Process: 358/2015-T

Date: July 15, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD tax arbitration case (Process 358/2015-T) examines whether Stamp Tax under Item 28.1 of the General Table of Stamp Duty (TGIS) applies to construction land without formal building permits or housing licenses. The claimant company challenged a €23,299.90 Stamp Tax assessment for 2014, arguing that Item 28.1 requires concrete evidence of building authorization, prior communication, or favorable prior information for housing construction, as defined in the IMI Code (Real Estate Transfer Tax Code). The company contended the Tax Authority failed to demonstrate these legal prerequisites existed, and that the land lacked the positive requirements for tax incidence. Additionally, constitutional challenges were raised regarding violations of typicality, legal certainty, legitimate expectation, equality principles, and procedural rights including the right to prior hearing. The Tax Authority defended the assessment by arguing that construction land classification depends on the property's aptitude and destination rather than actual permits, invoking Articles 2 and 6 of the IMI Code. The Respondent emphasized that residential purpose encompasses both built properties and construction land, with purpose determined as a coefficient in property valuation. Critically, the Tax Authority noted the land was located in a consolidated residential urban zone according to the Municipal Master Plan (PDM), supporting its residential classification. The case raises fundamental questions about the burden of proof in Stamp Tax assessments on construction land, the interpretation of 'terreno para construção' under Portuguese tax law, and whether formal building permits are mandatory prerequisites for tax incidence or merely evidential factors. The proceedings demonstrate CAAD's jurisdiction to arbitrate Stamp Tax disputes concerning construction land classification and valuation, highlighting the tension between formal legal requirements and functional property characterization in Portuguese tax law.

Full Decision

ARBITRAL DECISION

The arbitrator Francisco Carvalho Furtado (arbitrator in a Single Arbitration Panel), designated by the Deontological Board of CAAD, decides as follows:

I. REPORT

  1. The Claimant A…, S.A., legal entity no. …, with registered office at Rua … no. …, …-… Lisbon, notified of the assessment act for Stamp Duty relating to the year 2014 and made under item 28.1 of the General Table of Stamp Duty (TGIS), in the total amount of €23,299.90, hereby presents, pursuant to paragraph a), no. 1 of Article 2 and paragraph a) of no. 1 of Article 10 of Decree-Law no. 10/2011, of 20 January ("Legal Framework of Tax Arbitration", hereinafter "LFTA") a request for arbitral determination aimed at the annulment of that act.

  2. The Respondent is the Tax and Customs Authority (AT).

  3. The claim that is the subject matter of the request for arbitral determination consists in the annulment of that Stamp Duty assessment act.

3.1. The Claimant petitions for the declaration of illegality and the consequent annulment of the Stamp Duty assessment act, made with reference to the year 2014.

  1. The request for constitution of the Arbitration Panel was accepted by the President of CAAD and automatically notified to AT.

4.1. The Claimant did not appoint an arbitrator, so, pursuant to paragraph a) of no. 2 of Article 6 and paragraph b) of no. 1 of Article 11 of the LFTA, the President of the Deontological Board designated the undersigned as arbitrator of the Single Arbitration Panel, who communicated acceptance of the designation within the deadline.

4.2. On 28 July 2015, the parties were notified of the designation of the arbitrator and raised no objection.

4.2. In accordance with the provision in paragraph c) of no. 1 of Article 11 of the LFTA, the collective Arbitration Panel was constituted on 12 August 2015.

4.3. In these terms, the Arbitration Panel is regularly constituted to hear and decide on the subject matter of the case.

