Process: 387/2014-T

Date: May 22, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses the application of Stamp Tax (Imposto do Selo) under Item 28.1 of the General Stamp Tax Table (TGIS) to properties in total ownership with independently usable divisions. The claimant, A... S.A., challenged Stamp Tax assessments for 2012 and 2013 on an urban property registered as total ownership but containing multiple divisions capable of independent use, each registered separately for Municipal Property Tax (IMI) purposes. The core legal issue centers on whether Stamp Tax should apply to the aggregate property value or individual division values when none of the divisions exceeds the €1,000,000 threshold established by Law 55-A/2012. The Tax Authority argued that for Stamp Tax purposes, properties in total ownership must be valued as a whole, regardless of independent divisions, distinguishing this from horizontal property arrangements. The claimant contended this interpretation violated constitutional principles of tax equality, legal certainty, and the ratio legis of taxing luxury assets. Following a Constitutional Court judgment, this reformed arbitral decision was issued. The proceedings also addressed procedural matters including expanded claims for subsequent tax instalments and requests for compensatory interest on amounts paid under subsequently annulled assessments. The decision has significant implications for real estate taxation, particularly regarding the treatment of commercial buildings with multiple lettable units held under single ownership versus condominium structures.

Full Decision

ARBITRAL DECISION

Following the judgment delivered by the Constitutional Court, the new arbitral decision is pronounced.

I – REPORT

Request

A… S.A., taxpayer no. …, with address at Av. …, no. …, 5th Floor Left, in Lisbon, submitted, on 22-05-2014, pursuant to the provisions of paragraph a) of article 2, paragraph 1, and articles 10 et seq. of Decree-Law no. 10/2011, of 20 January, which approves the Legal Framework for Arbitration in Tax Matters (RJAT), in conjunction with paragraph a) of article 99 and paragraph d) of article 102, paragraph 1, of the Tax Procedure and Process Code (CPPT) – applicable by virtue of paragraph a) of article 10, paragraph 1, of the aforementioned decree-law, a request for arbitral pronouncement, in which the AT – TAX AND CUSTOMS AUTHORITY is Respondent, in its capacity as successor to the DIRECTORATE-GENERAL OF TAXES, with a view to:

  • Annulment of the tax assessment act for Stamp Duty, under Item 28.1 of the General Table of Stamp Duty, for the year 2012, relating to the urban property registered in the real property register of the parish … under no. … (as per document 1 attached to the initial petition and reproduced herein), assessment act notified to the Claimant through the following documents:

2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …

  • Annulment of the tax assessment act for the first instalment of Stamp Duty, under Item 28.1 of the General Table of Stamp Duty, for the year 2013, relating to the same property, assessment act notified to the Claimant through the following documents:

2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …

  • Annulment of "subsequent notices for collection of subsequent instalments of Stamp Duty" (referring to the second instalment, not yet assessed at the time of submission of the arbitration request on 22-05-2014, of Stamp Duty, Item 28.1 of the General Table of Stamp Duty, for the year 2013 and relating to the same property);

  • Condemnation of the AT – Tax and Customs Authority to pay compensatory interest on the amounts paid by the Claimant relating to the challenged assessments.

The Claimant alleges, in essence, the following:

  • The Claimant is the owner of the urban property located at Av. …, …, …-A, …-B and …-C, in Lisbon, registered in the real property register of the parish … under no. … and described as a property in full ownership with divisions capable of independent use;

  • The divisions capable of independent use were all subject to separate assessment for purposes of Municipal Property Tax (IMI);

  • None of the divisions capable of independent use has a value equal to or exceeding €1,000,000;

  • As article 6, paragraph 2 of Law no. 55-A/2012 provides that the assessment of Stamp Duty provided for in item no. 28 of the respective General Table (TGIS), and as IMI is assessed on the value of each division capable of autonomous use, the Tax Administration could not take the total value of the property as the basis for assessment of Stamp Duty;

  • What item 28 of the TGIS aims at is the taxation of luxury assets. As this is not the case, the taxation of the property in question in Stamp Duty violates the ratio of the legal norm;

  • The taxation of the property in question in Stamp Duty violates the principle of tax equality;

  • The assessment act also violates the principles of legal certainty and non-retroactivity, given the timing of the creation and application of the law that created the tax, which was approved in October 2012, with effect in the same year.

Response

In its response to the arbitration request, the Respondent AT – Tax and Customs Authority argues for dismissal of the request, alleging, in summary, the following:

  • In the case of properties in full ownership with parts capable of independent use and separately registered in the real property register, although IMI is assessed in relation to each part, for purposes of Stamp Duty what matters is the property as a whole, as the parts capable of independent use are not considered properties;

  • Item 28.1 of the TGIS does not constitute any violation of the constitutional principle of equality, there being no discrimination in the taxation of properties in horizontal ownership and properties in full ownership with divisions capable of independent use, or between properties with housing designation and properties with other designations;

  • Item 28.1 of the TGIS applies to urban properties with housing designation and with tax property value equal to or exceeding €1,000,000, which value is the value of the property and not the value of its parts;

  • The different valuation and taxation of a property in full ownership compared to a property in horizontal ownership results from the different legal effects inherent in these two arrangements;

  • The different suitability of properties (housing/services/commerce) sustains different treatment, having been a choice of the legislator, for political and economic reasons, to exclude from the scope of Stamp Duty properties intended for purposes other than housing;

  • Taxation for purposes of Stamp Duty follows the criterion of suitability, in so far as it aims at taxation of wealth embodied in the ownership of high-value properties, arising in a context of economic crisis that cannot be ignored.

Request for Expansion of the Request Relating to the Second Instalment of Stamp Duty for 2013 and Interlocutory Decision

In a request submitted after acceptance of the initial request, presented on 14-08-2014, the Claimant requested the Court to annul the tax assessment act for the second instalment of Stamp Duty, under Item 28.1 of the General Table of Stamp Duty, for the year 2013, relating to the same property, assessment notified to the Claimant in June 2014.

The Respondent was notified to pronounce itself on this request if it wished, which it chose not to do.

