Process: 323/2015-T

Date: November 27, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 323/2015-T addressed the controversial application of Stamp Tax under Verba 28.1 of the General Table of Stamp Duties (TGIS) to vertical property buildings. The central issue concerned whether stamp duty on residential properties valued at €1,000,000 or more should apply to the aggregate taxable property value (VPT) of an entire building or to each individual unit separately in properties not formally constituted under horizontal ownership. The claimant company challenged stamp duty assessments totaling €24,867.60 for fiscal years 2012 and 2013, arguing that the Tax Authority unlawfully aggregated the VPTs of separate stories with independent use. The claimant contended that Article 67(2) of the Stamp Duty Code mandates subsidiary application of the Municipal Property Tax Code (CIMI), which treats vertical properties identically to horizontal properties for assessment purposes. Under Article 12(3) of CIMI, each story or division capable of independent use constitutes a separate taxable unit. The claimant emphasized that the Tax Authority itself issued individualized assessment documents for each story, acknowledging their separate nature. The core argument rested on principles of tax equality and legality: taxpayers with vertical properties should not face higher taxation than those with identical horizontal property condominiums merely due to formal property structure. The legislative intent behind Verba 28 was to tax luxury residences exceeding €1 million, not to create arbitrary distinctions based on property registration. Aggregating VPTs would violate constitutional principles of equality and proportionality, as it would tax identical economic situations differently. The claimant maintained that stamp duty should only apply if an individual unit's VPT reached the €1,000,000 threshold, which was not the case for any individual story in this property.

Full Decision

ARBITRAL DECISION

The Arbitrator Raquel Franco, appointed by the Deontological Board of the Administrative Arbitration Center (CAAD) to form the singular arbitral tribunal constituted on 07.08.2015, decides as follows:

I. REPORT

  1. On 21.05.2015, the company "A... SA", NIPC..., filed a request for constitution of a singular arbitral tribunal, in accordance with the combined provisions of 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"), in which the Tax and Customs Authority (hereinafter referred to only as "TA") is the respondent.

  2. The request for constitution of the arbitral tribunal was accepted by the Honourable President of the CAAD and automatically notified to the TA on 08.06.2015.

  3. In accordance with the provisions of item a) of no. 2 of article 6 and item b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Board appointed the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the appointment within the applicable time limit.

  4. The parties were notified of this appointment on 23.07.2015, and raised no objection to it.

  5. Thus, in accordance with the provision of item c) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the singular arbitral tribunal was constituted on 07.08.2015, with the relevant legal proceedings having been followed.

  6. The claimant's claim in the present proceedings is for a declaration of the invalidity of the stamp duty assessments relating to the fiscal years 2012 and 2013, from which resulted tax payable in the amount of €24,867.60, in accordance with the provision of Item no. 28 of the General Table of Stamp Duties (GTSD), relating to the urban property registered in the property register of the parish of ... under article ....

  7. The Claimant sustains its claim, in summary, in the following terms:

The essential issue to be decided in the present proceedings is to determine, with reference to properties not constituted under a horizontal property ownership regime, comprising various stories and divisions with independent use, some or all of which with residential purpose, which is the taxable property value (TPV) relevant for purposes of stamp duty under item 28.1 of the GTSD, namely, whether it should be the amount corresponding to the sum of the taxable property value attributed to the different parts or stories (global TPV) as occurred in the case "sub iudice", or rather the TPV attributed to each of the residential parts or stories.

Using the criterion that the law itself introduced in article 67, no. 2 of the Stamp Duty Code, "to matters not regulated in the present Code relating to item 28 of the General Table, the Municipal Property Tax Code (MPTC) shall apply subsidiarily."

Thus, being the case, considering that the registration in the property register of properties in vertical ownership, constituted by different parts, stories or divisions with independent use, in accordance with the MPTC, follows the same registration rules as properties constituted under horizontal ownership, and that the respective Municipal Property Tax (MPT), as well as the new Stamp Duty (SD), are assessed individually in relation to each of the parts, it is beyond doubt that the legal criterion for defining the incidence of the new tax must be the same.

