Process: 306/2014-T

Date: November 28, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

Case 306/2014-T involved a challenge to a Stamp Duty (Imposto do Selo) assessment of €46,711.10 issued by the Portuguese Tax Authority for the 2012 tax year. The claimant, a real estate development company (A, S.A.), contested the application of Verba 28.1 of the General Stamp Duty Table (TGIS) to an urban property classified as land for construction. The dispute centered on whether undeveloped land for construction could be legally treated as 'properties with residential use' under Item 28.1 TGIS, which was introduced by Law 55-A/2012 to tax high-value real estate. The claimant argued the assessment violated multiple provisions of the Stamp Tax Code (Articles 2(4), 23(7), and 44(5)) and the Real Estate Tax Code (Articles 6, 41, and 45), asserting that land without constructed buildings cannot qualify as residential property. Additionally, constitutional challenges were raised, alleging violations of the equality principle (Article 13 CRP), tax capacity principle (Articles 103(1) and 104(3) CRP), and progressivity principle, arguing the taxation created unjustified disparities between taxpayers. The case proceeded through CAAD tax arbitration under Decree-Law 10/2011, with a sole arbitral tribunal constituted on June 4, 2014. Both parties waived the oral hearing under Article 18 RJAT, agreeing the matter involved purely legal questions. The Tax Authority defended the assessment's legality, arguing it complied with statutory provisions. The tribunal's task was determining whether Stamp Duty under Items 28 and 28.1 TGIS could lawfully apply to undeveloped construction land. The claimant sought annulment of the assessment plus compensatory interest (juros indemnizatórios) for illegally collected taxes.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 306/2014 – T

Subject: Stamp Duty - Item 28 of the General Stamp Duty Table.

I - REPORT

A) The Parties and Constitution of the Arbitral Tribunal

  1. A, S.A., a legal entity with number …, with registered office at Street …, …, …, …, in Lisbon, hereinafter referred to as the "Claimant", hereby requests, in accordance with the provisions of Article 2, no. 1, subsection a), 5th no. 2, subsections a) and b), 6th, no. 1, 10th, no. 1 subsection a) and no. 2, all of Decree-Law no. 10/2011, of January 20 (hereinafter "RJAT"), the constitution of a sole arbitral tribunal. The Claimant requests a decision regarding the declaration of illegality of the assessment of Stamp Duty ("Stamp Tax") No. …, of 14.07.2013, relating to the year 2012, issued by the Tax and Customs Authority, in the total amount of €46,711.10, contested assessment which is contained in document no. 4 attached to the request for arbitral decision and is hereby fully reproduced.

The Claimant further requests the condemnation of the Tax and Customs Authority to reimburse the Stamp Tax paid (illegally) plus the respective compensatory interest.

  1. Upon presentation of the request for constitution of the Arbitral Tribunal, it was accepted by His Excellency the President of CAAD and automatically notified to the Tax and Customs Authority. The Claimant opted not to appoint an arbitrator, wherefore, under the provisions of no. 1, article 6 of RJAT, was appointed by the Ethics Council of the Centre for Administrative Arbitration, the undersigned as arbitrator of the sole Arbitral Tribunal. The appointment was accepted and the parties, notified of the acceptance, on May 6, 2014, did not refuse the appointment, in accordance with the provisions of subsections a) and b), no. 1, article 11, of RJAT, combined with the provisions of articles 6 and 7 of the Ethics Code. Thus, in compliance with the provision of subsection c), no. 1, article 11 of Decree-Law no. 10/2011, of January 20, as amended by article 228, of Law no. 66-B/2012, of December 31, the sole Arbitral Tribunal was constituted on June 4, 2014.

