Process: 25/2014-T

Date: September 8, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

Case 25/2014-T before the Portuguese Administrative Arbitration Center (CAAD) concerns whether building land (terreno para construção) is subject to Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS). The claimant, A, S.A., challenged stamp tax assessments totaling €8,559.60 under the transitional regime of Law 55-A/2012 and €17,119.19 for 2012, arguing that building land cannot be classified as property 'with residential use' for stamp tax purposes. The company owns urban property registered as building land with a patrimonial value of €1,801,795.06. After administrative reconsideration requests were rejected in October 2013, the claimant filed for arbitration in January 2014, seeking annulment of the tax assessments based on error regarding legal premises and requesting reimbursement of amounts paid plus compensatory interest. The Tax and Customs Authority contended the assessments constituted correct interpretation of item 28.1 TGIS. The arbitral tribunal, constituted on March 31, 2014, with sole arbitrator Suzana Fernandes da Costa, admitted joinder of claims based on identity of tax facts, competent tribunal, and factual/legal grounds. The decision references multiple similar CAAD cases (53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 310/2013-T), suggesting a pattern of jurisprudence on this issue. The core legal question is whether undeveloped land zoned for construction qualifies as residential property under stamp tax legislation applicable to high-value properties.

Full Decision

CAAD: Tax Arbitration

Case No. 25/2014-T

Subject Matter: Stamp Tax – Building Land

Arbitral Award

Claimant / Petitioner: A, S.A.

Respondent: Tax and Customs Authority (hereinafter AT)

  1. Report

On 10-01-2014, the corporation A, S.A., legal person no. …, with registered office at …, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Center (CAAD) a request for constitution of an arbitral tribunal with a view to the annulment of the tax acts assessing Stamp Tax for item no. 28 of the General Stamp Tax Table (GSTT), relating to the urban property registered in the cadastral register under article … of the parish of …, municipality of …, and described in the Land Registry Office of … under no. ….

The Claimant requests the annulment of the aforementioned Stamp Tax assessment acts due to error regarding the legal premises which, in its view, would justify the declaration of illegality of those acts and their annulment.

The Claimant alleges that the property to which the Stamp Tax assessments refer is building land, and for that reason, cannot be classified as property "with residential use" for purposes of the taxation provided for in item 28.1 of the General Stamp Tax Table.

The Claimant further requests the reimbursement of the amount of €8,559.60, relating to the payment made in respect of the Stamp Tax assessment no. …, issued under the transitional regime defined in article 6 of Law no. 55-A/2012 of 29-10, plus compensatory interest until full reimbursement.

The Claimant also requests the joinder of claims, alleging the existence of identity of the tax facts, of the tribunal competent to decide the matter, and of the factual and legal grounds.

The Tax and Customs Authority submitted its reply on 09-05-2014, arguing that the request for declaration of illegality and consequent annulment of the contested assessments should be held unfounded, since the assessments in question constitute a correct interpretation of item 28.1 of the General Stamp Tax Table.

Suzana Fernandes da Costa was appointed as sole arbitrator on 26-02-2014.

In accordance with the provisions of article 11, section 1, subsection c) of the RJAT, the single arbitral tribunal was constituted on 31-03-2014.

A meeting of the arbitral tribunal was held on 02-07-2014, in accordance with the terms and objectives provided for in article 18 of the Tax Arbitration Regime. The Claimant's representative did not attend the meeting. It was determined that notification be given to the same to attach to the file the power of attorney and statement of the Claimant ratifying the proceedings within 10 days, which it did on 10-07-2014. The Respondent was notified to attach the administrative file within 10 days, which it did on 24-07-2014. There being no corrections to be made to the pleadings nor preliminary exceptions to be addressed, oral submissions were dispensed with. On that date, 08-09-2014 was fixed as the date for pronouncement of the decision.

The parties possess legal personality and capacity and are entitled parties (articles 4 and 10, sections 1 and 2 of RJAT and article 1 of Ordinance no. 112-A/2011 of 22 March).

The present request for an arbitral pronouncement was submitted in a timely manner, in accordance with article 10, section 1, subsection a) of Decree-Law no. 10/2011 of 20 January, taking into account that the Claimant was notified on 15-10-2013 of the decision on the administrative request for reconsideration which addressed the Stamp Tax assessment no. … (issued under the transitional regime defined in article 6 of Law no. 55-A/2012 of 29-10, in the amount of €8,559.60), and the collection documents no. …, in the amount of €5,706.41, and of the decision on the administrative request for reconsideration which addressed the collection document no. …, in the amount of €5,706.39, relating to the 2012 Stamp Tax assessment, and was notified on 12-12-2013 of the decision on the administrative request for reconsideration of the collection document no. …, in the amount of €5,706.39, relating to the 2012 Stamp Tax assessment.

