Process: 365/2015-T

Date: November 10, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 365/2015-T addressed whether building land (terrenos para construção) with high patrimonial values is subject to Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS). The claimant, A... S.A., challenged two 2014 Stamp Tax assessments totaling €19,397.82 on building plots valued at €1,678,995.42 and €4,140,351.18. The central legal question was whether 'building land' falls within the scope of 'urban real properties with residential use' for purposes of Item 28.1 TGIS, which taxes properties with patrimonial values equal to or exceeding €1 million. The taxpayer argued that building land, by its nature as undeveloped property without buildings or residential licenses, cannot be classified as property with residential use. The property registry confirmed these were terrenos para construção with no constructions. The Tax Authority countered that the concept of 'residential use' under Item 28.1 is broader than the claimant suggested, encompassing both built properties and building land. The AT relied on the assessment methodology in the Municipal Property Tax Code (CIMI), particularly Article 45(2), which applies residential use coefficients to building land based on 'authorized or planned buildings.' The AT emphasized that the legislator deliberately used 'residential use' rather than 'intended for residential use,' indicating a broader interpretation. Furthermore, the AT noted that Law 83-C/2013 later expressly included building land in Item 28.1's scope for subsequent years, supporting their interpretation that this was the intended meaning even in 2014. The arbitral tribunal was constituted on August 14, 2015, with both parties presenting written submissions but no oral hearing held. The case illustrates the interpretative challenges in applying Stamp Tax to undeveloped real estate and the tension between literal interpretation of tax provisions and broader systemic integration with property assessment rules under CIMI.

Full Decision

ARBITRAL DECISION

  1. REPORT

1.1. A..., S.A., taxpayer no. ..., with tax domicile on Rua..., in ..., filed on 05/06/2015, a request for arbitral ruling, in which it petitions the declaration of illegality of the Stamp Tax assessment acts for the year 2014, corresponding to documents no. 2015... and no. 2015..., in the amounts of €5,596.65 and €13,801.17, respectively.

1.2. His Excellency, the President of the Ethics Council of the Administrative Arbitration Centre (CAAD) appointed, on 09/07/2015, as sole arbitrator the signatory of this decision.

1.3. On 14/08/2015 the arbitral tribunal was constituted.

1.4. In compliance with the provisions of Article 17, paragraph 1 of the Legal Regime for Tax Arbitration (RJAT), the Tax Authority and Customs Authority (AT) was notified on 14/08/2015, to, if willing, submit a reply and request the production of additional evidence.

1.5. On 29/09/2015 the AT submitted its reply, accompanied by the respective property registration records.

1.6. The arbitral tribunal on 29/09/2015 decided to waive the holding of the meeting referred to in Article 18, paragraph 1 of the RJAT, on the grounds of the principle of autonomy of the arbitral tribunal in the conduct of the proceedings, inviting both parties to, if willing, submit optional written submissions and scheduled the date for delivery of the final decision.

1.7. The Claimant and the Respondent did not submit optional written submissions.

  1. JURISDICTIONAL SUITABILITY

The arbitral tribunal was properly constituted and is materially competent.

The parties have legal personality and capacity and are legitimate, with no defects in legal representation.

There are no nullities, exceptions or preliminary issues that prevent knowledge of the merits and which must be known ex officio.

The request for constitution of the arbitral tribunal was presented within the time limit provided in paragraph (a) of Article 10, paragraph 1 of the RJAT, therefore it is timely.

Consequently, the conditions are met for the final decision to be delivered.

  1. POSITIONS OF THE PARTIES

There are two conflicting positions: that of the Claimant, set out in the request for arbitral ruling, and that of the AT in its reply.

In summary, the Claimant contends that:

a) The concept of "building land," for tax purposes, cannot be considered real property with residential use, under the provisions of Article 1, paragraph 1 of the Stamp Tax Code and Item 28.1 of the General Table of Stamp Tax (General Table);

b) The real properties in question have the nature of "building land," as shown in the property registration records, where there are no buildings or constructions, therefore they do not possess, nor could they possess, a license for residential use, therefore, the AT's understanding errs in the factual presuppositions.

