Process: 315/2016-T

Date: January 9, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration case 315/2016-T addresses the proper application of Stamp Tax (Imposto do Selo) under item 28.1 of the General Table (TGIS) to buildings held in vertical property. The taxpayer owned a property with 14 independent units (12 residential), with aggregate patrimonial tax value of €1,628,211.03, though no individual unit exceeded €1,000,000. The Tax Authority assessed Stamp Tax on the total aggregate value for 2012-2013. The taxpayer challenged this, arguing that each independent unit should be taxed separately (similar to IMI treatment), meaning none would exceed the threshold requiring Stamp Tax. The Authority countered that in vertical property—unlike horizontal ownership regimes—independent units lack legal autonomy, and the law requires summing values of all units to determine the property's taxable value. The taxpayer first sought official revision (revisão oficiosa) filed in February 2014, which was denied in March 2016. Subsequently filed CAAD arbitration in June 2016, requesting annulment of the assessments and refund of taxes paid (€18,674.49) plus compensatory interest. The Authority raised a statute of limitations defense. The case highlights critical distinctions between vertical and horizontal property regimes for Stamp Tax purposes, the interpretation of 'property' under item 28.1 TGIS, and whether independent residential units constitute separate taxable properties or mere fractions of a unified whole for tax assessment purposes.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, NIF…, resident at Rua …, n.º … –..., in Lisbon, (hereinafter referred to as the Applicant), filed, on 08-06-2016, a request for the constitution of a sole arbitral tribunal, pursuant to articles 2.º and 10.º of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as LRATM), in conjunction with article 99.º, subparagraph a) of the Tax Procedures Code (TPC), whereby the Tax and Customs Authority is the Respondent (hereinafter referred to as the Respondent).

The Applicant submits the request for arbitral decision with respect to (i) the dismissal of the request for revision of the tax act and (ii) the assessment acts of Stamp Tax item 28.1 of the General Table of Stamp Tax (hereinafter, GTST), issued in 2012 and 2013, in the total amount of € 18,674.49, concerning the urban property located at Rua …, n.º … to …, registered in the property roll of the parish of …, municipality of Lisbon, under article…. The Applicant further requests the condemnation of the Respondent to reimburse the tax unduly paid, plus compensatory interest.

The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD on 09-06-2016 and notified to the Tax and Customs Authority on that same date.

Pursuant to article 6.º, n.º 2, subparagraph a) and article 11.º, n.º 1, subparagraph b) of the LRATM, the Deontological Council appointed as arbitrator of the sole arbitral tribunal the undersigned, who communicated acceptance of the assignment within the applicable deadline.

On 16-08-2016, the Parties were duly notified of this appointment, and did not express any intention to refuse the appointment of the arbitrator, pursuant to the combined provisions of article 11.º, n.º 1, subparagraphs a) and b) of the LRATM and articles 6.º and 7.º of the Deontological Code.

In accordance with article 11.º, n.º 1, subparagraph c) of the LRATM, the sole arbitral tribunal was constituted on 05-09-2016.

Notified to respond, the Respondent filed its answer raising the exception of lapse of the request for arbitral decision, further concluding for the total lack of merit of the request filed by the Applicant.

The Applicant was granted a deadline to respond in writing to the exception raised, which it did.

By order of 20-10-2016, the meeting provided for in article 18.º of the LRATM was dispensed with, and the parties were granted a deadline for submission of successive written submissions.

The Applicant alleges, briefly, that there was an error of fact and of law in the assessment of the disputed tax by taking as the basis of incidence the total aggregate value of the parts of independent use assigned to housing that compose each of the identified properties and not the individual value of each of those same parts. Being in issue properties in vertical ownership composed of units capable of independent use, the patrimonial value for tax purposes relevant for purposes of assessment of Stamp Tax will be that of each one of them individually considered and not their sum, similar to what occurs with the IMI. It therefore requests the declaration of illegality of the assessments made by the Respondent in the years 2012 and 2013 concerning the property identified.

