Process: 238/2015-T

Date: November 9, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 238/2015-T addresses the controversial application of Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) to vertical property ownership in Portugal. The case involved a building comprising 84 tourist apartments with a total taxable patrimonial value (TPV) of €6,318,510, where the Tax Authority assessed Stamp Tax totaling €95,022.31. The core legal dispute centers on whether Item 28.1 TGIS, which taxes properties with residential use exceeding €1,000,000 in value, should apply to the aggregate value of a building in vertical ownership or to each independent unit separately. The claimant argued that since each apartment unit had an individual TPV between €47,000 and €86,000—none exceeding the €1,000,000 threshold—the tax should not apply. The taxpayer contended that vertical property (where horizontal ownership has not been formally constituted) should receive the same treatment as horizontal property (condominium), where each autonomous unit is taxed independently. The claimant invoked the Municipal Property Tax Code (CIMI) provisions, specifically Article 7(2)(b), arguing that each autonomous division with independent use has its own TPV for tax purposes. The fundamental question was whether the Tax Authority could sum individual TPVs of separate units to trigger the high-value property tax, or whether each unit should be assessed independently, thereby avoiding the tax entirely when individual values fall below the statutory threshold.

Full Decision

ARBITRAL AWARD

The arbitrators José Poças Falcão (presiding arbitrator), Paulo Ferreira Alves and Ricardo Jorge Rodrigues Pereira (arbitrator-members), appointed by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 22 June 2015, hereby agree as follows:

I – REPORT

A - PARTIES

A..., with registered office at Rua ..., ... - ....º, ... - .. Lisbon and with NIPC ..., hereinafter designated as Claimant or taxpayer.

TAX AND CUSTOMS AUTHORITY (which succeeded the General Directorate of Taxes, by virtue of Decree-Law no. 118/2011, of 15 December) hereinafter designated as Respondent or AT.

The petition for constitution of the arbitral tribunal was accepted by the President of CAAD and the Arbitral Tribunal was duly constituted on 08-04-2015 to examine and decide on the subject-matter of this case, and the Tax and Customs Authority was automatically notified on 08-04-2015, as appears in the respective minutes.

The Claimant failed to appoint an arbitrator, therefore, pursuant to article 6(1) and article 11(1)(b) of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed Dr. José Poças Falcão, Dr. Paulo Ferreira Alves and Dr. Ricardo Jorge Rodrigues Pereira, and the appointment was accepted in accordance with the legal provisions.

On 03-06-2015, both parties were duly notified of this appointment and did not express any intention to refuse the appointment of the arbitrators, in accordance with article 11(1)(a) and (b) of the RJAT and articles 6 and 7 of the Deontological Code.

In accordance with article 11(1)(c) of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was duly constituted on 22-06-2015.

Both parties agreed to waive the meeting provided for in article 18 of the RJAT.

The arbitral tribunal is duly constituted. It is materially competent, in accordance with articles 2(1)(a) and 30(1) of Decree-Law no. 10/2011, of 20 January.

The parties possess legal capacity and standing, are duly represented (articles 4 and 10(2) of the same decree and article 1 of Ordinance no. 112-A/2011, of 22 March).

The case contains no defects that would invalidate it.

B – CLAIM

The Claimant seeks a declaration of illegality of the tax assessment acts for Stamp Tax purposes, which set a total tax payable of €95,022.31 (ninety-five thousand twenty-two euros and thirty-one cents):

[Table with multiple entries of division numbers (2012 and 2013) with corresponding tax amounts - structure preserved but specific identifying information redacted with "..."]

C – GROUNDS FOR THE CLAIM

The Claimant, in support of its request for an arbitral pronouncement, to justify the declaration of illegality of the aforementioned tax assessment acts for Stamp Tax purposes, has alleged, in summary, the following:

The Claimant alleges that it is the owner of the urban property situated at ..., Rua da ..., ..., ..., Lot ..., district of Faro, Municipality of Loulé, Parish of ..., with property registration number ....

