Process: 370/2014-T

Date: December 2, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether Stamp Tax (Imposto de Selo) under entry 28.1 of the General Stamp Tax Table (TGIS) applies to undeveloped building land (terrenos para construção). A taxpayer challenged two Stamp Tax assessments of €11,640.90 each for 2012 and 2013 on land for construction with a taxable patrimonial value of €1,164,090.00. The claimant argued that entry 28.1, which taxes high-value properties exceeding €1 million, should only apply to residential properties with actual buildings, not bare land. The property in question was mere excavation without any construction, and its future use could be residential, commercial, or cultural. The claimant presented several key arguments: First, under Article 6 of the Real Estate Tax Code (CIMI), urban residential property requires an existing building or construction. Second, entry 28.1's rationale was to tax displays of wealth through properties intended for housing with substantially elevated patrimonial value, not undeveloped land. Third, subsequent legislative amendments in Law 83-C/2013 (State Budget 2014) explicitly clarified that land for construction should only be taxed if the building authorized or planned is for housing—demonstrating the original provision did not encompass such land. The claimant also raised constitutional challenges, arguing violation of the equality principle (Article 13 CRP) and contributory capacity requirements (Article 104(3) CRP). The taxpayer contended that the tax created unjustified double taxation since the same property ownership was taxed under both Real Estate Tax (IMI) and Stamp Duty for the same fiscal period. The case demonstrates that taxpayers can challenge Stamp Tax assessments through CAAD arbitration under the RJAT regime, and multiple assessments on the same property for different years can be combined in a single arbitration request when based on identical legal grounds.

Full Decision

ARBITRAL DECISION

Process No. 370/2014-T

I – Report

  1. On 6 May 2014, A…S.A., a legal person with tax identification number ..., with registered office at Rua ..., Lisbon, Tax Authority of Lisbon ..., (hereinafter referred to as the "Claimant"), pursuant to Decree-Law No. 10/2011, of 20 January (RJAT), and Order No. 112-A/2011, of 22 March, sought the constitution of an arbitral tribunal for a declaration of illegality of the acts of assessment of Stamp Duty (IS), with number 2014 ..., of 14.07.2013, in the amount of € 11,640.90 (eleven thousand six hundred and forty Euros and ninety cents) and number 2014 ..., of 17.03.2014, also in the amount of € 11,640.90 (eleven thousand six hundred and forty Euros and ninety cents) with annulment of the acts of assessment of IS, reimbursement of the tax paid unduly, and payment of the respective compensatory interest.

  2. In the Request for arbitral pronouncement, the Claimant opted not to designate an arbitrator.

  3. Pursuant to paragraph 1 of article 6 of the RJAT, by decision of the President of the Deontological Council, the undersigned was designated as sole arbitrator, who accepted the position within the legally stipulated period.

  4. The arbitral tribunal was constituted on 10 July 2014.

  5. The Tax and Customs Authority (AT) submitted its Response on 29 September 2014, accompanied by the administrative file (PA), and a request in which, taking into account the absence of any exception and the need for additional evidence production, expressed a position in favour of dispensing with the meeting provided for in article 18 of the RJAT.

  6. The Claimants were notified to pronounce themselves on the dispensation of the meeting of article 18 of the RJAT and on the need for production of pleadings; there being no response, the Tribunal, by order of 25 November 2014, decided to dispense with the meeting and pleadings, and to deliver a decision by 10 January 2015.

  7. The Request for Pronouncement

The Claimant contends, in summary:

  • The assessments of Stamp Tax relating to the "land for construction" registered in the property register under article ... of the parish of ... – the assessment with number 2014 ..., of 14.07.2013, notified to the Claimant on 05.02.2014, in the amount of €11,640.90 relating to the year 2012 and the assessment with number 2014 ..., of 17.03.2014, also in the amount of €11,640.90 suffer from the defects of violation of ordinary law, due to error concerning the prerequisites for application of entry 28.1 of the TGIS, and of constitutional law, due to violation of the principle of equality (article 13 of the CRP) in its aspects of contributory capacity and coherence of the tax system.

  • The conditions for cumulation of claims are met (art. 3 RJAT) because both assessments are of Stamp Tax, pursuant to the same entry 28.1, relating to the same property, by application of the same legal rules, and the arguments used in both cases are identical.

  • The land for construction of which the Claimant is the owner, registered in the property register of the same parish with the new article number ... (former article ..., before the administrative reorganization of parishes) and described in the Land Registry of ... under registration number ..., has a TTP of € 1,164,090.00.

  • According to article 6 of the Real Estate Tax Code (CIMI), the first requirement for an urban property to be considered as residential is the existence of a building or construction.

