Process: 291/2013-T

Date: July 14, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration case 291/2013-T addresses the controversial application of Stamp Tax (Imposto do Selo) under item 28.1 of the General Stamp Tax Schedule (TGIS) to properties held in total ownership with multiple independent units. The claimant, A... Lda., a civil company owning a building with 20 residential apartments, challenged stamp tax assessments totaling €28,589.50. The core dispute centered on whether stamp tax should be calculated based on each apartment's individual Taxable Patrimonial Value (VPT) or the entire building's aggregate VPT. Each apartment had a VPT below €1,000,000, but the building's total VPT was €2,858,950. The claimant argued that item 28.1 TGIS should apply to each independent unit separately, as recognized in IMI (Municipal Real Estate Tax) property rolls, where each story capable of independent use is registered separately. A critical constitutional challenge was raised: the claimant contended that taxing properties in total ownership differently from horizontal property (condominium) regimes violates the equality principle under Article 13 of the Portuguese Constitution, as both involve independent residential units. Additionally, the claimant alleged violations of the transitional regime established by Law 55-A/2012, arguing improper tax rates and assessment timing were applied. During proceedings, the claimant requested expansion of the claim to include additional 2013 assessments issued while the case was pending, which the tribunal allowed based on procedural efficiency principles. This case exemplifies the complex intersection of property law structures, stamp tax incidence rules, and constitutional equality guarantees in Portuguese tax arbitration.

Full Decision

ARBITRAL DECISION

Claimants: A..., Lda.

Respondent: Tax and Customs Authority

The arbitrator Rogério M. Fernandes Ferreira appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the Arbitral Tribunal, constituted on 14 February 2014 (order of the President of the Deontological Council of CAAD of 14 February 2014), decides as follows:

ARBITRAL DECISION

A) Report:

  1. A..., Lda. (hereinafter referred to as "Claimant"), a private company limited by quota with registered office at Avenue …, …, filed a request for arbitral pronouncement and constitution of an arbitral tribunal on 13 December 2013, pursuant to the provisions of Article 10, paragraphs 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in which the Tax and Customs Authority (hereinafter referred to as "Respondent") is the respondent.

  2. The Claimant seeks, in the said request for arbitral pronouncement, that the Arbitral Tribunal declare the annulment of twenty stamp tax assessments numbered 2013 ... to 2013 ..., in the total amount of € 28,589.50 (twenty-eight thousand, five hundred and eighty-nine euros and fifty cents), relating to immovable properties registered under article U-..., of the extinct municipality of …, current municipality of … and likewise declare unlawful the assessment acts mentioned above, for violation of the provisions of Article 6, paragraphs c), d) and f), point ii), of Law no. 55-A/2012.

  3. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and was notified to the Respondent on 16 December 2013.

  4. The Claimant did not appoint an arbitrator, wherefore, pursuant to the provisions of Article 6, paragraph 1, b), of RJAT, the undersigned was appointed as arbitrator by the President of the Deontological Council of CAAD, with the appointment being accepted under the legally provided terms.

  5. On 24 March 2014, the Respondent filed its Reply.

  6. On 10 April 2014, and in accordance with the terms and for the purposes provided in Article 18 of RJAT, the arbitral hearing was held, in the course of which the representative of the Claimant declared waiving the examination of witnesses listed by it, without opposition from the Respondent, and, for this purpose, the Respondent admitted as proven the facts contained in Articles 11, 12 and 13 of the request for arbitral pronouncement.

  7. As a result of the arbitral hearing, the Claimant also requested the broadening of the claim, with regard to the assessment acts issued, with reference to the tax year 2013, which were notified during the pendency of these proceedings, on the same grounds and amount, taking into account the principles of procedural efficiency and uniformity of decisions.

  8. After hearing the parties, and with no opposition from them, the Tribunal decided to dispense with the holding of final submissions.

