Process: 358/2016-T

Date: January 16, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 358/2016-T addresses fundamental jurisdictional and substantive issues concerning stamp tax under Verba 28.1 of the TGIS on high-value properties. The claimant company challenged 2015 stamp tax assessments totaling €15,582.50 on a building comprising seven floors capable of independent use, each with individual VMV ranging from €37,010 to €257,670. The core dispute involves whether stamp tax should be calculated based on each floor's individual VMV or the property's aggregate value. The Tax Authority raised preliminary exceptions challenging CAAD's competence, arguing the claimant attacked payment instalments contained in collection notices rather than the underlying liquidation acts, placing the matter outside Article 2 RJAT jurisdiction. Additionally, the Authority invoked the unchallengeable nature of collection documents per se. Substantively, the case explores whether vertical ownership properties with independently usable floors merit the same tax treatment as horizontal property ownership (condominium) regimes under Verba 28.1 TGIS. The claimant contended the legislator drew no distinction between ownership types and that material use should govern tax incidence. Conversely, the Tax Authority argued that while CIMI Article 12(3) mandates individual valuation of independently usable parts for assessment purposes, Verba 28.1 TGIS necessarily applies to the total property VMV, as no legislative gap exists requiring analogical extension. The tribunal deferred ruling on preliminary exceptions to the final decision, emphasizing the critical procedural distinction between challengeable tax liquidation acts and unchallengeable collection notices in Portuguese tax arbitration.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1. A…, S.A., taxpayer no.…, with registered office at Avenida…, no.…, …, Lisbon, hereinafter referred to as the Claimant, filed on 30/06/2016 a request for arbitral pronouncement, in which it requests the annulment of the "Stamp Tax assessments" for the year 2015.

1.2. The Honourable President of the Ethics Council of the Administrative Arbitration Center (CAAD) designated on 31/08/2016 as arbitrator, Francisco Nicolau Domingos.

1.3. On 16/09/2016 the arbitral tribunal was constituted.

1.4. In compliance with the provision of art. 17, no. 1 of Decree-Law no. 10/2011, of 20 January (RJAT), the Respondent was notified on 16/09/2016 to, if so desired, present a reply and request the production of additional evidence.

1.5. On 19/10/2016 the Respondent presented its reply, in which it invoked, in particular, the exception of incompetence of the arbitral tribunal, the unchallengeable nature of the acts, and further defended itself by challenge, sustaining, subsidiarily, the legality of the acts performed.

1.6. The tribunal, faced with the dilatory exceptions invoked, on 22/11/2016 invited the Claimant to make submissions with respect to the same.

1.7. The Claimant on 13/12/2016 came before the proceedings to argue that: "In April 2015 the Claimant was notified to proceed with the payment of the 1st instalment of the stamp tax for 2015, which cannot but constitute a tax act" and "Upon being notified to pay each one of the instalments (1st, 2nd and 3rd instalments), the Claimant is notified of the assessment of isolated tax acts with autonomous challenge periods".

1.8. The tribunal on 20/12/2016 understood that: the examination of the witnesses listed would result in a useless act, the dilatory exceptions could be addressed with the arbitral decision and dispensed with the holding of the meeting to which art. 18, no. 1 of RJAT refers, on the grounds of the principle of autonomy of the arbitral tribunal in the conduct of proceedings and in the determination of the rules to be observed with a view to obtaining, within a reasonable timeframe, a pronouncement on the merits of the claims formulated, cfr. art. 16, al. c) of RJAT, as well as determined that the parties, if so desired, present written final submissions and scheduled 16/01/2017 for the pronouncement of the final decision.

1.9. The parties did not present written final submissions.

2. POSITION OF THE PARTIES

The Claimant contends, in summary, that the assessments of "…€ 825.88 relating to the first floor (no. 2016…); € 825.88 relating to the second floor (no. 2016…); € 850.64 relating to the third floor (no. 2016…); € 850.64 relating to the fourth floor (no. 2016…); € 858.90 relating to the fifth floor (no. 2016…); € 858.90 relating to the sixth floor (no. 2016…) and € 185.05 relating to the seventh floor (no. 2016…)" are unlawful, inasmuch as the determining factor for the tax incidence is the normal use of the property and as the legislator has made no distinction between properties in vertical ownership and properties subject to the horizontal property ownership regime, in the present case, only the material truth underlying the property and its respective use can be revealed. That is, the "…subjection to stamp tax is determined not by the VMV of the property, but by the VMV attributed to each one of the floors or divisions".

