Process: 37/2015-T

Date: July 17, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 37/2015-T addresses a fundamental dispute regarding the application of Stamp Tax (Imposto de Selo) under Verba 28 of the General Stamp Tax Table (TGIS) to properties held in vertical ownership with independent residential units. The claimant challenged Stamp Tax assessments for 2013 on a building in Lisbon containing shops, commercial mezzanine, and multiple residential floors with independent use. The total tax patrimonial value (VPT) of all residential units combined was €1,754,789.10, though each individual unit's VPT ranged only between €158,996.88 and €200,548.75. The core legal issue centered on whether the €1,000,000 threshold triggering Stamp Tax liability should apply to the aggregate value of all residential units in a vertically-owned building, or only to individual units when each separately exceeds this threshold. The claimant argued that the Tax Authority illegally assessed Stamp Tax on each residential unit individually as if they were autonomous horizontal property fractions, despite none reaching the €1,000,000 threshold. The claimant contended that Article 7(2)(b) of CIMI requires separate VPT assessment for each independent floor or division, and that differential tax treatment between vertical and horizontal property violates constitutional equality principles, as horizontal property fractions would only be taxed if individually exceeding €1,000,000. The Tax Authority countered that the request was time-barred and the tribunal lacked competence, arguing that vertical ownership constitutes a single legal reality distinct from horizontal property's autonomous fractions. The AT maintained that different ownership structures justify different taxation approaches and that the assessments were legal. The tribunal needed to first resolve preliminary matters of competence and timeliness before addressing the substantive tax law question of whether ownership structure alone can justify disparate tax treatment of economically equivalent residential units.

Full Decision

I – REPORT

1 – A..., domiciled at..., no.... – ... Esq.... Lisbon, TIN[1]..., filed on 22/01/2015 a request for constitution of the arbitral tribunal, pursuant to the provisions of subparagraph a) of item 1 of article 2, item 1 of article 3 and subparagraph a) of item 1 of article 10, all of the RJAT[2], the AT[3] being summoned, with a view to assessing the legality of the tax assessment acts for Stamp Duty[4], relating to the year 2013 affecting a building with floors and divisions with independent use located at... no.... to... ...-... Lisbon, registered in the urban property matrix of the parish of... under article..., within the area of the Lisbon tax service....

2 – The request for constitution of the arbitral tribunal was made without exercising the option of designating an arbitrator, having been accepted by His Excellency the President of CAAD[5] and automatically notified to the AT on 23/01/2015.

3 – Pursuant to the provisions of item 1 of article 6 of RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable deadlines, Arlindo José Francisco was designated as arbitrator, who communicated to the Deontological Council and to the Centre for Administrative Arbitration his acceptance of the assignment within the regularly established deadline.

4 - The tribunal was constituted on 31/03/2015 in accordance with the provisions contained in subparagraph c) of item 1 of article 11 of RJAT, in the wording introduced by article 228 of Law no. 66-B/2012 of 31 December.

5 – With its request the claimant aims at the declaration of illegality of the tax assessment acts for item 28 of the TGIS[6] that affected the tax patrimonial value of the parts or independent units of the property already identified with residential allocation, all as appears more clearly in pages 1 and 2 of the request.

6- Invokes to this effect the following:

6.1- The illegality of the Stamp Duty assessments, supported, from its point of view, on the fact that the property in the year 2013 was in full or vertical ownership, being composed of two shops, mezzanine intended for commerce and the remaining part already referred to allocated to housing with a TPV[7] total of € 1,754,789.10.

6.2 – None of the floors or independent divisions allocated to housing has TPV equal to or greater than €1,000,000.00, its value individually fluctuates between €158,996.88 and €200,548.75.

6.3 – The TPV of the property in question was assessed separately, that is, by floor or independent division, as provided for in item 2 subparagraph b) of article 7 of CIMI[8], the TPV of each floor or division with independent use and residential allocation varying, as we have seen, between €158,996.88 and €200,548.75, therefore none of them has TPV equal to or greater than €1,000,000.00.

6.4 – The contested Stamp Duty was assessed on the TPV of each of the floors or independent divisions with residential allocation, individually, as if they were true autonomous fractions of horizontal property ownership, the legislator of item 28 of TGIS having made no distinction between the floors or independent divisions of vertical ownership and the autonomous fractions of horizontal property ownership.

6.5– The constitution of horizontal property ownership is merely a formal legal alteration that does not even require new assessment and to effect differentiated taxation, as the AT intends, would violate the principle of equality.

