Process: 270/2016-T

Date: September 28, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Decision 270/2016-T addresses a fundamental controversy regarding the application of Stamp Tax (Imposto do Selo) under Item 28.1 of the General Stamp Tax Table (TGIS) to building land (terrenos para construção) with taxable patrimonial values exceeding €1,000,000 for the years 2012 and 2013. Four taxpayers challenged Stamp Tax assessments through hierarchical appeals that were rejected by the Tax Authority, subsequently bringing their case to tax arbitration at CAAD.

The taxpayers argued that the original wording of Item 28.1 TGIS, which referred to 'property with residential use' (prédio com afectação habitacional), could not encompass building land because residential use presupposes actual, concrete residential occupation requiring existing buildings or constructions. They contended that applying this provision to vacant building land violated the fundamental principles of tax legality and typicity, as the legislative terminology was imprecise and undefined in other tax legislation. The taxpayers emphasized that land classified as 'building land' under the Municipal Property Tax Code (CIMI) has no current residential use, and the mere fact that taxable patrimonial value calculations may consider planned construction does not transform building land into property with residential use.

The Tax Authority defended its interpretation by appealing to the legislative spirit and systematic interpretation within the broader property tax framework, arguing that building land destined for residential construction was always intended to fall within Item 28.1's scope. The AT noted that the 2014 State Budget Law (Law 83-C/2013) amended Item 28.1 to explicitly include building land for residential construction, demonstrating the legislator's original intent. However, this amendment was not given interpretive character, preventing its retroactive application to 2012-2013 assessments. The case exemplifies the interpretive challenges arising from imprecise legislative drafting and the tension between literal interpretation favoring taxpayer protection and purposive interpretation supporting fiscal objectives in Portuguese tax law.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1

A…, resident at Rua …, …, Porto, taxpayer no.…, B…, resident at Rua …, …, … Esq., Porto, taxpayer no.…, C…, resident at Av…, …, …º…, Lisbon, taxpayer no.… and D…, resident at Rua …, …, …, Porto, taxpayer no.… (Requesters), filed on 16/05/2016 a request for arbitral pronouncement, wherein they petition for a declaration of illegality of the decisions rejecting hierarchical appeals nos. …2015…, n.º …2015… (…/2015), n.º …2015… (…/2015) and n.º …2015… (…/2015) duly filed following the rejection of requests for official review of Stamp Duty assessments for the years 2012 and 2013 and, further, the annulment of the respective assessment acts.

1.2

His Excellency the President of the Deontological Council of the Centre for Administrative Arbitration (CAAD) designated, on 07/06/2016, the signatory of this decision as sole arbitrator.

1.3

On 26/07/2016 the arbitral tribunal was constituted.

1.4

In compliance with Article 17(1) of the Legal Framework for Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified on 27/07/2016 to, if it so wished, submit a response and request the production of additional evidence.

1.5

On 08/08/2016 the AT submitted a response, further requesting exemption from the meeting referred to in Article 18 of the RJAT.

1.6

The arbitral tribunal on 11/08/2016 decided to waive the meeting referred to in Article 18(1) of the RJAT, on the ground of the principle of arbitral tribunal autonomy in conducting the proceedings, inviting both parties to, if they so wished, submit optional written pleadings and set the date for pronouncement of the final decision.

1.7

Neither the Requesters nor the AT submitted optional written pleadings.

2. PRELIMINARY SANCTION

The arbitral tribunal was duly constituted.

The parties have legal standing and capacity and are legitimately represented, with no defects in representation occurring.

The proceedings do not suffer from defects affecting their validity.

The conditions are therefore met for the final decision to be pronounced.

3. POSITIONS OF THE PARTIES

There are two positions in confrontation: that of the Requesters, set forth in the request for arbitral pronouncement, and that of the AT in its response.

