Process: 281/2013-T

Date: April 24, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (281/2013-T) addresses a critical dispute regarding the application of Item 28 of the General Table of Stamp Duty (Tabela Geral do Imposto do Selo - GTSD) to urban properties with multiple independent divisions. Company A, S.A. challenged Stamp Duty assessments on an urban building located in Porto containing 8 floors and 42 divisions with independent use (38 residential units), arguing that the property should not be subject to Item 28.1 taxation. The central legal question concerns whether properties in full ownership with independent divisions should be assessed as a single unit or separately for Stamp Duty purposes. The Claimant contended that the same individualized assessment criteria applied for Municipal Property Tax (IMI) should govern Stamp Duty, meaning Item 28 would only apply if individual divisions exceeded €1,000,000 in tax property value (VPT). They argued that if the property were constituted under horizontal ownership, none of the residential units would face this tax obligation. The Tax Authority (AT) defended the assessments, asserting that properties in full ownership constitute a single legal-tax entity under Article 2(4) of CIMI, distinguishing them from autonomous horizontal ownership units. The AT maintained that the legislator intentionally designed Item 28.1 to tax entire properties in full ownership, regardless of internal divisions. This arbitration proceeding, conducted under Decree-Law 10/2011 (RJAT), exemplifies taxpayers' ability to challenge Stamp Duty assessments through alternative dispute resolution mechanisms, with the arbitral tribunal constituted on February 6, 2014, to resolve this fundamental interpretive question affecting real estate taxation in Portugal.

Full Decision

ARBITRATION DECISION

CAAD: Tax Arbitration

Case No. 281/2013-T

Subject: Stamp Duty – item 28

I - REPORT

  1. On December 3, 2013, company A, S.A., holder of NIPC …, with registered office …, (hereinafter referred to as "Claimant") requested the constitution of an arbitral tribunal, under the terms of articles 2 and 10 of Decree-Law No. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT").

  2. The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD, on December 4, 2013, and was notified, on December 5, 2013, to the Tax and Customs Authority (hereinafter referred to as "AT" or the "Respondent").

  3. The Claimant seeks the pronouncement of the Arbitral Tribunal with a view to declaring the illegality of the acts of assessment of Stamp Duty, relating to the floors and divisions with independent use of the urban property located at …, 264/278/320, …, Porto district, registered in the respective urban property matrix under article …, previous ….

  4. In the request for arbitral pronouncement, the Claimant opted not to appoint an arbitrator. Pursuant to subsection a) of item 2 of article 6 and subsection b) of item 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of December 31, the Deontological Council of CAAD designated as arbitrator of the sole arbitral tribunal the Esteemed Dr. Olívio Mota Amador who, within the applicable period, communicated acceptance of the office.

  5. The parties were notified, on January 22, 2014, of the designation of the arbitrator, and did not manifest any intention to refuse the arbitrator's designation, in accordance with article 11, item 1, subsections a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  6. In accordance with the provisions of subsection c) of item 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of December 31, the arbitral tribunal was constituted on February 6, 2014.

  7. On March 17, 2014, the Respondent, duly notified for such purpose, presented its Answer and, on the same date, forwarded the Tax Administrative Proceedings.

  8. On March 31, 2014, at 3 p.m., in the offices of CAAD, the meeting provided for in article 18 of the RJAT took place, with the attendance of the designated Arbitrator and the representative of the Respondent. The representative of the Claimant communicated to the Tribunal, on March 28, 2014, that he could not attend the aforementioned meeting and informed that he waived the production of evidence and oral arguments. The representative of the Respondent declared that she also waived the production of evidence and final arguments, as stated in the respective meeting minutes, which are hereby reproduced in full for the necessary legal purposes.

  9. The request for arbitral pronouncement filed by the Claimant, in accordance with the provisions of the petition, may be summarized in the following terms:

9.1. The property is not exclusively residential and its floors or divisions with independent use intended for housing are not covered by the provision of item 28.1 of the General Table of Stamp Duty, hereinafter abbreviated as "GTSD". Thus, the referenced assessments suffer from a defect of violation of that item 28.1 of the GTSD due to error on the legal and factual assumptions, which justifies the declaration of their illegality and annulment.

