Process: 334/2015-T

Date: October 28, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (334/2015-T) concerns the legality of a stamp duty assessment under Item 28.1 of the General Table (GITS) for the 2014 fiscal year. The claimant, A…, SA, challenged an assessment of €28,309.27 on construction land in Figueira da Foz with a taxable property value (VPT) of €2,830,962.91. Following amendments introduced by Law 83-C/2013 (effective January 1, 2014), the Tax Authority applied the 1% stamp duty rate to properties exceeding €1,000,000, interpreting the legislation to include construction land with authorized or anticipated residential development. The claimant argued that Item 28.1's reference to properties 'with residential use' implies actual, present functionality rather than future potential, and that construction land should maintain its classification for tax purposes regardless of building authorization. The company contended that extending the tax to encompass future development possibilities lacks legal support under the interpretative principles of Article 9 of the Civil Code and Article 11 of the General Tax Law. The Tax Authority maintained that the 2014 legislative modification explicitly brought construction land within the scope of Item 28.1 when the authorized or anticipated construction is residential and the VPT equals or exceeds €1,000,000. The arbitration proceedings followed the RJAT (Legal Framework for Tax Arbitration) established by Decree-Law 10/2011, with the arbitral tribunal constituted on August 7, 2015. The case centered on statutory interpretation regarding whether terrenos para construção fall within Item 28.1's incidence rule, presenting significant implications for high-value construction land taxation in Portugal.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 334/2015-T

Subject Matter: Stamp Duty (Imposto de Selo), Item 28.1 General Table

Claimant: A…, SA

Respondent: Tax and Customs Authority (AT)

I - REPORT

A…, SA, tax identification number …, with registered office at Av. …, no. … and … at …, …, in Lisbon, filed, on 28/05/2015, pursuant to the provisions of paragraph a) of article 1 of article 10 of Decree-Law no. 10/2011, of January 20, which approves the Legal Framework for Tax Arbitration (RJAT), a request for arbitral determination in which the Tax and Customs Authority - AT is the Respondent, requesting a declaration of illegality, with the consequent annulment, of the additional tax assessment no. 2015 …, dated 20.3.2015, of the Stamp Duty relating to the year 2014, in the amount of 9,436.43€.

The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD, and the Tax and Customs Authority (hereinafter referred to as "AT" or the "Respondent") was notified of its constitution on 23 July 2015.

The CAAD Deontological Council appointed, in accordance with article 1 of article 6, and paragraph a) of article 1 of article 11 of RJAT, sole arbitrator of the arbitral tribunal the undersigned, who communicated acceptance of the office within the legally stipulated timeframe, the Tribunal having been constituted on 07/08/2015 and the parties notified on the same date.

II – GROUNDS

1 – Request

The Claimant in these proceedings, A…, SA, bases its request fundamentally on the following:

The issue to be decided concerns the mentioned stamp duty assessment relating to the year 2014, with which the Claimant disagrees, and from which it seeks the respective annulment on grounds of illegality.

The appellant attached a copy of the Notification of the Stamp Duty assessment with reference to the year 2014, in the amount of 28,309.27€, which also contains the elements for payment of the value of the first installment of the tax during the month of April 2015.

However, and although in the PI and document attached by the Claimant the property is identified, it being deduced from its reading that it concerns land for construction, only through the Property Register and the Valuation Sheet presented by AT, in which it is stated that the Constructive Feasibility Project is attached, did we become aware of the remaining essential elements for verification of the legality of the challenged assessment.

The Tribunal, upon reading both documents, became aware that it concerns the taxation in stamp duty, with reference to the year 2014, falling upon land for construction located in the parish of …, in Figueira da Foz, which is registered in the urban property matrix under article U - …, with the taxpayer property value of 2,830,962.91€ and that,

It was because it had a TPV [Taxpayer Property Value] exceeding 1,000,000€, and because it appeared in the property matrix that it concerned land with capacity for authorized or anticipated construction, that AT carried out the assessment of the stamp duty provided for in Item 28.1 of the GITS with reference to the year 2014.

