Process: 271/2015-T

Date: December 15, 2015

Tax Type: IMI

Source: Original CAAD Decision

Summary

This arbitral decision addresses the classification and valuation methodology for IMI (Municipal Property Tax) purposes of two service station properties owned by A..., S.A. The Tax Authority classified both properties as 'Other' under Article 6 of the IMI Code, applying the cost-based valuation method under Article 46(2), which resulted in taxable patrimonial values (VPT) of €324,080 and €238,000. The claimant challenged these valuations before CAAD's arbitral tribunal, arguing that service stations should be classified as 'commercial' or 'services' properties based on their normal purpose of selling fuel and consumer goods, as evidenced by municipal use licenses. The claimant contended that even if classified as 'Other,' the comparative market method under Article 38 should apply rather than the construction cost method. Key legal issues included: (1) whether evaluation commissions improperly applied administrative guidance over statutory law by following the Valuation Manual instead of Article 6 of the IMI Code; (2) inconsistencies in construction cost calculations between different evaluation commissions; (3) whether certain elements like metal coverings constitute taxable buildings or merely equipment; and (4) mathematical errors in valuation calculations. The claimant requested annulment of both valuation acts, asserting that the Tax Authority failed to properly justify departing from the standard Article 38 valuation methodology and applied arbitrary criteria without legal basis in determining construction costs and land values.

Full Decision

ARBITRAL DECISION

The Arbitrator Dr. André Festas da Silva, appointed by the Ethics Council of the Administrative Arbitration Centre (CAAD) to form the singular Arbitral Tribunal, constituted on 6 July 2015, decides as follows.

I. REPORT

I.1

  1. On 24 April 2015, A..., S.A., a company with registered office at Avenue ... no. ..., in Lisbon (...-...), with unique registration number and collective person number ..., requested, pursuant to the terms and effects of Article 2 and Article 10, both of Decree-Law no. 10/2011, of 20 January, the constitution of an Arbitral Tribunal with the designation of a singular arbitrator by the Ethics Council of the Administrative Arbitration Centre, in accordance with the provisions of Article 6, no. 1 of the said legal instrument.

  2. The request for constitution of the Arbitral Tribunal was accepted by the Esteemed President of CAAD and was notified to the Tax and Customs Authority (hereinafter designated as AT or "Respondent") on 28 April 2015.

  3. The Claimant did not proceed with the appointment of an arbitrator, therefore, under the terms of Article 5, no. 2, paragraph b) and Article 6, no. 1, of the RJAT, the undersigned was appointed by the President of the Ethics Council of CAAD to serve on the present singular Arbitral Tribunal, having accepted in accordance with legal provisions.

  4. The AT submitted its response on 21 September 2015.

  5. By order of 22.09.2015, the meeting provided for in Article 18 of the RJAT was scheduled for 19-10-2015.

  6. At that meeting the request for the production of additional expert evidence requested by the Respondent was waived by the Tribunal.

  7. The Claimant submitted no written pleadings.

  8. The Respondent submitted no written pleadings.

  9. The Claimant seeks that the Arbitral Tribunal declare the annulment of the acts fixing the taxable patrimonial value, set forth (i) in the valuation sheet no. ..., referring to the property no. ..., located in the parish of ... and ..., and (ii) in the valuation sheet no. ..., concerning the property no. ..., located in the parish of....

I.A The Claimant bases its request, in summary, on the following terms:

  1. The Claimant submitted two model 1 declarations, through which it requested the valuation of:

    (i) The urban property no. ..., located in the parish of ... and....

    (ii) The urban property no. ... located in the parish....

  2. These valuations resulted in the following:

    (i) To the urban property no. ..., located in the parish of ... and ... was attributed a taxable patrimonial value (VPT) of €324,080.00; and

    (ii) To the urban property no. ..., located in the parish ..., was attributed a taxable patrimonial value (VPT) of €238,000.00.

  3. In view of these valuations, not agreeing with them, the Claimant presented, with respect to each of the properties, a request for a second valuation, focusing its disagreement on the classification of the urban properties as "Other" and the consequent fixing of the VPT based on the method provided for in no. 2 of Article 46 of the IMI Code.

  4. As appears from the notifications of the valuations, the properties were valued considering their classification as "Other."

  5. Both evaluation commissions complied uncritically and without reading Article 6 of the IMI Code, the criterion contained in the "Manual for Valuation of Urban Properties," of the Assessment Services Directorate dated May 2011.

