Process: 406/2014-T

Date: January 26, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration case 406/2014-T addresses whether Stamp Duty under item 28 of the General Stamp Duty Table (TGIS) applies to land for construction with residential destination. The claimant, a construction company, challenged 2012-2013 stamp duty assessments on urban property classified as 'land for construction' after tacit rejection of gracious objections. Law 55-A/2012 introduced item 28 of TGIS, establishing stamp duty on ownership, usufruct, or superficies rights of urban properties with tax-assessed value (VPT) equal to or above €1,000,000. The central legal dispute concerns whether 'properties with residential use' encompasses only built residential properties or also includes undeveloped land designated for residential construction. The claimant argued that properties cannot simultaneously be residential and for construction under CIMI article 6, and that the 2014 State Budget amendment adding explicit reference to land for construction confirmed this interpretation. The Tax Administration contended that residential destination applies in property valuation through coefficients under CIMI article 45, making land for construction with residential purpose subject to item 28. The tribunal found the arbitration procedurally valid, accepting joinder of multiple years under RJAT article 3 due to identity of tax, factual circumstances, and legal principles. The case illustrates important interpretive questions about stamp duty scope on high-value properties and the relationship between property classification systems in CIMI and tax obligations under TGIS.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration
Case No. 406/2014 -T
Matter: Stamp Duty – item 28 of the General Stamp Duty Table

  1. REPORT

1.1. A, Society for Initiatives and Construction, SA, taxpayer no. …, submitted on 28/05/2014 a request for arbitral pronouncement, in which it petitions, namely, the declaration of illegality of the acts of assessment of Stamp Duty for the years 2012 and 2013, by virtue of the formation of the act of implied rejection of the gracious objections relating to the aforementioned years.

1.2. His Excellency the President of the Deontological Council of the Centre for Administrative Arbitration (CAAD) appointed on 18/07/2014 as arbitrator, Francisco Nicolau Domingos.

1.3. On 04/08/2014 the tribunal was constituted with a sole arbitrator.

1.4. In compliance with the provision of article 17, no. 1 of the RJAT, the Tax Administration (AT) was notified on 26/08/2014 to, if so wished, submit a reply and request the production of additional evidence.

1.5. On 06/10/2014 the AT submitted its reply and requested a waiver of the holding of the meeting described in article 18 of the RJAT in a separate petition.

1.6. The tribunal on 10/11/2014 invited the Claimant to state whether it intended the holding of the said meeting and to, in the event of a negative answer, have the parties, if so wished, submit their arguments.

1.7. Neither party submitted arguments.

1.8. The tribunal on 04/12/2014, in the absence of a request for the production of additional evidence and pursuant to the principle of free determination of evidence production measures and the tribunal's autonomy in the conduct of proceedings, determined the waiver of the meeting referred to in article 17, no. 1 of the RJAT.

1.9. On 14/01/2015 the tribunal ordered the attachment of the PAT by the AT to the case file.

1.10. And on that same day, scheduled the rendering of the arbitral decision for 26/01/2015.

  1. PRELIMINARY PROCEEDINGS

The cumulation of petitions underlying the request for arbitral pronouncement is admissible, inasmuch as it has as its object acts of assessment of the same tax, that of stamp duty, for the years 2012 and 2013. There is also identity between the factual matter and because the success of the petition depends on the interpretation of the same principles and rules of law, cf. article 3, no. 1 of the RJAT.

Accordingly, the proceedings do not suffer from nullities, no issues have been raised that would prevent consideration of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to know and decide the petition, and consequently the conditions are met for the final decision to be rendered.

  1. PARTIES' POSITIONS

There are two positions in confrontation, that of the Claimant, set out in the request for arbitral pronouncement, and that of the AT in its reply.