  • But the property in question is mere land for construction, a mere excavation without any building or construction erected on it, and it is not possible to state that its normal use will be residential use since on it there could be erected cultural spaces such as, for example, museums.

  • Neither can residential use be confused with usage coefficients (articles 38 and 41 of the CIMI): article 41 of the CIMI determines that "The usage coefficient (Ca) depends on the type of use of the built properties, in accordance with the following table (...).", which implies the existence of a built property, which is certainly not the present case, and the destination of this could be for housing or any other provided for in that article (commerce, services, warehouses or uncovered parking).

  • It is settled case law that for the calculation of the TTP of land for construction, the usage coefficient provided for in article 41 of the CIMI is not taken into account.

  • The rationale for the introduction of entry 28 in the TGIS is to tax displays of wealth manifested through properties intended for housing with a substantially elevated patrimonial value, resulting from the dichotomy between properties whose ownership is held by residents in national territory and those whose ownership is held by taxpayers resident in a territory or region subject to a clearly more favourable tax regime, from which it is intended to tax only properties with residential use, and not any property without distinction (as in the case of taxpayers resident in territory with a clearly more favourable tax regime)

  • The present property is owned by a taxpayer resident in national territory, is not intended for housing and on it there could be erected both residential dwellings as well as spaces for commerce, industry or services.

  • The fact that the legislator subsequently, through Law No. 83-C/2013, of 31 December, which approved the State Budget for 2014, altered the wording of entry 28.1 (which now reads «For a residential property or for land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the Real Estate Tax Code»), demonstrates that it did not intend to include land for construction in the version in force until 31.12.2013 (and under which the assessments now impugned were made).

  • The decisions of the Administrative Arbitration Centre and the case law of the SAT concerning this matter have been unanimous: entry 28.1 of the TGIS does not encompass land for construction.

  • The differentiated treatment of taxpayers results in a violation of the principle of contributory capacity which carries the material unconstitutionality of entry 28 of the TGIS (as already decided in arbitral process No. 218/2013-T) due to violation of articles 13 and 104, paragraph 3 of the CRP.

  • Unconstitutionality which vitiates all acts carried out under that legislation, including the present assessments, which should therefore be annulled pursuant to article 135 of the CPA and article 2, paragraph 1, subparagraph a) of the RJAT.

  • And there exists here a situation of internal double taxation because the object of taxation of this tax is the ownership of the real estate assets of the tax payer whose ownership is taxed both under Real Estate Tax as under Stamp Duty and for the same tax period, the fiscal years 2012 and 2013.

  • The taxation of wealth should contribute to equality between citizens (art. 104, paragraph 3 of the CRP) and the tax system aims at a fair distribution of income and wealth (art. 103 of the CRP), but whereas 10 properties with a TTP of EUR 100,000.00 each will be subject to taxation only under Real Estate Tax, the property with a TTP of EUR 1,000,001.00 will see its ownership be taxed not only under Real Estate Tax, but equally under Stamp Duty, which constitutes an unjustified and discriminatory tax burden between taxpayers with equal contributory capacity (ceteris paribus) and with patrimony of equal value.

  • The legislator, by imposing three distinct tax obligations on the same tax fact, violated the principle of equality in its aspect of the principle of coherence and systematicity of the tax system, it being noted that taxation under Stamp Duty ends up being more onerous than taxation under Real Estate Tax itself – in the municipality of ... the Real Estate Tax rates are 0.35 and 0.65 depending on whether the property is or is not valued in accordance with the rules of the CIMI; already the Stamp Duty rate is 1% for Stamp Duty of the year 2013.

  • There is a violation of the principle of coherence of the tax system - it would be more coherent to achieve this result through the increase of tax rates under Real Estate Tax for the said properties - enshrined in articles 13 and 104, paragraph 3 of the CRP, with unconstitutionality of entry 28 of the TGIS.

  1. The Response

The Respondent answers, in summary:

  • The present request for arbitral pronouncement has as its object the annulment of the assessment of Stamp Tax in the year 2012, in the amount of € 11,640.90, and the collection notice of Stamp Tax, relating to the 1st installment, of the year 2013, in the amount of €3,880.30,

  • But the Claimant cannot associate with the request for annulment of the assessment of Stamp Tax in the year 2012 the request for annulment of the tax relating to the year 2013, based on the collection notice of IS in the amount of €3,880.30, relating to the 1st installment, associating to this latter the request for annulment of the remaining tax relating to the year 2013 (which has not yet been notified to him concerning the 2nd and 3rd installments) quantifying its request for annulment relating to the year 2013 at € 11,640.90 (thus decided the arbitral tribunal in proc. No. 180/2013-T).