The proceedings do not suffer from any procedural defects and no preliminary matters were raised, other than the request for joinder of claims which shall hereinafter be decided.

The Claimant requests the joinder of claims, alleging the existence of identity of the tax facts, of the tribunal competent to decide the matter, and of the factual and legal grounds.

In this case, the joinder of claims is admissible, in accordance with articles 104 of the CPPT and 3 of RJAT, and is therefore admitted.

  1. Matter of Fact

2.1. Proven Facts:

Having examined the documentary evidence produced, the following facts are considered proven and relevant to the decision of the case:

  1.  The Claimant is the owner of the urban property registered in the urban cadastral register under article … of the parish of …, municipality of …, as shown in the property record attached to the arbitration request as document 10;

  2.  The property is building land and has a patrimonial value of €1,801,795.06 (determined in 2013), as shown in the property record attached to the arbitration request;

  3.  The Claimant was notified of the Stamp Tax assessment no. …, issued under the transitional regime defined in article 6 of Law no. 55-A/2012 of 29-10, in the amount of €8,559.60, payable in a single installment by 20-12-2012.

  4.  It was further notified of the 2012 Stamp Tax assessment, in the amount of €17,119.19, payable in three installments, as shown in the collection documents no. …, in the amount of €5,706.41, payable by 30-04-2013, collection document no. …, in the amount of €5,706.39, payable by 31-07-2013, and collection document no. …, in the amount of €5,706.39, payable by 30-11-2013.

  5.  The Claimant filed an administrative request for reconsideration of the assessment no. … in the amount of €8,559.60 and of the collection document no. … in the amount of €5,706.41, relating to the 2012 Stamp Tax assessment, as shown in document 6 attached to the arbitration request.

  6.  Having been notified on 15-10-2013 of the rejection of said administrative request for reconsideration, as shown in document 7 attached to the arbitration request.

  7.  The Claimant further filed an administrative request for reconsideration of the collection document no. … in the amount of €5,706.41, of the 2012 Stamp Tax assessment.

  8.  And on 15-10-2013 was also notified of the rejection of this administrative request for reconsideration, as shown in document 8 attached to the arbitration request.

  9.  On 02-12-2013, the Claimant also filed an administrative request for reconsideration of the collection document no. … in the amount of €5,706.39, of the 2012 Stamp Tax assessment, as shown in document 9 attached to the request.

  10. The Claimant made payment, on the payment deadline (20-12-2012), of the Stamp Tax assessment issued under the transitional regime defined in article 6 of Law no. 55-A/2012 of 29-10, in the amount of €8,559.60, as shown in document 5 attached to the arbitration request.

No other facts with relevance to the decision of the case were proven.

2.2. Basis of the Proven Facts:

As regards the proven facts, the arbitrator's conviction was based on the documentary evidence attached to the file and on the agreement of the parties with respect to the facts accepted as established.

  1. Legal Matters:

3.1. Object and Scope of the Present Proceedings

The question to be decided in the present proceedings is whether the property which was the subject of the stamp tax assessments, being building land, has residential use and whether item 28.1 of the General Stamp Tax Table (GSTT) is applicable thereto.

On this same question, among others, the CAAD awards rendered in cases numbered 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 310/2013-T and 284/2013-T have already pronounced themselves.

The Supreme Administrative Court has also pronounced itself on this question, namely in the awards of cases no. 0467/14 of 02-07-2014, no. 0676/14 of 09-07-2014, no. 0395/14 of 28-05-2014, no. 01871/13 of 14-05-2014 and no. 055/14 of 14-05-2014, no. 0425/14 of 28-05-2014, no. 0396/14 of 28-05-2014, no. 0274/14 of 14-05-2014 and no. 046/14 of 14-05-2014.

3.2. Classification of Building Land within the Scope of Application of Item 28.1 of the GSTT

3.2.1. Regime of Law no. 55-A/2012, of 29 October

Law no. 55-A/2012, of 29 October, added item 28 to the General Stamp Tax Table (GSTT), with the following wording:

28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial value as listed in the cadastral register, in accordance with the Code on Municipal Property Tax (CMPT), is equal to or greater than €1,000,000 – on the patrimonial value used for purposes of the IMI:

28.1 – For property with residential use – 1% (…);

In the transitional provisions contained in article 6 of said Law no. 55-A/2012, the following rules were established:

c) The patrimonial value to be used in the assessment of the tax corresponds to that which results from the rules provided in the Code on Municipal Property Tax by reference to the year 2011; (…)

f) The rates applicable are as follows:

i) Properties with residential use assessed in accordance with the Code of IMI: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the Code of IMI: 0.8%;

Item 28.1 of the GSTT and subitems i) and ii) of subsection f) of section 1 of article 6 of Law no. 55-A/2012 contain a concept that is not used in any other tax legislation, which is that of "property with residential use".

