Process: 198/2014-T

Date: September 15, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 198/2014-T, the CAAD arbitral tribunal addressed whether Verba 28 of the Portuguese Stamp Tax General Table (TGIS) applies to construction land (terrenos para construção). The case involved Company A, which owned urban plots designated for residential and commercial construction under a subdivision permit. The Tax Authority (AT) issued four stamp duty assessment notices totaling €23,724.36 for fiscal year 2012, treating the construction land as 'property intended for housing' under Verba 28.1 of TGIS, as amended by Law 55-A/2012. The property's patrimonial tax value was assessed at €1,019,450.00 after a second evaluation. The claimant challenged the assessments on multiple grounds: (1) legal error, arguing that undeveloped construction land cannot be classified as residential property for stamp tax purposes; (2) constitutional violations of legality and equality principles; (3) unconstitutional retroactivity under Article 103 of the Portuguese Constitution, since the taxable event used past-assessed values; and (4) duplicate collection, as four separate assessments were made for the same property and tax period. The Tax Authority defended its position by arguing that 'properties intended for housing' should be interpreted broadly to encompass both built residential properties and construction plots. This arbitration raised critical questions about the scope of Verba 28 TGIS, particularly whether the legislature intended to tax undeveloped land based solely on its intended future use. The case also highlighted procedural issues regarding multiple assessments for a single tax period and the constitutional limits on retroactive tax legislation. The decision would have significant implications for property developers and landowners holding construction plots designated for residential development throughout Portugal.

Full Decision

ARBITRAL DECISION

The arbitrator, Dr. Henrique Nogueira Nunes, appointed by the Deontological Council of the Administrative Arbitration Center ("CAAD") to form the Arbitral Tribunal, constituted on 5 May 2014, hereby decides as follows:

1. REPORT

1.1

Company A, with tax identification number …, hereinafter referred to as "Claimant", requested the constitution of the Arbitral Tribunal pursuant to article 2, no. 1, paragraph a) of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT").

1.2

The request for arbitral ruling concerns the declaration of illegality of the acts of assessment of stamp duty better identified under the collection documents issued with numbers 2012 …, in the amount of €7,908.12; 2013 …, in the amount of €5,272.08; no. 2013 …, in the amount of €5,272.08 and no. 2013 …, in the amount of €5,272.08, all in the total amount of €23,724.36, said assessments being made pursuant to the provisions of item 28.1 of the TGIS[1], relating to the year 2012. Additionally, the Claimant petitions for the reimbursement of the allegedly unduly paid tax and the payment of compensatory interest.

1.3

To support its request, the Claimant alleges, in summary, the following defects:

a) Error in the legal presuppositions, by virtue of:

(i) A plot of land for construction, for tax purposes, cannot be considered a property intended for housing, pursuant to the provisions of article 1, no. 1 of the Stamp Tax Code (CIS) and of item 28 of the TGIS.

(ii) The objective of the amendment to item 28 of the TGIS, widely announced by the current Government of the Republic, was to tax housing of greater patrimonial value, in a logic of social equity in the sharing of tax burdens currently required of citizens.

b) Defects of unconstitutionality, inasmuch as:

(iii) The interpretation underlying the assessments impugned according to which plots of land for construction are properties with housing intended use suffers from unconstitutionality due to violation of the principles of legality and equality enshrined in the Constitution of the Portuguese Republic (CRP).

(iv) In the present case, the taxable fact is formed with values assessed in the past, revealing a retroactive character, illegitimate in light of the constitutional rule provided for in article 103° of the CRP.

(v) In this manner, for the same period of time — fiscal year 2012 — four assessments of the same nature were required — both concerning item 28 of the TGIS, relating to the same property — without prejudice to the fact that there was a reduction in the tax rate applicable to the assessments issued in 2012.

(vi) There is thus, it is argued, a duplication of collection, inasmuch as the TA is attempting to collect "four" times the same tax, that is, Stamp Duty, by reference to item 28, relating to the same period of time and to the same property.

