Process: 358/2014-T

Date: March 6, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration case (Process 358/2014-T) before CAAD concerns the legality of a Stamp Tax assessment on construction land under item 28.1 of the Stamp Tax General Table (GSTD). The claimant, a real estate company, challenged the 2012 Stamp Tax assessment on a property registered as 'land for construction,' arguing that item 28.1 GSTD requires properties with actual 'residential use,' not merely potential future residential use. The company contended the assessment notification lacked proper substantiation required by article 77/6 of the General Tax Law (LGT), constituting a nullity affecting all subsequent proceedings. The central legal issue is whether construction land without existing habitable structures falls within the scope of Stamp Tax on 'urban properties with residential use.' The claimant argued that effective residential use requires actual buildings suitable for habitation, citing the IMI Code's distinction between residential properties and construction land. The company invoked article 67/2 of the Stamp Tax Code for subsidiary application of IMI definitions. The Tax Authority raised a procedural defense of untimeliness, challenging whether the arbitration request was filed within legal deadlines under the RJAT (Decree-Law 10/2011). The claimant was given opportunity to respond to this timeliness exception and also alleged the Tax Authority's response was late. The arbitral tribunal was constituted on July 2, 2014, and proceeded without oral hearings by agreement of the parties. The case involves fundamental questions about the scope of Stamp Tax on construction land and procedural requirements for both tax notifications and arbitration requests.

Full Decision

Case No. 358/2014 – T

ARBITRAL DECISION

A – REPORT

  1. A…, SA, taxpayer …, with registered office at Avenue …, in Lisbon, came to request the establishment of an arbitral tribunal, pursuant to the provisions of articles 2, no. 1, a) and 10, no. 1 and 2 of the Legal Regime of Tax Arbitration, provided for in Decree-Law 10/2011, of 20 January, hereinafter referred to as "LRTA" and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, with a view to the declaration of illegality of the act of assessment of stamp duty, with the Tax and Customs Authority (hereinafter referred to as "TA") being requested.

  2. Having admitted the request for constitution of a single arbitral tribunal, and the claimant having not opted for the designation of an arbitrator, under the terms of the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the LRTA, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council designated the undersigned as arbitrator.

The parties were notified of that designation, having not expressed the will to refuse the designation of the arbitrator, under the combined terms of the provisions of article 11 no. 1 paragraphs a) and b) of the LRTA and articles 6 and 7 of the Code of Ethics, and in accordance with what is provided in paragraph c) of no. 1 of article 11 of the LRTA, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 02-07-2014.

  1. Notified, the TA submitted a response in which it raised the untimeliness of the submission of the request for arbitral pronouncement.

  2. The claimant, after invitation to respond to the exception raised, upheld the timeliness of the submission of the request and, furthermore, invoked the late submission of the response by the respondent.

  3. Having the TA been subsequently notified to attach to the case file the administrative file, it submitted a request in which it alleges that it has already brought to the case file "both the collection document evidencing the assessment, as well as the proof of its notification to the claimant", further alleging that there are no other elements incorporated in the administrative file, in particular, because the act that the claimant challenges is the summons in enforcement proceedings, which is of a judicial nature and not administrative.

  4. It was dispensed with, with the consent of the parties, the holding of the meeting provided for in article 18 of the LRTA, as well as the submission of arguments.

  5. The claimant intends that the illegality and inherent annulment of the act of assessment of Stamp Duty relating to the year 2012 be declared, alleging in summary:

a) It is a company whose corporate purpose is the construction of buildings and purchase and sale of real estate, having been notified of the assessment of stamp duty relating to a property which is registered in the registry as land for construction.

b) The said notification does not present any substantiation, does not present, even briefly, an exposition of the reasons of fact and law that motivated it, or even any mere compliance with the grounds of previous opinions, reports or proposals.

c) No other conclusion can be reached, except that, in accordance with the provisions of article 77/6 LGT, since the effectiveness of the decision depends on the notification, and since it is affected by the defect of lack of substantiation that vices it, the said notification now in question should be declared null, as well as all the subsequent proceedings.

d) For the reason that in particular, it does not indicate, specify or substantiate the scope of application that the TA considers for the present taxation now in question, of land for construction, which does not have the effective and real residential use, a presupposition that is essential and necessary for the requirement of incidence of stamp duty of item 28.1 GSTD.

