Process: 365/2016-T

Date: February 13, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 365/2016-T addresses the controversial application of Stamp Duty under item 28.1 of the General Table (GTSD) to urban properties with multiple independently usable parts. The taxpayer challenged eight stamp duty assessments totaling €18,743.05 for 2012, arguing that each floor or division with independent use had a tax patrimonial value (VPT) below the €1,000,000 threshold. The claimant relied on Article 12(3) of the IMI Code, which requires separate registration of parts capable of independent use, contending that stamp duty incidence should be determined individually for each part. The Tax Authority countered that the critical distinction lies between full ownership properties (propriedade plena) and horizontal property regimes (propriedade horizontal). Under Article 2(4) of CIMI, only autonomous units in horizontal property constitute separate properties. In full ownership situations with independently usable parts, the property remains a single legal-tax entity. Consequently, stamp duty applies when the aggregate VPT of all parts exceeds €1,000,000, not the individual part values. This interpretation aligns with the legislator's intent to tax properties as unified legal-tax realities. The case highlights fundamental differences in property characterization between IMI assessment (which separately values independent parts) and stamp duty incidence (which considers full ownership properties holistically), establishing important precedent for taxation of multi-unit buildings outside horizontal property regimes.

Full Decision

ARBITRAL DECISION

I – Report

1. On 5 July 2016, A…, private limited liability company, taxpayer number …, with registered office at Avenue …, no. …–…, in Lisbon, requested from CAAD the establishment of an arbitral tribunal, pursuant to article 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "LRAT"), in which the Tax and Customs Authority is the Respondent, with a view to annulling eight acts of stamp duty tax assessments relating to the year 2012 (item no. 28.1 of the General Table of Stamp Duty), in the total amount of € 18,743.05, issued by the Respondent on 16 April 2014, regarding the urban property located at …, nos. … to … in Lisbon, which was, at the time of the tax facts in question, registered in the respective urban property register under no. … of the parish … - … .

2. The request for establishment of the arbitral tribunal was accepted by the Honourable President of CAAD and notified to the Tax and Customs Authority.

Pursuant to the provisions of article 6, paragraph 1 of LRAT, by decision of the President of the Deontological Board, duly communicated to the parties within applicable legal time limits, the undersigned was appointed as arbitrator, who communicated to the Deontological Board and to the Centre for Administrative Arbitration the acceptance of the appointment within the applicable time limit.

The Arbitral Tribunal was established on 21 September 2016.

3. The grounds presented by the Claimant, in support of its claim, were, in summary, as follows:

The taxes were assessed individually on the tax patrimonial values (TPV) of the floors or parts capable of independent use of the urban property located at …, nos. … to … in Lisbon, which was registered in the respective urban property register under no. … of the parish … - … .

Item no. 28.1 of the GTSD provides that stamp duty is levied on the property of each urban property with residential use whose TPV stated in the register, pursuant to the CIMI, is equal to or exceeding € 1,000,000, based on its TPV used for purposes of IMI.

In the case of a property such as the one in this matter, which comprises floors or divisions with independent use, subjection to stamp duty is determined, not by the TPV of the property, but by the TPV of those floors or divisions.

Moreover, pursuant to the CIMI, each floor or part of a property capable of independent use is considered separately in the property registration (article 12, paragraph 3 of the CIMI).

And it is precisely to the TPV stated in the register that the text of the law directs attention in order to determine the incidence of stamp duty of item no. 28 of the GTSD.

Since the TPV of each of the floors stated in the register, pursuant to the CIMI, is less than € 1,000,000, stamp duty of item no. 28.1 of the GTSD, here challenged, is not levied.

The assessment acts now challenged are illegal by violation of the incidence rule of item no. 28.1 of the GTSD.

4. The ATA – Tax and Customs Administration, called upon to make representations, contested the Claimant's claim, defending itself by objection, in summary, with the following grounds:

a. With reference to the year 2012, in compliance with and pursuant to the provisions of article 6, paragraph 2 of Law no. 55-A/2012, of 29/10, which added item no. 28 to the GTSD, and whose respective incidence rule refers to urban properties, valued in accordance with the CIMI, with VP equal to or exceeding € 1,000,000.00, and, pursuant to its paragraph 28.1, with residential use, the AT proceeded to notify the collection documents for payment of the assessments in question.

