Process: 2/2016-T

Date: October 21, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

In CAAD Process 2/2016-T, a real estate investment management company representing two closed real estate investment funds challenged Stamp Tax assessments totaling €154,558.30 for 2014, relating to construction land destined for housing. The central issue was whether item 28 of the General Stamp Tax Table (TGIS), introduced by Law 83-C/2013, unconstitutionally imposed Stamp Tax on such properties. The Tax Administration raised a preliminary objection, arguing the arbitral tribunal lacked jurisdiction to assess constitutional issues. The tribunal rejected this exception, establishing crucial precedent on its competence. It ruled that while arbitral tribunals cannot declare unconstitutionality with general binding effect (reserved to the Constitutional Court under Article 281(2) CRP), they are competent to disapply unconstitutional norms when assessing the legality of specific tax acts under Article 2(1) RJAT. The tribunal reasoned that acts based on unconstitutional norms are illegal per Article 266(2) of the Portuguese Constitution, and courts cannot apply unconstitutional provisions per Article 204 CRP. Since the claimants requested the tribunal to declare the tax assessments illegal due to violation of constitutional equality principles, not a general declaration of unconstitutionality, the matter fell within the tribunal's jurisdiction. The tribunal also confirmed the admissibility of coalition of claimants under Article 3(1) RJAT, as the claims depended on the same factual circumstances and legal principles. The decision demonstrates that taxpayers can challenge tax assessments on constitutional grounds through tax arbitration, with tribunals empowered to disapply unconstitutional provisions in concrete cases. This procedural ruling strengthens taxpayer rights and confirms CAAD's role in constitutional review of tax matters within specific cases, without encroaching on the Constitutional Court's exclusive jurisdiction for abstract norm control.

Full Decision

ARBITRAL DECISION

I. REPORT

A…- REAL ESTATE INVESTMENT MANAGEMENT COMPANY, S.A., in representation of B…– CLOSED REAL ESTATE INVESTMENT FUND and of C…- CLOSED SPECIAL REAL ESTATE INVESTMENT FUND, all with registered office in Lisbon and with the Tax Identification Numbers, respectively, …, … and …, filed, invoking the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Tax Arbitration (RJAT), a request for the constitution of an Arbitral Tribunal, in order to declare illegal the dismissals of the administrative appeals which it lodged against the Stamp Tax (IS) assessments relating to 2014, and hereinafter identified, which total the amount of € 154,558.30, which it paid, for which reason it also requests the condemnation of the TAX AND CUSTOMS ADMINISTRATION (AT) to refund this amount to it, plus compensatory interest.

Having expressed its intention not to appoint an arbitrator, the signatories were appointed by the Ethics Council of the CAAD, without opposition from the parties, with the arbitral tribunal being constituted on 23 March 2016.

The meeting referred to in Article 18 of the RJAT was dispensed with, and the parties were invited to submit written pleadings, from which they abstained, with the tribunal announcing that the decision would be delivered by 23 November 2016, following an extension of the respective deadline.

II. PRELIMINARY MATTERS

A.

Above all, it is necessary to assess the dilatory exception of material lack of jurisdiction raised by the AT, on the understanding that the jurisdiction of the arbitral court is exhaustively enumerated in Article 2, No. 1 of the RJAT, which does not include "the assessment of the request for a declaration of material unconstitutionality of Article 194 of Law No. 83-C/2013, of 31/12, in the segment that added construction land to item No. 28 of the GIST" (General Table of Stamp Tax).

As the AT itself recognises, arbitral tribunals are competent to declare the "illegality of acts of tax assessments", in accordance with No. 1 of Article 2 of the RJAT.

Acts that apply norms that are inconsistent with fundamental law are illegal, which follows directly from No. 2 of Article 266 of the Constitution of the Portuguese Republic.

Therefore, when a citizen resorts to an arbitral tribunal to obtain a declaration of illegality of a tax assessment act, accusing it of being based on unconstitutional law, that tribunal is competent.

It is not, it must be said, to declare the unconstitutionality of the norm with generally binding force, as that is the sole competence of the Constitutional Court (Article 281, No. 2 of the CRP), but to censure the act based on an unconstitutional norm, eliminating it from the legal order, as is its obligation, imposed by Article 204 of the CRP: as courts cannot apply unconstitutional norms, they cannot also maintain the administrative acts submitted to them that are based on norms that violate the Constitution.

