Process: 304/2014-T

Date: November 24, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision from the Administrative Arbitration Centre (CAAD) addresses the controversial application of Stamp Tax (Imposto do Selo) under Verba 28.1 of the General Stamp Tax Table (TGIS) to properties held under vertical ownership. The claimant, a real estate company, challenged stamp tax assessments totaling €118,693.90 for 2012 on five Lisbon properties. The central legal dispute concerns whether the Portuguese Tax Authority can aggregate the patrimonial values of independent floors and divisions within a building in full ownership to meet the €1,000,000 threshold triggering stamp tax liability. The claimant argued that since none of the individual divisions exceeded €1,000,000 in Tax Patrimonial Value (VPT), stamp tax should not apply, contending the tax authority's aggregation methodology violated the incidence rule of Verba 28.1 TGIS and constitutional equality principles. The claimant also alleged violations of procedural rights regarding prior hearing and duty to provide reasons. The Tax Authority defended its position by distinguishing between IMI (property tax) assessment rules and Stamp Tax application, arguing that while IMI assesses each independent unit separately, Stamp Tax under Verba 28.1 considers the entire property as a single taxable unit when held in full ownership. The Authority contended that only autonomous units under the horizontal property regime (propriedade horizontal) qualify as separate properties for stamp tax purposes, pursuant to Article 2(4) of the CIMI. This case highlights the critical distinction between vertical and horizontal property regimes in Portuguese tax law and has significant implications for real estate companies holding multi-unit buildings not subject to condominium division.

Full Decision

ARBITRAL DECISION

Case No. 304/2014-T

Claimant: A... - Real Estate Company, S.A.
Respondent: Tax and Customs Authority
Stamp Duty ("IS")

The arbitrators, Court of Appeals Judge Manuel Malheiros (presiding arbitrator), Dr. Henrique Nogueira Nunes and Dr. Maria Antónia Torres (arbitrator members), appointed by the Deontological Council of the Administrative Arbitration Centre ("CAAD") to form the Collective Arbitral Tribunal, constituted on 12 June 2014, hereby agree as follows:

  1. REPORT

1.1. A... - Real Estate Company, S.A., taxpayer number n.º …, hereinafter referred to as "Claimant", with registered office at Rua …, Lisbon, requested the constitution of an arbitral tribunal, pursuant to Article 2, n.º 1, paragraph a), and Article 10, both of Decree-Law n.º 10/2011, of 20 January (hereinafter "RJAT"[1]).

1.2. The request for arbitral pronouncement concerns the declaration of illegality, and consequent annulment, of the tax acts assessing Stamp Duty in the total amount of €118,693.90€, relating to the year 2012, with payment due in December 2013, all issued by the Director-General of the Tax and Customs Authority (hereinafter the Respondent or TA) and contained in the assessment notes attached by the Claimant in its initial petition, which are hereby considered as articulated and reproduced for all legal effects, which relate to five urban properties owned by the Claimant, which were not subject to the horizontal property regime, all located in Lisbon, namely:

(i) Av. …, registered in the property tax matrix, at the date of the assessments, under article no. …, of the parish of ... - assessment notes …;

(ii) Av. …, no. …, registered in the property tax matrix, at the date of the assessments, under article no. …of the parish of … - assessment notes …;

(iii) Av. …no. 5, registered in the property tax matrix, at the date of the assessments, under article no. … of the parish …- assessment notes …;

(iv) Rua …, registered in the property tax matrix, at the date of the assessments, under article no. … of the parish of …- assessment notes …;

(v) Rua …, …registered in the property tax matrix, at the date of the assessments, under article no. … of the parish of ... - assessment notes …;

The Claimant further requests the conviction of the Respondent to the restitution of the amounts improperly paid.

Finally, the Claimant requests "that it be expressly declared the existence of error by the services and recognized to the claimant the right to indemnity interest on all disputed amounts that the claimant may, eventually, pay until the end of the proceedings".

