Process: 257/2013-T

Date: March 28, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Case 257/2013-T, the CAAD arbitral tribunal examined whether Stamp Duty under Item 28 of the General Stamp Duty Table (TGIS) applies to undeveloped building land. The claimant, A, S.A., challenged stamp duty assessments totaling €141,421.06 on three land plots designated for construction, each with taxable values exceeding €1,000,000. The company argued that Item 28.1, which taxes 'properties with residential use,' cannot encompass undeveloped land for construction, as these are neither built nor licensed for residential purposes. The claimant contended that the Municipal Property Tax Code (CIMI) defines residential properties as built and licensed buildings, excluding construction land regardless of intended use. Furthermore, two of the plots had approved projects for mixed-use or exclusively commercial purposes, not solely residential. The claimant also cited Legislative Proposal 178/XII (2014 State Budget), which proposed explicitly extending Item 28 to building land, as evidence that the original wording excluded such properties. The company requested annulment of both tacit and express dismissals of administrative appeals, reimbursement of amounts paid, and compensatory interest. The case demonstrates that taxpayers can challenge Stamp Duty assessments through CAAD arbitration when contesting the legal interpretation of tax provisions, particularly regarding whether undeveloped land falls within the scope of residential property taxation under the TGIS.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 257/2013 – T

Subject: Stamp Duty – Land for Development; Item 28 of the General Stamp Duty Table.

The arbitrators, Jorge Lino Ribeiro Alves de Sousa, Martins Alfaro, and Mónica Respício Gonçalves, designated by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the Arbitral Tribunal, constituted on 17 January 2014 (order of the President of the Deontological Council of CAAD of 17 January 2014), agree as follows:

A) Report:

  1. A, S.A. (hereinafter referred to as "Claimant"), a joint-stock company with registered office at Praça …, No. …, …, legal entity and taxpayer number …, submitted a request for arbitral pronouncement and constitution of an arbitral tribunal on 18 November 2013, pursuant to the provisions of nos. 2 and 10 of article 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "LFATM"), in which the Tax and Customs Authority is the Respondent (hereinafter referred to as "Respondent").

  2. In the said request for arbitral pronouncement, the Claimant seeks to have the Arbitral Tribunal declare:

a) the illegality of the decisions of tacit dismissal of the administrative appeal presented by the Claimant on 19/04/2013, in which it contested the Stamp Duty assessments numbered 2012…, 2012… and 2012.., in the total amount of € 47,140.35 (forty-seven thousand, one hundred and forty euros and thirty-five cents), relating to the properties registered under the following articles: (i) …-…, of the extinct parish of …, current article ..-… of the parish of Union of Parishes of … and …, (ii) article …-… of the extinct parish of …, current article … of the parish of Union of Parishes of … and …, and (iii) article … of the parish of … and which gave rise to administrative appeal cases No. 182… and No. 338…;

b) the illegality of the express decisions of dismissal of the administrative appeal in which the Claimant contested Stamp Duty assessments No. 2013…, No. 2013… and No. 2013.., in the total amount of € 94,280.71 (ninety-four thousand, two hundred and eighty euros and seventy-one cents), relating to the properties identified above and which gave rise to administrative appeal cases No. 182… and No. 338…;

c) the annulment of the Stamp Duty assessments identified in paragraphs a) and b) above, issued in 2012 and in 2013, pursuant to Item 28 of the General Stamp Duty Table; and

d) the condemnation of the Respondent to reimburse the amounts unduly paid and resulting from the assessments identified above, in the total amount of € 141,421.06 (one hundred and forty-one thousand, four hundred and twenty-one euros and six cents), plus the indemnity interest owed.

  1. The request for constitution of the Arbitral Tribunal was accepted by the Honorable President of CAAD and was notified to the Respondent on 19 November 2013.

  2. The Claimant did not proceed to appoint an arbitrator, so, pursuant to the provisions of article 6, no. 1, of the LFATM, the signatories were designated as arbitrators by the President of the Deontological Council of CAAD, with the appointment having been accepted in accordance with the legally provided terms.

  3. On 17 February 2014, the Respondent submitted its Reply.

  4. On 18 February 2014, and in accordance with the terms and for the purposes provided in article 18 of the LFATM, and considering the lack of opposition from the parties, an order was issued by the President Arbitrator, in which the Tribunal dispensed with the holding of a meeting of the Tribunal with the parties.

  5. The Claimant supports its request, in summary, in the following manner:

7.1 The assessments in question concern the taxation of urban properties with residential use and whose taxable equity value is equal to or greater than € 1,000,000 (one million euros), in accordance with Item 28.1 of the General Stamp Duty Table, in the wording in force at the date of the facts.

7.2 The Claimant is the owner of three plots of land for development, all of them with taxable equity values exceeding the said amount of € 1,000,000.

7.3 With respect to the first of these properties, registered in the cadastre with the number …-…, located in …, and with a taxable equity value of € 1,709,442.70, no building permit or development permit was issued, having only been subject to a prior information request and, subsequently, the presented architectural project was approved, whose approval order expressly states that the projected construction is intended, not exclusively for housing, but also for commercial purposes.

7.4 With respect to the property registered in the cadastre with the number …-…, with a taxable equity value of € 5,414,446.45, located in the parish of …, a development permit No. …/.., was issued by the Municipal Chamber of …, in accordance with which the lot in question ("Lot 4") is intended exclusively for offices, with Amendment No. .../… to the said permit subsequently being issued, extending the possibility of such construction being intended also for housing, from which it results that the construction could be intended exclusively for offices, exclusively for housing, or for offices and housing simultaneously.

