Process: 320/2015-T

Date: January 22, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision addresses the application of Stamp Tax under item 28.1 of the General Tax Items Table (TGIS) to vertical property structures. The claimant, owner of an urban property in Lisbon with a total taxable value of €2,287,080, challenged Stamp Tax assessments totaling €32,536.80 for 2012-2013. The property comprised multiple independent units (basement, shops, and 5 floors with 17 units), none individually exceeding €1,000,000 in taxable value, though housing units collectively totaled €1,626,800. The Tax Authority applied the 1% Stamp Tax rate by aggregating the taxable values of housing units. The claimant argued that taxation should only apply if any single unit exceeds €1,000,000, citing principles of legality, tax equality, and material truth. After requesting official review in January 2015 and receiving implied rejection, the claimant filed for tax arbitration in May 2015. The Tax Authority raised three procedural exceptions: (1) arbitral tribunals lack jurisdiction over official review matters under article 2/1/a of LRTA; (2) timeliness issues regarding the review request; and (3) non-challengeability of certain assessment installments. The core legal question concerns whether Stamp Tax on high-value properties applies based on total aggregated value of housing units or individual unit values in vertical property not constituted as horizontal ownership. This distinction significantly impacts taxation of multi-unit buildings where no single unit reaches the €1,000,000 threshold but collectively exceed it. The decision examines the interpretation of Verba 28.1 TGIS following amendments by Decree-Law 55-A/2012, competence of arbitral tribunals for official review procedures, and proper methodology for calculating taxable value in complex property structures with multiple autonomous fractions.

Full Decision

ARBITRAL DECISION

I – REPORT

A – Procedural Course

  1. A… S.A., Tax ID No. …, with registered office at…, Lot 1, …, …-… Lisbon, (hereinafter Claimant) submitted, on 20 May 2015, a request for the constitution of an Arbitral Tribunal, pursuant to the provisions of articles 2nd and 10th of Decree-Law no. 10/2011, of 20 January, which introduced the Legal Regime for Tax Arbitration (hereinafter, briefly designated as LRTA), with a view to the declaration of illegality and consequent annulment of the assessment acts for Stamp Tax for the years 2012 and 2013, in the total amount of € 32,536.80, affecting the urban property located at Rua da … no.… and …E, in Lisbon, registered in the urban property register under article...º of the parish of…, municipality of Lisbon.

  2. The Claimant further requests the condemnation of the Respondent to the restitution of the amount unduly paid, increased by compensatory interest, pursuant to articles 43.º/1 of the General Tax Law (GTL) and articles 61.º/2 and 5 of the Tax Procedure and Process Code (TPPC).

  3. In the request for arbitral ruling, the Claimant chose not to designate an arbitrator.

  4. Pursuant to article 6.º/2 paragraph a) and article 11.º/1 paragraph b) of the LRTA, the Ethics Council designated the undersigned as Arbitrator, who accepted the position within the legally prescribed period.

  5. The Arbitral Tribunal was constituted on 7 August 2015.

  6. The Respondent submitted its answer on 7 October 2015.

  7. On 6 November 2015, the Claimant submitted in writing its response to the exceptions.

  8. On 2 December 2015, the Claimant attached to the case file a postal receipt proving the sending, on 15/01/2015, by registered mail, of the request for official review of the assessments in question.

  9. As there was no opposition from the parties, it was decided to dispense with the meeting provided for in article 18.º of the LRTA.

  10. The parties were notified to submit written submissions, if they so wished, with 25 January 2016 being set as the deadline for the delivery of the decision.

  11. The parties did not submit written submissions.

B. Position of the Parties

  1. The Claimant alleges, in summary, that:

12.1. The taxpayer requested official review on 16/01/2015 of the assessments of stamp tax.

12.2. To date, the process has not been concluded, so that – pursuant to the provision of article 57.º/5 of the GTL – implied rejection is presumed on 16/05/2015.

12.3. Under article 102.º of the TPPC, judicial challenge may be submitted within three months from the implied rejection.

12.4. The Claimant is the owner of the urban property located at Rua da … no.… and …E, registered in the urban property register under article….º, parish of…, municipality of Lisbon.

12.5. The property comprises a basement, shops and 5 floors, and has a total taxable value of € 2,287,080.00.

12.6. At issue in the present case is the assessment of Stamp Tax at the rate of 1%, by application of item no. 28.1 of the General Tax Items Table (GTIT), amended by Decree-Law no. 55-A/2012, of 29 October.

