Process: 34/2018-T

Date: June 6, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitral decision 34/2018-T addresses whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to properties held in vertical ownership (propriedade vertical) based on the global taxable property value or individual unit values. The taxpayer challenged Stamp Tax assessments for 2012 and 2013 totaling €56,615.86 on two urban properties registered as 'full ownership with storeys or divisions capable of independent use.' The Tax Authority (AT) argued that Stamp Tax should apply to the total property value exceeding €1,000,000, while the claimant contended that each autonomous unit should be taxed individually. The arbitrator ruled in favor of the taxpayer, following extensive Supreme Administrative Court case law, determining that vertical ownership should be treated equivalently to horizontal ownership for Stamp Tax purposes. The decision emphasized that each independent storey or division should be assessed separately based on its individual taxable property value, not the aggregate value. This interpretation aligns with principles of tax capacity and equality, as the legislator referenced 'homes' implying economic autonomy regardless of legal ownership structure. The AT itself had issued individualized assessment notices, acknowledging the independence of each unit. The tribunal ordered full reimbursement of €56,615.86 plus compensatory interest at the legal rate, recognizing the assessments resulted from legal error by the Tax Authority. The ruling establishes important precedent that properties in vertical ownership with units below the €1,000,000 threshold are exempt from Stamp Tax under item 28.1 when assessed individually, preventing discriminatory treatment compared to horizontal ownership condominiums.

Full Decision

ARBITRATION AWARD

A… Lda (hereinafter Claimant) with tax identification number …, better identified in the case file, hereby requests an arbitral decision to declare the illegality of the Stamp Tax assessment acts relating to the year 2012, the decision rejecting the request for official review issued by the Tax and Customs Authority, the Stamp Tax assessments relating to the year 2013, and requests that the ATA be ordered to reimburse the Claimant for the tax paid in the amount of €56,615.86, and to pay compensatory interest at the legal rate, until full reimbursement of the amount owed, calculated on the tax.

The ATA (hereinafter Defendant) contends and requests that the Claimant's petition be judged unfounded, absolved of the claim.

The Claimant has standing and its petition was timely presented and by appropriate means.

Proven Facts

Tax assessment acts for Stamp Tax issued under item 28.1 of the General Table attached to the Stamp Tax Code ("TGIS"), identified with the numbers

2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, corresponding to the property with registration number … (current registration number …), located in the former parish of …, in the total amount of €14,091.10, and the tax assessment acts for Stamp Tax numbers …, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, 2017…, corresponding to the property with registration number … (current registration number …), located in the former parish of …, in the total amount of €14,497.80, all of these acts relating to the year 2012 (copies of which are attached under the designation Documents 1 to 23), decision rejecting the request for official review issued in the context of case number …2017…, notified to the Petitioner on 30 November 2017, through Official Letter number … of 29 November 2017 (copy of which is attached under the designation Document 24), and, consequently, the tax assessment acts for Stamp Tax underlying the same, relating to the year 2013, in the total amount of €28,026.96 (whose notifications are attached under the designation Document 25).

B… – merged by incorporation into the Claimant in 2017 – was the owner, on the date of the aforementioned assessments, of urban properties registered under registration numbers … and … (current … and …), located in the current Parish of …, Municipality of Lisbon.

The properties were registered in the urban property register as "property in a regime of full ownership with storeys or divisions capable of independent use."

B… was notified of the Stamp Tax assessment acts relating to the year 2012, resulting from the application of Article 1, no. 1 of the Stamp Tax Code, in conjunction with item 28.1 of the TGIS, in the amount of €28,588.90.

It submitted a request for official review, which was rejected on 30 November 2017, with additional Stamp Tax for 2013 being assessed.

Positions of the Parties

The divergence between the Claimant and the Defendant centers on the following legal issue.

For the Defendant (ATA), the properties would be subject to Stamp Tax under item 28.1 of the TGIS, because the determining values for the application of that item would be the global TPC (Taxpaying Capacity) values of the properties in question (exceeding €1,000,000) rather than the individual TPC of each of the storeys or divisions of independent use of these same properties with values below €1,000,000 per unit.

For its part, the Claimant contends that for the legislator, the situation of the property in vertical or horizontal ownership is not relevant, only the material truth underlying its existence as an urban property and its use is relevant.

The Legal Issue

Proceeding to the decision on the legal issue stated.

The issue under analysis has been the subject of extensive case law of the Supreme Administrative Court in a manner favorable to the Claimant's petition – Decision of 9 September 2015, in appeal 47/15; 2 March 2016, case 1354/15; 29 September 2016, case 560/16, referred to in STA Decision of 15/02/2017, Case 01425/14, and this same Decision, in addition to numerous arbitral case law.

We agree with this case law: where it is a matter of a property constituted in a vertical ownership regime, the incidence of Stamp Tax should be determined, not by the TPC of all divisions or storeys capable of independent use – individualized in the property register – but by the TPC attributed to each of these storeys or divisions intended for housing.

There is no reason to distinguish, at the level of tax capacity, horizontal ownership (to which item 28.1 does not apply) from vertical ownership.

Moreover, the declarations of the Secretary of State for Tax Affairs in the presentation of law refer to "homes." And these, regardless of their legal status of horizontal or vertical ownership, imply an idea of economic autonomy, of individual use by families or legal entities.