7.5 The Claimant thus alleges that none of the said land plots for development are intended for the construction of properties exclusively for residential use, and furthermore, no designation of the said properties has been indicated in the corresponding Form 1 declaration of Municipal Property Tax (IMI).

7.6 The Claimant further maintains that in the property records of the properties in question there is no mention of the respective residential use coefficient, only of the location coefficient determined on the basis of residential use.

7.7 Thus, the Claimant considers that the understanding that land for development falls within the concept of "property with residential use", provided in Item 28.1 of the General Stamp Duty Table, is illegal, and this illegality is evident in the case of land for development whose planned or authorized construction is not even intended exclusively for residential use.

7.8 Indeed, with respect to the definition of the concept of "property with residential use", the Claimant understands that, from the referral made by the Stamp Duty Code to the Municipal Property Tax Code (hereinafter "MPTC"), it results that, although the latter Code does not provide an express definition of that concept, it follows from article 6 of the MPTC that that concept corresponds to a built and licensed property for housing, or, if not licensed for that purpose, to which there corresponds normal housing use, and cannot, ever, include land for development (regardless of its respective use), inasmuch as they are not built properties and cannot be or be allocated to housing.

7.9 The Claimant also considers that the fact that the legislator proposed, through Legislative Proposal No. 178/XII (State Budget Proposal for 2014) the amendment of the said rule, so as to extend it to land for development, constitutes an indication that the wording in force at the date of the occurrence of the facts, which referred only to "properties with residential use", did not include land for development, as also results from the rules of interpretation of the law provided in article 9 of the Civil Code.

7.10 The Claimant maintains that, even if it were not possible to obtain the definition of the said concept of "property with residential use" with recourse to the MPTC, it results from the rules contained in the Legal Framework for Urbanization and Building that, by definition, no land for development can be licensed for residential purposes.

7.11 The Claimant also alleges that Item 28.1 of the General Stamp Duty Table, in the wording in force at the date of the facts, violates the Principle of Tax Equality, provided in articles 13 and 104, no. 3, of the Constitution of the Portuguese Republic, inasmuch as it does not ensure equal treatment among citizens.

7.12 The Claimant also maintains that such rule violates the Principle of Equality in its aspect of proportional equality, namely the Principle of Proportionality, enshrined in articles 18, 19 and 266 of the Constitution of the Portuguese Republic, at least with respect to the year 2012, inasmuch as, instead of distributing among taxpayers the financial effort in question, Item 28.1 of the General Stamp Duty Table ends up increasing by more than one third the taxation owed in the year 2012 by taxpayers who own properties whose taxable equity value is equal to or greater than € 1,000,000.

7.13 Finally, the Claimant alleges the lack of authorization for the collection of Stamp Duty on property ownership with respect to the contested assessments for the year 2012, and these should be considered illegal.

7.14 In summary, the Claimant seeks the annulment of the contested assessments, as illegal, and as having been issued pursuant to Law No. 55-A/2012 and Item 28.1 of the General Stamp Duty Table, which should be declared unconstitutional, and also that the Tax and Customs Authority be condemned to reimburse the amount paid in the context of the enforcement proceeding instituted, plus indemnity interest.

  1. The Respondent replied, arguing for the non-acceptance of the request for arbitral pronouncement and alleging, in summary, that:

8.1 The lots of land for development in question have the legal nature of properties with residential use, since, from consultation of the respective property records, it results that the location coefficient for properties with residential use was considered in determining their respective taxable equity value.

8.2 The acts of assessment subject to the request for arbitral pronouncement should be maintained, inasmuch as they are based on a correct interpretation of Item 28 of the General Stamp Duty Table, in accordance with which the concept of "property with residential use" provided therein calls for the residential use coefficient provided in the MPTC.

8.3 The fact that the land for development in question do not have, pursuant to the documents relating to their respective building licenses, an exclusively residential vocation, does not prevent the application of Item 28 of the General Stamp Duty Table, since the exclusivity of residential use is not a requirement for the application of the said rule, and the Claimant should have identified the parts of the properties in question possibly intended for commerce and services.

8.4 The legislative amendment introduced with the Law approving the State Budget for 2014 (Law No. 83-C/2013 of 31 December) merely reinforces that the interpretation sustained by the Respondent is the correct one, since the legislator replaced the expression "property with residential use" with "residential property or land for development", thus clarifying that the expression previously enshrined in the law comprises these two realities.

8.5 Item 28 of the General Stamp Duty Table, in the interpretation sustained by the Respondent, does not violate the constitutional principles of equality or proportionality.

8.6 The Claimant failed to prove any violation of rules relating to the budgetary discipline of State revenues.

B) Preliminary Determination

  1. The Tribunal is competent and is regularly constituted, in accordance with articles 2, no. 1, paragraph a), 5 and 6, all of the LFATM.

  2. The parties have legal personality and capacity, are legitimate and are represented, in accordance with articles 4 and 10 of the LFATM and article 1 of Ordinance No. 112-A/2011, of 22 March.

  3. No nullities or prior issues affecting the entire proceeding are found to exist, so it is now necessary to rule on the merits of the request.