  6. In summary, the classification of these urban properties as "other" stems from the "Manual." But it is certain that the "Manual" contains not a single basis for – in accordance with Article 6 of the IMI Code – departing from the classification of this property as "commercial."

  7. Even if the properties in question were susceptible to being classified as "other," the preferable valuation method would continue to be the formula provided for in Article 38.

  8. The evaluation commissions – without taking the trouble to identify why they did not evaluate the buildings in accordance with Article 38 – classified the properties as "other," attributing them patrimonial values calculated based on the market value of the land added to construction costs.

  9. Immediately, with respect to the valuation of the urban property no. ..., located in the parish ..., it should be noted that the sum of the items listed does not correspond to the value attributed to the property. Indeed, the value of €194,340.00 was attributed and from the sum of the items identified in the valuation sheet results €163,450.00.

  10. But what we wish to highlight here is that the evaluation commissions, without further, identified a construction cost for the following realities:

(i) Convenience stores and technical buildings (the only buildings actually existing);

(ii) Service areas;

(iii) Bituminous pavement

(iv) Car washes

(v) Sidewalks in air/water zones.

  1. Yet, different commissions manage to calculate – with no known basis on what criteria – different construction costs.

  2. And when we arrive at the market value of the land, the disorder and disparity are absolute. To the point that the values change, without further, from the first to the second valuation.

  3. We are faced with an indiscriminate amalgam of criteria. Which has objective criterion only in the absence of criterion and basis.

  4. In the evaluation commissions it was decided that service stations constitute property of the "other" type.

However, the Claimant does not see the reason why service stations do not encompass the typology of "commercial property" or "property for services."

  1. Let us focus on the provision of no. 2 of the cited Article 6: "Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal purpose each of these ends."

  2. It seems obvious to us that service stations constitute a location that has as its normal purpose the practice of commercial acts (sale of fuels, beverages and foodstuffs).

  3. But if there were any doubts, we present the respective copies of the use licenses issued by the City Councils of ... and....

  4. For its part, the obvious also has to be repeated: The "Manual of Valuations" does not override the IMI Code.

  5. "Commercial" or "services" properties are valued in accordance with Article 38 of the IMI Code.

  6. To summarize: even if it were an "other" property, the criterion of Article 38 must be applied, with such modifications as may be necessary. And only when this is not possible is recourse to the cost method justified.

  7. Why was the construction cost of the "service area" (metal covering) and the "pavement" determined?

  8. Now the "metal covering" is not a property for purposes of IMI, insofar as it does not constitute a building or construction nor does it perform a similar utility.

  9. Rather, it constitutes equipment comprised of metal plates resting on the ground, but which does not at all assume a functionality identical to that of a building or construction.

  10. And it happens that the tax base cannot be extended to equipment and machinery.

I.B In its Response the AT invoked the following:

  1. The facts related to the evaluation acts "sub judice" are few, and cause no disagreement between the parties. It is worthwhile to recall them to frame the litigious matter:

    a) On the initiative of the taxpayer, permitted by Article 130, no. 3, paragraph a) of the IMI Code, the valuation procedures of the properties referred to above, with respect to the property registered in the register under Article ... of the parish of ... and ..., began on 19.12.2014, with the submission of the IMI model 1 declaration, in the ... tax office, which gave rise to a first valuation, in which a taxable patrimonial value (VPT) of €393,311.00 was established, the property being classified as urban "other." With respect to the property registered under Article ..., of the parish of ..., Santarém municipality, the procedure began on 24.11.2014, with the submission of the IMI model 1 declaration, in the ... tax office, which gave rise to a first valuation, in which a taxable patrimonial value (VPT) of €238,000.00 was established, the property being classified as urban "other."

    b) Not having agreed with this value, nor with the classification of the property, the taxpayer requested a second valuation, in accordance with Article 76, no. 2 of the IMI Code, and sought its reclassification as urban property for commerce, which resulted in a reduction of the VPT to €324,080.00 for the property at ... and for the property located at ... the VPT was reduced to €194,340.00, but the property's classification was not changed.

  2. It must be taken into account in this analysis the composition of the properties, when we know that the primary purpose to which it is destined, by nature, is the retail sale of fuels.