The aforementioned claim was the subject of an interlocutory decision by the Court, which, considering that:

"(…), the integration of these new elements does not result, in the specific case, in a modification of the action, in so far as such elements do not import any alteration either of the request, which continues to be the declaration of illegality of the tax assessment act notified with the collection notice sent to the Claimant in March 2014, or of the cause of action, as they add nothing of relevance for the assessment of the legality of the assessment act",

Concluded by:

  • Determining the attachment to the proceedings of the documents whose attachment was requested by the Claimant;

  • Correcting the value of the economic interest in the proceedings to €22,318.20, corresponding to the total value of Stamp Duty assessed in the challenged assessments, pursuant to article 97-A of the Tax Procedure and Process Code, applicable by virtue of article 29, paragraph 1, paragraph a) of the RJAT.

Meeting Provided for in Article 18 of the RJAT and Submissions

The parties agreed to dispense with the conduct of the meeting provided for in article 18 of the RJAT as well as the final submissions phase.

Request for Expansion of the Request Relating to the Third Instalment of Stamp Duty for 2013 and Interlocutory Decision

On 28 November 2014, the Claimant submitted a new request to the Court in which it informed the same of:

  • The fact that it had been assessed in October 2014 for the third instalment of Stamp Duty for the year 2013 and that it had proceeded to pay the same;

  • The fact that the Tax Administration had in the meantime annulled the assessment of Stamp Duty for the year 2012 relating to the Left Ground Floor of the property, in the amount of €1,112.20;

  • The fact that the Tax Administration had returned the tax relating to the annulled assessment, but had not paid compensatory interest corresponding to the refunded amount.

And it requested the Court to:

  • Annul the assessments relating to the third instalment of Stamp Duty for the year 2013;

  • Condemn the Tax Administration to pay compensatory interest corresponding to the tax refunded by virtue of the annulment of the Stamp Duty assessment for the year 2013 relating to the Left Ground Floor of the property.

The Respondent was also notified to pronounce itself on this request if it wished, which it chose not to do.

II – QUESTIONS TO BE DECIDED

The following are the questions to be decided by the Court:

  • The applicability of item 28.1 of the TGIS to urban properties in full ownership formed by parts capable of independent use considered as a whole, with the consequence that the tax property value to be taken into account for purposes of the tax's scope shall be, in the event of an affirmative answer, the tax property value of the property;

  • The constitutionality of the tax scope norm contained in item 28.1 of the TGIS, if interpreted to cover urban properties in full ownership composed of parts capable of independent use and separately assessed, in light of the constitutional principle of tax equality.

III – CASE MANAGEMENT

The Court is competent and properly constituted, pursuant to articles 2, paragraph 1, paragraph a), 5, and 6, all of the RJAT.

The parties have legal personality and capacity, are entitled to sue and be sued, and are properly represented.

The cumulation of claims is admissible, as all the requirements established in article 3, paragraph 1 of the RJAT are met.

No procedural defects have been identified, so nothing prevents assessment of the merits of the request.

IV – LEGAL BASIS

FACTS FOUND TO BE RELEVANT

The following facts are found to be relevant to the decision:

  • The Claimant is the owner of the urban property located at …, …, …-A, …-B and …-C, in Lisbon, registered in the real property register of the parish … under no. … (Document 1 attached to the initial petition);

  • The property is described as a property in full ownership with apartments or divisions capable of independent use;

  • In 2013 and 2014, the tax property value of the property was €1,060,300.00, this value resulting from the sum of the tax property values of the various parts capable of independent use with housing designation;

  • No division capable of independent use with housing designation has a tax property value equal to or exceeding €1,000,000.00;

  • In March 2014, the Claimant was notified of the assessments of Stamp Duty, under item 28.1 of the TGIS, for the year 2013 and relating to each of the divisions capable of independent use with housing designation of the property in question, totalling €10,603.00 (Documents 2 to 12 attached to the initial petition);

  • Through the notices of assessment of the tax, the Claimant was notified to proceed with payment of the first instalment of the tax for the year 2013, in the total amount of €3,534.30;

  • The Claimant proceeded to pay the first instalment of the tax for the year 2013 (Documents 2a to 12a attached to the initial petition);

  • In May 2014, the Claimant was notified of the assessments of Stamp Duty, under item 28.1 of the TGIS, for the year 2012 and relating to each of the divisions capable of independent use of the property in question, including one division designated for commerce, totalling €11,715.20 (Documents 13 to 24 attached to the initial petition);

  • The Claimant paid the total amounts relating to the tax for 2012 (Documents 12 to 23 attached to the request sent by the Claimant to the proceedings on 1 September 2014);

  • In June 2014, the Claimant was notified to pay the second instalment of the tax for the year 2013, in the total amount of €3,534.30 (Documents 1 to 11 attached to the request sent by the Claimant to the proceedings on 1 September 2014);

  • The Claimant paid the total amounts relating to the second instalment of the tax for the year 2013 (Documents 1 to 11 attached to the request sent by the Claimant to the proceedings on 1 September 2014).

FACTS NOT FOUND TO BE PROVEN

From the analysis of the documents submitted by the Claimant, it is not proven that the assessment of Stamp Duty relating to the part identified as Left Ground Floor of the property subject to the assessments challenged herein was annulled.

The document submitted as evidence by the Claimant merely states that a sum of €1,112.20 is paid to the Claimant as a matter of "compensation".

The document in question does not clarify what the said compensation refers to, nor what its cause is.

LEGAL BASIS

Question of the Constitutionality of the Tax Scope Norm Contained in Item 28.1 of the TGIS, When Interpreted to Cover Urban Properties in Full Ownership Considered as a Whole, When Formed by Parts Separately Registered in the Real Property Register, in Light of the Constitutional Principle of Tax Equality

In the initial decision of this Court, the question of the unconstitutionality of the tax scope norm in item 28.1 of the TGIS to cover urban properties in full ownership considered as a whole, when formed by parts separately registered in the real property register, in light of the constitutional principle of tax equality, was assessed as follows:

"This same question was also assessed in the arbitral award cited, in the terms set forth below and which are endorsed:

'The principle of contributive capacity is not expressly enshrined in the Constitution of the Portuguese Republic. However, its application in the Portuguese constitutional order has been affirmed by both doctrine and case law, with the principle of equality established in article 13 of the Constitution as its principal foundation (in this sense, see the judgments of the Constitutional Court: nos. 106/2013, 437/2006, 84/2003, 211/2003, 452/2003 and 601/2004, all available at www.tribunalconstitucional.pt).

