CAAD Decision 343/2016-T: Stamp Tax Vertical Property Untimeliness

Process: 343/2016-T

Date: November 30, 2016

Tax Type: Selo

Summary

Arbitral Decision 343/2016-T addresses critical procedural issues in challenging Stamp Tax assessments on vertical property ownership in Portugal. The case involves an estate heir contesting multiple Imposto do Selo liquidations for 2015 under Verba 28.1 of the General Stamp Tax Table (TGIS), which imposes a 1% annual tax on the patrimonial value of urban properties. The disputed property consists of a building in Lisbon held in vertical co-ownership with apartments capable of independent use but not constituted under the horizontal property regime. The Portuguese Tax Authority (AT) raised two fundamental exceptions: (1) untimeliness of the arbitration request filed with CAAD, arguing the statutory deadline for challenging the assessments had expired, and (2) absolute incompetence of the Arbitral Tribunal to adjudicate at least the 2nd installment of 2014, suggesting jurisdictional limitations. These procedural defenses are critical in Portuguese tax arbitration, as untimeliness (intempestividade) results in automatic dismissal without substantive analysis, and absolute incompetence renders any decision void. The case highlights key challenges heirs face when contesting stamp tax on inherited vertical property, where multiple autonomous fractions exist without formal horizontal property constitution. The Arbitral Tribunal had to determine whether the request was filed within the legal timeframe under RJAT (Legal Regime of Tax Arbitration) and whether it possessed jurisdiction over all contested assessments. This decision has significant implications for taxpayers holding vertical property, establishing precedents on procedural compliance requirements, the scope of CAAD's jurisdiction in stamp tax disputes involving periodic obligations, and the ability of estate representatives to seek arbitral review of tax assessments on inherited properties with complex ownership structures.

Full Decision

ARBITRAL DECISION [1]

The Arbitrator, Dr. Sílvia Oliveira, appointed by the Ethics Board of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 13 September 2016, with respect to the case identified above, decided as follows:

1. REPORT

1.1.

A..., Head of Estate of the Succession of, taxpayer number..., represented by Head of Estate B..., widow, holder of Citizen Card number... ..., taxpayer number ..., resident in ..., P.O. Box..., ... (hereinafter referred to as "Claimant"), submitted a request for arbitral pronouncement and constitution of a singular Arbitral Tribunal on 27 June 2016, under the provisions of article 4º and section 2 of article 10º of Decree-Law no. 10/2011, of 20 January [Legal Regime of Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority is the Respondent (hereinafter referred to as "Respondent").

1.2.

The Claimant requests that the Arbitral Tribunal:

1.2.1.

Declare "(…) the illegality of the Stamp Tax (Imposto do Selo) assessments (…) challenged, due to errors in the legal prerequisites, determining their annulment, with legal consequences";

1.2.2.

Condemn "(…) the Tax and Customs Authority (…) to reimburse (…) the amount of taxes unduly paid, increased by compensatory interest under legal terms, from the date when such payments were made until the date of full reimbursement thereof";

1.2.3.

Declare "(…) the present judgment well-founded, all execution proceedings instituted (…) with origin in Stamp Tax, calculated in accordance with the criterion upheld by AT (…) shall be terminated";

1.2.4.

"That, being the present judgment well-founded, the Tax Authority (…) be condemned to review the tax acts that are in a relationship of prejudicial effect or dependency with the tax acts object of the arbitral decision, namely because they fall within the scope of the same legal tax relationship, even if corresponding to distinct periodic obligations, altering or replacing them, wholly or partially";

1.2.5.

"That, being the present judgment well-founded, the Tax Authority (…) be condemned to, henceforth, assess the stamp tax payments in conformity with the arbitral decision, without incurring in the defect that justified the declaration of illegality, or to refrain from assessing, should it not be possible to prepare a new assessment without incurring in the illegality declared in the arbitral decision";

1.2.6.

"That, being the present judgment well-founded, costs be fixed against the Respondent (…)".

1.3.

The request for constitution of the Arbitral Tribunal was accepted by the Esteemed President of CAAD and automatically notified to the Respondent on 28 June 2016.

1.4.

The Claimant did not proceed with the appointment of an arbitrator, and therefore, under the provisions of article 6º, section 2, paragraph a) of RJAT, the undersigned was appointed as arbitrator by the President of the Ethics Board of CAAD, with the appointment being accepted within the time limit and legal terms provided.

1.5.

On 29 August 2016, the Parties were duly notified of this appointment and did not manifest a desire to refuse the appointment of the arbitrator, under the provisions of article 11º, section 1, paragraphs a) and b) of RJAT combined with articles 6º and 7º of the Ethics Code.

1.6.

In conformity with the provision in paragraph c), section 1, of article 11º of RJAT, the Arbitral Tribunal was constituted on 13 September 2016, and an arbitral order (despacho) was issued on 16 September 2016, directing the Respondent to, under the provisions of article 17º, section 1 of RJAT, submit a response within a maximum period of 30 days and, should it wish, request the production of additional evidence.

1.7.

On 13 October 2016, the Respondent submitted its Response, defending itself by exception and challenge and concluding that:

1.7.1.

"(…) the respondent entity should be absolved of the proceedings due to the manifest untimeliness of the request for constitution of the Arbitral Tribunal, as well as the evident incompetence of the same, concerning the 2nd installment of the year 2014";

1.7.2.

"Furthermore, if the esteemed Arbitral Tribunal understands otherwise, the present request for arbitral pronouncement should be judged unfounded, given the legality of the assessment, absolving the respondent entity of the claim".

1.8.

Additionally, the Respondent presented in its Response a request for exemption "from holding the meeting provided in article 18º of RJAT, as well as the exemption from holding arguments".

1.9.

On the same date, the Respondent attached to the proceedings the administrative file.

1.10.

Taking into account the exceptions raised by the Respondent in its Response, the Claimant was notified, by arbitral order of 13 October 2016, to provide comments, if it so wished, within a 10-day period on the matter of exception raised by the Respondent.

1.11.

However, the Claimant did not provide comments within the time given for this purpose regarding the content of the exceptions raised by the Respondent.

1.12.

In these terms, by order of this Arbitral Tribunal dated 13 November 2016, it was decided:

1.12.1.

To dispense with the holding referred to in article 18º of RJAT;

1.12.2.

To dispense with the submission of arguments by the Parties;

1.12.3.

To set 30 November 2016 for the purpose of rendering the arbitral decision.

1.13.

Finally, the Claimant was further warned that "until the date of rendering the arbitral decision, it should proceed with payment of the subsequent arbitral fee, under the provisions of section 3 of article 4º of the Regulation of Costs in Tax Arbitration Proceedings and communicate this payment to CAAD" (which it did on 7 November 2016).

2. CAUSE OF ACTION

The Claimant supports its claim, in summary, as follows:

2.1.

It alleges that it is the legitimate owner "(…) of the urban property in vertical co-ownership, located at ... Street, ..., Lisbon, which is described in the Real Property Registry Office of Lisbon under number..., of the parish of ... and registered in the respective urban real property matrix under article... of the parish of ... (…)".

2.2.

The Claimant further states that "the aforementioned property is held in full ownership with apartments and divisions capable of independent use not being constituted in the regime of horizontal property".

2.3.

The Claimant clarifies that it was notified "(…) of the (…) Stamp Tax assessments of the year 2015 (1st installment), relating to part of the apartments or divisions with independent use existing in the aforementioned property with a value corresponding to 1% of its taxable patrimonial value:

assessment no. 2016…, in the amount of €156.90, relating to C/V D of the aforementioned property, whose TPV is €31,380.00;
assessment no. 2016…, in the amount of €153.70, relating to C/V F of the aforementioned property, whose TPV is €30,740.00;
assessment no. 2016…, in the amount of €155.25, relating to R/C of the aforementioned property, whose TPV is €31,050.00;
assessment no. 2016…, in the amount of €339.20, relating to 1st Rt. of the aforementioned property, whose TPV is €101,760.00;
assessment no. 2016…, in the amount of €273.08, relating to 1st Lt. of the aforementioned property, whose TPV is €81,920.00;
assessment no. 2016…, in the amount of €339.20, relating to 2nd Rt. of the aforementioned property, whose TPV is €101,760.00;
assessment no. 2016…, in the amount of €273.08, relating to 2nd Lt. of the aforementioned property, whose TPV is €81,920.00;
assessment no. 2016…, in the amount of €342.58, relating to 3rd Rt. of the aforementioned property, whose TPV is €102,770.00;
assessment no. 2016…, in the amount of €275.80, relating to 3rd Lt. of the aforementioned property, whose TPV is €82,740.00;
assessment no. 2016…, in the amount of €582.80, relating to 4th of the aforementioned property, whose TPV is €174,840.00;
assessment no. 2016…, in the amount of €345.98, relating to 5th Rt. of the aforementioned property, whose TPV is €103,790.00;
assessment no. 2016…, in the amount of €278.54, relating to 5th Lt. of the aforementioned property, whose TPV is €83,560.00;
assessment no. 2016…, in the amount of €345.98, relating to 6th Rt. of the aforementioned property, whose TPV is €103,790.00;
assessment no. 2016…, in the amount of €278.54, relating to 6th Lt. of the aforementioned property, whose TPV is €83,560.00 (…)".

