Process: 334/2016-T

Date: November 29, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 334/2016-T, the CAAD addressed whether item 28.1 of the General Table of Stamp Duty (TGIS), introduced by Law 55-A/2012, applies to construction land (terrenos para construção) valued above €1 million. The applicant, as head of household of an estate owning urban property in Lisbon worth €1,533,508, challenged 2012 Stamp Duty assessments totaling €22,992.62. The taxpayer argued that construction land without residential authorization does not constitute 'urban property with residential allocation' under item 28.1 TGIS. The Tax Authority contended the property had residential allocation. The arbitrator relied on consistent Supreme Administrative Court (STA) jurisprudence, including decisions 0676/14, 048/14, and 01871/13, which established that Article 6 of the Municipal Property Tax Code distinguishes 'urban residential properties' from 'plots of land for construction.' The STA held that since the legislator did not define 'urban properties with residential allocation' and the IMI Code creates a clear distinction, construction land cannot be taxed under item 28.1 TGIS in its original 2012 wording. The decision cited over 20 CAAD precedents supporting this interpretation. This ruling confirms that before the 2014 State Budget Law amendments, high-value construction plots were excluded from Stamp Duty taxation under item 28.1, protecting taxpayers from assessments on undeveloped land lacking residential building permits or authorization.

Full Decision

ARBITRAL DECISION

1. Report

On 21-06-2016, A…, taxpayer no. …, residing at Street …, no. …, …, …, …-… Loures, in the capacity of head of household of the estate of B…, with tax identification number …, hereinafter referred to as the Applicant, submitted to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal with a view, immediately, to the annulment of the dismissal of the request for review of the tax act of billing of item 28.1 of the General Table of Stamp Duty (TGIS), and, mediately, to the annulment of the tax acts of billing of Stamp Duty relating to the urban property registered in the urban property matrix under article … of the parish of …, municipality of Lisbon, with a tax patrimonial value of 1,533,508.00 €.

The Applicant alleges that item 28 of the General Table of Stamp Duty (TGIS) added by article 4 of Law no. 55-A/2012, does not cover plots of land for construction with a tax patrimonial value equal to or greater than one million euros.

The Applicant further alleges that, insofar as the billings relate to the year 2012 and at that time there was no rule sustaining their legality, there can be no doubt that they are tainted with illegality and, therefore, should be annulled, due to breach of law and offensive to the principle of legality.

The Applicant also states that the land in question was not, is not, and will not be authorized or permitted any construction, whether for residential or other purposes.

Finally, the Applicant states that it is the understanding of abundant case law issued by courts of first instance, the Central Administrative Courts, and the Supreme Administrative Court, that plots of land for urban construction, with a tax patrimonial value equal to or greater than one million euros, at least until the entry into force of the State Budget Law for 2014, were not and have never been covered by the aforementioned item 28 of the TGIS, according to its original wording.

Suzana Fernandes da Costa was appointed as sole arbitrator on 25-08-2016.

In accordance with the provisions of article 11 no. 1, paragraph c) of the Tax Arbitration Regime (RJAT), the singular arbitral tribunal was constituted on 13-09-2016.

The Tax Authority (A.T.A.) submitted its response on 17-10-2016 (within the legal deadline).

The Tax Authority defends that the request for declaration of illegality and consequent annulment of the contested billing should be judged unfounded, since the disputed billing embodies a correct interpretation of item 28.1 of the General Table of Stamp Duty, given that the aforementioned property has the legal nature of property with residential allocation.

The Tax Authority further requested, on the same date, the waiver of the holding of the meeting provided for in article 18 of the Tax Arbitration Regime, as well as the waiver of the presentation of arguments.

On 17-10-2016, an order was issued requiring notification of the Applicant to, within 10 days, pronounce itself on the request of the Tax Authority for waiver of the holding of the meeting provided for in article 18 of the RJAT, and for waiver of the presentation of arguments. In the same order, the Applicant was further notified to attach to the case file the billings that are the object of the arbitral request.