Let us consider:

3.2.2. Concepts of Properties Used in the CMPT

In the CMPT, the categories of properties are enumerated in its articles 3 to 6. The concept of "property with residential use" is not discernible in any of these articles.

The closest notion to the literal wording of this expression used is that of "residential properties", which section 2 of article 6 of the CMPT defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, which have as their normal purpose residential purposes.

However, the non-correspondence of the terms of the expression used in item 28.1 of the GSTT with that derived from section 2 of article 6 of the CMPT indicates that the same concept was not intended to be used.

This concept, with this terminology, is also not found in any other statute.

3.2.3. The Concept of "Property with Residential Use" as a Distinct Concept from "Residential Properties"

The word "use" (afetação), in this context of the utilization of a property, has the meaning of "action of allocating something to a particular use".

As stated in the CAAD award rendered in case no. 53/2013-T, in which the judges were Judge Counselor Jorge Lopes de Sousa, Ms. Dr. Conceição Pinto Rosa and Mr. Dr. Alberto Amorim Pereira:

"in proper legal interpretation, 'property with residential use' cannot be a property merely licensed for residential purposes or intended for that purpose (that is, it will not suffice that it be a 'residential property'), but must be a property that already has actual allocation to that purpose".

Thus, "it must be concluded that the available interpretative elements, including 'the circumstances in which the law was enacted and the specific conditions of the time in which it is applied', clearly point to the fact that it was not intended to cover within the scope of application of item 28.1 situations of properties that are not yet allocated to residential use, namely building land held by companies".

Properties are classified as building land, and bearing in mind the provisions of article 6, section 3 of the CMPT Code, those in which the owner has acquired the right to build thereon or to carry out subdivision operations, as well as those which have been expressly acquired for that purpose. In this sense, see JOSÉ MARIA FERNANDES PIRES in Lectures on Taxes on Property and Stamp Tax, Almedina, 2010, page 97.

It should be noted that in the classification as building land it is irrelevant what use the future constructions may have, namely residential, commercial, industrial or for services.

For its part, the award of the Supreme Administrative Court of 09-07-2014, in case no. 0676/14, in which the judge rapporteur is Counselor Dulce Neto, states that "residential use is always referred to in the CMPT Code as referring to 'buildings' or 'constructions', existing, authorized or anticipated, because only these can be inhabited, which is not the case with building land, which does not, in itself, have conditions for such use, not being capable of being used for residential purposes unless and until a construction is built thereon as authorized and anticipated for it (but in that case they will no longer be 'building land' but another category of urban properties – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of CMPT)."

Similarly, in the award of the Supreme Administrative Court of 14-05-2014, case no. 046/14, in which Judge Ascenção Lopes is the judge rapporteur, it states that "since the legislator has not defined the concept of 'urban properties with residential use', and it results from article 6 of the CMPT Code – subsidiarily applicable to the Stamp Tax provided for in the new item 28 of the General Table – a clear distinction between 'residential urban properties' and 'building land', the latter cannot be considered, for purposes of the scope of application of the Stamp Tax (Item 28.1 of the GSTT, in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential use."

We can thus conclude that, article 6 of the CMPT Code clearly distinguishing urban properties "residential" from "building land", the latter cannot be considered as "properties with residential use" for purposes of the application of item 28.1 of the General Stamp Tax Table.

Prohibition of Analogy and Extensive Interpretation

The question could be raised on the other hand regarding the possibility of application of analogy to item 28.1 of the GSTT. Now, on this matter article 11, section 4 of the General Tax Law provides as follows:

"4. Gaps resulting from tax provisions covered by the legislative reserve of the National Assembly are not susceptible to analogical integration"

As regards the matters covered by the legislative reserve, note article 103, section 2 of the Constitution and article 8 of the GTL. According to these provisions the principle of fiscal legality encompasses the scope of application, the rate, tax benefits and safeguards of taxpayers. This is also referred to in the work "The Principle of Fiscal Legality" by Ana Paula Dourado, Almedina, 2007, page 106.

Since item 28.1 of the GSTT is a provision on scope of application, covered by the principle of fiscal legality, its analogical application to situations not expressly provided therein is prohibited.

Similarly, extensive interpretation of the aforementioned item will not be admissible, which would allow the inclusion in the expression contained in the law of building land. On interpretation, article 11, sections 1 to 3 of the GTL and article 9 of the Civil Code apply. We understand that extensive interpretation of the aforementioned item is not possible insofar as it would include building land therein, since it would always have to have a minimum correspondence in the letter of the law, which does not occur.

Regarding the historical element, the fact that item 28.1 of the GSTT was subsequently expressly amended by the State Budget Law for 2014, so as to include, as from 01.01.2014, building land, also allows the conclusion that such properties were not taxed under the wording that was in force until 31.12.2013.

