Process: 319/2015-T

Date: November 5, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses a stamp tax dispute concerning the application of Item 28 of the General Stamp Tax Table (TGIS) to high-value properties under vertical property ownership. The applicants, four heirs of an undivided estate, challenged nine stamp tax assessments issued by the Tax and Customs Authority in March 2015 for the 2014 tax year. The property in question, located in Lisbon, comprises 13 physically and economically autonomous units (basement, 2 shops, ground floor, and six floors) with independent use. The central legal issue concerns whether stamp tax should be levied on individual autonomous units or on the aggregate value of the entire property. The Tax Authority calculated stamp tax based on the total patrimonial value of all units exceeding €1,000,000, triggering Item 28.1 of TGIS, and issued separate assessments for nine units (ranging from €468.72 to €476.07 each). The applicants contested the legality of this assessment criterion, arguing that the taxation methodology was unlawful. The case was brought before the Administrative Arbitration Centre (CAAD) under the Legal Regime for Tax Arbitration (RJAT - Decree-Law 10/2011). The singular arbitral tribunal, constituted on August 31, 2015, with Dr. Sílvia Oliveira as arbitrator, dispensed with oral hearings as both parties agreed the matter involved exclusively legal questions. This decision has significant implications for property owners with vertically divided buildings where multiple independent units exist under total ownership, particularly regarding how stamp tax obligations are determined when the aggregate property value exceeds statutory thresholds. The case illustrates the tension between treating autonomous units as separate taxable entities versus considering the property as a unified whole for stamp tax purposes under Portuguese tax law.

Full Decision

Arbitral Decision [1]

Applicants – A…, B…, C… and D…

Respondent - Tax and Customs Authority

The Arbitrator, Dr. Sílvia Oliveira, appointed by the Ethics Council of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 31 August 2015, with respect to the above-identified process, decided as follows:

1. REPORT

1.1. A…, taxpayer number …, married under a separation of property regime, resident at Avenue …, number …, …, Monte do Estoril, B…, taxpayer number …, married under a separation of property regime, resident at Avenue …, number …, …, Lisbon, C…, taxpayer number …, married under a community of acquired property regime, resident at Street …, number …, …, Lisbon and D…, taxpayer number …, married under a community of acquired property regime, resident at Street …, number …, ..., Lisbon, (hereinafter referred to as "Applicants"), on their own behalf and in the capacity of sole heirs of the undivided estate of E… (with TIN …), filed a request for arbitral pronouncement and constitution of a singular Arbitral Tribunal, on 19 May 2015, under the provisions of article 4 and paragraph 2 of article 10 of Decree-law number 10/2011, of 20 January [Legal Regime for Tax Arbitration (RJAT)], in which the Tax and Customs Authority is Respondent (hereinafter referred to as "Respondent").

1.2. The Applicants request that the Arbitral Tribunal pronounce itself "on the illegality of the criterion that determined the (…) acts of assessment of transfer tax on nine independent units of urban property in the regime of full ownership located at number … of Avenue …" [parish … - Avenidas Novas (former parish … - S. Sebastião da Pedreira, article number …), in Lisbon, with article number … and described in the Property Registry Office of Lisbon under number …).

1.3. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD, and automatically notified to the Respondent, on 21 May 2015.

1.4. Given that the Applicants did not proceed with the appointment of an arbitrator, under the provisions of article 6, paragraph 2, subparagraph a) of RJAT, the undersigned was appointed as arbitrator, on 22 July 2015, by the President of the Ethics Council of CAAD, the appointment having been accepted within the legally prescribed deadline and terms.

1.5. On the same date, the parties were duly notified of this appointment, and did not manifest any intention to refuse the appointment of the arbitrator, in accordance with the provisions of article 11, paragraph 1, subparagraphs a) and b) of RJAT combined with articles 6 and 7 of the Ethics Code.

1.6. Thus, in accordance with what is prescribed in subparagraph c), paragraph 1, of article 11 of RJAT, the Arbitral Tribunal was constituted on 31 August 2015, with an arbitral order having been issued on the same date, to notify the Respondent to, in accordance with the provisions of article 17, paragraph 1 of RJAT, present a response within a maximum period of 30 days and, if it so wished, request the production of additional evidence.

1.7. On 2 October 2015, the Respondent presented its Response, having defended itself by objection and concluded that "(…) the tax acts in question (…) did not violate (…) any legal or constitutional provision, and should (…) be maintained".

1.8. Additionally, "given that the matter in dispute is exclusively a matter of law", the Respondent also presented in its Response a request to dispense with "the arbitral hearing provided for in article 18 of RJAT, as well as the presentation of submissions".

1.9. The Applicants were notified of the arbitral order, dated 5 October 2015, to pronounce themselves within 5 days on the content of the dispensation request referred to in the previous point, and the Applicants said nothing about the content thereof.

1.10. In these terms, it was decided by the Arbitral Tribunal, in an order dated 12 October 2015, in accordance with the procedural principles enshrined in article 16 of RJAT, of the autonomy of the Arbitral Tribunal in the conduct of the process and in the determination of the rules to be observed [subparagraph c)], of cooperation and procedural good faith [subparagraph f)] and of the free conduct of the process enshrined in articles 19 and 29, paragraph 2 of RJAT, and also taking into account the principle of limitation of useless acts provided for in article 130 of the Code of Civil Procedure (CCP) [applicable by virtue of the provisions of article 29, paragraph 1, subparagraph e) of RJAT], to dispense with the holding of the hearing referred to in article 18 of RJAT, as well as to dispense with the presentation of submissions, with 5 November 2015 being appointed as the date for the pronouncement of the arbitral decision.

1.11. In the same order, the Applicants were further warned that "up to the date of pronouncement of the arbitral decision they should proceed to payment of the subsequent arbitration fee, in accordance with the provisions of paragraph 3 of article 4 of the Regulations for Costs in Tax Arbitration Proceedings and communicate this payment to CAAD".

2. STATEMENT OF CLAIM

The Applicants support their request, in summary, as follows:

2.1. The Applicants are the legitimate owners "of 4/6 of the urban property" described above, in the following terms and proportion:

• "A… – 1/12;

• F… – 1/12 (by virtue of marriage under a general community of property regime with co-owner A…, marriage already dissolved);

• B… – 1/6;

• C… – 1/6".

