Process: 232/2015-T

Date: November 9, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 232/2015-T addressed whether construction land (terrenos para construção) with a tax patrimonial value (VPT) exceeding €1,000,000 is subject to Stamp Tax under Item 28 of the General Stamp Tax Table (TGIS), as amended by Law 55-A/2012. The applicant owned construction land in Albufeira valued at €1,400,990 and challenged a stamp tax assessment of €7,004.95, arguing that construction land cannot be classified as property with 'residential use' since it lacks and cannot possess a residential use license. The Tax Authority contended that construction land has the legal nature of residential use property because its VPT calculation incorporates the residential use coefficient under Article 41 of CIMI, and that 'residential use' is broader than 'intended for residential purposes.' The applicant cited subsequent legislative action as supporting evidence: Law 83-C/2013 explicitly amended Item 28.1 to include construction land without retroactive effect, demonstrating the original provision did not encompass such property. The tribunal considered whether Item 28 of TGIS applies to construction land where residential use coefficients were applied in valuation, and whether the assessment should be annulled for illegality. This case reflects the critical distinction between property classification for valuation purposes versus tax incidence, highlighting that the use of residential coefficients in calculating VPT does not automatically confer residential use status for stamp tax purposes.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 232/2015-T

Matter: IS – Item 28 of the TGIS

I – REPORT

1 A…, … Ltd., NIPC[1] … with registered office at Avenue … No. …, … Lisbon, area of the Lisbon tax authority service, filed a request for arbitral determination, pursuant to the provisions of paragraph a) of No. 1 of article 2, No. 1 of article 3, and paragraph a) of No. 1 of article 10, all of the RJAT[2], requiring the AT[3] with a view to the annulment of the tax assessment acts for stamp tax on the ownership of a real property registered in the urban matrix under article … of the parish of Albufeira and Olhos de Água, municipality of Albufeira, relating to land for construction, in accordance with collection documents 2012… and 2014… for settlement of accounts in the amount of € 7,004.95, acts against which it presented an administrative review request and hierarchical appeal, both dismissed, and, not accepting such taxation and decisions, filed the present request.

2 Which was submitted without exercising the option of designating an arbitrator, being accepted by the Esteemed President of the CAAD[4] and automatically notified to the AT on 06/04/2015.

3 Pursuant to the provisions of No. 2 of article 6 of the RJAT, by decision of the Esteemed President of the Deontological Council, duly communicated to the parties within the legally applicable timeframes, on 02/06/2015, arbitrator Arlindo José Francisco was designated, who communicated acceptance of the assignment within the legally stipulated timeframe.

4 The tribunal was constituted on 18/06/2015 in accordance with the provisions contained in paragraph c) of No. 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of December 31.

5 With its request, the applicant seeks the annulment of the stamp tax assessment act in question, considering it manifestly unlawful, with all legal consequences flowing therefrom.

6 It supports its point of view, in summary, on the understanding that the assessments in question violate article 1 of the CIS[5] and item 28.1 of the TGIS[6], as amended by Law 55-A/2012 of October 29, in that land for construction in no way could be considered immovable property with residential use, not possessing and being unable to possess a residential use license, the understanding of the AT suffering from an error in the factual assumptions.

7 In its reply, the respondent considers that item 28 of the TGIS as amended by Law 55-A/2012 determines the taxation of land for construction, as these have the legal nature of immovable property with residential use, considering that in the determination of its VPT[7] the residential use coefficient provided for in article 41 of the CIMI[8] is taken into account, citing Judgment No. 04950/11 of 14/02/2012 of the TCA[9] of the South.

8 That the legislator does not speak of immovable property intended for residential purposes, but of residential use, an expression much broader, with a view to integrating other realities beyond those identified in article 6, No. 1, paragraph a) of the CIMI.

9 In 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 being violative of the Law, whether of the CRP[10] or of the CIS, whereby the applicant's claim should be judged unfounded and the respondent absolved of the request.

II - PRELIMINARY RULING

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

The parties possess legal capacity and standing, demonstrate themselves as legitimate and are regularly represented in accordance with articles 4 and 10, No. 2 of the RJAT and article 1 of Ordinance No. 112-A/2011, of March 22.

The parties agreed to dispense with the meeting referred to in article 18 of the RJAT and the unnecessary production of written or oral submissions.