  9. The Claimant sustains its claim, in summary, as follows:

a) The Claimant is a civil company, in the form of a private company limited by quota, whose corporate purpose concerns the purchase and ownership of urban immovable properties to satisfy the needs of its members and has a share capital of € 5,005.00, divided into 20 indivisible quotas.

b) The assessments in question concern the stories or sections with independent use of the immovable property, the ownership of which belongs to the Claimant.

c) The said immovable property consists of a total of twenty-one stories or sections with independent use and whose Taxable Patrimonial Value (VPT) varies between € 126,510.00 and € 163,210.00, which totals € 2,958,550.00, however only twenty of these are allocated to housing, so the total VPT amounts to € 2,858,950.00.

d) The immovable property that is the object of these proceedings consists of ten floors, each with two apartments, left and right, with completely independent and autonomous use.

e) Each holder of each of the twenty indivisible quotas of share capital may use and manage one of the twenty apartments, as if they were the owner, and in this sense, the management of the Claimant's company administers the immovable property as if it were a condominium administrator.

f) With regard to the assessment of Stamp Tax, the Claimant considered that, where an immovable property consists of stories with independent use, the subjection to the said tax is determined by the VPT of each story or section, and not by the VPT of the immovable property.

g) Thus, it argues that attention should be paid to the VPT contained in the property roll that determines the subjection to stamp tax of each story of the immovable property capable of independent use.

h) In this sense, it alleges that the stamp tax of item 28.1 of the General Schedule of Stamp Tax has a subsidiary nature in relation to the Municipal Real Estate Tax (IMI), which is the principal tax, because the legal relationship that arises from it is subordinate to the vicissitudes of the legal relationship of the latter.

i) Thus, in accordance with the provisions of the IMI Code, each story or part of the immovable property capable of independent use is considered separately in the property registration and, in this sense, it is to the VPT that appears in that same property roll that the incidence of stamp tax is determined, in accordance with item no. 28.1 of the General Schedule of Stamp Tax.

j) Now, the Claimant states that the VPT of any one of the twenty apartments is less than € 1,000,000.00, which means that stamp tax does not apply and likewise that the assessment acts are unlawful for violation of the incidence rule of item no. 28.1 of the General Schedule of Stamp Tax.

k) Note that, according to the Claimant, the concentration of independent dwellings in a single immovable property cannot constitute a cause for the incidence of stamp tax of item no. 28 of the General Schedule of Stamp Tax on each one and likewise does not constitute, also, a cause for the incidence of the said tax, the failure to constitute a regime of horizontal property ownership of an immovable property, as is the object of these proceedings.

l) In this sense, it argues that the legal form of ownership of the immovable property cannot be determinative of incidence, so one cannot differentiate based on the regime of horizontal or vertical property ownership, in accordance with which the rights over the respective buildings are constituted, under penalty of unequal treatment.

m) Thus, the taxpayer whose immovable property is not subject to the regime of horizontal property ownership is required to make a tax contribution that is not required of the other taxpayer.

n) The Claimant supported its understanding by considering that equality is a constitutional principle and, in this sense, differentiations of treatment without sufficient material basis are prohibited, as results from Article 13 of the Constitution of the Portuguese Republic.

o) Thus, the Claimant concludes that, since concentration is not a criterion of tax capacity, it should be concluded that the incidence rule of item no. 28 of the General Schedule of Stamp Tax is unconstitutional for violation of the principle of equality, provided in the Constitution, in Article 13.

p) Now, the Claimant further alleges that a stamp tax assessment was made at a rate of 1%, in accordance with the provisions of item 28.1 of the General Schedule of Stamp Tax, as amended by Article 6 of Law no. 55-A/2012, of 29 October.

q) In fact, it argues that there is a violation of the transitional regime of stamp tax, applicable to the year 2012, in this sense, it alleges that the taxable event does not occur on 31 December, so also the assessment should not occur in February or March 2013 and likewise the rate should not be 1%.

r) Thus, it concludes that there is a violation of the rules of the transitional regime of 2012 and that therefore the assessment acts cannot subsist.

  1. The Respondent replied arguing for the dismissal of the request for arbitral pronouncement and alleging, in summary:

a) That since the Claimant's immovable property is in a regime of absolute ownership, it does not have autonomous units, so it is not considered to be the owner of 21 autonomous units, but rather of a single immovable property.

b) In fact, it considers that the interpreter and applicator of tax law cannot apply by analogy to the regime of absolute ownership the regime of horizontal property ownership, considering it to be abusive and unlawful, because the regime of horizontal property ownership is a specific legal regime of ownership provided in Article 1414 of the Civil Code.

c) In this sense, the Respondent understands that the interpreter of tax law cannot equate these regimes, in accordance with Article 11 of the General Tax Law and Article 10 of the Civil Code, since the application of analogy is only possible in case of gaps in the law.

