Process: 244/2016-T

Date: October 31, 2016

Tax Type: IMI

Source: Original CAAD Decision

Summary

This arbitral decision concerns the IMI (Municipal Property Tax) classification and valuation of a fuel station property in Portugal. The taxpayer, A... SA, challenged the Tax Authority's assessment of €363,560.00 for an urban property consisting of two buildings (cafeteria and support/workshop), land with fuel equipment (metal covering, tanks, and pumps), and access infrastructure. The central dispute involves whether the property should be classified as 'commercial' or 'for services' under Article 6(1)(b) and 6(2) of the IMI Code, or as 'other' under Article 6(4). The taxpayer argued that as a licensed service station with normal commercial destination (fuel sales, beverages, food), it should receive commercial classification and be valued under Article 38(1) of the IMI Code, which applies to residential, commercial, industrial, and service properties. The Tax Authority defended its 'other' classification, arguing that a fuel supply station, as defined by Regulation 131/2002, has a primary purpose of vehicle fueling using specialized equipment, making it distinct from typical commercial properties. The AT applied the construction cost method under Article 46(2), adding land value, because the property's intrinsic characteristics—including refueling infrastructure, protective zones, metal canopy, and specialized equipment—prevent application of the standard formula in Article 38. The AT further argued that while convenience store and car wash activities exist, they are merely accessory to the principal fuel supply purpose. This case was brought to the Administrative Center for Tax Arbitration (CAAD) under Decree-Law 10/2011, demonstrating taxpayers' right to challenge IMI valuations through arbitration rather than traditional court proceedings.

Full Decision

ARBITRAL DECISION

  1. REPORT

A…, SA, with NIPC … and with registered office at Av.ª…, n.º…, …, in Lisbon (hereinafter referred to as Applicant), requests, under the combined provisions of articles 2.º, no. 1, paragraph b) and 10.º, no.s 1, paragraph b), of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters (RJAT), the establishment of an Arbitral Tribunal, with the intervention of a sole arbitrator, in which the Tax and Customs Authority (AT) is the Respondent, with a view to declaring the illegality of the act fixing the tax property value (VPT) of the urban property of which it is owner, registered under article … of the parish of … and …, municipality of ..., of whose 2nd assessment, in the amount of € 363,560.00, it was notified on 15 April 2016. It further requests the annulment of that assessment act, with the consequent repetition of the procedure.

The Applicant invokes as grounds for its request:

a. The fact that the urban property identified above consists of two buildings (a cafeteria and a support/workshop building), a plot of land on which equipment goods are installed (metal covering, tanks and fuel pumps) and respective access roads (pavements, green areas and vehicle access area for fuel acquisition);

b. That it is, therefore, a service station, which is licensed and has as its "normal destination" a commercial activity (sale of fuel, beverages and foodstuffs);

c. That it should, therefore, be classified as an urban property of the species "commercial" or "for services", in accordance with article 6.º, no. 1, paragraph b) and no. 2, of the IMI Code and not, as the AT maintains, as an urban property of the species "other", classifiable under paragraph d) and in no. 4, of the same article;

d. The assessment is illegal, because it was carried out in accordance with article 46.º, no. 2, of the IMI Code, in violation of the criteria established by article 38.º, no. 1, of the IMI Code, for determining the tax property value of urban properties for residential, commercial, industrial and service purposes.

Notified in accordance with the provisions of article 17.º of the RJAT, the AT submitted its response and attached the administrative files relating to the assessment of the property. The Respondent considers that the property identified above should maintain the classification of urban property of the species "other", with the following grounds:

a. The property to which the Applicant refers as being a "service station" is "a property where there is installed (…) a fuel supply station, with 4 refuelling pumps, it is (…) composed of commercial retail and display areas, vehicle wash tunnel, sanitary facilities and warehouse", "whose constructive characteristics mean that for the assessment, the construction cost method provided for in article 46.º, no. 2 of the IMI Code must be adopted", in which "Construction costs contemplate, in addition to buildings, all the infrastructure that enables the installation of the tanks and other equipment necessary for operation, according to the map attached to the said assessment form";

