Process: 33/2014-T

Date: September 18, 2014

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

CAAD arbitration process 33/2014-T addresses the critical question of Stamp Tax (Imposto do Selo) liability under Verba 28.1 of the General Stamp Tax Table for vertical property buildings not constituted under horizontal property regime. The case involves an estate owning a building with ten independent floors (nine residential), each registered with separate property tax articles. The Portuguese Tax Authority assessed Stamp Tax individually on eight floors, arguing that the property should be treated as a single unit with a combined taxable property value of €1,499,874, exceeding the €1,000,000 threshold triggering the 1% tax under Verba 28.1 TGIS introduced by Law 55-A/2012. The taxpayer challenged this interpretation, contending that each floor with independent use should be evaluated separately for tax purposes, and since no individual unit exceeded €1,000,000, no Stamp Tax was due. The fundamental legal issue concerns whether 'property' under Verba 28.1 refers to each independently registered unit or the entire building complex. The arbitration references precedent Case 50/2013-T involving the same property, which annulled a similar assessment. The case establishes important principles regarding vertical property taxation, the interpretation of taxable base for properties with multiple independent units, and the application of the €1,000,000 threshold. This decision has significant implications for inherited estates, investment properties, and real estate holdings structured as vertical property rather than horizontal condominiums, affecting how Portuguese tax law treats buildings with functionally independent units for Stamp Tax assessment purposes.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 33/2014 – T

A – REPORT

  1. The head of the ESTATE OF …, taxpayer No. …, with domicile …, came to request the constitution of an arbitral tribunal, under the provisions of articles 2, subsection 1, a) and 10, subsections 1 and 2 of the Legal Regime for Tax Arbitration, provided in Decree-Law 10/2011, of 20 January, hereinafter referred to as "LRTA" and of articles 1 and 2 of Administrative Order No. 112-A/2011, of 22 March, with a view to the declaration of illegality of eight Stamp Tax assessment acts, referring to the year 2012, with the Tax and Customs Authority (hereinafter referred to as "TCA") being the respondent.

  2. Upon admission of the request for constitution of a single arbitral tribunal, and the applicant having not opted for the appointment of an arbitrator, pursuant to subparagraph a) of subsection 2 of article 6 and subparagraph b) of subsection 1 of article 11 of the LRTA, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator.

The parties were notified of this appointment and did not express any intention to challenge the appointment of the arbitrator, in accordance with the combined provisions of article 11, subsection 1, subparagraphs a) and b) of the LRTA and articles 6 and 7 of the Code of Ethics, and, in compliance with the provision of subparagraph c) of subsection 1 of article 11 of the LRTA, as amended by article 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 19-03-2014.

  1. Upon notification, the TCA submitted its response, having raised no exception.

  2. The holding of the meeting provided for in article 18 of the LRTA was dispensed with, as well as the submission of arguments, with the consent of the parties.

  1. The applicant seeks the declaration of illegality and consequent annulment of eight Stamp Tax assessment acts relating to the year 2012, issued by the Tax and Customs Administration (TCA) with reference to various floors of the property registered in the urban property register of the parish of …, municipality of …, under article …, alleging in summary:

a) The aforementioned property, which is not constituted under a regime of horizontal property ownership, is composed of ten floors with independent use, nine of which are destined for residential purposes.

b) The TCA assessed tax individually on the taxable property values of the floors destined for residential use, which reach a global value of €1,499,874.00 (one million four hundred ninety-nine thousand eight hundred seventy-four euros).

c) This was done by application of item 28.1 of the General Table of Stamp Tax, as worded by article 4 of Law No. 55-A/2012, of 29 October.

d) Being a matter concerning a property that comprises floors or divisions with independent use, the subjection to Stamp Tax is not determined by the sum of the taxable property values of all such floors or divisions, but by the individual value of each one.

e) The assessment acts in question are illegal by violation of the rule of incidence of item 28.1 of the General Table of Stamp Tax.

  1. For its part, the respondent alleged in response, in summary:

a) The applicant being the owner of a property under a regime of total or vertical property ownership, it does not have autonomous units to which the law attributes the qualification of property.

b) Whereby, whether for the purposes of Property Tax or Stamp Tax, by virtue of the wording of the aforementioned item 28.1, the applicant is not the owner of nine autonomous units, but rather of a single property.

c) The unity of urban property in vertical ownership composed of various floors or divisions is not affected by the fact that all or part of such floors or divisions are capable of independent economic use.

d) The interpretation of item 28.1 of the General Table of Stamp Tax, in the sense that the taxable property value upon which its incidence depends is determined globally and not floor by floor or division by division, violates the principle of tax legality.

