Process: 243/2014-T

Date: March 27, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration case (Process 243/2014-T) addresses whether Stamp Duty under Item 28.1 of the General Table (TGIS) applies to properties held in vertical ownership when individual units have independent use. The taxpayer owned an urban property in Porto registered under vertical ownership, comprising 5 floors with 17 independent units for housing and commerce. The Tax Authority assessed Stamp Duty totaling €11,484.52 based on the aggregate tax property value (VPT) of all housing units (€1,111,848), exceeding the €1,000,000 threshold. The taxpayer challenged this approach, arguing that Item 28.1 should apply individually to each independent unit rather than the property as a whole, invoking constitutional principles of justice, equality, and proportionality. The Tax Authority defended its position by distinguishing vertical ownership from horizontal ownership (condominium), asserting that vertical ownership constitutes a single juridical property despite containing independently usable units. The Authority argued that the relevant VPT for Item 28.1 purposes is the total property value, not individual unit values, based on CIMI provisions defining urban properties. The case raises fundamental questions about the interpretation of tax incidence rules when traditional property ownership structures (vertical ownership) contain multiple economically independent units. The taxpayer requested annulment of 18 separate Stamp Duty assessments through a single CAAD arbitration proceeding initiated in March 2014, demonstrating the procedural efficiency of tax arbitration for consolidated challenges. The arbitral tribunal was constituted on May 14, 2014, following appointment procedures under RJAT (Decreto-Lei 10/2011). This decision has significant implications for taxation of vertically-owned properties with high aggregate values but individually modest unit values.

Full Decision

ARBITRATION DECISION

I - REPORT

I.1. On 7 March 2014, M..., taxpayer no. ..., resident at Street ... no. ... (hereinafter the "Applicant"), requested the Centre for Administrative Arbitration (CAAD) to constitute a sole arbitral tribunal, in accordance with Article 99 of the Code of Tax Procedure and Process (CPPT) and Articles 2, no. 1, sub-paragraph a), and 10, no. 2, sub-paragraph c), both of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT").

I.2. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and, on 11 March 2014, it was notified to the Tax and Customs Authority (hereinafter referred to as AT or "Respondent").

I.3. In accordance with Articles 6, no. 1, and 11, no. 1, sub-paragraph a), both of the RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrator of the present sole arbitral tribunal, who communicated his acceptance within the legally prescribed period. On 28 April 2014 the parties were notified of this decision, and neither manifested a will to reject it.

I.4. The Tribunal was thus constituted on 14 May 2014, as confirmed by the communication of the President of the Deontological Council of CAAD, which is attached to the case file.

I.5. On 3 July 2014, the first meeting of the Tribunal took place at the headquarters of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, in accordance with the terms and purposes of Article 18 of the RJAT, and minutes thereof were drawn up, which are attached to the case file.

I.6. At that meeting the Tribunal allowed the joinder to the case file of the documents mentioned in Article 80 of the request for arbitration pronouncement, which the Applicant had protested to attach. The Applicant also communicated that it was waiving the submission of written pleadings. The Respondent had already expressed the same position through written request. The Tribunal fixed the deadline for pronouncement of the final decision until 30 September 2014, which would subsequently be extended, pursuant to Article 21, no. 1, of the RJAT.

I.7. The Applicant petitions:

a) The declaration of illegality and respective annulment, with all legal consequences, namely the restitution of the amount of tax paid unduly, of the Stamp Duty assessments no. 2013..., in the amount of €799.30, no. 2013..., in the amount of €799.30, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €799.30, no. 2013..., in the amount of €799.30, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, no. 2013..., in the amount of €660.10, all dated 14 July 2013, totalling a global amount of €11,484.52, issued under item 28.1 of the General Table of Stamp Duty (TGIS).

b) The conviction of Respondent AT to pay compensation interest, in accordance with Article 43, no. 1, of the General Tax Law and Article 61 of the CPPT, calculated from the date of payment until the reimbursement of the amount unduly paid.

I.8. The Applicant supports its petition, in summary, as follows:

I.8.1. The Applicant is the owner of the urban property registered in the respective property register of the Union of Civil Parishes of ..., municipality of Porto, under article ..., in the regime of full ownership, also designated vertical ownership.

I.8.2. The said property is composed of 5 floors, corresponding to 17 parts susceptible to independent use, intended for housing and commerce.

I.8.3. AT subjected the property to Stamp Duty provided for in item 28.1 of the TGIS, based on the global tax property value (VPT) of all units intended for housing, which amount, altogether, to €1,111,848.00.

