Process: 403/2016-T

Date: December 9, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration decision 403/2016-T addresses a fundamental dispute regarding Stamp Duty (Imposto do Selo) under item 28.1 of the General Stamp Tax Table (TGIS) for vertical property ownership structures. The claimant A... SA challenged 24 stamp duty assessments totaling €52,615.70 for tax year 2015, concerning an urban building containing 24 independent residential units not subject to the horizontal property regime. The central legal issue determines whether the 1% annual stamp duty rate applies to the total combined tax property value (VPT) of €5,261,570 for all units collectively, as assessed by the Tax Authority, or whether each residential division's individual VPT should constitute a separate taxable base. The property comprises 12 floors with 24 autonomous residential divisions, each with individual VPTs ranging from €79,500 to €246,730. The Tax Authority issued separate collection documents per unit but calculated tax using the aggregate building VPT, resulting in substantially higher assessments. The claimant requested annulment arguing violation of item 28.1 TGIS, plus reimbursement with compensatory and default interest. The arbitral tribunal confirmed jurisdiction under Article 2(1)(a) RJAT, accepted cumulation of claims under Article 3(1) RJAT given common factual and legal bases, and dispensed with oral hearings as positions were fully documented in written pleadings. This ruling has significant implications for multi-unit building owners under full ownership structures, as the interpretation determines whether stamp duty thresholds apply per autonomous unit or building-wide, creating potentially dramatic differences in tax liability and establishing precedent for vertical property taxation methodology.

Full Decision

ARBITRAL DECISION

I. Report

a) Parties and request for arbitral ruling

1. A..., SA, collective entity no. ..., with registered office at ..., no. ..., ...-... Lisbon (hereinafter referred to as Claimant), filed on 14.07.2016, pursuant to articles 2, no. 1, paragraph a) and 10 of Decree-Law no. 10/2011, of 20 January, as subsequently amended (hereinafter the Legal Framework for Tax Arbitration or RJAT), a request for arbitral ruling against the Tax and Customs Authority (hereinafter Respondent or AT), with a view to declaring the illegality of the acts of assessment of Stamp Duty (IS), item 28.1 of the General Table of Stamp Duty (TGIS), relating to the year 2015, the subject of collection documents with identification references nos. 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016... and 2016..., from which resulted a total collection value of €52,615.70.

b) Constitution of the Arbitral Tribunal

2. In accordance with articles 5, no. 2, paragraph a), 6, no. 1 and 11, no. 1, paragraph a) of the RJAT, the Ethics Council of this Administrative Arbitration Center (CAAD) appointed as arbitrator of the sole arbitral tribunal the undersigned, who accepted the office.

3. Pursuant to the provisions of paragraph c) of no. 1 and no. 8 of article 11 of the RJAT, as communicated by the President of the Ethics Council of the CAAD, the Sole Arbitral Tribunal was constituted on 04.10.2016.

c) Procedural history

4. In the request for arbitral ruling (hereinafter initial petition or PI), the Claimant seeks the declaration of illegality of twenty-four acts of assessment of Stamp Duty, item 28.1 of the TGIS, relating to the year 2015, the subject of collection documents with identification references nos. 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., with the indication of collection of €2,467.30 each, nos. 2016..., 2016..., 2016..., with the indication of collection of €824.90 each, and no. 2016..., with the indication of collection of €795.00, in the total amount of €52,615.70, requesting "the consequent annulment, with all legal consequences, as they violate the provisions contained in item no. 28.1 of the TGIS" and that "the respondent be ordered to reimburse the claimant the sums paid as stamp duty, item 28.1 of the TGIS, with reference to the year 2015, increased by default interest and compensatory interest".

5. The AT filed a reply requesting the dismissal of the request for arbitral ruling as unproven, and the maintenance in the legal order of the tax assessment acts challenged.

6. By order of 9.11.2016, the Sole Arbitral Tribunal, pursuant to the provisions of paragraph c) of article 16 and article 19 of the RJAT, decided that it was not necessary to hold the meeting referred to in article 18 of the RJAT, as the circumstances and purposes provided for in the various paragraphs of no. 1 of this provision were not present. It further decided, in accordance with no. 2 of article 18 of the RJAT, to dispense with the production of oral submissions, as the positions of the parties were fully set forth in their respective pleadings.

The deadline for rendering the arbitral decision was set for 9 December 2016.

d) Issue to be decided

7. The issue to be resolved on the merits of the dispute concerning the claim for declaration of illegality of the challenged IS assessments consists in determining whether, for the purposes of the incidence of item 28.1 of the TGIS, in cases of a property in full ownership with storeys or divisions susceptible to independent use, regard should be had to the total tax property value (VPT) of the property resulting from the sum of the tax property values of the various storeys or divisions with residential allocation, as underlies the challenged assessments, or whether instead regard should be had to the individual tax property value of each storey or division with residential allocation, as invoked by the Claimant in its PI, with consequent violation of law, by error in the assumptions of fact and law, of the disputed assessments.

