Process: 27/2015-T

Date: June 11, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitral Process 27/2015-T addresses whether Stamp Duty under Item 28.1 of the General Stamp Duty Schedule (TGIS) applies to land for construction valued above €1,000,000. Law 55-A/2012 of October 29, 2012 introduced a 1% annual stamp duty on urban properties with "residential use" (afetação habitacional) with taxable patrimonial value equal to or exceeding €1,000,000. The taxpayer challenged a €3,398.16 assessment for 2013 on urban property classified as "land for construction" in Porto municipality, arguing such land cannot have residential use by definition. The central legal issue concerns statutory interpretation: whether "properties with residential use" includes undeveloped land authorized for construction or exclusively applies to completed residential buildings. The taxpayer contended that Article 6 of the Property Tax Code (CIMI) establishes clear legal distinctions between residential properties (subsection a) and land for construction (subsection c), creating separate categories with different valuation rules and tax treatment. Land for construction, defined in CIMI Article 6(3) as plots with granted construction licenses or declared as such in acquisition titles, represents transitional property that ceases to exist once construction is completed. The taxpayer argued that residential use requires an actual building used for housing, not vacant land with mere construction potential, and that extending stamp duty to land for construction violates statutory interpretation principles under Civil Code Article 9 and General Tax Law Article 11. The taxpayer sought declaration of illegality, annulment of the assessment, and refund of €3,398.16 plus compensatory interest. The case raises fundamental questions about whether administrative authorities can expand tax incidence beyond legislative scope and whether future potentiality establishes current tax liability under Item 28.1 TGIS targeting high-value residential properties.

Full Decision

CAAD – Tax Arbitration Center

ARBITRAL PROCEEDING No. 27/2015-T

Subject: Stamp Duty. Item 28.1 of the General Stamp Duty Schedule.

ARBITRAL DECISION

  1. REPORT

A, a legal person with Tax Identification Number …, with registered office at …, hereby, pursuant to the combined provisions of Articles 2, 5 no. 2, 6 no. 1 and 10 and following of Decree-Law No. 10/2011 of 20 January, which approved the Legal Framework for Arbitration in Tax Matters (RJAT), in combination with Articles 99, subsection a) and 102, no. 1, subsection f) and no. 2, of the Tax Procedure and Process Code (CPPT), submits a request for constitution of the arbitral tribunal against the Tax and Customs Authority (hereinafter, AT or Respondent), with a view to the declaration of illegality and consequent annulment of the Stamp Duty Assessment Decision No. 2014 ...7, relating to the urban property of the type "land for construction", registered under Article ... of the Union of parishes of ..., municipality of Porto, in the amount of € 3,398.16.

Cumulatively, the Applicant requests the condemnation of the Respondent to refund the amount unduly paid, plus indemnity interest on the said amount.

The arguments put forward by the Applicant are, briefly, as follows:

a) The Stamp Duty Assessment No. 2014 ...7, effected on the basis of Article 1 of the Stamp Duty Code, combined with item no. 28 of the respective General Schedule and with Article 6 of Law No. 55-A/2012 of 29 October, relates to the year 2013 and was duly notified to the Applicant;

b) The taxation provided for in the cited rules has as its object urban properties "with residential use", from which are excluded "land for construction" which, by nature, do not have such aptitude;

c) The classification of land for construction as "properties with residential use" is illegal, by violation of the provisions of Articles 6, 41 and 45 of the Property Tax Code;

d) Law 55-A/2012 of 29 October added item no. 28 to the General Schedule of Stamp Duty (TGIS), subjecting to this tax urban properties whose taxpaying patrimonial value contained in the register, in accordance with the Property Tax Code, is equal to or greater than € 1,000,000.00;

e) (…) the tax is assessed annually by the AT (Article 23, no. 7), at the rate of 1% per urban property with residential use, the taxpayers and debtors of the tax being the owners, usufructuaries or surface rights holders on 31 December of the year to which the tax relates;

f) With respect to the assessment and payment of the tax in question, the corresponding rules of the Property Tax Code apply, by express reference of Articles 4, no. 6, 5, no. 1, subsection u), 23, no. 7, 44, no. 5 and 49, no. 3, of the Stamp Duty Code and, in general, by reference of Article 67, no. 2, of the same Code, the provisions of the Property Tax Code apply subsidiarily to matters not specially regulated;

