Process: 28/2015-T

Date: September 3, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This tax arbitration case (CAAD Process 28/2015-T) addresses whether Stamp Duty under Item 28.1 of the General Stamp Tax Table (TGIS) applies to construction land (terreno para construção) in Portugal. Company A... S.A. challenged two 2013 Stamp Duty assessments totaling €13,926.10 on urban property registered as land for construction with a tax value of €2,088,915.10. The petitioner argued that construction land lacks residential purpose and therefore falls outside Item 28.1's scope, claiming the assessments violated constitutional principles of equality, proportionality, and legal certainty. The Portuguese Tax Authority (ATA) contended the property had legal residential nature, justifying the assessments. The arbitrator cited extensive Supreme Administrative Court jurisprudence, particularly decision 0676/14, establishing that construction land cannot be classified as urban residential property for Stamp Duty purposes. The Court reasoned that Article 6 of the Property Tax Code clearly distinguishes between urban residential properties and land for construction, and since the legislator never defined 'properties with residential purpose' to include undeveloped construction land, Item 28.1 does not apply. The case followed standard CAAD arbitration procedures: administrative reclamation filing, rejection notification, timely arbitration request submission, sole arbitrator appointment, response filing, and written submissions. The petitioner sought assessment annulment and tax refund plus compensatory interest under Article 43 of the General Tax Law. Multiple similar CAAD decisions (53/2013-T, 49/2013-T, 180/2013-T, among others) have addressed this issue, creating consistent jurisprudence protecting taxpayers from improper Stamp Duty assessments on construction land. This case demonstrates the effectiveness of tax arbitration in challenging erroneous property tax classifications and securing refunds for illegally assessed taxes on undeveloped land.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 28/2015 – T

Subject Matter: Stamp Duty – item 28.1 of the General Stamp Tax Table – land for construction

Claimant / Petitioner: A…, S.A.

Respondent: Tax and Customs Authority (hereinafter A.T.A.)

1. Report

On 19-01-2015, the limited liability company A…, S.A., collective person No. …, with registered address at Avenue …, No. … Ground Floor Left, …, hereinafter referred to as the Petitioner, submitted to the Administrative Arbitration Center (CAAD) a request for constitution of an arbitral tribunal with a view, immediately, to the annulment of the decision rejecting the Administrative Reclamation, and mediately, to the annulment of the tax acts assessing Stamp Duty of item No. 28 of the General Stamp Tax Table (TGIS), relating to the year 2013 and relating to the urban property (land for construction) registered in the urban property registry under article … of the parish of …, municipality of Lisbon, and with the tax patrimony value of 2,088,915.10 €.

The Petitioner requests the annulment of the Stamp Duty assessments corresponding to the first and second installments of the tax for the year 2013, each in the amount of 6,963.05 €.

The Petitioner alleges that the property which was the subject of the Stamp Duty assessment is land for construction, and therefore does not have residential purpose, whereby the assessments in question are illegal as they are based on item 28.1 of the General Stamp Tax Table (TGIS) which, in its view, is manifestly unconstitutional by violation of the principles of equality, proportionality and legal certainty.

The Petitioner further requests reimbursement of the amount of stamp duty paid, in the total amount of 13,926.10 €, plus compensatory interest, in accordance with article 43 of the General Tax Law.

A sole arbitrator was designated on 10-03-2015: Suzana Fernandes da Costa.

In accordance with the provisions of article 11, paragraph 1, subparagraph c) of the Tax Arbitration Regime, the sole arbitral tribunal was constituted on 25-03-2015.

The Tax and Customs Authority submitted its response on 06-05-2015 (within the legal deadline for such purpose).

The A.T.A. argues that the request for declaration of illegality and consequent annulment of the disputed assessments should be judged unfounded, since the assessments in question constitute a correct interpretation of item 28.1 of the General Stamp Tax Table, given that the aforementioned property has the legal nature of property with residential purpose.

The A.T.A. further requested, on the same date, the waiver of the meeting provided for in article 18 of the Tax Arbitration Regime.

The Petitioner, notified of this request by the A.T.A., informed on 12-05-2015 that it had no objection to the waiver of the meeting, and that it did not waive the presentation of written submissions, within a deadline to be granted for such purpose.

