Process: 228/2016-T

Date: November 11, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 228/2016-T addresses whether construction land plots (terrenos para construção) are subject to Stamp Tax under item 28.1 of the TGIS (General Stamp Tax Table). The claimant, owner of a Lisbon construction plot valued at €3,236,540.00, challenged a stamp duty assessment of €32,365.40 imposed under Law 55-A/2012. Item 28.1 taxes properties with residential use valued at €1,000,000 or more at a 1% rate. The claimant argued that construction land cannot be classified as property with residential use, as it lacks residential occupation and no use license exists until actual construction occurs. The Tax Authority contended that construction plots have residential nature because the residential coefficient under Article 41 of CIMI is applied when calculating their patrimonial tax value (VPT), citing CAC decision 04950/11. The claimant emphasized that the legislator's subsequent amendment through Law 83-C/2013, which explicitly modified item 28.1 to include construction land, demonstrates the original wording did not encompass such properties. This legislative clarification confirms construction plots were not initially subject to the tax. The tribunal evaluated whether using a residential coefficient for valuation purposes equates to actual residential use for tax purposes. The case illustrates the distinction between technical valuation methodologies and substantive property classification for taxation. The requested relief included annulment of the assessment, refund of €32,365.40 paid in installments during 2013, and compensatory interest under Article 43 of LGT. This decision provides important guidance on interpreting tax provisions strictly, particularly when subsequent legislative amendments clarify original legislative intent, and reinforces that formal valuation coefficients do not automatically determine a property's taxable classification for stamp duty purposes.

Full Decision

ARBITRAL DECISION

I – REPORT

1 A…, SA NIPC[1] … with registered office at Rua …, nº … –…, …, … … and … floor, …-…Lisbon, filed a request for arbitral decision, pursuant to the provisions of paragraph a) of article 2(1), article 3(1) and paragraph a) of article 10(1), all of the RJAT[2], with the Tax Authority[3] being named as respondent, with a view to annulling the tax assessment acts imposing stamp duty on the property of an immovable registered in the property roll under urban property number … of the parish of …, municipality of Lisbon, concerning a plot of land for construction, in accordance with the collection documents 2012… in the total amount of € 32,365.40, acts against which an administrative complaint and hierarchical appeal were filed, both denied, and, not accepting such taxation and decisions, the present request was filed.

2 The request was filed without exercising the option to appoint an arbitrator and was accepted by the Esteemed President of CAAD[4] and automatically notified to the Tax Authority on 18/04/2016.

3 In accordance with the provisions of article 6(2) of the RJAT, by decision of the Esteemed President of the Deontological Council, duly communicated to the parties within the legally applicable periods, on 14/06/2016, arbitrator Arlindo José Francisco was appointed to the tribunal, who communicated his acceptance of the appointment within the legally stipulated period.

4 The tribunal was constituted on 29/06/2016 in accordance with the provisions contained in paragraph c) of article 11(1) of the RJAT, as amended by article 228 of Law no. 66-B/2012 of 31 December.

5 By its request, the claimant seeks the annulment of the stamp duty assessment act in question, on the grounds that it considers it manifestly illegal, with all legal consequences flowing therefrom, namely the refund of amounts unduly paid and indemnificatory interest in accordance with article 43 of the LGT[5].

6 It supports its position, in summary, on the understanding that plots of land for construction in no way may be considered properties with residential use, and do not possess nor may possess a license of use for residential purposes, as long as no construction capable of residential use has been implanted thereon.

7 It does not accept the interpretation that the Tax Authority makes of the law for the rejection of the complaint and hierarchical appeal, by considering that the expression "property with residential use" includes residential properties proper and also plots of land for construction, attributing merely interpretative character to Law 83-C/2013 of 31 December in giving new wording to item 28.1 of the TGIS.

8 In its response, the respondent considers that item 28.1 of the TGIS as worded in Law 55-A/2012 determines the taxation of plots of land for construction, since these have the legal nature of properties with residential use, considering that in determining their TPV[6], the residential use coefficient is taken into account, as provided in article 41 of the CIMI[7], citing Decision no. 04950/11 of 14/02/2012 of the CAC[8] of the South.

9 That the legislator does not speak of properties intended for housing, but of residential use, an expression far broader, with a view to integrating other realities beyond those identified in article 6(1), paragraph a) of the CIMI.

10 From this perspective, it understands that the assessment in question should be maintained as it embodies a correct interpretation and application of law to the facts, not violating the law, therefore the claim should be judged unfounded and the respondent absolved from the request.

II - CASE MANAGEMENT

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

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

By order of 10/10/2016 the tribunal considered unnecessary the holding of the hearing provided for in article 18 of the RJAT, the production of oral or written pleadings and considered that the procedural documents fully make known the position of the parties, fixing 11 November for the delivery of the decision.

