Process: 373/2016-T

Date: November 25, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This tax arbitration case (Process 373/2016-T) addresses whether Stamp Tax under Item 28.1 of the General Stamp Tax Table (Tabela Geral do Imposto do Selo - TGIS) applies to an urban property converted from residential to educational use. The claimant, an investment fund, challenged a Stamp Tax assessment of €14,955.60 for 2015 on a property valued over €1,000,000 that operates as a school. The core legal dispute centers on the interpretation of 'residential property' under Item 28.1 TGIS and Article 6 of the IMI Code. The claimant argues the property should not be taxed because: (1) it has no residential use license; (2) it holds construction permits specifically for educational use (school equipment); (3) it currently operates as a school under provisional authorization; and (4) its 'normal destination' is educational services, not residential, as required by Article 6(2) of the IMI Code. The Tax Authority counters that the property remains registered in the land registry as residential with a patrimonial value exceeding €1,000,000, triggering automatic application of Item 28.1 TGIS regardless of actual use. The AT maintains this interpretation reflects a valid legislative presumption of taxpaying capacity and does not violate constitutional principles of equality or legality. The case raises critical questions about whether Stamp Tax liability under Item 28.1 depends on land registry classification versus actual licensing and use, the application of the 'normal destination' test when properties undergo conversion, and whether constitutional principles constrain the taxation of properties based solely on registry data. This decision has significant implications for property owners undertaking conversions from residential to commercial or institutional use, particularly regarding when reclassification for tax purposes becomes effective.

Full Decision

ARBITRAL DECISION

I. REPORT

The A…, taxable person with Tax Identification Number …, represented by its Management Company B… – INVESTMENT FUND MANAGEMENT COMPANY, SA, with Tax Identification Number … and with registered office at …, n.º…, …, in Lisbon, under the jurisdiction of the Lisbon Finance Service …, (hereinafter referred to as the Claimant), hereby requests, pursuant to the combined provisions of Articles 2, no. 1, subsection a), 5, no. 2, and 10, no. 1, subsection a) of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Tax Arbitration (RJAT), the constitution of an Arbitral Tribunal, in which the Tax and Customs Authority (AT) is the Defendant, with a view to the declaration of illegality and consequent annulment of the assessment of Stamp Tax (Item 28.1, of the TGIS) identified in the collection notice no. 2016…, in the total amount of € 14,955.60, relating to the year 2015 and to the urban property registered under article … of the Union of Freguesias of … and …, municipality of ..., of which it is the owner.

The Claimant further requests the condemnation of the Defendant to restitution of the amount of tax wrongfully paid, plus indemnificatory interest at the legal rate, from the date of payment, as well as for the costs of the arbitral proceedings.

Summary of the Positions of the Parties:

a. Of the Claimant

The Claimant is the owner of the urban property on which the assessment of Stamp Tax (IS) of item 28.1, of the General Table of Stamp Tax, of the year 2015, was levied, the first instalment of which was notified to it through collection notice no. 2016…;

It considers that the aforementioned assessment is illegal, due to errors in the factual and legal premises, in as much as the taxed property, not being a residential property, does not fall within the scope of item 28.1, of the TGIS:

The urban property in question does not currently possess a use licence, nor is it dedicated to residential use, as is known to the AT, and does not fall within the classification of Article 6, no. 1, subsection a) and no. 2, of the IMI Code (by virtue of no. 2 of Article 67 of the Stamp Tax Code), which defines residential properties as "buildings or constructions licensed for such purpose or, in the absence of a licence, that have as their normal destination each of these purposes";

The property subject to the assessed levy was acquired by purchase by the Claimant, on 5 August 2008 and was leased to the educational establishment "C…, Ld.ª", to which was granted, by the Municipal Council of … the Partial Works Licence Permit, no.…, of 16 March 2010 (type of construction: Alteration; Use: Child Support Equipment) and the Construction Works Permit no.…, of 9 June 2011 (Type of work: new construction; Intended use: School Equipment);

