Process: 235/2013-T

Date: October 7, 2014

Tax Type: IMI

Source: Original CAAD Decision

Summary

Process 235/2013-T addresses a fundamental dispute regarding the Portuguese Tax Authority's methodology for determining the Valor Patrimonial Tributário (VPT) of construction land under IMI legislation. The claimant contested a dramatic revaluation of their construction lot from €9,587.15 (2012) to €24,350.00 (2013), challenging both procedural defects and substantive errors. The taxpayer argued the Tax Authority violated the duty of reasoning under Article 77 of the General Tax Law by failing to explain why allocation coefficients (ca) and quality/comfort coefficients (cq) were applied to what should be valued as construction land under Article 45 CIMI, not as a completed dwelling. The core legal question involves whether construction lots must be valued solely based on building footprint area plus adjacent land, without dwelling-specific coefficients. The Tax Authority raised a jurisdictional exception, arguing that property valuations constitute preliminary administrative acts outside the arbitral tribunal's competence under Article 2 RJAT and Ordinance 112-A/2011, which covers only acts directly fixing taxable bases for tax collection. Additionally, the Tax Authority contended the claimant failed to exhaust mandatory administrative remedies by not requesting a second valuation under Article 76 CIMI, resulting in res judicata. This case exemplifies tensions between taxpayer rights to reasoned administrative decisions, proper valuation methodologies for distinct property categories, and jurisdictional limits of tax arbitration. The decision would clarify whether CAAD has authority over IMI valuation disputes and whether the Tax Authority must provide detailed, case-specific reasoning when applying technical coefficients to construction land, particularly when methodology appears inconsistent with the property's actual classification and intended legal treatment under the IMI Code.

Full Decision

CASE No. 235/2013-T

ARBITRAL DECISION

I – REPORT

  1. The [name] (hereinafter identified only as the Claimant), with Tax Identification Number …, resident in …, filed on 18 October 2013, a request for the establishment of an Arbitral Tribunal, pursuant to the provisions of articles 2 and 10 of Decree-Law 10/2011 of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter identified only by the abbreviation RJAT).

  2. In the request for arbitral decision, the Claimant opted not to appoint an arbitrator.

  3. Pursuant to no. 1 of article 6 of the RJAT, the Deontological Council of the Arbitration Center appointed a single arbitrator.

  4. On 18 December 2013, the Arbitral Tribunal was duly and regularly constituted to appreciate and decide the subject matter of the proceedings.

  5. The Claimant came, through the request for establishment of the Arbitral Tribunal, to challenge the valuation carried out on the urban property located in the parish of ..., municipality of ... registered in the urban real estate registry under article no. ..., of which it is the owner.

  6. Invoking, for this purpose, a breach of legal formalities due to the defect of lack of reasoning and an error in the factual assumptions for fixing the property value.

  7. The Claimant sustains, in summary, its claim, as follows:

(i) The subject of valuation is a construction lot, which had been the subject of valuation in the year 2012, to which was assigned, at that time, the value of € 9,587.15;

(ii) By valuation carried out in 2013, the tax property value of the lot changed to € 24,350.00, that is to say its value was increased by € 14,762.85;

(iii) A second valuation of the said property was not requested;

(iv) Having, however, not agreeing with the explanations presented by the services of the Tax Authority through Official Letter no. ..., filed a hierarchical appeal based on lack of reasoning;

(v) That is, the Claimant understood that the notification of the valuation does not allow one to conclude and verify where the coefficients applied came from, particularly since, in the case of a construction lot, it is not understood why the Tax Authority identifies it as a single-family dwelling;

(vi) The Claimant considers that, in the case of a construction lot, its tax property value should result from the sum of two factors – the value of the building site area to be constructed and the value of the land adjacent to the building site area.

(vii) It believes that these two factors were not duly considered by the Tax Authority and further questions the fact that the Tax Authority did not provide reasons for why the allocation coefficients and quality and comfort coefficients were applied in this case;

(viii) Accordingly, the duty of reasoning provided for in article 77 of the General Tax Law (LGT) was not respected, as the Tax Authority limited itself to transcribing some legal provisions, without application to the specific case, which do not in themselves evidence any type of reasoning.