Now, the request of the Claimant is, on this point, that "item No. 28 of the General Table of Stamp Tax be disapplied, in the present case, due to manifest violation of the constitutional principle of equality", and that "the illegality of the tax acts of Stamp Tax assessment be declared, because based on unconstitutional norms, and that they be promptly annulled".

That is, the subject matter of the proceedings is not a declaration of material unconstitutionality of any legal norm, but the verification of the legality, in relation to the CRP, of the acts of assessment of a tax and of the acts of dismissal of the corresponding administrative appeals.

This demonstrates the jurisdiction of the tribunal and the consequent lack of merit of the exception raised by the Respondent.

B.

Beyond being competent, the tribunal is regularly constituted, with the parties presenting themselves with personality, capacity, legal standing and representation, with no nullities or exceptions or preliminary issues that impede the assessment of the merits of the case.

The coalition of claimants and the cumulation of claims are admissible, in accordance with that stipulated in Article 3, No. 1 of the RJAT, which permits them "when the success of the claims depends essentially on the assessment of the same factual circumstances and on the interpretation and application of the same legal principles or rules", as occurs in casu.

III. FACTUAL MATTERS

A.

It is proven that:

  1. B…– CLOSED REAL ESTATE INVESTMENT FUND, was notified of the following assessment acts:

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land intended for housing under Article…;

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land intended for housing under Article…;

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land intended for housing under Article…;

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land intended for housing under Article…;

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land under Article…;

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land intended for housing under Article…;

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land intended for housing under Article…;

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land intended for housing under Article…;

  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish of…, municipality of... as construction land intended for housing under Article….

  1. C…- CLOSED SPECIAL REAL ESTATE INVESTMENT FUND, was notified of the following assessment acts:
  • 2015…, 2015…, and 2015…, relating to the property registered in the property register of the parish …, municipality of Alcácer do Sal as construction land intended for housing under Article….

  1. The Claimant lodged administrative appeals against these assessments, and these appeals, bearing the numbers …2015… and …2015…, were dismissed.

  2. The assessment acts referred to assessed tax in the amount of € 154,558.30, which the Funds represented by the Claimant paid.

  3. In the orders that dismissed the administrative appeals, here considered to be fully reproduced, reference was made to "Law No. 55-A/2012, of 29-10-2012", which "amended Article 1 of the Stamp Tax Code, and added to the General Table of Stamp Tax, item No. 28, creating a new reality subject to tax".

It is stated in the same orders, in particular:

"(…) upon being registered in the urban property register as a parcel of land for construction of residential properties, it falls within the concept provided for in item 28.1 and, as such, is subject to tax"; "(…) the Tax Administration, which is under the hierarchical dependence of the executive, cannot substitute itself for the courts, and rule on the constitutionality of the laws it must apply", and cannot "(…) fail to apply the law and comply with it".

And, concluding:

"(…) the Services of the Tax Authority acted in accordance with what is stipulated in the law(…).

B.

The tribunal's conviction is based on the documents attached to the file, all of which are hereby considered reproduced, as well as on the absence of controversy regarding them.

C.

There are no relevant facts, alleged by the parties, that remained unproven.

IV. ASSESSMENT

A.

The Claimant expressed its objection to the impugned acts based on reasons of three orders:

  • Item No. 28 of the GIST, applied by the said acts, suffers, in the segment that is relevant to the case, from unconstitutionality, due to violation of the principles of equality, contributory capacity, and prohibition of double taxation;

  • Taxation cannot stem from a mere potentiality of use of the land, as occurred, without demonstrating, at the time thereof, a real contributory capacity;

  • Being the entities represented by the Claimant in the present arbitral proceedings real estate investment funds, the assets on which taxation fell are investment assets, used in real estate operations, intended for the realisation of their corporate purpose, and not representing a contributory capacity superior to the average.

B.

Properties with residential use became subject to stamp tax by virtue of item No. 28 of the GIST, added by Article 4 of Law 55-A/2012, of 29 October, in the following terms:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value as recorded in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000.00 – on the tax patrimonial value used for the purpose of IMI:

28.1 – Per residential property – 1%

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

Law No. 83-C/2013, of 31 December, effective from 1 January 2014, amended the wording of item 28.1, which now read:

"per residential property or per construction land whose construction, authorised or planned, is for housing, in accordance with the provisions of the Municipal Property Tax Code".