9.2. For purposes of Municipal Tax on Real Estate (abbreviated as "IMI"), real properties in vertical ownership consisting of parts capable of independent use are subject to the same registration rules as properties constituted in horizontal ownership, and the respective IMI is levied individually in relation to each one of the parts and based on their respective tax property values (VPT), as if they were autonomous units. Being the respective IMI, as well as the Stamp Duty to which they may be subject levied individually in relation to each one of the parts, it offers no doubt that the legal criterion to define the incidence of Item 28 of the GTSD must be the same.

9.3. There could only be an application of item 28 of the GTSD if any of the divisions with independent use had a VPT exceeding € 1,000,000.00. This is not the case. In fact, if the property in question were under a horizontal ownership regime, none of its residential units would suffer the incidence of the new tax.

9.4. It makes no sense for the AT to consider as the reference value for the incidence of the new tax the total value of the property since the legislator himself established a different rule in the scope of CIMI (article 12, item 3 applicable by virtue of article 67, item 2 of the Stamp Duty Code).

9.5. As the assessment results from a manifest error of the AT services in the interpretation of the applicable legal framework, the Claimant is entitled, pursuant to article 43, item 1, of the LGT, to compensatory interest calculated on the value of the tax improperly paid, from the date of its respective payment.

  1. The Respondent in its answer states, in abbreviated summary, the following:

10.1. In properties in full ownership, even if with floors or divisions capable of independent use, although IMI is levied in relation to each part capable of independent use, for purposes of Stamp Duty what is relevant is the property as a whole, since divisions capable of independent use are not considered as property, but only autonomous units in the horizontal ownership regime, as provided in article 2, item 4 of the CIMI.

10.2. The constitution in horizontal ownership determines the partition/division of full ownership and the independence or autonomy of each of the units that constitute it, for all legal purposes, pursuant to article 4, item 2 of the CIMI and article 1414 of the Civil Code, and a property in full ownership constitutes, for all purposes, a single legal-tax entity.

10.3. It results expressly from the law that the legislator intended to tax with item 28.1 of the GTSD properties as a single legal-tax entity.

10.4. Given that parts of the properties have non-residential use, it is important to purge the Tax Property Value subject to tax in that part, under penalty of incurring excess quantification of the taxable matter.

10.5. It is clear that the tax acts are valid and legal, because they conform to the legal regime in force at the date of the tax facts, and no error imputable to the services has occurred, nor any annulment of any tax act. Thus, the legal requirements that could confer upon the claimant the right to the requested compensatory interest are not met.

II – CLARIFICATION

  1. The arbitral tribunal is materially competent and is regularly constituted, pursuant to articles 2, item 1, subsection a), 5, item 2, and 6, item 1 of the RJAT.

The parties have legal personality and capacity, are legitimate and are duly represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Ordinance No. 112-A/2011 of March 22.

The proceedings do not suffer from any defects that would invalidate them.

In these terms, there is no obstacle to the consideration of the merits of the case.

III – FACTUAL MATTERS

  1. Proven Facts

12.1. On the basis of the tax administrative proceedings and the documentary evidence attached to the records, the following facts are considered proven:

A) The Claimant is the legitimate owner of the urban property located at …, registered in the urban property matrix of the parish under the property article ….

B) The property, identified in the previous subsection, is not constituted in horizontal ownership. According to the Urban Property Record, the aforementioned property is described as property in full ownership with floors or divisions capable of independent use, having 8 floors and 42 floors or divisions with independent use.

C) The property, identified in subsection A), has a total of 42 floors or divisions with independent use, of which 38 are intended for housing, 3 are allocated to services and 1 allocated to covered and enclosed parking.

D) The total tax property value of the property, identified in subsection A), which appears in the Urban Property Record is € 1,614,990.00 (one million six hundred fourteen euros and ninety cents).

E) The AT, on March 23, 2013, notified the Claimant, in accordance with and for the purposes of Item 28.1 of the GTSD, of the following assessments, corresponding to the year 2012, relating to the floors or divisions with independent use existing in the property identified in subsection A):