In response, the Respondent begins by invoking the exception of lapse of the request for arbitral decision for having been filed beyond the 90-day deadline provided for in article 10.º, n.º 1 of the LRATM and counted from the facts provided for in articles 102.º, n.ºs 1 and 2 of the TPC. Indeed, as the request for arbitral decision concerns the assessment acts made in 2012 and 2013, at the date of submission, such legal deadline would have long since expired. Without prejudice to the exception raised, as regards specifically the request for declaration of illegality of the assessments contested, the Respondent argues, briefly, that in properties not subject to horizontal ownership, units capable of independent use have no autonomy; the individualization for purposes of registration and assessment does not affect its legal-tax nature, the law determining that the value of the property will necessarily correspond to the sum of the value of the various independent units. Units of independent use cannot be considered as "properties" in accordance with the legal definition, wherefore they cannot be relevant for purposes of incidence of item 28.1 of the GTST. For purposes of this rule, it will therefore be necessary to take into account the patrimonial value of the property in vertical ownership which will correspond, in accordance with the law, to the sum of the values of each unit capable of independent use. It thus concludes for the legality of the identified assessments which, for this same reason, should be upheld.

In the response to the exception, the Applicant clarifies and reiterates that the request for arbitral decision concerns both the assessments of Stamp Tax as well as the dismissal of the request for revision filed with reference to those assessments.

III. PRELIMINARY OBJECTIONS

The Arbitral Tribunal was regularly constituted and is competent.

The parties have judicial personality and capacity and are entitled (arts. 4.º and 10.º, n.º 2, of the same legislation and art. 1.º of Ordinance No. 112-A/2011, of 22 March).

The case does not contain any nullities.

IV. FACTUAL MATTERS

A. Proven Facts

The following facts are considered proven:

  1. The Applicant is the owner of the urban property located at Rua …, n.º … to …, registered in the property roll of the parish of …, municipality of Lisbon, under article….

  2. The identified property has a patrimonial value for tax purposes of € 1,628,211.03.

  3. The identified property is composed of 14 units capable of independent use, 12 of which are assigned to housing.

  4. None of the units capable of independent use assigned to housing has a patrimonial value for tax purposes exceeding € 1,000,000.

  5. In November 2012, the Applicant was notified of the assessments of Stamp Tax item 28.1 of the GTST, made with reference to the identified property under the transitional regime approved by Law No. 55-A/2012, of 29 October, in the total amount of € 6,224.74.

  6. These assessment notes were paid on 20-12-2012.

  7. In March 2013, the Applicant was notified of the assessments of Stamp Tax item 28.1 of the GTST, with reference to the identified property, in the total amount of € 12,449.48.

  8. Such assessments were paid in the enforcement collection phase, plus the respective default interest and procedural costs.

  9. On 27-02-2014, the Applicant filed a request for official review, pursuant to article 78.º of the Tax Code, in which it requested the annulment of the Stamp Tax assessments made in 2012 and 2013.

  10. The request for official review was dismissed by order of 17-03-2016 of the Head of Services of the Real Estate Registry, notified to the Applicant on 11-04-2016.

  11. On 08-06-2016, the Applicant filed the present request for arbitral decision.

B. Unproven Facts

No other facts with relevance for the arbitral decision were proven.

C. Reasoning for Factual Matters

The factual matters stated as proven are based on documentary evidence submitted and not contested.

V. LEGAL MATTERS

A. The Exception of Lapse of the Request for Arbitral Decision

For an adequate assessment of the exception raised, it is first necessary to determine and delimit concretely the object of the request for arbitral decision.

Having analyzed the initial petition and the response to the exception submitted by the Applicant, this Tribunal considers that the present arbitral proceeding concerns (i) the assessment acts of Stamp Tax item 28.1 of the GTST made in 2012 and 2013 and (ii) the dismissal of the request for official review filed with reference to those assessment acts.

This is evident from the outset from the heading of the request submitted when the Applicant states that it comes to "present a Request for Arbitral Decision in tax matters, with a view to the dismissal of the request for review filed (…)", attaching to the file a copy of the order issued.

And, although the request finally filed appears to be limited to the "annulment of the act of assessments" and the "reimbursement of the total tax paid and of the compensatory interest due, in accordance with legal terms", the truth is that, called to respond to the exception raised, the Applicant reiterates that the request filed was also directed to the very dismissal of the official review requested. This is evident from the words of the Applicant when it states in point 3 of the response to the exception that "Since the tax Administration did not accept the request for review filed by the Applicant, but instead dismissed it, once again it found itself forced to resort, now, to what is provided in subparagraph e), of n.º 1, of the aforementioned article 102.º, to, as is logical and certain and as there is no longer a deadline to challenge the payments, as there was not when it resorted to the request for review, impugn, as it indeed did, the dismissal of the request for review". The pretension of the Applicant is clearly identified here and should be considered in complement to what is alleged in the initial petition.

