Process: 319/2017-T

Date: March 11, 2019

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 319/2017-T) concerns the application of Stamp Tax (Imposto do Selo) under Item 28.1 of the General Table of Stamp Duty (TGIS) to construction land valued over €1,000,000. The case involved A... S.A. challenging 2014 Stamp Tax assessments on construction plots in Portimão designated for housing purposes. The company argued that the taxation was unconstitutional, claiming the buildings were intended for tourist accommodation rather than residential housing, and that taxing hypothetical or planned buildings violated principles of contributory capacity and created prohibited double taxation. The Tax and Customs Authority (TCA) countered that the construction permits clearly designated the land use as residential, and this tax qualification could not be altered by the owner's intended use for local accommodation. The Director-General of the TCA appealed the initial CAAD decision to the Constitutional Court. In Summary Decision No. 738/2018 (dated 7 November 2018), the Constitutional Court ruled that Item 28.1 of the TGIS is constitutional insofar as it imposes annual taxation on ownership of construction land for housing purposes with a tax patrimonial value equal to or greater than €1,000,000. The Constitutional Court granted the TCA's appeal and ordered the case remitted to CAAD to reform the arbitral decision in accordance with this constitutional ruling. Under Article 2 of the Constitutional Court Law, such decisions are binding on all public and private entities and prevail over other courts and authorities. This reformed decision demonstrates that high-value construction land designated for housing remains subject to annual Stamp Tax under Item 28.1, regardless of the owner's intended commercial use, and confirms taxpayers' right to challenge such assessments through CAAD arbitration while recognizing the Constitutional Court's ultimate authority on constitutionality questions.

Full Decision

ARBITRAL DECISION

The Director-General of the Tax and Customs Authority filed an appeal to the Constitutional Court against the arbitral decision rendered on 7 December 2017, pursuant to Article 70, paragraph 1, letter a) of the Constitutional Court Law.

The Constitutional Court, through Summary Decision No. 738/2018, dated 7 November 2018, rendered in appeal case No. 105/2018, which became final on 22 November 2018, decided "a) Not to declare unconstitutional the provision contained in Item 28.1 of the General Table of Stamp Duty, approved by Law No. 55-A/2012, of 29 October, and amended by Law No. 83-C/2013, of 31 December, insofar as it imposes annual taxation on the ownership of construction land whose building, authorized or planned, is for housing purposes, whose tax patrimonial value is equal to or greater than €1,000,000.00; b) To grant the appeal, determining that the case be remitted to the Arbitral Court of the Administrative Arbitration Center (CAAD), in order for it to reform the decision in accordance with the judgment on the question of unconstitutionality."

In accordance with Article 2 of the Constitutional Court Law "The decisions of the Constitutional Court are binding on all public and private entities and prevail over those of other courts and any other authorities".

Thus, the arbitral decision is reformed as follows.

I – REPORT

  1. On 8 May 2017, the company A..., S.A. with tax identification number ... and registered at Avenue ..., No. ..., ..., ...-... Lisbon, (hereinafter designated as "Claimant") filed a petition for the constitution of a sole arbitral tribunal, pursuant to Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as "LRAT").

  2. The petition for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority (hereinafter designated as "TCA" or the "Respondent") on 19 May 2017.

  3. The Claimant seeks the annulment of the Stamp Duty assessments for the year 2014 made on the basis of Item 28.1 of the General Table of Stamp Duty (hereinafter "GTSD") on construction land registered in the cadastre under Articles ..., ..., ... and ... located in the parish of ..., municipality of Portimão.

  4. In the petition for arbitral decision, the Claimant chose not to designate an arbitrator. Pursuant to letter a) of paragraph 2 of Article 6 and letter b) of paragraph 1 of Article 11 of the LRAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Board of CAAD designated as arbitrator of the sole arbitral tribunal His Excellency Dr. Olívio Mota Amador who, within the applicable time limit, communicated acceptance of the assignment.

  5. The parties were notified on 4 July 2017 of the designation of the arbitrator and did not manifest any intention to challenge the arbitrator's designation, pursuant to the combined provisions of Article 11, paragraph 1, letters a) and b) of the LRAT and Articles 6 and 7 of the Deontological Code.

  6. In accordance with letter c) of paragraph 1 of Article 11 of the LRAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 19 July 2017.

  7. On 3 October 2017, the Respondent, duly notified for that purpose, filed its Response and the respective Administrative File.

  8. On 24 October 2017, the Arbitral Tribunal dispensed with the holding of the meeting provided for in Article 18 of the LRAT, as there was no occasion for the production of evidence in the proceedings, which it did in reliance on the principles of tribunal autonomy in conducting the proceedings, and in order to promote expedience, simplification and informality thereof (see Articles 19, paragraph 2 and 29, paragraph 2 of the LRAT). The Tribunal notified the parties to, within a period of 5 days, declare whether they intended to file written submissions. The Tribunal further set 4 December 2017 as the deadline for rendering the arbitral decision.

  9. Written submissions were filed by the Claimant on 6 November and by the Respondent on 17 November 2017.

  10. The position of the Claimant, in accordance with the petition for constitution of the Arbitral Tribunal and the written submissions, is, in summary, as follows:

10.1. The assessments made on plots A1, A2 and K are based on construction land where there is no licensed or authorized building, nor any license, authorization or administrative decision permitting construction thereon.

10.2. It is unlawful to subject a hypothetical building to Stamp Duty, and not even a residential building was designed or planned by the Claimant, since the sale of dwellings does not constitute its business and the project ... was conceived for tourist purposes.

10.3. Regarding plot ..., the error attributable to the services results from the fact that it does not constitute construction land whose licensed or authorized building is intended for housing purposes, and therefore cannot be subject to Stamp Duty provided for in Item 28.1 of the GTSD.

10.4. Indeed, the Municipal Chamber of Portimão issued a construction license on plot ... for an urban nucleus of townhouses consisting of 44 units and later, in 2013, issued a special license for completion of unfinished works on that land.

10.5. Although the respective permits indicate "housing" as the use, the dwellings on plot ..., when completed, will be intended for tourist accommodation and not to serve as residential accommodation for private individuals.

10.6. In the event that the building to be constructed or under construction on the land is devoted to an activity with economic content, such as local accommodation, and not to the satisfaction of personal needs, such as housing, Stamp Duty taxation under Item 28.1 of the GTSD cannot apply.

10.7. The application of Item 28.1 of the GTSD violates fundamental principles of tax law, such as that of contributory capacity and the democratic rule of law, such as good faith, impartiality and confidence.