For which reason, it concludes by requesting the annulment of the "…tax acts".

For its part, the Respondent contends that the Claimant does not challenge tax acts, but rather the payment of an instalment (1st) thereof, contained in documents which are the collection notices, a matter not provided for in the norm that delimits the competence of tax arbitral tribunals – art. 2 of RJAT – being the tribunal incompetent for the appreciation of the claim.

It further maintains that the Claimant challenges collection documents that are unchallengeable per se and, as such, the dilatory exception should equally be declared.

Subsidiarily it contends for the total rejection of the claim, given that the Claimant intends that there exists analogy between the vertical ownership regime and the horizontal property ownership regime, when no such gap exists. Therefore, it argues that it cannot be accepted that, for the purposes of item 28.1 of the General Schedule of Stamp Tax (TGIS), the parts susceptible of independent use have the same tax regime as the autonomous fractions of the horizontal property ownership regime. In truth, in its view, with the property submitted to the regime of complete ownership, yet being physically constituted by parts susceptible of independent use, the tax law attributed relevance to such materiality, evaluating these parts individually, pursuant to art. 12, no. 3 of CIMI.

In sum, in its judgment, the determining factor for the application of item 28.1 of the TGIS is the total VMV of the property and not that of each one of the units (floors or divisions).

Thus the tribunal must determine:

a) Whether the dilatory exceptions invoked should succeed;

b) Whether the assessments are unlawful for suffering from error regarding the factual and legal presuppositions.

3. FACTUAL MATTER

3.1. Facts considered proven

3.1.1. The Claimant on 31 December 2015 was the holder of the property right to the building corresponding to property registration number…, urban, parish of…, municipality of Lisbon, registered, in particular, with seven floors susceptible of independent use, as follows:

a) 1st floor with a VMV of € 247,760.00;

b) 2nd floor with a VMV of € 247,760.00;

c) 3rd floor with a VMV of € 255,190.00;

d) 4th floor with a VMV of € 255,190.00;

e) 5th floor with a VMV of € 257,670.00;

f) 6th floor with a VMV of € 257,670.00;

g) 7th floor with a VMV of € 37,010.00.

3.1.2. The Stamp Tax assessments for the year 2015 were as follows:

a) 1st floor – € 2,477.60;

b) 2nd floor – € 2,477.60;

c) 3rd floor – € 2,551.90;

d) 4th floor – € 2,551.90;

e) 5th floor – € 2,576.70;

f) 6th floor – € 2,576.70;

g) 7th floor – € 370.10.

3.1.3. The sum of the amount of the assessments identified in 3.1.2 is € 15,582.50.

3.1.4. The Claimant requested the annulment of the following assessments "…€ 825.88 relating to the first floor (no. 2016…); € 825.88 relating to the second floor (no. 2016…); € 850.64 relating to the third floor (no. 2016…); € 850.64 relating to the fourth floor (no. 2016…); € 858.90 relating to the fifth floor (no. 2016…); € 858.90 relating to the sixth floor (no. 2016…) and € 185.05 relating to the seventh floor (no. 2016…)".

3.2. Facts not considered proven

There are no facts with relevance for the arbitral decision that have not been given as proven.

3.3. Substantiation of the factual matter considered proven

The factual matter given as proven originates in documents joined to the proceedings and whose authenticity was not called into question.

4. PRELIMINARY ISSUE

The Respondent, in its reply, defends itself by invoking the exception of incompetence of the arbitral tribunal and the unchallengeable nature of the acts, given that, in its view, these constitute the first instalments relating to a unit value of tax.

It follows that the tribunal must officially know the dilatory exceptions provided for in art. 16 of the Code of Tax Procedure and Process (CPPT) and in articles 577, al. a) and 578, both of the Code of Civil Procedure (CPC), applicable by force of art. 29, no. 1, al. a) and e) of RJAT.

Thus, it is imperative to know, from the outset, the competence of the tribunal to appreciate the claim of the Claimant.