This assessment was notified jointly with the indication that it should effect payment of the amount of 9,346.43€, during the month of April 2015, an amount corresponding to the first installment of the collection of 28,309.27€ calculated in that assessment (attached document).

The appellant does not agree with such assessment and, for this reason, comes to request from the Tribunal its annulment, on grounds of illegality.

In its favor, it alleged, in essence, that the taxation fell improperly upon land for construction, because referring to "the rule of incidence to urban properties with 'residential use' without any specific concept being established for this purpose, cannot from it be extracted that therein is contained a future potentiality, inherent in a distinct property that may possibly be built on the land".

"The expression 'with residential use' suggests, in a simple reading, an idea of real and present functionality. From the rule in question (the cited Item 28 of the Table) it is not possible to extract, by interpretation, that the option of the legislator for that expression is aimed at integrating 'other realities beyond those identified in article 6, no. 1 paragraph a) of CIMI'. Such interpretation has no legal support, in light of the principles contained in article 9 of the Civil Code and article 11 of the General Tax Law".

And it also alleged that "… the circumstance that for a given land for construction authorization for building of a property intended for habitation, or any other purpose, although it should be considered in its valuation, does not determine any alteration in the classification of the land which, for tax purposes, continues to be considered as such".

In summary, according to the appellant, lands for construction are not covered by the rule of incidence of Item 28.1 of the GITS.

Nothing else is requested.

2. Response of the Respondent

The AT responds that it is its understanding that the assessment document sent to the Appellant concerns an annual assessment, although therein is also referenced the value corresponding to the value of the 1st installment of the annual assessment amount.

For this reason, the Tribunal must examine a single tax act of assessment with reference to the stamp duty of the year 2014, the amount of which is 28,309.27€, and which was also notified in March 2015, along with the value of the first installment to be paid in April 2015, whereby the decision to be taken in these proceedings should concern the assessment of the year 2014 and not merely the value of the 1st installment.

It adds further that one thing is the amount of the assessment and another thing is its collection, because,

"The Tax Administration effected a single act of assessment of the Stamp Duty pertaining to item 28.1 of the GITS and referring to the year 2014, which was notified in March 2015, together with the collection document for the first installment thereof.

Now, it is this assessment act, annual and single, notified in March 2015, which is the object of the present request for arbitral determination, impugning the said act with the argument of error in the application of the rule of incidence of the tax.

And, impugning the act of assessment of the tax, the judgment that comes to be made on the legality or illegality of the same will reverberate upon all collection acts, independent of the moment in which they may take place".

As to the merits, not clarifying, however, its position as to prior years, the Respondent argues that, following the modification of the wording given by Law no. 83-C/2013, of December 31 to Item 28.1 of the General Table Attached to the Stamp Duty Code, whose commencement of effectiveness occurred from 1/01/2014, stamp duty is due at the rate of 1%, which will fall upon the taxpayer property value of lands for construction whose building, authorized or anticipated, is for habitation, always provided the same is equal to or exceeding 1,000,000.00€.

In the sequence of this reasoning, the AT understands that the assessment notified complies with the legal criteria of the Stamp Duty Code in force for the fiscal year 2014 and that this is what is properly reflected in the notification sent to the appellant in the attached document.

III - Subsequent Proceedings

Taking into account that in these proceedings only questions of law are under consideration, and no exceptions exist to consider, the Tribunal decided to dispense with the holding of the meeting provided for in article 18 of the RJAT, as well as the stage of allegations.

IV – PROVEN FACTS

The following are the facts deemed proven:

The claimant, on 31 December 2014, was the owner of the land for construction located in Figueira da Foz - parish of …, registered in the urban property matrix under article no. …, with the taxpayer property value (TPV) of 2,830,928.91€, recorded in the matrix on that date;

The AT, in observance of the provisions of Item 28.1 of the GITS in force on the date, effected the assessment of stamp duty in March 2015, with reference to the year 2014, applying to the mentioned TPV the rate of 1% established therein;

The Claimant was notified of the value of the Stamp Duty of the year 2014, in the amount of 28,309.27€, value recorded in the first part of the notification to which reference is made in Doc. no. 2015 003476578, attached to the file,

And in that same notification document, where also appear the references for this purpose, the Claimant was informed that it should pay during the month of April 2015 the value pertaining to the first of the three installments in which the law permits the payment of Stamp Duty to be effected (as was the case, in accordance with article 120 of CIMI).