(ix) Finally, the Claimant considers that, in determining the Tax Property Value (VPT) of a construction lot, account should be taken of the provisions of article 45 of the IMI Code (CIMI), with no place for the application of allocation coefficients (ca) and quality and comfort coefficients (cq).

  1. In its defense, the Tax Authority, Respondent in these proceedings, understood that there was no merit to the Claimant's claim, having presented a defense by exception and by challenge, sustaining such defense as follows:

8.1. By exception:

(i) The Claimant requested the establishment of the Arbitral Tribunal to obtain the annulment of the valuation of the urban property above identified carried out by the Tax Authority;

(ii) Accordingly, and considering the scope of tax arbitral jurisdiction set out in article 2 of the RJAT and in Ordinance 112-A/2011 of 22 March, there is an absolute incompetence of the Arbitral Tribunal to judge the question raised by the Claimant;

(iii) In defense of this position, the Tax Authority comes to consider that, being the Tribunal confronted with the regime for determining the VPT of a property, this act cannot be qualified as an act of fixing the taxable base that gives rise to the collection of a tax for the purpose of the provisions of subparagraph b) of no. 1 of article 2 of the RJAT, as well as of article 2 of Ordinance 112-A/2011;

(iv) The Tax Authority understands that the contested act does not fall within the potential of acts of fixing the taxable base insofar as it does not apply a set of factors, objective or subjective, that lead to the collection of the corresponding tax, rather falling within a prior phase of fixing the taxable base;

(v) That is, there is no act of fixing the taxable matter, nor a tax, as the question raised deals only with an administrative procedural phase, whereby the Tribunal cannot substitute itself for the Tax Authority in the task of carrying out the valuation;

(vi) The Claimant intends to attempt to obtain through the arbitral route that which is no longer permitted to obtain through any other contentious or administrative route, in light of the preclusion of all legal periods of reaction to the valuation carried out by the Tax Authority on the property in question;

(vii) In conclusion, the Respondent maintains that, in the case in question, we are faced with an act of the Tax Authority that does not fall within the set of acts provided for in subparagraphs a) and b) of no. 1 of article 2 of the RJAT, which combined with article 2 of Ordinance no. 112-A/2011 leads to the Arbitral Tribunal being incompetent to judge the question and, as a consequence, to consider the exception of absolute incompetence invoked by it to be well-founded;

8.2. By challenge

(i) The valuation carried out in 2012 was merely an updating of the property value by application of the devaluation coefficients made pursuant to article 138 of the IMI Code (CIMI) and not the determination of a new tax property value in accordance with the rules contained in that Code;

(ii) The valuation carried out in 2013 was done within the framework of the general process of valuation of urban properties imposed by Law 60-A/2011;

(iii) The challenge of this valuation must be carried out in accordance with legally established procedures, namely, in the first place, a procedure requiring a second valuation, as provided for in article 76 of the CIMI, and only then a process of judicial challenge, provided for in article 77 of the CIMI;

(iv) In light of this, the Claimant, not agreeing with the fixed VPT and its method of determination should have requested a second valuation, which was not done, with the Claimant resorting to an atypical or unspecified procedural means, which invalidated the lack of merit of the hierarchical appeal that was filed;

(v) Accordingly, the fixed value became settled in the tax legal order, as the non-use of the means of defense specifically provided for the purpose in article 76 of the CIMI led to the formation of res judicata or resolved matter with regard to the VPT contained in the registry;

(vi) What is at issue is merely the appropriateness and validity of the act of valuation of the urban property in question, within the framework of the general process of valuation of urban properties carried out by Law 60-A/2011 of 30.11;

(vii) Now, the Tax Authority understands that, the valuation not having been duly and timely contested, cannot, as the Claimant intends, be discussed again;

II – FACTS PROVEN

  1. The Claimant is the owner and legitimate proprietor of an urban property located in the parish of ..., municipality of ..., registered in the real estate registry of that parish, under article no. ...

