Process: 201/2017-T

Date: September 28, 2017

Tax Type: IMI

Source: Original CAAD Decision

Summary

CAAD arbitration case 201/2017-T addresses a fundamental dispute regarding the IMI classification of a fuel supply station in Cascais. The taxpayer challenged the Tax Authority's determination of a Taxable Asset Value (VPT) of €526,160, arguing the property was incorrectly classified as 'other' urban property under Article 6(4) of the CIMI (Municipal Property Tax Code) when it should have been classified as 'commercial' property. The fuel station comprises buildings (cafeteria, warehouse, auxiliary structures), land, and equipment installations (fuel tanks, pumps, canopy, paving). The taxpayer contended that since the property is licensed for commercial activities (fuel sales, food and beverage service), Article 6 of CIMI mandates its classification as commercial property, with valuation pursuant to Article 38 CIMI, yielding a VPT of €155,660. The Tax Authority maintained that fuel supply stations constitute a distinct category under 'other' properties, as they serve purposes not encompassed by residential, commercial, industrial, or service classifications. Consequently, the ATA applied the cost-plus-land-value method prescribed in Article 46(2) CIMI, treating site improvements separately and valuing land based on permitted construction indices under the Municipal Master Plan (PDM). This methodological choice significantly impacted the VPT determination. The taxpayer's representative on the second appraisal commission filed a dissenting opinion supporting commercial classification. The case illustrates the critical importance of property classification in the IMI system, as different categories trigger distinct valuation methodologies with substantial financial consequences. The dispute required the arbitral tribunal to interpret whether fuel stations, despite their commercial operational nature, fall within the 'commercial' classification or constitute a separate 'other' category requiring alternative valuation approaches under Portuguese tax law.

Full Decision

ARBITRATION DECISION

I – REPORT

A…, SA NIPC[1]…, with registered office at Avª … no…, …, within the … tax office area of Lisbon, filed a request for arbitral determination, pursuant to the provisions of paragraph (a) of no. 1 of article 2, no. 1 of article 3 and paragraph (a) of no. 1 of article 10, all of RJAT[2], with the ATA[3] being requested, with a view to declaring the illegality of the act of determining the TPV[4] of the urban property of which it is the owner, registered under article … of the respective matrix of the Union of parishes … and …, in the municipality of Cascais, which was determined in the 2nd appraisal in the amount of € 526,160.00, with the consequent repetition of the act of appraisal and classification of the property as a commercial property, fixing the inherent TPV of € 155,660.00.

That the request was made without exercing the option of designating an arbitrator, and was accepted by His Excellency the President of CAAD[5] on 24/03/2017 and notified to the ATA on the same date.

Pursuant to the provisions of no. 2 of article 6 of RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties, within the legally applicable time limits, on 17/05/2017, arbitrator Arlindo José Francisco of the tribunal was designated, who communicated acceptance of the assignment within the legally stipulated time limit.

The tribunal was constituted on 01/06/2017 in accordance with the provisions contained in paragraph (c) of no. 1 of article 11 of RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December.

With its petition, the applicant seeks the annulment of the act of determining the TPV of the aforementioned property, its classification as commercial, and the repetition of the appraisal procedure with the fixing of the TPV at € 155,660.00.

It supports its position, in summary, on errors of fact and law in the act of determining the TPV both in the 1st and in the 2nd appraisal, the appraisal commission having disregarded article 6 of CIMI[6] and numerous arbitral decisions.

The aforementioned commission followed the Appraisal Manual, classifying the property as "other," when the same, in the view of the applicant and in accordance with article 6 of CIMI, may only be classified as "commercial," and its TPV should be determined in accordance with article 38 of the aforementioned Code.

It maintains that the property in question is composed of buildings (cafeteria, warehouse, two small buildings) and land, on which are installed equipment structures (metal covering, tanks, fuel pumps, roads, pavements and green areas).

This is, therefore, a service station, licensed for a commercial activity (sale of fuels, food and beverages), for which reason the property may only be classified as an urban "commercial" property, concluding by declaring illegal the appraisals carried out in light of the Appraisal Manual and article 46, no. 2 of CIMI.