2.2. According to the Applicants, "the remaining 2/6 of the same property constitute the undivided estates of E… and G…, of which heirs are the (…) Applicants" A…, B…, C… and D….

2.3. According to the Applicants, "the property is composed of a basement, 2 shops, ground floor and six floors (…) with independent use(…)"[2] and "the division that characterizes the property means that, annually, AT, for purposes of IMI, proceeds to the legal operations of assessment of this tax, based on the patrimonial taxpayer value of each of its 13 physical and economically autonomous units".

2.4. "Nevertheless, AT understood that it is subject to the objective incidence of item number 28.1 of TGIS, since the sum of the patrimonial value of each of the aforementioned independent units (…) exceeds the sum of €1,000,000.00 (…)".

2.5. "In March 2015, with reference to the tax year 2014, AT proceeded to assessment acts of transfer tax on 9 (nine) independent units of the property in the present case", relating "(…) to the 1st right, 2nd right, 2nd left, 3rd right, 3rd left, 4th right, 4th left, 5th right and 5th left", and which are identified below:[3]

a) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €470.53, relating to the 1st Right, and final payment date for the first installment, in the amount of €235.27, on 30 April 2015;

b) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 2nd Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

c) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 2nd Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

d) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 3rd Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

e) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 3rd Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

f) Assessment number 2015 …, dated 20 March 2015, with collection of €468.72, relating to the 4th Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

g) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 4th Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

h) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €467.45, relating to the 5th Right, and final payment date for the first installment, in the amount of €233.73, on 30 April 2015;

i) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €470.77, relating to the 5th Left, and final payment date for the first installment, in the amount of €235.39, on 30 April 2015;

j) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €470.53, relating to the 1st Right, and final payment date for the first installment, in the amount of €235.27, on 30 April 2015;

k) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 2nd Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

l) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 2nd Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

m) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 3rd Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

n) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 3rd Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

o) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 4th Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

p) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 4th Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

q) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €467.45, relating to the 5th Right, and final payment date for the first installment, in the amount of €233.73, on 30 April 2015;

r) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €470.77, relating to the 5th Left, and final payment date for the first installment, in the amount of €235.39, on 30 April 2015;

s) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €470.53, relating to the 1st Right, and final payment date for the first installment, in the amount of €235.27, on 30 April 2015;

t) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 2nd Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

u) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 2nd Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

v) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 3rd Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

w) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 3rd Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

x) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 4th Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

y) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 4th Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

z) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €467.45, relating to the 5th Right, and final payment date for the first installment, in the amount of €233.73, on 30 April 2015;

aa) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €470.77, relating to the 5th Left, and final payment date for the first installment, in the amount of €235.39, on 30 April 2015;

bb) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €470.53, relating to the 1st Right, and final payment date for the first installment, in the amount of €235.27, on 30 April 2015;

cc) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 2nd Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

dd) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 2nd Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

ee) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 3rd Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

ff) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 3rd Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

gg) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €468.72, relating to the 4th Right, and final payment date for the first installment, in the amount of €234.36, on 30 April 2015;

hh) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €476.07, relating to the 4th Left, and final payment date for the first installment, in the amount of €238.04, on 30 April 2015;

ii) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €467.45, relating to the 5th Right, and final payment date for the first installment, in the amount of €233.73, on 30 April 2015;

jj) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €470.77, relating to the 5th Left, and final payment date for the first installment, in the amount of €235.39, on 30 April 2015;

kk) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €941.07, relating to the 1st Right, and final payment date for the first installment, in the amount of €313.69, on 30 April 2015;

ll) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €937.43, relating to the 2nd Right, and final payment date for the first installment, in the amount of €312.49, on 30 April 2015;

mm) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €952.13, relating to the 2nd Left, and final payment date for the first installment, in the amount of €317.39, on 30 April 2015;

nn) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €937.43, relating to the 3rd Right, and final payment date for the first installment, in the amount of €312.49, on 30 April 2015;

oo) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €952.13, relating to the 3rd Left, and final payment date for the first installment, in the amount of €317.39, on 30 April 2015;

pp) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €937.43, relating to the 4th Right, and final payment date for the first installment, in the amount of €312.49, on 30 April 2015;

qq) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €952.13, relating to the 4th Left, and final payment date for the first installment, in the amount of €317.39, on 30 April 2015;

rr) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €934.90, relating to the 5th Right, and final payment date for the first installment, in the amount of €311.64, on 30 April 2015;

ss) Assessment number 2015 …, dated 20 March 2015, relating to 2014, with collection of €941.53, relating to the 5th Left, and final payment date for the first installment, in the amount of €313.85, on 30 April 2015.

2.6. On 26 April 2015 "the first installments of the assessments were paid by the respective SP, A…, in a total of 2,121.97, the first installments of the assessments were paid by the respective SP, B…, in a total of 2,121.97, the first installments of the assessments were paid by the respective SP, D…, in a total of 2,121.97 and the first installments of the assessments were paid by the respective SP, E… - head of the estate of, represented by A…, in a total of €2,828.82".

2.7. On 15 May 2015 "the first installments of the assessments were paid by the respective SP, C…, in a total of €2,121.97", "all in the total amount of €11,316.70".

2.8. However, the Applicants do not agree with the aforementioned assessments because in their understanding "(…) there is no legal basis whatsoever for assessing transfer tax based on the value found from the sum of the autonomous patrimonial taxpayer values of nine of the independent units that constitute the property in the present case".[4]

2.9. "Now, the property in the present case is described in the property registry in accordance with the provisions of paragraph 3 of article 12 of the Code of (…) IMI, according to which each floor or part of a property capable of independent use is considered separately in the property registration, which also identifies its respective patrimonial taxpayer value".

2.10. Thus, according to the Applicants, "(…) the property was assessed in accordance with the provisions of article 7, paragraph 2, subparagraph b) of CIMI, according to which the patrimonial taxpayer value of urban properties with parts that can be classified in more than one of the classifications of paragraph 1 of the preceding article is determined, if the different parts are economically independent, each part is assessed by application of the corresponding rules, and the value of the property is the sum of the values of its parts."

2.11. Thus, "given the facts set out and their legal framework, they understand (…) that the assessments are tainted by the defect of violation of law, and therefore their annulment is necessary". [5]

On the violation of the principle of tax legality inherent in article 8 of the General Tax Law (…) and 103 of the Constitution of the Portuguese Republic

2.12. According to the Applicants, "AT determined the TVP of each of the 13 units of the property in the present case, considering them individually, in accordance with the legal provisions set out above", "without any legal provision that permitted it to do so and violating the principle of tax legality, as well as the principle of equality constitutionally enshrined (…)".