The Applicant, on 20-10-2016, attached to the case file the Stamp Duty billings in question.

On 15-11-2016, an order was issued to waive the holding of the meeting provided for in article 18 of the RJAT, and further to designate 29-11-2016 as the date for the pronouncement of the decision, and the Applicant was warned to proceed with payment of the subsequent arbitration fee by that date.

The parties have judicial personality and capacity and are legitimate (articles 4 and 10 no. 1 and 2 of the RJAT and article 1 of Ordinance no. 112-A/2011 of 22 March).

The present request for arbitral pronouncement was submitted in a timely manner, in accordance with article 10 no. 1 paragraph a) of Decree-Law no. 10/2011 of 20 January.

The case is not affected by nullities and no preliminary questions were raised.

2. Facts

2.1. Established Facts:

Having analyzed the documentary evidence produced, the following facts are considered proven and of interest for the decision of the case:

  • The Applicant A… is head of household of the estate left by death of B…, an undivided estate with tax identification number ….

  • The undivided estate identified above was, in 2011 and 2012, owner of the urban property located at … front to no. …, letters …, registered in the property matrix under article … of the parish of …, municipality of Lisbon, with a tax patrimonial value of 1,533,508.00 €.

  • A…, in the capacity of head of household of the estate of B…, was notified of the Stamp Duty billing no. 2012 …, issued under Law no. 55-A/2012, in the amount of 7,667.54 € payable by 20-12-2012, in accordance with the billing attached to the case file.

  • A…, in the capacity of head of household of the estate of B…, was further notified of the Stamp Duty billing no. 2013 …, relating to the year 2012, in the amount of 15,335.08 €, payable in three installments (30-04-2013, 31-07-2013, and 30-09-2013), in accordance with the billing attached to the case file.

  • A…, in the capacity of head of household of the estate of B…, submitted a Request for Review of both Stamp Duty billings in question in the present case.

  • A…, in the capacity of head of household of the estate of B…, was notified on 03-06-2016 of the decisions dismissing the requests for review of the billings that are the object of the arbitral request, as appears in the administrative case file attached by the Tax Authority.

No other facts with relevance for the decision of the case were proven.

2.2. Substantiation of the Proven Facts:

With respect to the facts proven, the conviction of the arbitrator was based on the documentary evidence attached to the case file and on facts admitted by agreement.

3. Legal Issues:

3.1. Object and Scope of the Present Case

The question to be decided in the present case is whether the immovable property that was subject to Stamp Duty billing, being a plot of land for construction, has residential allocation and whether item 28.1 of the General Table of Stamp Duty (TGIS) is applicable to it, in the wording given by Law no. 55-A/2012 of 29 October.

On this same question, the decisions of the CAAD issued in case numbers 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 284/2013-T, 288/2013-T, 310/2013-T, 12/2014-T, 151/2014-T, 202/2014-T, 210/2014-T, 276/2014-T, 514/2014-T, 516/2014-T, 523/2014-T, 599/2014-T, and 663/2014-T have already pronounced themselves, among others.

The Supreme Administrative Court has also already pronounced itself on this question, namely in the decisions of cases no. 048/14 of 09-04-2014, 07/14 of 02-07-2014, no. 0676/14 of 09-07-2014, no. 0395/14 of 28-05-2014, no. 01871/13 of 14-05-2014 and no. 055/14 of 14-05-2014, no. 0425/14 of 28-05-2014, no. 0396/14 of 28-05-2014, no. 0274/14 of 14-05-2014, no. 046/14 of 14-05-2014, 01481/14 of 15-04-2015, 0764/14 of 15-04-2015, no. 0279/15 of 22-04-2015, no. 021/15 of 29-04-2015, and no. 01479/14 of 17-06-2015. As is read in the decision issued in case no. 0676/14 of 09-07-2014: "Having the legislator not defined the concept of 'urban properties with residential allocation', and resulting from article 6 of the Municipal Tax on Real Property Code – subsidiarily applicable to the Stamp Duty provided for in the new item no. 28 of the General Table – a clear distinction between 'urban residential properties' and 'plots of land for construction', the latter cannot be considered, for purposes of the Stamp Duty tax (Item no. 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October) as urban properties with residential allocation."