1.3. To support its request, the Claimant alleges that the assessments of Stamp Duty that are the subject of its initial petition are illegal by violation of the incidence rule of item 28 of the TGIS. The Claimant considers that, since the properties, as they were on that date, divided in vertical ownership, the TA cannot, as it did, sum the patrimonial values of the floors and divisions susceptible to independent use, given that none of those floors or divisions, by itself, has a TPC equal to or greater than 1,000,000.00 euros. And that the incidence rule, in the interpretation put into practice by the TA, is unconstitutional for violation of the principle of equality. The Claimant further alleges the violation of the duty of reasoning and prior hearing concerning the assessments now called into question.

1.4. The TA argues that the request for declaration of illegality, and consequent annulment of the contested assessments, should be judged unfounded, given that it contends that although the assessment of IS, under the conditions provided for in item 28 of the TGIS, is processed in accordance with the rules of the CIMI, the truth is that the legislator reserves the aspects that require proper adaptations.

The TA understands that this is the case for properties in full ownership, even with floors or divisions susceptible to independent use, since although the IMI is assessed in relation to each part susceptible to independent use, for IS purposes the property as a whole is relevant, as the divisions susceptible to independent use are not deemed to be property, but only as autonomous units under the horizontal property regime, in accordance with Article 2-4 of the CIMI.

Thus contending for the legality of the tax acts because they constitute a correct application of the law to the facts.

1.5. The parties agreed to waive written arguments and the meeting of the arbitral tribunal provided for in Article 18 of the RJAT.

  1. SANITATION

The Tribunal was regularly constituted and is competent ratione materiae, in accordance with Article 2 of the RJAT.

The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented (cf. Articles 4 and 10, n.º 2 of the RJAT and Article 1 of Ordinance n.º 112-A/2011, of 22 March).

No procedural nullities were identified.

A preliminary question was identified for decision by the Tribunal, concerning the cumulation of claims.

  1. FACTUAL MATTER

With relevance for the decision on the merits, the Tribunal considers the following facts to be proven:

  1. The Claimant was the owner, on the date of 31/12/2012, of the urban properties that are the subject of the assessments at issue in these proceedings, all under the regime of "full ownership" (i.e., not subject to the horizontal property regime) and all with Tax Patrimonial Value (TPC) determined in accordance with the IMI Code and to which a global TPC was assigned exceeding 1,000,000.00€, corresponding to the sum of the partial TPC of each "floor or division with independent use", hereinafter better identified:

(i) Property located at Av. …, registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... - (cfr. Document n.º 77, attached by the Claimant with its initial petition).

(ii) Property located at Av. ..., no. 8 to 8-A, registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... (former article no. … of the extinct parish of …, although in the attached property ledger there appears, by clerical error, mention of article no. … of the extinct parish of S. ...) - (cfr. Document n.º 78, attached by the Claimant with its initial petition).

(iii) Property located at Av. ... no. 5, registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... (former article no. … of the extinct parish of …, although in the attached property ledger there appears, by clerical error, mention of article no. …of the extinct parish of S. ...) - (cfr. Document n.º 79, attached by the Claimant with its initial petition).

(iv) Property located at …, registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... (former article no. ... of the extinct parish of S. ..., although in the attached property ledger there appears, by clerical error, mention to articles no. ... of the extinct parish of S. ... and ... of the extinct parish of S. ...) - (cfr. Document n.º 80, attached by the Claimant with its initial petition).

(v) Property located at Rua ..., , registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... (former article no. ... of the extinct parish of N. ..., although in the attached property ledger there appears, by clerical error, mention of article no. 2113 of the extinct parish of ...) - (cfr. Document n.º 81, attached by the Claimant with its initial petition).

  1. In accordance with the content of the property ledgers attached by the Claimant, none of the floors or divisions susceptible to independent use, to which an autonomous TPC was assigned by the Respondent, and regardless of its intended use - residential or otherwise -, has a TPC that exceeds the amount of one million Euros (cfr. Documents n.ºs 77 to 81, attached by the Claimant with its initial petition).

