Process: 355/2016-T

Date: November 8, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 355/2016-T addresses the application of stamp tax (Imposto de Selo) under Item 28.1 of the General Stamp Tax Table (TGIS) to buildings in vertical property ownership with independently usable units. The taxpayer challenged stamp tax assessments for 2015 on a property with 75 independent units (26 residential), arguing that since no individual residential unit exceeded the €1,000,000 VPT threshold, the tax should not apply. The Tax Authority contended that vertical property constitutes a single property unit, and the aggregate VPT of €4,883,710 should determine tax incidence, not individual unit values ranging from €44,740 to €197,520.

The core legal question concerns whether vertical property ownership—where a building contains autonomous divisions not constituted as horizontal property (condominium)—should be treated as a single taxable unit or as separate units for stamp tax purposes. Item 28.1 TGIS, introduced by Law 55-A/2012, imposes a 1% annual stamp tax on urban properties with residential allocation and VPT equal to or exceeding €1 million. The interpretive dispute centers on whether 'property' means the entire building or each independently registered unit with separate matrix entries.

The taxpayer argued that vertical property units with separate property register entries and individual VPT assessments should be treated analogously to horizontal property autonomous units, where each unit is taxed independently. The Tax Authority maintained that unlike horizontal property, vertical ownership lacks legal autonomy for each unit, making the building indivisible for tax purposes. This distinction is critical for determining whether the minimum €1 million threshold applies to the aggregate property value or individual units, significantly impacting tax liability and establishing precedent for similar vertical property structures throughout Portugal.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1 A…, S.A., a collective person …, with registered office at Avenue …, …, …, in Lisbon, came, pursuant to Article 2(1)(a) of Decree-Law No. 10/2011, of 20 January (hereinafter RJAT) and Ordinance No. 112-A/2011, of 22 March, to request the establishment of an arbitral tribunal.

1.2 The Respondent in the proceedings is the TAX AND CUSTOMS AUTHORITY.

1.3 The Ethics Council of the Centre for Administrative Arbitration (CAAD) appointed the undersigned to form the Single Arbitral Tribunal, notifying the parties thereof, and the Tribunal was constituted on 15 September 2016.

1.4 The request for arbitral decision concerns the acts of stamp tax assessment relating to the year 2015 executed on 05 April 2016 by the Lisbon Tax Office - … concerning the property registered in the urban property register of the parish of … of the municipality of Lisbon under article …, which are better identified in the Claimant's request and in the documents attached thereto, to which reference is hereby made.

1.5 The Claimant invokes the illegality of the assessment acts, contesting the application of the new item 28.1 of the General Stamp Tax Table (TGIS) to urban properties not constituted in the regime of horizontal property ownership, but which include units susceptible to independent use, in which the minimum incidence value set by law is reached by the sum of the VPT (taxpayers' property value) of the separate (or autonomous) property register entries corresponding to those various units with residential allocation, but not by any one of them individually considered.

It contends that by reason of the fact that the property, notwithstanding not being constituted in the regime of horizontal property ownership, is composed of units susceptible to independent use, the VPT relevant to assessing the fulfilment of the requirement upon which the incidence of the aforementioned item depends is not met, since of the 75 units of the property susceptible to independent use only twenty-seven of them have residential allocation and each one of them has a separate entry in the corresponding property register and, therefore, an individualized VPT lower than the aforementioned minimum limit.

The Claimant thus contends that it is not the owner of a property with a VPT equal to or greater than the aforementioned minimum amount, but rather the owner of a property in vertical ownership regime in which the VPT exceeding that value is only reached by the sum of the VPT of the units susceptible to independent use allocated to residential purposes, without any of them, individually considered, reaching that minimum amount of tax relevance.

For that reason, in the Claimant's view, the disputed assessments suffer from a defect of violation of law, which makes them voidable.

It concludes by requesting the annulment of the disputed assessment acts, with the consequent annulment of the collection notices already issued and those to be issued pending the proceedings, and the condemnation of the Respondent to refund the amounts paid by the Claimant, as well as indemnity interest.

1.6 The TAX AND CUSTOMS AUTHORITY filed its Response on 10.10.2016, and that which it designated as "substitute" was admitted by order of 18.10.2016, defending itself by opposition, sustaining the maintenance of the assessments, emphasizing, in summary, that total ownership, or vertical ownership, corresponds to a single property, this being the reality to be taken into account in determining whether the minimum value contained in the incidence rule is met.