12.7. With reference to the years 2012 and 2013, the Respondent considered that, as the property was not constituted as horizontal property ownership, the criterion for determining the incidence of stamp tax was the sum of the taxable value of the various floors and/or units capable of independent use allocated to housing.

12.8. The Claimant maintains, however, that stamp tax shall only apply if any one of the parts, floors or units with independent use presents a taxable value exceeding one million euros, which is not the case herein.

12.9. It further argues that the criterion defended by the Tax Authority violates the principles of legality and tax equality, as well as the prevalence of material truth over legal-formal reality.

12.10. It concludes by requesting that the tax arbitral tribunal declare the illegality of the acts in question, with the consequent restitution of the tax paid, as well as the corresponding compensatory interest.

  1. In its answer, the Respondent alleges, in summary, that:

13.1. By exception, it invokes that official review of assessment acts for taxes is not within the material jurisdiction of the Arbitral Tribunal, pursuant to article 2.º/1/paragraph a) of the LRTA.

13.2. As is evident from the request and the cause of action raised by the Claimant, it seeks to obtain through this procedural channel the official review of the stamp tax assessments for 2012 and 2013 because the period for the rejection of the request for official review submitted on 16/01/2015 has elapsed.

13.3. Since the Tax Authority is not bound by arbitral jurisdiction with respect to requests for official review of tax assessment acts, it concludes for the incompetence of the present tribunal to decide the present dispute, which leads to the dismissal of the action – cf. articles 576.º and 577/e) of the Code of Civil Procedure (CCP), applicable ex vi article 29.º/1, paragraph e) of the LRTA.

13.4. In tentative terms, the Respondent further raises the timeliness of the request for arbitral ruling of the request for official review that the Respondent allegedly submitted on 16/01/2015, since the request was not accompanied by the respective request for official review.

13.5. As an exception, the Respondent further raises the non-challengeability of the installments of the assessment acts contained in the collection notices that constitute the subject matter of the present request for arbitral ruling, which gives rise to the dilatory exception provided in article 89.º/1, paragraph c) of the Administrative Procedure Code (APC), subsidiarily applicable, ex vi, article 29.º/1, paragraph c) of the LRTA, which prevents the tribunal from addressing the merits of the case and results in the dismissal of the TA from the action.

13.6. By way of substantive response, it argues that the taxable value relevant for purposes of tax incidence is the total taxable value of the urban property and not the taxable value of each one of the parts that comprise it, even if capable of independent use.

13.7. It thus argues for the legality of the contested assessments and that the Claimant's claim should be dismissed and the Respondent absolved of the claims.

C – Facts Established

  1. Based on the facts alleged by the parties and not contested, as well as on the documentation attached to the case file, the following relevant facts are established:

14.1. The Claimant was, at the date of the facts at issue in the present case, the owner of the urban property, in full ownership with floors capable of independent use, located at Rua da … no.… and …E, registered in the urban property register of the parish of…, municipality of Lisbon, under matrix article no.…, with a total taxable value of € 2,287,080.00.

14.2. The property comprised a basement, shops, five floors, with 17 floors or units capable of independent use.

14.3. Each of the floors or units capable of independent use allocated to housing has an individual Taxable Value below € 1,000,000.00.

14.4. The sum of the individual taxable values of the floors capable of independent use allocated to housing was € 1,626,800.00.

14.5. The Tax Authority assessed Stamp Tax, by application of item no. 28.1 of the GTIT, for the year 2012, at the rate of 1% on € 1,626,800.00, from which resulted the determination of a tax amount in the total of € 16,268.00.

14.6. The Tax Authority assessed Stamp Tax, by application of item no. 28.1 of the GTIT, for the year 2013, at the rate of 1% on € 1,626,800.00, from which resulted the determination of a tax amount of € 16,268.00, to be collected in three installments.

14.7. On 16/01/2015, the Claimant submitted, by registered mail (registration no. …PT, of 15/01/2015), a request for official review, pursuant to article 78.º of the GTL, of the Stamp Tax assessments for the years 2012 and 2013, in the total amount of € 32,536.00.

14.8. On 20/05/2015, having received no decision on the aforementioned request for official review, the Claimant submitted the present request for arbitral ruling, on the basis of the implied rejection of that request for official review.

