Process: 251/2013-T

Date: March 6, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 251/2013-T addresses whether Stamp Duty (Imposto de Selo) under Item 28.1 of the General Table (TGIS) applies to construction land (terrenos para construção). The applicant company challenged a 2012 stamp tax assessment of €11,250.75 on urban property classified as construction land authorized for a twelve-floor residential building with 62 units but with no construction erected. The taxpayer argued that construction land and residential property are legally distinct categories under Article 6 of the Municipal Property Tax Code (CIMI), which defines construction land separately from residential buildings. The applicant contended that residential properties require physical buildings with actual residential use, while their land generates no income and remains unutilized. Key legal arguments included: (1) manifest error in legal premises for applying residential property tax to construction land; (2) constitutional violation of property rights if construction land is taxed as residential property; (3) violation of proportionality principle with the 1.8% rate for 2012; (4) violation of qualitative typicality as the State Budget Law 2012 did not authorize this revenue collection; and (5) insufficient substantiation of the assessment notice, which lacked proper exposition of facts and legal grounds. The applicant referenced Law 55-A/2012 which amended the TGIS and cited previous CAAD arbitral decisions (cases 48/2013, 49/2013, and 53/2013) supporting the position that construction land should not be subject to Item 28.1 stamp duty. The arbitral tribunal was constituted in November 2013 under CAAD jurisdiction, with the Tax Authority responding that the request should be judged unfounded. The excerpt does not include the final decision or reasoning of the tribunal.

Full Decision

I – REPORT

A - PARTIES

A..., S.A., NIF …, with registered office at Rua do …, …, hereinafter referred to as Applicant or taxpayer,

THE TAX AND CUSTOMS AUTHORITY (which succeeded the General Directorate of Taxes) hereinafter referred to as Respondent or AT. On the date of verification of the facts, the entity competent for the issuance of the said assessment notices held the designation of "General Directorate of Taxes".

Decree-Law no. 118/2011, of 15 December, approved the new organizational structure of the Tax and Customs Authority, an entity resulting from the merger of DGCI, the General Directorate of Customs and Special Consumption Taxes ("DGAIEC") and the General Directorate of Informatics and Support to Tax and Customs Services ("DGITA"), effective 1 January 2012.

The application for the constitution of the arbitral tribunal was accepted by the Chair of CAAD, and the Arbitral Tribunal was duly constituted on 04-11-2013 to examine and decide upon the subject matter of the present proceedings, and was automatically notified to the Tax and Customs Authority on 05-11-2013, as appears in the respective minutes.

The Applicant did not proceed with the appointment of an arbitrator, wherefore, pursuant to the provisions of no. 1 of article 6 and subparagraph b) of no. 1 of article 11 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 designated the Honourable Dr. Paulo Ferreira Alves, the appointment having been accepted in accordance with legal provisions.

On 18-12-2013 the parties were duly notified of this designation, and did not manifest any intention to refuse the designation of the arbitrators, in accordance with article 11 no. 1, subparagraphs a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code.

The Tax and Customs Authority responded to the applicant's request, arguing that the request for arbitral pronouncement should be judged unfounded.

On 27-02-2014, the meeting provided for in article 18 of the RJAT was held, at which the representatives of the applicant and respondent were given the floor.

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

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

The proceedings do not suffer from defects that would render them invalid.

B – REQUEST

  1. The Applicant hereby requests the declaration of illegality of the tax assessment acts relating to Stamp Duty, no. 2012 ..., which fixed a tax payable of €11,250.75.

C – GROUNDS

  1. To substantiate its request for arbitral pronouncement, the Applicant alleged, with a view to the declaration of illegality of the tax assessment acts relating to Stamp Duty, no. 2012 ..., in summary, the following:

  2. The assessment act under challenge is manifestly illegal for suffering from manifest error in the legal premises and lack of substantiation, wherefore its annulment should be declared.

  3. The urban property of which the Applicant is owner corresponds to a plot of land for construction, the subdivision authorization of which authorizes thereon the construction of a building with twelve floors, being two basement levels for parking and the ground floor and upper floors for residential use with 62 units, the said land having no construction erected thereon.

  4. The Applicant indicates that the land is devoid of any utilization, without generating any income for the taxpayer.

  5. The Applicant alleges that the amendment introduced by Law 55-A/2012 extended the scope (objective) of stamp duty to the (new) "legal situation" resulting from the (new) Item 28 of the General Table, that is, that articles 2, no. 4, article 3, no. 3, subparagraph u), article 5, subparagraph u), article 23, no. 7, article 46 and article 67 of the Stamp Duty Code make express reference to the Municipal Property Tax Code as the statute of subsidiary application in relation to the tax provided for in the said item no. 28.

  6. It results from the cited article 6 of the Municipal Property Tax Code that urban properties may have one of the following nature: i) residential; ii) commercial, industrial or for services; iii) land for construction; iv) and others.

  7. The Applicant understands that always and in any circumstance, land for construction and residential property are of absolutely distinct species. As defined in no. 2 of article 6, residential properties correspond to buildings or constructions, the same being to say those having an effective utilization (which presupposes their physical existence) for residential purposes.