  2. On the same date, the respondent "AT" was notified, in accordance with the provisions of article 17 of RJAT, to submit a response within the legal deadline, in accordance with the provisions of nos. 1 and 2, article 17, of RJAT. The AT submitted to the case file its Response and the administrative case and also a request for waiver of the meeting provided for in article 18 of RJAT, as well as presentation of arguments, due to the absence of exceptional matters raised in the case, evidence to be produced and the issue to be decided being exclusively a matter of law. On the same date an arbitral order was issued joining to the case file the request submitted by AT and the claimant was notified to comment thereon. On July 22, 2014 the Claimant submitted comments in favour of the requested waiver of the meeting and presentation of arguments, in line with what was requested by AT. Accordingly an arbitral order was issued on September 4, 2014, in which the meeting referred to in article 18 of RJAT was waived, as well as the presentation of arguments by the parties and a deadline was set for the issuance of the arbitral decision until December 1, 2014, the Claimant being required to pay the respective subsequent fee within the same deadline.

B) THE REQUEST FORMULATED BY THE CLAIMANT

  1. The Claimant formulates the present request for arbitral decision seeking the declaration of illegality and consequent annulment of the assessment act of Stamp Duty, relating to the year 2012, with number …, of 14.07.2013 in the total amount of €46,711.10, with reference to the urban property, composed of a parcel of land for construction, located in the Parish of …, Municipality of …, registered in the real estate register under number …, on the basis of subsection a) of article 99 of the Tax Procedure and Process Code (CPPT). The property and the respective contested tax assessment are duly identified in documents nos. 1 and 4, which are hereby reproduced.

  2. The Claimant bases its request on the illegality of the tax assessments and respective interest, alleging in summary the following:

a) The treatment of land for construction as "properties with residential use", for purposes of item 28.1 of the General Stamp Duty Table, is illegal, due to violation of the provisions of articles 2, no. 4, 23, no. 7 and 44, no. 5 of the Stamp Tax Code and the provisions of articles 6, 41 and 45 of the Real Estate Tax Code;

b) It further alleges that the taxation of real estate property introduced by Law no. 55-A/2012, namely by items 28 and 28.1 of the General Stamp Duty Table, leads to flagrant inequalities between citizens that find no material justification for this purpose. In this manner, item 28 of the General Stamp Duty Table violates, grossly, the principle of equality and tax capacity provided for in articles 13, 103, no. 1 and 104, no. 3, and also the principle of progressivity enshrined in articles 103, no. 1 and 104, no. 3, all of the Constitution of the Republic (CRP).

C) – THE RESPONSE OF THE RESPONDENT

  1. The Respondent alleges in its response, in summary, that the Claimant's arguments are without merit. The Tax and Customs Authority (ATA) defends in its response the legality of the assessment on the grounds that it complies with the letter of the law and that the request for declaration of illegality and consequent annulment of the contested assessments should be judged not well-founded, with its absolution from the request.

It concludes with the dismissal of the arbitral request, seeking the legality of the challenged tax acts and the absolution of the Respondent from the request.

D) PROCEDURAL PREREQUISITES

  1. The Arbitral Tribunal is properly constituted and is materially competent, in accordance with article 2, no. 1, subsection a) of Decree-Law no. 10/2011, of January 20.

  2. The Parties have legal personality and capacity, are entitled to litigate and are duly represented (articles 4 and 10, no. 2, of Decree-Law no. 10/2011 and article 1, of Ordinance no. 112/2011, of March 22).

The case does not suffer from nullities that would invalidate it and no exceptions were raised that would prevent the judgment on the merits of the case, so the Tribunal is in a position to issue the arbitral decision.

The case does not suffer from nullities.

II. ISSUE TO BE DECIDED

  1. Given the positions taken by the Parties in the arguments presented, it is incumbent upon the Tribunal to decide the issue of whether or not it is in accordance with the law that stamp duty is assessed in accordance with the provisions of items 28 and 28.1 contained in the General Stamp Duty Table (General Stamp Duty Table) to the specific case of the urban property characterized as a parcel of land for construction, described in the case file.

