Process: 291/2015-T

Date: November 22, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether stamp duty under item 28.1 of the General Table of Stamp Duties (GTSD) applies to a building held as vertical property (propriedade vertical) with 23 independent residential units. The taxpayers challenged 46 stamp duty assessments totaling €13,661.70 for 2014, arguing the tax was illegally levied. The property's individual units had tax values ranging from €26,620 to €65,830—all below the €1 million threshold established by Law 55-A/2012—but the combined value reached €1,366,170. The core dispute centered on whether the stamp duty threshold applies to each independent unit individually or to the aggregate value of the entire building. The taxpayers contended that since no individual unit exceeded €1 million, no stamp duty was due, and that the Tax Authority's interpretation violated constitutional principles including tax equality, legality, taxpaying capacity, and proportionality. They also argued that as co-owners under a separation of property regime, each owned only half the property, further reducing their individual exposure. The Tax Authority defended its position by arguing that a building constituted as full ownership represents a single taxable unit, regardless of internal divisions, and that the aggregate taxpayer property value determines stamp duty incidence. The Authority also raised a procedural objection, arguing that individual installments of a single annual assessment cannot be challenged autonomously, only the complete assessment act itself. The case involves fundamental questions about the proper interpretation of item 28.1 GTSD, the relationship between stamp duty regulations and the Municipal Property Tax Code, and whether the taxation methodology respects constitutional tax principles when applied to vertically-divided properties.

Full Decision

ARBITRAL DECISION

The Arbitrator Raquel Franco, designated by the Ethics Council of the Administrative Arbitration Center (CAAD) to form the sole arbitration tribunal constituted on 22 July 2015, decides in the following terms:

I. REPORT

  1. On 05-05-2015, the taxpayers … and …, with tax identification numbers … and …, respectively, filed an application for the constitution of a sole arbitration tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to simply as LRAT), against the Tax and Customs Authority.

  2. The application for constitution of the arbitration tribunal was accepted by the Honourable President of the CAAD and automatically notified to the Tax and Customs Authority on 07-05-2015.

  3. Pursuant to the provisions of paragraph (a) of article 6, paragraph 2, and paragraph (b) of article 11, paragraph 1, 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 designated as arbitrator of the sole arbitration tribunal the undersigned, who communicated acceptance of the appointment within the applicable period, and notified the parties of this designation on 07-07-2015.

  4. Thus, in conformity with the provisions of paragraph (c) of article 11, paragraph 1, of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the sole arbitration tribunal was constituted on 22-07-2015, following the relevant legal procedures.

  5. In the present proceedings, the Claimant requests that the Arbitral Tribunal declare the illegality and unconstitutionality of 46 stamp duty tax assessment acts for the year 2014, relating to the urban property located at …, No.s … and …, …-… Lisbon, registered in the urban property register under article … of the current parish of …, former article … of the same parish, of which the claimants are joint owners, in the total amount of € 13,661.70 (corresponding to the amount of € 6,830.85 established for each of the Claimants, relating to 23 assessments, respectively). The assessments in question, issued under item 28.1 of the General Table of Stamp Duties (GTSD) are as follows: 2015 …, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015 0…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015….

  6. Specifically, the said stamp duty assessments related to the taxpayers' property values of 23 independent units with residential use of the urban property constituted as full ownership referred to above, which are comprised between the amounts of € 26,620.00 and € 65,830.00, but which, when added together, amount to the sum of € 1,366,170.00.

  7. After presentation of the application for arbitral determination, the Claimant submitted to the proceedings evidence of payment of the installments due for the said assessments.

  8. The Claimants base their application on the following grounds: (i) erroneous classification of the taxable fact, (ii) error as to the legal prerequisites, and (iii) erroneous quantification of the income and taxpayers' property values in question.

  9. They argue that the independent divisions are intended for residential use and have a taxpayer property value assigned and separately determined pursuant to paragraph (b) of article 7, paragraph 2, of the Municipal Property Tax Code (MPTC), that none of their parts or floors with residential use has a taxpayer property value equal to or greater than € 1,000,000.00, and that the Tax Authority assessed the stamp duty under item 28.1 of the General Table based on the total taxpayer property value.

