Process: 287/2014-T

Date: September 15, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 287/2014-T) examines whether Stamp Tax under Item 28.1 of the General Stamp Tax Table applies to properties held in vertical ownership (propriedade vertical) with multiple independent units. The applicant company challenged 2012 Stamp Duty assessments on three buildings containing 14, 13, and 21 independent units respectively, with total property values ranging from €1.9 million to €7.2 million. The Tax Authority calculated the taxable base by summing individual unit values while excluding commercial/service units, creating a 'tax property value – total subject to tax' concept. The applicant argued this approach violated legal principles, contending that: (1) Portuguese law does not authorize aggregating tax property values of independent units for Stamp Tax purposes; (2) Article 12(3) of the Municipal Property Tax Code mandates separate assessment for each independent unit; (3) the 'residential use' classification lacks legal foundation when properties include commercial units; (4) the assessment methodology applies concepts foreign to the tax legal framework; and (5) Item 28.1's legislative intent targets 'luxury houses' rather than multi-unit buildings in vertical ownership. The applicant also sought compensation for €1,250 in bank guarantee costs incurred during the dispute. This case addresses critical interpretative questions regarding vertical property taxation under Imposto do Selo, the proper methodology for determining taxable values when single owners hold buildings with multiple autonomous units, and the boundaries between horizontal property (condominium) and vertical ownership regimes for Stamp Tax application under the 2012 tax reform introducing taxation on high-value residential properties.

Full Decision

ARBITRAL DECISION[1]

  1. Report

A – General

1.1. A..., S.A., a company with registered office in …, at Rua .., holder of tax identification number … (hereinafter referred to as "Applicant"), filed, on 26.03.2014, a request for constitution of a collective arbitral tribunal in tax matters, which was accepted, seeking, on the one hand, the declaration of illegality of the tax assessment acts for Stamp Duty of the year 2012 with date of 14.07.2013, relating to item 28.1 of the General Table of Stamp Duty (hereinafter "GTSD"), concerning properties of which it is the owner, as will be seen below, and, on the other, compensation for damages suffered by it through the provision of an undue bank guarantee.

1.2. In accordance with the provisions of paragraph a) of no. 2 of article 6 and of paragraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council of the Centre for Administrative Arbitration (CAAD) appointed as arbitrators Jorge Lino Ribeiro Alves de Sousa (arbitrator-president), Fernando Borges de Araújo and Nuno Pombo, and the parties, after being duly notified, raised no objection to this appointment.

1.3. By order of 04.04.2014, the Tax and Customs Authority (hereinafter referred to as "Respondent") proceeded to appoint Mrs. Dr. … and Mrs. Dr. … to intervene in the present arbitral proceedings, in the name and representation of the Respondent.

1.4. In accordance with the provision of paragraph c) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 02.06.2014.

1.5. On the same date, 02.06.2014, the highest-ranking official of the Respondent's department was notified to, if he so wished, within a period of 30 days, submit a response and request the production of additional evidence.

1.6. On 03.07.2014, the Respondent submitted its response.

B – Position of the Applicant

1.7. The Applicant is the owner of 3 (three) properties (hereinafter referred to as "Properties") in full or vertical ownership, namely:

1.7.1. A property located at Av. ..., in …, with the property registration number …, of the new parish of …, with 7 (seven) storeys and 14 (fourteen) units with independent use, with a total property value of € 2,233,530.00 (two million two hundred and thirty-three thousand five hundred and thirty euros), to which corresponds the property record that the Applicant annexes to its request as document no. 2, the contents of which are considered hereby reproduced;

1.7.2. A property located at Av. ..., in …, with the property registration number …, of the new parish of …, with 7 (seven) storeys and 13 (thirteen) units with independent use, with a total property value of € 1,922,100.00 (one million nine hundred and twenty-two thousand one hundred euros), to which corresponds the property record that the Applicant annexes to its request as document no. 3, the contents of which are considered hereby reproduced;