· AP.01: € 289.00 (Doc …)
· AP.02: € 272.70 (Doc.…)
· AP.03: € 272.70 (Doc.…)
· AP.04: € 287.70 (Doc. …)
· AP.05: € 469.70 (Doc. …)
· AP.06: € 338.70 (Doc. …)
· AP.07: € 287.70 (Doc. …)
· AP.08: € 469.70 (Doc. …)
· AP.09: € 338.70 (Doc. …)
· AP.10: € 287.70 (Doc. …)
· AP.12: € 469.70 (Doc. …)
· AP.14: € 257.50 (Doc. …)
· AP.15: € 288.90 (Doc. …)
· AP.17: € 281.30 (Doc. …)
· AP.18: € 278.60 (Doc. …)
· AP.19: € 278.60 (Doc. …)
· AP.20: € 279.40 (Doc. …)
· AP.21: € 279.40 (Doc. …)
· AP.22: € 278.60 (Doc. …)
· AP.23: € 278.60 (Doc. …)
· AP.24: € 281.30 (Doc. …)
· AP.25: € 279.40 (Doc. …)
· AP.26: € 273.90 (Doc. …)
· AP.27: € 273.90 (Doc. …)
· AP.28: € 281.30 (Doc. …)
· AP.29: € 279.40 (Doc. …)
· AP.30: € 278.60 (Doc. …)
· AP.31: € 278.60 (Doc. …)
· AP.32: € 281.30 (Doc. …)
· AP.33: € 405.20 (Doc. …)
· AP.34A: € 224.20 (Doc. …)
· AP.34B: € 398.00 (Doc. ...)
· AP.35: € 398.00 (Doc. …)
· AP.36: € 398.00 (Doc. …)
· AP.37: € 398.00 (Doc. …)
· AP.38: € 398.00 (Doc. …)
· AP.39: € 398.00 (Doc. …)
· AP.40: € 398.00 (Doc. …)

The collection documents identified above appear as Documents Nos. 2 to 39 attached with the request for arbitral pronouncement, whose contents are given as reproduced.

F) The assessments, identified in the previous subsection, whose amounts correspond to 1% of the Tax Property Value (VPT) of the aforementioned floors or divisions with independent use total € 12,208.00 (twelve thousand two hundred and eight euros).

G) None of the residential units of the property, identified in subsection A), has a tax property value equal to or exceeding € 1,000,000.00 (one million euros).

H) In the collection documents, identified in subsection E), it appears that the total value of the property subject to tax amounts to € 1,220,800.00 (one million, two hundred twenty thousand and eight hundred euros) corresponding to part of the VPT of the urban property, identified in subsection A), more specifically to the sum of the VPT of the floors or divisions with independent use existing in the same property intended/allocated to housing.

I) The Claimant filed, on April 30, 2013, a Gracious Complaint against the aforementioned Stamp Duty assessments identified in subsection E).

J) On November 18, 2013, the Claimant was notified of the decision dismissing the gracious complaint filed.

K) The claimant proceeded to the voluntary payment of all the assessed amounts.

12.2. The facts stated in the previous item constitute uncontested matters and documentarily proven in the records.

  1. Unproven Facts

There are no facts relevant to the decision that have not been proven.

IV – LEGAL MATTERS

  1. In view of the foregoing, in the previous numbers, the issue to be decided in the present proceedings consists of determining whether the floors or divisions with independent use in an urban property in full ownership are covered by the scope of the incidence of Item 28.1 of the GTSD.

  2. The factual matter is established (see supra item 12) and we will now determine the law applicable to the underlying facts in accordance with the issue already stated (see supra item 14).

  3. The legal framework for this issue is as follows:

16.1. Item 28 was added to the GTSD by Law No. 55-A/2012, of October 29 and reads as follows:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax property value appearing in the matrix, pursuant to the Municipal Tax on Real Estate Code (CIMI), is equal to or exceeding € 1,000,000 – on the tax property value used for purposes of IMI:

28.1 – For property with residential use – 1%;

28.2 – For property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%"

16.2. Law No. 55-A/2012, of October 29 added article 67 to the Stamp Duty Code which establishes in item 2 the following: "To matters not regulated in this Code relating to item No. 28 of the General Table, the provisions of the CIMI shall apply, subsidiarily."

16.3. The CIMI, in article 12, which is entitled "Concept of property matrices", provides in item 3 "Each floor or part of a property capable of independent use shall be considered separately in the property registration, which also discriminates the respective tax property value."

16.4. It is verified, in accordance with the legal provisions cited above, that the rule contained in the CIMI implies the levy of IMI individualized in relation to each of the parts capable of independent use. This rule is also applicable to the assessment of Stamp Duty.