10.8. Furthermore, the requirement of Stamp Duty on construction land under Item No. 28.1 of the GTSD arises from a tax fact incapable of revealing a manifestation of contributory capacity, which violates the principle of fiscal legality, constitutes a situation of legal double taxation that is constitutionally prohibited by the principles of contributory capacity, non bis idem and equality, and finally violates the principles of good faith, confidence and impartiality.

  1. The position of the Respondent, expressed in the Response and written submissions, can be summarized as follows:

11.1. The fact that the Claimant states that it intends to designate the dwellings for local accommodation does not detract from the fact that, in accordance with the Construction Permit, the land use is residential.

11.2. Also, the fact that the Claimant may use the dwellings under construction as individual units of "local accommodation" is not capable of altering the qualification, in tax terms, of the property as construction land with residential designation.

11.3. All documents attached to the case demonstrate that the properties in question are construction land with residential designation, pursuant to Article 6, paragraph 3 of the IMI Code, and accordingly fall within the objective scope of Item 28.1 of the GTSD.

11.4. Thus, the determination of the TVM of construction land is based on the determination of the value of the authorized or planned buildings, which requires, pursuant to Article 38 of the IMI Code, that consideration be given to the designation of such buildings.

11.5. In accordance with the documents submitted to the case, the authorized building on the land intended for housing was considered in the valuation made to the land to which a TVM greater than €1,000,000.00 was assigned.

11.6. Thus, it appears clear that the properties in question fall squarely within the definition of construction land for purposes of Item 28.1 of the GTSD.

11.7. The fact that the Claimant may in the future use the dwellings under construction as individual units of "local accommodation" is not capable of altering the qualification, in tax terms, of the property as construction land with residential designation. Accordingly, given the legal framework in force, it is not because the property may accommodate tourists temporarily in exchange for payment that it ceases to be considered "housing" to become a "hotel" or a "tourist resort" or any other unit provided for in Decree-Law No. 39/2008".

11.8. The provision of Item 28.1 of the GTSD must be understood within the express objective of the legislature to impose additional taxation on residential properties of higher value in order to ensure the distribution, beyond the holders of income and pensions, also by the holders of certain real property, of the sacrifices imposed by austerity in a specific economic and financial situation of the country. Given the purpose of Item 28.1 of the GTSD, the nature and structure of the tax, as well as the manifestation of wealth or income that the legislature intended to capture, it does not constitute a violation of the constitutional principle of contributory capacity in all its aspects.

II – ADMISSIBILITY

  1. The arbitral tribunal is materially competent and is regularly constituted, pursuant to Articles 2, paragraph 1, letter a), 5, paragraph 2, and 6, paragraph 1 of the LRAT.

  2. The parties have personality and legal capacity, have standing and are duly represented, pursuant to Articles 4 and 10 of the LRAT and Article 1 of Order No. 112-A/2011 of 22 March.

  3. No exceptions requiring consideration were raised.

  4. The proceedings contain no defects rendering them invalid.

III – FACTS

  1. Established Facts

16.1. Based on the documentary evidence submitted to the case, the following facts are established:

A) The Claimant is the owner of the urban property registered under cadastral article U-... located in the parish of ..., municipality of Portimão, which is construction land, designated lot ..., having a tax patrimonial value (TVM) of €1,336,820.00.

B) The Claimant is the owner of the urban property registered under cadastral article U-... located in the parish of ..., municipality of Portimão, which is construction land, designated lot ..., having a TVM of €1,456,820.00.

C) The Claimant is the owner of the urban property registered under cadastral article U-... located in the parish of ..., municipality of Portimão, which is construction land, designated lot ..., having a TVM of €1,141,380.00.

D) The Claimant is the owner of the urban property registered under cadastral article U-... located in the parish of ..., municipality of Portimão, which is construction land, designated lot ..., having a TVM of €1,048,410.00.

E) The construction land identified above originated from Subdivision Permit No. .../89, dated 10/01/1989, issued by the Municipal Chamber of Portimão to the Claimant, which is found at pages 86 to 91 of the Administrative File attached to these arbitral proceedings. The said Permit established the following:

"The implementation of the subdivision is subject to the following prescriptions:

  1. Authorization is granted for the constitution of seventeen plots of urban construction land, designated A1, A2, B, C, D, E, F, G, H, I, J, K, L, O, P, Q and U, two plots of land for agricultural purposes, designated M1 and M2 and one plot of land for a landscaped area designated R, with the areas, location and building typology indicated in the attached plan, which I initialed and had authenticated with the white seal of this Municipal Chamber." (see page 88 of the Administrative File). (emphasis added)

F) Regarding the property identified in letter A) (article U-...-Plot ...), the following Stamp Duty assessments were issued by the Tax Service of Lisbon-... for the year 2014, which are attached to the petition for constitution of the Arbitral Tribunal, whose contents are reproduced:

  • Assessment No. 2015 ... in the amount of €4,456.08.

  • Assessment No. 2015 ... in the amount of €4,456.06.

  • Assessment No. 2015 ... in the amount of €4,456.06.

G) Regarding the property identified in letter B) (article U-...-Plot ...), the following Stamp Duty assessments were issued by the Tax Service of Lisbon-... for the year 2014, which are attached to the petition for constitution of the Arbitral Tribunal, whose contents are reproduced:

  • Assessment No. 2015 ... in the amount of €4,856.08.

  • Assessment No. 2015 ... in the amount of €4,856.06.

  • Assessment No. 2015 ... in the amount of €4,856.06.

H) Regarding the construction land identified in letter C) (article U-...-Plot ...), the following Stamp Duty assessments were issued by the Tax Service of Lisbon-... for the year 2014, which are attached to the petition for constitution of the Arbitral Tribunal, whose contents are reproduced:

  • Assessment No. 2015 ... in the amount of €3,804.60.

  • Assessment No. 2015 ... in the amount of €3,804.60.

  • Assessment No. 2015 ... in the amount of €3,804.60.

I) The construction land identified in letter C) (article U...-Plot ...) obtained the following Permits issued by the Municipal Chamber of Portimão, as shown in the documents attached to the petition for constitution of the Arbitral Tribunal and in the Administrative File: (i) Building Works Permit No. .../08, case No. .../87, authorizes construction area of 5336 m2, volumetry 15994 m3, number of floors 2, and use "Housing (construction of an urban nucleus of townhouses totaling 44 units)"; (ii) Building Works Permit No. .../13, case No. 118/07, the works were approved with the following characteristics: "use - Housing (Special License For Completion of Unfinished Works)"; "Floors: housing"; "number of units 44".

