Process: 347/2014-T

Date: October 31, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 347/2014-T) addresses a fundamental question about Stamp Tax (Imposto de Selo) assessment on high-value properties in Portugal. The taxpayer, A... SA, challenged Stamp Tax assessments totaling €28,286.30 for years 2011-2013 under items 28 and 28.1 of the General Stamp Tax Table (TGIS). The dispute centers on whether the Portuguese Tax Authority can sum the individual tax property values (valor patrimonial tributável - VPT) of multiple residential units within a single building held in full ownership to meet the €1,000,000 threshold that triggers Stamp Tax. The property in question consists of an urban building with ten separate floor units, each registered individually in the property tax matrix. While no individual unit exceeded €1,000,000 in tax property value, the Tax Authority aggregated all unit values to surpass this threshold and levy the tax. The taxpayer argued this interpretation violates the legal framework, contending that Stamp Tax should apply unit-by-unit rather than to the aggregate value of a vertically divided property. The company further raised constitutional concerns, alleging the Tax Authority's interpretation breaches the equality principle under Article 13 of the Portuguese Constitution by treating vertical properties (where units are stacked in the same building) differently from horizontal properties (separate buildings), despite both being held in full ownership. The case also involves procedural aspects of tax arbitration, including the application of subsidiary IMI Code rules to Stamp Tax matters and the proper interpretation of charging provisions in tax legislation. This decision has significant implications for property owners and real estate companies holding multi-unit buildings in Portugal.

Full Decision

THE PARTIES

Applicant: A... SA, NIPC PT ..., with registered office in … of ..., ….

Respondent: Tax and Customs Authority (AT).

DECISION

REPORT

a) On 22-04-2014, the public limited company A... SA, NIPC PT ..., filed a request with CAAD requesting, under the Legal Framework for Arbitration in Tax Matters (RJAT), the establishment of a sole arbitrator tribunal (TAS).

b) The request is signed by an attorney whose power of attorney was attached.

THE REQUEST

c) The Applicant petitions for the annulment of the acts of assessment of Stamp Duty (IS) under item 28 of TGIS, contained in the following documents:

On the basis of subparagraphs a) to f) of no. 1 of article 6 of Law 55-A/2012, of 29.10

ü 2013 ...; 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ...;

On the basis of item 28.1 of TGIS – Year 2012

ü 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ...;

On the basis of item 28.1 of TGIS – Year 2013

ü 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ...;

relating to the years 2011 (implied), 2012 and 2013 and dated 18.09.2013 (the acts for the years 2011 and 2012) and 17.03.2014 (the acts for the year 2013), generating a total collection of 28,286.30 euros, (5,540.90 + 11,081.80 + 11,663.60 = 28,286.30 euros, respectively), with reference to an urban property in full ownership, with floors or units capable of independent use, more specifically covering the floors designated for housing that comprise it, namely:

ü Urban property located in …, on Avenue ..., currently registered in the urban property tax matrix of the parish of …, municipality and district of …, under articles U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., (according to the assessment notices issued under Law 55A/2012 and for the year 2012) the property is registered with the identification "... … U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., ; and according to the property register it originated from articles ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., - … (extinct)).

d) It contends that the assessment acts are illegal for violation of the charge provision of item 28.1 of TGIS in that the AT added the tax property values of the floors in full ownership and none of them individually has a TPV equal to or greater than 1,000,000.00 euros, arguing that it should be the TPV of each floor and not their sum that is relevant for taxation purposes.

e) And that the charge provision, in the interpretation implemented in practice by the AT, is unconstitutional for violation of the principle of equality enshrined in article 13 of the Fundamental Law.

f) It concludes by petitioning for the annulment of the tax acts identified in c), with all legal consequences.

