Process: 394/2016-T

Date: March 23, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 394/2016-T addresses the controversial application of Stamp Tax under item 28.1 of the General Table of Stamp Tax (TGIS) to buildings held in vertical property with multiple independent residential units. Three co-owners challenged Stamp Tax assessments totaling €8,493.84 for 2015 on an urban property in Lisbon with five independently usable divisions. The central dispute concerns whether the Tax Authority (AT) can aggregate the patrimonial values of all independent units to calculate Stamp Tax, or whether each autonomous division should be taxed separately based on its individual patrimonial value. The claimants argued that the AT's interpretation violates fundamental tax principles including substance over form, good faith, and legitimate expectations. They contended that regardless of whether property is registered as horizontal or vertical ownership, the taxable base for both IMI (Municipal Property Tax) and Stamp Tax should be the patrimonial value of each independently leasable division, not the aggregate total. The AT defended its position by asserting that the legislator intended to tax properties as a single legal-tax reality under item 28 GTST, arguing that vertical property owners hold one unified property rather than autonomous fractions. The AT maintained that using total patrimonial value complies with principles of tax legality and equality, representing a straightforward application of statutory law without discretionary assessment. Claimant C, having paid the contested tax, additionally claimed compensatory interest of €1,415.64 under Article 43(1) of the General Tax Law. This case exemplifies recurring controversies in Portuguese tax law regarding the proper tax treatment of vertical property structures with independently usable units, particularly the methodological difference between aggregated versus unit-specific valuation approaches for Stamp Tax purposes.

Full Decision

ARBITRAL DECISION

Plaintiffs/Claimants: A…, B… and C…

Respondent: Tax and Customs Authority (hereinafter AT)

1. REPORT

On 14-07-2016, A…, taxpayer no. …, resident at Rua…, no. …, …, …-… Lisbon, B…, taxpayer no. …, resident at Rua…, no. …, …, …-… Lisbon, and C…, taxpayer no. …, resident at Rua…, no. …, …, …-… Lisbon, hereinafter referred to as Claimants, submitted to the Administrative Arbitration Center (CAAD) a request for the constitution of an arbitral tribunal with a view to declaring the illegality of the Stamp Tax assessment acts in the total amount of €8,493.84, relating to the year 2015 and to item 28.1 of the General Table of Stamp Tax. Said assessments relate to the urban property situated at Rua…, no. … to …, Lisbon, registered in the urban property register of the parish of…, municipality of Lisbon, under article…, constituted in vertical ownership and with five divisions capable of independent use, all intended for residential purposes.

The Claimants allege that the assessments which are the subject of the arbitral request were based on the sum of the patrimonial values corresponding to floors or divisions of independent use and capable of separate lease. They further assert that whether the property is registered in the property matrix in horizontal or vertical ownership, the taxable base subject to IMI is the patrimonial value of each one of the divisions capable of separate lease and should also be so with respect to item 28 of the GTST.

According to the Claimants, the AT makes an erroneous interpretation of item 28 of the GTST and thereby violates the principles of substance over form, good faith, and trust.

Claimant C… requests, for having made the payment of the Stamp Tax assessed to him, the payment of compensatory interest in the amount of €1,415.64, pursuant to article 43, no. 1 of the General Tax Law.

Suzana Fernandes da Costa was appointed sole arbitrator on 19-09-2016.

In accordance with the provision in article 11, no. 1, paragraph c) of the JRAT, the singular arbitral tribunal was constituted on 04-10-2016.

Notified in accordance with article 17 of the Legal Regime of Arbitration in Tax Matters (JRAT), the Tax and Customs Authority filed its response on 07-11-2016, arguing that what expressly results from the letter of the law is that the legislator intended to tax with item 28 GTST the properties as a single legal-tax reality and that the Claimants are owners of a single property and not of autonomous fractions. Thus, for the Respondent, the patrimonial value relevant for purposes of the incidence of the tax of item 28 GTST would be the total patrimonial value of the urban property and not the patrimonial value of each one of the floors or divisions, even though they are capable of independent use. According to the AT, what is at issue in the case are assessments that result from the direct application of a legal rule, which translates into objective elements, without any subjective or discretionary assessment. The AT argues that the application of item 28 GTST to situations such as those in the case respects both the principle of fiscal legality and the principle of equality.

