Process: 407/2016-T

Date: December 13, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 407/2016-T addressed the application of Item 28.1 of the General Table of Stamp Tax (Tabela Geral do Imposto do Selo) to properties held in full ownership with multiple independent units. Four co-owners challenged a €12,528.72 Stamp Tax assessment for 2015, arguing that each floor or independent unit should be taxed separately based on its individual tax-assessed property value (all below €1,000,000), rather than the aggregate property value exceeding €1,000,000. The petitioners contended that, similar to Municipal Property Tax (IMI), each independent unit should constitute a separate taxable object, and that taxation based on total value violated constitutional equality principles by treating vertical property differently from horizontal ownership regimes. The Tax Authority (AT) defended the assessment, emphasizing the critical legal distinction between full ownership properties with independent units and horizontal ownership regimes. Under Article 2(4) of the IMI Code, only autonomous units under horizontal ownership qualify as separate properties; full ownership properties, regardless of having divisions capable of independent use, constitute a single legal-tax reality. The AT argued that Item 28.1 intentionally targets properties as unified entities, and the total tax-assessed property value determines Stamp Tax liability when not constituted under horizontal ownership. This case highlights the intersection between IMI valuation methodology and Stamp Tax incidence, demonstrating that while both taxes reference property values determined under the IMI Code, the legal characterization of the property ownership structure—whether full ownership or horizontal ownership—fundamentally determines the taxable base for Stamp Tax purposes under Item 28.1 of the TGIS.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1. A…, widower, taxpayer no. …, resident at Avenue …, no.…, in …, municipality of Cascais, B…, married, taxpayer no.…, resident at Street …, no.…, in …, municipality of Cascais, C…, married, taxpayer no. …, resident at …, …, in Alenquer, and D…, married, taxpayer no.…, resident at Avenue …, no.…, ..., in Lisbon (hereinafter referred to as "Petitioners"), filed on 15/07/2016 a request for arbitral pronouncement with a view to the examination and declaration of illegality of the tax assessment acts for Stamp Tax for the year 2015, relating to the application of Item no. 28.1 of the General Table of Stamp Tax (General Table), in the total amount of € 12,528.72 (twelve thousand five hundred and twenty-eight euros and seventy-two cents) to a property of which they are owners.

1.2. The Honourable President of the Deontological Council of the Administrative Arbitration Centre (CAAD) designated, on 25/07/2016, as sole arbitrator the signatory of this decision.

1.3. On 17/10/2016 the arbitral tribunal was constituted.

1.4. In compliance with the provisions of Article 17(1) of the Legal Framework for Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified on 17/10/2016 to, if it so wished, file a reply and request the production of additional evidence.

1.5. On 16/11/2016 the AT filed its reply, requesting the waiver of the hearing described in Article 18 of the RJAT, as well as of the submission of arguments.

1.6. Being a matter of law exclusively, the arbitral tribunal on 18/11/2016 decided to waive the hearing referred to in Article 18(1) of the RJAT, on the basis of the principle of the autonomy of the arbitral tribunal in conducting the proceedings, inviting both parties to, if they so wished, submit optional written arguments and scheduled the date for delivery of the final decision.

1.7. Neither the AT nor the Petitioners submitted optional written arguments.

2. SANATION

The arbitral tribunal was duly constituted and is materially competent.

The parties have legal personality and capacity and are entitled to participate, with no defects in representation occurring.

There are no nullities, exceptions or preliminary issues that prevent examination of the merits and of which the tribunal is obliged to take cognisance ex officio.

Consequently, the conditions are satisfied for the final decision to be delivered.

3. POSITIONS OF THE PARTIES

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

In summary, the Petitioners allege that:

a) It is on each floor or part of a property capable of independent use that the Municipal Property Tax (IMI) is applied, that is, it is the tax-assessed property value, individually set, of each floor or part of a property capable of independent use that is relevant for the application of IMI.

b) In practice, it is on the basis of the tax-assessed property value of each floor or part of a property capable of independent use that its subjection to tax, or not, is determined by Item no. 28.1 of the General Table.

c) More specifically, that in the year to which the tax now challenged relates, the floors in question all constituted autonomous units capable of independent use.

d) As the floors in question constitute units capable of independent use with residential allocation, the tax-assessed property value of each of these floors is below the minimum threshold for tax incidence, as furthermore results from their respective property registrations for IMI purposes.