In this way, the controversy was resolved as to whether construction land with residential use fell within the said item. From 2014 onwards, it is clear that construction land is considered property with residential use, subject to stamp tax.

But the doubt about the constitutionality of the norm was not resolved.

An arbitral tribunal, constituted within the CAAD, has already decided, in case No. 507/2015-T, "that item 28.1 of the GIST, in the wording given by Law No. 83-C/2013, of 31 December, is materially unconstitutional, insofar as it subjects taxation in Stamp Tax to the ownership of construction land whose tax patrimonial value as recorded in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000, with respect to which the authorised or planned construction does not include any individual dwelling of value equal to or greater than that, as well as insofar as it applies to situations in which construction land belongs to companies engaged in the commercialisation of land for resale".

Other arbitral tribunals, also within the CAAD, have ruled in the opposite sense – among others, see the decisions handed down in cases 495, 515 and 516/2015-T.

The question therefore remains subject to controversy, and the jurisprudence of the Constitutional Court, which, in these cases, cannot fail to serve as the principal support, is not decisive. For that Court, having already ruled on the constitutionality of the item of the GIST in question, has not yet ruled, at least to the knowledge of this Court, on the specific case of construction land with residential use.

In any event, it is useful to recall here excerpts from what the Constitutional Court said on 11 November 2015 in case No. 542/14:

"(…) from the classification of the taxation in question within the scope of Stamp Tax, and not within other types of taxes, there does not result, in itself, a breach of any parameter of constitutionality. Even if it were to be concluded that there was an introduction of an element of incoherence, or even imbalance, in the system of taxation of real estate property, as the appellant contends, the mere lack of systematicity of the norm in question is not apt to determine constitutional censure (cf., even if in other fields of regulation, Decisions No. 353/2010 and 324/2013)" (...) "It can certainly be conceived that there are other avenues available to the legislature, possibly through recourse to other types of taxes, but it is no less certain that the option taken finds its place within the broad margin of discretion of the tax legislature, being incapable of founding autonomous constitutional censure.".

And:

"Neither is there found in the incidence norm in question an arbitrary fiscal measure, because lacking rational foundation. As was seen, the legislative amendment had as its purpose the broadening of taxation of property, making it fall more intensely on ownership which, by its value considerably superior to that of the generality of urban properties with residential use, reveals greater indicators of wealth and, as such, is capable of founding the imposition of an increased contribution for the remedying of public accounts on its holders, in realisation of the aforementioned 'principle of social equity in austerity'.".

And further:

"It should be noted that the existence of distinct application results in the face of very approximate values - by excess or by deficiency - of a quantitative expression stipulated normatively as the limit – positive or negative – of any legal effect whatsoever is inherent to its fixation by the legislature. Whether in the definition of tax incidence, or in the establishment of tax exemptions or benefits based on value criteria, it is always possible to find examples of taxpayers with differentiated treatment based on a quantitative variation of very reduced expression. Because it is necessarily so, the differentiation involved in the second hypothesis placed does not appear to be lacking in rational foundation, in accordance with the scope, structure and nature of the norm in analysis: aimed at increasing the taxation of residential properties of high value, the fiscal measure could not fail to determine, by imperative of the principle of fiscal legality, the concrete patrimonial value from which a special rate of Stamp Tax began to apply to such properties, which also excludes, on this point, the verification of arbitrariness on the part of the legislature.".

Finally, note what was written in the decision of the CAAD handed down on 17 March 2016 in case No. 507/2015-T, which relied on the same constitutional jurisprudence:

"(…) situations of double taxation, expressed in the application of two taxes to the same tax fact, are frequent in cases where the public entities that benefit from them are distinct, as occurs in the case in question, since IMI is municipal revenue and Stamp Tax is state revenue. A parallel situation occurs with the municipal surcharge which currently applies, like the Corporate Income Tax, to the tax base of that tax (Article 18, No. 1, of Law No. 73/2013, of 3 September).".

As is known, the principle of equality, in its aspect of contributory capacity - upon which the Claimant bases the essence of its argument – is not an absolute principle, but rather is obliged to coexist with other principles and interests that also merit consideration.

