Process: 375/2015-T

Date: August 1, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision (Process 375/2015-T) addresses whether Stamp Duty introduced by Law 55-A/2012 of 29 October applies to building land classified as 'land for construction' under item 28.1 of the General Stamp Tax Table (TGIS). The taxpayer, a real estate development company, owned urban land with a tax patrimonial value of €8,346,718.63, designated for housing (17,400 m²) and commerce/services (2,465 m²) according to the local detailed plan. However, in 2012 the land had no buildings or constructions, nor pending construction license applications. The Tax Authority assessed Stamp Duty of €40,225.15 at the transitional rate of 0.5%, treating the property as a 'building with housing allocation' under item 28.1 TGIS. The taxpayer challenged this assessment through ex officio review on 07.11.2014, which was presumed tacitly rejected on 07.03.2015 after the four-month deadline under Article 57 of the General Tax Law (LGT). The taxpayer then filed for arbitral tribunal constitution within the 90-day deadline established by Article 10 of the Legal Framework for Tax Arbitration (RJAT). The tribunal confirmed its jurisdiction and found the application timely. The taxpayer's core argument was that land for construction does not constitute an 'urban building with housing allocation' as required by item 28.1 TGIS, and therefore Stamp Duty should not apply. Additionally, constitutional objections were raised regarding violations of equality, contributive capacity, and progressivity principles. The case is significant because it clarifies the scope of item 28.1 TGIS, which targets ownership of urban buildings valued at €1,000,000 or more. The distinction between undeveloped land for construction and actual buildings with housing allocation is critical for determining Stamp Duty liability. This decision has important implications for real estate developers and property owners holding valuable land plots without existing structures, potentially excluding such properties from the scope of item 28 taxation.

Full Decision

ARBITRAL DECISION

The arbiter Dr. Fernando Pinto Monteiro, appointed by His Excellency the President of the Administrative Arbitration Center (CAAD) to form the Tax Tribunal, constituted on 25-06-2015, decided as follows:

I – REPORT

A…, S.A. with head office at Street…, …, in …(…-…) with the single registration number and collective person number no…, following the formation of the presumption of tacit rejection of the application for official review of the assessment of Stamp Duty no. 2012…, of 07.11.2012, in the amount of € 40,225.15, issued following the entry into force of Law no. 55-A/2012, of 29 October, hereby requests the constitution of the Singular Arbitral Tribunal, in accordance with the provisions of articles 2, no. 1, paragraph a), 5, no. 2, paragraphs a) and b), 6, no. 1, 10, no. 1, paragraph a) and no. 2, all of the Legal Framework for Tax Arbitration, the present application aiming at:

a) the declaration of illegality of the Stamp Duty assessment identified above, on the grounds of paragraph a) of art. 99 of the CPPT;

b) the restitution of amounts paid, with compensation interest.

The application for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD and the Tax and Customs Authority was notified on that same date.

The Applicant did not proceed to appoint an arbiter, whereby, under the provisions of Article 6, no. 2, paragraph a) of the RJAT, the arbiter was appointed, having accepted in accordance with legally provided terms.

I – TIMELINESS

  1. First of all, it is necessary to address the exception raised by the Respondent. On 7/11/2014 the Applicant requested official review of the Stamp Duty assessment, in accordance with art. 78 of the LGT, a request which to date had not been decided upon.

  2. As art. 57 of the LGT provides, the tax procedure must be concluded within four months under penalty of presuming its rejection.

  3. Paragraph a) of no. 1 of art. 10 of the RJAT determines that the application for constitution of the arbitral tribunal is presented within 90 days, counted from the formation of the presumption of tacit rejection, whereby, having the administrative complaint been presented on 07.11.2014, it is presumed rejected on 07.03.2015, whereby the respondent has no grounds. The application for constitution of the Arbitral Tribunal was, therefore, deduced within the time limit.

