Process: 382/2014-T

Date: November 26, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitration Process 382/2014-T addresses a critical dispute over Stamp Duty (Imposto de Selo) assessment under Verba 28 of the General Table (TGIS) involving €26,136.60 in contested taxes for 2013. The central legal question concerns whether the €1,000,000 taxable patrimonial value threshold applies to an entire building or to each independent residential unit separately. The taxpayer owned a property with multiple autonomous floors, each with independent use and separate property registration entries, where no individual unit exceeded the statutory threshold. The Portuguese Tax Authority (AT) assessed Stamp Duty on the aggregate property value, while the claimant argued that Article 12(3) of the Municipal Property Tax Code (CIMI) mandates separate assessment of each independent unit. The claimant invoked established arbitral precedents (Processes 50/2013-T and 132/2013-T) holding that CIMI rules apply to determine tax incidence under Verba 28, and that treating condominium units differently from other independent units violates constitutional equality principles under Articles 13 and 104(3) of the Portuguese Constitution. The case exemplifies the interpretative conflict between aggregate and unit-based valuation methods for multi-unit residential properties, with significant implications for taxpayers holding high-value properties structured as independent units rather than formal condominiums. The claimant sought complete annulment of the assessments plus reimbursement with compensatory interest under Article 43(1) of the General Tax Law (LGT), arguing the tax authority's error in applying an incorrect legal criterion for determining tax liability under Verba 28.

Full Decision

ARBITRAL DECISION

Process no. 382/2014-T

I. REPORT

  1. A, Tax Identification Number …, with registered office at …, covered by the territorial jurisdiction of the Tax Service of …, came, under the provisions of articles 2º, no. 1, letter a) and 10º, no. 1, letter a) and no. 2 of Decree-Law no. 10/2011, of 20 January (hereinafter, RJAT), to request the constitution of an Arbitral Tribunal.

  2. The Tax and Customs Authority is the Respondent.

  3. The Claimant seeks the annulment of the acts of assessment of Stamp Tax (item no. 28 of the General Table of Stamp Tax) issued by documents numbered 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ... and 2014 ..., relating to the year 2013, in the total amount of € 26,136.60, and the reimbursement of the total amount unduly paid, increased by compensatory interest, with the other legal consequences.

  4. The Claimant hereby formulates a cumulation of claims under the provisions of article 3º, no. 1, of the RJAT, considering that the merits of the claims depend essentially on the assessment of the same circumstances of fact and on the interpretation and application of the same rules of law.

  5. The Claimant bases its claim alleging the illegality of the aforementioned acts of assessment, consisting of an error regarding the factual and legal requirements for the application of items no. 28 and 28.1 of the GTST, and in violation of the constitutional principle of equality, both as a general principle (article 13º of the CRP), and as a principle of contributory equality in the context of wealth taxation (article 104, no. 3, of the CRP).

  6. The Claimant states, in the request for arbitral ruling, that:

16th

It is, therefore, on the basis of the taxable patrimonial value of each storey or part of property susceptible to independent use that its subjection to tax is determined, or not – as occurs in the present case – by item no. 28 of the General Table.

17th

Indeed, as was demonstrated in the facts, the storeys in question constitute, all of them, autonomous units with independent use, as appears from their respective property registration entries and is evidenced, unequivocally, by the property booklet itself (cf. doc. no. 13).

18th

Now, constituting the storeys in question units susceptible to independent use with residential purpose, it cannot fail to be noted that the patrimonial value of each of these storeys is below the minimum threshold of tax incidence – such as appears, it should be underlined, from their respective property registration entries for IMI purposes (cf. doc. no. 13).

19th

The acts of stamp tax assessment sub judice, by applying the incidence of taxation under stamp tax to units susceptible to independent use on the overall value of the property, are based on an error regarding the factual and legal requirements of taxation under Stamp Tax, in violation of the provisions of item no. 28 of the GTST.

20th

In fact, each of the referred units susceptible to independent use – the storeys subject to the assessments here in question – has a taxable patrimonial value clearly below €1,000,000.00 according to the only admissible criterion, which is the legal criterion, in accordance with the rules of the Municipal Property Tax Code, by express reference of the law that created item no. 28 of the GTST.

