Process: 367/2017-T

Date: February 26, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 367/2017-T addressed whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to a vertical property with 86 independent residential units in Loulé. The real estate investment fund challenged €53,363.04 in Stamp Tax assessments for 2015, arguing that item 28.1 should apply individually to each autonomous unit rather than to the aggregate property value. The claimant maintained that since no individual unit exceeded the €1,000,000 VPT threshold (units ranged from €57,770 to €85,640), no Stamp Tax was due, despite the total property VPT of €6,344,561.63. The fund argued that treating vertical property differently from horizontal property (condominium regime) violates constitutional principles of fiscal equality, legality, and contributory capacity. The Tax Authority countered that vertical property, even with separately registered independent units, constitutes a single taxable entity requiring summation of all residential unit values. The claimant cited IMI Code provisions requiring separate valuation of economically independent parts and referenced consistent CAAD jurisprudence supporting unit-by-unit assessment. This case highlights the ongoing interpretative conflict regarding Stamp Tax application to properties in vertical ownership versus horizontal property regime.

Full Decision

ARBITRAL DECISION

1. Report

On 09-06-2017, A... – OPEN SPECIAL REAL ESTATE INVESTMENT FUND, Special Real Estate Investment Fund, legal entity no. ..., whose managing entity is B... – REAL ESTATE INVESTMENT FUND MANAGEMENT COMPANY, S.A., legal entity no. ..., with registered office at Rua ..., ..., ..., ...-... Lisbon, hereinafter referred to as Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of an arbitral tribunal with the aim, immediately, of declaring the illegality of the act of rejection of the gracious complaint no. ...2016..., and mediately, of declaring the illegality of the acts of Stamp Tax assessments in the total amount of 53,363.04 €, relating to the year 2015 and to item 28.1 of the General Table of Stamp Tax. Said assessments relate to the urban property registered in the urban property register of the parish of ..., municipality of Loulé, under article ..., constituted in vertical ownership and with eighty-six units susceptible of independent use, all intended for housing.

The request for constitution of the Arbitral Tribunal was accepted by the Honourable President of CAAD on 12-06-2017 and notified to the Respondent on the same date.

The Claimant did not proceed with the nomination of an arbitrator, wherefore, pursuant to article 6º no. 2 paragraph a) of the RJAT, Dr. Suzana Fernandes da Costa was designated as arbitrator by the President of the Deontological Council of CAAD on 03-08-2017, the nomination having been accepted within the legally provided deadline and terms.

On the same date, the parties were duly notified of this designation, having manifested no will to refuse the arbitrator's designation, in accordance with article 11º, no. 1, paragraphs a) and b) of the RJAT, combined with articles 6º and 7º of the Deontological Code.

Thus, in accordance with the provision in paragraph c), no. 1, of article 11º of the RJAT, the Arbitral Tribunal was constituted on 12-09-2017.

An order was issued on 12-09-2017 to notify the Respondent to, within 30 days, submit a response and, if it wished, request the production of additional evidence and send to the arbitral tribunal a copy of the administrative file within the deadline for submission of the response.

On 11-10-2017, the Claimant submitted its response and attached to the case file the administrative process.

On 13-10-2017, an order was issued ordering the notification of the Claimant to, within 10 days, make pronouncements on the request for waiver of the hearing provided for in article 18º of the RJAT, and waiver of arguments.

The Claimant attached to the case file the proof of payment of the subsequent arbitral fee on 10-11-2017.

On 22-11-2017, an order was issued deciding in favour of waiving the hearing provided for in article 18º of the RJAT, taking into account the position of the parties, pursuant to articles 16º paragraph c) and 19º of the RJAT and the prohibition of performing useless acts.

In the same order, 27-02-2018 was designated for the pronouncement of the arbitral decision.

The parties have legal personality and capacity and are legitimate (articles 4º and 10º no. 1 and 2 of the RJAT and article 1º of Ordinance no. 112-A/2011 of 22 March).

The arbitral request is timely, in accordance with article 10º no. 1 paragraph a) of Decree-Law no. 10/2011 of 20 January and article 102º no. 1 paragraph a) of the Code of Tax Procedure and Process.

The case does not suffer from nullities and no preliminary matters were raised.