II - CASE MANAGEMENT

  1. The Tribunal is competent and properly constituted, in accordance with articles 2, no. 1, paragraph and 5 and 6, all of the RJAT;

  2. The parties have legal standing and capacity, are legitimate and are legally represented, in accordance with articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March;

  3. There are no outstanding preliminary questions that must be addressed nor defects that invalidate the proceedings.

It is now necessary to address the application.

III – THE FACTS

Proven Facts

  1. The Applicant is a commercial company dedicated to the realization and development of real estate businesses and projects.

  2. In 2012, the applicant was owner of an urban building (land plot for construction) registered in the urban real estate register of the parish of …, municipality of …, under art …, with the tax patrimonial value of € 8,346,718.63;

  3. According to the Detailed Plan of …, of the total area of the land, 17,400 m² were intended for housing and 2,465 m² for commerce and services.

  4. In 2012 there was no building or construction on the land nor was there a pending application for obtaining a construction license.

  5. The building had been assessed, in accordance with the IMI Code and, with the entry into force of Law 55-A/2012, of 29 October, the Applicant was notified of the Stamp Duty assessment, made in accordance with item no. 28.1 of the TGIS;

  6. Based on the VPT, the Tax and Customs Authority proceeded to assess the Stamp Duty of item no. 28.1 of the General Table, in the total amount of € 40,225.15, as a result of the application of the transitional rate of 0.5%, applicable to buildings with housing allocation assessed in accordance with the IMI Code, paid on 20.12.2012.

  7. In 2013 the Applicant was notified of the assessment of the tax, referring to the year 2012, in the amount of € 83,467.19, payable in three installments.

  8. Not conforming to this assessment, the Applicant filed an administrative complaint which would be rejected.

  9. The Applicant then filed a request for arbitral decision, having the process 66/2014-T been instituted, of the CAAD, in the context of which the annulment of that tax act would come to be determined.

Unproven Facts

  1. Other facts with interest for the decision were not proven.

IV THE LAW

  1. Law no. 55-A/2012, of 29 October, came to add to the TGIS, appended to the Stamp Duty Code, item 28 subjecting Stamp Duty to the ownership, usufruct or right of surface of urban buildings whose patrimonial value, determined in accordance with the IMI Code, is equal to or greater than € 1,000,000.00.

  2. Item 28.1 of the TGIS provided, at the time, that it was subject to Stamp Duty:

28 - The ownership, usufruct or right of surface of urban buildings whose tax patrimonial value contained in the register, in accordance with the Code of Municipal Tax on Real Estate (CIMI) is equal to or greater than € 1,000,000 – on the tax patrimonial value used for purposes of IMI:

28.1 – For building with housing allocation - 1%

28.2 – For building, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.55% (Cf. Article 4 of Law no. 55-A/2012, of 29 October.)

  1. It further provides in no. 4 of article 2 of the Stamp Duty Code in the wording of Law no. 55-A/2012, that "in the situations provided for in item 28 of the General Table, the taxpayers are those referred to in article 8 of the CIMI", i.e., the owner of the building on 31 December of the year to which the tax relates.

  2. In accordance with articles no. 23, no. 7 and 44, no. 5 of the Stamp Duty Code the tax was assessed and sent, by the tax administration to the taxpayer, by the end of the month prior to that of payment, to be paid in two or three installments depending on the value of the assessment.

  3. For the year 2012, law 55-A/2012, of 29 October, established the following transitional regime:

a) taxable event would occur until 31 October 2012;

b) taxpayer – the owner of the urban building on 31 October 2012;

c) the tax administration would assess and remit the tax by the end of November 2012;

d) payment would have to be made by 20 December 2012.

  1. The applicable rates would be as follows:

i) Buildings with patrimonial allocation assessed in accordance with IMI: 0.5%;

ii) Buildings with housing allocation not yet assessed in accordance with the IMI Code: 8%;

iii) Urban buildings when the taxpayers who are not natural persons are resident in a country, territory or region subject to a more favorable tax regime, contained in the list approved by Ordinance of the Minister of Finance: 7.5%.

