Process: 315/2017-T

Date: October 12, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 315/2017-T examined whether Stamp Tax under Item 28.1 of the General Table (TGIS) applies to residential properties in full ownership (propriedade plena) when individual independent units have Tax Patrimonial Values (VPT) below €1,000,000 but the total VPT exceeds this threshold. The taxpayer owned a Lisbon property with 14 independent residential units, evaluated separately under Article 7(2)(b) of the IMI Code, with a combined VPT exceeding €1,000,000. The Tax Authority assessed €22,003.60 in Stamp Tax for 2015, arguing the entire property constitutes one taxable unit. The taxpayer contested this, claiming each independent unit should be assessed individually for stamp duty purposes, mirroring the IMI treatment where each unit is taxed separately. The central legal dispute focused on whether properties under full ownership regimes with multiple independent units should be treated as a single property (total VPT applies) or as separate taxable units (individual VPTs apply) when determining stamp duty liability under Verba 28.1. The taxpayer filed an administrative review in October 2016, receiving no response, then initiated CAAD arbitration in May 2017. The case highlights critical interpretation questions regarding the intersection of IMI property valuation rules and Stamp Tax application to complex residential properties.

Full Decision

ARBITRAL DECISION

REPORT

A…, NIF…, with address at Avenue … no. …, ..., in Lisbon, submitted a request for the constitution of a singular Arbitral Court, pursuant to the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax Authority and Customs Authority (hereinafter TA) is required, with the objective of obtaining the declaration of illegality of the stamp duty assessment act for the year 2015, in the total amount of €22,003.60.

The request for the constitution of the Arbitral Court was accepted by the Honorable President of CAAD on 16.05.2017 and automatically notified to the TA.

In accordance with the provisions of paragraph c) of no. 1 of article 11 of the RJAT, the singular Arbitral Court was constituted on 14.07.2017.

The TA replied, defending the rejection of the request.

The meeting referred to in article 18 of the RJAT and the presentation of final arguments were dispensed with, in view of the nature of the matter contained in the case file.

The Arbitral Court is regularly constituted and materially competent, in accordance with paragraph a) of no. 1 of article 2 of the RJAT.

The parties have legal personality and capacity, are legitimate and are represented (article 4 and no. 2 of article 10 of the RJAT and article 1 of Order no. 112/2011, of 22 March).

There are no nullities, exceptions or preliminary questions that prevent the immediate resolution of the merits of the case.

STATEMENT OF FACTS

Based on the elements contained in the case file, the following facts are considered proven:

The Petitioner is the owner and legitimate proprietor of the urban property registered in the urban property matrix of the parish of …, in Lisbon, under number …;

The aforementioned property is an urban property in full ownership with floors or divisions capable of independent use, described as an urban property composed of 6 floors intended for residential use and two basements, for a total of 14 divisions capable of independent use;

The Petitioner was notified of the collection acts of the stamp duty assessment act, relating to the property …, relating to the year 2015 contained in the arbitration case file, in the total amount of €22,003.60 (twenty-two thousand and three euros and sixty cents);

The Tax Patrimonial Value (VPT) of the floors and divisions identified was determined separately, in accordance with article 7, no. 2, paragraph b) of the Municipal Property Tax Code;

The total VPT of the identified property is greater than €1,000,000 (one million euros):

On 3 October 2016, the Petitioner filed an administrative review of the stamp duty assessment act for the year 2015, in the total amount of €22,003.60 (twenty-two thousand and three euros and sixty cents);

Not having been notified of a decision regarding the administrative review filed, on 4 May 2017 the Petitioner filed an arbitration petition.

There are no facts relevant to the decision of the case that should be considered unproven.

This Court established its conviction on the basis of the documents submitted to the case file by the Parties.

LEGAL GROUNDS

The main issue raised in the present case is to determine which tax patrimonial value is relevant for the application of items 28 and 28.1 of the General Table of Stamp Duty (TGIS) with respect to residential urban properties constituted under a regime of vertical property ownership, which comprise floors or divisions capable of independent use.