Although the works were completed, with the property registered in the land registry having been demolished and reconstructed with the necessary specifications and the educational establishment currently operating there, under a "Provisional Operating Authorization", issued by the competent authority, the issuance of a use licence for the new construction is pending the resolution of the dispute opposing the works director to the tenant, without which the Municipal Council of … does not issue the respective use licence;

However, in the absence of a licence, account must be taken of the normal purpose to which the property is to be put, in accordance with the final part of no. 2 of Article 6 of the IMI Code, and this does not have residential use as its normal use, but rather that of services;

Even if it were understood that the property falls within the scope of item 28.1 of the TGIS, it would in any case benefit from the exemption from IS referred to in subsection h) of no. 1 of Article 44 of the Banco de Fundos Bancários [General Statutes], by referral from no. 6 of Article 7 of the Stamp Tax Code;

The Claimant further considers that the interpretation of item 28.1 of the TGIS, according to which it encompasses properties registered in the land registry as residential, even though they are not licensed nor have residential use as their normal purpose, would be unconstitutional, as it violates the principle of tax legality (no. 2 of Article 103 of the CRP) and the principles of equality and taxpaying capacity.

b. Of the Defendant

Notified in accordance with and for the purposes provided for in Article 17 of the RJAT, the AT submitted administrative proceedings (PA) and a response, in which it states that it does not agree with the Claimant, on the following grounds:

  1. The property of which the Claimant is the owner was assessed in accordance with the IMI Code, as part of the general assessment of urban properties and is registered in the land registry as property in full ownership with no storeys or divisions capable of independent use, dedicated to residential use and with a tax patrimonial value exceeding € 1,000,000.00;

It is therefore a matter of an assessment that results from the direct application of the rule of incidence, without any subjective or discretionary appreciation, which is correct and is due, with no indemnificatory interest being due, as there is no error attributable to the Services;

  1. The rule of item 28.1 of the TGIS does not violate the principle of equality, a principle which, although established in no. 3 of Article 104 of the CRP, does not currently have expression at the level of taxation of property, according to doctrine;

The Claimant raises the violation of the principle of equality before tax law, in the dimension of the prohibition of differentiation in equal situations, a matter on which the Constitutional Court has already reflected, inter alia, in Decision no. 187/2013, of 5 April, in the following terms: "only those legislative choices made by the ordinary legislator can be criticized, on the basis of a breach of the principle of equality, in those cases where it is proven that they result in differential treatment between persons that cannot be justified on reasonable, perceptible or intelligible grounds, having regard to the constitutional ends pursued by the measure of differentiation", as well as that "[t]his principle, in its dimension of prohibition of arbitrariness, constitutes an essentially negative criterion (...) which, not eliminating the "freedom of legislative configuration" - understood as the freedom which belongs to the legislator to "define or qualify the factual situations or relationships of life that are to serve as reference elements to be treated equally or unequally" -, entrusts to the courts not the faculty of substituting themselves for the legislator, "weighing the situation as if they were in its place and imposing their own idea of what would be, in the case, the reasonable, just and opportune solution (what would be the ideal solution in the case)", but rather that of "setting aside those legal solutions which are in no way capable of being rationally credentialed";

With regard to item 28.1 of the TGIS, the legislator defined an economically viable presumption, constitutionally valid, as a manifestation of taxpaying capacity, and the fact of establishing the value of €1,000,000.00 as a delimiting criterion for the scope of the tax is a legitimate choice as to the fixing of the material scope of "luxury residential properties" which it was intended to tax more heavily;

In the context in which it was approved, item 28.1 of the TGIS aimed to rebalance the distribution of burdens, so that these did not fall solely on "those who live on the income of their work" and complies with the criterion of suitability, being applied uniformly to all holders of properties with residential dedication with a value exceeding €1,000,000.00.

The AT ends by requesting exemption from the meeting referred to in Article 18 of the RJAT, as well as from submission of written submissions.

