Process: 384/2014-T

Date: February 8, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (384/2014-T) addresses whether Stamp Tax under verba 28.1 of the General Stamp Tax Table (TGIS) applies to construction land in Portugal. The petitioner challenged a €27,469.62 stamp tax assessment on construction land with a patrimonial value of €2,746,961.85, arguing that construction land lacks residential purpose and therefore falls outside the scope of verba 28.1. Law 55-A/2012 introduced verba 28.1, imposing stamp tax on ownership, usufruct, or superficies rights of urban properties with residential purpose having patrimonial values equal to or exceeding €1,000,000. The Tax Authority contended the property had residential nature, justifying the assessment. However, the petitioner argued that construction land, as defined under Article 6 of the Real Estate Municipal Tax Code (CIMI), is legally distinct from residential urban properties. The tribunal referenced extensive CAAD and Supreme Administrative Court jurisprudence establishing that construction land cannot be classified as properties with residential purpose for stamp tax purposes. Notable Supreme Administrative Court decisions (cases 0467/14, 0676/14, 0395/14) clarified that since the legislator distinguishes between residential urban properties and land for construction under CIMI Article 6, construction land falls outside verba 28.1's scope. This interpretation prevents unlawful tax assessments on undeveloped land intended for future construction. The case emphasizes taxpayers' rights to challenge improper stamp tax liquidations through CAAD arbitration, seeking annulment and refunds with compensatory interest under Article 43 of the General Tax Law. This decision reinforces legal certainty regarding stamp tax applicability to different property categories in Portugal's tax system.

Full Decision

Arbitral Decision

CAAD: Tax Arbitration

Case no. 384/2014 – T

Subject: Stamp Tax – item 28.1 of the General Stamp Tax Table – land for construction

Claimants / Petitioners: A

Respondent: Tax and Customs Authority (hereinafter ATA)

  1. Report

On 20-05-2014, the joint-stock company A, legal entity no. ..., with registered office at ..., hereinafter designated as the Petitioner, submitted to the Administrative Arbitration Center (CAAD) a request for the constitution of an arbitral tribunal with a view to annulling the tax act of assessment of Stamp Tax under item no. 28 of the General Stamp Tax Table (TGIS), relating to the year 2013 and concerning the urban property registered in the real estate registry under article ... of the parish of ..., municipality of .... The assessment whose annulment is requested is in the amount of 27,469.62 €.

The Petitioner alleges that the property that was subject to the Stamp Tax assessment is land for construction, and therefore has no residential purpose, and thus the assessment in question suffers from the defect of violation of the law due to error regarding the legal prerequisites for the application of item 28.1 of the TGIS.

The Petitioner further requests the refund of the stamp tax paid, in the amount of 9,156.54 €, plus compensatory interest, pursuant to article 43 of the General Tax Law.

A single arbitrator was appointed on 08-07-2014: Suzana Fernandes da Costa.

In accordance with the provisions of article 11 no. 1, paragraph c) of the RJAT, the singular arbitral tribunal was constituted on 25-07-2014.

The Tax and Customs Authority submitted its response on 30-09-2014 (within the legal deadline), immediately noting that the petition cannot exceed the collection document that was attached, in the amount of 9,156.54 €, relating to the first installment.

The ATA argues that the petition for a declaration of illegality and consequent annulment of the contested assessments should be ruled unfounded, since the assessments at issue constitute a correct interpretation of item 28.1 of the General Stamp Tax Table, as the aforementioned property has the legal nature of property with residential purpose.

The ATA further requested, on the same date, the waiver of the holding of the meeting provided for in article 18 of the Tax Arbitration Regime.

Having been notified of this petition by the ATA, the Petitioner informed on 09-10-2014 that it did not oppose what was proposed by the ATA. In the same petition, the Petitioner attached to the case file a document issued by the ATA, which had been notified to it after the submission of the arbitral petition.

On 14-10-2014, an order was issued to attach the aforementioned petition to the case file and to request notification of the ATA to pronounce itself within 10 days on the document attached by the Petitioner and to confirm whether the assessment that was the object of the arbitral petition had been annulled, as the Petitioner stated. However, the ATA did not pronounce itself on the matter.