On 14-05-2015, an order was issued waiving the meeting provided for in article 18 of the Tax Arbitration Regime, and granting a deadline of 30 days for the Petitioner and Respondent, in that order and successively, to present their written submissions. It was also decided in the same order to set as the date for pronouncement of the arbitral decision the day 10-09-2015.

On 22-05-2015 the Petitioner submitted its submissions, and the A.T.A., notified for such purpose, submitted no submissions whatsoever.

The parties have legal personality and capacity and are legitimate (articles 4 and 10, paragraphs 1 and 2 of the Tax Arbitration Regime and article 1 of Ordinance No. 112-A/2011 of 22 March).

The present request for arbitral pronouncement was submitted in a timely manner, in accordance with article 10, paragraph 1, subparagraph a) of Decree-Law No. 10/2011 of 20 January.

The case does not suffer from vices and no preliminary matters were raised.

2. Facts

2.1. Established Facts:

Having analyzed the documentary evidence produced, the following facts are considered established and of interest for the decision of the case:

  1. The Petitioner is the owner of the urban property registered in the property registry under article … of the parish of …, municipality of Lisbon, described as land for construction and which has a tax patrimony value of 2,088,915.10 €.

  2. The Petitioner was notified of the Stamp Duty assessment No. 2014 …, relating to the urban property identified above, a notification which also incorporated a payment document for the first installment of the tax for the year 2013, in the amount of 6,963.05 €, payable by 30-04-2014, in accordance with document 1 attached to the arbitral request.

  3. The Petitioner was notified of the Stamp Duty assessment No. 2014 …, relating to the urban property identified above, a notification which also incorporated a payment document for the second installment of the tax for the year 2013, in the amount of 6,963.05 €, payable by 31-07-2014, in accordance with document 2 attached to the arbitral request.

  4. The Petitioner submitted an administrative reclamation of the two Stamp Duty assessments in question in the present proceedings, in accordance with document 3 attached to the arbitral request.

  5. The administrative reclamation of the aforementioned Stamp Duty assessments was expressly rejected, the Petitioner being notified of its rejection by registered letter with proof of receipt on 24-10-2014, in accordance with copy of the decision attached to the arbitral request as document 5.

  6. The Petitioner proceeded to payment of the stamp duty contained in the two assessments referred to above, in accordance with supporting documents attached to the arbitral request as documents 6 and 7.

No other facts with relevance for the decision of the case were established.

2.2. Foundation of Established Facts:

With regard to the established facts, the conviction of the arbitrator was based on the documentary evidence attached to the case file and on the facts admitted by agreement.

3. Legal Issues:

3.1. Object and Scope of the Present Proceedings

The question to be decided in the present proceedings is whether the property which was the subject of the stamp duty assessments, being land for construction, has residential purpose and whether item 28.1 of the General Stamp Tax Table (TGIS) applies to it.

On this same question, inter alia, the decisions of CAAD issued in cases numbered 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 284/2013-T, 288/2013-T, 310/2013-T, 12/2014-T, 151/2014-T, 202/2014-T, 210/2014-T, 276/2014-T, 514/2014-T, 516/2014-T, 523/2014-T, 599/2014-T and 663/2014-T have already pronounceable.

The Supreme Administrative Court has also already pronounced on this question, namely in the decisions of cases No. 048/14 of 09-04-2014, 0467/14 of 02-07-2014, No. 0676/14 of 09-07-2014, No. 0395/14 of 28-05-2014, No. 01871/13 of 14-05-2014 and No. 055/14 of 14-05-2014, No. 0425/14 of 28-05-2014, No. 0396/14 of 28-05-2014, No. 0274/14 of 14-05-2014, No. 046/14 of 14-05-2014, 01481/14 of 15-04-2015, 0764/14 of 15-04-2015, No. 0279/15 of 22-04-2015, No. 021/15 of 29-04-2015 and No. 01479/14 of 17-06-2015. As stated in the decision issued in case No. 0676/14 of 09-07-2014: "Since the legislator has not defined the concept of 'properties (urban) with residential purpose', and resulting from article 6 of the Property Tax Code – subsidiarily applicable to the Stamp Duty provided for in the new item No. 28 of the General Tax 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 No. 28.1 of the TGIS, as amended by Law No. 55-A/2012, of 29 October) as urban properties with residential purpose."