1.7.3. A property located at Av. ..., in …, with the property registration number …, of the new parish of …, with 9 (nine) storeys and 21 (twenty-one) units with independent use, with a total property value of € 7,234,050.00 (seven million two hundred and thirty-four thousand fifty euros), to which corresponds the property record that the Applicant annexes to its request as document no. 4, the contents of which are considered hereby reproduced;

1.8. In late October, the Applicant was notified of the Stamp Duty assessments (hereinafter referred to as "SD") which are listed in the tables of article 1 of the request for arbitral decision (attached under the joint designation of document no. 1 of said request, the contents of which are considered hereby reproduced), which were based on article 1 of the Stamp Duty Code (hereinafter "SDC"), on item 28.1 of the GTSD, as amended by article 4 of Law no. 55-A/2012, of 29 October, and on sub-paragraph i) of paragraph f) of no. 1 of article 6 of the same Law, the payment deadline of which refers to the end of December 2013.

1.9. The Applicant provided a payment guarantee for the tax demanded by the assessments referred to above, as evidenced by the document attached to the request for arbitral decision with no. 5, the contents of which are considered hereby reproduced, having incurred a cost of € 1,250.00 (one thousand two hundred and fifty euros).

1.10. The Applicant bases its request on the "defect of error concerning the assumptions of law and defect of violation of law".

1.11. The defect of error concerning the assumptions of law, the Applicant contends, is rooted in the circumstance that it does not follow from the law that the tax property value (hereinafter referred to as "TPV") of a property composed of several independent units corresponds to the sum of the TPV of the storeys or units susceptible of independent use, particularly since, according to no. 3 of article 12 of the Municipal Property Tax Code (MPTC), "each storey or part of a property susceptible of independent use is considered separately in the property registration, which also specifies the respective tax property value", being consequently subject to separate assessment for Municipal Property Tax (MPT).

1.12. The Respondent, however, to determine the TPV of each of the Properties in full or vertical ownership, did not limit itself to proceeding to the arithmetic sum of the TPV of each of its parts susceptible of independent use. For this determination, it excluded from the alleged unit constituted by each of the mentioned Properties the parts of them that appear, according to the respective property records, to be affected by commerce or services, creating for each of the Properties a "tax property value – total subject to tax", a concept, moreover, "completely alien to the legal tax system":

1.12.1. For the property referred to in 1.7.1., which has a total property value of € 2,233,530.00 (two million two hundred and thirty-three thousand five hundred and thirty euros), the Respondent determined a "tax property value – total subject to tax" of € 1,751,160.00 (one million seven hundred and fifty-one thousand one hundred and sixty euros);

1.12.2. For the property referred to in 1.7.2., which has a total property value of € 1,922,100.00 (one million nine hundred and twenty-two thousand one hundred euros), the Respondent determined a "tax property value – total subject to tax" of € 1,261,990.00 (one million two hundred and sixty-one thousand nine hundred and ninety euros); and

1.12.3. For the property referred to in 1.7.3., which has a total property value of € 7,234,050.00 (seven million two hundred and thirty-four thousand fifty euros), the Respondent determined a "tax property value – total subject to tax" of € 5,543,540.00 (five million five hundred and forty-three thousand five hundred and forty euros).

1.13. The Applicant, if it does not find legal grounds for the Respondent to exclude from the alleged unit of each of the Properties in full ownership the parts that, according to the respective property records, are shown to be affected by services or commercial activities, also does not see in the law any basis that authorizes the Respondent to define the use of the Properties as residential.

1.14. The Applicant further considers that the terminology used by item 28.1 of the GTSD – "property with residential use" – is not provided for in the SDC, so recourse to the MPTC is required, as results from what is established in no. 3 of article 67 of the SDC, and there is no provision in that statute that supports the assessments referred to in 1.8..

1.15. The Applicant also states that "underlying the teleology of the norm is the legislature's intention to tax the 'luxury houses', which is not the case with the Properties in question."