e) Regardless of whether it is a mass act or not, the truth is that it is an act of tax matter that affects the rights and legitimate interests of taxpayers, so that they only produce effects in relation to these, when validly notified to them – article 36/1 LGT.

f) Even if it is a mass act, the truth is that the same formal and procedural rigor must be imposed and required as is required of any other administrative tax act, because even if it is a mass act, when individualized in the legal sphere of its recipient, it affects its rights and legitimate interests, producing for that purpose, the effects that it entails.

g) We are faced with a defect of violation of law and omission of essential formalities, which affect all the subsequent proceedings cfr. articles 195 and 198 of the CPC ex vi article 2 CTPC.

h) What entails the nullity of the summons carried out and of all subsequent acts in this case, cfr. articles 195 and 198 of the CPC ex vi article 2 CTPC.

i) Item no. 28.1 IS establishes exhaustively the subjection to tax of properties "with residential use".

j) As long as there are no constructions susceptible of use for habitation therein, these are not covered by the tax act in question, because in the face of the non-existence of constructions susceptible of use for habitation, the concept of "residential use" is not fulfilled and thus verified.

k) Since the real property that is the genesis of the tax act is land on which there is no construction susceptible of use for habitation, it is clear that it does not fall within the legal sphere of application of the tax that was applied to it.

l) The question to be assessed, however of relatively accessible analysis, lies in knowing whether within the scope of the incidence of stamp duty to which this item refers, land for construction is, or is not, included.

m) That is, to know whether for the application of the said amendment to the Stamp Duty Code, land for construction – such as that which is in question in this case – can, or cannot, be considered as urban properties with residential use.

n) The rule of incidence of stamp duty on urban properties with "residential use", without any specific concept being established for that purpose, cannot from it be extracted that it contains a future potentiality, inherent to a different property that may possibly be built on the land.

o) Therefore, it is non-existent and irrelevant in the tax legal panorama any judgment of future prognosis, such as that which appears to be the understanding of the administrative tax body.

p) The circumstance that for a given land for construction the authorization for the construction of a property intended for habitation, or for any other purpose, is given, even though it must be considered in its assessment, does not determine any change in the classification of the land itself.

q) It results from the IMI Code a clear distinction between urban properties "residential" and "land for construction", and these cannot be considered, for purposes of the incidence of stamp duty, as "properties with residential use".

r) According to article 67/2 IS, we must resort subsidiarily to what is provided for in the IMI Code, resorting to other modalities of interpretation of the law.

s) One should never confuse the effective and real use for residential purposes with a possible expectation or future potentiality but uncertain, of a property being able to come to have an effective and real residential use.

t) There is no doubt, therefore, when item 28.1 GSTD is placed against article 6/2 IMI Code, which defines the concept of residential properties, which points manifestly, in the sense that an effective and real residential use is necessary.

u) For which reason, the assessment in question in the present case, not falling within the scope of objective incidence application of item 28.1 GSTD, is affected with illegality.

  1. For its part, the respondent came in response to allege, in summary:

a) The document that the claimant presents, and thus identifies is, not the collection note and/or stamp duty assessment note, but rather the postal summons document, referring to case nº ..., sent on 26-01-2014, and whose tax act in coercive collection consists, as can be understood from the said document, in the assessment of Stamp Duty no. 2013 ..., relating to the year 2012, in the amount of € 16,218.60, and whose voluntary payment period ended in November 2013.

b) Bearing in mind that the period for submission of the arbitral request which is provided for in article 10 of the LRTA is 90 days, and that this is computed under the terms of article 279 of the Civil Code (as indeed results from the jurisprudence emanating from the arbitral decision handed down in case 83/2012-T), beginning the same on the day following the end of the period for voluntary payment of the tax, it necessarily had its end before the date of submission to the CAAD of the request for arbitral pronouncement that gave rise to the present case.

c) Consequently, it must necessarily be concluded that the request is manifestly untimely, and consequently the Respondent Entity should be absolved of the request.

d) It is the understanding of the TA that the property on which the impugned assessment falls, has the legal nature of a property with residential use, so that the act of assessment subject to the present request for arbitral pronouncement should be maintained, as it constitutes a correct interpretation of Item 28 of the General Table of Stamp Duties, added by Law 55-A/2012, of 29-10.

e) In the absence of any definition regarding the concepts of urban property, land for construction and residential use, in the context of stamp duty, recourse must be had to the IMI Code, in search of a definition that allows to ascertain the possible subjection to stamp duty, in accordance with what is provided for in article 67 no. 2 of the Stamp Duty Code in the wording given by Law no. 55-A/2012, of 29-10.

