Process: 209/2014-T

Date: July 29, 2014

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 209/2014-T) addresses the application of the IMI safeguard regime under Article 15-O of Decreto-Lei 287/2003 to urban buildings with multiple independently usable units. The taxpayer owned a 1966 building under vertical property regime containing six residential units (two per floor across three floors). Following a general revaluation under CIMI in 2013, the property's taxable value increased from €8,467.42 to €186,920.00, causing the 2012 IMI assessment to jump from €59.27 to €507.12. The Tax Authority applied the safeguard regime separately to each independent unit, limiting the annual increase per unit to €75 plus the prior year's IMI attributable to that unit. The taxpayer challenged this approach, seeking partial annulment of €219.91, arguing the safeguard regime should apply to the entire building as a single property rather than to each autonomous unit separately. The central legal question involved interpreting Article 15-O in conjunction with Article 12(3) of CIMI, which mandates separate cadastral registration for each floor or independently usable part with discriminated taxable values. The Tax Authority maintained that because CIMI requires individual registration and valuation of each autonomous unit, the safeguard regime must likewise apply per unit rather than to the aggregate property. The tribunal analyzed whether the phrase 'per property or per part of urban property' in Article 15-O permits separate application to independently usable units within a vertical property regime. The decision establishes important precedent for calculating IMI safeguard limits in buildings with multiple autonomous fractions, particularly affecting older properties undergoing general revaluation where the cadastral matrix previously did not properly discriminate individual unit values. This interpretation significantly impacts the financial burden on owners of multi-unit buildings during transitional valuation periods.

Full Decision

ARBITRAL DECISION - CAAD

I – Report

  1. On 28.02.2014, the Petitioner ..., taxpayer number ..., with domicile at Street ..., …, requested the CAAD to constitute an arbitral tribunal, pursuant to article 10 of Decree-Law no. 10/2011, of January 20 (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as LFTM), in which the Tax and Customs Authority is Respondent, with a view to the partial annulment of the assessment act for IMI (Municipal Property Tax) concerning the urban property no. ..., of the parish of …, Municipality of …, relating to the year 2012, which corresponds to document no. 2012 ..., which resulted in a levy of 507.12 €.

The partial annulment sought is in the amount of 219.91 €, with a further request for payment of compensatory interest from the date of payment, which the Petitioner considers undue.

  1. The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD and notified to the Tax and Customs Authority.

Pursuant to the terms and for the purposes of article 6, no. 1 of LFTM, by decision of the President of the Ethics Council, duly communicated to the parties within the legally applicable time limits, Dr. Marcolino Pisão Pedreiro was appointed as arbitrator, who communicated to the Ethics Council and to the Administrative Arbitration Centre his acceptance of the appointment within the properly applicable time limit.

The Arbitral Tribunal was constituted on 7.05.2014.

  1. The meeting provided for in article 18 of LFTM took place on 18.06.2014, at 9:30 hours.

  2. The Petitioner, as the basis of its claim, argued that the assessment act was tainted with the defect of violation of law by breach of no. 1 of article 15-O of Decree-Law no. 287/2003, of November 12.

  3. The Tax and Customs Authority, called upon to respond, contested the Petitioner's claim, arguing that the illegality alleged by the Petitioner does not occur.

  4. The parties submitted written submissions in which they maintained their positions.

  5. The tribunal is materially competent and is regularly constituted pursuant to LFTM.

The parties have legal personality and capacity, are legitimate parties and are legally represented.

The case does not suffer from defects that would invalidate it.

II – The Relevant Facts

  1. The tribunal considers the following facts as proven:

  2. The Petitioner is listed in the cadastral matrix as owner of the urban property registered under article U-..., of the Parish of …, Municipality of ….

  3. It is a property subject to vertical property regime, whose construction was completed on 3.03.1966, composed of ground floor, first and second floors, each with two parts capable of independent use intended for residential purposes.

  4. In March 2013 the Petitioner was notified of an IMI assessment for 2012 based on the taxable property value of 8,467.42 €, corresponding to valuation that occurred before the CIMI entered into force, which resulted, for this property, in a levy of 59.27 €.