2.4.

It further states that "the deadline for payment of these assessments ended on 30/04/2016".

2.5.

Now, according to the Claimant, "from the aforementioned assessments it appears that the Patrimonial Value of the property – total subject to tax" is €1,195,580.00, but "it is important to know whether entry 28.1 of the General Table of Stamp Tax (TGIS), in the case of properties not constituted in horizontal co-ownership, applies to the sum of the taxable patrimonial value attributed to the different parts or apartments (global TPV), or, instead, to the taxable patrimonial value of each part of the property with independent economic use".[2]

2.6.

In this context, according to the Claimant, "(…) the subjection to stamp tax contained in entry no. 28.1 of TGIS should be assessed not by the total value of the property but by the value attributed to each of the parts, according to their respective TPV, following the same criterion as the determination of IMI (…)".

2.7.

Citing the Arbitral Decision issued within the scope of case no. 50/2013-T, "(…) in the legislator's view, what matters is not the legal-formal accuracy of the concrete situation of the property but rather its normal use, the purpose for which the property is intended", therefore the Claimant understands that one should conclude that "(…) for the legislator it is irrelevant whether the property is in vertical co-ownership or in horizontal co-ownership, what matters is only the material truth underlying its existence as an urban property and its use".

2.8.

Thus, the Claimant understands that "with respect to determining the value relevant for the incidence of Stamp Tax on properties in vertical co-ownership, the criterion adopted by AT does not appear to conform to the principle of tax legality or the principle of tax equality".

2.9.

Indeed, the Claimant argues that "since the Stamp Tax Code refers to the Municipal Property Tax Code, we should consider that the registration in the real property matrix of properties in vertical co-ownership, consisting of different parts, apartments or divisions with independent use, follows the same registration rules as properties in horizontal co-ownership", therefore "from this it follows that the respective IMI, as well as Stamp Tax, are assessed individually in relation to each of the parts", and that, "for this reason, the legal criterion to define the incidence of the new tax must be the same".[3]

2.10.

Thus, for the Claimant "(…) it results (…) from the Law that there would only be an incidence of stamp tax from entry 28.1 of TGIS if any of the parts, apartments or divisions with independent use had a TPV exceeding €1,000,000.00, which does not occur in the case at hand", therefore the Claimant understands that "the criterion upheld by AT, which takes into account the sum of the parts, with the argument that the property is not constituted in the regime of horizontal co-ownership, has no legal basis and is contrary to the criterion that results from the Municipal Property Tax Code and that applies by referral to Stamp Tax".

2.11.

The Claimant reiterates that "the adoption of the criterion upheld by AT, which takes into account the sum of the parts, with the argument that the property would not be constituted in the regime of horizontal co-ownership, has no legal basis and is contrary to the criterion that results from the Municipal Property Tax Code and that applies by referral to Stamp Tax, therefore violates the principles of tax legality and tax equality; as well as violates the principle of the prevalence of material truth over legal-formal reality".

2.12.

In these terms, according to the Claimant, "in the case before us, the property in question is held in vertical co-ownership and contains several apartments and divisions with independent use, intended for housing", and, "none of the apartments, intended for housing, have a patrimonial value equal to or exceeding €1,000,000.00, (…)" therefore the Claimant understands that one can conclude "(…) the non-verification of the legal prerequisite for the incidence of Stamp Tax provided in Entry 28 of TGIS".

2.13.

On the other hand, the Claimant alleges that "the reasoning for the measure designated as special tax on high-value residential urban properties is based on the invocation of the principles of social equity and tax justice, calling to contribute more intensely the holders of properties of high value intended for housing, making the new special tax apply to houses of value equal to or exceeding 1 million euros", concluding that "(…) it is illegal and unconstitutional to consider as the reference value the one corresponding to the sum of the TPVs attributed to each part or division", because "(…) the taxation of the parts with independent use of value less than one million euros is not covered by the rule of incidence".

2.14.

Thus, the Claimant understands that "its taxation effectively violates the principle of equality, more specifically in its corollaries of contributive capacity and tax proportionality".[4]

2.15.

In these terms, "in line with the case law of the Constitutional Court and CAAD (…)", the Claimant concludes in the sense of the existence "(…) of the violation of the principle of tax equality and contributive capacity", thus requesting "(…) the annulment of the aforementioned acts of assessment of Stamp Tax due to errors in the factual and legal prerequisites and lack of legal basis".

2.16.

Additionally, the "Claimant, although not agreeing, for the reasons set out above, with the collection of such tax (…)" alleges that "(…) was attempting (…) to proceed with the payment of the aforementioned tax", but also states that "such payment was not always possible (…)", for which reason the Claimant "(…) saw the property of which she is the owner (…) be seized consecutively by AT, due to non-payment, in particular, of Stamp Tax (…)".

2.17.

In this context, the Claimant further states that "in order to prevent the sale of the property (…) she was compelled to enter into installment payment agreements, which she has been complying with (…)".

2.18.

In these terms, the Claimant concludes its request, namely petitioning that the Respondent be condemned "(…) to reimburse (…) the amounts of taxes unduly paid, increased by compensatory interest under legal terms, from the date when such payments were made, until the date of full reimbursement thereof".[5]

3. RESPONSE OF THE RESPONDENT

3.1.

The Respondent, in its response presented, begins by clarifying that the Claimant submitted "(…) the present request for constitution of Arbitral Tribunal which concerns the 1st installment, of the year 2015 (…) and 2nd installment, of the year 2014, of what it designates as assessment of Stamp Tax (…) concerning the urban property contained in article ... of the urban real property matrix of the parish of..., municipality and district of Lisbon, based on illegality (error regarding the factual and legal prerequisites)", having defended itself by exception and by challenge as described below:

BY EXCEPTION

Of the "dual" untimeliness of the claim

3.2.

The Respondent begins by alleging that "(…) the present request for arbitral pronouncement is clearly untimely", because "the date of assessment of tax for the year 2014 is 20.03.2015 (…)" and "under the provisions of article 10º, section 1, paragraph a), of Decree-Law no. 10/2011, of 20 January (…) and of article 102º, section 1, paragraph a), of the Code of Procedural and Tax Procedure (CPPT), the time limit for submission of the request for constitution of the arbitral tribunal is 90 days counted from the end of the deadline for voluntary payment of the tax".

3.3.

"That is, the time limit for requesting the constitution of the arbitral tribunal for assessment of the legality of the stamp tax assessment has already ended, contrary to what is alleged by the Claimant (…)", because "having this Request been submitted on 2016-06-27, it is clearly untimely".

3.4.

Thus, according to the Respondent, "in accordance with the combined provisions of section 1 of article 10º RJAT and sections 1 and 2 of article 102º of CPPT, the deadline for submission of the request for constitution of arbitral tribunal has long since ended", "from which it is concluded that the claim is untimely", therefore the Respondent understands that "(…) it should (…) be absolved of the claim, with respect to the 2nd installment of 2014" and, "in that sequence the amount of the Claimant's claim should be reduced to the amount of the 1st installment of 2015".

Of the absolute incompetence of the arbitral tribunal

3.5.

In this context, the Respondent states that "(…) the Claimant does not challenge a tax act, but rather challenges the payment of the 2nd installment of 2014 and the 1st installment of 2015, of a tax act contained in a document which is a collection notice, that is, the object of the proceedings is the annulment, not of a tax act (or of 1/3 of a tax act, which would not be legally possible), but rather of a collection notice for the payment of the 2nd installment of 2014 and the 1st installment of 2015 of the tax (…)", "this matter which is not (…) contained in the set of norms that delimit the competence of tax arbitral tribunals, contained in article 2º of RJAT".

3.6.

Thus, the Respondent understands that "(…) the Arbitral Tribunal is incompetent to assess the claim made, which is the legality of a mere collection notice".

BY CHALLENGE

3.7.

In the matter of defense by challenge, the Respondent invokes that "what is at issue here is an assessment that results from the direct application of the legal norm, which translates into objective elements, without any subjective or discretionary assessment".

3.8.

Indeed, according to the Respondent, "at that time, the Claimant held full ownership of the urban property under analysis, assessed in accordance with the Municipal Property Tax Code, within the general assessment of urban properties, contained in article ... of the urban real property matrix of the parish of..., municipality and district of Lisbon, described as property in full ownership with apartments or divisions capable of independent use, composed of 8 floors and 19 apartments or divisions capable of independent use, with taxable patrimonial value (VP) exceeding €1,000,000.00".

3.9.

"With reference to the years under review, in compliance and under the provisions of article 6º, section 2 of Law no. 55-A/2012, of 29/10 (…), as amended by Law no. 83-C/2013 of 31/12 and whose respective rule of incidence refers to urban properties, assessed in accordance with the Municipal Property Tax Code, with VP equal to or exceeding €1,000,000.00 and (...) residential designation, the AT proceeded with the assessment of 2014 and 2015, from which resulted the collection notices, object of the present request for arbitral pronouncement".

3.10.

According to the Respondent, "the concept of property is defined in article 2º, section 1 of the Municipal Property Tax Code, and it is provided in section 4 that in the regime of horizontal co-ownership, each autonomous unit is deemed to constitute a property", resulting "from the analysis of the normative provision that a property in full ownership with apartments or divisions capable of independent use is, unequivocally, different from an asset in the horizontal co-ownership regime, constituted by autonomous units, that is, several properties".