    Thus, the property registered in the register under Article ..., of the parish of ..., according to the valuation statement in the justification part of the VPT states the following: "Taking into account the characteristics of the property as well as the specificities inherent in the purpose to which it is intended, fuel pump with fuel supply and commerce in a support building, car wash infrastructures, that is, of multiple occupation, making the valuation using the formula indicated in Article 38 of the IMI Code impossible. Therefore, the property was valued by application of the cost method added to the value of the land, as provided for in no. 2 of Article 46 of the IMI Code. In this justification, the cost structure is reproduced, with the exclusion of equipment and untransformed land. The value of land, existing buildings and pavements (bituminous and cement sidewalks) were considered.

    The value of the land was determined taking into account the surroundings, taking into account that it is an area with some urban qualification, endowed with infrastructures. The value attributed was €125 per m²."

  3. It should also be noted that in the use license permit no. .../98, issued by the City Council of ... nothing relevant appears either for the position of the Claimant or of the Respondent.

  4. It should also be noted that from the authorization license permit no. .../2010, issued by the City Council of ..., it appears that the building is intended for the following use: Commercial establishment (convenience store).

  5. Therefore, it can already be stated that the primary purpose of a fuel station or service station is to supply vehicles with fuel, using the appropriate equipment for this purpose.

  6. From this narrative we can conclude that the purpose of the properties of the now Claimant is the retail sale of fuels to the public, and the properties where it develops this activity is prima facie a fuel station with several service units, the property being intended to develop the activity of an enterprise.

  7. Of the other activities developed there, the convenience store stands out, affirming that it is not the main activity of A..., nor is it the main purpose of the properties. It is an ancillary activity, in support of customers who purchase fuel, being therefore the main activity the supply of fuel to its customers.

  8. From all of the above, as well as from the photographs contained in the valuation statement and from the common sense that each of us has of this reality, we have no doubt in stating that we are dealing with a fuel station, or a service station, to which the Claimant entity attached, in the spare space of the property, a convenience store, among other services related to fuel supply such as air/water and vehicle washing, but which does not distort the legal definition of a service station, nor of a fuel station.

  9. Now the law exhaustively describes what "other" urban properties are. We can even affirm that it is a residual category of all realities that are considered properties by Article 2 of the IMI Code, and that have no place in the species of urban properties listed in the preceding paragraphs of Article 6 of the IMI Code:

  10. Now, without any interpretive effort beyond the literal, and taking into account the highlighted legal text, it will be said that a fuel station comprises buildings and constructions licensed for this purpose, which is the operation of fuel stations, and which are not residential, commercial, industrial purposes or services, this from the perspective of the destination of the property.

  11. There is no doubt that A... practices acts of commerce, as it sells fuel at retail, and that in the specific cases, the permits either reference nothing or reference only commercial establishment/convenience store (albeit improperly as we will see); but that is not what determines that the properties – fuel stations – have commerce as their purpose!

  12. Having the now Claimant complied with all these rules to develop its activity, licensing to build and operate fuel stations, one cannot affirm that the property has a commercial or services purpose, as the Claimant seeks.

  13. "The orientations of the 'Manual for Valuation of Urban Properties' were followed. Now according to the now Claimant this is not law, for that reason it does not override the IMI Code, it is merely an internal regulation, with restricted access, only made available to regional experts, which does not serve to justify the attribution of urban "other" property."

  14. Well then, the valuation statements state that the option was made to apply the cost method added to the value of the land, provided for in no. 2 of Article 36, in lieu of the valuation method in Article 38, due to the fact that it is an "other" property, whose intrinsic characteristics prevent the use of the formula contained in Article 38 of the IMI Code.

  15. The description of the properties of the now Claimant are comprised of land, where the fuel service units are located, the access areas, the protection zones, the referred "covering canopy of the fuel service units," or as now referred to as "the metal covering" as well as the convenience store, the self-service car wash and air/water service areas, with their respective accesses.

  16. It is difficult to admit that to this property one can apply a quality and comfort coefficient, and an obsolescence coefficient.

  17. And for this reason the evaluation commissions opted, and rightly so, to follow the cost method added to the value of the land, as permitted by Article 46, no. 2 and 3 of the IMI Code.

  18. But a property where acts of commerce are practiced does not automatically, before the referred tax law, become an urban property intended for commerce.

  19. In conclusion, in the application of the cost method, the price of the land is obtained by comparison, that is, by the use of the comparative method. That is indeed what occurred – the evaluation commission attributed a price to the land based on land prices with similar construction suitability as well as similar location and in our view the justification is sufficient and is correct.