II – ASSESSMENT OF THE TRIBUNAL

The Tribunal is duly constituted, pursuant to articles 5.º/2 and 6.º/1 of the LRTA. The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to articles 4.º and 10.º/2 of the LRTA and article 1.º of Ordinance no. 112-A/2011, of 22 March. The process is not affected by defects that would invalidate it.

III. REASONING

The issues to be decided in the context of the present case are as follows:

  1. On the material jurisdiction of the arbitral tribunal.

  2. On the non-challengeability of the installments of the tax assessment acts for Stamp Tax.

  3. On the expiry of the request for arbitral ruling submitted as a consequence of implied rejection of a request for official review of the tax assessment acts for Stamp Tax.

  4. On the application of item no. 28.1 of the GTIT to properties in vertical ownership.

a) On the material jurisdiction of the arbitral tribunal

The Respondent takes the view that the arbitral tribunal, in light of the combined provisions of articles 2.º/1, paragraph a) and 4.º of the LRTA, is materially incompetent to consider requests for official review of assessment acts for taxes.

The Claimant requests the constitution of the arbitral tribunal to rule on the legality of the Stamp Tax assessment resulting from the application of item no. 28.1 of the GTIT, justifying the timeliness of the request by the implied rejection of the request for official review of the Stamp Tax assessments for the fiscal years 2012 and 2013.

The issue that arises is, therefore, whether the arbitral tribunal is competent to consider the request for arbitral ruling against the implied rejection of the request for official review of the Stamp Tax assessments being challenged in the present case.

It is important, therefore, to clarify whether the declaration of illegality of acts of implied rejection of requests for official review of the tax act, provided for in article 78.º of the GTL, falls within the scope of the jurisdiction assigned to the arbitral tribunals that operate under the CAAD.

The jurisdiction assigned to tax arbitral tribunals is provided for in article 2.º/1 of the LRTA, which provides that:

"1 — The jurisdiction of arbitral tribunals comprises the consideration of the following claims:
a) The declaration of illegality of acts assessing taxes, self-assessment, withholding at source and payments on account;

b) The declaration of illegality of acts determining the taxable matter when it does not give rise to the assessment of any tax, of acts determining taxable income and of acts fixing taxable values."

For its part, Ordinance no. 112-A/2011, of 22 March, approved under article 4.º/1 of the LRTA, established the terms of binding the Tax Authority to the jurisdiction of the arbitral tribunals that operate under the CAAD, and determined the binding of the TA to the consideration of claims relating to taxes, with the exceptions provided for in paragraphs a) to d) of article 2.º of that ordinance (it being certain that, in the case at hand, the application of any of those exceptions is not involved).

In light of these normative provisions, it is understood that the jurisdiction of arbitral tribunals comprises the consideration of the legality of acts assessing taxes, that is, acts through which the amount of tax to be paid is determined. However, the taxpayer may choose to proceed with direct challenge of the tax act or, alternatively, the law grants them the faculty to choose, via the administrative route, to challenge administratively the act, by means of an administrative complaint and, possibly, by hierarchical appeal and, subsequently, to file the respective judicial challenge or request for arbitral ruling, in case of rejection, express or implied. Alongside these means of defense against assessment acts, the taxpayer may also initiate the process of review of tax acts provided for in article 78.º of the GTL.

In the case at hand, the Claimant submitted a request for official review of the Stamp Tax assessment for the years 2012 and 2013, resulting from the application of item no. 28.1 of the GTIT, on the property of which it is the owner.

The acts that decide administrative complaints, hierarchical appeals or requests for review of a tax act constitute second and third-degree acts in that they involve the consideration of the legality of first-degree acts, that is, assessment acts and, as such, it is understood that it falls within the scope of the jurisdiction of arbitral tribunals to consider those acts. Only in cases where the second or third-degree act addressed a preliminary issue whose resolution prevented the consideration of the legality of the primary act – such as, for example, untimeliness, lack of standing or lack of jurisdiction – would they fall outside the material scope of jurisdiction of the arbitral tribunals that operate under the CAAD.

We understand that the arbitral tribunal, pursuant to article 2.º/1/paragraph a) of the LRTA, may challenge the legality of the assessment act, also in cases where the declaration of illegality may be obtained as a consequence of the declaration of illegality of second or third-degree acts. Thus, article 2.º/1/paragraph a) of the LRTA does not exclude cases where the declaration of illegality results from the declaration of illegality of the second-degree act, nor cases where that declaration of illegality is sought as a consequence of the implied rejection of the request for official review of the tax act.