II. Preliminary Determination

8. The Tribunal was regularly constituted and is competent to examine the thema decidendum indicated (article 2, no. 1, paragraph a) of the RJAT), the parties enjoy legal personality and capacity, as well as standing (articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March) and are duly represented.

9. The cumulation of claims relating to the challenged assessments is admissible in light of article 3, no. 1 of the RJAT, given that the merits of the claims depend on the examination of the same factual circumstances and the interpretation and application of the same legal rules, namely the normativity resulting from item 28.1 of the TGIS and the legal provisions of the Stamp Duty Code (CIS) which frame it.

10. The case does not suffer from any nullities and no issues have been raised that impede the examination of the merits of the case, so it is appropriate to render a final decision on the substance of the dispute.

III. Decision on the Factual Matters and Respective Grounds

11. Having examined the documentary evidence produced, the Tribunal finds proven, with relevance for the decision of the case, the following facts:

I. The Claimant is the owner of an urban property, not subject to the horizontal property regime, situated on ..., no. ..., ..., Loures, registered in the urban property register of the Union of Parishes of ... and ..., municipality of Loures, under article ... (cf. the urban property register attached at pages 1 to 18 of the tax administrative proceeding, hereinafter PA, and as document no. 1 - attached to the PI).

II. The aforementioned urban property constitutes a "property in full ownership with storeys or divisions susceptible to independent use", with the "total tax property value" of €5,261,570.00, being composed of 12 floors, with 24 divisions with independent use, allocated to residential purposes, with the following individual tax property values (as stated in the aforementioned property register):

| RC D | 82,490.00€ | 2º D | 246,730.00€ | 5º D | 246,730.00€ | 8º D | 246,730.00€ |
| RC E | 82,490.00€ | 2º E | 246,730.00€ | 5º E | 246,730.00€ | 8º E | 246,730.00€ |
| RC F | 82,490.00€ | 3º D | 246,730.00€ | 6º D | 246,730.00€ | 9º D | 246,730.00€ |
| RC P | 79,500.00€ | 3º E | 246,730.00€ | 6º E | 246,730.00€ | 9º E | 246,730.00€ |
| 1º D | 246,730.00€ | 4º D | 246,730.00€ | 7º D | 246,730.00€ | 10º D | 246,730.00€ |
| 1º E | 246,730.00€ | 4º E | 246,730.00€ | 7º E | 246,730.00€ | 10º E | 246,730.00€ |

III. With reference to the year 2015, assessments of Stamp Duty were made on 05.04.2016, which are the subject of collection documents with identification references nos. 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., with the indication, each, of collection of €2,467.30 and of first instalment of €822.44, nos. 2016..., 2016..., 2016..., with the indication, each, of collection of €824.90 and of first instalment of €274.98, and no. 2016..., with the indication of collection of €795.00 and of first instalment of €265.00, relating to each of the twenty-four divisions susceptible to independent use intended for residential purposes identified above in II, taking as the basis the total of the tax property value of the twenty-four divisions with residential allocation, which corresponds to €5,261,570.00 through the application of the 1% rate established by item 28.1 of the TGIS to the tax property value of each of the divisions, all as set forth in documents attached as documents nos. 2 to 25 to the PI, which are hereby reproduced.

IV. In all the above-identified documents appears the mention: "Tax Property Value of the property - total subject to tax: 5,261,570".

V. The Claimant proceeded on 22.4.2016 to payment of the first instalment of the tax resulting from the assessments which are the subject of the documents identified in III, in the total amount of €17,538.74, as per copies of queries of collection notes at pages 19 to 90 of the PA and proof of the payment operation to the State attached as document no. 26 to the PI.

12. There exists no other factual matter relevant to the decision on the merits in light of the possible legal solutions that should be considered as unproven.

13. The Tribunal's conviction regarding the factual matters determined to be proven resulted from the examination of the PA and the documents not challenged, which are in the case file, as specified in each of the points of the evidence set forth above, there being, in any case, no dispute between the parties on factual matters.