  20. Under Article 2, no. 1 of the IMI Code, a property is any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or resting thereon, with a character of permanence, provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, have economic value.

  21. In accordance with no. 2 of the same article, buildings or constructions, although mobile by nature, are deemed to have a character of permanence when devoted to non-transitory purposes, no. 3 presuming the character of permanence when the buildings or constructions have been resting in the same location for a period exceeding one year.

  22. Once this structure, which is a canopy, is integrated as a real property, with the consequent fulfillment of its economic purpose, the movable property passes to be considered as an integral part of that property, without the economic autonomy that would enable its autonomous qualification as real property.

II. SANITATION

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

The proceeding is proper.

The parties have legal personality and capacity.

The parties are legitimate and are legally represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March.

There are no other preliminary issues to be examined nor defects that invalidate the proceeding.

It is now necessary to examine the merits of the request.

III. MATTER TO BE DECIDED

The validity of the valuations carried out on the properties by the Respondent for purposes of IMI.

IV. FACTUAL MATTERS

IV.1. Proven Facts

Before proceeding to the examination of the issues, it is necessary to present the factual matter relevant to its understanding and decision, which, having examined the documentary evidence, the administrative tax proceeding attached and taking into account the facts alleged, is established as follows:

  1. The Claimant submitted two model 1 declarations, through which it requested the valuation of:

    (iii) The urban property no. ..., located in the parish of ... and....

    (iv) The urban property no. ... located in the parish....

  2. These valuations resulted in the following:

    (iii) To the urban property no. ..., located in the parish of ... and ... was attributed a taxable patrimonial value (VPT) of €324,080.00; and

    (iv) To the urban property no. ..., located in the parish ..., was attributed a taxable patrimonial value (VPT) of €238,000.00.

  3. In view of these valuations, not agreeing with them, the Claimant presented, with respect to each of the properties, a request for a second valuation, focusing its disagreement on the classification of the urban properties as "Other" and the consequent fixing of the VPT based on the method provided for in no. 2 of Article 46 of the IMI Code.

  4. In the second valuation the properties were valued considering their classification as "Other."

  5. In the evaluation commissions it was decided that service stations constitute property of the "other" type.

  6. Service stations constitute a location that has as its normal purpose the sale of fuels, beverages and foodstuffs.

  7. From the use license issued by the City Council of ..., of the property registered in the urban real property register under Article ..., of the parish of ..., Santarém municipality, it appears that the building is intended for a commercial establishment (convenience store).

  8. From the use license issued by the City Council of ..., of the property registered in the urban real property register under no. ..., of the parish of ... and ..., Matosinhos municipality, it appears that the building is intended for a Service Station.

IV.2. Facts Found Not Proven

There are no facts found not proven, since all facts relevant to the examination of the request were found proven.

IV.3. Justification of Factual Matter

The facts found proven comprise uncontested matter and documented in the case files.

The facts stated in numbers 1 to 8 are accepted as established by agreement of the parties, by analysis of the administrative proceeding and by the documents submitted by the Claimant (docs. 1 to 10 of the request for constitution of the Arbitral Tribunal).

V. APPLICATION OF LAW TO FACTS

a) Classification of properties as "Other"

The Respondent alleges that the valuations challenged are illegal because the properties were classified as "other" and not as commercial or for services.

In accordance with Article 2 of the IMI Code, the concept of property rests on three elements: an element of a physical nature (fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or resting thereon, with a character of permanence), an element of a legal nature (requirement that the thing – movable or immovable – form part of the patrimony of a natural or legal person) and an element of an economic nature (requirement that the thing have economic value in normal circumstances).

In the case at hand, there is no question that the properties in question constitute properties for tax purposes.

Moreover, although the concept of urban property contained in Article 4 of the IMI Code is a residual concept, relative to that of rustic property (for urban properties are all those that should not be classified as rustic), the parties do not contest the classification of the properties as urban.

We are confronted, in the present proceeding, essentially with the legal analysis of what is provided in Article 6, no. 1 of the IMI Code, with respect to the classification of urban properties, which we now transcribe:

Species of Urban Properties

1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other.

2 - Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal purpose each of these ends.