  10. They disagree with the Tax Authority's criterion of considering that it is the global taxpayer property value of the property that determines its subjection to stamp duty, which they consider illegal because there should only be incidence of this tax under item 28.1 of the GTSD if any of the parts, floors, or independent units had a taxpayer property value equal to or greater than € 1,000,000.00. This is because the Tax Authority cannot establish as the reference value for stamp duty incidence the total value of the property when the legislator has established a different rule under the MPTC, which is the applicable regulation for matters not regulated in the Stamp Duty Code regarding the incidence of item 28.1 of the GTSD.

  11. They further contend that the Tax Authority's interpretation of item 28.1 of the GTSD is unconstitutional as it violates the principles of tax equality, tax legality, taxpaying capacity, fairness, the prevalence of material truth over formal legal reality, and proportionality in tax matters, as set out in articles 13, 18, 81 paragraph (b), 103, and 104, all of the Constitution of the Portuguese Republic.

  12. With regard to erroneous quantification of the income and taxpayers' property values, the Claimants further invoke that they married under a regime of separation of property, whereby they are joint owners of the urban property in question, each of them being owner of only half of said property. Thus, not only does the property not have a value equal to or greater than € 1,000,000.00 but also each of the two joint owners is not owner of property of that value, but at most, of half of the same.

  13. The Claimant also requests the payment of compensatory interest, given that illegal tax assessments were paid due to error attributable to the public services, pursuant to paragraphs 1 and 2 of article 43 and articles 100 and 102, paragraph 2, of the General Tax Law and article 24, paragraph 5, of the LRAT.

  14. The Respondent replied as follows:

  • By way of exception, the Tax Authority invokes the non-challengeability of the subject-matter of the arbitration proceedings. In this regard, it states that the act of assessment of item 28 of stamp duty is unique, and the fact that it may be paid in various installments does not imply that multiple assessments have occurred. The nature of the installments of an assessment of this tax is the division of the global assessment, made annually, and each installment per se cannot be challenged autonomously, as the subject-matter of judicial challenge or tax arbitration proceedings is the tax assessment act. Thus, given the manifest non-challengeability of the installments of the assessment acts contained in the collection notices which constitute the subject-matter of the present application for arbitral determination, there arises the exception for dilatory grounds provided for in paragraph (c), paragraph 1, article 89 of the Code of Tax and Administrative Procedure, subsidiarily applicable by article 29, paragraph 1, paragraph (c), of the LRAT, which bars consideration of the merits and results in the absolution of the Tax Authority from the instance.

  • Without prejudice to the above, the Respondent alleges, on the merits of the challenge:

· It was the wealth arising from real property ownership that Law No. 55-A/2012 came to tax in an innovative manner, subjecting stamp duty to the ownership and other real rights over urban properties whose taxpayer property value was to prove equal to or greater than € 1,000,000.

· The Tax Authority has consistently held that, if the building is constituted as full ownership with parts or divisions susceptible to independent use (so-called full ownership), it integrates the tax legal concept of "property," that is, a single unit, and the taxpayer property value thereof is determined by the sum of the parts with residential use, and if this equals or exceeds € 1,000,000.00, there is subjection to stamp duty under item 28 of the General Table attached to the Stamp Duty Code. According to the Tax Authority, this position is based on the following grounds:

· In the Stamp Duty Code there is no definition of the concepts of urban property, and therefore the provisions of the MPTC must be applied to determine possible subjection to stamp duty (see article 67, paragraph 2 of the Stamp Duty Code as amended by Law No. 55-A/2012);

· Article 2, paragraph 1 of the MPTC defines the concept of property;

· Article 2, paragraph 4 of the MPTC provides an exception for autonomous units of properties constituted under a horizontal property scheme, which it considers, exceptionally, as properties;

· By contrast, if a property is constituted as full ownership with parts or divisions susceptible to independent use, it is the property as a whole, and not each one of those parts, that integrates the concept of "property," for purposes of Municipal Property Tax and stamp duty, by reference to article 1, paragraph 6 of the Stamp Duty Code;

· This is not affected by the fact that each floor/division appears separately in the property register, with its respective taxpayer property values, as such discrimination is only relevant, for tax purposes, given the concept of property registers contained in article 12 of the MPTC and in the matters regulated in this Code for the organization of property registers;

· The requirement to organize property registers in this manner derives from the need to reflect the autonomy that, within the same property, belongs to each of its parts, which may be functionally and economically independent;

· This autonomization is justified only because within the same property there may be use for commerce or residential purposes, with or without rental, which determines the rules of tax valuation under the MPTC, given the different use coefficients provided in article 41 of that Code.

