Process: 203/2014-T

Date: August 25, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 203/2014-T) addresses whether the Tax Authority can aggregate the patrimonial values of individual units in a vertical property building to apply Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS). The claimant challenged 18 Stamp Tax assessment acts totaling €5,327.55 for 2012, concerning urban property in full ownership with multiple floors and divisions susceptible to independent use. The central legal issue concerns properties in vertical ownership where no individual unit reaches the €1,000,000 threshold, but the aggregated value does. The claimant argued that the Tax Authority illegally summed the patrimonial values of separate floors, when each should be considered independently for tax purposes. The claimant also raised constitutional challenges, alleging violations of tax equity principles, legality (Article 103(2) of the Portuguese Constitution), and principles of justice, equality, and tax proportionality. The Tax Authority defended its position by arguing that while Municipal Property Tax (IMI) assesses each independent division separately, Stamp Tax legislation requires different treatment. The AT contended that for full ownership properties with divisible floors, the property as a whole is relevant for tax purposes, distinguishing these from autonomous fractions under horizontal property regimes as defined in Article 2(4) of the Municipal Property Tax Code (CIMI). The claimant referenced favorable precedents from CAAD Cases 50/2013-T and 132/2013-T, which adopted interpretations favoring separate assessment of independent divisions. The tribunal dispensed with the formal hearing under Article 18 of RJAT, as both parties consented, given the similarity to previously decided cases addressing identical legal questions regarding the proper interpretation of item 28.1 TGIS for vertical property taxation.

Full Decision

CAAD TAX ARBITRATION DECISION – ENGLISH TRANSLATION

THE PARTIES

Claimant: A..., NF ..., residing at Avenue ..., Estoril.

Respondent: Tax and Customs Authority (AT).

DECISION

REPORT

a) On 28-02-2014, the Claimant submitted to the CAAD a request seeking, under the Legal Framework for Arbitration in Tax Matters (RJAT), the constitution of a Singular Arbitral Tribunal (TAS).

b) The request is signed by a lawyer whose power of attorney was attached.

THE REQUEST

c) The Claimant petitions for the annulment of 18 acts of assessment of Stamp Duty (IS) with reference to the year 2012 – identification of documents nos ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., – generating a total collection of 5,327.55 euros, dated 2013-07-17 and relating to urban property in full ownership with floors or divisions susceptible to independent use, located in …, in …, no. …, registered in the urban property matrix of the parish of …, municipality of …, under article U-...º - 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E, (former article 305º 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E – parish of … (extinct), but counted from the assessment documents as property described in Municipality/Parish … … – U – ... - 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E).

d) Alleges that the assessment acts are illegal by violation of the rule of incidence of item 28.1 of the TGIS, in that the AT summed the patrimonial values of the floors in full ownership and none of them individually has a VPT equal to or greater than 1,000,000.00 euros.

e) And that the rule of incidence, in the interpretation applied in practice by the AT, is unconstitutional and arbitrary by violation, namely, of the principle of tax equity and legality provided for in no. 2 of article 103 of the CRP as well as the principles of justice, equality and tax proportionality provided for in the Fundamental Law.

f) They conclude by petitioning for the annulment of the 18 tax acts identified in c), with all legal consequences.

OF THE ARBITRAL TRIBUNAL

g) The request for arbitral pronouncement was accepted by the President of the CAAD on 04-03-2014 and automatically notified to the AT on 05.03.2014.

h) By the Deontological Council of the CAAD, the signatory of this decision was appointed as arbitrator, and the parties were notified thereof on 21.04.2014.

i) Whereby the Singular Arbitral Tribunal (TAS) has been, since 08.05.2014, duly constituted to assess and decide upon the object of this dispute.

j) All these acts are documented in the communication of constitution of the Singular Arbitral Tribunal dated 08.05.2014, which is hereby reproduced.

k) Since issues identical to those already raised in many other cases already decided at the CAAD are raised in this proceeding, the TAS, by ruling of 06.06.2014, decided to dispense with the parties' meeting to which article 18 of the RJAT refers, following a request by the AT presented also on 06.06.2014, if the Claimant had no objection thereto.