  1. To substantiate the request for arbitral determination, the Claimant alleges, in summary, the following:

a) Item 28 of the TGIS, in the wording in force after 31 December 2013, subjected to Stamp Duty residential properties or land for construction whose building, authorized or intended, is for housing, in accordance with the Real Estate Transfer Tax Code (Código do IMI);

b) The concept of land for construction is defined in the Real Estate Transfer Tax Code, which stipulates the necessity of the existence of a building permit, prior communication, favorable prior information on subdivision or construction operation, for housing purposes;

c) The Respondent does not allege nor demonstrate the aforementioned presuppositions of the scope rules;

d) The land in question does not have any of the aforementioned positive requirements for tax scope;

e) The assessment act violates the constitutional principles of typicality, justice, property rights and freedom of private economic initiative;

f) The tax scope rules provided for in Item 28 of the General Table of Stamp Duty violate the principles of equality before public burdens, fair distribution of income and wealth, and proportionality;

g) The tax scope rules provided for in Item 28 of the General Table of Stamp Duty violate the principles of legitimate expectation and legal certainty;

h) The tax scope rules provided for in Item 28 of the General Table of Stamp Duty violate the principle of parliamentary reservation of law of the National Assembly;

i) The assessment act was not preceded by notification of the Claimant to exercise its right to a hearing on the respective presuppositions, thus violating Articles 267, no. 5, of the Constitution of the Portuguese Republic and Article 60 of the General Tax Law;

j) The assessment act in question is not reasoned, violating Articles 268, no. 3, of the Constitution of the Portuguese Republic and Article 77 of the General Tax Law.

  1. The Tax and Customs Authority (hereinafter identified as the Respondent) presented its response, defending itself by opposition, alleging, in summary, the following:

a) It is the Respondent's understanding that the property in question in these proceedings has the legal nature of land for construction;

b) The Claimant did not contest the criteria that presided over the appraisal of the property, namely its qualification as land for construction;

c) In the absence of any definition of the concepts of urban property, land for construction and residential purpose, in the context of Stamp Duty, one must resort to the provisions in the Real Estate Transfer Tax Code, namely, to the provisions in Articles 2 and 6 of that Code;

d) The notion of purpose of an urban property is anchored in the part relating to the appraisal of properties;

e) The concept of properties with residential purpose comprises both built properties and land for construction;

f) The purpose of the property (aptitude or destination) is a coefficient that contributes to the appraisal of the property, in the determination of the taxable patrimonial value, applicable to land for construction;

g) The legislator opted for the notion of "residential purpose" by invoking a classification that overlaps the categories provided for in no. 1 of Article 6 of the Real Estate Transfer Tax Code;

h) Law no. 83-C/2013, of 31 December 2013, amended the wording of Item 28.1 of the TGIS now expressly including land for construction as an objective element of the scope of the rule;

i) The property is located, according to the applicable PDM, in an area where land use respects central and residential space – consolidated urban layout C;

j) There is no duplication of collection or double taxation since it is not a matter of the demand for tax already previously paid, relating to the same taxable fact and to the same period;

k) The Claimant's point of reference is the tax relating to the civil year 2012, so, since the case concerns tax assessed with reference to the year 2014, the aforementioned defects do not exist;

l) The principle of equality provided for in Articles 13 and 104, no. 3, of the CRP has as a corollary the principle of ability to pay;

m) This principle requires that what is equal be treated as equal and what is essentially different be treated as different, preventing arbitrary and unreasonable discrimination;

n) There is no violation in the case under analysis of the principle of equality in the dimension of prohibition of differentiation in equal situations since we are not facing a solution that violates the prohibition of arbitrariness;

o) Item 28 of the TGIS applies to ownership, usufruct or right of superficies of urban properties with residential purpose, whose taxable patrimonial value recorded in the matrix, in accordance with the Real Estate Transfer Tax Code, is equal to or greater than €1,000,000.00, that is, it applies to the value of the property;

p) The legislator defined a valid economic presupposition, as a manifestation of the ability to pay, from which there do not result unjustified differences in treatment between taxpayers;

q) Equally, there is no violation of the principles of proportionality, legality, legitimate expectation and ability to pay;

r) It is rather – Item 28.1 of the TGIS – a measure of equality intended to reinforce the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment programme;

s) The ability to pay also expresses itself through the ownership of property;

t) Property which represents the economic presupposition that legitimates the taxation of the ownership of urban properties and land with residential purpose, with the criterion of adequacy being respected;