The AT concludes by requesting the maintenance of the assessed tax acts, that the improcedence of the arbitral request be declared, and dismissal of the request. In its response, the AT requested a waiver of the meeting provided for in article 18 of the JRAT, as well as of the submission of arguments.

On 10-11-2016, an order was issued ordering notification of the Respondent to state its position, within 10 days, on the AT's request for a waiver of the meeting and arguments.

On 16-12-2016, an order was issued directing notification of the AT to attach to the case file, within 10 days, copies of the Stamp Tax assessments issued to Claimant C….

The AT attached said assessments to the case file on 21-12-2016.

On 27-12-2016, Claimant C… came to inform the case file that he had made payment of the Stamp Tax assessments of item 28, and requested that he be reimbursed the amount paid plus compensatory interest.

Since the Claimants did not state their position on the AT's request for a waiver of meeting and arguments, and there were no exceptions to consider, an order was issued on 29-12-2016, waiving the holding of the meeting provided for in article 18 of the JRAT and the submission of arguments. In the same order, the date of 23-03-2017 was set for the pronouncement of the arbitral decision, and the Claimants were warned to proceed, by that date, with the payment of the subsequent arbitration fee.

The parties possess legal personality and judicial capacity and are legitimate (articles 4 and 10, nos. 1 and 2 of the JRAT and article 1 of Regulation no. 112-A/2011 of 22 March).

The joining of the Claimants is admissible pursuant to article 3, no. 1 of the JRAT.

The arbitral request is timely, pursuant to 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 case is not affected by nullities and no preliminary issues were raised.

2. STATEMENT OF FACTS

2.1. Proven facts:

Having analyzed 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 case:

1. Claimant A… was, in 2015, the owner of 1/4 of the urban property situated at Rua…, no. … to …, Lisbon, registered in the urban property register of the parish of…, municipality of Lisbon, under article…, constituted in vertical ownership and with five divisions capable of independent use intended for residential purposes, as shown in the property record attached to the case file.

2. Claimant B… was, in 2015, the owner of 1/4 of the urban property situated at Rua…, no. … to …, Lisbon, registered in the urban property register of the parish of…, municipality of Lisbon, under article…, constituted in vertical ownership and with five divisions capable of independent use intended for residential purposes, as shown in the property record attached to the case file.

3. Claimant C… was, in 2015, the owner of 1/4 of the urban property situated at Rua…, no. … to …, Lisbon, registered in the urban property register of the parish of…, municipality of Lisbon, under article…, constituted in vertical ownership and with five divisions capable of independent use intended for residential purposes, as shown in the property record attached to the case file.

4. Said property is held by the Claimants in a regime of co-ownership.

5. The following Stamp Tax assessments for the year 2015 were issued to Claimant A…, attached to the arbitral request as documents 1 to 6:

- assessment no. 2016 … in the amount of €482.03, relating to the 1st floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €482.03, relating to the 2nd floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €473.33, relating to the 3rd floor of the above-mentioned property, whose PV is €189,330.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €482.03, relating to the 4th floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €482.03, relating to the 5th floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €429.78, relating to the ground floor of the above-mentioned property, whose PV is €171,910.00, to be paid in three installments: April, June and September 2016.

6. The following Stamp Tax assessments for the year 2015 were issued to Claimant B…, attached to the arbitral request as documents 7 to 12:

- assessment no. 2016 … in the amount of €482.03, relating to the 1st floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €482.03, relating to the 2nd floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €473.33, relating to the 3rd floor of the above-mentioned property, whose PV is €189,330.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €482.03, relating to the 4th floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €482.03, relating to the 5th floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. 2016 … in the amount of €429.78, relating to the ground floor of the above-mentioned property, whose PV is €171,910.00, to be paid in three installments: April, June and September 2016.

7. The following Stamp Tax assessments for the year 2015 were issued to Claimant C…, attached to the case file by the AT:

- assessment no. … in the amount of €482.03, relating to the 1st floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. … in the amount of €482.03, relating to the 2nd floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. … in the amount of €473.33, relating to the 3rd floor of the above-mentioned property, whose PV is €189,330.00, to be paid in three installments: April, June and September 2016;

- assessment no. … in the amount of €482.03, relating to the 4th floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. … in the amount of €482.03, relating to the 5th floor of the above-mentioned property, whose PV is €192,810.00, to be paid in three installments: April, June and September 2016;

- assessment no. … in the amount of €429.78, relating to the ground floor of the above-mentioned property, whose PV is €171,910.00, to be paid in three installments: April, June and September 2016.