In turn, the AT argues that:

a) "(…) the real properties in question have the legal nature of real property with residential use, therefore the assessment acts that are the subject of this request for arbitral ruling must be maintained as they embody a correct interpretation of Item 28.1 of the GTST, amended by Law No. 55-A/2012, of 29 October.";

b) "Law No. 55-A/2012, of 29 October came to amend Article 1 of the CST, and add Item 28.1 to the GTST";

c) "With this legislative amendment, Stamp Tax would apply also to ownership, usufruct or right of superficies of urban real properties whose tax patrimonial value listed in the register, under the terms of the Municipal Tax on Real Property Code (CIMI) be equal to or greater than €1,000,000.00.";

d) "The notion of use of the urban real property is found in the section relating to the assessment of real property, which is well understood since the assessment of the real property (purpose) incorporates value to the real property, constituting a determining fact of distinction (coefficient) for purposes of assessment.";

e) "As results from the expression (…) value of authorized or planned buildings," contained in Article 45, paragraph 2 of the CIMI, the legislator chose to determine the application of the methodology of assessment of real properties in general, to the assessment of building land, therefore being applicable to them the coefficient of use provided in Article 41 of the CIMI.";

f) "Contrary to what the Claimant proposes, the AT understands that the concept of "real properties with residential use," for the purposes of Item 28.1 of the GTST, comprises both built real properties and building land, in particular given the literal element of the norm.";

g) "Note that the legislator does not refer to "real properties intended for residential use," having opted for the notion "residential use." - a different and broader expression whose meaning must be found in the need to integrate other realities beyond those identified in Article 6, paragraph 1 of the CIMI.";

h) "It being the case that the only reference to the "use" of urban real properties appears in the chapter relating to the determination of the tax patrimonial value (TPV) of urban real properties (…), resulting from Article 38 of the CIMI that the TPV of urban real properties for residential use is determined by the application of a formula that integrates various factors, one of which is the coefficient of use (Ca)." [emphasis by the Respondent];

i) "It could only be otherwise, which for mere academic exercise is conceded, if the legislator, in the original drafting of the aforementioned item, had adopted the definition provided in paragraph (a) of Article 6, paragraph 1 of the CIMI ("residential urban real properties"), instead of referring to "urban real properties with residential use," a distinct and broader expression, revealing the intention to integrate, in the rule of objective scope, other realities, beyond that one." [emphasis by the Respondent];

j) Concluding, "Although this has always been the understanding of the AT, no doubt whatsoever can remain for the year now in issue, i.e., 2014, since, with Law No. 83-C/2013 of 31-12-2013, the wording of that provision was amended, now expressly including building land as an objective element within the scope of the norm, therefore necessarily lacking any attempt to raise any issue of statutory interpretation of the wording of the Law." [emphasis by the Respondent];

  1. FACTS

4.1. FACTS DEEMED PROVEN

In light of the documents on file, the following are deemed proven:

4.1.1. The Claimant is sole owner of the urban real properties of the kind "building land" located in the parish..., municipality of..., district of Coimbra, registered in the property register under articles... and...

4.1.2. The tax patrimonial value (TPV) of the urban real properties in question amounts to €1,678,995.42 and €4,140,351.18, respectively.

4.1.3. The voluntary payment period for the 2014 Stamp Tax assessment (document no. 2015...), in the amount of €5,596.65, ended on 30 April 2015.

4.1.4. The voluntary payment period for the 2014 Stamp Tax assessment (document no. 2015...), in the amount of €13,801.17, ended on 30 April 2015.

4.2. FACTS NOT DEEMED PROVEN

There are no facts relevant to the decision that have not been deemed proven.

  1. THE LAW

5.1. (ILLEGALITY OF THE 2014 STAMP TAX ASSESSMENT ACT

In the case at hand, the fundamental question under consideration by the arbitral tribunal consists of determining the scope of application of Item 28.1 of the General Table of Stamp Tax (General Table) in its wording as of the date of the tax facts. That is, in 2014, did Item 28 of the General Table of Stamp Tax subject to taxation "building land" whose tax patrimonial value equaled or exceeded 1 million euros?

On this matter, it is important, first of all, to bear in mind the following.

According to João Ricardo Catarino and Vasco Branco Guimarães, "Stamp Tax on real properties of high tax patrimonial value was created in 2012, by Law No. 55-A/2012, of 29 October, and represents, in substantial terms, an additional municipal property tax on those real properties, despite being, legally, another fact subject to Stamp Tax." [1].