b. "(…) the licence of use no. …/2005 issued by the Municipality of…, in … September 2005 refers as the use of the property "fuel supply station with a construction area of 574m2"", this having been the "designation used in accordance with the assessment terms that justify the assessment carried out";

c. The designation of "fuel supply station" or "service station" is not immaterial, for while the former is defined by article 2.º, no. 3 paragraph q) of Regulation no. 131/2002, of 9 February (subsequently amended by Regulation no. 362/2005, of 4 April), which approves the Regulation for Construction and Operation of Fuel Supply Stations as "the installation intended for the supply, for own, public or cooperative consumption, of petrol, diesel and LPG for motor vehicles, corresponding to the area of the place where the refuelling units, their respective reservoirs and the safety and protection zones are located, as well as the integrated buildings and the roads necessary for the circulation of motor vehicles to be refuelled", the latter is synonymous with "service area", as "a set of services designed to meet the needs of travellers", in which "services such as: fuel supply, catering, convenience store, service station, rest areas, among others, are available";

d. Being a "fuel supply station", its primary purpose is to "proceed to supply vehicles with fuel, using the appropriate equipment for that purpose", which fits into the Applicant's Downstream activity (commercialisation of petroleum products); the convenience store and vehicle wash centre, which the Applicant annexed to the surplus yard space, are accessory activities, which "does not undermine the legal definition of service station, nor of fuel supply station";

e. The AT classified the Applicant's property in the "other" category, as defined in no. 4 of article 6.º of the IMI Code, given that a fuel supply station comprises buildings and constructions licensed for that purpose, which, in its view, are not for residential, commercial, industrial or service purposes, although the Applicant carries out acts of commerce therein;

f. As stated in the assessment terms, the AT chose to apply the method of construction cost added to the value of the land, provided for in no. 2 of article 46.º of the IMI Code, to the detriment of the assessment method provided for in article 38.º, because it is a property "other", whose intrinsic characteristics prevent the use of the formula contained in the last-mentioned article;

g. The description of the Applicant's property includes a plot of land where the refuelling units, access areas, protection zones, the "Canopy Covering the refuelling units" (metal covering), the convenience store and the car wash and air/water supply spaces, with their respective accesses, are located, to which it is not possible to apply the quality and comfort coefficient, nor the enhancing or reducing criteria referred to in article 43.º of the IMI Code, or the age depreciation coefficient;

h. On the other hand, in accordance with "paragraph a) of no. 2 of article 7.º of the IMI Code, the tax property value of urban properties with parts classifiable in more than one of the classifications of no. 1 of article 6.º of the IMI Code, "if one of the parts is principal and the other or others merely accessory, by application of the evaluation rules of the principal part, taking into account the appreciation resulting from the existence of the accessory parts", which was taken into account in the assessment;

i. The assessment method adopted, of construction cost added to the value of the land, disregarded any development and treated the land in isolation, "as the method itself requires", in accordance with the average construction areas permitted for the surrounding area according to the indices of the Master Plan.

The AT concludes by, invoking in support of its defence the Judgment delivered by the STA on 10 April 2013, in case no. 0770/12, requesting the dismissal of the claim.

The request for establishment of the Arbitral Tribunal was filed with the CAAD on 27 April 2016, having been accepted by the President of the CAAD and automatically notified to the AT.

The Applicant informed that it did not intend to use the faculty of appointing an arbitrator, wherefore, under article 6.º, no. 1 of the RJAT, the undersigned was appointed arbitrator by the President of the Deontological Council of the CAAD, a duty which was accepted within the legally prescribed period, without opposition from the Parties.

The Sole Arbitral Tribunal was regularly constituted on 15 July 2016 and is materially competent to assess and decide the dispute which is the object of the present proceedings.

The Parties have legal personality and capacity, are legitimate and are duly represented (articles 4.º and 10.º, no. 2 of the RJAT and article 1.º of Regulation no. 112-A/2011, of 22 March).