IV. On the Law

a) Submissions of the parties

14. To support its request for declaration of illegality of the disputed assessments, the Claimant, in its PI, alleges, in essence, the following:

i) it is illegal the understanding of the AT in considering, in relation to a property in vertical ownership, that the criterion for the determination of stamp duty under item 28 of the TGIS is the global VPT of the property, regardless of whether it is composed of divisions intended for residential purposes, for independent use (articles 13 and 15 of the PI);

ii) "The subjection to stamp duty contained in item no. 28.1 of the TGIS is determined by the conjunction of two facts: the residential allocation and the VPT recorded in the register equal to or exceeding €1,000,000.00", so that "in the case of properties with the characteristics already described, the subjection to stamp duty is determined, not by the VPT of the properties, but by the VPT attributed to each of those storeys or divisions susceptible to independent use" (articles 16 and 17 of the PI);

iii) it is emphasized in the arbitral decision rendered in proceedings no. 50/2013-T that: "for the legislator the situation of the property in vertical ownership or in horizontal ownership was not relevant, as no reference or distinction is made between them. What is relevant is the material truth underlying its existence as an urban property and its use"; "considering that the registration in the register of real property in vertical ownership, constituted by different parts, storeys or divisions with independent use, pursuant to the CIMI, follows the same registration rules of real property constituted in horizontal ownership, and their respective IMI, as well as the new IS, are assessed individually in relation to each of the parts, it offers no doubt that the legal criterion for defining the incidence of the new tax must be the same" (articles 20 and 32 of the PI);

iv) "there would only be occasion for the incidence of the new stamp duty if any of the parts, storeys or divisions with independent use presented a VPT exceeding €1,000,000", thus the AT cannot "consider as the reference value for the incidence of the new duty the total value of the property", so the "criteria adopted by the AT violate the principles of legality and tax equality, as well as that of the prevalence of material truth over formal legal reality" (articles 24 to 26 of the PI);

15. For its part, in its reply, the AT sustains, in essence, the following:

i) what is at issue is an assessment "that results from the direct application of the legal norm, which translates into objective elements without any subjective or discretionary assessment" (article 5 of the reply);

ii) It follows from the concept of property defined in article 2, nos. 1 and 4 of the CIMI that "a 'property in full ownership with storeys or divisions susceptible to independent use' is, unequivocally, different from a real property in the horizontal property regime, constituted by autonomous portions, that is, several properties" (article 8 of the reply);

iii) Article 12 of the CIMI establishes the concept of property register, and its no. 3 respects, exclusively, the manner of recording property register data (article 9 of the reply);

iv) "although the assessment of IS, in the situations provided for in item no. 28.1 of the TGIS, is carried out in accordance with the rules of the CIMI, the truth is that the legislator reserves the aspects that require the necessary adaptations, namely those in which, as is the case with properties in full ownership, even though with storeys or divisions susceptible to independent use (even though the IMI is assessed in relation to each part susceptible to independent use) for IS purposes the property in its entirety is relevant because the divisions susceptible to independent use are not regarded as property, but only the autonomous portions in the horizontal ownership regime, as provided in no. 4 of article 2 of the CIMI" (article 19 of the reply).

v) "In accordance with the rules of the CIMI, specifically article 113, no. 1, the assessment is carried out annually, based on the tax property values of the properties and in relation to the taxpayers who are listed in the registers on 31 December of the year to which it relates", so that: "As the property is in the full ownership regime (not possessing autonomous portions, to which tax law attributes the qualification of property, because from the notion of property in no. 4 of article 2 of the CIMI it follows that only the autonomous portions of property in the horizontal ownership regime are regarded as properties), it is the global VPT of the property that must, therefore, be relevant" (articles 24 and 25 of the reply);

vi) "the provision of item 28.1 of the TGIS does not constitute any violation of the principle of equality, there being no discrimination in the taxation of properties constituted in horizontal ownership and properties in full ownership with storeys or divisions susceptible to independent use, or between properties with residential allocation and properties with other allocations", because "horizontal ownership and vertical ownership are differentiated legal institutions", in that "the constitution in horizontal ownership determines the division/separation of full ownership and the independence or autonomy of each of the portions that constitute it, for all legal purposes, pursuant to no. 4 of article 2 of the CIMI and articles 1414 and following of the CC, whereas a property in full ownership constitutes, for all purposes, a single tax and legal reality" (articles 27, 28 and 39 of the reply);

vii) it was well decided in the arbitral decision rendered in proceedings no. 668/2015-T that: "From a literal interpretation of article 2 of the CIMI, there will be no doubt that parts of properties that are not in horizontal ownership do not integrate, for IMI purposes, the concept of property" and "Consequently, if the parts of properties, for IMI purposes, are not properties, then they will not be for IS purposes either. Therefore, the tax fact is the ownership of the property as a whole, as follows from the concept contained in article 2 of the CIMI" (article 48 of the reply).