u) The taxation provided for in Item 28.1 of the TGIS is individualized, on each property, and is independent of the consideration or appraisal of the totality of the real estate assets of each taxpayer;

v) The ownership of property with the characteristics defined in the scope rule evidences a special ability to pay;

w) The scope of this taxation only over land for construction with residential purpose, not including properties intended for commerce, services or industry, is justified because these are distinct realities that deserve distinct tax treatment;

x) The inequality verified is not excessive, being proportional to the reasons that justify the differentiated treatment;

y) There is not, therefore, also, a violation of the principle of equality inherent to Article 13 of the CRP;

z) Item 28.1 of the TGIS is a general and abstract rule, applicable indistinctly to all situations in which the presuppositions, of fact and law, are met;

aa) It represents a legitimate, legal and constitutional option of the legislator;

bb) The assessment act was not made in the context of an administrative procedure in which there was instruction, so there is no violation of the principle of participation, nor is there a lack of reasoning, of fact and law;

cc) It concludes by requesting dismissal of the claim.

  1. On 31 July 2015, the Claimant requested the objective modification of the case and consequent expansion of its subject matter and claim;

  2. On 26 January 2016, the Claimant requested the objective modification of the case and consequent expansion of its subject matter and claim;

  3. On 28 April 2016, the meeting referred to in Article 18 of the LFTA was held, with witnesses summoned by the Claimant being heard;

  4. On 17 May 2016, the Claimant presented its arguments;

  5. On 6 June 2016, the Respondent presented its arguments;

II. JURISDICTIONAL MATTERS

  1. The parties have legal personality and capacity, show themselves to be legitimate, and are regularly represented (Articles 4 and no. 2 of Article 10 of the LFTA and Article 1 of Regulation no. 112-A/2011, of 22 March).

  2. The tribunal is competent and is regularly constituted.

  3. The case does not suffer from nullities.

  4. There are no other circumstances that prevent the examination of the merits of the case.

III. QUESTIONS TO BE DECIDED

  1. In these proceedings, the questions to be decided are:

a) To rule on the request for objective modification of the case;

b) To determine whether Item 28.1 of the TGIS, in the wording in force at the date of the facts, applies to land for construction for which there is no building permit or authorization; prior communication, favorable prior information or subdivision or construction operation, for housing;

c) To determine whether Item 28.1 of the TGIS, in the wording in force at the date of the facts, is in accordance with the constitutional principles of equality, ability to pay, and the right to housing;

d) To determine whether the assessment act is illegal by reason of omission of legal formality and violation of the principle of participation;

e) To determine whether the assessment act is reasoned in the terms legally required.

IV. MERITS

IV.1. Factual Matters

  1. Proven facts:

17.1. With relevance to the examination and decision of the questions raised, the following facts are taken as established and proven:

a) The Claimant is the owner of an urban property registered in the urban property matrix, in the parish of …, district of Lisbon and municipality of Lisbon, under the property registration no. … (document 4, attached to the Initial Request);

b) The property in question has a taxable patrimonial value of €2,329,990.00, is registered in the matrix as "land for construction" and has been attributed a location coefficient corresponding to housing (document 4, attached to the Initial Request);

c) The Claimant, with reference to the aforementioned property, was notified of the Stamp Duty assessment act, made with reference to the taxation period corresponding to the civil year 2014 and based on Item 28.1 of the TGIS, resulting in a collection of €23,299.90 (document 1, attached to the Initial Request);

d) The property has no construction or building of any kind (testimony of the witnesses heard);

f) On 4 June 2015, the Claimant filed the request for arbitral determination that gave rise to the present case.

17.2. Substantiation of factual matters

The proven facts were based on documents attached to the request for arbitral determination and the statements made by the Parties in their respective procedural documents, with no controversy about them.

  1. There are no other facts with relevance to the examination of the merits of the case that have not been proven.

IV.2. Legal Matters

On the Merits

  1. First, it is important to address the requests made by the Claimant for the objective modification of the case and consequent expansion of its subject matter and claim. In short, the Claimant argues that the second and third instalments of Stamp Duty assessed with reference to the taxation period corresponding to the civil year 2014 represent a development or a consequence of the original claim. The Claimant, however, is not correct.