  • With respect to the taxation relating to 2012, and to the 1st installment of 2013, the assessment in question constitutes a correct interpretation and application of law to the facts, not suffering from the defect of violation of law, whether of the CRP or of the CIS, because:

  • With the legislative amendment introduced by Law No. 55-A/2012, of 29/10/2012, to article 1 of the CIS, and the addition of entry 28 to the TGIS, IS began to also apply to the ownership, usufruct or surface right of urban properties whose patrimonial tax value contained in the register, in accordance with the Real Estate Tax Code, is equal to or greater than €1,000,000.00.

  • In the absence of any definition, in the context of IS, of the concepts of urban property, land for construction and residential use, one must resort to the CIMI, mandatorily applied on a subsidiary basis by art. 67, paragraph 2, of the Stamp Tax Code.

  • One must take into account the concept of property in paragraph 1 of article 2 of the CIMI, as well as the provision of article 6, paragraph 1 of the CIMI, concerning the types of existing urban properties (integrating in this concept land for construction).

  • The mere constitution of a right of potential construction causes an increase in the value of the property in question, therefore the notion of use of the urban property is based on the valuation of properties, and article 45, paragraph 2, of the CIMI should be applied which mandates taking into account the "…value of authorized buildings", and therefore the usage coefficient provided for in art. 41 of the CIMI is applicable.

  • Thus, if it is clear that for purposes of determining the patrimonial tax value of land for construction one must take into account the usage coefficient in the context of valuation, its consideration cannot be ignored for purposes of applying entry 28 of the TGIS.

  • The legislator does not refer to properties intended for housing but to residential use, and the meaning of this expression should be found not in art. 6, paragraph 1, subparagraph a), of the CIMI but in art. 45 of the CIMI, which distinguishes the part of the land where the building to be constructed will be implanted and the area of free land; once the amount of the first part is calculated, the value determined is reduced to a percentage between 15% and 45% as provided for in paragraph 2 of said rule, by virtue of the construction not yet being effected.

  • The value of the land adjacent to the area of implantation is calculated in the same manner as the value of the area of free land and the area of surplus land is determined for purposes of any urban property.

  • It is possible, before the actual building of the property, to calculate and determine the use of the land for construction taking into account the urbanization and building regime, RJUE and Municipal Master Plans.

  • The Constitution of the Republic does not prevent differentiation of treatment, but only arbitrary, unreasonable, unjustified and without sufficient material foundation discriminations: entry 28 of the TGIS does not violate the CRP because it supports the different treatment of properties (housing/services/commerce) with the legislator's option to remove, for political and economic reasons, properties not destined for non-residential purposes.

  • Taxation under Stamp Duty complies with criteria of appropriateness, applying itself indistinctly to all holders of properties with residential use of value exceeding € 1,000,000.00, applying to the wealth embodied and manifested in the value of properties, being legitimized as a mechanism for obtaining revenue, and not violating the principle of proportionality by applying itself indistinctly to all holders of properties with residential use of value exceeding €1,000,000.00.

  • Because the assessments do not suffer from the defect of violation of law, whether of the CRP or of the CIS, the claimed relief should be judged unfounded and the Respondent Entity should be absolved of the claim.

  1. Object of the Claim

The legal issues raised in the assessment of the present request for assessment of the legality of the present assessments of Stamp Tax are:

a) What is the amount of tax susceptible of being covered by the present request for assessment of legality of the IS assessments relating to 2012 and 2013.

b) Whether a plot of land for construction should be considered a "property with residential use", for purposes of applying entry 28.1 of the General Table of Stamp Tax, added by Law No. 55-A/2012, of 29 October.

c) Whether the taxation provided for in entry 28 constitutes double taxation.

d) Constitutionality of entry 28 of the TGIS.

  1. Case Management

The arbitral tribunal is materially competent, pursuant to the provisions of articles 2, paragraph 1, subparagraph a) of the Legal Regime for Arbitration in Tax Matters.

The parties have legal personality and capacity and have standing in accordance with art. 4 and paragraph 2 of art. 10 of the Legal Regime for Arbitration in Tax Matters (RJAT), and art. 1 of Order No. 112-A/2011, of 22 March.

The process does not suffer from any nullity nor were any exceptions raised by the parties that would prevent the assessment of the merits of the case, so the conditions are met for the pronouncement of the arbitral decision.

