Process: 260/2014-T

Date: November 5, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether Verba 28 of the General Stamp Tax Table (TGIS) applies to building land (terrenos para construção) valued at €3,994,930 in Portugal. The taxpayer challenged Stamp Duty assessments totaling €59,923.95, arguing that Verba 28, introduced by Law 55-A/2012, does not apply to building land and that the assessment right had expired under Article 6(1)(d) of that law. The Tax Authority (AT) contended that the property has housing allocation characteristics, making Verba 28 applicable. The case raised important procedural issues regarding CAAD arbitral tribunal composition under RJAT Article 5, with the tribunal ruling it was correctly constituted as a three-member panel since the claim value of €60,134.03 exceeded the €60,000 threshold. Key factual elements include two collection documents issued on 17 July 2013: one for €19,974.65 at 0.50% rate (paid voluntarily) and another for €39,949.30 at 1.00% rate (paid within enforcement proceedings with €210.08 costs). The tribunal must resolve whether building land falls within Verba 28's scope when a housing allocation coefficient was applied to determine its taxable patrimonial value (VPT), whether statute of limitations bars the assessment, and whether compensation interest and cost refunds are due if illegality is declared. This decision has significant implications for high-value urban land taxation in Portugal.

Full Decision

ARBITRAL DECISION

I – REPORT

1 – A, with registered office at …, submitted on 13/03/2014 an application for constitution of the arbitral tribunal, under the provisions of subparagraph a) of no. 1 of article 2, of no. 1 of article 3 and of subparagraph a) of no. 1 of article 10, all of the RJAT[1], with the AT[2] being summoned, with a view to assessing the legality of the tax assessment acts of Stamp Duty[3], relating to land for construction, registered in the urban real property register under article ... of the parish of ..., current article ... of the Union of parishes of ... and ... municipality of ..., registered in the name of the applicant, as appears from a copy of the urban real property register obtained via internet on 2013/10/18 and attached to the proceedings.

2 – The application for constitution of the arbitral tribunal was made without exercising the option of appointing an arbitrator, and was accepted by His Excellency the President of CAAD[4] and automatically notified to the AT on 17/03/2014.

3 – In accordance with and for the purposes of the provisions of no. 2 of article 6 of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, were appointed Mr. Counsellor Judge Jorge Lino Ribeiro Alves de Sousa, Her Excellency Dr. Maria Celeste Cardona and Dr. Arlindo José Francisco, respectively in the capacity of President and members, who communicated to the Deontological Council and to the Administrative Arbitration Centre their acceptance of the appointment within the regularly stipulated period.

4 - The tribunal was constituted on 20/05/2014 in accordance with the provisions contained in subparagraph c) of no. 1 of article 11 of the RJAT, in the version introduced by article 228 of Law no. 66-B/2012, of 31 December.

5 – With his application, the applicant seeks the declaration of illegality of the tax assessment acts of Stamp Duty, carried out by the AT, under item 28 of the TGIS[5] which fell upon the patrimonial value of the land for construction already identified.

6 - He invokes for this purpose the non-applicability of item 28 of the TGIS to land for construction, since these, in his view, do not fall within the scope of incidence intended by the aforementioned rule.

7 – But even if this were not the case, he contends that the assessment corresponding to the collection document ... is further illegal because the right to make such assessment provided for in subparagraph d) of no. 1 of article 6 of Law 55-A/2012 has expired.

8 – In its reply, the AT raises as preliminary issues, firstly, the question of the value of the action which would be only € 59 923.95 in accordance with article 97-A of the CPPT[6] and not € 60 134.03, this value being the result of adding €210.08 relating to costs to that amount which would contravene the applicable rule, and from this it draws the consequence that the arbitral tribunal should be singular and not collective, and therefore the jurisdiction of the tribunal to resolve the dispute should be assessed.

9 - The AT further contends that the assessments in question do not suffer from illegality since the property on which they fall has the legal nature of property with housing allocation, and therefore should be maintained given that they result from the correct application of item 28 of the TGIS, amended by Law 55-A/2012 of 29 October.

II – RULING ON PRELIMINARY MATTERS

The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.

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

On 07/07/2014, the tribunal, considering the non-objection of the parties, dispensed with the holding of the meeting referred to in article 18 of the RJAT and, since the proceedings already contain the necessary and sufficient factual elements to decide on law, communicated that final judgment would be delivered by 29-10-2014.

Due to illness of the President of the Tribunal it was not possible to deliver the judgment by that date.

