Process: 23/2014-T

Date: May 27, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitration Process 23/2014-T addressed whether Stamp Tax under Clause 28.1 of the General Stamp Tax Table (TGIS) applies to building land (terrenos para construção) valued over €1,000,000. The taxpayer A... Lda. challenged a €297,571.50 Stamp Tax assessment, arguing that Clause 28.1, which imposes a 1% tax on 'properties with residential use' (imóveis com afetação habitacional), does not encompass building land. The core legal issue centered on interpreting Article 6 of the IMI Code, which clearly distinguishes residential properties from building land as separate categories of urban property. The petitioner argued that building land cannot have 'residential use' until construction occurs, making it conceptually distinct from built residential properties. Legislative intent analysis revealed that Law 55-A/2012 aimed to tax luxury residential properties demonstrating significant taxpayer capacity, not undeveloped land incapable of generating income. The taxpayer cited precedent from multiple CAAD arbitral decisions (including cases 49/2013-T and others from September-October 2013) that consistently ruled building land falls outside Clause 28.1's scope. The Ombudsman's position supported this interpretation, confirming that construction land cannot have residential use per se until built. This case represents critical jurisprudence on the distinction between residential property taxation and building land under Portuguese tax law, establishing that Stamp Tax on properties exceeding €1,000,000 applies exclusively to built residential properties, not undeveloped construction land regardless of intended future use.

Full Decision

ARBITRAL DECISION

The arbitrators, Judge Dr. José Poças Falcão (presiding arbitrator), Professor Doctor João Catarino and Professor Doctor Carlos Lobo, appointed by the Deontological Council of the Administrative Arbitration Centre to constitute the Arbitral Tribunal, constituted on 12-3-2014, agree as follows:

I REPORT

A..., Lda., Tax ID Number 505 076 322, with registered office at Av. ... …, in accordance with the provisions of articles 2º and 10º of Decree-Law nº 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter "LRATM"), submits a request for arbitral pronouncement seeking the complete annulment of the Stamp Tax assessment act nº 2013 ... of 14-7-2013, in the amount of € 297.571,50, with payment deadline until the end of December 2013 [Doc 2, attached to the petition]

The petitioner did not appoint an arbitrator, and therefore, pursuant to article 6.º, paragraph 2, subsection a), of the LRATM, the undersigned were appointed by the President of the Deontological Council of the Administrative Arbitration Centre to form the present collective Arbitral Tribunal, having accepted the assignment within the legal timeframe and under the applicable legal terms.

On 25-02-2014, the parties were duly notified of this appointment, and neither party manifested any intention to challenge the appointment of the arbitrators, in accordance with article 11.º, paragraph 1, subsections a) and b) of the LRATM and articles 6.º and 7.º of the Code of Ethics.

Accordingly, in compliance with the provision of subsection c) of paragraph 1 of article 11.º of Decree-Law nº 10/2011, of 20 January, in the wording introduced by article 228.º of Law nº 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 12-03-2014.

The petitioner argues, in summary, that:

a) There is an error as to the legal prerequisites, embodied in the application of item nº 28 of the GIST to construction land, even if with a tax property value exceeding € 1.000.000,00;

b) Item nº 28 of the GIST provides that the Stamp Tax shall apply, at the rate of 1%, to "properties with residential use", and to clarify such concept it is necessary to specify it in light of the rules provided in the IMI Code, due to Law nº 55-A/2012, of 29 October ("Law nº 55-A/2012") having added, by virtue of the provision in its article 4.º, item nº 28 to the GIST, now referring to concepts specific to the Municipal Property Tax ("IMI") to establish the tax base for Stamp Tax. Article 6º of the IMI Code provides the characterization of an urban property as residential, commercial, industrial or for services and, in turn, what is considered construction land. The classification of species of urban properties under the IMI Code clearly shows that there are residential properties and construction land;

c) At issue is construction land, provided for in subsection c) of paragraph 1 of article 6.º of the IMI Code, and not a residential property, provided for in subsection a) of the same rule. Therefore, such immovable property should not be subject to the Stamp Tax provided in item nº 28 of the GIST, since it is not demonstrable that the legislator intended to also include in this rule construction land intended for residential purposes. The legislator in the tax base rule in question does not refer to "residential properties" (the term used to classify properties that is defined in the IMI Code), having instead used the expression "properties with residential use";

