Process: 388/2015-T

Date: November 19, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Case 388/2015-T addressed whether Stamp Duty (Imposto de Selo) under item 28.1 of the General Stamp Duty Table applies to a property held in total ownership comprising 18 independent residential units in Porto. The claimant owned a building with a total tax property value (VPT) of €1,254,600, divided into multiple independent units each valued at €125,460. The Tax Authority issued separate Stamp Duty assessments for each unit totaling €12,546 for 2014. The claimant challenged these assessments on three grounds: (1) lack of proper legal foundation; (2) substantive illegality, arguing that since no individual unit exceeded the €1,000,000 threshold, Stamp Duty should not apply under item 28.1 TGIS; and (3) unconstitutionality, claiming violation of the equality principle because properties in total ownership are taxed differently than those in horizontal ownership (condominiums). The Tax Authority defended the assessments, arguing that the relevant value for tax incidence is the total VPT of the entire urban property, not the individual values of separate divisions, even when capable of independent use. The arbitration tribunal admitted the cumulation of all three installments of the 2014 Stamp Duty into a single proceeding based on identity of tax and legal grounds. The case raises fundamental questions about the interpretation of item 28.1 TGIS regarding the unit of assessment—whether the property as a whole or its independently usable divisions should be considered when applying the €1,000,000 threshold for high-value residential properties subject to annual Stamp Duty.

Full Decision

Arbitral Decision

CAAD: Tax Arbitration

Case No. 388/2015 – T

Subject Matter: Stamp Duty, item 28.1 of the General Stamp Duty Table

Claimant/Applicant: A…

Respondent: Tax and Customs Authority (hereinafter A.T.A.)

1. Report

On 19-06-2015, A…, taxpayer no. …, resident at Rua …, no. …, …, Porto, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal with a view to declaring the illegality of Stamp Duty assessments in the amount of €4,182.00, relating to the year 2014, dated 21-03-2015 and concerning item 28.1 of the General Table of Stamp Duty. Said documents relate to the urban property located at Rua …, no. … to …, Porto, registered in the urban property register of the union of parishes of ..., ..., ..., ..., S... and ... under article … (former urban article …), constituted in full ownership and comprising eighteen divisions susceptible to independent use.

The Claimant begins by stating that the assessments in question in these proceedings lack the required legal foundation, which constitutes a defect that renders the assessment act illegal.

The Claimant further alleges that, since none of the floors with independent use has a tax property value (VPT) exceeding one million euros (€1,000,000), Stamp Duty cannot be assessed or collected, and therefore the assessments in question are illegal. The Claimant cites several CAAD decisions to support its position.

The Claimant further alleges that the interpretation of item 28.1 underlying the assessments now contested is not in accordance with the Constitution of the Portuguese Republic (CRP), by violation of the principle of equality.

On 24-08-2015, the Claimant attached to the proceedings the assessment documents corresponding to the second instalment of Stamp Duty, since they had been received by the Claimant on a date subsequent to the submission of the request for arbitral ruling.

On 31-08-2015, a ruling was issued notifying the Claimant to clarify, within 10 days, whether it intended to extend the claim, given that the value attributed by the Claimant to the case corresponded only to the value of the first instalments of Stamp Duty.

The Claimant responded on 03-09-2015, stating that the assessments underlying the documents attached on 25-08-2015 coincided with those underlying the payment documents relating to the first instalment of Stamp Duty of 21-03-2015, since the tax assessment is single, although it may be divided into several installment payments. The Claimant further states that, should it not be understood that the second instalment was also included in the case, it intends to expand the scope of the claim to the instalment of tax attached to the proceedings on 25-08-2015 and the third instalment of the tax.

On 16-09-2015, a ruling was issued ordering notification of the Respondent to pronounce itself on the claim submitted by the Claimant.

The Tax and Customs Authority submitted a response on 15-10-2015, having not pronounced itself on the claim submitted by the Claimant.

The A.T.A. defended, in its response, the maintenance of the disputed tax acts, requested absolution of the claim, and alleged that the property value relevant for purposes of tax incidence is the total tax property value of the urban property and not the property value of each of the floors or divisions that compose it, even though they may be susceptible to independent use.

Finally, the A.T.A. requested the waiver of the holding of the meeting provided for in article 18 of the RJAT, and of the production of submissions.