d) The Respondent argues that in the IMI Code, within the scope of the horizontal property ownership regime, the units constitute immovable properties, so, if the immovable property is not subject to this regime, the units must be legally considered as parts capable of independent use.

e) Thus it argues that it is untenable that, for purposes of item 28.1 of the General Schedule attached to the Stamp Tax Code (TGIS), parts capable of independent use have the same tax regime as autonomous units of the horizontal property ownership regime.

f) With regard to these proceedings, it understands that, where an immovable property is subject to the regime of absolute ownership, but is composed of parts capable of independent use, tax law assesses the parts individually and considers them separately in the property registration, although in the same property roll.

g) In this sense, the Respondent argues that the unity of the urban immovable property in vertical property ownership composed of various stories is not, however, affected by the fact that these stories are capable of independent economic use.

h) In fact, it understands that within the scope of these proceedings, the property registration of each part capable of independent use is not autonomous, by property roll, but is included in the description in the property roll of the immovable property in its entirety.

i) The Respondent understood that the taxable event of stamp tax of item 28.1, consisting of the ownership of urban immovable properties whose taxable patrimonial value is equal to or exceeding € 1,000,000.00, understands that the taxable patrimonial value refers to the total of the immovable property and not to the value of each of the parts that compose it, even when capable of independent use.

j) The Respondent further alleges that it does not understand how the taxation in question could have violated the principle of equality referred to by the Claimant.

k) On the other hand, it considers that there is no violation of the transitional regime, applicable to the year 2012, with regard to the assessments in question, because the taxable event occurred on 31 December 2012, even though the deadline for assessment occurred in 2013.

l) Finally, the Respondent argues that the request for witness examination presented by the Claimant is not relevant to clarify the facts underlying the legal question in these proceedings, because it is ineffective and inappropriate.

B) Preliminary Matters

  1. The Tribunal is competent and is regularly constituted, in accordance with Articles 2, paragraph 1, letter a), 5 and 6, all of RJAT.

  2. The parties have legal personality and capacity, are legitimate and are represented, in accordance with Articles 4 and 10 of RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March.

  3. The Claimant requested the broadening of the claim, with regard to the assessment acts issued, with reference to the tax year 2013, notified during the pendency of these proceedings, on the same grounds and amount, taking into account the principles of procedural efficiency and uniformity of decisions.

  4. The initial object of these proceedings initiated through the petition filed on 13 December 2014 are the stamp tax assessment acts of 2012, relating to immovable properties registered under article U-..., of the extinct municipality of …, current municipality of ….

  5. Now, during the pendency of these proceedings, the Claimant was notified of stamp tax assessment acts, relating to another immovable property, with reference to the tax year 2013.

  6. Thus, during the pendency of these proceedings, the Claimant was notified of stamp tax assessment acts, on immovable properties registered under article U-..., of the current municipality of …, relating to the tax year 2013, in the total amount of € 9,529.90.

  7. Having the Respondent been notified, at the time of the arbitral hearing, on 10 April 2014, to, within the period of 30 days, pronounce itself on the request noted for the record to broaden the claim, it did not exercise that power.

  8. In view of the foregoing, with regard to this issue, and in accordance with the provisions of Article 265, paragraph 2, of the Code of Civil Procedure, it is necessary to bear in mind that for a broadening of the claim to occur in these proceedings, it implies that the new assessments, submitted within the scope of the arbitral hearing held, are a development or consequence of the original claim.

  9. Thus, it becomes relevant to make the distinction between broadening of the claim and joinder of claims, because, in cases of broadening of the claim, it is assumed that, within the same cause of action, the initial claim is modified for something more, whereas in joinder of claims, to a single claim based on a certain act, another is added, based on a different act (See NETO, Abílio, New Annotated Civil Procedure Code, 2nd revised and expanded edition, January 2014, EDIFORUM, Legal Editions, Lda., Lisbon, p. 306).

  10. In this sense, the Court of Appeal of Lisbon also considered in case no. 5202/2007 that "The claimant did not abandon the original cause of action, does not rely on any act or fact different from that which had already been alleged in the initial petition, so if there is a broadening of the claim, it would imply an improper joinder. Broadening of the claim is possible provided that it is virtually contained in the original claim (cf. Decisions CA. of 25-6-96 and 26-2-87, in www.dgsi.pt.). In fact, the intended broadening is not contained in the original claim, nor does it correspond to a development or consequence of the original claim.".