For the Respondent, the VPT relevant for purposes of tax incidence is therefore the VPT of the urban property and not the VPT of each of the units comprising it, even though these are susceptible to independent use, as they are allocated to residential purposes. In support of this thesis, it also emphasizes that the unity of the property is not affected, and its distinct units cannot be legally equated to the autonomous units of a property constituted in the horizontal property ownership regime.

1.7 The Respondent did not attach the administrative file to the proceedings.

1.8 On 18.10.2016, the Tribunal issued an order indicating its intention to dispense with the arbitral tribunal meeting provided for in Article 18 of the RJAT as well as the arguments, and the parties, notified, did not object.

1.9 On 04.11.2016, the Claimant attached to the proceedings the collection notices and proof of payment relating to the second and third instalments of the assessed tax in dispute.

2. PRELIMINARY RULING

The Tribunal was regularly constituted and is competent.

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

The proceedings do not suffer from any defects that would invalidate them.

3. FACTS

As relevant to the decision on the merits, the Tribunal finds the following facts proven:

1) The Claimant is the owner of the urban property located at Square …, … to …, Street …, …, … to …, Square of …, 1, … to 1M, 2, 2A to 2E and 3, 3A to 3C and Street of …, 1, 1A and 1B, registered in the urban property register of the parish of … of the municipality of Lisbon under article …;

2) The "total property value" of the property registered in the property register is € 4,883,710.00;

3) The property is composed of 75 units or divisions of independent use, identified separately in the property register entry, with the respective VPT also being specified for each of them;

4) Of the 75 units or divisions susceptible to independent use, only twenty-six have residential allocation;

5) The taxable value of each of those divisions with residential allocation, determined under the Municipal Property Tax Code (CIMI) ranges between €44,740.00 and €197,520.00, all of which, therefore, individually considered, are below €1,000,000.00;

6) The assessments in question stem from the application of stamp tax provided for in item 28.1 of the General Stamp Tax Table (TGIS) attached to the Stamp Tax Code (CIS) as amended by Article 4 of Law No. 55-A/2012, of 29 October, at the rate of 1% on the property value subject to tax on twenty-six of the seventy-five divisions of the property susceptible to independent use, precisely those with residential allocation, with reference to the year 2015.

Facts Not Proven

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

Reasoning of the Decision on the Facts

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

4. LEGAL MATTER - QUESTIONS TO BE DECIDED

The question to be decided is as follows:

With reference to properties not constituted in the regime of horizontal property ownership, composed of various units and divisions with independent use, some of which have residential allocation, is the VPT relevant as a criterion for tax incidence the sum total of the property value subject to tax attributed to the different units or floors (global VPT) or, rather, the VPT attributed to each of the residential units or floors?

It is necessary to decide:

The question to be decided corresponds to the application, in situations of so-called vertical property ownership, of the new taxation in stamp tax on urban properties with residential allocation and VPT equal to or greater than one million euros. This new taxation was introduced in 2012 to strengthen budgetary control measures from the revenue side, in a context of financial necessity.

On this question of determining the (minimum) VPT relevant for the application of item 28.1 of the General Tax Table in cases of vertical property ownership, among others, the decisions of CAAD in cases numbered 50/2013-T, 132/2013, 181/2013-T, 183/2013-T, 272/2013-T, 280/2013-T, 26/2014-T, 30/2014-T, 88/2014-T, 177/2014-T, 206/2014-T and 349/2015-T have already been pronounced.

In all of them, the issue lay, as in these proceedings, in determining whether the VPT relevant to the incidence rule (28.1 of the TGIS) is the VPT corresponding to each of the divisions susceptible to independent use separately considered in the property register or whether, on the contrary, the relevant VPT should correspond to the sum of all those divisions susceptible to independent use, but forming part of the same property and which are allocated to residential purposes.

And the answer, in those decisions, was always for the first option, with which we agreed and which we have also supported in several other previous decisions.

It is important to note that each unit or part of a property susceptible to independent use is considered separately in the property register of the total property, which also specifies the property value subject to tax thereof (Article 12(2) of the CIMI), and the IMI (Municipal Property Tax) is assessed individually in relation to each unit or part of a property susceptible to independent use (Article 119(1) of the CIMI), as was also the case in the matter at hand.

And, if this is the case for IMI, it should also be the case for Stamp Tax, especially since, as the Respondent correctly states, the Stamp Tax Code refers to the Municipal Property Tax Code.

