Process: 305/2015-T

Date: December 2, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Case 305/2015-T addresses a critical Stamp Tax dispute concerning the application of item 28.1 of the General Stamp Tax Table (TGIS) to vertical property structures. The claimant, A...-..., LDA, challenged €19,757.40 in stamp duty assessments for 2014 on an urban property comprising twenty independent residential divisions under single full ownership, not constituted as horizontal property (condominium). The central legal question concerns whether the €1,000,000 threshold in item 28.1 TGIS applies to the aggregate taxable patrimonial value (VPT) of the entire building (€2,225,220.00) or to each independent division separately. The claimant argued that since no individual division exceeded €1,000,000 in VPT, stamp duty could not be lawfully assessed, invoking principles of legal certainty, good faith, legitimate expectations, and the prevalence of economic substance over legal form. The Tax Authority contended that the relevant taxable base is the total VPT of the urban property as a single registered article, regardless of internal divisions. This case highlights the interpretative challenge posed by vertical property structures that contain multiple economically independent units but remain under unified ownership without condominium constitution. The arbitral tribunal, constituted on July 24, 2015, with sole arbitrator Suzana Fernandes da Costa, proceeded without oral hearings by agreement of both parties. The decision impacts how stamp duty applies to multi-unit buildings held in single ownership, with significant implications for real estate taxation planning, particularly for landlords and property investment companies holding buildings with multiple rental units. The case underscores the importance of property structuring decisions and their tax consequences under Portuguese stamp duty legislation.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case no. 305/2015 – T

Subject: Stamp Duty – item 28.1 of the General Stamp Tax Table

Claimant/Applicant: A… – …, LDA

Respondent: Tax Authority and Customs Authority (hereinafter T.A.C.A.)

1. REPORT

On 14-05-2015, A… – …, LDA, legal entity no. …, with registered address at …, n.º …, …, … Lisbon, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal with a view to declaring the illegality of stamp duty assessments in the total amount of 19,757.40 €, relating to the year 2014, covering the first, second and third instalments, and relating to item 28.1 of the General Stamp Tax Table. Said documents relate to the urban property located at Avenida …, n.º … to …, Lisbon, registered in the urban property register of the parish of ... under article …, constituted in full ownership and with twenty divisions susceptible of independent use, all intended for residential purposes, with the exception of the shop on the ground floor.

The Claimant alleges that the taxable basis in relation to the Stamp Duty is the patrimonial value of each of the said divisions. And since none of the floors with independent use has a taxable patrimonial value (TPV) exceeding one million euros (1,000,000 €), Stamp Duty cannot be assessed or collected, and therefore the assessments in question are illegal. The Claimant states that the actions of the T.A.C.A. clearly violate, among others, the principles of legal certainty, good faith and confidence, and also the principle of the prevalence of economic substance over the form of acts.

A single arbitrator, Suzana Fernandes da Costa, was appointed on 09-07-2015. In accordance with the provisions of article 11, paragraph 1, subsection c) of the Tax Arbitration Rules, the singular arbitral tribunal was constituted on 24-07-2015.

The Tax Authority and Customs Authority submitted a response on 30-09-2015, defending the maintenance of the tax acts in question, requested dismissal of the claim, and alleged that the patrimonial value relevant for purposes of stamp duty incidence is the total patrimonial value of the urban property and not the patrimonial value of each of the floors or divisions that compose it, even if they are susceptible of independent use.

Finally, the T.A.C.A. requested the waiver of the meeting provided for in article 18 of the Tax Arbitration Rules, and the production of pleadings.

On 05-10-2015, an order was issued ordering the notification of the Claimant to pronounce itself within 10 days on the T.A.C.A.'s request for waiver of the meeting and production of pleadings.

On 04-11-2015 an order was issued waiving the holding of the meeting provided for in article 18 of the Tax Arbitration Rules, as well as the production of pleadings. And the date of 02-12-2015 was set for the pronouncement of the arbitral decision.

The parties possess legal standing and capacity and are legitimate (articles 4 and 10, paragraphs 1 and 2 of the Tax Arbitration Rules and article 1 of Order no. 112-A/2011 of 22 March).

The arbitral claim is timely, in accordance with article 10, paragraph 1, subsection a) of Decree-Law no. 10/2011 of 20 January and article 102, paragraph 1, subsection a) of the Tax Procedure and Process Code.

The case does not suffer from nullities and no preliminary questions were raised.