The freedom enjoyed by the legislature, to whom tasks beyond those relating to taxation are incumbent, requires that the principle of contributory capacity have some flexibility and can yield, up to a certain limit, before other purposes of the State.

On the other hand, the said principle is also respected when things are treated unequally, which moreover is required when they are unequal. And the truth is that situations absolutely equal, in a way requiring rigorously equal treatment, are not very frequent. Especially in cases such as the one at hand, in which it is not a matter of taxing equal income, nor equal consumption, but mere signs, manifestations of wealth that are not rigorously measurable, and which can even be misleading as to real contributory capacity. Consider the owner and inhabitant of a palace or a sixteenth-century manor of value superior to one million euros who finds himself in great difficulties maintaining it with his income – substituting himself, even, for the State, to whom it falls to watch over historical heritage…

All to conclude that when an apparently or potentially equal situation is treated in a somewhat different manner, one can only speak of fiscal inequality if there are not attendible reasons that led the legislature to make the choices it made.

That is, what is constitutionally forbidden to the legislature is pure arbitrariness, treating unequally because so, but not when it has in view the pursuit of objectives to which it attributes greater value – as is the paradigmatic case of fiscal benefits, in which the legislature prefers to forgo fiscal revenue to achieve other objectives.

The said freedom of the legislature permits, from the outset, that it caused this tax to fall only on real estate, leaving outside other manifestations of contributory capacity, such as the ownership of art collections, antiquities, vintage automobiles.... Here reasons of practicality that are also comprehensible and attendible may weigh.

That same freedom of conformity of the legislature also permits that it fixed the registered value of real estate subject to taxation at one million or more euros. And that it did not take into account the sum of real estate property, especially since the sum of values, perhaps not very high, of various properties does not necessarily reveal the same contributory capacity. And what is true for a natural person no less applies to a legal person.

Here too it can be said that the legislature exercised its freedom without offending fiscal equality, as it treated equally what was equal and unequally what was unequal.

Furthermore, nothing obliged the legislature to establish a general tax on property, as it did not, and its choice could be limited to some, but not necessarily all, of a single owner's real estate.

And, if it is true that for the barrier of one million euros no obvious justification is apparent, it is still not a matter of pure arbitrariness, as the threshold necessarily had to be placed somewhere, and the legislature placed it where it considered reasonable, in accordance with what it considered to constitute a manifestation of wealth superior to the average and adequate to achieve the revenue sought.

Also when the legislature taxed only residential properties, refraining from imposing stamp tax on those used for agriculture, fishing, industry, commerce, it took a measure of distinction of what is unequal, making a choice whose justification seems clear: not to increase the tax burden on productive sectors, in view of the much-touted needs for investment and economic growth.

It further follows that buildings intended for housing constitute consumer goods, and of them, when of value equal to or greater than one million euros, it can be said that they reveal a high standard of living and greater contributory capacity.

Although the contributory capacity revealed may be equal, no violation of the principle of equality is apparent, given the reasonableness of the distinction and the purposes intended – although what is affirmed here does not necessarily apply to construction land intended for housing.

Turning now to the ground which the Claimant adduces to invoke unconstitutionality based on violation of equality, and consisting in the "(…) tax fact [being] based on an expectation of use", in the case of construction land, it is proper to begin by noting that this is not a tax on income.

Construction land may indeed never be used for such and, consequently, may not yield any income. And it may even be built upon and the real estate transaction may proceed in such a way as to be a source of losses.

But what the legislature intended to capture here is a moment and a static fact – the ownership of an asset which, at a given moment, deserves a given classification – construction land for housing - (that ownership and classification which the Claimant does not dispute) and which is of high value, measured by average standards.

The ownership of that asset, combined with its value, reveals, at the moment of taxation, above-average contributory capacity, and this is sufficient to justify taxation, regardless of whether or not future expectations are realised.

Another ground to which an answer can be considered to have been given is that referring to double taxation.