The PA which accompanied the AT's Response, the summary of which precedes, contains information from the Finance Service of ... …, the area where the property subject to the assessed levy is located, to the following effect:

"(…)

  1. The urban property in question is located on Rua … Lot … …-… … and is composed of a 2-storey property with basement and ground floor with 2 rooms, 2 storage areas, toilet, cold storage room and bathroom facilities, ground floor with 6 rooms, 3 bathrooms, garage, kitchen, toilet and pantry, as stated in the assessment sheet … of 2008/12/19.

  2. Subsequently, no IMI Model 1 declaration was submitted, as required by subsection d) no. 1 of Article 13 of the IMI Code, either for alteration, construction or use dedication of the property;

  3. As stated above, the Stamp Tax levy, item 28.1, is in accordance with the matricial data communicated to the AT, since the alteration was not reported and the property remains registered with the dedication of "residential";

  4. However, information was requested from the M.C. …, which confirms that there was a request for a works permit no.…, requested by C…, LDA, Tax ID-…, in its capacity as tenant of the property, of which copies are attached.

  5. In order to correct the use dedication and the composition of the property, the claimant should submit the aforementioned IMI Model 1 declaration, with the date of completion of the works, attaching for this purpose a copy of the closure of the works log, since no use licence has been issued, as well as proof that the educational establishment operates and from what date, in accordance with no. 2 of Article 6 of the IMI Code;

In conclusion, the assessment in question is a consequence of non-compliance with the provisions of subsection d) no. 1 of Article 13 of the IMI Code and not the misapplication or misinterpretation of the law, so its compliance will be the correct means for the alteration and correction of the tax act, with consequent annulment of the assessed tax.

(…)".

The Parties, being invited to do so, did not produce submissions.

II – PRELIMINARY MATTERS:

  1. The request for constitution of the Arbitral Tribunal was filed with the CAAD on 7 July 2016, having been accepted by the Honourable President of the CAAD and automatically notified to the AT on 22 July 2016.

  2. The Claimant informed that it did not intend to use the faculty of designating an arbitrator, so, pursuant to the provisions of no. 1 of Article 6 of the RJAT, the undersigned was appointed arbitrator by the Honourable President of the Deontological Council of the CAAD, a duty which she accepted within the legally provided period, without objection from the Parties.

  3. The Singular Arbitral Tribunal was duly constituted on 21 September 2016 and is materially competent to hear and decide the dispute that is the subject matter of these proceedings.

  4. The Parties have legal personality and capacity, are legitimate and are properly represented (Articles 4 and 10, no. 2, of the RJAT and Article 1 of Order no. 112-A/2011, of 22 March).

  5. The proceedings do not suffer from nullities and no exceptions were raised.

III - GROUNDS

1. MATTER OF FACT

1.1. Facts Considered Proven:

1.1.1. Both at the date of the occurrence of the taxable event and the issuance of the assessed Stamp Tax levy, the Claimant was the owner of the urban property registered in the land registry of the Union of Freguesias of … and … under article …;

1.1.2. In accordance with the land registry certificate with copy attached to the proceedings, extracted via the internet on 17 May 2016, the aforementioned property is intended for residential use, having been attributed a tax patrimonial value (VPT) of € 1,462,650.00, in the assessment carried out on 19 December 2008 (assessment sheet no.…), following the acquisition by public deed of purchase and sale, on 15 July 2008;

1.1.3. The VPT of the property on which the assessed Stamp Tax levy was levied, on 5 April 2016, is € 1,495,559.63, as shown in the collection notice no. 2016…, referring to the first instalment of the year 2015, with copy attached to the proceedings;

1.1.4. The Claimant made payment of the first instalment of the IS (item 28.1 of the TGIS) for the year 2015, in the amount of € 4,985.20, on 29 April 2016;