2. FACTS

2.1. Proven Facts:

Having analysed the documentary evidence produced and the position of the parties contained in the procedural documents, the following facts are considered proven and having relevance to the decision of the case:

  • The Claimant, in 2014, was the owner of the urban property located at Avenida …, n.º … to …, Lisbon, registered in the urban property register of the parish of ... under article …, constituted in full ownership and with twenty divisions susceptible of independent use, as evidenced by the property record attached to the arbitral claim as document 18.

  • The patrimonial value of all fractions of the property referred to above that are intended for residential use was, at the date of the assessments in question, two million, two hundred and twenty-five thousand, two hundred and twenty euros (2,225,220.00 €), as shown in the stamp duty assessments attached to the arbitral claim as documents 1 to 17.

  • The Claimant was notified of the following stamp duty assessments for the year 2014:

  • Assessment no. 2015 … in the amount of 1,235.30 €, relating to the 2nd floor right of the property referred to above, whose TPV is 123,530.00 €;

  • Assessment no. 2015 … in the amount of 1,235.30 €, relating to the 2nd floor left of the property referred to above, whose TPV is 123,530.00 €;

  • Assessment no. 2015 … in the amount of 1,247.40 €, relating to the 3rd floor right of the property referred to above, whose TPV is 124,740.00 €;

  • Assessment no. 2015 … in the amount of 1,247.40 €, relating to the 3rd floor left of the property referred to above, whose TPV is 124,740.00 €;

  • Assessment no. 2015 … in the amount of 1,247.40 €, relating to the 4th floor right of the property referred to above, whose TPV is 124,740.00 €;

  • Assessment no. 2015 … in the amount of 1,247.40 €, relating to the 4th floor left of the property referred to above, whose TPV is 124,740.00 €;

  • Assessment no. 2015 … in the amount of 1,259.50 €, relating to the 5th floor right of the property referred to above, whose TPV is 125,950.00 €;

  • Assessment no. 2015 … in the amount of 1,259.50 €, relating to the 5th floor left of the property referred to above, whose TPV is 125,950.00 €;

  • Assessment no. 2015 … in the amount of 1,259.50 €, relating to the 6th floor right of the property referred to above, whose TPV is 125,950.00 €;

  • Assessment no. 2015 … in the amount of 1,259.50 €, relating to the 6th floor left of the property referred to above, whose TPV is 125,950.00 €;

  • Assessment no. 2015 … in the amount of 1,295.90 €, relating to the 7th floor right of the property referred to above, whose TPV is 129,590.00 €;

  • Assessment no. 2015 … in the amount of 1,295.90 €, relating to the 7th floor left of the property referred to above, whose TPV is 129,590.00 €;

  • Assessment no. 2015 … in the amount of 1,308.00 €, relating to the 8th floor right of the property referred to above, whose TPV is 130,800.00 €;

  • Assessment no. 2015 … in the amount of 1,308.00 €, relating to the 8th floor left of the property referred to above, whose TPV is 130,800.00 €;

  • Assessment no. 2015 … in the amount of 904.20 €, relating to the 9th floor right of the property referred to above, whose TPV is 90,420.00 €;

  • Assessment no. 2015 … in the amount of 801.50 €, relating to the 9th floor left of the property referred to above, whose TPV is 80,150.00 €;

  • Assessment no. 2015 … in the amount of 345.70 €, relating to the 9th floor right of the property referred to above, whose TPV is 34,570.00 €.

  • None of the floors or divisions with independent use possess a taxable patrimonial value exceeding one million euros.

No other facts with relevance to the decision of the case were proven.

2.2. Rationale for the Proven Facts:

With respect to the proven facts, the arbitrator's conviction was based, on one hand, on the documents attached to the proceedings by the Claimant, namely the assessments and the property record, and on the other hand, on the positions taken by the parties.

3. LAW

3.1. Subject Matter and Scope of the Present Case

The question to be decided in the present proceedings is whether item 28.1 of the General Stamp Tax Table (GSTT), in the case of properties not constituted in horizontal property ownership, applies to the sum of the taxable patrimonial value attributed to the different parts or floors (global TPV), or rather to the taxable patrimonial value of each part of the property with independent economic use.

On this question, the CAAD decisions rendered in cases no. 280/2013-T, 26/2014-T, 88/2014-T, 206/2014-T, 290/2014-T, 428/2014-T, 451/2014-T, 457/2014-T, 458/2014-T and 567/2014-T, 724/2014-T, 152/2015-T, 174/2015-T, 236/2015-T, 311/2015-T, and decision no. 047/15 of the Supreme Administrative Court (SAC) have already pronounced themselves, among others.