And on 18-11-2014, an order was issued scheduling the meeting provided for in article 18 of the RJAT and the production of oral arguments, for 05-12-2014 at 16:30 hours.

The jurist designated to represent the Director General of the ATA did not attend the meeting.

At the meeting it was decided to notify the ATA again to inform the tribunal within 10 days whether the act that was the object of the arbitral petition had been effectively annulled and to attach the administrative file.

It was further determined at the meeting to notify the Respondent to pronounce itself within 10 days on the waiver of arguments, which shall be considered waived in the absence of a response.

It was also decided to set 08-01-2015 as the date for the rendering of the arbitral decision.

On 08-01-2015, since it was found that the ATA had still not been notified of the content of the minutes of the meeting, on that date it was notified, and it was decided to extend the deadline for rendering the decision by one month.

The ATA did not pronounce itself within the designated deadline.

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

The present petition for arbitral decision was submitted timely, pursuant to article 10 no. 1 paragraph a) of Decree-Law no. 10/2011 of 20 January.

The case does not suffer from nullities and no prior questions were raised.

  1. Factual Matters

2.1. Proven Facts:

Having analyzed the documentary evidence produced, the following facts are considered proven and relevant to the decision of the case:

  • The Petitioner is the owner of the urban property registered in the urban real estate registry under article ... of the parish of ..., municipality of ..., and which has a tax patrimonial value of 2,746,961.85 €, as confirmed by the property record attached to the arbitral petition as document 2;

  • The aforementioned property is land for construction and has a patrimonial value of 2,746,961.85 €, as confirmed by the property record attached to the arbitral petition;

  • The Petitioner was notified of the Stamp Tax assessment for the year 2013, in the amount of 27,469.62 €, notification which also included a collection document for the first installment of the tax, in the amount of 9,156.54 €, payable by 30-04-2014, as document 1 attached to the arbitral petition.

  • The Petitioner made payment of the first installment of Stamp Tax in the amount of 9,156.54 €, on 30-04-2014, as confirmed by document 1 attached to the arbitral petition.

No other facts with relevance to the decision of the case were proven.

2.2. Justification of the Proven Factual Matters:

With respect to the proven facts, the arbitrator's conviction was based on the documentary evidence attached to the case file.

  1. Legal Matters:

3.1. Object and Scope of the Present Case

The issue to be decided in the present case is whether the property that was subject to the stamp tax assessment, being land for construction, has residential purpose and whether item 28.1 of the General Stamp Tax Table (TGIS) is applicable to it.

On this same issue, among others, the awards of the CAAD rendered in cases number 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 310/2013-T and 284/2013-T, 12/2014-T, 151/2014-T, 202/2014-T, 210/2014-T and 276/2014-T have already pronounced.

The Supreme Administrative Court has also already pronounced on this issue, namely in awards of cases no. 0467/14 of 02-07-2014, no. 0676/14 of 09-07-2014, no. 0395/14 of 28-05-2014, no. 01871/13 of 14-05-2014 and no. 055/14 of 14-05-2014, no. 0425/14 of 28-05-2014, no. 0396/14 of 28-05-2014, no. 0274/14 of 14-05-2014 and no. 046/14 of 14-05-2014. By way of example, the summary of the award of case no. 0676/14 of 09-07-2014 states: "Since the legislator has not defined the concept of 'properties (urban) with residential purpose', and as it results from article 6 of the Real Estate Municipal Tax Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table – a clear distinction between 'residential urban properties' and 'land for construction', these cannot be considered, for purposes of the incidence of Stamp Tax (Item no. 28.1 of the TGIS, as amended by Law no. 55-A/2012, of 29 October) as urban properties with residential purpose."