The proceedings do not suffer from any nullities and no exceptions were raised.

As no further evidence was requested, nor was there any need for correction of the procedural documents, the meeting referred to in article 18.º of the RJAT was dispensed with, and the Parties were invited to submit successive written submissions within a period of 10 days, beginning with the Applicant.

The Parties submitted no submissions.

  1. FINDINGS OF FACT

With relevance to the decision of the case, the following facts are considered proved:

  1. On 22 December 2014, the Applicant submitted a model 1 IMI declaration, under article 130.º, no. 1, paragraph a) of the IMI Code (registration no. …), relating to the urban property registered in the matrix under article … of the Union of Parishes of … and … (…), municipality of ...;

  2. The property was described by its owner as being used for commerce, with only one storey and one division, built on land with a total area of 3,276.4000 m², with the property's floor area of 373.9500 m², equivalent to the gross construction area and the gross private area of 296.6500 m², with 21 years of construction;

  3. By application of the same date, addressed to the Head of the Financial Services Office of …, the Applicant provided information relating to the model 1 declaration submitted, attaching copies of the property plan and its respective licence of use, as well as a decision of the arbitral tribunal favourable to an identical claim by it and, further, a simulation of the VPT, considering the property as "commercial";

  4. By official letter no. … of the Financial Services Office of …, dated 16 November 2015, the Applicant was notified of the result of the first assessment of the property (form no. …), classified as an urban property "other" and assessed in accordance with article 46.º, no. 2 of the IMI Code, to which the VPT of € 363,710.00 was assigned, in accordance with the table below:

[TABLE DATA PRESERVED]

  1. On 11 December 2015 a second assessment of the urban property identified was requested, on the grounds that it was a commercial property, to be assessed in accordance with article 38.º of the IMI Code;

  2. The second assessment was notified to the Applicant by official letter no. … of the Financial Services Office of …, sent under the CTT registration *RY…PT, received on 15 April 2016;

  3. The assessment data, which resulted in the VPT of € 363,560.00, by application of the method provided for in no. 2 of article 46.º of the IMI Code, are those set out in the table below:

[TABLE DATA PRESERVED]

  1. The Representative of the Applicant in the Commission which carried out the 2nd assessment recorded a dissenting opinion, on the grounds that, having regard to the commercial activity for which it is licensed and which is exercised therein, the property assessed should be classified in accordance with the combined provisions of paragraph b) of no. 1 with no. 2, both of article 6.º of the IMI Code, applying to it the formula contained in article 38.º of the same Code;

  2. The "Licence of Authorization of Use no. …/2005", issued by the Municipal Council of … in … September 2005, authorises the use of the Applicant's property, at a time when it was missing from the matrix, to which there corresponded the building licence no. …, of … February 2004, as "Fuel Supply Station, with a construction area of 574 m² (…)".

2.2. Grounds for the findings of fact proved:

The Tribunal's conviction regarding the findings of fact given as proved resulted from critical analysis of the documentary evidence attached to the request for arbitral pronouncement and the response of the Respondent.

2.3. Facts not proved

There are no facts relevant to the decision of the case that should be considered as not proved.

  1. MATTERS OF LAW – GROUNDS

3.1. The issue to be decided:

The issue to be decided in the present proceedings is to determine whether the assessment act under scrutiny suffers from the vice of violation of law, due to error in the factual and legal premises, by proceeding from the classification as an urban property "other" of a property licensed for "fuel supply station", instead of having classified it as an urban property "commercial", since the classification given to the existing factual reality determines the method to be used in the respective assessment – the method provided for in no. 2 of article 46.º of the Municipal Property Tax Code (IMI Code), used by the AT, or that provided for in article 38.º of the IMI Code, as the Applicant maintains.

3.2. On the concept of commercial urban property

In the structure of the IMI Code, article 2.º, contained in Chapter I – Scope, contains the legal definition of property as being "any fraction of territory, encompassing the waters, plantations, buildings and constructions of any nature incorporated or based therein, with a permanent character, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory which constitutes an integral part of a diverse patrimony or does not have a proprietary nature." (no. 1), with the specifications contained in its no.s 2 to 4.