Although pointing out in its petition illegalities to the act of assessment of the Stamp Duty effected under Item 28.1 of the Stamp Duty Table, with reference to the year 2014, the Claimant, in the pleading, refers itself only to the amount of the 1st installment of the collection assessed with respect to the entire year, but says nothing about the value of the annual assessment nor indicates, ultimately, what the value of the case is.

Notwithstanding all this, it is deemed proven that the parties are referring to the same tax fact and to the same Stamp Duty assessment of 2014.

There are no unproven facts, nor was any fact or document impugned.

V – SANITATION

The Sole Arbitral Tribunal is regularly constituted on 07-08-2015, and the respective legal and regulatory formalities have been complied with (articles 11, no. 1, paragraphs a) and b) of RJAT and articles 6 and 7 of the CAAD Deontological Code), whereby the same is competent ratione materiae, in conformity with article 2 of the RJAT.

The parties have legal personality and capacity, are legitimate and are regularly represented.

No nullities were identified in the proceedings nor exceptions of which the Tribunal should take cognizance, and the request is timely.

VI – QUESTIONS TO BE DECIDED

Taking into account that the grounds of the parties are based on different versions, in time, for the same rule, this Tribunal is burdened with the obligation to decide on:

· On the one hand, what is the wording of item 28.1 of the GITS that applies to the calculation of the tax relating to lands for construction with reference to the year 2014, whether it is the law invoked by the Claimant, or rather the version in force from 1/01/2014 invoked by the AT, and whether, in light of this new wording, the notified assessment suffers from any illegality;

· On the other hand, whether the request formulated encompasses the stamp duty assessment of 2014 or rather, and only, the value of the 1st installment to which the Claimant refers.

A – Substantive Issue

The legislator established in the amended Item 28 of the GITS that, from 1/01/2014, ownership, usufruct or surface right of urban properties would be taxed under stamp duty whenever the respective taxpayer property value recorded in the matrix in accordance with CIMI is equal to or exceeding 1,000,000.00€ and, provided that that urban property has residential use. Upon the TPV the rate of 1% shall fall.

From careful reading of the PI of the Claimant it can be deduced with moderate certainty that the argumentation expended has as its argumentative basis the normative content of Item 28 of the GITS, amended by Law no. 55-A/2012, of 2012, which established:

«28 — Ownership, usufruct or surface right of urban properties whose taxpayer property value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000 — on the taxpayer property value used for the purpose of IMI:

28.1 — For property with residential use — 1 %;

28.2 — For property, when the taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by order of the Minister of Finance — 7.5 %.»

With the backing of this legal regime, the Claimant understands that the rule of incidence does not contemplate the taxation of lands for construction, even though their capacity be construction, whether or not an approved project exists.

And indeed has reason in its pertinent allegations, considering that the objective element of the rule of incidence did not include, in its core, lands for construction although endowed with those characteristics. And in its support would benefit from the reiterated and settled jurisprudence of the STA and the CAAD which, always, understood that these properties did not fall within Item 28 of the GITS amended to the GITS by the above-mentioned Law no. 55-A/2012, of 29/10.

However, this rule only remained in force until 31 December 2013 in its original wording, since the Budget Law for 2014, specifically Law no. 83-C/2013, of 31 December, in its article 194, came to determine:

"Article 194 - Amendment to the General Table of Stamp Duty:

Item 28.1 of the General Table of Stamp Duty, attached to the Stamp Duty Code, approved by Law no. 150/99, of 11 September, is amended to read as follows:

«28.1 — For residential property or for land for construction whose building, authorized or anticipated, is for habitation, in accordance with the provisions of the Municipal Property Tax Code — 1 %»

And, in turn, article 260 of the same law fixed the commencement of effectiveness of the amendment introduced:

Article 260 - Entry into Force

This law enters into force on 1 January 2014".