As that situation of illness continued, by order of the President of the Deontological Council of the CAAD, the temporary replacement of the President of the Arbitral Tribunal by Mr. Counsellor Jorge Lopes de Sousa was determined.

The proceedings are not affected by any nullities, although the AT raised the question of jurisdiction ratione valoris, which if established would place the tribunal in a situation of relative incompetence, which must be assessed.

In accordance with article 5 of the RJAT, arbitral tribunals function with the intervention of a sole arbitrator when the value of the claim does not exceed twice the value of the jurisdiction of the Central Administrative Court, that is € 60 000.00, and the taxpayer opts not to appoint an arbitrator. When the value of the claim exceeds that amount or the taxpayer opts to appoint an arbitrator, there shall be intervention of a panel of three arbitrators.

In the present case, the taxpayer elected not to appoint an arbitrator but the value of the claim exceeds € 60 000.00, being precisely € 60 134.03, thus, regardless of what is decided concerning this value for purposes of costs in accordance with article 97-A of the CPPT applicable by virtue of no. 2 of article 3 of the RCPAT[7], we must conclude that the three-member panel is competent based on the value of the claim.

In this way we find no issues which prevent assessment of the merits of the case, the conditions being met for final judgment to be delivered.

III - GROUNDS FOR DECISION

1 – Questions to be resolved:

a) Whether the right to make the assessment of Stamp Duty expired in relation to the collection document ..., by violation of subparagraph d) of no. 1 of article 6 of Law no. 55-A/2012 of 29 October, and therefore the said assessment is illegal.

b) Whether land for construction, to which in determining its VPT[8] was applied the coefficient of housing allocation whose determined value is equal to or greater than € 1 000 000.00, falls within the scope of subjection to Stamp Duty provided for in item 28 of the TGIS, amended by Law no. 55-A/2012 already mentioned.

c) Whether the amount of € 210.08 paid within the PEF[9] ..., instituted due to non-payment during the voluntary payment period (December 2013) of the assessment ... in the amount of € 39 949.30, should be refunded in the event that the illegality of said assessment is declared.

d) Finally, whether, in the event that the illegality of the assessments is declared, there shall be a claim for the payment of indemnification interest as requested.

2 - Facts

The relevant facts established based on the elements attached to the proceedings are as follows:

a) The applicant is the owner of land for construction registered in the urban real property register under article ... of the parish of ..., current article ... of the Union of parishes of ... and ... municipality of ....

b) The VPT of the said land for construction is € 3 994 930.00, a value which served as the basis for the assessments here challenged.

c) In the collection document ... appears the assessment date 2013-07-17; in the tax year field appears "Law 55-A/2012" with an additional reference to Law 55-A/2012 Article 6/1/f/i; patrimonial value € 3 994 930.00; rate 0.50; collection € 19 974.65; final payment date December 2013; which was paid on 04/12/2013.

d) In the collection document ... appears the assessment date 2013-07-17; tax year 2012; item 28.1 of the TGIS; patrimonial value € 3 994 930.00; rate 1.00; collection € 39 949.30; final payment date December 2013; which was paid within the scope of the PEF ... on 28/02/2014 plus costs in the amount of € 210.08.

e) We do not find any unproven facts relevant to the decision of the case.

3 – Law

a) The first issue to be assessed is whether the assessment to which the collection document ... dated 2013-07-17 corresponds occurred within or outside the period of expiry.

b) As already noted, in the said collection document, with interest for the proceedings, in addition to the assessment date, in the tax year field appears "Law 55-A/2012" with an additional reference to Law 55-A/2012 Article 6/1/f/i; patrimonial value € 3 994 930.00; rate 0.50; collection € 19 974.65; final payment date December 2013.

c) No. 1 of article 45 of the LGT[10] establishes a general period of expiry of four years, if the law provides otherwise.

d) Law 55-A/2012 at article 6 no. 1 subparagraph d) establishes a period of expiry running until the end of November 2012.

e) The relevant provisions are found in article 6 of Law 55-A/2012, headed "Transitional Provisions." No. 1 states: "In 2012 the following rules must be observed with reference to the assessment of Stamp Duty provided for in item no. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012

b) 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;

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

d) The assessment of the Tax by the Tax and Customs Authority must be carried out until the end of November 2012;

e) The tax should be paid, in a single instalment, by the taxpayers until 20 December 2012;

f) The applicable rates are as follows:

i) Property with housing allocation assessed in accordance with the Municipal Property Tax Code: 0.5%

ii) …."

