Process: 372/2014-T

Date: January 12, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (372/2014-T) addresses a critical Stamp Tax dispute concerning the proper calculation method for taxing urban residential properties under Item 28 of Portugal's General Stamp Tax Table (TGIS). The applicant owned a building containing 12 independent residential units with individual taxable patrimonial values (VPT) ranging from €104,140 to €113,780, totaling contested assessments of €13,326.80 for 2013. The central legal issue revolves around whether Stamp Tax should be calculated based on each apartment's individual VPT or the aggregate VPT of all units within the property. The applicant argued that taxation must apply to each residential unit separately based on its own registered VPT, contending that the tax event is the value of each individual dwelling, not the concentration of multiple dwellings in one property. Additionally, the applicant raised constitutional challenges, alleging Item 28 violates equality principles (Article 13 CRP) by discriminating against residential property owners and Article 104(3) CRP requiring property taxation to contribute to citizen equality. Notably, the Tax Authority's reply aligned substantially with the applicant's interpretation, acknowledging that summing all unit values would contradict Item 28.1's literal wording and that the tax base should be each dwelling's individual taxable value rather than the total property value. The Authority argued alternative interpretations would violate constitutional legality principles (Article 103(2) CRP). The arbitral tribunal accepted the joinder of multiple assessment challenges under RJAT Article 3(1), finding common factual elements and legal interpretation issues. This case establishes important precedent regarding VPT calculation methodology for multi-unit residential buildings and the boundaries of Stamp Tax application under Portuguese tax law.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case no. 372/2014-T

Subject: IS - Item 28 of TGIS; TPC of urban properties with residential use.

  1. REPORT

1.1. A (Applicant), taxpayer no. …, having been notified of the Stamp Duty assessments to which correspond the numbers …1; …2; …3; …4; …5; …6; …7; …8; …9; …10; …11; …12 filed, on 09/05/2014, a request for arbitral pronouncement, in which it petitions for a declaration of illegality of the Stamp Duty assessment acts in the total amount of € 13,326.80.

1.2. His Excellency the President of the Deontological Council of the Centre for Administrative Arbitration (CAAD) designated on 30/06/2014 as arbitrator, Francisco Nicolau Domingos.

1.3. On 15/07/2014 the tribunal was constituted with a single arbitrator.

1.4. The Applicant, on 25/07/2014, attached the documents of the 2nd instalment of Stamp Duty, relating to the year 2013 and to which correspond the numbers …13; …14; …15; …16; …17; …18; …19; …20; …21; …22; …23 and …24.

1.5. In compliance with the provision of art. 17, no. 1 of the RJAT, the Tax Administration (TA), on 29/07/2014 was notified to, if it so wishes, present a reply and request the production of additional evidence. As well as, if it so wishes, to exercise the right to reply regarding the documents attached on 25/07/2014.

1.6. On 01/10/2014 the TA presented its Reply.

1.7. The Respondent was again notified on 25/11/2014 to exercise the right to reply regarding the content of the request presented on 25/07/2014.

1.8. The Respondent said nothing.

1.9. The tribunal on 09/12/2014, in the face of the absence of a request for the production of additional evidence and under the principle of free determination of evidence production proceedings and the tribunal's autonomy in conducting the process, determined the waiver of the hearing referred to in art. 17, no. 1 of the RJAT. Furthermore, it granted a period of 10 days for the presentation of submissions and scheduled the date for issuing the final decision for 12/01/2015.

1.10. The Applicant on 22/12/2014 presented its submissions, in which it reiterates all the factual and legal matters described in the request for arbitral pronouncement.

  1. CASE PROCESSING

The joinder of requests underlying the request for arbitral pronouncement is admissible, in that it has as its object assessment acts of the same tax, that of stamp duty. As also the identity between the factual matters is verified and because the merits of the request depend on the interpretation of the same principles and rules of law, cf. art. 3, no. 1 of the RJAT.

The TA in its reply argues that the Applicant did not attach to the proceedings the documents capable of supporting the request for arbitral pronouncement, as art. 10, no. 2, lit. d) of the RJAT requires. That is, it imputes to the request the omission of evidence elements of the alleged facts. However, upon consultation of the CAAD's case management system, it was verified that the Applicant accompanied its request with 12 Stamp Duty assessments (item 28.1) for the year 2013 and in which it appears as the passive subject. In this manner, the exception invoked by the TA cannot proceed.