  11. In view of the foregoing, it seems to us that, in these proceedings, the request for broadening relating to stamp tax assessment acts relating to the tax year 2013 cannot proceed. Note that there is no development or consequence of the original claim and likewise, it is important to refer to the fact that the description of the immovable property contained in the assessment acts submitted at the arbitral hearing, relating to the tax year 2013, does not correspond to the description contained in the stamp tax assessment acts relating to the tax year 2012 and object of these proceedings.

  12. See that the stamp tax assessment acts of the tax year 2012 refer to immovable property U-..., whereas the stamp tax assessment acts, whose broadening was requested, refer to immovable property U-..., so likewise there is no development or consequence of the original claim.

  13. The argument sustained by the Claimant, relating to the safeguarding of the principles of procedural efficiency and uniformity of decisions, cannot equally proceed, because "The understanding that, by resorting to the principle of procedural efficiency, and in order not to excessively limit the scope of the said art. 506 of CPC, defends the admissibility of alteration or broadening of the cause of action (...). It is important not to overvalue the principle of procedural efficiency to the detriment of other major principles that shape civil procedure, namely, devaluing the principle of stability of the instance (...)." (See NETO, Abílio, New Annotated Civil Procedure Code, 2nd revised and expanded edition, January 2014, EDIFORUM, Legal Editions, Lda., Lisbon, p. 306).

  14. In view of the foregoing, the broadening of the claim is not admitted, so the object of the proceedings concerns the stamp tax assessment acts nos. 2013 ... to 2013 ..., in the total amount of € 28,589.50 (twenty-eight thousand, five hundred and eighty-nine euros and fifty cents).

  15. There being no irregularities, nor preliminary matters or exceptions, it is now necessary to address the merits of the claim.

C) Subject Matter of the Arbitral Pronouncement

  1. The following matters are put before the Tribunal, in the manner described above:

a) Is the understanding unlawful according to which item 28.1 of TGIS should be interpreted in the sense that, as for immovable properties with residential allocation in vertical property ownership, with stories or sections capable of independent use, the VPT on which the rate will apply refers to their sum or should each story or section be considered separately, as occurs within the horizontal property ownership regime?

b) Is the understanding that the Respondent has made regarding the application of item 28 of TGIS unconstitutional, taking into account the principle of equality provided in Article 13 of the Constitution of the Portuguese Republic?

c) Is the rate of 1%, applied to stamp tax assessment acts, in accordance with the transitional rule provided in Article 6 of Law no. 55-A/2012?

D) Factual Matters (Proven Facts)

  1. The following facts are considered as proven, with relevance to the decision, based on the documentary evidence submitted to the proceedings:

a) The Claimant appears as the owner of full property of urban immovable property in absolute ownership with stories or sections capable of independent use, with residential allocation, located at …, municipality of …, in …, registered under article ..., 1st D, 1st E, 2nd D, 2nd E, 3rd D, 3rd E, 4th D, 4th E, 5th D, 5th E, 6th D, 6th E, 7th D, 7th E, 8th D, 8th E, 9th D, 9th E, 10th D and 10th E (See Document 2 attached to the request for arbitral pronouncement);

b) The Claimant was notified of stamp tax assessments of 2012, in the total amount of € 28,589.50 (twenty-eight thousand, five hundred and eighty-nine euros and fifty cents), in accordance with item 28 of TGIS, having been considered separately the VPT of each story or section, as per the table below (See Document 1 attached to the request for arbitral pronouncement):

Property Registration VPT Tax
…-U-...-1st D 126,510.00 1,265.10
…-U-...-1st E 152,950.00 1,529.50
…-U-...-2nd D 126,510.00 1,265.10
…-U-...-2nd E 152,950.00 1,529.50
…-U-...-3rd D 126,510.00 1,265.10
…-U-...-3rd E 163,210.00 1,632.10
…-U-...-4th D 126,510.00 1,265.10
…-U-...-4th E 152,950.00 1,529.50
…-U-...-5th D 126,510.00 1,265.10
…-U-...-5th E 163,210.00 1,632.10
…-U-...-6th D 130,860.00 1,308.60
…-U-...-6th E 163,210.00 1,632.10
…-U-...-7th D 130,860.00 1,308.60
…-U-...-7th E 163,210.00 1,632.10
…-U-...-8th D 126,510.00 1,265.10
…-U-...-8th E 163,210.00 1,632.10
…-U-...-9th D 126,510.00 1,265.10
…-U-...-9th E 142,690.00 1,426.90
…-U-...-10th D 130,860.00 1,308.60
…-U-...-10th E 163,210.00 1,632.10