  5. The assessment for the year 2011 had been set by the Respondent at the value of 57.13 €.

  6. On 25 March 2013, the Petitioner was notified of valuation of the property, pursuant to CIMI, in the context of the general valuation procedure for urban properties, which resulted in the new taxable property value of 186,920.00 €, corresponding to the sum of the taxable property value of the left and right ground floors, each with taxable property value of 31,400.00 €, and the remaining four units, each with the new taxable property value of 31,030.00 €.

  7. On 7.05.2013, the Tax and Customs Authority carried out a new IMI assessment for 2012, through document no. 2012 ..., which resulted in a new levy for this property in the amount of 507.12 €, based on the application of the rate of 0.40% to that taxable property value, but correcting the value thus obtained with the application of the safeguard regime, provided for in article 15-O of Decree-Law no. 287/2003, of November 12, added by Law no. 60-A/2011, of 30-11, treating the property in question as property with parts capable of independent use.

  8. The increase per part capable of independent use had as limit the value of 75 €, each, to which the Respondent added, for purposes of assessment, the value of 9.6 € relating to IMI due in the previous year, relating to each of the parts of the right ground floor and the left ground floor, having added to the remaining ones the value of 9.48 €, each, also relating to IMI due in the previous year.

  9. Which resulted in the assessment of 507.12 € corresponding to 84.60 € to the taxable property value of each of the parts of the ground floor and 84.12 € to each of the remaining four independent units.

  10. Without application of the safeguard regime, from the application of the legal rate of 0.40% to the taxable property value of all independent units of the property, the levy would result in 747.68 €.

  11. Although the property, before and after this valuation, has always had the same composition, the taxable property value of each part capable of independent use was not properly discriminated in the cadastral matrix, and the IMI due for the year 2011 for each independent unit was obtained by the Respondent by dividing it among the six parts capable of independent use.

  12. According to document no. 2012 ... from the new levy was deducted the value of 59.27 € resulting from the previous levy, which resulted in an amount to pay of 447.85 €.

  13. No other facts relevant to the decision of the case were proven, nor were they alleged.

  14. The Tribunal's conviction regarding the determination of factual matters was based on the allegations of facts invoked by the Petitioner and not contested by the Respondent, on the documents contained in the file presented by the parties and contained in the administrative file, namely the cadastral booklet of the property and the notifications of assessments carried out for the year 2012, it being noteworthy that the parties have manifested no divergence with regard to the facts, confining the disagreement to legal matters.

III – The Applicable Law

  1. Article 15-O of Decree-Law no. 287/2003, of November 12, added by Law no. 60-A/2011, of 30-11, under the heading "Safeguard Regime for Urban Properties" establishes the following in its no. 1:

"The IMI levy concerning the years 2012[1] and 2013 and assessed in the years 2013 and 2014, respectively, per property or per part of urban property subject to general valuation, cannot exceed the IMI levy due in the immediately preceding year added, in each of those years, of the greater of the following values:

a) € 75; or

b) One-third of the difference between the IMI resulting from the taxable property value established in the general valuation and the IMI due in the year 2011 or that should have been, in the case of exempt properties."

  1. It results, thus, from the provision of the aforementioned rule that, depending on the specific case, it applies to an urban property or a part of an urban property subject to general valuation.

  2. This rule must be understood in connection with article 12, no. 3 of CIMI which establishes that "Each floor or part of property capable of independent use is considered separately in the cadastral registration, which also discriminates the respective taxable property value"[2], since it is from this rule that it results which parts of urban property are subject to valuation, which will imply the discrimination of the respective taxable property value.

  3. From the combination of no. 1 of article 15-O of Decree-Law no. 287/2003 with article 12, no. 3 of CIMI, it results, thus, that each floor or part of floor capable of independent use is considered separately in the cadastral registration, which discriminates, also, the respective taxable property value, and the safeguard regime provided for in the aforementioned article 15-O applies to each floor or part capable of independent use.

As stated in the arbitral decision rendered in case 245/2013-T[3]:

"In the same sense as the individualization, for tax purposes, of the independent units of urban properties, the provision of no. 1 of article 15-O of Decree-Law no. 287/2003, of 12/11, added by Law no. 60-A/2011, of 30/11, is also relevant.