Moreover, the TA itself admits that this is the criterion, which is why the assessment itself issued is very clear in its essential elements, resulting in the incidence value being the amount corresponding to the TPV of each of the individualized fractions and the assessment documents being individualized on the part of the property corresponding to the various stories.

Thus, there will only be stamp duty incidence if one of the parts, stories or divisions with independent use presented a TPV equal to or exceeding €1,000,000.00, which is not the case in the matter "sub iudice".

The criterion sought by the TA, of considering the amount corresponding to the sum of the TPVs attributed to the parts, stories or divisions with independent use, on the argument that the property is not constituted under a horizontal ownership regime, finds no legal support and is contrary to the criterion that is applicable under the MPTC regime and, by referral, under the SD regime.

Furthermore, the law itself expressly establishes, in the final part of item 28 of the GTSD, that the SD to be levied on urban properties of value equal to or exceeding €1,000,000.00 — shall be "on the taxable property value used for purposes of MPT."

Thus, the adoption of the criterion defended by the TA violates the principles of legality and tax equality, as well as the prevalence of material truth over legal-formal reality, clearly to the detriment of the taxpayer.

Furthermore, the ratio legis underlying the rule of item 28 of the GTSD, introduced by Law no. 55-A/2012 of 29 October, and in compliance with the provision of article 9 of the Civil Code, according to which the interpretation of the legal norm should not be limited to the letter of the law, but should reconstruct from the texts and other elements of interpretation the legislative intent, taking into account the unity of the legal system, the circumstances in which it was drafted and the specific conditions of the time in which it is applied.

The legislator, when introducing this legislative innovation, considered as the determining element of taxpaying capacity urban properties, with residential purpose, of high value (luxury), more precisely, of value equal to or exceeding €1,000,000.00, on which a special rate of stamp duty began to be levied, intending to introduce a principle of taxation on wealth demonstrated in the ownership, usufruct or right of superficies of luxury urban properties with residential purpose.

For this reason, the criterion was the application of the new rate to urban properties with residential purpose, whose TPV is equal to or exceeding €1,000,000.00.

The justification for the measure designated as "special rate on the highest value residential urban properties" is based on the invocation of the principles of social equity and tax justice, calling upon those holding high-value properties intended for housing to contribute in a more intensive manner, applying the new special rate to "houses of value equal to or exceeding 1 million euros."

The legislator understood that this value, when attributed to a residence (house, autonomous fraction or story with independent use) reflects a taxpaying capacity above average and, as such, capable of determining a special contribution to ensure fair distribution of the tax burden.

Now, the existence of a property in vertical or horizontal ownership cannot, by itself, be an indicator of taxpaying capacity. On the contrary, from the law it follows that both should receive the same tax treatment in compliance with the principles of justice, tax equality and material truth.

In truth, a taxpayer will not be richer if they have a property in vertical ownership where the sum of the individualizable divisions exceeds €1,000,000.00 than an individual who has exactly the same property but constituted under horizontal ownership and each of the fractions does not exceed in TPV €1,000,000.00.

Such a situation would constitute a tax inequality that is not at all permissible or acceptable, being illegal and unconstitutional to consider as the reference value that which corresponds to the sum of the TPVs attributed to each part or division. Immediately, because such would be a clear violation of the principle of equality and proportionality in tax matters.

For this very reason article 12, no. 3 of the MPTC states that "each story or part of a property capable of independent use is considered separately in the property registration, which also distinguishes the respective taxable property value."

Therefore, material truth is what imposes itself as the determining criterion of taxpaying capacity and not the mere legal-formal reality of the property.

The discrimination operated by the TA constitutes arbitrary and illegal discrimination.

It is not mandatory to constitute horizontal property ownership; indeed at present the taxpayer has already constituted the horizontal property regime on the property in question, and is not subject to item 28.1 of the GTSD, however the value of the autonomous fractions is the same when the property is in vertical ownership.

  1. In its Response, the TA invoked, in summary, the following:

Preliminary Issue:

The TA alleges that, given that the matter concerns stamp duty assessments of item 28.1, relating to the years 2012 and 2013, and taking only the last year as reference, the deadline for payment of the last installment of 2013 would have occurred on 30 November 2014 and that, therefore, the request for constitution of the arbitral tribunal which occurred on 21 May 2015 is manifestly out of time.