l) Taking into account the purposes of the parties' meeting referred to in article 18 of the RJAT, in the TAS ruling of 06.06.2014, the parties were requested to state whether they also waived allegations and that their silence would be understood as assent to their non-realization.

m) The parties having been notified of the proceeding referred to in the two preceding subsections, none manifested itself in the sense of realizing supplementary allegations, nor of the necessity of realizing the parties' meeting of article 18 of the RJAT.

n) Whereby the meeting provided for in article 18 of the RJAT did not take place nor were allegations of the parties produced.

PROCEDURAL REQUIREMENTS

o) Legitimacy, capacity and representation – the parties possess legal personality and capacity, are legitimate and are duly represented.

p) Contradiction – the AT attached to the proceedings, on 03.06.2014, the response to the request for pronouncement submitted by the Claimants.

q) Dilatory exceptions – the proceeding does not suffer from nullities and the request for arbitral pronouncement is timely since it was presented within the prescribed period in subparagraph a) of no. 1 of article 10 of the RJAT.

SUMMARY OF THE POSITION OF THE CLAIMANTS

Regarding non-conformity with the rule of incidence of item 28.1 of the TGIS

r) The Claimant considers that the tax patrimonial value (VPT) in the case under discussion, relevant for the incidence of the taxation rate, given that it is property in full ownership that integrates floors or divisions with independent use, is not the sum of all those floors or divisions, but the VPT of each of the floors or divisions.

s) Given that the subjection to stamp duty of item 28.1 of the TGIS cannot result from the "concentration of independent divisions in the same property" nor from the "failure to establish a horizontal property regime".

t) Proposing a reading of the law in accordance with what has already been decided in Case CAAD 50/2013-T and in Case CAAD 132/2013-T, adhering to certain passages of these decisions that it transcribes.

u) It also argues that the taxation in 2012 to be due should be carried out at the rate of 0.5% and not 1% as occurred in the case under discussion.

Regarding the unconstitutionality of the rule contained in item 28.1 of the TGIS, in the implicit reading applied in practice by the AT

v) It argues that the interpretation applied in practice by the AT, of items 28 and 28.1 of the TGIS, in the assessments now in question, violate the principle of equity, principle of tax legality provided for in no. 2 of article 103 of the Fundamental Law, as well as the principles of justice, equality and tax proportionality also provided for in the CRP.

SUMMARY OF THE POSITION OF THE TAX AUTHORITY

Regarding non-conformity with the rule of incidence of item 28.1 of the TGIS

w) The AT argues in the sense that "although the assessment of IS, under the conditions provided for in item 28.1 of the TGIS is carried out in accordance with the rules of the CIMI, the fact remains that the legislator reserves aspects that require proper adjustments". (our underlining)

x) "As is the case with property in full ownership, even if with floors or divisions susceptible to independent use, for although the IMI is assessed in relation to each part susceptible to independent use",

y) "for the purposes of IS the property as a whole is relevant as the divisions susceptible to independent use are not regarded as property, but only autonomous fractions in the horizontal property regime, as per article 2-4 of the CIMI"

Regarding the unconstitutionality of the rule contained in item 28.1 of the TGIS, in the implicit reading applied in practice by the AT

z) There is no violation of the principle of equality because there is no discrimination between horizontal property and full ownership property with floors or divisions susceptible to independent use or between properties with residential use and properties with other uses.

aa) Given that item 28.1 of the TGIS is a general and abstract rule, applicable indiscriminately to the cases provided for therein.

bb) The different valuation and taxation of property in full ownership compared to property in horizontal ownership results from the different legal effects inherent to these two figures.

cc) These are distinct realities, valued by the legislator in different ways.

dd) Arguing for the legality of the tax acts because they constitute a correct application of the law to the facts and do not suffer from any non-conformity with the "grundsnorm".