The Claimant contends that for the application of item 28.1 of the General Table of Stamp Tax, it is necessary that the objective elements of the tax base be cumulatively satisfied and thus alleges that it is necessary that (i) there exists a right of ownership, usufruct, or surface right over an urban property; (ii) that the urban property in question has a taxable patrimonial value equal to or exceeding €1,000,000; (iii) and further that the urban property has residential use, or the urban property, regardless of residential use, is owned by taxpayers who, not being natural persons, are resident in a country, territory or region subject to a clearly more favourable tax regime, set out in a list approved by ministerial ordinance of the Minister of Finance.

The Claimant further alleges that the enumeration in item 28.1 of the General Table of Stamp Tax is exhaustive.

The Claimant argues that the Property is described in the Urban Property Registry as a "Building Property with Storeys or Divisions Susceptible to Independent Use", consisting of "Building composed of 84 tourist apartments, of which 4-T2 and 80-T1, having a basement and sub-basement, called 'Clube B...'" Number of storeys: 10; Number of storeys or divisions with independent use: 86; Total patrimonial value: €6,318,510.00"

The Claimant contends that, on the date of the assessments, the Taxable Patrimonial Value (TPV) of the Property was €6,188,067.47, and was subsequently subject to revaluation on 07/10/2014, with the TPV being recorded as €6,318,510.00.

The Claimant alleges that the property in its entirety has residential use and in the absence of a definition of what constitutes "residential use" under the Stamp Tax Code, the interpreter should resort to the subsidiarily applicable provisions, namely the provisions of the Municipal Property Tax Code (CIMI).

The Claimant contends that the TPV of the storeys of the property in question, with residential use, varies between €47,000.00 and €86,000.00, meaning that none of the independent units comprising the Claimant's property presents a patrimonial value exceeding €1,000,000.00.

The Claimant maintains that the idea embodied in the current Item 28 of the General Table of Stamp Tax, for tax purposes, is that the mere fact that horizontal property has not been constituted does not reflect any special contributive capacity of the respective owners compared to owners of identical properties on which such horizontal property has been constituted.

The Claimant alleges that according to article 7(2)(b) of the CIMI, the value of the property is the sum of the value of its parts.

The Claimant further contends that the taxable patrimonial value of the "property", constituted by storeys or parts susceptible to independent use, is, for tax purposes, the sum of various TPVs determined according to autonomous criteria, and thus only the properties, storeys or parts susceptible to independent use, individually considered, which have "residential use" and a taxable patrimonial value, used for Municipal Property Tax purposes, equal to or exceeding €1,000,000 (one million euros), are susceptible to falling within the tax base rule contained in Item 28.1 of the General Table of Stamp Tax.

The Claimant further alleges that, since the Stamp Tax Code refers to the Municipal Property Tax Code, it should be considered that the registration in the property register of properties in vertical ownership, constituted by different parts, storeys or divisions with independent use, follows the same registration rules as properties constituted in horizontal ownership.

The Claimant contends that, in light of the Municipal Property Tax Code, each autonomous part of the property has its own TPV, constituting the taxable value for purposes of this tax, and therefore that should be the taxable value for purposes of Stamp Tax, namely in the context of the application of item 28.1 of the General Table of Stamp Tax, which indeed expressly requires that the value to be considered is the "taxable patrimonial value used for Municipal Property Tax purposes".

The Claimant argues that the AT cannot sum the TPV determined individually for each storey of a property to arrive at a value exceeding one million euros and apply Stamp Tax thereto.

The Claimant further contends that the existence of a property in vertical or horizontal ownership cannot, by itself, be an indicator of any contributive capacity.

The Claimant considers that there is no justification for differentiated treatment of the units or parts of a property being based solely and exclusively on the fact that it is in horizontal ownership, as long as the units or parts have independent use.

The property is an urban property and comprises 10 (ten) storeys and divisions with independent uses, whose taxable patrimonial value (TPV) was determined separately, in accordance with article 7(2)(b) of the Municipal Property Tax Code.