J) Regarding the property identified in letter D) (article U-...-Plot ...), the following Stamp Duty assessments were issued by the Tax Service of Lisbon-... for the year 2014, which are attached to the petition for constitution of the Arbitral Tribunal, whose contents are reproduced:

  • Assessment No. 2015 ... in the amount of €3,494.70.

  • Assessment No. 2015 ... in the amount of €3,494.70.

  • Assessment No. 2015 ... in the amount of €3,494.70.

K) The construction land identified in letter C) (article U-...-Plot ...) forms part of the project for tourist purposes designated ... and the Multidisciplinary Team for Local Accommodation of Turismo de Portugal, I.P., through an email message dated 16 July 2015, stated that "(…) nothing appears to prevent the accommodation units (dwellings) planned in the real estate project ... from being registered and operated as local accommodation establishments.", as shown in the document attached to the petition for constitution of the Arbitral Tribunal.

L) Regarding the assessments identified in letters F), G), H) and J), the Claimant filed on 7 March 2016 a petition for official review, pursuant to Article 78 of the General Tax Law, which proceeded under case No. ...2016... .

M) The petition for official review identified in the preceding letter was dismissed by order of the Director of Services for Municipal Tax on Onerous Transfers of Real Property, Stamp Duty, Single Circulation Tax and Special Contributions, dated 27 January 2017, set out in Memorandum ..., of 25 January 2017.

16.2. The facts stated in the preceding paragraph constitute undisputed matters and are documented in the case.

  1. Unproven Facts

There are no facts relevant to the decision that have not been established.

IV – LAW

  1. The issue to be decided in the present proceedings is whether the Stamp Duty assessments were based on an erroneous interpretation and application of Item 28.1 of the GTSD.

  2. The legal framework for this issue is as follows:

19.1. Item 28 added to the GTSD by Law No. 55-A/2012, of 29 October had the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the cadastre, pursuant to the Municipal Tax Code on Real Property (IMI Code), is equal to or greater than €1,000,000 – on the tax patrimonial value used for purposes of IMI:

28.1 – For property with residential designation – 1%;

28.2 – For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the table approved by order of the Minister of Finance – 7.5%"

19.2. Article 194 of Law No. 83-C/2013, of 31 December, gave new wording to Item 28.1 of the GTSD which now reads: "28.1 – For residential property or for construction land whose building, authorized or planned, is for housing purposes, pursuant to the IMI Code– 1%;" (emphasis added)

19.3. In accordance with Article 67, paragraph 2 of the Stamp Duty Code, added by Law No. 55-A/2012, of 29 October, "Matters not regulated in this Code relating to Item No. 28 of the General Table are governed, subsidiarily, by the provisions of the IMI Code."

19.4. Pursuant to Article 6, paragraph 1 of the IMI Code, urban properties are divided into residential, commercial, industrial or service properties, construction land and others.

19.5. The IMI Code, in Article 6, paragraph 3, defines construction land as "(…) land located within or outside an urban area, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation, and also those so declared in the title of acquisition, with the exception of land where the competent entities prohibit any of these operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are dedicated to public spaces, infrastructure or facilities." (emphasis added).

  1. The wording of Item 28.1 of the GTSD resulting from Law No. 83-C/2013, of 31 December, is ratione temporis applicable to the situation under consideration.

  2. The new wording given to Item 28.1 of the GTSD by Article 194 of Law No. 83-C/2013, of 31 December, enlarged the scope of objective application of the provision by expressly including construction land, provided it has authorized or planned construction for housing purposes.

  3. Demonstrating that a property has authorized or planned construction for housing purposes goes far beyond mere cadastral registration. Consequently, the mere cadastral registration of an immovable as "construction land" does not by itself legitimize the application of Item 28.1 of the GTSD.

  4. On the meaning of Item 28.1 of the GTSD, in the wording given by Article 194 of Law No. 83-C/2013, we agree with the position adopted in the Judgment of CAAD of 19 April 2016, rendered in case No. 578/2015-T, from which we quote (p. 16):

"(…) the application of Stamp Duty to construction land cannot be materialized by mere registration thereof in the cadastre, but rather, decisively, by verification of the actual building potential on the said land (which must be determined case by case and revealed through the existence of the documents described above). In other words, the application of the tax, for purposes of Item 28.1, is materialized only with the verification of "actual designation," to use the apt expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507). Without that demonstration of actual building potential (…) the purposes underlying the new wording of Item 28.1 of the GTSD are not fulfilled"

  1. The application of Item No. 28.1 of the GTSD to construction land depends on verification of three cumulative requirements, namely: i) Ownership, usufruct or right of superficies of urban properties; ii) The TVM of the urban property being equal to or greater than €1,000,000.00; iii) Construction land whose building, authorized or planned, is for housing purposes.

  2. From the facts established in these arbitral proceedings, it appears that the first two requirements referred to in the preceding paragraph are met. Indeed, the Claimant is the owner of four construction land plots, all of which have TVM exceeding €1,000,000.00 (see letters A), B), C), D) of paragraph 16.1).

  3. The third requirement, referred to in paragraph 24, is that the authorized or planned building be intended for housing purposes. The inclusion of construction land in Item 28.1 of the GTSD presupposes that there exists a provision or expectation of construction for housing purposes that is materialized through compliance with legal and administrative requirements necessary for such construction. In this regard, ANTÓNIO SANTOS ROCHA and EDUARDO JOSÉ MARTINS BRÁS (in Taxation of Patrimony. IMI-IMT and Stamp Duty (Annotated and Commented), Almedina, 2015, pp. 44) state:

"With regard to construction land, whether or not located within an urban area, as defined in Art. 3/4 of this statute (IMI Code), land should be considered as such with regard to which:

• a license for a subdivision operation has been granted,

• a license for construction has been granted,

• authorization for a subdivision operation has been granted,

• authorization for construction has been granted,

• favorable prior notification admitted for a subdivision or construction operation,

• favorable prior information issued for a subdivision or construction operation, as well as

• those so declared in the title of acquisition, it being noted that, also for this purpose, only the title of acquisition with the form prescribed by civil law, namely the public deed or the authenticated private document referred to in Article 875 of the Civil Code, should be relevant."

The legal and administrative requirements set out above constitute requirements necessary for the inclusion of construction land in Item 28.1 of the GTSD.

In accordance with the facts established in these arbitral proceedings, it appears that the four construction land plots originated from Subdivision Permit No. .../89, dated 10/01/1989, issued by the Municipal Chamber of Portimão. The said Permit is very clear in its terms in granting authorization for construction intended for housing purposes in plots A1, A2, B and K (see letter E) of paragraph 16.1).