C) Subject Matter of the Arbitral Pronouncement

  1. The following questions are placed before the Tribunal, in the terms described above:

(i) Should the decisions of tacit dismissal of the administrative appeal presented by the Claimant on 19 April 2013, in which Stamp Duty assessments No. 2012…, No. 2012… and No. 2012… be declared illegal, in the total amount of € 47,140.35, relating to the properties registered under articles …-…, of the extinct parish of …, current article …-.., of the parish of Union of Parishes of … and …, article …-…, of the extinct parish of …, current article … of the parish of Union of Parishes of … and … and article … of the parish of …, which gave rise to administrative appeal cases No. 182… and No. 338…?

(ii) Should the express decisions of dismissal of the administrative appeal be declared illegal, in accordance with which the Claimant contested Stamp Duty assessments No. 2013…, No. 2013… and No. 2013…, in the total amount of € 94,280.71, relating to the properties better identified in (i) above, and which gave rise to administrative appeal cases No. 182… and No. 338…?

(iii) Should the Stamp Duty assessments better identified in (i) and (ii) above, issued pursuant to Item 28 of the General Stamp Duty Table in 2012 and in 2013, be annulled?

(iv) Should the Respondent be condemned to reimburse the amounts unduly paid with respect to the contested assessments, in the total amount of € 141,421.06, plus the respective indemnity interest?

D) Factual Matter (Proven Facts)

  1. The following facts are considered proven, with relevance for the decision, on the basis of the documentary evidence joined to the case file:

13.1 In accordance with the respective property records (see documents 9 to 11 attached to the request for arbitral pronouncement), the Claimant is the sole owner of the property registered in the cadastre with the number …-…, of the parish of …, of the property registered in the cadastre with the number …-…, of the parish of … and of the property registered in the cadastre with the number …-…, of the parish of ….

13.2 In accordance with the respective property records (see documents 9 to 11 attached to the request for arbitral pronouncement), the property registered in the cadastre with the number …-…, of the parish of …, the property registered in the cadastre with the number …-…, of the parish of … and the property registered in the cadastre with the number …-…, of the parish of … are, all of them, land for development.

13.3 In accordance with the respective property record (see document 11 attached to the request for arbitral pronouncement), the property registered in the cadastre with the number …-…, of the parish of … originated from the properties registered in the cadastre with the numbers …, … and …, of the parish of …, with its respective taxable equity value, fixed at € 2,304,181.95, having been calculated taking into account the location coefficient applicable to urban properties intended for housing.

13.4 In accordance with the respective property record (see document 10 attached to the request for arbitral pronouncement), with the extinction of the parish of …, the property registered in the cadastre with the number …-…, of the parish of … gave rise to the property registered in the cadastre with the number …, of the Union of Parishes of … and …, with its respective taxable equity value, fixed at € 5,414,446.45, having been calculated taking into account the location coefficient applicable to urban properties intended for housing.

13.5 In accordance with the respective property record (see document 9 attached to the request for arbitral pronouncement), with the extinction of the parish of …, the property registered in the cadastre with the number …-…., of the parish of gave rise to the property registered in the cadastre with the number ..., of the Union of Parishes of …and…, with its respective taxable equity value, fixed at € 1,709,442.70, having been calculated taking into account the location coefficient applicable to urban properties intended for housing.

13.6 On 14 August 1998, Amendment No. …, relating to the Modification of Development Permit No. …, affecting the property located in …, parish of …, registered in the mixed real estate cadastre under articles …, …, … and … and registered in the urban real estate cadastre under articles … to …, inclusive, … to …, inclusive, … to …, inclusive, … to …, inclusive, and … – and which gave rise to the property registered in the cadastre with the number …-…, of the parish of … and the property registered in the cadastre with the number …, of the Union of Parishes of … and … – was issued by the Municipal Chamber of …, providing therein for the modification of the use of lots three, four and five for alternative uses, with the change for lots three and four from offices to offices and/or housing and for lot five from offices and commerce to offices and/or housing (see documents 23 and 24 attached to the request for arbitral pronouncement).

13.7 On 12 May 2001, Amendment No. …, relating to the Modification of Development Permit No. …, providing, among other amendments, for the modification of the construction area of lot 4 and the subdivision of lot 5 into two new lots (lot 5, intended for services and lot 10, intended for housing and services) and also the subdivision of lot 8 into two new lots (lot 8, intended for services – hotel – and lot 11, also intended for services – hotel) was issued by the Municipal Chamber of … (see document 24 attached to the request for arbitral pronouncement).

13.8 On 12 December 2002, Amendment No. …, relating to the Modification of Development Permit No. …, providing for the modification of the construction area of lots 3 and 4 and also the modification and correction of the configuration of the access ramps to the garages and parking spaces was issued by the Municipal Chamber of … (see document 24 attached to the request for arbitral pronouncement).

13.9 On 11 December 2003, Amendment No. …, relating to the Modification of Development Permit No. …, providing for the correction of the areas of lots 3 and 4, was issued by the Municipal Chamber of … (see document 24 attached to the request for arbitral pronouncement).

13.10 Pursuant to the Official Letter of 21 October 2008, the Director of the Urban Management Department of the Municipal Administration Department, of the Municipal Chamber of …, informed the Claimant that the architectural project relating to the property registered in the cadastre with the number …-…, of the parish of … and which gave rise to the property registered in the cadastre with the number …, of the Union of Parishes of … and …, for construction of a collective housing building and commerce, was approved by order of the President of the Municipal Chamber of … of 14 October 2008 (see document 22 attached to the request for arbitral pronouncement).