2.13. Now, "insofar as the Respondent took into account the value resulting from the sum of 13 of the units of the property in the present case (calculating the amount of €3,580,110.00), to which it deducted the TVP of the 4 floors/units with municipal license for commercial activity (obtaining as a result the amount of €2,545,860)", and "insofar as this result exceeds the value of one million euros", the Respondent "understood that the property fell under the objective incidence of the aforementioned item 28.1 of TGIS".

2.14. However, there are no doubts for the Applicants that "for purposes of the transfer tax in question, each unit must be considered in itself, not only as to its use, but also as to its value".

2.15. In consequence, as "none of the assessments sub judice and now contested was based on a value above €1,000,000.00 (one million euros)", "since each of the floors in the assessments (…) has a value below one million euros, they should be annulled, as they do not fall within the scope of the objective incidence of item 28.1 of transfer tax".[6]

On the violation of the principle of equality constitutionally enshrined

2.16. The Applicants argue that "the assessments in the present case are not only illegal but also unconstitutional, by violating the principle of equality constitutionally enshrined (…)", "(…) according to which everyone has the duty to (…) pay taxes according to the same criterion – with contributory capacity being the unitary criterion for taxation".

2.17. In light of the above, the Applicants consider that "in the case of urban properties with parts or floors capable of independent use, the value to be considered for purposes of applying item 28 of TGIS is the patrimonial taxpayer value of each of those independent parts, with only those parts capable of independent use whose own patrimonial taxpayer value exceeds € 1,000,000 being subject to this tax".

2.18. In these terms, it is clear and distinct for the Applicants, "that the assessments in the present case are illegal, and therefore the annulment of the 9 disputed assessment acts is necessary".

On indemnificatory interest

2.19. As set out, although the first installments of the Transfer Tax Assessment in the present case were paid on 26.04.2015 (in a total of EUR 9,193.59) and also on 15.05.2015 (in a total of €2,121.97), amounting to a total value of EUR 11,315.56, for the Applicants "such assessments are illegal, and therefore their annulment is necessary, and there are no doubts that these same assessments resulted from an error attributable to the finance service" and, thus, "indemnificatory interest is owed (…)".

2.20. In these terms, the Applicants request that the Respondent "be ordered to pay indemnificatory interest on the amount of €9,193.59 (…), and on the amount of €2,121.97 (…), calculated from the day following the undue payment (…) until the date of issuance of the respective credit note".

2.21. And, the Applicants conclude their Request for Arbitral Pronouncement by requesting that:

2.21.1. The request for annulment of the tax act of assessment of transfer tax shall be granted "on the basis of violation of the principles of equality and contributory capacity", and in consequence, "AT should be ordered to refund to each of the passive subjects here applicants the (…) amounts already paid";

2.21.2. Furthermore, the Respondent should be "ordered to pay to the (…) applicants indemnificatory interest (…) calculated from the day following the undue payment of each of the (…) installments of the assessments (…) until the date of issuance of the respective credit note".

3. RESPONSE OF THE RESPONDENT

3.1. The Respondent answered arguing the inadmissibility of the request for arbitral pronouncement and invoking the following arguments:

3.2. "The (…) Applicants are co-owners of 4/6 (…) and of the remaining 2/6 (…) of an uncertain and undetermined part of the urban property registered in the respective property matrix of the parish of Avenidas Novas, municipality of Lisbon, under article …, property (…) constituted in a regime of (…) vertical property", being "(…) composed of 8 floors and 13 units or parts capable of independent use (…) 9 intended for residential use, and the remainder intended for commerce and services".

3.3. The Respondent continues by referring that "it was solely the patrimonial value of the 9 floors/parts with residential use that corresponds to a TVP of €2,545,860.00, which was taken into account in the assessments made relating to the year 2014" and from these assessments resulted "(…) a payment value relating to the 1st installment, for the year 2014, of €11,316.70 for all co-owners and heirs".

3.4. According to the Respondent, "the Applicants do not agree with the assessments, considering them illegal, because they disagree with the interpretation that AT makes of the (…) item 28.1 of the General Table attached to CIS" because "they challenge the discrimination that AT makes between the regime of vertical property and horizontal property".

3.5. The Respondent affirms that "given the position of the applicants" it cannot "in any way, adhere to any of its arguments (…)", namely, taking into account the "interpretative issue of the incidence rule".

3.6. In the first place, the Respondent refers that "since the property of which they are co-owners is in a regime of full property, it does not have autonomous fractions, to which tax law attributes the qualification of property" so that "the (…) Applicants, for purposes of IMI and also of transfer tax (…) are not co-owners of 13 autonomous fractions, but rather of a single property".

3.7. Now, according to the Respondent, "to claim that the interpreter and applicator of tax law apply, by analogy, to the regime of full property, the regime of horizontal property is what is abusive and illegal(…)", because "the interpreter of tax law cannot equate these regimes, in accordance with the rule according to which the concepts of other branches of law have the meaning in tax law that is given to them in those branches of law (…)".

3.8. Thus, the Respondent concludes that "we cannot (…) accept that it be considered, that for purposes of item 28.1 of the General Table attached to CIS, that the parts capable of independent use have the same tax regime as the autonomous fractions of the horizontal property regime", whereby "(…) each floor or part of property capable of independent use is considered separately in the property registration, but in the same matrix, proceeding to assess IMI taking into account the patrimonial taxpayer value of each part".

3.9. The Respondent continues by referring that "the unit of the urban property in vertical property composed of several floors or units is not, however, affected by the fact that all or part of those floors or units are capable of independent economic use", "(…) with their distinct parts not being (…) legally equated to autonomous fractions in a horizontal property regime".

3.10. Thus, the Respondent understands that "any other interpretation would violate (…) the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in article 103, paragraph 2, of the Constitution of the Portuguese Republic (CRP)", and it would be "(…) unconstitutional, by offending the principle of tax legality, the interpretation of item 28.1 of the General Table, to the effect that the patrimonial value on which its incidence depends be determined globally and not floor by floor or unit by unit".

