Process: 345/2017-T

Date: January 8, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitral decision 345/2017-T addresses whether Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) applies to buildings in vertical property ownership when individual units fall below the minimum taxable threshold. The claimant, owner of a building with 21 independent housing units in vertical property, contested 2013 stamp duty assessments. Each unit had separate property registry entries with individual taxable patrimonial values (VPT) ranging from €50,530 to €155,990—none individually meeting the minimum threshold for Item 28.1 TGIS application. However, the aggregated total VPT reached €1,269,570. The claimant argued that since each unit has individualized registry and VPT below the threshold, the tax should not apply, as the property is not constituted as horizontal property (condominium). Subsidiarily, the claimant contended that aggregating VPT values violates constitutional equality principles. The Portuguese Tax Authority defended the assessments, asserting that vertical property constitutes a single property under CIMI Article 2, requiring consideration of total VPT rather than individual unit values. The Authority emphasized that vertical property units, despite independent use capability, remain legally distinct from horizontal property autonomous fractions, as they cannot have separate owners. The Tax Authority also raised a preliminary objection regarding the timeliness of the arbitral request, arguing the underlying review request was untimely. The case presents fundamental questions about property characterization for stamp tax purposes, the aggregation methodology for determining tax incidence thresholds, and whether differential treatment between horizontal and vertical property regimes violates constitutional equality guarantees under Portuguese tax law.

Full Decision

ARBITRAL DECISION

1. REPORT

A..., S.A., taxpayer, legal entity and registration number..., with registered office in ..., ..., ..., Lagoa, on 26.05.2017, under article 2, no. 1, subparagraph a) and article 10, nos. 1 and 2 of Decree-law no. 10/2011 of 20 January (hereinafter RJAT) and article 102, no. 1, al. d) of the CPPT, requested the constitution of an arbitral tribunal.

The PORTUGUESE TAX AND CUSTOMS AUTHORITY is the respondent in the proceedings.

The Deontological Board of the Administrative Arbitration Centre (CAAD) appointed the undersigned to form the Singular Arbitral Tribunal, notifying the parties accordingly, and the Tribunal was constituted on 24 August 2017.

The request for arbitral pronouncement has as its object the dispatch rejecting the request for ex officio review that the Claimant submitted regarding the acts of stamp duty tax assessment, item 28.1 of the General Schedule, for 2013 and relating to the urban property registered in the urban property register of the Union of Parishes of ... and ..., municipality of Silves, district of Faro, under article...º, assessments, review request and property which are better identified in the Claimant's request and in the documents attached to it, to which reference is made here.

The Claimant, not agreeing with the dispatch rejecting the request for ex officio review, continues to contend the illegality of the assessment acts, contesting the application of the new item 28.1 of the TGIS to urban properties not constituted in horizontal property, but which include units capable of independent use, where the minimum threshold of application set by law is achieved by the sum of the TPC (taxable patrimonial value) of the separate (or autonomous) property register entries corresponding to those several units, but not by any one of them individually considered.

It considers that due to the fact that the property, despite not being constituted in horizontal property, being constituted by parts capable of independent use, the TPC relevant for assessing the fulfilment of the requirement on which the application of the said item depends is not met, since each of the parts of the property capable of independent use has a separate entry in the corresponding register and, therefore, individualized TPC below the referred minimum threshold.

The Claimant thus contends that it is not the owner of a property with TPC equal to or greater than the referred minimum amount, but rather the owner of a property in vertical ownership in which the TPC greater than that value is only achieved by the sum of the TPC of the units capable of independent use intended for housing, without any of them, considered individually, reaching that minimum threshold of tax relevance. For that reason, for the Claimant, the assessments in question are vitiated by violation of law, which makes them voidable.

The Claimant alleges subsidiarily that an interpretation of the norm in a different sense would be unconstitutional due to violation of the principle of equality of article 13 and also of number 3 of article 104 of the CRP.

It concludes by petitioning the annulment of the assessments in question and the reimbursement of the amounts paid by it as a consequence of such assessments, plus indemnificatory interest.

THE PORTUGUESE TAX AND CUSTOMS AUTHORITY responded, defending itself in the first place by exception, alleging the non-timeliness of the request for arbitral pronouncement.

It alleges that the review request was untimely, and rejected summarily on that ground, so, in its view, "the Claimant can never seek to justify the timeliness of the request for arbitral pronouncement based on the rejection of an untimely review request", under penalty of opening "the way to continue discussing the legality of tax acts in relation to which the respective periods of contestation have already ended". This is because, it understands, the review request being untimely, the period provided for in article 10, no. 1 of the RJAT, for submission of the request for arbitral pronouncement, is calculated in accordance with subparagraph e), before subparagraph a) of no. 1 of the CPPT, so it is untimely, which, it alleges, constitutes a peremptory exception that determines the dismissal of the Tax Authority from the claim.