The registration in the property register of properties in horizontal ownership, pursuant to Article 67, 2, of the Stamp Tax Code, must follow the same registration rules for properties constituted in a horizontal ownership regime, with their respective Stamp Tax and IMI (Municipal Property Tax) being assessed individually in relation to each part, so the criterion used for the definition of Stamp Tax should be the same.

Moreover, the ATA itself issued individualized assessment notices for the autonomous parts in vertical ownership, revealing the understanding that such fractions, although not constituted in horizontal ownership would be independent of each other.

Any contrary understanding would violate the principles of tax capacity and equality in comparison between horizontal and vertical ownership with identical global income. The fairness of this solution seems to be decisive in giving it preference. A line of reasoning that has its beginning in Article 12, 3 of the IMI Code which provides that "each storey or part of a property capable of independent use is considered separately in the property registration, which also discriminates the respective taxable property value." The legislator not distinguishing, and not needing to distinguish as has been stated, between horizontal and vertical ownership, but considering each fraction.

Conclusion

Where it is a matter of a property constituted in a vertical ownership regime, Stamp Tax should apply, not to the TPC resulting from the sum of the TPC of all divisions or storeys capable of independent use individualized in the register, but to the TPC attributed to each division or storey intended for housing.

Compensatory Interest

The assessments and the rejection of the official review request resulted from a legal error by the ATA services.

In these terms, interest is owed on the entire amount paid as tax until such amount is reimbursed.

Decision

The Claimant's petition is hereby granted in full.

I set the value of the case at 56,615.86 euros (fifty-six thousand six hundred and fifteen euros and eighty-six cents) and costs at 2,142.00 euros (two thousand one hundred and forty-two euros), these to be borne by the Respondent.

CAAD, Lisbon, 06 June 2018.

The Arbitrator

Dr. Diogo Leite de Campos

Frequently Asked Questions

Automatically Created

Does Stamp Tax under Verba 28.1 of the TGIS apply to buildings held in vertical property (propriedade vertical)?
Stamp Tax under item 28.1 of the TGIS does not apply to buildings held in vertical property when assessed on an individual unit basis. The CAAD ruled that where a property is constituted in a vertical ownership regime with independent storeys or divisions, Stamp Tax should be determined by the taxable property value (TPC) attributed to each individual division or storey intended for housing, not by the aggregate TPC of all units combined. This interpretation follows Supreme Administrative Court case law and treats vertical ownership equivalently to horizontal ownership for tax purposes, ensuring compliance with principles of tax capacity and equality.
Can a taxpayer request an official review (revisão oficiosa) of Stamp Tax assessments under Verba 28.1?
Yes, a taxpayer can request an official review (revisão oficiosa) of Stamp Tax assessments under item 28.1 of the TGIS. In this case, the taxpayer (B…, later merged into A… Lda) submitted a request for official review of the 2012 Stamp Tax assessments, which was rejected on 30 November 2017. Following the rejection, the taxpayer successfully challenged both the denial of the official review and the underlying assessments through arbitration at CAAD. The tribunal's decision confirms that taxpayers have procedural rights to contest these assessments through administrative review and subsequent arbitration.
How are properties classified as 'total property with independent units' (propriedade total com andares ou divisões suscetíveis de utilização independente) taxed under Stamp Tax?
Properties classified as 'total property with storeys or divisions capable of independent use' (propriedade total com andares ou divisões suscetíveis de utilização independente) should be taxed under Stamp Tax item 28.1 by assessing each independent unit individually, not the aggregate property value. The CAAD established that the €1,000,000 threshold applies to each autonomous storey or division separately, consistent with Article 12(3) of the IMI Code which requires separate property registration for each independent unit. The Tax Authority's practice of issuing individualized assessment notices further supports treating each fraction as an independent taxable unit, regardless of whether the property is formally constituted under horizontal or vertical ownership regimes.
Is a taxpayer entitled to reimbursement and compensatory interest after an unlawful Stamp Tax assessment under Verba 28.1?
Yes, a taxpayer is entitled to both reimbursement and compensatory interest following an unlawful Stamp Tax assessment under item 28.1 of the TGIS. In decision 34/2018-T, CAAD ordered the Tax Authority to reimburse the claimant €56,615.86 in illegally assessed Stamp Tax and to pay compensatory interest at the legal rate calculated on the tax amount until full reimbursement. The tribunal determined that compensatory interest is owed on the entire amount paid as tax because the assessments and rejection of the official review request resulted from legal error by the Tax Authority services, not from any fault or delay attributable to the taxpayer.
What was the outcome of CAAD arbitral decision 34/2018-T regarding Stamp Tax liquidations for 2012 and 2013?
The outcome of CAAD arbitral decision 34/2018-T was a complete victory for the taxpayer. The tribunal granted the claimant's petition in full, declaring illegal the Stamp Tax assessment acts for 2012 (totaling €28,588.90), the decision rejecting the official review request, and the subsequent Stamp Tax assessments for 2013. The Tax Authority was ordered to reimburse the total amount of €56,615.86 plus compensatory interest at the legal rate until full payment. The arbitrator, Dr. Diogo Leite de Campos, valued the case at €56,615.86 and set costs at €2,142.00 to be borne by the Tax Authority, establishing important precedent that vertical ownership properties should be taxed on a per-unit basis rather than aggregate value.