3.2. Question of the Taxable Patrimonial Value Relevant for the Application of Item 28.1 of the GSTT and the Alleged Violation of the Principle of Equality

According to the Tax Authority and Customs Authority, in a property in vertical ownership (or not constituted in horizontal property ownership regime) the criterion for determining the incidence of stamp duty is the global taxable patrimonial value of the floors and divisions intended for residential use.

As for the Claimant, the subjection to the stamp duty contained in item no. 28.1 of the GSTT should be assessed not by the total value of the property but by the value attributed to each of the parts with independent use, according to their respective TPV, and should follow the same criterion as the determination of the Municipal Tax on Real Estate (MTRE).

Let us examine:

Law no. 55-A/2012, of 29 October, added item 28 to the General Stamp Tax Table (GSTT), with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the register, in accordance with the Code of Municipal Tax on Real Estate (CMTRE), is equal to or higher than € 1,000,000 – on the taxable patrimonial value used for purposes of MTRE:

28.1 – For property with residential purpose – 1% (…);

In the transitory provisions contained in article 6 of that Law no. 55-A/2012, the following rules were established:

c) The taxable patrimonial value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Code of Municipal Tax on Real Estate by reference to the year 2011; (…)

f) The applicable rates are as follows:

i) Properties with residential purpose valued in accordance with the Code of MTRE: 0.5%;

ii) Properties with residential purpose not yet valued in accordance with the Code of MTRE: 0.8%;"

Item 28.1 GSTT and subalíneas i) and ii) of subsection f) of paragraph 1 of article 6 of Law no. 55-A/2012 contains a concept that is not used in any other tax legislation, which is that of "property with residential purpose".

In turn, article 67, paragraph 2 of the Stamp Duty Code, added by the aforementioned Law, provides that "to matters not regulated in this code relating to item 28 of the General Table shall subsidiarily apply the CMTRE."

The rule of incidence refers to urban properties, the concept of which is that resulting from the provisions of article 2 of the CMTRE, with the determination of the TPV obeying the terms provided in article 38 and following of the same code.

In turn, article 6 of the CMTRE indicates the different types of urban properties, and determines that "residential, commercial, industrial or service buildings or constructions licensed for such purposes or, in the absence of a licence, that have as their normal purpose each of these aims." (see subsection a) of paragraph 1) of article 6 CMTRE).

It must therefore be concluded that for the legislator it is irrelevant whether the property is in vertical ownership or in horizontal ownership, only the material truth underlying its existence as an urban property and its use being relevant.

Since the Stamp Duty Code (SDC) refers to the Code of MTRE, we should consider that the registration in the property register of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, obeys the same rules of registration of properties constituted in horizontal ownership.

From this it follows that the respective MTRE, as well as the Stamp Duty, are assessed individually in relation to each of the parts. For that reason, the legal criterion for defining the incidence of the new tax must be the same.

Thus it is concluded, as in CAAD decision 50/2013-T and in decision no. 047/15 of the SAC, according to which "if the legal criterion requires the issuance of individualised assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it has clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of item 28.1 of the GSTT".

It thus results from the law that there would only be grounds for the incidence of the stamp duty of item 28.1 of the GSTT if one of the parts, floors or divisions with independent use presented a TPV exceeding one million euros (1,000,000.00 €), which does not occur in the present proceedings.

The criterion defended by the T.A.C.A., which takes into account the sum of the parts, on the argument that the property would not be constituted in horizontal property ownership regime, finds no legal support and is contrary to the criterion that results from the CMTRE and that applies by referral in respect of Stamp Duty.

Furthermore, the law itself expressly establishes, in the final part of item 28 of the GSTT, that the Stamp Duty to be incurred on urban properties of equal or higher value to one million euros (1,000,000.00 €) –"on the taxable patrimonial value used for purposes of MTRE."

In conclusion, the patrimonial value relevant for purposes of the application of item 28.1 of the GSTT is the TPV of the part, floor or division with independent use with residential purpose, as concluded in decision no. 047/15 of the SAC.

The Claimant alleges that the application of item 28.1 of the GSTT violates the principle of equality enshrined in articles 13 and 104, paragraph 3 of the Constitution of the Portuguese Republic.

In accordance with the interpretation upheld above, the taxation of parts with independent use of value lower than one million euros is not covered by the rule of incidence; therefore, their taxation effectively violates the principle of equality, more specifically in its corollaries of tax-paying capacity and fiscal proportionality.