f) From the comparison of the data contained in the collection document in question with the provisions set out above, we can only conclude that the assessment intended to comply with the legal provision transcribed in the preceding subparagraph. However, it was made beyond the period specified in subparagraph d) of no. 1 of article 6 of Law 55-A/2012, and consequently the final payment date also differs from that required in subparagraph e) of the same legal provision. Therefore, the tribunal finds that the right to make the assessment has expired.

g) Beyond the expiry issue already resolved as to one of the assessments, the applicant contends that land for construction is not covered by item 28 of the TGIS, supporting this position not only through interpretation of the applicable rules, but also by reference to the legislator's need to intervene by expanding the scope of the rule, and also by consistent arbitral case-law unanimously holding that land for construction cannot be considered, for purposes of incidence of Stamp Duty, as property with housing allocation.

h) The respondent contends that land for construction has the legal nature of property with housing allocation, which would derive from no. 2 of article 45 of the CIMI[11], specifically from the expression "value of authorized buildings," which permits in its valuation the application of the allocation coefficient provided for in article 41 of the CIMI. It cites Judgment 04950/11 of 14/02/2012 of the TCA[12] South.

i) Item 28 of the TGIS, amended by Law no. 55-A/2012, subjects to this tax urban properties with housing allocation whose VPT, determined in accordance with the CIMI, is equal to or greater than €1.000.000.00, with the transitional regime provided for in article 6 of said Law applying for the year 2012.

j) The CIS[13] remits to the CIMI the regulation of the concept of property and of matters not regulated regarding item 28 of the TGIS (see no. 6 of article 1 and no. 2 of article 67 both of the CIS).

k) Article 6 of the CIMI establishes that urban properties are classified into: residential, commercial, industrial or service, land for construction, and others.

l) No. 2 of that article provides that urban residential properties "are buildings or constructions licensed for such purpose or, in the absence of license, which have such purpose as their destination," and no. 3 provides that land for construction "are those situated within or outside an urban agglomeration for which a license or authorization for subdivision or construction operations has been granted, and also those declared as such in the acquisition title…".

m) From these definitions we can conclude that autonomy exists between urban properties "residential" and urban properties "land for construction".

n) The Stamp Duty legislator, in establishing the taxation of urban properties "with housing allocation," did not specify the concept, and therefore we must, by force of the remission, refer to the CIMI. That Code, as already noted, treats them autonomously with respect to land for construction.

o) The expression "housing allocation" is in no way evident with respect to land for construction, nor could it, as the respondent argues, be understood as an umbrella expression encompassing other categories.

p) We adopt the position advocated in case 49/2013, which states: "The expression 'with housing allocation' suggests, on plain reading, an idea of real and present functionality. It is not possible to extract from the norm in question, by interpretation, that, as alleged in the respondent's reply, the legislator's choice of that expression was intended to encompass 'other realities beyond those identified in article 6, no. 1, subparagraph a), of the CIMI.' Such interpretation has no legal support given the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law. Indeed, if the legislator had intended to include within the scope of taxation realities other than those resulting from the classification set out in article 6 of the CIMI, it would have said so expressly. However, it does not; instead it remits wholesale to the concepts and procedures provided for in said Code. Moreover, the respondent's interpretation, to the effect that the concept of 'housing allocation' derives from the provision of article 45 of the CIMI, cannot be accepted. This article addresses the rules applicable in determining the patrimonial value of land for construction, establishing that this consists of the value of the land on which the building is to be constructed plus adjacent land. In valuing this area, a percentage between 15% and 45% of the value of the authorized or planned buildings is taken into account. According to the respondent, in valuing the authorized or planned buildings on the land in question, the coefficients applicable in determining patrimonial value for tax purposes are used, specifically the allocation coefficient provided for in article 1 of that Code. The respondent concludes that the consideration of such a coefficient, dependent on the type of use provided for the property to be built on the land, will be determinative for purposes of application of Item 28 of the TGIS. This conclusion rests on the premise that the expression 'properties with housing allocation' refers to a classification that overlaps the species provided for in no. 1 of article 6 of the CIMI. However, such conclusion cannot be accepted. [...]. Thus, given the clear distinction in article 6 of the CIMI between urban properties "residential" and "land for construction," these cannot be considered, for purposes of incidence of Stamp Duty, as "properties with housing allocation"."