The Parties agree that the property whose assessment is in question is an urban property (article 4.º of the IMI Code), but disagree on its classification as "commercial" or "other", although the AT agrees that the main activity carried out therein forms part of the Applicant's social purpose, in its "Downstream" aspect, namely the "supply and commercialisation (…) of petroleum products", "the retail sale of fuel".

As regards the classifications of urban properties, article 6.º of the IMI Code governs, under the heading "Types of properties", in accordance with whose no. 1,

"1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other.",

with no. 2 determining that

"2 - Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a licence, which have as their normal destination each of these purposes."

Urban properties classified as "other" are defined by the residual criterion contained in no. 4 of the same article 6.º of the IMI Code, which refers to "buildings and constructions licensed or, in the absence of a licence, which have as their normal destination other purposes than those referred to in no. 2 and also those under the exception in no. 3".

Well: having regard to the legal statement, that "commercial" properties (article 6.º, no. 1, paragraph b) of the IMI Code) are "buildings or constructions licensed for such purpose or, in the absence of a licence, which have as their normal destination each of these purposes" (article 6.º, no. 2 of the IMI Code), it remains to determine what commercial purposes are and whether those are the ones pursued by the Applicant in the property whose assessment is contested.

It has long been consistently accepted by legal doctrine that tax norms are interpreted like any other legal norms, a solution which is now expressly stated in no. 1 of article 11.º of the General Tax Law (LGT), by establishing that "1 - In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

On the other hand, no. 2 of the same article 11.º of the LGT determines that "2 - Whenever tax norms use terms specific to other branches of law, these must be interpreted in the same sense as that which they have therein, unless otherwise follows directly from the law".

Now, the commercial purposes to which urban properties are destined can be none other than those purposes governed by commercial law, namely the practice of acts of commerce, including commercial purchases and sales, provided for in articles 463.º and following of the Commercial Code.

The sale of fuel, as the main activity carried out by the Applicant in the assessed property, is reduced to the practice of acts of commerce, both objectively, because the sale of products acquired for that purpose are commercial sales, and subjectively, given that commercial companies are merchants by nature (article 13.º, no. 2 of the Commercial Code).

The Respondent entity argues that, for a property to be commercial, it is not enough that acts of commerce are practiced therein, giving as an example the bullring, a property destined for spectacles (subjective acts of commerce, since the singular or collective enterprises that organize them are commercial) and that, as decided by the Supreme Administrative Court in the Judgment delivered on 10/04/2013, in case no. 0770/12, in whose summary one may read:

"I – A property destined as a «bullring» is classified, for tax purposes, as an urban property of the species «other», as defined in no. 4 of article 6º of the IMI Code;

II – The principal part of this property is constituted by the arena and stands, the other dependencies being accessories or subsidiaries of that part, without economic autonomy in relation to it;

III – Having no different economic destination, in accordance with paragraph a) of no. 2 of article 7º of the IMI Code, the support zones must be assessed by the assessment rules of the principal part.

IV – In urban properties of the species "Other", the general formula for determining the tax property value of urban properties intended for residential, commercial, industrial and service purposes is used, whenever possible; when, due to the nature of the property, it is not possible to use that formula, the method of construction cost added to the value of the land should be used.

V – The bullring, due to its specific characteristics, should be assessed by the method of construction cost added to the value of the land."

The operative part of the same Judgment cited clarifies the reasons why a "bullring" should be assessed by the method of construction cost added to the value of the land: it is that "The mathematical formula of article 38º cannot be applied to the principal part of the property, constituted by the arena and the stands, because the coefficients that compose it do not adjust to the determination of market value. First and foremost, the fundamental coefficient of this assessment method, which is the base value (vc), and which is fixed administratively for the whole country, does not adjust to the specific characteristics of a bullring, especially those zones or principal parts. Article 39º of the IMI Code establishes that the base value corresponds to the unitary construction cost of a square metre of a building or construction, added to the value of the land. However, if the land value component could be applied to the entire area, the same is not true of the construction value component, for neither the arena is a built part, nor are the stands a construction which, in a competitive market, are in the same conditions as the real estate constructions for which an annual value of a square metre is fixed". (underlined in the original).