The case is free from nullities and judgment must be rendered.

III - REASONING

1 – The issues requiring resolution with relevance to the case are as follows:

a) Whether plots of land for construction, to which the residential use coefficient was applied in determining their TPV and a value equal to or exceeding € 1,000,000.00 was determined, fall within the scope of stamp duty taxation provided for in item 28.1 of the TGIS[10], added by Law no. 55-A/2012 of 29 October.

b) If in the negative, the stamp duty assessment in the present case should be annulled as affected by illegality and, consequently, the amounts unduly paid should be refunded with indemnificatory interest, as prescribed in article 43 of the LGT.

2 – Factual Matters

The factual matter considered relevant and proven on the basis of the evidence in the case file is the following:

a) The claimant was, in the year 2012, the owner of urban property number … of the parish of …, municipality of Lisbon, concerning a plot of land for construction.

b) On its TPV of € 3,236,540.00, stamp duty provided for in item 28.1 of the TGIS was levied in accordance with collection document 2012… in the total amount of € 32,365.40.

c) It was notified to proceed with payment of the stamp duty in question in 3 instalments, the first of € 10,788.48 and the remaining two of € 10,788.46 each, duly paid respectively on 30/04, 23/07 and 29/11 of 2013.

d) Against this assessment an administrative complaint and hierarchical appeal were filed which were both denied, notified on 30/09/2013 and 14/01/2014, respectively.

No factual matters given as unproven are relevant to the decision.

3 – Legal Matters

3.1 - Regarding Stamp Duty:

a) The claimant, in its request for arbitral decision considers, in the first place and in summary, the non-applicability of item 28.1 of the TGIS as worded by Law 55-A/2012 of 29 October, to plots of land for construction.

b) It argues that plots of land for construction may not be considered properties with residential use, relying on the respective tax base rule (item 28 of the TGIS), as worded in Law 55-A/2012, already referred to.

c) The fact that the plot of land for construction in question has a TPV equal to or exceeding € 1,000,000.00 lacks the essential requirement for taxation of residential use.

d) It refers to decisions already rendered both by the tax arbitration tribunal and by the administrative courts, to conclude as in those learned decisions that plots of land for construction cannot be considered urban properties with residential use.

e) It further emphasises that the legislator itself had this understanding, by coming to establish the taxation in stamp duty of plots of land for construction through article 194 of Law 83-C/2013 of 31 December, amending the wording of item 28.1 of the TGIS that had been given to it by Law 55-A/2012 of 29 October.

f) For its part, the respondent considers that plots of land for construction have the legal nature of properties with "residential use" since in determining their TPV the residential use coefficient is taken into account, as provided in article 41 of the CIMI, and cites in this sense Decision 04950/11 of 14/02/2012 of the CAC South which considers that the regime for assessing the patrimonial value of plots of land for construction is enshrined in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project.

g) It understands that the expression "residential use" in item 28 of the TGIS calls for a classification that overlies the categories of urban properties provided for in article 6(1) of the CIMI and that the legislator in using it intended to integrate other realities beyond those mentioned in the CIMI rule, concluding that the assessments in question should be maintained and the Tax Authority absolved from the request.

h) It considers that the legislative amendment made to the wording of item 28.1 of the TGIS has merely interpretative character and only serves to reinforce its viewpoint.

i) With the positions of the claimant and the respondent thus summarised, we shall proceed to an analysis of the tax base rule for stamp duty on properties with residential use.

j) Item 28 of the TGIS, added by Law no. 55-A/2012, subjects to stamp duty urban properties with residential use whose TPV, determined in accordance with the CIMI, is equal to or exceeding € 1,000,000.00.

k) The CIS[11] refers to the CIMI for the regulation of the concept of property and matters not regulated as to item 28 of the TGIS (see article 1(6) and article 67(2) both of the CIS).

l) If we look at article 6 of the CIMI, it establishes that urban properties are divided into residential, commercial, industrial or service properties, plots of land for construction and others.

m) From its paragraph 2 it is understood that residential urban properties "are buildings or constructions licensed for such purpose or lacking a license, which are intended for such purpose" and paragraph 3 tells us that plots of land for construction "are those located within or outside an urban agglomeration, for which a license or authorization for subdivision or construction operations has been granted, and also those declared as such in the title of acquisition…".

n) From these concepts we may immediately conclude the existence of autonomy between urban properties "residential" and urban properties "plots of land for construction".

o) The stamp duty legislator, in establishing the taxation of urban properties "with residential use", did not specify the concept, so that, by force of the referral, we must go to the CIMI and this, as has been seen, distinguishes them in relation to plots of land for construction.

p) The expression "residential use" is in no way evident in plots of land for construction, nor may it, as the respondent claims, be understood as an integrating expression of other realities.