2. Cause of action

The Claimant begins by stating that it submitted a gracious complaint of the Stamp Tax assessment of the year 2015 to the Finance Service of .... This complaint was expressly rejected. The AT based the rejection on the fact that the property in full or vertical ownership, even though it has parts or units susceptible of independent use and are registered separately, with patrimonial value individually attributed, constitutes a single entity. And for the AT, being the ownership of the property, without prejudice to co-ownership, of a single owner, its tax value is determined by the sum of the parts with residential use, and being this equal to or greater than 1,000,000.00 €, it is subject to Stamp Tax of item 28 of the General Table attached to the Stamp Tax Code.

The Claimant states that the property in question is described in the urban property register as a property in full ownership with floors or units susceptible of independent use, consisting of a building composed of 84 tourist apartments, four of which are T2 type and eighty are T1 type, having a basement and sub-basement, called "...", with 10 floors and with 86 floors or units with independent use, and with patrimonial tax value (VPT) of 6,344,561.63 €.

In the Claimant's view, the property in question is not subject to Stamp Tax of item 28.1 of the General Table of Stamp Tax (TGIS), since the VPT of each of the floors or autonomous units with residential use is not greater than 1,000,000 €. The Claimant states that the VPT of the floors or autonomous units vary between 57,770 € and 85,640 €.

The Claimant alleges that the fact that horizontal property is not constituted does not reflect any special contributory capacity of the respective owners in comparison with owners of identical properties but on which horizontal property has been constituted, in which case stamp tax of item 28.1 only applies when the fractions have VPT exceeding one million euros.

The Claimant makes reference to article 7º no. 2 paragraph b) of the Municipal Property Tax Code (IMI) which provides that in the case of a property with different economically independent parts, the value of the property corresponds to the sum of the values of its parts.

It is also referred to article 12º of the IMI Code which determines that each floor or part of property susceptible of independent use is considered separately in the land registry entry, which also distinguishes its respective VPT.

The Claimant concludes by stating that only the floors or parts susceptible of independent use, individually considered, which have residential use and with VPT, used for purposes of IMI, equal to or greater than 1,000,000 €, are capable of falling within the scope of the rule contained in item 28.1 of the TGIS.

The Claimant bases its position on arbitral decisions in cases no. 50/2013-T, 132/2013-T, 181/2013-T, 183/2013-T, 88/2014-T, 236/2015-T and 213/2016-T.

In its arbitral request, the Claimant alleges that the AT cannot sum the VPT determined individually for each floor of a property to reach a value greater than one million euros and apply stamp tax to it.

For the Claimant, the differentiated treatment of fractions or parts of a property based on the fact that it is not in horizontal property regime is violative of the Constitution of the Portuguese Republic (CRP).

The Claimant also makes reference to the principles of justice, fiscal equality and material truth, which imply that the AT treats fiscally in the same way what is equal and in a different way what is different, as concluded from the arbitral decision in case no. 218/2013-T.

The Claimant concludes by stating that the taxation of the property in question in Stamp Tax in the terms described violates the principles of legality and fiscal equality, as well as the principle of material truth, with the AT disregarding the principles of legal certainty, tax typicality and contributory capacity, provided for in the CRP, in the General Tax Law (LGT), IMI Code and Stamp Tax Code.

Finally, the Claimant requests the condemnation of the AT to reimburse the total amount paid by force of the disputed assessments, including the amounts paid in the fiscal execution processes, increased by indemnity interest until the date of reimbursement.

3. Response of the Respondent

The Tax and Customs Authority presented a response alleging that what expressly results from the wording of the law is that the legislator intended to tax with item 28 TGIS properties as a single legal-tax reality and that the Claimant is owner of a single property and not of autonomous fractions.

Thus, for the Respondent, the patrimonial value relevant for purposes of the tax of item 28 TGIS would be the total patrimonial value of the property and not the patrimonial value of each of the floors or units, even if they are susceptible of independent use.

According to the AT, what is at issue in the case are assessments that result from the direct application of a legal rule, which translates into objective elements, without any subjective or discretionary assessment.