The Claimant concludes by maintaining the voidability of the Stamp Tax assessment acts due to violation of law, alleging that there is a complete absence of legal basis that would legitimize the criterion applied by the AT in the present case, when considering the sum total of the TPV attributed to divisions with independent use, on the ground that the property is not in horizontal ownership regime, as such, the taxation carried out by the AT for Stamp Tax provided for in Item 28 of the General Table, as described, violates the principles of legality and tax equality, as well as the principle of material truth.

D - RESPONSE OF THE RESPONDENT

The Respondent, duly notified to that effect, timely presented its response in which, in abbreviated summary, it alleged the following:

The situation of the Claimant's property literally falls within the provision of item 28.1 of the General Table of Stamp Tax, and the Respondent further contends that the subjection to Stamp Tax of item 28.1 of the General Table annexed to the Stamp Tax Code results from the combination of two facts: residential use and the taxable patrimonial value of the urban property registered in the property register being equal to or exceeding €1,000,000.00.

The Respondent alleges that the Claimant is therefore the owner of a property in full or vertical ownership regime, and therefore there are no autonomous fractions to which tax law can attribute the qualification of property.

The Respondent contends that the property is composed of 84 apartments intended for housing, composed of 10 storeys, but in its entirety is composed of 86 divisions or parts susceptible to independent use, as shown in the respective property registry.

The Respondent further contends that the taxable patrimonial value was determined separately, in accordance with article 7(2)(b) of the Municipal Property Tax Code (CIMI), with the taxable patrimonial value in its entirety being the amount of €6,188,067.47.

It was on the basis of that TPV of €6,188,067.47 that the AT assessed the Stamp Tax under item 28.1 of the General Table for the year 2012, in accordance with articles 6(1)(a) and (f) of Law no. 55-A/2012, of 29 October, at the rate of 0.5% for 2012.

This Stamp Tax assessment resulted in a total amount for the year in question of €95,022.31.

The Respondent considers that the Claimant is the owner of two properties in full or vertical ownership regime and that under the definition of property in article 2 of the CIMI, only the autonomous fractions of property in horizontal ownership regime are considered as properties.

And thus the Claimant, for Municipal Property Tax purposes and also for Stamp Tax purposes, by virtue of the wording of the aforementioned item, is not the owner of 86 autonomous fractions, but rather of one property, according to its property registry.

The Respondent contends that this follows from the definition of property in article 2 of the CIMI, according to which only the autonomous fractions of property in horizontal ownership regime are considered as properties.

The Respondent maintains that the Claimant apparently seeks the AT to consider, for purposes of assessing this tax, that there is an analogy between the full ownership regime and the horizontal ownership regime, because it would be illegal for there to be discrimination in the legal-tax treatment of the two ownership regimes.

The Respondent further contends that horizontal ownership is a specific legal regime of property provided for in article 1414 et seq. of the Civil Code, which provides for and regulates the method of constitution as well as other rules on the rights and obligations of co-owners, recognizing it as a more evolved form of property. These two ownership regimes are civil law regimes, which have been incorporated into tax law, namely in accordance with the terms referred to in article 2 of the CIMI.

Supporting its position, the Respondent contends that in determining the meaning of tax rules and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed, as provided in article 11(1) of the General Tax Law (LGT), which refers to the Civil Code, which in article 10 on the application of analogy, determines that analogy shall only apply in case of gaps in the law, a gap which the tax law does not contain.

The Respondent further states that according to the CIMI, to which item 28.1 of the General Table of Stamp Tax refers, that in the horizontal ownership regime, the fractions constitute properties. The property not being subject to this regime, legally the fractions are parts susceptible to independent use, with no common parts.

Thus, it cannot be accepted that it be considered, for purposes of item 28.1 of the General Table annexed to the Stamp Tax Code, that the parts susceptible to independent use have the same tax regime as the autonomous fractions of the horizontal ownership regime, at risk of an open violation of the principle of legality.