It is important to emphasize that the legal criterion that imposes the issuance of individualized assessments for the autonomous parts of properties is unique, with no differentiation between properties in horizontal ownership and properties in vertical ownership.

  1. The AT considers that in properties in vertical ownership with floors or divisions capable of independent use, the IMI is levied in relation to each part capable of independent use, but for purposes of Stamp Duty what is relevant is the property as a whole. This criterion introduces a differentiation of regime that has no legal support and that contradicts the rule of the CIMI, which is legally applicable in the scope of Stamp Duty, due to the referral rule of article 67, item 2, of the Stamp Duty Code.

  2. In accordance with the legally established criterion, the application of Stamp Duty under Item 28 of the GTSD shall only occur if any of the parts or divisions with independent use present a VPT equal to or exceeding € 1,000,000.00.

  3. Considering the factuality object of the present arbitral proceedings (see supra item 12.1, subsections B), C) and G)), the property in question is in vertical ownership and none of the residential floors has a tax property value equal to or exceeding € 1,000,000.00. Thus, it is concluded that the legal requirement for the application of Stamp Duty provided for in Item 28 of the GTSD has not been met.

  4. Arbitral jurisprudence, through the Arbitration Decisions rendered in cases Nos. 50/2013-T and 132/2013-T has already pronounced on the illegality of the criterion used by the AT in the taxation of Stamp Duty, Item 28 of the GTSD, of vertical ownership.

V – REQUEST FOR COMPENSATORY INTEREST

  1. In accordance with the provisions of article 43, item 1, of the LGT, the judicial review process admits the condemnation of the AT in the payment of compensatory interest when it is determined that there was an error imputable to the services that results in payment of the tax debt in an amount exceeding what is legally owed.

Article 24, item 5, of the RJAT provides that "payment of interest is due, regardless of its nature, in accordance with the terms provided in the General Tax Law and the Tax Procedure and Process Code"

It is verified that the illegality of the assessment acts now annulled is attributable exclusively to the Respondent, therefore the request for compensatory interest is granted, which should be calculated, at the rate determined in accordance with the provisions of article 43, item 4, of the LGT, between the days in which the improper payments were made until the date of issuance of the corresponding credit notes.

VI – DECISION

In accordance with the foregoing, it is decided:

a) To grant the entirety of the Claimant's claim, annulling for violation of law, due to error in the legal and factual assumptions, the acts of assessment of Stamp Duty, identified in subsection E) of item 12.1 of this decision, which total € 12,208.00 (twelve thousand two hundred and eight euros);

b) To condemn the Respondent to refund to the Claimant the tax paid as a result of the annulled assessments;

c) To grant the request for payment of compensatory interest, at the legal rate, calculated from the date of payment of the tax assessed in the assessments now annulled until the date of complete reimbursement of the amounts collected.

The value of the case is fixed at € 12,208.00 (twelve thousand two hundred and eight euros and fifty-two cents), in accordance with the provisions of article 315, item 2, of the CPC, of article 97-A, item 1, subsection a), of the CPPT, applicable by virtue of subsections a) and b) of item 1 of article 29 of the RJAT and of item 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

Costs pursuant to article 22, item 4 of the RJAT, calculated in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT) based on the value of the claim, at the charge of the Respondent in the amount of € 918.00 (nine hundred and eighteen euros).

Notify the parties.