3.11.

The Respondent states that "as to the assessment of IMI (Municipal Property Tax), in the case of a property in full ownership, the VP that serves as the basis for its calculation will, indisputably, be the VP that the now Claimant defines as global value of the property", "and the assessment being correct and the tax being due, compensatory interest is not due, primarily because there is no error attributable to the Services, which merely acted as they should, in strict compliance with the legal norm".

3.12.

The Respondent understands that "the thesis defended by the Claimant lacks (…) legal support, because although the assessment of Stamp Tax, in the situations provided in entry no. 28.1 of TGIS, is carried out in accordance with the rules of the Municipal Property Tax Code, the truth is that the legislator reserves aspects that require proper adjustments (…), as is the case of properties in full ownership, even though with apartments or divisions capable of independent use (…) for the purposes of Stamp Tax what matters is the property in its entirety because the divisions capable of independent use are not deemed to be property, but only the autonomous units in the horizontal co-ownership regime, according to section 4 of article 2º of the Municipal Property Tax Code".

3.13.

The Respondent goes on to state that "the subjection to stamp tax of entry 28.1. of the General Table (…) results from the combination of two facts: the residential designation and the taxable patrimonial value of the urban property registered in the matrix being equal to or exceeding €1,000,000.00" and, "in fact, it appears from the real property record that the property is in the regime of full ownership, composed of several parts capable of independent use".

3.14.

Thus, according to the Respondent, "what expressly results from the letter of the law is that the legislator intended to tax with entry 28.1 in question the properties as a single legal-tax reality (…)" therefore "the information being matricial (…) the stamp tax assessments for the year 2015 were made by the Tax Administration, taking into account the nature of the urban property at the date of the tax event, applying, with necessary adjustments, the rules contained in the Municipal Property Tax Code".

3.15.

Now, according to the Respondent, "the property being in the regime of full ownership, not possessing autonomous units, to which tax law attributes the qualification of property, because from the notion of property of article 2º of the Municipal Property Tax Code, only the autonomous units of property in the horizontal co-ownership regime are deemed to be properties (…)", the Respondent understands that "the defect of violation of law due to error regarding the legal prerequisites should be judged unfounded, maintaining in the legal system the challenged assessments as they constitute a correct application of law to the facts".

3.16.

Already with regard to the alleged violation of the principle of tax equality alleged by the Claimant, the Respondent understands that "it is not discernible how the tax in question could have violated the principle of equality", because "(…) it understands that the provision of entry 28.1 of TGIS does not constitute any violation of the principle of equality, there being no discrimination in the taxation of properties constituted in horizontal co-ownership and properties in full ownership with apartments or divisions capable of independent use, or between properties with residential designation and properties with other designations", taking into account that "horizontal co-ownership and vertical co-ownership are differentiated legal institutes".

3.17.

In this way, the Respondent argues that "(…) one cannot conclude an alleged discrimination in violation of the principle of equality when, in fact, we are faced with distinct realities, valued by the legislator in different ways".

3.18.

On the other hand, the Respondent argues that "(…) taxation in the Stamp Tax field obeys the criterion of adequacy, to the exact extent that it aims at the taxation of wealth embodied in the ownership of high-value real estate, appearing in a context of economic crisis that cannot be at all ignored", and that "the measure implemented seeks to achieve maximum efficacy regarding the objective to be achieved, with minimal harm to other interests considered relevant".

3.19.

In these terms, the Respondent understands that it is "(…) justified in choosing this mechanism for obtaining revenue, which would only be censurable, in light of the principle of proportionality, if it resulted in manifestly indefensible".

3.20.

Thus, the Respondent reiterates that "everything that is now being defended in this arbitral forum was already the subject of binding guidance from AT, with order of agreement of 11.2.2013 from the Legal Substitute of the Director-General of the Tax Authority", therefore "(…) the collection notices relating to the 2nd installment of 2014 and 1st installment of 2015 of stamp tax (…) challenged remain fully valid and legal, concluding from their legality".

ON THE CLAIM FOR COMPENSATORY INTEREST

3.21.

In this context, the Respondent states that the "Claimant invokes (…) the right to compensatory interest, even though there is no proof of payment of the collection notices under review".

3.22.

Now, "given that the assessment made was based on the applicable law, to which the Administration is bound (…)" the Respondent argues that "(…) it cannot but give full compliance to the normative provisions that the ordinary legislator created and that are in force in the legal system and also by force of article 55º of the General Tax Law", therefore the Respondent understands that "(…) one cannot speak of error by the Services under the provisions of article 43º of the General Tax Law".

4. CLARIFICATION

4.1.

With respect to the alleged lack of timeliness of the claim, see the analysis carried out in Chapter 6 of this Decision, under the heading "Preliminary Matters".

4.2.

The Parties possess legal personality and capacity, are legitimate with respect to the request for arbitral pronouncement and are duly represented, under the provisions of articles 4º and 10º of RJAT and article 1º of Order no. 112-A/2011, of 22 March.

4.3.

The Tribunal is competent to assess part of the request for arbitral pronouncement made by the Claimant, as analyzed in Chapter 6 of this Decision ("Preliminary Matters"), to which reference is made here.

4.4.

With respect to the cumulation of claims made by the Claimant, reference is made here also to the analysis carried out in Chapter 6 of this Decision.

4.5.

With respect to the value of the Request for Arbitral Pronouncement, this Arbitral Tribunal cannot, given the content of the claim presented, agree with the value indicated by the Claimant of EUR 7,815.29.

4.6.

Indeed, taking into account:

4.6.1.

That the Claimant petitions for the declaration of "(…) illegality of the Stamp Tax assessments (…) challenged, due to errors in the legal prerequisites, determining their annulment, with legal consequences", referring to the tax assessments for the year 2015, in the total amount of EUR 10,928.10 and, allegedly, to the 2nd installment of tax for the year 2014, contained in the copies of the collection notices attached with the claim (doc. no. 17, 19, 21, 23, 25, 27, 29, 31, 33, 35 and 37), in the total amount of EUR 3,674.76), as well as,[6]

4.6.2.

The provision of article 306º and article 297º, both of the Code of Civil Procedure (CPC), under which "cumulating several claims in the same action, the value is the sum corresponding to the sum of the values of all of them" (that is, EUR 14,702.76).

the value of the proceedings is fixed at EUR 14,602.76 (and not at EUR 7,815.29, as indicated by the Claimant), with implications on the amount of final costs of the proceedings, which in accordance with the provisions of article 4º, section 4 of the Regulation of Costs in Arbitration Proceedings will be fixed by the Arbitral Tribunal in the chapter of the Decision.

4.7.

No other exceptions were raised that need to be addressed beyond those raised by the Respondent (see analysis in Chapter 6 of this Decision).

4.8.

There are no procedural irregularities.

5. MATTER OF FACT

Of the facts proven

5.1.

The following facts are considered proven (supported by the documents identified below, attached by the Claimant, as well as by the administrative file attached by the Respondent):

5.1.1.

The Claimant is the owner of the urban property located at... Street, no..., ... and ... and... Street, ... and ..., in Lisbon, registered in the urban real property matrix under article number..., of the parish of ... (extinct parish of ...), as shown by a copy of a Permanent Certificate of Real Property Registration attached with the claim (doc. no. 1).

5.1.2.

The aforementioned urban property is constituted in the regime of vertical co-ownership (or full ownership), being composed of basement, ground floor, six floors, right and left (except for the 4th floor), intended for commerce and housing, in a total of nineteen apartments or divisions with independent use, as shown by a copy of the Urban Real Property Record attached with the claim (doc. no. 2).

5.1.3.

The total TPV of the aforementioned urban property was EUR 1,384,440.00, determined within an evaluation carried out on 17 January 2013, and the sum of the TPV of all divisions or apartments capable of independent use intended for housing was, in the year 2015, EUR 1,092,810.00 [as results from the sum of the TPV individually considered for the purpose of issuing the assessment notices, copies of the collection notices (for payment of the first installment) were attached with the claim (doc. no. 3 to 16)].

5.1.4.

The TPV of each of the divisions (or parts capable of independent use) intended for housing is between EUR 30,740.00 (value attributed to the apartment denominated "front basement") and EUR 174,840.00 (value attributed to the "4th floor"), as shown by a copy of the Urban Real Property Record attached with the claim (doc. no. 2) and docs. no. 4 and 12 also attached with the claim.

5.1.5.

The Claimant was notified of collection notices for payment of the 1st installment of Stamp Tax, identified below (whose assessments that gave rise to it are dated 5 April 2016), for the year 2015 (whose payment deadline was "April/2016"), concerning the real estate identified above (see points 5.1.1. and 5.1.2.), in accordance with copies of the respective collection documents attached with the claim (docs. no. 3 to 16) [the amounts are expressed in Euro (EUR)]:

DOCUMENT NUMBER	APARTMENT	TPV	ASSESSMENT	1ST INSTALLMENT	DOC. ATTACHED TO CLAIM
2016 …	CV RT	31,380.00	313.80	156.90	3
2016 …	CV FRT	30,740.00	307.40	153.70	4
2016 …	R/C	31,050.00	310.50	155.25	5
2016 …	1st RT	101,760.00	1,017.60	339.20	6
2016 …	1st LT	81,920.00	819.20	273.08	7
2016 …	2nd RT	101,760.00	1,017.60	339.20	8
2016 …	2nd LT	81,920.00	819.20	273.08	9
2016 …	3rd RT	102,770.00	102,770.00	342.58	10
2016 …	3rd LT	82,740.00	827.40	275.80	11
2016 …	4th	174,840.00	1,748.40	582.80	12
2016 …	5th RT	103,790.00	1,037.90	345.98	13
2016 …	5th LT	83,560.00	835.60	278.54	14
2016 …	6th RT	103,790.00	1,037.90	345.98	15
2016 …	6th LT	83,560.00	835.60	278.54	16
TOTAL		1,092,810.00	10,928.10

5.1.6.