The principle of equality, enshrined in article 13 of the CRP, postulates that equal treatment be given to what is essentially equal and that different treatment be given to what is essentially different (judgment of the CC no. 437/2006).

However, to assess equality or difference between two different realities, from a tax perspective, a parameter is required – "the criterion to serve as the basis for comparison" – which is provided by contributive capacity (judgment of the CC no. 197/2013).

Contributive capacity thus constitutes – together with other aspects or functions of the principle (see judgment of the CC no. 197/2013) – the criterion by which different taxpayers must be compared, for the purpose of determining whether they should receive identical or different tax treatment.

In this way, the principle of contributive capacity (in one of its aspects) implements the principle of fiscal or tax equality (judgment of the CC no. 84/2003), presupposing equal tax treatment in relation to persons with the same contributive capacity and unequal tax treatment in relation to persons with different contributive capacity.

As a result of the principle of contributive capacity, taxpayers with the same spending capacity should pay the same taxes and taxpayers with different spending capacity should pay different taxes (Judgment of the CC no. 197/2013).

It is this dimension of the principle of contributive capacity, as prohibiting different tax treatment of persons with the same contributive capacity and equal tax treatment of persons with different contributive capacity, that is particularly relevant to the present case.

What is at issue, more specifically, is the difference in treatment given, by the Stamp Duty Code in item 28.1 of the TGIS, to properties in horizontal ownership and to properties in full ownership, composed of parts separately registered in the real property register.

We saw earlier that autonomous units of properties in horizontal ownership are considered properties for purposes of IMI (article 2, paragraph 4 of the CIMI), as are they also by virtue of article 1, paragraph 6 of the Stamp Duty Code.

Accordingly, the Stamp Duty in item 28.1, in the case of properties in horizontal ownership, may only apply if the tax property value of the autonomous unit is equal to or exceeding €1,000,000. On the other hand, the value resulting from the sum of the tax property values of the various habitation units cannot be taken into account for purposes of applying the tax.

Even if a single person is the owner of all units of a property in horizontal ownership, and the sum of the tax property values of the habitation units of the property is equal to or exceeding €1,000,000, such owner shall not be subject to Stamp Duty on this patrimony.

Now, between the two situations described – habitation property in horizontal ownership and habitation property in full ownership composed of parts capable of independent use and separately registered in the real property register – there exists no substantial difference, the difference being merely formal. A formal difference that does not affect, in any way, the contributive capacity of the respective owners.

Indeed, the ownership of a habitation property in full ownership, composed of parts capable of independent use and separately registered in the real property register, with a tax property value equal to or exceeding €1,000,000, reveals no greater contributive capacity than the ownership of several autonomous habitation units, in which the sum of the tax property values is equal to or exceeding €1,000,000.

(…)

Any other interpretation, which sought to disregard the substantial economic identity between the situations of properties in horizontal ownership and of properties in full ownership composed of parts capable of independent use and separately registered in the real property register, and to regard only the formal difference between both situations, would result in a violation of the principle of substance over form, which would have as a consequence a violation of the constitutional principle of contributive capacity.'

On these grounds, it must be concluded that the request for annulment of the challenged assessments is well-founded on the basis of violation of the constitutional principle of tax equality by the tax scope norm contained in item 28.1 of the General Table of Stamp Duty, when interpreted in the sense that it includes habitation urban properties in full ownership composed of parts capable of independent use and separately registered in the real property register."

The Constitutional Court, in its judgment in decision on the appeal filed by the Respondent, pronounced itself in the sense of the constitutionality of the norm, granting the appeal.

To support its decision, the Court invokes previous Constitutional Court case law, namely judgments 59/15, 620/15, 83/16 and 247/16, and bases its reasoning on judgment 620/15, in the terms set forth below, taking the liberty of reproducing only the final part of the argument:

(Partial transcription of judgment 620/2015 of the CC)

"What is precisely at issue in the present appeal is the principle of tax equality, particularly in its aspect of uniformity, that is, in so far as it requires that the duty to pay taxes (in this case, Stamp Duty) be assessed by a single criterion, translated by the principle of contributive capacity. It is necessary to assess whether, by subjecting to a special tax urban habitation properties in full ownership composed of parts capable of independent use and separately registered in the real property register, having regard for this to the sum of the tax property values assigned to the various parts of the property, contrary to what occurs in properties constituted in horizontal ownership, the said norm treated differently situations revealing identical contributive capacity and, if so, whether that inequality of treatment is shown to be arbitrary, by introducing discriminations between taxpayers lacking sufficient rational grounds.

It is therefore necessary, first and foremost, to compare the two situations under analysis, specifically the situation of urban habitation properties in full ownership composed of parts capable of independent use and separately registered in the real property register and the situation of properties in the regime of horizontal ownership, beginning, for this purpose, with a brief reference to the institutes of ownership proper and horizontal ownership.

Under the regime of the right of ownership in general, a building incorporated in the land may only be the subject of a single right of ownership that will generally encompass the entirety of the construction, the land and adjacent territory, even if that construction is divided into units capable of independent use (cf. articles 204, paragraph 1, paragraph a), and paragraph 2, and 1302 of the Civil Code).

This principle is departed from in the regime of horizontal ownership, under which '[t]he units of which a building is composed, in conditions to constitute independent units, may belong to different owners' (article 1414 of the Civil Code).

The application of the horizontal ownership regime to a building presupposes that certain requirements provided for in article 1415 of the Civil Code are met. In accordance with this norm, '[o]nly autonomous units that, in addition to constituting independent units, are distinct and isolated from each other, with direct access to a common part of the property or to a public thoroughfare, may be the subject of horizontal ownership'.

In the constitutive title of horizontal ownership, which may be 'a legal transaction, acquisitive prescription, administrative decision or judicial decision, delivered in an action for partition of common property or in a probate proceeding' (article 1417 of the Civil Code) are specified, in accordance with article 1418, paragraph 1, 'the parts of the building corresponding to the various units, so that they are properly individualized, and the relative value of each unit shall be fixed, expressed as a percentage or permille of the total value of the property', under pain of nullity of the title (cf. 1418, paragraph 3, of the Civil Code).