But the property whose assessment is the subject of the present proceedings is not in the same conditions as a bullring, for a "fuel supply station" is, by legal definition, "the installation intended for the supply, for own, public or cooperative consumption, of petrol, diesel and LPG for motor vehicles, corresponding to the area of the place where the refuelling units, their respective reservoirs and the safety and protection zones are located, as well as the integrated buildings and the roads necessary for the circulation of motor vehicles to be refuelled (…)" – underlined in the original (see article 2.º, paragraph q) of the Regulation for Construction and Operation of Fuel Supply Stations, approved by Regulation no. 131/2002, of 9 February, amended by Regulation no. 362/2005, of 4 April), cited by the Respondent in its response).

Therefore, "fuel supply station" does not correspond merely to the "installation intended for the supply, for own, public or cooperative consumption, of petrol, diesel and LPG for motor vehicles" as the Respondent seems to believe, an installation which in the terminology of the Regulation for Construction and Operation of Fuel Supply Stations is denominated a "refuelling unit", composed of one or more "pumps".

"Fuel supply station" is a complex reality in which, in addition to the refuelling units, the "integrated buildings" are also inserted, even if these are intended for the pursuit of complementary activities (defined by the Regulation for Construction and Operation of Fuel Supply Stations as being "the services to be provided to users within the limits of the fuel supply station, in complement to the offer of fuel and lubricants, namely convenience store, car support and vehicle washing (manual or automatic)").

As the Applicant refers and is shown in the photograph of the property, attached to the request for arbitral pronouncement and which the AT does not contest, this "fuel supply station" is composed of two buildings (cafeteria building and support/workshop building), which are integral parts thereof, and no reason is seen for the impossibility of applying the assessment method provided for in article 38.º of the IMI Code.

In fact, regarding the specific case of "fuel supply stations", abundant arbitral and judicial case law considers them to be commercial urban properties.

By way of example, in a similar situation, reference is made to the Judgment of the South Central Administrative Court, delivered on 4 June 2015 in case no. 08035/14, available at www.dgsi.pt, in which it was decided "(…) IX. As regards the classification of urban property as belonging to the species "other", the legislator adopted a "residual" purpose criterion by reference to the purposes stated in no. 2, as follows from the provision in no. 4 of article 6.º of the IMI Code by excluding from this species all buildings and constructions which have as their normal destination the purposes referred to in no. 2;

X. An urban property may only be classified in the species "other" provided for in paragraph d) of no. 1 of article 6.º of the IMI Code when the building or construction is not to be classified in the species commercial, industrial or for services".

Having demonstrated that the Applicant's property is a "fuel supply station" composed of two buildings, which is licensed for commercial purposes and which has as its normal destination the practice of commercial activities, it is necessary to conclude that this is a commercial property, to be assessed in accordance with article 38.º of the IMI Code.

  1. DECISION

On the basis of the facts and law set out above and, in accordance with article 2.º, paragraph b) of the RJAT, it is decided, ruling entirely in favour of the present request for arbitral pronouncement:

4.1. To declare the illegality of the assessment act of the urban property registered in the matrix of the parish of … and …, municipality of ..., under article …, determining its annulment;

4.2. To determine the repetition of the assessment procedure in accordance with the qualification of the property as a "commercial property", with the application of the criteria provided for in article 38.º of the IMI Code, in the version in force at the time of the facts.

CASE VALUE: In accordance with the provision of article 306.º, no.s 1 and 2 and 3.º, no. 3, of the Regulation on Costs in Tax Arbitration Proceedings, the case value is fixed at € 1,734.46 (one thousand seven hundred and thirty-four euros and forty-six cents).

COSTS: Calculated in accordance with article 4.º of the Regulation on Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 306.00 (three hundred and six euros), at the expense of the Tax and Customs Authority.