6.6- A property under vertical or horizontal ownership cannot, by itself, be an indicator of contributive capacity, equality of tax treatment deriving from law and thus, if a property under horizontal ownership would only pay Stamp Duty for the fractions that had tax patrimonial value equal to or greater than €1,000,000.00, the same should happen for properties under vertical ownership with floors or divisions with independent use.

6.7 – Also cites some decisions of the arbitral tribunals formed that go in this direction, concluding for the evident illegality of the assessments placed in crisis here.

7 – For its part the AT understands:

7.1- That the claimant is not right since the request is manifestly time-barred, indeed "doubly" time-barred, at the same time that it considers the tribunal materially incompetent, insofar as what is being challenged is not a tax act but merely the payment of an installment of a tax act.

7.2- The AT further states that, if that is not the tribunal's understanding, a property under full ownership and a property under horizontal ownership have different valuation and taxation from which different legal effects derive; while in horizontal ownership there is a division of full ownership and autonomy of each of the fractions, in the property under full ownership there is a single legal reality.

7.3 - Each part susceptible to independent use is not autonomous, by matrix, possessing a description of the property in its entirety.

7.4 – Concludes that the recognition of the tribunal's incompetence was already accepted within the scope of case 736/2014 of CAAD and that the tax acts placed in crisis here are legal, do not violate any legal or constitutional principle, which should be maintained, and the AT should be absolved from the request.

II – CASE MANAGEMENT

The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of RJAT.

The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented in accordance with articles 4 and 10 item 2 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

In its response the AT raised exceptions of "double" time-barment of the request and of incompetence of the tribunal.

Scheduled and held the meeting to which article 18 of RJAT alludes (21/05/2015), the parties pronounced themselves in the terms legally foreseen, namely on the exceptions invoked by the respondent and manifested the intention to produce written submissions, the tribunal having immediately notified the claimant and respondent to, within fifteen days, in this order and successively present them.

The date of 17/07/2015 was designated for the pronouncement of the arbitral decision.

It is verified in the SGP[9] the presentation of the submissions of the claimant, the same not happening with respect to the respondent.

In its submissions, in summary, the claimant not only maintains that the request was presented in time, but also understands that the tribunal is materially competent, since what is at issue is the declaration of the illegality of the tax assessment act.

III – GROUNDS

1 – The issues to be resolved of interest to the case are the following:

a) Firstly to know whether or not the tribunal is competent to assess the matter in dispute;

b) Should it be concluded that the tribunal is competent, to verify whether or not there is "double" time-barment of the request.

c) Being competent and should it be concluded that the request was filed in time, it must be resolved the issue of whether a property under full ownership with parts or divisions susceptible to independent use, with residential allocation should be subject to Stamp Duty on the TPV corresponding to the sum of each of the parts or independent divisions with residential allocation when equal to or greater than € 1,000,000.00 or whether the Stamp Duty should only apply to the TPV of each of the parts or independent divisions when some of them have TPV equal to or greater than that value.

d) Whether or not there is cause for annulment of the tax payments in question with the consequent right to compensatory interest, should it be decided that the Stamp Duty in question results from illegal assessment.

2 – Factual Matters

The relevant and proven factual matter based on the elements attached to the case is the following:

a) The claimant is the owner of an urban property under full ownership with parts or divisions susceptible to independent use, registered in the urban property matrix of the parish of... under article... within the area of the Lisbon tax service....

b) The claimant was notified for payment of the payments placed in crisis in the present case.

c) The property is composed of two shops, mezzanine intended for commerce and the remaining part, already referred to, allocated to housing with a TPV total of € 1,754,789.10.

d) The TPV of the divisions susceptible to independent use was assessed separately and none of them has TPV equal to or greater than € 1,000,000.00, only their sum is greater, as we have already seen.

e) The AT calculated the Stamp Duty individually to each of the floors or divisions susceptible to independent use, making their sum at the end, assessing the Stamp Duty to pay.

f) The claimant paid the assessed Stamp Duty.

3 – Of the Law

– Regarding the Exceptions raised by the AT

Although the exception of "double" time-barment of the request was raised in the first place, the tribunal will have to assess, first and foremost, its competence and concluding that it does not have it, from then on any other assessment is precluded.

In the AT's perspective, the claimant does not challenge a tax act, but the payment of an installment of a tax act, that is, a collection notice that corresponds to 1/3 of a tax act, which would not be legally possible and which absolutely does not appear in article 2 of RJAT, concluding for the incompetence of the arbitral tribunal.