  2. The Claimant was notified of a set of Stamp Duty assessments relating to five properties at issue in these proceedings, in the total amount of 118,693.90 €, which are listed below:

(i) Av. das ..., no. 51 to 51-D, registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... - assessment notes … – cfr. Docs. 1 to 26, attached by the Claimant with its initial petition;

(ii) Av. ..., no. 8 to 8-A, registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... - assessment notes …– cfr- Docs. 27 to 40, attached by the Claimant with its initial petition;

(iii) Av. ... no. 5, registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... - assessment notes …– cfr. Docs. 41 to 51, attached by the Claimant with its initial petition;

(iv) Rua ... ... no., registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... - assessment notes …– cfr. Docs. 52 to 62, attached by the Claimant with its initial petition;

(v) Rua ..., , registered in the property tax matrix, at the date of the assessments, under article no. ... of the parish of ... - assessment notes …– cfr. Docs. 63 to 76, attached by the Claimant with its initial petition.

Unproven Facts

No essential facts, with relevance for the appreciation of the merits of the case, were found to not have been proven.

Reasoning of the Factual Matter

The conviction regarding the facts given as proven was based on the extensive documentary evidence attached by the Claimant, whose authenticity and correspondence to reality were not questioned by the Respondent.

  1. "THEMA DECIDENDUM"

The essential question (i) to be decided in these proceedings is to determine, with reference to properties not constituted under the horizontal property regime, made up of various floors and divisions with independent use, some of which with residential designation, which is the Tax Patrimonial Value relevant, assessing from the criterion of incidence of the correct tax according to the law, in order to determine whether this should be assessed by the sum of the tax patrimonial value assigned to the different parts or floors (global TPC) or, rather, whether it should be assigned to each one of the parts or residential floors.

Additionally, the Claimant (ii) invokes the unconstitutionality of the transitional regime approved by Article 6, n.º 1 of Law 55-A/2012, of 29 October, for violation of a significant set of constitutional principles that it expressly invokes and (iii) the violation of the duty of reasoning and prior hearing concerning the assessments now called into question.

It also petitions for the payment of indemnity interest.

  1. PRELIMINARY QUESTION – ON THE CUMULATION OF CLAIMS

Before deciding on the main question, this Arbitral Tribunal has a preliminary question to decide, concerning the cumulation of claims.

The Claimant petitions for the request for declaration of illegality of the acts assessing Stamp Duty at issue in these proceedings in regime of cumulation, considering, it states, that these are several assessments relating to the same tax and properties, belonging to the same taxpayer, given that the success of the claims stems from the appreciation of the same factual circumstances and the interpretation and application of the same principles or rules of law.

The Claimant is correct, for, considered the identity of the tax fact, of the tribunal competent for the decision and of the factual and legal grounds invoked, nothing prevents, in accordance with the provisions of Articles 104 of the CPPT and 3 of the RJAT, from attending to the intended cumulation of claims.

  1. ON THE LAW

As identified above, the first question to be decided and central to the case sub judice concerns the determination of whether the patrimonial value relevant for purposes of ascertaining the applicability of Item 28 of the TGIS, when there is property not constituted in horizontal property regime, is that of each unit autonomously considered or the sum of the tax patrimonial value assigned to each of those units.

The question arises by virtue of taxation for purposes of stamp duty on the ownership, usufruct or surface right of urban properties whose tax patrimonial value contained in the property tax matrix is equal to or exceeding €1,000,000, the tax being due, at the rate of 1% on the tax patrimonial value used for purposes of IMI, per property with residential designation.

Therefore, it is important to determine whether, when there is property not constituted in horizontal property regime, the concept of "property with residential designation" should be interpreted as corresponding to each unit autonomously considered and to apply to the respective tax patrimonial value or whether it should correspond to the totality of the autonomous units, and should consequently apply to the sum of the tax patrimonial value assigned to each of those units.

As the Stamp Duty Code does not provide, nor does its respective General Table, nor Law n.º 55-A/2012, of 29 October (which approved the item of TGIS under consideration) a legal definition of "property with residential designation", it is important to assess from the correct interpretation of this expression, presuming that the legislator knew how to express his intent in the most adequate manner (cf. Article 9, n.º 3, final part, of the Civil Code), in its systematic integration with the rules contained in the IMI Code and, also, in the spirit of the law.