  1. With respect to lot B, authorization for construction for housing purposes is reiterated through Building Works Permit No. .../08 and Building Works Permit No. .../13 (see letter I) of paragraph 16.1).

  2. The designation for housing purposes conferred by the Subdivision Permit identified above and reiterated, with respect to Lot B, by two Building Permits is not called into question by the Claimant's allegation that the dwellings on the said Lot are intended for local accommodation.

It should be noted that in the document presented by the Claimant, Turismo de Portugal expresses, with caution, the possibility of the project (the 44 dwellings on lot B) being able to be registered and operated as a local accommodation establishment. This communication from Turismo de Portugal, through an email message, is dated 16 July 2015.

However, the tax event that gave rise to the assessments now challenged occurred on 31 December 2014.

The possible future use of the dwellings under construction as individual local accommodation units does not determine a change in the qualification, in tax terms, of the property as construction land with residential designation.

  1. In light of the foregoing, the construction land identified above falls within Item 28.1 of the GTSD.

  2. It remains to analyze the Claimant's allegations regarding the unconstitutionality of Item 28.1 of the GTSD.

  3. The decision rendered by this Arbitral Tribunal on 07-12-2017, regarding the merits of the case, found that the provision contained in Item 28.1 of the GTSD was materially unconstitutional and its application "(…) constitutes error regarding the presuppositions of law, which justifies its annulment, pursuant to Article 163, paragraph 1 of the Administrative Procedure Code. Consequently, the assessments that are the subject of this arbitral proceeding are vitiated by a violation of law." (see paragraph 33 of the arbitral decision of 07-12-2017).

  4. Summary Decision No. 783/2018 of the Constitutional Court, which referred to the grounds of Judgment No. 378/2018 of the Plenary of the Constitutional Court, did not declare unconstitutional the provision contained in Item 28.1 of the GTSD approved by Law No. 55-A/2012, of 29 October, and amended by Law No. 83-C/2013, of 31 December, insofar as it imposes annual taxation on the ownership of construction land whose building, authorized or planned, is for housing purposes, whose tax patrimonial value is equal to or greater than €1,000,000.00.

  5. Thus, given that the decision by the Constitutional Court has binding force in the proceedings, it must be concluded that the challenged assessments, which applied Item 28.1 of the GTSD, are not vitiated by the defects imputed to them by the Claimant.

V – DECISION

Accordingly, this Tribunal finds the petition for arbitral decision for annulment of the Stamp Duty assessment acts for the year 2014, identified above, of which the Claimant is the taxpayer, to be without merit.

VI – VALUE OF THE CASE

In accordance with Article 306, paragraph 2 of the Civil Procedure Code and Article 97-A, paragraph 1, letter a) of the Tax Procedure Code, applicable by virtue of Article 29, paragraph 1, letters a) and e) of the LRAT and Article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at €49,834.30 (forty-nine thousand eight hundred thirty-four euros and thirty cents).

VII – COSTS

In accordance with Articles 22, paragraph 4 and 12, paragraph 2 of the LRAT and Articles 2, 3, paragraph 1 and 4 of the Regulation of Costs in Tax Arbitration Proceedings, as well as in Table I attached to this statute, the total costs are set at €2,142.00 (two thousand one hundred forty-two euros), to be borne by the Claimant.

Notify.

Lisbon, Administrative Arbitration Center, 11 March 2019

The Arbitrator

Olívio Mota Amador

ARBITRAL DECISION

I – REPORT

  1. On 8 May 2017, the company A..., S.A. with tax identification number ... and registered at Avenue ..., No. ..., ..., ...-... Lisbon, (hereinafter designated as "Claimant") filed a petition for the constitution of a sole arbitral tribunal, pursuant to Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as "LRAT").

  2. The petition for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority (hereinafter designated as "TCA" or the "Respondent") on 19 May 2017.

  3. The Claimant seeks the annulment of the Stamp Duty assessments for the year 2014 made on the basis of Item 28.1 of the General Table of Stamp Duty (hereinafter "GTSD") on construction land registered in the cadastre under Articles ..., ..., ... and ... located in the parish of ..., municipality of Portimão.

  4. In the petition for arbitral decision, the Claimant chose not to designate an arbitrator. Pursuant to letter a) of paragraph 2 of Article 6 and letter b) of paragraph 1 of Article 11 of the LRAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Board of CAAD designated as arbitrator of the sole arbitral tribunal His Excellency Dr. Olívio Mota Amador who, within the applicable time limit, communicated acceptance of the assignment.

  5. The parties were notified on 4 July 2017 of the designation of the arbitrator and did not manifest any intention to challenge the arbitrator's designation, pursuant to the combined provisions of Article 11, paragraph 1, letters a) and b) of the LRAT and Articles 6 and 7 of the Deontological Code.

  6. In accordance with letter c) of paragraph 1 of Article 11 of the LRAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 19 July 2017.

  7. On 3 October 2017, the Respondent, duly notified for that purpose, filed its Response and the respective Administrative File.

  8. On 24 October 2017, the Arbitral Tribunal dispensed with the holding of the meeting provided for in Article 18 of the LRAT, as there was no occasion for the production of evidence in the proceedings, which it did in reliance on the principles of tribunal autonomy in conducting the proceedings, and in order to promote expedience, simplification and informality thereof (see Articles 19, paragraph 2 and 29, paragraph 2 of the LRAT). The Tribunal notified the parties to, within a period of 5 days, declare whether they intended to file written submissions. The Tribunal further set 4 December 2017 as the deadline for rendering the arbitral decision.

  9. Written submissions were filed by the Claimant on 6 November and by the Respondent on 17 November 2017.

  10. The position of the Claimant, in accordance with the petition for constitution of the Arbitral Tribunal and the written submissions, is, in summary, as follows:

10.1. The assessments made on plots ..., ... and ... are based on construction land where there is no licensed or authorized building, nor any license, authorization or administrative decision permitting construction thereon.

10.2. It is unlawful to subject a hypothetical building to Stamp Duty, and not even a residential building was designed or planned by the Claimant, since the sale of dwellings does not constitute its business and the project ... was conceived for tourist purposes.

10.3. Regarding plot ..., the error attributable to the services results from the fact that it does not constitute construction land whose licensed or authorized building is intended for housing purposes, and therefore cannot be subject to Stamp Duty provided for in Item 28.1 of the GTSD.

10.4. Indeed, the Municipal Chamber of Portimão issued a construction license on plot ... for an urban nucleus of townhouses consisting of 44 units and later, in 2013, issued a special license for completion of unfinished works on that land.