III – FACTUAL MATTER

A) Proven Facts

  1. As factual matter relevant to the decision to be issued, the Tribunal considers the following facts as proven:

a) The Claimant A, SA (hereinafter "A SA") is a commercial company that engages, within the scope of its activity, in the purchase of real estate for resale, in the urbanization of its own or third-party land, in the construction of real estate, in the sale of urbanized land and constructed real estate and in the administration of its own and third-party properties;

b) The Claimant A, SA is the owner of the urban property registered in the real estate register with number …, of the Parish of …, Municipality of …; (document no. 1 attached with the request for arbitral decision, the content of which is hereby reproduced);

c) The above-referenced urban property has no construction built on it, and in the area in which it is located the construction area contained in the respective subdivision license (document no. 2 attached with the request for arbitral decision, the content of which is hereby reproduced) has been exhausted;

d) The Claimant was notified in April 2013 of the general assessment carried out on the urban property in question, in the course of which the taxable asset value of €4,671,110.00 was assigned (document no. 3 attached with the request for arbitral decision, the content of which is hereby reproduced);

e) The Claimant was notified of assessment no. …, of 14.07.2013, relating to the year 2012, issued by the Tax and Customs Authority, in the total amount of €46,711.10, as a result of the application of the 1% rate made under item 28.1 of the General Stamp Duty Table, with a payment deadline until "December 2013" (document no. 4 attached with the request for arbitral decision, the content of which is hereby reproduced);

f) On 31-03-2014, the Claimant filed the request for constitution of the arbitral tribunal (CAAD computer system);

g) In February 2014 the Claimant was served with notice of the commencement of enforcement proceedings and on March 28, 2014 it proceeded to pay the tax and corresponding interest and surcharges (documents nos. 5 and 6 attached with the request for arbitral decision, the content of which is hereby reproduced).

B) Unproven Facts

  1. There are no facts relevant to the decision that were not proven.

C) Justification of the Proven Factual Matter

  1. The proven facts, as described above, are based on the documentary evidence that the Parties submitted to the present case and are based on the documents indicated for each of the points, whose authenticity and correspondence to reality were not contested.

IV – LEGAL MATTER

  1. With the factual matter established, it is necessary to address the sole legal issue under discussion in the present case, corresponding in summary to the illegality issues raised by the Claimant in the present arbitral request.

A decision must be made.

  1. The issue that is the subject of the present action is whether land for construction, to which was assigned, in an assessment process, intended for urban construction for "Residential" purposes, falls within the scope of item 28.1 of the General Stamp Duty Table (General Stamp Duty Table), in its original wording. Let us see, then, the legal framework of reference for the correct analysis of this issue.

  2. The taxation under stamp duty of urban properties with residential use was introduced by Law no. 55-A/2012, of October 29 (State Budget Law) which made several amendments to the Stamp Tax Code and added to the General Stamp Duty Table item 28, which has the following wording:

28 - Ownership, usufruct or right of surface of urban properties whose taxable asset value contained in the register, in accordance with the Real Estate Tax Code (CIMI), is equal to or greater than €1,000,000 – on the taxable asset value used for purposes of Real Estate Tax:

28.1 – For a property with residential use – 1%;

28.2 – For a property, when the tax subjects that are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by an ordinance of the Minister of Finance – 7.5%.

In the transitional provisions contained in article 6 of that Law no. 55-A/2012, the following rules relating to the assessment of the tax provided for in that item were established:

"1 – In 2012, the following rules shall be observed with reference to the assessment of stamp duty provided for in item no. 28 of the respective General Table:

a) The taxable event occurs on October 31, 2012;

b) The tax subject is the one mentioned in no. 4 of article 2 of the Stamp Tax Code on the date referred to in the preceding subsection;

c) The taxable asset value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Real Estate Tax Code with reference to the year 2011;

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

e) The tax shall be paid, in a single instalment, by the tax subjects by December 20, 2012;

f) The applicable rates are the following:

i) Properties with residential use assessed in accordance with the Real Estate Tax Code: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the Real Estate Tax Code: 0.8%;

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

2 – In 2013, the assessment of stamp duty provided for in item no. 28 of the respective General Table must be based on the same taxable asset value used for purposes of assessment of real estate tax to be carried out in that year.

3 – The failure to deliver, in whole or in part, within the indicated deadline, of the amounts assessed as stamp duty constitutes a tax violation, punished in accordance with the law."

  1. In the referred item 28.1 and in sub-subsections i) and ii) of subsection f) of no. 1 of article 6 of Law no. 55-A/2012, the legislator used the concept of "property with residential use", which finds no reference in any other legislative instrument, whereby the specification of the same is required.