Paragraph a) of no. 1 of Article 2 of the LFTA establishes that Arbitration Panels are competent to examine claims for declaration of illegality of assessment acts for taxes, self-assessments, withholding at source and estimated payments.

In turn, as to the binding of AT to the jurisdiction of arbitration panels, Article 4, no. 1 of the LFTA provides that this depends on a regulation by the Government members responsible for the areas of finance and justice. From the aforementioned Regulation, it results that the tax arbitration procedure has as its object, mediate or immediate, the tax assessment act, as an act of determination of the amount of tax to be paid (collection), by application of a rate to the taxable matter. In cases where the tax must be paid in instalments, the assessment is notified to the taxpayer together with the notification to pay each of the instalments, and can only be challenged in its entirety and not instalment by instalment. In this regard, José Casalta Nabais argues that "Assessment in the broad sense, that is, as a set of all operations intended to determine the amount of tax, comprises: 1) Subjective assessment intended to determine or identify the taxpayer or tax debtor in the tax legal relationship, 2) Objective assessment through which the taxable matter or amount subject to taxation is determined and also the rate to be applied, in case of plurality of rates, is determined, 3) Assessment in the strict sense expressed in the determination of the collection through the application of the rate to the taxable matter or amount subject to taxation, and 4) (possible) deductions to the collection." For each taxable fact there will be, in principle, a single assessment, by which the collection to be paid will be determined, as results from no. 7 of Article 23 of the Stamp Duty Code. This, obviously, without prejudice to the fact that the tax is paid in instalments – as occurs in the case of Stamp Duty provided for in Item 28 of the General Table of Stamp Duty. In sum, and from the combination of the legal provisions referred to above, it is possible to conclude that Stamp Duty is assessed annually, and payment in instalments is nothing more than a technique for collecting the tax and not a partial payment thereof. In view of the above, it is concluded from the outset that the object of the present arbitration proceedings was the Stamp Duty assessment act made with reference to the taxation period corresponding to the civil year 2014, resulting in a collection in the amount of €23,299.90. In this way, the requested objective modifications of the case cannot proceed, given that they in no way alter the object and original claim – the annulment of the Stamp Duty assessment act for the year 2014.

  1. Pursuant to Article 124 of the Code of Tax Procedure and Process, the order of examination of defects should be the one which, according to the prudent discretion of the judge, leads to more effective and stable protection of the interests injured.

In this line, the first question to be decided concerns whether the rule contained in Item 28 and 28.1 of the TGIS covers properties classified as land for construction, regarding which there is no building permit or authorization, prior communication, favorable prior information, or subdivision or construction operation.

Let us see.

  1. The Claimant argues that the assessment acts in question are illegal insofar as the taxable fact is not provided for in Item 28.1 of the TGIS. In view of the grounds contained in the Initial Request presented by the Claimant, it is important, from the outset, to analyze the regime that arises from ordinary law.

  2. From Article 1, no. 1, of the Stamp Duty Code, in the wording introduced by Law no. 55-A/2012, of 29 October, it follows that "stamp duty applies to all acts, contracts, documents, deeds, papers and other facts or legal situations provided for in the General Table, including gratuitous transfers of assets". Item 28 was added to the TGIS by the same Law simultaneously with an amendment to Article 1, no. 1, of the Stamp Duty Code.

The indicated amendment to Article 1, no. 1, of the Stamp Duty Code consisted of the inclusion of a generic reference to "legal situations" as a potential object of the scope of this tax, with Items 28, 28.1 and 28.2 of the TGIS defining the first legal situations on which the tax began to apply.

The initial wording of these items of the TGIS was as follows:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value recorded in the matrix, in accordance with the Real Estate Transfer Tax Code (CIMI), is equal to or greater than €1,000,000 – on the taxable patrimonial value used for the purposes of Real Estate Transfer Tax:

28.1 – For a property with residential purpose – 1%;

28.2 – For a property, when the tax debtors who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, recorded in the list approved by regulation of the Finance Minister – 7.5%."