Given the coinciding positions and, the proceedings not suffering from any nullities nor questions having been raised that obstruct the assessment of the merits of the case, the tribunal considers that the conditions are met to render a decision.

III – SUBSTANTIVE FINDINGS

1 – The matters to be resolved, with interest for the record, are as follows:

a) To determine whether land for construction, to which in the determination of its VPT the residential use coefficient was applied and a value calculated equal to or greater than € 1,000,000.00, fall within the scope of the subjection to IS[11] provided for in item 28 of the TGIS, added by Law No. 55-A/2012, of October 29.

b) If in the negative, whether the assessment of the IS in question in the present proceedings should be annulled for being tainted with illegality with all consequences flowing therefrom.

2 – Factual Matters

The factual matter considered relevant and proven based on the elements attached to the record is as follows:

a) The applicant was, in the year 2012, owner of land for construction registered in the urban matrix of the parish of Albufeira and Olhos de Água, municipality of Albufeira, under article …, replaced by ….

b) It was notified to proceed with the payments of the IS in question (€ 7,004.95) single installment for 2012.

c) Against such assessments presented an administrative review request and hierarchical appeal which came to be dismissed.

d) The VPT at the time was € 1,400,990.00 and currently € 708,370.00, as a result of the reassessment request filed by the applicant as soon as it was notified of the 1st collection notice.

e) Subsequently and ex officio the AT reactivated article …, on the grounds that the reassessment should not have given rise to a new article, with its VPT being updated with the effects of the reassessment.

No factual matter given as unproven is relevant to the decision.

3 – Matters of Law

3.1 - As regards IS:

a) The applicant, in its request for arbitral determination considers, in the first instance and in summary, the inapplicability of item 28 of the TGIS, as amended by Law 55-A/2012 of October 29, to land for construction.

b) It maintains that land for construction cannot be considered immovable property with residential use, making use of the respective incidence provision (item 28 of the TGIS), as amended by Law 55-A/2012, already mentioned.

c) The fact that the land for construction in question had, at the time, a VPT equal to or greater than € 1,000,000.00, lacks the essential requirement for taxation, namely residential use.

d) It refers to decisions already rendered either by the arbitral tribunal or by administrative courts, to conclude, just as in the corresponding learned decisions, that land for construction cannot be considered urban immovable property with residential use.

e) It further points out that the legislator itself had this understanding, by coming to establish the taxation in IS of land for construction, through article 194 of Law 83-C/2013 of December 31, amending the wording of item 28.1 of the TGIS, which had been given by Law 55-A/2012 of October 29, without retroactive effect.

f) For its part, the respondent understands that land for construction has the legal nature of immovable property with "residential use" in that in the determination of its VPT the residential use coefficient provided for in article 41 of the CIMI is taken into account, and cites, in this sense, Judgment 04950/11 of 14/02/2012 of the TCA South, which considers that the assessment regime for the tax value of land for construction is enshrined in article 45 of the CIMI, being equal to that of constructed buildings, although proceeding from the building to be constructed, based on the project.

g) It understands that the expression "residential use" of item 28 of the TGIS appeals to a classification that overlaps the categories of urban immovable property provided for in No. 1 of article 6 of the CIMI and that the legislator in using it intended to integrate other realities beyond those mentioned in the CIMI provision, concluding that the assessments in question should be maintained and the AT be absolved of the request.

h) Having summarized the positions of the applicant and the respondent, we shall proceed below to an analysis of the incidence provision of IS on urban immovable property with residential use.

i) Item 28 of the TGIS, added by Law No. 55-A/2012, subjects to IS urban immovable property with residential use whose VPT, calculated in accordance with the CIMI, is equal to or greater than € 1,000,000.00.

j) The CIS refers to the CIMI the regulation of the concept of immovable property and of matters not regulated regarding item 28 of the TGIS (see No. 6 of article 1 and No. 2 of article 67, both of the CIS).

k) If we examine article 6 of the CIMI, it establishes that urban immovable property is divided into residential, commercial, industrial or services, land for construction and others.

l) From its No. 2 it follows that urban residential immovable property "are buildings or constructions licensed for such purpose or in the absence of a license, which have such destination as their purpose" and its No. 3 tells us that land for construction "are those located within or outside an urban agglomeration, for which a license or authorization for land subdivision or construction operation has been granted, and also those which have been so declared in the acquisition instrument…".

m) From these concepts we can already conclude the existence of autonomy between urban immovable property "residential" and urban immovable property "land for construction".

n) The legislator of IS, in establishing the taxation of urban immovable property "with residential use", did not specify the concept, so we will, by force of the referral, have to go to the CIMI and this, as already seen, grants them autonomy in relation to land for construction.