As to the merits of the case:

In summary, the arguments of the TA are as follows:

The subjection to stamp duty of item 28.1 of the General Table attached to the Stamp Duty Code results from the combination of two facts, namely, the residential purpose and the taxable property value of the urban property registered in the property register being equal to or exceeding €1,000,000.00.

The claimant, for purposes of Municipal Property Tax and also of stamp duty, by force of the wording of the said item, is not the owner of 21 autonomous fractions, but rather of a single property.

Having taken this fact as established, what the claimant now seeks is for the TA to consider, for purposes of assessment of the present tax, that there is an analogy between the regime of complete ownership and that of horizontal property, since there should be no discrimination in the legal-tax treatment of these two property ownership regimes, as it would be illegal.

As is well known, horizontal property ownership is a specific legal regime of property provided for in article 1414 and following of the Civil Code, the manner of its constitution being provided for there, as well as the other rules concerning the rights and duties of the co-owners, and it must be recognized in this establishment, the existence of a more evolved property regime.

Now, to claim that the interpreter and applicator of tax law should apply, by analogy, to the regime of complete property ownership the regime of horizontal property ownership is what is abusive and illegal.

These two property ownership regimes are regimes of civil law, which have been imported into tax law, namely in the terms referred to by article 2 of the MPTC.

And the interpreter of tax law cannot equate these regimes, in accordance with the rule according to which the concepts of other branches of law have the sense in tax law that is given to them in those branches of law, or in the words of article 11, no. 2 of the General Tax Law (GTL), on the interpretation of tax law: "Whenever, in tax norms, terms specific to other branches of law are employed, they must be interpreted in the same sense that they have there, unless otherwise directly provided by law."

On the other hand, still taking into account that in determining the sense of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed, as per article 11, no. 1 of the GTL which thus refers to the Civil Code, its article 10 on the application of analogy, determines that this shall only be applicable in case of gaps in the law.

Now, tax law contains no gap. The MPTC determines, to which the cited item refers, that in the horizontal property regime the fractions constitute properties. The property not being subject to this regime, legally the fractions are parts capable of independent use, without there being common parts.

Being the property subject to the regime of complete property, but being physically constituted by parts capable of independent use, tax law attributed relevance to this materiality, evaluating these parts individually, in accordance with article 12 and consequently, in accordance with art. 12, no. 3, of the MPTC, each story or part of a property capable of independent use is considered separately in the property registration, but in the same register, proceeding to the assessment of Municipal Property Tax taking into account the taxable property value of each part.

The unity of the urban property in vertical ownership composed of various stories or divisions is not, however, affected by the fact that all or some of those stories or divisions are capable of independent economic use.

The fact that the Municipal Property Tax has been determined based on the taxable property value of each part of the property with independent economic use does not equally affect the application of item 28, no. 1, of the General Table.

It is what results from the fact that the determining factor for the application of that item of the General Table is the total taxable property value of the property and not separately that of each of its parcels.

Any other interpretation would violate, indeed, the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of tax provided in article 103, no. 2, of the Portuguese Republic's Constitution (PRC).

A tax incidence type according to which the taxable property value of urban properties on which the application of item 28.1 of the General Table depends is the taxable property value of each story or division capable of independent use and not the total taxable property value of the urban property with residential purpose certainly has no expression in law.

It is, thus, unconstitutional, as offensive of the principle of tax legality, the interpretation of item 28.1 of the General Table, to the effect that the taxable property value on which its incidence depends is determined globally and not story by story or division by division.

The tax fact of the stamp duty of item 28.1, consisting in the ownership of urban properties whose taxable property value contained in the property register, in accordance with the MPTC, is equal to or exceeding €1,000,000.00, the taxable property value relevant for purposes of the incidence of the tax is, thus, the total taxable property value of the urban property and not the taxable property value of each of the parts that compose it, even when capable of independent use.

And this interpretation of the tax incidence norm to stamp duty results from the combination with the other tax incidence norm to Municipal Property Tax which is article 1, according to which the Municipal Property Tax is levied on the taxable property value of urban properties, taking into account the notion of property of article 2 and of urban property contained in article 4 and also of the categories of urban properties described in article 6.