To this end, the Petitioner alleges in its request for arbitral ruling the following:

The stamp duty assessment acts are illegal, due to erroneous interpretation and application of item no. 28 of the General Table of Stamp Duty, in force in the years to which the respective taxes relate;

In reality, the VPT of an urban property cannot result from the sum of the VPT attributed to each of those divisions or floors capable of independent use allocated to residential use;

Given that it is established that the property in question is urban and that it is allocated to residential use, the VPT considered relevant by the TA to support the stamp duty assessments cannot be accepted;

In the case of a property in full ownership, each division or floor capable of independent use is evaluated separately, and is assigned, in an equally individual manner, the VPT to each one of those floors or divisions capable of independent use;

In other words, in properties in full ownership, with floors or divisions capable of independent use, the VPT used for the purposes of Municipal Property Tax, and which appears in the matrix, is that relating to each one of those floors or divisions capable of independent use and not the VPT corresponding to the sum of all floors and divisions capable of independent use;

Taking into account that under the Municipal Property Tax Code the floors and divisions capable of independent use, under a regime of full ownership, are taxed autonomously, since the Municipal Property Tax is levied individually on each one of those divisions or floors, the assessment carried out for the purposes of stamp duty, taking into account item 28 and the subsidiary application of the rules of the Municipal Property Tax Code, cannot be different.

For its part, the TA alleges, in summary, the following:

The subjection to stamp duty of item 28.1 of the General Table annexed to the Stamp Duty Code results from the combination of two facts: residential allocation and the tax patrimonial value of the urban property registered in the matrix being equal to or greater than €1,000,000.00;

The property was evaluated in 2015, taking into account residential and commercial purposes.

The property record states that the property is in full ownership, composed of several parts capable of independent use.

Being this the registration information, in accordance with article 23, no. 7 of the Stamp Duty Code, the stamp duty assessments here under consideration were carried out by the tax administration, taking into account the nature of the urban property, as of the tax event date (2013-12-31, 2014-12-31, 2015-12-31), applying, with the necessary adaptations, the rules contained in the Municipal Property Tax Code.

In accordance with the rules of the Municipal Property Tax Code, specifically article 113, no. 1, the assessment is made on the basis of the tax patrimonial values of the properties and in relation to the taxable persons that appear in the matrices as of 31 December of the year to which they relate;

Since the property is under a regime of full ownership, it does not have autonomous fractions, to which tax law attributes the qualification of property, because from the definition of property in article 2 of the Municipal Property Tax Code, only autonomous fractions of property under a regime of horizontal property ownership are considered properties – no. 4 of the cited article.

Thus, the illegality of the assessments (error as to legal presuppositions) must be judged as unfounded, maintaining in the legal order the assessments contested as they constitute a correct application of law to the facts.

Considering that the assessment was carried out on the basis of applicable law, to which the Administration is bound, the Tax Authority, in accordance with article 55 of the General Tax Law and following the principle set forth in article 266, no. 1 and 2 of the Constitution of the Portuguese Republic, "...the pursuit of the public interest, with respect for the rights and interests legally protected of citizens" and being its "organs and administrative agents ... subordinated to the Constitution and the law..." and must "...act, in the exercise of their functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith., cannot fail to give full compliance to the norms created by the ordinary legislator and that are in force in the legal order and also by force of article 55 of the General Tax Law.

Let us examine what must be understood.

It follows from article 11 of the General Tax Law (LGT) that the interpretation of tax law must be carried out in accordance with the general principles of interpretation.

The general principles of interpretation are established in article 9 of the Civil Code (CC), in the following terms:

"1. The interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intention, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

  1. However, the interpreter cannot consider the legislative intention 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 appropriate solutions and knew how to express its intention in adequate terms."

Taking into account the rules of interpretation of the Law, it is important to know that Law no. 55-A/2012, of 29 October, added to the TGIS items 28 and 28.1, creating the stamp duty rate on high-value urban properties.

The creation of this new tax event occurred in the context of economic crisis and serious crisis in public finances, with the purpose of increasing the State's tax revenues, through the taxation of those who reveal greater indicators of wealth.

The special stamp duty rate on properties valued above €1,000,000.00, also known as the "luxury tax", aimed to ensure the distribution of sacrifices to all and not only those who live from the income of their work.

In these circumstances, items 28 and 28.1 fixed the incidence of stamp duty in the following terms:

"Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000 – on the tax patrimonial value used for the purposes of Municipal Property Tax:

28.1. – For residential property or for land for construction whose building, authorized or planned, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code…… 1%."

It results, therefore, from the letter of the law that the rate provided for in item 28.1 is applicable to the right of ownership of a property with residential allocation, whose VPT used for the purposes of Municipal Property Tax is equal to or greater than €1,000,000.00.

In accordance with article 1, no. 6 of the Stamp Duty Code, "For the purposes of this Code, the concept of property is that defined in the Municipal Property Tax Code (CIMI)."

For its part, the Municipal Property Tax Code determines in its article 2, the following:

Concept of Property

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

2 - Buildings or constructions, even though mobile in nature, are deemed to have a character of permanence when devoted to non-transitory purposes.