· According to the Tax Authority, to adopt a contrary understanding would be to confuse teleologically distinct realities, full ownership on the one hand, and horizontal property on the other, the distinction of which finds its foundation in civil law.

· The Claimant, for purposes of Municipal Property Tax and also for stamp duty, by virtue of the wording of the said item, is not the owner of autonomous units, but rather of a single property, and the Tax Authority considers that this is the understanding that best accords with the principle of legality inherent in article 8 of the General Tax Law, to which its entire activity is devoted.

· It further states that the Tax Authority is bound by the principle of pursuing the public interest while respecting the rights and legally protected interests of taxpayers, and must act toward all with the same appropriateness and proportionality, especially because in a State governed by the rule of law, the principle of tax equality is a constitutive element of tax law, which embodies the idea that all citizens are bound by the duty to pay taxes measured by a single criterion – taxpaying capacity – and this is measured by the legislator taking into account indicators that assess their economic strength, and consequently identify their capacity to pay them.

II. CONSIDERATION OF PRELIMINARY ISSUES

In accordance with article 608 of the Code of Civil Procedure (CCP), applicable by virtue of article 22 of the LRAT, "(…) the decision shall first consider the procedural issues that may result in absolution from the instance, according to the order imposed by their logical precedence," with the judge having to "resolve all issues that the parties have submitted for consideration, excepting those whose decision is prejudiced by the solution given to others (…)" (emphasis added).

As the Respondent has invoked the exception of non-challengeability of the acts which constitute the subject-matter of the application for arbitral determination, this Arbitral Tribunal must first rule on the same.

In the first place, it is important to note that, should the acts which constitute the subject-matter of the proceedings be considered non-challengeable, then there would be an exception of absolute incompetence of this tribunal, making the tribunal incompetent to consider the application. Now, as the determination of the competence of courts is a matter of public order and its consideration must precede that of any other matter, [as derives from the combined reading of the provisions of articles 16 of the Tax and Administrative Procedure Code, 13 of the Code of Administrative Procedure and 96 of the Code of Civil Procedure, subsidiarily applicable ex vi paragraph 1 of article 29 of the LRAT], this exception should be analyzed immediately, as if it is found to be well-founded, it will preclude consideration of the merits of the case, justified by a decision of absolution from the instance [article 89, paragraph 2 of the Code of Administrative Procedure, subsidiarily applicable by virtue of article 29, paragraph 1, paragraph (c) of the LRAT].

In general terms, in accordance with article 2 of the LRAT, the competence of arbitration tribunals comprises "the declaration of illegality of acts of assessment of taxes, self-assessments, withholding at source and payments on account," as well as "the declaration of illegality of acts fixing the taxable matter when they do not give rise to the assessment of any tax, of acts determining the taxable base and of acts fixing taxpayers' property values."

On the other hand, article 95 of the General Tax Law (GTL) provides that "the interested party has the right to challenge or appeal any act prejudicial to their rights and legally protected interests, according to the forms of procedure prescribed by law," and may be prejudicial, in particular, "the assessment of taxes (…)."

The Respondent contends that "the assessment is one and only it constitutes an act prejudicial, susceptible of being challenged which can, obviously, be the subject of only one challenge, regardless of the tax being able to be paid in various installments, as is emphasized in the recent Arbitral Decision rendered in case No. 138/2015-T."

The issue that must be considered here is, therefore, whether the challenge "of each installment in an autonomous manner, to the extent that the dates and periods for challenge are autonomous," as is argued by the Claimant, or whether, by contrast, as the Respondent contends, given that "there is a single assessment," the payment of which "(…) is effected in installments," it does not permit "the challenge of a single installment or collection document at that installment amount."

As José Casalta Nabais states, "assessment in the broad sense, that is, as the totality of all operations intended to determine the amount of the tax, comprises the subjective assessment intended to determine or identify the taxpayer or subject of the tax legal relationship, the objective assessment through which the taxable or tributary matter of the tax is determined (and, likewise, the rate to be applied, in the case of plurality of rates)" whereas "assessment in the strict sense" is expressed as "the determination of the collection through the application of the rate to the taxable or tributary matter and the (eventual) deductions from the collection"[1].