The AT did not attach the PA, implicitly accepting that the urban property register and the IS assessment notes attached by the Claimant integrate what would be its normal content.

II – ISSUES TO BE SOLVED BY THE TRIBUNAL

The issues that arise before the Tribunal are only related to the interpretation and application of legal rules.

On this matter, in particular, the CAAD has already ruled in several decisions in which the substantive issue is the same, that is, the scope of the rule of incidence of items 28 and 28-1 of the TGIS is discussed.

The limit of interpretation is the letter, the text of the rule. What follows is the "task of interconnection and valuation that escapes the literal domain".

Starting from the principle that every rule has a provision (and a ruling), the question that arises here is to determine, by delimiting, whether the rule of incidence, as it is written – in its provision – (ownership of urban properties … with residential use … whose tax patrimonial value shown in the register, under the terms of the CIMI is equal to or greater than 1,000,000.00 euros – on the tax patrimonial value used for IMI purposes), admits or not the understanding that as regards properties "with residential use" in vertical ownership, with floors or divisions susceptible to independent use, owned by an entity, the VPT on which the rate will apply, should be their sum or should the individual VPT of each floor or division susceptible to independent use be considered, similar to what happens with properties under the horizontal ownership regime.

In essence, what is at stake will be the adoption of an adequate reading of the scope of the rule of incidence contained in items 28 and 28.1 of the TGIS, faced with what no. 7 of article 23 of the CIS refers to regarding the determination of taxable matter and consequent operation of tax assessment:

"Where the tax is due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI."

As we have stated in other decisions, regarding the interpretation of tax rules, there is a rule, although it may be considered residual, very specific, which is found in no. 3 of article 11 of the LGT: "persisting doubt about the meaning of the rules of incidence to apply, the economic substance of the tax facts should be considered".

We are not advocating for an "economic interpretation" of the norms of tax law.

Also here, appeal may be made to the analysis of the "economic substance of the tax facts" to adequately implement the "necessary adaptations of the rules contained in the CIMI" in order to resolve in the most balanced way the question that arises.

We are thus, only and solely, within the scope of the activity of interpretation and application of the rules, that is, in the task of delimiting the legal-factual situations that should be considered as encompassed in the provision of the rule of incidence of this new tax and which will result from the combination of items 28 and 28-1 of the TGIS and in this case what should be deemed acceptable at the level of the "necessary adaptations of the rules contained in the CIMI", following the command of no. 7 of article 23 of the CIS.

The question of conformity of the provision of the rule of incidence, faced with the constitutional text, will only arise if the interpreter arrives at the conclusion that a determined and unequivocal reading of the law – correctly applied to a specific case – violates one or more constitutional principles with such intensity that the legislative option adopted could not have been, also taking into account that the AT should not, on the basis of possible unconstitutionalities of rules, not declared by the courts, cease to apply the law, in the sense it deems most assertive.

What the TAS must ascertain is, in the first place, whether the tax act of IS assessment now contested suffers from any illegality, any non-conformity with the law, in particular "error in the qualification of the tax fact" that affects its maintenance in the tax legal order.

The other ground adduced by the Claimant, which could lead to the sanction of annulment (non-conformity with constitutional principles), being presented in the manner it was, should only be appreciated if it is concluded that there is no non-conformity of the contested tax act with ordinary law in itself, that affects its maintenance in the tax legal order.

This is the issue that the TAS must solve, in the first place, on the basis of the two grounds or arguments (presented in a linked and separate manner) that the Claimant adduces in the request for arbitral pronouncement:

ü The items 28 and 28-1 of the TGIS as rules of tax incidence, as they are written – in their provision – (ownership of urban properties … with residential use … whose tax patrimonial value shown in the register, under the terms of the CIMI is equal to or greater than 1,000,000.00 euros – on the tax patrimonial value used for IMI purposes), admit or not the understanding that as regards urban properties "with residential use" under vertical ownership, with floors or divisions susceptible to independent use, owned by an entity, the VPT on which the rate will apply, should be their sum or should the individual VPT of each floor or division susceptible to independent use be considered, similar to what happens with urban properties under the horizontal ownership regime?