Furthermore, as has been the jurisprudence of the Supreme Administrative Court, as exemplified by the judgment of 07-01-2016, rendered in proc. No. 1265/13, "In the interpretation of the request filed, some flexibility should be used not excluding the resort to the figure of the implicit request in order to better safeguard respect for the principles of effective judicial protection and pro actione."

It is thus incumbent upon the judge to adopt an adequate and flexible interpretation of the request filed by the author in order to ensure its economic utility and effective judicial protection, with a view to a definitive regulation of the situation at issue.

It is under this power of conformation, adaptation and flexibilization of the request recognized to the judge that, based on the procedural documents submitted by the Applicant, this tribunal concludes that the Applicant intends not only the declaration of illegality of the assessment acts of Stamp Tax item 28.1 of the GTST, but also of the order dismissing the request for official review that had been submitted with reference to the same.

Given this, as the request for arbitral decision also concerns the dismissal of the request for review filed, it is considered to be timely, as filed within the 90-day deadline provided for in article 10.º, n.º 1, subparagraph a) of the LRATM, wherefore the exception of lapse raised by the Respondent lacks merit.

B. The Illegality of the Stamp Tax Assessments

To ascertain the legality of the disputed assessments, it is necessary to determine what the base of incidence of this tax is when a property in vertical ownership is in issue, whose units capable of independent use are destined for housing.

Specifically, it is necessary to decide whether the patrimonial value relevant as the criterion of tax incidence will correspond to (i) the sum of the value of each of the units capable of independent use, as the Respondent contends, or (ii) the individual patrimonial value of each one of those units capable of independent use, considered autonomously and by themselves, as the Applicant contends.

The doubt results from the interpretation of items 28 and 28.1 of the GTST, the wording of which in effect at the date (2012 and 2013) was as follows:

"28. Ownership, usufruct or right of surface of urban properties whose patrimonial value for tax purposes contained in the property roll, in accordance with the Municipal Tax on Real Estate Code (MTCRE), is equal to or greater than (euro) 1,000,000 - on the patrimonial value for tax purposes used for purposes of MTCRE:

28.1. For property with housing allocation - 1%".

The legislator did not care to establish the legal concept of "property with housing allocation", having expressly provided that to all matters not regulated in the Stamp Tax Code (STC) with reference to the said item 28 of the GTST the provisions of the MTCRE (see n.º 2 of article 67.º of the STC) would be applied subsidiarily. It is therefore necessary to search in the MTCRE for such concept in order to be able to conclude regarding the base of incidence of item 28.1 of the GTST.

The legal definition of "property" is contained in article 2.º of the MTCRE, clarifying in n.º 4 that "For purposes of this tax, each autonomous fraction, under the horizontal ownership regime, is deemed to constitute a property".

From the reading of this article, and especially from the mentioned n.º 4, we would be led to conclude that, for purposes of MTCRE, an autonomous fraction of property in horizontal ownership assumes the nature of "property" whereas a unit capable of independent use of property in vertical ownership or in total ownership will not assume such nature, having no legal-tax autonomy.

As a result of this difference in classification, it would be defensible that, for purposes of item 28.1 of the GTST, each autonomous fraction should be considered as a "property" and therefore there would only be liability to payment of such tax if, being destined for housing, it had a patrimonial value for tax purposes exceeding the indicated amount. In the case of property in total ownership, the patrimonial value to be considered for purposes of determining incidence would result from the sum of the patrimonial values of each independent unit assigned to housing – see subparagraph b) of n.º 2 of article 7.º of the MTCRE. This is the position of the Respondent.

However, on a comparative analysis of the MTCRE regime applicable to autonomous fractions of property in horizontal ownership and to units capable of independent use of property in vertical ownership, it is concluded that there is no difference whatsoever. Indeed, notwithstanding the legal-formal nature being distinct, the tax regime of these figures is exactly the same. Materially, the law establishes no difference, as we shall see:

(i) properties in horizontal ownership and in total ownership are subject to the same rules of registration in the property roll, with article 12.º, n.º 3 of the MTCRE expressly providing that the parts capable of independent use are considered separately in the property registration which will discriminate the respective patrimonial value;

(ii) properties in horizontal ownership and in total ownership are subject to the same rules and procedures of evaluation, with article 7.º, n.º 2, subparagraph b) of the MTCRE expressly determining that, if the parts that compose the property in total ownership are economically independent, each part is evaluated by application of the corresponding rules.