For the purpose of determining the incidence of Stamp Tax from entry 28 on various autonomous parts of the real estate (identified above), the Respondent considered (i) the sum of the TPV of all divisions or apartments capable of independent use with residential designation (which amounted to, on 31 December 2015, EUR 1,092,810.00, that is, exceeded EUR 1,000,000.00) and (ii) the residential designation of the aforementioned autonomous parts.

5.1.7.

For the purpose of assessing the tax, the Respondent applied the rate of 1% Stamp Tax on the individual TPV of each of the units intended for housing identified in point 5.1.5 above.

5.1.8.

The Claimant was notified of collection notices for payment of the 2nd installment of Stamp Tax, identified below (whose assessments that gave rise to it are dated 20 March 2015), for the year 2014 (whose payment deadline was "July/2015"), concerning the 1st floor (left and right), 2nd floor (left and right), 3rd floor (left and right), 4th floor, 5th floor (left and right) and sixth floor (left and right) of the real estate identified above (see points 5.1.1. and 5.1.2.), in the total amount of EUR 3,674.76, in accordance with copies of the respective collection documents attached with the claim (doc. no. 17, 19, 21, 23, 25, 27, 29, 31, 33, 35 and 37).

5.1.9.

Evidence of payment of Stamp Tax concerning the collection notices referred to in the previous point was obtained, as shown by copies of the respective banking transfer documents "C…" attached with the claim (doc. no. 18, 20, 22, 24, 26, 28, 30, 32, 34, 36 and 38).

5.2.

No other facts were proven that could affect the decision on the merits of the claim.

Of the facts not proven

5.3.

No evidence was obtained of payment of Stamp Tax concerning the assessment for the year 2015 (object of the request for arbitral pronouncement), namely the 1st installment of tax, whose collection notices were attached to the claim (docs. no. 3 to 16).

5.4.

No other facts were verified as unproven with relevance for the arbitral decision.

6. PRELIMINARY MATTERS

On the assessment of the exceptions raised by the Respondent

6.1.

In accordance with the provisions of article 608º, section 1 of the Code of Civil Procedure, applicable by force of the provision of article 29º of RJAT, "(…) the judgment shall first address procedural matters that may result in absolution of the proceedings (…)", the judge should "resolve all matters that the parties have submitted to his consideration, except those whose decision is prejudiced by the solution given to others (…)" (emphasis ours).

6.2.

Given that the Respondent raised the following exceptions:

6.2.1.

"Of the dual untimeliness of the claim" and;

6.2.2.

"Of the absolute incompetence of the arbitral tribunal" to assess the request for arbitral pronouncement made by the Claimant;

it is necessary that this Arbitral Tribunal rule, preliminarily, on the same, analyzing, first, the exception of alleged absolute incompetence of the Arbitral Tribunal to assess the request for arbitral pronouncement made by the Claimant.

Of the absolute incompetence of the Arbitral Tribunal

6.3.

In this context, and as already mentioned in Chapter 3 of this Decision, the Respondent alleges that "(…) the Claimant does not challenge a tax act, but rather challenges the payment of the 2nd installment of 2014 and the 1st installment of 2015, of a tax act contained in a document which is a collection notice, that is, the object of the proceedings is the annulment, not of a tax act (…), but rather of a collection notice for the payment of the 2nd installment of 2014 and the 1st installment of 2015 of the tax (…)", "this matter which in no way is part of the set of norms that delimit the competence of tax arbitral tribunals, contained in article 2º of RJAT" therefore the Respondent understands that "(…) the Arbitral Tribunal is incompetent to assess the claim made, which is the legality of a mere collection notice".

6.4.

Now, given that the determination of the competence of tribunals is a matter of public order and its assessment must precede that of any other matter, [as is extracted from the reading combined with the provisions of articles 16º of the Code of Procedural and Tax Procedure (CPPT), article 13º of the Administrative and Tax Courts Code (CPTA) and article 96º of the Code of Civil Procedure (CPC), subsidiarily applicable by referral of section 1 of article 29º of RJAT], this exception must be analyzed immediately, because, if it is judged well-founded, knowledge of the merits of the case (or part thereof) will be prejudiced, justified with a decision of absolution of the proceedings [article 89º, section 2 of CPTA, subsidiarily applicable by force of the provision of article 29º, section 1, paragraph c) of RJAT].

6.5.

In general terms, in accordance with the provisions of article 2º of RJAT, the competence of arbitral tribunals comprises "the declaration of illegality of acts of assessment of taxes, of self-assessment, of withholding at source and payment on account", as well as "the declaration of illegality of acts of fixing the taxable matter when it does not give rise to the assessment of any tax, of acts of determination of the taxable matter and of acts of fixing of patrimonial values" (emphasis ours). [7]

6.6.

On the other hand, article 95º of the General Tax Law (LGT) provides that "the interested party has the right to contest or appeal any act that is harmful to their rights and legally protected interests, according to the forms of procedure prescribed by law", and may be harmful, in particular, "the assessment of taxes (…)".

6.7.

In this matter, it results from the normative framework transcribed above that, in general terms, the claim for declaration of illegality of assessment acts may be the object, either of judicial challenge, or of a request for arbitral pronouncement.

6.8.

In the case under analysis, the Claimant petitions that the assessments of "Stamp Tax for the year 2015" be declared illegal (even though substantiated, through documentary means, by copies of the collection notices concerning the first installment of tax) and, according to what the Respondent argues (a position that was not contradicted by the Claimant, given that it did not exercise the prerogative of response to the exceptions within the 10-day period that was given to it to do so), the second installment of tax for the year 2014.

6.9.

In this context, and with respect to the claim for annulment of the Stamp Tax assessments for the year 2015, no incompetence on the part of the Arbitral Tribunal is discernible to assess the claim, taking into account the content of article 2º of RJAT, transcribed above in point 6.5.

6.10.

Now, with respect to the claim for annulment of the second installment of Stamp Tax for the year 2014, it is important to note that for each tax event, there will, in principle, be a single assessment by which the amount of tax to be paid will be determined, an understanding that results from the provision of article 23º, section 7 of the Stamp Tax Code, under which it is provided that "in the case of tax due for the situations provided in entry no. 28 of the General Table, the tax is assessed annually (…) applying, with necessary adjustments, the rules contained in the Municipal Property Tax Code".[8]

6.11.

In turn, it results from the provision of article 113º, section 2 of the Municipal Property Tax Code that, although the assessment may be paid in several installments, this does not imply that several assessments have occurred. [9]

6.12.

In fact, the assessment of tax is only one and only it will constitute a harmful act, capable of being the object of a single challenge [10], so that when the law provides for its payment in several installments, staggered over time, the annulment of the tax act will have consequences with respect to all of them, causing the obligation to pay to cease or imposing the obligation to refund the amounts of tax already paid by the taxpayer, as well as the compensation of the situation through the payment of compensatory interest, all at the charge of the Tax Authority.

6.13.

What the law does not provide for, either in arbitral proceedings or in judicial challenge proceedings, is the claim for annulment of payment of isolated tax installments, since such effect will only result from the annulment of the tax assessment act which, as we have seen, consists in the quantification of the total amount to be paid and which is, only and solely, a single tax act.

6.14.

Thus, from the above it results that the collection notices for Stamp Tax relating to the second installment of tax for the year 2014 are not challengeable per se because they do not constitute acts of assessment of taxes, but only one of the installments in which payment of the tax may be made. [11] [12]

6.15.

In this context, let it be noted once more that, taking into account the fact that the Claimant did not rule on this matter regarding the exception raised by the Respondent, with respect to the inclusion in the request for arbitral pronouncement presented of the claim for assessment of the 2nd installment of Stamp Tax for the year 2014, it was deemed proven that the Claimant also intends to assess that installment.

6.16.

In these terms, as to this request for arbitral pronouncement concerning the second installment of Stamp Tax for the year 2014, the Arbitral Tribunal is incompetent to hear the claim, because the various installments in which a tax may be collected are not, per se, individually challengeable, as concluded above in point 6.14.

Of the untimeliness of the request for arbitral pronouncement

6.17.

In this matter, the Respondent alleges the "dual untimeliness of the claim" because "the date of assessment of tax for the year 2014 is 20.03.2015 (…)" and "(…) the time limit for submission of the request for constitution of the arbitral tribunal is 90 days counted from the end of the deadline for voluntary payment of the tax", therefore the Respondent understands that "the time limit for requesting the constitution of the arbitral tribunal for assessment of the legality of the stamp tax assessment has already ended (…)", being "(…) this Request (…) clearly untimely".