II Grounds

  1. Proven Facts

Based on the documents submitted by the Claimant (Request for arbitral pronouncement and Documents No. 1 to 7 attached with the Request) and by the Respondent (Response), the following facts are established, with the proven facts being sufficient for the pronouncement:

12.1. A…S.A., a legal person with tax identification number ..., with registered office at Rua ... Lisbon, is the owner of the property located at Rua..., municipality and parish of ..., described in the Land Registry of ... under registration number ... and registered in the property register of the same parish with the new article number ... (Property Certificate/Document No. 2, attached by the Claimant with the initial request and Collection Documents, Nos. 1 and 3, attached with the Request).

12.2. The type of property subject of this case is "land for construction" with the following areas: total land area 9,294.300 m2; building implantation area, 3,754.6500 m2; gross construction area, 10,223.7300 m2; dependent gross area, 3,717.7200 m2 (Property Certificate and Documents Nos. 1 and 3 of collection, attached with the Request).

12.3. The property was registered in the register in 2003 and the current patrimonial value determined in accordance with the CIMI is € 1,164,090.00 (Property Certificate and collection documents).

12.4. On 5 February 2014, the Claimant was notified, through a collection document with number 2014 ..., to pay the Stamp Tax relating to the year 2012, with assessment dated 14/07/2013, in the amount of € 11,640.90 (Article 1, a), of the Request and Document No. 1 attached with the Request).

12.5. The tax collected was calculated as a result of applying the rate of 1% to the TTP of € 1,164,090.00 and the grounds contained in the DUC was that it was an assessment of Stamp Tax provided for in entry 28 of the General Table, carried out in accordance with the data contained in the urban property register of the property indicated below (Doc. No. 1, attached with the request).

12.6. On 17 March 2014, the Claimant was notified, through a document with number 2014 ..., to pay the 1st installment in the amount of € 3,880.30, during April 2014, of the Stamp Tax, whose assessment dated 17/03/2014, and relating to the year 2013 reached the amount of tax collected of € 11,640.90 (Article 1, b), of the Request and Document No. 1 attached with the Request).

12.7. The tax collected was calculated as a result of applying the rate of 1% to the TTP of € 1,164,090.00, with entry 28.1 of the TGIS being cited.

12.8. The present arbitral request was submitted on 6 May 2014.

  1. Unproven Facts

There are no unproven facts of relevance to the decision of the case.

  1. Legal Assessment

14.1. Regarding the Cumulation of Claims and Scope of the Claim

In the present case the Claimant intends to cumulate two requests for declaration of illegality of the same tax, relating to the same taxpayer, and the same property, land for construction, relating to the years 2012 and 2013, with the same legal rules being at issue, in the assessment of the incidence on the same property of Stamp Tax provided for in entry No. 28.1 of the General Table of Stamp Tax (TGIS), added by article 4 of Law No. 55-A/2012, of 29 October, therefore

Nothing opposes the cumulation of claims carried out in the present request for arbitral pronouncement, in observance of the principle of procedural economy, pursuant to article 3, paragraph 1, of the RJAT, so the tribunal will proceed to the assessment and decision on the merits of the case.

The only question that arises is whether, with respect to the tax relating to the year 2013, the object of the claim is the assessment for the entirety or only the amount subject to notification up to the date of presentation of the request.

This question will be taken up again at the end, for determination of the effect of the decision and value of the case.

14.2. Entry 28 of the General Table of Stamp Tax (TGIS)

14.2.1. Regime Approved by Law No. 55-A/2012, of 29 October

Entry 28 of the General Table of Stamp Tax, attached to the Stamp Tax Code (CIS), was added by article 4 of Law No. 55-A/2012, of 29 October, with the following content:

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

28-1 – For a property with residential use – 1%;

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

According to the amendments to the CIS, introduced by article 3 of Law No. 55-A/2012, of 29/10, the stamp duty provided for in entry 28 of the TGIS applies to a legal situation (paragraph 1 of article 1 and paragraph 4 of article 2 of the CIS), in which the respective taxpayers are those referred to in article 8 of the CIMI (paragraph 4 of article 2 of the CIS), on whom the burden of the tax falls (subparagraph u) of paragraph 3 of article 3 of the CIS).

The provisions of the CIS, in the wording given by Law No. 55-A/2012, both in article 4, paragraph 6 ("In the situations provided for in entry 28 of the General Table, the tax is due whenever the properties are located in Portuguese territory"), and in article 23, paragraph 7 ("In the case of tax due for the situations provided for in entry No. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI"), combined with article 1 of the CIMI, consider the property as the fact that triggers taxation whenever it reaches the value provided for in entry 28 of the Stamp Tax Table.

The provisions of Law No. 55-A/2012, of 29 October, regarding the new entry 28 of the General Table of Stamp Tax, entered into force on the day following the publication of the law.