  8. In its understanding, it makes no sense whatsoever to subject land for construction to this additional tax, under penalty of constituting it a true act of deprivation of the right of property, well guaranteed constitutionally. And it further alleges that the thesis of the AT in subsuming construction land to such a concept of "property with residential use" to which article 4 of Law 55-A/2012, of 29 October, alludes, such norm would be manifestly unconstitutional.

  9. The Applicant alleges that it is abusive and illegal to consider that the object of the norm under analysis includes land for construction, wherefore it will always have to declare the voidability, for being illegal, of the assessment act under challenge and, as well, illegal, and therefore annulled, the despatch that dismissed the Gracious Claim and, finally, the dismissal (tacit) of the Hierarchical Appeal. For suffering from the defect of violation of that item no. 28 of the General Table of Stamp Duty, for error in the legal premises, and which justifies the declaration of its illegality and annulment (article 135 of the Administrative Procedure Code).

  10. It further states that Item no. 28 of the General Table of Stamp Duty violates the principle of proportionality enshrined constitutionally, in that the rate applicable in the year 2012 amounts to 1.8%, the rate applicable to other years being 1%, with the principle of qualitative typicality also being violated in that the collection of revenue resulting from the taxation provided for in the said item was not authorized by the State Budget Law for 2012.

  11. Indeed, and finally, in the sense of the illegality of the assessment of Stamp Duty with respect to land for construction, issued in accordance with the provision of Item 28 of the General Table of Stamp Duty - amended by Law 55-A/2012, of 29 October, this Venerable Tribunal has already pronounced itself in an arbitral decision rendered in the course of proceedings 48/2013, 49/2013 and 53/2013.

  12. The Applicant further sustains the defect of the assessment act due to manifest insufficiency of substantiation, the assessment act under challenge absolutely lacking an exposition of facts (and even of law) that motivated it, in this case, the same is reduced to generic references to a legislative statute and a statement appended to the document.

  13. The evidence of the lack of substantiation of the assessment act results even from the omission of an essential element of the assessment (the year to which the tax relates, an essential element that was "replaced" by: Law 55-A/2012 and which the "The assessment carried out observes the provisions of subparagraphs a) to f) of no. 1 of article 6 of Law 55-A/2012, of 29 October").

  14. The Applicant concludes its submission sustaining that the legal duty of substantiation must respond to the needs for clarification of the recipient ab initio, in the assessment act itself - with its omission entailing (if the other defects above invoked whose prior knowledge determines a more stable and effective protection of the interests of the applicant do not proceed, which is only admitted out of an abundance of caution), the voidability of the act lacking such substantiation, as is the case in the present proceedings.

D - RESPONDENT'S REPLY

  1. The Respondent, duly notified for such purpose, filed its response timely in which, in summary abbreviated form, alleged the following:

  2. It is the understanding of the AT that the property registered under the article ... in the urban property matrix of the parish of … and …, has the legal nature of property with residential use, wherefore the assessment act object of the present request for arbitral pronouncement should be maintained by constituting correct interpretation of Item 28 of the General Table, amended by Law 55-A/2012, of 29/10/12.

  3. With this legislative amendment, Law no. 55-A/2012, of 29/10/2012 came to amend article 1 of the Stamp Duty Code, and to add to the General Table the item, with Stamp Duty henceforth applying also to the ownership, usufruct or surface rights of urban properties whose tax patrimonial value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), be equal to or greater than €1,000,000.00.

  4. The respondent understands that stamp duty would thus apply to all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the general table, including gratuitous transcriptions of property. In the absence of any definition of the concepts of urban property, land for construction and residential use, in the context of Stamp Duty recourse must be had to CIMI in search of a definition that permits ascertainment of possible subjection to Stamp Duty, in accordance with the provision of article 67, no. 2 of the Stamp Duty Code in the wording given by Law no. 55-A/2012, of 29/10/2012. And that in accordance with the said legal provision, matters not regulated in the Code, concerning item no. 28 of the General Table of Stamp Duty, the provisions of CIMI apply subsidiarily, in particular no. 1 of article 2 and no. 1 of article 6 of CIMI.

  5. It further alleges that the notion of the property's use is found in the part relating to the valuation of immovable property, which is well understood in that the valuation of the property (purpose) incorporates value to the property, constituting a fact of distinctive determination (coefficient) for purposes of valuation.

  6. As results from the expression "value of authorized buildings", contained in article 45, no. 2 of CIMI the legislator chose to determine the application of the methodology of valuation of properties in general, to the valuation of land for construction, being therefore applicable to them the use coefficient provided for in article 41 of CIMI.

  7. The respondent sustains, in its reply, that for purposes of determination of the tax patrimonial value of land for construction it is clear the application of the use coefficient in the context of valuation, wherefore its consideration for purposes of application of item 28 of the General Table of Stamp Duty cannot be ignored, being valid in this sense this order of considerations:

a. In the application of law to concrete cases it is important to determine the exact sense and scope of the norm, so that it reveals the rule contained therein, an indispensable condition for it to be applied, in accordance with the provision of article 9 of the Civil Code, ex vi article 11 of the General Tax Law.

b. The use of the property (aptitude or purpose) is a coefficient that contributes to the valuation of the property, in the determination of tax patrimonial value, applicable to land for construction.

c. The very item 28 General Table of Stamp Duty refers to the expression "properties with residential use", appealing to a classification that overlays the species provided for in no. of article 6 of CIMI.