As the decision in case 206/2014-T points out: "Since the Stamp Tax Code refers to the Municipal Property Tax Code, it must be concluded that the registration in the property register of properties in vertical ownership, constituted by different parts, units or divisions with independent use, follows the same registration rules as horizontal property". Since the IMI and Stamp Tax are "assessed individually in relation to each of the parts", the "legal criterion for defining the incidence of the new tax must be the same". Consequently, item 28.1 of the TGIS shall apply (only) if any of those parts, units or divisions with independent use has a VPT at least equal to the amount provided for in the incidence rule.

As the decision delivered by the Arbitral Tribunal in case 349/2015-T aptly explains, "Thus, a property shall be the independent area, considered separately and autonomously in the property register, being subject to stamp tax if two requirements are met: being intended for residential purposes and having a VPT equal to or greater than one million euros, the criterion for assessing 'luxury' residential properties. Otherwise, a reality not provided for by the legislator would be created: that of a, so to speak, 'residential property', possibly inserted within a larger property, possibly with various purposes, in which the VPT thereof, unrelated to the property register entries, would consist in the fiction of a VPT given by the addition of the autonomous VPT of each division (independent and with residential purpose) considered in the property register entry. That is, where the legislator considered two realities, the interpreter would now, without support in the legislative text, have to fictionally create a third reality, hybrid, midway between the urban property and its independent divisions to which the legislator of the IMI, and of the stamp tax by reference to the CIMI, understood to give tax relevance.

Also in the decision delivered in case 272/2013-T (CAAD) it is stated that "considering that the registration in the property register of properties in vertical ownership, constituted by different parts, units or divisions with independent use, in accordance with the CIMI, follows the same registration rules as properties constituted in horizontal property ownership, the respective IMI, as well as the new Stamp Tax, being assessed individually in relation to each of the parts, offers no doubt that the legal criterion for defining the incidence of the new tax must be the same". Moreover, it is stated that the Authority's position "finds no legal support and is contrary to the criterion resulting from application under the CIMI and, by reference, under Stamp Tax", which is why "the adoption of the criterion defended by the Authority violates the principles of legality and fiscal equality, as well as the prevalence of material truth over the legal-formal reality".

And in the same sense it is stated in the arbitral decision of case 30/2014-T to find in the doctrine of the Authority a "non-conformity with the literal element of the final part of the incidence rule (item 28 of the TGIS) which states that the tax applies to 'the property value used for purposes of the IMI' and therefore should not apply to the sum of property values of properties, parts of properties or units, having no legal support the operation of adding property values of the units or parts of property susceptible to independent use, of residential allocation, separated from the VPT of the others with different purposes, in order to reach the eligible taxation threshold of 1,000,000.00 euros or more".

As also stated in that arbitral decision, what happens with respect to urban properties with residential allocation, in vertical ownership, with units or divisions susceptible to independent use, is that the Authority proceeds, in the stamp tax assessment operations, to the adaptation of the CIMI rules (adding the property values of the same property, without considering those corresponding to parts of the property with non-residential purposes, thus creating a new and hybrid VPT). Indeed, this "adaptation" corresponds to "adding the VPT of each unit or independent division allocated to residential purposes (excluding the VPT of the units or divisions intended for other purposes), creating a new legal reality, without legal support, which is a global VPT of urban properties in vertical ownership, with residential allocation", which "violates the literal element of the incidence rule".

Thus, "in urban properties with residential allocation, in vertical ownership, with units or divisions susceptible to independent use", the property value subject to tax should be considered "which results exclusively from Article 12(3) of the CIMI. Both for the IMI and for this stamp tax".

Specifically, as concluded in the decision delivered in case 26/2014-T of CAAD, "for purposes of application of item 28 of the TGIS to properties in vertical ownership, the same rules of the CIMI apply as to properties in horizontal property ownership, and in the same sense the VPT for purposes of application of the item is the individual VPT of each independent residential unit, being that in the present case none of the units exceeds the incidence criterion of €1,000,000.00", the same occurring in the case of the present proceedings.

Starting from the same position, the arbitral decision delivered in case 349/2015-T concludes that "as clearly follows from the decisions cited, that the literal interpretation of the new item of the TGIS cannot but be different from that sustained by the Authority, indeed, the opposite, given the clear and indisputable reference made with regard to the new item of the TGIS to the rules of the CIMI, the interpreter of the rule not being able to 'create' a new concept of property so as to obtain a hybrid VPT, not recognized in the property register and without any support in the text of the law."