In this path, the claimant's request to have the horizontal property regime applied, by analogy, to its property, considering that each of the fractions capable of independent use constitutes a property, does not succeed, because that would not be interpreting the norms of the MPTC, and by consequence of the Stamp Duty Code, that would be subverting the entire regime instituted there, with the violations of the principles referred to above.

II. THE PRELIMINARY ISSUE RAISED BY THE RESPONDENT

The preliminary issue raised by the TA concerns compliance with the legally fixed deadline for the request for constitution of the arbitral tribunal. Indeed, it does not clearly result from the request for arbitral ruling as it was initially formulated by the Claimant compliance with the aforementioned deadline.

However, following a dispatch dated 21.10.2015, the Claimant came to respond to the issue raised by the TA stating the following:

The taxpayer requested on 15/01/2015 official review of the stamp duty assessment acts, having been assigned the case number ...2015...;

In accordance with article 57 of the GTL the tax procedure must be completed within the period of 4 months;

To date the procedure has not been completed;

Under the provision of number 5 of article 57 of the GTL, tacit rejection is presumed on 15/05/2015;

In accordance with article 102 of the Code of Administrative Tax Procedure (CATP) judicial challenge may be filed within the period of 3 months counting from the tacit rejection;

The request for constitution of the arbitral tribunal occurred on 21 May 2015;

It is therefore not out of time the request for constitution of the arbitral tribunal in accordance with article 3-A of law 10/2011.

Called upon to pronounce itself on the request presented by the Claimant, the Respondent came to state the following:

The request for official review of the assessment is not a ground for requesting the constitution of the arbitral tribunal, in accordance with the final part of the aforementioned item a) of art. 10, no. 1, of Decree-Law no. 10/2011, of 20 January.

If the claimant's request is analyzed on the basis of the first part of the aforementioned item a), that is on the basis of the provision contained in article 102, no. 1, item a) of the CATP, that is, of the expiry of the deadline for voluntary payment of the tax liabilities legally notified to the taxpayer, the request for constitution of the tribunal is out of time, since the assessments in question had a voluntary payment deadline of 30 April 2014 if only the year 2013 is taken into account, when it also challenges the assessments of the year 2012, and the present request was presented by the claimant on 21 May 2015, therefore far beyond the 90-day period.

Now in accordance with article 78 of the GTL the deadline for the request for review is the deadline for administrative complaint, that is 3 months after the assessment, which in this case refer to the years 2012 and 2013.

In conclusion, there is a "double" expiration of time of the request, since from the request for official review one cannot count the 90-day period, but rather from the hierarchical appeal which was not filed, and if by hypothesis this fact is taken into account, the request for official review was filed out of time in accordance with article 78 of the GTL.

Let us then examine:

As to the first argument of the TA, that is, that the request for official review of the assessment is not a ground for requesting the constitution of the arbitral tribunal, it is not correct. Indeed, being the rejection, express or tacit, of the request for review of the tax act, one of the injurious acts referred to in article 95, no. 2, item d), of the GTL, it is susceptible of challenge, which constitutes an inalienable right, except in cases provided by law (article 96, no. 1, of the GTL).

However, the TA further contends that the request for review of the assessments presented by the Claimant was formulated beyond the deadline of "administrative complaint" and that, therefore, there would be a double expiration of time of the request for arbitral ruling.

On the meaning of the expression "administrative complaint" it is to be noted that there is the existence of two distinct doctrinal positions: one that this is reduced to the administrative complaint provided in the Code of Administrative Procedure, whose general period for filing is 15 days, and one that, in practice, is equivalent to gracious complaint, both as to the deadline for its presentation (120 days counting from the expiry of the deadline for voluntary payment of the assessment), as to its grounds (on the basis of any illegality) and, also, as to the intended legal effect, which is the total or partial annulment of the tax act. It is this second solution that seems to us to warrant acceptance.