With respect to the principle of equality, see CAAD decisions no. 50/2012-T and 218/2013-T, and decisions of the Constitutional Court no. 142/04 and 187/2013.

We conclude, as in CAAD decision no. 218/2013-T, stating that "the assessment of Stamp Duty now under review manifestly violates the principle of fiscal equality provided for in article 13 of the CPR, because: i) it is based on a rule that treats taxpayers who find themselves in identical situations in a very different manner, with the measure of the difference not being assessed by their actual tax-paying capacity; ii) it is based on an arbitrary legal solution devoid of any rational foundation."

In the present case, the property in question is in vertical ownership and contains several floors and divisions with independent use intended for residential purposes, as proven above. Given that none of the floors intended for residential use has a patrimonial value equal to or exceeding one million euros (1,000,000.00 €), as results from the documents attached to the proceedings, it is concluded that the legal presupposition of incidence of the Stamp Duty provided for in Item 28 of the GSTT is not satisfied.

Looking now at the ratio legis of the rule in question in item 28.1 GSTT and citing CAAD decision no. 50/2013-T "the legislator, in introducing this legislative innovation, considered as the determining element of tax-paying capacity urban properties with residential purpose of high value (luxury), more precisely, of value equal to or exceeding one million euros (1,000,000.00€), on which it began to impose a special stamp duty rate, intending to introduce a principle of taxation on wealth expressed in the ownership, usufruct or right of superficies of luxury urban properties with residential purpose. For that reason, the criterion was the application of the new rate to urban properties with residential purpose whose TPV is equal to or exceeding one million euros (1,000,000.00 €). Clearly the legislator understood that this value, when imputed to a residential property (house, autonomous fraction or floor with independent use) expresses a tax-paying capacity above average and, as such, capable of determining a special contribution to ensure the fair distribution of the tax burden." Already when applied to a part or fraction that does not exceed the said value of one million euros will not be satisfied by the rule of incidence.

The principle of fiscal equality determines that what is equal should be treated fiscally equally and what is different should be treated differently. Now, the differentiated treatment of fractions or parts of a property is not justified merely by the fact that the same is already in horizontal property ownership, provided that the fractions or parts have independent use.

As stated in CAAD decision of case no. 218/2013-T, "The principle of fiscal equality is based on the general principle of equality provided for in article 13 of the CPR, from which results the principle of tax-paying capacity which, by constitutional imperative, is the presupposition and the criterion of taxation."

Professor Casalta Nabais states that the principle of fiscal equality has embodied above all "the idea of generality or universality, in accordance with which all citizens are bound to fulfil the duty of paying taxes, and of uniformity, requiring that such a duty be assessed by a single criterion — the criterion of tax-paying capacity. This thus implies equal tax for those who have equal tax-paying capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those who have different tax-paying capacity in proportion to this difference (vertical equality)" (Casalta Nabais, Tax Law, 5th edition, Coimbra, 2009, p. 151-152).

In CAAD decision of case no. 50/2013-T it can be read that "the tax legislator cannot treat equal situations differently. Now, if the property were in horizontal property ownership regime, none of its residential fractions would suffer the incidence of the new tax."

Thus, and in line with the case law of the Constitutional Court and the CAAD, we conclude for the violation of the principle of fiscal equality and tax-paying capacity.

The Claimant further alleges that the principle of the prevalence of economic substance over the form of acts is violated.

As stated in the CAAD decision of case no. 185/2013-T, the principle of the prevalence of substance over form requires that the tax administration value material truth.

Now, in the present proceedings, the material truth consists in the absence of any substantive difference between the divisions owned by the Claimant and the fractions of a property constituted in horizontal ownership. Therefore, it is considered that this principle was also violated.

4. DECISION

In view of the foregoing, it is determined that the claim formulated by the Claimant in the present tax arbitral case is entirely upheld, as regards the illegality of the stamp duty assessments relating to the year 2014, assessment no. 2015 … in the amount of 1,235.30 €, no. 2015 … in the amount of 1,235.30 €, no. 2015 … in the amount of 1,247.40 €, no. 2015 … in the amount of 1,247.40 €, no. 2015 … in the amount of 1,247.40 €, no. 2015 … in the amount of 1,247.40 €, no. 2015 … in the amount of 1,259.50 €, no. 2015 … in the amount of 1,259.50 €, no. 2015 … in the amount of 1,259.50 €, no. 2015 … in the amount of 1,259.50 €, no. 2015 … in the amount of 1,295.90 €, no. 2015 … in the amount of 1,295.90 €, no. 2015 … in the amount of 1,308.00 €, no. 2015 … in the amount of 1,308.00 €, no. 2015 … in the amount of 904.20 €, no. 2015 … in the amount of 801.50 €, no. 2015 … in the amount of 345.70€.

