Process: 318/2014-T

Date: November 19, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral tribunal decision (Case 318/2014-T) addresses the application of stamp tax (Imposto de Selo) under item 28.1 of the General Stamp Tax Table (TGIS) to buildings held in full ownership with multiple independent-use units. The claimant, a real estate company, challenged IS assessments totaling €28,500 on a building containing 20 units (17 residential, 3 commercial) with a combined residential patrimonial value of €2,850,000. The Tax Authority calculated IS by aggregating the patrimonial values of all residential units, despite no individual unit exceeding the €1,000,000 threshold. The company argued this treatment created unlawful inequality compared to horizontal property regime buildings, where each autonomous fraction constitutes a separate building for tax purposes and would only be taxed if individually exceeding €1,000,000. The tribunal examined whether CIMI definitions apply to IS assessment, noting Article 2 defines buildings as physically and economically independent units, while Article 2(4) explicitly states autonomous fractions under horizontal property constitute separate buildings. The key legal issue centered on whether full-ownership buildings with independent-use divisions should receive the same per-unit treatment as horizontal property, or whether their aggregate residential value triggers IS liability. The company also contended the building's partial commercial use (3 of 20 units) precluded application of item 28.1, though the Tax Authority excluded non-residential TPVs from calculation. The tribunal's analysis required reconciling CIS provisions referencing CIMI concepts with the specific triggering mechanism of item 28.1 TGIS for residential property taxation.

Full Decision

ARBITRATION DECISION

CAAD: Tax Arbitration

Case No. 318/2014 – T

Subject: IS – item 28 of TGIS

I – REPORT

1 – Real Estate Company A, SA, legal entity number …, with registered address in …, submitted on 04/04/2014 a request for constitution of the arbitral tribunal, pursuant to the provisions of paragraph a) of no. 1 of Article 2, of no. 1 of Article 3 and paragraph a) of no. 1 of Article 10, all of the RJAT[1], with the Tax Authority[2] being the respondent, for the purpose of examining the legality of the tax acts assessing IS[3] on a building with apartments and divisions with independent use located …, recorded in the urban real estate register of the parish … under article … and formerly under article … of the parish of … .

2 – The request for constitution of the arbitral tribunal was made without exercising the option of designating an arbitrator, and was accepted by His Excellency the President of CAAD[4] and automatically notified to the Tax Authority on 08/04/2014.

3 – In accordance with the provisions of no. 1 of Article 6 of RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, Arlindo José Francisco was designated as arbitrator, who communicated to the Deontological Council and to the Centre for Administrative Arbitration his acceptance of the appointment within the regularly stipulated period.

4 – The tribunal was constituted on 11/06/2014 in accordance with the provisions contained in paragraph c) of no. 1 of Article 11 of RJAT, as amended by Article 228 of Law No. 66-B/2012 of 31 December.

5 – With its request, the claimant seeks a declaration of illegality of the tax acts assessing item 28 of TGIS[5] which fell upon the patrimonial value of the urban building recorded in the respective register under article … of the parish of … council of … of which it is the owner.

6 – It argues, in summary, that the illegality of the IS assessments results, in its view, from the fact that the combined value of the housing units was erroneously considered, thereby incurring unjustified inequality in relation to buildings formally constituted in horizontal property regime, and on the other hand, that the building in question is not wholly devoted to housing, seeking the annulment of the respective assessments.

7 – For its part, the Tax Authority, also in summary, considers that the claimant has no merit, since for IS purposes there is a different treatment of a building in full ownership and a building in horizontal property regime, and that the argument that the building is not wholly devoted to housing does not impugn the application of the tax rule for item 28.1 of TGIS, in so far as the TPVs[6] of the non-residential parts have been excluded, considering that the tax acts challenged here do not violate any legal provision and should therefore be upheld.

II – SANITATION

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

The parties have legal standing and capacity, are duly legitimate and are regularly represented in accordance with Articles 4 and 10 no. 2 of RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

In its response, the Tax Authority requested waiver of the hearing referred to in Article 18 of RJAT and that the tribunal proceed directly to the decision on the case, should the claimant not object.

Notified of this request on 15/07/2014, in a submission of 21/07/2014 the claimant manifested its agreement with the proposal.

The tribunal acceded to this request of the parties and considered the conditions to be met for rendering the final decision.