From this notion of assessment it follows that, for each taxable fact there will be, in principle, a single assessment by which the collection to be paid will be determined, an understanding which also results from article 23, paragraph 7, of the Stamp Duty Code, which states that "in the case of tax due for the situations provided in item No. 28 of the General Table, the tax is assessed annually (…) applying, with the necessary adaptations, the rules contained in the Municipal Property Tax Code."

In turn, in accordance with article 113, paragraph 2 of the Municipal Property Tax Code (MPTC), the assessment is made in the months of February and March of the year following that to which the tax relates and although it may be paid in various installments, it does not follow from this fact that multiple assessments occur.

In reality, the assessment of tax is only one and only it will constitute an act prejudicial, susceptible of being the subject of a single challenge, so that when the law provides for its payment in various installments, staggered over time, the annulment of the tax act will have consequences with respect to all of them, ceasing the obligation to pay or imposing the obligation to refund the amounts of tax already paid by the subject of the tax relationship.

To determine the competence of the arbitration tribunal to decide on the claim forming the subject-matter of the present proceedings, it becomes essential to ascertain whether the application for a declaration of illegality and consequent annulment of one of the installments of a Stamp Duty assessment, made under item 28 of the GTSD, is equivalent to an application for total or partial annulment of the same assessment, or, if not equivalent, whether one of those installments may constitute an act susceptible of autonomous challenge.

As to the first question, an installment is not equivalent to a tax assessment, as results from paragraph 7 of article 23 of the Stamp Duty Code: the expression therein contained that "the tax is assessed annually" indicates that a single annual assessment is made, although the same may be divided, for payment purposes, into installments, and not as many assessments as there are installments in which the debt is to be satisfied – the division of an assessment into installments is nothing more than a technique for collection of revenues.

On the other hand, the question of whether an installment may be regarded as an autonomously challengeable part of the assessment refers us to the divisibility of the tax assessment act and the consequent possibility of its partial annulment. In this regard, case law has held that the assessment is a divisible act, both by nature, as it relates to an obligation of a pecuniary nature, and by legal definition, since article 100 of the GTL admits "total or partial granting of administrative claims or appeals, or of legal proceedings in favor of the subject of the tax relationship," a situation in which the tax administration becomes obliged "to the immediate and complete restoration of the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, in the terms and conditions provided by law." However, in order for there to be partial annulment of the tax act, it is necessary that the illegality affects it only in part[2]. Thus, in cases where the tax act is divisible, "if partial annulment of a tax act is requested, the court cannot, in principle, annul it in its entirety"[3]; if its full annulment is requested and the act is only partially annullable, the application will be partially unsuccessful.

With respect to the payment installments of a Municipal Property Tax assessment or of a Stamp Duty assessment under item 28 of the GTSD, in accordance with António Braz Teixeira, they are not autonomously subject to review, given that they originate in a single annual obligation: "It is necessary not to confuse periodic installments, which, although being made through successive acts, at different times, originate in the same obligation and constitute the various portions of the same installment that was divided, with installments that are to be made periodically, not due to a division of the global installment, but rather to the birth, also periodic, of new obligations, by the continued existence of the factual prerequisites of taxation.[4]" In the same sense, arbitration tribunals constituted at the CAAD have already ruled, in particular in cases 120/2012-T and 205/2013-T.

Concluding that the installments of a tax assessment are not autonomously challengeable, as they constitute portions of a global installment, originating in the same obligation, it follows that we must ascertain whether one of those installments may be considered as an "autonomous challenge," referred to in article 10, paragraph 1, paragraph (a), of the LRAT, with reference to paragraphs 1 and 2 of article 102 of the Code of Tax and Administrative Procedure.