3.2. Issue of the Classification of Plots of Land for Construction within the Scope of Item no. 28.1 of the TGIS

3.2.1. Regime of Law no. 55-A/2012, of 29 October

Law no. 55-A/2012, of 29 October, added item 28 to the General Table of Stamp Duty (TGIS), with the following wording:

28 – Ownership, usufruct, or surface right of urban properties whose tax patrimonial value appearing in the register, in accordance with the Municipal Tax on Real Property Code (CIMI), is equal to or greater than € 1,000,000 – on the tax patrimonial value used for the purpose of Municipal Tax on Real Property:

28.1 – For property with residential allocation – 1 % (…);

In the transitional provisions contained in article 6 of said Law no. 55-A/2012, the following rules were established:

c) The tax patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided in the Municipal Tax on Real Property Code by reference to the year 2011; (…)

f) The applicable rates are as follows:

i) Properties with residential allocation assessed in accordance with the Municipal Tax on Real Property Code: 0.5 %;

ii) Properties with residential allocation not yet assessed in accordance with the Municipal Tax on Real Property Code: 0.8 %;

Item 28.1 TGIS and subitems i) and ii) of paragraph f) of no. 1 of article 6 of Law no. 55-A/2012 contains a concept that is not used in any other tax legislation, which is that of "property with residential allocation".

Let us examine this:

3.2.2. Concept of Properties Used in the CIMI

In the Municipal Tax on Real Property Code, the types of properties are enumerated in articles 3 to 6.

The concept of "property with residential allocation" does not appear in any of these articles.

The most approximate notion to the literal content of this expression used is that of "residential properties", which no. 2 of article 6 of the CIMI defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, that have as their normal purpose residential purposes.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that which is extracted from no. 2 of article 6 of the CIMI points to the sense that it was not intended to use the same concept. Nor is this concept found in any other statute.

3.2.3. Concept of "Property with Residential Allocation"

Item 28.1 of the TGIS referred in 2013 to "property with residential allocation".

The word "allocation" [afetação], in this context of the use of a property, has the meaning of "the act of assigning something to a particular use".

As is read in the decision of the CAAD issued in case no. 53/2013-T, in which Judge Councillor Jorge Lopes de Sousa, Dr. Conceição Pinto Rosa, and Dr. Alberto Amorim Pereira were arbitrators:

"it must be concluded that the interpretative elements available, including 'the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', clearly point to the sense that it was not intended to encompass within the scope of item no. 28.1 the situations of properties that are not yet allocated to residential use, namely plots of land for construction held by companies".

Those classified as plots of land for construction are, having regard to the provisions of article 6 no. 3 of the Municipal Tax on Real Property Code, those in which the owner has acquired the right to construct thereon or to proceed with subdivision operations, as well as those that have been acquired expressly for that effect. In this sense, see JOSÉ MARIA FERNANDES PIRES in "Lessons on Taxes on Patrimony and Stamp Duty", Almedina, 2010, page 97.

Note that in the classification as a plot of land for construction, the allocation that future constructions may have is irrelevant, namely residential, commercial, industrial, or for services.

For its part, in the decision of the Supreme Administrative Court of 09-07-2014, case no. 0676/14, in which Councillor Dulce Neto is the reporter, it is stated that "residential allocation always appears in the Municipal Tax on Real Property Code referred to 'buildings' or 'constructions', existing, authorized or foreseen, because only these can be inhabited, which does not happen in the case of plots of land for construction, which do not have, in themselves, conditions for such, not being capable of being used for residential purposes except if and when on them is built the construction authorized and foreseen for them (but in that case they will no longer be 'plots of land for construction' but another type of urban property – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of the CIMI)."