This identity of regime extends even further, having relevant repercussions at the level of the very collection of tax insofar as the legislator determined that the collection of MTCRE must be done with discrimination of the properties, their parts capable of independent use and respective patrimonial value for tax purposes – see n.º 1 of article 119.º of the MTCRE. It is thus the legislator determining that the collection of tax must be done individually, considering each economic reality (units capable of independent use) and not each legal reality (property or autonomous fraction of property in horizontal ownership).

From this it is concluded that, for purposes of MTCRE, the autonomous fractions of property in horizontal ownership and the parts capable of independent use that compose a property in total ownership have exactly the same tax treatment. But more relevant than that: for purposes of MTCRE, the base of incidence of the tax is determined in exactly the same manner, corresponding to the own and individual value of each autonomous fraction or independent part, fixed in the evaluation and recorded in the property roll; the collection is done in an individualized and autonomous manner in function of each of the independent parts of the property, whether or not they are autonomous fractions.

In the case of properties in total ownership, MTCRE is not collected based on the total patrimonial value of the property, but based on the individual patrimonial value of each autonomous unit that composes it; the total amount collected corresponds to the sum of the individual collections for each autonomous unit, determined based on their respective individual patrimonial values. Everything proceeds in exactly the same manner as that applied to the autonomous fractions of property in horizontal ownership.

It is, indeed, this autonomy between the various independent units of a property in vertical ownership that permits, for example, the individualized application of the aggravated or reduced tax rates, in accordance with what is provided in n.ºs 3 and 7 of article 112.º or 112.º-A of the MTCRE.

Furthermore, in accordance with item 28.1 of the GTST, only "properties with housing allocation" are subject to taxation. Now, in properties composed of independent units with different purposes and uses - as is the case in the present proceeding - the determination of the allocation can only be done based on each of those units and not based on the property as a whole. This is evident from subparagraph b) of n.º 2 of article 7.º of the MTCRE. On this aspect, it is necessary to cite J. Silvério Mateus and L. Corvelo de Freitas, The Taxes on Real Estate Property – The Stamp Tax, Annotated and Commented, Engifisco, 1st Edition, 2005, p. 121, note 5, who consider that "The rules provided in this n.º 2, relating to the determination of the patrimonial value of urban properties with more than one allocation, have to do with the diversity of some of the evaluation elements provided in articles 38.º and following of the MTCRE, namely (….). On the other hand, this provision is in consonance with the principle of individualization of the independent parts of an urban property, even if it is not constituted in horizontal ownership, provided for in n.º 3 of article 12.º". (emphasis in original)

In a situation like this, how would it be concluded that the property had "housing allocation", when there are parts of the same assigned to other purposes?

In truth, in accordance with the valuation rules provided for in the MTCRE, what has allocation is not the property as a building in its entirety, but the independent units that compose it, whether they are autonomous fractions or not. It is based on the effective and material use that the allocation of each independent unit or autonomous fraction is determined, the law not providing for any specific allocation for the property as a building. Each independent unit – whether or not an autonomous fraction – has, therefore, its own allocation that does not "contaminate" the allocation of the property as a whole.

Thus, one cannot argue that "property with housing allocation" corresponds to the strict and proper concept of article 2.º of the MTCRE (encompassing, only for the effect we intend, buildings and autonomous fractions of properties in horizontal ownership) insofar as, as demonstrated, it would have no practical concrete applicability (as stated, a property in vertical ownership can have more than one allocation or purpose). In our view, in using this expression the legislator intended to refer to the property as a reality capable of allocation, thus to the independent parts that compose each property, whether or not they have the legal nature of autonomous fractions.

It is thus concluded that, for purposes of application of item 28.1 of the GTST, the units capable of independent use that integrate a property under a regime of total ownership and autonomous fractions are, in substance, identical realities and that, therefore, they are subject to the same regime of incidence.