III – GROUNDS

1 – The issues to be resolved with relevance to the case are as follows:

a) To determine whether a building in full ownership with parts or divisions capable of independent use, some with residential purpose and others for commerce, should be assessed for IS the TPV corresponding to the sum of each of the parts or divisions with independent use and residential purpose when equal to or exceeding €1,000,000.00, or whether IS should only apply to the TPV of each of the parts or divisions with independent use and residential purpose when, considered individually, equal to or exceeding €1,000,000.00;

b) To determine further whether, in the event illegality of the assessment is declared, there shall be entitlement to payment of compensatory interest on the amounts indebted.

2 – Facts

The relevant facts proven on the basis of the evidence attached to the case are as follows:

a) The claimant is the owner of an urban building in full ownership with parts or divisions capable of independent use, recorded in the urban real estate register of the parish of … under article …, formerly recorded in the register of the parish of … under article …, council of ….

b) The building is located in …, facing …, and consists of 20 units, 17 residential and 3 for commerce.

c) The building was submitted for valuation in 2013 following the submission of a model 1 declaration for IMI[7], and the Tax Authority made the valuation separately, that is, division by division capable of independent use, and the TPVs attributed to each vary between € 40,440.00 and € 218,620.00, therefore none of them has a value equal to or exceeding € 1,000,000.00.

d) The total TPV of the building with residential and commerce purpose is € 3,336,010.00.

e) The total TPV of the parts or divisions capable of independent use with residential purpose is € 2,850,000.00.

f) The Tax Authority assessed IS individually for each of the parts capable of independent use with residential purpose and proceeded to notify each individually.

g) From the said assessment notices, it is verified that in none of them is the TPV assessed equal to or exceeding € 1,000,000.00, but in all of them it is stated that the total TPV of the building is € 2,850,000.00.

h) The tax assessed was € 28,500.00, and the claimant has, to the present date, already paid the 1st and 2nd instalments on 29/04/2014 in the amount of € 9,567.48 and on 28/06/2014 in the amount of € 9,365.28, respectively.

3 – Law

3.1 – Regarding IS

a) The legal question to be resolved in the first place is whether in accordance with the provisions of item 28.1 of TGIS the sum of the TPV of each of the parts or divisions capable of independent use should be considered, given that none of them has a value equal to or exceeding €1,000,000.00.

b) Taking into account that the CIS[8] refers to the CIMI[9] the regulation of the concept of building and of matters not regulated regarding item 28 of TGIS (no. 6 of Article 1 and no. 2 of Article 67 both of CIS), it is in the CIMI that we must observe the concepts that will allow us to resolve the question.

c) The general concept of building is contained in Article 2 of CIMI. In Article 3 of the same statute the legislator, using criteria of purpose and location, established the concept of rural buildings, then coming, in a classification by negation, in its Article 4, to establish that urban buildings shall be all those that should not be classified as rural.

d) Article 6 of the cited CIMI divides urban buildings into: residential, commercial, industrial or for services, land for construction and others.

e) In the present case we are dealing with an urban building with parts or divisions capable of independent use with residential purpose (17) and the remaining 3 with commercial purpose.

f) Each of the parts or divisions capable of independent use that comprise the property in question fulfils the concept of building established in Article 2 of CIMI, in so far as they are physically and economically independent and form part of the assets of a natural or legal person, in the present case a legal person.

g) Under the terms of no. 4 of Article 2 of CIMI each autonomous fraction, under the horizontal property regime is held to constitute a building, but there is nothing in the law that permits discrimination between buildings in horizontal property and vertical property regimes as to their identification as urban buildings for residential purposes.

h) The Tax Authority, in assessing IS, made its calculation on the TPV of each of the parts or divisions with independent use with residential purpose, considering them individually as a building, except that at the end it considered the global TPV and, verifying it to be superior to €1,000,000.00, summed the IS values assessed individually.

i) But this procedure has no legal support, since none of the parts or divisions with independent use with residential purpose, each of them meeting the concept of building set out in Article 2 of CIMI and thus considered by the Tax Authority in the assessment, has a TPV equal to or exceeding € 1,000,000.00, the requirement necessary for IS assessment.

j) Nor should it be said that there is different valuation and assessment of a building in full ownership with parts or divisions capable of independent use, as opposed to a building in horizontal property regime. In truth it does not exist in IMI just as it cannot exist in IS, since the applicable legislation is the same.