I.8.4. Such understanding is manifestly illegal and unconstitutional, by violation of the principles of justice, equality and proportionality, enshrined in Articles 262, no. 2, 13 and 104, no. 3, of the Constitution of the Portuguese Republic.

I.8.5. The subjection to Stamp Duty under item 28.1 of the TGIS is determined by the combination of two facts: the exclusive housing use of the property and the VPT appearing in the register equal to or greater than €1,000,000.00.

I.8.6. Now, since we are dealing with a property composed of several units with independent use, the subjection to Stamp Duty must be determined not by the VPT of the totality of the property, but rather by the VPT attributed to each of these units.

I.9. In its Reply, AT invoked, in summary, the following:

I.9.1. The situation of the Applicant's property falls, linearly, that is to say literally, within the provision of item 28.1 of the TGIS.

I.9.2. The unity of the urban property in vertical ownership composed of several floors or units is not affected by the fact that all or some of these floors or units are susceptible to independent economic use, these not being, therefore, juridically distinct, susceptible of comparison to autonomous fractions in the regime of horizontal ownership.

I.9.3. Thus, the pretension of application to the case sub judice, by analogy, of the horizontal ownership regime, considering that each of the fractions susceptible to independent use constitutes a property, does not succeed.

I.9.4. The fact that the Municipal Property Tax (IMI) was calculated according to the tax property value of each part of property with independent economic use does not affect the application of item 28.1 of the TGIS to the property as a whole.

I.9.5. The determining fact for the application of this item of the TGIS is the total property value of the property and not, separately, that of each of its parcels.

I.9.6. The taxable event of Stamp Duty of item 28.1, which consists in the ownership of urban properties whose tax property value appearing in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.00, implies that the tax property value relevant for the purposes of the incidence of the tax provided therein is the total tax property value of the urban property and not the tax property value of each of the parts that compose it, even when susceptible to independent use.

I.9.7. Such interpretation of the said norm of incidence of Stamp Duty is derived from the combination with Article 1 of the CIMI, according to which Municipal Property Tax is levied on the tax property value of urban properties, and also with the provisions of Articles 2, 4 and 6 of the said Code.

I.9.8. Any other interpretation would violate 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, no. 2, of the Constitution of the Portuguese Republic (CRP).

II. PRELIMINARY ISSUES

The Tribunal is competent and properly constituted, in accordance with Articles 2, no. 1, sub-paragraph a), 5 and 6, all of the RJAT. The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March. It is now necessary to assess the merits of the petition.

III. FACTS

III.1. Proven Facts

III.1.1. The Applicant is the owner of the urban property registered in the respective property register of the Union of Civil Parishes ..., municipality of Porto, under article ..., in the regime of full ownership, also designated vertical ownership.

III.1.2. The Applicant was notified of Stamp Duty assessments (single payment), dated 14 July 2013, described below, corresponding to the independent units that make up the urban property located in the Union of Civil Parishes of ..., with the cadastral article ..., namely:

  1. No. 2013..., in the amount of €799.30, corresponding to the independent unit, identified under U-..., with the VPT of €79,930.00;

  2. No. 2013..., in the amount of €799.30, corresponding to the independent unit, identified under U-..., with the VPT of €79,930.00;

  3. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  4. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  5. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  6. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  7. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  8. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  9. No. 2013..., in the amount of €799.30, corresponding to the independent unit, identified under U-..., with the VPT of €79,930.00;

  10. No. 2013..., in the amount of €799.30, corresponding to the independent unit, identified under U-..., with the VPT of €79,930.00;

  11. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  12. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  13. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  14. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  15. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00;

  16. No. 2013..., in the amount of €660.10, corresponding to the independent unit, identified under U-..., with the VPT of €66,010.00.

III.1.3. The Applicant submitted individual gracious objections requesting the annulment of the assessments, which, through joint analysis and decision, were rejected.

III.1.4. In the context of enforcement proceedings nos. ...2013..., ...2013..., ...2013..., ...2013..., ...2013..., ...2013..., ...2013..., ...2013..., ...2013..., ...2013...; ...2013..., ...2013..., ...2013..., ...2013..., ...2013... and ...2013..., the Applicant was notified of coercive collection of the aforesaid assessment notices, in the global amount of €11,484.52;

III.1.5. The property in question in the case is described in the register as full ownership with floors or units susceptible to independent use, composed of 5 floors and courtyard, intended for commerce and housing, and 17 units with independent use, whose total VPT amounts to €1,343,570.00.