Article 6 of Law No. 55-A/2012, provides for transitional provisions by virtue of which, in that first year of implementation, that is, 2012: the tax fact occurs on 31 October (when, in accordance with article 8 of the CIMI, applicable by referral from paragraph 4 of art. 2 of the CIS, it would be on 31 December); the taxpayer of the tax is the holder of the property (paragraph 4 of article 2 of the CIS) also on that 31 October; the patrimonial tax value to be used in the assessment of the tax corresponds to that which results from the rules provided for in the CIMI by reference to the year 2011; the assessment of the tax by the AT is carried out by the end of November 2012; the tax should be paid in a single installment, by the taxpayers, by 20 December of that year 2012.

As for rates, subparagraph f) of paragraph 1 of the same article 6, of Law No. 55-A/2012, provides for the application in 2012 of a rate lower than the rate of 1%, provided for in entry 28.1 of the TGIS for properties with residential use, distinguishing further between cases of properties valued in accordance with the Real Estate Tax Code (rate of 0.5%) and properties with residential use not yet valued in accordance with the Real Estate Tax Code (rate of 0.8%).

14.2.2. The Concept of Property with Residential Use

Entry 28.1 refers to "properties with residential use" but this concept is neither defined in any provision of the CIS nor is it used in the CIMI, the instrument to which article 67, paragraph 2, of the CIS expressly refers when matters not regulated in the CIS are at issue concerning entry 28.

This matter has been subject to assessment both by arbitral tribunals[1], and by administrative and tax courts, with a considerable number of decisions already delivered at the highest level [2], with a great unanimity of positions.

In order to agree with the assessment made in those different decisions, this tribunal will cite some excerpts from them as they adequately respond to issues raised in the present case.

Whereas the Claimants insist on the difference between residential urban properties and land for construction, the AT considers that the meaning of the fact that the legislator does not use the expression "properties intended for housing," but "residential use," must be found not in article 6, paragraph 1, subparagraph a) of the CIMI but in article 45 of the CIMI, because the interpretation of the expression "residential use" is based on the valuation of properties.

The AT considers that article 45, paragraph 2, of the CIMI, in mandating the consideration of the "…value of authorized buildings," refers to the usage coefficient provided for in art. 41 of the CIMI, to be taken into account in the application of entry 28 of the TGIS.

Analyzing precisely this type of argument, it was said in the arbitral decision rendered in proc. 53/2013-T: "With respect to article 45 of the CIMI, it has no relation whatsoever to the classification of properties, only indicating the factors to consider in the valuation of land for construction. What is weighed there, in making reference to the «building to be constructed» is the weighing of the intended use of the land, which, as was seen, is something that, in the context of the CIMI, does not imply use and occurs before it."[3]

Also the arbitral decisions Nos. 158/2913-T and 288/2013-T rejected the AT's thesis on the application of the methodology of valuation of properties in general to land for construction, which would make applicable to such properties the usage coefficient provided for in article 41 of the CIMI), in the following manner: "It is true that the CIMI determines the application, to the valuation of land for construction, of the methodology of valuation applicable to built buildings, incorporating into the value of the land the estimated value of the building to be constructed; and that this value is determined, in turn, by the type of use intended for the buildings to be erected. Put in simpler terms, the law (CIMI) says that to determine the patrimonial value of land for construction, one incorporates in it a part of the estimated value of the buildings to be constructed; and to estimate the value of the buildings to be constructed, one takes into account the intended use for them. Contrary to what the AT contends, it is precisely from the letter of these provisions that the inapplicability of the concept of "use" to land for construction results. The use taken into account, for valuation purposes, even of land for construction, is always and only the use of the buildings to be constructed. The intended use for the buildings to be constructed influences the patrimonial tax value of the land for construction, but nothing more. From the rule concerning the determination of the value of the properties that determines that in the value of land for construction is incorporated the estimated value of the buildings to be erected, which, in turn, is influenced by the intended future use of the same buildings, one cannot extract that the use in question is a use of the properties themselves, and this for two reasons: First, because this interpretation would be contrary to the very literal meaning of the provisions that mandate taking into account, in the valuation of land for construction, the use of the properties to be erected; and second, because the way the law mandates valuing a given patrimonial reality cannot be determinative of the nature or legal qualification of that same reality, bearing in mind, above all, the principle of typicality of tax incidence rules. The fact that the law mandates the application to a patrimonial reality of the same valuation methodology that is applied to another different reality does not mean that the first reality begins to share in the nature of the second. Thus, if it is true that the value of authorized or planned buildings influence the actual value of construction land, and therefore that value should be reflected in the patrimonial value of the same land, it does not follow from this that a property begins to have residential use by virtue of planned construction of residential properties on it, extracting this distinction clearly from the very provisions on valuation of the CIMI."