  1. The AT understands that the provision of item 28 of the General Table of Stamp Duty does not constitute any violation of the principle of equality of article 13 of the Constitutional Republic.

  2. As regards the alleged unconstitutionality by violation of the principle of proportionality, it is to be noted that taxation in the context of stamp duty obeys the criterion of suitability, being applied indistinctly to all holders of property with residential use with value superior to € 1,000,000.00, applying to the wealth embodied and manifested in the value of property.

  3. Item 28 of the General Table of Stamp Duty applies to the ownership, usufruct or surface rights of urban properties with residential use, whose tax patrimonial value recorded in the matrix, in accordance with CIMI, be equal to or greater than € 1,000,000.00, that is, it applies to the value of the property.

  4. It is a general and abstract norm, applicable indistinctly to all cases in which the factual and legal premises are met.

  5. The respondent concludes its reply, sustaining that the assessments under challenge constitute correct interpretation and application of law to the facts, not suffering from the defect of violation of law, whether of the Constitutional Republic or of the Stamp Duty Code, and in consequence, the applicant's claim should be judged unfounded and the Respondent Entity should be absolved of the request.

E - FACTUAL SUBSTANTIATION

  1. Before entering into the examination of these questions, it is necessary to present the factual matter relevant for its respective understanding and decision, which was made on the basis of documentary evidence and the unchallenged tax administrative proceedings, taking into account the alleged facts.

  2. As to relevant factual matters, this tribunal accepts as established the following facts:

  3. The Applicant is owner of the urban property corresponding to a plot of land for construction, designated as lot no. …, located at Lugar da …, in … described in the Land Registry of … under no. ... and registered in the urban property matrix at no. ...º (previous article ...), of the union of parishes of … and … (previous parish of …), with a tax patrimonial value of € 2,250,150.00 and has no construction erected thereon.

  4. The Applicant did not proceed with payment of the assessed tax and on 31 December 2012, manifested, in accordance with and for the purposes of no. 2 of article 169 of the Tax Procedural Code, its intention to claim against such assessment act, requesting the fixing of the value of guarantee to be provided, in accordance with no. 5 of article 199 of the Tax Procedural Code.

  5. The Applicant, which had in the meantime been cited for tax enforcement proceedings in which coercive collection is sought, requested the waiver of provision of guarantee in accordance with article 52 of the General Tax Law and 170 of the Tax Procedural Code.

  6. The Applicant filed, on 06 March 2013, the competent Gracious Claim, in accordance with and within the legal period, which came to be filed with no. ....

  7. On 30/05/2013 the Applicant was notified of the decision of dismissal of that Claim, with the grounds set forth in the draft decision which would have been notified to the Applicant on 05 May 2013.

  8. The AT decided to dismiss the Claim presented by the Applicant.

  9. On 07.06.2013 the Applicant, in face of the express act of dismissal of the Claim and assessment, filed a Hierarchical Appeal, addressed to the Minister of Finance.

  10. The entity appealed to did not decide within the legally fixed period of 60 days - no. 5 of article 66 of the Tax Procedural Code-, wherefore, on 06.08.2013, the presumption of its tacit dismissal was formed - no. 5 of article 57 of the General Tax Law.

  11. The Applicant requested a special insolvency proceeding, which, with no. ..., runs before the 3rd Civil Court of the Court of …, insolvency which has already been declared, by judgment with res judicata effect, having been maintained the Administration of the Insolvent and a plan of insolvency having been submitted, which has already been admitted.

F - UNPROVEN FACTS

  1. Of the facts with interest for the decision of the case, set forth in the challenge, all objects of concrete analysis, those not appearing in the factuality described above were not proven.

G - QUESTIONS TO BE DECIDED

  1. Given the positions of the parties assumed in the arguments presented, the central questions to be resolved, which it is necessary to examine and decide, are the following:

A) The alleged by the Applicant, the declaration of illegality of the tax assessment acts relating to Stamp Duty, no. 2012 ....

H - LEGAL MATTER

  1. Given the positions of the parties assumed in the pleadings presented, the central question to be resolved by this arbitral tribunal consists in deciding whether the act of assessment of stamp duty, in the amount of €11,250.75, relating to the urban property lot no. 21, located at Lugar da …, in … described in the Land Registry of … under no. ... and registered in the urban property matrix at no. ...º (previous article ...), of the union of parishes of … and … (previous parish of … suffers from formal defects, specifically that raised by the respondent regarding lack of substantiation, and of violation of law, by the erroneous interpretation and application of item 28.1 of the General Table of Stamp Duty and of article 6, no. 1, subparagraph f), i) of the said Law no. 55-A/2012, of 29 October.