16. Having set forth the arguments of the parties, it is necessary to examine and decide, for which it is convenient to begin by setting out the relevant legal framework.

b) Legal framework

17. The legal framework immediately relevant to the decision concerns item no. 28.1 of the TGIS, which was introduced by article 4 of Law no. 55-A/2012, of 29.10, with the wording determined by Law no. 83-C/2013, of 31.12, the content of which is as follows:

"28 - Ownership, usufruct or right of surface of urban properties whose tax property value recorded in the register, pursuant to the Real Estate Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 - on the tax property value used for IMI purposes:

28.1 - Per residential property or per land for construction whose authorized or planned construction is for residential purposes, pursuant to the provisions of the Real Estate Tax Code - 1%".

18. Besides this directly applicable normative proposition, it is also relevant, in hermeneutic terms, to consider the provisions of the following articles:

- in no. 7 of article 23 of the CIS, pursuant to which: "When the tax is due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI";

- in no. 5 of article 44 of the CIS, according to which: "When there is occasion to assess the tax referred to in item no. 28 of the General Table, the tax is paid in the deadlines, terms and conditions defined in article 120 of the CIMI";

in no. 5 of article 46 of the CIS, pursuant to which: "When there is occasion to assess the tax referred to in item no. 28 of the General Table, the collection document is issued in the deadlines, terms and conditions defined in article 119 of the CIMI, with the necessary adaptations";

- in no. 2 of article 67 of the CIS, according to which: "To matters not regulated in this Code concerning item no. 28 of the General Table, the provisions of the CIMI shall apply, on a subsidiary basis".

19. Given the references made by the articles cited in the preceding point to the rules contained in the Real Estate Tax Code (CIMI), as well as in light of the submissions of the parties in their pleadings, it is also of interest to bear in mind the following provisions of the CIMI, in the wording applicable ratione temporis (before the amendments made by Law no. 7-A/2016, of 30.03 and Decree-Law no. 41/2016, of 1.8):

- no. 4 of article 2 of the CIMI: "For the purposes of this tax, each autonomous portion, in the horizontal ownership regime, is regarded as constituting a property";

- no. 3 of article 12 of the CIMI: "Each storey or part of property susceptible to independent use is considered separately in the property register entry which also determines its respective tax property value";

- article 92 of the CIMI, whose nos. 1, 2 and 3 establish, respectively, as follows: "Each building in horizontal ownership regime has only one entry in the register"; "In the generic description of the building, mention shall be made of the fact that it is in horizontal ownership regime"; "Each of the autonomous portions is described in detail and individualized by the uppercase letter which corresponds to it according to alphabetical order";

- no. 1 of article 119 of the CIMI which establishes that: "The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month preceding that of payment, the competent collection document, with discrimination of the properties, their parts susceptible to independent use, respective tax property value and the tax collected attributable to each municipality of the location of the properties".

c) Assessment of the Tribunal

20. The resolution of the dispute that is the subject of the present proceedings, in light of the thema decidendum under examination (see above no. 7), depends on the definition of the "tax property value recorded in the register" "equal to or exceeding €1,000,000" "per residential property" that should be applicable in cases of properties in full ownership with storeys or divisions susceptible to independent use, which evidently implies the proper interpretation of the norm of objective incidence (cf. article 1, no. 1 of the CIS) contained in item 28.1 of the TGIS, set forth above, so as to establish, on the basis of the hermeneutic guidelines resulting from article 11 of the General Tax Law (LGT) and article 9 of the Civil Code, the exact meaning and scope of the aforementioned normative proposition in relation to the case sub judice.

21. It is well known that the interpretation and application of item no. 28.1 of the TGIS in relation to properties in the so-called "vertical ownership" situation has already been the subject of numerous arbitral decisions in this CAAD (as shown by the invocation of decisions of arbitral tribunals made by the parties in their pleadings – see above nos. 14, iii) and 15, vii)), as well as by the case law of the Supreme Administrative Court (see first the judgment of 09.09.2015, proceedings no. 047/15, which followed very closely the arbitral decision rendered in proceedings no. 724/2014-T, that judgment being thereafter followed unanimously, for example by the judgments of 2.3.2016, proceedings no. 01354/15, of 27.04.2016, proceedings no. 1534/15, of 4.5.2016, proceedings no. 0166/16, of 25.05.2006, proceedings no. 1344/15), so this is a matter whose normative contours are perfectly delineated, the plausible solutions of the legal issue that is the subject of dispute in the discussion of the case being thus well defined.

22. Well, this Tribunal understands, as set forth in the arbitral decisions rendered in proceedings nos. 451/2014-T and 518/2014-T, whose essential grounds it continues to subscribe to, that the hermeneutic solution that should be considered valid for properties in full ownership with storeys or divisions susceptible to independent use is that the incidence of stamp duty pursuant to item no. 28.1 of the TGIS is not determined by reference to the tax property value resulting from the sum of the individualized tax property value of the storeys or divisions susceptible to independent use with residential allocation, but rather in accordance with the individualized tax property value of each of those storeys or divisions with residential allocation. To cite the formulation that the case law of the Supreme Administrative Court came to establish (see the judgment of 09.09.2015, proceedings no. 047/15): "When a property constituted in vertical ownership is at issue, the incidence of IS must be determined, not by the VPT resulting from the sum of the VPT of all divisions or storeys susceptible to independent use (individualized in the property register entry), but by the VPT attributed to each of those storeys or divisions intended for residential purposes".

