Process: 352/2014-T

Date: December 26, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 352/2014-T) addresses whether Stamp Tax under Verba 28 of the General Stamp Tax Table (TGIS) applies to undeveloped land for construction. The claimant A..., S.A. challenged a 2013 Stamp Tax assessment of €9,436.43 on land for construction with a tax value of €2,830,926.91, arguing that Verba 28.1 applies only to properties with residential use requiring an actual building or construction, not vacant land. The Tax Authority countered that land for construction qualifies as real property under IMI Code articles 2 and 6, and the concept of 'property with residential use' should be interpreted broadly to include land for construction when its designated use for evaluation purposes is housing. The arbitral tribunal adopted extensive case law from both CAAD and the Supreme Administrative Court, particularly the STA judgment of 9/4/2014 (case 01870/13). The decision acknowledges that the legislator never formally defined 'property with residential use' when introducing it via Law 55-A/2012, creating ambiguity. However, subsequent clarification in the 2014 State Budget Law (Law 83-C/2013) confirmed that land for construction with authorized or planned residential buildings falls within Verba 28.1's scope. The tribunal ruled consistent with established jurisprudence that Stamp Tax applies to construction land designated for housing purposes, validating the Tax Authority's broader interpretation. This decision reinforces that for Portuguese Stamp Tax purposes, the functional designation of land, not merely its current physical state, determines tax liability under Verba 28.1 of TGIS.

Full Decision

ARBITRAL DECISION

Process no. 352/2014-T

Claimant: A..., S.A.
Respondent: Tax and Customs Authority

I. REPORT

A..., S.A., legal entity no. …, with registered office at Av. … Lisbon (hereinafter referred to simply as the Claimant), submitted, on 23-04-2014, a request for the constitution of a singular arbitral tribunal, in accordance with articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to simply as RJAT), in conjunction with item a) of article 99 of the CPPT, against which the Tax and Customs Authority (hereinafter referred to simply as the Respondent) is named as respondent.

The Claimant requests the annulment of the Stamp Tax assessment no. 2014 …, of 17-03-2014, for the year 2013, relating to the land for construction registered in the urban property register under the article ... of the parish of …, in the municipality of ..., with a payment value of € 9,436.43.

The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD on 28-04-2014 and notified to the Tax and Customs Authority on that same date.

Pursuant to the provisions of item a) of section 2 of article 6 and item b) of section 1 of article 11 of the RJAT, the Deontological Board appointed as arbitrator of the singular arbitral tribunal the undersigned, who communicated acceptance of the office within the applicable period.

On 16-06-2014, the Parties were duly notified of this appointment and did not express any intention to challenge the appointment of the arbitrators, in accordance with the combined provisions of article 11, section 1, items a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

In compliance with the provisions of item c) of section 1 of article 11 of the RJAT, the singular arbitral tribunal was constituted on 01-07-2014.

By order of 10-11-2014, the meeting provided for in article 18 of the RJAT was dispensed with, and the parties were granted successive periods for submission of written pleadings. Duly notified for this purpose, neither of the parties submitted written pleadings.

The Claimant alleges, briefly, that there was an error of fact and law in the assessment of the disputed tax insofar as items 28 and 28.1 of the General Stamp Tax Table (hereinafter simply referred to as TGIS) refer to properties with residential use and not to land for construction. In the Claimant's view, the concept of "property with residential use" presupposes a building or construction that meets the characteristics required to be classified as such, and therefore cannot be included in the category of land for construction. In the Claimant's understanding, land for construction does not satisfy in itself any condition for being licensed as such or for defining housing as its normal purpose.