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

p) We support the position advocated in Case 49/2013 which is transcribed: "The expression 'with residential use' inculcates, upon simple reading, an idea of real and present functionality. From the provision in question it is not possible to extract, by interpretation, that, as is stated in the respondent's reply, the legislator's choice of that expression was intended to integrate 'other realities beyond those identified in article 6, No. 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 within 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, rather referring, in bulk, to the concepts and procedures provided for in the said Code. On the other hand, neither can the respondent's understanding be accepted in the sense that the concept of 'residential use' flows from the provision of article 45 of the CIMI. This article refers to the rules applicable in the determination of the tax value 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 is considered varying between 15% and 45% of the value of authorized or foreseen buildings. According to the respondent, in fixing the value of the authorized or foreseen buildings on the land to be assessed, the coefficients applicable in the determination of tax real property 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 foreseen for the immovable property to be built on the land, will be decisive for purposes of application of Item 28 of the TGIS. This conclusion is based on the premise that the expression 'immovable property with residential use' appeals to a classification that overlaps the categories provided for in No. 1 of article 6 of the CIMI. It is not possible, however, to support such conclusion. [...]. In these terms, resulting from article 6 of the CIMI a clear distinction between urban immovable property "residential" and "land for construction", these cannot be considered, for purposes of incidence of stamp tax, as "immovable property with residential use"."

q) The legislator in intending to tax in IS land for construction revisited item 28 of the TGIS, through Law No. 83-C/2013, of December 31, and introduced them there, which proves that in the formulation of Law 55-A/2012, land for construction were excluded from taxation in IS by item 28 of the TGIS and now, through Law 83-C/2013, came to be taxed, whereby it seems clear to us that the legislator considers that the expression "residential use" did not include land for construction.

r) Neither should it be said that the fact that article 45 of the CIMI provides for the application of a residential use coefficient in the determination of the VPT of land for construction, will be a sufficient condition, in itself, to permit including them in the incidence provision of item 28 added by Law 55-A/2012, nor either alter its nature of land for construction, given that what is at issue here is solely to ascertain the VPT which will be influenced by the type of buildings to be carried out (which, it should be said, are not always materialized).

s) Judgment 04950/11 of 14/02/2012 of the TCA South, cited by the AT, considers that the assessment regime for the tax value of land for construction is enshrined in article 45 of the CIMI, being equal to that of constructed buildings, although proceeding from the building to be constructed, based on the project, is a statement which is limited to the determination of the VPT and nothing more than that.

t) Now, as already seen, it follows from article 6 of the CIMI an unmistakable distinction between residential immovable property and land for construction, which prevents these from being taxed in IS as the respondent intended.

u) In this sense several arbitral decisions have already been rendered, namely Cases 42, 48, 49 and 75, all of 2013 and by the STA[12].

v) The taxation in question here only occurred due to an error attributable to the services of the AT, once item 28 of the TGIS, in the wording of Law 55-A/2012, did not permit the taxation in IS of land for construction, whereby it should be annulled with all legal consequences flowing therefrom.

IV – DECISION

Based on the foregoing, the tribunal decides as follows:

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

b) Consequently to declare the request for arbitral determination well-founded, for there having been an error attributable to the services, annulling the stamp tax assessment acts relating to the year 2012 in the amount of € 7,004.95, with all legal consequences flowing therefrom, as they are manifestly violative of the said incidence provision.

c) To fix the value of the case at € 7,004.95 in accordance with the provisions contained in article 299, No. 1, of the CPC[13], article 97-A of the CPPT[14], and article 3, No. 2, of the RCPAT[15].

d) To fix the costs, pursuant to No. 4 of article 22 of the RJAT, in the amount of € 612.00 in accordance with the provisions of Table I referred to in article 4 of the RCPAT, which are charged to the respondent.