Application of the Regime to the Claimant's Situation

The Claimant's property is building land held by a company. For the reasons stated above, there is not a property with residential use, and therefore the Stamp Tax provided for in item 28.1 of the GSTT does not apply to that property.

For this reason, the assessments as to whose declaration of illegality is requested are defective by violation of item 28.1 of the GSTT, due to error regarding the legal premises, which justifies the declaration of their illegality and annulment (article 135 of the CPA).

  1. Decision

In view of the foregoing, it is determined:

  • to hold fully founded the claim formulated by the Claimant in the present tax arbitration proceedings, as regards the illegality of the Stamp Tax assessment issued under the transitional regime defined in article 6 of Law no. 55-A/2012 of 29-10, in the amount of €8,559.60, of the collection document no. …, in the amount of €5,706.41, of the collection document no. …, in the amount of €5,706.39, and of the collection document no. … in the amount of €5,706.39, relating to the 2012 Stamp Tax assessment;

  • to hold founded the claim for condemnation of the Tax and Customs Authority to reimburse to the Claimant the amount paid of €8,559.60, plus compensatory interest in accordance with legal terms, from the date on which such payment was made until the date of full reimbursement thereof.

  1. Value of the Action:

In accordance with the provisions of article 315, section 2 of the CPC and article 97-A, section 1, subsection a) of the CPPT and article 3, section 2 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the action is fixed at €25,678.79.

  1. Costs:

In accordance with article 22, section 4 of the RJAT, and Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €1,224.00, due by the Tax and Customs Authority.

Notify.

Lisbon, 08 September 2014.

Text prepared by computer, in accordance with article 138, section 5 of the Code of Civil Procedure (CPC), applicable by reference to article 29, section 1, subsection e) of the Tax Arbitration Regime, with blank spaces and reviewed by me.

The sole arbitrator

                                           Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Is land for construction ('terreno para construção') subject to Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS)?
The dispute in Case 25/2014-T centers on whether building land (terreno para construção) falls within the scope of item 28.1 of the General Stamp Tax Table. The claimant argued that undeveloped land designated for construction cannot be classified as property 'with residential use' and therefore should not be subject to stamp tax. The Tax Authority maintained that the assessments were correct. This question is crucial for determining stamp tax liability on high-value urban properties under the regime introduced by Law 55-A/2012.
Can a plot of land zoned for construction be classified as a property 'with housing allocation' for Portuguese Stamp Tax purposes?
This is the central legal question in the arbitration. The claimant contends that building land, being undeveloped and not yet allocated to any specific residential use, cannot be classified as property 'with housing allocation' (afeto a habitação) for stamp tax purposes under item 28.1 of the TGIS. The Tax Authority takes the opposing view that such land falls within the scope of taxation. The resolution of this classification issue determines whether owners of undeveloped urban land face stamp tax obligations on high-value properties.
What is the CAAD arbitration procedure for challenging Stamp Tax assessments on urban land in Portugal?
The CAAD arbitration procedure for challenging stamp tax assessments involves: (1) filing administrative reconsideration requests with the Tax Authority; (2) after rejection, submitting an arbitration request to CAAD within the legal deadline (the claimant filed in January 2014 after October 2013 rejection notifications); (3) appointment of an arbitrator (Suzana Fernandes da Costa was appointed February 26, 2014); (4) constitution of the arbitral tribunal (March 31, 2014); (5) arbitral meeting under article 18 of the Tax Arbitration Regime; (6) submission of administrative file by the Tax Authority; and (7) pronouncement of the arbitral award within the established timeframe.
Are taxpayers entitled to a refund with compensatory interest when Stamp Tax is unlawfully levied on land for construction?
The claimant in Case 25/2014-T specifically requested reimbursement of €8,559.60 paid for the stamp tax assessment issued under the transitional regime of Law 55-A/2012, plus compensatory interest (juros indemnizatórios) until full reimbursement. This request is standard when challenging unlawful tax assessments in Portugal. If the arbitral tribunal rules that building land is not subject to item 28.1 of the TGIS and annuls the assessments, taxpayers would be entitled to full refund of amounts paid plus compensatory interest calculated from the payment date until actual reimbursement.
How does the transitional regime under Article 6 of Law 55-A/2012 affect Stamp Tax liability on high-value urban properties?
Article 6 of Law 55-A/2012 of October 29 established a transitional regime for stamp tax on high-value properties. Under this regime, the claimant was assessed €8,559.60 in a single installment payable by December 20, 2012, based on the property's patrimonial value of €1,801,795.06 (determined in 2013). Additionally, regular 2012 stamp tax assessments totaling €17,119.19 were issued in three installments. The transitional regime introduced immediate stamp tax obligations on existing high-value urban properties, leading to disputes over which types of properties—particularly building land—fall within the taxable scope of item 28.1 of the General Stamp Tax Table.