On 20-10-2015, a ruling was issued admitting the extension of the claim, and ordering notification of the Claimant to pay, within 10 days, the remaining arbitration fee, since the value of the action increased to €12,546.00. In the same ruling, the Claimant was also notified to pronounce itself on the request to waive the meeting and the production of submissions.

On 30-10-2015, the Claimant proved payment of the remaining arbitration fee and attached to the proceedings the payment documents for the third instalment of Stamp Duty of which it was subsequently notified. Furthermore, it stated that it did not object to the waiver of the meeting and the production of submissions.

On 03-11-2015, a ruling was issued waiving the holding of the meeting provided for in article 18 of the RJAT, as well as the production of submissions. The date of 20-11-2015 was set for the pronouncement of the arbitral decision.

Suzana Fernandes da Costa was appointed as sole arbitrator on 07-08-2015. In accordance with article 11 no. 1 paragraph c) of the RJAT, the singular arbitral tribunal was constituted on 24-08-2015.

The parties possess 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 arbitral claim is timely, in accordance with article 10 no. 1 paragraph a) of Decree-Law no. 10/2011 of 20 January and article 102 no. 1 paragraph a) of the Code of Tax Procedure and Process.

The proceedings do not suffer from any nullities and no preliminary questions were raised, apart from the request for cumulation of claims which will be decided hereinafter.

The Claimant requested the cumulation of claims, alleging that there is identity of the tax and the grounds invoked.

In this case, the cumulation of claims is admissible, in accordance with articles 104 of the CPPT and 3 of the RJAT, and is therefore admitted.

2. Factual Matters

2.1. Proven Facts:

Having analysed the documentary evidence produced and the position of the parties contained in the procedural documents, the following facts are considered proven and of interest for the decision of the cause:

  1. The Claimant was the owner of the urban property located at Rua …, no. … to …, Porto, registered in the urban property register of the union of parishes of ..., ..., ..., ..., S... and ... under article … (former urban article …), constituted in full ownership and comprising eighteen divisions susceptible to independent use, as per the property schedule attached to the arbitral claim as document 2.

  2. The tax property value of all the fractions of the aforementioned property intended for housing was, at the date of the assessments in question, of one million, two hundred and fifty-four thousand and six hundred euros (€1,254,600.00), as stated in the Stamp Duty assessments attached to the arbitral claim as document 1.

  3. The Claimant was notified of the following Stamp Duty assessments for the year 2014:

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 1st left floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 2nd left floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 3rd left floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 4th left floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 5th left floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 1st right floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 2nd right floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 3rd right floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 4th right floor of the aforementioned property, with a VPT of €125,460.00;

  • Assessment no. 2015 … in the amount of €1,254.60, relating to the 5th right floor of the aforementioned property, with a VPT of €125,460.00.

  1. None of the floors or divisions with independent use possesses a tax property value exceeding one million euros.

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

2.2. Substantiation of the Proven Factual Matters:

With respect to the proven facts, the arbitrator's conviction was based, on the one hand, on the documents attached to the proceedings by the Claimant, namely the assessments and the property schedule, and on the other hand, on the positions taken by the parties.

3. Legal Matters:

3.1. Object and Scope of the Present Proceedings

The question to be decided in the present proceedings is whether item 28.1 of the General Table of Stamp Duty (TGIS), in the case of properties not constituted under the regime of horizontal property ownership, applies to the sum of the tax property value attributed to the different parts or floors (global VPT), or rather to the tax property value of each part of the property with independent economic use.

On this question, pronouncements have been made, among others, by CAAD decisions in cases numbered 280/2013-T, 26/2014-T, 88/2014-T, 206/2014-T, 290/2014-T, 428/2014-T, 451/2014-T, 457/2014-T, 458/2014-T and 567/2014-T, 724/2014-T, 152/2015-T, 174/2015-T, 236/2015-T, 311/2015-T, and decision no. 047/15 of the Supreme Administrative Court (STA).

3.2. Question of the Tax Property Value Relevant for the Application of Item 28.1 of the TGIS and of the Alleged Violation of the Principle of Equality

According to the Tax and Customs Authority, in a property in vertical ownership (or not constituted under the regime of horizontal property ownership), the criterion for determining the incidence of stamp duty is the global tax property value of the floors and divisions intended for housing.

For the Claimant, subjection to the stamp duty contained in item no. 28.1 of the TGIS should be assessed not by the total value of the property but by the value attributed to each of the parts with independent use, according to the respective VPT, and should follow the same criterion as the determination of IMI.