6.18.

Now, in general terms, taking into account the provision in section 1 of article 102º of the Code of Procedural and Tax Procedure (CPPT), the time limit for judicial challenge is three months counted from the facts enumerated in that article, in particular, from the "end of the deadline for voluntary payment of tax payments legally notified to the taxpayer".

6.19.

On the other hand, in accordance with what is provided for in article 10º, section 1, paragraph a) of RJAT, the request for constitution of an arbitral tribunal must be submitted "within a period of 90 days, counted from the facts provided for in sections 1 and 2 of article 102º of CPPT (...)".

6.20.

In this matter, it should be noted that the arbitral nature of this tribunal and the application of the tax arbitration regime do not entail any modification relating to the nature, modalities and method of counting time limits (as is extracted from reading RJAT) and, were there any doubt, article 29º of RJAT provides for the subsidiary application of norms of a procedural or substantive tax nature, norms on organization and procedure in administrative and tax tribunals, the Code of Administrative Procedure (CPA) and the Code of Civil Procedure (CPC).

6.21.

In the case under analysis, the Claimant first requests in its request for arbitral pronouncement that the "(…) illegality of the Stamp Tax assessments (…) challenged, due to errors in the legal prerequisites (…), determining their annulment" be declared, stating in article 3 of the request presented that "(…) was notified of the (…) Stamp Tax assessments of the year 2015 (1st installment), relating to part of the apartments or divisions with independent use existing in the property (…) identified with a value corresponding to 1% of its taxable patrimonial value (…)".

6.22.

Now, having the Claimant been notified in 2016 of the Stamp Tax assessments for the year 2015, whose collection notices for the first installment of tax had as the deadline for voluntary payment the end of April 2016 (that is, 30 April), the counting of the time limit referred to for submission of the request for constitution of Arbitral Tribunal would begin on the day following the end of that deadline for voluntary payment, that is, from 1 May 2016.

6.23.

Having the request for arbitral pronouncement been filed on 27 June 2016, it is considered timely with respect to the assessment of the legality of the assessments for the year 2015.

6.24.

With respect to the remaining claims made by the Claimant (included in the request for arbitral pronouncement), the Respondent understands that the Claimant, as mentioned above (see points 6.3. to 6.16., supra), also requests the assessment of the second installment of Stamp Tax concerning the assessments of that tax for the year 2014, because it refers, in article 57 and following of the claim, to the assessment of Stamp Tax for 2014 (due in 2015), attaching copies of the collection notices relating to the second installment of tax for that year 2014.

6.25.

However, and as already analyzed (see points 6.3. to 6.16., supra), taking into account:

6.25.1.

That payment in installments is nothing more than a technique for collection of the tax (and not a partial payment properly speaking), as well as;

6.25.2.

The above regarding the well-foundedness of the exception of absolute incompetence of the Arbitral Tribunal in this matter (because each of the aforementioned installments is an unchallengeable act), with the consequent absolution of the Respondent of the proceedings;

knowledge regarding these collection notices for Stamp Tax for the year 2014 of the alleged exception of untimeliness of the claim is here prejudiced, because such would prove to be futile.

On the remaining claims included in the request for arbitral pronouncement

6.26.

In this context, let it be recalled that the Claimant, in its request for arbitral pronouncement, petitions, in addition to the claim above already identified (declaration of the "(…) illegality of the Stamp Tax assessments (…) challenged, due to errors in the legal prerequisites, determining their annulment, with legal consequences"), that the Arbitral Tribunal:

6.26.1.

6.26.2.

6.26.3.

6.26.4.

6.26.5.

"That, being the present judgment well-founded, costs be fixed against the Respondent (…)".

6.27.

In this context, taking into account the above (in point 6.5.) regarding the competence of arbitral tribunals, in conformity with the provision of article 2º and article 24º of RJAT, this Tribunal understands that the claims identified above in points 6.26.2., 6.26.3. and 6.26.4. concern the direct implications that may result from the final decision that addresses the merits of the claim, should it be judged well-founded, and therefore reference is made here to the following chapters of this Decision (analysis of "Matter of Law" and the "Decision" itself).

6.28.

With respect to the claim presented by the Claimant and identified above in point 6.26.5., concerning the fixing of costs, taking into account the provision of article 22º, section 4 of RJAT, reference is made here to the following chapter of this Decision, where the responsibility for payment of arbitral costs will be fixed.

6.29.

As to the claims presented by the Claimant, identified above in point 1.2.1. and 6.26. [declaration of the "(…) illegality of the Stamp Tax assessments (…) challenged, due to errors in the legal prerequisites, determining their annulment, with legal consequences"] and in point 1.2.2. and 6.26.1. [condemnation of the "(…) Tax and Customs Authority (…) to reimburse (…) the amount of taxes unduly paid, increased by compensatory interest under legal terms, from the date when such payments were made until the date of full reimbursement thereof"], being competent the Arbitral Tribunal to hear them and the claim having been considered timely with respect to the assessment of the legality of the assessments for the year 2015, its analysis is referred also to the following chapter of this decision.

7. MATTER OF LAW

7.1.

In the case under analysis, in order to assess the legality of the Stamp Tax assessments notified to the Claimant, by reference to the year 2015, it will be important to answer a controversial legal question, underlying the Request for Arbitral Pronouncement:

7.1.1.

Is the subjection to Stamp Tax, under what is provided for in entry no. 28.1. of TGIS, determined by the TPV that corresponds to each of the parts of the property with residential designation or is it, on the contrary, determined by the global TPV of the property, which would correspond to the sum of all the TPVs of the apartments (with that type of designation) that make up the property?

7.2.

In this context, the Claimant argues that "the patrimonial value relevant for the purposes of the application of entry 28.1. of TGIS is the TPV of the part, apartment or division with independent use with residential designation (…)" and for the Respondent, "(…) the patrimonial value relevant for the purposes of the incidence of the tax (…)" is "(…) the total patrimonial value of the urban property and not the patrimonial value of each of the parts that make it up, even when capable of independent use".

7.3.

Now, in order to answer the question raised above, it will be important to analyze the changes resulting from Law no. 55-A/2012, of 29 October (that is, the addition to TGIS of entry 28), because that law "introduced a set of changes to the codifying legislation of three taxes – IRS (Personal Income Tax), IRC (Corporate Income Tax) and Stamp Tax – as well as the General Tax Law, among which the norm under analysis, all guided by obtaining additional tax revenue and, in general, to counteract budgetary imbalance". [13][14]

7.4.

Thus, "invoking the principles of social equity and tax justice, taxation on income from capital and mobile gains was increased (…)", and "(…) measures to strengthen the fight against tax fraud and evasion (…) were introduced to which was added the introduction, in the Stamp Tax field, of taxation of legal situations (…), which was understood to be capable of bearing increased tax burden, thereby more equitably distributing the sacrifice to achieve the budgetary consolidation required from taxpayers" (emphasis ours).[15]

7.5.

And were there any doubt as to the alleged unconstitutionality of entry 28 of TGIS, due to alleged violation of the principles of proportionality, equality and contributive capacity, the Constitutional Court ruled on this matter, in the Decision of 11 November 2015 (in the scope of case no. 542/14), in the terms of which it decided "(…) not to find unconstitutional the norm of entry 28. and 28.1 of the General Table of Stamp Tax, added by article 4º of Law no. 55-A/2012, of 29 October, insofar as it imposes annual taxation on the ownership of urban properties with residential designation, whose taxable patrimonial value is equal to or exceeding €1,000,000.00", "no violation of constitutional parameters (…) being verified, nor any others (…)" (emphasis ours).[16][17]

7.6.

Indeed, and with respect to the principle of tax equality and contributive capacity, that Court removes the "haze" of unconstitutionality, because:

7.6.1.

"As it was seen, the legislative change had as its purpose to expand the taxation of property, making it fall more intensely on ownership which, by its value substantially higher than (…) the generality of urban properties with residential designation, reveals greater indicators of wealth and, as such, is capable of supporting the imposition of increased contribution for the sanitation of public accounts to its holders, in realization of the aforementioned principle of social equity in austerity" (emphasis ours).

7.6.2.

On the other hand, that Decision further clarifies that "the constitutional principle of tax equality (…) finds realization in the generality and uniformity of taxes", and "generality means that all citizens are bound to pay taxes (…)" and "uniformity means that the distribution of taxes among citizens follows the same identical criterion for all" (emphasis ours).[18]

7.7.

And such criterion, as highlighted by Casalta Nabais, cited in that Decision, is found in the principle of contributive capacity, as it implies "(…) equal tax for those with equal contributive capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those with different contributive capacity in proportion to that difference (vertical equality)".[19]

7.8.

Now, "as a prerequisite and criterion for taxation, the principle of contributive capacity (…) removes the tax legislator from arbitrariness, obliging him to ensure that in the selection and articulation of tax facts he adheres to revelations of contributive capacity (…)" (emphasis ours).[20] [21]

7.9.

On the other hand, the same Decision states that "the principle of contributive capacity does not dispense with the concurrence of other constitutional principles", that is, "the principle of the Social State, the freedom of configuration of the legislator and certain requirements of practicability and cognoscibility of the tax fact, equally indispensable to the fulfillment of the purposes of the tax system".[22]

7.10.