d) By examining all legislation (fiscal and otherwise), the truth is that no legal definition can be found for "properties with residential use", and the only rule that makes reference to "use" is the rule that establishes the mathematical formula for evaluating immovables contained in article 38.º of the IMI Code. Specifically regarding the use coefficient provided in the aforementioned article 38.º, article 41.º of the IMI Code provides as follows: "The use coefficient (uc) depends on the type of use of built properties, according to the following table: (…)." From the foregoing, it undoubtedly follows that the use coefficient was created with regard to built properties. It is evident that the aforementioned coefficient is merely a coefficient applicable only in the matter of immovable property valuation, however, it does not follow in any way from this that construction land should be considered as a "property with residential use" for purposes of Stamp Tax liability;

e) Furthermore, by resorting to the understanding of the Ombudsman in communication addressed to the Honourable Secretary of State for Tax Affairs, dated 2 April 2013 and contained in Official Letter nº ..., it is proven that this is construction land which, naturally, cannot have residential use per se… since it is not yet a built property;

f) While not denying that the land in question may have residential use when a property is built on it, the Petitioner cannot be burdened with Stamp Tax on immovables with a tax property value exceeding € 1.000.000,00, on the terms and for the purposes provided in item nº 28 of the GIST, until such stage is reached;

g) Note that the legislative purpose of the new item nº 28 of the GIST is to tax property with respect to owners who are holders of built immovables with a tax property value exceeding € 1.000.000,00, thus revealing a special capacity to contribute. The legislator's intention was to combat the budget deficit, on the one hand, and to distribute the burdens among a broader set of citizens, especially by imposing a special levy on taxpayers who reveal a greater capacity to contribute. Corroborating clearly with the above, the Explanatory Statement of Draft Law nº 465/2012, which preceded Law nº 55-A/2012, can be read, and likewise, the intervention of the Honourable Secretary of State for Tax Affairs in the National Assembly, when presenting and discussing the draft law that was the source of Law nº 55-A/2012. Furthermore, in the expression used by deputies Pedro Filipe Soares, of the Left Bloc, and Paulo Sá, of the Portuguese Communist Party when discussing the draft law that was the source of Law nº 55-A/2012, the Government's intention was to promote taxation of luxury real estate property;

h) From the foregoing it is concluded that the legislator's intention was, in no way, to tax construction land, since until a property is built on it, its owners are not capable of revealing a special capacity to contribute, not least because construction land cannot be a source of income. In this way, it is demonstrated that, whether through literal interpretation of item nº 28 of the GIST, or through historical and systematic interpretation, construction land is not contemplated by this provision, and therefore the error regarding the legal prerequisites affecting the Stamp Tax assessment in question is verified;

i) In order to consider that the objective tax base rule of item nº 28 of the GIST does not apply to construction land, the Arbitral Tribunal functioning at the Administrative Arbitration Centre has pronounced itself on several occasions, called upon to analyse and decide the question of whether construction land is subsumable within the concept of properties with residential use and, consequently, whether they are included within the scope of the objective tax base of item 28.1 of the GIST attached to the STC. The first of the arbitral decisions on this matter was issued by Arbitrator Álvaro Caneira on 18.09.2013, in case nº 49/2013-T, followed by other decisions, such as a decision of the collective Arbitral Tribunal, composed of arbitrators Jorge Lopes de Sousa, Conceição Pinto Rosa and Alberto Amorim Pereira, on 02.10.2013, another arbitral decision issued by Arbitrator Manuel Carlos Rodrigues on 09.10.2013, and also an arbitral decision of 18.10.2013, issued by Arbitrator Nuno Azevedo Neves. The petitioner used excerpts from the arbitral decisions mentioned herein to reinforce its thesis, as all the aforementioned decisions have important specificities supporting the decisions that were always in the direction of considering construction land outside the scope of the objective tax base of item nº 28 of the GIST;

j) To reinforce the understanding that the objective tax base rule of item nº 28 of the GIST does not contemplate construction land, the tax legislator felt the need, in order to be able to include in the objective tax base of that rule construction land, as is the case sub judice, to make an amendment to that rule through the State Budget for 2014. Providing for it in article 192.º of Draft Law nº 178/XXI ("Draft Law on the State Budget for 2014");

k) In these terms, the petitioner alleges the undeniable existence of an error regarding the legal prerequisites affecting the Stamp Tax assessment being challenged, for which reason it should be entirely annulled.