Let us see:

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

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

28.1 – For property with residential use – 1% (…);

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

c) The tax property value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Code of Municipal Property Tax by reference to the year 2011; (…)

f) The applicable rates are as follows:

i) Properties with residential use assessed in accordance with the IMI Code: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the IMI Code: 0.8%;"

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

For its part, article 67 no. 2 of the Stamp Duty Code, added by said Law, provides that "to matters not regulated in the present code relating to item 28 of the General Table, the CIMI shall be subsidiarily applied."

The rule of incidence refers to urban properties, the concept of which results from the provisions of article 2 of the CIMI, and the determination of the VPT follows the terms of article 38 and following of the same code.

For its part, article 6 of the CIMI indicates the different types of urban properties, and determines that "residential, commercial, industrial or service buildings or constructions are licensed buildings or constructions for such purposes or, in the absence of a licence, which have as their normal destination each of these purposes." (see paragraph a) of no. 1 of article 6 CIMI).

It must therefore be concluded that for the legislator it is irrelevant whether the property is in vertical ownership or horizontal ownership, what matters is only the material truth underlying its existence as an urban property and its use.

Since the Stamp Duty Code (CIS) refers to the Municipal Property Tax Code, we must consider that the registration in the register of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, follows the same registration rules as properties constituted under the regime of horizontal ownership.

From this it follows that the respective IMI, as well as the Stamp Duty, are assessed individually in relation to each of the parts. For this reason, the legal criterion for defining the incidence of the new tax must be the same.

Thus it is concluded as in CAAD decision 50/2013-T, also cited by decision no. 047/15 of the STA, according to which "if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be single and unequivocal, for the definition of the rule of incidence of item 28.1 of the TGIS".

It thus results from the law that there would only be an incidence of the stamp duty of item 28.1 of the TGIS if any of the parts, floors or divisions with independent use presented a VPT exceeding one million euros (€1,000,000.00), which does not occur in the present proceedings.

The criterion defended by the A.T.A., which takes into account the sum of the parts, arguing that the property would not be constituted under the regime of horizontal ownership, finds no legal support and is contrary to the criterion that results from the CIMI and which applies by referral in the context of Stamp Duty.

Furthermore, the law itself expressly establishes, in the final part of item 28 of the TGIS, that the Stamp Duty applicable to urban properties of value equal to or greater than one million euros (€1,000,000.00) is "on the tax property value used for purposes of IMI."

In conclusion, the property value relevant for purposes of applying item 28.1 of the TGIS is the VPT of the part, floor or division with independent use with residential use, as concluded by decision no. 047/15 of the STA.

The Claimant alleges that the application of item 28.1 of the TGIS violates the principle of equality enshrined in articles 13 and 104 no. 3 of the Constitution of the Portuguese Republic.

In accordance with the interpretation upheld above, the taxation of parts with independent use of value less than one million euros is not covered by the rule of incidence; therefore, their taxation does indeed violate the principle of equality, more specifically in its corollaries of contributive capacity and fiscal proportionality.

With respect to the principle of equality, see CAAD decisions no. 50/2012-T and 218/2013-T, and Constitutional Court decisions no. 142/04 and 187/2013.

We conclude, as in CAAD decision no. 218/2013-T, saying that "the Stamp Duty assessment now under consideration manifestly violates the principle of fiscal equality provided for in article 13 of the CRP, because: i) it is based on a rule that treats taxpayers in identical situations in a very different way, with the measure of difference not being assessed by their real contributive capacity; ii) it is based on an arbitrary legal solution devoid of any rational foundation."

In the case at hand, the property in question is in vertical ownership and contains several floors and divisions with independent use intended for housing, as proven above. Since none of the floors intended for housing has a property value equal to or exceeding one million euros (€1,000,000.00), as results from the documents attached to the proceedings, it is concluded that the legal presupposition for the incidence of the Stamp Duty provided for in Item 28 of the TGIS is not met.

Looking now at the ratio legis of the provision in question in item 28.1 TGIS and citing CAAD decision no. 50/2013-T "the legislator, in introducing this legislative innovation, considered as a determining element of contributive capacity urban properties, with residential use, of high value (luxury), more precisely, of value equal to or exceeding one million euros (€1,000,000.00), on which it proceeded to impose a special rate of stamp duty, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of urban properties of luxury with residential use. For this reason, the criterion was the application of the new rate to urban properties with residential use, whose VPT is equal to or exceeding one million euros (€1,000,000.00). Clearly the legislator understood that this value, when attributed to a residence (house, autonomous fraction or floor with independent use) reflects a contributive capacity above the average and, as such, susceptible to determining a special contribution to ensure the fair distribution of the fiscal burden." However, when applied to a part or fraction not exceeding said value of one million euros, the rule of incidence will not be met.