13.11 The Claimant was notified of the act of Stamp Duty assessment No. 2012…, in the amount of € 11,520.91, made on 07 November 2012, based on article 6, no. 1, paragraph f), section i) of Law No. 55-A/2012, calculated on the taxable equity value of the property registered in the cadastre with the number …-…, of the parish of …, corresponding to € 2,304,181.95 (see document 3 attached to the request for arbitral pronouncement).

13.12 The Claimant made payment on 20 December 2012 of the Stamp Duty resulting from that same act of assessment, in the amount of € 11,520.91 (see document 3 attached to the request for arbitral pronouncement).

13.13 The Claimant was notified of the act of Stamp Duty assessment No. 2012…, in the amount of € 27,072.23, made on 08 November 2012, based on article 6, no. 1, paragraph f), section i) of Law No. 55A/2012, calculated on the taxable equity value of the property registered in the cadastre with the number …-…, of the parish of …, corresponding to € 5,414,446.45 (see document 2 attached to the request for arbitral pronouncement).

13.14 The Claimant made payment on 20 December 2012 of the Stamp Duty resulting from that same act of assessment, in the amount of € 27,072.23 (see document 2 attached to the request for arbitral pronouncement).

13.15 The Claimant was notified of the act of Stamp Duty assessment No. 2012…, in the amount of € 8,547.21, made on 07 November 2012, based on article 6, no. 1, paragraph f), section i) of Law No. 55A/2012, calculated on the taxable equity value of the property registered in the cadastre with the number U-6841 (current number 7574), of the parish of … (current Union of Parishes of … and …), corresponding to € 1,709,442.70 (see document 1 attached to the request for arbitral pronouncement).

13.16 The Claimant made payment on 20 December 2012 of the Stamp Duty resulting from that same act of assessment, in the amount of € 8,547.21 (see document 1 attached to the request for arbitral pronouncement).

13.17 The Claimant was notified of the act of Stamp Duty assessment No. 2013…, in the amount of € 23,041.82, made on 22 March 2013, for the year 2012, based on Item 28.1 of the General Stamp Duty Table, calculated on the taxable equity value of the property registered in the cadastre with the number …- .., of the parish of …, corresponding to € 2,304,181.95 (see document 8 attached to the request for arbitral pronouncement).

13.18 The Claimant made payment on 29 April 2013 of the first installment of the Stamp Duty resulting from the act of Stamp Duty assessment No. 2013…, relating to the property registered in the cadastre with the number …-…, of the parish of …, in the amount of € 7,680.62 (see document 8 attached to the request for arbitral pronouncement). On 24 July 2013, the Claimant made payment of the second installment of the Stamp Duty for the year 2012, resulting from the act of Stamp Duty assessment No. 2013…, in the amount of € 7,680.60 (see document 16 attached to the request for arbitral pronouncement). Finally, on 01 November 2013, the Claimant paid the third installment of the Stamp Duty for the year 2012, resulting from the act of Stamp Duty assessment No. 2013…, in the amount of € 7,680.60 (see document 19 attached to the request for arbitral pronouncement).

13.19 The Claimant was notified of the act of Stamp Duty assessment No. 2013…, in the amount of € 54,144.46, made on 22 March 2013, based on Item 28.1 of the General Stamp Duty Table, calculated on the taxable equity value of the property registered in the cadastre with the number ...-…, of the parish of …, corresponding to € 5,414,446.45 (see document 7 attached to the request for arbitral pronouncement).

13.20 The Claimant made payment on 29 April 2013 of the first installment of Stamp Duty for the year 2012, resulting from the act of Stamp Duty assessment No. 2012…, relating to the property registered in the cadastre with the number …-…, of the parish of …, in the amount of € 18,048.16 (see document 7 attached to the request for arbitral pronouncement). The Claimant made payment on 24 July 2013 of the second installment of Stamp Duty for the year 2012, resulting from the document identified with No. 2013…, in the amount of € 18,048.15 (see document 15 attached to the request for arbitral pronouncement). On 01 November 2013, the Claimant made payment of the third installment of Stamp Duty for the year 2012, resulting from the document identified with No. 2013..., in the amount of € 18,048.15 (see document18 attached to the request for arbitral pronouncement).

13.21 The Claimant was notified of the act of Stamp Duty assessment No. 2013…, in the amount of € 17,094.43, made on 21 March 2013, based on Item 28.1 of the General Stamp Duty Table, calculated on the taxable equity value of the property registered in the cadastre with the number …-…, of the parish of …, corresponding to € 1,709,442.70 (see document 6 attached to the request for arbitral pronouncement).

13.22 The Claimant made payment on 29 April 2013 of the first installment of Stamp Duty for the year 2012, resulting from the act of Stamp Duty assessment No. 2013…, in the amount of € 5,698.15, relating to the property registered in the cadastre with the number …-…, of the parish of …(see document 6 attached to the request for arbitral pronouncement). The Claimant made payment on 24 July 2013 of the second installment of Stamp Duty for the year 2012, resulting from the document identified with No. 2013…, in the amount of € 5,698.14 (see document 14 attached to the request for arbitral pronouncement). The Claimant made payment on 01 November 2013 of the third installment of Stamp Duty for the year 2012, resulting from the document identified with No. 2013…, in the amount of € 5,698.14 (see document 17 attached to the request for arbitral pronouncement).