(vii) It is submitted that assessments nos. 2013 …, 2013 … and 2013 … are vitiated by illegality due to duplication of collection.

(viii) And that assessment no. 2012 … is null by application of the constitutional principle of non-retroactivity of tax law.

(ix) It concludes by contending for the invalidity of the tax acts at issue in the present proceedings, and requesting the reimbursement of the total amount paid of €23,724.36, and, additionally, the payment of compensatory interest pursuant to the provisions of nos. 1 and 2 of article 43° of the LGT.

1.4

The Tax and Customs Authority responded to the effect that the concept of "properties intended for housing", for purposes of the provisions of item 28 of the TGIS, "should be understood in a broad manner, embracing both built residential properties and plots of land for construction", concluding for the maintenance of the assessment acts and dismissal of the request also as to the defect alleged by the Claimant of duplication of collection.

1.5

The TA requested the dispensation of the meeting provided for in article 18 of the RJAT, as well as the dispensation of further arguments, and the Claimant did not oppose.

1.6

Considering that the question sub judice is purely a question of Law, and that there is sufficient documentary evidence in the file for the decision, the Tribunal considers it appropriate to dispense with the witness testimony listed by the Claimant.

1.7

The Tribunal set a deadline for the purpose of rendering the arbitral decision and notified the Claimant to effect payment of the subsequent arbitration fee.

1.8

The Tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.

The parties have legal personality and capacity, show themselves to be legitimately interested and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

No exceptions, preliminary questions and nullities in the proceedings were identified.

2. QUESTION TO BE DECIDED

The question discussed in the present proceedings is (strictly) a legal one: whether a plot of land for construction can be qualified as a "property intended for housing" and, if so, whether it can be understood as falling within the scope of item 28.1 of the TGIS, amended by article 4 of Law no. 55-A/2012, of 29 October.

3. FACTUAL MATTER

With relevance for the appreciation and decision on the merits, the following facts are established:

A) The Claimant is the owner of the urban properties located at …, no. … and …, no. 55 to 63, described in the Property Registration Office of …, under the numbers …, … and … and registered in the urban property matrix under articles …, … and …, of the parish of …, of the Municipality of …. (cf. Property Register attached as Document no. 1 with the request for arbitral ruling)

B) The property at issue in the present proceedings corresponds to Lot .., in accordance with subdivision permit no. ALV/…/…, case no. …/03, of the Municipal Chamber of …, intended for construction for residential and commercial purposes. (cf. Subdivision Permit attached as Document no. 2 with the request for arbitral ruling)

C) At the time of the tax assessment of the plot of land for construction at issue in the present proceedings, on 23 April 2013, the TA determined as Patrimonial Taxpayers Value ("VPT") the amount of €1,234,070.00 (cf. Document no. 4 attached with the request for arbitral ruling).

D) The Claimant, not agreeing with the above-mentioned assessment, came to request a second assessment of the property at issue (cf. Document no. 5 attached with the request for arbitral ruling).

F) And which resulted in a new assessment by the TA for the property at issue, with the VPT being fixed on 27 May 2013 at €1,019,450.00. (cf. Document no. 6 attached with the request for arbitral ruling).

G) The Claimant was notified of the collection documents issued with numbers 2012 …, in the amount of €7,908.12; 2013 …, in the amount of €5,272.08; no. 2013 …, in the amount of €5,272.08 and no. 2013 …, in the amount of €5,272.08, all in the total amount of €23,724.36, said assessments being made pursuant to the provisions of item 28.1 of the TGIS, dated 14 July 2013, relating to the year 2012, and the Claimant paid the same. (cf. assessment acts attached with the request for arbitral ruling as Documents nos. 7 to 10 with the respective proof of payment)

H) On 27 February 2014, the Claimant submitted a request for constitution of the Arbitral Tribunal with the CAAD – cf. electronic request in the CAAD system.

4. UNPROVEN FACTS

There are no facts with relevance for the decision on the merits that have not been established.

