Process: 274/2013-T

Date: August 12, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 274/2013-T addressed critical issues regarding Stamp Tax (Imposto do Selo) application under Verba 28 of the General Table (TGIS) to properties held in vertical ownership. The case involved a building in Lisbon comprising three independent floors allocated to housing. The Tax Authority assessed Stamp Tax for 2012 by summing the Taxable Patrimonial Values (VPT) of all floors, which exceeded €1,000,000, and using VPT from an appraisal notified in May 2013. The taxpayer challenged this on two grounds: first, the incorrect VPT reference date, arguing that Article 113 of the IMI Code requires using the VPT registered on 31 December 2012, not a retroactive appraisal notified in 2013; second, the improper aggregation of independent units, contending that vertical ownership properties with autonomous divisions should be assessed separately like condominium units, consistent with IMI treatment where each unit receives individual collection documents. The taxpayer argued that Verba 28 TGIS, introduced by Law 55-A/2012, should follow IMI Code principles for determining taxable values, and that independent units below the €1,000,000 threshold should not be subject to Stamp Tax merely because their sum exceeds it. The case raised fundamental questions about temporal application of property appraisals, the legal definition of 'property' for Stamp Tax purposes, and whether vertical ownership structures warrant different treatment than traditional full ownership when independent housing units exist within a single building registration.

Full Decision

ARBITRAL DECISION

Case No. 274/2013-T

I – REPORT

A... (hereinafter identified only as Claimant), with Tax Identification Number ..., resident at ... Street, Lisbon, submitted on 29 November 2013, a request for constitution of an Arbitral Court, pursuant to the provisions of Articles 2 and 10 of Decree-Law 10/2011 of 20 January (Legal Framework of Arbitration in Tax Matters, hereinafter identified only by the initials RJAT).

In the request for arbitral determination, the Claimant chose not to appoint an arbitrator.

Pursuant to paragraph 1 of Article 6 of the RJAT, the Ethics Council of the Arbitration Centre appointed a sole arbitrator.

On 3 February 2014, the Arbitral Court was duly and properly constituted to appreciate and decide the object of the case.

On 13 May 2014, the following order was issued:

"Notify the Parties that, within a period of 10 days, they shall pronounce on the non-holding of the meeting provided for in Article 1 of the RJAT.

If the Parties agree with the non-holding of the said meeting, they shall be considered notified that, within a period of 10 days, counting from the end of the aforementioned period, they shall present, successively, starting with the Claimant, and in writing, their pleadings".

Following this order, on 2 and 11 June 2014, the Claimant and the Tax and Customs Authority (AT), in its capacity as Respondent, presented their pleadings, respectively.

The Claimant seeks, with the request for constitution of the Arbitral Court, the declaration of illegality of the tax assessment acts (notified through collection documents numbered 2013 ... all of 14.07.2013) of Stamp Duty (IS) which, under item 28 of the General Table of Stamp Duty, fell upon the urban property with registration number 86, located at ... Street, District and Municipality of Lisbon, parish of ..., of which he is the owner.

The Claimant argues, in summary, his claim as follows:

  • That, according to the respective urban property book, the property identified above is constituted in vertical ownership;

  • That, also according to the said property book, the property is constituted by three stories or independent divisions, corresponding to the Ground Floor, First Floor and Second Floor, all of which are allocated to housing and are of independent use;

  • That the contested assessments were based on the Taxable Patrimonial Value (VPT) resulting from the appraisal that was notified to him on 28 May 2013, and that in the Claimant's understanding and in light of the applicable norms, the VPT in force on 31 December 2012 was required;

  • That the VPT in force on 31 December 2012, contrary to what the Tax Authority (AT) argues, was already the VPT updated in accordance with the IMI Code (CIMI);

  • The AT's assessment acts are based on the understanding that a building constituted in full ownership, even if with parts or divisions susceptible to independent use, integrates the legal concept of property and should be viewed and treated as a single unit, whose VPT is determined by the sum of the parts with allocation, and if that sum exceeds €1,000,000.00, there is subjection to IS within item 28 of the GTIS;

  • This understanding of the AT has, for the Claimant, no basis in law, more specifically in the wording of item 28 and of the norms which, within Law 55-A/2012 of 29 October, accompanied the creation of that item 28 of the GTIS and also in the norms contained in the IMI Code (CIMI) to which the Stamp Duty Code refers;