  1. Following the entry into force of the law the Applicant was notified of the assessment, but could not conform to the assessment because:

a) At the time of the facts the urban building was classified as land for construction and thus did not fit into the category of urban building with housing allocation provided for in item 28.1 of the TGIS, its ownership not being subject to stamp duty;

b) Stamp Duty on the property defined in accordance with item 28.1 of the TGIS appears to be unconstitutional due to violation of the principles of equality, contributive capacity and progressivity.

  1. The objective incidence of Stamp Duty on property is thus delimited by the concept of urban building with "housing allocation".

  2. The truth is that neither in the Stamp Duty Code, nor in the IMI Code, to which the Stamp Duty Code refers to regulate the other aspects regarding the incidence, assessment, and collection of this tax, nor in any other legal instrument, is the concept of "building with housing allocation" defined.

  3. The allocation of an urban building to housing presupposes that it has minimum conditions of habitability, that is, that it is a built and habitable building that preserves family intimacy and privacy.

  4. Regardless of the allocation given to future housing, land for construction, as such, cannot be licensed for housing purposes nor can it have housing as its normal destination, because it does not meet habitability conditions.

  5. In employing the expression "land with housing allocation" the tax legislator intended only and solely to encompass urban buildings with real and present housing functionality, and not to extend, for purposes of incidence of stamp duty, to the species of buildings provided for in article 6, no. 1 of the IMI Code.

  6. On the other hand, land for construction began to be taxed in Stamp Duty only with the entry into force of the State Budget for 2014, approved by Law no. 83-C/2013, of 31 December, which in art. 194, under the heading - Amendment to the General Table of Stamp Duty, established:

"Item 28.1 of the General Table of Stamp Duty, appended to the Stamp Duty Code, approved by Law no. 150/99, of 11 September, is amended as follows:
«28.1 - For residential building or for land for construction whose building, authorized or foreseen, is for housing, in accordance with the provisions of the IMI Code - 1%»"

  1. To interpret the norm, article 11 of the General Tax Law refers the interpretation of tax norms to the Civil Code, article 9 which establishes that:

  2. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

  3. However, the interpreter cannot consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  4. In determining the meaning and scope of the law, the interpreter will presume that the legislator adopted the most adequate solutions and that he knew how to express his intent in adequate terms.

  5. Thus I understand that the legislator did not intend to include, for the fiscal year 2013, in the provision of item no. 28.1 of the TGIS, the taxation of land for construction.

  6. Matters of prejudicial knowledge.

Regarding the matter of fact, the Tribunal does not have to rule on everything that is alleged by the parties, but instead has the duty to select the facts that matter for the decision, the proven matter from the unproven (art. 123, no. 2 of the CPPT and art. 607, no. 3 of the Code of Civil Procedure, applicable "ex vi" art. 29, no. 1, paragraphs a) and e) of the RJAT). Thus, the facts relevant for the judgment of the case are chosen and delimited according to their legal relevance, which is established in attention to the various plausible solutions of the questions of law (cfr. former art. 511 of the CPC corresponding to the current 596, applicable "ex vi" art. 29, no. 2, e) of the RJAT).

  1. In truth, art. 124 of the CPPT, subsidiarily applicable by force of art. 29, no. 1 of the RJAT, in establishing an order of knowledge of defects, presupposes that, once ruled upon a defect that ensures effective protection of the rights of the challengers, it is not necessary to know the others, because if it were always necessary to appreciate all defects imputed to the acts challenged, it would be indifferent the order of its knowledge.

  2. In light of the above, it is concluded that the Applicant is right and, as a consequence, it is decided:

a) Declare the illegality of the assessments that are the subject of these proceedings and, as a consequence, judge as well-founded the request for arbitral decision, with the consequent annulment, with all legal effects, of the acts of assessment of stamp duty better identified in the proceedings;

b) Judge as well-founded the request for compensation interest petitioned by the applicant.