10.5. Although the respective permits indicate "housing" as the use, the dwellings on plot ..., when completed, will be intended for tourist accommodation and not to serve as residential accommodation for private individuals.

10.6. In the event that the building to be constructed or under construction on the land is devoted to an activity with economic content, such as local accommodation, and not to the satisfaction of personal needs, such as housing, Stamp Duty taxation under Item 28.1 of the GTSD cannot apply.

10.7. The application of Item 28.1 of the GTSD violates fundamental principles of tax law, such as that of contributory capacity and the democratic rule of law, such as good faith, impartiality and confidence.

10.8. Furthermore, the requirement of Stamp Duty on construction land under Item No. 28.1 of the GTSD arises from a tax fact incapable of revealing a manifestation of contributory capacity, which violates the principle of fiscal legality, constitutes a situation of legal double taxation that is constitutionally prohibited by the principles of contributory capacity, non bis idem and equality, and finally violates the principles of good faith, confidence and impartiality.

  1. The position of the Respondent, expressed in the Response and written submissions, can be summarized as follows:

11.1. The fact that the Claimant states that it intends to designate the dwellings for local accommodation does not detract from the fact that, in accordance with the Construction Permit, the land use is residential.

11.2. Also, the fact that the Claimant may use the dwellings under construction as individual units of "local accommodation" is not capable of altering the qualification, in tax terms, of the property as construction land with residential designation.

11.3. All documents attached to the case demonstrate that the properties in question are construction land with residential designation, pursuant to Article 6, paragraph 3 of the IMI Code, and accordingly fall within the objective scope of Item 28.1 of the GTSD.

11.4. Thus, the determination of the TVM of construction land is based on the determination of the value of the authorized or planned buildings, which requires, pursuant to Article 38 of the IMI Code, that consideration be given to the designation of such buildings.

11.5. In accordance with the documents submitted to the case, the authorized building on the land intended for housing was considered in the valuation made to the land to which a TVM greater than €1,000,000.00 was assigned.

11.6. Thus, it appears clear that the properties in question fall squarely within the definition of construction land for purposes of Item 28.1 of the GTSD.

11.7. The fact that the Claimant may in the future use the dwellings under construction as individual units of "local accommodation" is not capable of altering the qualification, in tax terms, of the property as construction land with residential designation. Accordingly, given the legal framework in force, it is not because the property may accommodate tourists temporarily in exchange for payment that it ceases to be considered "housing" to become a "hotel" or a "tourist resort" or any other unit provided for in Decree-Law No. 39/2008".

11.8. The provision of Item 28.1 of the GTSD must be understood within the express objective of the legislature to impose additional taxation on residential properties of higher value in order to ensure the distribution, beyond the holders of income and pensions, also by the holders of certain real property, of the sacrifices imposed by austerity in a specific economic and financial situation of the country. Given the purpose of Item 28.1 of the GTSD, the nature and structure of the tax, as well as the manifestation of wealth or income that the legislature intended to capture, it does not constitute a violation of the constitutional principle of contributory capacity in all its aspects.

II – ADMISSIBILITY

  1. The arbitral tribunal is materially competent and is regularly constituted, pursuant to Articles 2, paragraph 1, letter a), 5, paragraph 2, and 6, paragraph 1 of the LRAT.

  2. The parties have personality and legal capacity, have standing and are duly represented, pursuant to Articles 4 and 10 of the LRAT and Article 1 of Order No. 112-A/2011 of 22 March.

  3. No exceptions requiring consideration were raised.

  4. The proceedings contain no defects rendering them invalid.

III – FACTS

  1. Established Facts

16.1. Based on the documentary evidence submitted to the case, the following facts are established:

A) The Claimant is the owner of the urban property registered under cadastral article U-... located in the parish of ..., municipality of Portimão, which is construction land, designated lot ..., having a tax patrimonial value (TVM) of €1,336,820.00.

B) The Claimant is the owner of the urban property registered under cadastral article U-... located in the parish of ..., municipality of Portimão, which is construction land, designated lot ..., having a TVM of €1,456,820.00.

C) The Claimant is the owner of the urban property registered under cadastral article U-... located in the parish of ..., municipality of Portimão, which is construction land, designated lot ..., having a TVM of €1,141,380.00.

D) The Claimant is the owner of the urban property registered under cadastral article U-... located in the parish of ..., municipality of Portimão, which is construction land, designated lot ..., having a TVM of €1,048,410.00.

E) The construction land identified above originated from Subdivision Permit No. .../89, dated 10/01/1989, issued by the Municipal Chamber of Portimão to the Claimant, which is found at pages 86 to 91 of the Administrative File attached to these arbitral proceedings. The said Permit established the following:

"The implementation of the subdivision is subject to the following prescriptions:

  1. Authorization is granted for the constitution of seventeen plots of urban construction land, designated ..., ..., B, C, D, E, F, G, H, I, J, K, L, O, P, Q and U, two plots of land for agricultural purposes, designated M1 and M2 and one plot of land for a landscaped area designated R, with the areas, location and building typology indicated in the attached plan, which I initialed and had authenticated with the white seal of this Municipal Chamber." (see page 88 of the Administrative File). (emphasis added)

F) Regarding the property identified in letter A) (article U-...-Plot ...), the following Stamp Duty assessments were issued by the Tax Service of Lisbon-... for the year 2014, which are attached to the petition for constitution of the Arbitral Tribunal, whose contents are reproduced:

  • Assessment No. 2015 ... in the amount of €4,456.08.

  • Assessment No. 2015 ... in the amount of €4,456.06.

  • Assessment No. 2015 ... in the amount of €4,456.06.

G) Regarding the property identified in letter B) (article U-...-Plot ...), the following Stamp Duty assessments were issued by the Tax Service of Lisbon-... for the year 2014, which are attached to the petition for constitution of the Arbitral Tribunal, whose contents are reproduced:

  • Assessment No. 2015 ... in the amount of €4,856.08.

  • Assessment No. 2015 ... in the amount of €4,856.06.

  • Assessment No. 2015 ... in the amount of €4,856.06.

H) Regarding the construction land identified in letter C) (article U-...-Plot ...), the following Stamp Duty assessments were issued by the Tax Service of Lisbon-... for the year 2014, which are attached to the petition for constitution of the Arbitral Tribunal, whose contents are reproduced:

  • Assessment No. 2015 ... in the amount of €3,804.60.

  • Assessment No. 2015 ... in the amount of €3,804.60.

  • Assessment No. 2015 ... in the amount of €3,804.60.