OF THE ARBITRAL TRIBUNAL

g) The request for establishment of the TAS was accepted by the President of CAAD and automatically notified to the AT on 24.04.2014.

h) By the CAAD Deontological Board, the undersigned arbitrator was appointed, with the parties being notified thereof on 11.06.2014.

i) By which the Sole Arbitrator Tribunal (TAS) has been, since 30.06.2014, regularly established to assess and decide the subject matter of this dispute.

j) All these acts are documented in the communication of establishment of the Sole Arbitrator Tribunal dated 30.06.2014 which is hereby reproduced.

k) On 30.06.2014 the AT was notified in accordance with and for the purposes of article 17-1 of RJAT.

l) Since identical questions to those already raised in many other cases already decided at CAAD are raised in this proceeding, the TAS by order of 09.10.2014 invited the parties to comment on the waiver of the hearing referred to in article 18 of RJAT and likewise on submissions.

m) In the order referred to in the preceding subparagraph and under no. 2 of article 19 of RJAT, the AT was also invited to comment on any exceptions, to attach or produce additional evidence and to comment summarily on the request for hearing.

n) By request of 13.10.2014 the Applicant stated that it did not object to the non-holding of a hearing of the parties and likewise to no submissions being made.

o) By order of 14.10.2014 the TAS fixed the value of the case at 28,286.30 euros, (in substitution of the value indicated by the Applicant) as this is the value corresponding to the sum of the IS collections whose annulment is raised in the request for hearing.

p) By request of 16.10.2014 the AT raised a deadline for presentation of written submissions, accepting the documentary evidence produced in the case by the Applicant.

q) By order of the TAS of 17.10.2014, given the agreement of the parties, the holding of a hearing of the parties referred to in article 18 of RJAT was waived, submission of the PA was waived and a deadline for successive written submissions of 5 days was fixed.

r) By request of 22.10.2014 the Applicant waived the presentation of written submissions, by which, by order of the TAS of 23.10.2014, the deadline for the Respondent to present them was reiterated, now running from the date of notification of this order.

s) On 24.10.2014 the Respondent presented written submissions commenting on all questions of law which it understood to be at issue in this proceeding.

PROCEDURAL REQUIREMENTS

t) Legitimacy, capacity and representation - the parties enjoy legal personality and capacity, are legitimate and are duly represented.

u) Adversarial procedure - the AT was notified in accordance with subparagraphs k), m) and r). All orders issued in the proceeding and all documents attached were notified to the opposing party.

v) Dilatory exceptions - the proceeding does not suffer from nullities and the request for arbitral hearing is timely as it was submitted within the prescribed deadline in subparagraph a) of no. 1 of article 10 of RJAT, bearing in mind that as regards the assessments relating to the years 2011 (implied) and 2012, the Applicant filed a complaint in the nature of a request for reconsideration on 06.11.2013, which did not obtain a response from the AT up to the date of filing of this request for hearing, by which ex vi article 57-5 of LGT it is presumed that there occurred a silent act of express rejection 4 months after the filing of the request, shortly before 22.04.2014, the date on which this request was accepted at CAAD.

SUMMARY OF THE APPLICANT'S POSITION

As to the possible illegality of the assessment acts for non-conformity with the charge provision of item 28.1 of TGIS

w) The Applicant contends that the tax property value (TPV) relevant in the case under discussion, given that it is a property in full ownership that comprises floors or units with independent use, with residential purpose, is not the sum of all such floors or units, but the TPV of each one.

x) Expressing that when it is a property in full ownership that comprises floors or units with independent use "the subjection to stamp duty is determined, not by the TPV of the properties, but by the TPV of those floors".

y) It argues that the tax base for stamp duty of item 28.1 of TGIS should be the same as for IMI, since the law determines the subsidiary application of the IMI Code with respect to matters not regulated in the Stamp Duty Code.

As to the possible unconstitutionality of the provision inherent in item 28.1 of TGIS, in the interpretation implemented in practice by the AT

z) The Applicant considers that the IS assessments, in the interpretation implicitly implemented in practice by the AT, of items 28 and 28.1 of TGIS, (in which the TPVs of the floors are added to ascertain the taxation threshold of 1,000,000.00 euros or more) are not in conformity with the principle of equality enshrined in article 13 of the CRP.

aa) For the reason that, in terms of comparison, if immovable property is intended for residential purposes, someone who owns two properties in full ownership with TPV of 999,999.00 euros, each one, or two autonomous units of property under horizontal ownership regime with TPV of 999,999.00 euros, each one, is not subject to stamp duty, but someone who has a property in vertical ownership in which the TPVs of the floors sum to 1,000,000.01 euros, already becomes subject to stamp duty.