k) The criterion of assessment must be uniform, that is, if a residential fraction of a building in horizontal property regime is only assessed for IS if its TPV is equal to or exceeding €1,000,000.00, equally a story or part of a building capable of independent use of a building in vertical property regime with residential purpose shall only be assessed for IS if its TPV is equal to or exceeding €1,000,000.00.

l) As has been said, the story or part of a building capable of independent use of a building in vertical property regime meets the concept of building established in the IMI Code, just as the autonomous fractions of buildings in horizontal property regime do.

m) It is thus treated by the Tax Authority when it proceeded to its valuation, to the assessment of IMI, of IS and also when it excludes the non-residential part.

n) By not following the same criterion when it purports to make IS assessment it may breach no. 3 of Article 104 of CRP[10];

o) In truth, another company or citizen who has a building next to it, with the same structure, use and TPV, but in horizontal property regime, would not be assessed for IS, which would manifestly contradict the constitutional rule referred to which provides for assessment of property as a contribution to equality among citizens.

p) In this perspective and considering that none of the parts or divisions capable of independent use with residential purpose or purpose has TPV equal to or exceeding €1,000,000.00, it is inevitable to conclude that the IS assessment acts are illegal for not having observed the conditions defined in item 28 of TGIS.

3.2 – Regarding the request for compensatory interest.

a) The claimant, in addition to the annulment of the IS in question, seeks the payment of compensatory interest on the amounts of IS already paid by it (€ 9,567.48 paid on 29 April 2014 and € 9,365.28 paid on 28/06/2014) and on those it may still pay given the non-suspensive effect of the present request, basing its request on Article 43 of LGT[11] and Article 61 of CPPT[12].

b) The tribunal considers that, given the illegality of the assessment acts, when the amounts indebted are returned to it, they should be augmented by compensatory interest under no. 1 of Article 43 of LGT and Article 61 of CPPT.

IV – OPERATIVE PART

In view of the foregoing, the tribunal decides as follows:

a) To declare the request for arbitral pronouncement well-founded with the consequent annulment of the IS assessment acts challenged here and the return of the indebted instalments.

b) To declare the obligation of the Tax Authority to pay compensatory interest to the claimant, at the legal rate, from the date of payment of the instalments in question until the date on which reimbursement occurs.

c) Value of the case: € 28,500.00 having in view the provisions contained in Article 299 no. 1 of CPC[13], 97-A of CPPT and Article 3 no. 2 of RCPAT[14];

d) Costs charged to the respondent, under no. 4 of Article 22 of RJAT, fixing their amount at € 1,530.00 in accordance with Table I of RCPAT.