In annotation to article 102 of the Code of Tax and Administrative Procedure, and with respect to paragraph (e) of its paragraph 1, which provides for the commencement of the period for judicial challenge on the date of "notification of the remaining acts which may be the subject of autonomous challenge in accordance with this Code," Jorge Lopes de Sousa writes: "(…) this rule applies not only to the cases of autonomous challenge provided for in this Code [decisions on hierarchical appeals that involve consideration of the legality of assessment acts (art. 76, para. 2), self-assessment acts (art. 131), withholding at source acts (art. 132) and taxpayers' property value fixing acts (art. 134)], but also to other cases of challenge of direct assessment acts (article 86, paragraph 1, of the GTL)".

The fact that the declaration of illegality of acts fixing the taxable matter when they do not give rise to the assessment of any tax, of acts determining the taxable base and of acts fixing taxpayers' property values form part of the competence of arbitration tribunals, in accordance with article 2, paragraph 1, paragraph (b), of the LRAT, with the application for constitution of the arbitration tribunal, as to them, being filed within thirty days from the date of their respective notification, in accordance with article 10, paragraph 1, paragraph (b), of the LRAT, leads to the necessary conclusion that the acts of autonomous challenge to which article 10, paragraph 1, paragraph (a), of the LRAT refers are acts of assessment, self-assessment and payments on account, even though, with respect to these, an administrative claim or hierarchical appeal has been filed, expressly or tacitly denied.

Having excluded the possibility of an installment constituting a tax assessment act, it cannot be attributed to it the nature of self-assessment or payment on account even less.

Given that each of the installments of the Stamp Duty assessments identified in the file are not autonomously challengeable, for the reasons set out above, there exists a case of incompetence of the arbitration tribunal to consider and declare their illegality and consequent annulment.

This conclusion is not, however, valid with respect to the assessments relating to the independently usable division "RC F," to the extent that there the assessment is made through a single installment (see documents 13 and 36 attached by the Claimant, which constitute the assessment notes for the stamp duty assessed with reference to that division, in the amount of € 133.10, for each of the Claimants, also constituting proof of their respective payment, which occurred on 04.05.2015). Thus, with respect to these two assessment acts, this tribunal is competent because the acts are challengeable.

III. CONSIDERATION OF THE MERITS REGARDING THE ASSESSMENT RELATING TO THE INDEPENDENTLY USABLE DIVISION R/C F

III.1. Established Facts

a. The Claimants are owners of the urban property in full ownership registered in the urban property register of …, in …, under article …;

b. The property is composed of twelve floors constituting independent units, being constituted as full ownership;

c. The independent units are intended for residential use and have a taxpayer property value assigned and separately determined pursuant to paragraph (b) of article 7, paragraph 2, of the MPTC.

d. None of its parts or floors with residential use has a taxpayer property value equal to or greater than € 1,000,000.00.

e. The property has a total taxpayer property value of € 5,261,570.00.

f. The Tax Authority issued the stamp duty assessments Nos. 2014…, 2015…, 2014…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… with respect to the property referred to in the foregoing points, in relation to the fiscal year 2014.

g. Said assessments were paid by the Claimant.

III.2. Unestablished Facts

There are no facts relevant to the decision that have been deemed unestablished.

IV. THEMA DECIDENDUM

The essential issue in the present proceedings is to determine, with reference to an urban property not constituted under a horizontal property scheme, composed of various areas with independent use and residential use, whether the taxpayer property value relevant for purposes of taxation under stamp duty under item 28.1 of the GTSD should be that corresponding to the sum of the taxpayer property values assigned to the different parts or independent floors, or whether, by contrast, for purposes of the incidence of stamp duty under item 28.1 of the GTSD, the taxpayer property value assigned to each floor or independent unit should be taken into account.

V. LEGAL REASONING

Item 28 of the GTSD provides as follows:

  1. "Ownership, usufruct or right of superficies of urban properties whose taxpayer property value contained in the property register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than (euro) 1,000,000 - on the taxpayer property value used for purposes of the Municipal Property Tax:

28.1 Per property with residential use – 1%

28.2 – Per property, when the subjects of the tax relationship 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 order of the Minister of Finance – 7.5%."

In the present proceedings, it must be decided whether the taxpayer property value relevant as a criterion for incidence of stamp duty in accordance with item 28.1 of the GTSD is that corresponding to the sum of the taxpayer property values assigned to the different parts or floors (global taxpayer property value) or, instead, the taxpayer property value assigned to each of the residential parts or floors.

This issue has already been considered in various tax arbitration proceedings, and no reason is apparent for adopting a different understanding from that adopted in previously rendered decisions[5].