f) To matters not regulated in the Code, respecting item no. 28 of the GSTD, the provisions of the IMI Code are applied subsidiarily.

g) The notion of use of the urban property is found in the part relating to the valuation of real estate, which is well understood because the valuation of the real property (purpose) incorporates value to the real property, constituting a determining fact of distinction (coefficient) for purposes of valuation.

h) As it follows from the expression "... value of authorized buildings", contained in article 45 no. 2 of the IMI Code, the legislator chose to determine the application of the methodology of valuation of properties in general, to the valuation of land for construction, being consequently applicable to them the coefficient of use provided for in article 41 of the IMI Code.

i) Contrary to what is advocated by the Claimant, the TA understands that the concept of "properties with residential use", for purposes of what is provided in item 28 of the GSTD, comprises both built properties and land for construction, in particular bearing in mind the literal element of the rule.

j) The legislator does not refer to "properties intended for habitation", having opted for the notion "residential use" – an expression different and broader, whose meaning must be found in the need to integrate other realities beyond those identified in article 6 no. 1 paragraph a) of the IMI Code.

k) One cannot ignore that the building permit for the performance of urban development operations must contain, among other elements, the number of plots and the indication of the area of location, purpose, area of implantation, area of construction, number of floors, number of dwellings of each of the plots, with specification of dwellings intended for housing at controlled costs, when provided for, under the terms of paragraph a) of article 77 of the Urban Development and Construction Legal Regime.

l) Long before the actual construction of the property, it is possible to ascertain and determine the use of the land for construction.

m) It is the understanding of the TA that the provision of item 28 of the GSTD does not constitute a violation of any constitutional mandate.

n) Taxation under stamp duty follows adequacy criteria, applying itself indistinctly to all holders of real estate with residential use of value exceeding € 1,000,000.00, falling on the wealth embodied and manifested in the value of the real estate.

o) The assessment in question constitutes a correct interpretation and application of the law to the facts, not suffering from a defect of violation of law, whether of the Constitution or of the Stamp Duty Code, and consequently, the claim made should be judged as unfounded.

  1. The Arbitral Tribunal was duly constituted and is materially competent.

  • The parties have legal standing and capacity and are legally entitled (articles 4 and 10, no. 2, of the same instrument and article 1 of Ordinance no. 112-A/2011, of 22 March).

  • Given that the claimant raised the untimeliness of the response by the respondent, it is important to assess beforehand whether it is admissible or not (if the claimant's thesis is accepted).

The claimant alleges that the TA was notified of the order issued by the arbitral tribunal to submit a response on 02-07-2014, which it only did on 29-09-2014, from which its untimeliness results, and it should be deemed not written.

Assessing.

It must be said, to begin with, that it is not possible to see where the claimant found the dates it invokes, as there is no coincidence with any of those indicated with those appearing in the case file.

In fact, the claimant states that the respondent was notified of the order to submit a response on 02-07-2014, when this is of 04 July, having the respective notification been sent to the respondent on 08 July!

On the other hand, the claimant states that the respondent submitted a response on 29-09-2014, when this was effectively submitted by email on 26 September.

We have, therefore, as relevant dates, 08-07-2014 (date of sending of the said order) and 26-09-2014 (date of submission of the response).

To the notifications made in the request for arbitral pronouncement in the sphere of the TA, the provisions of no. 1 of article 40 of the CTPC should be applied, by virtue of what is provided for in no. 2, of article 11 of the ACPA.

Given the absence of express provision in the CTPC, electronic notifications made to representatives, within the scope of tax proceedings, the provisions of article 248 of the CPC are applied, in particular when it provides that such notifications are presumed made on the 3rd day following the date of elaboration of the notification or on the 1st business day following that, if it is not.

From the foregoing it results that, appearing from the computer system, that the notification of the order to submit a response was sent to the respondent on 08-07-2014, it is presumed notified on 11-07-2014, with the counting of the period beginning on 12 July.

Having, meanwhile, the period from 16 July to 31 August elapsed corresponding to judicial recess (article 12 of the Court Organization Law and subsequently, article 28 of the Judicial System Organization Law), applicable to the tax arbitral process by virtue of article 17-A of the LRTA, it is concluded that the response could be submitted by the TA until 26-09-2014, date on which it was effectively sent by email to CAAD.

Consequently, the claim of the claimant is without merit.