The Real Estate Tax Code (CIMI) is mentioned in several provisions of the Stamp Tax Code introduced by that Law and is indicated as an instrument of subsidiary application with respect to the tax provided for in the referred item no. 28, as occurs in articles 2, no. 4, 3, no. 3, subsection u), 5, subsection u), 23, no. 7, and 46 and 67 of CIS. However, in none of these provisions is a concept with that designation used.

Law no. 83-C/2013, of December 31, amended that item no. 28.1, giving it the following wording:

"28.1 - For a residential property or for land for construction whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the Real Estate Tax Code – 1%"

Such a formulation naturally applies only from January 1, 2014, but it must be said in advance that it did nothing to clarify the qualification of the concept in question.

  1. Therefore, it will be important to verify the possible contribution to be extracted from the concepts of properties used in the CIMI, in its articles 3 to 6. Thus, according to article 2 of the CIMI, a property is understood as:

"1 – For purposes of this Code, property is any parcel of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated in or erected on it, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land on which they are located, although situated in a parcel of territory that constitutes an integral part of a different asset or does not have a patrimonial nature.

2 – Buildings or constructions, even if moveable by nature, are considered to have a character of permanence when devoted to purposes that are not transitory.

3 – The character of permanence is presumed when the buildings or constructions are erected in the same location for a period of more than one year.

4 – For purposes of this tax, each autonomous fraction, under the horizontal property regime, is considered to constitute a property."

Article 3 adds, which is understood as rustic properties:

"1 – Rustic properties are lands situated outside an urban settlement that are not to be classified as land for construction, in accordance with no. 3 of article 6, provided that:

a) They are devoted or, in the absence of concrete use, have as their normal destination use that generates agricultural income, such as are considered for purposes of personal income tax (IRS);

b) Not having the use indicated in the preceding subsection, they are not built on or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Rustic properties are also lands situated within an urban settlement, provided that, by virtue of a legally approved provision, they cannot have use that generates any income or can only have use that generates agricultural income and are actually having this use.

3 – Rustic properties are also:

a) Buildings and constructions directly devoted to the production of agricultural income, when located on the lands referred to in the preceding numbers;

b) Waters and plantations in the situations to which no. 1 of article 2 refers.

4 – For purposes of this Code, urban settlements are understood as, besides those located within legally fixed perimeters, nuclei with a minimum of 10 dwellings served by public roads, with their perimeter delimited by points spaced 50 m from the axis of the roads, in the transversal direction, and 20 m from the last building, in the direction of the roads."

Article 4 qualifies as urban properties "all those that should not be classified as rustic, without prejudice to the provisions of the following article."

And article 6 indicates the types of urban properties, as follows:

"1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or service;

c) Land for construction; (underlined by us)

d) Other.

2 – Residential, commercial, industrial or service are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal destination each of these purposes.

3 – Land for construction is understood as lands situated within or outside an urban settlement, for which a license or authorization has been granted, prior notice admitted or favorable prior information issued for subdivision or construction operation, and also those that have been so declared in the acquisition title, with the exception of lands in which the competent authorities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use and management plans, are devoted to public spaces, infrastructures or facilities. (As amended by Law no. 64-A/08, of 31-12)

4 – The provision of subsection d) of no. 1 encompasses lands situated within an urban settlement that are not land for construction nor are covered by the provision of no. 2 of article 3 and also buildings and constructions licensed or, in the absence of a license, that have as their normal destination other purposes than those referred to in no. 2 and also those of the exception of no. 3."

  1. In light of the legal framework set out above, and considering the rules on the interpretation of legal norms, in particular those resulting from article 11 of the General Tax Law (LGT) it is necessary to conclude that the general principles of interpretation of laws, to which no. 1 of article 11 of LGT refers, are established in article 9 of the Civil Code, which establishes the following:

"1. Interpretation must not be limited to the letter of the law, but must reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied.

  1. However, the interpreter cannot consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms."

Thus, it is necessary to determine the meaning and scope of the concept of "property with residential use", a fundamental task for the interpretation and correct application of the provision contained in item 28 and 28.1 of the General Stamp Duty Table.

As can be seen from the above, the CIMI does not use in the classification of properties it adopts the concept of "property with residential use".