13.23 The Claimant presented, on 19 April 2013, at the Tax Service of …, an administrative appeal against the assessments No. 2012…, No. 2012… and No. 2012…, relating to Stamp Duty, in the amounts, respectively, of € 11,520.91, € 27,072.23 and € 8,547.21, corresponding to the total amount of € 47,140.35, based on Item 28 of the General Stamp Duty Table (see document 12 attached to the request for arbitral pronouncement and pages 1, 6, 7 and 8 of the administrative file).

13.24 The Claimant was notified, through the Official Letter of … of 2013, from the Chief of Finances of the Tax Service of …, that, after instituting the proceeding of consideration of the administrative appeal presented by it, which was assigned the number … (relating to the contest of assessment No. 2012… concerning the property located in the parish of … and registered in the cadastre under the number …-…), was transferred to the Tax Service of the … and also that the proceeding of consideration of the administrative appeal presented by it, which was assigned the number … (relating to the contest of assessments No. 2012… and No. 2012…, concerning respectively the property located in the current parish of Union of Parishes of …and… and registered in the cadastre under the number …-… (former article …-…) and the property located in the current parish of Union of Parishes of … and … and registered in the cadastre under the number …-… (former article …-…)), was transferred to the Tax Service of … – 1 (see document 21 attached to the request for arbitral pronouncement).

13.25 The act of tacit dismissal of the administrative appeal presented by the Claimant on 19 April 2013, to which were assigned the proceeding numbers 182… and 338…, was formed on 19 August 2013 (see administrative file).

13.26 The Claimant was notified, by fax, through the Official Letter of … 2013, from the Area of Tax Justice, Division of Administrative and Contentious Justice, of the Financial Authority of the …, of the draft decision to dismiss the request relating to the proceeding identified with the number 338… relating to the contest of assessment No. 2012… concerning the property located in the parish of… and registered in the cadastre under the number …-…, but in which came to be projected the dismissal of the administrative appeal presented, by reference also to the property located in the current parish of Union of Parishes of …e … and registered in the cadastre under the number …-… (former article …-….) and to the property located in the current parish of Union of Parishes of …e … and registered in the cadastre under the number ...-… (former article …-…) (see pages 105 to 115 of the administrative file).

13.27 Thus, the Claimant was again notified by fax, through the Official Letter of … of 2013, from the Area of Tax Justice, Division of Administrative and Contentious Justice, of the Financial Authority of the …, of the draft decision to dismiss the request relating to the proceeding identified with the number 338…, relating to the contest of assessment No. 2012…, mentioning, this time, only the property located in the parish of … and registered in the cadastre under the number …-… (see pages 116 to 123 of the administrative file).

13.28 On 28 November 2013, the Claimant informed the Respondent – specifically, the Area of Tax Justice of the Financial Authority of the … – that it has challenged, through the present request for arbitral pronouncement, the tacit dismissal which was formed of the administrative appeal presented by it and to which was assigned the proceeding number 338…, relating to the contest of Stamp Duty assessment No. 2012…, concerning the land for development identified in the cadastre with the number …-… and located in the parish of e… (see pages 124 and 125 of the administrative file).

13.29 Through the Order of … of 2013, from the Division of Administrative and Contentious Justice of the Financial Authority of the …, the Claimant was notified of the decision to maintain the order issued on … of 2013, in view of the challenge, by the Claimant, of the decision of tacit dismissal relating to the administrative appeal to which was assigned the proceeding number 338…, relating to the contest of Stamp Duty assessment No. 2012…, concerning the land for development identified in the cadastre with the number …-… and located in the parish of … (see pages 127 and 128 of the administrative file).

13.30 On 28 August 2013, the Claimant presented, at the Tax Service of …, an administrative appeal against the acts of assessment No. 2013…, No. 2013… and No. 2013…, relating to Stamp Duty, in the amounts, respectively, of € 23,041.82, € 54,144.46 and € 17,094.43, corresponding to the total amount of € 94,280.71, based on Item 28 of the General Stamp Duty Table (see document 20 attached to the request for arbitral pronouncement).

13.31 The Claimant was notified, through the Official Letter of … 2013, from the Chief of Finances of the Tax Service of …, that, after instituting the proceeding of consideration of the administrative appeal presented by it, which was assigned the number 338… (relating to the contest of assessment No. 2013…concerning the property located in the parish of … and registered in the cadastre under the number …-…), was transferred to the Tax Service of the … and also that the proceeding of consideration of the administrative appeal presented by it, which was assigned the number 182… (relating to the contest of assessments No. 2013… and No. 2013..., concerning respectively the property located in the current parish of Union of Parishes of … and … and registered in the cadastre under the number …-… (former article …-…) and the property located in the current parish of Union of … and … and registered in the cadastre under the number …-… (former article …-…)), was transferred to the Tax Service of … – 1 (see document 13 attached to the request for arbitral pronouncement).

13.32 The Claimant was notified, through Official Letter No. .../…, of … of 2013, from the Chief of the Tax Service of the …, of the order issued on … of 2013, in accordance with which the administrative appeal to which was assigned the proceeding number 338… was dismissed, relating to the contest of assessment No. 2013… concerning the property located in the parish of … and registered in the cadastre under the number …-… (see document 5 attached to the request for arbitral pronouncement).

13.33 The Claimant was notified, through Official Letter No. …, of ... 2013, from the Chief of the Tax Service of …, that by order issued on …of 2013, the administrative appeal to which was assigned the proceeding number 182… was dismissed, relating to the contest of assessments No. 2013… and No. 2013…, concerning respectively the property located in the current parish of Union of Parishes of... and … and registered in the cadastre under the number …-… (former article …-…) and the property located in the current parish of Union of Parishes of … and … and registered in the cadastre under the number …-… (former article …-…) (see document 4 attached to the request for arbitral pronouncement).