g) The relevant concept of urban property is that contained in Article 2 of the Property Tax Code (…); a plot of land for construction is an urban property, since it meets the requirements comprising the concept of property – physical reality, patrimonial nature and economic value;

h) (…) in accordance with no. 1 of Article 6 of the Property Tax Code, urban properties are divided into a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others – a distinction which assumes particular relevance for the application of the rules for determining the respective taxpaying patrimonial value;

i) (…) "land for construction" are plots located within or outside an urban settlement, for which a licence or authorization has been granted, or for which a favorable prior notification of subdivision or construction operation has been admitted, and also those so declared in the acquisition title, excluding plots where the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use planning plans, are intended for public spaces, infrastructure or facilities (Article 6, no. 3, of the Property Tax Code);

j) (…) The concept of land for construction (…) is based on presuppositions of an objective and subjective nature: regardless of whether they are located within or outside an urban settlement, all plots for which a licence or authorization for subdivision or construction has been granted, or in relation to which a favorable prior notification or favorable prior information has been issued, are considered land for construction;

k) (…) The verification of any of the elements contained in the concept of land for construction determines, immediately, a change in its previous classification (…), determining the consequent alteration of the property register entry (Articles 13, no. 1, subsection b) and 37, of the Property Tax Code);

l) This alteration involves not only the description of the new property, but also its valuation;

m) Once the building works are completed, the constructed property is registered in the register, and its taxpaying patrimonial value is determined in accordance with the rules provided for in Articles 38 and following of the Property Tax Code;

n) (…) The property classified as land for construction ceases to exist autonomously, with the corresponding register entry being eliminated from the register (Article 106, subsection h), of the Property Tax Code);

o) For the purposes of Item 28.1 of the General Stamp Duty Schedule, the legislator considers, as a relevant element of tax capacity, properties of high value, held for residential purposes;

p) Not establishing the specific concept of what should be understood as property with residential use, the legislator refers to the rules of the Property Tax Code;

q) With respect to the classification of urban properties, Article 6, no. 1, of the Property Tax Code establishes a clear distinction between "residential properties" and "land for construction";

r) (…) The granting of a licence for residential use, by the competent entity, or the normal use of a property whose purpose is residential use, refer to built properties;

s) A plot of land for construction, regardless of the type or purpose of the building that may be erected on it, does not satisfy, by itself, any condition to be defined as property with residential use;

t) Since the tax incidence rule of Stamp Duty refers to urban properties with "residential use", without any specific concept being established for this purpose, it cannot be extracted therefrom that the same contains a future potentiality, inherent to a different property that may be built on the land;

u) (…) from the rule in question it cannot be extracted, by interpretation, that (…) the legislator's choice for that expression aims at integrating "other realities beyond those indicated in Article 6, no. 1, subsection a), of the Property Tax Code";

v) Such interpretation has no legal support, in light of the principles contained in Articles 9 of the Civil Code and 11 of the General Tax Law;

w) (…) if the legislator intended to encompass within the scope of the tax incidence other realities than those resulting from the classification contained in Article 6 of the Property Tax Code, it would have said so expressly; but it did not, instead referring en bloc to the concepts and procedures provided for in the Property Tax Code.

The Applicant concludes, in the sequence of the foregoing, by formulating the requests for declaration of illegality of the Stamp Duty Assessment Decision – Item 28.1 of the General Stamp Duty Schedule, of the year 2013, relating to the identified property, its consequent annulment and the condemnation of the AT to refund the amount of € 3,398.16 unduly paid in relation to that assessment, plus the indemnity interest due.

Notified in accordance with Article 17 of the Legal Framework for Arbitration in Tax Matters, the Tax and Customs Authority timely filed a response, as well as a request in which it proposed dispensing with the holding of the meeting referred to in Article 18 of the Legal Framework for Arbitration in Tax Matters, since the verification of no exception had arisen which would prevent the consideration of the merits of the disputed issue, and documentary evidence offered by the Applicant was sufficient.