(…) In accordance with the provision of the aforementioned rule, the safeguard clause relating to the increase in taxation in IMI resulting from the general valuation of urban properties is applicable per property or part of urban property that is subject to the aforementioned valuation."

  1. It happens that, although the property in question is composed of parts capable of independent use, their respective taxable property values were not discriminated in the cadastral matrix, contrary to article 12, no. 3 of CIMI.

For this reason, the Petitioner understands that the safeguard regime should not be applicable to property with parts capable of independent use.

  1. It is understood, however, that such circumstance does not deprive the property of the characteristic of being composed of parts capable of independent use, there being, only, an error in the cadastral registration.

The law itself provides for the existence of urban properties divided into floors or independent use divisions, in which the omission of discrimination of the taxable property value occurs with respect to such parts.

In fact, article 130, no. 3 of CIMI provides that:

"The taxpayers referred to in no. 1 may, at any time, object[4] to any error in cadastral registrations, namely on the basis of the following grounds:

(….)

h) Non-discrimination of the taxable property value of urban properties divided into floors or independent use divisions".

From this rule it follows, thus, with clarity, that CIMI treats the omission in question as a mere error, the property not ceasing to be what, in substance, is: an urban property divided into floors or divisions capable of independent use.

  1. It follows from this that the property in question was not "transformed" into urban property with parts or floors capable of independent use by the valuation carried out in 2013. It already was previously.

  2. The safeguard regime provided for in article 15-O provides for its application to two distinct situations, and it is certain that the reality of the facts of the case sub judice subsumes into one of them: "part of urban property subject to general valuation".

  3. The safeguard regime takes as reference the IMI levy of the previous year, and as already mentioned, in such year the error occurred consisting of the omission of the discrimination of the taxable property value relating to each independent unit.

It should also be noted that, strictly speaking, there is no levy for each part capable of independent use.

Pursuant to article 119, no. 1 of CIMI "The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month preceding that of payment, the respective collection document, with discrimination of properties, their parts capable of independent use, respective taxable property value and the levy imputed to each municipality of the location of the properties".

It follows from this that there is not properly a levy per independent unit, but only that, from the discrimination of this part and the respective taxable property value results, by simple arithmetic operation, the part of the levy that corresponds to it, which does not occur if that value is not discriminated.

  1. In the absence of this discrimination, the Tax and Customs Authority proceeded to divide the levy of 2011 of the property among the six units, imputing to each of the independent parts of the ground floor 9.60 € and to each of the other ones 9.48 €, relating to IMI due in the previous year, and considered this to be the IMI due by each of them in the immediately preceding year, for purposes of the calculations pertaining to the safeguard regime, provided for in article 15-O of Decree-Law no. 287/2003, of November 12.

  2. Thus, to determine the application of the safeguard regime in the specific case the Tax and Customs Authority applied the rate of 0.40% to the taxable property value of each part capable of independent use and obtained the values of 125.60 € for one of the parts of the ground floor and the value of 124.12 € for each of the other four parts.

Then, it subtracted from each of the independent parts of the ground floor 9.60 € and from each of the remaining ones 9.48 €, relating to IMI due in the previous year, after which it divided the product of this subtraction by three, concluding that such value was less than 75,000 €, therefore, pursuant to no. 1 of article 15-O of Decree-Law no. 287/2003 of November 12, applied for purposes of safeguard regime the value of 75,000 €.

  1. The Petitioner argues, in practice, that the safeguard regime should not be applicable, in this case, to the parts of urban property with parts capable of independent use, and that the total IMI of the property should be used for the calculation thereof, whether due in the year 2011 or applicable for the year 2012, resulting from the 2013 valuation.

  2. As a consequence of this position, the Petitioner understands that:

"Given that the legislator ordered the comparison between the levies of 2011 and 2012, the safeguard regime would limit the increase in IMI to:

-75 €; or

-Difference between IMI levies of 2011 and 2012:

The sum of the taxable property values of 2012 corresponds to 186,920 €

Applying the rate of 0.4% we have an IMI levy of 747.68 €.