  • Thus, from the taxing rule contained in the cited item 28 of the GTIS, it results that payment of IS depends on two circumstances, namely:

    • That the VPT contained in the register is equal to or greater than €1,000,000.00;

    • That the property is allocated to housing

  • Pursuant to the provisions contained in the Stamp Duty Code (CIS) and Law 55-A/2012 (cf. Articles 5 para. u) and 23 para. 7 of the CIS and Article 6 para. 2 of Law 55-A/2012), the CIMI emerges as the normative reference within the scope of IS assessment provided for in item 28 of the GTIS, and that, for purposes of IS assessment, the VPT used in the same year for purposes of IMI shall be relevant;

  • Pursuant to Article 113 of the CIMI, the tax is assessed annually, in the year following the one to which the tax relates, and on the basis of the VPT contained in the register on 31 December of the year to which the tax relates, so the IS underlying the contested assessments should have fallen upon the VPT contained in the register on 31 December 2012;

  • In the present case, and contrary to what the norms cited here provide, the AT, in the IS assessments for 2012, upon the stories susceptible to independent use that make up the property, used the VPT determined within the scope of the general appraisal of properties provided for in Law 60-A/2011 of 30 November, which was only notified to the Claimant on 28 May 2013, which, in his understanding, is totally unacceptable because it represents the retroactive application of this appraisal result;

  • Not having complied with the deadline that the legislator proposed, in Law 60-A/2011, to have the general appraisal process of properties completed – 31 December 2012 – account must be taken of what the assessment rules provide, more specifically what the aforementioned Article 113 of the CIMI provides, which stipulates that IMI is assessed on the basis of the VPT contained in the register on 31 December of the year to which it relates;

  • Considering that the appraisal was only notified on 28 May 2013 and that, pursuant to the law, it only becomes final 30 days later, on 31 December 2012 the VPT that should have been considered was, repeats the Claimant, that which was contained in the register on this date, similar to what occurred, moreover, for IMI;

  • Now, being the VPT contained in the register, on 31 December 2012, whether that of any of the units/fractions susceptible to independent use, or what would result from the sum of those fractions, less than €1,000,000.00, the IS taxation sought by the AT should not have been triggered;

  • Whereby the taxing fact does not exist and the corresponding assessment is illegal for purposes of application of item 28 of the GTIS, because the result of the appraisal only produces effects for the year 2013;

  • In addition to the value of the VPT on which the IS assessments fell, the Claimant further raises the illegality of these same assessments resulting from the lack of autonomization of the taxable patrimonial values of each story or division susceptible to independent use;

  • After transcribing Articles 2 and 12 of the CIMI, the Claimant concludes for the illegality of the assessments because they were based on and fell upon the VPT resulting from the sum of the different stories or divisions susceptible to independent use;

  • In fact, the Claimant understands that, being IMI the frame of reference for this new form of taxation, it imposed itself, for purposes of IS assessment and similar to what occurs in that tax, the complete autonomization of fractions susceptible to independent use, as indeed occurs in the case of autonomous fractions of properties in condominium ownership;

  • Effectually, in the context of IMI, the registration in the property register of properties in full ownership, when constituted by independent units, is carried out separately, individually discriminating the VPT of each part of the property;

  • Furthermore, in this case, the AT issues, for purposes of IMI, individualized collection documents;

  • Given the arguments referred to, the Claimant concludes that, "… taking into account that the assessment of Stamp Duty should comply with the taxable patrimonial value resulting from the rules contained in the CIMI, and that the objective incidence of the tax constitutes ownership of the urban property allocated to housing whose taxable patrimonial value contained in the register equals or exceeds €1,000,000, in the assessment of Stamp Duty on properties in full ownership the individualization that in the register is made regarding each story or fraction susceptible to independent use should be respected.";

  • It should be added that, given the identity of this situation with the situation in which properties are in condominium ownership, not to consider this form of separate and individualized taxation of each fraction susceptible to independent use would constitute a clear violation of the principle of equality, constitutionally enshrined;

  • Thus, although the allocation of the three independent fractions is residential, there should be no IS assessment, because none of these fractions has, on its own, a VPT equal to or greater than the limit of €1,000,000.00 legally enshrined.