To support their request, the Requesters argue, in summary, that:

a) "(…) the interpretation that land for construction is subject to this tax in the years in question violates the principles of tax legality and typicality (…)";

b) "It occurs that the legislator (…) employed a concept that is not used in any other tax legislation, which is that of 'property with residential use'";

c) "This is equally recognized by the AT in the decisions rejecting the hierarchical appeals in question here.";

d) "In this sense, being on the record land for construction (…), it is necessary to interpret the provision in question to conclude whether land for construction, whose taxable patrimonial value exceeds one million euros, is capable of falling within the scope of Item 28.1 of TGIS, in its original wording, that is, before the amendment to this item introduced by Law no. 83-C/2013, of 31 December.";

e) "On this same matter, multiple decisions have already been pronounced, both by the Supreme Administrative Court (STA), and by tax arbitral tribunals, and uniformly and repeatedly these tribunals have decided contrary to the position sustained by the AT (…)";

f) "Indeed, a 'property with residential use' presupposes, from the outset, that an effective residential use has already been concretely realized, which depends, naturally, on the existence of buildings or constructions";

g) "Now, residential use can suggest no other meaning than the action of giving to certain property the destination of a house or a place where one dwells.";

h) "Which cannot happen, by nature, with land for construction.";

i) "On the other hand, '(…) the fact that it might be considered that in determining the taxable patrimonial value of urban properties classified as land for construction account should be taken of the use that the building authorized or planned for it will have for determining the respective value of the implantation area (…) does not determine that land for construction may be classified as 'property with residential use'.";

j) "Moreover, it does not seem reasonable to admit that recourse to tax incidence norms: one thing is the rules that the legislator imposes for determining the taxable patrimonial value of land for construction, and it is not unusual that account be taken of its constructive capacity and the nature and vocation of what may be built on it; another, different, is to pretend that these rules are invoked to delimit the field of the normative prediction of incidence rules.";

k) Now, "(…) in classification as 'land for construction' it is shown, effectively, to be irrelevant the use that future constructions may have, namely residential, commercial, industrial or for services (…)";

l) "From this it is extracted, without room for doubt, that the taxable reality that was had in view are, after all, and notwithstanding the imprecision in the law's terminology, 'residential properties', those that have current residential use, in common language, 'houses', and not other realities, such as land for construction." [emphasis of Requesters];

m) In conclusion, "(…) it is always said that, very probably due to its terminological imprecision, the original wording of item 28.1 of TGIS had a short life, because that reference to 'property with residential use' was abandoned when the State Budget Law for 2014 entered into force (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Table and which now delimits its scope of incidence through the use of concepts that are legally defined in Article 6 of the IMI Code.";

n) "This amendment – to which the legislator did not attribute interpretive character – merely makes clear for the future that land for construction, the construction of which, authorized or planned, is for residential purposes, is encompassed within the scope of item 28.1 of the General Table of Stamp Duty (provided that its taxable patrimonial value is equal to or greater than 1 million euros) (…)";

o) "But it clarifies nothing regarding prior situations (assessments of 2012 and 2013), such as those at issue in the present proceedings.".

Differently, the AT, defending itself by opposition, maintains, in summary, the following:

a) "(…) with respect to item 28.1 of TGIS (…) it is an inescapable fact that, presumably for reasons of legal certainty and security, Law 83-C/2013, of 31 December (2014 State Budget Law) was not given interpretive character, which prevents its application to tax facts occurring prior to its entry into force, as occurs in the case at hand.";

b) "It is also certain that it does not appear to us to be of negligible consequence the conclusion that the legislator, in recognizing the need to express itself with greater precision, ended up precisely demonstrating that it always had the intention to tax in the context of stamp duty – item 28.1 – land for construction, as urban properties devoted to residential purposes with a VPT equal to or greater than € 1,000,000.00.";

c) "And that, therefore, the AT was always correct in appealing for an interpretation that would attend to the spirit of the norm, seeking to systematize it within the broader context of the codification of property taxes, namely in the Municipal Property Tax code.";

d) "(…) the AT always preconized the understanding that, although not expressly provided for in law, land for construction, in accordance with Article 2(1) of CIMI and with Article 6(1), of the same legal instrument, to which Article 67(2) of the CIS refers, are equally subject to taxation in the context of stamp duty – item 28.1 of the General Table, as urban properties, 'land located inside or outside an urban cluster for which construction or subdivision license or authorization has been granted, prior communication admitted, or favorable prior information issued of a subdivision or construction operation'" [emphasis and underlining of AT];

e) "Having reiterated that for the fulfillment of the concept of residential use one would always have to attribute the same meaning employed by Article 45(2) of CIMI which, for purposes of determining the taxable patrimonial value of land for construction, requires account to be taken of the area to be built and the use to be given to that construction, that is, 'characteristics of a reality that does not yet exist, which is the urban property that can be built on it.' (José Maria Fernandes Pires in Lessons on Patrimonial and Stamp Tax, Almedina Coimbra, 2011, p. 100 and 101)" [underlining of AT];