SUMMARY OF THE TAX AUTHORITY'S POSITION

As to the possible illegality of the assessment acts for non-conformity with the charge provision of item 28.1 of TGIS.

bb) The AT argues that "it cannot be accepted that it be considered, for purposes of item 28.1 of TGIS annexed to CIS that the parts capable of independent use (of urban properties in vertical ownership) have the same tax regime as autonomous units under horizontal ownership regime, under penalty of open violation of the principle of legality", and for the reason that item 28.1 of TGIS refers to CIMI and in this it is considered that units of properties under horizontal ownership are by legal definition "urban properties", which does not occur as regards the floors of urban properties in full ownership.

cc) The Respondent contends that the Applicant seeks an application, by analogy, of the tax regime – as regards IS – of the floors that comprise the autonomous units of properties under horizontal ownership regime (which are by legal definition urban properties) to the floors that comprise urban properties in vertical ownership and that such is not possible, because there is no analogy, nor is such possible even because there is no lacuna in the law, nor is analogy permitted in the context of interpretation of tax charge provisions.

dd) And that "The fact that IMI was calculated based on the tax property value of each part of property with independent economic use does not equally affect the application of item 28 - no. 1, of the General Table".

ee) For the reason that "the determinative fact for the application of that item of the General Table is the total tax property value of the property and not separately that of each one of its parts".

ff) The different valuation and taxation of a property in full ownership as opposed to a property under horizontal ownership stems from the different legal effects inherent to these two arrangements.

gg) These are distinct realities, valued by the legislator in a different manner.

hh) Arguing for the legality of the tax acts because they constitute a correct application of the law to the facts.

As to the possible unconstitutionality of the provision inherent in item 28.1 of TGIS, in the interpretation implemented in practice by the AT

ii) It concludes that the challenged assessments do not violate any constitutional provision.

jj) It argues that "a type of charge under which the tax property value of urban properties on which the application of item 28.1 of the General Table depends is the tax property value of each floor or unit capable of independent use and not the total tax property value of the urban property with residential purpose has certainly no expression in the law", by which it would be "unconstitutional, for being offensive to the principle of tax legality, the interpretation of item 28.1 of the General Table, in the sense that the tax property value on which its charge depends is ascertained floor by floor, or unit by unit, and not globally".

II - ISSUES THAT THE TRIBUNAL MUST RESOLVE

On this matter, in particular, CAAD has already pronounced itself in diverse decisions in which the substantive issue is the same, namely, discussion of the scope of the charge provision of items 28 and 28-1 of TGIS.

The limit of interpretation is the letter, the text of the provision. What follows is the "task of interconnection and weighting that escapes the literal domain".

Starting from the principle that every provision has a charge provision (and a disposition), the issue that arises here is to ascertain, delimiting, whether the charge provision, as it is worded – in its charge provision - (ownership of urban properties … with residential purpose … whose tax property value recorded in the matrix, pursuant to CIMI be equal to or greater than 1,000,000.00 euros – on the tax property value used for purposes of IMI), allows or does not allow the understanding that as regards properties "with residential purpose" in vertical ownership, with floors or units capable of independent use, held by an entity, the TPV on which the rate will be charged, should be their sum or should the individual TPV of each floor or unit capable of independent use be considered, in similar fashion to what occurs with properties under horizontal ownership regime.

In essence, what would be at issue is the adoption of an adequate interpretation of the scope of the charge provision of items 28 and 28.1 of TGIS, in light of what no. 7 of article 23 of CIS refers to regarding the determination of the taxable matter and consequent tax assessment operation:

"In the case of tax due for the situations provided in item no. 28 of the General Table, tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in CIMI."

As we have stated in other decisions, regarding the interpretation of tax provisions there exists a rule, albeit it may be considered residual, very particular which is set out in no. 3 of article 11 of LGT: "persisting doubt about the meaning of the charge provisions to be applied, attention should be paid to the economic substance of the tax facts". This is a criterion to be used in the context of hermeneutic interpretation of provisions.

We do not advocate an "economic interpretation" of tax law provisions.

But it appears to us that here too one could appeal to the analysis of the "economic substance of the tax facts" to properly implement the "necessary adaptations of the rules contained in CIMI", with a view to resolving the issue that arises.