21st

Accordingly, none of the storeys in question is subject to stamp tax under item no. 28 of the GTST, a reason in itself sufficient to lead to the complete annulment of the contested assessments.

22nd

This is what results from the law, and has been reiterated by arbitral tribunals in successive Arbitral Decisions concerning the same central question underlying the case sub judice, namely by decision of 29 October 2013, issued within the scope of Process no. 50/2013-T, in which the tribunal concluded:

"The AT cannot thus consider as the reference value for the incidence of the new tax the total value of the property, when the legislator himself established a different rule under the CIMI, and this is the code applicable to matters not regulated concerning item 28 of the GTST".

23rd

This understanding was more recently corroborated in another learned Arbitral Decision, of 16 December 2013, issued in Process no. 132/2013-T, in which the tribunal specified that "to distinguish, in this context, between properties constituted in condominium ownership and in full ownership would be an 'innovation' without associated legal support, especially because, as has been stated here, nothing suggests, neither in item no. 28, nor in the provisions of the CIMI, a justification for that particular differentiation. Note, for example, what article 12º, no. 3, of the CIMI states: 'each storey or part of property susceptible to independent use is considered separately in the property registration, which also records its respective taxable patrimonial value.'".

24th

The uniform criterion that is required – according to the learned decision just cited – "is, therefore, what determines that the incidence of the rule in question only takes place when one of the parts, storeys or divisions with independent use of property in condominium or full ownership with residential purpose, possesses a TPV exceeding €1,000,000.00".

25th

In sum and continuing to follow the same arbitral decision: "Fixing as the reference value for the incidence of the new tax the global TPV of the property in question (…) finds no basis in the applicable legislation, which is the CIMI, given the reference made by the cited article 67º, no. 2, of the CST", the decision continuing by recalling that just as in "various Arbitral Decisions (see AD no. 48/2013-T and AD no. 50/2013-T), there is no evidence, in the work relating to the discussion of bill no. 96/XII in the Assembly of the Republic, of the invocation of a different interpretative ratio than the one presented here".

26th

Furthermore, as is more extensively revealed in the reasoning of the decision that has been cited, the contested acts of assessment also result in a violation of constitutional principles, namely the principle of equality (cf. article 13º of the CRP), and in particular of equality in the context of wealth taxation (cf. article 104º, no. 3, of the CRP) – in fact expressly targeted by Law no. 55-A/2012, of 29 October – by treating the properties in question (units susceptible to independent use) differently from those other properties that find themselves in a substantially equal situation, despite being constituted in condominium ownership.

27th

In fact, if the property in question had been divided in condominium ownership, none of the autonomous fractions would be taxed under this provision.

28th

It is thus concluded that the assessments subject to the present request are systematically based on a value higher than the actual taxable patrimonial value – not covered by item no. 28 of the General Table of Stamp Tax – attributing to the rule of incidence invoked a scope that it does not have, wherefore they cannot subsist in the legal order.

V. COMPENSATORY INTEREST

29th

The Claimant further petitions compensatory interest based on article 43º, no. 1, of the LGT.

30th

In fact, the illegality of the contested assessments having been proven, which have been paid, due to error exclusively attributable to the services of the Respondent, as has also been demonstrated, it results from article 43º, no. 1, of the LGT, that the Claimant has the right to compensatory interest, counted from the date of the undue payment of the tax until the date of its full reimbursement, in accordance with article 61º, no. 5, of the CPPT.

  1. The Claimant opted for the non-designation of an arbitrator.

  2. Under the provisions of letter a) of no. 2 of article 6º and letter b) of no. 1 of article 11º of the RJAT, in the wording introduced by article 228º of Law no. 66-B/2012, of 31 December, the Deontological Council designated the arbitrator of the arbitral tribunal, who communicated acceptance of the designation within the applicable time period.

  3. The parties were notified of this designation and did not express the will to refuse the designation of the arbitrator, in accordance with the combined provisions of article 11º, no. 1, letters a) and b) of the RJAT and articles 6º and 7º of the Code of Ethics of CAAD.

  4. Thus, in accordance with the provisions of letter c) of no. 1 of article 11º of the RJAT, in the wording introduced by article 228º of Law no. 66-B/2012, of 31 December, the singular arbitral tribunal was constituted on 25-07-2014.