3 - Land for construction shall be deemed to be land situated within or outside an urban settlement, for which a license or authorization has been granted, for which prior communication has been admitted or for which favorable prior information has been issued for a subdivision or construction operation, and also those which have been declared as such in the acquisition title, except for land in which the competent entities prohibit any of such operations, namely those located in green areas, protected areas or which, in accordance with the municipal land-use plans, are intended for public spaces, infrastructures or equipment.

4 - The provision of paragraph d) of no. 1 encompasses land situated within an urban settlement which are not land for construction nor fall within the provision of no. 2 of Article 3, and also buildings and constructions licensed or, in the absence of a license, which have as their normal purpose purposes other than those referred to in no. 2 and also those in the exception of no. 3.

The classifications in Article 6 are made by the legislator based on the economic purpose attributed to the properties. In this sense, Cfr. J. Silvério Mateus, L. Corvelo Freitas, Taxes on Real Property, Engifisco, 2005, p. 113

In order for properties to be classified as residential, commercial, industrial or for services, we must first take into account the respective license (Article 6, no. 2 of the IMI Code). "(…) for purposes of specification of the urban property, the formal requirement revealed by the licensing thereof must be considered." In Taxation of Property, António Santos Rocha and Eduardo José Martins Brás, Almedina, 2015, p. 44

In the same sense José Maria Pires proceeds: "In these cases the Law is relatively rigid, considering that, for purposes of Article 6, what is relevant is the allocation that appears in the licensing, leaving no room to attribute any importance to the actual use of the property." Lessons on Property and Seal Taxes, Almedina, 2010, p. 81

With respect to the analysis of Article 41 of the IMI Code, J. Silvério Mateus, L. Corvelo Freitas Mateus state: "The classification of urban properties into one of the allocations provided for in this article depends, in the first place and as provided in no. 2 of Article 6, on the use provided for in the licensing granted in view of the applicable general legislation." In, Taxes (...), p. 203

Only in the case of the non-existence of a license should the normal allocation of the property be considered in order to classify it within the various types of urban properties.

"This means to say that any urban property that is properly licensed for residence, or whose normal purpose is residence, even if it is, in reality, allocated, for example, to the practice of commerce, should be classified – and valued – according to the rules pertaining to properties of the 'residential' type." In Taxation of Property, António Santos Rocha and Eduardo José Martins Brás, (...), p. 157

The use license is issued by the City Council of the municipality where the property is located and has the purpose of attesting to what use the building or fraction is intended and that it is suitable for its intended purpose (Article 8 of the General Regulations on Urban Buildings).

In the case at hand, the property located at ... is classified as "commercial establishment (convenience store)" and the property located at ... is classified as "service station" (Cfr. proven facts nos. 7 and 8).

As for the property at ..., in view of its classification contained in the license, there can be no doubt as to its classification as being a commercial property in accordance with Article 6, no. 1, paragraph b) of the IMI Code. A commercial establishment (convenience store) where acts of resale of current consumption goods (beverages, foodstuffs, newspapers, tobacco, etc.) are practiced must be considered a commercial establishment. The purchase for resale is the paradigmatic act of commerce. This property is intended for commerce and should be classified as such for purposes of IMI.

It remains for us to consider the property located at.... What classification should be attributed to it for purposes of IMI?

The property in question has a license issued by the City Council where the claimant is authorized to use the property as a "service station."

Should the activity of a service station, or should it not, be considered a commercial activity? Based on this answer we should determine the classification that should be attributed to it for purposes of IMI.

First, it is important to note that although the activity of retail sale of fuel is subject to a licensing procedure distinct from other commercial activities, this fact results only from a greater concern to ensure the safety of persons and property and not from the classification as commercial, or not, of this activity. Cfr. Preamble of Ordinance no. 131/2002 of 9 February and Ordinance no. 362/2005 of 4 April.

A service station has as its principal purpose the purchase and sale of fuels.

We must determine whether the purchase and sale of fuels should be considered a commercial activity, whether acts of purchase and sale of fuel integrate the concept of an act of commerce, as well as whether a service station is a commercial establishment.

As for the concept of commercial activity, resorting to the teachings of Prof. Miguel Pupo Correia from the perspective of economic science: "(…) commerce: is any activity of mediation between the production and consumption of goods, in which the economic agent speculates on the value of goods, running a risk and aiming to obtain profit." In Commercial Law, 6th Ed., 1999, p. 49

"Technically, commerce (...) is the lucrative activity of production, distribution and sale of goods. The term 'commerce' can, with propriety, be applied to any of the segments of the circuit that unites producers with final consumers and, also to related accessory activities." In Manual of Commercial Law, António Menezes Cordeiro, Almedina, 2003, Vol. I, p. 22

The activity of the Claimant in the property in question consists of the retail sale of fuels. The Claimant is the mediator between the producer of fuels and the final consumer, having the purpose of obtaining profit.