1.16. The Applicant further contends that the Respondent, in the assessments referred to above, did not comply with the law regarding payment terms, by imposing a single payment until the end of December 2013, whereas article 120 of the MPTC, applicable pursuant to the provision of no. 5 of article 44 of the SDC, requires the division into two or three instalments when the tax to be paid exceeds € 250.00 (two hundred and fifty euros), as is clearly the case here, which also vitiates the validity of these same assessments.

1.17. Finally, the Applicant argues that we are faced with the defect of violation of law, since "the norm underlying the Stamp Duty assessments is unconstitutional, by violation of the constitutionally protected principle of equality", when interpreted in the sense and scope intended by the Respondent, which arbitrarily distinguishes properties that have been constituted in horizontal ownership and properties in full ownership with storeys or parts susceptible of independent use.

C – Position of the Respondent

1.18. The Respondent, in its response, pronounces on the alleged defect of error concerning the assumptions of law, understanding that the situation of the Properties falls literally within the provision of the item in question, adding that in properties under the regime of full ownership there are no autonomous units to which tax law can attribute the qualification of property, the Applicant being consequently the owner of three properties unitarily considered, and not of each one of the parts or units susceptible of independent use that compose them.

1.19. The Respondent further contends that it is prevented from applying, by analogy, to the full ownership regime the regime established for horizontal ownership, considering that any different interpretation from that assumed in said assessments would violate "the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in article 103, no. 2, of the Constitution of the Portuguese Republic", since "it is the responsibility of the law – Law of the Assembly of the Republic and authorized Decree-Law – to establish the essential elements of tax incidence".

D – Conclusion of the Report

1.20. On 07.07.2014, the collective arbitral tribunal, by order of its president, communicated that, should the parties not object, and none did, the meeting provided for in article 18 of the Legal Framework for Tax Arbitration (LFTA) would be waived, since the parties had already provided the tribunal with the necessary and sufficient factual elements for the issuance of the decision.

1.21. The collective arbitral tribunal has material competence, in accordance with the provisions of articles 2, no. 1, paragraph a) of the LFTA.

1.22. The parties have legal personality and capacity and have standing in accordance with article 4 and no. 2 of article 10 of the LFTA, and article 1 of Order no. 112-A/2011, of 22 March.

1.23. The joinder of claims made in the present request for arbitral decision, in homage to the principle of procedural economy, is justified since the contested assessment acts are based on the same factual basis and appeal to the application of the same legal rules, and the claim for compensation is also to be accepted since, without prejudice to the other arguments presented in section 3.1.4. below, article 3 of the LFTA, by expressly admitting the possibility of "joinder of claims even if relating to different acts", accommodates, without hermeneutical abuse, the appreciation of a claim that flows, in necessary terms, from the judgment that the collective arbitral tribunal entertains as to the validity of the assessments challenged.

1.24. The proceeding does not suffer from any nullity and no exceptions were raised by the parties that would prevent the merits of the case from being addressed, so the conditions are met for the issuance of the arbitral decision.

  1. Factual Matters

2.1. Established Facts

2.1.1. The Applicant is the sole owner of the Properties referred to in section 1.7. above (docs. nos. 2 to 4, attached with the request for arbitral decision).

2.1.2. The Properties are constituted in full or vertical ownership, all with storeys or units susceptible of independent use (docs. nos. 2 to 4, attached with the request for arbitral decision).

2.1.3. Each of the three Properties has storeys or units affected by commerce and services (docs. nos. 2 to 4, attached with the request for arbitral decision).

2.1.4. The Respondent, for the purpose of applying item 28.1 of the GTSD, proceeded to the arithmetic sum of the property values of each one of the storeys or units that in the respective property records were given as being affected by residential use (docs. nos. 1 to 4, attached with the request for arbitral decision).