Nor is this concept found with this terminology in any other statute.

Thus, following the reasoning already pursued in previous arbitral decisions, in particular in those issued in cases nos. 53/2013-T and 144/2013-T "in the absence of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes, several interpretive hypotheses can be advanced."

The starting point for the interpretation of that expression "properties with residential use" is, naturally, the text of the law, and it is on the basis of it that the "legislative thought" must be reconstructed, as required by no. 1 of article 9 of the Civil Code, applicable by virtue of the provisions of article 11, no. 1, of the LGT.

  1. The concept most closely corresponding to the literal meaning of this expression used is manifestly that of "residential properties", defined in no. 2 of article 6 of the CIMI as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, that have as their normal destination residential purposes.

If it is to be understood that the expression "property with residential use" coincides with that of "residential properties", it is manifest that the assessments will suffer from error as to the factual and legal prerequisites, for all the properties for which Stamp Duty was assessed under the referred item no. 28.1 are land for construction, without any building or construction required by that no. 2 of article 6 to fulfill that concept of "residential properties".

Therefore, it would be sufficient to adopt the interpretation that "property with residential use" means "residential property", and the assessment whose declaration of illegality is sought would be illegal, because there is no building or construction.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the General Stamp Duty Table with that which is extracted from no. 2 of article 6 of the CIMI indicates that it was not intended to use the same concept.

However, a more thorough interpretation of the meaning to be given to the concept in question leads to the conclusion that "use", in this context, means "action of allocating something to a determined use". And, if we take into account the objectives defined in the statement of principles issued in the Parliament on the intention of the legislator to introduce taxation on "luxury homes", there is no doubt that the purpose or ratio legis underlying is to tax the "use" of the property considered in the fullness of the degree of comfort it provides.

As Baptista Machado rightly points out, "when, as is the rule, norms (legislative formulas) admit more than one meaning, then the positive function of the text is expressed in giving stronger support to or suggesting more strongly one of the possible meanings. For, among the possible meanings, some will correspond to the most natural and direct meaning of the expressions used, whereas others can only fit into the verbal framework of the norm in a forced, artificial manner. Now, in the absence of other elements that induce the choice of the less immediate sense of the text, the interpreter must in principle opt for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular to its technical-legal meaning, in the assumption (not always accurate) that the legislator knew how to correctly express its thought".

The relevance of the text of the law is especially emphasized in the matter of interpretation of tax assessment norms, and in this regard Stamp Duty appears as a tax of difficult texture and confused identity, with the interpreter encountering frequent and successive difficulties, whereby the guiding thread must be, in the first place, the principle of the unity of the legal system, trying to impose some coherence of application.

And, in this line of thought, we cannot dispense with the use of the Statement of Reasons of the Bill no. 96/XII/2nd, on which Law no. 55-A/2012 was based. In this statement of reasons it is evident the concern of the Government to strengthen the principle of social equity in austerity, ensuring an effective sharing of the sacrifices necessary for the fulfillment of the adjustment program and its commitment to ensuring that the sharing of those sacrifices will be made by all and not only by those who live from the income of their work.

In this context, in the absence of other interpretive coordinates, the content of the legal text must be the primary element of interpretation, in accordance with the presumption imposed by the same no. 3 of article 9, that the legislator knew how to express its thought in adequate terms. Now, taking into account the meaning of the words "use" and "allocate", which are "to assign a destination" or "to apply", the formula used in that item no. 28.1 of the General Stamp Duty Table clearly encompasses properties that are already being used as residential, and cannot encompass properties that, despite not yet being applied to residential purposes, may eventually be intended for these purposes, as occurs with land for residential construction.

  1. Furthermore, it is necessary to clarify when a property can be considered as devoted to residential purposes, namely whether it is when such destination is fixed in a subdivision license or by a licensing act or similar, or when the effective assignment of that destination is realized. The comparison of item no. 28.1 of the General Stamp Duty Table with no. 2 of article 6 of the CIMI, which defines the concept of residential properties, indicates that an "effective use" is necessary.