  2. The urban property, which, pursuant to tax law, is considered a construction lot, was the subject of a valuation/updating in the year 2012, to which was assigned, at that time, the value of € 9,587.15.

  3. In the year 2013, within the framework of a general valuation process, the tax property value of the lot, determined pursuant to articles 38 and following of the CIMI and of article 15-D of Decree-Law 287/2003 (as amended by Law 60-A/2011), was set at € 24,350.00, such that its tax value suffered an increase of € 14,762.85, this valuation being notified to the Claimant through Official Letter no. ….

  4. In response to this Official Letter and to the valuation contained therein, through an atypical procedure (document attached to the initial petition with no. 3), the Claimant requested the annulment of this act on the grounds, essentially, of the fact that a valuation had been made in the previous year and also because the reasons for this valuation were not clear.

  5. Pursuant to Official Letter no. ... of 14.02.2013 (document attached to the initial petition with no. 4), the Tax Authority dismissed the request for annulment made by the Claimant, for lack of legal grounds for such action.

  6. From this dismissal, the Claimant filed a hierarchical appeal to the Minister of Finance, requesting the revocation of the dismissal decision and the consequent recognition of the illegality of the challenged valuation.

  7. On 18 October 2013, the establishment of this Arbitral Tribunal was requested, which was duly and regularly constituted on 18 December 2013.

  8. The facts above mentioned are proven by the documents attached by the parties, other facts considered relevant to the decision which is the subject of the present proceedings not having been proven.

It is now necessary to appreciate and decide.

III – DECISION

A – PRELIMINARY ISSUE – ON THE VALUE OF THE CLAIM

In the understanding of this Tribunal, the value assigned to the action is incorrect.

In fact, pursuant to article 5, no. 1, subparagraph b) of the Regulation of Tax Costs and of article 97-A of the Code of Tax Procedure and Process (CPPT), applied by the reference provided for in article 29, no. 1, subparagraph a) of the RJAT, the value to be considered, for purposes of costs, in a proceeding that challenges an act of fixing the property value, is the contested value, that is to say, in the case under consideration, the VPT fixed by the Tax Authority in the valuation process of the property owned by the Claimant and already identified above.

Accordingly, taking into account that VPT, the value of the action should be € 24,350.00 and not € 1,000.00 as indicated in the initial petition for establishment of the Arbitral Tribunal.

In this sense, the alteration of the value assigned to the present action is determined, with the consequent legal implications, namely in terms of procedural costs.

B - ON THE EXCEPTION INVOKED BY THE RESPONDENT (TAX AUTHORITY).

As mentioned above, it is the understanding of the Tax Authority, taking into account the scope of tax arbitral jurisdiction set out in article 2 of the RJAT and in Ordinance 112-A/2011 of 22 March, that there is an absolute incompetence of the Arbitral Tribunal to judge the question raised by the Claimant, insofar as, having the Tribunal been confronted with the regime for determining the VPT of a property, this act cannot be qualified as an act of fixing the taxable base that gives rise to the collection of a tax, for the purpose of the provisions of the aforesaid legal provisions (subparagraph b) of no. 1 of article 2 of the RJAT, and article 2 of Ordinance 112-A/2011).

It does not appear to us that this argument invoked by the Respondent is to be accepted.

Effectively, it is provided in the cited article 2, no. 1 of the RJAT (under the heading "Competence of arbitral tribunals and applicable law"), the following:

"1 – The competence of arbitral tribunals comprises the appreciation of the following claims:

a) The declaration of illegality of acts of collection of taxes, of self-assessment, of withholding at source and of payment on account;

b) The declaration of illegality of acts of fixing the taxable base when they do not give rise to the collection of any tax, of acts of determination of the taxable base and of acts of fixing of property values;" (underlining ours).

Now, the question raised by the Claimant has to do precisely with the legality or illegality of an act of fixing the Tax Property Value of an urban property of which it is the owner.

Accordingly, and in light of what is established in the final part of the above-transcribed subparagraph b) of no. 1 of article 2 of the RJAT, it seems clear and unequivocal that the exception invoked by the Respondent is not to be accepted, as it is considered that it falls within the competence of this Tribunal to appreciate and judge the question submitted to it by the Claimant, given that it concerns an act of fixing the VPT of a property.