  2. The factual matter is fixed and proven, for which reason we shall now determine the law applicable to the controversial facts, giving priority, in compliance with the provisions of subparagraph a) of no. 2 of article 124 of the Tax Procedural Code, to the defects whose merit determines a more stable and effective protection of the interests of the Applicant.

  3. Thus we shall give preference to errors in the legal premises of the assessment, to the detriment of possible administrative invalidity, given that such act, even if invalid, could always be renewed by the Respondent within the period of expiry of the tax.

  4. The defects of law by error on the legal premises of the assessment, as to the question of the categorization of land for construction within the scope of application of article 28 no. 1 of the General Table of Stamp Duty, introduced by the Regime of Law no. 55-A/2012, of 29 October.

  5. The amendment of the regime as to the subjection to stamp duty of properties with residential use by the addition of item 28 to the General Table of Stamp Duty, effected by article 4 of Law 55-A/2012, of 29/10, came to typify the following taxable facts, through the following wording:

"28 – Ownership, usufruct or surface rights of urban properties whose tax patrimonial value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), be equal to or greater than € 1,000,000 – on the tax patrimonial value used for purposes of Municipal Property Tax:

28.1 – For property with residential use – 1%;

28.2 – For property, when the taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the approval by ordinance of the Minister of Finance – 7.5%."

  1. Contained in article 6 of Law no. 55-A/2012 are the transitional provisions which established the rules pertaining to the assessment of the tax, provided for in that item:

"1 – In 2012, the following rules must be observed by reference to the assessment of stamp duty provided for in item no. 28 of the respective General Table:

The taxable fact occurs on 31 October 2012;

The taxpayer of the tax is the one mentioned in no. 4 of article 2 of the Stamp Duty Code on the date referred to in the preceding subparagraph;

The tax patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011;

The assessment of the tax by the Tax and Customs Authority must be effected by the end of the month of November 2012;

The tax shall be paid, in a single installment, by taxpayers by 20 December 2012;

The applicable rates are the following:

Properties with residential use valued in accordance with the Municipal Property Tax Code: 0.5%;

ii) Properties with residential use not yet valued in accordance with the Municipal Property Tax Code: 0.8%;

iii) Urban properties when the taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the approval by ordinance of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of stamp duty provided for in item no. 28 of the respective General Table shall apply to the same tax patrimonial value used for purposes of assessment of municipal property tax to be effected in that year.

3 – The non-delivery, total or partial, within the indicated period, of the amounts assessed as stamp duty constitutes a tax offense, punished in accordance with law."

  1. On the interpretation of this statute, decision 53/2013-T[1] has already pronounced itself, which writes "In the said item 28.1 and in the subitems i) and ii) of subparagraph f) of no. 1 of article 6 of Law 55-A/2012, a concept was used that is not used in any other tax legislation in these precise terms that is "property with residential use". Designately in CIMI, which in various norms of the Stamp Duty Code introduced by that Law is indicated as a statute of subsidiary application in relation to the tax provided for in the said item no. 28 [articles 2, no. 4, 3, no. 3, subparagraph u), 5, subparagraph u), 23, no. 7, and 46 and 67 of the Stamp Duty Code], a concept defined in those terms is not used."

  2. As to the concepts of properties, it is necessary for this to resort to the concepts of properties used in CIMI, in which the species of properties are enumerated in its articles 2 to 6, which are transcribed:

Article 2

Concept of property

1 – For purposes of the present Code, property is every fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or situated thereon, with a character of permanence, 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 implanted, albeit situated in a fraction of territory that constitutes an integral part of a diverse patrimony or does not have a patrimonial nature.

2 – Buildings or constructions, although movable by nature, are considered as having a character of permanence when devoted to non-transitory purposes.

3 – The character of permanence is presumed when buildings or constructions are situated in the same location for a period exceeding one year.

4 – For purposes of this tax, each autonomous fraction, under the horizontal property regime, is considered as constituting a property.

Article 3

Rural properties

1 – Rural properties are lands situated outside an urban agglomeration that are not to be classified as land for construction, in accordance with no. 3 of article 6, provided that:

They are devoted or, in the absence of concrete use, have as their normal purpose an use generating agricultural income, such as are considered for purposes of personal income tax (IRS);

Not having the use indicated in the preceding subparagraph, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Rural properties are also lands situated within an urban agglomeration, provided that, by virtue of legally approved provision, they cannot have use generating any income or can only have use generating agricultural income and are in fact having this use.

3 – Rural properties also include:

Buildings and constructions directly devoted to the generation of agricultural income, when situated in the lands referred to in the preceding numbers;

Waters and plantations in the situations to which no. 1 of article 2 refers.

4 – For purposes of the present Code, urban agglomerations are considered, in addition to those situated within legally fixed perimeters, clusters with a minimum of 10 units served by public-use streets, with their perimeter delimited by points distanced 50 m from the axis of the streets, in the transverse sense, and 20 m from the last building, in the direction of the streets.

Article 4

Urban properties

Urban properties are all those that should not be classified as rural, without prejudice to the provision of the following article.

Article 5

Mixed properties

1 - Whenever a property has rural and urban parts it is classified, in its entirety, in accordance with the main part.

2 – If neither of the parts can be classified as main, the property is considered mixed.

