Stamp Tax on Construction Land Under Verba 28.1: CAAD Arbitration on Property Valuation and Tax Annulment

ARBITRAL DECISION

I – Report

1. On 14-07-2016, the Claimant, A…, Lda, taxpayer number…, with registered office at Rua …, no. …, …, requested the CAAD for the constitution of an arbitral tribunal, under the terms of article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "LFRATM"), in which the Tax and Customs Authority is the respondent, with a view to the annulment of the stamp duty assessment provided for in Item 28.1 of the General Table of Stamp Duty, relating to the year 2015 and with reference to the urban property registered in the cadastral matrix under article U-…, of the extinct parish of…, currently the Union of Parishes of…, …, …, …, … and …, municipality of Porto, in the amount of 22,556.80 euros.

The Claimant, alleging that it paid the first and second instalments of the assessed stamp duty, further petitions for their reimbursement, plus compensatory interest at the legal rate.

1. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of the CAAD and notified to the Tax and Customs Authority.

Pursuant to and for the purposes of the provision in no. 1, article 6, of the LFRATM, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable time limits, the signatory was appointed as arbitrator, who communicated acceptance of the appointment to the Deontological Council and to the Centre for Administrative Arbitration within the regularly applicable time limit.

The Arbitral Tribunal was constituted on 04-10-2016.

1. The grounds presented by the Claimant in support of its claim were, synthetically, as follows:

• The taxpaying company is the legitimate owner of the urban property located at Rua…, of the Union of Parishes of …, …, …, …, … and …, and registered in the competent urban cadastral matrix with article….

• The said urban property was the subject of a prior information request submitted to the Municipal Chamber of Porto regarding "(…) construction works for the building of a building intended for a Hotel, or housing, or commercial/services."

• Following the said prior information request, the following information was provided by the Municipal Department of Urban Management – Municipal Directorate of Urban Planning, of the Municipal Chamber of Porto:

"In view of all the foregoing, it is proposed: that, pursuant to the provision in article 16 of Decree-Law no. 555/99, of 16 December, as amended by Decree-Law no. 26/2010, of 30 March, Legal Framework for Urban Development and Building (LFUDB), the Alderman responsible for Urban Planning and Mobility approve the proposal for issuing a favourable opinion regarding the prior information request concerning construction works whose characteristics are described above, under the conditions contained in this information (…)".

• According to Item 28.1 of the GTSD with the wording introduced by Law no. 83-C/2013, of 31 December [article 194] ut State Budget for 2014:

"For residential property or for land for construction whose authorized or foreseen building is for housing, under the provision of the IMI Code: 1%"

It so happens that from the analysis of the Prior Information Request in this case it is clear that the approved buildings are not intended solely for housing but also for the construction of a Hotel, commercial or services.

To this extent it must be concluded that there was an error as to the prerequisites of the assessment, when it is certain that the norm of real incidence typifies as taxable event, in the case of the same land for construction, the building authorized or foreseen solely for housing, under the provision of the IMI Code.

The legislator with Law 55-A/2012 and with the amendment to the GTSD intended, in a framework of national emergency, to tax taxpayers holding increased tax-paying capacity, in the concrete case through the taxation of luxury properties.

Following this same reasoning and considering that with the State Budget for 2015 the legislator expanded, with the same intent, the objective scope of Stamp Duty under Item 28.1 of the GTSD to land for construction.

In the legislator's view, luxury properties are thus those which, having residential use or whose authorized or foreseen building is for housing under the provision of the IMI Code [and not any type of property] – that is, a HOME – have a taxable patrimonial value (TPV) exceeding 1,000,000 Euros.

It occurs, however, that land for construction whose building, authorized or foreseen, is for housing, under the provision of the IMI Code are not considered luxury goods, since they constitute mere legal expectations.

On the other hand, while ownership of residential properties with a taxable value exceeding 1,000,000 Euros evidences increased tax-paying capacity, legitimating a "solidarity tax," this does not follow from ownership of properties by a real estate company that holds in its legal sphere land for construction intended to carry out its corporate purpose and develop real estate promotion activity,

To the extent that it does not represent a "luxury" patrimony, much less an additional or exceptional tax-paying capacity.

For which reason the assessment of the duty in question, which is based on land for construction, in addition to literally not observing compliance with the norms of real incidence, clearly affects the legislative ratio represented in the amendment introduced to the General Table also with the wording conferred by the State Budget of 2014.