f) "As to the moment that should determine that 'use,' the AT always maintained that this moment should correspond to the granting of the subdivision or construction license, as at this stage, despite the absence of actual building, it is possible to determine with precision the use of the land for construction, given the specific requirements imposed by Article 77 of the Legal Framework for Urban Planning and Building (RJUE) and also by the Municipal Master Plans.";

g) "It is thus undeniable that the AT sought to systematize the taxation of item 28.1 in the IMI code and in the rules for valuation of urban properties, promoting an interpretation of the expression 'residential use,' in light of the interpretive criteria inherent in Article 9 of the Civil Code, given the evident incongruity between the letter and the thought of the law.";

h) "Whereby in light of the arguments advanced the AT does not consider that the assessments now reviewed suffer from the defect of violation of law (…)";

i) "As is abundantly clear in the preamble of the draft law wherein the legislator made known its reasons, what Law no. 55-A/2012, of 29.10, aimed to tax subjecting to Stamp Duty (IS) property and other real rights over urban properties with taxable patrimonial value (VPT) equal to or greater than € 1,000,000.00, was the wealth signalized by that property." [emphasis of AT];

j) "Intent that we believe was not subject to due consideration and to this conclusion also came the legislator that decided through Article 192 of the Draft State Budget Law for 2014, to alter the text of the norm of item 28 of the General Table of Stamp Duty, there being expressly determined that the 1% stamp duty on property, usufruct or surface right of urban properties with residential use, with taxable patrimonial value equal to or greater than one million euros, would equally apply to 'land for construction, the construction of which authorized or planned is for residential purposes', thereby extending its scope of incidence.".

4. FACTS

4.1 FACTS DEEMED PROVEN

Based on the documents submitted in the proceedings, it is deemed proven that:

4.1.1

The Requesters are, by inheritance, co-owners of half of the urban property of the type "land for construction" registered in the urban land registry of the parish of …, Porto, under registration P-….

4.1.2

As of the date of the said assessments, the taxable patrimonial value (VPT) of the urban property in question amounted to € 2,720,926.75.

4.1.3

The AT proceeded to assess, by reference to the years 2012 and 2013, the Stamp Duty provided for in item 28.1 of the General Table of Stamp Duty (General Table), which amounted, in the portion relative to the Requesters, to the total amount of € 27,209.28 (€ 3,401.16 per year, for each of the Requesters).

4.1.4

Not conforming with the content of the assessment acts, the Requesters filed requests for official review against the Stamp Duty assessment acts for the years 2012 and 2013.

4.1.5

Having been judged improcedent, the Requesters appealed hierarchically alleging, in sum, that the interpretation of item 28.1 of the General Table, in the wording prior to that of Law no. 83-C/2013, of 31 December, to the effect that it applies to land for construction is contrary to law and to jurisprudence.

4.1.6

Through correspondence issued by the Porto Finance Service –…, dated 15/02/2016, the Requesters were notified of the decisions issued by the AT's Department of Urban Property Onerous Transfer Tax, Stamp Duty, Single Motor Vehicle Tax and Special Contributions, which rejected the hierarchical appeals duly filed following the rejection of the requests for official review of the Stamp Duty assessments for the years 2012 and 2013.

4.1.7

Dissatisfied with the decision rejecting the hierarchical appeals filed, the Requesters filed, on 16/05/2016, the request for arbitral pronouncement in question.

4.2 FACTS NOT DEEMED PROVEN

There are no facts with relevance to the decision that have not been deemed proven.

5. THE LAW

5.1 ON THE ILLEGALITY OF THE STAMP DUTY ASSESSMENTS OF 2012 AND 2013

In the case at hand, the fundamental question under examination by the arbitral tribunal is whether, within the scope of incidence of Item no. 28 of the General Table, in its wording as of the date of the tax facts, land for construction is included, or not. That is, for this purpose, land of this type is, or is not, capable of being considered "urban property with residential use"?