Article 6

Species of urban properties

1 – Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Land for construction;

Others.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of license, that have as their normal purpose each of these ends.

3 – Land for construction is considered lands situated inside or outside an urban agglomeration, for which a construction license or authorization has been granted, admission of prior notification or issuance of favorable prior information of subdivision or construction operation, and also those so declared in the acquisition title, excepting lands in which the competent entities prohibit any of those operations, designately those located in green areas, protected areas or which, in accordance with municipal territorial planning, are devoted to public spaces, infrastructure or equipment. (Wording of Law no. 64-A/08, of 31-12)

4 – Encompassed in the provision of subparagraph d) of no. 1 are lands situated within an urban agglomeration that are not land for construction nor are encompassed by the provision of no. 2 of article 3, and also buildings and constructions licensed or, in the absence of license, that have as their normal purpose purposes other than those referred to in no. 2 and also those of the exception of no. 3.

  1. On the interpretation of tax norms, for the case sub judice, article 11 of the General Tax Law tells us, which establishes the essential rules of interpretation of tax laws, which it does in the following terms:

Article 11

Interpretation

In determining the sense of tax norms and in qualifying the facts to which the same apply, the general rules and principles of interpretation and application of laws are observed.

Whenever, in tax norms, terms proper to other branches of law are employed, they must be interpreted in the same sense that they have therein, unless something else derives directly from law.

If doubt persists concerning the sense of the norms of incidence to be applied, the economic substance of the taxable facts shall be considered.

Gaps resulting from tax norms encompassed in the legislative reservation of the National Assembly are not susceptible to analogical integration.

  1. To this provision, it is likewise necessary to resort to the general principles of interpretation of laws, to which no. 1 of article 11 of the General Tax Law refers, which are established in article 9 of the Civil Code, which establishes the following:

Article 9

Interpretation of law

Interpretation should not confine itself to the letter of the law, but should reconstruct from the texts the legislative thought, having above all in account the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied.

The interpreter cannot, however, consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, albeit imperfectly expressed.

In fixing the sense and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms.

  1. Given the legal substantiation already set forth, and taking into account the articles transcribed and enumerated, the following hypotheses of interpretation of the concept of "property with residential use" arise, as to the Concept of "property with residential use" as referring to residential properties, and as to the Concept of "property with residential use" as a concept distinct from "residential properties".

  2. In articles 2 to 6 CIMI transcribed above, the legislator does not use, in the classification of properties, the concept of "property with residential use". Equally this concept is not found, with this terminology, in any other statute.

  3. The lack of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes may give rise to various interpretative hypotheses.

  4. The text of the law, being the starting point for the interpretation of the expression "properties with residential use", being based on it that the "legislative thought" must be reconstructed, as imposed by no. 1 of article 9 of the Civil Code, applicable by virtue of the provision of article 11, no. 1, of the General Tax Law, already transcribed.

  5. On the interpretation of the concept of "property with residential use", it is important to cite decision 53/2013-T which has already pronounced itself on this matter. A decision which equally sustains two interpretative hypotheses to the concept of "property with residential use", respectively in the same sense as the present decision, as to the concept of "property with residential use" as referring to residential properties, and as to the Concept of "property with residential use" as a concept distinct from "residential properties".

  6. Decision 53/2013-T writes, on the concept of "property with residential use" as referring to residential properties:

  7. "The concept closest to the literal sense of this expression used is manifestly that of "residential properties", defined in no. 2 of article 6 of CIMI as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of license, that have as their normal purpose residential purposes.

  8. If it is understood that the expression "property with residential use" coincides with that of "residential properties", it is manifest that the assessments will suffer from error on the factual and legal premises, since all properties with respect to which Stamp Duty was assessed under the said item no. 28.1 are land for construction, without any building or construction, required to meet that concept of "residential properties".

  9. Therefore, if the interpretation is adopted that "property with residential use" means "residential property", the assessments whose declaration of illegality is requested will be illegal, because there is in any of the lands any building or construction.

  10. However, the non-coincidence of the terms of the expression used in item no. 28.1 of the General Table of Stamp Duty with that extracted from no. 2 of article 6 of CIMI, points toward the sense that it was not intended to use the same concept."

  11. On the interpretation of the second hypothesis: Concept of "property with residential use" as a concept distinct from "residential properties", decision 53/2013-T is cited again, in which it writes:

"The word "use", in this context of use of a property, has the meaning of "action of assigning something to a determined use". ( [2] )

"When, as is usually the case, norms (legislative formulations) contain more than one meaning, then the positive function of the text is translated into giving stronger support to or more strongly suggesting one of the possible meanings. Because, among the possible meanings, some will correspond to the more natural and direct meaning of the expressions used, while others will only fit within the verbal framework of the norm in a forced, contrived manner. Now, in the absence of other elements that induce the selection of the less immediate sense of the text, the interpreter should in principle opt for that sense which better and more immediately corresponds to the natural meaning of the verbal expressions used, and designately to its technical-legal meaning, in the supposition (not always exact) that the legislator knew how to express its thought correctly". ( [3] )

The relevance of the text of the law is especially emphasized in the matter of interpretation of norms of incidence of Stamp Duty, which are reduced to an amalgamation, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves no appreciable margin for application of the primary interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this item no. 28.1, hastily included outside of the General State Budget, by a tax legislator without perceptible overall tax orientation, who is successively implementing norms of tax increases as a result of the setbacks in budget execution, the impositions of international institutional creditors (represented by the "troika") and the oversight of the Constitutional Court.