Notify.

Lisbon, November 9, 2015

Text prepared by computer, pursuant to article 131, No. 5 of the CPC, applicable by referral of article 29, No. 1, paragraph e) of the RJAT, with blank verses and reviewed by the tribunal.

The arbitrator

Arlindo José Francisco

[1] Acronym for Tax Identification Number for Legal Entities.

[2] Acronym for Legal Framework of Arbitration in Tax Matters.

[3] Acronym for Tax Authority and Customs Authority.

[4] Acronym for Center of Administrative Arbitration.

[5] Acronym for Stamp Tax Code.

[6] Acronym for General Table of Stamp Tax.

[7] Acronym for Tax Real Property Value.

[8] Acronym for Municipal Real Property Tax Code.

[9] Acronym for Central Administrative Court.

[10] Acronym for Constitution of the Portuguese Republic.

[11] Acronym for Stamp Tax.

[12] Acronym for Supreme Administrative Court.

[13] Acronym for Civil Procedure Code.

[14] Acronym for Code of Tax Procedure and Process.

[15] Acronym for Rules on Costs in Tax Arbitration Proceedings.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28 of TGIS applicable to construction land (terrenos para construção)?
Based on the legal arguments presented in Process 232/2015-T, Stamp Tax under Item 28 of TGIS (as amended by Law 55-A/2012) should not apply to construction land. The applicant successfully argued that construction land cannot be classified as property with residential use because it lacks and cannot possess a residential use license. The subsequent enactment of Law 83-C/2013, which explicitly included construction land in Item 28.1 without retroactive effect, provided strong evidence that the original legislation did not contemplate such property within its scope.
Can construction land be classified as property with housing allocation (afetação habitacional) for Stamp Tax purposes?
Construction land cannot be classified as property with housing allocation (afetação habitacional) for Stamp Tax purposes under Item 28 of TGIS as it existed before Law 83-C/2013. Although the Tax Authority argued that the use of residential use coefficients in calculating the property's tax value (VPT) under Article 41 of CIMI confers residential use status, the tribunal considered that valuation methodology does not equate to actual residential use or allocation. Construction land, by its nature, lacks the capacity to have a residential use license and cannot be inhabited until development is complete.
What was the CAAD arbitral tribunal's decision in Process 232/2015-T regarding Stamp Tax on building plots?
While the complete decision text is not provided in this excerpt, the CAAD arbitral tribunal in Process 232/2015-T likely ruled in favor of the applicant, annulling the stamp tax assessment on construction land. The tribunal evaluated whether Item 28 of TGIS applies to land for construction and whether the Tax Authority's interpretation suffered from an error in factual assumptions. The applicant's arguments, supported by references to similar arbitral and administrative court decisions, and the subsequent legislative clarification through Law 83-C/2013, strongly indicated that the assessment was unlawful under the pre-2013 legal framework.
How does the housing allocation coefficient under Article 41 of CIMI affect Stamp Tax liability on construction land?
The housing allocation coefficient under Article 41 of CIMI is used to calculate the tax patrimonial value (VPT) of construction land based on the intended residential use of the future building. However, this coefficient's application for valuation purposes does not automatically subject the land to Stamp Tax under Item 28 of TGIS. The tribunal distinguished between using residential use coefficients for determining property value versus classifying property as having residential use for tax incidence purposes. The Tax Authority's argument that coefficient application confers residential use status was challenged on the grounds that construction land cannot functionally serve residential purposes until development occurs.
What legal remedies are available to challenge Stamp Tax assessments on construction land in Portugal?
Property owners challenging Stamp Tax assessments on construction land in Portugal can pursue administrative review (revisão oficiosa) and hierarchical appeal (recurso hierárquico) before the Tax Authority, as the applicant did in this case. If these remedies are unsuccessful, taxpayers may file a request for arbitral determination with the Center for Administrative Arbitration (CAAD) under the Tax Arbitration Legal Regime (RJAT). Alternatively, taxpayers can appeal to administrative courts (tribunais administrativos e fiscais). The arbitral route offers advantages including faster resolution, specialized tax expertise, and single-instance decisions. Taxpayers should act within statutory deadlines and consider filing reassessment requests for the property's VPT if the valuation appears excessive.