Thus, the activity of retail sale of fuels should be considered a commercial activity.

Regarding the concept of an act of commerce, Article 2 of the Commercial Code gives us the definition:

Article 2

Acts of Commerce

All those acts which are specially regulated in this Code shall be considered acts of commerce, and, in addition to them, all contracts and obligations of merchants, which are not of an exclusively civil nature, if the act itself does not provide otherwise.

There are two categories of acts of commerce: objective acts of commerce and subjective acts of commerce. Subjective acts of commerce are those that "are characterized by the quality of merchant of its agents," that is, commerciality derives from the subject.

Being the Claimant a merchant (Article 230, 2 of the Civil Code), the purchase and sale of fuels is considered an act of commerce.

In addition, even if one of the parties is not a merchant, the legal regime applicable is that provided for in commercial law (Article 99 of the Commercial Code).

Thus, the retail sale of fuels is an act of commerce.

As for the notion of commercial establishment, both doctrine and case law have converged that it is an economic unit, organized with a view to pursuing a determined purpose and encompassing, for this purpose, a set of elements, corporeal (the property/location where the establishment operates, merchandise/products, machinery, money) and incorporeal (credits and debits, patents, trademarks, know-how, clientele, goodwill, etc.).

It will be said that the commercial or industrial establishment is the material and legal structure integrating, as a rule, a plurality of corporeal and incorporeal things – movable and/or immovable things, including the facilities themselves, rights of credit, real rights and the clientele or goodwill itself - organized with a view to realizing its respective purpose. The commercial establishment is a set of corporeal and incorporeal things, duly organized for the practice of commerce.

Inasmuch as the property has a structure integrated by corporeal and incorporeal elements with a view to the retail sale of fuels, this tribunal considers that it is a commercial establishment.

In view of the foregoing, considering the activity developed in the property as commercial, the acts practiced there as acts of commerce and the establishment considered as commercial, the property should be classified for purposes of IMI as being a commercial property (Article 6, no. 1, paragraph b) of the IMI Code).

Finally, the classification of a property as "other" is residual, that is, only properties that do not fall into any of the other categories are considered "other" (Article 6, no. 4 of the IMI Code). This tribunal being of the view that the property in question should fall under the classification of commercial, the property should not be classified as "other."

In conclusion both properties (the property registered in the urban real property register under no. ..., of the parish of ... and ..., Matosinhos municipality and the property registered in the urban real property register under Article ..., of the parish of ..., Santarém municipality) should be classified as commercial (Article 6, no. 1, paragraph b) of the IMI Code). The valuations challenged are illegal, for considering the properties as falling under the classification of "other" (Article 6, no. 1, paragraph d) of the IMI Code), and should therefore be annulled.

The examination of the other defects is prejudiced by the solution reached above.

VI. DECISION

In view of all that is set forth above, it is decided to render the request for arbitral pronouncement entirely procedurally sound, annulling the valuations:

a) No. ... of the property registered in the urban real property register under no. ..., of the parish of ... and ..., Matosinhos municipality;

b) No. ... of the property registered in the urban real property register under Article ..., of the parish of ..., Santarém municipality.

The value of the proceeding is established at €2,741.64 in accordance with Article 97-A, no. 1, a), of the Code of Tax Procedure, applicable by force of paragraph a) of no. 1 of Article 29 of the RJAT and no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The arbitration fee is established at €612.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid entirely by the Respondent, since the request was entirely granted, in accordance with Articles 12, no. 2, and 22, no. 4, both of the RJAT, and Article 4, no. 4, of the cited Regulation.

Notify the parties.

Lisbon, 15 December 2015

The Arbitrator,

(André Festas da Silva)

[1] Cfr. Oliveira Ascensão, Commercial Law, 1994, Vol. I, p. 122

[2] On the concept of an act of commerce Cfr. José de Oliveira Ascensão, Commercial Law (...), pp. 57 to 99 and António Menezes Cordeiro, Manual of Commercial Law, Almedina, 2003, Vol. I, pp. 147 to 165.