In truth, although in the "Explanatory Memorandum" of the Bill no. 96/XII/2nd ( [4] ), on which Law no. 55-A/2012 was based, reference is made to the laudable concern of the Government to "strengthen the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to fulfill the adjustment program" and to its commitment "to ensure that the distribution of these sacrifices will be made by all and not just by those who live from the income of their work", it is manifest, on the one hand, that those reasons of equity, certainly existing, did not begin to matter in mid-2012, already existing at the beginning of the year, when the General State Budget came into force, and on the other hand, that the scope of item no. 28.1, in taxing additionally properties with residential use and not also properties that do not have it, leaves to be seen that the concerns of social equity and the proclaimed intention of distribution of sacrifices for all, reaches much more some than properly all.

In this context, there being no interpretative elements sure that permit detecting legislative coherence in the solution adopted in the said item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in the face of no. 3 of article 9 of the Civil Code), the content of the legal text must be the primordial element of interpretation, in conformity with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express its thought in adequate terms.

In face of those meanings of the words "use" and "to use", which are "to give purpose" or "to apply", the formula used in that item no. 28.1 of the General Table of Stamp Duty, encompasses, manifestly, properties that are already applied to residential purposes, wherefore it is important to inquire whether it will also encompass properties that, although not yet applied to residential purposes, are destined for these and those whose purpose is unknown.

In the face of the literal content of item no. 28.1, it is to be removed from the scope of application of Stamp Duty provided for therein the land for construction of some Applicants that do not yet have any type of utilization defined, because they are not yet applied nor destined for residential purposes. That is, land for construction that has not defined use cannot be considered properties with residential use, because they do not yet have any use nor any other purpose than the construction of unknown type. An interpretation in the sense that item no. 28.1 refers to properties whose use is unknown has not the minimum of verbal correspondence in the letter of that norm, wherefore a hypothetical legislative thought of that type cannot be considered by the interpreter of the law, in face of the prohibition contained in no. 2 of article 9 of the Civil Code.

But this is not sufficient to clarify the situation of those land for construction that, although not yet applied to residential purposes, already have a determined purpose, designately, in the subdivision license, which is the case of the properties referred to in subparagraphs z) to dd) of the factual matter fixed.

Therefore, it will be necessary to clarify when it can be understood that a property is devoted to residential purpose, designately whether it is when that purpose is fixed for it in a licensing act or similar, or only when the actual assignment of that purpose is materialized.

From the outset, the confrontation of item no. 28.1 of the General Table of Stamp Duty with no. 2 of article 6 of CIMI, which defines the concept of residential properties, points manifestly in the sense that actual use is necessary.

In truth, a building or construction licensed for residential use or, even without license, but having residential use as its normal purpose, is, in the face of no. 2 of that article 6, a residential property.

Therefore, in the presupposition that the legislator of Law no. 55-A/2012 knew how to express its thought in adequate terms (as imposed by article 9, no. 3, of the Civil Code that be presumed), if it intended to refer to those properties already licensed for residential use or having residential use as their normal purpose, it certainly would have used the concept of "residential properties", which would express perfectly and clearly its thought, in the face of the definition given by that no. 2 of article 6 of CIMI.

Consequently, it must be presumed that the use of a different expression is aimed at a distinct reality, wherefore, in good hermeneutics, "property with residential use", cannot be a property merely licensed for residential use or intended for that purpose (that is, it will not suffice that it be a "residential property"), having to be a property that already has actual use for that purpose.

That this is the sense of the expression "use", in the same context of classification of properties as CIMI does, is confirmed by article 3 in which, regarding rural properties, reference is made to those that "are devoted or, in the absence of concrete use, have as their normal purpose a use generating agricultural income", which evidences that the use is concrete, actual. In truth, as is seen by the final part of this text, a property can have as its purpose a determined use and be or not devoted to it, which evidences that the use is, at the level of the connection of a property to a determined use, something more intense than mere purpose and which may or may not occur, downstream of this and not upstream. ( [5] )

Moreover, the text of the law in adopting the formula "property with residential use", instead of "urban properties with residential use", which appears in the said "Explanatory Memorandum", points strongly in the sense that it is required that the residential use already be concretized, since only in this way will the property be with that use.

As concerns article 45 of CIMI, it has no relationship with the classification of properties merely indicating the factors to be weighed in the valuation of land for construction. What is weighed therein, in making reference to the "building to be constructed" is the weighing of the purpose of the land, which, as has been seen, is something that, in the context of CIMI, does not imply use and occurs before this.

