Process: 351/2017-T

Date: December 4, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 351/2017-T addresses the application of Stamp Tax under item 28.1 of the General Table of Stamp Tax (TGIS) to vertical property ownership. The key issue concerns whether urban residential properties in full ownership, composed of independently usable parts registered separately in the property registry, fall within the scope of this tax provision. The Constitutional Court in Decision 620/2015 confirmed the constitutionality of item 28.1 TGIS, rejecting claims of violations to fiscal equality, contributory capacity, and proportionality principles. The 2014 State Budget Law modified the provision's wording, delimiting its objective scope through concepts defined in Article 6 of the Property Tax Code. Multiple Supreme Administrative Court decisions and CAAD arbitral rulings have supported this interpretation, clarifying that each floor or independently usable part is considered separately in the property register per Article 12(3) of the Property Tax Code. The decision confirms taxpayers' right to challenge assessments through CAAD arbitration and addresses the availability of compensatory interest when liquidations are annulled. This ruling provides critical guidance on vertical property taxation, distinguishing it from horizontal property regimes and establishing that no legal obligation exists to constitute property under horizontal ownership rules.

Full Decision

13] Indeed, the Constitutional Court concludes that "(…) item 28 of the GTIS does not suffer from any unconstitutionality, with no violation of the constitutional principles forming the tax law, specifically, the principles of fiscal equality, contributory capacity and proportionality (…)" (underline ours).

[14] The Respondent in the Response refers, with respect to the question raised by the Claimant of the (un)constitutionality of the rule of incidence contained in item 28.1 of the GTIS, when interpreted in the manner defended by the Respondent, that "(…) the Constitutional Court in Decision no. 620/2015, issued in process 305/15 (2nd section) (…) decided (…) not to declare unconstitutional the rule of incidence contained in item 28.1 of the General Table of Stamp Tax, when interpreted in the sense that it includes urban residential properties in full ownership composed of parts susceptible to independent use and considered separately in the property register (…)".

[15] In fact, taking into consideration that the concept of "property (urban) with residential use allocation" was not defined either by the legislator, nor by the text of Law no. 55-A/2012 (which introduced it), nor by the Property Tax Code, to which no. 2 of Article 67 of the Stamp Tax Code (also introduced by that Law) refers subsidiarily, it had a very short life, given that such concept was abandoned upon the entry into force of the State Budget Law for 2014 (in force from 1 January 2014 and, therefore, in force at the date of the tax assessments subject to the arbitral application), which gave new wording to that item no. 28.1 of the GTIS, in accordance with which its objective scope of incidence is delimited through the use of concepts that are legally defined in Article 6 of the Property Tax Code.

[16] In this context, note the provisions of Article 12, no. 3, of the Property Tax Code, by referring that "each floor or part of property capable of independent use is considered separately in the property register, which also discriminates the respective TPV".

[17] In this sense, see Decision of the Court of Appeal Process 07648/14, of 10 July 2014.

[18] Cfr. Decision of the Court of Appeal process 5320/12, of 2 October 2012, Decision of the Court of Appeal process 7073/13, of 12 December 2013 and Decision of the Court of Appeal 2912/09, of 27 March 2014.

[19] See Arbitral Decision no. 50/2013-T, of 29 October 2013.

[20] Which is the Property Tax Code, given the referral made by the cited Article 67, no. 2, of the Stamp Tax Code.

[21] According to which the interpretation of the legal rule should not be limited to the letter of the law, but should reconstruct the legislative intent, from the texts and other interpretation elements, taking into account the unity of the legal system.

[22] Available for consultation in the Parliamentary Gazette, I series, no. 9/XII/2, of 11 October 2012.

[23] As already mentioned in various Arbitral Decisions issued by CAAD (in particular, in process no. 48/2013-T and in process no. 50/2013-T).