In that measure, the final part of item 28 of the GTST, in determining that the tax will be incurred "(…) on the patrimonial value for tax purposes used for purposes of MTCRE:" expressly refers to the individual value of each independent part that composes the property in total ownership and not to the total value of the property (corresponding to the sum of the individual patrimonial values), since it is this individual value that is considered in MTCRE, for all purposes.

Furthermore, in accordance with the aforementioned n.º 7 of article 23.º of the STC, the assessment of the tax due in accordance with item 28 of the GTST is collected annually, in accordance with the rules provided for in the MTCRE. And it was exactly these rules that led the Respondent to collect the tax individually for each independent unit and considering the respective individual patrimonial value. Hence the fact that various assessment notes were issued.

If the understanding of the Respondent were to be applied here, there would be only one assessment of Stamp Tax per property and not as many assessments as there are units capable of independent use.

Finally, it is necessary to state that this matter has been the subject of various decisions of the CAAD, all in this same sense, transcribing here, by way of example, the arbitral decision rendered in proc. 50/2013-T, in the part to which we adhere:

"Now, being so, considering that the registration in the property roll of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, in accordance with the MTCRE, obeys the same rules of registration of properties constituted in horizontal ownership, with the respective MTCRE, as well as the new Stamp Tax, collected individually in relation to each of the parts, it offers no doubt whatsoever that the legal criterion for defining the incidence of the new tax must be the same.

Indeed, the Tax Authority admits that this is the criterion, which is why the assessment itself issued is very clear in its essential elements, from which it results that the incidence value is the corresponding to the VPT of the 2nd floor and the individualized collection on the part of the property corresponding to that same floor.

Therefore, if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.

Thus, there would only be incidence of the new stamp tax if any of the parts, floors or divisions with independent use presented a VPT exceeding € 1,000,000.00.

The Tax Authority cannot, therefore, consider as the reference value for the incidence of the new tax the total value of the property, when the legislator himself established a different rule in the MTCRE, and this is the code applicable to the matters not regulated concerning item 28 of the GTST.

The criterion intended by the Tax Authority, of considering the value of the sum of the VPT assigned to the parts, floors or divisions with independent use, with the argument that the property is not constituted in the regime of horizontal ownership, finds no legal support and is contrary to the criterion that is applicable in the MTCRE and, by referral, in the Stamp Tax.

To which is added the fact that the law itself expressly establishes, in the final part of item 28 of the GTST, that the Stamp Tax to be incurred on urban properties of value equal to or exceeding €1,000,000.00 – "on the patrimonial value for tax purposes used for purposes of MTCRE.""

In the same sense, reference should be made to the decision rendered in proc. 132/2013-T, of which we transcribe the part to which we wholly subscribe:

"Indeed, it makes no sense to distinguish in the law what the law itself does not distinguish (ubi lex non distinguit nec nos distinguere debemus). Furthermore, to distinguish, in this context, between properties constituted in horizontal ownership and in total ownership would be an "innovation" without associated legal support, particularly because, as has been asserted here, nothing denotes, neither in item 28, nor in what is provided in the MTCRE, any justification for that particular differentiation. Note, for example, what article 12.º, n.º 3, of the MTCRE says: "each floor or part of a property capable of independent use is considered separately in the property registration, which also discriminates the respective patrimonial value for tax purposes."

The uniform criterion that is required is, therefore, that which determines that the incidence of the rule in question only takes place when any of the parts, floors or divisions with independent use of property in horizontal or total ownership with housing allocation, possesses a VPT exceeding €1,000,000.00. To establish as the reference value for the incidence of the new tax the global VPT of the property in question, as the now respondent intended, finds no basis in the applicable legislation, which is the MTCRE, given the referral made by the cited article 67.º, n.º 2, of the STC.

Finally, as has been recalled in various Arbitral Decisions (see AD No. 48/2013-T and AD No. 50/2013-T), no interpretative ratio is envisaged, in the works relating to the discussion of bill No. 96/XII in the Parliament, distinct from that presented here. Indeed, such measure, dubbed the "special tax on high-value residential urban properties", was justified by the need to comply with the principles of social equity and fiscal justice, placing a greater burden on holders of high-value properties intended for housing, and, in that measure, bringing the new "special tax" to bear on "houses of value equal to or exceeding 1 million euros."