In its defense, the AT, Respondent in this case, invoked the following:

  • It is not true as alleged by the Claimant that the general appraisal of properties should have been completed by November 2012, because the period of 10 years should be counted from 2003-12-01, ending thus on 2013-12-01 and not in November 2012;

  • Moreover, although the general appraisal process, resulting from the obligation assumed towards international creditors and enshrined in Law 60-A/2011, ended already in the year 2013, the legislator was very clear, in the said Law, in intending to use the new taxable patrimonial values resulting from that process, with respect to taxpayers that were in the registers on 31 December 2012;

  • In defense of this understanding, the AT cites and transcribes (partially) Circular No. 4/2013 of the Services Directorate of Municipal Property Tax;

  • As to the retroactivity of the norm raised by the Claimant, the AT considers, insofar as this is not a situation of authentic retroactivity, which is the only case in which the Constitution imposes a prohibition on retroactivity of tax law (for this purpose, the Respondent indicates various rulings of the Constitutional Court in which this position is expressed);

  • Because, already from 1 December 2011 (with the entry into force of Law 60-A/2011), the legislator made very clear that the taxing fact occurring on 31 December 2012 would already be subject to a new VPT, even if that VPT was calculated already in the year 2013.

  • That is, the legislative amendment made by Law 60-A/2011 announced, more than a year in advance, the increase in IMI to be paid by owners of properties not appraised in light of the CIMI for the period of 2012.

  • In conclusion, the Respondent argues that, in the situation under analysis, there is no violation of the principles of trust and legal certainty, as with the publication of Law 60-A/2011, all taxpayers became aware of the consequences of the new regime provided therein, namely of that set out in Article 15-D/A of Decree-Law 287/2003;

  • As to the illegality resulting from the lack of autonomization of the VPT of each story susceptible to independent use, the AT also manifests total disagreement with the positions taken by the Claimant;

  • In fact, the AT understands that full ownership and condominium ownership do not constitute, in any way, substantially identical legal realities, because it was the legislator itself who understood that only fractions subject to the condominium ownership regime could acquire the status of property, so that only with a change in the nature of the fractions susceptible to independent use, that is, only with the effective constitution of condominium ownership, are those fractions considered properties;

  • For the Respondent, the VPT of an urban property in the full ownership regime results necessarily from the sum of the patrimonial values of the stories susceptible to independent use, a position which is supported both by the wording of Article 7 paragraph 2 para. b) of the CIMI, and by some doctrine, being cited and partially transcribed, for this purpose, the works of Joaquim Silvério Mateus and Corvelo de Freitas ("The Taxes on Real Property") and of Martins Alfaro (IMI Code Annotated and Commented);

Notified for this purpose, by order dated 13 May 2014 (cf. point 6 of this decision, above), the Parties presented, in writing, their pleadings, where they maintained the arguments deduced in the initial request – the Claimant – and in the defense - the Respondent.

II – PROVED FACTS

  • The Claimant was notified of the tax assessment acts (notified through collection documents numbered ... all of 14.07.2013) of Stamp Duty (IS) which, under item 28 of the General Table of Stamp Duty, fell upon the urban property with registration number 86, located at ... Street, No. 14, District and Municipality of Lisbon, ...

  • The assessment had as its basis the fact that the AT considered that the VPT of the property, corresponding to the sum of the VPT of the three units/fractions that compose it, was greater than €1,000,000.00.

  • The Claimant is the owner and legitimate proprietor of the property identified in number 1 above.

  • The property, despite being in the vertical ownership regime, has three units/fractions susceptible to independent use, corresponding to the ground floor, first and second floors, and, for each of these fractions, the AT determined a VPT autonomously and independently.

  • The VPT of each of the units/fractions susceptible to independent use is less than €1,000,000.00

  • The VPT on which the AT based the application of item 28.1 of the GTIS were notified to the Claimant on 28 May 2013.

  • The Claimant did not file an administrative complaint of these assessments and proceeded directly to their challenge before the Arbitral Court through a request filed on 29 November 2013.

  • The Arbitral Court was duly and properly constituted on 3 February 2014.

  • The facts mentioned above are proved by the documents attached by the parties, and no other facts considered relevant to the decision object of the present case have been proved.