In this way, on 1 January 2014 the wording of Law no. 55-A/2012 ceased to be in force, to be replaced by the new rule of incidence introduced in the wording of Item 28.1 by Law no. 83-C/2013, under whose aegis came, expressly, to be comprised in the rule of incidence of stamp duty lands for construction with the characteristics there enumerated, as is the case of the land to which the request for arbitral determination refers.

Respecting the request for determination to the assessment of the legality of the Stamp Duty required already in the effectiveness of the new law as to the assessment relating to the year 2014, which was in force from 1 January of that year, and taking into account that in accordance with general principles the legal regime to be observed in the assessment is that which is in force on the date of the occurrence of the respective tax fact, we are forced to take into account according to the wording of the law referred to at the date: (i) the taxpayer is the holder of the rights mentioned in Item 28 on 31/12/2014, that is, the Claimant (ii) the elements of the property matrix to be taken into account in the assessment (those which the law in force determines as relevant on the date of the respective occurrence, by virtue of article 8 of CIMI, subsidiarily applicable) were equally those recorded therein on that same date; (iii) the assessment act, by virtue of the new wording of the law, also fell upon a land for construction whose building, authorized or anticipated, is for habitation, in accordance with CIMI; (iv) whose respective TPV exceeded 1,000,000.00€.

That is, subsuming the facts enumerated in the new wording of Item 28 of the GITS, given by Law no. 83-C/2013, it is indisputable that the request for recognition of illegality of the assessment lacks legal basis, when referred to the Stamp Duty of 2014 falling upon the land for construction identified in the file, whereby the same is judged without merit.

B – Scope of the Decision

The other question relates to the scope of the decision, that is, the Claimant, although referring to "the additional assessment no. 2015 …, dated 20.3.2015, relating to Stamp Duty relating to the year 2014", requests the annulment of the value of the stamp duty in an amount equal to the 1st installment of the annual collection determined, payable in April 2015.

The AT, in its Response, alleged that the request can only refer to the tax act of assessment of the Stamp Duty of 2014 because:

"5.- …one thing is the act of assessment, (which is annual and single and must be notified in accordance with article 36), and another thing is the issuance and notification of the collection document, which contains an order for payment of the tax debt.

6 -It is thus clear that Stamp Duty relating to item 28.1 of the GITS is assessed annually and only once, which should occur between the months of February and March of the year following that to which the tax pertains, the payment of the tax being capable of being effected in a single installment, two installments or three installments, depending on the total of the debt.

…

9- And, impugning the act of assessment of the tax, the judgment that comes to be made on the legality of the same will reverberate upon all collection acts, irrespective of the moment in which they may take place."

The thesis of the AT is accompanied here.

What is provided for in article 2 of the RJAT is that in Tax Arbitration the respective Tribunals are competent to examine the claims that aim at the declaration of illegality of tax acts of assessment of taxes, of self-assessment, of withholding at source and payments on account.

The request of the Claimant comes filed having as its object the tax act of assessment of Stamp Duty of 2014 contained in Doc. 2015…, carried out by the AT on 2015-03-20, in which it is stated that the assessment has the value of 28,039.27€ and that the notified party should pay the 1st installment in which that value can be divided (of the three legally authorized) in April 2015.

In reality the Claimant presented to the Tribunal a request for assessment of the legality of the Stamp Duty assessment effected under Item 28.1 of the GITS, with reference to the year 2014 and, unless I am much mistaken, it is not because it requested the annulment in an amount equal to the value of the first installment that the Tribunal is not competent to analyze the tax act in its entirety, with the annual contours that are intrinsic to it and which were identified by it.

The decision taken in Arbitral Tribunal must necessarily report to the tax act examined, which, in this case, as has been said, is the assessment of the Stamp Duty provided for in the GITS, Item 28.1, with reference to the year 2014, in the amount of 28,309.27€, a value which derived from the multiplication of the rate of 1% on the TPV recorded in the matrix on 31/12/2014, which amounted to 2,830,926.91€, and not to the act contained in the payment document which is nothing more than the notification of the value of the assessment divided into three installments, in which the first should be paid during the month of April 2015.