Now, if such logic appears to make sense when applied to «housing» - whether it is a «house», «autonomous fraction» or «part of property with independent use» / «autonomous unit» -, because it is assumed a capacity to contribute above the average and, in that measure, justifies the need to carry out an additional contribution effort, it would make little sense to start disregarding the calculations "unit by unit" when only through the sum of the VPTs of the same (because held by the same individual) would the million euros threshold be exceeded."

In the judgment of 09-09-2015, rendered in proc. No. 047/15 (available at www.dgsi.pt), the Supreme Administrative Court confirmed what had been the understanding of the arbitrators of the Tax Arbitration Center, concluding that: "I. Regarding properties in vertical ownership, for purposes of incidence of the Stamp Tax (Item 28.1 of the GTST, as written by Law No. 55-A/2012, of 29 October), the subjection is determined by the combination of two factors: housing allocation and the VPT recorded in the property roll equal to or exceeding € 1,000,000. II. In the case of a property constituted in vertical ownership, the incidence of Stamp Tax must be determined, not by the VPT resulting from the sum of the VPT of all divisions or floors capable of independent use (individualized in the property article), but by the VPT attributed to each of those floors or divisions intended for housing."

This decision of the Supreme Administrative Court was upheld in subsequent judgments, examples of which are the judgments of 02-03-2016, proc. No. 01354/15, of 27-04-2016, proc. No. 01534/15, of 04-05-2016, proc. No. 01504/15, and of 24-05-2016, proc. No. 01344/15, all available at www.dgsi.pt.

In light of everything set forth above, the tribunal concludes that for purposes of application of item 28 of the GTST to properties in total ownership, the same rules of the MTCRE provided for properties in horizontal ownership apply, wherefore the patrimonial value for tax purposes to be considered for purposes of incidence will be the individual own value of each unit capable of independent use.

The material substance is what imposes itself as the determining criterion of the capacity to contribute and not the mere legal-formal reality of the property, wherefore, materially, the tax regime applicable to properties in total ownership is exactly the same as that applied to properties under the horizontal ownership regime.

None of the independent units that compose the identified property presents a value exceeding € 1,000,000, wherefore the minimum quantitative prerequisite for purposes of incidence of item 28.1 of the GTST is not met.

For all of this, this tribunal considers the request of the Applicant to be well-founded, concluding that both the order dismissing the request for official review as well as the assessment acts of Stamp Tax item 28.1 of the GTST, made in 2012 and 2013, suffer from the vice of violation of law, due to error regarding the factual and legal prerequisites, which justifies their annulment [article 135.º of the Code of Administrative Procedure, applicable by virtue of what is provided in article 2.º, subparagraph c), of the Tax Code].

C. The Right to Compensatory Interest

It results from the proven facts that the tax disputed here was paid by the Applicant.

Pursuant to n.º 1 of article 43.º of the Tax Code "Compensatory interest is due when it is determined, in an administrative review or judicial challenge, that there was an error imputable to the services from which results payment of the tax debt in an amount exceeding that legally due".

As stated by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, Tax Code - Annotated and Commented, Editorial Encontro da Escrita, 4th Edition, 2012, p. 342, note 2 "The error imputable to the services that performed the assessment is demonstrated when they proceed with an administrative review or challenge of that same assessment and the error is not imputable to the taxpayer (for example, there will be annulment due to error imputable to the taxpayer when the assessment is based on erroneous factual premises, but the error is based on an incorrect indication in the statement that the taxpayer filed)".

Now, in the concrete case, the request for payment of compensatory interest filed by the Applicant is unequivocally justified since the disputed tax assessments are illegal and therefore must be annulled. Thus, in addition to the reimbursement of the tax unduly paid, the Applicant is entitled to payment of compensatory interest, at the legal rate in effect, counted from the date of payment until the date of processing of the respective credit note, in which they are included – see article 43.º of the Tax Code and n.º 4 of article 61.º of the TPC.

VI. DECISION

In view of the foregoing, this Arbitral Tribunal decides to judge the request for arbitral decision well-founded and, consequently, revoke the order dismissing the request for official review filed with reference to the Stamp Tax assessments made in the years 2012 and 2013 with reference to the property identified in the case and declare those same tax assessments illegal, ordering their annulment and condemning the Respondent to reimburse the tax unduly paid by the Applicant plus compensatory interest, from the date of payment until the date of processing of the respective credit note.