In its response, the respondent, and also in summary, states that the property is a fuel supply station which it considers relevant for its classification as "other," under no. 4 of article 6 of CIMI, encompassing constructions licensed for that purpose which, in its view, are not residential, commercial, industrial or service purposes.

From this perspective, the ATA, in determining the TPV, chose to apply the method of cost plus land value, provided for in no. 2 of article 46 of CIMI, to the detriment of the appraisal method provided for in article 38 of CIMI.

The appraisal method used disregarded any site development and treated the land in isolation, as required, taking into account the average construction areas admissible for the surrounding area, according to the PDM[7] indices.

Concluding with the support of the Decision of the STA[8] of 10 April 2013, in case 0770/12 which upholds, from the respondent's perspective, the method used in the appraisals.

II – DISMISSAL OF OBJECTIONS

The tribunal was regularly constituted.

The parties have legal standing and capacity, are shown to be legitimate and are regularly represented in accordance with articles 4 and 10, no. 2 of RJAT and article 1 of Order no. 112-A/2011, of 22 March.

In light of the respondent's response, the tribunal issued, on 04/07/2017, an order in which it deemed unnecessary the holding of the meeting provided for in article 18 of RJAT, as well as the production of oral or written submissions, and granted 10 days for the parties to express themselves on this understanding and for the respondent to attach the PA[9].

On 12/07/2017 the respondent attached the PA[9].

By order of 20/07/2017, taking into account the attachment of the PA, the silence of the parties regarding the lack of necessity of the meeting of article 18 of RJAT as well as the production of submissions, the tribunal deemed the conditions met to render a decision and fixed 28/09/2017 for that purpose.

In this manner, the proceedings not being affected by nullities and no exceptions having been invoked, it falls to decide.

III – REASONING

The question to be resolved, with interest for the record, is as follows:

Whether the act of determining the TPV of the property in question is affected by defects of fact and law that would lead to its annulment.

In the affirmative case, whether the appraisal procedure should be repeated with the fixing of a new TPV.

2 – Factual Matters

The applicant presented on 22 December 2014 a petition requesting the correction of the appraisal carried out in 2008 of the property registered in the urban property matrix under article … of the Union of parishes … and …, since in the same the property was classified as "other" when it should have been considered as commercial, presenting together the respective IMI[10] model I statement.

From this procedure a TPV of € 483,150.00 was determined for the property, maintaining the classification of the property as "other," and the applicant presented a request for a 2nd appraisal for disagreeing with the classification, and in which it sought to demonstrate that the property should be classified as commercial and be appraised in accordance with no. 1 of article 38 of CIMI and not in the manner provided for in no. 2 of article 46 of the same statute, as occurred.

From the request for the 2nd appraisal not only was the classification of the property maintained as "other" but a TPV of € 526,160.00 resulted from it, and the representative of the applicant on the Commission that carried out this appraisal entered a dissenting vote, considering that, given the commercial nature of the property, its appraisal should follow the manner provided for in no. 1 of article 38 of CIMI already cited.

In the appraisals, as already seen, the property was always classified as "other" with the justification of corresponding to a fuel station, for which reason the method of construction cost provided for in article 46 no. 2 of CIMI was applied in the appraisal.

The property in question is composed of two buildings intended for cafeteria and warehouse, two small buildings and land, on which are installed fuel tanks, fuel pumps, metal covering, roads, pavements, green areas and accesses for refueling vehicles.

The License of Use no. … issued by the Municipal Chamber of Cascais on 27/12/2002 states that the property, taking into account its composition, is intended for "Fuel Supply Station."

The factual matters given as proven result from the elements attached to the record, and it is not considered that there exist facts not proven that are relevant to the decision.

3 – Legal Matters

What is important to ascertain is whether the appraisal at issue is deficient due to violation of law, due to errors in the factual and legal premises, by departing from the classification of the property as urban "other" when the property is licensed as a "Fuel Supply Station" or if, on the contrary, it should have been considered as a "commercial" property.