  5. The Respondent submitted a reply, in which it defends the inadmissibility of the request for arbitral ruling, having raised no exception.

  6. The Respondent sustains its position based on the following argument:

19th

The now claimant is the owner of a property in the regime of full or vertical ownership. From the notion of property in article 2º of the CIMI, only the autonomous fractions of property in the regime of condominium ownership are regarded as properties - no. 4 of the cited article 2º of the CIMI. Therefore,

20th

Being the property of which it is the owner in the regime of full ownership, it does not possess autonomous fractions, to which tax law attributes the qualification of property.

21st

Thus, the now claimant, for the purposes of IMI and also of stamp tax, due to the wording of the aforementioned item, is not the owner of autonomous fractions, but rather of a single property.

22nd

Having taken this fact as given, what the now claimant intends is that the AT consider, for the purposes of assessment of the present tax, that there exists an analogy between the regime of full ownership and that of condominium ownership, since there should be no discrimination in the legal-tax treatment of these two property regimes, as it would be illegal.

23rd

As is well known, condominium ownership is a specific legal regime of property provided for in article 1414º and following of the Civil Code, whose manner of constitution is provided for there, as well as the other rules regarding the rights and obligations of co-owners, it being necessary to recognize in this enactment the existence of a more evolved property regime.

24th

Now, to contend that the interpreter and applicator of tax law apply, by analogy, to the regime of full ownership, the regime of condominium ownership is what is abusive and illegal, as we shall see in detail.

25th

These two property regimes are regimes of civil law, which were imported into tax law, namely in the terms referred to in article 2º of the CIMI.

26th

And the interpreter of tax law cannot equate these regimes, in accordance with the rule according to which the concepts of other branches of law have the meaning in tax law that is given to them in those branches of law, or in the words of article 11º, no. 2 of the LGT, on the interpretation of tax law: "Whenever tax law norms employ terms proper to other branches of law, these should be interpreted in the same sense as they have therein, unless something else results directly from the law"

27th

On the other hand, still taking into account that in determining the meaning of tax norms and in qualifying the facts to which they apply the general rules and principles of interpretation and application of laws are observed, as article 11º, no. 1 of the LGT provides, which thus refers to the Civil Code, its article 10º on the application of analogy, determines that this will only be applicable in case of gaps in the law.

28th

Now tax law contains no gap! The CIMI determines, to which the aforementioned item refers, that in the regime of condominium ownership the fractions constitute properties. Not being the property submitted to this regime, legally the fractions are parts susceptible to independent use, without there being common parts.

29th

We cannot, therefore, accept that it be considered that for the purposes of item 28.1 of the General Table annexed to the CST, that the parts susceptible to independent use have the same tax regime as the autonomous fractions of the condominium ownership regime.

30th

Being the property submitted to the regime of full ownership, but being physically constituted by parts susceptible to independent use, tax law attributed relevance to this materiality, evaluating these parts individually, in accordance with article 12º and consequently, in accordance with article 12º, no. 3, of the CIMI, each storey or part of property susceptible to independent use is considered separately in the property registration, but in the same matrix, proceeding to the assessment of IMI taking into account the taxable patrimonial value of each part.

[…]

52nd

Finally, it should be noted that the property registration entry of each part susceptible to independent use is not autonomous, per matrix, but consists of a description in the matrix of the property as a whole - see the property booklet of this property which represents the document of the owner containing the property registration elements of the property.

53rd

What is intended to be concluded is that these procedural norms of evaluation, property registration and assessment of parts susceptible to independent use do not permit stating that there exists an equalization of the property in the regime of full ownership to the regime of vertical ownership, this because, and as has already been referred to,

54th

These legal-civil regimes are different, and tax law respects them.

55th

The taxable event of stamp tax in item 28.1, as it consists in the ownership of urban properties whose taxable patrimonial value contained in the matrix, in accordance with the CIMI, is equal to or greater than € 1,000,000.00, the patrimonial value relevant for the purposes of the incidence of the tax is, therefore, the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even when susceptible to independent use.