This would not be the case only if the Tax Authority had refused to consider the request for official review on the basis of any preliminary issue that would prevent the consideration of the legality of the tax act, because, in that case, the tax act would have to be challenged via the special administrative action and, consequently, would fall outside the sphere of jurisdiction of the arbitral tribunal.

Now, implied rejection (of administrative complaints, hierarchical appeals or requests for official review) constitutes a legal fiction designed to enable the use of contentious means of challenge (article 57.º/5 of the GTL). It thus appears that the segment of article 2.º/1 of the LRTA that alludes to claims regarding "declaration of illegality of acts" encompasses the declaration of illegality of implied rejections of assessment acts for Stamp Tax, in accordance with the provisions of articles 2.º/1/paragraph a) and 10.º/1 of the LRTA, combined with article 102.º/1/paragraph d) of the TPPC.

The exception of incompetence raised by the Tax Authority is therefore without merit.

  1. On the non-challengeability of the installments of the tax assessment acts for Stamp Tax

In the view of the Respondent, the law does not provide for the autonomous challenge of an installment of item no. 28 of the ST contained in the collection notices, as is the case in the present proceedings. In the view of the Respondent, "in view of the manifest non-challengeability of the installments of the assessment acts contained in the collection notices that constitute the subject matter of the present request for arbitral ruling, the dilatory exception provided for in paragraph c), no. 1, article 89.º of the APC, subsidiarily applicable by article 29.º, no. 1, paragraph c), of the LRTA, applies, which prevents the tribunal from addressing the merits and results in the dismissal of the TA from the action" – (cf. article 25.º of the answer).

The Claimant requested the "declaration of illegality of the acts assessing stamp tax, item 28.1 of the GTIT" (cf. preamble of the request), petitioning finally that the tribunal declare "illegal and annul the stamp tax assessments, by reference to the fiscal years 2012 and 2013, from which resulted tax to be paid in the amount of € 32,536.80 (which should now be refunded), concerning the taxation of urban properties with taxable value equal to or exceeding € 1,000,000.00, pursuant to the provision of Item no. 28 of the GTIT". Both in the final request and throughout its pleadings (cf. articles 14 and 15 of the initial request), the Claimant alludes to Stamp Tax assessment acts for the years 2012 and 2013, in the amount of € 16,268.40 for each of the years, the payment of which was subdivided into three installments of April, July and November.

In light of the foregoing, it appears clear to us that the Claimant seeks that, in the context of the present proceedings, the illegality of the aforementioned assessments be considered, which are the subject of the request for official review, which, by virtue of the implied rejection, is now challenged in the context of the present proceedings, and not the collection notices issued.

The exception of incompetence raised by the Respondent is therefore also without merit, on the basis of the non-challengeability of the autonomous installments of the Stamp Tax assessment acts.

  1. On the issue regarding the timeliness of the request for arbitral ruling

The Respondent raised, by way of merely tentative exception, the possible exception of untimeliness of the request for arbitral ruling, arguing that "as the Claimant did not accompany the request for arbitral ruling with the request for official review allegedly submitted on 16/01/2015, in accordance with the provision of paragraphs b) and d) of no. 2 of article 10.º of the LRTA, which leads to the impossibility of assessing whether it is timely or not, a question that is raised before this Tribunal" (cf. article 12.º of the Answer).

It is true that the request for constitution of the arbitral tribunal was not accompanied by the request for official review. However, the Claimant did so later, first on 6/11/2015 in its response to the exceptions and, subsequently, supplemented on 2/12/2015 with the attachment to the case file of the postal receipt evidencing the sending thereof by mail.

The deadlines for submitting a request for constitution of the arbitral tribunal are provided for in article 10.º/1 of the LRTA. Pursuant to article 10.º/1/paragraph a) of the LRTA, the request for constitution of the arbitral tribunal must be submitted within 90 days from the dates provided for in articles 102.º/1 and 2 of the TPPC. From the combined provision of these two norms it results that the request for constitution of the arbitral tribunal must be submitted within 90 days from the formation of the presumption of implied rejection. For its part, article 57.º of the GTL provides that the tax procedure must be completed within four months. If it is not decided within four months, the taxpayer then has 90 days to submit the request for constitution of the arbitral tribunal. It is, therefore, in light of this legal framework that the question regarding the timeliness of the request for constitution of the arbitral tribunal must be assessed.