We are thus, solely and exclusively, within the scope of the activity of interpretation and application of provisions, that is, in the task of delimiting the legal-factual situations that should be deemed to be encompassed in the charge provision of this new tax and which results from the combination of items 28 and 28-1 of TGIS and in this case what should be deemed acceptable at the level of the "necessary adaptations of the rules contained in CIMI", following the command of no. 7 of article 23 of CIS.

The question of conformity of the charge provision, in light of the constitutional text, will only arise if the interpreter reaches the conclusion that a certain and unequivocal interpretation of the law – correctly applied to a specific case - violates one or several constitutional principles with such intensity that the legislative option adopted could not have been adopted, while also taking into account that the AT cannot on the basis of possible unconstitutionalities of provisions, not declared by the courts, fail to apply the law, in the meaning it deems most assertive.

It does not appear to us, in light of the learned arguments presented by the Respondent, that what is at issue in this proceeding is the application, by analogy (presupposing a lacuna in the law) of the tax regime of the floors that comprise autonomous units of urban properties under horizontal ownership regime, to the floors that comprise urban properties under vertical ownership. The fact that in the argumentation on the subject one places as a paradigm one reality, in light of the other (in a logic of ascertainment of economic substance), does not mean that one is adopting an interpretation of the law following a logic of filling a lacuna in the law, which we do not see existing.

On the other hand, it does not appear to conform to reality the assertion (article 43 of the Respondent's submissions) that the assessments now at issue occurred on the basis of the "total tax property value of the property" which according to the property register is 1,484,198.80 euros. The assessments in question, as appears from documents 2 to 31, had as taxable base 1,108,177.90 euros. That is, the assessments were not made on the basis of the "total tax property value of the property" nor the "tax property value" of each floor that is used for purposes of IMI. What occurred was the creation by the AT of a new legal reality that did not exist in law (this is the crux of the issue), which is the sum of the tax property values of floors with residential purpose, with a view to finding the taxation threshold of 1,000,000.00 euros.

This operation of determination of taxable matter, operationalized "ex novo" only for the Stamp Duty under item 28 of TGIS is what is questionable in light of the principle of legality, whether understood that it is a question of legality in the meaning of no. 1 of article 8 of LGT (to verify conformity with the charge provision), or whether understood that it is a question of legality in the meaning of subparagraph a) of no. 2 of article 8 of LGT (to verify conformity in matters of determination of taxable matter and assessment).

Given that it is notorious that the AT implemented the operation of adding the TPVs of the floors with residential purpose of urban properties in vertical ownership to determine the taxation threshold of 1,000,000.00 euros, presupposing that it has legal support in no. 7 of article 23 of CIS, more specifically in the expression "applying, with the necessary adaptations, the rules contained in CIMI".

It appears to us that the fundamental question that the TAS should answer is the following:

  1.  Do items 28 and 28-1 of TGIS as tax charge provisions, as they are worded – in their charge provision - (ownership of urban properties … with residential purpose … whose tax property value recorded in the matrix, pursuant to CIMI be equal to or greater than 1,000,000.00 euros – on the tax property value used for purposes of IMI), allow or do they not allow the understanding that as regards properties "with residential purpose" in vertical ownership, with floors or units capable of independent use, held by an entity, the TPV on which the rate will be charged, should be their sum or should the individual TPV of each floor or unit capable of independent use be considered, in similar fashion to what occurs with properties under horizontal ownership regime?

From the answer given to this question will result the merits or lack of merits of the request, being that, if the answer is in a sense not in conformity with what the AT has learnedly argued, the TAS will not need to pronounce itself on the remaining grounds invoked by the Applicant in the request for hearing, with possible reflection on the validity of the assessment acts now at issue, nor as to the hypothetical non-conformity with the Fundamental Law adduced in zz) of the Report, by reason of it being unnecessary.