"Generally subject to this tax are urban real properties of tax patrimonial value equal to or greater than 1 million euros that are affected to residential use or are building land whose construction, authorized or planned, is for residential purposes, under the provisions of the Stamp Tax Code." [emphasis ours] [2].

On the other hand, as argued by António Santos Rocha and Eduardo José Martins Brás "It is important to note, first, that the stamp tax provided in this item applies solely to urban real property, therefore from it will be excluded all real properties that are classified as rural." [3].

"Thus, Item 28.1 will encompass urban real properties that fall within the class of residential urban real properties and building land whose construction, authorized or planned, is intended for residential use (…) whose tax patrimonial value listed in the register be equal to or greater than €1,000,000." [emphasis ours] [4].

As further points out Andreia Gabriel Pereira, "Regarding objective scope, the tax administration has sustained that the initial provision of Item 28 of the General Table of Stamp Tax permitted, from the outset, the taxation of building land whose tax patrimonial value equaled or exceeded 1 million euros." [5].

"However, on this point, there is already abundant case law of the Supreme Administrative Court and arbitral case law (issued by arbitral tribunals constituted with the CAAD under the Legal Regime for Tax Arbitration) in the opposite sense." [6].

"Pursuant to such case law, as the legislator has not defined the concept of «urban real property with residential use» upon which the application of the aforementioned Item 28 of the General Table of Stamp Tax depends, it is necessary to resort to the rules of the Municipal Tax Code and, insofar as Article 6 of the Municipal Tax Code results in a clear distinction between residential urban real properties and building land, it follows that these cannot be considered for purposes of the application of Stamp Tax as «urban real properties with residential use» – see, by way of example, the judgment of the Supreme Administrative Court of 29 October 2014, delivered in case no. 0505/14 or the arbitral decision issued in case no. 202/2014, on 16 October 2014." [emphasis ours] [7].

Now, "To put an end to the growing litigation on this matter and acknowledging the absence of a legal norm that permitted it before, the legislator amended, through the State Budget for 2014, item 28.1 of Item 28 of the General Table of Stamp Tax, now providing expressly that, in addition to «residential real properties», included within the scope of this Item are «building land whose construction, authorized or planned, is for residential purposes» – see Article 194 of the State Budget for 2014, approved by Law No. 83-C/2013, of 31 December." [emphasis and highlighting ours] [8].

"However, as likewise sustained by the Supreme Administrative Court, the aforementioned amendment does not have interpretive character – see the judgment of the Supreme Administrative Court of 2 July 2014, delivered in case no. 0467/14 –, which determines that building land whose construction, authorized or planned, is intended for residential use with value equal to or greater than 1 million euros may only be subject to taxation by the application of Item 28 of the General Table of Stamp Tax from 2014 onwards. Hence it appears that the Stamp Tax assessments made under Item 28, relating to building land and concerning 2012 and 2013, continue to be subject to challenge." [emphasis ours] [9].

For all of the above, if until the aforementioned legislative amendment the taxation of "building land" whose tax patrimonial value equaled or exceeded 1 million euros was controversial, in light of Item 28 of the General Table, from 1 January 2014 onwards, there remain no doubts that in fact this reality is also subject to Stamp Tax. Reason why the Claimant's petition is without merit.

  1. DECISION

In these terms and with the reasoning described above, the request for arbitral ruling is decided to be without merit, and the AT is absolved of the petition.

  1. VALUE OF THE CASE

The value of the case is fixed at €19,397.82 (nineteen thousand, three hundred and ninety-seven euros and eighty-two cents), under the terms of Article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by force of paragraphs (a) and (b) of Article 29, paragraph 1 of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs to be borne by the Claimant, in the amount of €1,224 (one thousand two hundred and twenty-four euros), under the terms of Table I of the Regulation of Costs in Tax Arbitration Proceedings, under the terms of Article 22, paragraph 2 of the RJAT.

Notify.

Lisbon, 10 November 2015

The Arbitrator,

(Hélder Filipe Faustino)

Document prepared on computer, in accordance with the provisions of Article 131, paragraph 5 of the CPC, applicable by referral from paragraph (e) of Article 29, paragraph 1 of the RJAT.

The drafting of this decision is governed by the spelling prior to the 1990 Orthographic Agreement.

[1] See "Lessons in Tax Law Vol. I – General Principles and Internal Taxation", 4th edition, 2015, p. 430.