2.1.5. Thus, the Respondent assigned to the Properties identified in sections 1.7.1. and following above, for the purpose of applying item 28.1 of the GTSD, the TPVs indicated here, respectively: (i) € 1,751,160.00 (one million seven hundred and fifty-one thousand one hundred and sixty euros); (ii) € 1,261,990.00 (one million two hundred and sixty-one thousand nine hundred and ninety euros); and (iii) € 5,543,540.00 (five million five hundred and forty-three thousand five hundred and forty euros) – (doc. no. 1, attached with the request for arbitral decision).

2.1.6. The Applicant was notified of the SD assessments referred to in the tables in article 1 of the request for arbitral decision (doc. no. 1, attached with the request for arbitral decision).

2.1.7. The Applicant on 27.01.2014 provided in favour of the Respondent a bank guarantee in the amount of € 113,095.50 (one hundred and thirteen thousand ninety-five euros and fifty cents), dated 24.01.2014, having incurred a cost of € 1,250.00 (one thousand two hundred and fifty euros) (doc. no. 5, attached with the request for arbitral decision and acknowledgment by the Respondent).

2.2. Unestablished Facts

There are no facts relevant to the appreciation of the merits of the case that should be considered unestablished.

  1. Legal Matters

3.1.1. Questions to be Decided

It results from what has been said above that the questions to be addressed are, fundamentally, two:

a) Whether a property constituted in full or vertical ownership, but with storeys or units with independent uses, is a "property with residential use" for purposes of applying article 1 of the SDC and item 28.1 of the GTSD, as amended by article 4 of Law no. 55-A/2012, of 29 October; and

b) Whether, should the claim for declaration of illegality and consequent annulment of the contested assessments be upheld, the Applicant, within the scope of the present arbitral proceeding, may obtain the condemnation of the Respondent regarding compensation for damages suffered by it through the provision of an undue bank guarantee.

3.1.2. Item 28.1 of the GTSD

Law no. 55-A/2012, of 29 October, among several amendments it made to the SDC, added, by its article 4, item 28 to the GTSD, which reads as follows:

"28 - Ownership, usufruct or surface right of urban properties whose tax property value contained in the property register, according to the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000 - based on the tax property value used for the purpose of MPT:

28.1 - For property with residential use - 1%;

28.2 - For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by order of the Minister of Finance - 7.5%."

With the heading "transitional provisions", article 6 of Law no. 55-A/2012, of 29 October, and with relevance to what is necessary to decide, established the following:

1 — In 2012, the following rules must be observed by reference to the assessment of the stamp duty provided for in item no. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012;

b) The taxpayer of the tax is the one mentioned in no. 4 of article 2 of the Stamp Duty Code on the date referred to in the preceding paragraph;

c) The tax property value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be carried out by the end of November 2012;

e) The tax must be paid, in a single instalment, by taxpayers by 20 December 2012;

f) The applicable rates are the following:

i) Properties with residential use evaluated according to the MPT Code: 0.5%;

ii) Properties with residential use not yet evaluated according to the MPT Code: 0.8%;

iii) Urban properties when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by order of the Minister of Finance: 7.5%.

As can be seen, item 28.1 refers to "properties with residential use". Now, not only does this concept not appear defined in any provision of the SDC, but it is also not used in the MPTC, the statute to which article 67, no. 2 of the SDC expressly refers when matters not regulated in the SDC concerning item 28 are at issue.

3.1.3. "Vertical Ownership" and the Application of Item 28.1 of the GTSD

Without prejudice to the interest, not merely dogmatic, of establishing the meaning and scope of the concept of "property with residential use", it is necessary, first and foremost, to answer the question of whether, for purposes of applying item 28.1 of the GTSD, the TPVs of each of the storeys or units with independent use of a given building can be added, as the Respondent did with respect to each of the Properties.

a) The property register of properties in full or vertical ownership and the collection of Municipal Property Tax

It is important to clarify from the outset that "each storey or part of a property susceptible of independent use is considered separately in the property registration, which also specifies the respective tax property value", as can be read in no. 2 of article 12 of the MPTC. Also, the MPT, in properties subject to the full ownership regime, gives typical relevance to each storey or part of a property susceptible of independent use (article 119, no. 1 of the MPTC).