The correctness of this interpretation in the sense that only properties that are actually devoted to residential purposes are encompassed within the scope of application of item no. 28.1 of the General Table of Stamp Duty is also confirmed by the perceptible ratio legis of the restriction of the field of application of the norm to properties with residential use, in the context of the "circumstances in which the law was drawn up and the specific conditions of the time in which it is applied", which article 9, no. 1, of the Civil Code also erects as interpretative elements. ( [6] ).

From the outset, the limitation of taxation in Stamp Duty to "properties with residential use" leaves to be perceived that it was not intended to encompass within the scope of application of the tax properties with use for services, industry or commerce, that is, properties devoted to economic activity, which is understood in a context in which, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching historical maximum levels, with an avalanche of closure of companies derived from economic unsustainability.

Having in mind this situation and being well known and public that the revitalization of economic activity and the increase of exports are the doors out of the crisis, it is understood that legislative measures were not taken that would hinder economic activity, designately the increase of tax burden that hinders it and affects competitiveness in international terms.

Therefore, it is to be concluded that the available interpretative elements, including the "circumstances in which the law was drawn up and the specific conditions of the time in which it is applied", point clearly in the sense that it was not intended to encompass within the scope of application of item no. 28.1 the situations of properties that are not yet devoted to residential purposes, namely land for construction held by companies."

  1. It results from the above that the application of the regime to the situation of the Applicant, as to the urban property corresponding to land for construction, with subdivision authorization that authorizes thereon the construction of a building with twelve floors, being two basement levels for parking and the ground floor and upper floors for residential use with 62 units, having no construction erected thereon.

  2. There is not present in this case a property with actual residential use, wherefore Stamp Duty provided for in item 28.1 of the General Table of Stamp Duty does not apply to these properties.

  3. This argumentative logic is reinforced by the amendment introduced to item 28.1 by Law no. 83-C/2013 of 29 October, which, without having an interpretative character, came to subject to the tax expressly "lands whose building, authorized or envisaged, is for residential purposes", assuming in this way expressly that this reality would not be subject to taxation before this amendment.

  4. In this manner, the assessment sub judice, whose declaration of illegality is requested suffers from the defect of violation of that item no. 28.1, by error on the legal premises, which justifies the declaration of its illegality and annulment (article 135 of the Administrative Procedure Code).

I - QUESTIONS OF PREJUDICED KNOWLEDGE

  1. Given the decision of this arbitral tribunal to declare the illegality of assessment no. 2012..., object of the present proceedings, by a defect that prevents the renewal of the act, the knowledge of the remaining defects imputed to it by the Applicant is prejudiced.

  2. This results from the application of article 124 of the Tax Procedural Code, subsidiarily applicable by virtue of the provision of article 29, no. 1, of the Rules of Arbitral Jurisdiction, in establishing an order of knowledge of defects, presupposes that, if a defect is judged founded that assures effective protection of the rights of the challengers, it is not necessary to know of the remaining ones, since, if it were always necessary to examine all defects imputed to the challenged act, the order of their knowledge would be indifferent.

  3. Therefore, knowledge is not taken of the remaining defects imputed by the Applicants to the act whose declaration of illegality they requested.

J - DECISION

Therefore, given all the above set forth, this Arbitral Tribunal decides:

To judge founded the request for declaration of illegality of the tax assessment acts relating to Stamp Duty, no. 2012 ..., by defect of violation of law as to the norm contained in item 28, no. 1, by error on the legal premises, which justifies the declaration of its illegality and annulment.

The value of the proceedings is fixed at € 11,250.75 of the value of the assessment given the economic value of the proceedings assessed by the value of the stamp duty assessments challenged, and in accordance therewith the costs are fixed, in the respective amount of €918.00 (nine hundred and eighteen euros), to be borne by the respondent in accordance with article 12, no. 2 of the Rules of Tax Arbitration, of article 4 of the Rules of Tax Procedural Costs and of Table I attached to the latter. – no. 10 of article 35, and no. 1, 4 and 5 of article 43 of the General Tax Law, articles 5, no. 1, subparagraph a) of the Rules of Tax Procedural Costs, 97-A, no. 1, subparagraph a) of the Tax Procedural Code and 559 of the Code of Civil Procedure).

Notify.

Lisbon, 6 March 2014.

The Arbitrator

Paulo Renato Ferreira Alves

[1] On this matter the Arbitral Tribunal of CAAD has already decided in decisions no. 42/2013-T, 48/2013-T, 49/2013-T

[2] Dictionary of Contemporary Portuguese Language of the Academy of Sciences of Lisbon, Volume I, page 102.

[3] BAPTISTA MACHADO, Introduction to Law and Legitimating Discourse, page 182.

[4] Bill no. 99/XII/2nd is available at
http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245

[5] Other norms of CIMI leave to be perceived that the term "use" is used to reference situations already existing and not merely future, even if foreseeable, as "purpose" is. This is the case of article 9 of CIMI, which, after establishing that "the tax is due from" "the 4th year following, inclusive, that in which land for construction has begun to appear in the inventory of a company that has as its object the construction of buildings for sale" or "the 3rd year following, inclusive, that in which a property has begun to appear in the inventory of a company that has as its object their sale" [subparagraphs d) and e) of no. 1], determines that "for purposes of the provision of subparagraphs d) and e) of no. 1, taxpayers must communicate to the finance service of the area of location of the properties, within the period of 60 days counted from the verification of the fact determining its application, the use of the properties for those purposes". The "use of the properties for those purposes", in the context of this article 9, is reduced to the concrete attribution to properties of the purpose "for sale", materialized by their inventorying, with it not sufficing that they have been constructed or acquired with a view to their sale.