For its part, the claimant, in its submissions, considers that what is at issue is the declaration of illegality of the assessment act, and that in the case of taxes paid in more than one installment, each of these may be subject to challenge whose deadline begins to run after the payment of each of them, and that the tribunal is competent pursuant to item 1 of article 2 of RJAT, concluding for the lack of merit of the exception.

It must be decided:

In truth, the declaration of illegality of the acts of assessment of taxes falls within the scope of subparagraph a) of item 1 of article 2 of RJAT, but what is truly at issue in the present request for pronouncement is the assessment of the collection of an installment of the tax assessed by the single assessment act. We follow the position advocated within the scope of case 736/2014 of CAAD, which, with due respect, is transcribed in part:

"… In order to give an answer to the issue that concerns us it is pertinent to have present the concept of assessment of taxes (article 97, item 1, subparagraph a) of CPPT) or acts of assessment of taxes (article 2, item 1, subparagraph a) of RJAT).

In the teachings of José Casalta Nabais "the assessment lato sensu, that is, as a set of all operations intended to determine the amount of the tax, comprises: 1) The subjective assessment intended to determine or identify the taxable person of the tax legal relationship, 2) The objective assessment through which the taxable matter of the tax is determined and, likewise, the rate to be applied in the case of plurality of rates is determined. 3) The assessment stricto sensu translated into the determination of the collection through the application of the rate to the taxable matter, and 4) the (eventual) deductions from the collection. As follows from the notion of assessment that is given to us by the illustrious professor, for each tax event there will be, in principle, a single assessment, by which the collection to be paid will be determined. That is, moreover, what follows from article 23, item 7, of the Stamp Duty Code when providing that "in the case of Stamp Duty owed for the situations provided for in item no. 28 of the general table, the tax is assessed annually (…)" applying, with the necessary adaptations, the rules contained in CIMI". In turn, article 113, item 2 of CIMI, applicable by reference of that provision of the Stamp Duty Code, provides that "the assessment (…) is made in the months of February and March of the following year". From the fact that, by force of law, the same may be paid in various installments, it does not follow that various assessments have occurred. The assessment is only one and only constitutes a lesive act, susceptible to being challenged which can only, evidently, be the object of a single challenge. Naturally, when the law provides for the payment of the amount of the assessment in various installments, staggered over time, the annulment of the tax act will have consequences with respect to all of them, causing the obligation to pay to cease or imposing the obligation of restitution and of interest at the charge of the ATA, in case of payment by the taxable person. What the law does not provide for, neither in arbitral proceedings nor in judicial proceedings is the intention to annul payment of installments per se since such effect would only follow from the annulment of the tax assessment act, which as we have seen, consists in the quantification of the total amount to be paid and which is only and solely a single tax act.

It is verified, thus, that the acts object of the present request for arbitral pronouncement are not included in article 2, item 1, subparagraph a), of RJAT, as they are not "acts of assessment of taxes" by which the exception of incompetence of the Arbitral Tribunal ratione materiae proceeds, which is absolute, pursuant to article 16, item 1 of the Code of Tax Procedure and Proceedings, applicable by force of article 29 of RJAT determining the absolution of the instance of the Respondent, pursuant to article 99, item 1 and 576, item 2, of the Code of Civil Procedure, also applicable ex vi of that provision of RJAT. Moreover, there would always be verified, with identical consequence, the unnamed dilatory exception deriving from the acts adjudged not constituting acts of assessment of taxes and we are, in reality, in the presence of unchallengeable acts in light of articles 97, item 1, of the Code of Tax Procedure and Proceedings and 95 of the General Tax Law, applicable by force of article 29 of the Legal Regime of Tax Arbitration."

Sharing this perspective, it is necessary to conclude for the incompetence of the tribunal to assess the request formulated, the dilatory exception adduced thus proceeding, thereby being deprived of knowledge of the remaining issues raised in the request.

IV – DECISION

Given the foregoing, the tribunal decides as follows:

a) Declare the exception of absolute incompetence of the tribunal well-founded, absolving the respondent from the instance.

b) Fix the value of the case at € 5,903.89 having in view the provisions contained in article 299 item 1 of CPC[10], 97-A of CPPT[11] and article 3 item 2 of RCPAT[12];

c) Fix the costs, under the powers of item 4 of article 22 of RJAT, in the amount of € 612.00 in accordance with the provisions of table I to which article 4 of RCPAT alludes, which shall be borne by the claimant.

Notify.

Lisbon, 17 July 2015

Text drawn up by computer, pursuant to article 131, item 5 of CPC, applicable by reference of article 29, item 1, subparagraph e) of RJAT, with blank lines and reviewed by me.