3.2. Question of the Classification of Land for Construction within the Scope of Application of Item 28.1 of the TGIS

3.2.1. Regime of Law No. 55-A/2012, of 29 October

Law No. 55-A/2012, of 29 October, added item 28 to the General Stamp Tax Table (TGIS), with the following wording:

28 – Ownership, usufruct or surface right of urban properties whose tax patrimony value contained in the registry, in accordance with the Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax patrimony value used for purposes of Property Tax:

28.1 – For property with residential purpose – 1% (…);

In the transitional provisions contained in article 6 of that Law No. 55-A/2012, the following rules were established:

c) The tax patrimony value to be used in the assessment of the tax corresponds to that which results from the rules provided for in the Property Tax Code by reference to the year 2011; (…)

f) The applicable rates are as follows:

i) Properties with residential purpose assessed in accordance with the Property Tax Code: 0.5%;

ii) Properties with residential purpose not yet assessed in accordance with the Property Tax Code: 0.8%;

Item 28.1 TGIS and sub-items i) and ii) of subparagraph f) of paragraph 1 of article 6 of Law No. 55-A/2012 contain a concept which is not used in any other tax legislation, which is that of "property with residential purpose".

Let us examine:

3.2.2. Concept of Properties Used in the Property Tax Code

In the Property Tax Code, the types of properties are enumerated in its articles 3 to 6. In none of these articles can the concept of "property with residential purpose" be found.

The closest notion to the literal meaning of this expression used is that of "residential properties", which paragraph 2 of article 6 of the Property Tax Code defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, which have as their normal destination residential purposes.

However, the non-coincidence of the terms of the expression used in item No. 28.1 of the TGIS with that which is extracted from paragraph 2 of article 6 of the Property Tax Code indicates that it was not intended to use the same concept. This concept is also not found in any other statute.

3.2.3. Concept of "Property with Residential Purpose"

Item 28.1 of the TGIS referred in 2013 to "property with residential purpose".

The word "purpose" (afetação), in this context of use of a property, has the meaning of "action of designating something for a particular use".

As stated in the decision of CAAD issued in case No. 53/2013-T, in which the judges were the Judicial Counselor Jorge Lopes de Sousa, Dr. Conceição Pinto Rosa and Dr. Alberto Amorim Pereira:

"it can be concluded that the interpretive elements available, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', clearly point to the fact that it was not intended to encompass within the scope of application of item No. 28.1 situations of properties that are not yet designated for residential purposes, namely land for construction held by companies".

Those classified as land for construction are, having regard to the provisions of article 6, paragraph 3 of the Property Tax Code, those in respect of which the owner has acquired the right to build thereon or to carry out subdivision operations, as well as those which have been acquired expressly for that purpose. In this sense, see JOSÉ MARIA FERNANDES PIRES in Lectures on Taxes on Patrimony and Stamp Duty, Almedina, 2010, page 97.

It should be noted that in the classification as land for construction it is irrelevant what the purpose of future constructions will be, namely residential, commercial, industrial or for services.

In turn, in the decision of the Supreme Administrative Court of 09-07-2014, in case No. 0676/14, in which the Counselor Dulce Neto is the reporter, it is stated that "residential purpose always appears in the Property Tax Code referred to 'buildings' or 'constructions', existing, authorized or planned, since only these can be inhabited, which is not the case with land for construction, which do not have in themselves conditions for such, not being susceptible of being used for residence except if and when the construction authorized and planned for them is built thereon (but in that case they will no longer be 'land for construction' but another type of urban property – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of the CIMI)."

Similarly, in the decision of the Supreme Administrative Court, of 14-05-2014, case No. 046/14, in which the Reporter is Ascenção Lopes, it is stated that "since the legislator has not defined the concept of 'properties (urban) with residential purpose', and resulting from article 6 of the Property Tax Code – subsidiarily applicable to the Stamp Duty provided for in the new item No. 28 of the General Tax 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 the TGIS, as amended by Law No. 55-A/2012, of 29 October), as urban properties with residential purpose."

We can therefore conclude that "land for construction" cannot be considered as "property with residential purpose" for purposes of application of item 28.1 of the General Stamp Tax Table.