3.11. For the Respondent, the "(…) procedural rules of assessment, property registration and assessment of the parts capable of independent use do not allow one to assert that there is an equating of property in a regime of full property to the regime of vertical property[7], this because, (…) these civil-legal regimes are different, and tax law respects them".

3.12. In these terms, the Respondent concludes that "(…) the tax acts in question, in terms of substance, did not violate (…) any legal or constitutional provision, and should, thus, be maintained".

3.13. Additionally, "given that the matter in dispute is (…) exclusively a matter of law, and is recurrent in this arbitral forum (…)" the Respondent requested in its Response the dispensation of "(…) the holding of the arbitral hearing provided for in article 18 of RJAT, as well as the presentation of submissions (…)", taking into account that the "(…) position of the parties is broadly and clearly defined".

3.14. On the other hand, the Respondent clarified that it did not send the administrative file "because it considers true the documents submitted by the Applicants and they instruct the present process fully".

4. CLEANUP ORDER

4.1. The request for arbitral pronouncement is timely given that it was presented within the prescribed deadline in subparagraph a) of paragraph 1 of article 10 of RJAT.

4.2. The parties have legal capacity and procedural standing, are legitimate with respect to the request for arbitral pronouncement and are duly represented, in accordance with the provisions of articles 4 and 10 of RJAT and article 1 of Order number 112-A/2011, of 22 March.

4.3. The joinder of claims and joinder of parties here effected by the Applicants is legal and valid, in accordance with the provisions of article 3, paragraph 1 of RJAT, given that the merits of the claims depend essentially on the appreciation of the same factual circumstances and the interpretation and application of the same principles or legal rules.

4.4. The Tribunal is competent with respect to the assessment of the request for arbitral pronouncement formulated by the Applicants.

4.5. No exceptions have been raised that require examination.

4.6. There are no procedural defects, and it is now necessary to examine the merits of the request.

5. MATTERS OF FACT

5.1. Proved Facts

5.2. The following facts are considered proved as documented by the following documents attached to the case file:

5.2.1. The Applicants are owners and heirs of the undivided estate of E…, with TIN …, with respect to the urban property located at Avenue …, number …, in Lisbon, which is registered in the urban property matrix under article number … of the parish … - Avenidas Novas and described in the Property Registry Office of Lisbon under number … (as per doc. number 47 and doc. number 48, attached with the request).

5.2.2. The aforementioned urban property is not in a regime of horizontal property, being composed of a basement, two shops, ground floor and six floors with independent use, for a total of eight floors, thirteen units or parts capable of independent use, nine of which are intended for residential use and the remainder intended for commerce and services (as per doc. number 47, attached with the request).

5.2.3. The total TVP of the aforementioned urban property is EUR 3,626,720.00 [8], and the total TVP of the nine units (or parts capable of independent use) intended for residential use amounts to EUR 2,545,860.00, each having been assigned the individual TVP that appears in the summary of the payment notices referred to in the next point).[9]

5.2.4. The Applicants were notified of the payment notices for payment of the 1st installment of tax, which are identified below, relating to the Transfer Tax Assessments, dated 20 March 2015, relating to the year 2014, whose final payment date was "30 April 2015":

5.2.4.1. Assessments in the name of A… [paid on 26 April 2015, as per copies of documents attached to the case (Doc. 1 to 9)];

ASSESSMENT NUMBER FLOOR TVP COLLECTION 1ST INSTALLMENT ANNEXED DOCUMENTS
2015 … 1ST RIGHT 282,320.00 470.53 235.27 1
2015 … 2ND RIGHT 281,230.00 468.72 234.36 2
2015 … 2ND LEFT 285,640.00 476.07 238.04 3
2015 … 3RD RIGHT 281,230.00 468.72 234.36 4
2015 … 3RD LEFT 285,640.00 476.07 238.04 5
2015 … 4TH RIGHT 281,230.00 468.72 234.36 6
2015 … 4TH LEFT 285,640.00 476.07 238.04 7
2015 … 5TH RIGHT 280,470.00 467.45 233.73 8
2015 … 5TH LEFT 282,460.00 470.77 235.39 9
TOTAL 2,545,860.00 4,243.12 2,121.59

5.2.4.2. Assessments in the name of B… [paid on 26 April 2015, as per copy of documents attached to the case (Doc. 10 to 18)];

ASSESSMENT NUMBER FLOOR TVP COLLECTION 1ST INSTALLMENT ANNEXED DOCUMENTS
2015 … 1ST RIGHT 282,320.00 470.53 235.27 10
2015 … 2ND RIGHT 281,230.00 468.72 234.36 11
2015 … 2ND LEFT 285,640.00 476.07 238.04 12
2015 … 3RD RIGHT 281,230.00 468.72 234.36 13
2015 … 3RD LEFT 285,640.00 476.07 238.04 14
2015 … 4TH RIGHT 281,230.00 468.72 234.36 15
2015 … 4TH LEFT 285,640.00 476.07 238.04 16
2015 … 5TH RIGHT 280,470.00 467.45 233.73 17
2015 … 5TH LEFT 282,460.00 470.77 235.39 18
TOTAL 2,545,860.00 4,243.12 2,121.59

5.2.4.3. Assessments in the name of C… [paid on 15 and 16 May 2015, as per copy of documents attached to the case (Doc. 19 to 27)];

ASSESSMENT NUMBER FLOOR TVP COLLECTION 1ST INSTALLMENT ANNEXED DOCUMENTS
2015 … 1ST RIGHT 282,320.00 470.53 235.27 19
2015 … 2ND RIGHT 281,230.00 468.72 234.36 20
2015 … 2ND LEFT 285,640.00 476.07 238.04 21
2015 … 3RD RIGHT 281,230.00 468.72 234.36 22
2015 … 3RD LEFT 285,640.00 476.07 238.04 23
2015 … 4TH RIGHT 281,230.00 468.72 234.36 24
2015 … 4TH LEFT 285,640.00 476.07 238.04 25
2015 … 5TH RIGHT 280,470.00 467.45 233.73 26
2015 … 5TH LEFT 282,460.00 470.77 235.39 27
TOTAL 2,545,860.00 4,243.12 2,121.59

5.2.4.4. Assessments in the name of D… [paid on 26 April 2015, as per copy of documents attached to the case (Doc. 28 to 36)];