5. GROUNDS FOR THE DECISION ON THE FACTUAL MATTER

As to the essential facts, the agreed factual basis is identically confirmed by both parties and the Tribunal's conviction was formed on the basis of the documentary (official) evidence attached to the file and above listed, whose authenticity and truthfulness was not questioned by any of the parties.

6. ON THE LAW

6.1 On the error in the legal presuppositions: scope of objective incidence of item 28.1 of the TGIS

The assessments which constitute the immediate object of this arbitral action have their origin in item 28.1 of the TGIS, amended by article 4 of Law no. 55-A/2012, of 29 October, having as an essential presupposition that one is dealing with properties that can be classified under the concept of "properties intended for housing".

Since in the situation under scrutiny the property at issue is exclusively a plot of land for construction, it is important to determine the meaning of the expression "properties intended for housing" in order to conclude whether it encompasses, or not, plots of land for construction.

The matter under analysis has already been the subject of extensive tax arbitral jurisprudence. We refer in particular, without concerns for exhaustiveness, to the decisions rendered in the following cases: 42/2013-T, of 18-10-2013; 48/2013-T, of 09-10-2013; 49/2013-T, of 18-09-2013; 53/2013-T, of 02-10-2013; 75/2013-T, of 01-11-2013; 144/2013-T, of 12-12-2013 and 158/2013-T, of 10-02-2014.

The Judicial Courts have likewise pronounced themselves on this same question. We refer to the decisions rendered by the Supreme Administrative Court ("STA") in the following cases: 048/14, of 09-04-2014; 0270/14, of 23-04-2014 and 676/14, and, more recently, of 09-07-2014.

Both the cited arbitral jurisprudence and the cited judicial jurisprudence, which we endorse, consider that plots of land for construction fall outside the scope of the provision of item 28.1 of the TGIS, in the wording in force at the date of the facts, in the terms that are hereinafter explained, beginning by analyzing the legislative context in which the amendment to item 28 of the TGIS occurred.

A. Context of the approval of item 28.1 of the TGIS and its respective regime

In the discussion in Parliament of Bill no. 96/XII (2nd), which originated Law no. 55-A/2012, which amended item 28 of the TGIS, the Secretary of State for Tax Affairs stated:

"(...) For the tax system to promote greater equality, it is fundamental that the effort of budgetary consolidation be shared by all taxpayers and focus on all types of income, embracing with particular emphasis capital income and properties of high value. This matter, it will be recalled, was extensively addressed in the judgment of the Constitutional Court (...).

This proposal has three essential pillars: the creation of special taxation on urban properties with values exceeding 1 million euros; the aggravation of taxation on capital income on securities gains; and the strengthening of rules to combat tax fraud and tax evasion.

First, the Government proposes the creation of a special tax rate to tax high-value residential urban properties. This is the first time that in Portugal special taxation has been created on high-value properties intended for housing. This tax rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or exceeding 1 million euros. With the creation of this additional tax rate, the tax effort required of these property owners will be significantly increased in 2012 and 2013" (emphasis ours) – cf. Journal of the Assembly of the Republic, I series, no. 9/XXII-2, of 11 October 2012, pp. 31-32.

Both the houses and the residential urban properties referred to herein do not correspond to plots of land for construction. It is noted that residential urban properties are one of the classification concepts contained in article 6 of the Property Tax Code clearly distinct from plots of land for construction. Indeed, article 6, no. 1 provides:

"1 - Urban properties are divided into:

(i) Residential;

(ii) Commercial, industrial or for services;

(iii) Plots of land for construction;

(iv) Others." (emphasis ours)

Thus, residential urban properties and plots of land for construction are, for purposes of Property Tax (whose applicability, by cross-reference, to Stamp Duty is, as shall be seen, to be invoked), two distinct categories, with legal classifications and definitions provided in the aforementioned article 6 of the Property Tax Code[2].

In light of the foregoing and as emphasizes the arbitral decision in case no. 75/2013-T, of 1 November 2013, it appears clear that "in the spirit of the Bill that originated Law no. 55-A/2012 was not the taxation of plots of land for construction, and there is, on the other hand, no evidence to the contrary from the Members of Parliament who approved the law".