Similarly, in the decision of the Supreme Administrative Court of 14-05-2014, case no. 046/14, in which Ascenção Lopes is the reporter, it is stated that "having the legislator not defined the concept of 'urban properties with residential allocation', and resulting from article 6 of the Municipal Tax on Real Property Code – subsidiarily applicable to the Stamp Duty provided for in the new item no. 28 of the General Table – a clear distinction between 'urban residential properties' and 'plots of land for construction', the latter cannot be considered, for purposes of the Stamp Duty tax (Item 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential allocation."

We can thus conclude that "plots of land for construction" cannot be considered as "properties with residential allocation" for purposes of the application of item 28.1 of the General Table of Stamp Duty.

Prohibition of Analogy and Extensive Interpretation

One could, on the other hand, raise the question of the possibility of applying analogy to the provision set forth in item 28.1 of the TGIS. However, on this matter, no. 4 of article 11 of the General Tax Law provides as follows:

"4. Gaps resulting from tax rules covered by the legal reserve of the Parliament are not susceptible to analogical integration"

As to matters covered by the legal reserve, note article 103, no. 2 of the Constitution of the Portuguese Republic and article 8 of the General Tax Law. According to these norms, the principle of tax legality encompasses the tax base, the rate, tax benefits, and taxpayer guarantees. This is also referred to in the work "The Principle of Tax Legality" by Ana Paula Dourado, Almedina, 2007, page 106.

Being item 28.1 TGIS a rule of tax incidence, covered by the principle of tax legality, its analogical application to situations not expressly provided therein is prohibited.

Similarly, an extensive interpretation of said item that would allow the inclusion in the expression contained in the law of plots of land for construction would not be admissible. On interpretation, article 11, no. 1 to 3 of the General Tax Law and article 9 of the Civil Code govern. We consider that an extensive interpretation of said item that would include therein plots of land for construction is not possible, since the same would always have to have a minimum correspondence to the letter of the law, which does not occur.

With respect to the historical element, the fact that item 28.1 TGIS was subsequently expressly altered, with the State Budget Law for 2014, so as to include, as of 01.01.2014, properties for construction, also permits the conclusion that such properties were not taxed in the wording in force until 31.12.2013.

Application of the Regime to the Applicant's Situation

The property in question in the present case is a plot of land for construction. The situation applies the wording of the TGIS given by Law no. 55-A/2012 of 29 October.

For what has been stated, we are not before a property with residential allocation, and therefore, the Stamp Duty provided for in item 28.1 of the TGIS does not apply to that property.

For this reason, the billings whose declaration of illegality is requested mediately are tainted with the vice of breach of said item no. 28.1 TGIS, by error as to the legal assumptions, which justifies the declaration of their illegality and annulment (article 135 of the Administrative Procedure Code).

4. Decision

In view of the above, it is determined that the request formulated by the Applicant in the present tax arbitral case is judged founded regarding the illegality of the Stamp Duty billings no. 2012 … in the amount of 7,667.54 € and no. 2013 … in the amount of 15,335.08 €.

5. Value of the Case:

In accordance with the provisions of article 315, no. 2 of the Civil Procedure Code and 97-A, no. 1, paragraph a) of the Tax Procedure and Process Code and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at 23,002.62 €.

6. Costs:

In accordance with article 22, no. 4 of the Tax Arbitration Regime, and Table I appended to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 1,224.00 € to be borne by the Tax and Customs Authority.

Notify.

Lisbon, 29 November 2016.

Text prepared by computer, in accordance with article 138, no. 5 of the Civil Procedure Code (CPC), applicable by referral of article 29, no. 1, paragraph e) of the Tax Arbitration Regime, revised by me.