The principle of fiscal equality determines that equal treatment should be accorded to what is equal and different treatment to what is different. However, there is no justification for differentiated treatment of the fractions or parts of a property solely because it is already in horizontal ownership, provided that the fractions or parts have independent use.

As stated in CAAD decision no. 218/2013-T of case no. 218/2013-T, "The principle of fiscal equality is based on the general principle of equality provided for in article 13 of the CRP, from which results the principle of contributive capacity which, by constitutional requirement, is the presupposition and criterion of taxation."

Professor Casalta Nabais states that the principle of fiscal equality has inherent especially "the idea of generality or universality, whereby all citizens are bound to comply with the duty to pay taxes, and of uniformity, requiring that such duty be assessed by the same criterion — the criterion of contributive capacity. This thus implies equal tax for those with equal contributive capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those with different contributive capacity in proportion to this difference (vertical equality) (Casalta Nabais, Direito Fiscal, 5th edition, Coimbra, 2009, pages 151-152)."

In CAAD decision in case no. 50/2013-T it can be read that "the tax legislator cannot treat equal situations differently. However, if the property were in the regime of horizontal ownership, none of its residential fractions would be subject to the incidence of the new tax."

Thus, in line with the jurisprudence of the TC and the CAAD, we conclude that there is a violation of the principle of fiscal equality and contributive capacity.

3.3. Questions of Prejudicial Knowledge

Resulting from the foregoing the declaration of illegality of the assessments which are the object of the present proceedings, by a defect which prevents the renewal of the acts, it is prejudiced the consideration of the remaining defects imputed to them by the Claimant.

In truth, article 124 of the CPPT, subsidiarily applicable by virtue of the provisions of article 29 no. 1 of the RJAT, in establishing an order of consideration of defects, presupposes that, having found one defect that ensures the effective protection of the rights of the challengers to be well-founded, it is not necessary to consider the remainder, since, if it were always necessary to assess all the defects imputed to the challenged act, the order of their consideration would be irrelevant.

For the foregoing, we do not consider the remaining defects imputed by the Claimant to the acts the declaration of illegality of which it requested.

4. Decision

Given the foregoing, it is determined that the claim formulated by the Claimant in the present tax arbitral proceedings shall be fully upheld, regarding the illegality of the Stamp Duty assessments relating to the year 2014, no. 2015 … in the amount of €1,254.60, no. 2015 … in the amount of €1,254.60, no. 2015 … in the amount of €1,254.60, no. 2015 … in the amount of €1,254.60, no. 2015 … in the amount of €1,254.60, no. 2015 … in the amount of €1,254.60, no. 2015 … in the amount of €1,254.60, no. 2015 … in the amount of €1,254.60, no. 2015 … in the amount of €1,254.60 and no. 2015 … in the amount of €1,254.60.

5. Value of the Case:

In accordance with article 306 no. 2 of the CPC and article 97-A no. 1 paragraph a) of the CPPT and article 3 no. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the action is fixed at €12,546.00.

6. Costs:

In accordance with article 22 no. 4 of the RJAT and Table I appended to the Regulations on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, to be borne by the Tax and Customs Authority.

Notify.

Lisbon, 19 November 2015.

Text drawn up by computer, in accordance with article 138 no. 5 of the Code of Civil Procedure (CPC), applicable by referral of article 29 no. 1 paragraph e) of the Tax Arbitration Regime, reviewed by me.