And it did so by also invoking the criterion of the economic substance of tax facts: "the expression 'each urban property' used in Article 23(7), for reasons of identity, encompasses not only urban properties in horizontal property ownership, but also the units, divisions or parts of urban properties in vertical ownership regime, provided they are allocated to residential purposes, always starting, in any of the cases, from a single tax base for all legal purposes: the property value used for purposes of the IMI (...). The economic reality of holding independent parts, e.g. susceptible to independent use or autonomous leasing, such as the autonomous units in the case of horizontal property ownership, and therefore capable of permitting use or obtaining income in a similar manner and thus externalizing, for this reason, equal contributive capacity (as it would be externalized by the sum of the VPT of several autonomous units of the same property in horizontal property ownership or of several properties which together would exceed the value of one million euros, without this having been considered by the legislator as an externalization of contributive capacity relevant for purposes of stamp tax)."

Furthermore, as stated in the Judgment delivered in case 26/2014-T of CAAD, no criticism of the legislator regarding vertical property is evident. Indeed, "it would be said, not unreasonably, that the legislator, for purposes of taxation under the IMI, chose to confer autonomy, independence, on each part or on each unit of a single property, provided that they both show independent use, to the point of providing for the individualized registration in the property register of each of those independent parts and imposing on taxation under the IMI a collection that is also autonomous. Despite the legal existence of a single property, it is the legislator himself who not only recommends but imposes the autonomous consideration of each of the independent parts, for purposes of taxation of assets".

Indeed, as decided in cases 26/2014-T and 272/2014-T and 349/2015-T, "the legislator is indifferent to one or another form of structuring the ownership of urban properties in the CIMI, it would not be understood why he would now wish to favor one to the detriment of the other, namely by considering one form of structuring more advanced than the other". "The current legal regime does not impose the obligation to constitute horizontal property ownership", which is why "the discrimination carried out by the Authority translates to arbitrary and illegal discrimination", as "the Authority cannot distinguish where the legislator itself chose not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of fiscal legality provided for in Article 103(2) of the Portuguese Constitution, and furthermore the principles of fiscal justice, equality and proportionality."

And the fact is that nothing induces the interpreter to conclude that the specific legislator of the new item of the TGIS, contrary to the legislator of the IMI, which moreover remains unchanged, intended to discriminate vertical property against horizontal property. As is rightly recalled in the Judgment delivered in the aforementioned case 26/2014-T of CAAD, also referred to in the aforementioned decision of case 349/2015-T, "when the bill was presented and discussed in Parliament, the Secretary of State for Tax Affairs explicitly stated: 'The Government proposes the creation of a special tax on high-value urban residential properties. It is the first time in Portugal that a special tax is created on high-value properties intended for residential use. This tax 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' (cf. Parliamentary Journal First Series No. 9/XII-2, of 11 October, page 32). Now, as is emphasized in that Judgment, "the Secretary of State for Tax Affairs presents this bill by referring without hesitation to the expression 'houses'... with a value equal to or greater than 1 million euros", so that "it results with meridian clarity that item 28.1 of the TGIS cannot be interpreted to mean that it covers each one of the units, divisions or parts susceptible to independent use when only from the sum thereof results a VPT exceeding that provided for in the same item".

Being, therefore, clear, as stated in the aforementioned decision 272/2014-T, that for the legislator only that value of one million euros, provided that it is allocated "to a house (house, autonomous unit or unit with independent use) translates a contributive capacity above the average and, as such, capable of determining a special contribution to ensure fair distribution of the tax burden".

And if this is so, we must then pay attention to the concept of "house" as a physical reality that enables a residential purpose, a unit susceptible to independent use, including its leasing, for it is in that economic reality that we will find the externalization of contributive capacity associated with "luxury houses" that the legislator considered relevant. Moreover, if it were not so, the legislator would proceed to discrimination that would not be justified, for as has been seen there is no criticism of vertical property when compared to horizontal property in the system. Moreover, this distinction would clash with a necessary equity between identical externalizations of the same contributive capacity.

Now, the contributive capacities externalized by the ownership of a property composed of a set of autonomous units in horizontal property ownership or by a set of divisions of independent use in vertical ownership regime cannot but be considered identical, if not even, possibly, smaller in the case of the latter hypothesis. That is, a property does not surely have a greater market value for being organized as vertical property ownership. It is worth the same (permitting equal benefit from its use or equal income via its leasing, as mentioned above), or it will even have a smaller value, since the alternatives for transferability will possibly be smaller. And we know that the VPT is intended to be an approximation, precisely, to the market value of properties and will therefore be the measure and the limit of the contributive capacity relevant to the new item of the TGIS. (cf. the decision we have cited, delivered in case 349/2015-T).