In summary:

The Claimant understands, namely, that:

a) With respect to the year 2012 "The aforementioned item no. 28, pursuant to the terms of article 6 of Law No. 55-A/2012, of 29 October, only applies to (i) Properties with residential use and (ii) Urban properties when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance.";

b) "The fact that the property owned by the Claimant does not have residential use, being the same intended for construction, a reality that excludes the application of item 28.1 as will be demonstrated hereinafter.";

c) "From the foregoing, it is clear that, pursuant to the terms established in article 6, no. 1 of the Code of the Municipal Tax on Real Property a property cannot simultaneously be residential and for construction, and must be intended for housing or intended for construction.";

d) "The property, such as the one now under analysis, which is intended for construction, cannot likewise be put to residential use.";

e) "And, there being no express reference in the law to land for construction, the interpreter applying the law should not include it in the interpretation that he makes of the legal concept, and should limit himself to the definition of the CIMI, that is, to taxation on residential properties as defined in no. 2 of article 6 of the CIMI."

f) "And, even if this were not to be understood, which by mere hypothesis is admitted, it is further stated that the equation of a property intended as land for construction with a property with residential use violates, from the outset, the spirit of the CIMI, inasmuch as the former have, pursuant to the terms of article 45 of the CIMI, their own rules regarding the calculation of the VPT.";

g) The amendment introduced by the State Budget Law for 2014 "...thus came to reinforce the interpretation of the Claimant, that is, the introduction of the expression in the legal norm, means unequivocally that it was not included in the previous wording.";

h) "...there is no culpable conduct on the part of the Claimant, which likewise prevents the assessment of compensatory interest...";

i) The tribunal should recognize "...the evident error attributable to the services in the assessment of the tax that gave rise to the institution of the enforcement proceedings, and consequently, to the presentation of bank guarantee which the Claimant presented".

On the other hand, the AT argues that:

a) "Law No. 55-A/2012, of 29/10/2012 amended article 1 of the CIS, and added item 28 to the TGIS.";

b) "With this legislative amendment, Stamp Duty would henceforth also apply to the ownership, usufruct or right of superficies of urban properties whose tax-assessed property value contained in the register, pursuant to the terms of the Code of the Municipal Tax on Real Property (CIMI), is equal to or greater than €1,000,000.00.";

c) "The notion of destination of the urban property is found in the part relating to the assessment of real property, which is well understood since the assessment of the real property (purpose) incorporates value to the real property, constituting a determining fact of distinction (coefficient) for purposes of assessment.";

d) "Thus, for purposes of determining the tax-assessed property value of land for construction it is clear that the application of the destination coefficient in the assessment is made, so that its consideration for purposes of applying item 28 of the TGIS cannot be ignored...";

e) "Contrary to what is advocated by the Claimant, the AT understands that the concept of 'properties with residential use', for purposes of the provision in item 28 of the TGIS, comprises both built properties and land for construction, foremost given the literal element of the rule";

f) "The mere constitution of a potential right of construction immediately increases the value of the real property in question, hence the rule contained in article 45 of the CIMI which mandates separation of the two parts of the land.";

g) "It should further be noted that taxation under the stamp duty tax complies with criteria of appropriateness, applying equally to all holders of real property with residential use of value exceeding €1,000,000.00, affecting the wealth embodied and manifested in the value of the real property".

  1. FACTS

4.1. FACTS CONSIDERED PROVEN

4.1.1. The Claimant is the owner of a real property to which corresponds the registration, Urban, Águas Livres.

4.1.2. The property (urban) is classified as "land for construction".

4.1.3. There is no construction on such property.

4.1.4. The Claimant filed on 31/10/2013 a gracious objection with respect to stamp duty assessments numbers … and …, relating to the years 2012 and 2013.

4.2. FACTS NOT CONSIDERED PROVEN

4.2.1. That the Claimant presented a bank guarantee to suspend the enforcement proceedings instituted for the collection of stamp duty for the years 2012 and 2013.

4.3. BASIS FOR THE FACTS CONSIDERED PROVEN

The facts found to be proven have their origin in the documents used for each of the alleged facts and whose authenticity was not called into question.

4.4. BASIS FOR THE FACTS NOT CONSIDERED PROVEN

The Claimant attached no document to prove that it had provided the said guarantee, when pursuant to the provision of article 10, no. 2, paragraph d) of the RJAT such burden rested solely with it. In this manner, the tribunal cannot find such fact to be proven.