It should be noted that what is referred to in subsection u) of the Report by the Claimant results from a less careful reading of no. 1 of article 6 of Law 55-A/2012, of 29.10. In this legal provision it is expressed: in 2012 and not in 2013 as is referred to in no. 2 of the same article.

The assessments that are the subject of this proceeding were carried out under no. 2 of article 6 of Law 55-A/2012, of 29.10, in 2013, whereby there is no non-conformity with the law of the assessments now under scrutiny, in this particular aspect.

III – PROVEN AND UNPROVEN FACTS. GROUNDS

With relevance to the decision to be adopted, these are the facts that are considered proven, indicating the respective documents (proof by documents) and/or the articles of the request of the Claimants and of the response of the AT as to the facts admitted by agreement, as grounds:

  1. The Claimant A..., NF ..., is the holder of ½ of the ownership right of urban property in full ownership with floors or divisions susceptible to independent use, located in …, in …, no. …, registered in the urban property matrix of the parish of …, municipality of …, under article U-...º - 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E, (former article 305º 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E – parish of … (extinct), but counted from the assessment documents as property described in Municipality/Parish … … – U – ... - 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E) – Preamble and article 2 of the request for pronouncement and document no. 19 attached with the request for pronouncement.

  2. The use of the floors or divisions of the urban property in full ownership referred to in 1) is "residential" – Article 5 of the request for pronouncement and Document no. 19 attached with the request for pronouncement.

  3. The Claimant was notified on a date not specifically determined of 18 acts of assessment of Stamp Duty (IS) – identification of documents nos ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., generating a total collection of 5,327.55 euros, dated 2013-07-17, under item 28.1 of the TGIS – Preamble of the request for pronouncement, Documents nos 1 to 18 attached with the request for pronouncement and articles 1 and 2 of the response of the AT.

  4. The floors or divisions susceptible to independent use, object of taxation, have VPT comprised between 54,180.00 euros (4º D and 4º E) and 75,240.00 euros (the 2nd floor), in a total of 1,065,510.00 euros; – Article 6 of the request for pronouncement and Document no. 19 attached with the request for pronouncement.

  5. In all assessment notes the AT recorded "Tax Patrimonial Value of the property-total subject to tax: 1,065,510.00 euros" – Documents nos 1 to 18 attached with the request for pronouncement.

  6. In document no. 19 attached with the request for pronouncement – urban property register – it appears that the property identified in c) of the Report has 20 floors or divisions with independent use and a total patrimonial value of 1,259,100.00 euros.

There is no other factuality alleged that is relevant for the correct composition of the procedural dispute.

The settled matter results from confession or from the documents attached by the parties whose contents and evidentiary values did not merit any kind of dissonance.

IV – APPRECIATION OF THE ISSUES TO BE SOLVED BY THE TRIBUNAL

The subjection to stamp duty of properties with residential use resulted from the addition of items 28, 28-1 and 28-2 of the General Table of Stamp Duty, carried out by article 4 of Law 55-A/2012, of 29/10, which typified the following tax facts:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value shown in the register, under the terms of the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax patrimonial value used for IMI purposes:

28-1 – For property with residential use - 1%;

28-2 – For property, when the passive subjects that are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, listed in the order approved by the Minister of Finance – 7.5%."

With relevance for the case, refer to:

· No. 7 of article 23 of the CIS regarding the tax assessment: "Where the tax is due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI."

· No. 4 of article 2 of the CIMI: "For the purposes of this tax, each autonomous fraction, under the horizontal property regime, is considered as constituting a property."

· No. 3 of article 12 of the CIMI: "Each floor or part of a property susceptible to independent use is considered separately in the matricial registration which also determines its respective tax patrimonial value".

It appears to us that the answer to the question raised in this request for pronouncement has to do with the reading made by the AT of no. 7 of article 23 of the CIS.