The Tax and Customs Authority (AT) submitted a response setting out its grounds for the present case, which are:

a) It is the understanding of the AT that urban properties which are construction land and to which residential use has been attributed within the scope of their respective valuations have the legal nature of properties with residential use, and therefore the Stamp Tax assessment act subject to the request for arbitral pronouncement should be maintained as it embodies the correct interpretation of the applicable law;

b) Indeed, at issue is the strictly legal question of interpretation of item nº 28 of the GIST, added by article 4.º of Law nº 55-A/2012, of 29/12. Fundamentally, in the absence of any definition of the concepts of urban property, construction land and residential use under Stamp Tax, concepts necessary to understanding item nº 28 of the GIST, one must resort to the IMI Code, in search of a definition that allows assessment of possible liability to Stamp Tax;

c) By resorting to the concept of property provided in paragraph 1 of article 2.º of the IMI Code and article 6.º, paragraph 1 of the IMI Code which, in turn, provides the species of urban properties, and are integrated therein construction land, that is, land situated within or outside an urban agglomeration, for which building or land subdivision authorization has been granted or prior notice admitted or prior information issued favourably for urban development or construction operations, and also those that have been declared as such in the acquisition title, excepting land in respect of which competent entities prevent any of those operations;

d) The notion of use of urban property will find its basis in the part relating to the valuation of immovables, therefore the use of the immovable (purpose) will incorporate value to the immovable, constituting a determining factor of distinction (coefficient) for valuation purposes;

e) As results from the expression "… value of authorised or anticipated buildings", contained in paragraph 2 of article 45.º of the IMI Code, the legislator chose to determine the application of the methodology for valuation of properties in general, to the valuation of construction land, and therefore the use coefficient provided in article 41.º of the IMI Code is applicable thereto;

f) In this sense, it is important to see Judgment nº 04959/11, dated 14/02/2012, of the Court of Administrative Review of the Southern Region (TCA South), regarding essentially its conclusions. For purposes of determining the tax property value of construction land, the application of the use coefficient in the context of valuation is clear, and therefore its consideration for purposes of applying item nº 28 of the GIST cannot be ignored, being valid in this sense the following order of considerations: In the application of law to concrete cases, it is important to determine the exact meaning and scope of the rule, so that the rule contained therein is revealed, an indispensable condition for it to be applied, in accordance with the techniques and interpretative elements generally accepted and provided in article 9.º of the Civil Code (article 11.º of the General Tax Law); Article 67.º, paragraph 2 of the STC mandates the subsidiary application of the provisions of the IMI Code; The use of the immovable (aptitude or purpose) is a coefficient that contributes to the valuation of the immovable, in the determination of the tax property value, applicable to construction land; Item nº 28 itself of the GIST refers to the expression "properties with residential use", appealing to a qualification that overlays the species provided in paragraph 1 of article 6.º of the IMI Code;

g) The reference to properties with residential use contained in item nº 28 of the STC should be understood in a broad manner, encompassing both built residential properties and construction land, not least by virtue of the wording of the rule itself and the concept used. Note that the legislator does not refer to "properties intended for housing", having opted for the notion of "residential use", being an expression that is different and broader, the meaning of which must be found in the need to integrate other realities beyond those identified in article 6.º, paragraph 1 of the IMI Code;

h) On the other hand, tax law considers as an integrating element for purposes of valuation of construction land, the value of the implantation area, which varies between 15% and 45% of the value of the authorised or anticipated buildings based on the urban development and construction project. It should be noted that it cannot be ignored that the building license for the carrying out of urban operations must contain, among other elements, the number of plots and indication of the location area, purpose, implantation area, construction area, number of stories and number of units in each of the plots, with specification of units intended for housing at controlled costs, when provided, in accordance with subsection a) of article 77.º of the Legal Regime of Urban Development and Building (LRUBE). It is certain that the aforementioned article contains mandatory specifications for licenses for land subdivision or urban works operations, as well as for building works;

i) On the other hand, Municipal Master Plans establish the strategy for municipal development, municipal policy for territorial and urban planning and other urban policies, integrating and coordinating the guidance established by territorial management instruments of national and regional scope. Thus, well before the actual building of the property, it will be possible to ascertain and determine the use of the construction land;