Thus, and in summary, "(…) the principle of tax equality can be realized through diverse aspects", whether "in the generality of the tax law, in its application to all without exception", or "in the uniformity of the tax law, in treating equally the taxpayers who are in equal situations and differently the taxpayers who are in different situations, in the measure of the difference, to be assessed by contributive capacity", or also "in the prohibition of arbitrariness, in preventing the introduction of discriminations among taxpayers that are devoid of rational foundation" (emphasis ours).[23]

7.11.

In these terms, "the incidence of Stamp Tax (…) refers here, as far as the essential elements of the assessment of the tax are concerned (…) to the regulation contained in the Municipal Property Tax Code (…)", and "doctrine itself attributes it the status of an additional municipal property tax rate, aimed at discriminating properties of higher patrimonial value and subjecting them to a more onerous tax regime than the others (…) explaining the creation of a new tax fact subject to Stamp Tax, beyond the heterogeneity that characterizes this tax, by the need to increase the tax revenue of the State, since Municipal Property Tax revenue goes to the benefit of municipalities and Stamp Tax is revenue of the State" (emphasis ours).[24]

7.12.

On the other hand, and with respect to the principle of proportionality, that Court also removes any unconstitutionality, because (and let it be cited):

7.12.1.

"The legislator did not intend merely by this means to achieve the objective of rebalancing public accounts (…) intended (…) to expand the tax base to the wealth represented in the ownership of high-value urban properties intended for housing and (…) as an instrument for obtaining more revenue and (…) for relief of the effort that might fall on other sources of revenue or on the reduction of public spending, with a view to meeting the targets of public deficit, it is beyond doubt that the amounts of Stamp Tax collected through the incidence provided in entry no. 28, whatever their amount, are apt and suitable to achieve the purposes of expanded distribution of effort in a period of additional fiscal and financial sacrifice that the legislator sought to achieve" (emphasis ours).

7.12.2.

Thus, "as a fiscal measure aimed at affecting more intensely the holders of real rights of enjoyment over urban properties with housing vocation and of higher value, there are no reasons to conclude by the disrespect of the dimensions of necessity or of fair measure, contained in the principle of proportionality" (emphasis ours).

7.13.

In these terms, any doubt regarding a possible unconstitutionality of entry 28 of TGIS is hereby removed, for the reasons set out above, with respect to the constitutional principles referred to above.

On the incidence of the tax

7.14.

In this context, as already mentioned above, it is important to analyze the essence of entry no. 28 of TGIS (added by article 4º of Law no. 55-A/2012, of 29 October).

7.15.

Notwithstanding the fact that Law no. 55-A/2012 (in force since 30 October 2012) did not proceed with the qualification of the concepts contained in the aforementioned entry no. 28, in particular the concept of "property with residential designation", if we observe the provision of article 67º, section 2 of the Stamp Tax Code (also added by the aforementioned Law no. 55-A/2012), we find that "to matters not regulated in the present Code concerning entry 28 of TGIS, the Municipal Property Tax Code applies, subsidiarily".

7.16.

Now, from reading the Municipal Property Tax Code, it is easily clear that the concept of "property with residential designation" refers to the concept of "urban property", defined under articles 2º and 4º of that Code.

7.17.

Indeed, in accordance with the provisions of article 2º, section 1 of the Municipal Property Tax Code, "for the purposes of this Code, property is every fraction of territory, encompassing the waters, plantations, buildings and constructions of any nature incorporated in or based on it, with character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as the waters, plantations, buildings or constructions, in the circumstances previously mentioned, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of assets diverse or does not have patrimonial nature" (emphasis ours).

7.18.

Still in accordance with section 2 and section 3 of the same article, "buildings or constructions, even if mobile by nature, are deemed to have character of permanence when intended for non-transitory purposes", and it is presumed "the character of permanence when buildings or constructions are based in the same location for a period exceeding one year".

7.19.

For the purposes of Municipal Property Tax, "each autonomous unit, in the regime of horizontal co-ownership, is deemed to constitute a property" and, in accordance with the provision of article 4º of the Code of that tax, "urban properties are all those that should not be classified as rustic (…)" (emphasis ours).

7.20.

Among the various kinds of "urban properties" referred to in article 6º of the Municipal Property Tax Code, "residential urban properties" are expressly mentioned [section 1, paragraph a)], with section 2 of the same article adding that these "are the buildings or constructions for which it is licensed or, in the absence of license, which have as normal purpose each of these uses".

7.21.

On the other hand, while it is true that section 4 of article 2º of the Municipal Property Tax Code states that "for the purposes of this tax, each autonomous unit, in the regime of horizontal co-ownership, is deemed to constitute a property", it is equally true that there is nothing in the law that points to discrimination between properties in horizontal co-ownership and property in vertical co-ownership as far as their identification as "residential urban properties" is concerned.

7.22.

Thus, from this it can be concluded that the autonomous parts of properties in vertical co-ownership, with residential designation, should be considered as "residential urban properties".

7.23.

As defended in various Arbitral Decisions, in particular in the one issued in the scope of Case no. 88/2013-T, "in the legislator's view, what matters is not the legal-formal accuracy of the concrete situation of the property but rather its normal use, the purpose for which the property is intended", therefore "it must be concluded that for the legislator it is irrelevant whether the property is constituted in vertical co-ownership or in horizontal co-ownership, what matters is only the material truth underlying its existence as an urban property and its use" (emphasis ours).

7.24.

Indeed, in the interpretation of the legal text, it makes no sense to distinguish what the law itself does not distinguish because distinguishing, in this context, between properties constituted in horizontal co-ownership and properties constituted in full ownership would be an "innovation" without associated legal support.

7.25.

In fact, neither in entry no. 28 of TGIS, nor in what is provided for in the Municipal Property Tax Code, is there anything that indicates justification for that differentiation, and it is today a settled understanding that fiscal laws are interpreted by determining their true meaning, ascertained in accordance with techniques and interpretive elements generally accepted by doctrine (cf. article 9º of the Civil Code and article 11º of the General Tax Law).[25] [26]

7.26.

On the other hand, it is also necessary to bear in mind that the norms of incidence of taxes must be interpreted in their exact terms, without resort to analogy, making prevailing the certainty and security in their application.[27]

7.27.

In these terms, the uniform criterion that is required is the one that determines that the incidence of what is provided for in the norm in question (entry 28 of TGIS) only takes place when any of the parts, apartments or divisions with independent use of property in horizontal co-ownership (or full ownership), with residential designation, possesses a TPV exceeding EUR 1,000,000.00.

7.28.

Thus "if the legal criterion imposes the issue of individualized assessments for the autonomous parts of properties in vertical co-ownership, in the same manner as it establishes for properties in horizontal co-ownership, it clearly established a criterion, which must be unique and unequivocal, for the definition of the rule of incidence of entry 28.1. of TGIS" [28], therefore fixing as the reference value for this purpose the global TPV of the property in question (as the Respondent intends), does not find a basis in the applicable legislation (emphasis ours).[29]

7.29.

Finally, it will be important to further stress what is the ratio legis underlying the rule of entry 28 of TGIS (in obedience to what is provided for in article 9º of the Civil Code[30]), taking into account the circumstances in which the norm was drafted, as well as the specific conditions of the time in which it was and is applied.

7.30.

Indeed, and as already mentioned above (see point 7.6., 7.11. and 7.12.), at the time of the change, the legislator intended to introduce a principle of taxation on the wealth represented in the ownership, usufruct or right of superficies of luxury urban properties with residential designation, having considered, as a determining element of contributive capacity, urban properties with residential designation of high value (luxury), that is, of value equal to or exceeding EUR 1,000,000.00, on which a special rate of Stamp Tax would apply.

7.31.

In fact, this is what can be concluded from the analysis of the discussion of the Bill no. 96/XII in the National Assembly[31], and there is no discernible invocation of a different interpretative ratio than the one presented here.[32]

7.32.

Indeed, the reasoning for the measure designated "special tax on high-value residential urban properties" is based, as we have seen, on the invocation of the principles of social equity and tax justice, calling to contribute more intensely the holders of properties of high value intended for housing, thus applying the new special tax to "houses of value equal to or exceeding 1 million euros" (emphasis ours).

7.33.

Now, while such logic seems to make sense when applied to a "residential property" (whether it is a house, an autonomous unit, a part of property with independent use or an autonomous unit) whenever it represents, on the part of its holder, above-average contributive capacity (and, in that measure, capable of determining a special contribution to ensure just distribution of tax burden), it would make no sense if applied "unit by unit" in order, through the sum of the individual TPVs of the same (because held by the same individual), to determine such value equal to or exceeding one million euros (emphasis ours).

7.34.

It is further added that to admit the differentiation of treatment could produce results incomprehensible and discriminatory from a legal point of view, because contrary to the objectives (of promoting social equity and tax justice) that the legislator claimed to have in adding the aforementioned entry no. 28.

7.35.

Thus, the existence of a property in vertical co-ownership or horizontal co-ownership cannot, by itself, be an indicator of contributive capacity, and it results from the law that both should receive the same tax treatment in obedience to the principles of justice, tax equality and material truth.

7.36.

Conversely, the existence in each property of independent residential units, in the regime of horizontal co-ownership or vertical co-ownership, may be susceptible of triggering the incidence of the new tax if the TPV of each part or unit is equal to or exceeding the limit defined by law, that is, EUR 1,000,000.00.