I) The construction land identified in letter C) (article U-...-Plot ...) obtained the following Permits issued by the Municipal Chamber of Portimão, as shown in the documents attached to the petition for constitution of the Arbitral Tribunal and in the Administrative File: (i) Building Works Permit No. .../08, case No. .../87, authorizes construction area of 5336 m2, volumetry 15994 m3, number of floors 2, and use "Housing (construction of an urban nucleus of townhouses totaling 44 units)"; (ii) Building Works Permit No. .../13, case No. .../07, the works were approved with the following characteristics: "use - Housing (Special License For Completion of Unfinished Works)"; "Floors: housing"; "number of units 44".

J) Regarding the property identified in letter D) (article U-...-Plot ...), the following Stamp Duty assessments were issued by the Tax Service of Lisbon-... for the year 2014, which are attached to the petition for constitution of the Arbitral Tribunal, whose contents are reproduced:

  • Assessment No. 2015 ... in the amount of €3,494.70.

  • Assessment No. 2015 ... in the amount of €3,494.70.

  • Assessment No. 2015 ... in the amount of €3,494.70.

K) The construction land identified in letter C) (article U-...-Plot ...) forms part of the project for tourist purposes designated ... and the Multidisciplinary Team for Local Accommodation of Turismo de Portugal, I.P., through an email message dated 16 July 2015, stated that "(…) nothing appears to prevent the accommodation units (dwellings) planned in the real estate project ... from being registered and operated as local accommodation establishments.", as shown in the document attached to the petition for constitution of the Arbitral Tribunal.

L) Regarding the assessments identified in letters F), G), H) and J), the Claimant filed on 7 March 2016 a petition for official review, pursuant to Article 78 of the General Tax Law, which proceeded under case No. ...2016... .

M) The petition for official review identified in the preceding letter was dismissed by order of the Director of Services for Municipal Tax on Onerous Transfers of Real Property, Stamp Duty, Single Circulation Tax and Special Contributions, dated 27 January 2017, set out in Memorandum ..., of 25 January 2017.

16.2. The facts stated in the preceding paragraph constitute undisputed matters and are documented in the case.

  1. Unproven Facts

There are no facts relevant to the decision that have not been established.

IV – LAW

  1. The issue to be decided in the present proceedings is whether the Stamp Duty assessments were based on an erroneous interpretation and application of Item 28.1 of the GTSD.

  2. The legal framework for this issue is as follows:

19.1. Item 28 added to the GTSD by Law No. 55-A/2012, of 29 October had the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the cadastre, pursuant to the Municipal Tax Code on Real Property (IMI Code), is equal to or greater than €1,000,000 – on the tax patrimonial value used for purposes of IMI:

28.1 – For property with residential designation – 1%;

28.2 – For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the table approved by order of the Minister of Finance – 7.5%"

19.2. Article 194 of Law No. 83-C/2013, of 31 December, gave new wording to Item 28.1 of the GTSD which now reads: "28.1 – For residential property or for construction land whose building, authorized or planned, is for housing purposes, pursuant to the IMI Code– 1%;" (emphasis added)

19.3. In accordance with Article 67, paragraph 2 of the Stamp Duty Code, added by Law No. 55-A/2012, of 29 October, "Matters not regulated in this Code relating to Item No. 28 of the General Table are governed, subsidiarily, by the provisions of the IMI Code."

19.4. Pursuant to Article 6, paragraph 1 of the IMI Code, urban properties are divided into residential, commercial, industrial or service properties, construction land and others.

19.5. The IMI Code, in Article 6, paragraph 3, defines construction land as "(…) land located within or outside an urban area, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation, and also those so declared in the title of acquisition, with the exception of land where the competent entities prohibit any of these operations, namely those located in green areas, protected areas or which, in accordance with municipal land use plans, are dedicated to public spaces, infrastructure or facilities." (emphasis added).

  1. The wording of Item 28.1 of the GTSD resulting from Law No. 83-C/2013, of 31 December, is ratione temporis applicable to the situation under consideration.

  2. The new wording given to Item 28.1 of the GTSD by Article 194 of Law No. 83-C/2013, of 31 December, enlarged the scope of objective application of the provision by expressly including construction land, provided it has authorized or planned construction for housing purposes.

  3. Demonstrating that a property has authorized or planned construction for housing purposes goes far beyond mere cadastral registration. Consequently, the mere cadastral registration of an immovable as "construction land" does not by itself legitimize the application of Item 28.1 of the GTSD.

  4. On the meaning of Item 28.1 of the GTSD, in the wording given by Article 194 of Law No. 83-C/2013, we agree with the position adopted in the Judgment of CAAD of 19 April 2016, rendered in case No. 578/2015-T, from which we quote (p. 16):

"(…) the application of Stamp Duty to construction land cannot be materialized by mere registration thereof in the cadastre, but rather, decisively, by verification of the actual building potential on the said land (which must be determined case by case and revealed through the existence of the documents described above). In other words, the application of the tax, for purposes of Item 28.1, is materialized only with the verification of "actual designation," to use the apt expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507). Without that demonstration of actual building potential (…) the purposes underlying the new wording of Item 28.1 of the GTSD are not fulfilled"

  1. The application of Item No. 28.1 of the GTSD to construction land depends on verification of three cumulative requirements, namely: i) Ownership, usufruct or right of superficies of urban properties; ii) The TVM of the urban property being equal to or greater than €1,000,000.00; iii) Construction land whose building, authorized or planned, is for housing purposes.

  2. From the facts established in these arbitral proceedings, it appears that the first two requirements referred to in the preceding paragraph are met. Indeed, the Claimant is the owner of four construction land plots, all of which have TVM exceeding €1,000,000.00 (see letters A), B), C), D) of paragraph 16.1).

  3. The third requirement, referred to in paragraph 24, is that the authorized or planned building be intended for housing purposes. The inclusion of construction land in Item 28.1 of the GTSD presupposes that there exists a provision or expectation of construction for housing purposes that is materialized through compliance with legal and administrative requirements necessary for such construction. In this regard, ANTÓNIO SANTOS ROCHA and EDUARDO JOSÉ MARTINS BRÁS (in Taxation of Patrimony. IMI-IMT and Stamp Duty (Annotated and Commented), Almedina, 2015, pp. 44) state:

"With regard to construction land, whether or not located within an urban area, as defined in Art. 3/4 of this statute (IMI Code), land should be considered as such with regard to which:

• a license for a subdivision operation has been granted,

• a license for construction has been granted,

• authorization for a subdivision operation has been granted,

• authorization for construction has been granted,

• favorable prior notification admitted for a subdivision or construction operation,

• favorable prior information issued for a subdivision or construction operation, as well as

• those so declared in the title of acquisition, it being noted that, also for this purpose, only the title of acquisition with the form prescribed by civil law, namely the public deed or the authenticated private document referred to in Article 875 of the Civil Code, should be relevant."