Thus, a building or construction licensed for residential purposes or, even without a license, but which has residential purposes as its normal destination, is, in accordance with the provision of no. 2 of article 6 of the CIMI, a residential property, because it is the legislator itself who considers as such "buildings or constructions licensed for such purposes or, in the absence of a license, that have such purposes as their normal destination".

Therefore, if the legislator of Law no. 55-A/2012 knew how to express its thought in adequate terms if it intended to also refer to properties merely licensed for residential purposes or that have residential purposes as their normal destination, it would certainly not have used the expression "properties with residential use".

  1. In these terms, it must be presumed that the legislator's use of a different expression was intended to reach a distinct reality, whereby "property with residential use" cannot be a property merely licensed for residential purposes or intended for that purpose, having to be a property that already has effective use for that purpose.

Note that in the present case the property in question is characterized as land for construction, and from the Certificate attached to the case by the Claimant as document no. 2, it is possible to extract that in the building area in which this lot/parcel of land is located, the building capacity has already been exhausted. Therefore, although it is land for construction, with the capacity for residential construction, this is only a mere possibility, whose realization will depend on obtaining the necessary building license which does not appear, in light of the information contained in the present case, even to be viable.

For this very reason the only possible meaning for the expression "use" is that of an "effective use". See that article 3 of the CIMI, with respect to rustic properties, makes reference to those that "are devoted or, in the absence of concrete use, have as their normal destination use that generates agricultural income", which evidences that the use is concrete, effective. As also seen from the latter part of this text, a property can have as destination a determined use and be or not devoted to it, which evidences the prerequisite of an effective use.

  1. In the case at hand there is no building or construction and, taking into account the content of the document issued by the Municipal Chamber of …, attached to the case as document no. 2, nor is it certain that one can come to exist, whereby we cannot consider that the property in question has an effective use for residential purposes.

Furthermore, the legislative intention not to extend the scope of assessment to construction land was expressly mentioned by the Government when presenting before the Plenary of Parliament the Bill 96-XII by saying, by the voice of the State Secretary for Tax Affairs: "First, the Government proposes the creation of a special tax to tax urban residential properties of higher value. It is the first time that Portugal has created special taxation on high-value properties intended for residential purposes. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to homes of value equal to or greater than 1 million euros. With the creation of this additional rate, the fiscal effort required of these owners will be significantly increased in 2012 and in 2013." (underlined by us).

The express reference to "homes" as the target of the new tax does not leave room for doubt about the legislative intention.

On the other hand, no reference to "land for construction" is found in the discussion of the referred Bill.

With regard to article 45 of the CIMI, it has no relation to the classification of properties, only indicating the factors to be considered in the assessment of land for construction. What is considered there, when making reference to the "building to be constructed" is the consideration of the destination of the land, which, as was seen, is something that, in the context of the CIMI, does not imply use and occurs before this. Therefore, the invocation of AT in article 16 of its response does not hold for the purpose relevant to the issue to be decided in the present case. The same can be said of the Supreme Administrative Court judgment invoked there, which refers, in fact, to the issue of the regime for assessment of the taxable asset value of land for construction, in no way being relevant to the decision being considered in the present case.

Finally, it is important to note that Law no. 83-C/2013, of December 31, also contradicts the position here defended by ATA, for it did not come to clarify the logical element underlying the original wording of item no. 28.1, but rather came to indirectly confirm the interpretation that it did not encompass land for construction.

In fact, if the original wording of item no. 28.1 under consideration, when speaking of "property with residential use" intended to encompass the buildings and constructions that constituted "residential properties" and land for construction for which residential construction was authorized or planned, then the natural thing should be to give the new wording an interpretive nature, similar to what it does in other provisions it contains, such as for example article 177, no. 7, regarding subsections a) and b) of no. 3 of article 17-A of the Personal Income Tax Code.

  1. For all that has been set out it is the understanding of this Tribunal that item 28.1 does not apply to land for construction, even if these reveal potential for residential construction.

It is important to note that on this same issue several arbitral decisions have already been issued, among which the ones issued in arbitral cases nos. 42/2013 T, 48/2013-T, 53/2013-T, 144/2013-T, 180/2013 – T and 189/2013-T, among others, are highlighted.