3.2. Question of the Classification of Land for Construction within the Scope of Applicability of Item 28.1 of the TGIS

3.2.1. Regime of Law no. 55-A/2012, of 29 October

Law no. 55-A/2012, of 29 October, added item 28 to the General Stamp Tax Table (TGIS), with the following wording:

28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value recorded in the registry, pursuant to the Real Estate Municipal Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the patrimonial tax value used for the purpose of the Municipal Real Estate Tax:

28.1 – For property with residential purpose – 1% (...);

In the transitional provisions contained in article 6 of that Law no. 55-A/2012, the following rules were established:

c) The tax patrimonial value to be used in the assessment of the tax corresponds to that which results from the rules provided for in the Real Estate Municipal Tax Code by reference to the year 2011; (...)

f) The applicable rates are as follows:

i) Properties with residential purpose evaluated pursuant to the Real Estate Municipal Tax Code: 0.5%;

ii) Properties with residential purpose not yet evaluated pursuant to the Real Estate Municipal Tax Code: 0.8%;

Item 28.1 TGIS and subitems i) and ii) of paragraph f) of no. 1 of article 6 of Law no. 55-A/2012 contain a concept that is not used in any other tax legislation, which is that of "property with residential purpose".

Let us examine:

3.2.2. Concept of Properties Used in the CIMI

In the CIMI, the categories of properties are enumerated in its articles 3 to 6. The concept of "property with residential purpose" does not appear in any of these articles.

The notion most closely approximating the literal meaning of this expression used is that of "residential properties", which no. 2 of article 6 of the CIMI defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, which have as their normal destination residential purposes.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that extracted from no. 2 of article 6 of the CIMI suggests that the same concept was not intended to be used.

Neither is this concept, with this terminology, found in any other statute.

3.2.3. Concept of "Property with Residential Purpose"

Item 28.1 of the TGIS referred in 2013 to "property with residential purpose".

The word "purpose" (afetação), in this context of the use of a property, has the meaning of "the act of designating something for a certain use".

As stated in the award of the CAAD rendered in case no. 53/2013-T, in which the arbitrators were Judge Counselor Jorge Lopes de Sousa, Ms. Dr. Conceição Pinto Rosa and Mr. Dr. Alberto Amorim Pereira:

"it is to be concluded that the interpretive elements available, including the 'circumstances in which the law was enacted and the specific conditions of the time in which it is applied', clearly point to the fact that it was not intended to encompass within the scope of applicability of item no. 28.1 situations of properties that are not yet designated for housing, namely land for construction held by companies".

Properties classified as land for construction are, and taking into account the provisions of article 6 no. 3 of the Real Estate Municipal Tax Code, those in which the owner has acquired the right to construct on them or to carry out subdividing operations, as well as those that have been acquired expressly for that purpose. In this regard, see JOSÉ MARIA FERNANDES PIRES in Lições de Impostos sobre o Património e do Selo, Almedina, 2010, page 97.

Note that in the classification as land for construction, the purpose that future constructions may have is irrelevant, namely residential, commercial, industrial or for services.

Moreover, the award of the Supreme Administrative Court of 09-07-2014, from case no. 0676/14, in which Counselor Dulce Neto is the reporter, states that "residential purpose always appears in the Real Estate Municipal Tax Code referred to 'buildings' or 'constructions', existing, authorized or planned, because only these can be inhabited, which does not occur in the case of land for construction, which do not have, in themselves, conditions for this, and are not susceptible to being used for housing unless and until an authorized and planned construction is built on them (but in that case they will no longer be 'land for construction' but another type of urban properties – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of the CIMI)."

Similarly, in the award of the Supreme Administrative Court, of 14-05-2014, case no. 046/14, in which Counselor Ascenção Lopes is the reporter, it is stated that "since the legislator has not defined the concept of 'properties (urban) with residential purpose', and as it results from article 6 of the Real Estate Municipal Tax Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table – a clear distinction between 'residential urban properties' and 'land for construction', these cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of the TGIS, as amended by Law no. 55-A/2012, of 29 October), as urban properties with residential purpose."

We can thus conclude that "land for construction" cannot be considered as "properties with residential purpose" for purposes of the application of item 28.1 of the General Stamp Tax Table.