And this is precisely what article 23, no. 7, of the Stamp Duty Code determines when it refers that "where stamp duty is due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually (…)" in the months of February and March of the following year, in accordance with the determination of article 113 of CIMI, subsidiarily applicable. That is, for each tax fact there will be, in principle, a single assessment, by which the collection to be paid shall be determined.

In this way, by the mere fact that the law permits the payment of the collection in installments, in a number normally provided for depending on its amount, does not mean that three or four assessments have been consummated, depending on the number of legally provided installments.

The assessment is only one and only its content can be prejudicial to the interests of the taxpayer covered, and, for this reason, only it can be the object of impugnation[1].

Even so, in this context, doubt could arise as to whether the Claimant did not have in view only impugning partially the tax act in the part corresponding to the value of the 1st installment.

It does not appear to us to be sustainable this thesis.

In the abstract, it is indeed permitted that the impugnation may have partial scope.

In the present case, from careful reading of the PI, it does not follow that the claimant intended that this Tribunal declare the partial illegality of the assessment of Stamp Duty of 2014, in a value corresponding to the amount of the 1st installment. All the argumentative construction is based on the possible vices of the act of assessment of Stamp Duty of 2014 and not on vices imputable to a part of the tax act whose annulment would correspond to the value of 9,436.43€, which is the amount there enumerated.

Whereby the AT is also correct in this matter.

The decision of the Tribunal encompasses the tax act of assessment in its annual entirety and not merely the value that corresponds to that of the payment document pertaining to the 1st installment, notwithstanding the legal possibility of requesting the partial annulment of an assessment act. The effects of the decision act upon the assessment, or part thereof if such is the object of the proceedings, and not merely upon the amount of the installment.

In this accordance it is understood that the decision rendered in the file concerns the tax act of assessment of stamp duty of 2014 with reference to the land for construction above more clearly identified, of which the appellant is the owner, carried out on the basis of Item 28.1 of the GITS.

VII - Value of the Case

The request that gave rise to the present impugnation concerns the tax act of assessment of Stamp Duty of 2014, it not being possible to consider that it concerns a part of the collection corresponding to or equal to that of the first installment payment that the appellant was obligated to effect in April 2015. For this reason, having the request for determination as its object the act of assessment of Stamp Duty of 2014, it is the amount of the collection computed therein that constitutes the value of the immediate economic utility of the request, taking into account the determination that follows from article 296 of CPC.

Furthermore, the competence of the arbitral tribunals functioning in CAAD, in the same manner as the courts of law in the area of impugnation, comprises only requests for declaration of illegality of acts of assessment and not of installments through which the collection of the amounts assessed is effected. These are acts related to collection.

On the other hand, article 306, no. 1, of the Code of Civil Procedure, determines that "it is incumbent upon the judge to fix the value of the case, without prejudice to the duty of indication that rests upon the parties".

Now, in conformity with no. 1 of article 3 of the Regulations of Costs in Tax Arbitration Proceedings, the value of the case is determined in accordance with article 97-A of the Code of Tax Procedure and Process. This article, in conformity with paragraph a) of its no. 1, provides that the values admissible for purposes of costs or others provided for in the law are the following: "when the assessment is impugned, that of the amount whose annulment is sought".

In conclusion, in light of this legal regime and the considerations explained, the value of the amount whose annulment is sought is the amount corresponding to the value of the assessment of Stamp Duty of 2014, whose computed collection amounts to 28,039.27€, this being because, in this case, the request presented is not directed to a part of the assessment only.

Whereby, without need of other considerations, in view of the clarity of the facts and the rules mentioned, the value of the case is fixed at 28,309.27€, corresponding to the amount of the immediate economic utility obtained with the arbitral decision.

VIII. DECISION

With the grounds expounded:

· The request formulated by the claimant is judged without merit, deciding to maintain in the legal order the act of assessment of Stamp Duty of 2014, as it does not suffer from any illegality.

· The value of the action is fixed at 28,309.27 euros (no. 2 of the Regulations of Costs in Tax Arbitration Proceedings, article 97-A of CPPT and article 306 of CPC).