This tribunal also endorses the analyses contained in the excerpts reproduced.

And it considers that this interpretation is confirmed by the fact that the legislator, in the State Budget for 2014 (Law No. 83-C/2013, of 31 December), proceeded to alter the wording of entry 28.1, which now reads: "For a residential property or for land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the Real Estate Tax Code".

This alteration in wording clearly means that it was intended to change the text to encompass what was not previously included therein. Indeed, if anyone had intended, already previously, to include land for construction in the scope of entry 28 of the TGIS, such purpose would not only have found no adequate verbal expression in the letter of the law but would have been contradicted by the historical element, through the account of parliamentary proceedings.

The SEAF declarations transcribed above are proof of this: the legislator, in introducing this legislative innovation, considered the determinant expression of contributory capacity to be urban properties with residential use of elevated value (luxury), more precisely, of value equal to or greater than €1,000,000.00, on which a special stamp tax rate began to apply, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or surface right of luxury urban properties with residential use.

"For this reason, the criterion was the application of the new rate to urban properties with residential use, whose TTP is equal to or greater than €1,000,000.00"." (...)[4] ."The rationale for the measure designated as "special tax on urban residential properties of higher value" is based on the invocation of the principles of social equity and fiscal justice, calling to contribute in a more intense manner the holders of properties of elevated value intended for housing, making the new special rate apply to "houses of value equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residence (house, autonomous fraction or separate dwelling) translates a contributory capacity above average and, as such, susceptible of determining a special contribution to ensure fair distribution of the tax burden."

Now, if the legislator clearly revealed, it wanting to tax luxury houses affected to housing, it is not possible to extract from the letter of the law, with the wording approved in 2012, the interpretation that maintains that the taxation encompasses land for construction of buildings, even if intended for housing.

Citing again the Ruling of the SAT rendered in rec. No. 317/14: "residential use" always appears in the Real Estate Tax Code referred to "buildings" or "constructions," existing, authorized or planned, for the reason that only these can be inhabited, which is not the case for land for construction, which do not, in themselves, have the conditions for such, not being susceptible of being used for housing unless and until there is erected on them the construction authorized and planned for them (but in that case they will no longer be "land for construction" but another type of urban property – "residential," "commercial, industrial or for services" or "other" – article 6 of the CIMI)".

Therefore, the wording given to entry 28.1, in the State Budget for 2014, is clearly innovative, with no question arising as to its applicability to prior years. Which the legislator did not even attempt, it is repeated.

14.3. Conclusion Regarding the Legality of the Assessment

In view of the fact that the Claimant's property is land for construction, one is not dealing with a property with current residential use, and is not, therefore, subject to the incidence of Stamp Tax provided for in entry 28.1 of the TGIS, in the wording in force at the time of the facts.

For this reason, the assessments whose declaration of illegality is sought suffer from the defect of violation of that entry No. 28.1, due to error concerning the legal prerequisites, which justifies the declaration of their illegality and annulment (article 135 of the CPA).

  1. Matters Precluded from Consideration

Given what has been stated, the declaration of illegality of the assessments which are the subject of the present process due to incorrect application of entry 28 of the TGIS, in the wording in force at the time of the facts, in including land for construction in the concept of "properties with residential use," makes it unnecessary, given the provision of article 124 of the CPPT, subsidiarily applicable by virtue of the provision of article 29, paragraph 1, of the RJAT, to consider the questions of double taxation and unconstitutionality of article 28 of the TGIS, invoked by the Claimant in its Request.

  1. The Matter of the Effects of the Decision and Value of the Case

As noted above, article 6 of Law No. 55-A/2012, of 29 October, provides for transitional provisions by virtue of which, in the first year of implementation of the IS now provided for in entry 28 of the TGIS, the assessment of the tax by the AT is carried out by the end of November 2012 and the tax paid in a single installment, by the taxpayers, by 20 December of that year 2012.

As for subsequent assessments, article 23, paragraph 7 of the Stamp Tax Code governs: "In the case of tax due for the situations provided for in entry No. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI.

Article 113 of the CIMI provides, in turn, that "the tax is assessed annually, in relation to each municipality, by the central services of the General Directorate of Taxes, based on the patrimonial tax values of the properties and in relation to the taxpayers who appear in the registers on 31 December of the year to which it relates" (paragraph 1) and that this assessment "is carried out in the months of February and March of the following year" (paragraph 2).