In its response, stating that it considers the Applicant to be without merit, the Respondent defends that the assessment decision subject to the present arbitration request should be maintained, as it constitutes a correct interpretation of Item 28 of the General Stamp Duty Schedule, with the following grounds:

a) Law No. 55-A/2012 of 29 October 2012 amended Article 1 of the Stamp Duty Code and added item 28 to the General Stamp Duty Schedule. With this legislative amendment, Stamp Duty would henceforth also be levied on the ownership, usufruct or surface rights of urban properties whose taxpaying patrimonial value contained in the register, in accordance with the Property Tax Code, is equal to or greater than €1,000,000.00;

b) Stamp Duty would thus be levied on all acts, contracts, documents, titles, papers and other legal facts or situations provided for in the general schedule, including gratuitous transfers of assets;

c) In the absence of any legal definition of the concepts of urban property, land for construction and residential use in the context of Stamp Duty, recourse must be had to the provisions of the Property Tax Code, in accordance with Article 67, no. 2 of the Stamp Duty Code, as amended by Law No. 55-A/2012 of 29 October, according to which to matters not regulated in this Code, relating to Item 28 of the General Stamp Duty Schedule, the provisions of the Property Tax Code apply subsidiarily;

d) No. 1 of Article 6 of the Property Tax Code provides on the types of existing urban properties, integrating within this concept land for construction, that is, "plots located within or outside an urban settlement, for which a licence or authorization has been granted, a favorable prior notification admitted or favorable prior information issued of a subdivision or construction operation, and also those so declared in the acquisition title, except for plots where the competent entities prohibit any of those operations…";

e) The notion of use of the urban property finds its basis in the part relating to the valuation of properties, since valuation (purpose) incorporates value to the property, constituting a fact of distinction determining (coefficient) for purposes of valuation;

f) As results from the expression "…value of authorized buildings", contained in Article 45, no. 2 of the Property Tax Code, the legislator chose to determine the application of the methodology for valuation of properties in general, to the valuation of land for construction, and accordingly the use coefficient provided for in Article 41 of the Property Tax Code is applicable to them;

g) In this sense, see the decision rendered in Decision No. 04950/11 of 14/02/2012 of the Administrative Court of the South: "The valuation regime for land for construction is enshrined in Article 45 of the Property Tax Code. The valuation model is the same as for built buildings, although starting from the building to be constructed, taking as a basis the respective project, the value of land for construction corresponds, fundamentally, to a legal expectancy, embodied in a right to construct thereon a property with certain characteristics and a certain value. It will be this expectancy of production of wealth materialized in a property to be built that increases the value of the patrimony and the wealth of the owner of land for construction. For that reason, the greater the value of the property to be built, the greater the value of the land for construction that underlies it (cf. Article 6, no. 3 of the Property Tax Code).

"In conclusion, in the valuation of land for construction the legislator intended that the valuation methodology for urban properties in general be applied, and thus all coefficients should be taken into account, above identified, namely the use coefficient provided for in Article 41 of the Property Tax Code, further resulting such legal requirement from no. 2 of Article 45 of the Property Tax Code, by referring to the value of buildings authorized or provided for on the same land for construction";

h) Thus, for purposes of determining the taxpaying patrimonial value of land for construction the application of the use coefficient is clear in the context of valuation and the application of item 28 of the General Stamp Duty Schedule, taking into account that:

a. In the application of the law to concrete cases, the exact meaning and scope of the rule must be determined, so that the rule contained therein is revealed (Article 9 of the Civil Code, ex vi Article 11 of the General Tax Law);

b. Article 67, no. 2 of the Stamp Duty Code mandates the subsidiary application of the Property Tax Code;

c. The use of the property (aptitude or purpose) is a coefficient that contributes to the valuation and determination of the taxpaying patrimonial value of land for construction;

d. Item 28 of the General Stamp Duty Schedule refers to the expression "properties with residential use", calling for a classification that overlaps the types provided for in no. 1 of Article 6 of the Property Tax Code;

i) The AT considers that the concept of "properties with residential use", for purposes of the provision in item 28 of the General Stamp Duty Schedule, comprises both built properties and land for construction, starting from the literal element of the rule, since the legislator does not refer to "properties intended for residence", having opted for the notion of "residential use", a broader expression, whose meaning must be found in the need to integrate other realities beyond those identified in Article 6, no. 1 subsection a) of the Property Tax Code;

j) The mere constitution of a right of potential construction immediately increases the value of the property in question, hence the rule contained in Article 45 of the Property Tax Code which mandates separating its parts from the land – that where the building to be constructed will be implanted and the area of free land. Once the amount of the first part is determined, the value determined is reduced to a percentage between 15% and 45% as provided for in no. 2 of the said rule, by reason of the construction not yet being effected;

k) The value of the land adjacent to the implantation area is determined in the same terms as the value of the area of excess land is determined for any urban property;