7.37.

Thus, and as the Claimant argues, it is illegal (and unconstitutional) to consider that the reference value for the assessment of the tax is the one corresponding to the sum of the TPVs attributed to each part or division, first and foremost because we would be faced with a clear violation of the principle of equality and proportionality in tax matters, because the tax legislator cannot treat equal situations differently, depending on whether we are or are not faced with a property in horizontal co-ownership or in vertical co-ownership.

7.38.

Now, if the property under analysis were held in the regime of horizontal co-ownership, it was clear that none of the residential divisions capable of independent use that make it up would be subject to the incidence of the new tax, because in none of them would the TPV, individually considered, exceed the limit of EUR 1,000,000.00 defined by law (see point 5.1.4., supra).

7.39.

It will be for this very reason that article 12º, section 3 of the Municipal Property Tax Code provides that "each floor or part of property capable of independent use is considered separately in the real property registration which equally distinguishes the respective TPV" so as not to generate situations of violation of the principles of social equity and tax justice (emphasis ours).

7.40.

Given that the constitution of horizontal co-ownership implies a mere legal alteration of the property, not even requiring a new evaluation, it will be the material truth that is imposed as the determining criterion of contributive capacity and not the mere legal-formal reality of the property, therefore the discrimination operated by the Respondent translates into an arbitrary and illegal discrimination.[33]

7.41.

And, given the full social and economic reality often underlying many of the properties in vertical co-ownership, the tax legislator himself in the Municipal Property Tax Code treated the two situations (horizontal co-ownership and vertical co-ownership) in an equitable manner, applying the same criteria.

7.42.

Indeed, let it be reiterated that the Respondent cannot distinguish where the legislator itself understood not to do so, under pain of violating the coherence of the tax system and the principles of tax legality (article 103º, section 2 of the Constitution of the Portuguese Republic - CRP), of justice, of equality and of tax proportionality, including in that framework.

7.43.

Analyzing the situation sub judice, and as already referred to in point 7.38., supra, it is noted that the TPV of the apartments (autonomous units) with residential designation in the real estate described above (point 5.1.1. and 5.1.2., supra) varies between the lowest value of EUR 30,740.00 (CV/FRT, in accordance with doc. no. 1 and 4, attached with the claim) and the highest value of EUR 174,840.00 (4th floor, in accordance with doc. no. 1 and 12, attached with the claim), therefore in any of them, individually considered, the said TPV is always less than EUR 1,000,000.00.

7.44.

Thus, in light of the above, the answer to be given to the question raised above (see point 7.1.1.) will be that the subjection to Stamp Tax, for the purposes of entry 28º of TGIS, is determined by the TPV that corresponds to each of the parts of the property with residential designation and not by the global TPV of the property, therefore it should be concluded that the apartments with residential designation (of the property identified in the proceedings) cannot be subject to the incidence of Stamp Tax referred to in entry no. 28 of TGIS, being thus illegal the assessment acts, relating to the year 2015, object of the Request for Arbitral Pronouncement presented by the Claimant. [34][35]

On the refund of tax paid with compensatory interest

7.45.

With respect to the payment of compensatory interest, in accordance with the provisions of section 5 of article 24º of RJAT, "payment of interest is due, regardless of its nature, under the terms provided for in the general tax law and in the Code of Procedural and Tax Procedure", from which it follows that an arbitral decision is not limited to the assessment of the legality of the tax act.

7.46.

Equally, in accordance with the provisions of article 24º, section 1, paragraph b) of RJAT, it should be understood that the claim for compensatory interest is a claim relating to tax acts (e.g., assessment), which aims to make explicit/concrete the content of the duty to "restore the situation that would exist if the tax act object of the arbitral decision had not been committed, adopting the acts and operations necessary for this purpose".

7.47.

As Jorge Lopes de Sousa states, "the competence of arbitral tribunals functioning in CAAD includes the fixation of the effects of the arbitral decision that can be defined in a process of judicial challenge, in particular, the annulment of the acts whose declaration of illegality is requested, the condemnation of the Tax and Customs Authority in the payment of compensatory interest (…)" (emphasis ours).[36] [37]

7.48.

Thus, in tax arbitral proceedings there may be a place for the payment of compensatory interest, under the terms provided for in articles 43º, sections 1 and 2, and 100º of the General Tax Law, when it is determined that there was error attributable to the services from which resulted payment of the tax debt in an amount higher than the legally due.

7.49.

In these terms, the right to compensatory interest will always depend on the verification of an error attributable to the services of the Respondent, from which resulted payment of a tax debt in an amount higher than the legally due.

7.50.

Following the declaration of illegality of the assessment acts already identified above (see points 5.1.5. and 7.44.) and, under the terms provided for in paragraph b), section 1 of article 24º of RJAT (in accordance with what is established there), "the arbitral decision on the merits of the claim from which no appeal or challenge is possible binds the tax administration from the end of the deadline set for appeal or challenge, and it must restore the situation that would exist if the tax act object of the arbitral decision had not been committed, adopting the acts and operations necessary for this purpose", therefore there must be a refund of the amounts that have been paid by the Claimant relating to Stamp Tax for the year 2015, as a way to achieve the reconstitution of the situation that would exist if the illegality had not been committed.

7.51.

Thus, in light of what is established in article 61º of the Code of Procedural and Tax Procedure, with the requirements of the right to compensatory interest fulfilled (that is, verified the existence of error attributable to the services from which resulted payment of a tax debt in an amount higher than the legally due, as provided for in section 1 of article 43º of the General Tax Law), the Claimant will be entitled to compensatory interest, at the legal rate, calculated on the amounts paid, within the assessments of Stamp Tax for the year 2015 (object of the request for arbitral pronouncement), which will be counted in accordance with the provision of section 3 of article 61º of the Code of Procedural and Tax Procedure, that is, from the date of payment of the undue tax until the date of issue of the respective credit note.

On the responsibility for payment of arbitral costs

7.52.

In harmony with the provision of article 22º, section 4 of RJAT, "the arbitral decision issued by the arbitral tribunal states the fixing of the amount and distribution among the parties of costs directly resulting from the arbitral proceedings".

7.53.

Thus, under the terms provided for in article 527º, section 1 of the Code of Civil Procedure (by force of article 29º, section 1, paragraph e) of RJAT), it must be established that the Party that gave cause to costs will be condemned to pay costs or, in the absence of a winning judgment, whoever obtained benefit from the proceedings.

7.54.

In this context, section 2 of the aforementioned article specifies the expression "gave cause to costs", according to the principle of proportional loss, understanding that costs are caused by the losing party, in the proportion in which they are losers.

7.55.

In the case under analysis, taking into account the above, the principle of proportionality imposes that responsibility for costs be attributed to the Claimant and the Respondent in proportion to their respective loss (25% and 75%, respectively), in accordance with the provision of article 12º, section 2 of RJAT and article 4º, section 4 of the Regulation of Costs in Tax Arbitration Proceedings.

8. DECISION

8.1.

Taking into account the analysis carried out in the previous Chapter, this Arbitral Tribunal decided:

8.1.1.

To judge well-founded the exception of absolute incompetence of the Arbitral Tribunal as to the claim for assessment of the second installment of Stamp Tax relating to the assessment of tax for the year 2014, absolving the Respondent of the proceedings in this matter;

8.1.2.

To judge unfounded the exception of untimeliness of the request for arbitral pronouncement as to the Stamp Tax assessments for the year 2015;

8.1.3.

To judge unfounded the exception of untimeliness of the request for arbitral pronouncement as to the second installment of Stamp Tax relating to the assessments of tax for the year 2014, because prejudiced by the well-foundedness of the exception of absolute incompetence of the Arbitral Tribunal;

8.1.4.

To judge well-founded the request for arbitral pronouncement presented by the Claimant, condemning the Respondent as to the claim for declaration of illegality of the Stamp Tax assessments, dated 5 April 2016 (relating to the year 2015), annulling, consequently, all the respective tax assessment acts, with the consequent refund of the amounts that have been unduly paid with respect to tax for the year 2015, increased by compensatory interest at the legal rate, counted in accordance with legal terms;

8.1.5.

To condemn the Claimant and the Respondent to payment of the costs of the present proceedings, in proportion to their respective loss (25% and 75%, respectively).

Value of the proceedings: Taking into account the provision of articles 306º, section 2 of the Code of Civil Procedure, article 97º-A, section 1 of the Code of Procedural and Tax Procedure and article 3º, section 2 of the Regulation of Costs in Tax Arbitration Proceedings, as well as what is stated above in point 4.6. (Chapter 4 of this decision), the value of the proceedings is fixed at EUR 14,602.76.

Costs of the proceedings: Under the terms provided for in Table I of the Regulation of Costs in Tax Arbitration Proceedings, the value of the costs of the Arbitral Proceedings is fixed at EUR 918.00, to be borne by the Claimant (25%) and the Respondent (75%), in accordance with article 22º, section 4 of RJAT.

Notify.

Lisbon, 30 November 2016

The Arbitrator

Sílvia Oliveira

[1] The drafting of the present decision is governed by the orthography prior to the Orthographic Agreement of 1990, except with respect to transcriptions made.