The underlying rationale for the legal innovation implemented with the introduction of Item 28 in the TGIS is contained in the Statement of Reasons of Bill no. 96/XII/2nd, in which the following is stated:

"The pursuit of public interest, in view of the country's economic and financial situation, requires a consolidation effort that will require, in addition to permanent activism in reducing public spending, the introduction of tax measures inserted in a broader set of measures to combat budget deficit.

These measures are fundamental to reinforcing the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment programme. The Government is strongly committed to ensuring that the distribution of these sacrifices is made by all and not just by those who live on the income from their work. In accordance with this objective, this act extends the taxation of income from capital and property, covering equitably a broad set of sectors of Portuguese society.

In these terms, the taxation of capital income and securities gains will be increased, with the respective rates rising from 25% to 26.5% in the context of Personal Income Tax. The rates of taxation applicable to income obtained from, or transferred to, tax havens are also increased to 35%.

On the other hand, a rate is created in the context of Stamp Duty applying to urban properties with residential purpose whose taxable patrimonial value is equal to or greater than one million euros.

Finally, this act introduces a measure to reinforce the fight against fraud and tax evasion, through the reinforcement of the regime applicable to manifestations of wealth of tax debtors (Personal Income Tax) and transfers to and from tax havens. First, the operationalization of Personal Income Tax assessment based on manifestations of wealth is reinforced, reducing the differential from 50% to 30% between manifestations of wealth and income declared in the context of Personal Income Tax. On the other hand, transfers to and from tax havens made between accounts of the tax debtor, not declared in accordance with the law, are now considered a manifestation of wealth and, accordingly, subject to taxation in the context of Personal Income Tax by indirect methods".

It is important to note that legal doctrine and case law were unanimous in declaring that the initial wording of Item 28.1 of the TGIS did not apply to realities that could be classified as land for construction.

In accordance with the new wording of Item 28.1 of the TGIS (whose wording results from Article 194 of Law no. 83-C/2013, of 31 December) the following: "For a residential property or for land for construction whose building, authorized or intended, is for housing, in accordance with the provisions of the Real Estate Transfer Tax Code".

The essential question that arises in this context is whether, in the absence of a foreseeable expectation of "building for housing" with respect to the land for construction under analysis, it can be accepted that Stamp Duty is applied, as done by the Respondent.

To answer the aforementioned question, it appears particularly useful to consider the following: "as regards land for construction, whether or not located within an urban agglomeration, as defined in Article 3/4 of this instrument [CIMI], must, as such, be considered land in relation to which there has been granted: - a permit for subdivision operation; - a building permit; - authorization for subdivision operation; - authorization for construction; - admitted favorable prior communication of subdivision or construction operation; issued favorable prior information of subdivision or construction operation, as well as; - those which have been declared as such in the acquisition deed, bearing in mind that, also for this purpose, only the acquisition deed with the form prescribed by civil law should be relevant, that is, the public deed or the authenticated private document referred to in Article 875 CC." [see ANTÓNIO SANTOS ROCHA / EDUARDO JOSÉ MARTINS BRÁS – Taxation of Assets. Real Estate Transfer Tax-Real Property Transfer Tax and Stamp Duty (Annotated and Commented). Coimbra, Almedina, 2015, p. 44].

In view of the requirements cited above – with which we agree here, as they represent and clarify the legal and administrative requirements necessary for the consideration of any land for construction as land covered by Item 28.1 of the TGIS – it is verified that, in the case now under analysis, the land in question does not meet any of them.

As results from the factual matters, no documentary support was attached to these proceedings attesting that the act in question was made with reference to a property that has a building permit or authorization, prior communication, favorable prior information on subdivision or construction operation. On the contrary, the testimony of the witnesses heard was clear to the effect that they do not exist.