l) It is noted that the legal framework for urbanization and building has as a presupposition buildings already constructed, [but] the licence for the carrying out of urbanization operations must contain, among other elements, the number of lots and the indication of the area of location, purpose, implantation area, building area, number of floors of number of units of each of the lots, with specification of units intended for dwellings at controlled costs, when foreseen, in accordance with subsection a) of Article 77 of the Legal Framework for Urbanization and Building;

m) The same Article 77 of the Legal Framework for Urbanization and Building contains mandatory specifications for licences for subdivision operations or urbanization works, and for building works, as well as Municipal Master Plans establish the strategy of municipal development, the municipal policy for land use planning and urbanism and other urban policies (…) of spatial organization of municipal territory;

n) In these terms, long before actual building construction, it is possible to determine and establish the use of the land for construction;

o) The AT considers that the provision of item 28 of the General Stamp Duty Schedule does not constitute a violation of any constitutional command, [as] it is levied on the ownership, usufruct or surface rights of urban properties with residential use, whose taxpaying patrimonial value contained in the register, in accordance with the Property Tax Code, is equal to or greater than € 1,000,000.00, that is, it is levied on the value of the property, being a general and abstract rule, applicable in the same manner to all cases in which the facts and legal presuppositions are verified;

p) (…) The different aptitude of properties (residence, services, commerce) sustains the different treatment, having constituted a choice of the legislator, for political and economic reasons, to exclude from the incidence of Stamp Duty properties intended for purposes other than residential;

q) (…) the choice for this mechanism of revenue collection is found to be legitimate, which would only be censurable, in light of the principle of proportionality, if it resulted in being manifestly indefensible;

r) (…) In such terms, (…) the request for declaration of illegality and consequent annulment of the disputed assessment should be judged unmeritorious, absolving the AT of the action.

The arbitration request was filed with the Tax Arbitration Center on 16 January 2015, was accepted by the Honorable President of the Tax Arbitration Center and automatically notified to the AT on 19 January 2015.

The Applicant chose not to appoint an arbitrator, and therefore, pursuant to Article 6, no. 1 of the Legal Framework for Arbitration in Tax Matters, the undersigned was appointed by the Honorable President of the Deontological Council of the Tax Arbitration Center to comprise the present singular arbitral tribunal, a responsibility which she accepted in accordance with the legal provisions.

The singular arbitral tribunal was duly constituted on 25 March 2015.

The parties have legal personality and capacity, are legitimate and are duly represented (Articles 4 and 10, no. 2 of the Legal Framework for Arbitration in Tax Matters and Article 1 of Ordinance No. 112-A/2011 of 22 March).

The proceeding does not suffer from defects and no exceptions were raised.

By arbitral order of 12 May 2015, duly notified to the parties, the holding of the meeting referred to in Article 18 of the Legal Framework for Arbitration in Tax Matters was dispensed with, as well as the hearing of the witness listed by the Applicant, and it was determined that the proceeding continue with successive written submissions, for 10 days, beginning with the submissions of the Applicant.

In the same order the Applicant was invited to, if it so saw fit and within the deadline for submissions, perfect the initial petition, towards better identification of the impugned act: (1). Whether the Stamp Duty Assessment Decision of the year 2013, issued on 18 March 2014, for the amount of € 10,194.50, or (2). Whether only the third installment of the aforementioned Stamp Duty Assessment, whose voluntary payment deadline elapsed in November 2014, in the amount of € 3,398.16, in accordance with the collection note relating to the third installment, a copy of which is attached to the initial petition. The date of 11 June 2015 was also set for delivery of the arbitral decision.

In a request dated 12 May 2015, the Applicant came to clarify that the act subject to the arbitration request was only the third installment of the Stamp Duty Assessment of the year 2013, effected on 18 March 2015, in the amount of € 3,398.16, with a voluntary payment deadline in November 2014, "it being certain that the illegality and consequent annulment of the Stamp Duty Assessment Decision No. 2014 ...5, in the amount of € 3,398.18 and 2014 ...6, in the amount of € 3,398.16, corresponding to the installments due in April and July 2014, were already declared in proceeding 599/2014-T, which was heard by the Tax Arbitration Center".

Notified of the request identified in the preceding paragraph, the AT did not pronounce on its contents.

The parties did not make submissions.