Costs to be borne by the Claimant.

In accordance with the terms of article 22, no. 4, of the RJAT, and with Table I attached to the Regulations of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 1,530.00€.

Let this arbitral decision be recorded and notified to the parties.

Lisbon, Center for Administrative Arbitration, 28/10/2015

The Arbitrator

(José Ramos Alexandre)

[1] There is jurisprudence of the CAAD in the same sense, an example of which is the Decision in Case 736-2014-T.

Frequently Asked Questions

Automatically Created

Is stamp tax under Verba 28.1 of the General Table applicable to construction land with a taxable value exceeding €1,000,000?
Under the amended Item 28.1 of the General Table effective from January 1, 2014 (introduced by Law 83-C/2013), stamp tax at a 1% rate applies to construction land when two conditions are met: (1) the taxable property value (VPT) equals or exceeds €1,000,000, and (2) the authorized or anticipated construction is for residential purposes. However, this interpretation is contested. Taxpayers argue that 'residential use' in Item 28.1 requires actual present functionality, not mere future potential, and that construction land should retain its classification regardless of building authorization. The Tax Authority maintains that the 2014 legislative modification explicitly includes such construction land within the tax's scope.
How can taxpayers challenge an additional stamp tax assessment through CAAD tax arbitration?
Taxpayers can challenge stamp tax assessments through CAAD (Centro de Arbitragem Administrativa) by filing a request for arbitral determination under Article 10(a) of the RJAT (Legal Framework for Tax Arbitration, Decree-Law 10/2011). The process involves: (1) submitting the arbitration request identifying the contested assessment, (2) acceptance by the CAAD President and notification to the Tax Authority, (3) appointment of an arbitrator by the Deontological Council, (4) constitution of the arbitral tribunal, (5) submission of the Tax Authority's response, and (6) proceedings where the tribunal examines legal questions. In this case, the request was filed on May 28, 2015, challenging assessment no. 2015… dated March 20, 2015, with the tribunal constituted by August 7, 2015.
What role does the patrimonial taxable value (VPT) play in determining stamp tax liability on urban property?
The patrimonial taxable value (VPT - valor patrimonial tributário) is the critical threshold determinant for stamp duty liability under Item 28.1. The tax only applies when the VPT equals or exceeds €1,000,000. In this case, the property's VPT was €2,830,962.91, triggering the assessment. The VPT is determined through property valuation and appears in the property matrix records. The Tax Authority used both the Property Register and Valuation Sheet to verify the VPT and confirm that a Constructive Feasibility Project was attached, establishing the property's classification as construction land with building capacity. The stamp duty amount (€28,309.27) was calculated as 1% of the VPT.
What legal grounds exist for annulling a stamp tax assessment on terrenos para construção under Portuguese tax law?
Legal grounds for annulling stamp tax assessments on terrenos para construção include: (1) error in applying the incidence rule - arguing that Item 28.1's reference to 'residential use' requires actual present functionality, not future construction potential; (2) improper statutory interpretation - contending that extending taxation to future potentialities violates interpretative principles under Article 9 of the Civil Code and Article 11 of the General Tax Law (LGT); (3) incorrect property classification - arguing that construction land maintains its classification for tax purposes regardless of authorized building projects; and (4) lack of legal basis for including construction land within Item 28.1's scope absent explicit legislative language clearly encompassing such properties.
How does CAAD arbitration process work for disputes involving Imposto de Selo on high-value construction plots?
CAAD arbitration for Imposto de Selo disputes on high-value construction plots follows the RJAT framework: The claimant files a request identifying the contested assessment and legal grounds for illegality. The CAAD President accepts the request and notifies the Tax Authority, which has an opportunity to respond. The Deontological Council appoints a sole arbitrator for cases under certain thresholds. Once the tribunal is constituted, parties are notified. The arbitrator reviews submissions, property registers, valuation sheets, and legal arguments. For purely legal questions, the tribunal may dispense with hearings and oral arguments (as occurred here under Article 18 RJAT). The tribunal then issues a binding arbitral decision determining the legality of the assessment, with effects on all related collection acts.