On this matter, there is already abundant jurisprudence from the Supreme Administrative Court (STA) and arbitral jurisprudence to the contrary. [1] [2]

This is jurisprudence which is also embraced here, as we continue to agree with it entirely, whereby we shall limit ourselves to reproducing what was said on the matter in the said STA Decision, of 9 April 2014, issued in Process no. 1870/13 [3], to wit:

"The concept of 'property (urban) with residential use' was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which Article 67(2) of the Stamp Duty Code (equally introduced by that Law) refers subsidiarily. And it is a concept which, probably due to its imprecision – a fact all the more serious given that it is in function of it that the objective scope of incidence of the new taxation is delimited – had a short life, since it was abandoned when the State Budget Law for 2014 entered into force (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Table, and which now delimits its objective scope of incidence through the use of concepts that are legally defined in Article 6 of the IMI Code." [underlining ours].

"This amendment – to which the legislator did not attribute interpretive character, nor does it appear to us that it did – merely makes clear for the future that land for construction the construction of which, authorized or planned, is for residential purposes is encompassed within the scope of item 28.1 of the General Table of Stamp Duty (provided that its taxable patrimonial value is of value equal to or greater than 1 million euros), clarifying nothing, however, regarding prior situations (…), such as that at issue in the present proceedings." [underlining ours].

"Now, as for these, it does not appear to be possible to adopt the interpretation of the (…)" AT "(…), since it does not follow unambiguously either from the letter, or from the spirit of the law that the intention of the latter was, ab initio, to encompass within its objective scope of incidence land for construction for which the building of residential edifices was authorized or planned, as unambiguously results today from item 28.1 of the General Table of Stamp Duty.

In fact, "From the letter of the law nothing unambiguous follows, moreover, since it itself, by using a concept which it did not define and which also was not found defined in the legal instrument to which it referred subsidiarily, lent itself, unnecessarily, to ambiguity, in a matter – of tax incidence – in which certainty and legal security should also be paramount concerns of the legislator." [underlining ours].

"And from its "spirit," ascertainable in the statement of reasons of the draft law that is at the origin of Law no. 55-A/2012 (Draft Law no. 96/XII – 2nd, Journal of the Assembly of the Republic, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows than the concern to raise new tax revenues, from sources "more spared" in the past from the reach of taxation than labor income, in particular capital income, securities gains and property, reasons which bring no relevant contribution to the clarification of the concept of "property (urban) with residential use", as they take it as established, with no concern to clarify it. Such clarification would, however, have arisen - as informed in the Arbitral Decision issued on 12 December 2013, in process no. 144/2013-T, available in the CAAD database –, during the presentation and discussion in the Assembly of the Republic of that draft law, in the words of the Secretary of State for Tax Affairs, who would have stated expressly, as appears from the Journal of the Assembly of the Republic (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: 'The Government proposes the creation of a special rate on high-value residential urban properties. This is the first time in Portugal that a special taxation is created on properties of high value intended for residential use. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or greater than 1 million euros" (underlining ours), from which it follows that the taxable reality had in view are, after all, and notwithstanding the terminological imprecision of the law, "property (urban) with residential use", in common language "houses", and not other realities.". [4]

"The fact that it might be considered that in determining the taxable patrimonial value of urban properties classified as land for construction account should be taken of the use that will be given to the building authorized or planned for it for determining the respective value of the implantation area (cf. Articles 45(1) and (2) of CIMI), does not determine that land for construction may be classified as 'property with residential use', since residential use appears always in the IMI Code referred to "buildings" or "constructions", existing, authorized or planned, since only these can be inhabited, which does not occur in the case of land for construction, which does not, in itself, have conditions for this, not being capable of being utilized for residential purposes except if and when the building authorized and planned for it is erected thereon (but in that case they would no longer be 'land for construction' but another type of urban property – 'residential', 'commercial, industrial or for services' or 'other' – Article 6 of CIMI).".

"It would be strange, indeed, if the determination of the scope of the tax incidence norm of item no. 28 of the General Table of Stamp Duty were to be found, after all, in the norms for determining the taxable patrimonial value of the IMI Code, and if the terminological imprecision of the legislator in the wording of that rule were, after all, elucidated and finally clarified by way of an indirect and ambiguous reference, to the use coefficient established by the legislator in relation to built properties (Article 41 of the IMI Code).".

In this measure, "(…) given that a land for construction – whatever the type and purpose of the building that will be, or may be, erected on it – does not satisfy, by itself, any condition to be licensed as such or for residential use to be able to be defined as its normal destination, and referring the tax incidence norm of stamp duty to urban properties with "residential use", without any specific concept being established for the effect, cannot from it be extracted that in the same there is contained a future potentiality, inherent in a distinct property that perhaps will be built on the land." [underlining ours].