j) Item nº 28 of the GIST applies to ownership, usufruct or surface rights over urban properties with residential use, whose tax property value listed in the property register, in accordance with the IMI Code, is equal to or exceeding € 1.000.000,00, that is, it applies to the value of the immovable. It is a general and abstract rule, applicable indiscriminately to all cases where the factual and legal prerequisites are met, applying to wealth embodied in the value of immovables;

k) The different valuation and taxation of an immovable in full ownership compared to an immovable constituted in horizontal property will result from the different legal effects inherent to the two aforementioned figures. Indeed, the constitution in horizontal property determines the division/splitting of full ownership and the independence (autonomy) of each of the fractions that compose it for all legal purposes, in accordance with the provisions of article 2.º, paragraph 4 of the IMI Code and article 1414.º of the Civil Code, whereas a property in full ownership constitutes, for all legal purposes, a single unit. These are distinct realities valued by the legislator differently and with necessarily different effects. The different aptitude of immovables (housing/services/commerce) sustains the different treatment, having been the legislator's choice, for political and economic reasons, to remove from the scope of Stamp Tax immovables intended for purposes other than residential;

l) For all the foregoing, the assessment under scrutiny embodies a correct interpretation of law applied to facts, not suffering from any defect of violation of law, and should therefore be judged without merit in its pretension advanced and the Defendant Entity absolved from the petition.

By order of 2-5-2014, the meeting provided for in article 18.º of the LRATM was dispensed with, and the parties were given the opportunity to present, if they so wished, final arguments in writing.

Neither party submitted arguments.

Preliminary Assessment

The arbitral tribunal was regularly constituted and is materially competent, in light of the provisions of articles 2.º, paragraph 1, subsection a), and 30.º, paragraph 1, of the LRATM.

The parties have legal personality and capacity and are legitimate (articles 4.º and 10.º, paragraph 2, of the same instrument and article 1.º of Ordinance nº 112-A/2011, of 22 March).

The proceedings do not suffer from any nullities and no questions were raised that could prevent appreciation of the merits of the case.

II – GROUNDS FOR DECISION

Essential Proven Facts

Based on the evidence in the file, the following essential facts with relevance for appreciating the merits of the petition are considered proven:

a) The petitioner is the owner of construction land – "Plot of land intended for urban construction" – located in ..., Portimão, registered in the urban property register of the parish of Portimão under item ...;

b) To the aforementioned land, in its entirety, a tax property value (TPV) of € 29.757.150,00 was attributed;

c) The petitioner was notified of the Stamp Tax assessment act nº 2013 ..., of 14-7-2013, in the amount of € 297.571,50 – item 28.1 of the GIST – with payment deadline in the month of December 2013 [cfr doc 2, attached to the petition].

Essential Facts Not Proven

There are no essential facts or facts of official knowledge that remain unproven.

Grounds for Decision

The conviction of the Tribunal is based on the documents attached and not challenged by the opposing party, combined with the clear acceptance of the factual reality alleged by the petitioner.

The Law

The essential question in the present proceedings is reduced to the definition of the scope of application of item 28.1 of the General Stamp Tax Table (GIST) in the wording given to it by Law nº 55-A/2012 of 29.10, namely to know whether in that rule construction land should be included and, in particular, whether construction land with a tax property value equal to or exceeding €1.000.000 subsumes, or not, into the species of urban properties "with residential use".

This is a question which, regardless of the constitutional issues it raises [cfr., e.g., judgment issued in Case nº 218/2013-T, of the Administrative Arbitration Centre], namely at the level of the principle of equality and the possibility of the existence of taxation under Stamp Tax on immovables from a purely property taxation perspective without any connection with the principle of equivalence or benefit (the fundamental principle of the IMI), is extensively addressed, whether in the case law of the Administrative Arbitration Centre [cfr Decisions in cases nºs 42/2013, 48/2013, 49/2013, 53/2013, 75/2013, 144/2013, 158/2013 and 231/2013] or in the case law of the Supreme Administrative Court [cfr very recent judgments: Case 1871/13, of 14-5-2014 and also, the Judgments of 9 April 2014, in cases nºs 1870/13 and 48/14 and of 23 April 2014 in cases 270/14 and 272/14, at http://www.dgsi.pt/].

Indeed, it is today the unanimous interpretation of the judicial bodies that construction land which has not yet had any type of use defined should be removed from the scope of Stamp Tax liability, as it is still not applied to or intended for residential purposes.