e) They further add that the AT issues a Stamp Tax assessment for each division capable of independent use, which is not without showing that the AT itself recognises that, for purposes of Stamp Tax incidence, as in the case of IMI, the tax-assessed property value of each division capable of independent use is relevant.

f) On the other hand, the Stamp Tax assessments in question also result in violation of constitutional principles, in particular the principle of equality, and in particular equality in the taxation of property by treating the properties in question (units capable of independent use) differently from those other properties which are in substantially equal circumstances, despite being constituted under horizontal ownership.

g) And they conclude that the tax assessments in question, by applying the taxation under Stamp Tax to units capable of independent use, all with a tax-assessed property value below one million euros, resorting to the sum of the same to fictionally create, in this manner, a global value of the property, are based on error regarding the factual and legal presuppositions of taxation under Stamp Tax, in clear violation of Item no. 28.1 of the General Table.

Conversely, the AT contends that:

a) At the date in question the Petitioners held full ownership of the urban property under analysis, evaluated in accordance with the IMI Code, within the framework of the general evaluation of urban properties, described as "property in full ownership with floors or divisions capable of independent use", having a tax-assessed property value exceeding € 1,000,000.00.

b) With reference to the year 2015, in compliance with Item no. 28.1 of the General Table [1], the incidence rule of which refers to urban properties, evaluated in accordance with the IMI Code with a tax-assessed property value equal to or exceeding € 1,000,000.00, and residential allocation, the AT proceeded to notify the collection documents for payment of the assessment in question.

c) It adds that the concept of property is defined in Article 2(1) of the IMI Code, with its paragraph 4 establishing that, under the horizontal ownership regime, each autonomous unit constitutes a property.

d) Now, a "property in full ownership with floors or divisions capable of independent use" is, unequivocally, different from an immovable property under the horizontal ownership regime, constituted by autonomous units, that is, several properties.

e) As for IMI assessment, in the case of properties in full ownership, the value that serves as the basis for its calculation will unquestionably be that registered in the property record as "total tax-assessed property value".

f) Thus, with the assessment being correct and the calculated tax being due, no compensatory interest is due, first and foremost because there is no error attributable to the services, which merely acted, as they should, in strict compliance with the legal rule.

g) With regard to the alleged violation of the principle of equality and contributive equality in the taxation of property, the AT contends that although the assessment of Stamp Tax, in the situations provided for in Item no. 28.1 of the General Table, is carried out in accordance with the rules of the IMI Code, the legislature reserves the aspects that require appropriate adaptations, namely: those in which, as is the case of properties in full ownership, although with floors or divisions capable of independent use, for purposes of Stamp Tax the property in its entirety is relevant since the divisions capable of independent use are not deemed to be properties, but only autonomous units under the horizontal ownership regime, in accordance with Article 2(4) of the IMI Code.

h) For the AT, what results from the letter of the law is that the legislature intended to tax with Item no. 28.1 of the General Table properties as a single legal-tax reality.

i) Now, in accordance with the registered information, with the property being under the full ownership regime (not possessing autonomous units, to which tax law attributes the qualification of property), it is the total tax-assessed property value of the property that must, therefore, be relevant, so that the defect of violation of law due to error regarding the factual and legal presuppositions should be judged unfounded.

j) On the other hand, the AT understands that the provision of Item no. 28.1 of the General Table does not constitute any violation of the principles of equality and tax equality, with no discrimination existing in the taxation of properties constituted under horizontal ownership and properties in full ownership with floors or divisions capable of independent use, or between properties with residential allocation and properties with other allocations.

k) The constitution of horizontal ownership entails a mere legal alteration of the property, with no revaluation occurring, but the legislature may, nevertheless, subject to a distinct tax legal framework, and therefore discriminatory, properties under horizontal and vertical ownership regimes, in particular, benefiting the more legally evolved institute of horizontal ownership, without such discrimination needing to be considered necessarily arbitrary.

l) It further adds that the registration of each part capable of independent use is not autonomous by matrix, but is contained in a description in the matrix of the property in its entirety.

m) To this extent, the norms of the valuation procedures, the norms regarding property registration, and also the norms regarding the assessment of the parts capable of independent use, do not permit asserting that there should be an equation of the property under full ownership to the vertical ownership regime.