Contrary to what the Claimant contends, double taxation is not constitutionally forbidden, as is stated in the excerpt from the CAAD decision reproduced again here:

"(…) situations of double taxation, expressed in the application of two taxes to the same tax fact, are frequent in cases where the public entities that benefit from them are distinct, as occurs in the case in question, since IMI is municipal revenue and Stamp Tax is state revenue. A parallel situation occurs with the municipal surcharge which currently applies, like the Corporate Income Tax, to the tax base of that tax (Article 18, No. 1, of Law No. 73/2013, of 3 September)".

There remains to be assessed the ground drawn from the ownership of the properties and "the realisation of the corporate purpose of the funds".

The Claimant states that the assets burdened constitute investment assets and that, as the owners develop the activity of buying and selling real estate, "can never represent greater contributory capacity".

On this point, it is considered that it is right.

Making our own the words that can be read in the aforementioned decision of the arbitral tribunal handed down on 17 March 2016 in case No. 507/2015-T.

"It is unequivocal that companies engaged in the commercialisation of construction land face an additional significant burden in relation to the generality of companies, based on a hypothetical index of contributory capacity that does not necessarily correspond to reality, since the imposition of taxation has no relationship whatsoever with the actual income from the activity developed by the companies and burdens them even if they have negative results, with taxation, cumulated annually, being accentuated precisely in situations where, due to the lack of success of the commercialisation activity, the land is held for several years and, for this reason, there would be less justification for the imposition of additional taxation, exclusive to this type of company.

On the other hand, there is also no reason apparent to distinguish between companies that commercialise land for construction of residential buildings and those that commercialise land for other purposes.

For this reason, also from this perspective, item 28.1 of the GIST materialises an unjustified negative discrimination of companies commercialising construction land, which implies its material unconstitutionality, due to violation of the principle of equality.".

This doctrine is also applicable to real estate investment funds, autonomous patrimonies that manage that patrimony by acquiring, leasing, renovating and selling real estate.

It should further be added that, if we are right as to the reasons justifying the non-taxation of construction land for non-residential purposes, the legislature will have incurred some incoherence here, as it fails to protect investment and economic activities, contrary to what it does moreover with respect to Municipal Property Tax, in whose Article 9, No. 1, subparagraphs d) and e) of its Code it enshrined favourable special regimes for companies that build for sale or that acquire for resale – activities similar to those developed by real estate investment funds.

This is sufficient, in the view of this Court, for the success of the Claimant's primary claim.

C.

As regards the request for compensatory interest, the Claimant's request fails.

It is true that, without fault on its part, acts were performed which the tribunal now decides to be illegal.

But, for the Administration to be condemned to payment of compensatory interest, it is necessary that "(…) it be determined (…) that there was error attributable to the services from which results payment of the tax debt in an amount superior to that legally due" – No. 1 of Article 43 of the General Tax Law.

In casu, the AT did no more than act according to the legal determination of Article 1 of the Stamp Tax Code and No. 28.1 of its respective General Table.

And it could not have acted otherwise, considering its binding to the law and the impossibility of disapplying it based on a judgment of unconstitutionality of ordinary law that does not fall to it to make.

In sum, it did not incur in error from which resulted payment of undue tax, and cannot, in the absence of such error, be condemned to payment of compensatory interest.

V. DECISION

Wherefore it is decided:

A) To judge the primary claim for arbitral pronouncement as well-founded, declaring illegal the dismissal of the administrative appeals presented by the Claimant and, consequently, annulling the stamp tax assessment acts referred to in the Factual Matters, from which resulted tax to be paid in the amount of € 154,558.30, relating to the taxation of construction land, in accordance with item No. 28, No. 1 of the GIST;

B) To judge the claim for condemnation of the Tax Administration in compensatory interest as without merit, absolving it of this claim;

C) To condemn to the costs of the proceedings the Tax Administration, in the proportion of 95%, and the Claimant, in the proportion of 5%, considering the respective fault;

D) To fix at the proceedings the value of € 154,558.30, in accordance with Article 97-A, No. 1, subparagraph a), of the Code of Tax Procedure, applicable by force of subparagraphs a) and b) of No. 1 of Article 29 of the RJAT and of No. 2 of Article 3 of the Regulation on Costs in Tax Arbitration Proceedings (RCPAT);

E) To fix the arbitration fee at € 3,672.00, in accordance with the provisions of Article 4 of the RCPAT and Table I attached.

Let notification be made.