The Supreme Administrative Court has also pronounced itself on this issue, in particular in the Judgments issued, namely on April 9 and 23, 2014 (in which Isabel Marques da Silva was the reporting judge) and May 9, 2014 (in which Dulce Neto was the reporting judge).

In this regard, the Supreme Administrative Court judgment of April 9, 2014 (in which express reference is made to arbitral decision no. 144/2013-T) concludes that "since the legislator did not define the concept of "properties (urban) with residential use", and it results from article 6 of the Real Estate Tax Code - subsidiarily applicable to Stamp Duty provided for in the new item no. 28 of the General Table - a clear distinction between "urban residential properties" and "land for construction", these cannot be considered, for purposes of the assessment of Stamp Duty (Item 28.1 of the General Stamp Duty Table, as amended by Law no. 55-A/2012, of October 29), as urban properties with residential use."

  1. The Claimant further alleges a violation of constitutional principles in the legal justification of its request. Well then, this Tribunal understands that the consideration and decision of the issue to be decided is related to the correct interpretation of the provision contained in item 28.1 of the General Stamp Duty Table, whereby we are faced with a clear violation of the provision itself, as amply demonstrated above.

  2. As a consequence of all that has been set out, it follows that the contested assessment is illegal, suffers from a defect of violation of law due to error regarding the legal prerequisites, embodied in violation of the provision of item no. 28.1 of the General Stamp Duty Table, whereby it must be subject to annulment, in accordance with article 135 of the Administrative Procedure Code.

Consequently, reimbursement must be made to the Claimant of all amounts wrongfully paid, plus compensatory interest, in accordance with the provisions of article 24, no. 1, subsection b) and 29, no. 1, subsection a) of RJAT, article 43, no. 1 and 100 of LGT.

  1. There appear to be no other relevant issues raised by the parties.

V - DECISION

Given the foregoing, this Arbitral Tribunal decides:

A) To judge the arbitral request as well-founded and declare the illegality of the contested assessment and annul the Stamp Duty assessment contested in the present case (no. …);

B) To judge as well-founded the request for condemnation of the Tax Administration to reimbursement of the amount wrongfully paid, plus compensatory interest at the legal rate, calculated from the day of the payment made until the full reimbursement of the aforementioned amount, condemning the Tax and Customs Authority to make these payments.

Value of the case: In accordance with the provisions of article 315, no. 2 and 2 of the Civil Procedure Code, article 97-A, no. 1, subsection a), of the Tax Procedure and Process Code and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €46,711.10.

Costs: In accordance with the provisions of no. 4, of article 22, of RJAT and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €2,142.00, to be borne by the respondent Tax and Customs Authority.

Register and notify.

Lisbon, November 28, 2014

The Arbitrator,

(Maria do Rosário Anjos)

Text prepared by computer, in accordance with no. 5 of article 131 of the Civil Procedure Code, applicable by referral of subsection e) of no. 1 of article 29 of Decree-Law no. 10/2011, of 20/01.

The drafting of this decision is governed by old spelling conventions.

[1] Article 11 of the General Tax Law provides, regarding the interpretation of tax norms, that:

"1. In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

  1. Whenever, in tax norms, terms specific to other branches of law are used, they shall be interpreted in the same sense as that which they have there, except if otherwise directly follows from the law.

  2. Persisting doubt about the meaning of the assessment norms to apply, account shall be taken of the economic substance of the tax facts.

  3. Gaps resulting from tax norms covered by the legislative reserve of Parliament are not susceptible to analogical integration."

[2] In this regard, see BAPTISTA MACHADO, J. Introduction to Law and Legitimating Discourse, latest edition Almedina, page 182 et seq.

[3] In this regard, see arbitral decisions issued in cases nos. 53/2013 – T, 144/2013-T, 178/2013 – T, 285/2014 – T, among others.