The AT defends that the application of item 28 TGIS to situations such as those in the case does not constitute any violation of the principles of equality, legality or material truth, with no discrimination existing in the taxation of properties constituted in horizontal ownership and properties in full ownership with floors or units susceptible of independent use, or between properties with residential use and properties with other uses.

The AT bases its understanding on the binding information of 11-02-2013, which argues that for the proper and legal purposes, namely for purposes of taxation in the Stamp Tax, item 28.1 of the TGIS, properties constituted in full ownership are considered in their entirety as a single property.

The Respondent also refers to the decision of the arbitral tribunal in case no. 668/2015-T, which judged the request for arbitral pronouncement not well-founded maintaining in the legal order the Stamp Tax assessments of item 28.1 then disputed. It also makes reference to judgment no. 620/2015 of the Constitutional Court.

The AT concludes requesting the maintenance of the tax acts under review and that the lack of merit of the arbitral request be declared and absolution of the request.

In its response, the AT requested waiver of the hearing provided for in article 18º of the RJAT, as well as of the submission of arguments.

4. Factual matter

4.1. Proven facts:

Having examined the documentary evidence produced and the position of the parties contained in the case documents, the following facts are considered proven and relevant for the decision of the case:

The Claimant A... – OPEN SPECIAL REAL ESTATE INVESTMENT FUND, Special Real Estate Investment Fund, was, in 2015, owner of the urban property registered in the urban property register of the parish of ..., municipality of Loulé, under article ..., constituted in vertical ownership and with eighty-six units susceptible of independent use, all intended for housing, as per the property register attached to the case file as document 5.

The following Stamp Tax assessments of the year 2015 were issued to the Claimant, attached to the arbitral request as document 4:

  • assessment no. 2016... in the amount of 849.50 €, relating to the unit designated by the letter A of the property referred to above, whose VPT is 84,950.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 591.90 €, relating to the unit designated by the letter AA of the property referred to above, whose VPT is 59,190.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 632.70 €, relating to the unit designated by the letter AB of the property referred to above, whose VPT is 63,270.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 733.70 €, relating to the unit designated by the letter AC of the property referred to above, whose VPT is 73,370.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 581.20 €, relating to the unit designated by the letter AD of the property referred to above, whose VPT is 58,120.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 582.60 €, relating to the unit designated by the letter AE of the property referred to above, whose VPT is 58,260.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 589.70 €, relating to the unit designated by the letter AF of the property referred to above, whose VPT is 58,970.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 608.70 €, relating to the unit designated by the letter AG of the property referred to above, whose VPT is 60,870.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 849.10 €, relating to the unit designated by the letter AH of the property referred to above, whose VPT is 84,910.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 577.70 €, relating to the unit designated by the letter AI of the property referred to above, whose VPT is 57,770.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 627.10 €, relating to the unit designated by the letter AJ of the property referred to above, whose VPT is 62,710.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 694.00 €, relating to the unit designated by the letter AL of the property referred to above, whose VPT is 69,400.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 572.20 €, relating to the unit designated by the letter AM of the property referred to above, whose VPT is 57,220.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 583.30 €, relating to the unit designated by the letter AN of the property referred to above, whose VPT is 58,330.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 583.30 €, relating to the unit designated by the letter AO of the property referred to above, whose VPT is 58,330.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 583.30 €, relating to the unit designated by the letter AP of the property referred to above, whose VPT is 58,330.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 583.30 €, relating to the unit designated by the letter AQ of the property referred to above, whose VPT is 58,330.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 572.10 €, relating to the unit designated by the letter AR of the property referred to above, whose VPT is 57,210.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 632.70 €, relating to the unit designated by the letter AS of the property referred to above, whose VPT is 63,270.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 733.70 €, relating to the unit designated by the letter AT of the property referred to above, whose VPT is 73,370.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 581.20 €, relating to the unit designated by the letter AU of the property referred to above, whose VPT is 58,120.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 581.00 €, relating to the unit designated by the letter AV of the property referred to above, whose VPT is 58,100.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 581.00 €, relating to the unit designated by the letter AX of the property referred to above, whose VPT is 58,100.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 600.00 €, relating to the unit designated by the letter AZ of the property referred to above, whose VPT is 60,000.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 577.90 €, relating to the unit designated by the letter B of the property referred to above, whose VPT is 57,790.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 849.10 €, relating to the unit designated by the letter BA of the property referred to above, whose VPT is 84,910.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 492.60 €, relating to the unit designated by the letter BB of the property referred to above, whose VPT is 49,260.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 483.20 €, relating to the unit designated by the letter BC of the property referred to above, whose VPT is 48,320.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 694.00 €, relating to the unit designated by the letter BD of the property referred to above, whose VPT is 69,400.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 572.20 €, relating to the unit designated by the letter BE of the property referred to above, whose VPT is 57,220.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 487.10 €, relating to the unit designated by the letter BF of the property referred to above, whose VPT is 48,710.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 487.10 €, relating to the unit designated by the letter BG of the property referred to above, whose VPT is 48,710.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 487.10 €, relating to the unit designated by the letter BH of the property referred to above, whose VPT is 48,710.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 487.10 €, relating to the unit designated by the letter BI of the property referred to above, whose VPT is 48,710.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 487.10 €, relating to the unit designated by the letter BJ of the property referred to above, whose VPT is 48,710.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 479.60 €, relating to the unit designated by the letter BL of the property referred to above, whose VPT is 47,960.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 721.20 €, relating to the unit designated by the letter BM of the property referred to above, whose VPT is 72,120.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 581.20 €, relating to the unit designated by the letter BN of the property referred to above, whose VPT is 58,120.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 482.60 €, relating to the unit designated by the letter BO of the property referred to above, whose VPT is 48,260.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 469.20 €, relating to the unit designated by the letter BP of the property referred to above, whose VPT is 46,920.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 600.00 €, relating to the unit designated by the letter BQ of the property referred to above, whose VPT is 60,000.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 697.80 €, relating to the unit designated by the letter BR of the property referred to above, whose VPT is 69,780.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 694.00 €, relating to the unit designated by the letter BS of the property referred to above, whose VPT is 69,400.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 572.20 €, relating to the unit designated by the letter BT of the property referred to above, whose VPT is 57,220.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 616.20 €, relating to the unit designated by the letter BU of the property referred to above, whose VPT is 61,620.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 594.30 €, relating to the unit designated by the letter BV of the property referred to above, whose VPT is 59,430.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 632.70 €, relating to the unit designated by the letter BX of the property referred to above, whose VPT is 63,270.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 721.20 €, relating to the unit designated by the letter BZ of the property referred to above, whose VPT is 72,120.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 631.00 €, relating to the unit designated by the letter C of the property referred to above, whose VPT is 63,100.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 581.20 €, relating to the unit designated by the letter CA of the property referred to above, whose VPT is 58,120.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 581.00 €, relating to the unit designated by the letter CB of the property referred to above, whose VPT is 58,100.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 594.10 €, relating to the unit designated by the letter CC of the property referred to above, whose VPT is 59,410.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 511.90 €, relating to the unit designated by the letter CD of the property referred to above, whose VPT is 51,190.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 535.40 €, relating to the unit designated by the letter CE of the property referred to above, whose VPT is 53,540.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 685.40 €, relating to the unit designated by the letter CF of the property referred to above, whose VPT is 68,540.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 721.20 €, relating to the unit designated by the letter CG of the property referred to above, whose VPT is 72,120.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 581.20 €, relating to the unit designated by the letter CH of the property referred to above, whose VPT is 58,120.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 602.70 €, relating to the unit designated by the letter CI of the property referred to above, whose VPT is 60,270.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 856.40 €, relating to the unit designated by the letter CJ of the property referred to above, whose VPT is 85,640.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 856.40 €, relating to the unit designated by the letter CL of the property referred to above, whose VPT is 85,640.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 511.90 €, relating to the unit designated by the letter CM of the property referred to above, whose VPT is 51,190.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 511.90 €, relating to the unit designated by the letter CN of the property referred to above, whose VPT is 51,190.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 856.40 €, relating to the unit designated by the letter CO of the property referred to above, whose VPT is 85,640.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 856.40 €, relating to the unit designated by the letter CP of the property referred to above, whose VPT is 85,640.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 749.60 €, relating to the unit designated by the letter D of the property referred to above, whose VPT is 74,960.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 574.70 €, relating to the unit designated by the letter E of the property referred to above, whose VPT is 57,470.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 483.50 €, relating to the unit designated by the letter F of the property referred to above, whose VPT is 48,350.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 485.50 €, relating to the unit designated by the letter G of the property referred to above, whose VPT is 48,550.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 499.60 €, relating to the unit designated by the letter H of the property referred to above, whose VPT is 49,960.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 479.10 €, relating to the unit designated by the letter I of the property referred to above, whose VPT is 47,910.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 765.50 €, relating to the unit designated by the letter J of the property referred to above, whose VPT is 76,550.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 558.40 €, relating to the unit designated by the letter L of the property referred to above, whose VPT is 55,840.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 578.00 €, relating to the unit designated by the letter M of the property referred to above, whose VPT is 57,800.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 584.00 €, relating to the unit designated by the letter N of the property referred to above, whose VPT is 58,400.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 597.50 €, relating to the unit designated by the letter O of the property referred to above, whose VPT is 59,750.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 857.80 €, relating to the unit designated by the letter P of the property referred to above, whose VPT is 85,780.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 586.30 €, relating to the unit designated by the letter Q of the property referred to above, whose VPT is 58,630.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 627.10 €, relating to the unit designated by the letter R of the property referred to above, whose VPT is 62,710.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 694.00 €, relating to the unit designated by the letter S of the property referred to above, whose VPT is 69,400.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 572.20 €, relating to the unit designated by the letter T of the property referred to above, whose VPT is 57,220.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 591.90 €, relating to the unit designated by the letter U of the property referred to above, whose VPT is 59,190.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 591.90 €, relating to the unit designated by the letter V of the property referred to above, whose VPT is 59,190.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 591.90 €, relating to the unit designated by the letter X of the property referred to above, whose VPT is 59,190.00 €, payable in three installments: April, June and September 2016;