1.1.5. On 15 July 2008, were entered into between the Claimant's Management Company, in its representation, and "C…, Ld.ª" (Tenant), an investment contract and a lease contract having as their object the property dealt with in these proceedings, in order to install there an educational establishment, as well as its alteration and enlargement, "so as to satisfy all the technical and functional requirements imposed by the change of use";

1.1.6. On 16 March 2010, was issued by the Municipal Council of … the Partial Works Licence Permit no.…, granting the Tenant authorization to carry out alteration works on the property, to be used as "Child Support Equipment";

1.1.7. On 9 June 2011, was issued by the Municipal Council of … the Construction Works Permit no.…, granting the Tenant authorization for "new construction" to be implemented on the property, intended for "School Equipment". In accordance with this Construction Works Permit, the Building Use Licence would only be issued after compliance with the requirements defined therein;

1.1.8. By means of a letter from the Directorate General for School Equipment, dated 22 October 2015, the entity holding the school "C…", which operates on the identified property, was notified of the maintenance of the renewal of the "Provisional Operating Authorization", valid for the school year 2015/2016.

1.1.9. By letter of 5 August 2016, from the Finance Service of ... …, received by the addressee on 8 of the same month, the Claimant was notified to, within 30 days from the date of its receipt, submit the IMI Model 1 declaration, relating to "alterations to the current registration description", with the threat that, if it did not do so within that period, those services would promote the official assessment of the property, in accordance with Article 37 of the IMI Code.

1.2. Grounds for the Proven Matter of Fact:

The Tribunal's conviction regarding the matter of fact given as proven resulted from critical analysis of the documentary evidence attached to the request for arbitral ruling and the response of the Defendant.

1.3. Facts Not Proven

There are no facts relevant to the decision of the case that should be considered as not proven.

2. MATTER OF LAW

2.1. The Issues to be Decided:

In light of the facts established above, the content of the request for arbitral ruling and the response of the Defendant entity, two issues are identified that the Tribunal must decide:

Whether an urban property registered in the land registry for residential purposes and with a tax patrimonial value (VPT) exceeding € 1,000,000.00 falls within the scope of item 28.1 of the General Table of Stamp Tax (TGIS), even if it does not possess a valid use licence, if it is intended for purposes other than residential purposes;

If, in the negative, the restitution of the tax assessed and paid under the aforementioned rule of incidence should be accompanied by the payment of indemnificatory interest in favor of the taxable person, if the updating of the registration data is due to failure to deliver the declaration referred to in Article 13 of the IMI Code.

2.2. On the Concept of Residential Urban Property

In accordance with the rule of incidence contained in item 28 of the TGIS, in the wording introduced by Law no. 83-C/2013, of 31 December, the following situations are subject to stamp tax:

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

28.1 — For residential property or for construction land whose building, authorized or envisaged, is for residential purposes, in accordance with the provisions of the IMI Code — 1%.

28.2 — For property, when the taxable persons who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, listed in an order approved by the Minister of Finance — 7.5%."

Thus, cumulative requirements for the application of the rule within Item 28.1 of the TGIS are that the property to be taxed be (a) a residential urban property or construction land whose building, authorized or envisaged, is "for residential purposes" and (b) its VPT, for purposes of IMI, is equal to or greater than € 1,000,000.00.

Although the Stamp Tax Code contains no definition or classification of properties, several of its provisions refer to the concept of property as defined in the IMI Code. In particular, with regard to matters relating to item 28 of the TGIS, Article 67, no. 2 of the Stamp Tax Code provides that "For matters not regulated in this Code relating to item no. 28 of the General Table, the provisions of the CIMI shall apply, on a subsidiary basis."

The concept of property is defined in Article 2 of the IMI Code, encompassing, among other realities, buildings and constructions of any nature incorporated or based on a fraction of the national territory, with a character of permanence, provided they form part of the assets of a natural or legal person and that, in normal circumstances, have economic value.

Such buildings or constructions are, as a rule, classified as urban properties, defined residually by Article 4 of the IMI Code, as "all those that should not be classified as rural, without prejudice to the provision of the following article" (mixed properties – those which consist of an urban part and a rural part, without either of them being able to be qualified as the main part).