What is at issue here are collection notes resulting from the direct application of the legal rule, which translates into objective elements, without any subjective or discretionary assessment.

c. The concept of property is defined in article 2, paragraph 1 of the CIMI, and it is provided in its paragraph 4 that in the horizontal property regime, each autonomous unit is deemed to constitute a property.

d. It follows from the analysis of the regulatory provision that a "property in full ownership with floors or divisions capable of independent use" is, unequivocally, different from an immovable in the horizontal property regime consisting of autonomous units, that is, several properties.

e. Regarding IMI assessment, in the case of properties in full ownership, the VP that serves as the basis for its calculation will, unquestionably, be the total TPV of the property.

f. In compliance with the provisions of article 119, paragraph 1 of the CIMI, the collection document is sent to the taxpayer with a breakdown of the parts capable of independent use, respective tax patrimonial value and the collection attributable to each municipality where the properties are located.

The thesis defended by the Claimant lacks legal support, since although the assessment of IS, in the situations provided for in item no. 28.1 of the GTSD, is carried out in accordance with the rules of the CIMI, the truth is that the legislator reserves the aspects that require appropriate adaptations, namely those in which, as is the case with properties in full ownership, even though with floors or divisions capable of independent use (although IMI is assessed in relation to each part capable of independent use), for IS purposes the property as a whole is relevant since the divisions capable of independent use are not deemed to be a property, but only autonomous units in the horizontal property regime, pursuant to paragraph 4 of article 2 of the CIMI.

What expressly results from the letter of the law is that the legislator wished to tax with item 28.1 under discussion the properties as a single legal-tax reality, as will be referred to below.

The subjection to stamp duty of item 28.1 of the General Table attached to the CIS results from the combination of two facts: residential use and the tax patrimonial value of the urban property registered in the matrix being equal to or exceeding € 1,000,000.00.

In fact, it appears from the property register that the property is in the full ownership regime, composed of several parts capable of independent use.

Finding that the properties are in full ownership, not possessing autonomous units, to which the tax law attributes the qualification of property, because from the notion of property in article 2 of the CIMI only the autonomous units of a property in the horizontal property regime are deemed to be properties – paragraph 4 of the aforementioned article 2 of the CIMI, the vice of violation of law due to error regarding the assumptions of law should be judged unfounded, maintaining in the legal order the challenged assessments for constituting a correct application of the law to the facts.

5. Verifying the non-existence of any situation provided for in article 18, paragraph 1, of the LRAT, which would make necessary the arbitral hearing therein provided, the holding thereof was dispensed with, based on the prohibition of performing useless acts and also on the principles of speed, simplification and procedural informality.

The holding of oral arguments was also dispensed with, pursuant to article 18, paragraph 2, of the LRAT, "a contrario".

6. The tribunal is materially competent and is regularly established pursuant to the LRAT.

The parties have legal personality and capacity, are legitimate and are legally represented.

The proceedings do not suffer from vices that would invalidate them.

7. It is necessary to resolve the question of whether the assessments that are the subject of the present proceedings are illegal and, consequently, should be annulled.

II – Relevant Factual Matters

8. The following facts are considered proven:

1. In the year 2012 the Claimant was the owner of the urban property located at …, nos. … to … in Lisbon, which was registered in the respective urban property register under no. … of the parish … - … .

2. The aforementioned immovable was valued considering the respective floors or independent divisions and each of such independent parts was assigned an autonomous tax patrimonial value.

3. The present Claimant was notified in 2012 by the Tax and Customs Authority (AT) of additional Stamp Duty assessments that were levied on some floors or independent divisions of that urban property relating to 2012, assessments which were subsequently corrected in 2013 and issued definitively on 16 April 2014.

4. Each assessment concerns a floor or independent division, as follows:

Document Identification Assessment Value Floor/Division

2014… 2,483.50 1st

2014… 2,491.65 2nd

2014… 2,490.65 3rd

2014… 2,491.00 4th

2014… 2,496.25 5th

2014… 2,497.20 6th

2014… 2,492.55 7th

2014… 1,300.25 8th

5. On 13 August 2014 and following the assessments mentioned, the present Claimant filed a gracious reclamation against the stamp duty assessment acts.

6. On 27 November 2014, the Claimant was notified of the dismissal of the gracious reclamation.

7. On 10 December 2014 the Claimant filed a hierarchical appeal against the decision dismissing the gracious reclamation it had filed.

8. On 7 April 2016, the Claimant was notified of the dismissal of the hierarchical appeal.

With regard to facts alleged by the Claimant, with interest for the resolution of the matter, there are no unproven facts.

9. The Tribunal's conviction regarding the decision of the factual matters was based on the documents contained in the file, as well as on the pleadings presented, it being noted that there is agreement between the parties regarding the factual matters, with disagreement being limited to the matters of law.