23. Naturally, the substantiation of the hermeneutic assessment thus indicated requires the proper specification of the legal reasons that support it (cf. articles 123 and 125, no. 1 of the Code of Tax Procedure and Process (CPPT), article 607, no. 3 of the Code of Civil Procedure (CPC), applicable ex vi article 29, no. 1, paragraphs a), c) and e) of the RJAT), which is now to be carried out.

24. The crucial point that should be highlighted, having regard to the literal element, a decisive vector for the establishment of the "legislative intent", even though the interpretation should not be confined to the legal text alone (articles 9, no. 1 of the Civil Code and 11, no. 1 of the LGT), concerns the references contained in item 28 of the TGIS to "urban properties whose tax property value recorded in the register, pursuant to the Real Estate Tax Code (CIMI), is equal to or exceeding (euro) 1,000,000" and to "tax property value used for IMI purposes".

25. By virtue of these formulations, both as to the objective incidence, with the reference to the "tax property value recorded in the register, pursuant to the Real Estate Tax Code", and as to the establishment of the taxable matter, with the reference to the "tax property value used for IMI purposes", the regulatory content of item no. 28 of the TGIS is based on a reference to the regulation of the tax property value that is established in the CIMI.

26. This is a legislative technique that characterizes incisively the functioning of this item no. 28 of the TGIS, as results from the legislator having even determined, in a generic manner, that "to matters not regulated in this Code concerning item no. 28 of the General Table, the provisions of the CIMI shall apply, on a subsidiary basis" (no. 2 of article 67 of the CIS), as well as from the verification, in various articles of the CIS concerning this item, of specific references to provisions of the CIMI (cf. articles 2, no. 4, 5, no. 1, paragraph u), 23, no. 7, 44, no. 5, 46, no. 5 and 49, no. 3 of the CIMI).

27. Now, having regard to the references contained in item no. 28.1 of the TGIS to the regulation established by the CIMI, when one considers the legal and tax framework of urban properties in full ownership with storeys or parts susceptible to independent use, it is indispensable to take into account the provision set forth in the above cited article 12, no. 3 of the CIMI, pursuant to which: "Each storey or part of property susceptible to independent use is considered separately in the property register entry which also determines its respective tax property value".

28. From this provision of the CIMI it follows that the storeys or parts of property susceptible to independent use possess a specific and proper tax property value, which is the subject of autonomous entry in the property register – this is precisely what occurs with the property at issue in the present proceedings as stated in the property register report set forth in point no. II of the evidence.

29. In these terms, the CIMI expressly provides for the autonomization, for IMI purposes, of the storeys or parts of property susceptible to independent use, which, although integrated in the same property register entry, are the subject of separate and autonomous property register entry and of distinct and autonomous tax property value (as results from the cited no. 3 of article 12 of the CIMI). It should be noted that the relevance of this autonomization of the tax property values of the storeys or parts of property susceptible to independent use is to such an extent assumed by the legislator of the CIMI that a complaint is specifically provided for as a ground for complaint regarding the incorrectness of property register entries the "non-discrimination of the tax property value of urban properties by storeys or divisions of autonomous use" (paragraph h) of no. 3 of article 130 of the CIMI).

30. Well then, given that item no. 28.1 of the TGIS establishes, pursuant to the references it incorporates, that in the taxation of the right of ownership, usufruct or surface right over urban properties with residential allocation regard is had, for incidence purposes, to "the tax property value recorded in the register, pursuant to the Real Estate Tax Code", and, for taxable matter purposes, to "the tax property value used for IMI purposes", then, in urban properties in full ownership with storeys or divisions susceptible to independent use, one cannot fail to take into account the proper tax property value of each storey, in accordance with the provision in no. 3 of article 12 of the CIMI, because that is both the tax property value recorded in the register pursuant to the CIMI and the tax property value used for IMI purposes.

31. In this consequence, and in this way the systematic element of interpretation is invoked, article 119, no. 1 of the CIMI, applicable by virtue of no. 5 of article 46 of the CIS, establishes that the collection documents for stamp duty discrimination of the storeys or parts of property with independent use, referring in individualized terms to the parts susceptible to autonomous use and not to the property as a single whole.