In effect, it appears to us that the crux of the dispute will have to do with the fact that the AT considers that as regards urban properties with residential use, in vertical ownership, with floors or divisions susceptible to independent use, because the floors or divisions are by formal legal definition not considered urban properties (but will be "parts of a property" according to no. 3 of article 12 of the CIMI), it proceeded to add their VPT to determine whether, for each property, the minimum VPT of 1,000,000.00 euros is attainable, a value on which, if equal to or greater than this threshold, it applies the ad valorem rate of 1% of IS of item 28.1 of the TGIS, although subsequently, formally, the assessment note comes subdivided into as many assessments as there are floors or parts of property in vertical ownership, as occurs at the level of IMI assessment.

And it considers that this is permitted because the law states that one must proceed with "the necessary adaptations" of the "rules of the CIMI" (no. 7 of article 23 of the CIS).

This is what results from what is alleged in the response of the AT in article 6 when it indicates the specific legal rule on which it places the crux to have opted for the addition of the VPT of the floors: "… the legislator reserves aspects that require proper adjustments".

But is this reading of the law adequate faced with the existing legal system?

In fact, although items 28 and 28.1 speak of "urban properties" and "per property" and no. 7 of article 23 of the CIS states that "the tax is assessed annually, in relation to each urban property", what seems relevant to us is that, at the level of determining the eligible taxable matter and at the level of the operation of assessing this tax, "… with the necessary adaptations, the rules contained in the CIMI" are applied as is referred to in the aforementioned no. 7 of article 23 of the CIS. But, obviously, "adaptations" provided that they are necessary and respecting the harmony of the legal-fiscal system.

Now what happened – as regards urban properties with residential use, in vertical ownership, with floors or divisions susceptible to independent use – was that the AT the "adaptation" it made, in the operations of determination of taxable matter and consequent assessment of IS, was to add the VPT of each floor or independent division intended for residential purposes with a view to determining the taxation threshold of 1,000,000.00 euros, creating a new legal reality, without legal support, which is a global VPT of urban properties in vertical ownership, with residential use.

This operation of the tax iter (incidence – determination of taxable matter – assessment – payment) will violate the literal element of the rule of incidence, item 28 of the TGIS, which states that this tax applies to "the tax patrimonial value used for IMI purposes".

The fact is that the AT, in the operation of determining the taxable matter and consequent assessment of IS of items 28 and 28.1 of the TGIS (operation of applying a rate to the taxable matter), as regards urban properties with residential use, in vertical ownership, with floors or divisions susceptible to independent use, should not consider any other tax patrimonial value (on which the ad valorem rate of the tax applies) than that which results exclusively from no. 3 of article 12 of the CIMI. Both as regards IMI and as regards IS.

And for the reason that urban properties in vertical ownership, in their entirety, do not have VPT. The law determines in these cases that the VPT be attributed to each floor or part of the property separately.

This conclusion does not lose acuity before the fact that in the property register appears – subsection 6) of part III of this decision – a total patrimonial value of the property that integrates the floors, of 1,259,100.00 euros, all the more so because this value encompasses all the floors, regardless of their residential use.

Creating a new legal reality, with a view to finding a new way of determining the taxable matter (a VPT for the floors or parts of property susceptible to independent use, of residential use) does not configure having legal support in the "necessary adaptations" referred to in no. 7 of article 23 of the CIS.

It will occur, it is perceived, also, non-conformity with the literal element of the final part of the rule of incidence (item 28 of the TGIS) which states that the tax applies to "the tax patrimonial value used for IMI purposes" and if so, should not apply to the sum of tax patrimonial values of properties, parts of properties or floors, the operation of adding tax patrimonial values of floors or parts of property susceptible to independent use, with residential use, having no legal support with a view to reaching the threshold of eligible taxation of 1,000,000.00 euros or more.

That is, it is not in conformity with the law, the creation of a new VPT for the purposes of taxation in IS as regards item 28 of the TGIS, as results from the notation in all collection notes of the following expression: "Tax Patrimonial Value of the property-total subject to tax: 1,065,510.00 euros" (subsections 5) of the matter given as proven – part III of this decision).