In fact, construction land, whether from the perspective of urban development law or from the perspective of tax law, has a nature distinct from properties intended for residential purposes, since, at the moment prior to the realization of the improvement (the construction itself) it does not have defined use, constituting itself as mere land asset, and therefore cannot be considered as properties with residential use.

Note that the legislator's intention was clearly restrictive. When using the expression "residential purposes", it clearly expresses a will to only include residential properties within the scope of application of the rule, clearly excluding those with commercial and industrial purpose (even if integrated in urban areas that, in a limiting situation of realization which is translated in the existence of an approved Master Plan or Detailed Plan), given that their actual use depends on their definitive construction.

In this context, the various court decisions concluded that the assessments challenged suffer from error regarding the factual and legal prerequisites, as the properties for which Stamp Tax was assessed under the aforementioned item nº 28.1 constitute construction land, without any building or construction, required to fulfil that concept of "residential properties".

The Public Treasury argues that the concept of "properties with residential use" for purposes of the provision in item nº 28.1 of the GIST, comprises both built properties and construction land, since the legislator does not refer to "properties intended for housing" but having rather opted for the notion of "residential use", an expression which it considers different and broader, integrating other realities beyond those identified in article 6.º paragraph 1 subsection a) of the IMI Code.

Concluding that residential use, for purposes of applying item 28, does not necessarily imply the existence of buildings or structures, applying therefore to construction land with such use.

Such does not appear to be correct for the reasons already advanced. Indeed, the question under consideration is, even in its factual assumptions, in all respects identical to those which were examined and decided in the Supreme Administrative Court at a recent date [cfr Judgments of the Supreme Administrative Court cited above, namely the judgments of 09.04.2014, issued in cases 1870/13 and 48/14, and of 23.04.2014, issued in cases 270/14, 271/14 and 272/14], in which it was decided that "construction land" cannot be considered, for purposes of Stamp Tax liability provided in Item 28.1 of the respective General Table (in the wording of Law nº 55-A/2012, of 29 October), as urban properties with residential use.

This is case law which is also here adopted, as we fully agree with its respective grounds, and will therefore limit ourselves to reproducing what was said about the question in the aforementioned Judgment nº 1870/13:

"The concept of 'property (urban) with residential use' was not defined by the legislator. Neither in Law nº 55-A/2012, which introduced it, nor in the IMI Code, for which paragraph 2 of article 67.º of the Stamp Tax Code (also introduced by that Law), refers on a subsidiary basis. And it is a concept that, probably due to its imprecision – a fact all the more serious given that it is a function of it that the scope of the objective tax base of the new taxation is defined – had a short life, as it was abandoned when the Law of the State Budget for 2014 (Law nº 83-C/2013, of 31 December) came into effect, which gave new wording to that item nº 28 of the General Table, and which now defines its scope of the objective tax base through the use of concepts that are legally defined in article 6.º of the IMI Code.

This amendment – to which the legislator did not attribute an interpretative character, nor do we believe it did – merely makes it unequivocal for the future that construction land whose construction, authorised or anticipated, is for housing is encompassed within the scope of item 28.1 of the General Table of Stamp Tax (provided that its respective tax property value is of a value equal to or exceeding 1 million euros), clarifying nothing, however, with respect to past situations (assessments of 2012 and 2013), such as the one at issue in the present proceedings.

Now, regarding these, it does not appear that the interpretation of the respondent can be upheld, because it does not result unequivocally either from the letter or from the spirit of the law that its intention was, ab initio, to encompass in its objective tax base construction land for which construction of residential buildings had been authorized or anticipated, as results today unequivocally from item 28.1 of the General Table of Stamp Tax.

From the letter of the law nothing unequivocal results, indeed, as it itself when using a concept which it did not define and which was also not defined in the statute to which it referred on a subsidiary basis lent itself, unnecessarily, to equivocations, in a matter – of tax liability – in which certainty and legal security should also be paramount concerns of the legislator.