III. FACTS PROVEN AND NOT PROVEN. GROUNDS

With relevance for the decision to be adopted these are the facts that are considered proven, indicating the respective documents (proof by documents) as grounds:

Facts Proven

  1.  The Applicant, A... SA, NIPC PT ..., is registered as the holder of the right of full ownership of an urban property under full ownership regime, with floors or units capable of independent use, more specifically covering the floors designated for housing that comprise it, namely: Property located in …, on Avenue ..., currently registered in the urban property tax matrix of the parish of …, municipality and district of …, under articles U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., (according to the assessment notices issued under Law 55A/2012 and for the year 2012) the property is registered with the identification "... … U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., ; and according to the property register it originated from articles ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., - … (extinct)) - Document no. 1 attached with the request for hearing (urban property register) and Documents 2 to 31 attached with the request for hearing;

  2.  The Applicant was notified, on a date not determined, of the assessments of Stamp Duty under item 28 of TGIS: On the basis of subparagraphs a) to f) of no. 1 of article 6 of Law 55-A/2012, of 29.10: by means of assessment notices no. 2013 ...; 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., ; on the basis of item 28.1 of TGIS – Year 2012: by means of assessment notices no. 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ...: and on the basis of item 28.1 of TGIS – Year 2013: by means of assessment notices no. 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ...; relating to the years 2011 (implied), 2012 and 2013 and dated 18.09.2013 (the acts pursuant to Law 55A/2012 and for the year 2012) and 17.03.2014 (the acts for the year 2013), generating a total collection of 28,286.30 euros, (5,540.90 + 11,081.80 + 11,663.60 = 28,286.30 euros, respectively) - As per documents nos. 2 to 31 attached with the request for hearing.

  3.  On 06 November 2013 the Applicant submitted at the Financial Services Office of … a complaint in the nature of a request for reconsideration aiming at the annulment of the IS assessments relating to the years 2011 (implied) and 2012 – Document no. 32 attached with the request for hearing.

  4.  The floors or units capable of independent use subject to taxation with residential purpose, have TPVs comprised between 110,817.70 euros (the 1st floor E, 2nd D, E, 3rd D, E and 5th D) and 110,818.00 euros (the 1st floor D, 4th D, E and 5th E) their TPVs summing to a total of 1,108,177.90 euros – Documents nos. 1 and 2 to 31 attached with the request and hearing.

  5.  In the urban property register of the property referred to in 1) it states: "Total tax property value: € 1,484,198.40" – Document no. 1 attached with the request for hearing.

  6.  In the assessment notices it states "Tax Property Value of the property-total subject to tax: 1,108,177.90" euros, which corresponds to the sum of the TPV of the floors with residential purpose of the property identified in 1) - Documents no. 2 to 31 attached with the request and hearing;

  7.  These taxes assessed on the basis of subparagraphs a) to f) of no. 1 of article 6 of Law 55-A/2012, of 29 October and on the basis of item 28.1 of TGIS with the wording given to it by Law 55-A/2012, of 29 October, respectively - Documents no. 2 to 31 attached with the request and hearing.

Facts Not Proven

There is no other factual matter alleged that is relevant to the correct resolution of the procedural dispute.

The established facts result from the documents attached by the Applicant, whose contents and evidential values did not merit disagreement from the AT.

IV. ASSESSMENT OF THE ISSUES THAT THE TAS MUST RESOLVE

Do items 28 and 28-1 of TGIS as tax charge provisions, as they are worded – in their charge provision - (ownership of urban properties … with residential purpose … whose tax property value recorded in the matrix, pursuant to CIMI be equal to or greater than 1,000,000.00 euros – on the tax property value used for purposes of IMI), allow or do they not allow the understanding that as regards properties "with residential purpose" in vertical ownership, with floors or units capable of independent use, held by an entity, the TPV on which the rate will be charged, should be their sum or should the individual TPV of each floor or unit capable of independent use be considered, in similar fashion to what occurs with properties under horizontal ownership regime?

The subjection to stamp duty of properties with residential purpose resulted from the addition of items 28, 28-1 and 28-2 to the General Table of Stamp Duty, effected by article 4 of Law 55-A/2012, of 29/10, which typified the following tax facts:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax property value recorded in the matrix, pursuant to the Municipal Property Tax Code (CIMI), be equal to or greater than € 1,000,000 – on the tax property value used for purposes of IMI:

28-1 – For property with residential purpose - 1%;

28-2 – For property, when the taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, included in the list approved by order of the Minister of Finance – 7.5%."

Of relevance to the case the following are mentioned:

· No. 7 of article 23 of CIS regarding tax assessment: "In the case of tax due for the situations provided in item no. 28 of the General Table, tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in CIMI."