Value of the case: In accordance with the provisions of article 306.º, n.º 2, of the Code of Civil Procedure and 97.º-A, n.º 1, subparagraph a), of the TPC and 3.º, n.º 2, of the Regulations on Costs in Tax Arbitration Proceedings, the case is assigned the value of € 18,674.49.

Costs: Pursuant to n.º 4 of article 22.º of the LRATM, the amount of costs is fixed at € 1,224.00, in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, at the charge of the Respondent.

Let this arbitral decision be recorded and notified to the parties.

Lisbon, 09-12-2016

The Sole Arbitrator

(Maria Forte Vaz)

Frequently Asked Questions

Automatically Created

How does Verba 28.1 of the TGIS apply to buildings held in vertical property (propriedade vertical)?
Verba 28.1 of the TGIS imposes annual Stamp Tax on urban properties assigned to residential use with patrimonial tax value exceeding €1,000,000. For vertical property buildings (propriedade vertical), the Tax Authority's position is that the taxable base comprises the aggregate sum of all independent residential units within the property, not each unit individually. This contrasts with horizontal property (propriedade horizontal) where each autonomous fraction has separate legal identity. The dispute centers on whether independent units in vertical property constitute separate 'properties' for tax purposes or whether they must be aggregated as a single taxable property under the vertical ownership structure.
Should Stamp Tax under Verba 28.1 be assessed on the aggregate value or individual value of each independent unit in a vertical property building?
According to the Tax Authority's interpretation, Stamp Tax under Verba 28.1 should be assessed on the aggregate value of all residential independent units in a vertical property building. The Authority argues that units of independent use in vertical property lack legal autonomy and cannot be considered separate 'properties' under the legal definition. Therefore, the patrimonial tax value relevant for Stamp Tax is the sum of all unit values (€1,628,211.03 in this case). The taxpayer argued for individual unit assessment, contending that each independent unit should be taxed separately like IMI, meaning none would exceed the €1,000,000 threshold and no tax would be due. The case turns on interpreting whether vertical property units have sufficient legal independence to constitute separate taxable properties.
What is the procedure to challenge Imposto do Selo liquidations through CAAD tax arbitration in Portugal?
To challenge Imposto do Selo liquidations through CAAD arbitration: (1) File within 90 days of notification of the assessment or decision being challenged, pursuant to Article 10(1) of RJAT (Decree-Law 10/2011); (2) Submit the arbitration request identifying the disputed acts, legal grounds, and relief sought; (3) The CAAD President accepts the request and notifies the Tax Authority; (4) The Deontological Council appoints an arbitrator; (5) The sole arbitral tribunal is constituted; (6) The Tax Authority files its response; (7) Parties may submit successive written pleadings; (8) The arbitrator issues a decision. Taxpayers can request annulment of assessments and reimbursement of taxes paid plus compensatory interest. The procedure is governed by RJAT and applicable TPC provisions.
Can a taxpayer request a revision of Stamp Tax acts and then submit an arbitration request to CAAD if the revision is denied?
Yes, taxpayers can request official revision (revisão oficiosa) of Stamp Tax acts under Article 78 of the Tax Code, and if denied, subsequently file arbitration with CAAD. In this case, the taxpayer filed for revision in February 2014 requesting annulment of 2012-2013 Stamp Tax assessments. The revision was dismissed in March 2016, and the taxpayer filed CAAD arbitration in June 2016 challenging both the assessment acts and the dismissal decision. However, the Tax Authority raised a statute of limitations defense, arguing that the 90-day deadline under Article 10(1) RJAT had expired for direct challenge of the 2012-2013 assessments. The arbitration request must be filed within applicable deadlines counted from notification of the decision being challenged (either the original assessment or the revision dismissal).
Are property owners entitled to a refund with compensatory interest when Stamp Tax is incorrectly assessed on vertical property units?
Yes, property owners are entitled to reimbursement of incorrectly assessed Stamp Tax plus compensatory interest (juros indemnizatórios) when tax authorities acknowledge or tribunals declare the illegality of the assessment. In this case, the taxpayer specifically requested condemnation of the Tax Authority to reimburse €18,674.49 in unduly paid Stamp Tax plus compensatory interest. Compensatory interest compensates taxpayers for the State's use of funds that should not have been collected. The right derives from Article 43 of the Tax Code (LGT), which establishes taxpayers' right to compensatory interest when taxes are paid but later determined to be undue or excessive. The interest runs from payment date until reimbursement, calculated according to legally established rates.