With this context established, it should be noted that the regime in question came to be approved by Law no. 55-A/2012, of 29 October, and, among several amendments it made to the Stamp Tax Code, amended item 28 of the TGIS, with the following wording:

"28 – Ownership, usufruct or surface right of urban properties whose patrimonial taxable value stated in the register, in accordance with the Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the patrimonial taxable value used for purposes of Property Tax:

28.1 – For property intended for housing – 1%;

28.2 – For property, when the taxable persons who are not individuals are resident in a country, territory or region subject to a regime clearly more favorable, listed in the approval by ordinance of the Minister of Finance – 7.5%". (emphasis ours)

B. The concept of "property intended for housing"

It is important, therefore, to interpret the provision of item 28.1 of the TGIS and determine its meaning and scope, given the absence of a legal definition of the concept of property intended for housing (a notion fundamental to the delimitation of objective incidence), whether in the Stamp Tax Code itself or in any other statute, including the Property Tax Code applicable by cross-reference.

Indeed, as emphasized in the Arbitral Award relating to case no. 53/2013-T, of 2 October 2013, the concept of "property intended for housing" is not employed by other tax legislation, in particular, in what is relevant to the case, in the Stamp Tax Code and in the Property Tax Code, the latter, of subsidiary application within the scope of item 28 of the TGIS, as provided in articles 2, no. 4; 3, no. 3, paragraph u); 5, paragraph u); 23, no. 7; 46, no. 5 and 67, no. 2, all of the Stamp Tax Code.

In the same sense, the Arbitral decision in case no. 144/2013-T, of 12 December 2013, states that this concept used by item 28.1 (of property intended for housing) "not only is not defined in any provision of the Stamp Tax Code, but also is not used in the Property Tax Code, statute to which article 67, no. 2 of the CIS expressly refers when matters not regulated in the CIS are at issue concerning item 28."

Tax rules should be interpreted like any others, and the conception has been superseded that they would have the exceptional character that was once attributed to them.

It should be noted in this regard that article 9 of the Civil Code marks the prevalence of the spirit over the letter of the law, although it expressly placed the letter as a limit to the search for meaning[3]. Article 9 of the Civil Code represents the emanation of a general hermeneutical principle, possessing, for that reason, intrinsic validity. This provision states:

"1. Interpretation should not be limited to the letter of the law, but should reconstitute from the texts the legislative thought, taking especially 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.

  1. However, the interpreter cannot consider legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In establishing the meaning and scope of the law, the interpreter will presume that the legislator adopted the most correct solutions and knew how to express his thought in appropriate terms."

The LGT, in its article 11, came, in the specific field of tax laws, to establish a set of interpretation rules as follows:

"1. In determining the meaning of tax rules and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

  1. Whenever tax rules employ terms specific to other branches of law, they must be interpreted in the same sense that they have there, unless otherwise directly follows from the law.

  2. If doubt persists about the meaning of the rules of incidence to be applied, attention should be paid to the economic substance of the taxable facts.

  3. The lacunae resulting from tax rules covered by the reserve of law of the Assembly of the Republic are not susceptible to analogical integration."

It appears that the text of the LGT adds nothing, referring to the general rules and principles, beyond incorporating distinct principles of difficult reconciliation.

As seen above, the Property Tax Code uses (in its article 6, no. 1) the notion of residential urban properties, which it establishes as an autonomous and distinct category from that of plots of land for construction, but does not provide for the concept of "property intended for housing", whose interpretation is now required.

At this point, we resort again to the arbitral jurisprudence and to the Award rendered in case no. 53/2013-T, above referenced, which is endorsed here and from which the following excerpt is transcribed:

"3.2.5. Concept of 'property intended for housing' as referring to residential properties

The concept closest to the literal meaning of this expression used is manifestly that of 'residential properties', defined in no. 2 of article 6 of the CIMI as encompassing 'buildings or constructions' licensed for residential purposes or, in the absence of a license, that have as their normal purpose residential purposes.