[3] In José de Oliveira Ascensão, Law (...). P. 81.

[4] Cfr. Decision of the Supreme Court of Justice of 08/05/2008, rendered in proceeding 08B1182, António Menezes Cordeiro, Manual (...) p. 239 and Oliveira Ascensão, Law (...), pp. 491 to 532.

[5] In the same sense Cfr. arbitral decision rendered in proceeding no. 62/2013-T, of 13.12.2013.

[6] In this sense Cfr. José Maria Pires, In Lessons of Tax Law, Coord. João Ricardo Catarino and Vasco Branco Guimarães, Vol. I, 2015, 4th Edition, p. 413.

Frequently Asked Questions

Automatically Created

What is the IMI tax and how does it apply to urban property classification in Portugal?
IMI (Imposto Municipal sobre Imóveis) is Portugal's Municipal Property Tax levied on urban and rural properties. For urban properties, Article 6 of the IMI Code establishes classifications including residential, commercial, industrial, services, and 'other.' Classification depends on the licensed purpose or, absent a license, the property's normal intended use. Commercial properties are those licensed or normally used for commercial activities such as retail sales. This classification is crucial because it determines the applicable valuation methodology: commercial and services properties are typically valued under Article 38 using comparative market methods, while 'other' properties may be valued under Article 46(2) using construction cost methods.
How is the taxable value (VPT) of urban properties determined under Portuguese tax law?
The taxable patrimonial value (VPT) of urban properties is determined based on their classification. For commercial, services, residential, and industrial properties, Article 38 of the IMI Code prescribes a formula-based method considering factors like location, quality, age, and market comparables. For properties classified as 'Other,' Article 46(2) permits valuation based on market value of the land plus construction costs. The valuation is performed by evaluation commissions following technical guidelines, but these administrative manuals cannot override statutory provisions in the IMI Code. Taxpayers can initiate valuations by submitting Model 1 declarations, and the Tax Authority issues valuation sheets detailing the classification, methodology, and calculated VPT.
What is the process for requesting a second property valuation when disputing an IMI assessment?
When disputing an IMI assessment, taxpayers may request a second valuation pursuant to Article 76 of the IMI Code. This request must be submitted within 30 days of notification of the first valuation and must specify the grounds for disagreement, such as incorrect classification, improper valuation methodology, or calculation errors. A new evaluation commission, different from the first, conducts the second valuation. If the taxpayer remains dissatisfied after the second valuation, they can escalate the dispute to CAAD (Centro de Arbitragem Administrativa) by requesting constitution of an arbitral tribunal within 90 days, as provided in Decree-Law 10/2011. The arbitral process allows for full review of both classification and valuation issues.
Can taxpayers challenge the classification of urban properties as 'Outros' (Other) before the CAAD arbitral tribunal?
Yes, taxpayers can challenge the classification of properties as 'Outros' (Other) before the CAAD arbitral tribunal. Article 2(1)(a) of the RJAT (Legal Regime of Tax Arbitration) grants jurisdiction over acts determining taxable values, which necessarily includes the underlying classification determinations. In this case, the claimant specifically contested the classification of service stations as 'Other' properties, arguing they should be classified as 'commercial' or 'services' based on Article 6(2) of the IMI Code. The tribunal has authority to review whether the Tax Authority correctly applied the statutory classification criteria, whether administrative guidance (such as valuation manuals) was improperly prioritized over the IMI Code, and whether the chosen classification aligns with the property's licensed or normal purpose.
What are the legal grounds for annulling property valuation acts issued by the Portuguese Tax Authority (AT)?
Legal grounds for annulling property valuation acts include: (1) misapplication of law, such as incorrectly classifying properties contrary to Article 6 of the IMI Code or applying inappropriate valuation methodologies; (2) violation of the hierarchy of norms, where administrative manuals override statutory provisions; (3) lack of adequate reasoning, when authorities fail to justify departures from standard valuation methods; (4) material errors in calculations, including arithmetical mistakes or inconsistent application of construction cost criteria; (5) inclusion of non-taxable elements, such as valuing equipment or machinery that do not constitute buildings or constructions under the IMI Code; and (6) arbitrary or inconsistent determinations lacking objective criteria, particularly when different evaluation commissions reach disparate results without justification. Annulment requires demonstrating that the valuation act violated applicable legal provisions or fundamental procedural guarantees.