  1. LAW

5.1. ILLEGALITY OF THE CHALLENGED ACTS

The first issue that the tribunal must determine consists in knowing what is the scope of application of item no. 28.1 of the TGIS in its wording as of the date of the tax facts. That is, it must be inquired whether land for construction falls within the scope of the provision as the AT argues or whether, on the contrary, they are excluded therefrom. It must also be decided whether the assessment of compensatory interest should subsist in the legal order and whether, lastly, the Claimant is entitled to compensation for the provision of an unwarranted guarantee.

To accomplish such a task, it is first necessary to seek the rule whose parts disagree as to its interpretation.

Accordingly, item 28 of the TGIS provides that the following are subject to taxation: "Ownership, usufruct or right of superficies of urban properties whose tax-assessed property value contained in the register, pursuant to the terms of the Code of the Municipal Tax on Real Property (CIMI), is equal to or greater than €1,000,000 – on the tax-assessed property value used for purposes of the IMI:

28.1 - For property with residential use - 1%..."[1].

Accordingly, it is necessary to examine the concept of "(urban) property with residential use" to which the rule under interpretation refers. Now, being unable to resolve the matter by resorting to the CIS, it is by force of the provision of article 67, no. 2 of the CIS necessary to apply the rules of the Code of the Municipal Tax on Real Property (CIMI) regarding the concept and types of urban properties.

Consequently, article 4 of the CIMI provides on the concept of urban property: "...those which should not be classified as rural...". And article 6, no. 1 continues: "Urban properties are divided into: a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Other". No. 2 provides that: "Residential, commercial, industrial or for services are buildings or constructions licensed as such or, in the absence of a license, that have as their normal destination each of these purposes.

Accordingly, for the classification of a property into each of the enumerated categories, what matters is the nature of the use, that is, the purpose to which it is intended.

Now, the stamp duty provision under analysis encompasses properties that are already limited to residential purposes, that is, those that have been given that destination[2]. But it is legitimate to pose the following question: and with respect to those properties (land for construction) with such destination or those in which the destination is unknown, do they fall under "properties with residential use"?

The answer to such a question cannot be anything but negative. Indeed, the literal tenor of the provision under analysis permits excluding from the scope of application those land for construction that have not materialized any type of use, inasmuch as they have not yet been applied or intended for residential purposes. In other words, it is not possible to classify them as "properties with residential use", since they do not yet have any use or other destination, except for construction of an unknown type[3].

Notwithstanding, it might be questioned: do land for construction that have not yet been applied for residential purposes but already have a determined right, such as in the case of a subdivision license, fall within the scope of item 28.1 of the TGIS? We believe not. In fact, article 6, no. 2 of the CIMI, subsidiarily applicable, points in the direction that an effective destination is necessary.

In fact, the legislator did not use the expression "residential properties", but rather "properties with residential use", that is, the property must already have effective destination to that purpose.

Now, such interpretive meaning becomes clear with the mobilization of a summary of the words of His Excellency the Secretary of State for Fiscal Affairs, when presenting and discussing in the Assembly of the Republic the proposed law[4], when he argued that such government proposal: i) aimed to create a special tax on high-value urban residential properties; ii) created special taxation on high-value properties intended for residence; and iii) the tax would apply to properties with a value equal to or greater than 1 million euros. Or, in other words, the category to which the legislator refers with the expression "properties with residential use" are "houses".

The same interpretive meaning is maintained, even if it is considered that in determining the tax-assessed property value (VPT) of urban properties classified as land for construction, one should take into account the use that the building authorized or planned for such use will have in order to ascertain the value of the building site area. This does not mean that land for construction should be classified as "properties with residential use", inasmuch as this destination refers in the economy of the CIMI to properties and constructions that can be inhabited[5].

Reverting such interpretive meaning to the present case, it must be stated that the land for construction that is the subject of these proceedings does not fall under the category of "properties with residential use" and, as such, the stamp duty assessments for 2012 and 2013 must be declared illegal.