If it is understood that the expression 'property intended for housing' coincides with [the] 'residential properties', it is manifest that the assessments will suffer from error on the presuppositions of fact and of law, since all properties on which Stamp Tax was assessed pursuant to item no. 28.1 are plots of land for construction, without any building or construction, required to fulfill that concept of 'residential properties'.

For this reason, if one adopts the interpretation that 'property intended for housing' means 'residential property', the assessments whose declaration of illegality is requested will be illegal, because there is no building or construction on any of the plots of land.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that which is extracted from no. 2 of article 6 of the CIMI points to the fact that it was not intended to use the same concept.

3.2.6. Concept of 'property intended for housing' as a concept distinct from 'residential properties'

The word 'affectation', in this context of the use of a property, has the meaning of 'the action of destining something to a determined use'1.

'When, as is the rule, the rules (legislative formulas) have more than one meaning, then the positive function of the text is translated into giving stronger support to or suggesting more strongly one of the possible meanings. For among the possible meanings, some will correspond to the more natural and direct meaning of the expressions used, while others will only fit within the verbal framework of the rule in a forced, contrived manner. Now, in the absence of other elements that induce the selection of the less immediate meaning of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular to their technical-legal meaning, in the supposition (not always exact) that the legislator knew how to express his thought correctly'2.

The relevance of the text of the law is especially emphasized in matters of interpretation of the rules of incidence of Stamp Tax, which are reduced to an amalgam, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves little room for application of the primary interpretative criterion, which is the unity of the legal system, which requires its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item no. 28.1, hastily included at the margin of the General State Budget, by a tax legislator without perceptible global fiscal orientation, which keeps implementing successively tax aggravation rules as the vicissitudes of budget execution, the impositions of international institutional creditors (represented by the 'troika') and the oversight of the Constitutional Court require. (…)

In this context, given the absence of reliable interpretative elements that allow detection of legislative coherence in the solution adopted in the aforementioned item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of no. 3 of article 9 of the Civil Code), the content of the legal text must be the primary element of interpretation, in conformity with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express his thought in appropriate terms.

In light of those meanings of the words 'affectation' and 'to affect', which are 'to give destination' or 'to apply', the formula used in that item no. 28.1 of the TGIS manifestly encompasses properties that are already applied to residential purposes, so it is important to inquire whether it will also encompass properties that, although not yet applied to residential purposes, are destined for these purposes and those whose purpose is unknown.

In light of the literal content of item no. 28.1, it is to be excluded from the scope of Stamp Tax incidence there provided the plots of land for construction of some Claimants that still do not have any defined type of use, since they are not yet applied to nor destined for residential purposes. That is, plots of land for construction that do not have defined use cannot be considered properties intended for housing, since they do not yet have any affectation or other purpose than construction of unknown type. An interpretation to the effect that item no. 28.1 refers to properties whose affectation is unknown has no minimum of verbal correspondence in the letter of that rule, so a hypothetical legislative thought of that type cannot be considered by the law interpreter, in light of the prohibition contained in no. 2 of article 9 of the Civil Code.

But this is not enough to clarify the situation of those plots of land for construction that, although not yet applied to residential purposes, already have a determined purpose, in particular, in the subdivision license (…).

For this reason, it is necessary to clarify when a property can be understood to be intended for residential purposes, in particular whether it is when this purpose is fixed for it in a licensing act or similar, or only when the actual attribution of this purpose is made concrete.

In the first place, the comparison of item no. 28.1 of the TGIS with no. 2 of article 6 of the CIMI, which defines the concept of residential properties, points manifestly to the necessity of an actual affectation.

Indeed, a building or construction licensed for housing or, even without a license, but which has housing as its normal purpose, is, in light of no. 2 of that article 6, a residential property.