2 FACTS

2.1 Facts considered established:

2.1.1 In accordance with the urban property record issued by the Head of the Tax Service of Porto 2 on 30 July 2014, the Applicant was, at that date, the owner of the urban property registered in the property register of the Union of parishes of ..., under Article ..., classified as "land for construction";

2.1.2 The said urban property was registered in the register following the filing of the standard form 1 of Property Tax Declaration No. ..., on 10 April 2013, and was assigned the taxpaying patrimonial value of € 1,019,450.00 (valuation sheet No. 9588693 of 21 May 2013);

2.1.3 The Stamp Duty Assessment of the year 2013 was issued by the AT on 18 March 2014, in accordance with Item 28.1 of the General Stamp Duty Schedule, at the rate of 1%, on the taxpaying patrimonial value of 1,019,450.00, for the amount of € 10,194.50;

2.1.4 The arbitration request relates exclusively to the third installment of the tax assessed on 18 March 2014, in the amount of € 3,398.16, with voluntary payment in November 2014, in accordance with collection note No. 2014 ...7, a copy of which is attached to the court file;

2.1.5 The said collection note was paid on 30 November 2014;

2.1.6 The 1st and 2nd installments of the Stamp Duty Assessment of the year 2013, relating to the property identified above, were annulled in the context of proceeding No. 599/2014-T, which was heard by the Tax Arbitration Center and whose decision of 24 March 2015 is published at https://caad.org.pt/tributario/decisoes/decisao.php?s_processo=599%2F2014-T&s_data_ini=&s_data_fim=&s_resumo=&s_artigos=&s_texto=&id=644.

2.2 Grounds for the facts established

The tribunal's conviction as to the facts established resulted from the analysis of the documentary evidence attached to the arbitration request, as well as the arbitral decision invoked by the Applicant, identified above.

2.3 Facts not established

There are no material facts for the decision of the case that should be considered as not established.

3 LAW – GROUNDS

In the decision, the judge must pronounce on all questions that must be addressed, refraining from pronouncing on questions he should not know about (final segment of no. 1 of Article 125 of the Tax Procedure and Process Code, applicable subsidiarily to the arbitral tax proceeding, by virtue of the provision of Article 29, no. 1, subsection a), of the Legal Framework for Arbitration in Tax Matters).

The questions on which the tribunal's jurisdiction is exercised are, in accordance with no. 2 of Article 608 of the Code of Civil Procedure (CPC), applicable subsidiarily to the arbitral proceeding, by reference of Article 29, no. 1, subsection e), of the Legal Framework for Arbitration in Tax Matters, "the questions which the parties have submitted for its consideration, except those whose solution is prejudiced by the solution given to others; it can only concern itself with the questions raised by the parties, unless the law permits or requires it to have knowledge of others."

Amongst the questions of official knowledge are "the procedural questions that may result in absolution of the instance", which the decision must address as a priority (Article 608, no. 1, of the CPC).

Such procedural questions are, in tax proceedings, those enumerated in no. 1 of Article 98 of the Tax Procedure and Process Code, which "may be officially known or raised at any time, until the final decision becomes res judicata", in accordance with no. 2 of the same article, in addition to those contained in Article 89 of the Code of Administrative Court Procedure (CPTA), subsidiarily applicable to the arbitral tax proceeding, by virtue of the provision of Article 29, no. 1, subsection c), of the Legal Framework for Arbitration in Tax Matters.

Given that the Applicant expressly admits that the Stamp Duty Assessment, effected under item 28.1 of the General Stamp Duty Schedule, is annual ("the tax being assessed annually by the AT with respect to each urban property" – cf. page 4 of 13 of the initial petition), it will be necessary to question whether it is possible to annul only one of the installments that comprise the tax assessment or whether, even if that annulment is possible, it falls within the jurisdiction conferred on arbitral tribunals by the Legal Framework for Arbitration in Tax Matters.

3.1. Of the (in)amenability to independent challenge of an installment of a Stamp Duty Assessment (Item 28.1 of the General Stamp Duty Schedule):

If it can be accepted that one of the installments of a Stamp Duty Assessment (under item 28.1 of the General Stamp Duty Schedule) may be challenged, as a partial challenge to the tax assessment decision, it must then be ascertained whether that assessment constitutes a divisible act.