The difference between levies is: 747.68 - 57.13 = 690.55

And one-third of that difference equals 690.55/3 = 230.18 €

(…) The highest value is 230.18 €. Therefore, the increase in the IMI levy of property U-... could not exceed 230.18 €.

Therefore, the levy would be 57.13 + 230.18 = 287.21 €."

  1. It happens that, to the substantive reality of the property in question the safeguard regime imposes the individualized consideration of each independent unit and these already existed materially, not having been "created" by the valuation, as has already been emphasized.

  2. Furthermore, it does not appear that the solution applied by the Tax and Customs Authority, of dividing the levy of the property relating to 2012 among the six independent units, in the absence of discrimination of the taxable property value peculiar to each unit in that year, is devoid of foundation or has prejudiced the Petitioner by comparison to the taxable property value that would have been discriminated had the Petitioner previously used the right provided for in article 130, no. 3, al. h) of CIMI, or the Tax and Customs Authority itself had promoted it pursuant to no. 5 of the same provision.

In reality, the discriminated taxable property value of each of the units would be what was considered in the assessment sub judice and admitting that it could not be exactly the same, the difference would always be of very reduced value, not to say irrelevant, and the total taxable property value of the property would always be the same, so that the value of the levy would never be different from what was obtained.

  1. On the other hand, it should be noted that, even in case of discrimination of the taxable property value of each independent unit, the reference to the levy of each one is strictly a fiction because, in reality, from article 119, no. 1 of CIMI does not result that a "levy" occurs per independent unit, but only that the part of the levy that is imputed to each one is arithmetically determinable, and further, the legislator in article 15-O, no. 1, does not refer to "IMI levy of the immediately preceding year", but rather "IMI due in the immediately preceding year", a broader expression that is compatible with a levy not individualized per property, allowing consideration by "part of property", provided for in the rule.

  2. The non-consideration of the substantive reality of the property would not only violate the letter and the spirit of no. 1 of article 15-O, but would also harm the principle of fiscal equality by comparison with equivalent property in which the cadastral error provided for in article 130, no. 3, al. h) had not occurred, or in which, the same having occurred, had been corrected by initiative of the taxpayer, provided for in that rule, or promoted ex officio by the Tax and Customs Authority, pursuant to no. 5 of the same article.

Such solution is, furthermore, the one that best harmonizes with the principle of substantive justice.

  1. Thus, it must be concluded that the safeguard regime provided for in article 15-O, no. 1 of Decree-Law no. 287/2003, of November 12, was correctly applied, and the assessment sub judice is not in non-compliance with the law and, therefore, should not be annulled.

IV – Decision

Thus, the arbitral tribunal decides:

a) To judge the challenge as unfounded, the requested partial annulment of the assessment act not being declared.

b) To judge the request for payment of compensatory interest as unfounded.

Value of the action: 219.91 € (two hundred nineteen euros and ninety-one cents) pursuant to article 315, no. 2 of the CPC and 97-A, no. 1, letter a), of CPPT and 3, no. 2 of the Regulation of Costs in Arbitration Proceedings.

Costs to be borne by the Respondent, in the amount of 306.00 € (three hundred six euros) pursuant to no. 4 of article 22 of LFTM.

Lisbon, CAAD, 29 July 2014.

The Arbitrator

(Marcolino Pisão Pedreiro)

[1] Pursuant to article 15-D, no. 4 of this act: "The taxable property values of urban properties that have been subject to general valuation enter into force:

a) On 31 December 2012, for purposes of the Municipal Property Tax.