And, with the constitution of a property in horizontal ownership, full property rights, held by the respective owners, begin to apply to each of the parts of the same, juridically made autonomous (the so-called autonomous units), rights that coexist with the rights of the collective owners in relation to the common parts. With the aforementioned juridical modification brought about by the constitutive title, the urban property in question comes to have a different juridical status from an urban property subject to the general regime of the right of ownership.

And the same occurs with the real rights of usufruct and superficies mentioned in item 28.1 of the General Table of Stamp Duty.

That is, as stated by Carvalho Fernandes (Notebooks of Private Law, no. 15, July/September 2006, pp. 4-5), with the constitution of the building in horizontal ownership a new juridical status of that building emerges, an alteration of that status that 'consists of the building in question ceasing to be considered, for the purposes of Law, as a unitary thing – an urban property, proper sensu, in the sense of paragraph a) of paragraph 1 of article 204 of the CC. In its place, there exists, now, a multiplicity of things, the autonomous units, to which are indissociably attached common parts of the building. Each of these sets – autonomous unit plus common parts – has juridical autonomy and, as such, may be the subject of its own real juridical situation'.

We are, therefore, faced with realities with a distinct juridical status, in which the holding of the real rights referred to in item 28.1 of the General Table of Stamp Duty that apply to the units of a property constituted in horizontal ownership may belong to different persons, whereas in a property constituted by units capable of independent use, but which is not constituted in horizontal ownership, that holding is necessarily of the same person or persons.

Thus, while it is undeniable that, in the civil law sphere, we are faced with two juridically different situations, it is nevertheless important to question whether such differences justify different treatment in the tax sphere, that is, whether such juridical differences exist and are relevant also in the substantive sphere for tax purposes, to the point that it may be affirmed that, in economic terms, we are faced with different manifestations of contributive capacity.

As we have seen, with the legislative change on which the interpretation sub iudicio was based, as results both from the statement of reasons of Bill no. 96/XII, which was the origin of Law no. 55-A/2012, of 29 October, as well as from its discussion on general principles in the National Assembly, the legislator had the purpose of 'reinforcing the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary for the fulfilment of the adjustment programme' and of 'ensuring that the distribution of these sacrifices shall be made by all and not only by those who live from the income of their work'. To this end, it decided through the said legislative diploma to broaden 'the taxation of returns on capital and property' and, among other measures, proceeded to 'create a special rate to tax urban habitation properties of higher value'.

Thus, with respect to the taxation of property, the legislator understood, based on the aforementioned 'principle of social equity in austerity', that an increased contribution should be required from holders of high-value immovable property intended for habitation. Hence the fact to which it attributed relevance as the determining element of the scope of this new 'special rate' and as a manifestation of contributive capacity has been the ownership, usufruct or right of superficies of urban properties, with housing designation, whose tax property value is equal to or exceeding €1,000,000.00. That is, the legislator understood that the availability, founded on the holding of a right of ownership, usufruct or superficies, of a habitation unit of this value (to be calculated on the basis of the tax property value taken into account for purposes of IMI), constitutes an element revealing an increased contributive capacity in relation to other taxpayers, apt to justify this special taxation, designed to ensure the aforementioned 'distribution of sacrifices necessary for the fulfilment of the adjustment programme' by all and not only by those who live from the income of their work. What was selected, therefore, as the taxable reality is the holding of a habitation property unit with a value exceeding €1,000,000.00, with that value resulting from that calculated for purposes of collection of IMI.

Now, if in a property constituted in horizontal ownership, that holding may only relate to each of the autonomous units, as each of the different units may be the subject of its own real juridical situation, the same does not occur in a property in which, despite being physically divided into units capable of independent use, its holding relates necessarily to the whole corresponding to the sum of the different units, with the real rights referred to in item 28.1 of the General Table of Stamp Duty not being capable of having as their object any isolated one of those units.

Thus, for purposes of the tax here under review, while the value of an entire property that is not constituted in horizontal ownership, despite being composed of different units capable of having independent use, reveals the contributive capacity of its sole holder, the same does not occur with an identical property constituted in horizontal ownership, since, as each of the units is capable of its own real juridical situation, only the value of each of them is apt to reveal the contributive capacity of its holder.

The differences arising from different ownership regimes constitute sufficient grounds for, with respect to the scope of Stamp Duty in the case of buildings in horizontal ownership, one has regard to the individualized tax property value of each of the units, which does not occur in the case of urban habitation properties in full ownership composed of parts capable of independent use and separately registered in the real property register.

Hence, an interpretation of the tax scope norm contained in item 28.1 of the General Table of Stamp Duty, in the sense that it includes urban habitation properties in full ownership, composed of parts capable of independent use and separately registered in the real property register, proceeding to the sum of the tax property value of each of the independent units with housing designation, is not shown to violate the principle of tax equality and the principle of contributive capacity, as set out above.

The appeal filed should therefore be judged to be well-founded."

The Constitutional Court continues:

"The sense of this (that of judgment 620/2015, partially transcribed above) is entirely transposable to the question raised in the proceedings, imposing the conclusion that what is at issue is a 'simple question', capable of being framed in the normative hypothesis delimited by paragraph 1 of article 78-A of the LTC.

Thus, being bound to maintain the aforementioned case law expounded in Judgment no. 620/2015, and referring to its grounds, under the terms authorized by article 78-A, paragraph 1 of the LTC, it remains to conclude that it is not constitutionally censurable the interpretation of the tax scope norm contained in item 28.1 of the TGIS, in the sense that it includes urban habitation properties in full ownership, composed of parts capable of independent use and separately registered in the real property register, terms in which the delivery of the present summary decision is justified, in accordance with the cited article 78-A, paragraph 1, of the LTC."

(End of quotation)

In order to conform, as is obvious, the arbitral pronouncement in the present proceedings with the dictates of the Constitutional Court's decision transcribed above, delivered on the appeal from that same pronouncement, it is therefore necessary to proceed with the alteration of the pronouncement with regard to the question of the constitutionality of the tax scope norm contained in item 28.1 (in the meantime repealed) of the TGIS, when interpreted in the sense of including in its scope properties in full ownership composed of parts capable of independent use and separately registered in the real property register.

In accord with the learned decision of the Constitutional Court and with the case law cited therein, endorsing and reproducing the grounds expounded therein, it is held that it is not unconstitutional the tax scope norm contained in item 28.1 (in the meantime repealed) of the TGIS, when interpreted in the sense that it includes properties in full ownership composed of parts capable of independent use and separately registered in the real property register.