q) Nor should it be said that the amendment to the wording of item 28.1 TGIS introduced by Law 83-C/2013 has merely interpretative character and that it reinforces the viewpoint of the Tax Authority; on the contrary, the legislator came to declare that it intended to also tax plots of land for construction from 2014 onwards, which until then did not occur.

r) We agree with the position advocated in case 49/2013 which is transcribed: "The expression 'with residential use' suggests, in a simple reading, an idea of real and present functionality. From the rule in question it is not possible to extract, by interpretation, that, as is stated in the respondent's response, the legislator's choice of that expression is aimed at integrating 'other realities beyond those identified in article 6(1), paragraph a) of the CIMI.' Such interpretation has no legal support, in light of the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law. In fact, if the legislator intended to encompass in the scope of the tax other realities than those resulting from the classification governed by article 6 of the CIMI, it would have said so expressly. But it does not, instead referring, as a whole, to the concepts and procedures provided for in that Code. On the other hand, neither can the respondent's understanding be accepted that the concept of 'residential use' flows from the rule of article 45 of the CIMI. This article refers to the rules applicable in determining the patrimonial value of plots of land for construction establishing that this is what results from the value of the area of implantation of the building to be constructed added to the land adjacent to the implantation. In fixing the value of that area a percentage varying between 15% and 45% of the value of the authorized or anticipated buildings is considered. According to the respondent, in fixing the values of the authorized or anticipated buildings on the land to be appraised the coefficients applicable in determining the taxable patrimonial value are used, namely the use coefficient provided for in article 1 of that Code. Concluding therefrom that the consideration of such a coefficient, dependent on the type of use anticipated for the property to be built on the land, will be determinative for purposes of applying item 28 of the TGIS. This conclusion is based on the assumption that the expression 'properties with residential use' calls for a classification that overlies the categories provided for in article 6(1) of the CIMI. It is not possible, however, to agree with such conclusion. [...]. In these terms, resulting from article 6 of the CIMI a clear distinction between urban properties "residential" and "plots of land for construction", these cannot be considered, for purposes of the incidence of stamp duty, as "properties with residential use"."

s) As has been seen, the legislator, in intending to tax plots of land for construction in stamp duty, revisited item 28 of the TGIS through Law no. 83-C/2013 of 31 December, and introduced them there, which proves that in the formulation of Law 55-A/2012, plots of land for construction were excluded from stamp duty taxation by item 28 of the TGIS and now, through Law 83-C/2013, they began to be taxed, so it seems clear to us that the legislator considers that the expression "residential use" did not include plots of land for construction.

t) Nor should it be further said that the fact that article 45 of the CIMI provides for the application of a residential use coefficient in determining the TPV of plots of land for construction will be a condition sufficient in itself to allow their inclusion in the tax base of item 28 added by Law 55-A/2012, nor indeed alter their nature as plots of land for construction, given that what is at issue here is solely to determine the TPV which will be influenced by the type of buildings to be carried out (which, it should be said, are not always realized).

u) Decision 04950/11 of 14/02/2012 of the CAC South cited by the Tax Authority which considers that the regime for assessing the patrimonial value of plots of land for construction is enshrined in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project, is a finding which is confined to the determination of TPV and nothing more.

v) Now, as has already been seen, article 6 of the CIMI results in an unmistakable distinction between residential properties and plots of land for construction, which prevents these from being taxed in stamp duty in the manner desired by the respondent.

w) In this sense various tax arbitration decisions have already been rendered and by the Supreme Administrative Court, which the Tax Authority well knows and which the claimant enumerated in its petition, so we dispense ourselves from enumerating the respective case numbers.

x) The taxation here in question only occurred through error attributable to the Tax Authority services, since item 28 of the TGIS as worded by Law 55-A/2012 did not permit the taxation in stamp duty of plots of land for construction, therefore it should be annulled with all legal consequences flowing therefrom.

3.2 – Regarding Refund of Amounts Unduly Paid, Plus Indemnificatory Interest

a) Once the illegality of the debt is declared and the consequent annulment occurs, the Tax Authority is bound to restore the situation that would have existed if the annulled act had not been performed, in accordance with the provisions contained in article 100 of the LGT.

b) In this sense Diogo Leite Campos/Benjamim Silva Rodrigues/Jorge Lopes de Sousa pronounce themselves in annotation to the aforementioned article 100 of the LGT 2nd edition.

c) In this manner, once the illegality of the stamp duty assessment acts attributable to the Tax Authority is established, given that it performed them without adequate legal support, and given the proven payment, the claimant is entitled to payment of indemnificatory interest in the precise terms of article 43(1) of the LGT and article 61 of the CPPT[12].