However, as to the specific case, it is important to distinguish between the assessment relating to the year 2012 and the assessment relating to the year 2013: as to the first, there is no doubt that, as of the date of the request for official review (15.01.2015), the deadline for administrative complaint (gracious complaint) had already expired; with regard to the assessment of the year 2013, whose voluntary payment deadline ended on 30 November 2014, on 15.01.2015 that deadline had not yet expired.

Notwithstanding the expiry of that administrative complaint deadline relating to the assessment of the year 2012, nothing prevents the impulse for the official review of the assessment of that year to lie with the taxpayer, as follows from the provision in no. 7 of article 78 of the GTL - in which reference is made to the interrupting effect of the respective deadline (see also articles 49, no. 1, of the GTL and 86, no. 4, item a), of the CATP).

Indeed, in accordance with repeated case law of the Supreme Administrative Court (Tribunal Supremo Administrativo - STA), recently expressed in the Decision of the Plenary of the Tax Court Section, rendered in case no. 0793/14, on 3 June 2015, "(…) when the request for review had as its object an assessment act that the taxpayer deems illegal – because, in its view, it was issued based on an incorrect interpretation and application of the applicable law, with faulty application to the relevant facts – nothing prevents that they may, within the period of four years counted from the assessment (or, if the tax has not yet been paid, at any time), request the Administration to officially review that act, thereby becoming invested with a right to a decision on the request filed."

Being a procedure opened by the initiative of the interested party (see article 54, no. 1, item c), of the GTL), the TA was obliged to pronounce itself (article 56, no. 1, of the GTL) and, not having done so within the deadline provided in no. 1 of article 57 of the GTL, its rejection is presumed, for purposes of judicial challenge (article 57, no. 5, of the GTL and article 102, no. 1, item d), of the CATP).

The request for official review of the assessments under analysis was presented on 15.01.2015 and, verifying the respective admissibility requirements, that is, as to the assessment of the year 2013, because it was made within the deadline of gracious complaint, in which any illegality could be invoked and, as to the assessment of the year 2012, because the period of 4 years after the date of its issuance had not yet elapsed and because the assessments were issued in error as to the legal requirements, by incorrect interpretation of the norm of objective tax incidence contained in item 28.1 of the GTSD, attributable to the TA, the filing of the request for constitution of the arbitral tribunal cannot be deemed untimely, having regard to the deadline established in article 10, no. 1, item a), of the LRAT.

Thus, having verified the timeliness of the request, it is appropriate to proceed to the analysis of the merits of the request.

III. SANATION

  1. The Tribunal is competent and is regularly constituted, in accordance with articles 2, no. 1, item a), 5 and 6, all of the LRAT.

  2. The parties have legal standing and capacity to sue, are legitimate and are legally represented, in accordance with articles 4 and 10 of the LRAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

  3. The proceedings do not suffer from vices that would invalidate it.

IV. FINDINGS OF FACT

IV.1. Facts Established

Before entering into the appraisal of the questions of law, it is appropriate to present the factual matter relevant for its understanding and decision, which, having examined the documentary evidence attached to the proceedings and also taking into account the facts alleged, is established as follows:

The Claimant is the owner and legitimate holder of the property with 7 stories, comprising basement, shop and 5 stories, with tile roof covering, registered in the property register of the parish of ... under article ....

The said property was constituted under horizontal property ownership on 18/09/2014.

Until that date the property was constituted by the following stories with independent use:

a) Shop B — With the taxable property value of €93,840 and intended for commerce;

b) Shop E - With the taxable property value of €656,330 and intended for commerce;

c) 1D — With the taxable property value of €120,040 and intended for housing;

d) 1E — With the taxable property value of €119,160 and intended for housing;

e) 2D - With the taxable property value of €120,040 and intended for housing;

f) 2E - With the taxable property value of €119,160 and intended for housing;

g) 3D - With the taxable property value of €120,040 and intended for housing;

h) 3E - With the taxable property value of €119,160 and intended for housing;

i) 4D - With the taxable property value of €120,040 and intended for housing;

j) 4E - With the current taxable property value of €93,860 and intended for housing;

k) 5D - With the taxable property value of €104,250 and intended for housing;

l) 5E - With the taxable property value of €104,880 and intended for housing;

m) SF - With the taxable property value of €102,950 and intended for housing;

n) SHOP 1D — Intended for services with the taxable property value of €92,240;

o) SHOP 1E - Intended for services with the taxable property value of €92,240;

p) SHOP 2D - Intended for services with the taxable property value of €92,240;

q) SHOP 2E - Intended for services with the taxable property value of €92,240;

r) SHOP 3D - Intended for services with the taxable property value of €92,240;

s) SHOP 3E - Intended for services with the taxable property value of €92,240;

t) SHOP 4D - Intended for services with the taxable property value of €92,240;

u) SHOP 4E - Intended for services with the taxable property value of €92,240;