ASSESSMENT NUMBER FLOOR TVP COLLECTION 1ST INSTALLMENT ANNEXED DOCUMENTS
2015 … 1ST RIGHT 282,320.00 470.53 235.27 28
2015 … 2ND RIGHT 281,230.00 468.72 234.36 29
2015 … 2ND LEFT 285,640.00 476.07 238.04 30
2015 … 3RD RIGHT 281,230.00 468.72 234.36 31
2015 … 3RD LEFT 285,640.00 476.07 238.04 32
2015 … 4TH RIGHT 281,230.00 468.72 234.36 33
2015 … 4TH LEFT 285,640.00 476.07 238.04 34
2015 … 5TH RIGHT 280,470.00 467.45 233.73 35
2015 … 5TH LEFT 282,460.00 470.77 235.39 36
TOTAL 2,545,860.00 4,243.12 2,121.59

5.2.4.5. Assessments in the name of the undivided estate of E… (TIN number …) [paid on 26 April 2015, as per copy of documents attached to the case (Doc. 37 to 45)];

ASSESSMENT NUMBER FLOOR TVP COLLECTION 1ST INSTALLMENT ANNEXED DOCUMENTS
2015 … 1ST RIGHT 282,320.00 941.07 313.69 37
2015 … 2ND RIGHT 281,230.00 937.43 319.49 38
2015 … 2ND LEFT 285,640.00 952.13 317.39 39
2015 … 3RD RIGHT 281,230.00 937.43 312.49 40
2015 … 3RD LEFT 285,640.00 952.13 317.39 41
2015 … 4TH RIGHT 281,230.00 937.43 312.49 42
2015 … 4TH LEFT 285,640.00 952.13 317.39 43
2015 … 5TH RIGHT 280,470.00 934.90 311.64 44
2015 … 5TH LEFT 282,460.00 941.53 313.85 45
TOTAL 2,545,860.00 8,486.18 2,835.82

5.2.5. The total of the collections identified above amounts to EUR 25,458.72, relating to the total value of Transfer Tax assessed with reference to the year 2014, as indicated by the Applicants in the request.

5.3. No other facts that could affect the decision on the merits of the request were proved.

5.4. Unproved Facts

5.5. No other facts were established as unproved with relevance to the arbitral decision.

6. LEGAL GROUNDS

6.1. In the case under analysis, there will be two disputed legal issues, underlying the Request for Arbitral Pronouncement, so as to assess the legality of the Transfer Tax assessments notified to the Applicants, by reference to the year 2014:

6.1.1. Is subjection to Transfer Tax, in accordance with what is provided in item number 28.1 of TGIS, determined by the TVP that corresponds to each of the parts of the property with residential use or, conversely, is it determined by the global TVP of the property, which would correspond to the sum of all the TVPs of the floors (with that type of use), that form part thereof?

6.1.2. Is item number 28 of TGIS unconstitutional or not due to violation of the principle of equality, as well as due to violation of the provisions of article 104, paragraph 3, of CRP ("the taxation of heritage must contribute to equality among citizens")?

6.2. The answer to these issues requires the analysis of the applicable legal rules so as to determine which is the correct interpretation in light of the Law and the Constitution, given that it is a matter of assessing a tax incidence premise, carefully protected by the principle of tax legality (article 103, paragraph 2 of CRP).

6.3. As to the answer to be given to the first of the issues formulated above (point 6.1.1), it is important to analyze the essence of item number 28 of TGIS, added by article 4 of Law number 55-A/2012, of 29 October, under which the following is established:

"28. Ownership, usufruct or surface rights of urban properties whose TVP shown in the matrix, under the terms of the Code of IMI, is equal to or higher than EUR 1,000,000 – on the TVP for purposes of IMI:

28.1. – For property with residential use – 1%.

28.2. – (…)".

6.4. Although Law number 55-A/2012 (in force since 30 October 2012) did not qualify the concepts contained in the aforementioned item number 28, namely the concept of "property with residential use", if the provisions of article 67, paragraph 2, of the Code of Transfer Tax (also added by the aforementioned Law number 55-A/2012) are observed, it is verified that "to matters not regulated in this Code relating to item 28 of TGIS shall apply, subsidiarily, the Code of IMI".

6.5. Now, from reading the Code of IMI, it is easily apparent that the concept of "property with residential use" refers naturally to the concept of "urban property", defined in accordance with articles 2 and 4 of that Code.

6.6. In effect, in accordance with the provisions of article 2, paragraph 1 of the Code of IMI, "for purposes of this Code, property is any portion of territory, including waters, plants, buildings and constructions of any kind incorporated in or based on it, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plants, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are based, although situated in a portion of territory that constitutes an integral part of an asset that is diverse or does not have a patrimonial nature" (underlining ours).

6.7. Also in accordance with paragraphs 2 and 3 of the same article, "buildings or constructions, although mobile by nature, are deemed to have a character of permanence when dedicated to non-transitory purposes", being presumed "the character of permanence when the buildings or constructions are based in the same location for a period exceeding one year".

6.8. For purposes of IMI, "each autonomous fraction, in the regime of horizontal property, is deemed to constitute a property".

6.9. In accordance with the provisions of article 4 of the Code of IMI, "urban properties are all those that should not be classified as rural (…)".

6.10. Among the various types of "urban properties" referred to in article 6 of the Code of IMI, are expressly mentioned "residential urban properties" [paragraph 1, subparagraph a)], with paragraph 2 of the same article adding that these "are buildings or constructions licensed for such purposes or, failing a license, that have as their normal purpose each of these purposes".

6.11. If it is true that paragraph 4 of article 2 of the Code of IMI states that "for purposes of this tax, each autonomous fraction, in the regime of horizontal property, is deemed to constitute a property" it is also true that there is nothing in the law that points to discrimination between properties in horizontal and vertical property with respect to their identification as "residential urban properties".

6.12. Thus, it can be concluded therefrom that the autonomous parts of properties in vertical property, with residential use, should be considered as "residential urban properties".

6.13. As sustained in various Arbitral Decisions, notably in the one issued in the framework of Process number 88/2013-T, "in the perspective of the legislator, the legal-formal precision of the concrete situation of the property does not matter but rather its normal use, the purpose to which it is destined".

6.14. Whereby, "it must be concluded that for the legislator it is irrelevant whether the property is constituted in vertical property or horizontal property, with only the material truth underlying its existence as an urban property and its use being relevant" (underlining ours).