"It is therefore concluded, in conformity with what was decided in the judgment under appeal, that, resulting from Article 6 of the IMI Code a clear distinction between urban properties "residential" and "land for construction", the latter cannot be considered as "property with residential use" for purposes of the provision of item no. 28.1 of the General Table of Stamp Duty, in its original wording, as conferred by Law no. 55-A/2012, of 29 October.".

See, on the one hand, as noted by the STA Decision, of 25 November 2015, issued in Process no. 01338/15 [5], whose summary is transcribed:

"The legislator not having defined the concept of property (urban) with residential use, but resulting from art. 6 of CIMI (subsidiarily applicable to Stamp Duty provided for in the new item no. 28 of the General Table) a clear distinction between urban residential properties and land for construction, the latter cannot be considered, for purposes of the incidence of Stamp Duty (Item 28.1 of TGIS, in the wording of Law no. 55-A/2012, of 29/10), as urban property with residential use." [underlining ours].

And, on the other hand, as concluded by the Decision of the South Central Administrative Court (TCAS), of 19 May 2016, issued in Process no. 09509/16 [6]:

"Within the scope of the C.I.M.I. (cf. art. 6, of C.I.M.I.) a property with a given use (residential, commercial and industrial) presupposes the existence of a building suitable for being used with a given purpose, which does not occur in land for construction, in which we are dealing with only 'buildings authorized or planned' with possible residential or other use. It is true that the new wording of item no. 28.1 of the General Table of Stamp Duty, introduced by Law 83-C/2013, of 31/12, makes taxation apply to 'residential property or land for construction the building of which, authorized or planned, is for residential purposes', but such norm has no interpretive character, being rather innovative. It appears to us, therefore, that Law 55-A/2012, of 29/10, in adding to the General Table of Stamp Duty the 'Item no. 28', subjecting to stamp duty urban properties 'with residential use', whose taxable patrimonial value recorded in the matrix, in accordance with the C.I.M.I., is equal to or greater than € 1,000,000.00, does not encompass in its scope land for construction lots, since that expression presupposes the existence of a building suitable for being used for residential purposes, requirements that land lots do not possess. This only occurred with the amendment to said item introduced by the cited Law 83-C/2013, of 31/12, effective from 1 January 2014, which came to encompass 'residential property or land for construction the building of which, authorized or planned, is for residential purposes'." [underlining ours].

The jurisprudential line is reiterated, once more.

For all the foregoing, considering that the property of the Requesters was registered matricially as "land for construction" as of the date of the tax fact(s) relating to the year(s) 2012 and 2013, the norm of incidence in question cannot be applicable to the case sub judice, under penalty of illegality. For this reason, the Stamp Duty assessments identified above must be annulled with all legal consequences.

Indeed, examination of the remaining matters raised by the Requesters is thereby prejudiced, given that the illegality of the assessments mentioned above has been declared, due to a substantive defect that prevents renewal of the acts, effectively assuring the protection of the Requesters' rights, in accordance with the provision of Article 124 of the Code of Tax Procedure and Process (CPPT). [7]

5.2 INDEMNITORY INTEREST

In light of the provision of Article 24(5) of the RJAT – in so far as it provides that "interest payment is due, regardless of its nature, in the terms provided for in the General Tax Law and in the Code of Tax Procedure and Process", it has been understood that this norm permits the recognition of the right to indemnitory interest in arbitral proceedings.

It is thus justified, by the foregoing, the analysis of the Requesters' request for payment of indemnitory interest.

Indemnitory interest is due when it is determined, in administrative review or judicial challenge, that there has been error attributable to the services from which there resulted payment of the tax debt in an amount exceeding the legally due amount (cf. Article 43(1) of the General Tax Law).

It is, therefore, a necessary condition for the award of said interest the demonstration of the existence of error attributable to the services. In this sense, see, for example, the following decisions: "The right to indemnitory interest provided for in Article 43(1) of the GTA [...] depends on it having been demonstrated in the proceedings that such act is affected by error regarding the premises of fact or law attributable to the AT." (STA Decision of 30 May 2012, proc. 410/12); "The right to indemnitory interest provided for in Article 43 of the General Tax Law presupposes that it be determined in the proceedings that in the assessment 'there was error attributable to the services', understood as 'error regarding the premises of fact or law attributable to the Tax Administration'" (STA Decision of 10 April 2013, proc. 1215/12).