Item 28 of the TGIS under consideration was added by Law n.º 55-A/2012, of 29 October with the following wording:

"28 - Ownership, usufruct or surface right of urban properties whose tax patrimonial value contained in the property tax matrix, according to the terms of the Municipal Tax Code on Real Property (CIMI), is equal to or exceeding €1,000,000 — on the tax patrimonial value used for purposes of IMI:

28.1 — Per property with residential designation — 1%;

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

(Emphasis ours)

Law n.º 55-A/2012, of 29 October entered into force on 30 October 2012, in accordance with its Article 7, n.º 1 which determined its entry "into force the day following its publication".

The following transitional rules were further determined by Law n.º 55-A/2012, of 29 October by reference to the assessment of stamp duty provided for in Item n.º 28 of the TGIS, with relevance for this decision:

  1. The tax event occurs on 31 October 2012;

  2. The taxpayer of the tax is the one mentioned in n.º 4 of Article 2 of the Stamp Duty Code on 31 October 2012;

  3. The tax patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided for in the IMI Code by reference to the year 2011;

  4. The assessment of the tax by the Tax and Customs Authority should be carried out by the end of November 2012;

  5. The tax should be paid, in a single installment, by taxpayers by 20 December 2012;

  6. The applicable rates are the following:

i) Properties with residential designation assessed according to the terms of the IMI Code: 0.5%;

ii) Properties with residential designation not yet assessed according to the terms of the IMI Code: 0.8%;

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

  1. The failure to deliver, in whole or in part, within the indicated period, of the amounts assessed as stamp duty constitutes a tax violation, punished according to the law.

It happens, however, that neither the Stamp Duty Code, nor Law n.º 55-A/2012, of 29 October specify the concept of "urban property with residential designation", therefore in accordance with Article 67 of the Stamp Duty Code, the interpretation of this concept should be sought in the IMI Code.

With effect, it results from Article 67 of the Stamp Duty Code that "To matters not regulated in this Code concerning item n.º 28 of the General Table, the provisions of the CIMI apply subsidiarily" - (Wording given by Article 3 of Law n.º 55-A/2012 of 29 October.).

In the IMI Code, the concept of property is defined in its Article 2, from which it results that "For purposes of this Code, property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or resting thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value (…), clarifying itself in n.º 4 of this legal provision that "For purposes of this tax, each autonomous fraction, under the horizontal property regime, is deemed to constitute a property".

From the reading of this legal provision in isolation we could be led, in a somewhat biased interpretation, to understand that for purposes of IMI, the autonomous fractions, under the horizontal property regime, would have a different treatment from the parts of a property susceptible to independent use.

However, a more careful analysis of the regime allows us to conclude precisely the opposite.

As was underlined by the Ombudsman to the Secretary of State for Tax Affairs, in a letter dated 2 April 2013, "the registration in the property tax matrix of properties in vertical ownership, made up of parts susceptible to independent use, follows the same rules as the registration of properties constituted in horizontal property regime, being the respective IMI, as well as the new Stamp Duty, assessed individually in relation to each one of the parts".

(Emphasis ours)

With effect, the IMI Code provides that "the assessment of each one of the parts susceptible to independent use be assessed separately and, moreover, that each one of those parts be inscribed in an autonomized manner in the property tax matrices. This autonomization, although integrated in the same number of matricial inscription, also encompasses the tax patrimonial value, the Law providing that each one of those parts has its own value." (PIRES, José Maria Fernandes Pires – Lectures on Taxes on Assets and Stamp Duty, Almedina, 2012, p. 88 and 89).

In this sense Article 12, n.º 3 of the IMI Code provides, by determining that "each floor or part of property susceptible to independent use is considered separately in the matricial inscription which also discriminates the respective tax patrimonial value."

In accordance with Article 119 of the IMI Code "The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month prior to that of payment, the competent assessment document, with discrimination of the properties, their parts susceptible to independent use, respective tax patrimonial value and the amount of tax imputable to each municipality of the location of the properties.".

In summary, for purposes of taxation for purposes of IMI, each independent unit, even if comprising a single property, is considered separately, being assigned its own patrimonial value and being taxed autonomously.

Thus, one cannot fail to accompany the understanding endorsed in the Arbitral Decision rendered in Case n.º 50/2013, according to which "if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner in which it establishes for properties in horizontal property regime, it clearly established the criterion, which must be unique and unequivocal, for the definition of the incidence rule of the new tax. Thus, the new stamp duty would only be applicable if one of the parts, floors or divisions with independent use presented a TPC exceeding €1,000,000.00.".