For the classification attributed to the existing factual reality will condition the method to be used in the respective appraisal, that is, in the first hypothesis the method provided for in no. 2 of article 46 of CIMI, used by the respondent, will be used, in the second hypothesis the method provided for in no. 1 of article 38 of the same statute will be used, as the applicant claims.

We must observe what the CIMI tells us, in particular its article 6 regarding the classification of urban properties. According to its no. 1 urban properties are divided into:

Residential;

Commercial, industrial or for services;

Land for construction;

Other.

No. 2 of the same article establishes that 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.

Those classified as "other" are defined by the residual criterion contained in no. 4 of said article 6, regarding 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 mentioned in no. 3 of the aforementioned rule.

Accordingly, properties with a commercial purpose shall be those whose use permits the practice of acts of commerce, regulated by commercial law, in particular those provided for in article 463 of the Commercial Code.

From this perspective, the sale of fuels, exercised by the applicant on the property in question, objectively constitutes the practice of acts of commerce, given that the sale of products acquired for that purpose are commercial sales and, in turn, such acts are practiced by a commercial company which, pursuant to no. 2 of article 13 of the Commercial Code, is considered a merchant.

In the concrete case, the argument that it is not sufficient for the practice of commercial acts in a property for it to be automatically classified as commercial does not hold, by making a comparison with a bullring, which from the point of view of this tribunal is not similar, and the decision in the STA Decision handed down in case 0770/12 of 10/04/2013 does not apply given that we are faced with diverse and incomparable realities.

A "fuel supply station" is a complex reality that comprises, in addition to the supply units, other buildings and integrated structures (such as convenience stores, cafeterias, vehicle washing stations, etc.) which together in their structural composition plus the clientele, form the commercial establishment.

In the case at hand we are faced with a property structured as a commercial establishment and we see no impediment to the method provided for in article 38 of CIMI already cited being applied in its appraisal.

Moreover, there is abundant arbitral jurisprudence to the effect of considering fuel supply stations as urban commercial properties.

Also the Central Administrative Court[11] of the South handed down a decision on 04 June 2015 in case 08035/14, where it decided that a property can only be classified as urban in the category "other," provided for in paragraph (d) of no. 1 of article 6 of CIMI, when the building or construction cannot be classified in the category commercial, industrial or for services.

As already seen the property in question is a complex structure, composed of two buildings, intended for cafeteria and warehouse, two small buildings, tanks, fuel pumps, roads, pavements, green areas and spaces for passage of vehicles for the purchase of fuels which, as a whole, are part of the commercial establishment, so there is no motivation seen to prevent its classification as a commercial property and as such that the determination of its TPV must be made in accordance with the terms provided for in article 38 of CIMI.

IV – DECISION

Accordingly, the tribunal decides:

To declare the request for arbitral determination to be well-founded, with the consequent declaration of the illegality of the appraisal act at issue here, determining its annulment.

To order the repetition of the appraisal procedure in accordance with the qualification of the property as a "commercial property" and application of the criteria provided for in article 38 of CIMI, with the wording in force at the date of the facts.

To fix the value of the case at € 2,052.02 in accordance with the provisions contained in article 299, no. 1, of CPC[12], article 97-A of CPPT[13], and article 3, no. 2, of RCPAT[14].

To fix the costs, pursuant to no. 4 of article 22 of RJAT, in the amount of € 612.00 in accordance with the provisions contained in table I referred to in article 4 of RCPAT, which shall be borne by the respondent.

Lisbon, 28 September 2017

Text prepared by computer, in accordance with, in accordance with article 131, no. 5 of CPC, applicable by referral of article 29, no. 1, paragraph (e) of RJAT, with blank lines and reviewed by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Acronym for Corporate Identification Number
[2] Acronym for Legal Regime of Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for Taxable Property Value
[5] Acronym for Administrative Arbitration Center
[6] Acronym for Municipal Property Tax Code
[7] Acronym for Municipal Master Plan
[8] Acronym for Supreme Administrative Court
[9] Acronym for Administrative Process
[10] Acronym for Municipal Property Tax
[11] Acronym for Central Administrative Court
[12] Acronym for Civil Procedure Code
[13] Acronym for Tax Procedure and Process Code
[14] Acronym for Costs in Tax Arbitration Proceedings Regulation