8. None of the floors or divisions with independent use possess a tax patrimonial value exceeding one million euros, as shown in the property record attached to the case file.

9. Claimant C… made payment of all the installments of the Stamp Tax assessments mentioned above, as shown in documents 13 to 18 attached to the arbitral request, and documents attached by the Claimant on 27-12-2016.

No other facts of relevance for the decision of the case were proven.

2.2. Grounds for the proven facts:

As regards the proven facts, the arbitrator's conviction was based on the documents attached to the case file by the Claimant, namely the assessments, the property record, and the proof of payment.

3. LEGAL MATTERS

3.1. Subject matter and scope of these proceedings

The question to be decided in these proceedings is whether item 28.1 of the General Table of Stamp Tax (GTST), in the case of properties not constituted in horizontal ownership, applies to the sum of the tax patrimonial value attributed to the different parts or floors (total PV), or rather to the tax patrimonial value of each part of the property with independent economic use.

On this issue have already ruled, inter alia, the decisions of the CAAD rendered in case numbers 529/2016-T, 507/2016-T, 495/2016-T, 485/2016-T, 471/2016-T, 466/2016-T, 465/2016-T, 464/2016-T, 450/2016-T, 439/2016-T, 438/2016-T, 433/2016-T, 431/2016-T and 4258/2016-T, and the decisions no. 01447/16, 01394/16, 01219/16, 0711/16, 047/15, no. 01352/15, no. 01344/15, no. 01534/15 and 01425/14 of the Supreme Administrative Court (SAC).

3.2. Issue of the relevant tax patrimonial value for the application of item 28.1 of the GTST

According to the AT, in a property in vertical ownership (or not constituted in a regime of horizontal ownership), the criterion for determining the incidence of stamp tax is the global tax patrimonial value of the floors and divisions intended for residential purposes.

As for the Claimants, the subjection to stamp tax contained in item no. 28.1 of the GTST should be assessed not by the total value of the property but by the value attributed to each one of the parts with independent use, based on its respective PV.

Let us examine this:

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

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the register, in accordance with the Code of Municipal Tax on Property (CMTP), equals or exceeds €1,000,000 – on the tax patrimonial value used for purposes of IMI:

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

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

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

f) The applicable rates are as follows:

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

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

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

In turn, article 67, no. 2 of the Code of Stamp Tax, added by said Law, provides that "to matters not regulated in this code concerning item 28 of the General Table the CMTP applies on a subsidiary basis."

The rule of incidence refers to urban properties, whose concept is that which results from the provision in article 2 of the CMTP, the determination of PV being subject to the terms provided in article 38 et seq. of the same code.

In turn, article 6 of the CMTP indicates the different types of urban properties and provides that "residential, commercial, industrial or for services are the buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal destination each one of these purposes." (see paragraph a) of no. 1 of article 6 CMTP).

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

Since the Code of Stamp Tax (CST) refers to the Code of IMI, we must consider that the registration in the property register of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, obeys the same rules of registration of properties constituted in horizontal ownership.

It follows therefore that the respective IMI, as well as Stamp Tax, are assessed individually in relation to each one 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 decision no. 50/2013-T of the CAAD and in decision no. 047/15 of the SAC, 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, clearly it established the criterion, that must be unique and unequivocal, for the definition of the rule of incidence of item 28.1 of the GTST."

Thus it results from the law that there would only be room for the incidence of stamp tax of item 28.1 of the GTST if any one of the parts, floors or divisions with independent use presented a PV exceeding one million euros (€1,000,000.00), which does not occur in these proceedings.

The criterion defended by the AT, which takes into account the sum of the parts, with the argument that the property would not be constituted in a regime of horizontal ownership, finds no legal support and is contrary to the criterion that results from the CMTP and which applies by referral in the context of Stamp Tax.

Furthermore, the law itself expressly establishes, in the final part of item 28 of the GTST, that Stamp Tax to apply to urban properties of value equal to or exceeding one million euros (€1,000,000.00) – "on the tax patrimonial value used for purposes of IMI."