56th

And this interpretation of the rule of incidence to stamp tax results from the combination of the other rule of incidence to IMI which is article 1º, according to which IMI is levied on the taxable patrimonial value of urban properties, bearing in mind the notion of property in article 2º and of urban property contained in article 4º and also of the types of urban properties described in article 6º

57th

In this direction, the request of the claimant does not succeed, even if indirect, that analogy be applied to its property of the regime of condominium ownership, considering that each of the fractions susceptible to independent use constitutes a property, since that would not be interpreting the norms of the CIMI, and consequently of the CST, that would be to subvert the entire regime instituted there, with violations of the principles referred to above.

[…]

61st

All things considered, we necessarily must conclude that the tax acts in question, in terms of substance, did not violate any legal or constitutional precept, and should, therefore, be upheld.

  1. By order of 29/10/2014, the Tribunal decided to dispense with the holding of the meeting provided for in article 18º of the RJAT, as well as to dispense with the examination of the witness called by the Claimant and to dispense with the production of allegations.

  2. The Arbitral Tribunal was properly constituted.

  3. The parties have legal personality and capacity and are legitimate (articles 4º and 10º, no. 2, of the RJAT and article 1º of Ordinance no. 112-A/2011, of 22 March).

  4. No nullity is apparent.

II. FACTUAL MATTER

a. Proven facts

  1. The following facts are considered proved:

17.1. The Claimant is the owner of the property registered under article ... in the urban property matrix of the parish of ..., municipality of ...;

17.2. The property identified above is registered in the urban property booklet, issued on 15 November 2013, in full ownership with thirteen storeys or divisions of independent use, twelve of which with residential purpose, in a total patrimonial value of € 2,805,320.00;

17.3. The assessments contested by the claimant refer to the storeys …, to which correspond, respectively, the following taxable patrimonial values, determined in accordance with the Municipal Property Tax Code (CIMI): €180,410.00, € 194,980.00, € 182,410.00, € 200,290.00, € 182,410.00, € 200,290.00, € 181,350.00, € 199,130.00, € 355,040.00, € 271,080.00, € 214,250.00 and € 252,020.00;

17.4. None of the storeys with residential purpose has, therefore, a taxable patrimonial value greater than € 1,000,000.00;

17.5. For the purposes of Item no. 28 of the General Table of Stamp Tax (GTST) the Respondent considered the total value of the storeys with residential purpose, corresponding to € 2,613,660.00;

17.6. Based on this value, the Respondent proceeded with the assessments of Stamp Tax of item 28.1 of the GTST, now contested by the Claimant, at the rate of 1%, in the total amount of € 26,136.60;

17.7. The first instalment of the tax for each of the assessments has already been paid in full by the Claimant.

b. Unproven facts

  1. Of the facts with interest for the decision of the case, those not contained in the factuality described above were not proved.

c. Reasoning of the decision on factual matter

  1. The facts were given as proved on the basis of documentary evidence.

III. LEGAL MATTER

  1. Having fixed the relevant factuality, it appears that the present case concerns exclusively legal matters.

  2. The first question to be decided by the Tribunal is that which concerns whether the taxable patrimonial value (TPV) to be considered for the purposes of applying Item 28 of the GTST, where a property not constituted in the condominium ownership regime is in question, is the TPV attributed to each storey or division with independent use and with residential purpose, or whether it is the overall TPV, corresponding to the sum of the TPV of each storey or division susceptible to independent use and with residential purpose.

  3. Item 28 of the GTST, now under consideration, was added by Law no. 55-A/2012, of 29 October, with the following text:

"28 – Ownership, usufruct or right of surface of urban properties whose taxable patrimonial value contained in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000.00 – on the taxable patrimonial value for the purposes of IMI:

28.1 – Per property with residential purpose – 1%

28.2 – Per property, when the passive subjects who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%."

  1. The Code of Stamp Tax (CST) and its General Table, with the amendments introduced by Law no. 55-A/2012, of 29 October, does not clarify the meaning of the expression "property with residential purpose".

  2. Article 68º, no. 2 of the CST, added by Law no. 55-A/2012, of 29 October, provides that "[t]o matters not regulated in this Code concerning item no. 28 of the General Table, the provisions of the CIMI shall apply subsidiarily."

  3. The legislator, in no. 1 of article 2º of the CIMI, adopts the following concept of property:

"For the purposes of this Code, property is any fraction of territory, encompassing 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 patrimony 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, endowed with economic autonomy in relation to the land where they are situated, although located in a fraction of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature."