  1. The Arbitral Tribunal was duly constituted and is materially competent.

The parties possess legal personality and capacity and are legitimate (articles 4 and 10, subsection 2, of the same statute and article 1 of Administrative Order No. 112-A/2011, of 22 March).

The proceedings do not suffer from any defects of nullity.

B. DECISION

  1. MATTER OF FACT

1.1. PROVEN FACTS

The following facts are considered proven:

a) The TCA assessed Stamp Tax individually on the taxable property values of the floors or parts capable of independent use of the property situated …, parish of …, municipality of …, as follows:

  1. Article No. …, tax of €1,079.15 on the taxable property value of €215,830.00;

  2. Article No. …, tax of €868.30 on the taxable property value of €173,660.00;

  3. Article No. …, tax of €627.05 on the taxable property value of €125,410.00;

  4. Article No. …, tax of €1,094.20 on the taxable property value of €218,814.00;

  5. Article No. …, tax of €908.45 on the taxable property value of €181,690.00;

  6. Article No. …, tax of €1,330.05 on the taxable property value of €266,010.00;

  7. Article No. …, tax of €495.10 on the taxable property value of €99,020.00;

  8. Article No. …, tax of €565.55 on the taxable property value of €113,110.00.

b) Such property is part of the undivided estate of ….

c) The property comprises a total of ten floors and divisions with independent use whose taxable property value (TPV), determined under the Property Tax Code (PTC), varies between €16,980 and €266,010 and totals €1,516,854 overall.

d) Nine of such floors are destined for residential use, including the eight mentioned in a) above.

e) The sum of the overall taxable property value of those nine floors totals €1,499,874.00.

f) The assessment of Stamp Tax relating to the 2nd floor of the same property was the subject of an arbitral decision rendered in Case No. 50/2013-T which, ruling the claim well-founded, annulled the respective act.

g) The applicant submitted an administrative complaint regarding the assessments that are the subject of these proceedings, to which a dismissal order was issued on 29-07-2013.

h) The applicant lodged, on 30-08-2013, an appeal of that dismissal order, to which no decision was rendered.

i) On 15-01-2014 the applicant submitted the request for arbitral pronouncement that gave rise to these proceedings.

1.2 The facts were accepted as proven on the basis of the documents attached to the proceedings.

1.3 UNPROVEN FACTS

There are no facts accepted as unproven that are relevant to the examination of the claim.

1.4 THE LAW

The substantive issue to be examined lies in the interpretation to be given to item 28.1 of the General Table of Stamp Tax, as worded by Law No. 55-A/2012 of 29 October, with a view to determining whether, with respect to properties not constituted under a regime of horizontal property ownership that comprise floors or divisions capable of independent use, the taxable property value relevant for the purposes of application of the tax is that individually assigned to each one or, on the contrary, is that corresponding to the sum of all of them.

Item 28 of the General Table of Stamp Tax provides:

  • "Ownership, usufruct or right of superficies of urban properties whose taxable property value shown in the property register, under the terms of the Property Tax Code, is equal to or exceeds €1,000,000.00 – on the taxable property value for the purposes of Property Tax:

28.1 – Per property for residential use – 1%

(…)".

Article 6 of the aforementioned Law No. 55-A/2012 provides that the taxable property value to be considered in the assessment of Stamp Tax corresponds to what results from the rules of the Property Tax Code (PTC), and subsection 2 of article 67 of the Stamp Tax Code (STC) adds that "for matters not regulated in the present Code relating to item No. 28 of the General Table, the provisions of the PTC apply subsidiary."

For its part, article 2 of the PTC gives us the concept of property, and article 6 of the same code, in its subsection 2, establishes that "residential, commercial, industrial or for services are the buildings or structures licensed for such purpose or, in the absence of a license, that have as normal destination each of these purposes".

It is with resort to these provisions that the answer to the question to be decided must be found.

It being certain that the only comparison that the PTC makes between properties under a regime of horizontal or total ownership can be found in subsection 4 of article 2 when it prescribes that "each autonomous unit, under the regime of horizontal property ownership, is deemed to constitute a property".