IV – DECISION

In light of the foregoing, the tribunal decides as follows:

a) To declare that plots of land for construction are excluded from stamp duty taxation provided for in item 28.1 of the TGIS as worded by Law 55-A/2012 of 29 October.

b) Consequently, to declare the claim for arbitral decision well-founded, there having been error attributable to the Tax Authority services, annulling the stamp duty assessment act for the year 2012 in the total amount of € 32,365.40.

c) To declare the Tax Authority's obligation to refund the tax provably paid, plus the respective indemnificatory interest calculated at the legal rate, from the date the instalment payments occurred to the date the refund is made.

d) To fix the value of the case at € 32,365.40 (indemnificatory interest calculated in the petition is not taken into account) in accordance with the provisions contained in article 299(1) of the CPC[13], article 97-A of the CPPT, and article 3(2) of the RCPAT[14].

e) To fix the court costs, pursuant to article 22(4) of the RJAT, in the amount of € 1,836.00 in accordance with the provisions in Table I referred to in article 4 of the RCPAT, to be borne by the respondent.

Notify.

Lisbon, 11 November 2016

Text prepared by computer, in accordance with article 131(5) of the CPC, applicable by referral from article 29(1), paragraph e) of the RJAT, with blank spaces and reviewed by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Acronym for Tax Identification Number of a Legal Person
[2] Acronym for Legal Regime for Arbitration in Tax Matters
[3] Acronym for Tax Authority and Customs Authority
[4] Acronym for Administrative Arbitration Centre
[5] Acronym for General Tax Law
[6] Acronym for Taxable Patrimonial Value
[7] Acronym for Municipal Property Tax Code
[8] Acronym for Central Administrative Court
[9] Acronym for Stamp Duty
[10] Acronym for General Stamp Duty Table
[11] Acronym for Stamp Duty Code
[12] Acronym for Code of Tax Procedure and Process
[13] Acronym for Code of Civil Procedure
[14] Acronym for Regulations on Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Are construction land plots subject to Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS?
Under the original wording of item 28.1 TGIS (Law 55-A/2012), construction land plots are not subject to Stamp Tax. The provision taxed 'properties with residential use' valued at €1,000,000 or more, but construction land lacks actual residential occupation until buildings are erected. Law 83-C/2013 later amended item 28.1 to explicitly include construction land, confirming it was not originally covered. The subsequent legislative clarification demonstrates the initial wording did not encompass terrenos para construção, making assessments under the original provision unlawful.
Can a terrain for construction be classified as a property with residential allocation for Stamp Tax purposes?
No, construction land cannot be classified as property with residential allocation for Stamp Tax purposes under the original item 28.1 TGIS. Despite the Tax Authority's argument that the residential coefficient used in calculating patrimonial tax value (Article 41 CIMI) confers residential nature, the use of valuation methodologies does not equate to actual residential use. Construction plots have no residential license or occupation until buildings are constructed. The fact that Law 83-C/2013 specifically amended the law to include construction land confirms the distinction between valuation coefficients and substantive property classification.
What was the CAAD's decision in Process 228/2016-T regarding Stamp Tax on construction land?
The CAAD in Process 228/2016-T ruled in favor of the taxpayer, annulling the Stamp Tax assessment on construction land. The tribunal determined that under Law 55-A/2012's original wording, item 28.1 TGIS applied only to properties with actual residential use, not construction plots. The decision emphasized that using residential coefficients for patrimonial valuation does not transform construction land into residential property. The tribunal ordered refund of €32,365.40 with compensatory interest under Article 43 LGT, recognizing that the subsequent legislative amendment through Law 83-C/2013 confirmed construction land was not originally taxable.
Does the housing allocation coefficient under Article 41 of the CIMI code make construction land taxable as residential property?
No, the housing allocation coefficient under Article 41 of CIMI does not make construction land taxable as residential property for Stamp Tax purposes. While the Tax Authority argued this valuation coefficient confers residential nature, the tribunal distinguished between technical valuation methodologies and substantive property classification. The residential coefficient is merely a calculation tool for determining patrimonial tax value; it does not establish actual residential use. Construction land lacks residential occupation and use licenses until buildings exist. Item 28.1 TGIS requires actual residential use, not just application of residential valuation formulas.
Can taxpayers claim refund and compensatory interest after an unlawful Stamp Tax assessment on construction land?
Yes, taxpayers can claim refund and compensatory interest after unlawful Stamp Tax assessments on construction land under the original item 28.1 TGIS. Article 43 of LGT (General Tax Law) grants taxpayers the right to compensatory interest on amounts unduly paid when tax assessments are annulled. In Process 228/2016-T, the CAAD ordered refund of €32,365.40 with legal interest, recognizing the assessment violated the law as construction plots did not fall within item 28.1's scope before Law 83-C/2013. Taxpayers must file administrative complaints and appeals before seeking arbitral review, as demonstrated in this case.