[2] In this matter, the Claimant cites Arbitral Decisions issued in the scope of cases no. 280/2013-T, 26/2014-T, 88/2014-T, 206/2014-T, 290/2014-T, 428/2014-T, 451/2014-T, 457/2014-T, 458/2014-T, 567/2014-T, 724/2014-T, 152/2015-T, 174/2015-T, 236/2015-T, 311/2015-T, 411/2015-T, 431/2015-T, 449/2015-T, 461/2015-T, 463/2015-T, 474/2015-T and also, the Judgments of the Supreme Administrative Court, case no. 047/15, of 09/09/2015, case no. 01354/15, of 02/03/2016 and case no. 01534/15, of 27/04/2015.

[3] In this sense, the Claimant cites the Arbitral Decision issued in the scope of case no. 50/2013-T, according to which "if the legal criterion imposes the issue of individualized assessments for the autonomous parts of properties in vertical co-ownership, in the same manner as it establishes for properties in horizontal co-ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of entry 28.1 of TGIS".

[4] The Claimant cites once more the Arbitral Decision no. 50/2013-T, according to which "the tax legislator cannot treat equal situations differently. Now, if the property were held in the regime of horizontal co-ownership, none of its residential units would suffer the incidence of the new tax".

[5] In this matter, reference is made here to the full transcription of the request for arbitral pronouncement presented.

[6] A typographical error appears in the original document at this point. The value should be EUR 14,702.76, not EUR 14,602.76, as stated in the cost section and in point 4.6.2.

[7] The concept of "act of fixing patrimonial values" also includes acts of fixing patrimonial values carried out by entities other than the Tax Authority (as is the case with entities managing real property registration and cadastral organizations).

[8] In this sense, we are in accordance with what was held in various Arbitral Decisions, notably those issued in the scope of cases no. 22/2013-T, 127/2013-T, 180/2013-T, 206/2014-T, 308/2014-T, 316/2014-T, 411/2015-T and 431/2015-T.

[9] In this sense, see also the Arbitral Decision issued in the scope of case no. 127/2013-T.

[10] In this sense, see also the Arbitral Decisions issued in the scope of cases no. 206/2014-T and 308/2014-T.

[11] See, in this sense, Arbitral Decision issued in the scope of case no. 206/2014-T.

[12] In strict logic, each installment of a tax assessment is merely a mode of arrecadation (tax collection) and not an independent tax act. The assessment is singular and unique, and it is only the assessment that can be legally impugned. The installments into which the tax may be divided are merely different payment deadlines. Therefore, in terms of legal theory, an installment cannot be impugned separately or independently, as it is not an autonomous legal act. Only the assessment to which it belongs can be impugned, and the impugnation of the assessment operates erga omnes relative to all its installments.

[13] See, in this sense, the Preamble to Law no. 55-A/2012, of 29 October.

[14] In this sense, see also Arbitral Decision issued in the scope of case no. 88/2013-T.

[15] Idem, ibidem.

[16] Decision of the Constitutional Court of 11 November 2015, available at www.tribunalconstitucional.pt.

[17] In this sense, see also Arbitral Decision issued in the scope of case no. 152/2015-T.

[18] Decision of the Constitutional Court of 11 November 2015, in the scope of case no. 542/14.

[19] Idem, ibidem.

[20] Idem, ibidem.

[21] In this sense, see also the Arbitral Decision issued in the scope of case no. 88/2013-T.

[22] Idem, ibidem.

[23] Idem, ibidem.

[24] See, in this sense, the Arbitral Decision issued in the scope of case no. 88/2013-T.

[25] In this sense, see also the Arbitral Decisions issued in the scope of cases no. 26/2014-T, 88/2013-T, 88/2014-T, 152/2015-T and 431/2015-T.

[26] See also Arbitral Decision issued in the scope of case no. 152/2015-T.

[27] In this sense, see also Arbitral Decisions issued in the scope of cases no. 28/2013-T and 128/2013-T.

[28] Arbitral Decision issued in the scope of case no. 50/2013-T.

[29] In this sense, see also the Arbitral Decision issued in the scope of case no. 152/2015-T.

[30] Article 9º of the Civil Code addresses the interpretation of laws.

[31] This legislative proposal (Bill no. 96/XII) was discussed in the National Assembly and would eventually lead to Law no. 55-A/2012.

[32] See, in this sense, also the Arbitral Decisions issued in the scope of cases no. 88/2013-T, 152/2015-T and 431/2015-T.

[33] In this sense, see also the Arbitral Decision issued in the scope of case no. 152/2015-T.

[34] In this sense, see the Arbitral Decisions issued in the scope of cases no. 26/2014-T, 50/2013-T, 88/2013-T, 88/2014-T, 152/2015-T and 431/2015-T.

[35] The Claimant's understanding is in line with the jurisprudence established by various Arbitral Decisions, particularly those issued in the scope of cases no. 26/2014-T, 50/2013-T, 88/2013-T, 88/2014-T, 152/2015-T and 431/2015-T, and even by decisions of the Supreme Administrative Court, as referenced in footnote [2] above.

[36] Jorge Lopes de Sousa, "Arbitragem em Matéria Tributária", Coimbra Editora, 2014, p. 181.

[37] In this sense, see also Arbitral Decisions issued in the scope of cases no. 22/2013-T and 180/2013-T.

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) liability under Verba 28.1 of the TGIS for vertical property in Portugal?

Under Verba 28.1 of the General Stamp Tax Table (Tabela Geral do Imposto do Selo), vertical property ownership in Portugal triggers an annual Stamp Tax liability of 1% on the patrimonial tax value (VPT) of urban buildings or autonomous fractions capable of independent use. This applies when properties are held in full ownership with separate apartments or divisions that could function independently but are NOT formally constituted under the horizontal property regime. Each autonomous fraction is taxed separately based on its individual patrimonial value as determined by the tax matrix. The tax is assessed annually in installments and applies to properties used for purposes other than permanent habitation or certain exempt activities.

When is a request to the CAAD Tax Arbitral Tribunal considered untimely (intempestivo) under Portuguese tax law?

An arbitration request to CAAD is considered untimely (intempestivo) when filed after the statutory deadline established in Article 10(1)(a) of the RJAT (Legal Regime of Tax Arbitration). For direct tax assessments, the taxpayer must file within 90 days from the end of the deadline for voluntary payment or, if a complaint or hierarchical appeal was filed with the Tax Authority, within 90 days of notification of the final administrative decision. Untimeliness is an absolute bar to arbitral jurisdiction - the Tribunal cannot analyze the merits and must dismiss the claim regardless of its substantive merit. The deadline is peremptory and cannot be extended, making precise calculation critical for preserving arbitration rights.

What constitutes absolute incompetence of the Tax Arbitral Tribunal in stamp tax disputes?

Absolute incompetence (incompetência absoluta) of the Tax Arbitral Tribunal occurs when the dispute falls outside CAAD's material, territorial, or hierarchical jurisdiction as defined in Articles 2 and 4 of the RJAT. This includes: (1) acts not subject to tax arbitration by law; (2) disputes involving taxes or acts expressly excluded from arbitration; (3) matters where judicial courts have exclusive jurisdiction; or (4) acts that were never properly challenged through required administrative procedures. In stamp tax disputes, absolute incompetence may arise when challenging assessments for which no prior administrative complaint was filed, or when the dispute involves matters beyond the Tribunal's statutory jurisdiction. Unlike relative incompetence, absolute incompetence cannot be waived and must be declared ex officio by the Tribunal.

Can heirs challenge Stamp Tax liquidations on inherited vertical property through tax arbitration in Portugal?

Yes, heirs can challenge Stamp Tax liquidations on inherited vertical property through tax arbitration at CAAD, as estate representatives have standing to contest tax acts affecting inherited assets. The heir acting as Head of Estate (cabeça de casal) is legally authorized to represent the succession in tax matters under Article 13 of the Tax Procedure and Process Code (CPPT). However, they must comply with strict procedural requirements: (1) file the arbitration request within the 90-day statutory deadline; (2) demonstrate that prior administrative remedies were exhausted or that direct arbitration is permissible; (3) pay the required arbitration fees; and (4) properly identify all contested assessments. The fact that property is inherited does not exempt heirs from procedural compliance requirements, and untimely requests will be dismissed regardless of the merits of the substantive tax dispute.

What are the legal consequences of filing an untimely arbitration request against the Portuguese Tax Authority (AT)?

Filing an untimely arbitration request results in immediate dismissal of the claim without substantive analysis of the tax dispute. The Arbitral Tribunal must declare its lack of jurisdiction ratione temporis and absolve the Tax Authority from the proceedings. Legal consequences include: (1) loss of the arbitration remedy - the taxpayer cannot pursue the dispute through CAAD; (2) forfeiture of the initial arbitration fee paid, which is not refunded; (3) preclusion of challenging the tax assessment's legality through arbitration, leaving only judicial appeal to Administrative Courts if deadlines permit; (4) potential consolidation of the tax debt with interest and enforcement proceedings continuing; and (5) costs assessed against the claimant. The untimeliness determination is based on objective deadline calculation from the relevant triggering event (assessment notification or administrative decision), and good faith or ignorance of deadlines provides no excuse under Portuguese tax procedural law.

Stamp Tax on Vertical Property: CAAD Ruling on Timeliness and Tribunal Jurisdiction (343/2016-T)

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