  • assessment no. 2016... in the amount of 591.90 €, relating to the unit designated by the letter Z of the property referred to above, whose VPT is 59,190.00 €, payable in three installments: April, June and September 2016.

None of the floors or units with independent use possess a patrimonial tax value greater than one million euros, as per the property register attached to the case file.

The Claimant submitted a gracious complaint of the above-indicated assessments with the Finance Service of Loulé ....

On 16-03-2017, the Claimant was notified of the decision rejecting the gracious complaint submitted, as per document 3 attached to the arbitral request.

The Claimant proceeded with the payment of all installments of the Stamp Tax assessments referred to above, as per document 4 attached to the arbitral request.

No other facts with relevance for the decision of the case were proven.

4.2. Reasoning of proven factual matter:

Regarding the proven facts, the arbitrator's conviction was based on documents attached to the case file by the Claimant, namely the assessments, the property register and the proof of payment.

4.3. Unproven facts

There are no other facts with relevance for consideration of the merits of the case that were not proven.

5. Matters of law:

5.1. Subject and scope of the present case

It constitutes a question to be decided in the present case whether item 28.1 of the TGIS, in the case of properties not constituted in horizontal ownership regime, applies to the sum of the patrimonial tax value attributed to the different parts or floors (global VPT), or rather to the patrimonial tax value of each part of the property with independent economic use.

On this question have already pronounced themselves, among others, the decisions of CAAD issued in cases number 261/2017-T, 260/2017-T, 253/2017-T, 245/2017-T, 164/2017-T, 147/2017-T, 146/2017-T, 123/2017-T, 93/2017-T, 82/2017-T, 529/2016-T, 507/2016-T, 495/2016-T, 485/2016-T, 471/2016-T, 466/2016-T, 465/2016-T, 464/2016-T, 450/2016-T, 439/2016-T, 438/2016-T, 433/2016-T, 431/2016-T and 4258/2016-T, and the judgments no. 0820/17, 0498/16, 0560/16, 01447/16, 01394/16, 01219/16, 0711/16, 0166/16, 047/15, 01352/15, 01344/15, 01534/15 and 01425/14 of the Supreme Administrative Court (STA).

5.2. Question of the patrimonial tax value relevant for application of item 28.1 of the TGIS

According to the AT, in a property in vertical ownership (or not constituted in horizontal ownership regime) the criterion for determining the applicability of the stamp tax is the global patrimonial tax value of the floors and units intended for housing.