And, as to the respective collection, "The services of the General Directorate of Taxes send to each taxpayer, by the end of the month prior to the month of payment, the competent collection document, with a breakdown of the properties, their parts susceptible to independent use, respective patrimonial tax value and the amount of tax attributed to each municipality of the location of the properties" (paragraph 1 of art. 119 of the CIMI, whose heading is "collection documents"), and the tax shall be paid in one installment (April), in case of an amount equal to or less than (euro) 250; two installments (April and November) in case of an amount exceeding (euro) 250 and equal to or less than (euro) 500 or in three installments (April, July and November), when its amount exceeds (euro) 500 (paragraph 1 of article 120 of the CIMI, in the wording given by Law No. 66-B/2012, which approved the State Budget for 2013).

From the provisions set forth above we believe it can be concluded that, after the transitional period corresponding to the first year of implementation, the assessment of Stamp Tax occurs, as does that of the Real Estate Tax, annually, during the months of February and March.

Another matter is payment which, depending on the value of the tax, will be carried out in one, two or three installments.

But, precisely, it is a matter of tax already assessed, although possibly not yet fully due.

The fact that taxpayers have not yet received the collection notice (DUC) relating to all installments does not mean that the assessment does not exist, the value of which is notified to them with the first notice of assessment, the document for payment of the 1st installment. There the TTP and the annual tax collected is indicated. Non-receipt of this document does not relieve the taxpayer of the burden of the tax nor of the duty to pay it within the legal periods established[5].

The assessment occurs from then on, and the obligation exists although not fully matured, being that paragraph 4 of art. 120 of the CIMI provides that "in the case provided for in paragraphs 1 and 3, non-payment of an installment or an annuity, within the established period, implies the immediate maturity of the remaining ones".

  1. Decision

On the grounds and in the terms set forth above, the arbitral tribunal decides to find the request for arbitral pronouncement well-founded with the consequent annulment of the assessments of Stamp Tax impugned, relating to the years 2012 and 2013.

  1. Value of the Case

In accordance with the provision of paragraph 2 of art. 315 of the CPC, in subparagraph a) of paragraph 1 of art. 97-A of the CPPT and also paragraph 2 of art. 3 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 23,281.80 (twenty-three thousand two hundred and eighty-one euros and eighty cents).

  1. Costs

For the purposes of the provision of paragraph 2 of art. 12 and paragraph 4 of art. 22 of the RJAT and paragraph 4 of art. 4 of the Regulation on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 1,224.00 (one thousand two hundred and twenty-four euros), in accordance with Table I attached to said Regulation, to be borne entirely by the Respondent.

Lisbon, 2 December 2014

The Arbitrator

Maria Manuela Roseiro

[Text drawn up by computer, in accordance with article 131, paragraph 5 of the Code of Civil Procedure (CPC), applicable by referral from article 29, paragraph 1, subparagraph e) of the Regime of Tax Arbitration. The wording of the present decision is governed by the orthography prior to the Orthographic Agreement of 1990, with possible exception of quotations].

[1] Within the scope of the CAAD it is possible to consult already a considerable number of decisions on the application of entry 28.1 to land for construction (cf. processes Nos. 42/2013-T; 48/2013-T; 49/2013-T; 53/2013-T; 75/2013-T; 144/2013-T; 158/2013-T; 180/2013-T; 189/2013-T; 191/2013-T; 215/2013-T; 231/2013-T; 288/2013-T; 310/2013-T).

[2] Cf. Rulings of the SAT (Tax Section), all rendered in 2014: 9 April (process Nos. 1870/13 and 48/14); 23 April (process Nos. 270/14; 271/14; 272/14); 14 May (process Nos. 1871/13, 46/14; 55/14; 274/14; 317/14); 28 May (process Nos. 395/14; 396/14 and 425/14); 2 July (proc. 467/14); 9 July (proc. 676/14), in www.dgsi.pt.

[3] The same decision also already concluded that "it must be presumed that the use of a different expression is intended to mean a different reality, so that, in good hermeneutics, «property with residential use,» cannot be a property merely licensed for housing or intended for that purpose (that is, it will not be enough that it be a «residential property»), having to be a property that already has effective use for that purpose." And "That this is the meaning of the expression «use,» in the same context of classification of properties made by the CIMI, is confirmed by article 3 in which, with respect to rural properties, reference is made to those that «are used or, in the absence of concrete use, have as normal use a use generating agricultural income,» which shows that use is concrete, effective. In fact, as is seen from the final part of this text, a property may have as intended use a particular use and be or not be used for it, which shows that use is, at the level of the connection of a property to a particular use, something more intense than mere intent and that may or may not occur, downstream of this and not upstream of it".

[4] Arbitral decision in proc. 219/2013-T and decisions cited therein (proc. 48/2013-T and 50/2013-T).