Thus:

In accordance with paragraph 2 of article 67 of the Stamp Duty Code, as to "matters not regulated in the present code relating to item 28 of the General Table, the MPTC shall apply subsidiarily." As the norm of incidence of item 28.1 of the GTSD refers to urban properties, it is necessary to seek the concept of urban property in the MPTC.

The MPTC establishes, in article 2, paragraph 1, the concept of property. It defines it as "any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or situated thereon, with a character of permanence, provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances aforesaid, endowed with economic autonomy in relation to the land on which they are located, although situated on a fraction of territory that constitutes an integral part of a patrimony other than or does not have the nature of patrimony."

Article 4 of the MPTC establishes that urban properties are "all those that should not be classified as rural, without prejudice to the provisions of the following article."

In turn, article 6 of the same Code makes the classification of the various types of urban properties, distinguishing them, in paragraph 1, into four subcategories: "a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others." In turn, paragraph 2 establishes the criterion used for this distinction, defining that "Residential, commercial, industrial or for services buildings or constructions are those buildings or constructions licensed for such purposes or, in the absence of licensing, that have as their normal destination each of these purposes."

With respect to the specific issue forming the subject-matter of the present decision, it is important to consider article 12, paragraph 3, of the MPTC, in accordance with which "each floor or part of property susceptible of independent use is considered separately in the property register, which also distinguishes the respective taxpayer property value."

Finally, in accordance with article 119, paragraph 1 of the MPTC, "The services of the Tax Authority send to each subject of the tax relationship, by the end of the month prior to that of payment, the relevant collection document, with discrimination of the properties, their parts susceptible of independent use, respective taxpayer property values and the collection imputed to each municipality of the location of the properties."

As doctrine recognizes, the fiscal concept of property departs from the civil law concept of property, contrary to what the Respondent maintains, in that, "For tax purposes, paragraph 1 of this article [2 of the MPTC] provides for the existence of three necessary requirements in order to be in the presence of the concept of property, namely, physical structure, patrimonial quality and economic value."

(See J. Silvério Mateus and L. Corvelo de Freitas, The Taxes on Real Property, Stamp Duty, Annotated and Commented, Engifisco, 1st edition, 2005, page 101).

Thus, "the physical element is defined by the reference to 'any fraction of territory,' encompassing waters, plantations and constructions of any nature incorporated therein or situated thereon with a character of permanence. In the legal sphere, patrimonial quality is attributed relevance. The property, in the physical sense, must be capable of integration into the patrimony of a natural or legal person. (…) The requirement of economic value is naturally associated with the requirement of patrimonial quality, resulting therefrom the susceptibility of generating income or other types of utilities for its holder." (op.cit.).

In the specific case, it seems to us that all three requirements mentioned are met, to the extent that the parts or divisions susceptible of independent use which are the subject-matter of the assessment acts in question have physical correspondence with reality, form part of the patrimony of the Claimant and possess an economic value which, at the very least, derives from the taxpayer property value assigned to them by the assessment conducted by the Tax Authority.

Thus, it seems to us that the parts or divisions susceptible of independent use, meeting all the requirements to qualify as a "property," in economic, physical and patrimonial terms, should be considered autonomously for purposes of the incidence of item 28.1 of the GTSD.

Furthermore, in the rule of incidence contained in item 28.1 of the GTSD, the legislator did not consider it relevant to distinguish between properties in horizontal ownership and properties in vertical ownership. And this, in our view, is because what is relevant, ultimately, is the economic destination of the real property, as also derives from article 6 of the MPTC, in light of the constitutional principles embodied in articles 103, paragraph 1 and 104, paragraph 3 of the Constitution of the Portuguese Republic. In fact, in terms of economic substance, there is no difference between a building in horizontal ownership and a building in vertical or full ownership constituted by parts or divisions susceptible of independent use, justifying, therefore, in terms of rules of incidence – and in particular the rule contained in item 28.1 of the GTSD – equal treatment of these two situations. Moreover, the fiscal legislator also determines this equal treatment, in article 119 of the MPTC, when it establishes that the tax must be assessed individually on each part or division susceptible of independent use, taking into consideration the taxpayer property value of each part or division susceptible of independent use, individually considered.