Thus, the interpretation advocated by the Authority, finding no hermeneutic justification, as has been seen up to now, would furthermore lead to a manifest inequality between owners of properties in horizontal and vertical ownership (and it has also been seen that there is no evidence of any intention to penalize the latter, even if it were admitted that such were constitutionally permissible).

In the same sense, as is well emphasized in the decision of case 272/2014-T of CAAD, the "existence of a property in vertical or horizontal ownership cannot be, by itself, an indicator of contributive capacity. On the contrary, the law makes clear that both should receive the same fiscal treatment in obedience to the principles of justice, fiscal equality and material truth".

Concluding, "material truth is what imposes itself as the determining criterion of contributive capacity and not the mere legal-formal reality of the property, seeing that the constitution of horizontal property ownership implies merely a legal alteration of the property not even requiring a new assessment", and this fact "does not seem coherent with the decision of the Authority to tax the residential parts of a property in vertical ownership, depending on the global VPT of the property and not on what is effectively attributed to each part." Thus, "the Authority cannot distinguish where the legislator itself chose not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of fiscal legality... and furthermore the principles of fiscal justice, equality and proportionality" (cf. the decision delivered in case 26/2014-T of CAAD).

Also the Supreme Administrative Court unanimously decided, in case 01344/15, on 24.05.2016 that "– With respect to properties in vertical ownership, for purposes of incidence of the Stamp Tax (Item 28.1 of the TGIS, as amended by Law No. 55-A/2012, of 29 October), subjection is determined by the conjunction of two factors: residential allocation and the VPT registered in the property register equal to or greater than €1,000,000. II – In the case of a property constituted in vertical ownership, the incidence of stamp tax must be determined, not by the VPT resulting from the sum of the VPT of all divisions or units susceptible to independent use (individualized in the property register entry), but by the VPT attributed to each of those units or divisions intended for residential use."

In the case at hand, we found reinforcement of this idea in the very conduct of the tax administration, which did not assess tax with respect to units or divisions susceptible to independent use that do not have residential allocation.

Note that the Respondent in the case sub judice, in a manner inconsistent with the thesis of unity which it sustains here, individualized for purposes of application of item 28.1 of the TGIS, of the seventy-five divisions, only the twenty-six with residential allocation.

The fact that it summed, for purposes of finding a value greater than €1,000,000.00, the VPT attributed to each of those twenty-six units, applying the tax rate to each of the VPTs of the divisions or units with residential allocation susceptible to independent use and issuing, for each of them, separate collection notices is, in our view, perfectly arbitrary and not only has no support in the wording or the reason of the incidence rule but is not even defensible from a logical standpoint.

In conclusion, as set out above, the tax acts in dispute suffer from the defect of violation of law, due to error in the legal and factual assumptions, for no part of the property has a VPT of a value equal to or greater than the threshold resulting from the applied rule, which makes those tax acts voidable.

5. DECISION

In these terms and with the reasoning above, it is decided:

To find the Claimant's request totally well-founded and, accordingly, to annul the assessment acts in dispute, on the grounds of violation of law.

To condemn the Respondent to refund the Claimant the amounts paid by it by virtue of the annulled assessment acts, plus indemnity interest calculated in accordance with Article 43 of the General Tax Law from the dates of the payments of such amounts until effective and complete refund.

* * *

The value of the case is fixed at €31,578.20 (thirty-one thousand, five hundred and seventy-eight euros and twenty cents), in accordance with the provisions of Articles 3(2) of the Rules of Costs in Tax Arbitration Proceedings (RCPAT), 97-A(1)(a) of the Code of Tax Procedure (CPPT) and 306 of the Code of Civil Procedure (CPC).

The amount of costs is fixed at €1,836.00 (one thousand, eight hundred and thirty-six euros) pursuant to Article 22(4) of the RJAT and Table I attached to the RCPAT, to be borne by the Respondent, in accordance with the provisions of Articles 12(2) of the RJAT and 4(4) of the RCPAT and 527 of the CPC.

Let it be notified.

Lisbon, 8 November 2016

The Arbitrator,

(Eva Dias Costa)

Text prepared by computer, in accordance with Article 131(5) of the Code of Civil Procedure, applicable by reference to Article 29(1)(e) of the RJAT.