n) It thus results from the fact that Item no. 28.1 of the General Table applies to the ownership of urban properties whose tax-assessed property value recorded in the matrix, in accordance with the IMI Code, is equal to or exceeding € 1,000,000.00, that the tax-assessed property value relevant for purposes of tax incidence is, clearly, the total tax-assessed property value of the urban property and not the tax-assessed property value of each of the parts that compose it, even when capable of independent use.

o) Also the different valuation and taxation of an immovable property in full ownership in comparison with an immovable property constituted under horizontal ownership results from the different legal effects inherent in these two figures.

p) The AT concludes that the Petitioners, for purposes of IMI and also of Stamp Tax, are not owners of autonomous units, but rather of a single property, further considering that this is the understanding which best accords with the principle of legality to which all its activity is devoted.

4. SUBJECT OF THE REQUEST

In the case at hand, the question which the Petitioners seek to have decided consists in determining whether Item no. 28.1 of the General Table, in the case of properties not constituted under horizontal ownership, applies to the sum of the tax-assessed property values attributed to the different parts or floors, or rather, to the tax value of each part of the property with independent economic use.

5. FACTUAL MATTERS

5.1. FACTS CONSIDERED PROVEN

On the basis of the documents submitted to the proceedings, it is considered proven that:

5.1.1. The Petitioners are co-owners, in the proportion of 1/4 each, of the property registered in the urban property matrix of the parish of…, municipality of Lisbon, under property article no.… .

5.1.2. The property is in full ownership with floors or divisions capable of independent use and is composed of 9 floors (including cellars, ground floor and 7 floors) and 27 divisions with independent use, of which only 23 are allocated to residential use, whose tax-assessed property value, determined under the IMI Code, varies between € 20,300.00 and € 69,940.00.

5.1.3. The property in question was registered in the matrix in 2009 and the sum of the tax-assessed property values of the aforementioned autonomous units allocated to residential use amounts to € 1,252,840.00 (one million, two hundred and fifty-two thousand, eight hundred and forty euros), with each of them individually having a tax-assessed property value below € 1,000,000.00.

5.1.4. The Petitioners were notified of the Stamp Tax assessment acts relating to the year 2015, carried out under Item no. 28.1 of the General Table, on the floors and divisions with independent use allocated to residential use, in the global amount of € 12,528.72 (twelve thousand, five hundred and twenty-eight euros and seventy-two cents), namely:

· Document no. 2016 …, referring to the floor or division with independent use identified as "CV Esq", in the amount of € 107.48;

· Document no. 2016 …, referring to the floor or division with independent use identified as "CV Dto", in the amount of € 50.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "RC Esq", in the amount of € 109.00;

· Document no. 2016 …, referring to the floor or division with independent use identified as "RC Dto", in the amount of € 111.28;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Esq", in the amount of € 169.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Dto", in the amount of € 169.63;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Frt", in the amount of € 90.08;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Esq", in the amount of € 169.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Dto", in the amount of € 169.63;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Frt", in the amount of € 90.08;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Esq", in the amount of € 171.45;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Dto", in the amount of € 171.33;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Frt", in the amount of € 90.98;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Esq", in the amount of € 171.45;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Dto", in the amount of € 171.33;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Frt", in the amount of € 90.98;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Esq", in the amount of € 171.13;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Dto", in the amount of € 171.03;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Frt", in the amount of € 91.88;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Esq", in the amount of € 174.85;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Dto", in the amount of € 171.03;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Frt", in the amount of € 86.13;

· Document no. 2016 …, referring to the floor or division with independent use identified as "7th", in the amount of € 155.28;

· Document no. 2016 …, referring to the floor or division with independent use identified as "CV Esq", in the amount of € 107.48;

· Document no. 2016 …, referring to the floor or division with independent use identified as "CV Dto", in the amount of € 50.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "RC Esq", in the amount of € 109.00;