(Emphasis ours)

But, moreover, it is this separate treatment of each unit susceptible to independent use that allows, in the application of the allocation coefficient (cf. Article 41 of the IMI Code), to take into account the different purposes of each unit, which make up a single property.

It is relevant for this effect, the actual use of each one of the parts susceptible to independent use, independently of whether the property is classified for housing, according to Article 6 of the IMI Code and, independently of whether it is an autonomous fraction or merely a unit susceptible to independent use.

In fact, in accordance with this logic of the system, an urban property classified as residential can be composed of various independent units, in which one or more can have a non-residential designation, in accordance with Article 41 of the IMI Code.

Thus it would occur, for example, if in a property in full ownership with floors or divisions susceptible to independent use, licensed for housing, one of its independent units is used for commerce or services, which even occurs with one of the properties at issue in these proceedings.

In this case, the units in question would not have residential designation.

From this analysis it can be concluded that the concept of "property with residential designation", used in Item 28 of the TGIS, encompasses each one of the autonomous units, with independent use, of properties in full ownership, with units susceptible to independent use, which have that designation.

In view of the foregoing, the understanding of the Respondent cannot be accompanied, which would moreover result in a violation of the principle of equality, tax justice and contributive capacity, constitutionally established.

As stated in the decision rendered in case 132/2013-T of this CAAD:

(…) in the works relating to the discussion of draft law n.º 96/XII in the Assembly of the Republic (…) such measure was justified, called an "special tax on high-value residential urban properties", with the need to comply with the principles of social equity and tax justice, placing a more significant burden on the holders of properties with high value intended for housing, and, to that extent, placing the new "special tax" on "houses valued at equal to or exceeding 1 million euros."

(Emphasis ours)

Thus, it is presumed, a contributive capacity (much) above the average that justifies a "special" contributive effort for those who have a "house" or "property" whose value is at least one million euros.

The intention of the legislator seems, therefore, to suggest that the scope of the incidence rule is to tax independent realities, individualized and not resulting from an aggregation or sum, even if legal.

That is to say, it is not drawn from this measure that the legislator aimed at the taxation of properties whose units susceptible to independent use did not individually reach that value.

In view of the foregoing and by virtue of none of the independent units that comprise the Claimant's properties having a patrimonial value exceeding €1,000,000, the assessments under consideration suffer from the vice of violation of law, by error in the legal presumptions, which justifies the declaration of their illegality and the corresponding annulment of the tax acts now under consideration.

Whereas it is the understanding of this Tribunal that the tax patrimonial value relevant for purposes of incidence of Stamp Duty in cases of properties constituted under the regime of full ownership, composed of various divisions with independent use, of which some with residential designation, is the tax patrimonial value of each one of the divisions of the property and not, as defended by the Respondent, the global tax patrimonial value of the property, corresponding to the sum of all the tax patrimonial values of the divisions that comprise it.

It should be noted, moreover, that the matter under analysis has already been the subject of extensive tax arbitral jurisprudence. We refer specifically, without concern for exhaustiveness, to the decisions rendered in the following cases: 50/2013, 132/2013, 181/2013, 183/2013 and 30/2014.

Concerning the remaining vices imputed by the Claimant and in view of the declaration of illegality of the assessments that are the subject of this proceeding, by vice of violation of law by error in the legal presumptions, the knowledge of the same invoked by way of subsidiary means is thereby foreclosed.

With effect, according to the provisions of Article 124 of the Code of Tax Procedure and Process, applicable by reference to Article 29, n.º 1 of the RJAT, in establishing an order of knowledge of vices, it presupposes that, should one vice be judged to be sustained which ensures the effective protection of the rights of those challenging it, it becomes unnecessary to know of the remaining ones.

On the Request for Indemnity Interest

The Claimant petitions for the conviction of the Respondent in the payment of indemnity interest, provided for in Articles 43 of the General Tax Law and 61 of the Code of Tax Procedure and Process.

It should be said, from the outset, that the Claimant is theoretically correct.