32. Thus, given that the parts of a property in full ownership for independent use with residential allocation are the subject of separate entry in the property register, possess proper tax property value recorded in the register and involve the assessment and issue of collection documents in an individualized manner, all as determined by the solutions of the CIMI (respective articles 12, no. 3 and 119, no. 1), the same must apply to the IS of item no. 28 of the TGIS, given the express reference, made in this item (not even providing the traditional caveat "with the necessary adaptations"), to the provisions of the CIMI regarding the tax property value recorded in the register and the tax property value used for IMI purposes.

33. Against this, it is not considered that the argument presented by the Respondent (see above nos. 15, iv) and v)) that, for IS purposes, the property as a whole is relevant, because the divisions susceptible to independent use are not regarded as property, but only the autonomous portions in the horizontal ownership regime, as provided in no. 4 of article 2 of the CIMI, is well-founded. Because, while it is true that item no. 28.1 of the TGIS refers to urban properties and, by virtue of the above cited article 2, no. 4 of the CIMI, only autonomous portions in horizontal ownership regime are qualified as properties for IMI purposes, it is equally beyond question that the legislator of item no. 28.1 of the TGIS constructed the tax incidence plane and the determination of the taxable matter on the basis of the tax property value that is used for IMI purposes, and, as mentioned above, pursuant to article 12, no. 3 of the CIMI, with respect to storeys or parts of property susceptible to independent use, the VPT used is the individual tax property value of each storey or part of property. Whence the application of item no. 28.1 of the TGIS requires, to resort to a formula already cited that is adopted in the CIMI itself (see paragraph h) of no. 3 of article 130 of the CIMI), the "discrimination of the tax property value of urban properties by storeys or divisions of autonomous use".

34. It is considered, furthermore, that the individualized consideration of the storeys or parts of property susceptible to independent use and the respective VPT is the solution that best accords with the objectives that appear to have presided over the historical legislator of the stamp duty of item 28.1 of the TGIS, at least having regard to the available (albeit sparse) elements of preparatory works concerning Bill no. 96/XII/2ª that formed the basis of Law no. 55-A/2012, of 29 October.

35. Because in the general discussion (see DAR, I Series, no. 9/XII/2, of 11/10/2012, p. 32) of this Bill, the Secretary of State for Tax Affairs, in representation of the proposing Government, pronouncing on the "creation of a special tax to tax urban residential properties of higher value" stated the following: "First, the Government proposes the creation of a special tax on urban residential properties of higher value. This is the first time that Portugal has created a special tax on high-value properties intended for residential purposes. This tax will be 0.5% to 0.8% in 2012, and 1%, in 2013, and will apply to houses of value equal to or exceeding 1 million euros. With the creation of this additional tax the fiscal burden required of these owners will be significantly increased in 2012 and 2013".

36. Now, the simultaneous use, with synonymous value, of the formulations "urban residential properties of higher value", "high-value properties intended for residential purposes" and "houses of value equal to or exceeding 1 million euros" seems to indicate that the aim was to target high-value residential locations. Indeed, the socially typical meaning of "house" is that of a place or residential unit, so it can be inferred that the legislator had in view residential units, whether they be sole properties, autonomous portions or independent storeys or divisions. In this way, the incidence for purposes of item no. 28.1 of the TGIS and the assessment of the "tax property value recorded in the register" "equal to or exceeding €1,000,000" would be determined by the particular consideration of each "residence", in order to tax the "luxury houses" (properties, dwellings, apartments) that the legislator appears to have had in view for its stated objective of "effective distribution of the necessary sacrifices for compliance with the adjustment program".

37. Precisely, in a property with independent storeys or divisions these are the residential units, not the property as a whole.

38. It is further added that it is considered that this interpretation of item no. 28.1 of the TGIS, pursuant to which, in the case of a property in full ownership with storeys or divisions susceptible to independent use, regard should be had to the proper tax property value of each storey or division with residential allocation recorded in the register, is the one that best accords with the principles of equality and contributive capacity (cf. articles 13 and 104, no. 3 of the CRP), and which therefore best suits the ratio legis that appears to have presided over the creation of this item of the TGIS for taxation in IS of – and only of – "high-value properties intended for residential purposes".

39. Because, for the purposes of the regulatory logic peculiar to the CIMI and, therefore, this item no. 28.1 of the TGIS, having regard to the legal reference to that diploma (see above nos. 25 and 26), it is beyond question an equation of legal and tax equivalence of properties in full ownership or vertical ownership, with independent storeys, with properties in horizontal ownership, with autonomous portions, as is demonstrated by the following: i) the rules for registration in Model Declaration 1 approved by Ordinance no. 1282/2003, of 13.11 – table V lines 49 and 50 and Annex II – involve completion in identical terms of properties in full ownership with storeys or divisions susceptible to independent use and properties subject to the horizontal ownership regime; ii) proper tax property values are attributed to each part susceptible to independent use of property in full ownership in the same manner in which this occurs for each autonomous portion of property in horizontal ownership regime (articles 12, no. 3 and 93 of the CIMI); iii) they are the subject of individualized discrimination in the competent collection documents of the parts of properties susceptible to independent use in the same terms in which this occurs with autonomous portions (articles 119, no. 1 and 2, no. 4 of the CIMI).