As to the divisibility of the tax assessment decision and the consequent possibility of its partial annulment, case law has held that the assessment is a divisible act, both by nature, as it relates to the assessment of an obligation of a pecuniary nature, and by legal definition, since Article 100 of the General Tax Law obligates "to the immediate and full reconstitution of the situation that would exist if the illegality had not been committed, including the payment of indemnity interest, in the terms and conditions provided for in the law".

However, for partial annulment of the tax act to exist, it is necessary that the illegality affects it only in part (cf., in this sense, the Decision of the Plenary of the Tax Litigation Section of the Supreme Administrative Court, rendered on 10 April 2013 in appeal No. 0298/12, available at http://www.dgsi.pt, in whose summary it reads: "Summary: I - The tax act, as a divisible act, both by nature and by legal definition, is susceptible to partial annulment. II - The criterion for determining whether the act should be totally or partially annulled is to determine whether the illegality affects the tax act as a whole, in which case the act should be wholly annulled or only in part, in which case partial annulment is justified." (Emphasis ours).

Cases of divisibility of the tax act are, namely, those in which there is a complex tax fact, in which there was an excess in the quantification of the taxable matter and not, as in the case of these proceedings, in which such quantification occurs autonomously, through the valuation act, and there is no excess in that quantification, from which the partial illegality of the assessment serving as its basis could result.

Thus, in cases in which the tax act is divisible, "if partial annulment of a tax act is requested, the tribunal may not, in principle, annul it in full" [1]; if full annulment is requested and the act is only partially annullable, the request will be partially unmeritorious.

However, in accordance with the combined provisions of Articles 120 and 113, no. 1, both of the Property Tax Code, applicable by reference of no. 7 of Article 23 of the Stamp Duty Code, in the form given to it by Law No. 55-A/2012 of 29 October, it results that, in the situations to which item 28 of the General Stamp Duty Schedule refers, an annual assessment is made, with payment in installments being nothing more than a collection technique for the tax and not a partial payment thereof.

On the question of the indivisibility of a Stamp Duty Assessment (item 28 of the General Stamp Duty Schedule), the Tax Arbitration Center has already pronounced itself in proceeding No. 205/2013-T (available at https://caad.org.pt/tributario/decisoes/ ), in accordance with the extract that is transcribed:

"11. The Respondent also impugns the value of the case considering it to be 8,940.94€ and not 28,822.80€, as indicated by the applicant.

The applicant maintains that "the act impugned in this proceeding is the assessment decision with no. ...of 22/02/2013, relating to the first installment of stamp duty of the year 2012, in the amount of € 8,940.94, attached by the applicant to the arbitration request as Doc. 1".

It so happens, however, that the value of the assessment No. ... of 22/02/2013, as appears from the said document, is in fact € 26,822.00 and not € 8,940.94.

Note that there is no assessment of € 8,940.94. This amount is only the first installment of an assessment that was made from the outset and in the amount indicated by the Applicant. From the fact that the value of the assessment can be paid in various installments, it does not follow that there are three assessments. It is, differently, an assessment that can be paid in various installments (emphasis ours), with the passive subject not being prevented from challenging the same due to the fact that only the payment deadline for one of them has elapsed.".

The installments of payment of a Stamp Duty Assessment, in accordance with Item 28 of the General Stamp Duty Schedule, are not independently reviewable, as they originate in a single annual obligation, in accordance with the teaching of Braz Teixeira: "It is necessary not to confuse periodic installments, which, although effected by successive acts, at different moments, originate from the same obligation and constitute the various portions of a single installment that was divided, with installments that must be effected periodically, not due to a division of the global installment, but rather to the birth, also periodic, of new obligations, by the permanence of the factual presuppositions of taxation." [2] (emphasis ours).

3.2 Of the (in)jurisdiction of the arbitral tribunal for the annulment of an installment of a Stamp Duty Assessment (item 28.1 of the General Stamp Duty Schedule):

The arbitral tax proceeding was conceived as an alternative form of jurisdictional resolution of disputes in tax matters, so as to constitute an alternative procedural means to judicial challenge proceedings.

The jurisdiction of arbitral tribunals in tax matters operating with the Tax Arbitration Center is fixed by Articles 2, no. 1, and 10, no. 1 of the Legal Framework for Arbitration in Tax Matters, with Article 2, no. 1, subsection a), of the Legal Framework for Arbitration in Tax Matters stating that such jurisdiction comprises the consideration of claims relating to the declaration of illegality of assessment decisions, self-assessments, withholdings at source and payments on account, whilst subsection a) of no. 1 of its Article 10 establishes the 90-day deadline for filing the arbitration request, "counted from the facts provided for in nos. 1 and 2 of Article 102 of the Tax Procedure and Process Code, as to acts susceptible to independent challenge and also from the notification of the decision or the expiry of the legal deadline for decision of the hierarchical appeal".