Furthermore, the Respondent defended itself by rebuttal, upholding the maintenance of the assessments, emphasizing, in summary, that total, or vertical, ownership corresponds to a property within the concept of article 2 of the CIMI, this being the reality to be taken into account to determine whether the verification of the minimum value contained in the rule of incidence is met.

For the Respondent, the TPC relevant for purposes of tax incidence is, therefore, the TPC of the urban property and not the TPC of each one of the parts that comprise it, even if these are capable of independent use, provided they are intended for housing. In reinforcement of this thesis it also emphasizes that the unity of the property is not affected, its distinct parts not being able to be legally equated to the autonomous fractions of a property constituted in horizontal ownership, particularly because their ownership is necessarily attributed to only a single owner (or more than one, but in cases of co-ownership).

It adds that a different understanding (i.e., that the TPC relevant for the rule of incidence would correspond to the TPC of each floor or unit capable of independent use) would be unconstitutional, due to violation of the principle of tax legality (inherent in art. 103, no. 2 of the CRP), by differentiating where the legislator did not distinguish.

For the Respondent the legislator could have intended to favour a more legally evolved regime (horizontal ownership), subjecting it to a distinct, and therefore discriminatory, legal and tax framework, without such discrimination being able to be considered necessarily arbitrary.

It further contends, in the event that the assessments are ruled illegal, that there is no place for indemnificatory interest, as there was no "error by the services", given that the Tax Authority's action was bounded by the principle of legality.

It concludes by requesting the waiver of the arbitral hearing provided for in article 18 of the RJAT, as well as of submissions and concludes that the peremptory exception should be judged proven and well-founded and, absent this understanding, the request should be judged unfounded.

Notified of the Tribunal's intention to waive the arbitral tribunal hearing provided for in article 18 of the RJAT, as well as submissions, the parties did not come to object.

2. PRELIMINARY RULING

The Tribunal was regularly constituted and is competent.

The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented.

However, invoked by the Respondent is the exception of non-timeliness of the request for arbitral pronouncement, the examination of which is deferred until after the decision on the matters of fact, as it is understood to be indispensable to the examination of the exception.

3. MATTERS OF FACT

With relevance to the decision on the merits, the Tribunal considers the following facts to be proven:

On 31.10.2012 the Claimant was the owner of the urban property under property register article..., with location in the parish of ... and ..., municipality of Silves, district of Faro.;

This corresponded to a building in total ownership, composed of 21 units of independent use, all intended for housing;

The taxable value of each of those units, TPC, determined under the Municipal Property Tax Code (CIMI), varies between a minimum of € 50,530.00 and a maximum of € 155,990, and amounts, in total, to € 1,269,570.00;

The assessments in question result from the application of the stamp duty tax provided for in item no. 28.1 of the General Schedule of the Stamp Duty Tax (TGIS) attached to the Stamp Duty Tax Code (CIS) in the wording given to it by art. 4 of Law no. 55-A/2012 of 29 October, at the rate of 1% to the taxable patrimonial value of € 1,269,570.00 corresponding to the set of independent units intended for housing of the said property with reference to the year 2013;

The payment deadline for the first instalment of each of those assessments ended on 30 April 2014.

On 7 April 2017 the Claimant submitted a request for ex officio review of the stamp duty tax assessments relating to 2013 in question;

A dispatch rejecting the request for ex officio review was issued on 11 May 2017, on the ground of its non-timeliness;

The request for constitution of the Arbitral Tribunal was submitted on 26 May 2017.

Facts Not Proven

No other facts with relevance to the assessment of the merits of the case were alleged by the parties that were not proven.

Grounds for the Decision on the Matters of Fact

The conviction regarding the facts taken as proven was based on the submissions of the Claimant and the Respondent not contradicted by the opposing party, sustained by the documentary evidence submitted both by the Claimant and the Respondent, whose authenticity and correspondence to reality were also not questioned.

4. MATTERS OF LAW - QUESTIONS TO BE DECIDED

The first question to be decided is, therefore, whether the request for arbitral pronouncement is untimely.

Analysing the facts and the submissions of the parties, it is verified that, in fact, the Claimant's request for ex officio review was rejected by the Respondent on the ground of its non-timeliness.

And it happens that the Claimant, in its request for arbitral pronouncement, does not challenge this decision, instead focusing on the illegality of the assessment acts, petitioning for their annulment.

In its favour, it invokes that the Tax Authority did not limit itself to considering the request untimely, insofar as it rebutted the Respondent's arguments.

Which is true. Being true, however, also that the ultimate ground of the decision is non-timeliness.