[2] Op. Cit., pp. 430.

[3] See "Taxation of Patrimony – Municipal Tax, Transfer Tax and Stamp Tax (Annotated and Commented)", 1st edition, 2015, p. 730.

[4] Op. Cit., pp. 730.

[5] See "The «Luxury Properties» and Stamp Tax. Commentary on the judgment of the Supreme Administrative Court (2nd Section), of 5 February 2015, delivered in case no. 0993/14, Reporter Cons. Francisco Rothes", Journal of Public Finances and Tax Law, Year VII, No. 4, July 2015, pp. 237 et seq.

[6] Op. Cit., pp. 237.

[7] Op. Cit., pp. 238.

[8] Op. Cit., pp. 238.

[9] Op. Cit., pp. 238.

Frequently Asked Questions

Automatically Created

Is land for construction subject to Stamp Tax under Verba 28.1 of the Portuguese General Stamp Tax Table?
The dispute in Process 365/2015-T centered on whether building land (terrenos para construção) falls within Item 28.1 of the TGIS for 2014. The Tax Authority argued that building land with patrimonial values exceeding €1 million is subject to Stamp Tax, interpreting 'urban real properties with residential use' broadly to include both built properties and building land. This interpretation relied on the CIMI assessment methodology, which applies residential use coefficients to building land based on authorized or planned constructions under Article 45(2). The taxpayer disputed this, arguing that undeveloped land without residential licenses cannot qualify as property with residential use.
Can a terreno para construção be classified as residential property for Imposto do Selo purposes?
The Tax Authority contended that terrenos para construção can be classified as residential property for Imposto do Selo purposes under a broad interpretation of 'residential use.' This classification depends on the assessment methodology under the Municipal Property Tax Code (CIMI), particularly Article 41's use coefficients and Article 45(2)'s reference to 'authorized or planned buildings.' The AT distinguished between 'residential use' (uso habitacional) and 'intended for residential use,' arguing the former encompasses building land designated for future residential development. However, the taxpayer maintained that only actual built properties with residential licenses qualify, and that building land registered as terrenos para construção lacks the essential characteristics of residential property.
What did CAAD Process 365/2015-T decide about Stamp Tax on building plots?
While the complete decision text is not provided in the excerpt, Process 365/2015-T involved a challenge to 2014 Stamp Tax assessments on two building plots valued over €1 million. The arbitral tribunal, constituted under the sole arbitrator appointed by CAAD's President, examined whether Item 28.1 of the TGIS applied to building land in 2014. The case highlighted conflicting interpretations: the taxpayer's literal reading that excluded undeveloped land versus the Tax Authority's systemic interpretation integrating CIMI assessment rules. The AT also referenced Law 83-C/2013, which later expressly included building land in Item 28.1, arguing this clarified rather than changed the law's original scope.
How does Portuguese tax law distinguish between land for construction and housing-designated property under TGIS?
Portuguese tax law distinguishes between land for construction and housing-designated property through several CIMI provisions. Article 6(1)(a) defines 'residential urban real properties' as buildings intended for habitation. However, for assessment purposes, Article 45(2) applies residential use coefficients to building land based on 'authorized or planned buildings,' creating ambiguity about whether fiscal classification follows current state or planned use. The Tax Authority in this case argued that 'residential use' (uso habitacional) in Item 28.1 TGIS is broader than Article 6's definition, encompassing building land whose patrimonial value reflects residential development potential. This systemic interpretation contrasts with literal readings that limit residential classification to actually built and licensed housing.
What is the procedure to challenge Stamp Tax assessments on terrenos para construção through tax arbitration at CAAD?
To challenge Stamp Tax assessments on terrenos para construção through CAAD arbitration, taxpayers must file a request within the deadline specified in Article 10(1)(a) of the RJAT (Legal Regime for Tax Arbitration). The request should identify the contested assessment acts, amounts, and legal grounds for illegality. Once filed, CAAD's President appoints an arbitrator who constitutes the tribunal. The Tax Authority is notified and may submit a reply with supporting documentation, such as property registry records. The tribunal may waive oral hearings under its procedural autonomy and invite written submissions before issuing a final decision. In Process 365/2015-T, the request was filed on June 5, 2015, the tribunal constituted on August 14, 2015, and both parties submitted written arguments without an oral hearing.