It is concluded, therefore, that, like the judicial challenge proceeding, the arbitral tax proceeding has as its object, immediate or mediate, the tax assessment decision, as the act of determination of the amount of tax payable (collection), by application of a rate to the taxable matter.

Now, in cases where the tax must be paid in installments, the assessment is notified to the taxpayer together with the notification for payment of each one of the installments, being able to be challenged only in its entirety and not installment by installment.

On the lack of jurisdiction of the arbitral tribunal to annul an installment of a Stamp Duty Assessment, the Collective Arbitral Tribunal constituted in proceeding No. 442/2014-T recently pronounced itself, of which Judge Counselor Jorge Lopes de Sousa was President Arbitrator, in accordance with the excerpt which, with due respect, is transcribed (decision available at https://caad.org.pt/tributario/decisoes/decisao.php?s_processo=442%2F2014-T&s_data_ini=&s_data_fim=&s_resumo=&s_artigos=&s_texto=&id=625):

" (…) the Applicant is correct in arguing that the value of the case should be that of the assessments whose declaration of illegality it requests and not the value of the 1st installment of each of the properties referred to, since it is the illegality of the annual assessments that the Applicant seeks.

Moreover, the jurisdiction of the arbitral tribunals operating in the Tax Arbitration Center covers requests for declaration of illegality of assessment decisions and not the installments through which collection of the amounts assessed is made." (emphasis ours).

4 DECISION

On the basis of the facts and legal grounds set forth above, it is decided to declare the lack of jurisdiction of this Singular Arbitral Tribunal for consideration of the requests formulated by the Applicant, which prevents the continuation of the proceeding, as well as the consideration of the merits of the case, absolving the Tax and Customs Authority of the action.

VALUE OF THE CASE: In accordance with the provisions of Article 306, nos. 1 and 2 of the Code of Civil Procedure, 97-A, no. 1, subsection a) of the Tax Procedure and Process Code and 3, no. 2 of the Regulation of Costs in Arbitral Tax Proceedings, the value of € 3,398.16 (three thousand, three hundred and ninety-eight euros and sixteen cents) is fixed to the case.

COSTS: Calculated in accordance with Article 4 of the Regulation of Costs in Arbitral Tax Proceedings and Table I thereto, in the amount of € 612.00, to be borne by the Applicant.

Lisbon, 11 June 2015.

The Arbitrator,

/Mariana Vargas/

Text prepared by computer, in accordance with no. 5 of Article 131 of the Code of Civil Procedure, applicable by reference of subsection e) of no. 1 of Article 29 of Decree-Law No. 10/2011 of 20 January.

The drafting of this decision is governed by the 1990 orthographic agreement.

[1] SOUSA, Jorge Lopes de, "Tax Procedure and Process Code – annotated and commented" Volume II, 6th Edition, Áreas Editora, 2011, page 319.

[2] TEIXEIRA, António Braz, "Principles of Fiscal Law", Vol. I, 3rd Edition, Almedina, Coimbra, 1995, pages 243 and 244.