III - Applicable Law

10. Item 28 of the General Table of Stamp Duty establishes that the property of properties with residential use with tax patrimonial value equal to or exceeding 1,000,000 euros is subject to stamp duty, as follows:

"Ownership, usufruct or surface right of urban properties whose tax patrimonial value stated in the register, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or exceeding (euro) 1,000,000 - based on the tax patrimonial value used for purposes of IMI:

28.1 For residential property or land for construction whose building, authorized or planned, is for residential purposes, pursuant to the provisions of the IMI Code: 1%.

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

11. Article 67, paragraph 2 of the CIS provides that "Matters not regulated in the present Code regarding item no. 28 of the General Table shall be governed subsidiarily by the provisions of the CIMI".

Article 2, paragraph 4 of the Code of Municipal Property Tax (hereinafter CIMI) provides that "For the purposes of this tax, each autonomous unit, in the horizontal property regime, is deemed to constitute a property".

The same code further establishes in article 92:

"1 - To each building in the horizontal property regime corresponds only one registration in the register.

2 - In the generic description of the building the fact that it is in the horizontal property regime must be mentioned.

3 - Each of the autonomous units is described in detail and individualized by the capital letter assigned to it according to alphabetical order."

Moreover, article 12, paragraph 3 of this Code establishes that "Each floor or part of a property capable of independent use is considered separately in the property registration, which also indicates the respective tax patrimonial value".[1]

Writing on this rule, J. Silvério Mateus and L. Corvelo de Freitas tell us: "An example that may illustrate this situation is the case of an urban property, not constituted in horizontal property and which is composed of several floors. Legally this property constitutes a single unit (…).

However, since each of these units may be the object of lease or any other use by its respective holder, the register must evidence these units and tax patrimonial value must be assigned to each of them".[2]

It appears, thus, that article 12, paragraph 3 of the CIMI, is applicable to situations of properties in conditions to satisfy the objective requirements for submission to the horizontal property regime, provided for in article 1415 of the Civil Code, but where there is no constitutive deed.

12. With regard to urban properties in conditions to satisfy the objective requirements for submission to the horizontal property regime, in substance, the economic reality subject to taxation does not cease to be the same by virtue of whether, or not, the practice of the act constituting horizontal property has occurred. In the perspective of taxation of these realities, there is no substantive difference in treatment in the CIMI of an immovable on the basis of the constitution of horizontal property.

Effectively, in the regime of articles 38 et seq. of the CIMI that regulate the determination of the tax patrimonial value of immovables, there is no substantive differentiation between immovables constituted in horizontal property and immovables with objective conditions for such, but in which submission to such regime did not occur[3], namely, such circumstances do not appear among the incremental or decremental elements provided for in the tables of articles 43, paragraph 2 of the code.

13. The essential issue to be resolved in the present proceedings relates to the question of whether in properties with parts or floors capable of independent use, but not submitted to the horizontal property regime, the immovable will be considered as a unit for purposes of application of item 28 of the GTSD or whether its independent parts will be considered individually.

In the first case, the value relevant for purposes of subsumption to item 28 will be the one resulting from the consideration of all its parts and, in coherence, only one assessment should be carried out, solely in relation to the immovable, and not as many assessments as there are parts or floors capable of independent use.

In the second case, the value to be considered for the purpose will be that of each of the parts capable of independent use similarly to what occurs in the autonomous units of properties submitted to the horizontal property regime, and as many assessments should be carried out as there are parts capable of independent use but, only and solely, in relation to parts capable of independent use whose value is equal to or exceeding 1,000,000 €.

The AT carried out as many assessments as there are parts capable of independent use, a procedure that in our view does not harmonize with its own thesis that, in these cases, the reality targeted by Item 28 of the GTSD is the immovable in its entirety and not each of its autonomous parts.

14. The issue has already been addressed in various arbitral decisions[4], which were, for the most part, to the effect that the value to be considered for the purpose will be that of each of the parts capable of independent use similarly to what occurs in the autonomous units of properties submitted to the horizontal property regime, a solution which we consider to be correct.

In an initial interpretive moment of item 28 of the GTSD, the expression "urban properties", in combination with article 2, paragraph 4 of the CIMI, which attributes the quality of urban property to autonomous units in the horizontal property regime and, apparently, does not attribute it to parts capable of independent use, could point to the consideration of the property as a whole.

But, still within the scope of the literal element, the item points in a different direction when it refers to "residential property", in that, in cases of properties with parts capable of independent use, the use can only be determined unit by unit[5] and not globally, in that it may happen, and frequently does happen in this type of immovable, that some parts are dedicated to residential use and others dedicated to other purposes.