Lisbon, Center for Administrative Arbitration, April 24, 2014

The Arbitrator

Olívio Mota Amador

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Tabela Geral do Imposto do Selo and how does it apply to urban property?
Verba 28 (Item 28) of the Tabela Geral do Imposto do Selo (General Table of Stamp Duty) is a tax provision applicable to urban properties in Portugal. According to this case, Item 28.1 specifically targets properties with tax property values (VPT) exceeding €1,000,000. The application controversy centers on whether this threshold applies to: (a) the total property value when buildings are in full ownership with multiple independent divisions, or (b) individual divisions separately. The Tax Authority interprets that for properties not constituted in horizontal ownership, the entire property is treated as a single legal-tax entity, meaning the total VPT determines tax liability. Conversely, taxpayers argue that divisions with independent use should be assessed individually, similar to Municipal Property Tax (IMI) treatment under Article 12(3) of CIMI, with Item 28 only applying when individual divisions exceed the €1,000,000 threshold.
Can taxpayers challenge Stamp Tax (Imposto do Selo) assessments on property through CAAD tax arbitration?
Yes, taxpayers can definitively challenge Stamp Tax (Imposto do Selo) assessments on property through CAAD (Centro de Arbitragem Administrativa) tax arbitration. This case demonstrates the process under Decree-Law 10/2011, which established the Legal Framework for Arbitration in Tax Matters (RJAT). Company A, S.A. successfully initiated arbitration proceedings on December 3, 2013, seeking a declaration of illegality regarding Stamp Duty assessments on their urban property. The RJAT framework provides taxpayers with an alternative dispute resolution mechanism to traditional court litigation, allowing them to contest tax assessments before specialized arbitral tribunals. Article 2(1)(a) of RJAT confirms material competence for arbitration in stamp duty disputes, while Article 10 establishes procedural requirements for requesting arbitral tribunal constitution. This arbitration pathway offers faster resolution compared to administrative courts and has become an increasingly popular mechanism for resolving Portuguese tax disputes.
How does the CAAD arbitration process work for disputes involving Stamp Tax on independently used building units?
The CAAD arbitration process for Stamp Tax disputes on independently used building units follows a structured timeline under RJAT: (1) The taxpayer files a request for arbitral tribunal constitution (Article 10 RJAT); (2) The CAAD President accepts the request and notifies the Tax Authority within days; (3) An arbitrator is designated either by party agreement or by CAAD's Deontological Council (Article 6 and 11 RJAT); (4) Parties may challenge the arbitrator designation within the legal timeframe (Article 11(1)); (5) The tribunal is formally constituted approximately 60 days after initial filing; (6) The Tax Authority submits its Answer and forwards the Tax Administrative Proceedings (in this case, submitted March 17, 2014); (7) An Article 18 RJAT meeting occurs where parties can present evidence and arguments or waive these rights; (8) If evidence is waived, the tribunal proceeds directly to decision based on written submissions. This case shows both parties waived evidence production and oral arguments, streamlining the process toward a written decision based on documentary evidence and legal arguments.
What are the grounds for declaring the illegality of Stamp Tax assessments on urban buildings in Portugal?
Grounds for declaring illegality of Stamp Tax assessments on urban buildings in Portugal include: (1) Violation of substantive tax law provisions, specifically incorrect application of Item 28.1 of the General Table of Stamp Duty (GTSD), as alleged in this case; (2) Error on legal assumptions (erro sobre os pressupostos de direito) - misinterpretation of applicable legal framework, such as whether properties in full ownership should be taxed as single units or by individual divisions; (3) Error on factual assumptions (erro sobre os pressupostos de facto) - incorrect determination of property characteristics, such as tax property value, property type, or independent division status; (4) Violation of Municipal Property Tax Code (CIMI) provisions, particularly Article 2(4) defining property units and Article 12(3) establishing assessment rules for divisions with independent use; (5) Manifest error by Tax Authority services in interpreting applicable legal frameworks, which under Article 43(1) of the General Tax Law (LGT) may entitle taxpayers to compensatory interest; (6) Defects in assessment procedures or calculation methodologies, including failure to purge non-residential portions from taxable value when properties have mixed use.
What is the role of the Autoridade Tributária e Aduaneira (AT) in CAAD arbitration proceedings under Decree-Law 10/2011?
The Autoridade Tributária e Aduaneira (AT - Tax and Customs Authority) serves as the Respondent in CAAD arbitration proceedings under Decree-Law 10/2011, defending the legality and validity of challenged tax assessments. In this proceeding, AT's specific responsibilities included: (1) Receiving formal notification of the arbitration request (notified December 5, 2013); (2) Preparing and submitting a comprehensive Answer addressing all claimant arguments (filed March 17, 2014); (3) Forwarding complete Tax Administrative Proceedings (processo administrativo tributário) to the arbitral tribunal, providing documentary evidence supporting the contested assessments; (4) Participating in the Article 18 RJAT meeting, where AT's representative attended and exercised the right to waive evidence production and oral arguments; (5) Presenting legal arguments defending the tax assessments, including interpretation of Item 28 GTSD, Article 2(4) CIMI, and the distinction between full ownership and horizontal ownership regimes; (6) Arguing against compensatory interest claims by demonstrating no administrative error occurred. AT functions as an adversarial party rather than a neutral administrator, actively defending revenue collection while ensuring tax law compliance and protecting public interest in legitimate taxation.