• It is not similar to tax a property intended for housing with the value of 1,000,000 Euros, because its configuration is definitive and represents for its owner increased tax-paying capacity, and land for construction, even though the authorized or foreseen building is also intended for housing, under the provision of the IMI Code, given that its natural destination will be the construction of fractions whose TPV will be fractioned or divided by the number of fractions resulting from the construction process, but of value certainly less than 1,000,000 Euros.

• The fact that now the TA intends to assess Stamp Duty under Item 28.1 of the GTSD with regard to investment assets reveals a clear violation of the principles of equality and tax-paying capacity, constitutionally enshrined.

• Beyond being illegal due to error as to the prerequisites, the challenged assessment is equally illegal due to defective reasoning.

Thus, to sustain the assessment in question, the TA would have to invoke that we are before land for construction whose building, authorized or foreseen, is for housing, under the provision of the IMI Code.

The reasoning must therefore include in a clear, sufficient and concrete manner, the factual and legal reasons that presided over the assessment decision now being challenged.

It must include, not only the law that serves as the basis for taxation, but also the interpretation that the Administration made of it, the description of factual reality and the evaluative process that presided over the decision to subject these to those.

Analyzing the Stamp Duty assessment notification in question, it is concluded that the reasoning contained therein is non-existent, not allowing the taxpayer or a normal addressee to reconstruct the cognitive and evaluative path undertaken by the TA.

It does not incorporate any elements that allow ascertaining what evaluative path the TA undertook that culminated with the decision to tax the property of which the Claimant is the owner.

It did not consider the factual reality of the property subject to the assessment now being challenged, or, alternatively, did not correctly identify the incidence of the tax determined by law by expanding it to realities not included therein.

That is, the TA neither explains nor justifies the assessment of a tax which in the letter of the norm of real incidence falls on residential properties or land for construction whose building foreseen or approved for housing under the IMI Code, but which in the case at hand is being demanded based on ownership of "land for construction," without clarifying or justifying its use and the reason why they are subject to said tax.

The TA [even if not fully corresponding to the material reality of the urban articles under analysis] should have stated and did not state that the land for construction has building foreseen or authorized for housing.

Accordingly, it is incumbent upon the TA to explain why it assessed Stamp Duty on land for construction with the various types of authorized uses, when it is certain that the enabling norm limits taxation to land for construction whose authorized building is solely for housing under the IMI Code.

Thus, also for this reason the assessment in question is illegal due to defective reasoning.

1. The ATA – Tax and Customs Authority, called upon to respond, contested the Claimant's claim, in summary, with the following grounds:

BY WAY OF EXCEPTION

Of the material incompetence of the Arbitral Tribunal to examine the petition for declaration of material unconstitutionality of Item no. 28 of the GTSD

• According to the express will of the legislator, in no. 1 of article 2 of the LFRATM "it is established with precision which are the matters upon which the arbitral tribunal may pronounce itself" – as per the Preamble of Decree-Law no. 10/2011, of 20 January;

• It is manifest that the competence of the arbitral jurisdictional forum does not include the examination of the constitutionality of legislative acts or their norms, ex vi article 2, no. 1 of the LFRATM;

• For which reason the Arbitral Tribunal is incompetent ratione materiae to examine the petition for declaration of material unconstitutionality of Item 28 of the General Table of Stamp Duty, for violation of the principle of tax-paying capacity, as an aspect of the principle of equality.

• Absolute incompetence ratione materiae constitutes a dilatory exception that impedes the continuation of the proceedings, leading to dismissal of the instance as to the respective claim, in accordance with the provision in articles 576, no. 2, 577, subsection a) and 278, no. 1, subsection a) of the CPC, applicable ex vi article 29, subsection e) of the LFRATM.

BY WAY OF SUBSTANTIVE CHALLENGE

• It is the TA's understanding that the property in question has the legal nature of property with residential use, for which reason the assessment act subject of the present petition for arbitral pronouncement should be maintained as it constitutes a correct interpretation of Item 28 of the General Table, amended by Law 55-A/2012, of 29/12.

• Law no. 55-A/2012, of 29/10/2012 amended art. 1 of the CIS, and added Item 28 to the GTSD and with this legislative amendment, Stamp Duty came to apply also to ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the cadastral register, under the terms of the Code for Municipal Tax on Real Estate (CMTRE), is equal to or exceeding €1,000,000.00.