5. VALUE OF THE CASE:

In accordance with the provisions of article 306, paragraph 2, of the Civil Procedure Code and article 97-A, paragraph 1, subsection a) of the Tax Procedure and Process Code and article 3, paragraph 2 of the Regulations of Costs in Tax Arbitration Proceedings, the value of the claim is fixed at 19,757.40 €.

COSTS:

In accordance with article 22, paragraph 4, of the Tax Arbitration Rules, and Table I attached to the Regulations of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 1,224.00 €, payable by the Tax Authority and Customs Authority.

Notify.

Lisbon, 02 December 2015.

Text prepared by computer, in accordance with article 138, paragraph 5 of the Civil Procedure Code (CPC), applicable by referral of article 29, paragraph 1, subsection e) of the Tax Arbitration Rules, reviewed by me.

The Single Arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Is Stamp Tax under verba 28.1 TGIS applicable when no individual unit in a vertical property exceeds €1,000,000 in taxable heritage value?
Under item 28.1 of the General Stamp Tax Table, the key issue in vertical property taxation is whether the €1,000,000 threshold applies to each independent unit or the total building value. When a property is held in full ownership (not constituted as horizontal property/condominium) with multiple independent divisions, the Tax Authority's position is that Stamp Tax applies if the aggregate taxable patrimonial value exceeds €1,000,000, even when no individual unit reaches this threshold. However, taxpayers can challenge this interpretation arguing that economically independent divisions should be taxed separately, invoking the principle of economic substance over form.
How is the taxable base for Imposto de Selo determined for buildings with multiple independent units under total ownership?
The taxable base for Imposto de Selo on buildings with multiple independent units under total ownership (vertical property) is disputed. The Tax Authority calculates the base using the sum of all divisions' taxable patrimonial values (VPT) as they appear in the property registry as a single article. However, taxpayers argue the base should be each division's individual VPT when units have independent economic use, even absent formal horizontal property constitution. This distinction is crucial: aggregated valuation triggers stamp duty at 1% annually on values exceeding €1,000,000, while individual division valuation may result in no tax liability if each unit falls below the threshold.
Can the Portuguese Tax Authority levy Stamp Tax based on the total VPT of a building rather than the VPT of each independent division?
Yes, the Portuguese Tax Authority can levy Stamp Tax based on the total VPT of a building registered as a single property article, arguing that the legal form of ownership determines taxation. The AT maintains that when property is not formally constituted as horizontal property (condominium), the entire building constitutes one taxable unit for stamp duty purposes under item 28.1 TGIS. However, this approach is challengeable through CAAD arbitration, particularly when the building contains physically and economically independent divisions. Taxpayers can argue that the economic reality of independent units should prevail over the formal registry structure, invoking constitutional principles and EU law regarding economic substance.
What legal principles such as legal certainty and economic substance apply to Stamp Tax disputes on vertical property in Portugal?
Several fundamental legal principles apply to Stamp Tax disputes on vertical property. Legal certainty (segurança jurídica) requires predictable tax consequences, particularly regarding what constitutes the taxable unit. The principle of good faith and legitimate expectations (boa-fé e confiança) protects taxpayers who reasonably interpret that independent divisions should be taxed separately. Most significantly, the principle of economic substance over form (prevalência da substância económica sobre a forma) supports taxing based on the economic reality of independent units rather than formal property registration. Additionally, principles of tax legality require strict interpretation of tax incidence rules, and proportionality demands that taxation reflect actual wealth capacity.
How does CAAD arbitration process work for challenging Imposto de Selo liquidations under verba 28.1 of the General Stamp Tax Table?
CAAD arbitration for challenging Imposto de Selo liquidations under verba 28.1 begins with filing a request (pedido de constituição do tribunal arbitral) within the statutory deadline under Article 10 of the Tax Arbitration Regime. The claimant must specify the contested assessments and legal grounds. A sole arbitrator is appointed for cases under €10,000 or a three-arbitrator panel otherwise. The Tax Authority submits a response (resposta) defending the assessments. Parties may waive the oral hearing (audiência) and proceed by written submissions. The tribunal examines legality, not merit, reviewing whether the tax application conforms to law. Decisions are binding and enforceable, with limited appeal grounds to administrative courts. The process typically concludes within 6-12 months, offering faster resolution than traditional administrative litigation.