In conclusion, the relevant patrimonial value for purposes of the application of item 28.1 of the GTST is the PV of the part, floor or division with independent use with residential use, as concludes decision no. 047/15 of the Supreme Administrative Court.

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

As to the principle of equality, we conclude, as in decision of the CAAD no. 218/2013-T, stating that "the assessment of Stamp Tax now under consideration clearly 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 that find themselves in identical situations in a very different manner, the measure of the 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 five floors and divisions with independent use intended for residential purposes, as was proven above. Given that none of the residential floors has tax patrimonial value equal to or exceeding one million euros (€1,000,000.00), as results from the documents attached to the case file, it is concluded that the legal prerequisite of incidence of Stamp Tax provided for in Item 28 of the GTST is not verified.

Looking now at the ratio legis of the provision in question in item 28.1 GTST and citing decision CAAD no. 50/2013-T, "the legislator in introducing this legislative innovation considered as the 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 began to apply a special rate of stamp tax, intending to introduce a principle of taxation on the wealth manifested in ownership, usufruct or right of superficies of luxury urban properties with residential use. Therefore, the criterion was the application of the new rate to urban properties with residential use whose PV equals or exceeds one million euros (€1,000,000.00). Clearly the legislator understood that this value, when attributed to a residential unit (house, autonomous fraction or floor with independent use), conveys a contributive capacity above average and, as such, capable of determining a special contribution to ensure the fair distribution of the fiscal burden." Now when applied to a part or fraction that does not exceed the aforementioned value of one million euros, the rule of incidence will not be found to be satisfied.

The principle of fiscal equality provides that one must treat fiscally in an equal manner what is equal and in a different manner what is different. Now, there is no justification for the differentiated treatment of the fractions or parts of a property merely because it already finds itself in horizontal ownership, provided that the fractions or parts have independent use.

As states decision CAAD 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, resulting from it the principle of contributive capacity which, by constitutional imperative, is the prerequisite and the criterion of taxation."

Professor Casalta Nabais states that the principle of fiscal equality inherently above all "the idea of generality or universality by which all citizens are bound to the fulfillment of the duty to pay taxes, and of uniformity, requiring that such duty be assessed by a single 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, Tax Law, 5th edition, Coimbra, 2009, pp. 151-152).

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

The Claimants further allege that is violated the principle of the prevalence of economic substance over the form of the acts.

As states the decision of the CAAD of case no. 185/2013-T, the principle of the prevalence of substance over form requires that the tax administration value the material truth. Now, in these proceedings, the material truth consists in the non-existence of any substantive difference between the divisions owned by the Claimant and the fractions of a property constituted in horizontal ownership. Wherefore, it is considered that this principle was also violated.

Thus, and in line with the jurisprudence of the Supreme Administrative Court and of the CAAD, we conclude by the violation of the principle of fiscal equality and of contributive capacity, and, as such, by the merits of the request.

4. COMPENSATORY INTEREST

Claimant C… requests the condemnation of the AT to return the tax improperly paid, plus compensatory interest.

Article 43, no. 1 of the GTL provides that "compensatory interest is due when it is determined in a petition for reconsideration or judicial challenge that there was error attributable to the services which results in the payment of the tax debt in an amount exceeding what is legally due."

In the case at hand, the error that affects the Stamp Tax assessments is attributable to the Tax and Customs Authority which performed the assessment acts on its own initiative, wherefore Claimant C… is entitled to receive compensatory interest from the date of payment of each amount until reimbursement, at the legal supplementary rate, pursuant to articles 43, nos. 1 and 4, and 35, no. 10, of the GTL, article 559 of the Civil Code and Regulation no. 291/2003, of 8 April.

As results from the aforementioned article 43, no. 1 of the GTL, the right to compensatory interest depends on the payment of tax debt in an improper amount.

Being affected by illegality, the Stamp Tax assessments, compensatory interest is due from the date of payment until full reimbursement by the AT, pursuant to articles 43 of the GTL and 61, no. 2 of the CTPP.