In other words, it is clear that the legislature, in the MPTC, did not intend to adhere to the strictness of the legal form of real rights affecting properties, but rather to the use given to them, namely in cases where a property, legally speaking, is composed of different storeys or parts susceptible of independent use.

It could be said, not unreasonably, that the legislature, for purposes of taxation under MPT, chose to confer autonomy, independence, on each part or each storey of a single property, provided that one and the other show themselves to be of independent use, to the point of providing for individual registration in the property register of each of these independent parts and of imposing on taxation under MPT an autonomous collection. Notwithstanding the legal existence of a single property, it is the legislature itself that not only recommends but requires the autonomous consideration of each independent part, for purposes of taxation of property.

b) The Application of Item 28.1 of the GTSD to Each Independent Part

If this is so for the MPT, as has been sought to be demonstrated, it cannot but also be so for the SD, namely for purposes of applying item 28.1 of the GTSD.

Indeed, this problem, if the tax, MPT or SD, were purely proportional, would not exist or would be innocuous, since the sum of the parts would necessarily correspond to the whole. This is not, however, the case in the present matter.

As has been seen, the SD to which item 28.1 of the GTSD appeals is only due with respect to properties with residential use and, in these, only those presenting a TPV equal to or greater than € 1,000,000.00 (one million euros).

The Respondent, in an exercise that is understandable, perceived the absurdity that would result from the application of the tax rate to the TPV of a property, if it were calculated on the basis of the sum of all independent parts that compose it. It therefore excluded, in the case under analysis, the parts that were registered as being affected to non-residential purposes, managing to achieve, for purposes of item 28.1, a TPV different from that which results from the application of the criteria for determining the taxable matter for purposes of taxation under MPT.

To say that the exercise carried out by the Respondent is understood does not, however, lead to the conclusion of its correctness, since the disregard of the autonomy of each of the parts susceptible of independent use of the Properties appears unwarranted, imposing, for purposes of applying item 28.1 of the GTSD, a unity that, while indisputable in terms of real rights, is not so in the sphere of taxation of real property.

Considering the letter and spirit of the law, it is not apparent that it is the legislature's intention to apply item 28.1 of the GTSD to each part of a property when only from the sum of all of them does a TPV greater than the legal threshold result.

c) The Ratio Legis of Item 28.1 of the GTSD

What has been said above does not ignore the confessed purpose of the proponent of the legislative amendment already referred to, which the Applicant also recalls. The interpretation that is adopted here is in harmony with what appears to have been the unequivocal intention of the Government, author of the proposal that resulted in this legislative intervention.

When presenting and discussing, in Parliament, Bill no. 96/XII (2nd), the Secretary of State for Tax Affairs expressly stated[2]:

"The Government proposes the creation of a special rate on high-value urban residential properties. This is the first time that Portugal has created a special tax on high-value properties intended for residential use. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or greater than 1 million euros."

Now, the Secretary of State for Tax Affairs presents this bill referring, without hesitation, to the expression "houses". "Houses with a value equal to or greater than 1 million euros", note well.

Thus, notwithstanding the unfortunate legislative technique adopted, it results with meridian clarity that item 28.1 of the GTSD cannot be interpreted in the sense that it encompasses each of the storeys, units or parts susceptible of independent use when only from their respective sum does a TPV equal to or greater than that provided for in the same item result. In truth, none of the "houses" of any of the Properties to which we have been referring presents, of itself, "a value equal to or greater than 1 million euros".

d) Conclusion

Based on the foregoing, it is the understanding of the collective arbitral tribunal that the assessment of SD based on item 28.1 of the GTSD is vitiated by illegality with respect to each one of the storeys or parts susceptible of independent use of each of the Properties, since the mentioned item cannot be interpreted in the sense that it may be applied to storeys or parts susceptible of independent use of a property in full or vertical ownership, when only from the sum of each of these storeys or parts can a TPV equal to or greater than € 1,000,000.00 (one million euros) be obtained, with the TPV of each of said storeys or parts not exceeding that legal threshold.