q) Article 45 of the CIMI is found in Chapter VI – Of the Patrimonial Value of Urban Properties – and establishes criteria for determining the VPT which serve only that purpose, since the concept of properties and their classifications is addressed in Chapter I – Incidence. What article 45 seeks to determine is the VPT of land for construction, which will be influenced by the type of constructions to be carried out; but to conclude from this that we are dealing with an urban property with housing allocation is a considerable leap.

r) We consider that the Judgment of the TCA South cited by the respondent must be understood within the scope of criteria for determining the VPT and not in a different sphere, such as the classification of properties.

s) It should be noted that many current land parcels for construction will remain without any construction due to market difficulties or other factors that will prevent their owners from realizing the planned buildings.

t) The legislator himself recognized that the formulation of item 28 of the TGIS, in the version of Law 55-A/2012, did not include land for construction. Intending its taxation by Stamp Duty, the legislator revisited the TGIS and rewrote item 28 through Law 83-C/2013 of 31 December, now providing therein: "Per residential property or per land for construction…"

u) If any doubt existed as to whether the expression "housing allocation" encompassed land for construction, it has been dissipated. Taxation by Stamp Duty, provided for in item 28 of the TGIS, in the version of Law 55-A/2012, is manifestly illegal.

v) Another issue to be resolved is whether the amount of € 210.08 paid in the PEF ..., instituted due to non-payment during the voluntary payment period (December 2013) of the assessment ... in the amount of € 39 949.30, should be refunded in the event that the illegality of said assessment is declared.

w) Upon declaration of the illegality of the debt and the consequent annulment, the AT is obliged to restore the situation that would exist if the annulled act had not been performed, in accordance with subparagraph b) of no. 1 of article 24 of the RJAT, which is consistent with no. 1 of article 173 of the CPTA[14]. This is the position expressed by Diogo Leite Campos/Benjamim Silva Rodrigues/Jorge Lopes de Sousa in annotation to article 100 of the LGT 2nd edition.

x) However, the amount in question was paid within the scope of a PEF and relates to costs, as verified in the postal notice attached to the proceedings. The tribunal considers that in accordance with no. 2 of article 103 of the LGT, the issue of refund of that amount should be assessed in the fiscal execution proceedings, and therefore no cognizance is taken of this request.

y) Having established the illegality of the Stamp Duty assessment acts imputable to the AT, which carried them out without legal support, and given the proven payment thereof by the applicant, the latter is entitled to the payment of indemnification interest in the precise terms of no. 1 of article 43 of the LGT and article 61 of the CPPT.

IV – JUDGMENT

In view of the foregoing, the tribunal decides as follows:

a) To declare the application for arbitral pronouncement well-founded with the consequent annulment of the assessments contained in the collection documents ... and ..., in the total amount of € 59 923.95, due to violation of subparagraph d) of no. 1 of article 6 of Law no. 55-A/2012 of 29 October in the first case, and because both are manifestly illegal by falling outside the scope of item 28 of the TGIS, amended by Law no. 55-A/2012 already mentioned.

b) Not to take cognizance of the request for condemnation to refund the amount of costs in the sum of € 210.08.

c) To declare the obligation of the AT to reimburse the applicant for the Stamp Duty unduly paid in the amount of € 59 923.95, plus indemnification interest calculated at the legal rate, from the date when the tax payments were made and the date on which such reimbursement takes place.

d) To fix the costs, under the authority of no. 4 of article 22 of the RJAT, in the amount of € 2 448.00, in accordance with the provisions of table I referred to in article 4 of the RCPAT, with € 2 439.45 charged to the respondent and € 8.55 charged to the applicant (99.65% and 0.34% respectively).

Notify.

Lisbon, 05 November 2014

Text prepared by computer in accordance with article 131, no. 5 of the CPC[15], applicable by remission of article 29, no. 1, subparagraph e) of the RJAT, with blank lines and revised by the tribunal.

The wording of this judgment is governed by spelling prior to the spelling agreement.