6.15. In effect, in the interpretation of the legal text, it makes no sense to distinguish what the law itself does not distinguish (ubi lex non distinguit nec nos distinguere debemus) because distinguishing, in this context, between properties constituted in horizontal property and properties constituted in full property would be an "innovation" without associated legal support.

6.16. In truth, nothing denotes, either in item number 28 of TGIS, or in the provisions of the Code of IMI, a justification for that particular differentiation.[10]

6.17. In effect, it can be stated that it is today a settled understanding that tax laws are interpreted as any others, and it is necessary to determine their true meaning in accordance with the techniques and interpretive elements generally accepted by doctrine [cfr. article 9 of the Civil Code and article 11 of the General Tax Law (LGT)].[11]

6.18. On the other hand, it is necessary to take into account that the rules of incidence of taxes must be interpreted in their exact terms, without recourse to analogy, making prevailing certainty and security in their application.[12]

6.19. In these terms, the uniform criterion that is necessary is that which determines that the incidence of the provision in the rule in question (item 28 of TGIS) takes place only when any of the parts, floors or units with independent use of property in horizontal property (or full property), with residential use, possesses a TVP superior to EUR 1,000,000.00 (underlining ours).

6.20. Thus "if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical property, in the same manner as it establishes for properties in horizontal property, it clearly established a criterion, which must be unique and unequivocal, for the definition of the rule of incidence of item 28.1 of TGIS" [13], whereby fixing as the reference value for the incidence of the new tax, the global TVP of the property in question, as the Respondent claims, finds no basis in the applicable legislation (underlining ours).[14]

6.21. Finally, it is important to further inquire what the ratio legis underlying the rule of item 28 of TGIS is and, in obedience to the provisions of article 9 of the Civil Code[15], what the circumstances were in which the rule was elaborated and what the specific conditions of the time in which it is applied are.

6.22. In effect, the legislator intended to introduce a principle of taxation on wealth externalized in the ownership, usufruct or surface rights of urban properties of luxury with residential use, having considered, as a determining element of contributory capacity, urban properties, with residential use, of high value (luxury), that is, of value equal to or superior to EUR 1,000,000.00, on which would pass (and did pass) to be subject to a special rate of Transfer Tax.

6.23. And we understand that this is precisely what can be concluded from the analysis of the discussion of Bill number 96/XII in the Assembly of the Republic[16], with no other interpretative ratio being envisioned than that presented here.[17]

6.24. In effect, the justification for the measure designated as "special rate on residential urban properties of higher value" is thus based on the invocation of the principles of social equity and tax justice, calling those holding properties of high value intended for residential use to contribute in a more intensive manner, thus making the new special rate apply to "homes of value equal to or superior to 1 million euros" (underlining ours).

6.25. Now, if such logic appears to make sense when applied to a "residential unit" (whether it be a house, an autonomous fraction, a part of property with independent use or an autonomous unit) whenever the same represents, on the part of its holder, a contributory capacity above the average (and, in that measure, capable of determining a special contribution to ensure just distribution of the tax effort), it would make no sense if applied "unit by unit" so as, through the sum of the TVPs of the same (because held by the same individual), to determine such value equal to or superior to one million euros (underlining ours).

6.26. It also follows that admitting the differentiation of treatment could produce incomprehensible and discriminatory results from a legal point of view, since contrary to the objectives (of promotion of social equity and tax justice) that the legislator claimed to have in adding item number 28.

6.27. In truth, the existence of a property in vertical property or horizontal property cannot, by itself, be indicative of contributory capacity, it being evident from the law that both should receive the same tax treatment in obedience to the principles of justice, tax equality and material truth.

6.28. Conversely, the existence in each property of independent residential units, in a regime of horizontal or vertical property, can be capable of triggering the incidence of the new tax if the TVP of each of the parts or fraction is equal to or superior to the limit defined by law, that is, EUR 1,000,000.00.

6.29. In this manner, it is illegal and unconstitutional to consider that the reference value for the assessment of the tax is that corresponding to the sum of the TVPs attributed to each part or unit, first and foremost because we would be faced with a clear violation of the principle of equality and proportionality in tax matters.

6.30. The tax legislator cannot treat equal situations differently, as a function of whether we are before a property in horizontal property or vertical property.

6.31. Now, if the property under analysis were in a regime of horizontal property, it would be clear that none of the residential fractions that make up the same would be subject to the incidence of the new tax, because none of them would individually exceed the limit of EUR 1,000,000.00 defined by law (see point 5.2.4 above regarding the TVP of each of the floors).

6.32. It will thus be for this very reason that article 12, paragraph 3 of the Code of IMI provides that "each floor or part of property capable of independent use is considered separately in the property registration which also identifies its respective TVP" so as not to generate situations of violation of the principles of social equity and tax justice.

6.33. In effect, the constitution of horizontal property implies a mere legal alteration of the property not even requiring a new assessment, whereby the material truth is that which imposes itself as the determining criterion of contributory capacity and not the mere legal-formal reality of the property.

6.34. In consequence, the discrimination operated by the Respondent translates into an arbitrary and illegal discrimination, since the law does not impose the obligation of constitution of horizontal property.

6.35. And, taking into account the entire social and economic reality (sometimes present in many of the properties existing in vertical property), the tax legislator itself in the Code of IMI treated the two situations (horizontal and vertical property) in an equitable manner, applying the same criteria.

6.36. In effect, it should be reiterated that the Respondent cannot distinguish where the legislator itself chose not to do so, under pain of violating the coherence of the tax system and the principles of tax legality (article 103, paragraph 2 of CRP), justice, equality and proportionality in tax matters, included therein.

6.37. Analyzing the situation sub judice, it is found that the TVP of the floors (autonomous units) with residential use varies between EUR 280,470.00 and EUR 285,640.00, whereby, in each one of them, individually considered, the aforementioned TVP is less than EUR 1,000,000.00 (as already referred to in point 6.31 above).

6.38. Thus, given the foregoing, and in response to the first of the issues raised above (see point 6.1.1), it is concluded that Transfer Tax as referred to in item number 28 of TGIS cannot apply to the floors with residential use (of the property identified in the present case) and therefore the assessment acts that are the subject of the Request for Arbitral Pronouncement presented by the Applicants are illegal [18].