(…)

[2] The identical rule was already contained in article 13, no. 2 of the Code of Local Contribution which provided that "Each floor or part of property capable of independent use shall be considered separately in the cadastral registration, which shall also discriminate the respective taxable value" but not in the corresponding article of the Code of Real Property Contribution and Tax on Agricultural Industry (article 155)

[3] Available at http://www.caad.org.pt/

[4] No. 5 of the same article also establishes that "The chief of the tax services may, at any time, promote the correction of any error in cadastral registrations, (…)"

Frequently Asked Questions

Automatically Created

What is the IMI safeguard regime under Article 15-O of Decreto-Lei 287/2003 and how does it apply to property tax assessments?
The IMI safeguard regime under Article 15-O of Decreto-Lei 287/2003 (added by Law 60-A/2011) limits IMI tax increases for properties undergoing general revaluation in 2012-2013. The levy cannot exceed the prior year's IMI plus the greater of either €75 or one-third of the difference between the new IMI (based on revalued taxable property value) and the 2011 IMI. This regime applies 'per property or per part of urban property subject to general valuation.' When combined with Article 12(3) of CIMI, which requires separate cadastral registration for each floor or independently usable part with discriminated taxable values, the safeguard applies individually to each autonomous unit in buildings with vertical property regimes rather than to the building as a whole.
How does IMI taxation apply to urban buildings with independently usable parts or floors (propriedade vertical)?
IMI taxation of urban buildings with independently usable parts (propriedade vertical) follows Article 12(3) of CIMI, which mandates that each floor or part capable of independent use be considered separately in cadastral registration with its own discriminated taxable property value (valor patrimonial tributário). This means each autonomous fraction receives individual valuation and separate IMI calculation. In the context of general revaluations, the safeguard regime of Article 15-O applies per independent unit, not to the aggregate building. For buildings where prior cadastral matrices did not properly discriminate individual unit values, tax authorities determine per-unit historical IMI by dividing the total building IMI proportionally among the autonomous fractions to establish baseline values for applying safeguard regime limits.
Can a taxpayer request partial annulment of an IMI tax assessment through CAAD arbitration?
Yes, taxpayers can request partial annulment of IMI tax assessments through CAAD (Centro de Arbitragem Administrativa) arbitration under Article 10 of Decreto-Lei 10/2011 (Legal Regime for Arbitration in Tax Matters - RJAT). The taxpayer must specify the contested amount and grounds for annulment. In this case, the petitioner challenged €219.91 of a €507.12 assessment, arguing violation of Article 15-O's safeguard regime. CAAD arbitration provides an alternative to judicial tax courts, with appointed arbitrators examining whether tax assessments comply with applicable law. Petitioners can also request compensatory interest (juros indemnizatórios) from the payment date if amounts are determined to be unduly collected. The process involves formal acceptance, arbitrator appointment, response from Tax Authority, and written submissions before decision.
What are the conditions for claiming compensatory interest (juros indemnizatórios) on overpaid IMI property tax?
Compensatory interest (juros indemnizatórios) on overpaid IMI property tax is governed by Article 43 of the Lei Geral Tributária (LGT). Taxpayers can claim compensatory interest when they have paid tax amounts later determined to be undue or excessive. The interest accrues from the date of payment until refund. To claim compensatory interest, the taxpayer must: (1) successfully challenge the tax assessment through administrative review, arbitration, or judicial proceedings; (2) have actually paid the contested amount; (3) demonstrate the payment was undue under applicable law; and (4) request compensatory interest either in the initial challenge or separately. In CAAD arbitration, petitioners typically include compensatory interest claims alongside the principal annulment request. The rate and calculation method are established by law and apply automatically once conditions are met.
How does the patrimonial tax value (valor patrimonial tributário) reassessment affect IMI calculations for older buildings?
Patrimonial tax value (valor patrimonial tributário) reassessment significantly affects IMI calculations for older buildings through general revaluation procedures under CIMI. Properties constructed before CIMI's entry into force may have outdated valuations substantially below current market-based assessments. When general revaluation occurs, the taxable property value can increase dramatically—in this case from €8,467.42 to €186,920.00 (22-fold increase). Such revaluations apply the current CIMI methodology considering location, construction quality, age, and other factors. To mitigate sudden tax increases, the safeguard regime limits annual IMI increases during 2012-2013. For older buildings with vertical property regimes where prior cadastral matrices did not properly discriminate individual unit values, authorities must reconstruct historical per-unit IMI to apply safeguard limits correctly. This transition presents particular challenges when older properties have multiple autonomous units requiring individual valuation and separate safeguard calculations.