Prohibition of Analogy and Extensive Interpretation

One may, on the other hand, raise the question of the possibility of applying analogy to the item provided for in item 28.1 of the TGIS. Now, on this matter, paragraph 4 of article 11 of the General Tax Law provides as follows:

"4. Gaps resulting from tax rules covered by the legislative reserve of the National Assembly are not susceptible to integration by analogy"

As for the matters covered by the legislative reserve, note article 103, paragraph 2 of the Constitution and article 8 of the General Tax Law. According to these rules the principle of tax legality encompasses incidence, rates, tax benefits and guarantees of taxpayers. This is also stated in the work "The Principle of Tax Legality" by Ana Paula Dourado, Almedina, 2007, page 106.

Since item 28.1 TGIS is a rule of incidence, covered by the principle of tax legality, its analogous application to situations not expressly provided therein is prohibited.

Similarly, neither can an extensive interpretation of the aforementioned item be admitted which would allow land for construction to be included in the expression contained in the law. Interpretation is governed by article 11, paragraphs 1 to 3 of the General Tax Law and article 9 of the Civil Code. We understand that an extensive interpretation of the aforementioned item which includes land for construction therein is not possible, since it would always have to have a minimum correspondence in the letter of the law, which does not occur.

With regard to the historical element, the fact that item 28.1 TGIS was subsequently expressly amended, by the State Budget Law for 2014, in such a way as to include, from 01.01.2014, land for construction, also allows the conclusion that such properties were not taxed in the wording in force until 31.12.2013.

Application of the Regime to the Claimant's Situation

The Claimant's property is land for construction held by a company. Based on what has been stated above, there are no properties with residential purpose, whereby Stamp Duty provided for in item 28.1 of the TGIS does not apply to such properties.

For this reason, the assessments whose declaration of illegality is requested are defective due to violation of that item No. 28.1 TGIS, due to error regarding the legal prerequisites, which justifies the declaration of its illegality and annulment (article 135 of the Code of Administrative Procedure).

The above necessarily implies that the act rejecting the administrative reclamation filed by the Claimant against the Stamp Duty assessments which are the subject of these proceedings is equally defective due to violation of law, due to error regarding the legal prerequisites, which also leads to the declaration of its illegality and consequent annulment (cf. article 135 of the Code of Administrative Procedure).

4. Compensatory Interest

The Claimant requested condemnation of the A.T.A. to reimburse the tax unduly paid, plus compensatory interest in accordance with article 43 of the General Tax Law.

Article 43, paragraph 1 of the General Tax Law provides that "compensatory interest is due when it is determined, in administrative reclamation or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due."

In the case at hand, the error affecting the assessments is attributable to the Tax and Customs Authority which made the assessment acts on its own initiative, whereby the Claimant is entitled to compensatory interest from the date of payment of each amount until reimbursement, at the legal default rate, in accordance with articles 43, paragraphs 1 and 4, and 35, paragraph 10, of the General Tax Law, article 559 of the Civil Code and Ordinance No. 291/2003, of 8 April.

As results from the aforementioned article 43, paragraph 1 of the General Tax Law, the right to compensatory interest depends on payment of a tax debt in an excessive amount.

As the Stamp Duty assessments for the year 2013, No. 2014 … in the amount of 6,963.05 € and No. 2014 … in the amount of 6,963.05 € are defective due to illegality, compensatory interest is due from the date of payment until full reimbursement by the Tax Authority, in accordance with articles 43 of the General Tax Law and 61, paragraph 2 of the Tax Procedural Code.

5. Decision

In view of the foregoing, it is determined:

a) to uphold the request filed by the Claimant in the present tax arbitral proceedings, regarding the illegality of the Stamp Duty assessments for the year 2013, No. 2014 … in the amount of 6,963.05 € and No. 2014 … in the amount of 6,963.05 €;

b) to uphold the request for condemnation of the Tax and Customs Authority to reimburse the Claimant the amount paid of 13,926.10 €, plus compensatory interest in accordance with the law, from the date on which such payment was made until the date of full reimbursement thereof.

6. Value of the Action:

In accordance with the provisions of article 315, paragraph 2, of the Code of Civil Procedure and article 97-A, paragraph 1, subparagraph a) of the Tax Procedural Code and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at 13,926.10 €.

7. Costs:

In accordance with article 22, paragraph 4, of the Tax Arbitration Regime, and Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 918.00 € to be paid by the Tax and Customs Authority.

Notify.

Lisbon, 03 September 2015.