III.1.6. The property, despite being composed of several floors and units with independent use, is not constituted in the regime of horizontal ownership.

III.1.7. The VPT of each independent unit was determined separately in accordance with Article 7, no. 2, sub-paragraph b), of the CIMI.

III.1.8. The VPT attributed to each unit and its use are as follows:

Unit VPT Use
285 CV 213,730.00 Covered and enclosed parking
295 RD 79,930.00 Housing
295 RE 79,930.00 Housing
2951 D 66,010.00 Housing
2951 E 66,010.00 Housing
2952 D 66,010.00 Housing
2952 E 66,010.00 Housing
2953 D 79,930.00 Housing
2953 E 66,010.00 Housing
319 DR 79,930.00 Housing
319 RE 79,930.00 Housing
3191 D 66,010.00 Housing
3191 E 66,010.00 Housing
3192 D 66,010.00 Housing
3192 E 66,010.00 Housing
3193 D 66,010.00 Housing
3193 E 66,010.00 Housing

III.2. Justification of the Facts Considered Proven

The facts given as proven result from matters not contested and demonstrated by documents attached to the case file, as well as from the elements of the administrative file joined by the Respondent.

III.3. Alleged Facts Not Proven and Their Justification

It is not considered proven that the tax levied in the assessments subject to challenge was paid. In fact, the Applicant alleges in Article 80 of its request for arbitration pronouncement that it carried out such payment, "as confirmed by the document which it undertakes to attach". Such documents were attached when the meeting provided for in Article 18 of the RJAT took place and were notified to AT. However, after examination of the same, it is not possible to conclude that they prove the payments in question, since the ATM references contained therein do not coincide with those appearing in the enforcement assessment notices (Docs. 19 to 34).

IV. LAW

IV.1. The question subject of the present case can be summarized as whether, in properties in full ownership, also called vertical ownership, for the purposes of Stamp Duty provided for in item 28.1 of the TGIS, the tax property value to be taken into account is that of each of the independent units or that of the respective sum.

IV.2. This is a matter that has been subject to abundant and consistent arbitral jurisprudence within the scope of CAAD, established in the sense that, in the said circumstances, it is illegal to consider in aggregate the tax property values of the independent units for the purpose of subjecting the property to Stamp Duty under item 28.1 of the TGIS. In this sense, see, among others, the decisions handed down in proceedings nos. 50/2013 – T, 132/2013 – T, 181/2013 – T, 183/2013 – T, 185/2013 – T, 248/2013 – T, 88/2014 – T and 177/2014 – T.

IV.3. And we do not see any reason not to follow such jurisprudence. On the contrary, we believe that the same is entirely correct.

IV.4. First of all, such understanding is what is required for reasons of coherence and unity of the legal system.

IV.5. Indeed, considering that the registration in the property register of properties in vertical ownership, composed of different parts, floors or units with independent use, in accordance with the CIMI, follows the same registration rules as properties constituted in horizontal ownership, and the respective Municipal Property Tax is levied individually in relation to each of the parts, there is no doubt that the legal criterion for defining the incidence of item 28.1 of the TGIS must be the same.

IV.6. Moreover, as the Applicant correctly notes, AT, by deducting from the total tax property value of the property the units that are not intended for housing, incurs a contradiction with its own thesis, as it ends up admitting that the property is taxed not as a whole, but by parts.

IV.7. Furthermore, the reasons of economic and social policy that determined, in 2010, the creation of item 28.1 are clearly contradictory with the understanding that AT proposes, as the Applicant well demonstrates in Articles 41 to 50 of its request for arbitration pronouncement, thus also contributing to conclude that the same has no legal support.

IV.8. Understanding that the challenged acts are vitiated by illegality, the examination of the violation of constitutional principles and norms, also alleged by the Applicant, becomes moot.

IV.9. As we stated above, it is considered that the Applicant did not succeed in proving that it has already proceeded to pay the tax levied in the assessments challenged, wherefore it is understood that there is no place for condemnation to compensation interest under Article 43 of the General Tax Law.

V. DECISION

In view of all that is set forth above, it is decided:

a) To uphold the petition for declaration of illegality of the assessments challenged, by violation of law due to error regarding the legal prerequisites, which are hereby annulled;

b) To absolve the Respondent from payment of compensation interest as it was not proven that it has already taken place the payment of the tax levied through the assessments challenged.