• Although this has always been the TA's understanding, no doubt can subsist for the year now in question, i.e., 2015, since, with Law no. 83-C/2013 of 31-12-2013, the letter of that provision was amended to expressly include land for construction as an objective element of incidence of the norm, for which reason any attempt to raise any interpretive question of the letter of the Law is lacking in sustenance.

• There is thus no sustenance for the alleged illegality which the Claimant intends to impute to the assessment sub judice, the Respondent Entity having acted in strict compliance with the law, to which it is rigorously bound, subsuming the taxable fact to the express normative provision.

• On the other hand, the tax act does not suffer from the defect of lack of reasoning, as it is considered that the intended purposes of such reasoning have been achieved, namely: the understanding of the content of the act by its addressees and the possibility of reacting against it.

• The Claimant came to know the origin and reason for the assessments, what was assessed, how and what the reasons were for the assessments being carried out in the precise manner in which they were.

• For the assessment acts in question in the present proceedings, the law demands nothing but compliance with the general requirements of reasoning contained in the cited numbers 1 and 2 of article 77 of the LGT and which is complied with by the Tax Administration in "standardized" and "computerized" manner, given the nature of "mass process" of the annual assessment of this tax.

• In the case at hand, the procedure culminated in the challenged assessment act and whose final result, in terms of determination of tax to be paid, is reflected therein in "standardized" manner, thereby complying with the reasoning requirements imposed by no. 2 of article 77 of the LGT.

• Notwithstanding the well-known "technicality" of tax matters and their, at times, "inaccessibility" for the "normal declarant," such circumstances did not prevent the Claimant from asserting its reasons through the avenues it deemed appropriate.

• It cannot therefore be said that prejudice to its defense has resulted from the reasoning of the challenged assessment, thus complying with one of the paramount purposes of the duty to provide reasoning.

• The Claimant did not fail to apprehend the totality of the circumstances of the assessment act, as can be seen from the subject matter articulated in the arbitral petition.

• The reasoning of the assessment act is sufficient, is clear, is precise and is objective.

• Nevertheless, even if the reasoning used had proved insufficient in light of its legal prerequisites – which we do not admit – the Claimant fully exercised its defense.

• Thus, any such hypothetical insufficiency could never equate to lack of reasoning of the act, since the legal purpose aimed at with it was, notwithstanding, effective and perfectly achieved by its addressees.

1. By order of 23.01.2017, the exception raised by the Respondent was judged without merit.

Given the non-existence of any situation provided for in article 18, no. 1, of the LFRATM, which would make necessary the arbitral meeting provided therein, its holding was dispensed with, on the grounds of the prohibition against performing useless acts and also on the principles of celerity, simplification and procedural informality.

Written submissions were further ordered within the successive period of 7 days for the Claimant and Respondent.

The parties submitted written submissions in which, in essence, they maintained the positions already manifested in the initial petition and in the response.

1. It is necessary to resolve the following issues:

• Whether there exists a defect of violation of law due to error in the factual and legal prerequisites.

• Whether there occurs a defect of lack of reasoning.

• Whether the Respondent should be condemned to reimburse to the Claimant the amounts allegedly paid with compensatory interest at the legal rate.

II. Sanitation of Issues

1. The tribunal is materially competent and is regularly constituted under the terms of the LFRATM.

The parties have legal personality and capacity, are legitimate and are legally represented.

The proceedings do not suffer from defects that would invalidate them.

III – The Relevant Factual Matter

1. The following facts are considered proven:

• The Claimant company is registered in the cadastral matrix as owner of a plot of land for construction located at Rua …, of the Union of Parishes of …, …, …, …, … and …, and registered in the competent urban cadastral matrix with article …, with the taxable patrimonial value of € 2,255,680.00.

• The said property was the subject of a prior information request submitted to the Municipal Chamber of Porto regarding "(…) construction works for the building of a building intended for a Hotel, or housing, or commercial/services," which was subject to a decision issuing a favourable opinion, on 6.07.2012.

• From said opinion the following appears with regard to characteristics of the works:

Implantation area: 1395.2 m2

Gross construction area: 7922 m2

Total construction area: 10,678.00 m2

• From the opinion the following appears with regard to uses:

Uses: Not defined (Hotel Unit, or housing, or commercial/services.)