  1. As observed by SILVÉRIO MATEUS and CURVELO DE FREITAS, "no. 1 of this article [of article 2º] provides for the existence of three requirements necessary for one to be faced with the concept of property, namely, physical structure, patrimonial character and economic value" (Taxes on Immovable Patrimony. The Stamp Tax, Engifisco, 2005, p. 101, note no. 1.1).

  2. Thus, the concept of property relevant for the purposes of CIMI and of CST does not exclude storeys or divisions of independent use of property registered in the urban property booklet in full ownership.

  3. No. 4 of article 2º of the CIMI further provides that:

"for the purposes of this tax [IMI], each autonomous fraction, in the regime of condominium ownership, is considered as constituting a property".

  1. Once again, this provision does not result in the exclusion from the concept of property of storeys or divisions of independent use of property in full ownership.

  2. In no. 4 of article 2º of the CIMI the legislator clarifies, unequivocally, that the autonomous fractions of properties registered in condominium ownership are considered properties for the purposes of IMI.

  3. But this does not legitimate the interpreter to make an interpretation a contrario, in the sense of excluding from the concept of property the units of independent use of properties registered in full ownership.

  4. It seems, in truth, that the ratio of no. 2 of article 4º is precisely to permit an extensive interpretation of the provisions of no. 1 of article 2º, so as to include in the concept of property the units (fractions, storeys or divisions) of independent use.

  5. This sense seems, moreover, to be confirmed by the provisions of no. 3 of article 12º of the CIMI, which follows:

"Each storey or part of property susceptible to independent use is considered separately in the property registration, which also records its respective taxable patrimonial value."

  1. From which it results that the units of independent use of properties registered in full ownership are subject to evaluation based on the criteria provided for in article 38º of the CIMI.

  2. Article 6º of the CIMI, on the other hand, enumerates the types of urban properties, and provides that "[r]esidential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a licence, which have as their normal destination each of these purposes".

  3. As is stated in the Arbitral Decision issued in Process no. 50/2013,

"From this we can conclude that, in the legislator's view, what matters is not the legal-formal rigour of the concrete situation of the property but rather its normal use, the purpose for which the property is intended. We also conclude that for the legislator the situation of the property in vertical or condominium ownership was not relevant, as no reference or distinction is made between one and the other. What is relevant is the material truth underlying its existence as an urban property and its use."

  1. When considering the literal element of interpretation we note that, in the final part of the provision contained in item 28.1 of the GTST, it is determined that the taxable value corresponds to the "taxable patrimonial value used for the purposes of IMI".

  2. The Respondent considers as the TPV relevant for the purposes of applying item 28.1 of the GTST the overall TPV of the property registered in full ownership, in manifest contradiction with the practice of a plurality of assessment acts relating to the various storeys susceptible to independent use.

  3. From the literal element of interpretation, in conjunction with the systematic and teleological elements, it results that the taxable patrimonial value to be considered for the purposes of applying item 28.1 of the CST is that corresponding to each of the units susceptible to independent use.

  4. And it appears to us that this is also the understanding most in conformity with the principle of the prevalence of substance over form.

  5. Furthermore, this is the sense most in conformity with the constitutional principle of equality, enshrined in article 13º of the Constitution of the Portuguese Republic.

  6. The Respondent, by applying item 28.1 of the GTST in a differentiated manner depending on whether the residential unit is inserted in property registered in condominium ownership or in full ownership is making a formal differentiation criterion prevail, to the detriment of the material equality required by the Fundamental Law.

  7. From the point of view of contributory capacity, as an operative criterion of the principle of equality, which postulates a material equality, it is irrelevant whether the property is in vertical or condominium ownership – the contributory capacity evidenced is the same, and the application of item 28.1 of the GTST should be made in the same terms.

  8. It is concluded that, in properties registered in full ownership, only the storey or division susceptible to independent use with residential purpose whose TPV is equal to or greater than € 1,000,000.00 is subject to Stamp Tax by application of item 28.1 of the GTST.

  9. In the present case, none of the storeys for which Stamp Tax was assessed by application of Item 28.1 of the GTST has a TPV equal to or greater than € 1,000,000.00, from which results the illegality of the respective acts of assessment.