In the case at hand, it is verified that the request for official review was submitted by the Claimant on 16 January 2015. As there was no ruling by the Tax Authority on that request, it is presumed to be rejected, implicitly, after four months (article 57.º/1 of the GTL), that is, on 15 May 2015. As the present request for constitution of the arbitral tribunal was received on 20 May 2015, it must be concluded that it was submitted within the period of 90 days subsequent to the four months for the competent body to issue an express decision (article 10.º/1 of the LRTA and 102/1/paragraph a) of the TPPC).

The exception of expiry of the right of action invoked by the Respondent is therefore without merit, the request for arbitral ruling submitted by the Claimant being considered timely.

  1. Application of item no. 28.1 of the GTIT to properties in vertical ownership

As we have already alluded to, the issue to be decided in the present case consists of determining whether the taxable value relevant for purposes of the incidence of ST (item no. 28 of the GTIT, in the wording given by Law no. 55-A/2012, of 29 October) is the one corresponding to the sum of the taxable values attributed to the different units or floors (total taxable value) or, rather, the taxable value attributed to each one of the residential floors.

The issue has already been addressed in several proceedings, within the scope of Tax Arbitration, in which it was decided that when it is verified that each one of the floors that comprise a property in vertical ownership has a taxable value below one million euros, the legal presupposition of incidence of Stamp Tax provided for in item no. 28.1 of the GTIT is not met and, consequently, the illegality of the respective assessment acts was pronounced (cf. decisions issued within the context of proceedings numbers 51/2015-T, 391/2014-T, 451/2014-T, 153/2015-T, in which among others[1]). Also, the Supreme Administrative Court, by judgment of 9/09/2015, proceedings no. 47/15, with Francisco Rothes as rapporteur, decided that in the case of a property in vertical ownership, the incidence of ST (Item 28.1 of the GTIT, in the wording given by Law no. 55-A/2012, of 29 October) must be determined, not by the taxable value resulting from the sum of the taxable values of all the units or floors capable of independent use (individualized in the matrix article), but by the taxable value attributed to each one of those floors or units intended for housing[2]. No arguments have been identified so far that would allow breaking the unanimity that has been achieved by the decisions already issued, so it is important to reiterate the jurisprudence already established[3].

Item no. 28 of the GTIT, annexed to the Tax Code, was amended by article 4.º of Law no. 55-A/2012, of 29 October, and had the following original wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable value contained in the register, pursuant to the Municipal Property Tax Code, is equal to or greater than € 1,000,000 – on the taxable value for purposes of Municipal Property Tax:

28.1 – For property with residential use – 1%;

28.2 – For property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Ministry of Justice – 7.5%."

The wording of item no. 28.1 of the GTIT was subsequently amended by Law no. 83-C/2013, of 31 December, which approved the State Budget for 2014, and item no. 28.1 of the GTIT began to use the concept of residential property, now providing as follows: "28.1 For residential property or for building land whose construction, authorized or planned, is for housing, pursuant to the provisions of the Municipal Property Tax Code – 1%". However, the legislative amendment made does not apply to the present proceedings, which have reference to the year 2013. In fact, as has already been noted by the Supreme Administrative Court judgment of 29/04/2015, this amendment does not apply to past situations (assessments of 2012 and 2013), such as the one at issue in the proceedings.

The issue that arises in the present case is that of determining what the scope of incidence of item no. 28.1 of the GTIT is in the wording given by Law no. 55-A/2012, of 29 October, i.e., whether item no. 28.1 of the GTIT applies to urban properties in full ownership, but with floors capable of independent use, with residential use, when the taxable value attributed to each one of those floors is below 1,000,000.00, although the sum of the floors with independent use allocated to housing has a total value equal to or exceeding that amount.

With respect to the norm at issue – item no. 28.1 of the GTIT – the legislative intent underlying its adoption can be ascertained from the presentation and discussion in Parliament of bill no. 96/XII (2nd), in which the Secretary of State for Tax Affairs expressly stated[4]:

"The Government proposes the creation of a special tax on high-value residential urban properties. This is the first time in Portugal that special taxation on high-value properties intended for housing has been created. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to properties valued at one million euros or more."

From the semantic variety of the discussion stands out, from the outset, the undifferentiated use of expressions such as "residential urban properties", "high-value properties intended for housing" and "properties valued at one million euros or more", all appearing to point to the intention to tax single-family units of greater economic value, parameterized through their respective taxable value equal to or exceeding one million euros.