[6] This approach does not take into account, in this abordagem, the special cases provided for in item no. 28.2, of ownership of properties by legal persons resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the approval by ordinance of the Minister of Finance to which, as in other norms, strong tax penalization is attributed, because these are situations normally associated with tax evasion.

Frequently Asked Questions

Automatically Created

Is stamp tax (Imposto de Selo) applicable to land classified as 'terrenos para construção' under Verba 28.1 of the TGIS?
The legal controversy concerns whether stamp tax under Item 28.1 of the General Table applies to 'terrenos para construção' (construction land). The taxpayer argues that construction land and residential property are distinct legal categories under Article 6 of the Municipal Property Tax Code. Construction land refers to plots authorized for building but without erected structures, while residential property requires physical buildings with actual residential use. The applicant contends that Law 55-A/2012, which introduced Item 28.1, should not extend to construction land as it generates no income and lacks utilization. However, the excerpt does not reveal the tribunal's final determination on this interpretive question. Previous CAAD decisions in cases 48/2013, 49/2013, and 53/2013 reportedly addressed this issue favorably to taxpayers.
What are the legal grounds for challenging a stamp tax assessment on construction land before the CAAD arbitral tribunal?
Taxpayers can challenge stamp tax assessments on construction land before CAAD based on several legal grounds: (1) error in legal premises (erro nos pressupostos de direito) arguing that Item 28.1 TGIS does not encompass construction land as it differs from residential property; (2) unconstitutionality claiming the tax constitutes deprivation of property rights guaranteed by the Portuguese Constitution; (3) violation of the proportionality principle due to excessive rates (1.8% in 2012); (4) violation of qualitative typicality (tipicidade qualitativa) if the State Budget Law did not authorize the revenue collection; (5) insufficient substantiation (falta de fundamentação) when assessment notices lack proper exposition of facts and legal grounds; and (6) violation of Article 135 of the Administrative Procedure Code for illegal administrative acts. These grounds can be raised cumulatively in arbitral proceedings.
How is the taxable value determined for stamp tax purposes on land for construction under Portuguese tax law?
The document does not explicitly detail the calculation methodology for taxable value on construction land under Item 28.1 TGIS. However, it references that Articles 2(4), 3(3)(u), 5(u), 23(7), 46, and 67 of the Stamp Duty Code make express reference to the Municipal Property Tax Code (CIMI) as the subsidiary statute. This suggests that the patrimonial tax value (valor patrimonial tributário) used for IMI purposes likely serves as the basis for stamp tax calculation. For 2012, the applicable rate was 1.8% on properties exceeding certain thresholds. The assessment challenged was €11,250.75, though the underlying property valuation is not specified in the excerpt. The applicant's construction land was authorized for a twelve-floor building with 62 residential units, suggesting significant patrimonial value.
What is the procedure for requesting arbitral proceedings at CAAD to dispute an Imposto de Selo liquidation?
To request arbitral proceedings at CAAD (Centro de Arbitragem Administrativa) for stamp tax disputes: (1) the taxpayer files a request for constitution of an arbitral tribunal within the legal deadline after exhausting administrative remedies or their tacit dismissal; (2) the CAAD Chair accepts the application if formal requirements are met; (3) parties may appoint arbitrators, or the Deontological Council designates them if a party does not proceed (as occurred here per Article 6 and 11(1)(b) of Decree-Law 10/2011); (4) the tribunal is formally constituted and the Tax Authority is automatically notified; (5) parties are notified of arbitrator designations and may refuse within legal timeframe; (6) the Tax Authority files a response; (7) a procedural meeting is held per Article 18 RJAT where parties present arguments; and (8) the tribunal issues a decision. Material competence exists under Articles 2(1)(a) and 30(1) of Decree-Law 10/2011 for tax assessment challenges.
Can a taxpayer contest the 2012 stamp tax reform applying Verba 28.1 TGIS to construction land with high patrimonial value?
Yes, taxpayers can contest the 2012 stamp tax reform applying Item 28.1 to high-value construction land. This case demonstrates multiple contestation grounds: arguing that Law 55-A/2012's extension of stamp duty to Item 28.1 situations should not encompass construction land due to its legal distinction from residential property; challenging the constitutionality of taxing unutilized land that generates no income as violating property rights protections; invoking violation of proportionality principle given the 1.8% rate in 2012; and claiming violation of qualitative typicality if the State Budget Law 2012 did not properly authorize this revenue collection. The applicant cited previous favorable CAAD precedents in cases 48/2013, 49/2013, and 53/2013. Taxpayers must demonstrate that their property qualifies as construction land (terrenos para construção) under CIMI Article 6 rather than residential property, typically by showing no buildings exist and no residential use occurs despite construction authorization.