What is meant to signify that when in no. 7 of article 23 it is stated that "…the tax is assessed annually, in relation to each urban property", this expression "each urban property" is intended to encompass, faced with the principles stated for interpretation and application of the rules, urban properties in horizontal property and floors or parts of urban properties in vertical ownership, provided they are intended for residential purposes, but always starting from a single taxable base for all legal purposes: the tax patrimonial value used for IMI purposes (final part of item 28 of the TGIS).

Given that, in compliance with what is stated in no. 7 of article 23 of the CIS, an adequate reading must be adopted, "with the necessary adaptations of the rules of the CIMI" which will be to consider that the expression "each urban property" encompasses not only floors in horizontal property (which are urban properties ope legis) but also "floors or parts of property susceptible to independent use" (no. 3 of article 12 of the CIMI) that integrate urban properties in vertical ownership, provided that in both cases there is residential use.

At the level of the interpretation of tax rules, the very specific rule found in no. 3 of article 11 of the LGT can be used: "persisting doubt about the meaning of the rules of incidence to apply, the economic substance of the tax facts should be considered".

Now, if for the floors that make up the autonomous fractions of residential urban properties, in horizontal property, (even if they are by definition and "ope legis" urban properties), for each taxpayer, the VPT are not added to determine the threshold of the eligible value for subjection to IS (1,000,000.00 euros) of item 28 of the TGIS (operation of determining the taxable matter), why should this occur as regards the "parts of property or floors" of urban properties in vertical ownership?

In both cases, the same tax-paying capacity of the taxpayers is manifested (their level of wealth at the level of real estate assets). It is the same "economic substance" analyzed from various perspectives, revealing the same "ability-to-pay".

From the literality of items 28 and 28-1 of the TGIS, especially from the final part of item 28 of the TGIS, combined with no. 7 of article 23 of the CIS, the conclusion will be drawn, with the "necessary adaptations of the rules of the CIMI" that the VPT of the floors or part of the property identified above should not be added to find a new global VPT of urban property, in the part with residential use, an operation of determining eligible taxable matter that the law does not contemplate.

The Claimant adduces, in essence, the non-conformity of the tax acts with tax law, alleging the non-conformity stated in subparagraph a) of article 99 of the CPPT: "erroneous qualification … of tax facts".

In fact, with the grounds expressed above, the IS assessments contested and carried out in the manner they were, are in non-conformity with the rule of incidence of items 28 and 28-1 of the TGIS, thus occurring the illegality provided for in subparagraph a) of article 99 of the CPPT.

With the first ground of the petition formulated by the Claimant in the request for arbitral pronouncement proceeding (subsection d) of the Report), it is not necessary to proceed to the appreciation of the other ground (subsection e) of the Report), by manifest futility.

As a consequence of the above, it will be necessary to judge the petition for annulment of the tax acts submitted by the Claimant before the Arbitral Tribunal as well-founded, since the IS assessments carried out by the AT are not in conformity with the law, in the reading proposed above.

In fact, it results from the facts proven (subsection 4) of part III of this decision) that none of the floors or part of property has, by itself, a VPT that is equal to or greater than the taxation threshold indicated in item 28 of the TGIS (VPT equal to 1,000,000.00 euros).

V – DECISION

By virtue of and with the grounds stated above, the petition for annulment of the 18 acts of assessment of Stamp Duty (IS) with reference to the year 2012 – identification of documents nos ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., generating a total collection of 5,327.55 euros, dated 2013-07-17 and relating to urban property in full ownership with floors or divisions susceptible to independent use, located in …, in …, no. …, registered in the urban property matrix of the parish of …, municipality of …, under article U-...º - 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E, (former article 305º 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E – parish of … (extinct), but counted from the assessment documents as property described in Municipality/Parish … … – U – ... - 2º, 3º, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D, 7º E, 8º D, 8º E, 9º D, 9º E, 10º D, 10º E, 11º D and 11º E), is judged to be well-founded, annulling the assessments of Stamp Duty.