However, there are various types of urban properties, whose classification is given by Article 6 of the IMI Code, depending on their licensing or, in the absence thereof, the purpose to which they are intended.

Thus, in accordance with the various subsections of no. 1 of Article 6 of the IMI Code (Types of urban properties), urban properties are classified as a) residential, b) commercial, industrial or for services; c) construction land and d) other, with nos. 2, 3 and 4 of the same article defining what should be understood by each of those designations.

With regard to residential urban properties, no. 2 of Article 6 of the IMI Code specifies that these are buildings or constructions licensed for residential purposes or, in the absence of a licence, that have residential purposes as their normal destination.

2.3. On the Land Registries

In accordance with Article 12, no. 1 of the IMI Code, "1 - Land registries are records which include, in particular, the characterization of properties, their location and tax patrimonial value, the identity of the owners and, where applicable, of usufructuaries and holders of surface rights".

Being registers, land registries contain the registration and description of properties, as well as their characterization, that is, among other aspects, the purpose for which they are intended.

Like any other register, land registries require updating whenever any of the elements characterizing the properties registered therein are altered, an updating that may occur at the initiative of the respective holder, by submitting a declaration in an official form (form 1), referred to in no. 1 of Article 13 of the IMI Code, within the period provided there (60 days), in particular, if there occurs "an event susceptible to determining a change in the classification of a property" (subsection b), as occurred in the situation under review, or, subsidiarily, be carried out ex officio by the Chief of Finance of the area where the property is located, in the event of failure to comply with the declarative obligation established by no. 1 (no. 3 of Article 13 of the IMI Code).

However, the failure to update land registry data of properties, due to omission of compliance with the declarative obligation of the taxable person, cannot, in itself alone, be susceptible to altering the classification of the property, as follows from the proven factual reality and the legal determination of no. 2 of Article 6 of the IMI Code.

2.4. The Assessed Levy

As stated in the facts given as proven, following the investment and lease contract entered into between the Claimant and the holder of the educational establishment, "C…", the property dealt with in these proceedings was subject to demolition and reconstruction ("new work", in accordance with the authorization conferred by the Construction Works Permit no.… of the Municipal Council of…, of 9 June 2011), with a view to its use as "School Equipment".

It is further proven that, in that property, in the year to which the assessed levy relates (2015), an educational establishment operated, duly authorized by the competent authority, the Directorate General for Educational Establishments, for the school year 2015/2016.

From this it follows that, although the previous construction, which was demolished to make way for new construction, was licensed for residential purposes, the current construction, due to a fact not attributable to the Claimant, does not possess any use licence. In light of the evidence brought to the proceedings, it is, however, indisputable, that the purpose to which the new property is intended is not residential, but rather that of services, as is defended in the request for arbitral ruling.

The conclusion that the property subject to the assessed Stamp Tax levy has an actual purpose other than residential use makes it possible to state, without a shadow of doubt, that it does not meet the scope of the rule of incidence of item 28.1 of the TGIS, and such an assessment cannot be maintained in the legal order.

2.5. On the Request for Indemnificatory Interest

If the illegality of the assessed levy is not controversial, the admissibility of the request for indemnificatory interest may raise some doubts.

Having the arbitral tax proceedings been conceived as an alternative means to the process of judicial challenge (cf. the legislative authorization granted to the Government by Article 124, no. 2 (first part) of Law no. 3-B/2010, of 28 April – State Budget Law for 2010), the arbitral tax jurisprudence has come to consider that, alongside the competence attributed by Article 2, no. 1, subsection a) of the RJAT, to the Arbitral Tribunals operating under the CAAD, to declare the illegality of tax acts, it must be understood that these hold the same powers that in proceedings for judicial challenge are attributed to tax courts, such as that of assessing the error attributable to the services.