Consequently, it is concluded that the Claimant's claim regarding the question of unconstitutionality is unfounded.

Question of the Applicability of Item 28.1 of the TGIS to Urban Properties in Full Ownership, Considered as a Whole, When Formed by Parts Separately Registered in the Real Property Register

In the arbitral pronouncement delivered on 15 December 2014, the question was assessed in the following terms:

The following is the text of item 28 of the General Table of Stamp Duty:

  1. "Ownership, usufruct or right of superficies of urban properties whose tax property value shown in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the tax property value used for purposes of IMI:

28.1 For property with housing designation – 1%"

The Claimant argues that this normative provision does not apply to urban properties in full ownership considered as a whole, when formed by parts capable of independent use and separately assessed for purposes of IMI.

As support for this conclusion, the Claimant starts from the wording of item 28 of the TGIS, in which it is provided that Stamp Duty applies "to the tax property value used for purposes of IMI".

Since, in the case of properties in full ownership composed of parts capable of independent use, IMI is assessed on the tax property value of the parts, Stamp Duty should also take as the basis for taxation the tax property value of each of those parts.

And, since none of the parts separately registered in the real property register forming the properties in question in the proceedings has a tax property value equal to or exceeding €1,000,000, no Stamp Duty could apply to those same parts.

The question of law that is at issue here is that of the interpretation of the term "urban property" contained in item 28 and subitem 28.1 of the TGIS, with a view to determining whether this concept includes the parts, separately registered in the real property register, forming a property in full ownership.

On this question the arbitral tribunal constituted in case no. 14/2014-T pronounced itself, in the terms set forth below and which are wholly endorsed:

"It is true that the IMI Code provides (article 12, paragraph 3) that parts of property capable of independent use are considered separately in the real property register, each with its own tax property value.

But on the other hand article 7, paragraph 2, paragraph b) of the same Code states that, in the case of property formed by economically independent parts, each part is assessed by application of the corresponding rules, the value of the property being the sum of the values of its parts.

Therefore, even for purposes of determining tax property value, the IMI Code does not equate parts of property capable of independent use with properties, but clearly separates property and parts of property. And it is only the whole that is a property – for purposes of IMI, in the case of properties in full ownership – and not the parts.

(…)

Given this, one must start from article 1, paragraph 6 of the Stamp Duty Code, according to which, for purposes of this tax, 'the concept of property is that defined in the Municipal Property Tax Code'.

Article 2, paragraph 1 of the CIMI, in turn, defines property as 'any tract of territory, including waters, plantations, buildings and constructions of any nature incorporated therein or built thereon, with a permanent character, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value'.

Given this definition, and with the classification of urban properties as 'habitation', 'commercial, industrial or for services', 'land for construction' and 'other', combined with this classification with the definition contained in article 2, paragraph 1, it is concluded that habitation properties are necessarily buildings or constructions incorporated or built on a tract of territory.

Despite this definition, according to paragraph 4 of article 2, autonomous units in the horizontal ownership regime are deemed to be properties for purposes of the tax, but the same cannot be said of parts of properties in full ownership considered separately in the real property register, as they neither fall within the definition of article 2, paragraph 1 nor are they expressly deemed to be such.

Parts of properties in full ownership considered separately in the real property register are not, therefore, properties for purposes of IMI, nor are they, consequently, for purposes of Stamp Duty. And thus, the taxable event of Stamp Duty can be none other than the ownership of the property considered as a whole, as this is a property, in the sense of article 2, paragraph 1 of the CIMI."

The request for annulment of the challenged assessments is therefore unfounded insofar as it is based on error in the legal assumptions, concretized in the inapplicability of item 28.1 of the TGIS to properties in full ownership with parts separately registered in the real property register.

Subsequently to the date of the arbitral pronouncement, the same question would be decided by the Supreme Administrative Court, for the first time, to the best of our knowledge, in the judgment of 9 September 2015, case 47/2015, in terms divergent from those established in our pronouncement of 15 December 2014.

In that judgment, the Supreme Administrative Court held that, "where it is a property constituted in full ownership, the scope of Stamp Duty should be determined, not by the tax property value resulting from the sum of the tax property values of all divisions or apartments capable of independent use (individualized in the real property record), but by the tax property value attributed to each of those apartments or divisions intended for housing". This doctrine would be consolidated in the judgments of 02-03-2016 (case no. 1354/15), of 04-05-2016 (case no. 0172/16), of 04-05-2016 (case no. 1504/15), of 24-05-2016 (case no. 1344/14), of 24-05-2016 (case no. 1352/15), of 04-05-2016 (case no. 166/16), of 01-02-2017 (case no. 711/16), of 15-02-2017 (case no. 1219/16), of 15-02-2017 (case no. 01425/14), of 15-02-2017 (case no. 1394/16), of 15-02-2017 (case no. 01447/16) and of 29-03-2017 (case no. 593/16).

Since then, the majority arbitral case law has conformed with this doctrine of the Supreme Court.

However, as the present reform of the arbitral decision delivered on 15 December 2014 is limited, in its scope, to the subject-matter of the appeal itself – which is confined to the question of the constitutionality of the tax scope norm in item 28.1 of the TGIS when applied to properties in full ownership composed of parts capable of independent use and considered as separate in the register – the arbitral decision cannot be altered with regard to the question of the applicability of the same tax scope norm to this class of properties, so the same decision remains as to this point.

VI – DECISION

On the grounds set forth, the present Court decides that the illegality is not declared and consequently the tax assessment acts for Stamp Duty challenged by the Claimant are not annulled.

Value of the proceedings: The value of the proceedings is fixed at €22,318.20.

Costs: Pursuant to article 22, paragraph 4 of the RJAT, the amount of costs is fixed at €1,224.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Claimant.

This arbitral decision is registered and notified to the parties.

Lisbon, Centre for Administrative Arbitration, 22 May 2017.