· No. 4 of article 2 of CIMI: "For purposes of this tax, each autonomous unit, under horizontal ownership regime, is deemed to constitute a property."

· No. 3 of article 12 of CIMI: "Each floor or part of a property capable of independent use is considered separately in the tax matrix registration which also determines its respective tax property value".

It appears to us that the answer to the question raised in this request for hearing has to do with the interpretation made by the AT of no. 7 of article 23 of CIS.

The AT must have considered, in order to proceed with the sum of the TPVs of floors or units/parts of urban property, in order to determine whether the minimum TPV threshold of 1,000,000.00 euros is attainable, per each urban property, that floors or units capable of independent use are not by formal legal definition considered urban properties.

And it must have considered that this addition of TPVs is required because the law refers to "necessary adaptations" of the "CIMI rules" (no. 7 of article 23 of CIS).

But is this interpretation of the law to be deemed the most assertive?

In fact, although items 28 and 28.1 speak of "urban properties" and "per property" and no. 7 of article 23 of CIS refers to "tax is assessed annually, in relation to each urban property", what is relevant here is that, at the level of the determination of the taxable matter eligible and assessment of this tax, "… with the necessary adaptations, the rules contained in CIMI" are applied as referred to in the aforementioned no. 7 of article 23 of CIMI. But, obviously, "adaptations" provided they are necessary.

What occurred – as regards urban properties with residential purpose, in vertical ownership, with floors or units capable of independent use – was that the AT the "adaptation" that it implemented, in the IS assessment operations, was to add the TPVs of each floor or independent unit affected for residential purposes (excluding the TPVs of floors or units intended for other purposes), creating a new legal reality, without legal support, which is a global TPV of urban properties in vertical ownership, with residential purpose.

This operation of the tax process (charge – determination of taxable matter – assessment – payment) would violate the literal element of the charge provision, item 28 of TGIS, which refers to that this tax applies to "the tax property value used for purposes of IMI".

That is, the AT, in the operation of determination of taxable matter and consequent IS assessment of items 28 and 28.1 of TGIS (operation of application of a rate to taxable matter), as regards urban properties with residential purpose, in vertical ownership, with floors or units capable of independent use, should not consider any tax property value other than that which results exclusively from no. 3 of article 12 of CIMI. Whether for IMI, whether for this IS.

And for the reason that urban properties in vertical ownership, as a whole, do not have TPV. The law determines in these cases that the TPV be attributed to each floor or part of the property separately.

The above conclusion will not be affected by the fact that in the property registers of this type of property the "total tax property value" is indicated, which corresponds to the sum of the TPVs of all floors, regardless of their purpose. What is relevant for this IS taxation is not the "total tax property value" it is solely the "tax property value" of urban properties with residential purpose.

To create a new legal reality, with a view to finding a new form of determination of taxable matter (a TPV for floors or parts of property capable of independent use, with residential purpose, separated from the TPV of the others with different purposes) does not constitute having support in the "necessary adaptations" referred to in no. 7 of article 23 of CIS.

There would further, it is observed, be non-conformity with the literal element of the final part of the charge provision (item 28 of TGIS) which refers to that the tax applies to "the tax property value used for purposes of IMI" and therefore, should not apply to the sum of tax property values of properties, parts of properties or floors, no legal support being discernible in the operation of addition of tax property values of floors or parts of property capable of independent use, with residential purpose, excluding the TPVs of the others with different purposes, in order to achieve the eligible taxation threshold of 1,000,000.00 euros or more.

That is, it does not conform to law, the creation of a new TPV for purposes of IS taxation as regards item 28 of TGIS, as results from the notation in all assessment notices of "tax property value of property – total subject to tax" – subparagraph 6 of the established facts.

What this means is that when no. 7 of article 23 refers to "…tax is assessed annually, in relation to each urban property", this expression "each urban property" will intend to encompass, in light of the stated principles of interpretation and application of provisions, urban properties under horizontal ownership regime and floors or parts of urban properties of properties in vertical ownership, provided they are affected for residential purposes, but always starting from a sole taxable base (but not from additions of taxable bases used for IMI) for all legal purposes: the tax property value used for purposes of IMI (final part of item 28 of TGIS).

