Process: 254/2017-T

Date: December 5, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision concerns Process 254/2017-T involving a real estate investment fund's challenge to a 2012 Stamp Tax assessment under Verba 28.1 of the General Stamp Tax Table (TGIS). The fund contested a €7,178.60 Stamp Tax assessment on urban construction land following rejection of its hierarchical appeal. The case arose under Law 55-A/2012, which introduced annual Stamp Tax on high-value property ownership. The arbitral tribunal was constituted on July 3, 2017, but procedural irregularities emerged regarding proper notification under Article 13 of RJAT. Significantly, before the arbitration concluded, the Deputy Director General of the Tax Authority issued an agreement order on May 23, 2017, accepting annulment of the contested tax assessment and recognizing the fund's right to compensatory interest. Due to the improper constitution of the tribunal and the Tax Authority's acceptance of the annulment, the arbitrator declared the proceedings moot and ordered closure without costs under Article 22(4) of RJAT. This decision demonstrates that real estate investment funds have legal standing to challenge Stamp Tax assessments through CAAD arbitration and highlights the possibility of administrative resolution before arbitral judgment. The case provides important precedent on Verba 28.1 application to construction land held by investment vehicles.

Full Decision

ARBITRAL DECISION

I – REPORT

1. A…, Special Real Estate Investment Fund with TIN[1]…, whose managing entity is B…– Real Estate Investment Funds Management Company, SA, with TIN…, with registered office at Street …, …–…, …-… Lisbon, filed a request for an arbitral pronouncement, under the terms of provision (a) of no. 1 of article 2, of no. 1 of article 3 and of provision (a) of no. 1 of article 10, all of the RJAT[2], requesting the ATA[3], with a view to assessing the legality of the tax administration acts rejecting the Administrative Appeal …2013… and the consequent annulment of the Stamp Tax[4] assessment 2012… of item 28.1 of the General Stamp Tax Table[5], relating to the year 2012, affecting the ownership of a property (building land) registered in the tax register under urban article no. … of the parish and municipality of … and currently under article … of the same parish and municipality, all as better appears in the initial petition which is hereby reproduced.

2. Which was filed without exercising the option to designate an arbitrator, coming to be accepted by the Honorable President of CAAD[6] and automatically notified to ATA on 10/04/2017.

3. Under the terms and for the purposes of provision no. 2 of article 6 of the RJAT by decision of the Honorable President of the Deontological Council, duly communicated to the parties, within the legally applicable deadlines, on 09/06/2017, Arlindo José Francisco was appointed as arbitrator of the tribunal, who communicated acceptance of the assignment within the legally stipulated deadline.

4. The tribunal was constituted on 03/07/2017 in accordance with the provisions contained in provision (c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of December 31.

5. With its request, the claimant seeks assessment of the legality of the tax administration acts rejecting the Administrative Appeal …2013… and the consequent annulment of the Stamp Tax assessment 2012… of item 28.1 of the General Stamp Tax Table[7], relating to the year 2012, Law 55-A/2012, in the amount of € 7,178.60.

6. On the date of its constitution the tribunal issued the following order: "In accordance with the provisions of article 17 no. 1 of the Legal Regime for Arbitration in Tax Matters (RJAT), in the wording given to it by Law no. 66/B/2012 of December 31, notify the Director General of Taxes, in her capacity as the highest official of the service of the Tax and Customs Authority, to present a response within 30 days and, if deemed appropriate, request the production of additional evidence. The same entity shall also be notified to attach a copy of the administrative file within the same deadline".

7. Alerted by CAAD, by telephone, on 27/07/2017, that on 05/06/2017 the notification provided for in article 13 of the RJAT would have been entered in the CMS, it immediately issued the following order: "The tribunal was constituted on 03/07/2017 and on the same date an order was issued to comply with the provisions of article 17 of the RJAT. It is noted that, dated 05/06/2017, the notification provided for in no. 1 of article 13 of the aforementioned legal instrument was entered in the CMS, without, however, proof being made of compliance with the provisions of no. 2 of the same article, whereby, within 10 days, ATA should submit the respective proof. Notify".

8. The defendant came, on 01/09/2017, to justify non-compliance with no. 2 of article 13 of the RJAT, as it is standard practice to make the notification to CAAD in accordance with no. 1 of the same provision, and this ensures compliance with its no. 2, considering that in the present case it would not even be applicable.

9. The Tribunal issued on 04/09/2017 the following order: "Notify the claimant, to within 10 days, if deemed appropriate, to pronounce itself on the motion filed by the defendant on the 1st of the current month.