Moreover, pursuant to article 2 of Ordinance 112-A/2011 of 22 March, the Tax Authority is bound by the jurisdiction of the Arbitral Tribunal that appreciates and analyzes the type of question raised by the Claimant in recourse to this Arbitral Tribunal, as the same does not fall within any of the subparagraphs thereof.

The request for declaration of incompetence of the Arbitral Tribunal raised by the Respondent is thus without merit, as the Tribunal understands itself to be competent to judge and decide on the question brought before it by the Claimant.

C – ON THE APPRECIATION OF THE REQUEST FOR ANNULMENT OF THE ACT OF VALUATION OF THE PROPERTY OWNED BY THE CLAIMANT

The fundamental question for the decision of the present matter is, in the first place, to know whether the Claimant may resort to this procedural means (judicial challenge through a request for establishment of an Arbitral Tribunal) so that the act of valuation be annulled, without having first resorted to a specific procedure for this type of situations, expressly provided for in article 76 of the CIMI, a procedure which, in the case of disagreement with the process of determination of the VPT of a property, is to request a second valuation of that property.

Effectively, it is provided in this provision of the CIMI, more concretely in its no. 1, that when "the taxpayer, ……………………, do not agree with the result of the second direct valuation of urban properties, may, respectively, request or promote a second valuation, within 30 days counted from the date on which the first was notified."

This question – of the obligation to exhaust administrative procedures before resorting to judicial means of challenge - comes expressed and directly regulated in article 134 of the CPPT.

Under the heading "Subject matter of the challenge" it is established in this article the following:

"1 - Acts of fixing property values may be challenged, within 90 days after their notification to the taxpayer, on the grounds of any illegality.

2 - A ground of illegality, in addition to breach of legal formalities, is an error of fact or law in the fixing.

3 - Inaccuracies in the registry entries of property values may be subject to judicial challenge, within 30 days, provided that the taxpayer has previously requested correction of the entry from the competent entity and this has refused or failed to pronounce within 90 days from the request.

4 - To the challenge referred to in the preceding number applies the provisions of no. 3 of article 111.

5 - The request for correction of the entry pursuant to the preceding number may be submitted at any time.

6 - The period of the challenge referred to in no. 3 is counted from the notification of the refusal or the expiry of the period for appreciation of the request.

7 - The challenge referred to in this article has no suspensive effect and may only take place after exhaustion of the gracious means provided for in the valuation procedure." (underlining ours)

In his comments on this norm, in his Code of Tax Procedure and Process (CPPT) Annotated, the Illustrious Counselor Jorge Lopes de Sousa, states that;

"The challenge of acts of fixing property values depends on prior exhaustion of the administrative means of review provided for in the valuation procedure (no. 7 of this article and art. 86, nos. 1 and 2 of the LGT). The same results from art. 77, no. 1 of the CIMI, in which the possibility of judicial challenge is provided only for the results of second valuations.

The need for exhaustion of administrative means exists even if the disagreement of the interested party with the act of fixing is only on matters of law, as no limitation is provided for regarding the cognition powers of the commissions that must carry out the valuations.

………As regards the valuation of real property, the regime provided for in the CIMI applies, in which the possibility of a second valuation is also admitted (arts. 74, 75 and 76).

Only after the second valuation is carried out may the taxpayer judicially challenge the fixing of the property value."

In the same sense, goes, moreover, art. 86 of the LGT, where, in its no. 2 it is provided that:

"2 - The challenge of direct valuation depends on the exhaustion of the administrative means provided for its review."

Thus, as is determined in the final part of this provision, the contentious challenge of the act of direct valuation is only possible after the administrative means of challenge, which are legally provided for, are exhausted.

An identical understanding results, also, from article 77 of the IMI Code, where the legislator expressly provides that "From the result of second valuations judicial challenge is available….."

Now, the law – art. 76 of the CIMI – provides, in a clear manner, that from the act of determination of the VPT of an urban property, that is, from the act that proceeded to its valuation, in the case of disagreement with the result of that valuation, a 2nd valuation should be requested.