The sole arbitrator,

Arlindo José Francisco

[1] Acronym for Tax Identification Number
[2] Acronym for Legal Regime of Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for Stamp Duty
[5] Acronym for Centre for Administrative Arbitration
[6] Acronym for General Table of Stamp Duty
[7] Acronym for Tax Patrimonial Value
[8] Acronym for Municipal Tax Code on Properties
[9] Acronym for Case Management System
[10] Acronym for Code of Civil Procedure
[11] Acronym for Code of Tax Procedure and Proceedings
[12] Acronym for Regulations on Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

How does Stamp Tax (Imposto de Selo) under Verba 28 of TGIS apply to properties in vertical ownership with independent units?
Stamp Tax under Verba 28 of TGIS applies to residential properties with tax patrimonial value (VPT) equal to or exceeding €1,000,000. For properties in vertical ownership (full ownership) with independent residential units, the key dispute is whether this threshold applies to each individual unit separately or to the aggregate value of all residential units combined. According to Article 7(2)(b) of CIMI, the VPT for properties with floors or divisions susceptible to independent use is determined separately for each unit. The claimant argued that Stamp Tax should only apply when individual units reach €1,000,000, while the Tax Authority treated the combined residential portion as subject to taxation when the aggregate exceeded this threshold, assessing tax on each unit proportionally.
Can the €1,000,000 VPT threshold for Stamp Tax be applied to the global value of a building instead of individual units?
The central controversy in this case is whether the €1,000,000 VPT threshold for Stamp Tax can be applied to the global value of all residential units in a vertically-owned building (€1,754,789.10 total) rather than to individual units. The claimant contended this approach is illegal, arguing that since Article 7(2)(b) of CIMI mandates separate VPT assessment for each independent floor or division, and none individually reached €1,000,000 (ranging from €158,996.88 to €200,548.75), no Stamp Tax should be due. The claimant emphasized that the legislator made no distinction between vertical property units and horizontal property fractions, and differential treatment would violate equality principles. The Tax Authority maintained that vertical ownership represents a single legal reality justifying aggregation of values.
What is the difference between vertical property and horizontal property for Stamp Tax (IS) purposes in Portugal?
For Stamp Tax purposes under Verba 28 of TGIS, the fundamental difference lies in legal structure: horizontal property involves division of full ownership into autonomous fractions, each with separate matrix registration and independent legal existence, while vertical property (full ownership) maintains a single legal reality despite having floors or divisions with independent use capability. In horizontal property, each fraction is assessed and taxed independently, so Stamp Tax applies only to fractions individually exceeding €1,000,000 VPT. The Tax Authority argued this structural difference justifies different tax treatment for vertical property, potentially aggregating values of independent units. However, the claimant argued this distinction is merely formal and doesn't reflect different economic capacity, as both involve physically independent residential units, making differential taxation unconstitutional.
How is the taxable value (VPT) determined for independent floors and divisions under Article 7(2)(b) of the CIMI?
Under Article 7(2)(b) of the CIMI (Código do Imposto Municipal sobre Imóveis), the tax patrimonial value (VPT) for urban buildings with floors or divisions susceptible to independent use must be determined separately for each such floor or division. This means each independent residential unit, commercial space, or other distinct area receives its own individual VPT assessment rather than a single global valuation for the entire building. In this case, the property's residential units were indeed assessed separately, with individual VPTs ranging from €158,996.88 to €200,548.75, while commercial areas had separate assessments. The claimant relied on this separate assessment methodology to argue that Stamp Tax should only apply to units individually exceeding €1,000,000, not to the aggregate of all residential units.
What are the grounds for challenging Stamp Tax assessments on residential properties before the CAAD tax arbitration tribunal?
Grounds for challenging Stamp Tax assessments before CAAD (Centro de Arbitragem Administrativa) include: (1) illegality of the tax assessment act due to incorrect application of substantive tax law, such as misapplication of the €1,000,000 threshold in Verba 28 of TGIS; (2) violation of constitutional principles, particularly the equality principle when similar economic situations receive different tax treatment; (3) incorrect determination of taxable value or tax base; (4) procedural irregularities in the assessment process. The challenge must be filed within the statutory deadline under RJAT (Regime Jurídico da Arbitragem Tributária). In this case, the claimant challenged the assessments on substantive grounds (incorrect application of the VPT threshold to vertical property) and constitutional grounds (violation of equality between vertical and horizontal property owners). The Tax Authority raised preliminary objections regarding timeliness and tribunal competence that had to be resolved first.