Already for the Claimant the subjection to the stamp tax contained in item no. 28.1 of the TGIS should be assessed not by the total value of the property but by the value attributed to each of the parts with independent use, in accordance with the respective VPT.

Let us examine:

Law no. 55-A/2012, of 29 October, added item 28 to the General Table of Stamp Tax (TGIS), with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial tax value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the patrimonial tax value used for purposes of IMI:

28.1 – Per property with residential use – 1% (...);"

The State Budget Law for 2014, Law no. 83-C/2013 of 31-12, amended item 28.1, and the text of the item came to read as follows:

"28.1 – Per residential property or for construction land whose authorized or planned construction is for housing, in accordance with the Municipal Property Tax Code – 1%".

Item 28.1 TGIS contains a concept that is not used in any other tax legislation which is that of "property with residential use".

For its part, article 67º, no. 2 of the Stamp Tax Code, added by the referred Law, provides that "on matters not regulated in the present code relating to item 28 of the General Table, the CIMI applies subsidiarily."

The rule of applicability refers to urban properties, the concept of which results from the provision of article 2º of the CIMI, and the determination of VPT obeys the provisions of article 38º and following of the same code.

For its part, article 6º of the CIMI indicates the different types of urban properties, and determines that "residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal destination each of these purposes." (see paragraph a) of no. 1 of article 6º CIMI).

It must thus be concluded that for the legislator it is irrelevant whether the property is in vertical ownership or in horizontal ownership, what is relevant is only the material truth underlying its existence as an urban property and its use.

Since the Stamp Tax Code refers to the IMI Code, we should consider that the registration in the register of properties in vertical ownership, constituted by different parts, floors or units with independent use, obeys the same registration rules as properties constituted in horizontal ownership.

From this it follows that the respective IMI, as well as the Stamp Tax, are assessed individually in relation to each of the parts. For that reason, the legal criterion for defining the applicability of the new tax must be the same.

Thus, as concluded in judgment no. 50/2013-T of CAAD and in judgment no. 047/15 of STA, according to which "if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of applicability of item 28.1 of the TGIS".

It thus results from the law that stamp tax of item 28.1 of the TGIS would only be applicable if some of the parts, floors or units with independent use presented a VPT greater than one million euros (1,000,000.00 €), which does not occur in the present case.

The criterion defended by the AT, which takes into account the sum of the parts, with the argument that the property would not be constituted in horizontal ownership regime, finds no legal support and is contrary to the criterion that results from the IMI Code and which applies by reference in the Stamp Tax.

Furthermore, the law itself expressly establishes, in the final part of item 28 of the TGIS, that the Stamp Tax to apply to urban properties of value equal to or greater than one million euros (1,000,000.00 €) – "on the patrimonial tax value used for purposes of IMI."

Indeed, the patrimonial tax value relevant for purposes of application of item 28.1 of the TGIS is the VPT of the part, floor or unit with independent use with residential use, as concluded, among others, in judgment no. 047/15 of the Supreme Administrative Court.

In accordance with the interpretation upheld above, the taxation of parts with independent use of value less than one million euros is not covered by the rule of applicability; therefore, its taxation violates the principle of equality, more specifically in its corollaries of contributory capacity and fiscal proportionality.

As to the principle of equality, we conclude, as in judgment of CAAD no. 218/2013-T, stating that "the Stamp Tax assessment now under review manifestly violates the principle of fiscal equality provided for in article 13º of the CRP, because: i) it is based on a rule that treats taxpayers that are in identical situations in a very different way, the measure of the difference not being assessed by their real contributory capacity; ii) it is based on an arbitrary legal solution devoid of any rational foundation."

In the case at hand, the property in question is in vertical ownership and contains eighty-six floors and units with independent use intended for housing, as proven above. Given that none of the floors intended for housing has patrimonial tax value equal to or greater than one million euros (1,000,000.00 €), as results from the documents attached to the case file, it is concluded that the legal presupposition for applicability of the Stamp Tax provided for in item 28 of the TGIS is not met.