Now, given that there has been, as follows from the present arbitral decision, error attributable to the services – which leads to the annulment of the tax acts in question and to the consequent refund of the amounts paid by the Requesters, in accordance with the provision of Article 173(1) of the Code of Procedure in the Administrative Courts (CPTA), by force of Article 29(1)(c) of the RJAT –, it is concluded, without necessity for further consideration, by the merits of the request for payment of indemnitory interest to the Requesters.

6. DECISION

With the grounds set forth, the arbitral tribunal decides:

a) To grant the request for arbitral pronouncement and, in consequence, declare the Stamp Duty assessments of 2012 and 2013 illegal, with all legal consequences;

b) To grant the request for recognition of the Requesters' right to payment of indemnitory interest;

c) To condemn the AT to refund to the Requesters the Stamp Duty wrongfully paid, in the amount of € 27,209.28;

d) To condemn the AT in costs.

7. CASE VALUE

The case value is fixed at € 27,209.28 (twenty-seven thousand, two hundred nine euros and twenty-eight cents), in accordance with Article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by force of Articles (a) and (b) of Article 29(1) of the RJAT and Article 3(2) of the Regulations on Costs in Tax Arbitration Proceedings (RCPAT).

8. COSTS

Costs to be borne by the AT, in the amount of € 1,530 (one thousand five hundred thirty euros), in accordance with Table I of the Regulations on Costs in Tax Arbitration Proceedings, in accordance with Article 22(2) of the RJAT.

Notify.

Lisbon, 28 September 2016

The Arbitrator,

(Hélder Filipe Faustino)

Text prepared by computer, in accordance with the provision of Article 131(5) of the Code of Civil Procedure (CPC), applicable by cross-reference in Article 29(1)(e) of the RJAT. The wording of this decision follows pre-1990 Portuguese Orthographic Agreement spelling.

[1] Cf. Andreia Gabriel Pereira, "The 'Luxury Houses' and Stamp Duty. Commentary on the Decision of the Supreme Administrative Court (2nd Section), of 5 February 2015, issued in process no. 0993/14, Rapporteur Cons. Francisco Rothes", Journal of Public Finances and Tax Law, Year VII, No. 4, July 2015, pp. 235 et seq.

[2] See, by way of example, the arbitral decisions issued in the scope of processes no. 218/2013-T, no. 247/2013-T, no. 66/2014-T and no. 202/2014-T, available at https://caad.org.pt/.

[3] By force of the STA Decision, of 29 April 2015, issued in Process no. 021/15, both available at www.dgsi.pt.

[4] As pointed out by Andreia Gabriel Pereira, "(…) the aim was to create specific taxation for holders of so-called 'luxury houses', which, moreover, is possible to infer from the fact that Item no. 28 of the General Table of Stamp Duty applies only to properties intended for residential use (and, marginally, to properties held by residents in tax havens). This was how that Item was presented to public opinion and perceived by it.". Op. Cit. p. 237.

[5] Available at www.dgsi.pt.

[6] Available at www.dgsi.pt.