The question does not, in our understanding, need to be raised at the level of violation of the CRP, sufficing, in compliance with the aforementioned no. 7 of article 23 of CIS that an interpretation be carried out, "with the necessary adaptations of the CIMI rules" which will be to consider that the expression "each urban property" encompasses not only floors under horizontal ownership (which are per se urban properties ope legis) but also "floors or parts of property capable of independent use" (no. 3 of article 12 of CIMI).

If, for instance, as regards floors that comprise autonomous units of residential urban properties, under horizontal ownership regime, (although they are by definition and "ope legis" urban properties) the TPVs are not added to determine, per each taxpayer, the threshold of eligible TPV for subjection to IS (1,000,000.00 euros) of item 28 of TGIS (operation of determination of taxable matter), why should this occur as regards the "parts of property or floors" of properties in vertical ownership?

In both cases the same contributory capacity of the taxpayers is manifested (their level of wealth at the level of immovable property). It is the same "economic substance" analyzed from various angles. In both situations the same "ability-to-pay" is manifested.

In fact it is the aforementioned provision, in its literalness, particularly the final part of item 28 of TGIS, combined with no. 7 of article 23 of CIS, that allows to conclude, with the "necessary adaptations of the CIMI rules" that the AT should not add the TPVs of floors or parts of the property above identified to find a new TPV relating to those that are affected for residential purposes, separated from the TPV of those that are affected for other purposes.

The Applicant alleges, in substance, the non-conformity of the tax acts with tax law, alleging the non-conformity stated in subparagraph a) of article 99 of CPPT: "erroneous qualification … of tax facts".

In fact, with the grounds expressed above, the IS assessments challenged carried out in the manner they were, are not in harmony with the charge provision of items 28 and 28-1 of TGIS, with the result that the illegality provided for in subparagraph a) of article 99 of CPPT occurs.

The first ground of the request formulated by the Applicant in the request for hearing (subparagraph d) of the Report) being well-founded, it does not become necessary to proceed with the assessment of the other grounds (subparagraph e) of the Report), by reason of it being unnecessary.

Given the logic of the decision that is adopted – in which it is found that only the interpretation and application of ordinary tax law is at issue – no need is discerned to resort to the assessment of constitutional principles (except to ground an interpretation of ordinary law according to the dictates of the "grundsnorm") which for this purpose does not appear to us should be brought into question, by which the raising of the matter expressed in jj) of the Report has no place.

As a consequence of the above the requests for annulment of the tax acts deduced by the Applicant before the Arbitral Tribunal are well-founded, given that the IS assessments carried out by the AT are not in conformity with the law, in the interpretation above advocated.

It results from the proven facts (subparagraph 4) of part III of this decision) that none of the floors or parts of property has, per se, a TPV that is equal to or greater than the taxation threshold indicated in item 28 of TGIS (TPV equal to 1,000,000.00 euros).

V. DECISION

In light of and on the grounds set out above it is held:

The request of the Applicant is well-founded and are annulled the assessments of Stamp Duty contained in the following documents:

on the basis of subparagraphs a) to f) of no. 1 of article 6 of Law 55-A/2012, of 29.10

· 2013 ...; 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., ;

on the basis of item 28.1 of TGIS – Year 2012

· 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ..., 2013 ...;

on the basis of item 28.1 of TGIS – Year 2013

· 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ...;

relating to the years 2011 (implied), 2012 and 2013 and dated 18.09.2013 (the acts relating to the years 2011 (implied) and 2012) and 17.03.2014 (the acts relating to the year 2013), generating a total collection of 28,286.30 euros, (5,540.90 + 11,081.80 + 11,663.60 = 28,286.30 euros, respectively), with reference to an urban property in full ownership, with floors or units capable of independent use, more specifically covering the floors designated for housing that comprise it, namely:

· Urban property located in …, on Avenue ..., currently registered in the urban property tax matrix of the parish of …, municipality and district of …, under articles U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., (according to the assessment notices issued under Law 55A/2012 and for the year 2012) the property is registered with the identification "... … U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., U-..., ; and according to the property register it originated from articles ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., - … (extinct)),

for the reason that the assessments in question are not in conformity with the charge provision of items 28 and 28-1 of TGIS, nor with no. 7 of article 23 of CIS and with nos. 1 and 2-subparagraph a) of article 8 of LGT.