[24] In this sense, cfr. Decision of the Administrative Supreme Court of 9 September 2015 (rec. no. 047/15), supported by the Decisions of the Administrative Supreme Court of 27 April 2016 (rec. no. 1534/15), of 24 May 2016 (recs. nos. 1344/15 and 1352/15), of 4 May 2016, (recs. nos. 166/16, 1504/15 and 172/16) and of 29 June 2016 (rec. no. 408/15).

[25] Similarly, see Decision of the Administrative Supreme Court, of 15 February 2017 (process no. 01425/14).

[26] Since the law does not impose an obligation to constitute the property in the horizontal property ownership regime.

[27] In this sense, the Decision of the Administrative Supreme Court no. 01354/15, of 2 March 2016, also pronounced itself, pursuant to the terms already mentioned for the Decision of the Administrative Supreme Court no. 0560/16, of 29 September 2016 (see point 6.33, above).

[28] In this sense, see Arbitral Decision no. 525/2016-T, of 8 February 2017.

[29] See Leite de Campos, Diogo, Silva Rodrigues, Benjamim, Sousa, Jorge Lopes, in "General Tax Law - Annotated and Commented", 4th Ed., 2012, page 116).

[30] On the subject of indemnity interest, reference may be made to the work of the same author (Sousa, Jorge Lopes), Interest in Tax Relations, in "Fundamental Problems of Tax Law", Lisbon, 1999, page 155 et seq).

Frequently Asked Questions

Automatically Created

Is Stamp Tax under Verba 28.1 of the TGIS applicable to vertical property owned by real estate investment funds?
Yes, Stamp Tax under Verba 28.1 of TGIS applies to vertical property where urban residential properties in full ownership contain parts capable of independent use and are registered separately in the property registry, regardless of ownership by real estate investment funds. The Constitutional Court confirmed this interpretation's constitutionality in Decision 620/2015, and the 2014 State Budget Law clarified the scope using Property Tax Code definitions.
Can a taxpayer challenge Stamp Tax assessments on vertical property through CAAD tax arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on vertical property through CAAD (Centro de Arbitragem Administrativa) tax arbitration. The decision references multiple CAAD arbitral processes (48/2013-T, 50/2013-T, 525/2016-T) where taxpayers successfully contested such assessments, demonstrating CAAD's jurisdiction over these disputes and providing an alternative to judicial courts for resolving Stamp Tax controversies.
What legal grounds exist to contest the constitutionality of Stamp Tax on vertical property under Portuguese law?
Legal grounds to contest the constitutionality of Stamp Tax on vertical property under item 28.1 TGIS include challenging violations of fiscal equality principles, contributory capacity, and proportionality under Portuguese constitutional tax law. However, the Constitutional Court in Decision 620/2015 (process 305/15) rejected these arguments, ruling that item 28.1 TGIS does not suffer from unconstitutionality. Taxpayers may also argue improper interpretation of Property Tax Code concepts or question whether properties meet the legal definition of independently usable parts under Article 12(3).
Are compensatory interest and full refunds available when Stamp Tax liquidations are annulled by arbitral decision?
Yes, compensatory interest (juros indemnizatórios) and full refunds are available when Stamp Tax liquidations are annulled by arbitral decision. The decision references legal doctrine on interest in tax relations by Jorge Lopes de Sousa, indicating that when tax authorities' assessments are determined to be unlawful and annulled, taxpayers are entitled to reimbursement of amounts paid plus compensatory interest for the period the State wrongfully held their funds.
How does the gracious complaint procedure interact with CAAD arbitration for Stamp Tax disputes on real estate?
The gracious complaint procedure (reclamação graciosa) and CAAD arbitration operate as alternative dispute resolution mechanisms for Stamp Tax disputes on real estate. Taxpayers must choose between administrative complaint procedures or direct arbitration through CAAD. The arbitration route provides faster resolution through specialized tax arbitrators applying the same legal framework, including Property Tax Code provisions and TGIS interpretations confirmed by Supreme Administrative Court jurisprudence, without requiring exhaustion of administrative remedies first.