  • The case does not suffer from nullities.

B. DECISION

  1. FINDINGS OF FACT

1.1 FACTS FOUND PROVED

The following facts are considered proved:

a) The claimant is registered as the owner of the land for construction, inscribed in the urban registry of the parish of …, Lisbon, under article ....

b) The TA assessed stamp duty by application of the provisions of item 28.1 of the GSTD, on the identified property, for the year 2012.

c) The collection note referring to the 3rd installment of the tax results from assessment no. 2013..., whose notification was made electronically, having been delivered to the electronic mailbox ViaCTT, of the claimant, on 30-10-2013.

d) The period for voluntary payment of that installment of the assessed stamp duty ended on 30-11-2013.

e) The claimant submitted the request for arbitral pronouncement, which gave rise to the present case, on 28-04-2014.

1.2 The facts were found proved on the basis of the documents attached to the case.

1.3 FACTS NOT PROVED

There are no facts found as not proved with relevance to the assessment of the request.

1.4 THE LAW

ON THE TIMELINESS OF THE REQUEST

The claimant did not identify distinctly, as it should have, which assessment it challenges in particular.

Only saying that it was notified of the assessment of stamp duty relating to property which is registered in the registry as land for construction.

Let it be said, however, from now on, that the claimant is in error.

What is the subject of assessment in the request for arbitral pronouncement, similarly to what occurs in the process of judicial challenge, are, broadly speaking, the acts of assessment of taxes (article 2 of the LRTA and 97 of the CTPC).

And we say this roughly, by comparison with the means of reaction to the fiscal execution process, to which it is only possible to react through opposition to execution (a matter that is not, of course, within the competence of arbitral tribunals).

The claimant bases its request on the summons it received in the fiscal enforcement proceeding no. ..., which was instituted with a view to the coercive collection of the tax, whose assessment it now seeks to have annulled, because it was not paid.

As the claimant will easily verify from the mere analysis of the documents in question, in the collection note that evidences assessment 2013... it is said "you may lodge a complaint or challenge the assessment in the terms and periods established in articles 70 and 102", whereas in the summons on which it bases itself, it says to "within 30 days after the present summons, you must proceed to pay the debt to be executed and interest ... or, in the same period, lodge opposition".

Different acts and different moments in the life of the tax are at issue (in the first notification we are still in the so-called phase of assessment of the tax, whereas in the second, we are already in that of collection).

Now, the request for constitution of an arbitral tribunal should be submitted within a period of 90 days counted from the facts provided for in no. 1 and 2 of article 102 of the CTPC [article 10, no. 1 a) of the LRTA].

As it matters to this case, we have that the arbitral request, with a view to the declaration of illegality of the act of assessment of stamp duty, should have been submitted within 90 days from the end of the period for voluntary payment.

A period which, as expressly stated in the said collection notes, ended on 30 November 2013 (the last day of the month).

What, moreover, results from article 120, no. 1, c) of the IMI Code, given the provisions of the final part of no. 5 of article 44 of the Stamp Duty Code.

On this matter, the claimant errs again.

It argues that, having been granted in the summons, a period of 30 days to proceed to the payment of the debt to be executed and interest, it "was granted the period for voluntary assessment of the tax that had been notified to it, with deadline of 28-02-2014".

This is not the meaning of "voluntary payment" in tax law. The current tax system knows only two modalities: voluntary payment and coercive collection.

According to the provisions of article 84 of the CTPC, voluntary payment is that which is carried out within the period established in the tax laws [in this case, the aforementioned article 120, no. 1, c) of the IMI Code]; after which coercive collection begins with extraction of debt certificate and institution of the respective enforcement process and subsequent summons, as was done to the claimant (article 88, n. 1 and 5 and article 188, no. 3 of the CTPC).

As already mentioned, the period for voluntary payment of the tax, whose assessment would be the subject of the present request for arbitral pronouncement, ended on 30-11-2013.

The claimant submitted the request for arbitral pronouncement on 28-04-2014.

The request for arbitral pronouncement in relation to the assessment of the stamp duty in question should, therefore, have been submitted by 28-02-2014.

Now, having the request for arbitral pronouncement been submitted on 28-04-2014, it is concluded that it is manifestly untimely, and the right of the claimant to challenge the respective assessment has lapsed.