Therefore, the property being subject to the full ownership regime, but being physically constituted by parts susceptible to independent use, the tax law attributed relevance to such materiality, assessing individually, in accordance with article 12(3) of the CIMI, each storey or part of property susceptible to independent use - considered separately in the property registration, but integrating the same registry - with the Municipal Property Tax being assessed taking into account the taxable patrimonial value of each part.

Given that the storeys or independent divisions, assessed in accordance with article 12(3) of the CIMI, are considered separately in the property registration, which likewise distinguishes the respective taxable patrimonial value on which the Municipal Property Tax is assessed.

And the fact that Municipal Property Tax was determined in function of the taxable patrimonial value of each part of property with independent economic use does not equally affect the application of item 28(1) of the General Table.

The Respondent contends that it results from the fact that the determinative factor for the application of this item of the General Table is the total taxable patrimonial value of the property and not separately that of each of its portions.

In this sense, it contends that any other interpretation would violate, rather, the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in article 103(2) of the Constitution of the Portuguese Republic.

The Respondent bases its position by noting that the property registration of each part susceptible to independent use is not autonomous, by registry, but consists of a description in the registry of the property in its entirety - see the property registry of this property which represents the owner's document containing the property registration elements of the property.

The Respondent intends to conclude that these procedural rules of assessment, property registration and tax assessment of the parts susceptible to independent use do not permit the assertion that there is an equalization of the property in full ownership regime with the vertical ownership regime.

Given that the tax fact for Stamp Tax under item 28.1 consists in the ownership of urban properties whose taxable patrimonial value shown in the registry, in accordance with the CIMI, is equal to or exceeding €1,000,000.00, the taxable patrimonial value relevant for purposes of the tax base of the tax is thus the total taxable patrimonial value of the urban property and not the taxable patrimonial value of each of the parts that comprise it, even when susceptible to independent use.

The Respondent contends that this interpretation of the Stamp Tax base rule results from the combination with the other Municipal Property Tax base rule which is article 1, according to which Municipal Property Tax is assessed on the taxable patrimonial value of urban properties, taking into account the definition of property in article 2 and of urban property contained in article 4 and also the types of urban properties described in article 6.

The Respondent concludes that the disputed tax acts, in terms of substance, did not violate any legal or constitutional provision and should be maintained in the legal order.

E - FACTUAL GROUNDS

Before examining these issues, it is necessary to present the factual matter relevant to its understanding and decision, which was determined based on documentary evidence and taking into account the facts alleged.

As to relevant factual matter, this tribunal finds as established the following facts:

The Claimant is the owner of an urban property corresponding to a property in full ownership (not horizontal) with 10 (ten) storeys and 86 (eighty-six) divisions susceptible to independent use, of which 84 (eighty-four) divisions have residential use, situated at [Property located at] ..., Rua ..., ..., Sector ..., Lot ..., district of Faro, Municipality of Loulé, Parish of ..., with property registration number ....

The Claimant presented a petition for administrative review of the assessments on 28 November 2013.

The Tax and Customs Authority ruled on 17 December 2013 for the complete dismissal of the said administrative review petition.

The Claimant exercised its right to be heard on 2 January 2014.

The Claimant filed an appeal on 14 February 2014.

The Tax and Customs Authority ruled on 16 December 2013 for the complete dismissal of the appeal.

The assessment notices relate to the following storeys and divisions, with independent use, which comprise the urban property, whose taxable patrimonial value was determined separately, in accordance with article 7(2)(b) of the Municipal Property Tax Code (CIMI), resulting in the issuance of the following tax acts, here disputed:

[Detailed table of divisions (A through P and beyond, with 2012 and 2013 entries) with corresponding tax amounts ranging from €237.31 to €513.46 - structure preserved as original]