The legal and administrative requirements set out above constitute requirements necessary for the inclusion of construction land in Item 28.1 of the GTSD.

In accordance with the facts established in these arbitral proceedings, it appears that the four construction land plots originated from Subdivision Permit No. .../89, dated 10/01/1989, issued by the Municipal Chamber of Portimão. The said Permit is very clear in its terms in granting authorization for construction intended for housing purposes in plots ..., ..., ... and ... (see letter E) of paragraph 16.1).

  1. With respect to lot B, authorization for construction for housing purposes is reiterated through Building Works Permit No. .../08 and Building Works Permit No. .../13 (see letter I) of paragraph 16.1).

  2. The designation for housing purposes conferred by the Subdivision Permit identified above and reiterated, with respect to Lot ..., by two Building Permits is not called into question by the Claimant's allegation that the dwellings on the said Lot are intended for local accommodation.

It should be noted that in the document presented by the Claimant, Turismo de Portugal expresses, with caution, the possibility of the project (the 44 dwellings on lot ...) being able to be registered and operated as a local accommodation establishment. This communication from Turismo de Portugal, through an email message, is dated 16 July 2015.

However, the tax event that gave rise to the assessments now challenged occurred on 31 December 2014.

The possible future use of the dwellings under construction as individual local accommodation units does not determine a change in the qualification, in tax terms, of the property as construction land with residential designation.

  1. In light of the foregoing, the construction land identified above falls within Item 28.1 of the GTSD.

  2. It remains to analyze the Claimant's allegations regarding the unconstitutionality of Item 28.1 of the GTSD. The Claimant begins by arguing that the tax obligation underlying Item 28.1 of the GTSD when applied to construction land arises from a tax fact incapable of revealing a manifestation of contributory capacity which violates the principle of fiscal legality.

  3. The Constitutional Court addressed this issue through Judgment No. 250/2017, to whose full text we hereby refer (see www.tribunalconstitucional.pt/tc/acordaos), and made the following statement:

"There is, indeed, an original sin in Item 28.1 of the GTSD as it was originally conceived by Law No. 55-A/2012, of 29 October, and which, as we shall see below, Law No. 83-C/2013 exacerbated with the addition of construction land to the said normative provision. For in failing to expand the tax base, at least to the totality of each taxpayer's real property, without personalizing the tax sufficiently, that item did not prove adequate to pursue "the principle of social equity in austerity, guaranteeing an effective apportionment of the sacrifices necessary to comply with the adjustment program," as the legislature proposed in the explanatory memorandum of Legislative Proposal No. 96/XII/2ª, which was the basis for the said Law No. 55-A/2012.

  1. As we said before, the amendment to the text made by Law No. 83-C/2013, which added construction land to Item 28.1 of the GTSD, introduced a distorting factor in the regime for taxation of real property that represents not only a distortion in the internal coherence of the whole fiscal system, or even of Stamp Duty considered in isolation, but a distortion in the internal coherence of the tax provision itself contained in the said item.

In fact, by bringing together in the same item the taxation of luxury homes and construction land, under the assumption that both fall generically into the category of real property of high tax patrimonial value, the provision whose validity is questioned confused manifestations of wealth with factors of production of that same wealth.

Tax doctrine has emphasized that, as a criterion of tax equality, the principle of contributory capacity "requires, above all, the personalization of the tax, so that when any manifestation of wealth is taxed, one asks about the person behind it and the conditions in which he finds himself" (see Sérgio Vasques, Contributory Capacity, Income and Patrimony, in Taxation – Journal of Tax Law and Management, No. 23, Coimbra Editora, Coimbra, 2005, p. 19).

Now, while behind the tax imposed on the owner of a home valued at more than one million euros there may be a taxpayer with sufficient economic capacity to bear the respective tax burden, behind the tax imposed on the owner of construction land there will normally be an entrepreneur, usually in the form of a commercial company engaged in real estate development, about whose economic capacity we know nothing. Indeed, we cannot presume that such a taxpayer has economic capacity proportional to the value of the land, which is merely instrumental in relation to his economic activity. We are unaware of what profit margin he will derive from its exercise, if he is in legal and economic conditions to develop it, or whether he may not even have a negative net position.

This leads to a second perversion of the principle of contributory capacity, which requires that the net income of the taxpayer be taxed, after deduction of expenses necessary for its own obtaining.

It may be said that this requirement applies only to income taxation and not to property taxation, but this argument only evidences the different reality of construction land taxation, which impacts more on the economic activity carried out by its owner than on the value of the asset in itself. With the aggravating circumstance that the respective tax burden, if it does not definitively prevent that activity, will ultimately be borne by the end consumer of the real estate products resulting from it, of whose contributory capacity nothing can be presumed without knowing the respective building typology and value.

  1. On another line of reasoning, the amendment made by Law No. 83-C/2013 to Item No. 28.1 of the GTSD also departs from the purpose of law of its original formulation, to the extent that it extends the normative provision to distinct realities, both in the physical and legal sense, which therefore correspond to equally distinct tax facts.

For tax purposes, residential properties are clearly distinguished from construction land, pursuant to Article 6 of the Municipal Tax Code on Real Property (IMI Code), the former of these categories consisting of buildings or constructions already in existence and intended for housing, while the latter comprises exclusively land for which the right to construct buildings intended for that or other purposes has been consolidated by a prior control administrative act of an urban operation.

Thus, while residential buildings correspond to real buildability, definitively incorporated into the legal sphere of their owner, construction land corresponds to merely potential buildability, legally consolidated in the legal sphere of the property owner, but not yet materialized.

That is, taxation of residential properties is based on existing reality, on tangible things, unlike taxation of construction land, which is based on building rights, on future things, as is also shown by Article 45 of the IMI Code, when it establishes that the tax patrimonial value of the latter is determined exclusively by the volume and quality of the building to be constructed on the land, and not by its current characteristics.

It may be said, correctly, that both correspond to real property devoted to a residential purpose. And that, by their property value, both are capable of expressing a certain form of wealth. But the comparisons end there, because, precisely, the different nature of these assets does not permit equating the contributory capacity of their respective owners, present or future, solely on the basis of their use and their tax patrimonial value (TVM).

If construction land is worth essentially for the content of its future urban development potential, it is not possible to integrate it into the normative provision of a tax aimed at taxing luxury homes, without considering either the building typology or the legal structure of the buildings that will be constructed on it. Taxing them based on what those lands will become after construction is materialized, as occurs with IMI, and not based on what they are before that activity is developed.