c) The stories or sections capable of independent use have VPT comprised between € 126,510.00 and € 163,210.00, in a total subject to tax of € 2,858,950.00, relating to the assessment acts of the 2012 tax year (See Document 1 attached to the request for arbitral pronouncement);

d) The notifications of the assessment acts are based on the same in accordance with item 28.1 of TGIS, as provided in Law 55-A/2012, of 29 October (See Document 1 attached to the request for arbitral pronouncement);

No other facts were proven that could affect the merit decision, in view of the possible legal solutions and which, consequently, it is important to record as not proven.

E) Legal Matters

E.1) On the illegality of the understanding according to which item 28.1 of TGIS should be interpreted in the sense that as for immovable properties with residential allocation in vertical property ownership, with stories or sections capable of independent use, the VPT on which the rate will apply refers to the sum of the VPT of each story or section, contrary to what occurs in the horizontal property ownership regime:

a) Now, it is incumbent upon the Tribunal to pronounce itself on this matter, taking into account whether the incidence rule, item 28.1 of TGIS, concerns immovable properties with residential allocation in vertical property ownership, with stories or sections capable of independent use, where the VPT, on which the rate applies, should be their sum, or whether the individual VPT of each story or section capable of independent use should be considered, in a manner similar to what occurs in immovable properties in horizontal property ownership, in accordance with the provisions of item 28 of TGIS and Article 23, paragraph 7, of the Stamp Tax Code.

b) However, before presenting our understanding regarding the case at hand, it is necessary to briefly refer to the concept of immovable property, even though this concept is not univocal, neither in the various branches of law, nor in the various existing taxes, assuming in each case specific contours and characteristics (see GOMES, Nuno de Sá, The Fiscal Concepts of Immovable Property, Science and Tax Technique no. 101, May 1967).

c) Thus, pursuant to Article 2 of the IMI Code, ex vi Article 67, paragraph 2, of the Stamp Tax Code, immovable property is "every fraction of territory, comprising waters, plantations, buildings and constructions of any nature incorporated in or established on it, with a character of permanence, provided that it is part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, although located in a fraction of territory that constitutes an integral part of different assets or does not have a patrimonial nature." (underlining ours).

d) In this sense, taking into account the elements underlined above, it is important to have regard to, from the outset, the position of the Supreme Administrative Court, in Decisions nos. 1109/11 and 1004/11, in accordance with which it considered that "(...) the concept of immovable property rests on three elements: an element of a physical nature (fraction of territory, comprising waters, plantations, buildings and constructions of any nature incorporated in or established on it, with a character of permanence), an element of a legal nature (requirement that the thing - movable or immovable - is part of the assets of a natural or legal person) and an element of an economic nature (requirement that the thing has economic value in normal circumstances). This is a concept of immovable property that differs, both from the concept of immovable property contained in no. 3 of art. 8 of CIRS.(...)".

e) Now, in the case at hand, we consider that the requirements mentioned above are met, because there is a physical correspondence with reality, which integrates the assets of the Claimant, and likewise has economic value, so it is important to consider the incidence of item 28 of TGIS.

f) Thus, with regard to item 28 of TGIS, added by Law no. 55-A/2012, of 29 October, the following is now provided:

28- Ownership, usufruct or right of superficies of urban immovable properties whose taxable patrimonial value contained in the property roll, in accordance with the Municipal Real Estate Tax Code (CIMI), is equal to or exceeding (euro) 1,000,000 - on the taxable patrimonial value used for purposes of IMI:

28.1- For residential immovable property or for land for construction whose construction, authorized or planned, is for housing, in accordance with the provisions of the IMI Code – 1%.

g) Thus, in accordance with the literal element, it is understood that the taxable event relevant for purposes of application of the item of the General Schedule of Stamp Tax under analysis applies to the rights described, constituted on: i) urban immovable properties; ii) with residential allocation; iii) whose taxable patrimonial value is equal to or exceeding € 1,000,000.00, and iv) this taxable patrimonial value must be that used for purposes of IMI.