· Document no. 2016 …, referring to the floor or division with independent use identified as "RC Dto", in the amount of € 111.28;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Esq", in the amount of € 169.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Dto", in the amount of € 169.63;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Frt", in the amount of € 90.08;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Esq", in the amount of € 169.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Dto", in the amount of € 169.63;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Frt", in the amount of € 90.08;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Esq", in the amount of € 171.45;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Dto", in the amount of € 171.33;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Frt", in the amount of € 90.98;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Esq", in the amount of € 171.45;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Dto", in the amount of € 171.33;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Frt", in the amount of € 90.98;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Esq", in the amount of € 171.13;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Dto", in the amount of € 171.03;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Frt", in the amount of € 91.88;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Esq", in the amount of € 174.85;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Dto", in the amount of € 171.03;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Frt", in the amount of € 86.13;

· Document no. 2016 …, referring to the floor or division with independent use identified as "7th", in the amount of € 155.28;

· Document no. 2016 …, referring to the floor or division with independent use identified as "CV Esq", in the amount of € 107.48;

· Document no. 2016 …, referring to the floor or division with independent use identified as "CV Dto", in the amount of € 50.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "RC Esq", in the amount of € 109.00;

· Document no. 2016 …, referring to the floor or division with independent use identified as "RC Dto", in the amount of € 111.28;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Esq", in the amount of € 169.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Dto", in the amount of € 169.63;

· Document no. 2016 …, referring to the floor or division with independent use identified as "1st Frt", in the amount of € 90.08;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Esq", in the amount of € 169.75;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Dto", in the amount of € 169.63;

· Document no. 2016 …, referring to the floor or division with independent use identified as "2nd Frt", in the amount of € 90.08;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Esq", in the amount of € 171.45;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Dto", in the amount of € 171.33;

· Document no. 2016 …, referring to the floor or division with independent use identified as "3rd Frt", in the amount of € 90.98;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Esq", in the amount of € 171.45;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Dto", in the amount of € 171.33;

· Document no. 2016 …, referring to the floor or division with independent use identified as "4th Frt", in the amount of € 90.98;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Esq", in the amount of € 171.13;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Dto", in the amount of € 171.03;

· Document no. 2016 …, referring to the floor or division with independent use identified as "5th Frt", in the amount of € 91.88;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Esq", in the amount of € 174.85;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Dto", in the amount of € 171.03;

· Document no. 2016 …, referring to the floor or division with independent use identified as "6th Frt", in the amount of € 86.13;

· Document no. 2016 …, referring to the floor or division with independent use identified as "7th", in the amount of € 155.28;

5.2. FACTS NOT CONSIDERED PROVEN

There are no facts relevant to the decision that have not been considered proven.

6. THE LAW

On the incidence of Item no. 28.1 of the General Table

The question to be decided consists in determining whether the tax acts assessing Stamp Tax are illegal due to erroneous interpretation and application of Item no. 28.1 of the General Table, added by Law no. 55-A/2012, of 29 October, by considering that the tax-assessed property value of an urban property constituted under full ownership regime, with floors or divisions capable of independent use allocated to residential use which is relevant for purposes of incidence is constituted by the value resulting from the sum of the tax-assessed property value attributed to each of those floors or divisions.

Further, whether the Stamp Tax assessments also suffer from the defect of unconstitutionality, due to violation of the principle of equality, provided for in Article 13 of the Constitution of the Portuguese Republic (CRP), as well as of the principle of contributive equality in the taxation of property, provided for in Article 104(3) of the CRP.

On this matter, there is already abundant case law of the Supreme Administrative Court [2] (STA) and, likewise, arbitral case law, which we indicate, by way of example, in the cases no. 277/2013-T, no. 291/2013-T, no. 35/2014-T, no. 464/2014-T, no. 639/2014-T, no. 724/2014-T, no. 245/2014-T, no. 152/2015-T and no. 21/2015-T, which we follow. [3]

In accordance with the established facts, the AT assessed Stamp Tax by considering that the tax-assessed property value of the urban property constituted under full ownership regime is exceeding € 1,000,000.00, taking into account the sum of the tax-assessed property value of each of the 23 floors or divisions with independent use allocated to residential use that compose the said property.

As follows.

In accordance with the provisions of Item no. 28 of the General Table, the following fall within the scope of incidence of Stamp Tax:

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

28.1 - For a residential property or for land for construction whose authorized or planned building is for residential purposes, in accordance with the provisions of the IMI Code - 1%. [4]

28.2 - For a property, when the passive subjects who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, listed in the list approved by ordinance of the Minister of Finance - 7.5%".