In this regard and in annotation to art. 16 of the CPPT the doctrine maintains that: "Questions of absolute competence are of official knowledge and their knowledge precedes that of any other issue (…). Thus, incompetencies by reason of subject matter and by reason of hierarchy, in judicial proceedings, must be known officially, preceding the knowledge of any other questions and may be argued by the interested parties…"[1].

Consequently, it is necessary to mobilize the relevant normative framework, that is, RJAT. More specifically, art. 2, no. 1 of RJAT provides that: "The competence of arbitral tribunals comprises the appreciation of the following claims: a) The declaration of unlawfulness of tax assessment acts, self-assessment acts, withholding at source acts and payment on account acts; b) The declaration of unlawfulness of acts fixing the taxable matter when it does not give rise to the assessment of any tax, acts determining the collectible matter and acts fixing patrimonial values;".

Furthermore, art. 97, no. 1 of CPPT establishes that: "The tax judicial proceedings comprise: a) The challenge of tax assessments, including parafiscal taxes and self-assessment acts, withholding at source and payment on account;".

The first conclusion to be drawn consists in the fact that the claim for declaration of unlawfulness of assessment acts can be subject to judicial challenge or, alternatively, to a request for arbitral pronouncement.

However, can the collection notices for the 1st instalment relating to the Stamp Tax assessments for the year 2015 be subject to the request for arbitral pronouncement?

To answer such a question, it is important, from the outset, to delineate the concept of assessment in order to determine the competence of the tribunal.

In concretization of such concept VÍTOR FAVEIRO taught[2]: "…it is an administrative act, of application of a rule of incidence and of the respective rate of quotity, to the previously or supposedly determined collectible matter; of the arithmetic expression of the pecuniary value of the tax obligation corresponding, and its imputation to the person of the taxpayer; and of the declaration, substantive and formal, of such operation and its notification to the taxpayer, with definitive and executory effects of effective obligation of the taxpayer and subjective right of credit of the State". Along this line, BRAZ TEIXEIRA adds: "It is necessary not to confuse periodic payments which, although accomplished by successive acts, at different moments, originate in one and the same obligation and constitute the various portions of one and the same payment which was divided, with payments which must be accomplished periodically, not due to a division of the global payment, but rather to the birth, equally periodic, of new obligations, by the permanence of the factual presuppositions of taxation".[3]

Now, such definitions share a common denominator, that is, that there will be only one assessment for each tax event, through which the amount of the tax will be determined. Consequently, if this is so, each assessment can be subject to only one challenge.

Within the scope of the Stamp Tax Code (CIS) it is possible to discern what was stated above in art. 23, no. 7 when it provides that: "In the case of tax due by the situations provided for in item no. 28 of the General Schedule, the tax is assessed annually, in relation to each urban property, (…) applying, with the necessary adaptations, the rules contained in CIMI". Art. 113, no. 1 of CIMI provides that: "The tax is assessed annually…" and no. 2 adds that: "The assessment referred to in the previous number is made in the months of February and March of the following year".

Thus, the fact that the assessment can be paid in instalments does not mean that, as a general rule, several assessments have been made. Strictly speaking, the assessment is singular and, if this is so, can only support a single challenge claim[4].

Reverting such interpretation to the case sub judice it is important, from the outset, to determine what was the object of challenge. In such respect, the Claimant clarified in the reply to the tribunal's invitation to make submissions on the exceptions invoked that: "In April 2015 the Claimant was notified to proceed with the payment of the 1st instalment of the stamp tax for 2015, which cannot but constitute a tax act" and "Upon being notified to pay each one of the instalments (1st, 2nd and 3rd instalments), the Claimant is notified of the assessment of isolated tax acts and with autonomous challenge periods; …", whereby, such will allows one to maintain that it intends the annulment of the first instalments of the collection notices.

Now, it is clear that the Claimant subsumes the 1st instalment of tax to an assessment.