h) Now, the law mentioned above provides, within the scope of transitional provisions, that, for application of the item mentioned, the taxable event must occur on 31 October 2012 and the Respondent must assess the tax due by the end of November of that year (2012). Moreover: taxpayers were required to pay the tax assessed in those terms by 29 December 2012 and likewise the rate applicable that year was 0.5% for immovable properties with residential allocation assessed in accordance with CIMI and 0.8% for immovable properties with residential allocation not yet assessed in accordance with CIMI.

i) Thus, for the application of the rate mentioned above, the right of ownership is important over the urban immovable property, with residential allocation and whose VPT is equal to or exceeding € 1,000,000.00.

j) Now, in the context of these proceedings, where it is at issue whether the total VPT of the immovable property or separately should be considered, it is important to bear in mind the provision of Article 12, paragraph 3, of the IMI Code, insofar as "each story or part of immovable property capable of independent use is considered separately in the property registration, which also discriminates the respective taxable patrimonial value.".

k) In fact, it seems to us that the understanding of the Respondent, which is based on the fact of adding the VPT of each independent story or section allocated to housing purposes, cannot proceed, because there is no legal support for this fact of the existence of a global VPT of urban immovable properties in vertical property ownership. Furthermore, this understanding calls into question the provision of Article 23, paragraph 7, of the IMI Code insofar as it provides that "the taxable patrimonial value used for purposes of IMI" should be considered.

l) Thus, we understand that the taxable patrimonial value should be considered separately, that is, to each story or part of the immovable property separately and, in this sense, we can affirm that the expression contained in the assessment acts of "taxable patrimonial value of the immovable property – total subject to tax" is not in accordance with the law.

m) In this sense, having regard to the fact that the essential criterion of the legislator, in the matter of taxes on assets, was that of the material substance of the thing, that is, more than formal legal rigor, what is at issue is the effective use of buildings and their component parts. This pragmatic criterion and of material truth manifests itself in the determination of taxable patrimonial value which is done individually by reference to each one of the divisions capable of individual use, as occurs in a building in horizontal property ownership.

n) In this regard, if the Municipal Real Estate Tax Code states that the assessment of that tax must be made individually on each of the divisions capable of independent use – which happened, as we saw in these proceedings - the same criterion must be used for the assessment of Stamp Tax provided in Item 28 of TGIS. The incidence of Stamp Tax must therefore be determined in view of the VPT of each of the divisions capable of independent use.

o) In fact, if the legal criterion of Municipal Real Estate Tax requires the issuance of individualized assessments for the autonomous parts of immovable properties in vertical property ownership, assessments that are based on the concrete VPT of each of the divisions with independent use, it is that concrete VPT that is relevant for determining the incidence of Stamp Tax.

p) In view of the foregoing, and having regard to what is mentioned above, verifying that none of the parts or sections capable of independent use, object of the assessment acts, has a taxable patrimonial value exceeding € 1,000,000.00, the Claimant's understanding should be deemed well-founded, considering these acts unlawful and, consequently, they should be annulled.

E.2) On the unconstitutionality of the understanding adopted by the Respondent, regarding the application of item 28 of TGIS, taking into account the principle of equality provided in Article 13 of the Constitution of the Portuguese Republic:

q) Nevertheless, being in itself sufficient for the declaration of illegality and annulment sought, what is indicated in the previous item, it will still be said with regard to the unconstitutionality invoked the following:

r) With regard to this matter, the Claimant invoked the principle of equality provided in Article 13 of the Constitution of the Portuguese Republic, considering that there should not be a differentiation as to immovable properties constituted under the regime of horizontal property ownership and under the regime of vertical property ownership.

s) Now, with regard to this matter, we understand that there is no distinction for the application of item 28 of TGIS regarding the regime of immovable property in horizontal or vertical property ownership, because what is essentially relevant is the economic allocation of the immovable property, in accordance with the IMI Code.

t) In fact, it is understood that the assessment acts issued by the Respondent are not in accordance with item 28 of TGIS and likewise the expression "each urban immovable property" provided in Article 23, paragraph 7, of the Stamp Tax Code should be understood not only regarding stories in horizontal property ownership, but also regarding stories or parts of immovable property capable of independent use.