On the other hand, subsection b) of no. 1 of Article 24 of the RJAT, determines that the arbitral decision on the merits of the claim against which no appeal or challenge is possible binds the tax administration from the end of the period provided for appeal or challenge, and this must, in the precise terms of the success of the arbitral decision in favor of the taxable person and until the end of the period provided for spontaneous execution of sentences of tax courts, "reestablish the situation that would exist if the tax act subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for that effect", which includes "the payment of interest, regardless of its nature, in accordance with the terms provided in the General Tax Law and in the Code of Tax Procedure and Process."

Equally, Article 100 of the LGT, applicable to arbitral tax proceedings by virtue of the provision of subsection a) of no. 1 of Article 29 of the RJAT, establishes that "The tax administration is obliged, in case of total or partial success of complaints or administrative appeals, or of court proceedings in favor of the taxable person, to the immediate and full reestablishment of the situation that would exist if the illegality had not been committed, including the payment of indemnificatory interest, in the terms and conditions provided by law."

And, in accordance with the provision of no. 1 of Article 43 of the LGT, "Indemnificatory interest is due when it is determined, in gracious complaint or judicial challenge, that there was an error attributable to the services which resulted in payment of the tax debt in an amount exceeding that legally due."

In light of the legal provision just transcribed, it is concluded that the requirements for the payment of indemnificatory interest are: "– that there is an error in a tax levy act; – that it be attributable to the services; – that the existence of that error is determined in proceedings for gracious complaint or judicial challenge; – that from that error has resulted the payment of a tax debt in an amount exceeding that legally due"[1].

Now, in the case in question, it appears manifest that, if there is an error in the assessment, from which resulted the payment of undue tax, such error cannot be attributed to the AT services, which issued it based on the elements they had at their disposal, that is, based on the land registry entry which shows that the Claimant's property is (a) intended for residential purposes and (b) has a VPT exceeding € 1,000,000.00, a situation in which the assessment of Stamp Tax of item 28.1 of the TGIS could not but be made.

In fact, as follows from the wording of Article 13 of the IMI Code, the initiative for updating the matricial elements falls, in the first instance, to the taxpayer, with the ex officio action of the Chief of Finance of the area where the property is located being merely subsidiary.

Nor would such initiative by the taxable person be hindered by the absence of issuance of a use licence for the property by the respective Municipal Council, since, in accordance with Article 10 of the IMI Code, could always be indicated, in the declaration of registration in the land registry, the date of completion of the works (Article 10, no. 1, subsection b, of the IMI Code), or attached thereto proof of the commencement of the new use to which the property was intended, after its reconstruction (Article 10, no. 1, subsection d) of the IMI Code).

In light of the above, it is decided not to recognize the Claimant's right to indemnificatory interest on the amount of tax paid.

2.6. Issues of Barred Knowledge

In the sentence, the judge must rule on all issues that he must decide, abstaining from ruling on issues of which he must not know (final segment of no. 1 of Article 125 of the CPPT), and the issues on which the court's cognition powers fall are, in accordance with no. 2 of Article 608 of the CPC, applicable subsidiarily to arbitral tax proceedings, by referral from Article 29, no. 1, subsection e) of the RJAT, "the issues which the parties have submitted to its consideration, except those whose decision is barred by the solution given to others (…)".

In light of the solution given to the issues to be decided above stated, knowledge of the remaining issues is barred, in particular those of the unconstitutionality of the interpretation given by the AT to the rule of item 28.1 of the TGIS.

3. DECISION

On the basis of the grounds of fact and law stated above and, in accordance with Article 2 of the RJAT, it is decided:

3.1. To declare the illegality of the Stamp Tax assessment of 2015, the subject of this request for arbitral ruling, determining its annulment;

3.2. To condemn the AT to restitution of the amount wrongfully paid by the Claimant by way of Stamp Tax of 2015;

3.3. To absolve the AT from the request for payment of indemnificatory interest, as the requirements on which depends the constitution of the Claimant's right to its receipt are not met.