The Sole Arbitrator

(Nina Aguiar)

ARBITRAL DECISION

I – REPORT

Request

A… S.A., taxpayer no. …, with address at Av. …, no. …, 5th Floor Left, in Lisbon, submitted, on 22-05-2014, pursuant to the provisions of paragraph a) of article 2, paragraph 1, and articles 10 et seq. of Decree-Law no. 10/2011, of 20 January, which approves the Legal Framework for Arbitration in Tax Matters (RJAT), in conjunction with paragraph a) of article 99 and paragraph d) of article 102, paragraph 1, of the Tax Procedure and Process Code (CPPT) – applicable by virtue of paragraph a) of article 10, paragraph 1, of the aforementioned decree-law, a request for arbitral pronouncement, in which the AT – TAX AND CUSTOMS AUTHORITY is Respondent, in its capacity as successor to the DIRECTORATE-GENERAL OF TAXES, with a view to:

  • Annulment of the tax assessment act for Stamp Duty, under Item 28.1 of the General Table of Stamp Duty, for the year 2012, relating to the urban property registered in the real property register of the parish … under no. … (as per document 1 attached to the initial petition and reproduced herein), assessment act notified to the Claimant through the following documents:

2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …

  • Annulment of the tax assessment act for the first instalment of Stamp Duty, under Item 28.1 of the General Table of Stamp Duty, for the year 2013, relating to the same property, assessment act notified to the Claimant through the following documents:

2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …
2014 …

  • Annulment of "subsequent notices for collection of subsequent instalments of Stamp Duty" (referring to the second instalment, not yet assessed at the time of submission of the arbitration request on 22-05-2014, of Stamp Duty, Item 28.1 of the General Table of Stamp Duty, for the year 2013 and relating to the same property);

  • Condemnation of the AT – Tax and Customs Authority to pay compensatory interest on the amounts paid by the Claimant relating to the challenged assessments.

The Claimant alleges, in essence, the following:

  • The Claimant is the owner of the urban property located at Av. …, …, …-A, …-B and …-C, in Lisbon, registered in the real property register of the parish … under no. … and described as a property in full ownership with divisions capable of independent use;

  • The divisions capable of independent use were all subject to separate assessment for purposes of Municipal Property Tax (IMI);

  • None of the divisions capable of independent use has a value equal to or exceeding €1,000,000;

  • As article 6, paragraph 2 of Law no. 55-A/2012 provides that the assessment of Stamp Duty provided for in item no. 28 of the respective General Table (TGIS), and as IMI is assessed on the value of each division capable of autonomous use, the Tax Administration could not take the total value of the property as the basis for assessment of Stamp Duty;

  • What item 28 of the TGIS aims at is the taxation of luxury assets. As this is not the case, the taxation of the property in question in Stamp Duty violates the ratio of the legal norm;

  • The taxation of the property in question in Stamp Duty violates the principle of tax equality;

  • The assessment act also violates the principles of legal certainty and non-retroactivity, given the timing of the creation and application of the law that created the tax, which was approved in October 2012, with effect in the same year.

Response

In its response to the arbitration request, the Respondent AT – Tax and Customs Authority argues for dismissal of the request, alleging, in summary, the following:

  • In the case of properties in full ownership with parts capable of independent use and separately registered in the real property register, although IMI is assessed in relation to each part, for purposes of Stamp Duty what matters is the property as a whole, as the parts capable of independent use are not considered properties;

  • Item 28.1 of the TGIS does not constitute any violation of the constitutional principle of equality, there being no discrimination in the taxation of properties in horizontal ownership and properties in full ownership with divisions capable of independent use, or between properties with housing designation and properties with other designations;

  • Item 28.1 of the TGIS applies to urban properties with housing designation and with tax property value equal to or exceeding €1,000,000, which value is the value of the property and not the value of its parts;

  • The different valuation and taxation of a property in full ownership compared to a property in horizontal ownership results from the different legal effects inherent in these two arrangements;

  • The different suitability of properties (housing/services/commerce) sustains different treatment, having been a choice of the legislator, for political and economic reasons, to exclude from the scope of Stamp Duty properties intended for purposes other than housing;

  • Taxation for purposes of Stamp Duty follows the criterion of suitability, in so far as it aims at taxation of wealth embodied in the ownership of high-value properties, arising in a context of economic crisis that cannot be ignored.

Request for Expansion of the Request Relating to the Second Instalment of Stamp Duty for 2013 and Interlocutory Decision

In a request submitted after acceptance of the initial request, presented on 14-08-2014, the Claimant requested the Court to annul the tax assessment act for the second instalment of Stamp Duty, under Item 28.1 of the General Table of Stamp Duty, for the year 2013, relating to the same property, assessment notified to the Claimant in June 2014.

The Respondent was notified to pronounce itself on this request if it wished, which it chose not to do.

The aforementioned claim was the subject of an interlocutory decision by the Court, which, considering that:

"(…), the integration of these new elements does not result, in the specific case, in a modification of the action, in so far as such elements do not import any alteration either of the request, which continues to be the declaration of illegality of the tax assessment act notified with the collection notice sent to the Claimant in March 2014, or of the cause of action, as they add nothing of relevance for the assessment of the legality of the assessment act",

Concluded by:

  • Determining the attachment to the proceedings of the documents whose attachment was requested by the Claimant;

  • Correcting the value of the economic interest in the proceedings to €22,318.20, corresponding to the total value of Stamp Duty assessed in the challenged assessments, pursuant to article 97-A of the Tax Procedure and Process Code, applicable by virtue of article 29, paragraph 1, paragraph a) of the RJAT.

Meeting Provided for in Article 18 of the RJAT and Submissions

The parties agreed to dispense with the conduct of the meeting provided for in article 18 of the RJAT as well as the final submissions phase.

Request for Expansion of the Request Relating to the Third Instalment of Stamp Duty for 2013 and Interlocutory Decision

On 28 November 2014, the Claimant submitted a new request to the Court in which it informed the same of:

  • The fact that it had been assessed in October 2014 for the third instalment of Stamp Duty for the year 2013 and that it had proceeded to pay the same;

  • The fact that the Tax Administration had in the meantime annulled the assessment of Stamp Duty for the year 2012 relating to the Left Ground Floor of the property, in the amount of €1,112.20;

  • The fact that the Tax Administration had returned the tax relating to the annulled assessment, but had not paid compensatory interest corresponding to the refunded amount.

And it requested the Court to:

  • Annul the assessments relating to the third instalment of Stamp Duty for the year 2013;

  • Condemn the Tax Administration to pay compensatory interest corresponding to the tax refunded by virtue of the annulment of the Stamp Duty assessment for the year 2013 relating to the Left Ground Floor of the property.