However, from the preparatory works it is not possible to determine, with the necessary precision, as has already been emphasized in previous decisions, what the concept of property underlying that norm is (cf. decisions 21/2015-T and 451/2014), namely, whether a residential urban property is, in the sense of article 28.º of the GTIT, an autonomous unit (self-sufficient for the purpose to which it is intended), distinct and isolated in which the life of each individual or household resident is conducted, in single-family or multi-family buildings; or whether it encompasses multi-family properties with autonomous units, but without legal autonomization, characteristic of the autonomous fractions that make up properties constituted in horizontal ownership.

In the case at hand, the Claimant's property is an urban property in full ownership, being composed of various floors capable of independent use, allocated to housing. The taxable values of the various floors capable of independent use are below € 1,000,000.00.

From the wording of item no. 28.1 it provides that "Ownership, usufruct or right of superficies of urban properties whose taxable value contained in the register, pursuant to the Municipal Property Tax Code, is equal to or greater than € 1,000,000 – on the taxable value for purposes of Municipal Property Tax.

It is therefore important to determine what taxable value is considered for purposes of Municipal Property Tax since it results from item no. 28.1 that stamp tax applies to the "Ownership, usufruct or right of superficies of property whose taxable value contained in the register, pursuant to the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000 (...)".

It is thus referred to the Municipal Property Tax Code the entire regulatory content regarding the incidence "urban properties with the taxable value contained in the register", pursuant to the Municipal Property Tax Code, and regarding the taxable matter "taxable value for purposes of Municipal Property Tax". A referral that, furthermore, is contained, on a subsidiary basis, in article 67.º/2 of the Tax Code, which refers to the Municipal Property Tax Code the "matters not regulated in the present Code concerning item no. 28 of the General Table.

We highlight from the Municipal Property Tax Code, with respect to floors or units capable of independent use, the following rules:

a) each property corresponds to a single matrix article (– cf. article 82.º/2 of the Municipal Property Tax Code;

b) each floor capable of independent use is considered separately in the matrix registration, which discriminates the respective taxable value (cf. article 12.º/3 of the Municipal Property Tax Code);

c) the determination of taxable value is assessed for each floor or unit capable of independent use, in accordance with the use of each unit, being evaluated separately according to their use and areas (cf. article 38.º of the Municipal Property Tax Code);

d) the collection document must contain, mandatorily, the discrimination of the properties, their parts capable of independent use, respective taxable value (cf. article 119.º/1 of the Municipal Property Tax Code).

e) The failure to discriminate the taxable value of urban properties by floors or units capable of independent use constitutes grounds for complaint of incorrect matrix registration (cf. article 130.º/3, paragraph h) of the Municipal Property Tax Code).

In legal writing, Silvério Mateus and Freitas Corvelo emphasize that one of the aspects that should be highlighted in the register concerns the need to make relevant the autonomy that, within each property, can be attributed to each one of its parts, functionally and economically independent[5].

The Municipal Property Tax Code grants tax relevance – at the level of matrix registration, determination of taxable value, discrimination of taxable value, assessment, grounds for complaint – to the individualization in the register of each part of a property capable of independent use.

It results from the Municipal Property Tax Code that the parts of a property in full ownership endowed with autonomy, that is, self-sufficient for the purpose to which they are intended, are subject to individual and separate assessment, are individualized in the respective matrix registration, possess their own taxable value contained in the register and are subject to individualized assessments (all as results from articles 7.º/2/paragraph b), 13.º/2 and 119.º/1 of the Municipal Property Tax Code), that autonomy should be respected and is relevant for purposes of application of item no. 28 of the GTIT.

Item no. 28 of the GTIT makes reference to "urban properties with taxable value contained in the register, pursuant to the Municipal Property Tax Code" and to the "taxable value used for purposes of Municipal Property Tax".

For its part, article 12.º/3 of the MPTC provides that "each floor or part of a property capable of independent use is considered separately in the matrix registration, which also discriminates the respective taxable value".

Whereby to the floors capable of independent use – as is the case in the present proceedings – is attributed a specific and proper taxable value that is subject to autonomous registration in the respective property register. Thus, there is an individualization for purposes of Municipal Property Tax of the floors capable of independent use that are subject to a specific assessment, pursuant to article 7.º/2, paragraph b) of the MPTC, individual matrix registration and with taxable value for purposes of Municipal Property Tax that is autonomous.