Thus, the proceedings do not suffer from nullities, no issues have been raised that prevent the assessment of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to know and decide the request, and consequently the conditions for issuing the final decision are met.

  1. POSITIONS OF THE PARTIES

There are two positions in conflict, that of the Applicant, set out in the request for arbitral pronouncement and that of the TA in its reply.

Summarizing:

The Applicant submits that:

a) "Despite the failure to submit the property to the horizontal property regime (in the year 2013), the TA made as many stamp duty assessments as there are floors with residential use, clear evidence that subjection to this tax is not determined by the sum of the TPC of all such floors or divisions, but by the TPC of each one".

b) "…this is clear evidence that subjection to this tax is not determined by the sum of the TPC of all such property registrations, but by the TPC of each of them";

c) "The TPC set out in the register, for the purposes of applying the rule of incidence set out in item no. 28 of the TGIS, can only be that of the property registration corresponding to each one of the parts of the property with residential use and not that corresponding to the sum of all the TPCs of the floors that compose it";

d) "If subjection to the tax of item no. 28 of the TGIS of each floor with residential use should be determined by the sum of the TPCs of the other independent dwellings existing in the same property, the tax event would cease to be the value of the dwelling, but the concentration of several dwellings in a given property".

e) Concludes by arguing that: "…the law, nowhere, provides the reason for the singling out of holders of real estate property with residential use, for the purposes of subjecting them to stamp duty, as well as the exclusion of other holders of real estate property with non-residential use from the scope of the tax", whereby the rule of incidence of item no. 28 of the TGIS is unconstitutional "a) For violating the principle of equality, provided in art. 13 of the Constitution of the Portuguese Republic (…) which tells us that all citizens have the same social dignity and are equal before the law and that no one can be privileged, benefited, harmed, deprived of any right or exempt from any duty by reason, namely, of their economic situation; and b) For violating art. 104, no. 3 of the CRP, which tells us that taxation of property must contribute to equality among citizens".

Otherwise, the TA argues that:

a) "One cannot understand, under pain of violation of the very literal element of the rule, contrary to what results from the contested stamp duty assessments, how this value could by any title be understood as the sum of the taxpayer value of urban properties susceptible to residential use.";

b) "This interpretation has no correspondence with the wording of item 28.1 of the General Table.";

c) "If subjection of each dwelling to stamp duty of item 28 of the General Table should be determined as a function of the other dwellings of the property, as is implicit in the contested assessment, the tax event would cease to be the taxable value susceptible to being attributed to each dwelling, but the total taxable value of each urban property.";

d) "The concentration in each property of independent dwellings is not, therefore, susceptible to triggering the incidence of stamp duty on each of them.";

e) It further contends that any other interpretation would be unconstitutional as it would: "…violate (…) the letter and the spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided in art. 103, no. 2, of the Constitution of the Portuguese Republic (C.R.P.)".

  1. FACTUAL MATTERS

4.1. FACTS CONSIDERED PROVEN

4.1.1. The Applicant is the owner of a property to which corresponds the registration …, Urban, … (…)

4.1.2. Such property comprises 12 floors with independent use, registered in the urban property register of the parish of … (…) as follows:

a) Ground floor E, with a TPC of € 104,140, residential;

b) Ground floor D, with a TPC of € 104,140, residential;

c) 1st E, with a TPC of € 111,550, residential;

d) 1st D, with a TPC of € 111,550, residential;

e) 2nd E, with a TPC of € 111,550, residential;

f) 2nd D, with a TPC of € 111,550, residential;

g) 3rd E, with a TPC of € 112,660, residential;

h) 3rd D, with a TPC of € 112,660, residential;

i) 4th E, with a TPC of € 112,660, residential;

j) 4th D, with a TPC of € 112,660, residential;

l) 5th E, with a TPC of € 113,780, residential;

m) 5th D, with a TPC of € 113,780, residential.