VALUE OF THE PROCEEDINGS: In accordance with the provision of Article 306, nos. 1 and 2, of the CPC, 97-A, no. 1, subsection a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 14,955.60 (fourteen thousand, nine hundred and fifty-five euros and sixty cents).

COSTS: Calculated in accordance with Article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 918.00 (nine hundred and eighteen euros), at the charge of the Tax and Customs Authority.

Lisbon, 25 November 2016.

The Arbitrator,

/Mariana Vargas/

Document prepared by computer, in accordance with no. 5 of Article 131 of the CPC, applicable by referral from subsection e) of no. 1 of Article 29 of Decree-Law 10/2011, of 20 January.

The wording of this decision is governed by the Orthographic Agreement of 1990.

[1] - Cf. SOUSA, Jorge Lopes de, Code of Tax Procedure and Process – annotated and commented, Volume I, Áreas Editora, 2006, p. 472.

Frequently Asked Questions

Automatically Created

What is the scope of Verba 28.1 of the Tabela Geral do Imposto do Selo for urban properties?
Item 28.1 of the TGIS targets urban properties classified as residential with a tax patrimonial value exceeding €1,000,000. The disputed scope concerns whether 'residential' status depends on land registry classification alone (Tax Authority position) or requires either a residential use license or that residential use constitutes the property's 'normal destination' per Article 6(2) of the IMI Code, applicable via Article 67(2) of the Stamp Tax Code. This distinction is crucial for properties undergoing conversion to non-residential uses.
Can Stamp Tax under Verba 28.1 TGIS be applied to properties not licensed or used for housing?
The claimant argues Stamp Tax under Item 28.1 cannot apply without residential licensing or residential use as the 'normal destination', citing Article 6(2) of the IMI Code which defines residential properties as 'buildings or constructions licensed for such purpose or, in the absence of a licence, that have as their normal destination each of these purposes.' The property holds educational construction permits and operates as a school under provisional authorization, establishing educational use as its normal destination. The Tax Authority contends registration as residential with value exceeding €1,000,000 triggers tax liability regardless of actual licensing or use.
How does Article 6(1)(a) of the IMI Code define residential properties for Stamp Tax purposes?
Article 6(1)(a) and (2) of the IMI Code, incorporated into Stamp Tax law via Article 67(2) of the Stamp Tax Code, defines residential properties as 'buildings or constructions licensed for such purpose or, in the absence of a licence, that have as their normal destination each of these purposes.' This two-prong test requires either: (1) a license for residential use, or (2) in the absence of such license, that residential use constitutes the property's normal destination. The claimant's property lacks residential licensing and operates as a school, arguing its normal destination is educational services, not residential.
What happens when an urban property is converted from residential to educational or commercial use under Portuguese tax law?
When an urban property converts from residential to educational or commercial use, a dispute arises regarding the timing and criteria for reclassification under Stamp Tax rules. The claimant's property received construction permits for educational use (2010 and 2011) and currently operates as a school, but the final use license is delayed due to a dispute between the works director and tenant. The claimant argues the 'normal destination' test in Article 6(2) of the IMI Code should apply, reclassifying the property based on actual educational use. The Tax Authority maintains land registry classification governs until formally changed, keeping Stamp Tax liability despite functional conversion.
Can a taxpayer claim a refund with compensatory interest after an illegal Stamp Tax assessment on a non-residential property?
The claimant requested restitution of the wrongfully paid Stamp Tax amount plus compensatory interest (juros indemnizatórios) at the legal rate from the payment date, pursuant to standard tax procedure rules. If the arbitral tribunal declares the assessment illegal and orders annulment, compensatory interest would generally be due from the payment date unless the Tax Authority demonstrates no attributable error. The AT argues no compensatory interest is due because the assessment resulted from direct application of legal rules without subjective error. The availability of compensatory interest depends on whether the tribunal finds the assessment illegal and whether the error is attributable to the tax administration.