For this reason, on the assumption that the legislator of Law no. 55-A/2012 knew how to express his thought in appropriate terms (as is required by article 9, no. 3 of the Civil Code that one presume), if it intended to refer to those properties already licensed for housing or that have housing as their normal purpose, it would certainly have used the concept of 'residential properties', which would express perfectly and clearly his thought, in light of the definition given by that no. 2 of article 6 of the CIMI.

Consequently, one should presume that the use of a different expression is intended to have a distinct reality, so, in good hermeneutics, 'property intended for housing', cannot be a property merely licensed for housing or destined for that purpose (that is, it will not suffice that it be a 'residential property'), having to be a property that already has actual affectation to that purpose.

That this is the meaning of the expression 'affectation', in the same context of the classification of properties made by the CIMI, is confirmed by article 3 in which, with respect to rural properties, reference is made to those 'that are affected or, in the absence of concrete affectation, have as their normal purpose a use generating agricultural income', which shows that affectation is concrete, actual. Indeed, as seen by the final part of this text, a property may have as its purpose a determined use and be or not affected to it, which shows that affectation is, at the level of the connection of a property to a determined use, something more intense than mere purpose and which may or may not occur, downstream of this and not upstream4.

Moreover, the text of the law by adopting the formula 'property intended for housing', instead of 'urban properties of housing affectation', which appears in the aforementioned 'Explanatory Memorandum', points strongly to the effect that it is required that the housing affectation already be made concrete, since only then will the property have that affectation.

With respect to article 45 of the CIMI, it has no relation to the classification of properties, only indicating the factors to consider in the assessment of plots of land for construction. What is considered there, in making reference to the 'building to be constructed' is the consideration of the purpose of the land, which, as seen, is something that, in the context of the CIMI, does not imply affectation and occurs before this.

The correctness of this interpretation to the effect that only properties that are actually affected to housing are included in the scope of item no. 28.1 of the TGIS is also confirmed by the perceivable ratio legis of the restriction of the field of application of the rule to properties with housing affectation, in the context of the 'circumstances in which the law was drafted and the specific conditions of the time in which it is applied', which article 9, no. 1 of the Civil Code also establishes as interpretative elements5.

First, the limitation of Stamp Tax taxation to 'properties with housing affectation' allows one to perceive that it was not intended to encompass within the scope of incidence of the tax properties with affectation to services, industry or commerce, that is, properties affected to economic activity, which is understandable in a context where, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures stemming from economic unsustainability.

Bearing in mind this situation and it being known and public that the reanimation of economic activity and the increase of exports are the ways out of the crisis, it is understandable that legislative measures were not taken that would hinder economic activity, in particular the aggravation of the fiscal burden that hinders it and affects international competitiveness.

For this reason, it should be concluded that the available interpretative elements, including the 'circumstances in which the law was drafted and the specific conditions of the time in which it is applied', clearly point to the fact that it was not intended to encompass within the scope of item no. 28.1 situations of properties that are not yet affected to housing, in particular plots of land for construction held by companies6."

In this light, for the reasons just expounded, the understanding advocated by the TA cannot proceed, namely that the notion of affectation (residential) of an urban property should be sought in the regime for the assessment of properties contained in article 45 of the Property Tax Code (which takes into account the affectation coefficient provided for in article 41 of the same Code).

In fact, as aptly referred to in the decision of arbitral case no. 144/2013-T, "If the primary sense of 'affectation', as we have said, suggests an actual, direct destination, given to a determined asset, we do not see how this understanding can be overturned by the finding that the legislator, within the scope of the assessment of plots of land for construction, authorizes (assuming that it authorizes) the use of the affectation coefficient, with a view to what may come to be built on it.

C. The case Sub Judice

In accordance with the factual matter, which results consensual, the property underlying the Stamp Tax assessments made, here impugned, constitutes a plot of land for construction.

Taking as correct and valid (as we do) the understanding according to which item 28.1 of the TGIS requires the necessity of an actual residential affectation of an urban property and not merely potential, a plot of land for construction cannot be considered included in that item, since it does not allow, by its very nature, to have an actual and current housing affectation.