The understanding of the collective arbitral tribunal rejects the unconstitutionality judgment invoked by the Respondent. It is known that it is the responsibility of the law – law of the Assembly of the Republic or authorized Decree-Law – to establish the essential elements of tax incidence. However, the understanding adopted by the collective arbitral tribunal does not disregard the principle of legality provided for in no. 2 of article 103 of the Constitution of the Portuguese Republic, because, as has been sought to be demonstrated by the arguments presented above, the solution advocated results from normative provisions that do not suffer from any organic unconstitutionality.

3.1.4. Compensation for Provision of Undue Guarantee

The Applicant also presents a claim for compensation for the provision of an undue guarantee.

Claims of this nature are not novel at the CAAD, and there are several decisions to the effect of admitting their cognizability by arbitral tribunals[3]. As has already been stated in summary terms in section 1.23., this collective arbitral tribunal also considers itself able to address such a claim.

Paragraph b) of no. 1 of the LFTA provides that "the arbitral decision on the merits of the claim for which there is no appeal or challenge binds the tax administration from the end of the deadline provided for appeal or challenge, and the latter must, in the exact terms of the success of the arbitral decision in favour of the taxpayer and until the end of the deadline provided for the voluntary enforcement of sentences of tax judicial tribunals, restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose".

It is not ignored that the legislative authorization granted to the Government by article 124 of Law no. 3-B/2010, of 28 April, on the basis of which the LFTA was approved, determines that the tax arbitral proceeding constitutes an alternative procedural means to the judicial impugnation proceeding and to the action for recognition of a right or legitimate interest in tax matters. Even though paragraphs a) and b) of no. 1 of article 2 of the LFTA base the competence of arbitral tribunals on "declarations of illegality", it seems reasonable the understanding that the powers attributed to tax tribunals in judicial impugnation proceedings are comprehended within their competence, and it is certain that in judicial impugnation proceedings, in addition to the annulment of tax acts, claims for compensation may be addressed, whether they relate to compensatory interest or to the provision of undue guarantees.

In fact, the principle of cognizability of compensation claims, in amicable reclamation or in judicial proceedings, is justified whenever the damage sought to be compensated results from a fact attributable to the tax and customs administration. Manifestations of this principle can be found in no. 1 of article 43 of the General Tax Law (GTL) and in no. 4 of article 61 of the Tax Procedure and Process Code (TPPC).

Specifically regarding compensation in case of undue guarantee, article 171 of the TPPC refers to it, and it is clear from this provision that the compensation claim can be addressed in the proceeding in which the legality of the executable debt is disputed, which is required for reasons of procedural economy, since the right to compensation for guarantee indebted provided depends on what is decided about the legality or illegality of the assessment act. Thus, it is necessary to conclude that the arbitral proceeding should also be considered as adequate for addressing the claim for compensation for guarantee indebted provided.

The regime for the right to compensation for guarantee indebted provided is contained in article 53 of the GTL, which establishes the following:

Article 53

Guarantee in Case of Undue Provision

  1. A debtor who, in order to suspend enforcement, offers a bank guarantee or equivalent will be compensated wholly or partly for the damage resulting from its provision, should he have maintained it for a period exceeding three years in proportion to the outcome in administrative appeal, impugnation or opposition to enforcement that have as their object the debt guaranteed.

  2. The deadline referred to in the preceding number does not apply when, in amicable reclamation or judicial impugnation, it is verified that there was an error attributable to the services in the assessment of the tax.