The arbitrators,

(Jorge Lopes de Sousa,
substituting for Jorge Lino Ribeiro Alves de Sousa
(President)

Maria Celeste Cardona
(member)

Arlindo José Francisco (rapporteur)
(member)

[1] Acronym for Legal Regime of Arbitration in Tax Matters
[2] Acronym for Tax and Customs Authority
[3] Acronym for Stamp Duty
[4] Acronym for Administrative Arbitration Centre
[5] Acronym for General Table of Stamp Duty
[6] Acronym for Tax Code of Procedural Process
[7] Acronym for Costs Regulation in Tax Arbitration Proceedings
[8] Acronym for Patrimonial Value for Tax Purposes
[9] Acronym for Fiscal Execution Proceedings
[10] Acronym for General Tax Law
[11] Acronym for Municipal Property Tax Code
[12] Acronym for Central Administrative Court
[13] Acronym for Stamp Duty Code
[14] Acronym for Code of Procedure in Administrative Courts
[15] Acronym for Civil Procedure Code

Frequently Asked Questions

Automatically Created

Does Verba 28 of the General Stamp Tax Table (TGIS) apply to building land (terrenos para construção) in Portugal?
Verba 28 of the TGIS, introduced by Law 55-A/2012, applies to properties with a taxable patrimonial value (VPT) equal to or exceeding €1,000,000. The central dispute in this case is whether building land (terrenos para construção) falls within Verba 28's scope. The taxpayer argued that building land should not be subject to this provision, while the Tax Authority contended that when a housing allocation coefficient is applied in determining the land's VPT, the property acquires housing allocation characteristics and becomes subject to Verba 28. The resolution depends on interpreting whether the legal nature of 'building land' can be classified as property with housing allocation for Stamp Tax purposes under the amended TGIS.
What are the grounds for challenging a Stamp Tax (Imposto do Selo) assessment on high-value property before CAAD?
Grounds for challenging Stamp Tax assessments on high-value property before CAAD include: (1) substantive illegality - arguing that Verba 28 does not apply to the specific property type (e.g., building land versus completed residential property); (2) procedural illegality - claiming the assessment right expired due to violation of statute of limitations under Law 55-A/2012 Article 6(1)(d); (3) incorrect calculation of taxable value or applicable rate; and (4) claims for refund of costs paid during enforcement proceedings if the assessment is deemed illegal. Taxpayers must file an arbitration request under RJAT Article 2(1)(a) and Article 10(1)(a), specifying the contested acts and legal grounds, with the proceedings value determined under CPPT Article 97-A affecting tribunal composition.
Can the right to assess Stamp Tax under Verba 28 TGIS expire due to statute of limitations (caducidade)?
Yes, the right to assess Stamp Tax under Verba 28 can expire due to statute of limitations (caducidade). In this case, the taxpayer specifically invoked expiry of the assessment right under Law 55-A/2012 Article 6(1)(d) regarding collection document issued in 2013. Portuguese tax law establishes time limits within which the Tax Authority must complete assessments, and failure to comply renders subsequent assessments illegal. The tribunal must determine whether the 17 July 2013 assessment date complied with applicable deadlines. This issue is particularly relevant for Stamp Tax on high-value properties introduced by Law 55-A/2012, where transitional provisions established specific assessment timelines. If caducidade is established, the assessment must be annulled regardless of its substantive merits.
How is the taxable value determined for Stamp Tax on urban building land in Portugal?
The taxable value for Stamp Tax on urban building land is determined by the taxable patrimonial value (VPT - valor patrimonial tributável) registered for property tax purposes. In this case, the VPT of €3,994,930 was calculated using coefficients applied to the land, including a housing allocation coefficient. The VPT serves as the basis for calculating Stamp Tax under Verba 28, with rates of 0.50% (for certain cases under Law 55-A/2012 Article 6(1)(f)(i)) and 1.00% (standard rate under Verba 28.1 TGIS) applied to properties valued at €1,000,000 or more. The controversy centers on whether applying a housing allocation coefficient in calculating the VPT of building land makes that land subject to Verba 28, or whether only completed residential properties fall within the provision's scope.
What procedural rules govern CAAD arbitral tribunal composition for tax disputes under the RJAT?
CAAD arbitral tribunal composition is governed by RJAT Article 5, which establishes rules based on claim value and taxpayer choice. A singular arbitrator decides cases when: (1) the claim value does not exceed twice the Central Administrative Court's jurisdictional threshold (€60,000), and (2) the taxpayer does not exercise the option to appoint an arbitrator. A three-member panel is required when either condition is not met. In this case, despite the taxpayer not appointing an arbitrator, the claim value of €60,134.03 exceeded the €60,000 threshold, requiring a three-member panel. The Tax Authority challenged this, arguing the value should be €59,923.95 (excluding €210.08 in enforcement costs per CPPT Article 97-A), but the tribunal ruled it was correctly constituted. The panel comprised a President and two members appointed by the Deontological Council President under RJAT Article 6(2).