4.1.3. The Applicant was notified of the Stamp Duty assessments for the year 2013, in relation to each of such registrations in the total amount of € 13,326.80 and which are broken down as follows:

a) Ground floor E, document …, in the amount of € 1,041.40;

b) Ground floor D, document …, in the amount of € 1,041.40;

c) 1st E, document …, in the amount of € 1,115.50;

d) 1st D, document …, in the amount of € 1,115.50;

e) 2nd E, document …, in the amount of € 1,115.50;

f) 2nd D, document …, in the amount of € 1,115.50;

g) 3rd E, document …, in the amount of € 1,126.60;

h) 3rd D, document …, in the amount of € 1,126.60;

i) 4th E, document …, in the amount of € 1,126.60;

j) 4th D, document …, in the amount of € 1,126.60;

l) 5th E, document …, in the amount of € 1,137.80;

m) 5th D, document …, in the amount of € 1,137.80.

4.1.4. The property identified in 4.1.1. was not constituted in horizontal property on 31 December 2013.

4.2. FACTS NOT CONSIDERED PROVEN

There are no facts with relevance to the arbitral decision that have not been given as proven.

4.3. REASONING FOR THE FACTUAL MATTERS CONSIDERED PROVEN

The facts given as proven originate in the documents used to evidence each of the alleged matters and whose authenticity was not challenged. Equally, the facts not contested were also taken as established.

  1. THE LAW

It results from the foregoing that there are two questions which the tribunal must decide, to ascertain whether subjection to the rule of incidence of art. 28 of the TGIS should be implemented by the TPC corresponding to each one of the parts, floors or divisions susceptible to independent use, or, if on the contrary, by the sum of the TPC of each of such parts. And, secondly, to determine whether the interpretation which concludes that there is incidence of Stamp Duty when the sum of the TPC of each one of the fractions susceptible to independent use exceeds € 1,000,000, violates the principle of equality provided in art. 13 of the CRP and that of legality of the essential elements of the tax provided in art. 103, no. 2, also of the CRP.

To accomplish this task, it is first necessary to seek the rule on whose parts the parties disagree in its interpretation.

Thus, art. 1, no. 1 of the Stamp Duty Code (CIS) and item 28 of the General Table of Stamp Duty (TGIS), provide that the following are subject to taxation: "Ownership, usufruct or right of surface of urban properties whose taxable value set out in the register, under the terms of the Municipal Tax Code on Real Estate (CIMI), is equal to or exceeding € 1,000,000 – on the taxable value used for the purposes of IMI:

28.1 - For property with residential use - 1 %..."[1].

First, it is necessary to examine the concept of "property with residential use" to which the rule under interpretation alludes and that of "taxable value used for the purposes of IMI". Now, as it is not possible to resolve the question by resorting to the CIS, it is by force of the provision of art. 67, no. 2 of the CIS necessary to apply the rules of the Municipal Tax Code on Real Estate (CIMI).

Consequently, art. 2 of the CIMI provides regarding the concept of property:

"1 - For the purposes of this Code, property is any portion of territory, including waters, plantations, buildings and constructions of any nature incorporated therein or situated thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above mentioned, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of a different asset or does not have a patrimonial nature.

2 - Buildings or constructions, although movable by nature, are deemed to have a character of permanence when devoted to non-transitory purposes.

3 - The character of permanence is presumed when the buildings or constructions are situated in the same location for a period exceeding one year.

4 - For the purposes of this tax, each autonomous fraction, under the horizontal property regime, is deemed to constitute a property."

Now, the concept of property in the context of IMI is, as we know, endowed with greater scope in relation to that set out in 204, no. 2 of the Civil Code (CC) and encompasses three elements, more specifically, one of a physical nature, the second of a legal character and the last of an economic nature, cf. JOSÉ MARTINS ALFARO, Municipal Tax Code on Real Estate – Commented and Annotated, Áreas Editora, 2004, p. 118 to 123. The first requires reference to a portion of territory, comprising, in particular, buildings and constructions incorporated therein with a character of permanence. The element of legal character requires that the thing, movable or immovable, belong to the assets of a natural or legal person. Thirdly, the element of an economic nature requires that the thing have economic value.