VALUE OF THE PROCESS – In accordance with the provisions of art. 306, no. 1 and 2 of the CPC and 97-A, no. 1, paragraph a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the process is fixed at € 40,225.15.

COSTS - The costs, in the amount of € 2,142.00 (Table I, annex to the Regulation of Costs in Tax Arbitration Proceedings), are entirely at the charge of the respondent (Article 24-A of the Regulation of CAAD).

Notify and Register.

Lisbon, 2016-08-01

The Arbiter,

(Fernando Pinto Monteiro)

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto de Selo) applicable to building land under Verba 28 of the General Stamp Tax Table (TGIS)?
No, Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) is not applicable to building land. Item 28.1 specifically targets 'urban buildings with housing allocation' whose tax patrimonial value equals or exceeds €1,000,000. Land for construction (terreno para construção), even if designated in urban plans for future housing development, does not constitute a 'building with housing allocation' because it lacks an actual constructed building. In this case, the property was classified as land for construction with no existing buildings or structures in 2012, and therefore did not meet the legal requirements for Stamp Duty assessment under item 28.1 TGIS introduced by Law 55-A/2012.
What was the legal basis for challenging the Stamp Tax assessment introduced by Law 55-A/2012 of 29 October?
The legal basis for challenging the Stamp Tax assessment included two main grounds: (a) substantive illegality under Article 99(a) of the Tax Procedure Code (CPPT), arguing that land for construction does not qualify as an 'urban building with housing allocation' under item 28.1 TGIS, making the assessment inapplicable to the property; and (b) constitutional grounds, alleging that Stamp Duty on property under item 28.1 TGIS violates constitutional principles of equality, contributive capacity, and progressivity. The taxpayer sought declaration of illegality of the assessment and restitution of amounts paid (€40,225.15) with compensatory interest.
Can a taxpayer request arbitral tribunal constitution after presumed tacit rejection of an ex officio review under Article 78 of the LGT?
Yes, a taxpayer can request arbitral tribunal constitution after presumed tacit rejection of an ex officio review under Article 78 of the General Tax Law (LGT). Article 57 of the LGT establishes that tax procedures must be concluded within four months, after which tacit rejection is presumed. Article 10(1)(a) of the Legal Framework for Tax Arbitration (RJAT) allows taxpayers to file an arbitration request within 90 days from the formation of the presumed tacit rejection. In this case, the ex officio review filed on 07.11.2014 was presumed rejected on 07.03.2015, and the arbitral tribunal application was filed within the statutory deadline, making it timely and admissible.
What is the 90-day deadline for filing an arbitration request after presumed tacit rejection under Article 10 of the RJAT?
Under Article 10 of the Legal Framework for Tax Arbitration (RJAT), the 90-day deadline for filing an arbitration request after presumed tacit rejection runs from the date when tacit rejection is presumed to have occurred. Article 57 of the General Tax Law (LGT) establishes that tax administrative procedures must be concluded within four months, after which tacit rejection is presumed. In this case, the ex officio review was submitted on 07.11.2014, so the four-month period expired on 07.03.2015, when tacit rejection was presumed. The taxpayer then had 90 days from 07.03.2015 to file the arbitration request, which was done within the legal timeframe, making the application timely.
Is a property company entitled to reimbursement with compensatory interest after an unlawful Stamp Tax assessment on building land?
Yes, a property company is entitled to reimbursement with compensatory interest after an unlawful Stamp Tax assessment on building land. When a tax assessment is declared illegal and annulled, Article 100 of the Tax Procedure Code (CPPT) establishes the taxpayer's right to restitution of amounts unduly paid. Additionally, compensatory interest is due on amounts paid in excess, calculated from the date of payment until restitution, as provided in Articles 43 and 61 of the General Tax Law (LGT) and Article 61 of the CPPT. In this case, the applicant specifically requested both the declaration of illegality under Article 99(a) CPPT and restitution of €40,225.15 paid on 20.12.2012 with compensatory interest, which would be granted if the tribunal found the assessment unlawful.