Frequently Asked Questions

Automatically Created

How are fuel stations classified for IMI (Municipal Property Tax) purposes under Portuguese tax law?
Fuel stations present a classification challenge under Portuguese IMI law. The Tax Authority (AT) typically classifies them as 'other' urban properties under Article 6(4) of CIMI, arguing they constitute specialized installations not fitting residential, commercial, industrial, or service categories. However, taxpayers frequently contend that fuel stations should be classified as 'commercial' properties under Article 6 CIMI because they are licensed for commercial activities (fuel sales, retail services). The classification determines the valuation methodology: 'commercial' properties are valued under Article 38 CIMI using comparative market methods, while 'other' properties are valued under Article 46(2) CIMI using construction cost plus land value approaches, often resulting in significantly different Taxable Asset Values.
What is the difference between 'commercial' and 'other' classification for urban properties in the Portuguese IMI Code (CIMI)?
The distinction between 'commercial' and 'other' classifications under CIMI is crucial for valuation purposes. Commercial properties, defined in Article 6 CIMI, are buildings or fractions autonomously intended for commercial activities, services, or liberal professions. They are valued using the comparative method in Article 38 CIMI, based on market transactions and rental values. 'Other' properties, under Article 6(4) CIMI, encompass urban buildings not fitting residential, commercial, industrial, or service categories, including specialized structures. These are valued using the cost method in Article 46(2) CIMI, calculating construction costs plus land value based on permitted development indices. The 'other' classification typically yields higher valuations as it doesn't reflect market depreciation or functional obsolescence affecting specialized properties.
How does Article 6 of the CIMI define the classification of urban buildings used for commercial activities?
Article 6 of CIMI establishes the classification framework for urban buildings. It defines commercial properties as buildings or autonomous fractions thereof intended for commercial activities, provision of services, or exercise of liberal professions. The classification depends on the building's licensed use and functional purpose. For properties used for commercial activities like retail sales or service provision, Article 6 supports commercial classification. However, Article 6(4) creates an 'other' category for buildings serving purposes not covered by residential, commercial, industrial, or service classifications. The interpretative challenge arises with specialized facilities like fuel stations: whether their commercial operational nature predominates, or whether their specialized infrastructure character justifies 'other' classification. Arbitral tribunals must analyze the property's essential nature and licensed use to determine the appropriate classification.
Can a taxpayer challenge the Taxable Asset Value (VPT) of a property through CAAD arbitral proceedings?
Yes, taxpayers can challenge the Taxable Asset Value (VPT) determined by the Tax Authority through CAAD (Administrative Arbitration Center) arbitral proceedings under the RJAT (Legal Regime for Tax Arbitration). Article 2(1)(a) and Article 10(1)(a) of RJAT grant jurisdiction to tax arbitration for disputes concerning property valuation acts, including IMI appraisals. Taxpayers may request arbitration after exhausting the second appraisal procedure when disagreeing with the classification or valuation determined by appraisal commissions. The arbitral tribunal has authority to review both legal and factual determinations, assess whether the Tax Authority correctly applied CIMI provisions, and annul illegal appraisal acts. Arbitration provides an alternative to judicial appeals, offering faster resolution of property valuation disputes with specialized arbitrators experienced in tax matters.
What impact does urban property classification have on the calculation of the Taxable Asset Value (VPT) under Articles 38 and 46 of the CIMI?
Urban property classification fundamentally determines the valuation methodology and resulting VPT under CIMI. Article 38 CIMI, applicable to commercial properties, employs a comparative method based on market evidence: coefficients applied to building areas considering location, quality, comfort, and market rental values. This typically produces lower valuations reflecting market conditions and property age. Article 46(2) CIMI, applicable to 'other' properties, uses a cost-based method: reconstruction cost (Vc) plus land value (Vt), treating improvements separately. Land is valued based on theoretical construction potential under municipal planning regulations, not actual use. This methodology often generates higher VPT because it doesn't account for functional obsolescence, market depreciation, or specialized use limitations. The classification dispute in fuel station cases often involves VPT differences exceeding 200-300%, making proper classification critical for tax liability determination.