The Respondent was also notified to pronounce itself on this request if it wished, which it chose not to do.

II – QUESTIONS TO BE DECIDED

The following are the questions to be decided by the Court:

  • The applicability of item 28.1 of the TGIS to urban properties in full ownership formed by parts capable of independent use considered as a whole, with the consequence that the tax property value to be taken into account for purposes of the tax's scope shall be, in the event of an affirmative answer, the tax property value of the property;

  • The constitutionality of the tax scope norm contained in item 28.1 of the TGIS, if interpreted to cover urban properties in full ownership composed of parts capable of independent use and separately assessed, in light of the constitutional principle of tax equality.

III – CASE MANAGEMENT

The Court is competent and properly constituted, pursuant to articles 2, paragraph 1, paragraph a), 5, and 6, all of the RJAT.

The parties have legal personality and capacity, are entitled to sue and be sued, and are properly represented.

The cumulation of claims is admissible, as all the requirements established in article 3, paragraph 1 of the RJAT are met.

No procedural defects have been identified, so nothing prevents assessment of the merits of the request.

IV – LEGAL BASIS

FACTS FOUND TO BE RELEVANT

The following facts are found to be relevant to the decision:

  • The Claimant is the owner of the urban property located at …, …, …-A, …-B and …-C, in Lisbon, registered in the real property register of the parish … under no. … (Document 1 attached to the initial petition);

  • The property is described as a property in full ownership with apartments or divisions capable of independent use;

  • In 2013 and 2014, the tax property value of the property was €1,060,300.00, this value resulting from the sum of the tax property values of the various parts capable of independent use with housing designation;

  • No division capable of independent use with housing designation has a tax property value equal to or exceeding €1,000,000.00;

  • In March 2014, the Claimant was notified of the assessments of Stamp Duty, under item 28.1 of the TGIS, for the year 2013 and relating to each of the divisions capable of independent use with housing designation of the property in question, totalling €10,603.00 (Documents 2 to 12 attached to the initial petition);

  • Through the notices of assessment of the tax, the Claimant was notified to proceed with payment of the first instalment of the tax for the year 2013, in the total amount of €3,534.30;

  • The Claimant proceeded to pay the first instalment of the tax for the year 2013 (Documents 2a to 12a attached to the initial petition);

  • In May 2014, the Claimant was notified of the assessments of Stamp Duty, under item 28.1 of the TGIS, for the year 2012 and relating to each of the divisions capable of independent use of the property in question, including one division designated for commerce, totalling €11,715.20 (Documents 13 to 24 attached to the initial petition);

  • The Claimant paid the total amounts relating to the tax for 2012 (Documents 12 to 23 attached to the request sent by the Claimant to the proceedings on 1 September 2014);

  • In June 2014, the Claimant was notified to pay the second instalment of the tax for the year 2013, in the total amount of €3,534.30 (Documents 1 to 11 attached to the request sent by the Claimant to the proceedings on 1 September 2014);

  • The Claimant paid the total amounts relating to the second instalment of the tax for the year 2013 (Documents 1 to 11 attached to the request sent by the Claimant to the proceedings on 1 September 2014).

FACTS NOT FOUND TO BE PROVEN

From the analysis of the documents submitted by the Claimant, it is not proven that the assessment of Stamp Duty relating to the part identified as Left Ground Floor of the property subject to the assessments challenged herein was annulled.

The document submitted as evidence by the Claimant merely states that a sum of €1,112.20 is paid to the Claimant as a matter of "compensation".

The document in question does not clarify what the said compensation refers to, nor what its cause is.

LEGAL BASIS

Question of the Applicability of Item 28.1 of the TGIS to Urban Properties in Full Ownership, Considered as a Whole, When Formed by Parts Separately Registered in the Real Property Register

The following is the text of item 28 of the General Table of Stamp Duty:

  1. "Ownership, usufruct or right of superficies of urban properties whose tax property value shown in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the tax property value used for purposes of IMI:

28.1 For property with housing designation – 1%"

The Claimant argues that this normative provision does not apply to urban properties in full ownership considered as a whole, when formed by parts capable of independent use and separately assessed for purposes of IMI.

As support for this conclusion, the Claimant starts from the wording of item 28 of the TGIS, in which it is provided that Stamp Duty applies "to the tax property value used for purposes of IMI".

Since, in the case of properties in full ownership composed of parts capable of independent use, IMI is assessed on the tax property value of the parts, Stamp Duty should also take as the basis for taxation the tax property value of each of those parts.

And, since none of the parts separately registered in the real property register forming the properties in question in the proceedings has a tax property value equal to or exceeding €1,000,000, no Stamp Duty could apply to those same parts.

The question of law that is at issue here is that of the interpretation of the term "urban property" contained in item 28 and subitem 28.1 of the TGIS, with a view to determining whether this concept includes the parts, separately registered in the real property register, forming a property in full ownership.

On this question the arbitral tribunal constituted in case no. 14/2014-T pronounced itself, in the terms set forth below and which are wholly endorsed:

"It is true that the IMI Code provides (article 12, paragraph 3) that parts of property capable of independent use are considered separately in the real property register, each with its own tax property value.

But on the other hand article 7, paragraph 2, paragraph b) of the same Code states that, in the case of property formed by economically independent parts, each part is assessed by application of the corresponding rules, the value of the property being the sum of the values of its parts.

Therefore, even for purposes of determining tax property value, the IMI Code does not equate parts of property capable of independent use with properties, but clearly separates property and parts of property. And it is only the whole that is a property – for purposes of IMI, in the case of properties in full ownership – and not the parts.

(…)

Given this, one must start from article 1, paragraph 6 of the Stamp Duty Code, according to which, for purposes of this tax, 'the concept of property is that defined in the Municipal Property Tax Code'.

Article 2, paragraph 1 of the CIMI, in turn, defines property as 'any tract of territory, including waters, plantations, buildings and constructions of any nature incorporated therein or built thereon, with a permanent character, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value'.

Given this definition, and with the classification of urban properties as 'habitation', 'commercial, industrial or for services', 'land for construction' and 'other', combined with this classification with the definition contained in article 2, paragraph 1, it is concluded that habitation properties are necessarily buildings or constructions incorporated or built on a tract of territory.