10. Until now the claimant has said nothing, with its silence being understood as non-opposition to the defendant's justification.

11. Without needing to assess the defendant's position regarding compliance with no. 2 of the aforementioned article 13 of the RJAT and noting that the appointment of the arbitrator occurred after the aforementioned notification was entered in the CMS[8], we conclude that the tribunal should not have been constituted.

12. On the other hand, an order of agreement of the Honorable Deputy Director General, dated 23/05/2017, was issued accepting the proposal to annul the tax in question and recognizing the right to compensatory interest in favor of the claimant, whereby the present proceedings are rendered moot and should be filed without further formalities.

II – OPERATIVE PART

In light of the foregoing and considering that the tribunal should not have been constituted, the proceedings are hereby declared closed and archived without further formalities and, in light of the provisions of article 3-A of the RCPAT[9] and the atypical nature of the concrete situation, no costs shall be assessed under the terms of no. 4 of article 22 of the RJAT.

Notify.

Lisbon 05/12/2017

(text prepared by computer, in accordance with article 131, no. 5 of the Code of Civil Procedure, applicable by reference of article 29 no. 1, provision (e) of the RJAT, with blank pages and reviewed by the tribunal)

The arbitrator,

Arlindo José Francisco

[1] Acronym for Taxpayer Identification Number
[2] Acronym for Legal Regime for Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for Stamp Tax
[5] Acronym for General Stamp Tax Table
[6] Acronym for Administrative Arbitration Centre
[7] Acronym for General Stamp Tax Table
[8] Acronym for Case Management System
[9] Acronym for Costs Regulation in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to construction land?
Verba 28.1 of the General Stamp Tax Table (Tabela Geral do Imposto do Selo - TGIS) establishes an annual Stamp Tax on ownership of urban property with high patrimonial value, introduced by Law 55-A/2012. It applies to construction land (terreno para construção) classified as urban property in the tax register when the property's cadastral value exceeds specified thresholds. The tax is assessed annually based on the property's registered patrimonial value, affecting landowners including real estate investment funds holding building land for development purposes.
Can real estate investment funds challenge Stamp Tax (Imposto do Selo) assessments on property through CAAD arbitration?
Yes, real estate investment funds (fundos de investimento imobiliário) have full legal capacity to challenge Stamp Tax (Imposto do Selo) assessments through CAAD (Administrative Arbitration Centre) arbitration. As demonstrated in Process 254/2017-T, investment funds can file arbitration requests under Articles 2(1)(a), 3(1), and 10(1)(a) of RJAT (Legal Regime for Arbitration in Tax Matters) to contest both the underlying tax assessments and rejected hierarchical appeals. The fund may be represented by its management company in such proceedings.
How is Stamp Tax calculated on urban property classified as construction land (terreno para construção) in Portugal?
Stamp Tax on urban property classified as construction land (terreno para construção) in Portugal is calculated annually under Verba 28.1 of the TGIS, introduced by Law 55-A/2012. The tax base is the property's patrimonial value (valor patrimonial tributário) as registered in the tax matrix (matriz predial urbana). Tax rates are progressive, varying according to value thresholds established in the General Stamp Tax Table. The tax is assessed yearly on ownership as of January 1st, regardless of whether construction has commenced on the land.
What is the procedure for filing a hierarchical appeal (recurso hierárquico) against a Stamp Tax assessment in Portugal?
To file a hierarchical appeal (recurso hierárquico) against a Stamp Tax assessment in Portugal, the taxpayer must submit a written appeal to the Tax and Customs Authority (Autoridade Tributária e Aduaneira) within the statutory deadline, typically 120 days from notification of the assessment. The appeal is directed to the hierarchical superior of the official who issued the contested act. If the hierarchical appeal is rejected, the taxpayer may then seek judicial review through administrative courts or, alternatively, request tax arbitration with CAAD under the RJAT regime, as occurred in Process 254/2017-T.
What are the legal grounds for annulling a 2012 Stamp Tax assessment under Law 55-A/2012 on high-value properties?
Legal grounds for annulling a 2012 Stamp Tax assessment under Law 55-A/2012 on high-value properties include: incorrect property classification in the tax register, errors in calculating the patrimonial value used as tax base, improper application of Verba 28.1 of TGIS to properties below the value threshold, failure to recognize applicable exemptions or special regimes (particularly for real estate investment funds), procedural defects in the assessment process, and violation of legal principles such as proportionality or legitimate expectations. In Process 254/2017-T, the Tax Authority accepted annulment through administrative agreement, recognizing the fund's right to compensatory interest.