The Respondent is further condemned to proceed with the reimbursement to the Applicant of any amount that may have been paid.

Value of the proceeding: in accordance with the provisions of article 3, no. 2, of the Rules of Costs in Tax Arbitration Proceedings (and subparagraph a) of no. 1 of article 97A of CPPT), the value of the proceeding is fixed at 28,286.30 euros.

Costs: in accordance with the provisions of article 22, no. 4, of RJAT, the amount of costs is fixed at € 1,530.00 €, according to Table I annexed to the Rules of Costs in Tax Arbitration Proceedings, to be borne by the respondent.

Notify.

Lisbon, 31 October 2014

Sole Arbitrator Tribunal,

Augusto Vieira

Document prepared on computer in accordance with the provisions

of article 131, no. 5, of CPC, applicable by reference of article 29 of RJAT.

The text of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is Stamp Tax (Imposto de Selo) under Verba 28.1 of the TGIS and how does it apply to high-value properties in Portugal?
Stamp Tax under Verba 28.1 of the TGIS is an annual tax on high-value real estate property in Portugal. It applies to urban properties with a tax property value (valor patrimonial tributável) equal to or exceeding €1,000,000. The tax was introduced for properties used for residential purposes and represents an additional tax burden beyond regular property tax (IMI). The rate and specific application depend on whether the property is owned by individuals or companies, and whether it qualifies under the threshold established by law.
Can the Portuguese Tax Authority sum the patrimonial values of individual units in a vertical property building to meet the €1,000,000 threshold for Stamp Tax?
This is the central dispute in Process 347/2014-T. The Portuguese Tax Authority (AT) summed the patrimonial values of ten individual residential units within a single building held in full ownership to reach the €1,000,000 threshold. The taxpayer challenged this approach, arguing that each independently usable floor or unit should be assessed individually for Stamp Tax purposes, not aggregated. Since no single unit exceeded €1,000,000, the taxpayer contended that no Stamp Tax was due. The case required the arbitral tribunal to interpret whether 'property' under item 28.1 means the entire building or each autonomous unit.
How does the CAAD arbitral tribunal interpret the taxable value for properties held in total ownership with independently usable divisions?
The CAAD arbitral tribunal in this case must interpret whether properties held in total ownership (propriedade plena) comprising floors or units capable of independent use should be taxed based on the individual tax property value of each unit or the aggregate value of all units. The applicant argued that the taxable value should be determined unit-by-unit, consistent with how such properties are registered in the property tax matrix and assessed for IMI purposes. The tribunal must consider the subsidiary application of the IMI Code to Stamp Tax matters and determine the proper interpretation of the charging provision in item 28.1 of TGIS.
Does taxing vertical property differently from horizontal property violate the constitutional principle of equality under Article 13 of the Portuguese Constitution?
The taxpayer raised a constitutional challenge arguing that the Tax Authority's interpretation of item 28.1 violates Article 13 of the Portuguese Constitution, which enshrines the principle of equality. The argument centers on alleged discriminatory treatment between vertical properties (multiple units within a single building structure) and horizontal properties (separate buildings on different land parcels). If values are aggregated for vertical properties but not for separately owned buildings, this could create unequal tax treatment for economically similar situations. The constitutional question requires analysis of whether there is objective justification for treating these property configurations differently under tax law.
What is the procedure for challenging Stamp Tax assessments through CAAD tax arbitration in Portugal?
The procedure for challenging Stamp Tax assessments through CAAD involves: (1) Filing a request for establishment of an arbitral tribunal within the legal deadline (typically after exhausting administrative remedies or following tacit rejection of complaints); (2) The CAAD President accepts the request and notifies the Tax Authority; (3) An arbitrator is appointed by the CAAD Deontological Board; (4) The tribunal is formally established once the arbitrator accepts; (5) The Tax Authority is notified to respond and may present evidence and exceptions; (6) Parties may agree to waive hearings; (7) Written submissions are filed; (8) The tribunal issues a decision. The process follows the Legal Framework for Arbitration in Tax Matters (RJAT) and provides an alternative to traditional administrative courts for resolving tax disputes.