It now falls to appreciate and decide.

III – DECISION

In the understanding of this Court, there are two fundamental issues that must be the subject of analysis.

The first is to determine the VPT on which the IS should fall, that is, whether the VPT that was contained in the register on 31 December 2012, or the VPT that served as the basis for the assessment and that was notified to the Claimant only on 28 May 2013.

The second issue is to determine which, under item 28 of the GTIS, is the taxable value on which IS should fall, when it is a property in full (or vertical) ownership constituted by units/fractions susceptible to independent use. To decide, in this manner, whether IS should fall on the sum of the VPT of those fractions or if, on the contrary, IS should fall on each of those fractions susceptible to independent use and corresponding VPT.

DETERMINATION OF WHICH VPT SHOULD FORM THE BASIS OF STAMP DUTY

As mentioned in the introduction to this chapter of the decision, the question under analysis is whether the assessment of IS under item 28 of the GTIS should consider the value inscribed in the property register of the property subject to taxation on 31 December 2012 or whether it should consider the value notified to the Claimant on 28 May 2013, resulting from the general appraisal process determined by Law 60-A/2011.

From the applicable provisions, especially from the transitional rule provided for in Law 55-A/2012, the IMI Code is the normative reference for purposes of IS assessment, and it should be noted, with particular emphasis, that which is established in paragraph 2 of the cited Article 6 of the said Law.

According to this provision: "In 2013, the assessment of stamp duty provided for in item no. 28 of the respective General Table must fall upon the same taxable patrimonial value used for purposes of assessment of municipal property tax to be effected in that year."

Now, for this purpose, Article 113 of the CIMI provides that this tax is assessed annually, "… on the basis of the VPT contained in the register on 31 December of the year to which the tax relates."

From this, it results clearly that the taxable base on which the IS provided for in item 28 of the GTIS must fall is the VPT contained in the register on 31 December 2012, since pursuant to paragraph 1 of Article 113 of the CIMI, the tax is assessed on the basis of the VPT of properties contained in the registers on 31 December of the year to which the same relates.

Now, although the tax is assessed only in 2013, pursuant, moreover, to that provided for in paragraph 2 of Article 113 of the CIMI, it relates, unequivocally, to the previous year, that is, 2012.

Therefore, the VPT to be considered can only be, pursuant to the applicable legislation, that which was inscribed in the register on 31 December 2012.

It should be added that, with respect to the IMI assessed to the Claimant, it was that value on which this tax fell.

To adopt the VPT that resulted from the general appraisal process promoted by the AT, in the wake of the Memorandum of Understanding entered into by the Portuguese State with international creditors, would be, in the opinion of the Court, a retroactive application of the result of that appraisal.

Thus, as stated in the decision rendered in the context of case 225/2013-T of the CAAD, "… Article 103 paragraph 3 of the Constitution of the Portuguese Republic determines that retroactive taxes cannot be created, which, together with the principle of legal certainty, prevents, in our view, that the tax act of value fixation occurring in 2013 have repercussions on a legal fact occurring in 2012."

Now, being the VPT of the property on which taxation fell, on 31 December 2012 less than €1,000,000.00, even assuming (with which we do not agree, as we shall see below) that IS falls on full and not fractional ownership, one of the essential requirements for the verification of the taxing rule is not thus fulfilled, and therefore not of the assessment of the tax.

Therefore, in this particular respect, the contested assessments are illegal and should accordingly be annulled.

INCIDENCE OF IS PROVIDED FOR IN ITEM 28 OF THE GTIS IN CASE OF PROPERTY HELD IN FULL OWNERSHIP REGIME BUT COMPOSED OF FRACTIONS SUSCEPTIBLE TO INDEPENDENT USE

The issue to be decided focuses essentially on determining whether within the scope of incidence of IS provided for in item 28 of the GTIS are included residential properties which, not being constituted in condominium ownership, are composed of fractions/units susceptible to independent use and whose VPT is less than €1,000,000.00, but in which the sum of the VPT of those same fractions exceeds this amount.

The taxing rule contained in item 28 of the GTIS states that urban properties whose VPT, contained in the register, pursuant to the CIMI, is equal to or greater than €1,000,000.00 are subject to this tax.