The sum of the TPVs of the divisions independent intended for housing is €1,243,380.

In the year 2013, relating to the year 2012, the Respondent assessed and the Claimant paid the amount of €12,433.80, relating to the TPV of all the divisions considered independent intended for housing.

In the year 2014, relating to the year 2013, the Respondent assessed and the Claimant paid the amount of €12,433.80 relating to the TPV of all the divisions considered independent intended for housing.

On 15.01.2015, the taxpayer requested the official review of the stamp duty assessment acts in question in the present proceedings.

On 21.05.2015, the Claimant filed the request for constitution of the singular arbitral tribunal.

Until that date, the request for official review mentioned in 7 had not been subject to response by the TA.

IV.2. Facts Not Established

There are no facts with relevance to the cause that have been deemed not established.

V. ISSUE TO BE DECIDED

The essential issue in the present proceedings is to determine, with reference to an urban property not constituted under a horizontal property ownership regime, comprised of various areas with independent use, with residential purpose, whether the TPV relevant for purposes of taxation under stamp duty under item 28.1 of the GTSD should be the amount corresponding to the sum of the taxable property value attributed to the different parts or stories independently or whether, on the contrary, the TPV attributed to each story or division with independent use should be taken into account for purposes of the incidence of stamp duty under item 28.1 of the GTSD.

VI. LEGAL GROUNDS

Item 28 of the GTSD provides as follows:

  1. "Ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the property register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or exceeding (euro) 1,000,000 - on the taxable property value used for purposes of Municipal Property Tax (MPT):

28.1 Per property with residential purpose – 1%

28.2 – Per property, when the taxpayers that 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 ordinance of the Minister of Finance – 7.5%."

In the present proceedings it is necessary to decide whether the TPV relevant as a criterion for the incidence of stamp duty in accordance with item 28.1 of the GTSD is the amount corresponding to the sum of the taxable property value attributed to the different parts or stories (global TPV) or, rather, the TPV attributed to each of the residential parts or stories.

This issue has already been considered in various proceedings of tax arbitration, and there are no reasons to adopt a different understanding from that which was adopted in decisions previously rendered. Thus:

In accordance with no. 2 of article 67 of the Stamp Duty Code, as to "matters not regulated in the present Code relating to item 28 of the General Table, the Municipal Property Tax Code shall apply subsidiarily." The tax incidence norm of item 28.1 of the GTSD referring to urban properties, it is appropriate to seek the concept of urban property in the MPTC.

The MPTC establishes, in article 2, no. 1, the concept of property. It defines it as "any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated in or situated on it, with a character of permanence, insofar as it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the aforementioned circumstances, endowed with economic autonomy in relation to the land on which they are situated, although situated in a fraction of territory that constitutes an integral part of a different patrimony or does not have patrimonial nature".

Article 4 of the MPTC establishes that urban properties are "all those that should not be classified as rural, without prejudice to the provision of the following article".

For its part, article 6 of the same Code proceeds to the classification of the various categories of urban properties, distinguishing them, in no. 1, into four subcategories: "a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Other". For its part, no. 2 establishes the criterion used for this distinction, defining that "Residential, commercial, industrial or for services are the buildings or constructions licensed for such or, in the absence of a license, that have as their normal destination each of these purposes".

With regard to the specific issue that is the object of the present decision, it is appropriate to take into account article 12, no. 3, of the MPTC, in accordance with which "each story or part of a property capable of independent use is considered separately in the property registration, which also distinguishes the respective taxable property value."