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto de Selo) liability under Verba 28.1 of the General Stamp Tax Table (TGIS) for vertical property in Portugal?
Under Verba 28.1 of the General Stamp Tax Table, Stamp Tax applies to ownership, usufruct, or surface rights over urban properties with residential use when the taxable patrimonial value equals or exceeds €1,000,000. For vertical property (buildings with divisions susceptible to independent use where horizontal ownership is not constituted), the critical issue is whether the €1,000,000 threshold applies to the aggregate building value or to each independent unit. Taxpayers argue that vertical property should be treated like horizontal property, with each autonomous unit assessed separately based on its individual TPV as determined under the Municipal Property Tax Code (CIMI), meaning only units individually exceeding €1,000,000 would trigger the tax liability.
How does CAAD arbitration handle disputes over Stamp Tax assessments on real estate properties?
The CAAD (Administrative Arbitration Centre) handles Stamp Tax disputes through arbitral tribunals constituted under Decree-Law 10/2011. In real estate Stamp Tax cases, taxpayers can request arbitration to challenge tax assessment acts by filing a petition with CAAD. The tribunal, composed of appointed arbitrators, examines the legality of tax liquidation acts based on both procedural and substantive grounds. In Process 238/2015-T, the tribunal was constituted on June 22, 2015, to review Stamp Tax assessments totaling €95,022.31 on a vertical property. The arbitration process provides an alternative to judicial courts, offering specialized tax law expertise and typically faster resolution of disputes involving the interpretation and application of tax legislation to complex property ownership structures.
What constitutes vertical property (propriedade vertical) for Stamp Tax purposes under Portuguese tax law?
Vertical property (propriedade vertical) under Portuguese tax law refers to buildings registered as having storeys or divisions susceptible to independent use, where formal horizontal ownership (condominium regime) has not been constituted. Unlike horizontal property where each unit is registered as an autonomous property with its own individual registration, vertical property remains registered as a single building with multiple functional divisions. For Stamp Tax purposes under Item 28.1 TGIS, the distinction is significant because it raises the question of whether the taxable patrimonial value should be calculated for the building as a whole or for each independent division separately. The Municipal Property Tax Code (CIMI) recognizes that each autonomous part of a building has its own TPV, and taxpayers argue this individual valuation should apply equally to vertical property for Stamp Tax purposes.
Can taxpayers challenge Stamp Tax liquidation acts through the CAAD Tax Arbitration Tribunal?
Yes, taxpayers can challenge Stamp Tax liquidation acts through the CAAD Tax Arbitration Tribunal under Article 2(1)(a) of Decree-Law 10/2011. This administrative arbitration mechanism allows taxpayers to contest the legality of tax assessment acts, including those issued for Stamp Tax under Item 28.1 TGIS. The arbitration request must be filed within the legal deadline, and the tribunal has material competence to review disputes involving tax amounts exceeding the minimum threshold. In Process 238/2015-T, the claimant successfully invoked CAAD jurisdiction to contest €95,022.31 in Stamp Tax assessments on vertical property. The tribunal reviews both the legal interpretation of tax provisions and their application to specific factual circumstances, providing binding decisions that can declare tax acts illegal and order their annulment.
What are the legal grounds for declaring the illegality of Stamp Tax assessments under Verba 28.1 TGIS?
Legal grounds for declaring illegality of Stamp Tax assessments under Verba 28.1 TGIS include: (1) incorrect interpretation of what constitutes 'urban property' when the building comprises multiple independent units; (2) improper aggregation of individual TPVs instead of treating each autonomous division separately; (3) failure to apply Municipal Property Tax Code (CIMI) principles that establish individual TPVs for each autonomous part; (4) violation of equal treatment principles by taxing vertical property differently than horizontal property despite equivalent economic substance; (5) misapplication of the €1,000,000 threshold when no individual unit exceeds this value; and (6) violation of the principle that tax incidence requires all cumulative statutory conditions to be met. Taxpayers argue the enumeration in Item 28.1 is exhaustive, requiring residential use AND individual property value exceeding €1,000,000, which is not satisfied when only the aggregate building value exceeds the threshold.