With regard to the concept of urban property, art. 6 of the CIMI describes its various categories, being fundamental for subsumption in each of them, the nature of the use, that is, the purpose to which it is intended. And nothing in the scheme of art. 6, no. 1, lit. a) of the CIMI prevents the classification of parts of a property in vertical ownership, with divisions or floors susceptible to independent use, with residential use, as "property with residential use". What is relevant, it is repeated, is its use. And a different conclusion is not possible to reach by interpreting art. 2, no. 4 of the CIMI which elevates each autonomous fraction in horizontal property to the category of property. In truth, also in this latter rule no foundation can be discerned to discriminate between properties in horizontal property and properties in vertical ownership, with floors or divisions susceptible to independent use, as regards their subsumption as urban and residential properties, in accordance with the entire scheme of item 28 of the TGIS. In other words, if the legislator did not treat differently properties in vertical ownership from those constituted in horizontal property, neither should the interpreter do so[2].

Quite the contrary, the property registration and the determination of the TPC clearly demonstrate the similarity of legislative treatment. Indeed, the parts endowed with economic independence must, each of them, be the subject of separate property registration and, consequently, the respective TPC should likewise be set out autonomously, cf. art. 2, no. 4, art. 7, no. 2, lit. b) and art. 12, no. 3 all of the CIMI. This has repercussion in the context of assessment, in that there will be one for each part, division or floor subject to separate use.

Reverting such interpretation to the present case, there are 12 floors of the property with independent residential use which, at the date of the tax event, 31 December 2013, were not yet constituted in horizontal property and, therefore, from the outset, there is no doubt that they should be classified as "urban property with residential use".

It is also important to clarify the other graphic aspect of the CIS item under interpretation, that is, the "taxable value for the purposes of IMI".

In this regard, as already described above, the CIMI provides for the autonomization of parts of urban property susceptible to independent use as regards property registration and the specification of the respective TPC. Such observation is equally valid regarding the consequent assessment, as provided by art. 113, no. 1 and art. 119, no. 1, both of the latter statute cited. Indeed, if the tax is assessed "…on the basis of the taxable values of the properties (our emphasis) and in relation to the passive subjects that appear in the registers (our emphasis)…" and the collection document must contain the "…specification of the properties, their parts susceptible to independent use, respective taxable value and the levy…", this means that, not only is the TPC for the purposes of application of item 28.1 of the TGIS to be considered that which is the subject of separate property registration, but also nothing prevents the qualification as "property with residential use" of parts, floors or divisions with independent use.

Now, if none of the Applicant's floors exceeded the TPC of € 1,000,000, the rule of incidence in question cannot be applied to the case sub judice, under pain of illegality.

The TA further argues that it would be unconstitutional, by violation of the principle of legality of the essential elements of the tax, the interpretation of item 28.1 of the TGIS different from that which concludes that the TPC relevant to such rule of incidence must be the global taxable value of the property and not that of each one of its independent parts. If this were so, the express reference to "taxable value used for the purposes of IMI" would not be understood. And this, there is no doubt, is the subject of autonomization in relation to each one of the parts susceptible to independent use. Equally, neither would we find argument for the issuance of autonomous assessment notes. Furthermore, given the express reference in art. 67, no. 2 of the CIS to the CIMI, as regards matters not regulated, the parts, floors or divisions with autonomy are classifiable under properties classified as urban and residential, cf. art. 2, 3 and 6, all of the CIMI. In this manner, it is understood that the said interpretation does not suffer from unconstitutionality.

Finally, if the tribunal has accepted the Applicant's request for a declaration of illegality of the Stamp Duty assessment acts, knowledge of the remaining defects attributed to the latter becomes moot, cf. art. 124 of the CPPT applicable by force of the provision in art. 29, no. 1 of the RJAT.

  1. DECISION

In these terms and with the reasoning described above, it is decided to rule the arbitral request well-founded, with the consequent expurgation from the legal order of the acts which are the subject of this case.

  1. CASE VALUE

The case value is set at € 13,326.80, under the terms of art. 97-A of the CPPT, applicable by force of the provision in art. 29, no. 1, lit. a) and b) of the RJAT and of art. 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs at the charge of the TA, in the amount of € 918, cf. art. 22, no. 4 of the RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings.