• From the cadastral record of the property the following appears, in particular:

Total land area: 2,756 m2

Building implantation area: 1395.2 m2

Gross construction area: 10,678.00 m2

"type of location coefficient: housing" and Ca: 1.00.

Model 1 of IMI, filed on 22.10.2012.

• On 5.04.2016, the Respondent made the challenged assessment, relating to the year 2015, in the amount of € 22,556.80 and concerning the property identified above, with the Claimant as the taxpayer.

• From the notification of this assessment appears the tax identification of the Claimant, the year of the tax, the identification of the document, the date of assessment, the identification of the property, the Item of the GTSD in question, the taxable patrimonial value of the property, the rate of the tax, the amount collected and the amount of the 1st instalment, and a mention that payment should be made in the month of April 2016, with no mention of the use of the authorized or foreseen building.

• The Claimant paid the first instalment of the tax, in the amount of 7,518.94 Euros, on 27.04.2016 and the second, in the amount of 7,518.93 Euros, on 6.07.2016.

With relevance to the decision of the case, regarding facts alleged by the parties, there are no unproven facts.

1. The Tribunal's conviction regarding the decision of the factual matter was based on the documents contained in the proceedings, which were not challenged by the Respondent, specifically, the notification of the assessment and the receipts of payments (documents one, two and three filed with the initial petition), cadastral record (document number four filed with the initial petition) and notification of the decision on the prior information request made to the Claimant by the Municipal Directorate of Urban Planning of the Municipal Chamber of Porto (document number five filed with the initial petition), it being noteworthy that no disagreement regarding the factual matter results from the pleadings presented.

IV – The Applicable Law

1. Item 28 of the General Table of Stamp Duty establishes in the wording introduced by Law no. 83-C/2013, of 31 December (State Budget Law for 2014) that the following is subject to stamp duty:

"Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the cadastral register, under the terms of the Code for Municipal Tax on Real Estate (CMTRE), is equal to or exceeding (euro) 1,000,000 - on the taxable patrimonial value used for purposes of IMI:

28.1 For residential property or for land for construction whose authorized or foreseen building is for housing, under the provision of the CMTRE Code: 1%.

(…)

The original wording of the norm in question, in this part, was as follows:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the cadastral register, under the terms of the Code for Municipal Tax on Real Estate (CMTRE), is equal to or exceeding 1,000,000 euros – on the taxable patrimonial value used for purposes of IMI:

28.1 – For property with residential use – 1%;

(…)

1. According to the new wording of the norm in question, also subject to taxation is "land for construction whose authorized or foreseen building is for housing, under the provision of the CMTRE Code."

The new segment of the norm, in its apparent simplicity, raises various questions, in particular in light of the recognized legislative intent embodied in Item 28.1 of the GTSD to tax "luxury properties."

From the outset, at the level of its literal element, in providing for the taxation of land for construction "whose building," authorized or foreseen, is for housing, it legitimates the question of whether the provision refers solely to land where the building of one dwelling is authorized or foreseen, or also to plots of land with respect to which the building of several dwellings is authorized or foreseen.

Still within the scope of the literal element of the norm, admitting that it may refer to the building of more than one dwelling, whether the provision refers to land where only the building of dwellings is authorized or foreseen or, also, foreseen or authorized the construction of properties intended for other purposes, as in the case at hand where the construction of a "building intended for a Hotel, or housing, or commercial/services" is foreseen.

1. It is settled in national case law that, in the original wording, the legislative intent of Item 28 of the GTSD is the taxation of luxury properties built and devoted to housing.

With the change in wording established by Law no. 83-C/2013, of 31 December, taxation is also established for land for construction whose building, authorized or foreseen, is for housing and has a taxable patrimonial value exceeding one million euros in similar manner to what occurs in the case of residential buildings.

The legislator, in making the taxation of Item 28.1 apply to plots of land for construction, is thereby anticipating the taxation of "luxury," which constitutes the premise of taxation, in that, although the possibility of the high-value property being subject to residential use has not yet occurred, the mere fact of being the owner of land intended for the building of a property with such characteristics and, also itself, immediately possessing high taxable patrimonial value, is presumed to evidence increased tax-paying capacity, the premise and criterion of this taxation.

But this increased tax-paying capacity, this "luxury," only occurs if the authorized or foreseen construction is for "luxury" housing, that is, for residential units with value exceeding one million euros.