In the case of properties in vertical or full ownership with floors or units capable of independent use, but not constituted in horizontal ownership, there is a clear tax autonomy that is evidenced by the different units (assessed with distinct parameters depending on the specific use of each unit), indication of the floor/story, including with specification of the gross private area and gross dependent area, all as if they were true autonomous fractions, as occurs in the case at hand.

Thus, there is no reason for – in terms of the incidence of Stamp Tax provided for in item no. 28.1 of the GTIT – to give to the floors/units capable of independent use (integrated in properties in vertical ownership) a treatment distinct from that granted in the MPTC.

Thus, for purposes of the incidence of Stamp Tax, specifically for purposes of the application of item no. 28.1 of the GTIT, "the taxable value contained in the register" and the "taxable value used for purposes of Municipal Property Tax" corresponds to the taxable value that is contained in the register with respect to each floor or part of a property capable of independent use, as results from the provision of article 12.º/3 of the Municipal Property Tax Code.

In light of the foregoing, it is reiterated, following the decisions already issued, that the application in the present case of item no. 28.1 of the GTIT, with respect to the property of which the Claimant is the owner, is illegal because the said item should be interpreted in the sense that the taxable value relevant is the one corresponding to each one of the floors capable of independent use and not the taxable value resulting from the arithmetic sum of all the floors that comprise the property, that is, the taxable values, in parts, attributed to each one of the floors intended for housing, in cases where only from the sum of the taxable values results the determination of a taxable value equal to or exceeding 1,000,000.00. As none of the floors that comprise the property has a taxable value exceeding one million euros, item no. 28.1 of the GTIT does not apply.

On compensatory interest

The Claimant requests the condemnation of the TA to the refund of the tax unduly paid in the total amount of € 32,536.80, as well as the respective compensatory interest.

Article 43.º/1 of the General Tax Law provides that compensatory interest is "due when it is determined, in an administrative complaint or judicial challenge, that there was an error attributable to the services from which resulted the payment of the tax debt in an amount higher than that legally due."

For its part, article 24.º/1, paragraph b) of the LRTA provides that the "arbitral decision on the merits of the claim that cannot be subject to appeal or challenge binds the tax administration from the end of the period provided for the appeal or challenge, and the latter must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for the voluntary execution of the judgments of the tax courts, restore the situation that would exist if the tax act subject to the arbitral decision had not been performed".

Given that, in the case sub iudice, there is verification of the illegality of the contested assessments, due to error in the legal assumptions, attributable to the Tax Authority that proceeded with the contested assessments, due to incorrect application and interpretation of the provision of item no. 28.1 of the GTIT, the Claimant is entitled to the refund of the tax paid in the amount and to compensatory interest calculated from the date of payment until full refund, at the interest rate resulting from article 43.º/4 of the General Tax Law.

Decision:

For the reasons stated above, the Arbitral Tribunal decides:

a) To dismiss as without merit the exceptions raised by the Respondent;

b) To grant the claim and, in consequence, declare illegal the assessments of Stamp Tax, by reference to the years 2012 and 2013, from which resulted tax to be paid in the amount of € 32,536.80.

c) To grant the claim for condemnation of the Tax and Customs Authority to refund the Claimant the amount of the tax unduly paid, increased by compensatory interest from the date on which each of the payments was made until the date of its complete refund;

d) To condemn the Respondent to pay the costs of the present proceedings.

Value of the case:

In accordance with the provision of articles 306.º/1 and 2 of the Code of Civil Procedure, combined with article 97.º-A/1 paragraph a) of the Tax Procedure and Process Code (TPPC) and article 3.º/2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at € 32,536.80, which constitutes the total amount of the tax resulting from the contested assessment whose refund was requested.

Costs:

For the purposes of the provision of article 12.º/2 and article 22.º/4 of the LRTA and article 4.º/4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at € 1,836.00, pursuant to Table I annexed to the Regulation, to be borne entirely by the Respondent.

Lisbon, 22 January 2016

The Arbitrator,

(Alexandra Gonçalves Marques)

[1] All available in the CAAD database (www.caad.pt).

[2] Available at www.dgsi.pt

[3] We will follow closely the jurisprudence already established and the text of the decision issued within the scope of the CAAD in proceedings no. 153/2015-T and 420/2015, both drafted by the undersigned.

[4] Cf. DAR I Series no. 9/XII-2, of 11 October, page 32.

[5] Silvério Mateus and Freitas Corvelo (2005), Property Taxes on Real Estate and Stamp Tax, Commented and Annotated, Engifisco, pp. 159-160.