[5] Paragraph 3 of art. 119 of the CIMI provides that in case the taxpayer does not receive the document mentioned in paragraph 1 he should request a second copy at any tax authority office.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto de Selo) under clause 28.1 of the TGIS applicable to building land (terrenos para construção)?
Based on the arguments presented in this case, Stamp Tax under entry 28.1 of the TGIS should not apply to undeveloped building land (terrenos para construção). Entry 28.1 was intended to tax residential properties with actual buildings, not bare land. The claimant demonstrated that under Article 6 of the Real Estate Tax Code (CIMI), residential property requires an existing building or construction. The subsequent legislative amendment in Law 83-C/2013 (State Budget 2014) clarified that land for construction is only taxable if the building authorized or planned is specifically for housing, which supports the interpretation that the original version did not encompass undeveloped land. This case reflects consistent administrative arbitration case law holding that entry 28.1 does not apply to building land without constructed residential properties.
Can a taxpayer challenge Stamp Tax assessments on high-value properties through CAAD arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on high-value properties through CAAD (Centro de Arbitragem Administrativa) arbitration. This case demonstrates the procedure: the taxpayer filed a request for arbitral pronouncement pursuant to Decree-Law No. 10/2011 (RJAT - Legal Regime for Arbitration in Taxation) and Order No. 112-A/2011. The taxpayer can opt not to designate an arbitrator, in which case the President of the Deontological Council designates a sole arbitrator. The arbitral tribunal is then constituted, and the Tax and Customs Authority (AT) submits its response accompanied by the administrative file. Parties may waive the oral hearing provided in Article 18 of RJAT. CAAD arbitration provides an efficient alternative to judicial courts for contesting tax assessments, including seeking declarations of illegality, annulment of assessment acts, reimbursement of unduly paid taxes, and payment of compensatory interest.
Does applying Stamp Tax to building land violate the constitutional principle of equality under Article 13 of the Portuguese Constitution?
The claimant argued that applying Stamp Tax to building land violates Article 13 of the Portuguese Constitution (principle of equality) in multiple respects. First, it violates the principle of contributory capacity because it creates discriminatory treatment between taxpayers with equal economic capacity—ten properties worth €100,000 each are only subject to Real Estate Tax, while one property worth €1,000,001 is taxed under both Real Estate Tax and Stamp Duty, despite representing similar overall wealth. Second, it creates internal double taxation by taxing the same property ownership under both IMI and Stamp Duty for the same fiscal period. Third, it violates the principle of coherence and systematicity of the tax system (Article 104(3) CRP) by imposing multiple distinct tax obligations on the same taxable event. The claimant also cited prior arbitral case law (Process 218/2013-T) finding entry 28 of TGIS materially unconstitutional for similar violations of contributory capacity and equality principles.
What is the procedure for requesting arbitration at CAAD to contest Stamp Tax liquidation acts?
The procedure for requesting arbitration at CAAD to contest Stamp Tax liquidation acts follows the Legal Regime for Arbitration in Taxation (RJAT - Decree-Law No. 10/2011 of January 20, and Order No. 112-A/2011 of March 22). The taxpayer files a request for arbitral pronouncement (Pedido de Pronúncia Arbitral) identifying the contested assessment acts, the grounds for challenge (illegality, constitutional violations, etc.), and the requested relief (annulment, reimbursement, compensatory interest). The taxpayer may designate an arbitrator or opt not to, in which case one is appointed by the President of the Deontological Council. Once the arbitral tribunal is constituted, the Tax and Customs Authority submits its response with the administrative file. Parties may agree to dispense with the oral hearing under Article 18 of RJAT and proceed directly to written decision. The entire process provides a streamlined alternative to traditional court litigation for resolving tax disputes.
Can multiple Stamp Tax assessments on the same property be combined in a single CAAD arbitration request?
Yes, multiple Stamp Tax assessments on the same property can be combined in a single CAAD arbitration request, as demonstrated in this case. The taxpayer successfully cumulated two separate assessments (for fiscal years 2012 and 2013) in one arbitration proceeding. According to Article 3 of RJAT, the conditions for cumulation of claims are met when: (1) the assessments concern the same type of tax (both Stamp Tax), (2) they relate to the same property, (3) they involve application of the same legal rules (entry 28.1 of TGIS), and (4) the legal arguments are identical in both cases. This procedural efficiency allows taxpayers to challenge multiple related assessments simultaneously rather than filing separate arbitration requests for each tax year, reducing costs and avoiding inconsistent outcomes. The cumulation is particularly appropriate when the legal issue (such as whether entry 28.1 applies to building land) is identical across all contested assessments.