Construction land with a tax patrimonial value exceeding one million euros, but intended for construction of a collective housing building that will consist of autonomous fractions of small or medium size, all of them valued at much less than one million euros, is not comparable, nor does it express economic capacity equivalent to that of construction land intended for construction of one or more luxury homes. And even less does it compare to an already constructed luxury home, whatever its typology.

Because Item 28.1, moreover, disregards the legal nature of taxpayers, not distinguishing between individuals and legal entities, nor the specific purpose pursued by the latter, it will apply indiscriminately, for example, to a luxury home in a tourist development in the Algarve and to construction land for a collective housing building in a cooperative regime in the metropolitan suburbs of Lisbon or Porto.

  1. From what has been said, it is evident that, if the addition of construction land made by Law No. 83-C/2013 to Item No. 28.1 of the GTSD is not arbitrary, it is, in any case, violative of the principle of tax equality enshrined in Articles 13 and 104, paragraph 3 of the Portuguese Constitution, both because it does not respect the different contributory capacity of the owners of properties on which it is levied, hitting indiscriminately taxpayers with and without the contributory capacity necessary to bear the tax, and because the differentiations it introduces between those included in and excluded from its scope of application are not proportional, being inadequate to fulfill the purpose sought by the provision, which is to tax severely real property wealth of greater value in terms that satisfy "the principle of social equity in austerity".

  2. We agree with the position adopted by the Constitutional Court in Judgment No. 250/2017, cited above, and, given the foregoing, we conclude that Item 28.1 of the GTSD, in the wording given by Law No. 83-C/2013, of 31 December, is materially unconstitutional, to the extent that it violates the principle of tax equality enshrined in Articles 13 and 104, paragraph 3 of the Portuguese Constitution, by not respecting the different contributory capacity of the owners of properties on which it is levied and by introducing non-proportional differentiations in its scope of application.

  3. The application of a materially unconstitutional provision constitutes error regarding the presuppositions of law, which justifies its annulment, pursuant to Article 163, paragraph 1 of the Administrative Procedure Code. Consequently, the assessments that are the subject of this arbitral proceeding are vitiated by a violation of law.

  4. In accordance with Article 124 of the Tax Procedure Code, applied subsidiarily by virtue of Article 29, paragraph 1 of the LRAT, the order of consideration of defects presupposes that once a defect is found to have merit, assuring effective protection of the rights of the challengers, there is no need to consider the others. In these terms, as a consequence of the declaration of illegality of the assessments that are the subject of this arbitral proceeding, consideration of the remaining defects argued by the Claimant becomes moot.

Accordingly, no consideration is given to the remaining defects imputed by the Claimant to the acts for whose declaration of illegality it requested.

V – DECISION

Accordingly, this Tribunal finds the petition for arbitral decision to be well-founded and hereby orders the annulment, with all legal effects, of the Stamp Duty assessment acts for the year 2014, identified above, of which the Claimant is the taxpayer.

Communicate to the Prosecutor General of the Republic for purposes of Article 280, paragraph 5 of the Portuguese Constitution.

VI – VALUE OF THE CASE

In accordance with Article 306, paragraph 2 of the Civil Procedure Code and Article 97-A, paragraph 1, letter a) of the Tax Procedure Code, applicable by virtue of Article 29, paragraph 1, letters a) and e) of the LRAT and Article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at €49,834.30 (forty-nine thousand eight hundred thirty-four euros and thirty cents).

VII – COSTS

In accordance with Articles 22, paragraph 4 and 12, paragraph 2 of the LRAT and Articles 2, 3, paragraph 1 and 4 of the Regulation of Costs in Tax Arbitration Proceedings, as well as in Table I attached to this statute, the total costs are set at €2,142.00 (two thousand one hundred forty-two euros), to be borne by the Respondent.

Notify.

Lisbon, Administrative Arbitration Center, 7 December 2017

The Arbitrator

Olívio Mota Amador

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) applicable to building land (terrenos para construção) valued over €1,000,000 under Verba 28.1 of the TGIS?
Yes, Stamp Tax under Verba 28.1 of the TGIS is applicable to construction land (terrenos para construção) intended for housing purposes with a tax patrimonial value equal to or greater than €1,000,000. The Portuguese Constitutional Court explicitly confirmed the constitutionality of this annual taxation in Summary Decision No. 738/2018, rejecting arguments that such taxation violates principles of contributory capacity or constitutes prohibited double taxation.
Did the Portuguese Constitutional Court rule Verba 28.1 of the Stamp Tax Table unconstitutional for building land intended for housing?
No, the Portuguese Constitutional Court did not rule Verba 28.1 unconstitutional. In Summary Decision No. 738/2018, the Constitutional Court specifically decided 'Not to declare unconstitutional' the provision in Item 28.1 of the General Table of Stamp Duty that imposes annual taxation on construction land for housing purposes valued at €1,000,000 or more. The Court upheld the validity of this tax provision.
What happens when the Constitutional Court overturns a CAAD arbitral decision on tax matters?
When the Constitutional Court overturns a CAAD arbitral decision, it orders the case remitted to the Administrative Arbitration Center (CAAD) to reform the decision in accordance with the Constitutional Court's judgment on the constitutional question. Under Article 2 of the Constitutional Court Law, such decisions are binding on all public and private entities and prevail over decisions of other courts and authorities. The CAAD tribunal must then issue a reformed decision consistent with the Constitutional Court's ruling.
Can property owners challenge annual Stamp Tax liquidations on high-value building plots through tax arbitration at CAAD?
Yes, property owners can challenge annual Stamp Tax liquidations on high-value building plots through tax arbitration at CAAD. This case demonstrates the process: taxpayers file a petition for constitution of an arbitral tribunal under the Legal Regime of Arbitration in Tax Matters (LRAT - Decree-Law No. 10/2011). However, if constitutional questions arise, the case may be appealed to the Constitutional Court, whose decisions will bind the arbitral tribunal's final determination.
What is the legal effect of a Constitutional Court summary decision (Decisão Sumária) on the reform of a prior arbitral tax ruling?
A Constitutional Court summary decision (Decisão Sumária) has full binding legal effect under Article 2 of the Constitutional Court Law. Such decisions bind all public and private entities and prevail over decisions of other courts and authorities. When issued in response to an appeal from a CAAD arbitral decision, the summary decision requires the arbitral tribunal to reform its judgment to conform with the Constitutional Court's ruling on the constitutionality question, as occurred in this case with Decision No. 738/2018.