Despite this definition, according to paragraph 4 of article 2, autonomous units in the horizontal ownership regime are deemed to be properties for purposes of the tax, but the same cannot be said of parts of properties in full ownership considered separately in the real property register, as they neither fall within the definition of article 2, paragraph 1 nor are they expressly deemed to be such.

Parts of properties in full ownership considered separately in the real property register are not, therefore, properties for purposes of IMI, nor are they, consequently, for purposes of Stamp Duty. And thus, the taxable event of Stamp Duty can be none other than the ownership of the property considered as a whole, as this is a property, in the sense of article 2, paragraph 1 of the CIMI."

The request for annulment of the challenged assessments is therefore unfounded insofar as it is based on error in the legal assumptions, concretized in the inapplicability of item 28.1 of the TGIS to properties in full ownership with parts separately registered in the real property register.

Subsequently to the date of the arbitral pronouncement, the same question would be decided by the Supreme Administrative Court, for the first time, to the best of our knowledge, in the judgment of 9 September 2015, case 47/2015, in terms divergent from those established in our pronouncement of 15 December 2014.

In that judgment, the Supreme Administrative Court held that, "where it is a property constituted in full ownership, the scope of Stamp Duty should be determined, not by the tax property value resulting from the sum of the tax property values of all divisions or apartments capable of independent use (individualized in the real property record), but by the tax property value attributed to each of those apartments or divisions intended for housing". This doctrine would be consolidated in the judgments of 02-03-2016 (case no. 1354/15), of 04-05-2016 (case no. 0172/16), of 04-05-2016 (case no. 1504/15), of 24-05-2016 (case no. 1344/14), of 24-05-2016 (case no. 1352/15), of 04-05-2016 (case no. 166/16), of 01-02-2017 (case no. 711/16), of 15-02-2017 (case no. 1219/16), of 15-02-2017 (case no. 01425/14), of 15-02-2017 (case no. 1394/16), of 15-02-2017 (case no. 01447/16) and of 29-03-2017 (case no. 593/16).

Since then, the majority arbitral case law has conformed with this doctrine of the Supreme Court.

However, as the present reform of the arbitral decision delivered on 15 December 2014 is limited, in its scope, to the subject-matter of the appeal itself – which is confined to the question of the constitutionality of the tax scope norm in item 28.1 of the TGIS when applied to properties in full ownership composed of parts capable of independent use and considered separately in the register – the arbitral decision cannot be altered with regard to the question of the applicability of the same tax scope norm to this class of properties, so the same decision remains as to this point.

VI – DECISION

On the grounds set forth, the present Court decides:

  • To annul the tax assessment acts for Stamp Duty challenged by the Claimant.

  • To condemn the Tax Authority, pursuant to paragraph b) of article 24, paragraph 1 of the RJAT, to restore the situation that would have existed if the annulled assessment acts had not been carried out, by adopting the acts and operations necessary for this purpose, through the restitution of the amounts of tax wrongly paid and the payment of the corresponding compensatory interest.

Value of the proceedings: The value of the proceedings is fixed at €22,318.20.

Costs: Pursuant to article 22, paragraph 4 of the RJAT, the amount of costs is fixed at €1,224.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Respondent.

This arbitral decision is registered and notified to the parties.

Lisbon, Centre for Administrative Arbitration, 15 December 2014.

The Sole Arbitrator

(Nina Aguiar)

Frequently Asked Questions

Automatically Created

Does Stamp Tax under Verba 28.1 apply to individual units of a property in total ownership when none exceeds €1,000,000?
For Stamp Tax purposes under Verba 28.1, properties in total ownership (propriedade total) are valued as a single unit based on the aggregate tax property value, not individual division values. Even when a property contains divisions capable of independent use that are separately registered for IMI purposes, the Tax Authority takes the position that the entire property constitutes the taxable unit. This means if the total property value exceeds €1,000,000, Stamp Tax applies regardless of whether individual divisions fall below this threshold. This contrasts with horizontal property (propriedade horizontal) where each autonomous fraction is treated as a separate property for tax purposes.
How are properties with independent divisions valued for purposes of Stamp Tax Verba 28.1 of the General Stamp Tax Table?
Yes, taxpayers are entitled to claim compensatory interest (juros indemnizatórios) on amounts paid under Stamp Tax assessments that are subsequently annulled. Article 43 of the Tax Benefits Statute (EBF) and Article 100 of the Tax Procedure Code (CPPT) establish the right to compensatory interest when tax authorities delay refunding amounts paid in excess or without legal basis. The interest rate and calculation period are determined according to legal provisions, typically running from the date of payment until the refund is processed. In this case, the claimant specifically requested compensation for periods when the Tax Administration annulled assessments but failed to pay corresponding interest on refunded amounts.
What is the legal basis for requesting arbitral decision reform following a Constitutional Court ruling in Portuguese tax disputes?
Article 6(2) of Law 55-A/2012 established Stamp Tax under Verba 28.1 of the TGIS, creating an annual tax on urban properties with housing designation having a tax property value equal to or exceeding €1,000,000. The central interpretative dispute concerns how this provision applies to properties in total ownership with independent divisions. The claimant argued that since IMI is assessed on each division capable of autonomous use, and Article 6(2) references this tax property value, Stamp Tax should similarly apply only when individual divisions exceed the threshold. The Tax Authority countered that the legislative intent was to tax high-value properties as wealth indicators, requiring assessment of the property as a whole rather than its component parts, particularly when not formally constituted as horizontal property.
Can a taxpayer claim compensatory interest (juros indemnizatórios) on amounts paid under annulled Stamp Tax assessments?
The legal basis for requesting arbitral decision reform following a Constitutional Court ruling is found in the interaction between the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011) and constitutional review procedures. When the Constitutional Court issues a judgment affecting the constitutional validity of provisions applied in an arbitral decision, the arbitral tribunal may need to issue a reformed decision to comply with the constitutional ruling. This ensures conformity with constitutional principles and the hierarchy of legal norms. Article 29 of the RJAT allows for correction and clarification of arbitral decisions, while the binding nature of Constitutional Court judgments under Article 281 of the Portuguese Constitution necessitates adjustment of prior decisions affected by constitutional determinations. The reformed decision must reconsider the case in light of the constitutional guidance provided.