  1. No other facts capable of affecting the decision on the merits were proven, in view of the possible legal solutions, and there are no unproven facts with interest for the decision in the case.

E) On the Law

  1. From the examination of the legality of the contested acts through the present request for arbitral pronouncement:

15.1 The question underlying the present request for arbitral pronouncement concerns the correct interpretation of Item 28.1 of the General Stamp Duty Table, in the wording in force at the date of the occurrence of the facts – that is, prior to the entry into force of the new wording resulting from the amendments introduced through the Law approving the State Budget for 2014 – in order to determine whether land for development is included in the concept of "properties with residential use" and, consequently, to determine whether they are, therefore, subject to Stamp Duty in the terms that result from that tax provision.

15.2 Item 28 of the General Stamp Duty Table was added by Law No. 55-A/2012, of 29 October, providing therein that the following are included in the scope of taxation "28 — Ownership, usufruct or right of superficies of urban properties whose taxable equity value registered in the cadastre, in accordance with the Municipal Property Tax Code, is equal to or greater than € 1,000,000 — on the taxable equity value used for purposes of Municipal Property Tax: 28.1. - For properties with residential use - 1 %;".

15.3 Moreover, the said Law No. 55-A/2012, of 29 October also established the transitional provisions for the application of the said tax provision, still in the year 2012, having determined, among other aspects, that (i) the taxable event was deemed to occur on 31 October 2012, (ii) the Tax and Customs Authority should effect the assessment of the tax due by the end of November of that year, (iii) the taxpayers should make payment of the tax assessed in such terms by 29 December 2012 and also (iv) the applicable rate in that year was 0.5% for properties with residential use assessed in accordance with the Municipal Property Tax Code and 0.8% for properties with residential use not yet assessed in accordance with the Municipal Property Tax Code.

15.4 Law No. 55-A/2012, of 29 October also added no. 2 of article 67 of the Stamp Duty Code, in accordance with which it was established that "To matters not regulated in the present Code relating to Item No. 28 of the General Table, the provisions of the MPTC are applied, subsidiarily".

15.5 Having made the legislative framework of the problem raised and being concerned with the interpretation of the concept of "property with residential use", it is appropriate first to inquire about the existence of a legal definition of the said concept.

15.6 Finding that the legislator did not define the concept of "property with residential use" in the Law No. 55-A/2012 itself, of 29 October, nor in the Stamp Duty Code, nor in the General Stamp Duty Table, we are forced to seek the said legal definition in the Municipal Property Tax Code, by virtue of the referral contained in no. 2 of article 67 of the Stamp Duty Code.

15.7 Article 4 of the Municipal Property Tax Code, under the heading "Urban properties", defines them as being "all those that should not be classified as rural".

15.8 Article 6, no. 1 of the Municipal Property Tax Code also provides that urban properties are divided into residential, commercial, industrial or for services, land for development and, residually, others.

15.9 The legislator established, in article 6, no. 2 of the Municipal Property Tax Code, that urban residential, commercial, industrial or for services properties are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal destination each of these purposes.

15.10 In article 6, no. 3 of the Municipal Property Tax Code, the legislator provided that land for development is "land situated within or outside an urban settlement, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for subdivision or construction operation, and also those that have been so declared in the acquisition deed, except for land where the competent entities prevent any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are allocated to spaces, infrastructure or public facilities".

15.11 Still in accordance with article 6, no. 4 of the Municipal Property Tax Code, properties of the type "others" are land situated within an urban settlement that are neither land for development nor are they classified as rural properties and also buildings and constructions licensed or, in the absence of a license, which have as their normal destination other purposes than residential, commercial, industrial or for services purposes and also land where the competent entities prevent any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are allocated to spaces, infrastructure or public facilities.

15.12 Given the above, the Municipal Property Tax Code also does not contain a specific definition of what "properties with residential use" are.

15.13 The provision contained in article 11, no. 1, of the General Tax Law provides that "In the determination of the meaning of tax rules and in the qualification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed."

15.14 Thus, and having regard to article 9, no. 1, of the Civil Code, when it refers that "Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied", we proceed to the analysis of the possible interpretive elements. These are: the grammatical element and the logical element.

15.15 As taught by PIRES DE LIMA and ANTUNES VARELA[1], the grammatical element is constituted by the legislative text, by the words of the law, while the second of the said elements, the logical element, refers to the spirit of the law, and the elements in question do not constitute two distinct forms of interpretation, but rather complement each other, as the Authors teach: the two elements should, therefore, be used jointly in the fixing of the decisive meaning of the law.

15.16 Also SOARES MARTINEZ[2], expressly referring to the problem of interpretation of tax rules, concludes that "The interpreter of tax rules, like the interpreter of any other legal rules, will have to fix their meaning, combining the 'grammatical element' with the 'logical' or 'teleological' element, including the rational, systematic and historical aspects (…).".

15.17 We will thus proceed to the task of interpreting the provision contained in Item 28.1 of the General Stamp Duty Table, making use of each of the said elements.

15.18 Resorting, in the specific case, to the grammatical element, we find that the legislator used the expression "properties with residential use". Now, the choice made by the legislator through the use, in the expression in question, seems to indicate that what is at issue are residential properties, as defined in article 6, no. 2 of the Municipal Property Tax Code, that is, those that are licensed as such or that are intended for that purpose, because only these could have a true "residential use".