[7] Subsidiarily applicable by force of the provision of Article 29(1)(a) of the RJAT.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28 of the TGIS applicable to building land (terrenos para construção)?
The applicability of Stamp Tax under Item 28 of the TGIS to building land (terrenos para construção) was highly controversial for tax years 2012 and 2013. The original wording of Item 28.1 taxed 'property with residential use' (prédio com afectação habitacional) with taxable patrimonial values equal to or exceeding €1,000,000, but did not explicitly mention building land. The Tax Authority interpreted this provision broadly to include building land destined for residential construction, basing their position on systematic interpretation and the IMI Code framework. However, taxpayers and numerous tax arbitral tribunals consistently rejected this interpretation, arguing that 'residential use' requires actual buildings with current residential occupation, not vacant land. The legislator subsequently amended Item 28.1 through Law 83-C/2013 (2014 State Budget) to explicitly include building land for residential construction, but this amendment was not given interpretive character and thus could not apply retroactively to prior tax years.
Does taxing building land under Verba 28 violate the principles of legality and tax typicity in Portuguese tax law?
Taxpayers argued that taxing building land under the original Item 28.1 TGIS violated the constitutional principles of legality and tax typicity enshrined in Portuguese tax law. The principle of tax legality requires that all essential elements of taxation be clearly defined by law, while tax typicity demands precision in defining taxable events. The term 'prédio com afectação habitacional' (property with residential use) was undefined in tax legislation and represented imprecise terminology that could not reasonably encompass building land without existing structures. Taxpayers contended that residential use necessarily implies actual occupation as a dwelling, which vacant building land cannot provide. The fact that the legislator felt compelled to amend the provision in 2014 to explicitly include building land demonstrated the original wording's inadequacy. Multiple Supreme Administrative Court and CAAD decisions supported this position, holding that interpretive norms establishing tax incidence must be strictly construed in favor of taxpayers when ambiguous, and that reliance on valuation methodology (which considers future construction) cannot substitute for clear incidence norms.
What is the meaning of 'prédio com afectação habitacional' for Stamp Tax purposes and does it include land for construction?
The core interpretive dispute in this case concerned the meaning of 'prédio com afectação habitacional' (property with residential use) under the original Item 28.1 TGIS. Taxpayers argued this term requires actual, concrete residential use—meaning a building or construction currently serving as a dwelling or habitation. In common language, these are 'houses' where people reside. Building land (terrenos para construção), classified as urban property under Article 6 of the IMI Code, lacks any existing structures and therefore cannot have current residential use regardless of what might be built in the future. The taxpayers emphasized that classification as building land under IMI law is independent of the intended use of future constructions (residential, commercial, industrial, or services). While the IMI Code methodology for determining taxable patrimonial value of building land may consider the authorized or planned construction's nature, this valuation approach cannot transform vacant land into property with residential use for incidence purposes. Tax incidence norms and valuation methodologies serve different functions and must not be conflated. The 2014 amendment's explicit reference to 'land for construction' effectively acknowledged that the original terminology was insufficient to encompass such property.
How can taxpayers challenge Stamp Tax assessments on building land through hierarchical appeals and arbitration at CAAD?
Taxpayers can challenge Stamp Tax assessments on building land through a multi-stage administrative and judicial review process. First, taxpayers may file a request for official review (pedido de revisão oficiosa) with the Tax Authority within the legal deadline, requesting annulment of the assessment based on illegality. If the Tax Authority rejects this review or fails to respond within the statutory period, taxpayers may file a hierarchical appeal (recurso hierárquico) to the superior administrative authority, challenging the rejection decision. When the hierarchical appeal is also rejected—as occurred in this case with decisions rejecting appeals nos. …2015…—taxpayers have two main options: (1) judicial appeal to the tax courts through the general judicial system, or (2) request arbitral proceedings at CAAD (Centro de Arbitragem Administrativa). CAAD arbitration, established by the Legal Framework for Tax Arbitration (RJAT), offers a faster, specialized alternative to traditional tax courts. The arbitration request must be filed within the legal deadline following the hierarchical appeal rejection, identifying the contested acts and legal grounds. CAAD proceedings typically involve appointment of an arbitrator, constitution of the arbitral tribunal, the Tax Authority's response, and issuance of a binding arbitral decision that has the same effect as a court judgment.
What were the grounds for requesting annulment of the 2012 and 2013 Stamp Tax assessments in CAAD decision 270/2016-T?
The taxpayers in CAAD Decision 270/2016-T requested annulment of Stamp Tax assessments for 2012 and 2013 on multiple interrelated grounds. First, they argued the assessments violated the constitutional principles of tax legality and typicity because the original Item 28.1 TGIS language was imprecise and undefined, failing to clearly establish building land as a taxable event. Second, they contended that 'prédio com afectação habitacional' (property with residential use) must be interpreted to require actual existing residential use through buildings or constructions, which vacant building land lacks. Third, they invoked consistent jurisprudence from the Supreme Administrative Court and multiple CAAD arbitral decisions that uniformly rejected the Tax Authority's interpretation and held that building land could not be taxed under the original Item 28.1 wording. Fourth, they distinguished between tax incidence norms (which must clearly define taxable events) and valuation methodologies (which may consider future use), arguing the Tax Authority improperly conflated these concepts. Finally, they emphasized that the 2014 legislative amendment explicitly adding building land to Item 28.1—without interpretive character—implicitly acknowledged the original provision's inadequacy and confirmed that building land was not previously covered, making the 2012-2013 assessments illegal.