By which, that would be the appropriate means to react against the valuation carried out by the Tax Authority regarding the property owned by the Claimant and necessary in order that, in a later phase of the procedure, with that valuation procedure concluded, recourse be had to its judicial challenge.

Accordingly, in the case in question, the non-use, by the Claimant, of the procedure legally provided for to contest a valuation of its property, leads to the illegality of the challenge, conducting, pursuant to article 89, no. 1, subparagraph c) of the CPTA, to its rejection.

That is, the non-use of the means of defense specifically provided for the purpose in article 76 of the CIMI led to the formation of res judicata or resolved matter with regard to the VPT contained in the registry, whereby the value fixed in the first valuation became settled and consolidated in the tax legal order.

D - CONCLUSION

Decision:

In light of the foregoing, it is decided:

  1. To alter the value of the proceedings from € 1,000.00 to € 24,350.00, taking into account the provisions of articles 97-A of the CPPT and 5, no. 1, subparagraph b) of the Regulation of Tax Costs.

  2. To judge without merit the request for annulment of the act of valuation formulated by the Claimant, considering the unimpeachability of the contested act, and the formation of res judicata or resolved matter with regard to the VPT contained in the registry and consequently, maintaining the VPT fixed by the Tax Authority in the first valuation carried out with regard to the urban property located in the parish of ..., municipality of ... registered in the real estate registry under article no. ..., in the value of € 24,350.00.

Value of the proceedings: € 24,350.00

Costs of the proceedings: Costs calculated in conformity with Table I of the Regulation of Costs of Tax Arbitration Proceedings in accordance with the value of the claim, at the expense of the Claimant and which I fix at 1,224.00 (one thousand two hundred twenty-four euros).

Lisbon, 7 October 2014

Let it be notified

THE ARBITRATOR

João Marques Pinto

The drafting of the present decision is governed by the former orthography.