Prohibition of Analogy and Extensive Interpretation

One could, on the other hand, raise the question of the possibility of applying analogy to the provision in item 28.1 of the TGIS. Now, on this matter, no. 4 of article 11 of the General Tax Law provides as follows:

"4. Gaps resulting from tax provisions covered by the parliamentary reservation of law are not susceptible to integration by analogy"

As to the matters covered by the parliamentary reservation of law, note article 103, no. 2 of the Portuguese Constitution and article 8 of the General Tax Law. According to these provisions, the principle of fiscal legality encompasses the scope, the rate, tax benefits and taxpayer guarantees. This is also referred to in the work "The Principle of Fiscal Legality" by Ana Paula Dourado, Almedina, 2007, page 106.

Since item 28.1 TGIS is a provision regarding scope, covered by the principle of fiscal legality, its analogical application to situations not expressly provided for therein is prohibited.

Similarly, an extensive interpretation of the aforementioned item that would allow including in the expression contained in the law land for construction shall not be admitted. On interpretation, article 11, no. 1 to 3 of the General Tax Law and article 9 of the Civil Code apply. We understand that an extensive interpretation of the aforementioned item that includes land for construction therein is not possible, since it would always have to have a minimum correspondence in the letter of the law, which does not occur.

With respect to the historical element, the fact that item 28.1 TGIS was subsequently expressly amended, with the State Budget Law for 2014, in order to include, as from 01.01.2014, land for construction, also permits the conclusion that such properties were not taxed under the wording in force until 31.12.2013.

Application of the Regime to the Petitioner's Situation

The Petitioner's property is land for construction held by a company. By what has been stated, there is no property with residential purpose, and therefore the Stamp Tax provided for in item 28.1 of the TGIS does not apply to that property.

For this reason, the assessment whose declaration of illegality is requested suffers from the defect of violation of item no. 28.1 TGIS, due to error regarding the legal prerequisites, which justifies the declaration of its illegality and annulment (article 135 of the Administrative Procedure Code).

The arbitral petition clearly identifies the assessment whose annulment is requested, and which is contained in document 1 attached to the arbitral petition. Said assessment is in the amount of 27,469.62 €.

However, since the collection document contained in the same notification only includes the first installment, only the refund of the amount paid in the amount of 9,156.54 € shall be determined.

  1. Compensatory Interest

Suffering from illegality the Stamp Tax assessment, compensatory interest is owed from the date of payment of the first installment, in the amount of 9,156.54 €, until the full reimbursement by the ATA, pursuant to articles 43 of the General Tax Law and 61 no. 2 of the Tax Procedure and Process Code.

  1. Decision

In view of the foregoing, it is determined:

  • to rule as well-founded the petition filed by the Petitioner in the present tax arbitral case, with respect to the illegality of the Stamp Tax assessment for the year 2013, in the total amount of 27,469.62 €;

  • to rule as well-founded the petition condemning the Tax and Customs Authority to reimburse to the Petitioner the amount of the tax improperly paid, in the amount of 9,156.54 €, plus compensatory interest pursuant to the law, from the date on which such payment was made until the date of full reimbursement thereof.

  1. Value of the Case:

In accordance with the provisions of article 315, no. 2, of the Civil Procedure Code and 97-A, no. 1, paragraph a) of the Tax Procedure and Process Code and 3, no. 2 of the Regulation of Costs in Tax Arbitration Cases, the value of the action is set at 27,469.62 €.

  1. Costs:

Pursuant to article 22, no. 4, of the RJAT, and Table I annexed to the Regulation of Costs in Tax Arbitration Cases, the amount of costs is set at 1,530.00 € to be paid by the Tax and Customs Authority.

Notify.

Lisbon, 8 February 2015.

Text prepared by computer, pursuant to article 138, no. 5 of the Civil Procedure Code (CPC), applicable by reference to article 29, no. 1, paragraph e) of the Tax Arbitration Regime, as reviewed by me.