The sole arbitrator,

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Does Stamp Tax under clause 28.1 of the TGIS apply to a building in total ownership when no individual unit exceeds €1,000,000 in taxable asset value (VPT)?
The central dispute in Process 388/2015-T concerned whether Stamp Duty under item 28.1 TGIS applies when a building held in total ownership contains multiple independent units but no individual unit exceeds €1,000,000 in VPT. The claimant argued that the tax should not apply since each of the 18 units was valued at only €125,460, well below the threshold. However, the Tax Authority contended that the relevant value is the aggregate VPT of the entire property (€1,254,600), which exceeds €1,000,000. The legal interpretation hinges on whether 'urban property' for purposes of item 28.1 means the registered property as a whole or each independently usable unit. The claimant cited previous CAAD decisions supporting the position that individual unit values should be considered, particularly when the property structure would allow for horizontal property division.
Can the tax authority levy Imposto de Selo on the aggregate value of a property with multiple independent units under clause 28.1 of the Tabela Geral do Imposto de Selo?
According to the Tax Authority's position in this case, Imposto de Selo under clause 28.1 of the Tabela Geral do Imposto de Selo can be levied based on the aggregate tax property value of the entire urban property, even when it comprises multiple independent units capable of separate use. The AT argued that the registered property as a whole constitutes the taxable unit, and therefore the total VPT of €1,254,600 exceeded the €1,000,000 threshold, triggering Stamp Duty liability. This interpretation means that properties held in total ownership (propriedade plena) with multiple divisions are taxed on their aggregate value, whereas the same divisions organized as horizontal property (propriedade horizontal) would be taxed individually, only if each unit exceeded the threshold. This differential treatment formed the basis of the claimant's constitutional challenge based on violation of the equality principle under the Portuguese Constitution.
What is the CAAD arbitration procedure for challenging Stamp Tax (Imposto de Selo) assessments in Portugal?
The CAAD arbitration procedure for challenging Stamp Tax assessments in Process 388/2015-T followed the standard framework under the RJAT (Legal Regime for Tax Arbitration). The claimant filed a request for arbitration on June 19, 2015, identifying the contested assessments and legal grounds. A sole arbitrator was appointed on August 7, 2015, and the tribunal was formally constituted on August 24, 2015. The Tax Authority was notified to respond, which it did on October 15, 2015, defending the assessments. The claimant was permitted to expand the claim to include subsequently received second and third installments of the 2014 Stamp Duty, with cumulation of claims admitted under articles 104 CPPT and 3 RJAT based on identity of tax and grounds. Both parties waived the oral hearing under article 18 RJAT and production of written submissions. The arbitration fee was calculated based on the total claim value of €12,546. The procedural timeline from filing to scheduled decision was approximately five months, demonstrating the efficiency of the CAAD arbitration process compared to ordinary judicial proceedings.
Does taxing a property in total ownership differently from properties in horizontal ownership violate the constitutional principle of equality under the Portuguese Constitution?
The claimant in Process 388/2015-T argued that taxing a property in total ownership differently from properties in horizontal ownership violates the constitutional principle of equality enshrined in the Portuguese Constitution (CRP). The constitutional challenge centered on the disparate treatment of economically similar situations: a building with 18 independent residential units held under total ownership faces Stamp Duty based on aggregate value (€1,254,600), while the same units organized as horizontal property (condominium) would only be taxed individually if each exceeded €1,000,000. Since none of the individual units reached this threshold, converting to horizontal property would eliminate the tax liability entirely. The claimant contended this differential treatment lacks objective justification, as the economic reality and use of the property remain identical regardless of the legal ownership structure. The equality principle under the CRP requires that taxpayers in materially similar situations be treated equally for tax purposes. Discrimination based solely on the formal legal characterization of ownership (total vs. horizontal property), without corresponding differences in taxpaying capacity or economic substance, potentially violates Article 13 (equality) and Article 104 (tax system principles) of the Portuguese Constitution.
How are Stamp Tax installment payments treated when filing an arbitration request at CAAD under Process 388/2015-T?
Stamp Tax installment payments in Process 388/2015-T were treated through the mechanism of cumulation of claims under CAAD arbitration procedures. The claimant initially filed the arbitration request on June 19, 2015, contesting the first installment of 2014 Stamp Duty. Subsequently, on August 24, 2015, the claimant attached documents for the second installment received after the initial filing. The tribunal issued a ruling on August 31, 2015, requiring clarification whether the claim would be extended. The claimant responded that the assessment was singular, though payable in installments, and alternatively requested expansion of the claim to include all three installments. On October 20, 2015, the tribunal admitted the extension and ordered payment of the remaining arbitration fee, as the total claim value increased to €12,546. The claimant subsequently attached third installment documents on October 30, 2015. The cumulation was admitted under articles 104 CPPT and 3 RJAT because there was identity of the tax (Stamp Duty under item 28.1 TGIS) and identity of grounds (same legal arguments applied to all installments of the 2014 tax year). This approach allowed consolidated resolution of all related assessments in a single proceeding, promoting procedural economy and preventing contradictory decisions.