Finally, in accordance with article 119, no. 1 of the MPTC, "The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month preceding the month of payment, the competent collection document, with specification of the properties, their parts capable of independent use, respective taxable property value and the tax amount attributable to each municipality of the location of the properties."

As recognized by doctrine, the tax concept of property deviates from the civil concept of property, contrary to what the Respondent contends, and that, "For tax purposes, no. 1 of this article [2 of the MPTC] provides for the existence of three necessary requirements for one to be before the concept of property, namely, the physical structure, patrimonialness and economic value."
(Cf. J. Silvério Mateus and L. Corvelo de Freitas, "Real Property Taxes, Stamp Duty, Annotated and Commented", Engifisco, 1st edition, 2005, p. 101).

Thus, "the physical element is defined by reference to 'any fraction of territory', encompassing waters, plantations and constructions of any nature incorporated in or situated on it with a character of permanence. On the legal plane, relevance is given to patrimonialness. The property, in the physical sense, must be capable of integration into the patrimony of a natural or legal person. (…) The requirement of economic value is naturally associated with the requirement of patrimonialness, resulting therefrom the susceptibility of generating income or other type of utilities for its holder." (op.cit.).

In the specific case, it seems to us that all three requirements mentioned are met, insofar as the parts or divisions capable of independent use that are the object of the assessment acts in question have physical correspondence with reality, form part of the Claimant's patrimony and have an economic value that, if nothing else, derives from the TPV that was attributed to them by the valuation carried out by the TA.

Thus, it seems to us that the parts or divisions capable of independent use, meeting all the requirements to qualify as a "property", in economic, physical and patrimonial terms, should be considered autonomously for purposes of the incidence of item 28.1 of the GTSD.

Furthermore, in the tax incidence rule contained in item 28.1 of the GTSD, the legislator did not deem it relevant to distinguish between properties in horizontal ownership and properties in vertical ownership. And this, in our view, because what is ultimately relevant is the economic purpose of the property, as also follows from article 6 of the MPTC, in light of the constitutional principles contained in articles 103, no. 1 and 104, no. 3 of the PRC. In truth, in terms of economic substance, there is no difference between a building in horizontal property ownership and a building in vertical or complete property ownership constituted by parts or divisions capable of independent use, justifying itself, therefore, in terms of tax incidence rules – and in particular the rule contained in item 28.1 of the GTSD – the equal treatment of these two situations. Moreover, the tax legislator also determines this equal treatment, in article 119 of the MPTC, when it establishes that the tax should be assessed individually on each part or division capable of independent use, taking into consideration the TPV of each part or division capable of independent use, individually considered.

It follows from the foregoing that the rule contained in item 28.1 of the GTSD should apply indistinctly, whether to urban residential properties constituted in horizontal ownership or those found in complete or vertical property ownership, and the tax should be levied on the TPV attributed by the Respondent, through general valuation, to each of the parts or divisions capable of independent use.

In view of the foregoing, and considering the fact that none of the parts or divisions capable of independent use that are the object of the assessment acts challenged have a taxable property value equal to or exceeding €1,000,000.00, as was demonstrated in the present proceedings, it is concluded that the Claimant's request is well-founded, the assessment acts challenged being deemed illegal, due to error as to the facts and law and violation of article 1, no. 1 of the Stamp Duty Code and item 28.1 of the GTSD, and the said acts should be annulled.

As to indemnitory interest, article 43 of the GTL stipulates that "indemnitory interest is due when it is determined, in gracious complaint or judicial challenge, that there was error attributable to the services which results in payment of the tax debt in an amount greater than legally due".

As to the existence, in the case, of error attributable to the services, this is deemed to be verified, according to uniform case law of the STA (see, in this sense, the Decisions of the STA of 22-05-2002, Case no. 457/02; of 31.10.2001, Case no. 26167 and of 2.12.2009, Case no. 0892/09).

Thus, there is no doubt that the Claimant is entitled to be compensated through receipt of indemnitory interest, calculated in accordance with article 43, no. 1 of the GTL and article 61, numbers 2, 3 and 5, on the amounts paid relating to the assessment acts annulled.