And from its "spirit", apprehensible in the explanatory statement of the draft law that is the source of Law nº 55-A/2012 (Draft Law nº 96/XII – 2.ª, Journal of the National Assembly, series A, nº 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more results than the concern of garnering new fiscal revenue, from sources of wealth "more spared" in the past from the voracity of the Revenue, than income from labour, in particular income from capital, capital gains and property, reasons which contribute no relevant clarification to the concept of "properties (urban) with residential use", as they take it as established, with no concern whatsoever to clarify it. Such clarification will, however, have emerged – as informed in the Arbitral Decision issued on 12 December 2013, in case nº 144/2013-T, available in the Administrative Arbitration Centre database – when the aforementioned draft law was presented and discussed in the National Assembly, in the words of the Secretary of State for Tax Affairs, who is reported to have stated expressly, as appears from the Journal of the National Assembly (DAR I Series nº 9/XII – 2, of 11 October, p. 32) that: 'The Government proposes the creation of a special tax on urban residential properties of higher value. It is the first time that in Portugal a special tax has been created on properties of high value intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or exceeding 1 million euros' (underlining ours), from which it is gathered that the reality to be taxed had in mind is, after all, and despite the terminological imprecision of the law, 'the properties (urban) residential', in common language 'houses', and not other realities. The fact that it can be considered that in the determination of the tax property value of urban properties classified as construction land one should take into account the use that the construction authorized or anticipated for it will have for determination of the respective value of the implantation area (cfr. paragraphs 1 and 2 of article 45.º of the IMI Code), does not determine that construction land can be classified as 'properties with residential use', because 'residential use' always appears in the IMI Code referred to 'buildings' or 'constructions', existing, authorised or anticipated, because only these can be inhabited, which does not occur in the case of construction land, which does not have, in itself, conditions for such, being not susceptible to being used for housing unless and when the construction authorized and anticipated for it is built thereon (but in that case they would no longer be 'construction land' but another species of urban properties – 'residential', 'commercial, industrial or for services' or 'other' – article 6.º of the IMI Code).

It would indeed be strange if the determination of the scope of the tax base rule of item nº 28 of the General Table of Stamp Tax were to be found, after all, in the rules for determination of the tax property value of the IMI Code, and that the terminological imprecision of the legislator in the drafting of that rule were, in fact, clarified and finally elucidated via an indirect and equivocal referral to the use coefficient established by the legislator in relation to built properties (article 41.º of the IMI Code). Thus, considering that construction land – whatever the type and purpose of the building that will be or could be erected thereon – does not satisfy, by itself, any condition for as such to be licensed or to define housing as its normal destination, and referring the rule of tax base of stamp tax to urban properties with 'residential use', without any specific concept being established for that purpose, cannot it be extracted therefrom that such contains a future potentiality, inherent to a distinct property that may perhaps be built on the land. It is thus concluded, in accordance with the judgment under appeal, that, resulting from article 6.º of the IMI Code a clear distinction between urban properties 'residential' and 'construction land', these cannot be considered as 'properties with residential use' for purposes of the provision in item nº 28.1 of the General Table of Stamp Tax, in its original wording, which was given to it by Law nº 55-A/2012, of 29 October." (end of citation)

It is this case law which is here adopted and reiterated, taking into account the rule contained in nº 3 of article 8º of the Civil Code – which imposes upon the judge the duty to consider all cases that merit analogous treatment, in order to obtain a uniform interpretation and application of law, and the respondent does not adduce new grounds that would undermine such jurisprudential orientation.

III DECISION

On the terms and for the grounds set out, this Tribunal agrees:

a) To judge the petition for arbitral pronouncement in full as having merit; and

b) To annul the Stamp Tax assessment act nº 2013 ..., of 14-7-2013, in the amount of € 297.571,50.

In accordance with the combined provisions of articles 315º-2 of the Civil Procedure Code; 97º-A/1-a) of the Code of Administrative Tax Procedure and 3º-2 of the Costs Regulations for Tax Arbitration Proceedings, the proceedings are fixed at the value of € 297.571,50.

The amount of costs is fixed at € 5.202,00 (Table I attached to the Costs Regulations for Tax Arbitration Proceedings), with such payment to be borne by the Tax and Customs Authority given its complete defeat (article 22º-4 of the LRATM).