  10. Concluding that the acts of assessment contested in the present proceedings are illegal, the Tribunal must decide a second question, which concerns whether or not compensatory interest is owed to the Claimant.

  11. No. 1 of article 43º of the General Tax Law provides that:

"[c]ompensatory interest is owed when it is determined, in gracious reclamation or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount greater than legally due".

  1. It is considered that "[t]he error attributable to the services that operated the assessment is demonstrated when they proceed with gracious reclamation or challenge of that same assessment and the error is not attributable to the taxpayer" (DIOGO LEITE DE CAMPOS, BENJAMIM SILVA RODRIGUES, JORGE LOPES DE SOUSA, General Tax Law. Annotated and Commented, 4th ed., ..., 2012, p. 342).

  2. The law further determines, in article 100º of the General Tax Law, that:

"The tax administration is obliged, in case of total or partial success of claims or administrative appeals, or of court proceedings in favour of the passive subject, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, in the terms and conditions provided for in the law."

  1. As is stated in the Decision of the SAT of 11/02/2009, appeal no. 1003/08,

"Having the legislator adopted indemnification in the form of compensatory interest, following a decision annulling an act of assessment, presuming the patrimonial injury derived from the deprivation of the amount paid following an illegal assessment act, the interpretation of article 100º of the LGT in accordance with the Constitution is that it recognizes the right to compensatory interest from the date on which the deprivation of the illegally assessed amount occurred and not only from the end of the period for enforcement of the annulling decision."

  1. In the present case we are faced with a plurality of assessments of Stamp Tax founded on error attributable to the services, from which resulted undue payments of tax instalments by the Claimant, from which it is recognized that the Claimant has the right to compensatory interest.

  2. In accordance with the provisions of no. 1 of article 61º of the Code of Tax Procedure and Process (CPPT), "[i]nterest is counted from the date of undue payment of the tax until the date of processing of the respective credit note, in which they are included".

IV. DECISION

In these terms, and with the grounds set out, the Arbitral Tribunal decides:

a) To find in favour of the claim for annulment of the acts of assessment, with all legal effects, of the acts of assessment of Stamp Tax issued by documents numbered 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ... and 2014 ..., and to condemn the Respondent to reimburse the tax instalments unduly paid by the Claimant;

b) To find in favour of the claim for condemning the Respondent to the payment of compensatory interest, at the legal rate, in accordance with the provisions of articles 43º of the General Tax Law and 61º of the Code of Tax Procedure and Process.

V. VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at € 26,136.60, in accordance with the provisions of article 97º-A, no. 1, letter a), of the Code of Tax Procedure and Process and article 3º, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings.

VI. COSTS

In accordance with article 22º, no. 4, of the RJAT, the amount of costs is fixed at € 1,530.00, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Lisbon, 26 November 2014