It follows from the foregoing that the rule contained in item 28.1 of the GTSD should be applied indiscriminately both to urban residential properties constituted in horizontal ownership and to those in full or vertical ownership, with the tax being levied on the taxpayer property value assigned by the Respondent, through a general assessment, to each of the parts or divisions susceptible of independent use (indeed, the Respondent issued, in the case forming the subject-matter of the present proceedings, as many assessment acts as there are parts or divisions susceptible of independent use intended for residential use).

In light of the foregoing, and given that none of the parts or divisions susceptible of independent use which are the subject-matter of the assessment acts being challenged has a taxpayer property value equal to or greater than € 1,000,000.00, as has been demonstrated in the present proceedings, it is concluded that the Claimant's application is well-founded, with the assessment acts being challenged deemed illegal, for error as to factual and legal prerequisites and violation of article 1, paragraph 1 of the Stamp Duty Code and item 28.1 of the GTSD, and said acts should be annulled.

As regards compensatory interest, article 43 of the GTL provides that "compensatory interest is due when it is established, in an administrative claim or judicial challenge, that there was error attributable to the public services resulting in payment of the tax debt in an amount greater than that legally due."

As to the existence, in this case, of error attributable to the public services, it is considered to be established, according to consistent case law of the Supreme Tax Court (see in this regard the decisions of the Supreme Tax Court of 22-05-2002, case No. 457/02; of 31.10.2001, case No. 26167 and of 2.12.2009, case No. 0892/09).

Thus, there is no doubt that the Claimant is entitled to be compensated through the receipt of compensatory interest, calculated in accordance with article 43, paragraph 1 of the GTL and article 61, paragraphs 2, 3 and 5, on the amounts paid relating to the annulled assessments.

VI. DECISION

The conclusion that the Stamp Duty assessment of item 28 of the GTSD is indivisible, with each of its installments not being autonomously challengeable, determines the incompetence of the arbitration tribunal and bars the continuation of the proceedings as well as consideration of the merits of the case. For these reasons, it is decided to absolve the Tax and Customs Authority from the instance.

Value: In accordance with the provisions of paragraph 2 of article 315 of the Code of Civil Procedure, combined with paragraph (a) of article 97-A, paragraph 1 of the Code of Tax and Administrative Procedure and paragraph 2 of article 3 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 13,661.70.

Costs: In accordance with the provisions of article 22, paragraph 4, of the LRAT and in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € …, to be borne entirely by the Respondent in accordance with articles 12, paragraph 2, and 22, paragraph 4, both of the LRAT, and article 4, paragraph 4, of the aforementioned Regulation.

Registered and notified.

Lisbon, 22 November 2015

The Arbitrator,

Raquel Franco

[1] See Legal Precedent on Tax Law, 3rd Edition, Almedina, 2005, page 318.

[2] See, in this regard, the Decision of the Full Court of the Tax Litigation Section of the Supreme Tax Court, rendered on 10 April 2013, in appeal No. 0298/12, available at http://www.dgsi.pt, in whose summary it is stated: "Summary: I - The tax act, as a divisible act both by nature and by legal definition, is susceptible of partial annulment. II - The criterion for determining whether the act should be totally or partially annulled is to determine whether the illegality affects the tax act in its entirety, in which case the act should be wholly annulled, or only in part, in which case partial annulment is justified."

[3] Jorge Lopes de Sousa, "Code of Tax and Administrative Procedure – annotated and commented" Volume I, Áreas Publisher, 2006, page 875.

[4] António Braz Teixeira, "Principles of Tax Law," Vol. I, 3rd Edition, Almedina, Coimbra, 1995, pages 243 and 244.

[5] See the decisions rendered in cases 50/2013T; 132/2013-T; 181/2013-T; 182/2013-T; 183/2013-T; 185/2013-T; 240/2013-T; 248/2013-T; 268/2013-T; 272/2013-T; 280/2013-T; 14/2014-T; 26/2014-T, 30/2014-T; 72/2014-T; 88/2014-T; 100/2014-T; 177/2014-T, 193/2014-T; 194/2014-T, 206/2014-T, 238/2014-T; 290/2014-T; 292/2014-T; 372/2014-T; 428/2014-T; 450/2014-T.