Text prepared by computer, in accordance with article 138, paragraph 5 of the Code of Civil Procedure, applicable by referral of article 29, paragraph 1, subparagraph e) of the Tax Arbitration Regime, reviewed by me.

The sole arbitrator,

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Is Stamp Tax under Table 28.1 of TGIS applicable to construction land (terreno para construção) without residential designation?
No, Stamp Tax under Item 28.1 of TGIS is not applicable to construction land (terreno para construção) without residential designation. The Supreme Administrative Court has consistently ruled that construction land cannot be considered urban property with residential purpose. Article 6 of the Property Tax Code clearly distinguishes between urban residential properties and land for construction. Since the legislator has not defined construction land as having residential purpose, Item 28.1 of TGIS (introduced by Law 55-A/2012) does not apply to such properties. Multiple CAAD arbitration decisions and Supreme Administrative Court rulings support this interpretation, establishing that undeveloped land designated for future construction lacks the residential character required for Stamp Duty assessment under Item 28.1.
Can a taxpayer challenge Stamp Tax assessments on construction land through CAAD tax arbitration proceedings?
Yes, taxpayers can successfully challenge Stamp Tax assessments on construction land through CAAD (Administrative Arbitration Center) tax arbitration proceedings. The procedure requires: (1) first filing an administrative reclamation (reclamação graciosa) against the assessments; (2) if rejected, submitting a timely arbitration request to CAAD within legal deadlines under Article 10 of Decree-Law 10/2011; (3) appointing a sole or panel arbitrator; (4) allowing the Tax Authority to file its response; and (5) presenting written submissions. This case demonstrates that CAAD arbitration is an effective remedy, with the arbitral tribunal having jurisdiction to annul illegal assessments and order refunds. The process provides faster resolution than judicial courts and has produced consistent favorable outcomes for taxpayers challenging construction land assessments.
Does applying Stamp Tax Table 28.1 to construction land violate constitutional principles of equality, proportionality, and legal certainty?
While the petitioner argued that applying Stamp Tax Table 28.1 to construction land violates constitutional principles of equality, proportionality, and legal certainty, the arbitration decisions primarily rest on statutory interpretation rather than constitutional grounds. The Supreme Administrative Court and CAAD tribunals have focused on the legal distinction between construction land and residential property under the Property Tax Code. However, the constitutional arguments have merit: applying residential property tax to undeveloped land creates unequal treatment compared to actual residential properties, disproportionately burdens landowners without corresponding use value, and violates legal certainty by extending tax provisions beyond their clear legislative scope. The tribunals' consistent rulings effectively protect these constitutional principles by narrowly interpreting Item 28.1's application to exclude construction land.
What is the procedure for claiming a refund of Stamp Tax paid on construction land, including compensatory interest under Article 43 of the General Tax Law?
The procedure for claiming a Stamp Tax refund on construction land includes: (1) filing an administrative reclamation challenging the assessments; (2) upon rejection, submitting a CAAD arbitration request seeking assessment annulment and refund; (3) providing proof of payment of the contested amounts; (4) specifically requesting reimbursement of paid taxes plus compensatory interest; and (5) invoking Article 43 of the General Tax Law (Lei Geral Tributária), which mandates compensatory interest on illegally collected taxes. In this case, the petitioner paid €13,926.10 and requested full reimbursement plus interest. Once the arbitral tribunal annuls the illegal assessments, the Tax Authority must refund the principal amount plus compensatory interest calculated from payment date until refund issuance. The interest compensates taxpayers for the time value of money improperly retained by the state.
How does the Portuguese Tax Authority (ATA) interpret the housing designation requirement for construction land under Stamp Tax Table 28.1?
The Portuguese Tax Authority (ATA) interprets construction land as having 'legal nature of property with residential purpose,' arguing that Item 28.1 of TGIS applies regardless of whether buildings currently exist. The ATA's position is that land designated for construction inherently has residential purpose if it will eventually support residential development. However, this interpretation conflicts with Supreme Administrative Court jurisprudence and the Property Tax Code's Article 6, which clearly distinguishes construction land from urban residential properties. The courts have rejected the ATA's broad interpretation, holding that residential purpose requires actual residential use or completed residential structures, not merely future potential. The ATA's expansive reading would improperly extend Stamp Duty to undeveloped property, contradicting legislative intent and established tax law principles requiring strict interpretation of tax obligations.