Having not made this demonstration – which was the responsibility of the Respondent, in accordance with Article 74 of the General Tax Law – it cannot be considered that the land in question has building, authorized or intended, for housing, in accordance with the Real Estate Transfer Tax Code. This is, moreover, the case law that results from the Decision handed down in Arbitration Case no. 578/2015-T, to which we adhere.

Equally, even if the properties here in question are recorded in the matrix as "land for construction", this does not legitimize the automatic application of Item 28.1 of the TGIS, since, as seems obvious, the mere matrix recording does not, by itself, constitute proof that a property has building for housing intended.

In the same sense, legal doctrine has also already expressed itself. As ANTÓNIO SANTOS ROCHA and EDUARDO JOSÉ MARTINS BRÁS also refer (op. cit., p. 46), "properties located in urbanized areas or included in areas covered by already approved urbanization plans [...] should only be considered as land for construction when, through action undertaken by the respective owner, there is verified, alternatively, the issue of any of those documents ["granting of permits, building or subdivision authorizations, favorable communications or prior information for the same purpose"]".

In the same sense, see also JOSÉ MANUEL FERNANDES PIRES, (Lessons on Taxes on Assets and Stamp Duty. Coimbra, Almedina, 3rd ed., 2015, pages 110 to 112): "The right to build is not inherent in the right of ownership, but only arises de novo in the patrimony of the owner when an administrative act of the competent public entity recognizes and authorizes the owner to build or subdivide. [...] only when this right is established in the legal sphere of the owner does the Real Estate Transfer Tax Code establish that we are faced with land for construction. As this constitutive act is made by the public entity at the request of the owner, then the classification of a property as land for construction always depends on the will of the owner."

In sum, it is clear, in the case being dealt with, that the scope of the tax to land for construction cannot be materialized by the mere recording of the same as such in the matrix, but rather, and decisively, by the verification of the actual potential for building on the aforementioned land (which must be ascertained in the case and revealed through the existence of the documents described above). In other words, the scope of the tax, for the purposes of Item 28.1, is only materialized with the verification of "actual purpose", to use the felicitous expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507).

Without this demonstration of actual building potential – which, as stated, did not occur in the case under analysis – the presuppositions underlying the new wording of Item 28.1 of the TGIS are not met, which is why it is concluded that the assessment in question suffers from the error invoked by the Claimant, being illegal by violation of Item 28 of the TGIS and Article 1 of the Stamp Duty Code and, consequently, to be annulled.

Showing the Claimant's understanding to be correct as to the question referred, it is foreclosed, in view of the provisions in Article 124 of the Code of Tax Procedure and Process (CTPP), by virtue of Article 29, no. 1, paragraph c) of the LFTA, the examination of the other questions raised by the Claimant (there being, in view of this decision, no prejudice to the more stable or effective protection of its interests).

V. DECISION

Therefore, this Arbitration Panel decides to uphold the claim made by the Claimant, declaring the illegality and annulling the Stamp Duty assessment act for the year 2014 contested, in the amount of €23,299.90.

VI. VALUE OF THE CASE

In accordance with the provisions in no. 2 of Article 306 and in no. 2 of Article 297, both of the Code of Civil Procedure, of paragraph a) of no. 1 of Article 97-A of the Code of Tax Procedure and Process and of no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €23,299.90 (twenty-three thousand, two hundred and ninety-nine euros and ninety cents).

VII. COSTS

In accordance with the provisions in no. 4 of Article 22, in no. 2 of Article 12, both of the LFTA, in Article 2, in no. 1 of Article 3 and in nos. 1 to 4 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, as well as in Table I annexed to this instrument, the overall value of costs is fixed at €1,224.00 (one thousand, two hundred and twenty-four euros), to be borne by the Respondent.

Lisbon, 15 July 2016.

The Arbitrator,

Francisco de Carvalho Furtado

Text prepared by computer, in accordance with the provisions in no. 5 of Article 131 of the Code of Civil Procedure, applicable by reference to paragraph e) of no. 1 of Article 29 of the LFTA.