VI. Case Value

The value of the case is fixed at €11,484.52, in accordance with Article 97-A, no. 1, sub-paragraph a), of the Code of Tax Procedure and Process, applicable by force of sub-paragraphs a) and b) of no. 1 of Article 29 of the RJAT and no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

VII. Arbitration Fee

The value of the arbitration fee is fixed at €918.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid in full by the Respondent, in accordance with Articles 12, no. 2, and 22, no. 4, both of the RJAT, and Article 4, no. 4, of the said Regulation.

Notify.

Lisbon, 27 March 2015

The Arbitrator,

Luís Máximo dos Santos

The drafting of this Decision is governed by the orthography prior to the 1990 Orthographic Agreement.

Frequently Asked Questions

Automatically Created

Does Verba 28 of the Tabela Geral do Imposto do Selo apply to properties held in vertical ownership (propriedade vertical)?
Yes, according to the Tax Authority's interpretation, Verba 28 of the Tabela Geral do Imposto do Selo applies to properties held in vertical ownership (propriedade vertical) when the total tax property value exceeds €1,000,000. The Tax Authority argues that vertical ownership constitutes a single juridical property unit, not separate properties like horizontal ownership fractions. Therefore, the incidence of Stamp Duty is determined by the aggregate VPT of the entire property registered under vertical ownership, not the individual values of economically independent units within it. However, taxpayers have challenged this interpretation, arguing it should apply only to individual units exceeding the threshold.
How is Imposto do Selo calculated on individual units within a building under vertical property regime?
Under the Tax Authority's position in this case, Imposto do Selo on properties under vertical ownership is calculated based on the total tax property value (VPT) of the entire property as registered, not on individual units. Even when the property contains multiple floors or units susceptible to independent economic use, the Tax Authority treats the vertically-owned property as a single taxable unit. The aggregate VPT of all housing units determines whether the €1,000,000 threshold is met for Item 28.1 taxation. This contrasts with the taxpayer's argument that each independent unit should be assessed separately, with only those individually exceeding €1,000,000 being subject to Stamp Duty.
Can a taxpayer challenge multiple Stamp Tax liquidations through a single CAAD arbitration proceeding?
Yes, a taxpayer can challenge multiple Stamp Tax liquidations through a single CAAD arbitration proceeding, as demonstrated in Process 243/2014-T. The applicant consolidated 18 separate Stamp Duty assessments (all dated July 14, 2013, totaling €11,484.52) into one arbitration request filed on March 7, 2014. This procedural consolidation is permitted under the RJAT (Decreto-Lei 10/2011) framework when the assessments relate to the same legal issue and factual circumstances. The CAAD accepted this consolidated approach, allowing efficient resolution of related tax disputes without requiring separate arbitration proceedings for each assessment.
What are the legal grounds for annulling Imposto do Selo assessments under Verba 28 for vertically owned real estate?
Legal grounds for annulling Imposto do Selo assessments under Verba 28 for vertically owned properties include: (1) incorrect interpretation of the tax incidence rule, arguing that Item 28.1 should apply to individual independent units rather than aggregate property value; (2) violation of constitutional principles of justice, equality, and proportionality (Articles 262(2), 13, and 104(3) of the Portuguese Constitution); (3) improper application of CIMI provisions regarding tax property value determination; (4) illegality in treating vertical ownership differently from horizontal ownership without juridical basis; and (5) disproportionate taxation where no single unit exceeds the €1,000,000 threshold individually. Taxpayers argue that economically independent units should be taxed separately, not aggregated.
What is the procedural timeline for requesting tax arbitration at CAAD under Decreto-Lei 10/2011 (RJAT)?
The procedural timeline under Decreto-Lei 10/2011 (RJAT) for tax arbitration at CAAD follows these key stages: (1) Request submission - the taxpayer files the arbitration request with CAAD (March 7, 2014 in this case); (2) Acceptance and notification - CAAD's President accepts the request and notifies the Tax Authority within days (March 11, 2014); (3) Arbitrator appointment - the Deontological Council appoints the arbitrator, who must accept within the legal period; (4) Party notification - parties are notified of the appointment and may object (April 28, 2014); (5) Tribunal constitution - the tribunal is formally constituted (May 14, 2014); (6) First meeting - held at CAAD headquarters for procedural matters (July 3, 2014); (7) Decision deadline - initially set but may be extended under Article 21(1) RJAT (initially September 30, 2014, subsequently extended).