The Arbitrator,

Paulo Nogueira da Costa

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Portuguese Stamp Duty General Table and how does it apply to residential properties?
Verba 28 of the Portuguese Stamp Duty General Table (TGIS) imposes an annual stamp tax on residential properties with a taxable patrimonial value (VPT) exceeding €1,000,000. Introduced by Law 55-A/2012 as a wealth tax measure, it applies to properties for residential purposes. The critical interpretative issue is whether the threshold applies to entire buildings or individual independent units. According to Article 67(2) of the Stamp Tax Code (CIS), matters not specifically regulated refer to the Municipal Property Tax Code (CIMI). Under Article 12(3) CIMI, each floor or part of property susceptible to independent use is considered separately in property registration with its own taxable patrimonial value. Arbitral tribunals have consistently held that this CIMI criterion governs Verba 28 application, meaning each autonomous unit must be assessed individually. Therefore, a building containing multiple independent residential units each valued below €1,000,000 should not be subject to Verba 28, even if the aggregate building value exceeds the threshold.
Can the Portuguese Tax Authority levy Stamp Duty based on the total value of a building rather than each independent unit?
No, according to established Portuguese tax arbitration jurisprudence, the Tax Authority cannot lawfully levy Stamp Duty under Verba 28 based on the total building value when the property comprises multiple independent units. Process 382/2014-T follows precedents from Arbitration Decisions 50/2013-T (29 October 2013) and 132/2013-T (16 December 2013), which held that the Tax Authority cannot use the total property value as the reference for tax incidence when the legislator established different rules under CIMI. The tribunals ruled that distinguishing between properties in condominium ownership and full ownership with independent units constitutes an 'innovation' without legal support. Article 12(3) CIMI expressly provides that each floor or part susceptible to independent use is considered separately with its own registered taxable patrimonial value. Since Article 67(2) of the Stamp Tax Code refers to CIMI for matters not specifically regulated in Verba 28, the uniform criterion requires that tax incidence occurs only when one of the independent units exceeds €1,000,000, not when the aggregate value does. Assessing based on total building value contradicts the applicable CIMI legislation and creates unlawful discrimination.
How does CAAD arbitration process 382/2014-T interpret the taxable value threshold for properties with multiple independent units?
Process 382/2014-T interprets the €1,000,000 taxable value threshold as applying to each independent unit separately, not to the aggregate property value. The arbitral tribunal reasoning follows that when a property contains multiple autonomous floors or units with independent use—each with separate property registration entries and individual taxable patrimonial values under CIMI—the Verba 28 threshold must be assessed unit-by-unit. In this case, the property comprised several independent residential units, none of which individually exceeded €1,000,000 in taxable patrimonial value according to their respective property registrations for Municipal Property Tax (IMI) purposes. The tribunal adopted the interpretation from prior decisions that CIMI Article 12(3) governs the determination of taxable value for Verba 28 purposes. Consequently, the uniform criterion requires tax incidence only when an individual unit's taxable patrimonial value exceeds the statutory threshold. The Tax Authority's approach of aggregating values from multiple independent units to reach the threshold was deemed legally incorrect, constituting an error regarding the factual and legal requirements for Verba 28 application, warranting annulment of the contested assessments.
Does the constitutional principle of equality (Article 13 CRP) apply to Stamp Duty on real estate in Portugal?
Yes, the constitutional principle of equality under Article 13 of the Portuguese Constitution (CRP) applies to Stamp Duty on real estate, and specifically to Verba 28 assessments. Process 382/2014-T invokes both the general equality principle (Article 13 CRP) and the specific principle of contributory equality in wealth taxation (Article 104(3) CRP), which Law 55-A/2012 expressly targeted when introducing Verba 28. The claimant argued that assessing independent units based on aggregate building value violates constitutional equality by treating substantially similar properties differently based solely on their formal ownership structure. Specifically, if the property had been divided into formal condominium ownership, none of the autonomous fractions would be subject to Verba 28 because each would be assessed independently below the threshold. However, under the Tax Authority's approach, identical independent units in full ownership would face taxation solely because they share a common property title. Arbitral Decision 132/2013-T confirmed there is no legal justification for differentiating between condominium properties and full ownership properties with independent units, and doing so creates unconstitutional discrimination. The principle requires equal tax treatment of equal economic realities regardless of formal legal structure.
What remedies are available to taxpayers who overpaid Stamp Duty under Verba 28, including compensatory interest?
Taxpayers who overpaid Stamp Duty under Verba 28 have multiple remedies available. First, they can seek annulment of the illegal tax assessments through administrative appeal or tax arbitration (CAAD) under the Tax Arbitration Legal Regime (RJAT). Upon successful challenge, taxpayers are entitled to full reimbursement of amounts unduly paid. Second, Article 43(1) of the General Tax Law (LGT) provides for compensatory interest on illegally collected taxes. When illegality is proven and the error is attributable exclusively to tax authority services, compensatory interest runs from the date of undue payment until full reimbursement, calculated under Article 61(5) of the Tax Procedure Code (CPPT). In Process 382/2014-T, the claimant specifically requested compensatory interest based on this provision. Third, taxpayers can invoke cumulation of claims under Article 3(1) RJAT when multiple assessments depend on the same factual circumstances and legal interpretation, enabling efficient resolution of all related disputes. The consistent arbitral jurisprudence (Processes 50/2013-T, 132/2013-T, 48/2013-T) supporting unit-based assessment provides strong precedential support for taxpayers challenging aggregate-value assessments on properties with multiple independent units below the individual threshold.