In response, the Respondent argues, briefly, that land for construction is qualified as real property, pursuant to articles 2 and 6 of the IMI Code, and it is possible and legally mandatory to determine its use for evaluation purposes. Section 2 of article 45 of the IMI Code, by referring to "(…) the value of authorized buildings (…)", refers to the evaluation rules for buildings provided for in articles 38 et seq. of the IMI Code, thus including the weighting of coefficients of use and quality and comfort (invoking the judgment of the Supreme Administrative Court of 14/02/2012, handed down in case 04950/11). In this regard, the concept of "property with residential use" in item 28.1 of the TGIS should be interpreted in a broader and more comprehensive manner than the Claimant argues, and should not be restricted to the category of properties intended for housing referred to in item a) of section 1 of article 6 of the IMI Code; such concept shall thus encompass land for construction provided that its respective use, determined for evaluation purposes, is housing. In this respect, the tax assessment is valid and the Claimant's request should fail.

III. SCREENING

The Arbitral Tribunal was regularly constituted and is competent.

The parties have legal standing and capacity and are properly parties (articles 4 and 10, section 2, of the same statute and article 1 of Order no. 112-A/2011, of 22 March).

The case is not affected by any nullities and there are no obstacles to consideration of the merits of the case.

IV. MATTERS OF FACT

A. Proven Facts

The following facts are considered proven:

  1. The Claimant is registered as owner of the land for construction registered in the urban property register of the parish of …, municipality of ..., under the article ..., with a tax value of € 2,830,926.91 (document attached with request of 28-10-2014);

  2. In March 2014, the Claimant was notified of the Stamp Tax assessment, item 28.1 of the TGIS, for the year 2013, relating to the land for construction identified (document attached with request of 28-10-2014);

  3. The total value of each installment of the Stamp Tax amounts to € 9,436.42.

B. Facts Not Proven

No other facts with relevance for the arbitral decision were proven.

C. Basis for the Factual Matters

The factual matters established as proven are based on documentary evidence submitted and not contested.

V. MATTERS OF LAW

The essential issue to be decided concerns the determination of the tax base of item 28.1 of the TGIS, in particular as regards the inclusion of land for construction in the concept of "urban property with residential use".

Now, on this question there are already numerous decisions of the Centre for Administrative and Tax Arbitration, examples of which are the decisions of 18/09/2013, case no. 49/2013-T, of 02/10/2013, case no. 53/2013-T, of 09/10/2013, case no. 48/2013-T, of 18/10/2013, case no. 42/2013 and of 01/11/2013, case no. 75/2013-T. There are also numerous decisions of the Supreme Administrative Court on this matter, examples of which are the judgments handed down on 24/9/2014, in cases nos. 01533/13, 0739/14 and 0825/14; on 10/9/2014, in cases nos. 0503/14, 0707/14 and 0740/14; on 9/7/2014, in case no. 0676/14; on 2/7/2014, in case no. 0467/14; on 28/5/2014, in cases nos. 0425/14, 0396/14, 0395/14; on 14/5/2014, in cases nos. 055/14, 01871/13 and 0317/14; on 23/4/2014, in cases nos. 270/14 and 272/14; and on 9/4/2014, in cases nos. 1870/13 and 48/14.

The undersigned has had the opportunity to rule on the matter at issue in this case (arbitral decision of 14-12-2014, handed down in arbitral case no. 388/2014) and, given the identity of the factual question and the identity of the legal matter, what was decided there is reproduced here, adopting the above-mentioned case law and following what was stated in the cited judgment of the Supreme Administrative Court of 9/4/2014, case no. 01870/13, whose reasoning we fully subscribe to in the following part:

"The concept of 'property (urban) with residential use' was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which section 2 of article 67 of the Stamp Tax Code (also introduced by that Law) refers on a subsidiary basis. And it is a concept which, probably owing to its imprecision – a fact that is all the more serious given that the scope of the objective tax basis of the new taxation is determined in function thereof – had a short life, as it was abandoned upon the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Table, and which now determines its objective tax basis through the use of concepts that are legally defined in article 6 of the IMI Code. This change – to which the legislator did not attribute an interpretative character, nor does it appear to us that it did – merely makes clear for the future that land for construction whose building, authorized or planned, is for housing is encompassed within the scope of item 28.1 of the General Stamp Tax Table (provided that its respective tax value is equal to or greater than 1 million euros), while clarifying nothing, however, regarding prior situations (assessments for 2012 and 2013), such as the one at issue in the present case. Now, as regards these, it does not appear possible to adopt the interpretation of the appellant, since it does not result unequivocally either from the letter or from the spirit of the law that its intention was, ab initio, to encompass within its objective tax basis land for construction for which construction of residential buildings was authorized or planned, as results unequivocally today from item 28.1 of the General Stamp Tax Table. Nothing unequivocal follows from the letter of the law, indeed, as the law itself, by using a concept that it did not define and which was also not defined in the statute to which it referred on a subsidiary basis, lent itself unnecessarily to ambiguities, in a matter – of tax liability – where certainty and legal security should also be overriding concerns of the legislator. And from its 'spirit', ascertainable in the explanatory memorandum of the bill that gave rise to Law no. 55-A/2012 (Bill no. 96/XII – 2nd, Official Gazette of the Assembly of the Republic, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows than the concern to raise new tax revenues from sources of wealth that were 'more spared' in the past from the tax collector than labour income, in particular capital income, stock capital gains and property, which reasons bring no relevant contribution to the clarification of the concept of 'properties (urban) with residential use', as they take it as settled, without any concern to clarify it. Such clarification was, however, to emerge – as reported in the Arbitral Decision handed down on 12 December 2013, in case no. 144/2013-T, available in the CAAD database – upon the presentation and discussion in the Assembly of the Republic of that bill, in the words of the Secretary of State for Tax Affairs, who expressly stated, as appears from the Official Gazette of the Assembly of the Republic (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: 'The Government proposes the creation of a special rate on urban residential properties of higher value. It is the first time that in Portugal a special taxation has been created on properties of high value intended for housing. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or greater than 1 million euros" (emphasis ours), from which it follows that the reality to be taxed had in view is, after all, and notwithstanding the terminological imprecision of the law, 'urban residential properties', in common language 'houses', and not other realities. The fact that it can be considered that in determining the tax value of urban properties classified as land for construction account should be taken of the use that the building authorized or planned for it will have for determination of the respective value of the implantation area (cf. sections 1 and 2 of article 45 of the IMI Code) does not determine that land for construction can be classified as 'properties with residential use', as 'residential use' is always referred to in the IMI Code with reference to 'buildings' or 'constructions', existing, authorized or planned, as only these can be inhabited, which is not the case with land for construction, which does not have in itself the conditions for such, being susceptible to being used for housing only if and when the construction authorized and planned for it is built thereon (but in that case they would no longer be 'land for construction' but another species of urban property – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of the IMI Code). It would be strange, indeed, if the determination of the scope of the tax liability rule of item no. 28 of the General Stamp Tax Table were to be found, in the end, in the rules for determining the tax value of the IMI Code, and if the terminological imprecision of the legislator in drafting that rule were, after all, clarified and finally elucidated through an indirect and equivocal reference to the use coefficient established by the legislator in relation to built properties (article 41 of the IMI Code). Thus, bearing in mind that land for construction – whatever the type and purpose of the building that will be, or could be, erected thereon – does not satisfy in itself any condition for being licensed as such or for defining housing as its normal purpose, and the tax liability rule of stamp tax referring to urban properties with 'residential use', without any specific concept being established for that effect, cannot extract from it that it contains a future potentiality, inherent to a distinct property that may possibly be built on the land.

It is concluded therefore, in accordance with what was decided in the judgment under appeal that, resulting from article 6 of the IMI Code a clear distinction between urban properties 'residential' and 'land for construction', these cannot be considered as 'properties with residential use' for the purposes of the provision in item no. 28.1 of the General Stamp Tax Table, in its original wording, as was given to it by Law no. 55-A/2012, of 29 October" (bold ours).