In accordance with this, in the definition of the concept of property registers, subsection 3 of article 12 of the PTC determines that "each floor or part of a property capable of independent use is considered separately in the matricial registration, which also discriminates its respective taxable property value".

That is to say, there is nothing in the law that permits the conclusion that the taxable property value of property under a regime of total ownership is to be obtained by the sum of the values individually assigned to the parts that constitute it, in accordance with an understanding that has been adopted by several arbitral decisions[1] to which we fully adhere and, accordingly, subscribe.

Whereby we understand that the position of the TCA, in seeking to establish as the reference value for the incidence of Stamp Tax the global value of the property in question, cannot merit acceptance, as this is not admitted by the PTC which is, as already mentioned, the remissive legal basis supporting the same.

Likewise, the annulment has already been decreed, by arbitral decision, of the assessment made by the TCA with respect to the 2nd floor of the same property.

From which it is concluded that the assessments that are the subject of this arbitral request suffer from illegality, whereby their annulment is necessary.

  1. DECISION

In view of the above, it is decided:

a) to rule well-founded, on the ground of breach of law, the request for arbitral pronouncement, with the consequent annulment of the contested Stamp Tax assessment acts relating to the year 2012;

b) to order the respondent to pay the costs of the proceedings.

VALUE OF THE CASE: In accordance with the provisions of article 306, subsection 2 of the Code of Civil Procedure, article 97-A, subsection 1, a) of the Code of Tax Procedure and article 3, subsection 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €6,985.85 (six thousand nine hundred eighty-five euros and eighty-five cents).

COSTS: Pursuant to the provision of article 22, subsection 4, of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €612.00 (six hundred twelve euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, charged to the Tax and Customs Authority.

Let notice be given.

Lisbon, 18 September 2014

The Arbitrator

(António Alberto Franco)

[1] Among others, those rendered in Cases 50/2013-T, 131/2013-T, 181/2013-T and 185-2013-T

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) liability under Verba 28.1 of the General Stamp Tax Table for vertical property buildings?
Under Verba 28.1 of the General Stamp Tax Table (TGIS), Stamp Tax liability for vertical property buildings depends on whether each independent unit is treated separately or collectively. For properties not constituted under horizontal property regime (propriedade horizontal) but comprising floors or divisions with independent use and separate property tax registrations (artigos matriciais), the taxable property value relevant for applying the €1,000,000 threshold should be determined individually for each unit, not by summing all units together. The 1% Stamp Tax only applies to individual residential properties whose taxable property value (VPT) equals or exceeds €1,000,000, consistent with the Property Tax Code principles that assign separate valuations to independently registered units.
Can the Portuguese Tax Authority assess Stamp Tax individually on each independent unit of a building not constituted under horizontal property regime?
No, based on CAAD arbitration precedent including Process 33/2014-T, the Portuguese Tax Authority cannot automatically assess Stamp Tax by aggregating values of individual units in buildings not under horizontal property regime when each unit has separate property tax registration. The correct interpretation of Verba 28.1 TGIS requires evaluating each independently registered floor or division against the €1,000,000 threshold separately. When a building comprises multiple floors capable of independent economic use, each with its own property tax article number (artigo matricial), the tax incidence must be determined individually per unit, not by calculating the total building value. This interpretation respects the principle of tax legality and aligns with how the Property Tax Code treats properties with autonomous registrations, even within a single building structure not formally divided under horizontal property law.
How does CAAD arbitration process 33/2014-T define the taxable base for properties with independent units under Verba 28.1 TGIS?
Legal grounds for challenging Stamp Tax assessments on inherited vertical property buildings in Portugal include: (1) violation of the correct interpretation of Verba 28.1 TGIS when the Tax Authority improperly aggregates individual unit values instead of assessing each separately; (2) breach of the tax legality principle when assessment methodology contradicts the Property Tax Code's treatment of independently registered units; (3) misapplication of the €1,000,000 threshold by treating multiple units as a single property when each has separate property tax registration; and (4) reliance on CAAD arbitration precedents establishing that properties not under horizontal regime with independent units should be taxed individually. Taxpayers can file administrative complaints followed by tax arbitration under the RJAT (Legal Regime for Tax Arbitration, Decree-Law 10/2011), which provides an alternative to judicial appeals for contesting illegal assessment acts involving properties held in undivided estates or structured as vertical property.