Thus, the legislator in referring to "residential property", with respect to properties with floors or parts of property capable of independent use, could only have had in mind each of these independent parts and not the property in its entirety.

15. This reading of the literal element is in complete harmony with the provisions of the CIMI mentioned above, as well as with the other interpretive elements, as demonstrated in various decisions of CAAD in this matter and to whose jurisprudence we adhere without reservation.

As was written in the decision handed down in process 50/2013-T:

"The ratio legis underlying the rule of item 28 of the GTSD, introduced by Law no. 55-A/2012 of 29 October, and in obedience to the provisions of article 9 of the Civil Code, according to which the interpretation of the legal rule should not be limited to the letter of the law, but reconstruct from the texts and other interpretive elements the legislative intent, taking into account the unity of the legal system, the circumstances in which it was drawn up and the specific conditions of the time in which it is applied.

The legislator in introducing this legislative innovation considered as a determining element of tax capacity the urban properties, with residential use, of high value (luxury), more strictly, of value equal to or exceeding €1,000,000.00, on which a special rate of stamp duty came to be levied, intending to introduce a principle of taxation on the wealth externalized in the ownership, usufruct or surface right of urban properties of luxury with residential use. For this reason, the criterion was the application of the new rate to urban properties with residential use, whose TPV is equal to or exceeding €1,000,000.00.

This very conclusion results from the analysis of the discussion of bill no. 96/XII in the Assembly of the Republic, available for consultation in the Diário da Assembleia da República, I series, no. 9/XII/2, of 11 October 2012.

The justification of the measure called "special tax on residential urban properties of highest value" is based on the invocation of the principles of social equity and tax justice, calling upon the holders of properties of high value intended for housing to contribute in a more intensive way, making the new special rate apply to "houses of value equal to or exceeding 1 million euros."

Clearly the legislator understood that this value, when attributed to a dwelling (house, autonomous unit or floor with independent use) reflects a tax capacity above the average and, as such, capable of determining a special contribution to ensure the fair distribution of tax burden."

16. Based on the foregoing, it is considered that in the case of urban properties with parts or floors capable of independent use, the value to be considered for purposes of application of item 28 of the GTSD is the tax patrimonial value of each of those independent parts, only those parts capable of independent use whose own tax patrimonial value is greater than € 1,000,000 being subject to this tax.

17. In the case at hand, since the tax patrimonial value of each of the parts capable of independent use is less than that value, they do not come within the scope of the tax incidence rule, and therefore the assessments sub judice suffer from the vice of violation of law, and consequently cannot fail to be annulled.

IV - Decision

Accordingly, the arbitral tribunal decides, judging the arbitral pronouncement request to be wholly founded, to decree the annulment of the assessments that are the subject of the present proceedings.

Value of the action: € 18,743.05 (eighteen thousand seven hundred and forty-three euros and five cents) pursuant to the provisions of article 306, paragraph 2 of the CPC and 97-A, paragraph 1, subparagraph a), of the CPPT and 3, paragraph 2, of the Regulation of Costs in Arbitration Proceedings.

Costs to be borne by the Respondent in the amount of € 1,224.00 (one thousand two hundred and twenty-four euros) pursuant to paragraph 4 of article 22 of the LRAT.

Let it be notified.

Lisbon, CAAD, 13 February 2017

The Arbitrator

Marcolino Pisão Pedreiro

[1] Also in the sense of the individual consideration of these parts capable of independent use, article 119, paragraph 1 of the CIMI determines that the tax collection document shall contain the "breakdown of properties, their parts capable of independent use, respective tax patrimonial value".

Also pointing in the same direction, article 15-O of Decree-Law no. 287/2003, of 20 November, as added by Law 60-A/2011 of 30/11, referring to the collection of IMI for purposes of the safeguard regime, mentions "property or part of urban property subject to the general assessment".

[2] TAXES ON IMMOVABLE PROPERTY, STAMP DUTY, Annotated and Commented, Engifisco, 1st Edition, 2005, pages 159-160.

[3] This was already the case under the Code of Property Contribution and Tax on Agricultural Industry and the Code of Municipal Contribution.

The Circular Instructions nos. 40012, of 23.12.1999 and 40.025, of 11.08.2000 (which may be consulted in CODE OF MUNICIPAL PROPERTY TAX, Commented and Annotated, by Martins Alfaro, Áreas Publisher, 2004, pages 589-592 and in the aforementioned work by Silvério Mateus and Corvelo de Freitas, pages 294-295 and 259-261, and the second one may still be consulted today at http://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/legislacao/instrucoes_administrativas/oficios_circulados_contribuicao_autarquica.htm) explicitly clarified the understanding that except in cases of reconstruction, modification or improvement of the property that implies some variation of the taxable value, the transition to the horizontal property regime does not give rise to new assessment.