The "legislative intent" of the provision is in no way the taxation of plots of land intended for housing of average or medium value or social housing apparently resulting from the literal element of the norm, for a plot of land for construction intended for construction of housing of average or lower value can reach a value exceeding one million euros, which may depend, in particular, on the number of dwelling units to be built.

A restrictive interpretation of the provision is thus required, in the sense of considering that plots of land for construction are subject to taxation but, solely and exclusively, in the case where the authorized or foreseen construction is for housing of high value or that is, for residential units with value exceeding one million euros ("cessante ratione legis cessat eius dispositivo").

Furthermore, the interpretation of the norm which is here adopted, in addition to being in harmony with the teleological element and having in the letter of the law a minimum of verbal correspondence, is the one that best accords with the unity of the legal system and, in particular, with the principle of interpretation in conformity with the Constitution. In fact, if it were understood that the taxation of plots of land provided for in Item 28.1 of the GTSD were not limited to plots intended for the building of high-value housing, this would imply the taxation of land intended for housing of average value or even social housing, which, in addition to clearly violating the principle of tax-paying capacity, would also manifestly violate article 65 of the Constitution of the Portuguese Republic.[1] [2]

In the case at hand, from the proven factual matter there does not emerge the verification of the legal prerequisite, in the interpretation adopted, and it even results in uncertainty as to the type of construction to be built (hotel unit or housing or commercial services), as results from the decision approving the prior information request, whose elements relating to building capacity coincide in essence with those transposed to the cadastral record, as to the areas to be built (Implantation area contained in both documents: 1395.2 m2; Gross construction area contained in the cadastral record and Total construction area contained in the decision approving the prior information request: 10,678.00 m2) being, for this reason, to be presumed that the cadastral registration was based on the decision approving the prior information request, moreover, in line with what results from article 37, no. 3, of the CMTRE, and for this reason no particular relevance is to be given to the type of use contained in the cadastral record, since that, given the alternative approval of various purposes for construction, some of them would necessarily have to be inserted, given the legal impossibility of considering all of them for purposes of valuation and, consequently, of joint cadastral inscription.

To this extent, and without need for further considerations, it is understood that the property in question, of which the Claimant is the registered owner in the cadastral register, does not fall within the norm contained in Item 28.1 of the GTSD, for which reason the assessment sub judice cannot fail to be annulled, remaining consequently prejudiced the examination of the defect of lack of reasoning of the tax act also alleged by the Claimant.

1. The Claimant further petitioned for the condemnation of the Respondent to reimburse the sums paid corresponding to the assessment subject of the present proceedings, as well as the respective compensatory interest.

Let us consider this.

In accordance with the provision in subsection b) of article 24 of the LFRATM, the arbitral decision on the merits of the claim insofar as it is not subject to appeal or challenge binds the tax administration from the end of the time limit provided for appeal or challenge, and the latter must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the time limit provided for the voluntary execution of judgments of tax courts, "restore the situation that would exist if the tax act subject of the arbitral decision had not been carried out, adopting the necessary acts and operations for this purpose," which is in harmony with the provision in article 100 of the LGT [applicable by force of the provision in subsection a) of no. 1 of article 29 of the LFRATM] which establishes that "the Tax Administration is obligated, in case of total or partial merit of a complaint, judicial challenge or appeal in favor of the taxpayer, to immediate and full restoration of the legality of the act or situation subject of the dispute, including the payment of compensatory interest, if applicable, from the end of the term of execution of the decision."

Although article 2, no. 1, subsections a) and b), of the LFRATM uses the expression "declaration of illegality" to define the competence of the arbitral tribunals operating in the CAAD, making no reference to condemning decisions, it should be understood that the competencies comprehend the powers which in judicial challenge proceedings are attributed to tax courts, this being the interpretation that is in harmony with the sense of the legislative authorization on which the Government based itself to approve the LFRATM, in which it proclaims, as the first directive, that "the tax arbitral process should constitute an alternative procedural means to the judicial challenge process and to the action for recognition of a right or legitimate interest in tax matters."[3]

The judicial challenge process, despite being essentially a process of annulment of tax acts, admits the condemnation of the Tax Administration to the payment of compensatory interest, as is drawn from article 43, no. 1, of the LGT, in which it is established that "compensatory interest is due when it is determined, in an administrative complaint or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount exceeding that legally due" and from article 61, no. 4 of the CPPT (in the wording given by Law no. 55-A/2010, of 31 December, to which corresponds no. 2 in the original wording), which states that "if the decision recognizing the right to compensatory interest is judicial, the time limit for payment is counted from the beginning of the time limit for its voluntary execution."