40. In these terms, given that it is the CIMI itself, to which, in general terms, remits the regulation relating to item no. 28 of the TGIS (see above nos. 25 and 26), that establishes the equation of the situation of the parts of properties susceptible to independent use with autonomous portions, the normative sense attributed above to item no. 28.1 of the TGIS is the one that most perfectly complies with the principle of equality, because, it must be recognized, from a perspective of contributive capacity for purposes of the patrimonial taxation at issue, there is no relevant difference between the ownership of a property with independent units with certain proper tax property values and a property in horizontal ownership with autonomous portions with the same proper tax property values.

40. It is understood, in sum, in light of the foregoing, that, with respect to properties in full ownership with storeys or divisions susceptible to independent use, for the purposes of applying item no. 28.1 of the TGIS, regard should be had exclusively to the tax property value recorded in the register that is proper to each storey or division with residential allocation, so there is occasion for the incidence of the tax only if any of the parts or divisions with independent use for residential purposes possesses a VPT equal to or exceeding €1,000,000.00.

d) Application to the case sub judice

41. It is necessary now to apply to the case sub judice the solution indicated regarding the interpretation of item 28.1 of the TGIS, establishing the dialogue between the proven facts and the relevant Law.

42. To this effect, in light of the factuality determined to be proven in no. II of the evidence, it is verified that none of the storeys of independent use with residential allocation of the property identified in no. I of the same evidence possesses a tax property value equal to or exceeding €1,000,000.00.

43. In these terms, since the tax property value of each of the indicated storeys of independent use with residential allocation is less than the value provided for in item no. 28 of the TGIS, it follows that such storeys do not come within the tax incidence norm contained in this item, so the disputed assessments are vitiated by illegality, by error on the assumptions of law, which implies the declaration of their illegality and consequent annulment pursuant to article 163, no. 1 of the Code of Administrative Procedure, which is decided.

e) On compensatory interest

44. The Claimant further petitions the ordering of the AT to reimburse the tax paid unduly in the amount, concerning the first instalment, of €17,538.74 (see fact determined to be proven in no. V of the evidence), as well as the respective compensatory interest.

45. Article 24, paragraph b) of the RJAT provides that the arbitral decision on the merits of the claim to which no appeal or challenge may be brought binds the tax administration as from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the period provided for the spontaneous execution of sentences of tax courts, re-establish the situation that would exist if the tax act which is the subject of the arbitral decision had not been taken, adopting the acts and operations necessary to that effect, which must be understood, in accordance with article 100 of the LGT, applicable ex vi paragraph a) of no. 1 of article 29 of the RJAT, as encompassing the payment of compensatory interest, in consonance, furthermore, with the provision in no. 5 of this same article 24 of the RJAT.

46. Article 43, no. 1 of the LGT determines that "compensatory interest is due when it is determined, in gracious reclamation or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount exceeding the legally due", and article 61, no. 4 of the CPPT establishes that "if the decision that recognized the right to compensatory interest is judicial, the deadline for payment is counted from the beginning of the deadline for its spontaneous execution".

47. Given that, in the case under examination, there is illegality of the disputed assessments, by error in the assumptions of Law, which is attributable to the Tax Administration, which, on its own initiative, in the assessments made, proceeded to the incorrect interpretation and application to the case of the provision contained in item 28.1 of the TGIS, the Claimant is entitled, in accordance with articles 24, no. 1, paragraph b) of the RJAT and 100 of the LGT, to the reimbursement of the tax payments made in excess in the amount of €17,538.74, and to compensatory interest, pursuant to article 43, no. 1 of the LGT, calculated on the indicated amount from 22.4.2016 (cf. fact proven under no. V), at the rate resulting from no. 4 of article 43 of the LGT, until full reimbursement of the amount paid.

V. Decision

In view of the foregoing, the decision is as follows:

i) upholding the claim filed in the present tax arbitration proceedings and, as a consequence, declaring illegal and annulling the assessments of Stamp Duty reflected in the collection documents with identification references nos. 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016... and 2016..., in the total amount of €52,615.70;

ii) upholding the claim ordering the Tax and Customs Authority to reimburse to the Claimant the value of the tax unduly paid, plus compensatory interest in accordance with the law, from the date on which payment was made until the date of its full reimbursement;

iii) condemning the AT in the costs of the proceedings.