Notify.

Lisbon, 12 January 2015

The single arbitrator,

Francisco Nicolau Domingos

Text prepared by computer, under the terms of no. 5 of article 131 of the CPC, applicable by virtue of the reference in lit. e) of no. 1 of article 29 of Decree-Law no. 10/2011, of 20/01.

The drafting of this decision is governed by the old orthography

[1] In the wording in force at the date of the tax event.

[2] See in this sense the arbitral decision issued in case no. 50/2013 – T, of 29/10/2013.

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Portuguese General Stamp Tax Table (TGIS) and how does it apply to residential urban properties?
Item 28 (Verba 28) of the Portuguese General Stamp Tax Table (TGIS) imposes annual Stamp Tax on urban properties with residential use. Under Item 28.1, the tax applies to the taxable patrimonial value (VPT) of residential properties. The key interpretive issue in Case 372/2014-T concerned whether properties containing multiple independent residential units should be taxed based on each unit's individual VPT or the aggregate VPT of all units. Both parties agreed that the correct application requires taxation of each residential unit separately based on its own registered VPT, as the tax event is the value attributable to each individual dwelling, not the total property value.
How is the taxable patrimonial value (VPT) used to calculate Stamp Tax on urban properties with residential use in Portugal?
The taxable patrimonial value (VPT) serves as the tax base for calculating Stamp Tax on residential urban properties under Item 28.1 of TGIS. The VPT is the official value assigned to each property in the urban property register (matriz predial urbana). In Case 372/2014-T, involving a building with 12 residential units with individual VPTs ranging from €104,140 to €113,780, the tribunal addressed whether tax calculation should use each unit's individual VPT or sum all VPTs. The proper interpretation confirmed that each independent residential unit must be taxed separately based on its own registered VPT, ensuring the tax event remains the individual dwelling's value rather than aggregate property value.
Can taxpayers challenge Stamp Tax (Imposto do Selo) liquidations through CAAD tax arbitration proceedings?
Yes, taxpayers can challenge Stamp Tax (Imposto do Selo) liquidations through CAAD (Centro de Arbitragem Administrativa) tax arbitration proceedings. Case 372/2014-T demonstrates this process, where the applicant successfully filed a request for arbitral pronouncement (pedido de pronúncia arbitral) on May 9, 2014, challenging 12 Stamp Duty assessments totaling €13,326.80. The CAAD provides an alternative dispute resolution mechanism to judicial courts for resolving tax disputes, including Stamp Tax matters. The arbitral tribunal has jurisdiction to declare tax assessment acts illegal when they violate applicable law or constitutional principles.
What are the legal requirements for filing a request for arbitral pronouncement (pedido de pronúncia arbitral) against Stamp Tax assessments?
According to the Legal Regime for Tax Arbitration (RJAT), particularly Article 10, number 2, letter d), taxpayers filing a request for arbitral pronouncement against Stamp Tax assessments must attach supporting documents capable of substantiating the request. This includes the actual tax assessment notices (liquidações) being challenged. In Case 372/2014-T, the applicant initially submitted 12 Stamp Duty assessment documents and later supplemented with 12 additional assessments from the second installment. The Tax Authority attempted to argue the applicant failed to provide sufficient evidentiary documents, but the tribunal verified that proper documentation had been attached to the proceedings, allowing the case to proceed to merits evaluation.
How does the cumulation of claims (cumulação de pedidos) work in CAAD arbitration cases involving multiple Stamp Tax liquidations?
Under Article 3, number 1 of RJAT, the joinder (cumulação) of multiple requests in CAAD arbitration is admissible when several conditions are met: (1) the requests concern assessment acts of the same tax; (2) identity exists between the factual matters underlying each request; and (3) resolution of the merits depends on interpretation of the same legal principles and rules. Case 372/2014-T exemplifies proper cumulation, as the tribunal accepted the joinder of challenges to 24 separate Stamp Tax liquidations (initially 12, supplemented by 12 more) because all involved Item 28 Stamp Tax on residential properties, shared identical factual circumstances (multiple units in one building owned by the same taxpayer), and required interpretation of the same VPT calculation methodology under TGIS Item 28.1.