Value of the case: in accordance with the provision in article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (and subparagraph a) of no. 1 of article 97A of the CPPT), the value of 5,327.55 euros is set for the case.

Costs: pursuant to the provision in article 22, no. 4, of the RJAT, the amount of costs is set at € 612.00, according to Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the respondent.

Notify.

Lisbon, 25 August 2014

Singular Arbitral Tribunal,

Augusto Vieira

Text prepared by computer in accordance with the provision in article 138, no. 5, of the CPC, applicable by reference of article 29 of the RJAT.

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

Frequently Asked Questions

Automatically Created

Can the Tax Authority aggregate the VPT of individual units in a vertical property building to apply Verba 28.1 of the Stamp Tax General Table?
According to the claimant's position supported by CAAD precedents (Cases 50/2013-T and 132/2013-T), the Tax Authority cannot aggregate the VPT of individual units in vertical property buildings for Stamp Tax purposes under item 28.1 TGIS. Each independent division or floor susceptible to independent use should be assessed separately. The Tax Authority's contrary interpretation, which treats the entire building as a single taxable unit when in full ownership, has been challenged as contrary to the legal framework that distinguishes independent divisions from mere parts of a unified property.
Is Stamp Tax (Imposto de Selo) due under Verba 28.1 TGIS when no single unit reaches the €1,000,000 threshold?
No, Stamp Tax under item 28.1 TGIS should not be due when no single unit individually reaches the €1,000,000 threshold. The claimant argues that the relevant patrimonial value for taxation is the VPT of each independent floor or division, not their sum. This interpretation prevents taxation based solely on concentration of independent divisions in the same property or failure to establish a horizontal property regime. The obligation arises only when an individual unit's VPT equals or exceeds €1,000,000, triggering the applicable tax rate.
What constitutional principles apply to the taxation of urban properties in vertical ownership under Portuguese tax law?
The constitutional principles applicable include: (1) the principle of tax equity under Article 103(2) of the Portuguese Constitution (CRP); (2) the principle of tax legality, requiring clear legal basis for taxation; (3) the principle of justice in taxation; (4) the principle of equality, ensuring similar situations receive similar tax treatment; and (5) the principle of tax proportionality, requiring taxes to be proportionate to taxable capacity. The claimant alleged that the Tax Authority's interpretation of item 28.1 TGIS violates these fundamental principles by arbitrarily treating vertical property ownership differently from horizontal property regimes without sufficient justification.
How does the CAAD arbitral tribunal address the distinction between horizontal and vertical property for Stamp Tax purposes?
The CAAD tribunal addresses the distinction by examining whether independent divisions in vertical property (full ownership) should be treated differently from autonomous fractions in horizontal property regimes. The Tax Authority argues that Article 2(4) of CIMI establishes that only horizontal property fractions qualify as independent 'property' for tax purposes, while divisions in full ownership constitute a single property unit. However, claimants and some CAAD precedents have rejected this distinction for Stamp Tax purposes, arguing that independent divisions susceptible to separate use should be assessed individually regardless of the ownership structure, to ensure equal treatment and avoid penalizing property owners who have not formally divided their buildings into horizontal property.
What is the procedure to challenge Stamp Tax liquidation acts through tax arbitration at CAAD?
The procedure involves: (1) submitting a request for arbitration to CAAD within the legal deadline under Article 10(1)(a) of RJAT; (2) the request must be signed by a lawyer with attached power of attorney; (3) CAAD's President accepts the request and notifies the Tax Authority; (4) the CAAD Deontological Council appoints an arbitrator; (5) a Singular Arbitral Tribunal (TAS) is constituted; (6) the Tax Authority submits its response; (7) normally a hearing under Article 18 RJAT occurs, though it may be dispensed with by agreement when issues are identical to previously decided cases; (8) parties may submit allegations; and (9) the tribunal issues a decision on the legality of the challenged tax acts, which may result in annulment with all legal consequences.