3 - The character of permanence is presumed when the buildings or constructions are established in the same location for a period exceeding one year.

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

Taking into account the concept of property established in the Law, it is clear that properties constituted under a regime of vertical property ownership constitute properties, for the purposes of item 28 of the TGIS.

To the extent that the property under analysis (hereinafter Property) constitutes a Property, in accordance with the provisions of article 2 of the Municipal Property Tax Code, it is literally covered by items 28 and 28.1.

In truth, the law makes no distinction whatsoever between property in horizontal ownership and property in vertical ownership, being limited in no. 4 of article 2 to establish that under the regime of horizontal property ownership each autonomous fraction is deemed to be a property.

From what is stated in no. 4 of article 2, it does not result, contrary to what was argued by the Respondent in its reply, that only autonomous fractions of property under a regime of horizontal property ownership are deemed to be properties.

Nevertheless, the special stamp duty rate fixed in the item in question only applies if the Property constitutes a residential property, whose tax patrimonial value recorded in the matrix, in accordance with the Municipal Property Tax Code, is equal to or greater than €1,000,000.

Since the Stamp Duty Code does not establish what is meant by "residential", by force of no. 2 of article 67 of the said Code, the rules provided for in the Municipal Property Tax Code are also applicable here, namely those established in articles 6 and 41 of that Code.

From the analysis of the aforementioned rules, it also results clearly that the Property is covered by item 28.1, as an urban property with residential allocation.

It remains, therefore, to ascertain whether the VPT recorded in the matrix of the Property, in accordance with the Municipal Property Tax Code, is equal to or greater than €1,000,000.

Now, as follows from the letter of the Law, the VPT of the Property will be that which is used for the purposes of Municipal Property Tax.

To this end, it is determined in no. 1 of article 7 of the Municipal Property Tax Code, applicable ex vi of no. 7 of article 23 of the Stamp Duty Code, that "The tax patrimonial value of the properties is determined in accordance with the provisions of this Code."

For its part, in no. 2 and 3 of article 7 of the Municipal Property Tax Code, the rules for determining the VPT of properties with two or more classifications are established.

Since the rate provided for in items 28 and 28.1 of the TGIS only applies to properties with residential allocation, the rules established in no. 2 and 3 of article 7 of the Municipal Property Tax Code are not applicable to the determination of the VPT relevant within the scope of the aforementioned item.

In truth, the VPT of properties with residential allocation, provided for in items 28 and 28.1, must be determined taking into account no. 3 of article 12 of the Municipal Property Tax Code, according to which:

"Each floor or part of a property capable of independent use is considered separately in the registration entry, which also specifies the respective tax patrimonial value."

Thus, taking into account that the legislator does not attribute any relevance to the fact that the property is constituted under a regime of vertical property ownership, the VPT must be imputed to each floor or part of the property capable of independent use.

In fact, there is no rule in the Municipal Property Tax Code that allows concluding that the VPT of a property under a regime of vertical property ownership should be obtained by the sum of the VPT that were attributed separately to the parts that constitute it (See, among others, the arbitral decisions rendered in Cases 50/2013-T, 131/2013-T, 177/2014-T, 396/2014-T).

Taking into account that the rules of incidence are subject to the principle of tax legality (See article 103 of the Constitution of the Portuguese Republic and article 8 of the LGT), it appears that there is no legal basis for the assessment of stamp duty based on the sum of the VPT of each one of the parts of the Property.

In fact, the TA cannot carry out an assessment operation based on a rule of incidence that does not expressly provide for the basis of incidence of the tax in the terms assessed, since the rules of incidence of taxes must be interpreted in their exact terms, without recourse to analogy, making prevalent certainty and security in their application (See Ruling of the Central Administrative Court of the South, rendered in the context of case 7648/14, of 10.07.2014).

It is understood, thus, that there is no legal basis that permits the TA to add the tax patrimonial values of the floors or parts of property capable of independent use, in order to reach the eligible taxation threshold of €1,000,000.00, provided for in item 28 of the TGIS.

In light of the foregoing, given that none of the floors capable of independent use has a tax patrimonial value exceeding €1,000,000.00, there is no incidence of the rate provided for in item 28 of the TGIS.

As a consequence, what is required is not the declaration of nullity, whose legal presuppositions stated in article 161 of the Code of Administrative Procedure are not met, but rather the annulment of the stamp duty assessment act under judgment, and the recognition of the Petitioner's right to compensatory interest in relation to the stamp duty payments already made, since the illegality of the assessment act is attributable to error on the part of the Respondent, in accordance with article 43 of the LGT.