As already verified previously, also in this question, by virtue of the referential rule contained in Article 67 paragraph 2 of the Stamp Duty Code, we shall have to resort to the rules of IMI regarding the treatment given to parts of urban properties susceptible to independent use, especially regarding the determination of their VPT.

Thus, pursuant to Article 12 paragraph 3 of the CIMI, which defines what is considered the property register: "each story or part of a property susceptible to independent use is considered separately in the property registration, which discriminates the respective taxable patrimonial value".

The law thus establishes a true "fiscal" autonomization of the fractions of a property susceptible to independent use, an autonomization that also occurs, moreover, regarding the assessment rules, as clearly results from that provided for in Article 119 of the CIMI.

According to the last of the cited provisions, when it is a property in vertical ownership, but with fractions susceptible to independent use, the assessment of IMI does not have as reference the sum of the taxable patrimonial values of the various autonomous parts, but only the value attributed to each of them.

It results therefore from the applicable rules of the CIMI, to which the Stamp Duty Code expressly refers, that the autonomous units/fractions of urban properties have total autonomy, both in terms of appraisal and of assessment of the tax.

As stated in the decision rendered in case no. 248/13-T of the CAAD, with which this Court agrees, "In referring to the taxable patrimonial value considered for purposes of IMI, the rule of incidence and quantification of stamp duty to which item 28 of the respective Table refers, can only appeal to the reality described above, that is, to the taxable patrimonial value considered under IMI regarding each part of the urban property susceptible to independent use." (underlined in original).

Being, in this case, the question in every respect identical to that which was dealt with and analyzed in the cited case (248/13-T), and agreeing with its content, full adherence is given to the conclusion expressed therein and transcribed here.

In the same sense, moreover, the Arbitral Judges had already pronounced in arbitral cases of the CAAD, as for example, among others, in cases 50/2013-T, 132/13-T and/or 181/13-T.

Thus being, the Court understands that, also in this particular respect, the assessments are marred by illegality and should, consequently, be annulled.

CONCLUSION

Decision: Based on the foregoing, it is decided in favor of the procedence of the request for annulment of the IS assessment acts contained in the collection documents numbered ... all dated 14.07.2013.

In this manner, showing itself procedent the understanding of the Claimants regarding the question of the illegality of the IS assessment acts, it becomes unnecessary to verify the procedence of the allegation of other defects of the assessments now challenged, with the exception of the request formulated by the Claimant that the AT be condemned, forthwith, to reimburse him for the expenses incurred with the provision of the bank guarantee to suspend the tax enforcement proceedings.

As to this request, the Court understands, as defended by the AT in its defense, that this request should not be formulated at this stage, but rather in the context of Execution of Judgment.

Value of the case: €12,486.60

Costs of the case: Costs calculated in accordance with Table I of the regulation of costs of tax arbitration proceedings according to the value of the claim, at the charge of the Respondent and which I fix at 918.00 (nine hundred and eighteen euros).

Lisbon, 12 August 2014

Let it be notified

THE ARBITRATOR

The drafting of this decision is governed by the old orthography.