The Claimant could have challenged this "summary" decision, namely by alleging that the "legal framework" and, therefore, the period for presentation of the request for ex officio review was different from that considered by the Tax Authority. But it did not, and this Tribunal cannot substitute itself in this particular submission.

In that measure, it seems to us that the Respondent is correct: since the Claimant's request for arbitral pronouncement which is now being decided does not invoke any defect in the dispatch which dealt with its request for ex officio review, its consequent nullity or annulment and, possibly, by that means, the re-examination of the request or even the annulment of the assessments in question, the period for submission of the request for arbitral pronouncement is calculated from the end of the payment period for the assessments in question, and not from the notification of that dispatch.

Non-timeliness constitutes a peremptory exception, which implies the dismissal of the claim, in accordance with the provisions of art. 576 of the Civil Procedure Code, by virtue of art. 29 of the RJAT.

Thus the examination of any other of the questions raised by the Claimant is precluded.

5. DECISION

In these terms and with the above grounds, it is decided to uphold the peremptory exception of non-timeliness of the request for arbitral pronouncement and, consequently, dismiss the claim against the Respondent.

* * *

Process Value

The process value is fixed at € 12,695.70 (twelve thousand six hundred and ninety-five euros and seventy cents) in accordance with the provisions of articles 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97-A, no. 1, subparagraph a) of the CPPT and 306 of the CPC.

Costs

The amount of costs is fixed at €918.00 under article 22, no. 4 of the RJAT and Table I annexed to the RCPAT, and shall be borne by the Claimant.

Notice to be given.

Lisbon, on 08 January 2018,

(Eva Dias Costa)

Document prepared by computer, in accordance with article 131, no. 5 of the Civil Procedure Code, applicable by referral from article 29, no. 1, subparagraph e) of the RJAT.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Verba 28.1 TGIS) apply to buildings in vertical property when individual units are below the minimum taxable value?
According to the Tax Authority's position in this case, Stamp Tax under Item 28.1 TGIS applies to vertical property buildings even when individual units are below the minimum taxable value, provided the total aggregated VPT of all units meets the threshold. The Authority argues that vertical property constitutes a single property under CIMI Article 2, making the total property value—not individual unit values—determinative for tax incidence. The claimant contested this interpretation, arguing each independently usable unit with separate registry should be assessed individually.
How is the taxable patrimonial value (VPT) calculated for buildings with independently usable divisions not constituted as horizontal property?
For buildings with independently usable divisions not constituted as horizontal property (vertical property), the Tax Authority calculates VPT by aggregating the taxable patrimonial values of all separate matrix registrations comprising the building. In this case, although 21 housing units each had individual registry entries with VPT ranging from €50,530 to €155,990, the Tax Authority summed these values to reach €1,269,570 total VPT. The claimant disputed this methodology, contending each unit's individual VPT should be considered separately since they have distinct registry entries.
Can the tax authority aggregate the VPT of separate matrix registrations to meet the Stamp Tax incidence threshold?
Yes, according to the Tax Authority's interpretation defended in this case, separate matrix registrations can be aggregated to meet the Stamp Tax incidence threshold under Item 28.1 TGIS when the property constitutes vertical ownership. The Authority maintains that vertical property remains a single legal property entity under CIMI Article 2, despite comprising multiple independently usable units with separate registry entries. Therefore, the combined VPT of all units determines whether the minimum threshold is met, not each unit's individual value. This aggregation approach was contested by the claimant as legally improper.
What is the difference between horizontal and vertical property for Stamp Tax purposes under Portuguese law?
For Stamp Tax purposes under Portuguese law, horizontal property (propriedade horizontal) consists of autonomous fractions that can have separate owners, each fraction constituting an independent property unit with distinct ownership rights. Vertical property (propriedade vertical or total ownership) comprises a building with independently usable units that must have a single owner (or co-owners), maintaining legal unity as one property despite multiple divisions. The Tax Authority argues this distinction justifies different tax treatment: horizontal property fractions are assessed individually, while vertical property units are aggregated for determining Item 28.1 TGIS application.
Is it unconstitutional to apply Verba 28.1 of the General Stamp Tax Table by summing individual VPT values of separate building units?
The claimant subsidiarily argued that aggregating individual VPT values of separate building units in vertical property to apply Item 28.1 TGIS violates constitutional equality principles under Article 13 and Article 104(3) of the Portuguese Constitution. However, the Tax Authority contended that differential treatment between horizontal and vertical property regimes is constitutionally permissible, as the legislator may legitimately favor more evolved legal regimes (horizontal property) without such discrimination being arbitrary. The Authority further argued that applying individual unit VPT would violate tax legality principles by creating distinctions where the law makes none.