Frequently Asked Questions

Automatically Created

What is the Valor Patrimonial Tributário (VPT) and how is it calculated for a construction land plot under Portuguese IMI tax law?
The Valor Patrimonial Tributário (VPT) is the tax property value that serves as the basis for calculating IMI (Municipal Property Tax) in Portugal. For construction land plots (terrenos para construção), Article 45 of the IMI Code establishes a specific calculation methodology distinct from completed buildings. The VPT should equal the sum of: (1) the value of the building footprint area (área de implantação) intended for construction, and (2) the value of land adjacent to that footprint. This calculation uses location coefficients and land values per square meter but should not incorporate allocation coefficients (ca) or quality and comfort coefficients (cq), which apply only to completed buildings under Articles 38-41 CIMI. The distinction is critical because construction lots lack the physical characteristics—building typology, age, quality features—that these coefficients measure. Process 235/2013-T specifically questioned whether the Tax Authority erroneously applied dwelling-specific coefficients to land classified as a construction lot, potentially inflating the VPT beyond what Article 45 methodology permits.
Can a taxpayer challenge an IMI property valuation before the Portuguese Arbitral Tax Tribunal (CAAD)?
The jurisdiction of the Portuguese Arbitral Tax Tribunal (CAAD) over IMI property valuations presents a contested legal issue examined in Process 235/2013-T. Article 2(1)(b) RJAT grants CAAD competence over acts determining taxable bases giving rise to tax collection. The Tax Authority argued that property valuations constitute preliminary administrative acts preceding actual tax base determination, falling outside arbitral jurisdiction—the valuation merely establishes VPT, while the subsequent IMI assessment actually determines the taxable base and tax due. According to this position, taxpayers must challenge valuations through the specific procedure in Article 76 CIMI (requesting a second valuation) followed by judicial review under Article 77 CIMI if necessary. However, the counter-argument holds that VPT determination directly establishes the taxable base for IMI purposes, making it challengeable before CAAD as an act of tax base determination under Article 2 RJAT. This jurisdictional question fundamentally affects taxpayer access to arbitration for valuation disputes versus relegating them to traditional administrative and judicial channels. The resolution determines whether CAAD represents an alternative forum for contesting property valuations or whether such disputes remain outside arbitral competence.
What legal grounds justify contesting an IMI property reassessment, including lack of reasoning and factual errors?
Portuguese taxpayers may challenge IMI property reassessments on several legal grounds, prominently featured in Process 235/2013-T. First, lack of reasoning (falta de fundamentação) under Article 77 of the General Tax Law requires the Tax Authority to provide specific, comprehensible explanations for its valuation decisions, not merely transcribe legal provisions without demonstrating their application to the particular property. The duty of reasoning ensures transparency and enables meaningful taxpayer review of technical determinations. Second, error in factual assumptions (erro sobre os pressupostos de facto) occurs when the Tax Authority misclassifies property characteristics or applies incorrect factual premises—for example, treating a construction lot as a completed single-family dwelling, thereby applying inappropriate valuation coefficients. Third, legal error in applying the wrong valuation methodology, such as using Article 38 CIMI (completed buildings) instead of Article 45 CIMI (construction land) based on misunderstanding the property's legal classification. Fourth, violation of procedural formalities if the valuation process failed to comply with mandatory legal requirements. These grounds enable challenges both to the procedural propriety of valuations (reasoning defects, procedural violations) and substantive accuracy (factual errors, wrong legal framework), protecting taxpayers from arbitrary or erroneous property assessments that inflate their tax obligations.
How are the coefficients of allocation and quality and comfort applied when determining the taxable value of urban land for construction?
Under the Portuguese IMI Code, allocation coefficients (coeficiente de afetação - ca) and quality and comfort coefficients (coeficiente de qualidade e conforto - cq) apply specifically to completed buildings when determining VPT, not to construction land. The allocation coefficient (Article 41 CIMI) adjusts value based on the building's use—whether residential, commercial, services, or other purposes—reflecting how utilization affects property value. The quality and comfort coefficient (Article 40 CIMI) evaluates physical features like construction materials, finishes, infrastructure availability, elevators, central heating, and overall building quality, ranging from buildings of excellent quality to basic construction. These coefficients modify the base calculation under Article 38 CIMI for buildings by recognizing that identical-sized properties have different values depending on use and quality characteristics. However, Process 235/2013-T highlights that construction lots (terrenos para construção) should be valued under Article 45 CIMI using only the building footprint area value plus adjacent land value, without allocation or quality coefficients since undeveloped land lacks the completed building features these coefficients measure. The central dispute involved whether the Tax Authority erroneously applied ca and cq coefficients to property properly classified as construction land, thereby using an inappropriate methodology that inflated the VPT beyond what the legal framework for construction lots permits.
What duty of reasoning (fundamentação) must the Portuguese Tax Authority (AT) fulfill under Article 77 of the General Tax Law (LGT) when issuing property valuations?
Article 77 of the Portuguese General Tax Law (Lei Geral Tributária) establishes a fundamental duty of reasoning (dever de fundamentação) requiring the Tax Authority to explain its decisions, particularly technical determinations like property valuations. This duty serves transparency, enables taxpayer understanding and effective challenge of administrative acts, and prevents arbitrary decision-making. In the IMI valuation context examined in Process 235/2013-T, the Tax Authority must provide case-specific reasoning explaining: (1) why particular coefficients were applied to the property; (2) how the property's physical and legal characteristics justify the chosen valuation methodology; (3) the origin and calculation of applied coefficients including location, allocation, and quality factors; and (4) why the property was classified in a particular category affecting which valuation rules apply. Mere transcription of legal provisions or generic statements without demonstrating their specific application to the property at issue fails to satisfy Article 77. The reasoning must be sufficiently detailed that a taxpayer can understand the Tax Authority's logic and identify potential errors. For construction lots, this includes explaining whether Article 45 CIMI (construction land) or Article 38 CIMI (completed buildings) applies and why, and justifying any coefficient application. Inadequate reasoning constitutes a procedural defect (vício de forma) invalidating the valuation and potentially requiring the Tax Authority to issue a properly reasoned decision, ensuring administrative accountability and taxpayer procedural rights.