Frequently Asked Questions

Automatically Created

Is Stamp Tax under Verba 28.1 of the TGIS applicable to vertical property (propriedade vertical) buildings?
Yes, Stamp Tax under Verba 28.1 of the TGIS applies to vertical property (propriedade vertical) buildings. The central dispute in this case concerns how the tax base is calculated for properties not constituted as horizontal property ownership. The Tax Authority's position is that for vertical properties with multiple independent units, the relevant taxable value is the sum of all housing units' taxable values, not individual unit values. In this case, although no single unit exceeded €1,000,000, the Tax Authority aggregated the housing units totaling €1,626,800 and applied the 1% rate. The claimant contested this interpretation, arguing the tax should only apply if any individual unit exceeds the €1,000,000 threshold. This interpretation question significantly affects multi-unit buildings organized as vertical rather than horizontal property.
Can a taxpayer request an official review (revisão oficiosa) to challenge Stamp Tax assessments on high-value properties?
Yes, taxpayers can request an official review (revisão oficiosa) to challenge Stamp Tax assessments under article 78 of the General Tax Law (GTL). In this case, the claimant submitted an official review request on January 16, 2015, by registered mail. However, the Tax Authority raised a jurisdictional exception, arguing that arbitral tribunals lack competence to decide official review matters under article 2/1/a of the LRTA. When the Tax Authority did not decide the official review within the legal timeframe, implied rejection occurred after four months pursuant to article 57/5 of GTL (on May 16, 2015). Following implied rejection, the taxpayer may resort to judicial or arbitral challenge within three months under article 102 of TPPC. The procedural question of whether CAAD has jurisdiction over matters originating from official review requests was contested by the Tax Authority.
What are the deadlines and timeliness requirements for contesting Stamp Tax liquidations through tax arbitration at CAAD?
For contesting Stamp Tax liquidations through CAAD tax arbitration, taxpayers must observe specific timeliness requirements. If filing after an official review request: (1) the official review must be decided or reach implied rejection under article 57/5 GTL (deemed rejected after 4 months from submission); (2) arbitration must be filed within 3 months from the implied rejection date per article 102 TPPC. In this case, the official review was submitted on January 16, 2015, implied rejection occurred on May 16, 2015, and arbitration was filed on May 20, 2015—within the 3-month window. The Tax Authority challenged timeliness, arguing the claimant failed to attach proof of the review request initially. Additionally, article 10 of LRTA establishes that arbitration requests must be filed within 90 days from notification of the contested act or implied rejection, and the tribunal must be constituted within specific timeframes.
How is the taxable value determined for Stamp Tax purposes when a property consists of multiple independent units?
The determination of taxable value for Stamp Tax purposes when a property consists of multiple independent units is the core disputed issue in this case. The Tax Authority's position is that for vertical property (not constituted as horizontal property ownership), the relevant taxable value is the aggregate sum of all housing units' individual taxable values. In this case, the Tax Authority summed the 17 independent units allocated to housing, reaching €1,626,800, and applied the 1% Stamp Tax rate under Verba 28.1 TGIS. The claimant argued that the correct interpretation requires each individual unit's taxable value to exceed €1,000,000 for the tax to apply. Since no single unit exceeded this threshold (each was below €1,000,000), the claimant contended no Stamp Tax was due. This methodological difference creates significant taxation consequences for multi-unit vertical properties where collective values exceed thresholds but individual units do not.
What are the grounds for claiming illegality and annulment of Stamp Tax assessments on urban properties exceeding €1,000,000?
Grounds for claiming illegality and annulment of Stamp Tax assessments on high-value urban properties include: (1) violation of the principle of legality (principio da legalidade)—arguing the Tax Authority misinterpreted Verba 28.1 of TGIS by aggregating unit values rather than assessing individual units; (2) violation of tax equality principles (igualdade fiscal)—contending that similar properties are treated differently depending on their legal structure (horizontal vs. vertical property); (3) violation of the principle that material truth prevails over legal-formal reality—arguing the economic substance of independent units should govern over legal property structure; (4) incorrect determination of the taxable base by aggregating values instead of assessing per unit; (5) procedural grounds including improper assessment methodology and lack of legal basis for the summation approach under the applicable legal framework. The claimant sought declaration of illegality with consequent annulment and restitution of €32,536.80 plus compensatory interest under articles 43/1 GTL and 61/2 and 5 TPPC.