15.19 The logical element, on the other hand, integrates within itself three distinct categories of aspects or "sub-elements" to be considered: the rational aspect or element, the systematic one and, finally, the historical one, with relevance, as regards the three aspects, the ratio legis underlying the introduction of the said provision in our legal order.

15.20 In the "Statement of Reasons" contained in Legislative Proposal No. 96/XII/2ª, which underlaid the approval of Law No. 55-A/2012 which added Item 28 to the General Stamp Duty Table, the legislator states only that "a tax rate in Stamp Duty is created applying to urban properties with residential use whose taxable equity value is equal to or greater than one million euros".

15.21 Also from the Opinion of the Committee on Budget, Finance and Public Administration on the said Legislative Proposal[3] there is no express clarification regarding the said concept of "property with residential use".

15.22 Nevertheless, we cannot fail to consider that, in adding Item 28 to the General Stamp Duty Table, the legislator considered as the determining element of taxpaying capacity urban properties with residential use of value equal to or greater than € 1,000,000.00, on which such taxation came to apply, and we therefore adopt the understanding underlying the arbitral decision issued in the context of Case No. 50/2013, of 29.10.2013, when it states that "This same conclusion is drawn from the analysis of the discussion of legislative proposal no. 96/XII in the National Assembly, available for consultation in the Diário da Assembleia da República [Parliamentary Record], I series, no. 9/XII/2, of 11 October 2012. The justification for the measure designated 'special tax on residential urban properties of higher value' is based on the invocation of the principles of social equity and fiscal justice, calling on holders of high-value properties intended for housing to contribute in a more intensive manner, with the new special tax applying to 'houses valued at equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to housing (house, independent unit or apartment with independent use) reflects taxpaying capacity above the average and, as such, capable of determining a special contribution to ensure just distribution of the tax burden.'".

15.23 Moreover, in our view, the legislative amendment introduced with the Law approving the State Budget for 2014 – commendable, because it served to clarify the meaning of the law - seems, to the contrary of what the Tax Authority maintains, to be an argument in favor of the understanding that the concept of "property with residential use" did not include land for development.

15.24 Indeed, if this were not the case, the legislator would not have needed to indicate that, besides "residential properties" – which are nothing more, in the terms we will expound below, the "properties with residential use", with correspondence to the concept provided in article 6, no. 1, paragraph a) and no. 2 of the Municipal Property Tax Code – also land for development now comes to be encompassed by that tax provision.

15.25 Given the above, we cannot fail to adopt the understanding that the legal requirement of "property with residential use", contained in Item 28.1 of the General Stamp Duty Table in the wording in force at the date of the occurrence of the facts, implies an effective allocation of an urban property to that purpose, and underlying the creation of that concept is the correspondence with the concept of "urban residential property" and not, as the Respondent defends, with the concept of property whose taxable equity value is determined in accordance with a location coefficient corresponding to allocation for housing, an interpretation which does not appear to have any legal correspondence.

15.26 In this respect, land for development can never be included in the expression "properties with residential use", inasmuch as they do not possess a use license for housing and are not even built.

15.27 We conclude, therefore, that the concept of "property with residential use" provided in Item 28.1 of the General Stamp Duty Table corresponds to the concept of "urban residential property", provided in article 6, no. 1, paragraph a) and no. 2 of the Municipal Property Tax Code and also in the first part of the current wording of Item 28.1 of the General Stamp Duty Table.

15.28 As such, being at issue in the present request for arbitral decision three plots of land for development of which the Claimant is the owner, the same did not fall within the scope of the tax provision contained in Item 28.1 of the General Stamp Duty Table in the wording in force at the date of the occurrence of the facts, which renders illegal the acts of assessment No. 2012…, No. 2012…, No. 2012…, No. 2013…, No. 2013… and No. 2013… and the express dismissal decisions issued in the context of the proceedings for review of the administrative appeals presented by the Claimant No. 338… and No. 182… and tacit dismissal of the administrative appeals presented by the Claimant and to whose review proceedings were assigned the numbers 182… and 338…, all subject of the present arbitral proceeding, rendering the Claimant's request procedurally well-founded.

15.29 Given the above, it no longer makes sense, and is no longer useful, to examine that which the Claimant requested regarding the authorization for collection of the tax, in accordance with budgetary rules, and also regarding the (non-) constitutionality of the interpretation of the provision sustained by the Respondent.

  1. Regarding the condemnation of the Respondent to reimburse the amounts unduly paid with respect to the contested assessments, in the total amount of € 141,421.06, plus the respective indemnity interest:

16.1 The Claimant petitioned for payment of indemnity interest, by considering that there was, in the specific case, payment of tax in excess of the amount due due to error attributable to the services.

16.2 The General Tax Law (GTL) provides in article 43 and the Code of Tax Procedure and Process (CTPP) in article 61 that indemnity interest is owed when it is determined, in administrative appeal or judicial challenge, that there was an error attributable to the services and from which results payment of tax debt in an amount higher than that legally due.

16.3 Error attributable to the Administration is understood as the error not attributable to the taxpayer and based on erroneous presuppositions of fact and law which are not the responsibility of the taxpayer.