VII. DECISION

In accordance with that which is set forth above, it is decided:

  1. To grant the request for arbitral ruling and, in consequence, declare the illegality of the stamp duty assessments challenged, with the consequent annulment of these same assessments;

  2. To order the Respondent to pay indemnitory interest;

  3. To order the Respondent to pay the costs of the proceedings.

Value: in accordance with the provision of articles 97-A, no. 1, item a), of the CATP and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case value is fixed at €24,867.60.

Costs: in accordance with the provision of article 22, no. 4, of the LRAT and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €1,530.00, to be paid by the Respondent in accordance with articles 12, no. 2, and 22, no. 4, both of the LRAT, and article 4, no. 4, of the said Regulation.

Let it be registered and notified.

Lisbon, 27 November 2015

The Arbitrator,

Raquel Franco

[1] Cf., in this sense, Diogo Leite de Campos, Benjamim Silva Jorge Lopes de Sousa, "General Tax Law – annotated and commented", 4th Edition, Lisbon, Encontro da Escrita, 2012, pp. 707-709.

[2] Thus, José Casalta Nabais, "Tax Law", 7th Edition, Coimbra, Almedina, 2014, p. 306 and Joaquim Freitas da Rocha "Lessons on Tax Procedure and Process", 5th Edition, Coimbra, Coimbra Editora, 2014, p. 226.

Frequently Asked Questions

Automatically Created

How is the taxable patrimonial value (VPT) determined for vertical property buildings under Verba 28 of the TGIS?
For vertical property buildings under Verba 28 of the TGIS, the taxable patrimonial value (VPT) should be determined individually for each story or division with independent use, not as an aggregate sum. According to the claimant's interpretation supported by Article 67(2) of the Stamp Duty Code and Article 12(3) of CIMI, vertical properties follow the same assessment rules as horizontal property, where each autonomous unit capable of independent use is assessed separately with its own VPT for both Municipal Property Tax and Stamp Tax purposes.
Does Stamp Tax (Imposto do Selo) under Verba 28.1 apply to the global VPT or individual unit VPT in non-horizontal property buildings?
Stamp Tax under Verba 28.1 should apply to individual unit VPT rather than global VPT in non-horizontal property buildings. The claimant argued that the €1,000,000 threshold must be evaluated separately for each story or division with independent use. The Tax Authority's approach of summing all VPTs contradicts the subsidiary application of CIMI rules and violates principles of tax equality, as it creates disparate treatment between vertical and horizontal properties with identical economic characteristics.
Can CIMI rules apply subsidiarily to Stamp Tax matters under Article 67(2) of the Código do Imposto do Selo?
Yes, CIMI rules can and should apply subsidiarily to Stamp Tax matters under Article 67(2) of the Código do Imposto do Selo. This provision explicitly states that for matters not regulated in the Stamp Duty Code relating to Item 28 of the General Table, the Municipal Property Tax Code shall apply subsidiarily. Since CIMI treats each story or division capable of independent use as a separate taxable unit under Article 12(3), this methodology should extend to Stamp Tax assessment, ensuring consistent treatment across different tax regimes.
What was the outcome of CAAD arbitration process 323/2015-T regarding Stamp Tax liquidations for 2012 and 2013?
The text excerpt presents the claimant's comprehensive arguments challenging the stamp duty assessments for 2012 and 2013 totaling €24,867.60, but the actual arbitral decision outcome is not included in the provided excerpt. The claimant sought a declaration of invalidity of the assessments, arguing that stamp duty should only apply if individual units exceeded €1,000,000 in VPT. The arbitrator's final ruling and reasoning would appear in the subsequent sections of the decision not included in this excerpt.
How does the distinction between horizontal and vertical property affect Stamp Tax liability on residential buildings in Portugal?
The distinction between horizontal and vertical property significantly affects Stamp Tax liability under Verba 28. If the Tax Authority's interpretation prevails, vertical properties face taxation on aggregated VPT, potentially triggering the €1,000,000 threshold even when no individual unit reaches this value. Conversely, horizontal property owners pay stamp duty only on autonomous fractions exceeding €1 million individually. The claimant argued this distinction violates constitutional principles of equality and tax justice, as identical properties with the same economic value receive vastly different tax treatment based solely on formal legal structure rather than actual taxpaying capacity.