A lapse that was raised by the respondent and is to be determined ex officio, being excluded from the availability of the parties [which results from the combined application of articles 333, no. 1 of the CC and 89, no. 1, h) of the ACPA ex vi article 2, c) of the CTPC, given what is provided in paragraphs a) and c) of no. 1 of article 29 of the LRTA].

This would not be obstructed by the eventual and alleged lack of substantiation of the notification invoked by the claimant (it being certain that, from what has been set forth, it is not clear to which notification the claimant refers: whether to that of the assessment proper or to that of the summons in the enforcement), since that would not generate nullity, but mere voidability (as has already been understood by the Constitutional Court – Decision 594/2008, of 10-December) susceptible of being invoked in the process of judicial challenge, of contentious appeal or of request for arbitral pronouncement (see, in this sense, Diogo Leite Campos, Benjamin S. Rodrigues and Jorge Lopes Sousa – LGT 4th ed, note 18 to article 77), within the legally foreseen periods.

It follows from the foregoing that the right of action lapses, due to untimeliness of the request for arbitral pronouncement, whereby the same must be judged as unfounded.

  1. DECISION

Given the foregoing, it is decided:

a) to judge the exception of lapse of rights invoked by the respondent as well-founded and, consequently, to judge the request totally unfounded, absolving the respondent of the same and absolving the Tax and Customs Authority;

b) to condemn the claimant to payment of the costs of the proceedings.

VALUE OF THE CASE: In accordance with the provisions of article 306, no. 2 of the Civil Procedure Code, article 97-A, no. 1, a) of the Tax Procedure Code and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at € 16,427.02 (sixteen thousand four hundred and twenty-seven euros and two cents).

COSTS: In accordance with the provisions of article 22, no. 4, of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €1,224.00 (one thousand two hundred and twenty-four euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings.

Notify.

Lisbon, 06-03-2015

The Arbitrator

António Alberto Franco

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) applicable to construction land in Portugal?
Item 28.1 of the Stamp Tax General Table (GSTD) establishes Stamp Tax on urban properties with 'residential use.' The central dispute is whether construction land (terreno para construção) without actual buildings falls within this scope. The claimant argued that construction land lacking habitable structures does not have effective residential use and therefore should not be subject to this tax, distinguishing between actual residential use and future potentiality. The assessment requires property to have real residential use, not merely authorization for future construction of residential buildings.
What are the legal deadlines for filing an arbitration request under the RJAT (DL 10/2011)?
Under the Legal Regime of Tax Arbitration (RJAT) established by Decree-Law 10/2011, taxpayers must file arbitration requests within specific deadlines after notification of the contested tax act. While the exact deadline is not specified in this excerpt, the Tax Authority raised the defense of untimeliness (intempestividade) in its response, indicating the arbitration request may have exceeded the statutory time limit. Articles 2 and 10 of the RJAT govern the procedural requirements and deadlines for submitting arbitration petitions to CAAD.
Can the Tax Authority challenge the timeliness of an arbitration petition at CAAD?
Yes, the Tax Authority can and did challenge the timeliness of arbitration petitions at CAAD. In this case, the Tax Authority raised the exception of untimeliness (intempestividade) in its response, as stated in point 3 of the case. This is a standard procedural defense available to the Tax Authority under the RJAT framework. The arbitral tribunal must examine this preliminary issue before proceeding to the merits of the case, as timeliness is a condition for admissibility of the arbitration request.
How does CAAD assess the admissibility of late-filed arbitration requests in tax disputes?
CAAD follows a procedural approach where the claimant is given opportunity to respond to timeliness exceptions raised by the Tax Authority. In this case, after the Tax Authority raised untimeliness in its response, the claimant was invited to respond to the exception and maintained the timeliness of the submission while also alleging the Tax Authority's response was late. The arbitral tribunal examines whether the arbitration request was filed within the statutory deadline from notification of the contested tax act, considering evidence of notification dates and submission dates.
What are the grounds for annulment of a Stamp Tax assessment on construction land (terreno para construção)?
The claimant alleged multiple grounds for annulment: (1) lack of substantiation of the notification violating article 77/6 of the General Tax Law (LGT), as the notification failed to present reasons of fact and law; (2) violation of law through misapplication of item 28.1 GSTD to property without actual residential use; (3) omission of essential formalities; (4) the construction land falls outside the objective scope of the tax since it lacks buildings suitable for habitation and therefore doesn't have 'residential use' as required; (5) nullity of notification and subsequent proceedings under articles 195 and 198 of the Civil Procedure Code applied via article 2 of the Tax Procedure Code.