6.39. Additionally, having also taken into account all of the above, we can conclude that, as to the answer to be given to the second of the issues above enunciated (see point 6.1.2), the interpretation made by the Respondent is not in accordance with the Law and the Constitution, as it violates the principle of equality (article 13 of CRP) and does not contribute to equality among citizens (article 104, paragraph 3, of CRP) [19].

On indemnificatory interest

6.40. Finally, and with respect to the request presented by the Applicants to be "owed indemnificatory interest, in accordance with the provisions of article 43 of LGT, according to which the right to indemnificatory interest subsists, whenever this stems from an error attributable to the AT services (…)", "(…) calculated from the day following that of the undue payment until the date of issuance of the respective credit note, at the legal rate [20]" it is important to note that, in accordance with the provisions in subparagraph b), paragraph 1, of article 24 of RJAT, and in conformity with what is there established, "the arbitral decision on the merits of the claim as to which no appeal or contestation is available shall bind the tax administration from the end of the deadline prescribed for appeal or contestation, the administration having to restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been performed, adopting the necessary acts and operations for that purpose"[21] (underlining ours).

6.41. In truth, in accordance with the provisions of article 100 of LGT, applicable in this case by virtue of the provisions in subparagraph a), paragraph 1, of article 29 of RJAT, "the tax administration is obliged, in case of total or partial success of administrative complaints or appeals, or of judicial process in favor of the passive subject, to the immediate and complete restoration of the situation that would have existed if the illegality had not been committed, comprising the payment of indemnificatory interest, under the terms and conditions provided for in law" (underlining ours).

6.42. In the situation under analysis, and as a consequence of the illegality of the assessment acts already identified above, there must be, by virtue of the rules previously referred to, reimbursement of the amounts already paid, at this date, by the Applicants, as a way of achieving the restoration of the situation that would have existed if the illegality had not been committed.

6.43. As to the indemnificatory interest requested by the Applicants, it appears that, given what is established in article 61 of the Code of Procedural and Tax Procedure (CPPT) and the requirements being met for the right to indemnificatory interest (that is, verified the existence of an error attributable to the services from which results payment of the tax debt in an amount greater than that legally due, as provided for in paragraph 1, of article 43 of LGT), they shall have the right to indemnificatory interest at the legal rate, calculated on the amounts paid relating to the Transfer Tax Assessments dated 20 March 2015 (and relating to the year 2014), which shall be calculated in accordance with the provisions of paragraph 3 of article 61 above already referred to, that is, from the date of payment of the undue tax until the date of issuance of the respective credit note.

7. DECISION

7.1. In accordance with the provisions of article 22, paragraph 4, of RJAT, "the arbitral decision issued by the arbitral tribunal comprises the determination of the amount and distribution among the parties of the costs directly resulting from the arbitration process".

7.2. In this context, the basic rule regarding responsibility for process charges is that the party that occasioned them should be condemned, it being understood that the losing party occasions the costs of the process, in the proportion in which it lost (article 527, paragraphs 1 and 2 of CCP).

7.3. In the case under analysis, having regard to the foregoing, the principle of proportionality requires that the entirety of responsibility for costs be attributed to the Respondent.

7.4. In these terms, having regard to the analysis made, this Arbitral Tribunal decided:

7.4.1. To find the request for arbitral pronouncement presented by the Applicants to be warranted and to condemn the Respondent with respect to the request for declaration of illegality of the Transfer Tax Assessments, dated 20 March 2015 (relating to the year 2014), underlying the first installment payment notices identified in this process, annulling, in consequence, all the respective tax acts;

7.4.2. To find the request to condemn the Respondent for reimbursement of the amounts unduly paid by the Applicants, plus indemnificatory interest at the legal rate, calculated in accordance with legal provisions, to be warranted;

7.4.3. To condemn the Respondent for payment of the costs of the present process.

Value of the process: Having regard to the provisions of articles 306, paragraph 2 of CCP, article 97-A, paragraph 1 of CPPT and article 3, paragraph 2 of the Regulations for Costs in Tax Arbitration Proceedings, the value of the process is fixed at EUR 25,458.72.

Costs of the process: In accordance with the provisions of Table I of the Regulations for Costs of Tax Arbitration Proceedings, the value of the costs of the Arbitration Process is fixed at EUR 1,530.00, at the charge of the Respondent, in accordance with article 22, paragraph 4 of RJAT.

Notify.

Lisbon, 5 November 2015

The Arbitrator

Sílvia Oliveira

Sílvia Oliveira

[1] The writing of this decision is governed by the spelling prior to the 1990 Spelling Agreement, except with respect to transcriptions made.

[2] According to the Applicants, the shops, the ground floor and the 1st left floor have "license for use number …, issued by the Lisbon Municipal Council in … November 1996" and the 1st right floor, the 2nd right floor, the 3rd right floor, the 4th right floor, the 5th right floor, the 2nd left floor, the 3rd left floor, 4th left and 5th left, "autonomous units that maintain the purpose described in the Inspection Report for residential use and occupation issued at the time of their construction (…)".

[3] For proof purposes, the Applicants attached copies of the respective documents (doc. 1 to 45).

[4] Understanding this which, the Applicants refer, "with respect to this same property, but with reference to the years (…) 2012 and 2013, already obtained acceptance from this CAAD, as per decision already final (…)", whose copy they attached to the request as doc. number 46 (Arbitral Decision number 494/2014, of 13 March 2015).

[5] In this matter, the Applicants cite the Arbitral Decision issued in the framework of case number 494/2014 T, of 13 March 2015.

[6] In this sense, the Applicants cite the Arbitral Decision issued in the framework of process number 50/2013-T, of 29 October 2013, under which "the adoption of the criterion advocated by AT violates the principles of legality and tax equality, as well as that of prevalence of material truth over legal-formal reality".

[7] The Respondent should have meant "regime of horizontal property".

[8] As appears from the copy of the Urban Property Registry Book, attached to the case (doc. number 47).

[9] It was the total TVP of the units or parts capable of independent use intended for residential use, in the amount of EUR 2,545,860.00, which was taken into account in the Transfer Tax Assessments made with respect to the year 2014 and which are here the subject of a request for arbitral pronouncement.

[10] In this context, note the provisions of article 12, paragraph 3, of the Code of IMI, by referring that "each floor or part of property capable of independent use is considered separately in the property registration, which also identifies its respective TVP".