Notify

Lisbon, 19 November 2014

The sole arbitrator,

Arlindo José Francisco

[1] Acronym of Regime for Tax Arbitration

[2] Acronym of Tax Authority and Customs Authority

[3] Acronym of Stamp Duty

[4] Acronym of Centre for Administrative Arbitration

[5] Acronym of General Table of Stamp Duty

[6] Acronym of Patrimonial Taxable Value

[7] Acronym of Municipal Property Tax

[8] Acronym of Stamp Duty Code

[9] Acronym of Municipal Property Tax Code

[10] Acronym of Portuguese Constitution

[11] Acronym of General Tax Law

[12] Acronym of Code of Tax Procedure and Process

[13] Acronym of Code of Civil Procedure

[14] Acronym of Rules on Costs in Tax Arbitration Cases

Frequently Asked Questions

Automatically Created

What is the stamp tax (Imposto de Selo) incidence under clause 28.1 of the General Stamp Tax Table (TGIS) for properties with independent units?
Under clause 28.1 of the TGIS, stamp tax (Imposto de Selo) applies at 1% annually to urban buildings or autonomous fractions for residential purposes with a patrimonial value equal to or exceeding €1,000,000. For properties with independent units, the critical determination is whether each unit is assessed individually or collectively. In this case (318/2014-T), the Tax Authority aggregated the patrimonial values of all 17 residential units (totaling €2,850,000) despite no single unit exceeding €1,000,000 individually. The tribunal examined whether full-ownership buildings with divisions capable of independent use should be treated as single taxable units or whether each division constitutes a separate building under CIMI Article 2 definitions, which would require individual assessment exceeding the €1,000,000 threshold for IS incidence.
How does the tax treatment differ between a property held in total ownership versus one constituted under horizontal property (condominium) for stamp tax purposes?
The tax treatment differs significantly between full ownership and horizontal property regime under stamp tax law. Article 2(4) of CIMI explicitly provides that each autonomous fraction under horizontal property regime constitutes a separate building for tax purposes. Consequently, in condominium arrangements, IS under item 28.1 TGIS applies only if an individual fraction's patrimonial value reaches or exceeds €1,000,000. In contrast, for buildings in full ownership with multiple independent-use divisions, the Tax Authority's position in this case was to aggregate residential unit values, triggering IS liability when the combined total exceeds €1,000,000, even if no individual unit meets this threshold. This differential treatment formed the basis of the taxpayer's inequality argument, as economically similar residential units face different tax consequences based solely on the building's legal ownership structure rather than the units' individual characteristics or values.
Can a property owner challenge stamp tax assessments based on the combined patrimonial value of residential units in a non-horizontally divided building?
Yes, property owners can challenge stamp tax assessments based on combined patrimonial value aggregation in non-horizontally divided buildings, as demonstrated in Case 318/2014-T. The claimant successfully brought the matter before the CAAD arbitral tribunal under RJAT Article 2(1)(a), arguing that aggregating residential unit values in a full-ownership building creates unlawful inequality compared to horizontal property treatment. The legal challenge centered on interpreting whether CIMI's building definitions—particularly Article 2's requirement that buildings be 'physically and economically independent'—should govern IS assessment methodology. Since CIS Article 1(6) and Article 67(2) reference CIMI for matters not specifically regulated in stamp tax law, the tribunal examined whether each independent-use division qualifies as a separate building, which would require individual rather than aggregate valuation. This interpretive question allows taxpayers to contest the Tax Authority's aggregation methodology as contrary to CIMI principles incorporated into stamp tax legislation.
Does partial non-residential use of a building affect the application of clause 28.1 of the TGIS for stamp tax liquidation?
Partial non-residential use affects IS application under clause 28.1 TGIS by excluding commercial or other non-residential patrimonial values from the tax base calculation. In Case 318/2014-T, the building contained 20 units: 17 residential and 3 commercial, with total patrimonial value of €3,336,010. The Tax Authority correctly excluded the three commercial units' values (€486,010), assessing IS only on the residential portion (€2,850,000). The claimant argued the building's mixed use precluded item 28.1 application entirely, but the tribunal rejected this interpretation. Item 28.1 specifically targets 'urban buildings or autonomous fractions for residential purposes,' which the Tax Authority and tribunal interpreted as applying to the residential components separately. The commercial units' TPVs were properly excluded from calculation, but their presence in the building did not invalidate IS assessment on qualifying residential portions. This approach aligns with the tax provision's purpose of taxing high-value residential property while recognizing that mixed-use buildings commonly exist in Portuguese urban areas.
What is the CAAD arbitral tribunal procedure for contesting stamp tax (Imposto de Selo) liquidation acts under the RJAT?
The CAAD arbitral tribunal procedure for contesting stamp tax liquidation acts under RJAT follows these steps: (1) The taxpayer submits a request for tribunal constitution under RJAT Articles 2(1)(a), 3(1), and 10(1)(a), identifying the Tax Authority as respondent and specifying the contested acts; (2) The taxpayer may designate an arbitrator or allow automatic assignment by the CAAD President's Deontological Council; (3) Upon acceptance, the request is automatically notified to the Tax Authority (here on 08/04/2014); (4) The President designates an arbitrator under Article 6(1), who must accept within the stipulated period; (5) The tribunal constitutes formally under Article 11(1)(c) as amended by Law 66-B/2012; (6) The Tax Authority files a response presenting its defense; (7) Under Article 18, parties may waive the hearing and request direct decision-making, requiring mutual agreement; (8) The tribunal performs sanitation review, verifying competence, standing, legitimacy, and representation under Articles 2, 4, and 10(2) and Ordinance 112-A/2011; (9) The tribunal examines facts based on submitted evidence and applicable law; (10) A final decision is rendered addressing the legal questions presented. The procedure emphasizes efficiency while ensuring full adversarial process and legal review of administrative tax acts.