Notwithstanding, such interpretation might be thought to be undermined by the entry into force of Law No. 83-C/2013, of 31 December (State Budget Law for 2014) in the segment in which it gave new wording to item 28.1 of the TGIS, to which now refers to the categories described in article 6 of the CIMI, that is, "residential property" and "land for construction". We understand that it does not, because as is sustained by counselor ISABEL MARQUES DA SILVA[6]: "... the legislator did not confer an interpretive character (...), merely makes unequivocal for the future that land for construction whose authorized or planned building, is for residential purposes are covered in the scope of item 28.1 of the General Stamp Duty Table". That is, nothing is concretized with respect to the acts performed under the previous wording and demonstrates another legislative choice with the reference to the types of urban property, i) residential and ii) land for construction. Accordingly, such legislative amendment in no way modifies our decision set forth in the previous paragraph.

For this summation of reasons, if the Claimant's property was inscribed in the property register as land for construction as of the date of the tax facts relating to the years 2012 and 2013, the scope provision under examination cannot be applicable to the case sub judice, under penalty of illegality. For which reason, the stamp duty assessments for 2012 and 2013 and the respective compensatory interest must be annulled, inasmuch as the latter are only due when there is an error attributable to the taxpayer. That is, in the case sub judice the Claimant bears no responsibility for the delay in the assessment.

5.2. RIGHT TO COMPENSATION FOR THE PROVISION OF AN UNWARRANTED GUARANTEE IN ENFORCEMENT PROCEEDINGS

Now, if the tribunal did not find the provision of a bank guarantee in the enforcement proceedings that may be pending for collection of the credits that the AT claims to hold to be proven, it cannot be declared in these proceedings the right to compensation for the provision of an unwarranted guarantee. Indeed, it was solely incumbent upon the Claimant to allege and prove the existence of the said guarantee. Not having done so, the AT is absolved as to this part.

  1. DECISION

For these reasons and with the basis described above, it is decided that the arbitral petition is found to be well-founded, with the consequent expurgation from the legal order of the acts that are the subject of the case file and the consequent compensatory interest.

On the other hand, the AT is absolved with respect to the petition for compensation for the provision of an unwarranted bank guarantee.

  1. VALUE OF THE CASE

The value of the case is fixed at €100,046.40 (€50,023.20 for the petition relating to compensation for an unwarranted guarantee – 297, no. 1 – final part- of the CPC), pursuant to the terms of article 97-A of the CPPT, applicable by force of the provision of article 29, no. 1, paragraphs a) and b) of the RJAT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs to be borne by the Claimant and the AT in the proportion of their success in the proceedings, in the amount of €3,060, cf. article 22, no. 4 of the RJAT and Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings.

Notify.

Lisbon, 26 January 2015

The sole arbitrator,

Francisco Nicolau Domingos

[1] In the wording in force as of the date of the tax facts.

[2] V. in this sense, decision of the Supreme Administrative Court, rendered within the scope of appeal 048/14, of 09/04/2014, in which counselor ISABEL MARQUES DA SILVA was the reporter; decision of the Supreme Administrative Court, rendered in appeal 046/14 of 14/05/2014, in which counselor ASCENSÃO LOPES was the reporter, and the arbitral decision rendered within the scope of case 53/2013-T, of 02/10/2013, in which counselor JORGE LOPES DE SOUSA assumed the function of arbitrator-president.

[3] V. decision rendered within the scope of case 53/2013-T, of 02/10/2013, in which counselor JORGE LOPES DE SOUSA assumed the function of arbitrator-president.

[4] Diary of the Assembly of the Republic, I Series, no. 9/XII – 2, of 11 October, p. 32.

[5] Decision of the Supreme Administrative Court, rendered within the scope of appeal 048/14, of 09/04/2014, in which counselor ISABEL MARQUES DA SILVA was the reporter.

[6] Within the scope of decision 048/14, of 09/04/2014 reported by her.