Thus, in the situation at hand, we are not dealing with a property with current housing affectation, so Stamp Tax provided for in item 28.1 of the TGIS cannot be assessed on it, the contested assessments suffering from error in the presuppositions, embodied in the violation of said item 28.1, and the same should be annulled (cf. article 135 of the CPA, of subsidiary application ex vi articles 2 paragraph d) of the CPPT and 29, no. 1, paragraphs a) and d) of the RJAT).

6.2 On the alleged violation of constitutional principles

The Claimant raised questions of unconstitutionality, in the interpretation of item 28.1 of the TGIS made by the Respondent, on the assumption that the stamp tax provided there could equally be assessed on plots of land for construction, further alleging the defect of duplication of collection in relation to the assessments with nos. 2013 …, 2013 … and 2013 ….

Considering that this Arbitral Tribunal did not accept that interpretation, this issue is rendered moot and procedurally unnecessary for consideration.

6.3 On the reimbursement of the amount paid and on the request for Compensatory Interest

The Claimant requests the reimbursement of the amount paid pursuant to the assessment act at issue in the present proceedings, in the total amount of €23,724.36, together with compensatory interest for the allegedly unduly paid amounts.

In the present case, it is manifest that, as a consequence of the illegality of the assessment acts, for the reasons that are better developed in this decision, there is grounds for reimbursement of the tax paid by the Claimant, by force of the provisions of articles 24, no. 1, paragraph b), of the RJAT and 100 of the LGT, as this is essential to "restore the situation that would exist if the tax act subject to the arbitral decision had not been performed".

With respect to compensatory interest, it is also clear in the file that the illegality of the impugned tax assessment acts is directly attributable to the Respondent, which, on its own initiative, performed them without legal support, suffering from an erroneous interpretation (and therefore application) of the legal rules to the concrete case.

Consequently, the Claimant is entitled to receive compensatory interest, pursuant to the provisions of articles 43, no. 1, of the LGT and 61 of the CPPT.

The compensatory interest should be paid to the Claimant from the date on which it made the respective payment of the stamp tax assessment at issue in the present proceedings until the full reimbursement of the amount paid, at the legal rate.

In these terms, the Claimant's request is upheld.

7. DECISION

In light of the foregoing, this Tribunal hereby decides:

  • To render judgment upholding the request for arbitral ruling and to declare the annulment of the Stamp Tax assessment acts, as illegal, better identified under the collection documents issued with numbers 2012 …, in the amount of €7,908.12; 2013 …, in the amount of €5,272.08; 2013 …, in the amount of €5,272.08 and 2013 …, in the amount of €5,272.08, in the total amount of €23,724.36, with the legal consequences.

  • To render judgment upholding the request for conviction of the Respondent to reimburse the Claimant

the amount paid as tax, together with compensatory interest in accordance with legal provisions, from the date on which such payment was made until the date of the full reimbursement thereof.

The value of the case is set at €23,724.36, in accordance with the provisions of articles 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97-A, no. 1, paragraph a) of the CPPT and 306 of the CPC.

The amount of costs is set at €1,224.00, pursuant to article 22, no. 4 of the RJAT and Table I attached to the RCPAT, borne by the Tax and Customs Authority, in accordance with the provisions of articles 12, no. 2 of the RJAT and 4, no. 4 of the RCPAT.

Let notification be made.

Lisbon, 15 September 2014.

The Arbitrator,

Dr. Henrique Nogueira Nunes

Prepared by computer, in accordance with article 131, no. 5 of the Civil Procedure Code, applicable by cross-reference to article 29, no. 1, paragraph e) of the RJAT.

The preparation of this arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] Assessment no. 2012 … was also issued on the basis of article 6 of Law no. 55-A/2012.

[2] Nos. 2 to 4 of article 6 of the Property Tax Code define the concepts at issue:

"2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these ends.