Frequently Asked Questions

Automatically Created

How does Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) apply to properties held in vertical ownership (propriedade vertical)?
Verba 28 of the TGIS applies Stamp Tax to urban properties allocated to housing with a Taxable Patrimonial Value (VPT) equal to or exceeding €1,000,000. In Process 274/2013-T, the central dispute concerned whether properties held in vertical ownership (propriedade vertical) with multiple independent units should be treated as a single property for this threshold or assessed separately. The taxpayer argued that buildings with independent floors or divisions capable of autonomous use should follow IMI Code principles, where each unit is registered and assessed individually. The Tax Authority's position was that vertical ownership properties constitute a single legal unit whose VPT equals the sum of all component parts, triggering Stamp Tax when the aggregate exceeds €1,000,000. This contrasts with horizontal property (condominium) where autonomous fractions are unquestionably assessed separately. The taxpayer contended this interpretation lacked legal basis in Verba 28's wording, the IMI Code references in Articles 5(u) and 23(7) of the Stamp Duty Code, or Law 55-A/2012 which created the provision.
What is the correct Valor Patrimonial Tributário (VPT) reference date for Stamp Tax (Imposto do Selo) assessments on residential properties?
The correct VPT reference date for Stamp Tax assessments under Verba 28 TGIS is governed by Article 113 of the IMI Code, which the Stamp Duty Code expressly references as the normative framework. Article 113 stipulates that IMI is assessed annually based on the VPT contained in the property register on 31 December of the year to which the tax relates. In Process 274/2013-T, the taxpayer challenged the Tax Authority's use of VPT from a general appraisal notified on 28 May 2013 for calculating 2012 Stamp Tax. The taxpayer argued this constituted illegal retroactive application, as the appraisal only became final 30 days after notification (June 2013), well after 31 December 2012. Since Law 60-A/2011's deadline for completing the general property appraisal by 31 December 2012 was not met, the taxpayer contended the assessment rules in Article 113 CIMI must apply strictly: the VPT in force for 2012 Stamp Tax should be that registered on 31 December 2012, which was below €1,000,000, meaning no taxable event occurred and the new appraisal results could only affect 2013 onwards.
Can each independent unit in a vertical property building be assessed separately for Stamp Tax under Verba 28 TGIS?
The key issue in Process 274/2013-T was whether independent units within a vertical ownership building can be assessed separately for Stamp Tax under Verba 28 TGIS. The taxpayer argued that complete autonomization of fractions capable of independent use is required, consistent with IMI treatment. Under the IMI Code, particularly Articles 2 and 12, properties in vertical ownership with independent units are registered separately in the property register with individualized VPT for each part, and the Tax Authority issues separate IMI collection documents for each unit. The taxpayer contended that since Verba 28 references the IMI Code framework (via Articles 5(u) and 23(7) of the Stamp Duty Code and Article 6(2) of Law 55-A/2012), the same autonomization principle must apply to Stamp Tax. Therefore, each independent floor should be assessed against the €1,000,000 threshold individually, not aggregated. The Tax Authority maintained that buildings in full ownership, even with independently usable parts, constitute a single property whose VPT is the sum of components, and Stamp Tax applies when the total exceeds €1,000,000, regardless of individual unit values.
What was the CAAD arbitral tribunal's decision in Process 274/2013-T regarding the legality of Stamp Tax liquidations?
While the complete decision text is not provided, Process 274/2013-T at the CAAD (Administrative Arbitration Center) involved the taxpayer seeking declaration of illegality for Stamp Tax assessments issued in July 2013 for the 2012 tax year under Verba 28 TGIS. The arbitral tribunal, constituted as a sole arbitrator under the RJAT (Legal Framework of Arbitration in Tax Matters - Decree-Law 10/2011), was tasked with determining two fundamental issues: whether the Tax Authority correctly applied VPT from an appraisal notified in May 2013 retroactively to 2012, and whether independent units in vertical ownership should be assessed separately or aggregated. The taxpayer argued that using the 2013 appraisal for 2012 violated Article 113 of the IMI Code requiring the VPT registered on 31 December 2012, and that treating independent housing units as a single property contradicted IMI Code principles. The case raised important precedential questions about temporal application of property valuations and the proper interpretation of 'property' for Stamp Tax purposes when independent housing units exist within vertical ownership structures.
How can taxpayers challenge Stamp Tax assessments on high-value residential properties through CAAD arbitration under the RJAT?
Taxpayers can challenge Stamp Tax assessments on high-value residential properties through CAAD arbitration under the RJAT (Regime Jurídico da Arbitragem em Matéria Tributária) established by Decree-Law 10/2011 of 20 January. As demonstrated in Process 274/2013-T, the procedure involves submitting a request for constitution of an arbitral tribunal pursuant to Articles 2 and 10 of the RJAT. Taxpayers may choose to appoint an arbitrator or, as in this case, opt not to appoint one, whereupon the Ethics Council of the Arbitration Centre appoints a sole arbitrator under Article 6(1) RJAT. Once constituted, the tribunal follows procedural rules including potential hearings (though parties may agree to written pleadings only) and allows both parties to present arguments. Key grounds for challenging Verba 28 TGIS assessments include: incorrect VPT reference date (arguing for 31 December valuation under Article 113 CIMI rather than later appraisals), improper aggregation of independent units in vertical ownership, retroactive application of property appraisals, and substantive interpretation of threshold applicability. CAAD arbitration provides an alternative to judicial courts for resolving tax disputes efficiently.