It is clear in the proceedings that the illegality of the tax assessment acts impugned is directly imputable to the Respondent, which, on its own initiative, committed them without legal support, suffering from an erroneous interpretation (and, therefore, application) of the legal norms to the specific case.

Consequently the Claimant is entitled to the receipt of indemnity interest, according to the provisions of Articles 43, n.º 1, of the GTL and 61 of the CPPT.

The indemnity interest should be paid from the date on which the Claimant makes the respective payment of the stamp duty at issue in these proceedings until the full reimbursement of the amount paid, at the legal rate. This is because the Claimant did not proceed, until the date of filing of this request for arbitral pronouncement, to payment of the amounts assessed and challenged, having requested, according to what it expressly states, at the Finance Service of Lisbon 10, the suspension of a set of tax enforcement proceedings relating, according to it, to the assessments at issue in these proceedings, through the indication of assets for attachment.

Considering that the Claimant states it has not proceeded to payment of the amounts improperly assessed as stamp duty, at issue in these proceedings, having requested the suspension of the respective tax enforcement proceedings through the indication of assets for attachment, the right to receive indemnity interest will be conditioned by the actual payment of the stamp duty assessments identified in these proceedings, and in this case, the Claimant should present to the Respondent the respective proof of payment of the tax.

Therefore, the Arbitral Tribunal considers that the Claimant's request is sustained, although conditioned to the condition immediately referred to above.

  1. DECISION

In view of the foregoing, it is decided:

  1. To judge sustained the request for arbitral pronouncement, with the consequent annulment, with all legal effects, of the acts of stamp duty assessment better identified in these proceedings, in the total amount of Euros 118,693.90 (one hundred eighteen thousand, six hundred ninety-three euros and ninety cents);

  2. To judge sustained the request for indemnity interest petitioned by the Claimant, but conditioning the same to the proof to be presented by the Claimant to the Respondent of the actual payment of the stamp duty assessments at issue in these proceedings.

The value of the case is set at Euros 118,693.90 (one hundred eighteen thousand, six hundred ninety-three euros and ninety cents), in accordance with the provisions of Articles 3, n.º 2 of the Regulation of Costs in Arbitration Proceedings in Tax Matters (RCPAT), 97-A, n.º 1, paragraph a) of the CPPT and 306 of the CPC.

The amount of costs is fixed at Euros 3,060.00 (three thousand and sixty euros) under Article 22, n.º 4 of the RJAT and Table I annexed to the RCPAT, to be borne by the Tax and Customs Authority, in accordance with the provisions of Articles 12, n.º 2 of the RJAT and 4, n.º 4 of the RCPAT.

Notification to be given.

Lisbon, 24 November 2014

The Arbitrators

The Presiding Arbitrator

(Manuel Macaísta Malheiros)

The Arbitrator Member

(Maria Antónia Torres)

The Arbitrator Member

(Henrique Nogueira Nunes)

Text prepared by computer, in accordance with Article 131, n.º 5 of the Code of Civil Procedure, applicable by reference to Article 29, n.º 1, paragraph e) of the RJAT.

The drafting of this arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] Acronym for Legal Regime of Tax Arbitration.