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the TGIS apply to buildings in vertical property with independently usable divisions?
Verba 28.1 of the TGIS applies to urban properties with residential allocation and VPT equal to or exceeding €1 million. In vertical property cases, the central interpretive question is whether each independently usable division constitutes a separate 'property' or whether the entire building is treated as a single taxable unit. The Tax Authority's position is that vertical property, despite having divisions susceptible to independent use with separate matrix registrations, constitutes one indivisible property for stamp tax purposes. Therefore, Verba 28.1 applies when the aggregate VPT of residential units exceeds €1 million, even if individual units fall below this threshold. However, taxpayers argue that divisions with separate property register entries and individual VPT assessments should be treated as distinct properties, meaning the threshold applies to each unit individually, not collectively.
How is the VPT threshold calculated for stamp tax when a building has separate matrix registrations for each unit?
When a building has separate matrix registrations (inscrições matriciais) for each unit, two interpretive approaches exist for calculating the VPT threshold under Verba 28.1. The Tax Authority aggregates all individual VPT values of residential units within the vertical property to determine if the €1 million threshold is met, treating the building as a single taxable unit despite separate registrations. Each residential unit's VPT is determined under the Municipal Property Tax Code (CIMI) and registered separately, but for stamp tax purposes, the sum total determines tax incidence. The taxpayer's alternative interpretation treats each separately registered unit as an independent property, applying the €1 million threshold to each unit individually. Under this view, separate matrix entries with individual VPT assessments create distinct taxable units analogous to horizontal property autonomous fractions, preventing aggregation of values across units.
Can the tax authority aggregate individual VPT values of independent units to meet the minimum stamp tax incidence threshold?
The Tax Authority's position is that it can aggregate individual VPT values of independent units in vertical property to meet the minimum €1 million stamp tax threshold under Verba 28.1. This aggregation approach treats vertical property as a unified whole, where the total VPT of all residential units determines tax incidence, regardless of separate matrix registrations. The Authority argues that vertical ownership represents single ownership of an undivided property, distinguishing it from horizontal property where autonomous units have separate legal personality. However, this aggregation methodology is contested by taxpayers who argue that units with separate property register entries, individual VPT assessments, and independent use capability should be treated as distinct properties. The legal debate centers on whether separate matrix registration creates sufficient legal autonomy to prevent aggregation, or whether the absence of horizontal property regime allows the Tax Authority to consolidate VPT values across all residential units within the same building.
What is the difference between horizontal and vertical property for purposes of stamp tax under Verba 28.1?
The fundamental difference between horizontal and vertical property for stamp tax purposes under Verba 28.1 lies in legal autonomy and property structure. Horizontal property (propriedade horizontal) involves condominiums where each autonomous fraction has separate legal personality, independent ownership, distinct matrix registration, and individual VPT assessment. Each autonomous unit is definitively treated as a separate property for all tax purposes, including stamp tax, with the €1 million threshold applying to each unit independently. Vertical property (propriedade vertical or total ownership) involves a single property with multiple divisions or floors susceptible to independent use but not legally constituted as autonomous units. While these divisions may have separate matrix entries and individual VPT assessments, they lack the legal autonomy of horizontal property fractions. The Tax Authority argues this distinction permits aggregating VPT values across residential units in vertical property, treating the building as one taxable unit, whereas horizontal property units cannot be aggregated due to their independent legal status.
Is the taxpayer entitled to a refund and compensatory interest when stamp tax assessments on vertical property are annulled?
When stamp tax assessments on vertical property under Verba 28.1 are annulled, the taxpayer is entitled to a full refund of amounts paid plus compensatory interest (juros indemnizatórios). Article 43 of the General Tax Law (LGT) establishes the right to compensatory interest when taxpayers suffer financial loss due to delayed refunds of amounts paid in excess or unduly. Interest accrues from the date of payment until the refund date, calculated according to the legal interest rate for delays in tax refunds. The annulment of assessment acts invalidates the underlying tax liability, making all payments unduly collected amounts subject to mandatory refund. Taxpayers must request annulment of collection notices (notas de cobrança) already issued and those pending, ensuring complete reversal of the illegal assessments. The arbitral tribunal's annulment decision establishes the legal basis for refund claims, and the Tax Authority must process reimbursements with compensatory interest to restore the taxpayer's financial position to what it would have been absent the illegal assessments.