VI. Value of the case

In accordance with the provisions of article 306, nos. 1 and 2 of the Code of Civil Procedure, article 97-A, no. 1, paragraph a), and no. 3 of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a), c) and e) of no. 1 of article 29 of the RJAT and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), the value of the proceedings is fixed at €52,615.70, which constitutes the total amount of the tax collected resulting from the assessments whose annulment was requested.

VII. Costs

In accordance with the provisions of articles 12, no. 2, and 22, no. 4, both of the RJAT, and article 4, no. 4 of the RCPAT, the value of the arbitration fee is fixed at €2,142.00, in accordance with Table I of the aforementioned Regulation, at the charge of the Respondent, given the merits of the claim for annulment of the tax acts which are the subject of the proceedings.

Let it be notified.

Lisbon, 9 December 2016.

The Arbitrator

(João Menezes Leitão)

[1] The orthography resulting from the Portuguese Language Orthographic Agreement of 1990 is followed, having been updated, accordingly, the spelling contained in the citations made.

[2] This bill, entitled "Introduces amendments to the Code of Income Tax on Natural Persons, to the Code of Income Tax on Legal Persons, to the Stamp Duty Code and to the General Tax Law" can be consulted at: http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245.

[3] Also available at: http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245.

[4] The Preamble of Bill no. 96/XII/2ª is cited.

[5] The Claimant also makes reference to default interest, but it is supposed that this will be a matter of formal language, because no default on the part of the Respondent can be spoken of prior to the passage of the decision of the present arbitration proceedings.

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) and how does it apply to vertical property?
Verba 28.1 of the TGIS imposes an annual 1% stamp duty on urban properties with residential allocation. For vertical property—buildings in full ownership with multiple floors or divisions capable of independent use but not under horizontal property regime—the key interpretative issue concerns the tax base determination. The dispute centers on whether the tax applies to each autonomous residential unit's individual tax property value (VPT) separately or to the total combined VPT of all residential units within the building. This distinction significantly affects both applicable rate thresholds and total tax liability, making it crucial for properties with multiple independent residential divisions under unified ownership.
Can stamp tax (Imposto do Selo) liquidations on vertical property buildings be challenged through tax arbitration at CAAD?
Yes, stamp duty assessments on vertical property are subject to CAAD arbitration under Article 2(1)(a) of Decree-Law 10/2011 (RJAT), which grants jurisdiction over disputes concerning legality of tax acts including Imposto do Selo. The tribunal confirms competence to examine challenges to IS assessments under item 28.1 TGIS. Article 3(1) RJAT permits cumulation of multiple related claims when they depend on identical factual circumstances and legal interpretation, allowing taxpayers to challenge multiple assessment acts affecting the same property in one efficient proceeding rather than requiring separate litigation for each collection document.
What legal grounds justify the annulment of Imposto do Selo liquidations under Verba 28.1 for vertical property?
The primary legal ground is error in determining the tax base (error in assumptions of fact and law). Taxpayers argue the Tax Authority incorrectly applies item 28.1 TGIS by using aggregate VPT of all residential units rather than treating each autonomous division as a separate taxable subject with its own VPT. Additional grounds include violation of legality principle requiring strict interpretation of tax incidence norms, misapplication of Stamp Duty Code (CIS) provisions framing item 28.1, and potential unconstitutionality if tax treatment differs unjustifiably from horizontal property regimes where each unit is independently assessed.
Are property owners entitled to compensatory and late-payment interest after an unlawful stamp tax liquidation is annulled?
Yes, property owners who paid unlawful stamp duty are entitled to reimbursement plus compensatory interest (juros compensatórios) and default interest (juros de mora). This right derives from general tax law principles requiring the State to restore taxpayers to their original position following annulment of illegal tax acts. Compensatory interest compensates for undue State retention of funds while default interest penalizes delayed payment. The claim must be explicitly requested, as demonstrated here where the claimant sought reimbursement increased by both interest types, with applicable rates and periods governed by the General Tax Law (LGT) and Stamp Duty Code provisions.
How does CAAD arbitral procedure work for disputes involving multiple stamp tax liquidation acts on the same property?
CAAD permits cumulative challenge of multiple related tax acts under Article 3(1) RJAT when claims depend on identical factual circumstances and legal interpretation. Here, 24 separate assessments were challenged together as all involved the same property and same legal question regarding item 28.1 TGIS application. The procedure includes: (1) filing arbitration request identifying all challenged acts; (2) arbitrator appointment by Ethics Council; (3) tribunal constitution; (4) Tax Authority reply; (5) optional hearing phase, dispensable if unnecessary; and (6) decision within statutory deadline. This consolidated approach ensures efficiency and consistent resolution of related disputes.