u) This has in fact been the position already adopted by the arbitral tribunal, within the scope of several arbitral decisions. In this sense and having regard to the ratio of this Item, in arbitral decision no. 48/2013 it is stated that, "In order for the tax system to promote more equality, it is fundamental that the budgetary consolidation effort be shared by all types of income, with special emphasis on capital income and high-value properties. This matter, it will be recalled, was extensively addressed in the ruling of the Constitutional Court. Finally, for the tax system to be more equitable, it is crucial that all are called upon to contribute in accordance with their tax capacity, giving the tax administration reinforced powers to control and inspect situations of tax fraud and evasion. In this sense, the Government presents today a set of measures that effectively strengthen a fair and equitable distribution of the adjustment effort by a broad and comprehensive set of sectors of Portuguese society. This proposal has three essential pillars: the creation of special taxation on urban immovable properties with values exceeding 1 million euros; the increase in taxation on capital income and capital gains on securities and the strengthening of anti-fraud and anti-evasion rules. First, the Government proposes the creation of a special rate on residential urban immovable properties of the highest value. It is the first time that Portugal has created special taxation on high-value properties intended for housing. 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 exceeding 1 million euros. With the creation of this additional tax rate, the tax burden required of these owners will be significantly increased in 2012 and 2013".

v) In this sense, arbitral jurisprudence has pronounced itself to the effect that "the interpretation made by the Tax Administration is not in accordance with the Law and the Constitution, for violation of the principle of equality (art. 13 of CRP), as well as what is provided for in art. 104, no. 3, of CRP. (...) Given the above, it is concluded that item no. 28, by opening the possibility of taxing in a differentiated manner the holding of immovable property of equal value held by different people based on criteria that may contend, without the minimal necessary justification, with, namely, the principle of tax capacity (such as the case of the "dispersal" or "concentration" of residential immovable property held by each one), cannot but be considered unconstitutional, given the violation of the principle of equality.". And likewise, decision no. 50/2013-T states that "Well, this criterion of opportunity adopted by the Tax Administration does not appear acceptable, nor in accordance with the principle of tax legality. (...) for the legislator the situation of immovable property in vertical or horizontal property ownership did not matter, since no reference or distinction is made between them. What matters is the material truth underlying its existence as an urban immovable property and its use".

w) In view of the foregoing, it is concluded that, if for the stories that compose the autonomous units of residential urban immovable properties, in horizontal property ownership, there is no operation of adding VPT to determine a total VPT to subject to stamp tax, it is important that the same happens regarding immovable properties in vertical property ownership, because there are in question substantially and economically identical realities, so they must receive the same tax treatment.

E.3) On the conformity of the application of the rate of 1% to stamp tax assessment acts, with the transitional rule provided in Article 6 of Law no. 55-A/2012:

x) Having, furthermore, regard to the fact that a VPT equal to or exceeding € 1,000,000.00 is not at issue, it is not our responsibility to pronounce on the conformity of the application of the rate of 1% to stamp tax assessment acts, because of the fact that the same is not applicable.

y) In view of the foregoing, once the arbitral tribunal did not accept the understanding of the applicability of item 28.1 of TGIS to the case at hand, this issue becomes moot and procedurally useless for consideration.

F) Decision:

  1. In view of the foregoing, it is decided that the Claimant's claim is well-founded and thus annuls the stamp tax assessments contested.

  1. The value of the action is fixed at € 28,589.50 (twenty-eight thousand, five hundred and eighty-nine euros and fifty cents), in accordance with the provision of Article 97-A, paragraph 1, letter a), of the Code of Administrative Court Procedure (CAPT), applicable ex vi Article 3, paragraph 2, of the Regulation of Costs of Arbitration Proceedings in Tax Matters.

  2. The value of the Arbitration Fee is fixed at € 1,530.00 (one thousand five hundred and thirty euros), in accordance with Table I of the Regulation of Costs of Arbitration Proceedings in Tax Matters, charged to the Respondent, in accordance with the provision of Article 22, no. 4 of RJAT.