[4] Among others, those handed down in processes 50/2013-T, 132-2013-T, 181/2013-T, 183/2013-T, 185/2013-T, 248/13, 177/2014-T, 396/2014-T, 461/2015-T and 474/2015-T, which may be consulted at https://caad.org.pt/.

In the same sense the judgment of the Supreme Administrative Court of 9.09.2015, handed down in process 047/15, in whose summary may be read:

"I - Regarding properties in vertical ownership, for purposes of incidence of Stamp Duty (Item 28.1 of the GTSD, as amended by Law no. 55-A/2012, of 29 October), subjection is determined by the combination of two factors: residential use and the TPV stated in the register equal to or exceeding € 1,000,000.

II - In the case of a property constituted in vertical ownership, the incidence of IS should be determined, not by the TPV resulting from the sum of the TPV of all divisions or floors capable of independent use (individualized in the property record), but by the TPV attributed to each of those floors or divisions intended for residential purposes."

[5] We use the expression here in the sense of part or floor capable of independent use.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Verba 28.1) apply to individual building units with a VPT below €1,000,000?
Under item 28.1 of the General Table of Stamp Duty, individual building units with VPT below €1,000,000 may still be subject to stamp duty if they form part of a property in full ownership (not horizontal property) whose aggregate VPT equals or exceeds €1,000,000. The Tax Authority's position, as articulated in Process 365/2016-T, distinguishes between autonomous units in horizontal property regimes (each constituting a separate property under Article 2(4) CIMI) and parts capable of independent use within full ownership properties (which remain a single legal-tax entity). Only autonomous units are assessed individually for stamp duty purposes.
How is the taxable value determined for buildings with independently usable parts under Portuguese Stamp Tax?
For buildings with independently usable parts under Portuguese Stamp Duty, the determination method depends on the property regime. In horizontal property with autonomous units, each unit's individual VPT is considered separately pursuant to Article 2(4) CIMI. However, for properties in full ownership containing floors or divisions capable of independent use, the taxable value is the aggregate VPT of the entire property. While Article 12(3) CIMI requires separate registration of independent parts for IMI purposes, and Article 119(1) provides for breakdown in IMI collection documents, these provisions do not fragment the property into separate taxable entities for stamp duty incidence under item 28.1 GTSD.
Can the Tax Authority aggregate VPT values of separate building units to exceed the €1M Stamp Tax threshold?
Yes, the Tax Authority can and does aggregate VPT values of separate building units to exceed the €1 million stamp duty threshold, provided the property is in full ownership with parts capable of independent use rather than horizontal property with autonomous units. Process 365/2016-T confirms this approach: although IMI assessment may separately value each part capable of independent use, stamp duty legislation treats full ownership properties as single legal-tax realities. The legislator intentionally reserved appropriate adaptations where divisions capable of independent use do not constitute separate properties under Article 2(4) CIMI. This aggregation approach applies the €1,000,000 threshold to the property's total VPT.
What does CAAD Process 365/2016-T decide regarding Stamp Tax on multi-unit residential properties?
CAAD Process 365/2016-T examines whether stamp duty under item 28.1 GTSD applies to a full ownership property whose total VPT exceeded €1,000,000 but whose individual parts capable of independent use each had VPT below that threshold. The taxpayer sought annulment of €18,743.05 in assessments, arguing Article 12(3) CIMI's separate registration requirement meant each part should be assessed independently. The Tax Authority defended the assessments, emphasizing that only autonomous units in horizontal property constitute separate properties under Article 2(4) CIMI, while full ownership properties with independent parts remain unified legal-tax entities. The case establishes critical precedent distinguishing property characterization for IMI versus stamp duty purposes.
How does Article 12(3) of the IMI Code affect Stamp Tax incidence on independent parts of urban buildings?
Article 12(3) of the IMI Code, which requires separate consideration of each floor or part capable of independent use in property registration, does not automatically create separate taxable properties for stamp duty incidence under item 28.1 GTSD. As clarified in Process 365/2016-T, this provision serves IMI valuation purposes and enables breakdown in collection documents per Article 119(1) CIMI, but does not override the fundamental property definition in Article 2 CIMI. For stamp duty, the decisive factor is whether parts constitute autonomous units in horizontal property (separate properties) or merely independent parts of full ownership properties (single property). Article 12(3) affects IMI calculation methodology without fragmenting full ownership properties into multiple taxable entities for stamp duty purposes.