  3. The compensation referred to in number 1 has as its maximum limit the amount resulting from the application to the guaranteed value of the rate of compensatory interest provided for in this law and may be requested in the very proceeding of reclamation or judicial impugnation, or autonomously.

  4. Compensation for provision of guarantee undue will be paid by deduction from the revenue of the tax of the year in which the payment is made.

In the case sub judice, as has been said, the contested assessment acts are illegal, since the norms on which they are based are not applicable to the factuality of the case, an error that cannot fail to be attributable to the Respondent since said assessments are of its exclusive initiative and responsibility.

Consequently, this collective arbitral tribunal understands that the Applicant has the right to be compensated for the damage suffered with the issuance of the guarantee indebted provided, this being equivalent to the costs it had to bear with such issuance, namely € 1,250.00 (one thousand two hundred and fifty euros).

It is thus necessary to determine whether this amount exceeds the limit fixed in no. 3 of article 53 of the GTL, depending on the application to the guaranteed value of the rate of compensatory interest. Now, the guaranteed value was € 113,095.50 (one hundred and thirteen thousand ninety-five euros and fifty cents), the guarantee having been provided on 27.01.2014, although dated 24.01.2014. Since the guarantee is still valid, it is not possible to carry out this arithmetic operation, so it will have to be performed at a later date.

3.1.5. Barred Questions: Payment Term and Unconstitutionality Invoked by the Applicant

The Applicant raised the question of the payment term, understanding that, were it to be relevant, it would have to be divided in accordance with the provision of article 120 of the MPTC, applicable pursuant to the provision of no. 5 of article 44 of the SDC.

The Applicant also raised the question of the unconstitutionality of the provisions of sub-paragraph i) of paragraph f) of no. 1 of article 6 of Law no. 55-A/2012, of 29 October, and of item 28.1 of the GTSD, as worded by the same statute, should they be interpreted in the sense that the SD provided for therein could apply to each of the storeys or independent parts of each of the Properties.

Since the collective arbitral tribunal did not accept the understanding of the applicability of item 28.1 of the GTSD to the case under consideration, the appreciation of these questions and of any other vices that may affect the contested assessments become barred and procedurally moot.

  1. Decision

Based on the grounds and foundations set forth, the collective arbitral tribunal decides:

a) To uphold the claim for arbitral decision with the consequent annulment of the impugned assessments, with all legal consequences;

b) To uphold the claim for compensation for guarantee indebted provided, condemning the Respondent to pay to the Applicant the compensation to be determined in execution of the hereby decided matter.

  1. Value of the Case

In accordance with the provision of no. 2 of article 315 of the Code of Civil Procedure, in paragraph a) of no. 1 of article 97-A of the TPPC and also of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 85,566.90 (eighty-five thousand five hundred and sixty-six euros and ninety cents).

  1. Costs

For the purposes of the provision of no. 2 of article 12 and no. 4 of article 22 of the LFTA and no. 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 2,754.00 (two thousand seven hundred and fifty-four euros), in accordance with Table I annexed to said Regulation, to be borne entirely by the Respondent.

Lisbon, 15 September 2014

The collective arbitral tribunal

(Jorge Lino Ribeiro Alves de Sousa)

(Fernando Borges de Araújo)

(Nuno Pombo)

[1] The drafting of the present arbitral decision follows the spelling prior to the Orthographic Agreement of 1990.

[2] See DAR I Series no. 9/XII-2, of 11 October, p. 32.

[3] See, by way of example, the decisions rendered in proceedings numbers 233/2013-T, 112/2013-T and 36/2013-T.