16.4 Thus, "the right to indemnity interest covers only one of the causes of responsibility of the Tax Administration, acting as such: that originated by payment of undue taxes, which is attributable to it (...) the right to indemnity interest in favor of the taxpayer comes, as a general rule, from a duty of indemnification of the Tax Administration resulting from the forced unproductivity of the amounts paid out by the taxpayer." (see. António Lima Guerreiro, General Tax Law Annotated, Rei dos Livros Publisher, p. 204 and 205).

16.5 Given the above and the erroneous interpretation made by the Respondent, in applying the provision in question – Item 28.1 of the General Stamp Duty Table – there is no doubt that it was due to error attributable to the services that the Claimant made payment of tax in excess of that which effectively would be due.

16.6 In view of the above, it is considered that the Claimant is entitled to indemnity interest, calculated from the date of payment of the assessments of tax annulled to the date of issuance of the credit note, in accordance with article 61, nos. 2 to 5, of the Code of Tax Procedure and Process.

F) Decision:

  1. In these terms, it is decided to rule that the Claimant's request is procedurally well-founded and, thus, to annul the express and tacit dismissal decisions of the Administrative Appeals presented and also the tax assessments and compensatory interest impugned, with the legal consequences, in particular with restitution of the amounts assessed and paid by the Claimant, plus the indemnity interest calculated in accordance with the law, as indicated above.

  1. The value of the action is fixed at € 141,421.06 (one hundred and forty-one thousand, four hundred and twenty-one euros and six cents), in accordance with the provisions of article 97-A, no. 1, paragraph a), of the Code of Tax Procedure and Process, applicable by referral of article 3, no. 2, of the Regulation of Costs of Tax Arbitration Proceedings.

  2. The Arbitration Fee is fixed at € 3,060.00 (three thousand and sixty euros), in accordance with Table I of the Regulation of Costs of Tax Arbitration Proceedings, charged to the Respondent, in accordance with the provisions of article 22, no. 4 of the Legal Framework for Arbitration in Tax Matters.

Let notice be given.

Lisbon, 28 March 2014

The Arbitrators

Jorge Lino Ribeiro Alves de Sousa

Martins Alfaro

Mónica Respício Gonçalves

Text prepared by computer, in accordance with no. 5 of article 131 of the Code of Civil Procedure, applicable by referral of paragraph e) of no. 1 of article 29 of Decree-Law No. 10/2011, of 20/01.

The wording of this decision is governed by the old spelling.

[1] In "Fundamental Notions of Civil Law I", 5th revised and enlarged edition, Coimbra Editora, 1961, p. 150.

[2] In "Tax Law", 9th edition (reprint), Almedina, 1997, p. 132.

[3] Available at http://app.parlamento.pt/.

Frequently Asked Questions

Automatically Created

Does Verba 28 of the Tabela Geral do Imposto do Selo apply to building land (terrenos para construção)?
The central issue in Case 257/2013-T was whether undeveloped building land (terrenos para construção) qualifies as 'property with residential use' under Item 28 of the TGIS. The claimant argued that this provision should only apply to built and licensed residential properties, not vacant land, even if designated for future residential construction. The company emphasized that the Municipal Property Tax Code defines residential properties as constructed buildings, and that subsequent legislative proposals to explicitly include building land suggested such land was not originally covered by Item 28.1.
Can taxpayers challenge Stamp Tax (Imposto do Selo) assessments on high-value properties through CAAD arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on high-value properties through CAAD arbitration. In this case, the claimant successfully initiated arbitral proceedings under Decree-Law 10/2011 to contest both tacit and express dismissals of administrative appeals regarding Stamp Duty assessments under Item 28 of the TGIS. The CAAD arbitral tribunal has jurisdiction to review the legality of tax assessments, including those involving properties valued at or above €1,000,000 subject to the special stamp duty regime.
What are the grounds for annulling Stamp Tax liquidations issued under Verba 28 of the TGIS?
Grounds for annulling Stamp Tax liquidations under Verba 28 include: (1) incorrect classification of the property type—arguing that building land does not constitute 'property with residential use' as required by Item 28.1; (2) absence of exclusive residential designation, particularly when construction permits authorize mixed-use or commercial purposes; (3) violation of constitutional principles such as tax equality under Articles 13 and 104(3) of the Portuguese Constitution; and (4) misinterpretation of the Municipal Property Tax Code provisions that define residential properties as built and licensed structures, not undeveloped land.
Are property owners entitled to compensatory interest (juros indemnizatórios) when Stamp Tax assessments are annulled?
Property owners whose Stamp Tax assessments are annulled are entitled to reimbursement of amounts unduly paid plus compensatory interest (juros indemnizatórios). In Case 257/2013-T, the claimant explicitly requested condemnation of the Tax Authority to reimburse €141,421.06 plus indemnity interest owed. Compensatory interest compensates taxpayers for the State's improper retention of funds when tax assessments are later deemed illegal and annulled by the arbitral tribunal or courts.
How does the CAAD arbitral tribunal process gracious complaints (reclamação graciosa) related to Imposto do Selo?
The CAAD arbitral tribunal processes administrative appeals (reclamação graciosa) related to Imposto do Selo by reviewing decisions on such appeals when taxpayers request arbitration. In this case, the claimant filed administrative appeals that resulted in both tacit dismissals (by silence/inaction) and express dismissals. The taxpayer then initiated CAAD arbitration under Article 10 of Decree-Law 10/2011, requesting the tribunal to declare the illegality of both types of dismissals and annul the underlying stamp duty assessments. The tribunal has authority to review the substantive legality of the tax assessments themselves, not merely the procedural handling of the administrative appeals.