DECISION

For these reasons, this Arbitral Court decides:

To judge the request for annulment of the stamp duty assessment act relating to the urban property registered in the urban property matrix of the parish of … under number …, relating to the year 2015, to be wholly well-founded;

To order the Tax Authority and Customs Authority to refund to the Petitioner the amount of tax paid, plus compensatory interest, in accordance with legal provisions;

To order the Respondent to pay the costs of the present proceeding, as the losing party.

VALUE OF THE PROCEEDINGS

In accordance with article 306, no. 2 of the Code of Civil Procedure, article 97-A, no. 1 a) of the Code of Tax Procedure and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the claim is fixed at €22,003.60.

COSTS

In accordance with articles 12, no. 2 and 22, no. 4, both of the RJAT, and article 4, no. 4 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €1,224, in accordance with Table I of the aforementioned Regulation, to be borne by the Respondent.

Let notification be made.

Lisbon, 12 October 2017

The Arbiter

Magda Feliciano

(The text of this decision was prepared by computer, in accordance with article 131, no. 5, of the Code of Civil Procedure, applicable by reference of article 29, no. 1, of paragraph e) of Decree-Law no. 10/2011, of 20 January (RJAT), governed in its drafting by the spelling prior to the 1990 Orthographic Agreement.)

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) due under Verba 28.1 of the TGIS when individual units of a property each have a VPT below €1,000,000 but the total exceeds that threshold?
According to the Tax Authority's position in Process 315/2017-T, Stamp Tax under Verba 28.1 of the TGIS is due when a property in full ownership (propriedade plena) has a total VPT exceeding €1,000,000, even if individual independent units each have VPTs below this threshold. The TA argues that under Article 2(4) of the IMI Code, only autonomous fractions under horizontal property ownership constitute separate 'properties,' while full ownership properties with independent units remain a single taxable property for stamp duty purposes, with the total VPT determining tax liability.
How is the Taxable Heritage Value (VPT) calculated for properties with independent units under Article 7(2)(b) of the IMI Code?
Under Article 7(2)(b) of the IMI Code, properties in full ownership with floors or divisions capable of independent use have their Tax Patrimonial Value (VPT) determined separately for each independent unit. Each unit receives an individual VPT that appears in the property matrix and is used for IMI taxation purposes, where each division is taxed autonomously. However, this separate valuation method for IMI purposes creates interpretative questions regarding whether the individual or aggregate VPT should apply for Stamp Tax under Verba 28.1 of the TGIS.
What is the procedure for challenging a Stamp Tax assessment through CAAD tax arbitration in Portugal?
To challenge a Stamp Tax assessment through CAAD arbitration in Portugal, the taxpayer must first exhaust administrative remedies or wait for their resolution. In Process 315/2017-T, the taxpayer filed a reclamação graciosa (administrative review) on 3 October 2016. After receiving no decision, the taxpayer submitted an arbitration request to CAAD on 4 May 2017 under Articles 2 and 10 of Decree-Law 10/2011 (RJAT). The CAAD President accepted the request on 16 May 2017, the Tax Authority was notified, and the singular Arbitral Court was constituted on 14 July 2017, with both parties submitting their defenses before the court rendered its decision.
Can a property owner file a gracious complaint (reclamação graciosa) before requesting CAAD arbitration against a Stamp Tax liquidation?
Yes, a property owner can and typically should file a reclamação graciosa (gracious complaint/administrative review) before requesting CAAD arbitration against a Stamp Tax assessment. In Process 315/2017-T, the taxpayer filed an administrative review on 3 October 2016 contesting the €22,003.60 Stamp Tax assessment for 2015. When no decision was issued on this administrative review, the taxpayer proceeded to file the arbitration petition with CAAD on 4 May 2017. This sequence demonstrates that administrative remedies can be pursued first, and the lack of a timely administrative decision does not prevent subsequent arbitration.
What was the outcome of CAAD Process 315/2017-T regarding the €22,003.60 Stamp Tax assessment on a Lisbon residential property?
Process 315/2017-T involved a €22,003.60 Stamp Tax assessment on a Lisbon residential property for the year 2015. The property, located in Lisbon and owned by the petitioner, consisted of 6 residential floors and 2 basements comprising 14 independent units with a total VPT exceeding €1,000,000. The taxpayer challenged the assessment, arguing that each independent unit should be evaluated separately for Stamp Tax purposes under Verba 28.1 of the TGIS, as they are for IMI. The Tax Authority defended the assessment, contending the property in full ownership constitutes a single taxable unit. The singular Arbitral Court was constituted on 14 July 2017 to resolve this dispute over the correct application of stamp duty law to properties with multiple independent units.