Lisbon and Administrative Arbitration Centre, 27 May 2014

The Arbitrators

(José Poças Falcão)

(João Catarino)

(Carlos Lobo)

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto de Selo) under Clause 28.1 of the TGIS apply to building land (terrenos para construção) with a taxable value over €1,000,000?
According to the arguments presented in Process 23/2014-T, Stamp Tax under Clause 28.1 of the TGIS should not apply to building land (terrenos para construção), even with taxable values exceeding €1,000,000. The petitioner argued that Clause 28.1 specifically targets 'properties with residential use' (imóveis com afetação habitacional), which refers to built residential properties under Article 6 of the IMI Code. Building land, classified separately under Article 6(1)(c) of the IMI Code as 'terrenos para construção', cannot have residential use until construction occurs. Previous CAAD arbitral decisions (cases 49/2013-T, decisions from October 2013) consistently ruled that construction land falls outside the scope of Clause 28.1, supporting the position that undeveloped land should not be subject to this Stamp Tax.
How does the IMI Code (Article 6) distinguish between residential properties and building land for Stamp Tax purposes?
Article 6 of the IMI Code establishes distinct classifications for urban properties: residential properties (imóveis para habitação) under subsection (a) and building land (terrenos para construção) under subsection (c). Residential properties are built structures with residential use, while building land represents undeveloped parcels intended for future construction. For Stamp Tax purposes under Clause 28.1 TGIS, this distinction is critical. The use coefficient (coeficiente de afetação) referenced in Articles 38 and 41 of the IMI Code applies only to built properties in property valuation formulas. Building land, lacking any constructed improvements, cannot be classified as having 'residential use' under the literal interpretation of Clause 28.1. The IMI Code's systematic classification demonstrates that residential properties and construction land are mutually exclusive categories, preventing building land from being subsumed within 'properties with residential use' for Stamp Tax liability purposes.
What was the outcome of CAAD arbitration process 23/2014-T regarding Stamp Tax on building land?
While the complete text of the arbitral decision is not provided in the excerpt, Process 23/2014-T involved a request for complete annulment of a €297,571.50 Stamp Tax assessment issued against A... Lda. The collective arbitral tribunal, composed of Judge José Poças Falcão, Professor João Catarino, and Professor Carlos Lobo, was constituted on March 12, 2014. The petitioner argued extensively that Clause 28.1 TGIS does not apply to building land, citing legal error in applying the provision to construction land rather than built residential properties. The taxpayer referenced multiple precedent CAAD decisions (49/2013-T and others from September-October 2013) that ruled favorably on this issue, excluding building land from Clause 28.1's scope. Based on the systematic presentation of these arguments and supporting jurisprudence, the process sought to establish that Stamp Tax assessments on construction land with values exceeding €1,000,000 constitute legal error warranting annulment.
Can building land be classified as having 'residential allocation' (afetação habitacional) under Clause 28 of the General Stamp Tax Table?
Building land cannot be classified as having 'residential allocation' (afetação habitacional) under Clause 28 of the TGIS according to the legal arguments in Process 23/2014-T. The term 'properties with residential use' requires actual residential utilization, which is impossible for undeveloped construction land. Article 6 of the IMI Code distinguishes residential properties from building land, treating them as separate property categories. The use coefficient (coeficiente de afetação) in Articles 38 and 41 of the IMI Code applies exclusively to built properties for valuation purposes, not to undeveloped land. While building land may be intended for future residential construction, this potential future use does not constitute current residential allocation. The Ombudsman's communication (Official Letter dated April 2, 2013) supported this interpretation, confirming that construction land 'cannot have residential use per se... since it is not yet a built property.' Legislative intent behind Law 55-A/2012 targeted luxury residential properties demonstrating taxpayer capacity, not undeveloped land incapable of generating income or revealing special contributive capacity.
What legal grounds support the annulment of Stamp Tax assessments on building land under Portuguese tax law?
Legal grounds supporting annulment of Stamp Tax assessments on building land include: (1) Error regarding legal prerequisites (erro sobre os pressupostos de direito) in applying Clause 28.1 TGIS to construction land rather than built residential properties; (2) Literal interpretation of Clause 28.1 referencing 'properties with residential use,' which excludes undeveloped building land classified separately under Article 6(1)(c) of the IMI Code; (3) Systematic interpretation showing the IMI Code distinguishes residential properties from construction land as mutually exclusive categories; (4) Historical/legislative intent analysis demonstrating Law 55-A/2012 aimed to tax luxury residential properties with special contributive capacity, not undeveloped land; (5) Ombudsman's position confirming construction land cannot have residential use until built; (6) Established CAAD jurisprudence from multiple 2013 arbitral decisions (49/2013-T and others) consistently ruling that building land falls outside Clause 28.1's scope; (7) Constitutional principles of tax legality and strict interpretation of tax incidence rules preventing expansive application to property categories not expressly contemplated by the legislator. These cumulative grounds establish that Stamp Tax assessments on construction land exceed legal authority and warrant annulment.