The wording of this decision is governed by the spelling preceding the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS applicable to construction land without a building permit or housing license?
Based on this arbitration proceeding, the applicability of Stamp Tax under Item 28.1 TGIS to construction land without building permits depends on interpreting whether formal authorization is a mandatory prerequisite or merely evidential. The claimant argued that Item 28.1 requires demonstrated building permits, prior communications, or favorable prior information for housing purposes as defined in the IMI Code. However, the Tax Authority contended that construction land classification relies on the property's aptitude and destination rather than actual permits, using the land's location in a residential zone per the Municipal Master Plan as supporting evidence. The dispute centers on whether 'terreno para construção' requires formal administrative acts or can be established through urban planning designations and property characteristics.
What are the legal requirements for Stamp Tax incidence on construction land (terreno para construção) under Portuguese tax law?
The legal requirements for Stamp Tax incidence on construction land under Portuguese law involve multiple elements. According to Item 28.1 TGIS (as amended by Law 83-C/2013), Stamp Tax applies to urban properties or construction land with residential purpose whose taxable patrimonial value equals or exceeds €1,000,000. The Tax Authority argues that the IMI Code (Articles 2 and 6) provides the applicable definitions, where 'residential purpose' encompasses both built properties and construction land, determined by aptitude or destination rather than completed construction. The property's purpose functions as a coefficient in valuation. However, taxpayers argue that construction land requires concrete evidence of building permits, prior communications, or favorable prior information for housing construction, as these administrative acts formally establish the land's constructive potential under IMI Code provisions.
Can a taxpayer challenge a Stamp Tax assessment on construction land through CAAD tax arbitration proceedings?
Yes, taxpayers can challenge Stamp Tax assessments on construction land through CAAD (Centro de Arbitragem Administrativa) tax arbitration proceedings. This case demonstrates that CAAD has jurisdiction under Article 2(1)(a) and Article 10(1)(a) of Decree-Law 10/2011 (Legal Framework of Tax Arbitration) to hear disputes concerning Stamp Tax assessments under Item 28.1 TGIS. Taxpayers can request arbitral determination seeking annulment of assessment acts, raising substantive challenges regarding property classification, tax incidence requirements, valuation methodology, and constitutional violations. The arbitration panel, constituted according to RJAT procedures, has competence to review both the legal interpretation of construction land definitions and the factual determination of whether specific properties meet the statutory requirements for Stamp Tax liability under Item 28.1.
How does the IMI Code define 'terreno para construção' for the purposes of Stamp Tax under Verba 28.1 of the TGIS?
The IMI Code defines 'terreno para construção' (construction land) through Articles 2 and 6, which are incorporated by reference into Stamp Tax law. According to the Tax Authority's interpretation, construction land includes urban land with building capacity, where the property's residential purpose is determined by its aptitude and destination rather than actual construction. This purpose serves as a valuation coefficient for determining taxable patrimonial value. The classification considers urban planning designations such as Municipal Master Plan (PDM) zoning for residential use. However, taxpayers argue that the IMI Code definition requires concrete administrative acts—building permits, prior communications, or favorable prior information for housing construction—to formally establish land as 'terreno para construção.' This interpretative dispute centers on whether potential use (based on zoning) or authorized use (based on permits) defines construction land for tax purposes.
Does the burden of proof for Stamp Tax incidence on construction land fall on the Tax Authority (Autoridade Tributária) under the principle of tax legality?
The burden of proof issue is central to this dispute. The claimant argues that under the principle of tax legality and typicality, the Tax Authority bears the burden of proving all presuppositions for tax incidence, specifically that the land meets the legal definition of 'terreno para construção' with the required building permits, prior communications, or favorable prior information for housing purposes. The claimant contends the Tax Authority 'does not allege nor demonstrate' these prerequisites. Conversely, the Tax Authority argues that the claimant failed to contest the property's qualification as construction land or the valuation criteria. Under Portuguese tax procedural law, while the Tax Authority must establish the legal basis for assessment, taxpayers challenging administrative acts typically bear the burden of proving illegality. This case highlights tension between the constitutional requirement that tax incidence be clearly established and procedural rules governing administrative act contestation.