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to high-value urban properties?
Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) is a provision introduced by Law 55-A/2012 that imposes annual Stamp Duty on real estate property ownership. Specifically, Verba 28.1 applies to 'properties with residential use' (prédios com afetação habitacional) with high taxable values. The taxation applies annually based on the property's patrimonial value (valor patrimonial tributário). In this case, the central legal dispute concerned whether undeveloped land for construction (terreno para construção) could be classified as property with 'residential use' and thus subject to Verba 28.1. The claimant argued that land without constructed buildings cannot constitute residential property under the Stamp Tax Code or Real Estate Tax Code definitions, making the €46,711.10 assessment illegal.
Can a taxpayer challenge a Stamp Tax (Imposto do Selo) liquidation through CAAD tax arbitration under Decree-Law 10/2011?
Yes, a taxpayer can challenge a Stamp Tax (Imposto do Selo) liquidation through CAAD (Centro de Arbitragem Administrativa) tax arbitration under Decree-Law 10/2011 (RJAT). This case clearly establishes such jurisdiction under Article 2(1)(a) of the RJAT, which grants CAAD competence over tax disputes. The claimant successfully initiated arbitration by filing a request under Articles 2(1)(a), 5(2)(a)(b), 6(1), and 10(1)(a) of the RJAT. The President of CAAD accepted the request, notified the Tax and Customs Authority, and a sole arbitral tribunal was constituted on June 4, 2014. This procedural route provides taxpayers an alternative to judicial courts for contesting tax assessments, offering a specialized, typically faster resolution mechanism for tax disputes.
What are the legal grounds for contesting a 2012 Stamp Tax assessment on properties valued over €1,000,000 under Verba 28?
The legal grounds for contesting a 2012 Stamp Tax assessment under Verba 28 include: (1) Procedural grounds under Article 99(a) of the Tax Procedure and Process Code (CPPT) for declaration of illegality and annulment of the assessment act; (2) Substantive illegality based on violation of the Stamp Tax Code, specifically Articles 2(4), 23(7), and 44(5), arguing that land for construction cannot be treated as 'properties with residential use' under Verba 28.1; (3) Violation of Real Estate Tax Code Articles 6, 41, and 45 regarding property classification; (4) Constitutional challenges including violation of the equality principle (Article 13 CRP), the tax capacity principle (Articles 103(1) and 104(3) CRP), and the progressivity principle (Articles 103(1) and 104(3) CRP), arguing that the taxation creates unjustified disparities between similarly situated taxpayers with no material justification for differential treatment.
Is a taxpayer entitled to compensatory interest (juros indemnizatórios) when a Stamp Tax liquidation is declared illegal by an arbitral tribunal?
Yes, a taxpayer is entitled to compensatory interest (juros indemnizatórios) when a Stamp Tax liquidation is declared illegal by an arbitral tribunal. In this case, the claimant explicitly requested 'condemnation of the Tax and Customs Authority to reimburse the Stamp Tax paid (illegally) plus the respective compensatory interest.' Compensatory interest serves to compensate taxpayers for the financial loss resulting from having funds improperly withheld by the State. When a tax assessment is annulled due to illegality, the taxpayer has the right not only to reimbursement of the principal amount paid but also to interest calculated from the payment date until the refund date. This right is established in Portuguese tax law to provide full restitution and discourage unlawful tax collection.
What is the procedure for constituting a singular arbitral tribunal at CAAD to dispute an Imposto do Selo assessment?
The procedure for constituting a singular (sole) arbitral tribunal at CAAD to dispute an Imposto do Selo assessment involves: (1) Filing a request for arbitral decision under Article 2(1)(a) and related provisions of Decree-Law 10/2011 (RJAT), identifying the contested assessment and legal grounds; (2) The President of CAAD accepts the request and automatically notifies the Tax and Customs Authority; (3) The claimant may choose to appoint an arbitrator or decline; if no appointment is made, the Ethics Council of CAAD appoints a sole arbitrator under Article 6(1) RJAT; (4) The appointed arbitrator's acceptance is notified to the parties, who have the right to refuse the appointment under Articles 11(1)(a)(b) RJAT and Articles 6-7 of the Ethics Code; (5) If no refusal occurs, the tribunal is formally constituted (in this case, on June 4, 2014); (6) The Tax Authority is notified to submit a response within the legal deadline (Article 17 RJAT); (7) Parties may waive the oral hearing under Article 18 RJAT if the matter involves purely legal questions, as occurred in this case.