3 – Plots of land for construction are considered those lands situated inside or outside an urban agglomeration, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been so declared in the acquisition title, with the exception of lands in which the competent entities prohibit any of those operations, in particular those located in green zones, protected areas or that, in accordance with municipal land planning plans,

are intended for public spaces, infrastructures or equipment. (wording of Law no. 64-A/2008, of 31 December)

4 – Those included in the provision of subparagraph d) of no. 1 are lands situated inside an urban agglomeration that are not plots of land for construction nor are covered by the provision of no. 2 of article 3 and also buildings and constructions licensed or, in the absence of a license, that have as their normal purpose other ends than those referred to in no. 2 and also those of the exception of no. 3."

[3] See Oliveira Ascensão, "Interpretation of laws. Integration of lacunae. Application of the principle of analogy", in Journal of the Bar Association, Year 57 – III, Lisbon, December 1997, pp. 913-941.

Frequently Asked Questions

Automatically Created

Does Verba 28 of the Portuguese Stamp Tax General Table apply to building land (terrenos para construção)?
Based on the Tax Authority's position in this arbitration, Verba 28 of TGIS can apply to building land (terrenos para construção). The AT argued that 'properties intended for housing' should be interpreted broadly to include not only built residential properties but also plots of land designated for construction. However, the claimant contested this interpretation, arguing that undeveloped construction land lacks the characteristics of residential property and that the legislative intent behind Verba 28 was to tax high-value housing, not bare land. The arbitral tribunal was tasked with deciding this purely legal question of statutory interpretation.
Can construction plots be classified as residential property for Stamp Tax purposes under Portuguese law?
The central dispute in this case was whether construction plots can be classified as residential property under Verba 28 TGIS. The Tax Authority maintained that the concept of 'properties intended for housing' (imóveis destinados a habitação) encompasses construction land designated for future residential development, even if no buildings exist. The claimant argued this interpretation violates both the Stamp Tax Code and constitutional principles of legality and equality, contending that only completed or habitable residential structures should fall within Verba 28's scope. The property in question was a subdivision lot approved for residential and commercial construction purposes.
What constitutes duplicate tax assessment (duplicação de colecta) in Portuguese Stamp Tax liquidations?
Duplicate tax assessment (duplicação de colecta) occurred in this case when the Tax Authority issued four separate stamp duty assessments under Verba 28 TGIS for the same property and the same fiscal year 2012. The claimant argued this constituted an illegal attempt to collect the same tax multiple times for a single tax period, violating fundamental tax law principles. Three assessments were issued in 2013 (each for €5,272.08) and one in 2012 (for €7,908.12), totaling €23,724.36. The claimant specifically challenged assessments issued in 2013 as duplicative and the 2012 assessment as unconstitutionally retroactive, requesting annulment of all four collection documents.
Is retroactive application of Verba 28 TGIS unconstitutional under Article 103 of the Portuguese Constitution?
The claimant argued that retroactive application of the amended Verba 28 TGIS violates Article 103 of the Portuguese Constitution, which prohibits retroactive tax legislation except in specific circumstances. The constitutional challenge focused on the fact that the taxable event was constructed using patrimonial values assessed in the past, creating an impermissible retroactive effect. The claimant contended that applying the new stamp duty regime to property valuations determined before the law's enactment violated constitutional guarantees against retrospective taxation. This argument was particularly relevant to the 2012 assessment, which the claimant sought to have declared null on constitutional grounds.
How can taxpayers challenge multiple Stamp Tax assessments on the same property through CAAD arbitration?
Taxpayers can challenge multiple stamp tax assessments through CAAD (Centro de Arbitragem Administrativa) arbitration by filing a request under Article 2(1)(a) of the RJAT (Administrative Arbitration Legal Framework). In this case, the claimant filed an electronic request on 27 February 2014, seeking declaration of illegality for all four assessment acts, reimbursement of the paid amount (€23,724.36), and compensatory interest under Article 43 of the LGT. The arbitration process allows taxpayers to contest assessments on grounds including legal error, unconstitutionality, and procedural defects like duplicate collection. After constitution of the arbitral tribunal and payment of arbitration fees, the tribunal decides the case, with the possibility of dispensing with oral hearings when the dispute involves purely legal questions.