Thus, no. 5 of article 24 of the LFRATM in stating that "interest is due, regardless of its nature, under the terms provided for in the general tax law and in the Code of Tax Procedure and Process" should be understood as allowing the recognition of the right to compensatory interest in the arbitral process.

In the case at hand, it is manifest that, following the illegality of the assessment act, there is place for reimbursement of the tax, by force of the said articles 24, no. 1, subsection b), of the LFRATM and 100 of the LGT, since this is essential to "restore the situation that would exist if the tax act subject of the arbitral decision had not been carried out."

1. With regard to compensatory interest, it is still necessary to examine this claim in light of article 43 of the General Tax Law.

No. 1 of that article provides that "Compensatory interest is due when it is determined, in an administrative complaint or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount exceeding that legally due."

We endorse the understanding of Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa who sustain that "The error attributable to the services that carried out the assessment is demonstrated when they proceed with an administrative complaint or a judicial challenge of that same assessment and the error is not attributable to the taxpayer" (GENERAL TAX LAW, Annotated and Commented, writing encounters, 4th Edition, 2012, page 342).

In the case "sub judice," the error which gave rise to the assessment now annulled not being attributable to the Claimant, the request for condemnation of the Respondent as to compensatory interest cannot fail to proceed.

Thus, the Tax and Customs Authority should execute the present decision, under the terms of article 24, no. 1, of the LFRATM, reimbursing the amounts paid by the Claimant relating to the annulled assessment, with compensatory interest, at the legal rate.

Compensatory interest is due from the date of payment until the date of processing of the credit note, in which it is included (article 61, no. 5, of the CPPT).

IV – Decision

Thus, the arbitral tribunal decides, judging the petition for arbitral pronouncement to be totally well-founded:

a) Decree the annulment of the assessment subject of the present proceedings.

b) Condemn the Respondent to reimburse to the Claimant the amounts paid with compensatory interest at the legal rate, counted from the date of payment by the Claimant until the date of processing of the credit note.

Amount in controversy: 22,556.80 € (twenty-two thousand five hundred and fifty-six euros and eighty cents) under the terms of the provision in article 306, no. 2, of the CPC and 97-A, no. 1, subsection a), of the CPPT and 3, no. 2, of the Costs Regulation in Arbitration Proceedings.

Costs owed by the Respondent in the amount of 1,224.00 € (one thousand two hundred and twenty-four euros) under the terms of no. 4 of article 22 of the LFRATM.

Notify parties.

Lisbon, CAAD, 9.03.2017

The Arbitrator

Marcolino Pisão Pedreiro

[1] In this sense the arbitral decision of 5.02.2016, issued in proceedings 482/2015-T. (https://caad.org.pt/tributario/decisoes/)

[2] In the arbitral decision of 17-03-2016, issued in proceedings 507/2015-T, it was considered that "the norm of Item 28.1 of the GTSD, in the wording introduced by Law no. 83-C/2013, of 31 December, is materially unconstitutional, for breach of the principle of equality, stated generically in article 13 of the CRP, for applying to land for construction with taxable patrimonial value equal to or exceeding € 1,000,000.00 for which the authorized or foreseen construction does not include any fraction susceptible to independent use with value equal to or exceeding that amount.

The same reasons for distinguishing will apply with regard to land for construction intended for building of autonomous dwellings with value equal to or exceeding € 1,000,000.00, since ownership of rights over land with this purpose reveals, by itself alone, a situation of wealth, at the level of the "highest standards of Portuguese society": that is, if the land, by itself alone, has value equal to or exceeding € 1,000,000.00 and is intended for construction of individual dwellings of value also equal to or exceeding this amount, one is faced with situations in which the mere ownership of rights over the land reveals wealth corresponding to "the highest standards of Portuguese society". (https://caad.org.pt/tributario/decisoes/)[emphasis in original].

[3] On this question see Jorge Lopes de Sousa, Commentary on the Legal Framework for Tax Arbitration, in GUIDE TO TAX ARBITRATION, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, 2013, Almedina, pages 110-116).