Frequently Asked Questions

Automatically Created

How does Verba 28.1 of the TGIS apply to properties held under vertical ownership (propriedade vertical) for Stamp Tax purposes?
Verba 28.1 of the TGIS imposes Stamp Tax on property ownership rights when the Tax Patrimonial Value (VPT) equals or exceeds €1,000,000. For properties held under vertical ownership (propriedade vertical or full ownership), the dispute centers on whether each floor or division with independent use should be assessed separately or as a unified whole. The Tax Authority's interpretation treats the entire building as a single taxable unit for Stamp Tax purposes, even when it contains multiple divisions susceptible to independent use. This contrasts with IMI (Municipal Property Tax) assessment, where each independent division receives its own separate VPT assessment. The key legal question is whether the aggregation of VPT values across all divisions in a vertically-owned property to meet the €1,000,000 threshold complies with the legislative intent of Verba 28.1 TGIS.
Can the Portuguese Tax Authority aggregate the patrimonial values of independent units in a vertically divided building to meet the €1,000,000 Stamp Tax threshold?
According to the Tax Authority's position defended in this case, yes - the patrimonial values of independent units in a vertically divided building can be aggregated to determine if the €1,000,000 Stamp Tax threshold is met. The Authority argues that for Stamp Tax purposes under Verba 28.1 TGIS, the property as a whole constitutes the relevant taxable unit when held in full ownership, regardless of internal divisions. The Authority bases this interpretation on Article 2(4) of the CIMI, which it contends recognizes only autonomous units under the horizontal property regime (condominium units) as separate 'properties,' not mere divisions susceptible to independent use within a building held in vertical ownership. The claimant contested this aggregation methodology, arguing it violates the proper interpretation of the incidence rule and that each division not exceeding €1,000,000 individually should not be subject to Stamp Tax. This aggregation question represents the core legal controversy in applying Verba 28.1 TGIS to multi-unit buildings.
What is the difference between horizontal and vertical property regimes for Imposto do Selo under Verba 28.1 TGIS?
The distinction between horizontal property (propriedade horizontal) and vertical ownership (propriedade vertical or full ownership) is crucial for Stamp Tax under Verba 28.1 TGIS. Horizontal property regime refers to condominium ownership where a building is legally divided into autonomous units (frações autónomas), each with separate ownership titles, registration, and property tax identification. Under Article 2(4) of CIMI, these autonomous fractions are recognized as distinct 'properties' for tax purposes. For Stamp Tax, each autonomous fraction is assessed individually against the €1,000,000 threshold. Vertical ownership (full ownership) refers to a building owned entirely by one entity without legal division into condominiums, even if it contains multiple floors or divisions physically capable of independent use. The Tax Authority's position is that in vertical ownership, all divisions must be aggregated as a single property for Stamp Tax purposes, whereas in horizontal property, each autonomous unit is assessed separately. This distinction significantly impacts tax liability for property owners, particularly real estate investment companies holding multi-unit buildings.
What procedural steps are required to challenge Stamp Tax (Imposto do Selo) assessments before the CAAD arbitral tribunal?
To challenge Stamp Tax (Imposto do Selo) assessments before the CAAD arbitral tribunal, taxpayers must follow the procedural requirements established in Decree-Law 10/2011 (RJAT - Legal Regime of Arbitration in Taxation). The process includes: (1) submitting a formal request for arbitral tribunal constitution pursuant to Article 2(1)(a) and Article 10 of RJAT; (2) clearly identifying the contested tax acts, including assessment notice numbers, amounts, and legal grounds for illegality; (3) attaching relevant supporting documentation such as assessment notices, property ledgers, and payment receipts; (4) articulating specific legal grounds for the challenge, which may include violation of tax incidence rules, constitutional principles, or procedural rights; (5) specifying requested relief, such as declaration of illegality, annulment of assessments, restitution of amounts paid, and compensatory interest. The parties must have legal personality, capacity, and legitimate standing. In this case, the claimant challenged assessments totaling €118,693.90, alleging violations of Verba 28.1 TGIS incidence rules, constitutional equality principles, and procedural duties regarding reasoning and prior hearing. Parties may agree to waive oral hearings and written arguments as occurred in this proceeding.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) when Stamp Tax liquidations under Verba 28.1 TGIS are declared illegal?
Yes, taxpayers are entitled to compensatory interest (juros indemnizatórios) when Stamp Tax liquidations are declared illegal, provided legal requirements are met. In this case, the claimant explicitly requested 'that it be expressly declared the existence of error by the services and recognized to the claimant the right to indemnity interest on all disputed amounts that the claimant may, eventually, pay until the end of the proceedings.' Compensatory interest is governed by Article 43 of the Tax Procedure and Process Code (CPPT) and compensates taxpayers for financial loss resulting from illegal tax collection. The right to compensatory interest requires: (1) a declaration that the tax assessment was illegal; (2) payment of the illegally assessed tax by the taxpayer; (3) demonstration that the illegality resulted from error attributable to tax services. The interest accrues from the date of payment until restitution. For Stamp Tax cases involving interpretation of Verba 28.1 TGIS, if the tribunal finds the Tax Authority incorrectly aggregated patrimonial values or misapplied the legal threshold, this could constitute administrative error warranting compensatory interest on amounts improperly collected during the dispute period.