Frequently Asked Questions

Automatically Created

Does Stamp Tax under Verba 28.1 of the TGIS apply to building land (terrenos para construção) valued over €1,000,000?
Based on the taxpayer's arguments in Process 27/2015-T, Stamp Tax under Item 28.1 of the TGIS should not apply to land for construction (terrenos para construção), even if valued above €1,000,000. The legal framework established by Law 55-A/2012 requires properties to have "residential use" (afetação habitacional). Article 6 of the Property Tax Code (CIMI) creates distinct categories: residential properties (subsection a) and land for construction (subsection c). Land for construction, as undeveloped land with construction authorization, cannot by its nature have residential use since it lacks any building or housing occupation. The taxpayer argued that residential use requires an actual constructed property used for housing purposes, not mere construction potential. The Stamp Duty targets high-value properties held for residential purposes based on actual tax capacity, not vacant land. If the legislator intended to include land for construction within the tax incidence, it would have stated so explicitly rather than using the specific term "residential use" which references CIMI's clear categorical distinctions.
What is the legal distinction between urban properties with housing allocation and building land for Stamp Tax purposes?
The fundamental legal distinction lies in CIMI Article 6, which classifies urban properties into separate categories with different legal characteristics and tax treatment. Residential properties under Article 6(1)(a) are completed buildings used for housing purposes, characterized by residential licenses or actual housing occupation. Land for construction under Article 6(1)(c) and Article 6(3) comprises plots with granted licenses/authorizations for subdivision or construction operations, or declared as such in acquisition titles, excluding plots in protected or public-use areas. This distinction creates significant legal consequences: different valuation methodologies apply under CIMI Articles 38 onwards (Article 41 for residential properties, Article 45 for land for construction), different registry requirements under Articles 13(1)(b) and 37, and different property life cycles. Land for construction represents a transitional legal category that ceases to exist as an autonomous property once construction is completed, with the registry entry eliminated per Article 106(h). For Stamp Tax purposes under Item 28.1 TGIS, "residential use" requires an actual property capable of housing occupation, not undeveloped land with mere construction authorization or potential.
How did CAAD Process 27/2015-T interpret the scope of Lei 55-A/2012 regarding Stamp Tax on high-value properties?
While the complete arbitral decision is not provided in the excerpt, Process 27/2015-T presented comprehensive arguments challenging the Tax Authority's interpretation that Law 55-A/2012 applies to land for construction. The taxpayer argued that the law targets properties of high value held for residential purposes, reflecting tax capacity based on actual housing use rather than potential future use. The interpretation required examining CIMI provisions, which Law 55-A/2012 expressly incorporates by reference. The taxpayer contended that "urban properties with residential use" means completed residential buildings, not land authorized for construction, based on the clear legislative distinction in CIMI Article 6 between residential properties and land for construction. The case challenged whether administrative authorities could expand tax incidence beyond the statute's literal scope to include properties that by definition cannot have residential use. The taxpayer argued this extension violates statutory interpretation principles under Civil Code Article 9 and General Tax Law Article 11, which prohibit analogical extension of tax incidence rules. The arbitral tribunal needed to determine whether construction potential on vacant land could be equated with actual residential use for Stamp Duty purposes.
Can taxpayers claim a refund with compensatory interest after an illegal Stamp Tax assessment on building land?
Yes, taxpayers can claim refunds with compensatory interest (juros indemnizatórios) after illegal Stamp Tax assessments on building land, as demonstrated in Process 27/2015-T. The taxpayer cumulatively requested: (1) declaration of illegality of the Stamp Duty assessment, (2) consequent annulment, and (3) condemnation of the Tax Authority to refund €3,398.16 unduly paid plus compensatory interest on said amount. This legal framework derives from combined provisions of CPPT Articles 99(a) and 102(1)(f) and (2), which grant arbitral tribunals jurisdiction to annul illegal tax acts and order refunds with interest. The Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011) provides the procedural basis for such claims. Compensatory interest serves to compensate taxpayers for financial loss caused by unlawful tax collection, recognizing that the State improperly held funds without legal entitlement. When a tax assessment is declared illegal due to misapplication of law - such as taxing land for construction under a provision limited to properties with actual residential use - taxpayers are entitled to complete restitution including interest from payment date until refund, ensuring full compensation for the illegal exaction.
Which articles of the IMI Code (CIMI) define building land as distinct from housing-allocated urban property for Stamp Tax liability?
Article 6 of the CIMI is the primary provision defining building land as distinct from housing-allocated urban property. Article 6(1) establishes four categories of urban properties: (a) Residential, (b) Commercial, industrial or services, (c) Land for construction, and (d) Others. Article 6(3) specifically defines "land for construction" (terrenos para construção) as plots within or outside urban settlements for which subdivision or construction licenses/authorizations have been granted, or favorable prior notifications admitted, or declared as such in acquisition titles, excluding plots where operations are prohibited in green areas, protected areas, or public spaces per municipal land use plans. Articles 13(1)(b) and 37 govern mandatory registry updates when land acquires construction classification. Article 41 establishes valuation rules for residential properties, while Article 45 provides distinct valuation methodology for land for construction, reflecting their different economic and legal nature. Article 106(h) provides that land for construction ceases as autonomous property once construction is completed, with registry entry elimination. These CIMI provisions create a comprehensive legal framework distinguishing land for construction from completed residential properties for all tax purposes, including Stamp Duty under Item 28.1 TGIS, preventing conflation of construction potential with actual residential use.