5. DECISION

In light of the foregoing, it is determined:

a) to judge as entirely well-founded the request formulated by the Claimants in these tax arbitral proceedings as to the illegality of the Stamp Tax assessments relating to the year 2015 which is the subject of this arbitral request;

b) to judge as well-founded the request for condemnation of the Tax and Customs Authority to reimburse to Claimant C… the amount of the tax improperly paid, plus compensatory interest in accordance with the law, from the date on which such payment was made until the date of its full reimbursement.

6. VALUE OF THE CASE

In accordance with the provision in article 306, no. 2, of the CCP and 97-A, no. 1, paragraph a) of the CTPP and 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the action is fixed at €8,493.84.

7. COSTS

Pursuant to article 22, no. 4, of the JRAT and Table I annexed to the Regulation on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, owed by the Tax and Customs Authority.

Notify.

Lisbon, 23 March 2017.

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

The sole arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

How is Stamp Tax under Verba 28.1 TGIS applied to buildings held in vertical property with independent units?
Stamp Tax under Verba 28.1 TGIS applied to vertical property buildings raises the question of whether each independent unit should be taxed separately or whether the entire property's aggregated patrimonial value should form the tax base. In this CAAD case, the claimants argued that vertical property with divisions capable of independent use and separate lease should be taxed per division based on individual patrimonial values, mirroring the IMI treatment. However, the Tax Authority contended that vertical property constitutes a single legal-tax reality, requiring taxation based on total patrimonial value rather than unit-by-unit assessment, representing divergent interpretations of the same legislative provision.
Can the tax authority sum the patrimonial values of independent divisions in a vertical property for Imposto de Selo purposes?
The Tax Authority in Process 394/2016-T defended its practice of summing the patrimonial values of all independent divisions within a vertical property to determine the Stamp Tax base under Verba 28.1 TGIS. The AT argued this approach reflects the legislator's intent to treat the property as a unified legal-tax entity, since vertical property owners technically own the entire building rather than autonomous fractions like in horizontal property (condominium) structures. The claimants contested this aggregation methodology, asserting it produces inequitable results and contradicts the substance-over-form principle by ignoring the economic reality of independently usable and leasable units that function as separate taxable units for IMI purposes.
What is the difference between vertical and horizontal property for Stamp Tax Verba 28 TGIS incidence?
The critical distinction between vertical and horizontal property for Stamp Tax Verba 28 TGIS incidence lies in legal ownership structure and tax treatment. Horizontal property (propriedade horizontal) involves legally autonomous fractions with separate matrix registrations, each taxed individually for both IMI and Stamp Tax purposes. Vertical property (propriedade vertical) involves common ownership of an entire building divisible into floors or units capable of independent use but not constituting legally autonomous fractions. The Tax Authority's position treats vertical property as a single taxable unit with aggregated patrimonial values, while claimants argued this creates arbitrary discrimination since the independent units in vertical property are economically and functionally equivalent to horizontal property fractions and should receive parallel tax treatment.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) when Stamp Tax is unlawfully assessed on vertical property?
Taxpayers are entitled to compensatory interest (juros indemnizatórios) when Stamp Tax is unlawfully assessed, as claimed by Claimant C who paid €1,415.64 in interest claims under Article 43(1) of the General Tax Law (LGT). Compensatory interest compensates taxpayers for the financial damage caused by paying tax later determined to be illegal or excessive. The right arises automatically when tax is paid and subsequently ruled unlawful through administrative review or judicial/arbitral proceedings. The interest rate and calculation methodology are governed by the LGT, running from the payment date until reimbursement. This mechanism ensures taxpayers are made whole for the time-value of money lost due to erroneous tax assessments by the authorities.
Does the substance-over-form principle apply to Stamp Tax assessment on buildings with independently leasable units?
The substance-over-form principle (princípio da substância sobre a forma) applies to Stamp Tax assessment on buildings with independently leasable units by requiring tax authorities to consider economic reality rather than merely legal formalities. The claimants invoked this principle arguing that vertical property divisions capable of independent lease function identically to horizontal property fractions in economic substance, despite different legal structures. Under this principle, tax treatment should reflect the underlying economic nature of transactions and property arrangements rather than rigid adherence to legal form. The claimants contended that taxing vertical property by aggregating all unit values while taxing horizontal property fractions individually creates arbitrary distinctions unsupported by economic differences, violating substance-over-form requirements alongside good faith and legitimate expectations principles in tax law.