[11] In this sense, see AC TCAS Process 07648/14, of 10 July 2014.

[12] Cfr. AC TCAS Process 5320/12, of 2 October 2012, AC TCAS Process 7073/13, of 12 December 2013 and AC TCAS 2912/09, of 27 March 2014.

[13] See Arbitral Decision number 50/2013-T (CAAD), of 29 October 2013.

[14] Which is the Code of IMI, given the referral made by the aforementioned article 67, paragraph 2, of the Code of Transfer Tax.

[15] According to which the interpretation of the legal rule should not be limited to the letter of the law, but should reconstruct the legislative intent, starting from the texts and other elements of interpretation, taking into account the unity of the legal system.

[16] Available for consultation in the Diary of the Assembly of the Republic, I series, number 9/XII/2, of 11 October 2012.

[17] As already referred to in various Arbitral Decisions issued by CAAD (see Process number 48/2013-T and Process number 50/2013-T).

[18] In this sense, see Arbitral Decision number 368/2014-T, of 18 December 2014, issued by the undersigned.

[19] In this sense, see Arbitral Decision identified in the previous note.

[20] In this context, the Applicants cite Arbitral Decision 218/2013-T, of 24 February 2014.

[21] In this sense, see Arbitral Decision 27/2013-T, of 10 September 2013, regarding "reimbursement of the total amount paid and indemnificatory interest".

Frequently Asked Questions

Automatically Created

What is the scope of Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) regarding stamp tax on high-value properties?
Item 28 of the General Stamp Tax Table (TGIS) imposes an annual stamp tax (Imposto do Selo) on real estate properties with taxable patrimonial values exceeding €1,000,000 located in Portuguese territory. The tax applies at a rate of 1% on the portion of the patrimonial value that exceeds this threshold. The scope specifically targets high-value properties, whether used for residential, commercial, or other purposes. The critical interpretative question in this case involved whether the €1,000,000 threshold should be calculated by aggregating the patrimonial values of all independent units within a single building under vertical property ownership, or whether each autonomous unit should be assessed separately. This distinction significantly impacts tax liability, as individual units may fall below the threshold while their combined value exceeds it, triggering the stamp tax obligation.
How does the concept of vertical property (propriedade vertical) affect stamp tax liability on independent units in Portugal?
Vertical property (propriedade horizontal or propriedade vertical) in Portugal refers to the legal regime where a building is divided into autonomous units with independent economic utility, each capable of separate ownership while sharing common areas. For stamp tax purposes under Item 28 TGIS, the treatment of vertical property creates interpretative challenges. The Tax Authority's position in this case was that when a building comprises multiple independent units held under total ownership (not yet divided among separate owners), the patrimonial values should be aggregated to determine if the €1,000,000 threshold is exceeded. This means that even though each unit has independent registration and separate patrimonial valuation for Municipal Property Tax (IMI) purposes, for stamp tax calculation under Item 28, the Tax Authority considered the property as a unified whole. This interpretation can result in stamp tax liability arising from the collective value of units, even when no single unit exceeds the threshold individually, affecting properties held in undivided estates or co-ownership situations.
Can heirs of an undivided estate challenge stamp tax assessments on individual property units before CAAD?
Yes, heirs of an undivided estate have legal standing to challenge stamp tax assessments before the Administrative Arbitration Centre (CAAD) under the Legal Regime for Tax Arbitration (RJAT - Decree-Law 10/2011). In this case, the four applicants acted both on their own behalf as co-owners of 4/6 of the property and in their capacity as sole heirs of the undivided estate that owned the remaining 2/6. Article 4 and Article 10(2) of RJAT permit taxpayers to request arbitral proceedings to contest the legality of tax acts, including stamp tax assessments. The heirs' standing derives from their status as interested parties affected by the tax assessments, which were issued against the property in which they hold ownership interests through inheritance. The CAAD accepted the request and constituted the arbitral tribunal, confirming that heirs representing an undivided estate possess the necessary legal capacity and legitimate interest to challenge tax liquidations affecting inherited property, even when the estate remains undivided and the succession process may be ongoing.
What criteria determine whether independent units in a building under total ownership are taxed separately for Imposto do Selo?
The determination of whether independent units in a building under total ownership are taxed separately or collectively for stamp tax purposes under Item 28 TGIS depends on several interpretative criteria. First, the existence of separate property registry inscriptions and individual article numbers for each autonomous unit suggests economic and legal independence. Second, each unit's separate patrimonial valuation for Municipal Property Tax (IMI) purposes indicates recognition of their autonomous character by the tax administration. However, the Tax Authority's position in this case emphasized that when units remain under unified ownership (not yet separately alienated to different owners), the aggregate patrimonial value should be used to determine Item 28 TGIS applicability. The critical criterion appears to be the ownership structure: if all units belong to the same owner(s) in co-ownership or undivided estate, the Tax Authority treats them collectively for the €1,000,000 threshold calculation, even though they constitute physically and economically autonomous units. This contrasts with situations where units have been separately conveyed to different owners, where individual taxation might apply. The legal dispute centered on whether this aggregation criterion was lawful or whether each unit's autonomous nature should prevail for stamp tax purposes.
What is the arbitral procedure for contesting stamp tax liquidations under the RJAT (Decreto-Lei 10/2011)?
The arbitral procedure for contesting stamp tax liquidations under RJAT (Decree-Law 10/2011) follows a structured process before CAAD. First, the taxpayer files a request for arbitral pronouncement within the statutory deadline (generally 90 days from notification of the tax act or final decision on administrative claim). The request must specify the contested acts and legal grounds. Upon acceptance by CAAD's President, the request is notified to the Tax Authority (respondent). If the applicant doesn't appoint an arbitrator, CAAD's Ethics Council appoints a sole arbitrator (singular tribunal) or president of a collective tribunal. Once constituted (after parties' opportunity to refuse the appointment expires), the tribunal orders the Tax Authority to respond within 30 days. The tribunal may order additional evidence or dispense with oral hearings if parties agree and the matter involves exclusively legal questions, as occurred in this case. The decision timeline is established (here, November 5, 2015), and applicants must pay the subsequent arbitration fee. The tribunal issues a binding arbitral decision on the legality of the tax acts, which can annul unlawful assessments. The procedure emphasizes efficiency, party autonomy, good faith, and limitation of unnecessary procedural acts under Article 16 and 29 of RJAT.