In light of all the above, it is concluded that the Claimant's petition should be granted, and the illegality of the tax assessment act disputed is declared by violation of items 28 and 28.1 of the TGIS.

VI. DECISION

In accordance with the above, this Arbitral Tribunal agrees to rule in favor of the Claimant's request for arbitral determination regarding the request for annulment of the Stamp Tax assessment no. 2014 …, with a payment value of € 9,436.43, disputed by the Claimant.

Case Value: In accordance with the provision of article 306, section 2, of the CPC and 97-A, section 1, item a), of the CPPT and 3, section 2, of the Regulation of Costs in Tax Arbitration Processes, the case value is fixed at € 9,436.43.

Costs: Pursuant to section 4 of article 22 of the RJAT, the amount of costs is fixed at € 918.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Processes, to be borne by the Tax and Customs Authority.

Let this arbitral decision be registered and notified to the parties.

Lisbon, 26-12-2014

The Singular Arbitrator

(Maria Forte Vaz)

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28 of TGIS applicable to land for construction (terrenos para construção)?
Yes, Stamp Tax under Verba 28 of the TGIS is applicable to land for construction (terrenos para construção) in Portugal. This decision, along with extensive case law from CAAD and the Supreme Administrative Court, confirms that such land falls within the scope of Verba 28.1 when its authorized or planned use is for residential purposes. The 2014 State Budget Law (Law 83-C/2013) clarified this interpretation, making explicit that construction land designated for housing is subject to Stamp Tax regardless of whether buildings currently exist on the property.
Does a terreno para construção qualify as a prédio com afectação habitacional for Stamp Tax purposes in Portugal?
Yes, a terreno para construção qualifies as a prédio com afectação habitacional (property with residential use) for Stamp Tax purposes if its authorized or planned building use is for housing. While the claimant argued that this concept requires an actual constructed building, the Tax Authority's broader interpretation prevailed. The tribunal adopted established jurisprudence holding that the functional designation of the land for evaluation purposes under the IMI Code determines whether it constitutes property with residential use, not merely its current physical state as undeveloped land.
What is the legal distinction between land for construction and residential property under Portuguese Stamp Tax law?
The legal distinction between land for construction and residential property under Portuguese Stamp Tax law relates to interpretation of 'property with residential use' under Verba 28.1 of TGIS. Initially, Law 55-A/2012 introduced this concept without clear definition, creating ambiguity about whether it required actual constructed buildings or could include vacant land. The 2014 State Budget Law clarified that land for construction whose authorized or planned building is for housing falls within Verba 28.1's scope. The key factor is the designated use for evaluation purposes under IMI Code provisions, not whether construction has been completed.
How does the CAAD interpret Verba 28.1 of the Tabela Geral do Imposto do Selo regarding undeveloped land?
CAAD interprets Verba 28.1 of the TGIS regarding undeveloped land to include land for construction when its designated use is residential. The tribunal cited numerous CAAD decisions (cases 49/2013-T, 53/2013-T, 48/2013-T, 42/2013, 75/2013-T) supporting this interpretation. CAAD follows the principle that the concept of 'property with residential use' encompasses construction land if its use determined for evaluation purposes under IMI Code provisions is housing, even absent actual buildings. This broad interpretation aligns with Supreme Administrative Court jurisprudence establishing that functional designation, not physical state, determines tax liability.
Can a taxpayer challenge Stamp Tax liquidation on construction land through CAAD arbitration under RJAT?
Yes, taxpayers can challenge Stamp Tax liquidation on construction land through CAAD arbitration under RJAT (Legal Framework for Arbitration in Tax Matters, Decree-Law 10/2011). This case demonstrates the process: the claimant submitted a request for constitution of a singular arbitral tribunal under articles 2 and 10 of RJAT, in conjunction with article 99(a) of CPPT. The arbitral tribunal was properly constituted, had jurisdiction over the matter, and issued a binding decision on the validity of the Stamp Tax assessment on land for construction, confirming that such disputes fall within CAAD's arbitration competence.