Looking now at the ratio legis of the provision in question in item 28.1 TGIS and citing judgment CAAD no. 50/2013-T "the legislator in introducing this legislative innovation considered as the determinant element of contributory capacity urban properties with residential use of high value (luxury), more precisely, of value equal to or greater than one million euros (1,000,000.00€), on which a special rate of stamp tax came to apply, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies 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 VPT is equal to or greater than one million euros (1,000,000.00 €). Clearly the legislator understood that this value, when attributed to a dwelling (house, autonomous fraction or floor with independent use) expresses a contributory capacity above the average and, as such, capable of determining a special contribution to ensure just distribution of fiscal burden." Already when applied to a part or fraction that does not exceed the referred value of one million euros the rule of applicability will not be met.

The principle of fiscal equality determines that tax treatment be given in the same way to what is equal and in a different way to what is different. Now, the differentiated treatment of fractions or parts of a property is not justified by the sole fact that it is not already in horizontal ownership regime, provided that the fractions or parts have independent use.

As referred in judgment CAAD of case no. 218/2013-T, "The principle of fiscal equality is based on the general principle of equality provided for in article 13º of the CRP, from which results the principle of contributory capacity which, by constitutional imperative, is the presupposition and criterion of taxation."

Professor Casalta Nabais states that the principle of fiscal equality has inherent above all "the idea of generality or universality, in accordance with which all citizens are bound by compliance with the duty to pay taxes, and of uniformity, requiring that such duty be assessed by a single criterion — the criterion of contributory capacity. This thus implies equal tax for those with equal contributory capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those with different contributory capacity in proportion to this difference (vertical equality)" (Casalta Nabais, Tax Law, 5th edition, Coimbra, 2009, page 151-152).

In judgment CAAD of case no. 50/2013-T it can be read that "the tax legislator cannot treat equal situations differently. Now, if the property were in horizontal ownership regime, none of its residential fractions would suffer applicability of the new tax."

Thus, and in line with the case law of the Supreme Administrative Court and CAAD, we conclude for the violation of the principle of fiscal equality and contributory capacity and, as such, for the merit of the request.

6. Other requests

The Claimant petitions to be reimbursed "for the full amount paid by force of the Assessments described in the present p.i., including amounts paid through fiscal execution proceedings of which it was subject, increased by indemnity interest that may be owed until the date of that reimbursement".

The Respondent in its response said nothing regarding the amounts paid through fiscal execution proceedings instituted against the Claimant.

In this context, it should be noted that among the competencies of the Arbitral Tribunals functioning in CAAD defined in article 2º no. 1 of the RJAT and Ordinance no. 112-A/2011 of 22 March, do not include competencies to assess acts performed in fiscal execution, but only to declare the illegality of acts of tax assessments, self-assessments, withholding at source and payment on account, in addition to acts of fixing of taxable matter and acts of fixing of patrimonial values.

Thus, the acts of assessment of default interest and costs in fiscal execution proceedings are not of any of the categories indicated, wherefore this Arbitral Tribunal is not competent to assess their legality, and this part of the request is not entertained, as already decided by decisions of CAAD in cases no. 525/2016-T and no. 351/2017-T.

7. Indemnity interest

The Claimant requests the condemnation of the AT to return the indebitedly paid tax, increased by indemnity interest.

Article 43º no. 1 of the LGT establishes that «indemnity interest is owed when it is determined, in gracious complaint or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally owed».

In the case at hand, the error affecting the Stamp Tax assessments is attributable to the Tax and Customs Authority which performed the assessment acts on its own initiative, wherefore the Claimant is entitled to receive indemnity interest from the date of payment of each of the amounts until reimbursement, at the legal supplementary rate, in accordance with articles 43º, no. 1 and 4, and 35º, no. 10, of the LGT, article 559º of the Civil Code and Ordinance no. 291/2003, of 8 April.

As results from the referred article 43º no. 1 of the LGT, the right to indemnity interest depends on payment of a tax debt in an improper amount.

Suffering from illegality the Stamp Tax assessments, indemnity interest is owed from the date of payment until full reimbursement by the AT, in accordance with articles 43º of the LGT and 61º no. 2 of the CPPT.