The sole arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Does verba 28.1 of the Portuguese Stamp Tax (TGIS) apply to construction land (terrenos para construção) valued over €1 million?
No. According to consistent Portuguese Supreme Administrative Court (STA) jurisprudence and CAAD decisions, item 28.1 of the TGIS in its original 2012 wording (Law 55-A/2012) does not apply to terrenos para construção (construction land plots), regardless of their value. The STA established that Article 6 of the Municipal Property Tax Code (IMI) clearly distinguishes between 'urban residential properties' and 'plots of land for construction.' Since the legislator did not define 'urban properties with residential allocation' and construction land constitutes a separate legal category, plots valued over €1 million were not subject to Stamp Duty under item 28.1 before the 2014 State Budget Law amendments.
Can the Portuguese Tax Authority (AT) levy Stamp Tax on urban land plots not authorized for residential construction?
No. The Portuguese courts, particularly the Supreme Administrative Court, have ruled that the Tax Authority cannot levy Stamp Tax under item 28.1 TGIS on urban land plots that lack authorization or permission for residential construction. In Process 334/2016-T and numerous similar cases, the CAAD confirmed that construction land without approved residential building rights does not qualify as 'urban property with residential allocation.' The STA decision 0676/14 explicitly stated that terrenos para construção cannot be taxed under item 28.1 in its 2012 version, as they are legally distinct from completed residential properties under the IMI Code framework.
What was the legal basis for challenging the 2012 Stamp Tax assessment on high-value construction land before the CAAD?
The legal basis for challenging 2012 Stamp Tax assessments on high-value construction land before the CAAD included: (1) breach of the principle of legality (princípio da legalidade), as the assessments lacked legal foundation when issued; (2) incorrect legal interpretation of item 28.1 TGIS, which does not encompass terrenos para construção; (3) violation of taxpayer rights through application of a tax provision to property categories not covered by the legislative text; and (4) procedural grounds following dismissal of administrative review requests. Taxpayers could submit arbitration requests to CAAD under Article 10(1)(a) of the Tax Arbitration Regime (RJAT), seeking annulment of both the review dismissal decisions and the underlying tax assessments within legal deadlines.
How did Portuguese courts interpret verba 28 of the TGIS regarding construction land before the 2014 State Budget Law?
Portuguese courts uniformly interpreted item 28 of the TGIS (in its 2012 version before the 2014 State Budget Law) as excluding construction land from taxation. The Supreme Administrative Court issued numerous decisions between 2014-2015 (cases 048/14, 0676/14, 0395/14, 01871/13, among others) holding that 'plots of land for construction' constitute a distinct legal category under Article 6 of the IMI Code and cannot be classified as 'urban properties with residential allocation.' Over 20 CAAD decisions (including 53/2013-T, 180/2013-T, 514/2014-T, 599/2014-T) reached identical conclusions. Courts emphasized that absent explicit legislative definition, construction land lacking completed residential structures falls outside item 28.1's scope, protecting taxpayers from assessments until the law was amended.
What is the procedure for requesting arbitral review of a Stamp Tax (Imposto de Selo) assessment at the CAAD?
The procedure for requesting arbitral review of Stamp Tax assessments at CAAD involves: (1) filing a written arbitration request (pedido de constituição do tribunal arbitral) with the Administrative Arbitration Centre within legal deadlines established in Article 10(1) RJAT; (2) paying the initial arbitration fee; (3) identifying the contested tax acts and legal grounds for annulment; (4) attaching relevant documentation including tax assessments, administrative review decisions, and supporting evidence; (5) awaiting appointment of arbitrator(s) and tribunal constitution; (6) responding to Tax Authority submissions; (7) participating in hearings if scheduled (or agreeing to waive under Article 18 RJAT); and (8) paying subsequent arbitration fees before decision issuance. The process follows Ordinance 112-A/2011 requirements and RJAT procedural rules, with decisions typically issued within months of request submission.