But, one could always raise the question of the tribunal's invitation to correction of the request for arbitral pronouncement by the Claimant. We believe that this does not occur, inasmuch as, if it is possible for the tribunal to accept correction regarding the value of the proceedings, the same cannot happen in relation to the very acts which are the object of the claim and these, in the case sub judice, refer to the first instalments of Stamp Tax for the year 2015. Along this line, jurisprudence states within the scope of the arbitral decision handed down in the proceedings no. 741/2014-T and in which the functions of arbitrator-president were assumed by counselor JORGE LOPES DE SOUSA: "…the corrections of the procedural documents to which refers sub-paragraph c) of no. 1 of art. 18 must be understood as respecting its lack of adequacy for appreciation of the lawfulness of the act which is the object of the request for arbitral pronouncement and no other, not extending such possibility to the substitution of the act which is the object of the claim. Certainly those will be covered by the possibility of correction of deficiencies in the identification of the act which the Taxpayer challenged, such as error in the indication of its number or its date or value of the assessment, for these will be cases in which the correction does not involve substitution of the act which is the object of the proceedings, merely aiming to make clear the expression of the will of the Taxpayer to challenge it. But, different from corrections of that type will be the cases in which the act which was the object of the request for arbitral pronouncement is perfectly identified and there was no error in the expression of the will of the Taxpayer".

For which reason, if the will of the Claimant consisted in the challenge of the 1st instalment of the Stamp Tax assessments for the year 2015, as results from the procedural documents, any alteration became impossible.

Consequently, the acts underlying the request for arbitral pronouncement do not constitute "tax assessment acts" described in art. 2, no. 1, al. a) of RJAT, whereby, the tribunal is materially incompetent, dilatory exception which is declared, pursuant to the provision in art. 16, no. 1 of CPPT, which determines the absolution of the Respondent from the proceedings, cfr. art. 99, no. 1 and art. 576, no. 2 of CPC, applicable by force of art. 29, no. 1, al. e) of RJAT.

Thus, the recognition of the incompetence of this tribunal makes impossible the appreciation of the merits of the case.

5. DECISION

In these terms and with the substantiation described above, it is decided to recognize the absolute incompetence of the tribunal and, in consequence, absolve the Respondent from the proceedings, with all legal consequences.

6. VALUE OF THE PROCEEDINGS

The Claimant, despite having specified the assessments by the collection notice of the 1st instalment of Stamp Tax for the year 2015 and sourced from item 28.1 of the TGIS, the truth is that the economic utility of the claim is determined by the value of the assessment, as established in art. 97-A of CPPT, applicable by force of the provision in art. 29, no. 1, al. a) of RJAT. Consequently, if by the sum of the assessments the value of € 15,582.50 is reached, as was determined, that amount must be the sum to consider for determination of the value of the proceedings.

Now, against such a position one could still argue that such value does not correspond to that which the Claimant delimited as the object of the proceedings. It follows that the tribunal must attend to all elements contained in the proceedings, cfr. art. 308 of CPC, applicable by referral of art. 29, no. 1, al. e) of RJAT. Thus, if it appears in the proceedings that the amount of the Stamp Tax assessments is € 15,582.50 that is the value which the tribunal must consider in order to concretize the economic utility of the claim.

For such a summation of reasons, the value of the proceedings is fixed at € 15,582.50, pursuant to art. 97-A of CPPT, applicable by force of the provision in art. 29, no. 1, al. a) of RJAT and of art. 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

7. COSTS

Costs to be borne entirely by the Claimant, in the amount of € 918, cfr. art. 22, no. 4 of RJAT and Table I attached to RCPAT.

Notify.

Lisbon, 16 January 2017

The Arbitrator,

(Francisco Nicolau Domingos)

[1] JORGE LOPES DE SOUSA, Code of Tax Procedure and Process – annotated, 4th edition, Vislis Publishers, 2003, p. 141.

[2] The status of the taxpayer. The person of the taxpayer in the Social Rule of Law State, Coimbra Publisher, 2002, p. 683.

[3] Principles of Tax Law, volume I, 3rd edition, Almedina, 1993, p. 244, footnote 3.

[4] See in this sense the arbitral decision handed down in the proceedings no. 346/2015-T, in which the function of arbitrator was assumed by Master MARIANA VARGAS and that respecting proceedings no. 736/2014-T, in which the function of arbitrator was assumed by Master MARCOLINO PISÃO PEDREIRO.