Frequently Asked Questions

Automatically Created

Is Verba 28.1 of the Tabela Geral do Imposto do Selo applicable to individual units of a vertical property (propriedade total)?
According to the taxpayers' interpretation, item 28.1 of the GTSD should only apply to individual units of a vertical property if each independent unit has a taxpayer property value equal to or greater than €1,000,000. They argue that when a building is divided into independent residential units with separately determined tax values under article 7(2)(b) of the Municipal Property Tax Code, each unit should be evaluated individually for stamp duty purposes. However, the Tax Authority maintains the opposite view: that a building constituted as full ownership (propriedade vertical) represents a single taxable 'property' unit, and therefore the aggregate taxpayer property value of all residential parts determines whether the €1 million threshold is met for stamp duty incidence under item 28.1.
Can stamp tax be levied on residential fractions whose individual tax value is below €1,000,000 but whose combined value exceeds that threshold?
Yes, according to the Tax Authority's position in this case. The Authority argues that stamp tax under item 28.1 can be levied on residential fractions whose individual tax values fall below €1,000,000 when their combined aggregate value exceeds that threshold. The Tax Authority's consistent interpretation is that a building held as full ownership with parts or divisions susceptible to independent use constitutes a single 'property' for stamp duty purposes, and the taxpayer property value is determined by summing all parts with residential use. If this total equals or exceeds €1,000,000, stamp duty under item 28 applies. The taxpayers dispute this methodology, arguing it contravenes the legislative framework established in the Municipal Property Tax Code and violates constitutional principles of tax legality and equality.
How do co-owners challenge multiple stamp tax assessments through CAAD arbitration proceedings?
Co-owners can challenge stamp tax assessments through CAAD arbitration by filing a joint application for constitution of a sole arbitration tribunal under articles 2 and 10 of the Legal Regime for Arbitration in Tax Matters (LRAT). In this case, two co-owners jointly challenged 46 stamp duty assessments (23 for each co-owner) totaling €13,661.70. They must submit evidence of payment of the contested amounts and clearly identify all assessment acts being challenged. However, the Tax Authority raised a procedural objection arguing that individual installments of stamp duty cannot be challenged autonomously, as the assessment act is unitary even when paid in installments. According to the Authority, only the complete annual assessment act can be challenged, not each individual installment payment notice, which would constitute grounds for dismissal under article 89(1)(c) of the Code of Tax and Administrative Procedure.
What are the grounds for claiming illegality and unconstitutionality of stamp tax liquidations on urban property fractions?
The grounds for claiming illegality and unconstitutionality of stamp tax liquidations on urban property fractions include: (1) erroneous classification of the taxable fact—arguing that independent units with separate tax values below €1 million should not be aggregated; (2) error as to legal prerequisites—contending the Tax Authority misapplied item 28.1 GTSD by ignoring the Municipal Property Tax Code's framework for independently valued units; (3) erroneous quantification—asserting that co-ownership under separation of property regime means each owner possesses only half the property value; and (4) unconstitutionality—alleging violations of constitutional principles of tax equality (article 13), tax legality (article 103), taxpaying capacity (article 104), fairness, proportionality (article 18), and prevalence of material truth, all protected under the Portuguese Constitution. Additionally, taxpayers can claim compensatory interest for illegal assessments paid due to errors attributable to public services under articles 43, 100, and 102(2) of the General Tax Law.
How does the tax authority calculate Imposto do Selo on buildings held in propriedade vertical with independent residential units?
The Tax Authority calculates Imposto do Selo on buildings held in propriedade vertical with independent residential units by treating the entire building as a single taxable 'property' unit and aggregating the taxpayer property values of all parts or divisions with residential use. If this combined total equals or exceeds €1,000,000, the Authority applies stamp duty under item 28.1 of the General Table of Stamp Duties at the applicable rate to the aggregate value. This calculation methodology does not consider whether individual units separately exceed the threshold; rather, it focuses on the building's constitutional structure as full ownership. The Authority divides the annual assessment into installments for payment purposes, but maintains that this division does not create multiple separate assessment acts—the assessment remains unitary despite being paid in parts. This approach contrasts with the taxpayers' argument that each independently valued unit under the Municipal Property Tax Code should be evaluated separately for stamp duty threshold purposes.