Lisbon, 21 October 2016

José Baeta de Queiroz

(reviewing the position assumed in case 516/2015-T)

Ricardo Marques Candeias

Henrique Nogueira Nunes

(Text prepared by computer, in accordance with Article 131, No. 5 of the Code of Civil Procedure, applicable by reference from Article 29, No. 1, subparagraph e) of the Legal Framework for Tax Arbitration).

Frequently Asked Questions

Automatically Created

Is the CAAD arbitral tribunal competent to assess the unconstitutionality of Stamp Tax rules under Verba 28 of the TGIS?
Yes, the CAAD arbitral tribunal is competent to assess the unconstitutionality of Stamp Tax rules under Verba 28 of the TGIS in the context of specific tax assessment disputes. The tribunal ruled that while it cannot declare unconstitutionality with general binding effect (which is the exclusive competence of the Constitutional Court under Article 281(2) CRP), it has jurisdiction under Article 2(1) RJAT to declare tax assessment acts illegal when based on unconstitutional norms. The tribunal must disapply unconstitutional provisions per Article 204 CRP when assessing the legality of administrative acts, as acts based on norms violating the Constitution are illegal under Article 266(2) CRP. This distinction between general abstract control (Constitutional Court) and concrete case application (arbitral tribunals) is fundamental to Portuguese tax arbitration law.
Does Verba 28 of the TGIS apply Stamp Tax to building land destined for housing owned by real estate investment funds?
According to the Tax Administration's position upheld in the dismissal orders, Verba 28 of the TGIS does apply Stamp Tax to building land destined for housing owned by real estate investment funds. Law 55-A/2012 of October 29, 2012 amended Article 1 of the Stamp Tax Code and added item 28 to the TGIS, creating a new taxable event. The administrative decisions stated that once property is registered in the urban property register as construction land for residential properties, it falls within the concept provided in item 28.1 and becomes subject to Stamp Tax. The Tax Administration applied this provision without distinction based on the ownership structure, treating real estate investment funds the same as other property owners for purposes of this tax.
Can a real estate investment fund management company challenge Stamp Tax liquidations through tax arbitration under the RJAT?
Yes, a real estate investment fund management company can challenge Stamp Tax liquidations through tax arbitration under the RJAT. In this case, A… Real Estate Investment Management Company filed the arbitration request in representation of two closed real estate investment funds (B… and C…). The tribunal confirmed that the coalition of claimants was admissible under Article 3(1) RJAT, as the success of the claims depended essentially on the assessment of the same factual circumstances and the interpretation of the same legal principles. The tribunal also confirmed that the parties presented themselves with proper personality, capacity, legal standing and representation. This establishes that management companies acting on behalf of investment funds have procedural legitimacy to initiate and pursue tax arbitration proceedings under the RJAT framework.
What was the legal basis for contesting the 2014 Stamp Tax assessments on building land in CAAD Process 2/2016-T?
The legal basis for contesting the 2014 Stamp Tax assessments on building land was the alleged unconstitutionality of item 28 of the General Stamp Tax Table, specifically claiming violation of the constitutional principle of equality enshrined in the Portuguese Constitution. The claimants invoked Articles 2 and 10 of Decree-Law 10/2011 (RJAT) to establish the arbitral tribunal and requested that item 28 be disapplied due to manifest violation of constitutional equality principles. They also challenged the dismissal of their administrative appeals, arguing that the tax assessment acts were illegal because they were based on unconstitutional norms. The total amount contested was €154,558.30, which had been paid by the funds, and the claimants sought both the declaration of illegality of the assessments and condemnation of the Tax Administration to refund the amount paid.
Are taxpayers entitled to compensatory interest when Stamp Tax liquidations on building land are declared illegal?
Yes, taxpayers are entitled to compensatory interest when Stamp Tax liquidations on building land are declared illegal. In this case, the claimant specifically requested condemnation of the Tax and Customs Administration to refund the amount of €154,558.30 paid, plus compensatory interest (juros indemnizatórios). This request for compensatory interest is consistent with Portuguese tax law principles that provide for interest compensation when taxpayers have paid taxes that are subsequently determined to be illegally assessed. The payment of compensatory interest aims to compensate taxpayers for the financial loss resulting from having their funds inappropriately withheld by the tax authorities during the period between payment and refund, serving as a restorative measure for the illegal exaction of tax.