Frequently Asked Questions

Automatically Created

What is verba 28 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to residential properties?
Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) was introduced by Law 55-A/2012 of October 29, establishing annual Stamp Duty on ownership, usufruct, or superficies rights of urban properties with tax-assessed property value (VPT) equal to or greater than €1,000,000. According to the literal text and Tax Administration interpretation, it applies to properties with residential use (afetação habitacional), encompassing both built residential properties and land for construction with residential destination. The tax applies based on the property's classification under the Municipal Property Tax Code (CIMI), where residential destination is determined through valuation coefficients. The controversy centers on whether undeveloped land classified as 'land for construction' falls within 'residential use' when designated for future residential development, with taxpayers arguing the concept should be limited to existing residential buildings.
Can Stamp Tax (Imposto do Selo) liquidation acts from 2012 and 2013 be challenged through tax arbitration at CAAD?
Yes, Stamp Tax (Imposto do Selo) liquidation acts from 2012 and 2013 can be challenged through tax arbitration at CAAD, as demonstrated in case 406/2014-T. The procedure requires first filing a gracious objection (reclamação graciosa) with the Tax Administration against the stamp duty assessments. When the Tax Administration fails to respond within the legal timeframe, a tacit rejection (indeferimento tácito) is formed. Following this tacit rejection, the taxpayer may submit a request for arbitral pronouncement (pedido de pronúncia arbitral) to CAAD under the Tax Arbitration Legal Framework (RJAT). In this case, the claimant filed gracious objections on October 31, 2013, and subsequently submitted the arbitration request on May 28, 2014, after formation of tacit rejection. The CAAD tribunal constituted with a sole arbitrator has jurisdiction to review the legality of stamp duty assessments.
How does Law 55-A/2012 affect the application of Stamp Tax under verba 28 to properties with housing allocation?
Law 55-A/2012 of October 29 fundamentally amended the Stamp Tax Code (CIS) by modifying article 1 and adding item 28 to the General Stamp Duty Table (TGIS), creating a new annual tax on high-value urban properties. Article 6 of this law established that item 28 applies to properties with residential use (prédios com afetação habitacional) and to urban properties held by non-natural persons resident in blacklisted tax havens when the tax-assessed property value reaches or exceeds €1,000,000. The central interpretive dispute concerns whether 'properties with residential use' includes only built residential properties or also encompasses land for construction (terrenos para construção) with residential destination coefficient applied under CIMI article 45. Taxpayers argue the law should be interpreted restrictively to exclude undeveloped land, while the Tax Administration contends that residential allocation determined through CIMI valuation methodology brings such land within item 28's scope, with the 2014 State Budget amendment allegedly clarifying this broader interpretation.
What is the procedure for filing a tax arbitration claim (pronúncia arbitral) after a tacit rejection of a gracious complaint?
The procedure for filing a tax arbitration claim after tacit rejection of a gracious complaint follows a specific sequence under the RJAT (Tax Arbitration Legal Framework). First, the taxpayer must file a gracious objection (reclamação graciosa) with the Tax Administration challenging the tax assessment acts. If the Tax Administration fails to issue a decision within the statutory deadline, a tacit rejection (indeferimento tácito) is formed by operation of law. The taxpayer may then submit a request for arbitral pronouncement (pedido de pronúncia arbitral) to CAAD within the applicable limitation period. Once submitted, the CAAD President appoints an arbitrator from the approved roster. The tribunal is formally constituted, and pursuant to RJAT article 17(1), the Tax Administration is notified to submit a reply (resposta) and request additional evidence if desired. The parties may request or waive the hearing meeting under article 18, submit written arguments, and the tribunal determines evidence production measures autonomously. After administrative case file (PAT) attachment, the tribunal schedules and renders the arbitral decision within legal deadlines.
Under what conditions can multiple Stamp Tax liquidation claims be joined in a single CAAD arbitration process?
Multiple Stamp Tax liquidation claims can be joined (cumulação de pedidos) in a single CAAD arbitration process when three cumulative conditions under article 3, no. 1 of RJAT are satisfied: (1) the claims concern acts of assessment of the same tax, (2) there is identity of factual circumstances underlying the claims, and (3) the success of the claims depends on interpretation of the same legal principles and rules. In case 406/2014-T, the tribunal admitted joinder of stamp duty assessments for years 2012 and 2013 because all three requirements were met—both years involved the same tax (Imposto do Selo under item 28 TGIS), identical factual circumstances (ownership of the same urban property classified as land for construction with VPT above €1,000,000), and resolution depended on interpreting the same legal question (whether item 28 applies to land for construction with residential destination). This procedural economy allows efficient resolution of related tax disputes arising from continuing factual situations across multiple tax periods without requiring separate arbitration proceedings for each assessment year.