The single arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Does Stamp Tax verba 28.1 of TGIS apply to construction land (terrenos para construção) in Portugal?
No, Stamp Tax verba 28.1 of TGIS does not apply to construction land (terrenos para construção) in Portugal. According to consistent CAAD arbitration tribunal and Supreme Administrative Court jurisprudence, verba 28.1 only applies to urban properties with residential purpose (afetação habitacional). Article 6 of the Real Estate Municipal Tax Code (CIMI) establishes a clear legal distinction between residential urban properties and land for construction. Since construction land is undeveloped and designated for future building purposes rather than current residential use, it cannot be classified as having residential purpose under verba 28.1. Multiple Supreme Administrative Court decisions, including case 0676/14 from July 2014, have confirmed that construction land falls outside the scope of this stamp tax provision, protecting property owners from unlawful assessments on undeveloped land.
Can a construction land plot be classified as having residential allocation for Stamp Tax purposes?
No, construction land plots cannot be classified as having residential allocation (afetação habitacional) for Stamp Tax purposes under verba 28.1 of TGIS. Portuguese tax law, specifically Article 6 of the Real Estate Municipal Tax Code (CIMI), establishes distinct categories for urban properties: residential buildings and land for construction are separate classifications. Construction land represents undeveloped plots designated for future development and lacks the essential characteristic of residential purpose required by verba 28.1. The Supreme Administrative Court has consistently ruled that the legislator's clear distinction between these property types in CIMI must be respected when interpreting stamp tax incidence. Even if construction land is ultimately intended for residential development, its current legal classification as construction land prevents it from being taxed under verba 28.1, which specifically targets properties with existing residential purpose rather than future potential residential use.
How can taxpayers challenge Stamp Tax assessments on construction land through CAAD arbitration?
Taxpayers can challenge Stamp Tax assessments on construction land through CAAD (Centro de Arbitragem Administrativa) arbitration by filing a request for constitution of an arbitral tribunal seeking annulment of the illegal tax liquidation. The process involves: (1) submitting an arbitration petition within the legal deadline established in Article 10 of the Tax Arbitration Regime (RJAT); (2) arguing that the assessment violates the law due to error regarding legal prerequisites, specifically that construction land lacks residential purpose required by verba 28.1 of TGIS; (3) supporting the claim with property records demonstrating the land's classification as construction land under CIMI; (4) requesting annulment of the assessment and refund of amounts paid plus compensatory interest under Article 43 of the General Tax Law. The arbitration tribunal will analyze whether Article 6 of CIMI's distinction between residential properties and construction land was properly applied, considering established Supreme Administrative Court jurisprudence favoring taxpayers in similar cases.
What are the legal grounds for annulling a Stamp Tax liquidation under verba 28.1 of the TGIS?
The primary legal ground for annulling a Stamp Tax liquidation under verba 28.1 of TGIS on construction land is violation of law due to error regarding the legal prerequisites for tax incidence (erro sobre os pressupostos de direito). Specifically, taxpayers argue that: (1) verba 28.1 requires properties to have residential purpose (afetação habitacional); (2) Article 6 of the Real Estate Municipal Tax Code (CIMI), which is subsidiarily applicable to Stamp Tax, clearly distinguishes between residential urban properties and land for construction as separate legal categories; (3) construction land, by legal definition, lacks residential purpose since it represents undeveloped plots designated for future construction rather than current residential use; (4) applying verba 28.1 to construction land constitutes incorrect interpretation and application of the legal provision. Supreme Administrative Court jurisprudence consistently supports this interpretation, establishing that construction land cannot be considered urban property with residential purpose for stamp tax purposes, making assessments on such properties legally defective and subject to annulment.
Are property owners entitled to compensatory interest when a Stamp Tax liquidation is annulled?
Yes, property owners are entitled to compensatory interest (juros indemnizatórios) when a Stamp Tax liquidation under verba 28.1 is annulled. Article 43 of the General Tax Law (Lei Geral Tributária) establishes taxpayers' right to compensatory interest when tax payments are subsequently determined to be unlawful. When CAAD arbitration tribunals or courts annul stamp tax assessments on construction land and order refunds, the Tax Authority must pay compensatory interest calculated from the date of the unlawful payment until the refund is issued. This compensatory mechanism recognizes that taxpayers suffered financial damage by being deprived of funds due to an illegal tax assessment. The interest compensates for the time value of money and the improper retention of amounts by the Tax Authority. In stamp tax cases involving construction land misclassified as residential property, refunds typically include both the principal amount paid (often in installments) and accrued compensatory interest, ensuring full restitution to taxpayers who successfully challenge unlawful assessments through administrative arbitration or judicial proceedings.