Lisbon, 31 October 2016.

The Arbitrator,

/Mariana Vargas/

Text prepared by computer, in accordance with no. 5 of article 131.º of the Code of Civil Procedure, applicable by reference of paragraph e) of no. 1 of article 29.º of Decree-Law 10/2011, of 20 January.

The drafting of this decision is governed by the 1990 Orthographic Agreement.

Frequently Asked Questions

Automatically Created

How are fuel stations classified for IMI property tax purposes in Portugal?
Fuel stations in Portugal face classification disputes for IMI purposes. The Tax Authority typically classifies fuel supply stations as 'other' urban properties under Article 6(4) of the IMI Code, arguing they are specialized installations primarily designed for vehicle fueling with specific equipment and safety requirements per Regulation 131/2002. However, taxpayers often contend that fuel stations operating commercial activities (fuel sales, convenience stores, food service) should be classified as 'commercial' or 'for services' properties under Article 6(1)(b) and 6(2). The classification depends on whether the property's principal purpose is considered specialized fuel infrastructure or commercial retail activity.
What is the difference between 'commercial' and 'other' urban property classifications under Article 6 of the IMI Code?
Under Article 6 of the IMI Code, 'commercial' properties are buildings intended for commercial or service activities with typical retail characteristics that allow application of standard valuation formulas. 'Other' properties under Article 6(4) are urban buildings or constructions that do not fit residential, commercial, industrial, or service categories—often due to specialized characteristics, unique infrastructure, or technical requirements. The key distinction lies in whether the property's intrinsic features allow standard valuation methods: commercial properties can be assessed using the Article 38 formula with quality/comfort coefficients, while 'other' properties require the construction cost method under Article 46(2) due to specialized elements that prevent standard coefficient application.
How is the patrimonial tax value (VPT) calculated for fuel station properties under Article 46 of the IMI Code?
For fuel station properties classified as 'other' under Article 6(4), the Tax Authority applies Article 46(2) of the IMI Code, using the construction cost method added to land value. This method calculates construction costs for all infrastructure enabling the installation—including buildings, tanks, refueling equipment, protective zones, metal canopies, and access roads—then adds the land value assessed separately according to Master Plan indices for the area. This differs from Article 38(1), which uses a formula incorporating covered area, quality/comfort coefficients, age depreciation, and enhancement factors. The AT argues that fuel stations' specialized infrastructure prevents application of standard coefficients, necessitating the construction cost approach that treats buildings and land separately.
Can a taxpayer challenge an IMI property valuation through tax arbitration at CAAD?
Yes, taxpayers can challenge IMI property valuations through tax arbitration at CAAD (Centro de Arbitragem Administrativa) under Decree-Law 10/2011, which established the Legal Framework for Arbitration in Tax Matters (RJAT). Article 2(1)(b) and Article 10(1)(b) of the RJAT specifically allow arbitration for acts fixing tax property values (VPT). This case demonstrates the process: the taxpayer filed a request for arbitral tribunal establishment within the legal deadline after receiving the assessment notification. CAAD offers an alternative to traditional administrative courts, providing faster resolution of IMI valuation disputes through binding arbitration with either a sole arbitrator or three-member panel.
What criteria determine whether a mixed-use property qualifies as commercial under Portuguese IMI legislation?
Under Portuguese IMI legislation, mixed-use property classification depends on identifying the principal versus accessory purpose per Article 7(2)(a) of the IMI Code. When a property has parts classifiable under different Article 6(1) categories, if one part is principal and others merely accessory, the entire property follows the principal part's evaluation rules while considering appreciation from accessory elements. For commercial qualification, courts examine: (1) the property's licensed use and normal destination, (2) whether commercial activities are primary or ancillary, (3) whether the property's intrinsic characteristics allow application of Article 38 valuation methods, and (4) the relationship between different functional areas. Properties with specialized infrastructure serving non-commercial primary purposes may be classified as 'other' even when commercial activities occur, if those activities are accessory to the principal specialized function.