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the Portuguese Stamp Tax Table apply to buildings held in vertical property (propriedade vertical)?
The application of Verba 28.1 TGIS to vertical property (propriedade vertical) is the central issue in this arbitration. Vertical property refers to buildings where a single owner holds the entire property containing multiple independent units, as opposed to horizontal property (condominium) where different owners hold separate units. The taxpayer argued that Item 28.1, introduced by Law 55-A/2012 to tax high-value residential properties, should not apply to vertical property structures because Article 12(3) of the Municipal Property Tax Code requires each independent unit to be assessed separately for tax purposes. The Tax Authority's methodology of aggregating tax property values of independent units within a vertically-owned building was challenged as lacking legal basis, particularly when the building includes commercial or service units alongside residential ones.
How is the taxable value determined for Stamp Tax on properties with multiple independent units under a single owner?
For Stamp Tax purposes under Verba 28.1 TGIS, the determination of taxable value for properties with multiple independent units under single ownership is disputed. The Tax Authority calculated the taxable base by arithmetically summing the tax property values (VPT) of individual autonomous units while selectively excluding units designated for commerce or services in property records, creating what the taxpayer called an extra-legal concept of 'tax property value – total subject to tax.' The taxpayer challenged this methodology, arguing that Portuguese tax law does not authorize aggregating individual unit values for a property in vertical ownership, and that the selective exclusion of commercial units lacks statutory foundation. The taxpayer further contended that the Municipal Property Tax Code's mandate for separate assessment of each independent unit should govern Stamp Tax treatment, as SDC Article 67(3) requires reference to MPTC definitions.
Can a taxpayer challenge Stamp Tax assessments on high-value properties through CAAD arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on high-value properties through CAAD (Centro de Arbitragem Administrativa) arbitration. This case demonstrates that Stamp Duty assessments under Verba 28.1 TGIS, which taxes properties with residential use exceeding certain value thresholds, are subject to administrative arbitration proceedings. The applicant successfully initiated arbitration under Decree-Law 10/2011 as amended by Law 66-B/2012, challenging the legality of 2012 Stamp Duty assessments. The arbitral tribunal was constituted with three arbitrators, and the Tax Authority submitted a formal response. CAAD provides an alternative dispute resolution mechanism to judicial courts for tax controversies, offering specialized arbitration for administrative and tax matters. Taxpayers must typically provide payment guarantees pending resolution, as occurred in this case where a €1,250 bank guarantee was furnished.
What is the distinction between horizontal and vertical property ownership for Imposto do Selo purposes under Verba 28.1 TGIS?
The distinction between horizontal and vertical property ownership is fundamental for Imposto do Selo under Verba 28.1 TGIS. Horizontal property (propriedade horizontal or condomínio) involves multiple owners each holding separate autonomous units within a building, typically with shared common areas under co-ownership. Vertical property (propriedade vertical) exists when a single owner holds an entire building comprising multiple units susceptible of independent use but not separately owned. For Stamp Tax purposes, this distinction matters because horizontal property units are owned by different taxpayers and clearly constitute separate properties for tax assessment. The controversy arises with vertical property: whether a building with multiple independent units under single ownership should be treated as one aggregated property for Item 28.1 purposes or whether each autonomous unit maintains separate tax identity. The taxpayer argued that MPTC Article 12(3) treating each independent unit separately for Municipal Property Tax should extend to Stamp Tax treatment.
Is a property owner entitled to compensation for bank guarantees provided during a Stamp Tax dispute at CAAD?
Regarding compensation for bank guarantees provided during Stamp Tax disputes at CAAD, the applicant in this case specifically requested damages for the €1,250 cost incurred in providing the bank guarantee required to suspend tax collection during the arbitral proceedings. Portuguese law allows taxpayers to seek compensation for damages resulting from illegal administrative acts, including costs of guarantees furnished to challenge unlawful tax assessments. If the arbitral tribunal finds the Stamp Duty assessments illegal, the taxpayer may be entitled to reimbursement of guarantee costs as damages flowing from the unlawful tax demand. However, compensation depends on demonstrating the illegality of the underlying assessment and the causal link between that illegality and the guarantee expense. The outcome of such compensation claims in CAAD arbitration depends on the tribunal's substantive findings regarding the tax assessment's legality and whether Portuguese administrative liability principles support recovery of such procedural costs.