Frequently Asked Questions

Automatically Created

What is the scope of Verba 28.1 of the Tabela Geral do Imposto do Selo regarding high-value property stamp tax?
Verba 28.1 of the TGIS imposes stamp tax on property rights over high-value real estate exceeding specified VMV thresholds. Process 358/2016-T presented the interpretative question of whether buildings under vertical ownership with multiple independently usable floors should be taxed based on aggregate property value or individual floor values. The Tax Authority maintained that the total VMV of the entire property determines tax incidence under Verba 28.1, irrespective of internal subdivision into independently usable units. This differs from horizontal property ownership where autonomous fractions constitute separate legal entities with individual tax treatment. The scope determination affects substantial tax liability, as evidenced by the disputed €15,582.50 assessment based on individual floor VMVs versus potentially lower taxation if the total property value applied with appropriate thresholds.
Can the CAAD arbitral tribunal rule on stamp tax liquidations under Verba 28.1 of the TGIS?
CAAD's competence to adjudicate stamp tax liquidations under Verba 28.1 TGIS hinges on whether challenged acts constitute 'tax acts' within Article 2 RJAT's scope. Process 358/2016-T illustrates this jurisdictional boundary: the Tax Authority argued incompetence because the claimant challenged payment instalments from collection notices rather than substantive liquidation acts. Collection notices are unchallengeable procedural documents demanding payment of previously liquidated tax. The tribunal must distinguish between: (1) challengeable substantive liquidation acts establishing tax liability; and (2) unchallengeable procedural collection notices. This distinction constitutes a dilatory exception requiring resolution before merits examination. Competence issues involve absolute incompetence subject to official cognizance under Article 16 CPPT and Articles 577(a), 578 CPC, taking precedence over all other matters in arbitral proceedings.
How does the distinction between vertical and horizontal property ownership affect stamp tax incidence in Portugal?
Portuguese tax law distinguishes vertical ownership (single property with independently usable parts) from horizontal property ownership (legally autonomous condominium fractions). For Verba 28.1 TGIS purposes, this distinction carries significant implications. In horizontal property ownership, each fraction represents a separate legal entity with individual VMV and potentially distinct tax treatment. Process 358/2016-T's claimant advocated analogical application of horizontal ownership principles to vertical ownership based on material use and absence of express legislative distinction. However, the Tax Authority contended no legal lacuna exists requiring analogy: CIMI Article 12(3) mandates individual valuation of independently usable parts for assessment purposes, but Verba 28.1 TGIS specifically taxes the complete property right based on aggregate VMV. This interpretation prevents tax fragmentation for properties in unified ownership despite physical divisibility into independently functional units.
What are the procedural requirements for challenging stamp tax liquidation notices before the Portuguese tax arbitration court?
Challenging stamp tax liquidations before CAAD demands strict procedural compliance. Taxpayers must challenge actual liquidation acts establishing tax liability, not subsequent collection notices or payment instalments. Collection notices are unchallengeable as mere payment demands for previously liquidated tax. Process 358/2016-T exemplifies this pitfall: the claimant referenced specific instalment amounts from collection notices (e.g., €825.88 for first floor), prompting the Tax Authority to invoke incompetence and unchallengeable nature exceptions. Proper procedure requires identifying and challenging substantive liquidation acts within applicable statutory periods (prazos de impugnação) running from notification of each autonomous liquidation. Arbitration requests must clearly specify challengeable tax acts, amounts, legal grounds, and relief sought. Failure to properly identify challengeable acts risks preliminary dismissal on jurisdictional or procedural grounds before substantive examination.
When can the incompetence exception be raised by the tax authority in CAAD arbitral proceedings?
The incompetence exception operates as a dilatory exception (exceção dilatória) in CAAD proceedings, addressable before substantive merits under Article 16 CPPT and Articles 577(a), 578 CPC (applicable via Article 29 RJAT). Questions of absolute competence—including incompetence by subject matter (razão da matéria) and hierarchy—are subject to official cognizance (conhecimento oficioso) and take precedence over all other issues. In Process 358/2016-T, the Tax Authority invoked incompetence in its reply, arguing CAAD lacked jurisdiction because challenged payment instalments fall outside Article 2 RJAT's scope. The tribunal must examine competence even sua sponte. Upon receiving the exception, the tribunal allowed the claimant to respond, demonstrating adversarial procedure for preliminary exceptions. The tribunal deferred ruling to the final decision, permitting integrated analysis of jurisdictional and substantive issues while respecting the priority of competence determinations.