8. Decision

In view of the above, it is determined:

To judge the request filed by the Claimant in the present tax arbitral process wholly well-founded, as to the illegality of the Stamp Tax assessments, relating to the year 2015, object of the present arbitral request;

To judge well-founded the request for condemnation of the Tax and Customs Authority to reimburse to the Claimant the amount of indebitedly paid tax, increased by indemnity interest in accordance with legal terms, from the date on which such payment was made until the date of full reimbursement thereof;

Not to entertain the request for reimbursement of the amounts paid by the Claimant, as default interest and costs (1,556.44 €), in fiscal execution proceedings, whereupon the Tribunal is incompetent ratione materiae to assess this question, absolving of the instance the Respondent in the respective part;

To condemn the Claimant and the Respondent in the payment of the costs of the present case, in the proportion of their respective failure.

9. Value of the case:

In accordance with the provision of article 306º, no. 2, of the CPC and 97º-A, no. 1, paragraph a) of the CPPT and 3º, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at 53,363.04 €.

10. Costs:

In accordance with article 22º, no. 4, of the RJAT, and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 2,142.00 €, at the charge of the Claimant (2.9%) and the Respondent (97.1%), in accordance with article 22º no. 4 of the RJAT.

Notify.

Lisbon, 26 February 2018.

Text prepared by computer, in accordance with article 138º, no. 5 of the Code of Civil Procedure (CPC), applicable by reference of article 29º, no. 1, paragraph e) of the Tax Arbitration Rules, revised by me.

The sole arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

What is Stamp Tax (Imposto de Selo) under clause 28.1 of the Portuguese General Stamp Tax Table (TGIS)?
Stamp Tax under item 28.1 of the TGIS is an annual tax levied on urban properties intended for residential use with a patrimonial tax value (VPT) equal to or greater than €1,000,000. The rate varies based on the property value, applying to ownership rights over high-value residential real estate. This tax aims to capture additional revenue from luxury residential properties.
How does vertical property (propriedade vertical) affect Stamp Tax liability on urban buildings in Portugal?
Vertical property (propriedade vertical) creates significant Stamp Tax disputes because the Tax Authority treats the entire building as a single taxable unit by aggregating all residential unit values, while taxpayers argue each independent unit should be assessed separately. Unlike horizontal property (condominium regime) where autonomous fractions are clearly distinct legal entities, vertical property involves floors or units susceptible of independent use but without formal condominium constitution, creating interpretative uncertainty about whether item 28.1 applies to individual units or the aggregate property.
Can a real estate investment fund challenge Stamp Tax assessments through CAAD arbitration?
Yes, real estate investment funds have legal standing to challenge Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa) arbitration. Process 367/2017-T confirms that investment funds, as taxpayers subject to Stamp Tax on properties they own, possess legal personality, capacity, and legitimacy under articles 4 and 10 of RJAT to request arbitral review of tax assessments and gracious complaint rejections within the statutory deadlines established in the Tax Procedure Code.
What are the grounds for contesting Stamp Tax liquidation on properties with multiple independent units used for housing?
Grounds for contesting Stamp Tax on properties with multiple independent units include: (1) violation of fiscal equality principles by treating vertical property differently from horizontal property; (2) incorrect legal interpretation requiring individual unit assessment rather than aggregate valuation; (3) breach of contributory capacity principles when individual units do not exceed the €1,000,000 threshold; (4) reference to IMI Code provisions mandating separate valuation of economically independent parts; (5) violation of legality and typicality principles; and (6) established CAAD jurisprudence supporting unit-by-unit assessment in cases 50/2013-T, 132/2013-T, 181/2013-T, 183/2013-T, 88/2014-T, 236/2015-T, and 213/2016-T.
What was the outcome of CAAD process 367/2017-T regarding Stamp Tax on a vertical property in Loulé?
The complete arbitral decision for CAAD process 367/2017-T is not fully provided in the excerpt, which ends during the Tax Authority's response. However, the case involved a real estate investment fund contesting €53,363.04 in Stamp Tax assessments on a vertical property in Loulé with 86 independent units. The arbitral tribunal was constituted on 12-09-2017 with arbitrator Dr. Suzana Fernandes da Costa, and the decision deadline was set for 27-02-2018. The claimant sought declaration of illegality of both the gracious complaint rejection and the underlying assessments based on constitutional and statutory interpretation arguments.