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The wording of the decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Lisbon, 14 July 2014

The Arbitrator,

Rogério M. Fernandes Ferreira

Frequently Asked Questions

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What is Verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to properties with independent units?
Verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS), as amended by Law 55-A/2012, imposes a 1% annual Stamp Tax on immovable properties (real estate) with a Taxable Patrimonial Value (VPT) exceeding €1,000,000. The key interpretative question addressed in this case is whether, for properties containing multiple divisions or stories capable of independent use, the tax threshold applies to each independent unit's individual VPT or to the aggregate VPT of the entire property. The claimant argued that Stamp Tax has a subsidiary relationship to IMI (Municipal Real Estate Tax), and since IMI treats each story or section with independent use as a separate unit in property registration, the same approach should apply for Stamp Tax purposes. According to this interpretation, if each apartment's VPT is below €1,000,000, no Stamp Tax should be levied, regardless of whether the building's total value exceeds this threshold.
Can Stamp Tax (Imposto do Selo) be levied on individual units of a building held under total ownership (propriedade total)?
The central legal controversy is whether Stamp Tax under Verba 28.1 TGIS can be assessed on individual units when a building is held under propriedade total (total or unified ownership) rather than propriedade horizontal (condominium or horizontal property). The claimant maintained that the legal form of property ownership should not determine tax incidence. The company owned a building with 20 independent apartments, with each of 20 quota holders having exclusive use rights to one apartment, functioning similarly to condominium ownership. The claimant argued that differentiating tax treatment based solely on whether horizontal property has been formally constituted violates the constitutional principle of equality (Article 13 of the Portuguese Constitution), as both arrangements involve economically and functionally independent residential units. The tax authorities, however, appeared to treat the property as a single taxable unit with an aggregate VPT exceeding €1,000,000, thereby triggering Stamp Tax liability on the entire property value.
What are the grounds for annulment of Stamp Tax assessments under Article 6 of Law 55-A/2012?
The grounds for annulment under Article 6 of Law 55-A/2012 relate to violations of the transitional regime established when Stamp Tax under item 28.1 was introduced. The claimant alleged that the tax assessments violated transitional provisions regarding: (1) the applicable tax rate - arguing the 1% rate was improperly applied; (2) the timing of the taxable event and assessment - contending that the taxable event does not occur on December 31st, and therefore assessments in February or March 2013 were premature or incorrectly timed; and (3) the proper application of transitional rules for the 2012 tax year. These procedural and temporal violations formed independent grounds for challenging the legitimacy of the stamp tax liquidations, separate from the substantive arguments about how item 28.1 should apply to properties with independent units. The transitional regime was particularly complex as it introduced entirely new stamp tax obligations on high-value real estate.
How does the CAAD arbitral tribunal handle requests to extend proceedings to additional tax assessments issued during pending cases?
The CAAD arbitral tribunal demonstrated procedural flexibility in handling the claimant's request to broaden the claim scope. During the arbitral hearing held on April 10, 2014, the claimant requested expansion of the proceedings to include additional stamp tax assessments for the 2013 tax year that had been issued and notified while the original case was already pending. The tribunal allowed this expansion based on principles of procedural efficiency (economia processual) and uniformity of decisions, as the new assessments concerned the same property, same legal grounds, and same amounts as the original disputed assessments. After hearing both parties and encountering no opposition from the Tax Authority, the tribunal accepted the broadened claim. This approach prevents the need for multiple parallel arbitration proceedings on essentially identical legal issues, conserving judicial resources and ensuring consistent treatment of related tax assessments arising from the same factual and legal circumstances.
What is the procedure for challenging multiple Stamp Tax liquidations before the CAAD tax arbitration tribunal in Portugal?
The procedure for challenging multiple Stamp Tax liquidations before CAAD involves filing a single request for arbitral pronouncement (pedido de pronúncia arbitral) under Article 10 of Decree-Law 10/2011 (RJAT - Legal Framework for Tax Arbitration). As demonstrated in this case, a taxpayer can consolidate multiple related assessments into one arbitration proceeding, particularly when they involve the same legal issues and factual circumstances. The claimant initially challenged 20 stamp tax assessments totaling €28,589.50, all relating to the same property and tax year. The request must identify all contested assessment acts, specify the amounts involved, and articulate the legal grounds for annulment. If the parties do not appoint arbitrators, CAAD's Deontological Council appoints a sole arbitrator. The Tax Authority files a written reply (Resposta), followed by an arbitral hearing where evidence is presented. Parties may waive witness testimony, as occurred here when the claimant waived examination and the Tax Authority admitted certain facts as proven. The tribunal may dispense with final oral submissions if both parties agree, streamlining the process toward a final written arbitral decision.