Thus the presuppositions for the incidence of Item no. 28.1 of the General Table are urban properties, with residential allocation, whose tax-assessed property value recorded in the matrix and used for purposes of IMI assessment is equal to or exceeding € 1,000,000.00.

However, Law no. 55-A/2012, of 29 October, says nothing regarding the qualification of the concepts in question, in particular, regarding the concept of "property with residential allocation", which is relevant here.

Now, Law no. 55-A/2012, of 29 October, with reference to Item no. 28 of the General Table, further established several amendments to the Stamp Tax Code, in particular, regarding its assessment and payment, expressly referring to the rules provided for in the IMI Code [5] with the appropriate adaptations, with it also being provided in paragraph 2 of Article 67 of the Stamp Tax Code that, "To matters not regulated in the present Code regarding Item no. 28 of the General Table, the provisions of the CIMI shall apply, subsidiarily".

From the analysis of the aforementioned rules, it is verified that the concept of "property with residential allocation" provided for in Item no. 28.1 of the General Table is not defined in the Stamp Tax Code, nor in the cited Law no. 55-A/2012, of 29 October, nor even in the IMI Code, the rules of which are of subsidiary application, given the provisions of paragraph 2 of Article 67 of the Stamp Tax Code.

It is thus unequivocal that a property in full ownership or under vertical ownership regime constitutes an urban property, in accordance with the provisions of paragraph 1 of Articles 2 and 4 of the IMI Code, applicable subsidiarily, and it is also certain that, whether for purposes of incidence of Item 28.1 of the General Table or for purposes of classification of urban properties [6], the legislature does not make a distinction between properties constituted under vertical ownership and under horizontal ownership regime (as mentioned in the arbitral decisions delivered in cases no. 50/2013-T and no. 132/2013-T), being a tax presupposition of Item no. 28.1 of the General Table properties that are actually already allocated to residential use, because what is relevant is the actual and current use of each of the properties.

What then will be the tax-assessed property value relevant in the case of urban properties under full ownership regime composed of floors or divisions capable of independent use with "residential allocation", for purposes of incidence of Item 28.1 of the General Table?

As results from Item no. 28.1 of the General Table itself and from paragraph 1 of Article 6 of Law no. 55-A/2012, of 29 October, the Stamp Tax shall apply to the tax-assessed property value used for purposes of IMI.

Let us therefore see what is the tax-assessed property value used for purposes of IMI.

The tax-assessed property value of each property is determined in accordance with Articles 38 et seq. of the IMI Code, in compliance with the provisions of paragraph 1 of Article 7 of the IMI Code.

In the case of a property under full ownership or vertical ownership regime, each floor or division with independent use that comprises it is equally subject to valuation, with a tax-assessed property value being attributed to each of those floors or divisions, in compliance with the provisions of Articles 12 and 38 of the IMI Code.

Indeed, paragraph 1 of Article 12 of the IMI Code establishes that "property records are registers which contain, in particular, the characterization of properties, location and their tax-assessed property value, the identification of owners (…)", further providing in its paragraph 3 that, "Each floor or part of a property capable of independent use is considered separately in the property registration, which also separately specifies the respective tax-assessed property value", and, in compliance with the provisions of paragraph 1 of Article 119 of the IMI Code, it is on that tax-assessed property value separately considered that the IMI will be calculated and assessed in relation to each floor or part with independent use that comprise an urban property under vertical or full ownership regime, given the autonomy of each of those units.

This understanding is further shared by J. Silvério Mateus and L. Corvelo de Freitas [7] according to whom, "Another aspect that should be highlighted in the register concerns the need to make relevant the autonomy which, within the same property, can be attributed to each of its parts, functionally and economically independent. In these cases, the property registration should not only make reference to each of these parts but should make express reference to the property value corresponding to each of them. An example that can illustrate this situation is the case of an urban property, not constituted under the horizontal ownership regime and which is composed of several floors. (…) However, as each of these units may be subject to lease or other any use by its respective holder, the register should evidence these units and should attribute property value to each of them." [emphasis ours].

On the other hand, and as evidenced in the arbitral decision delivered in case no. 194/2014-T, which we also follow, "the IMI Code consecrates, both regarding the property registration and discrimination of the respective tax-assessed property value, and regarding the assessment of the tax, the autonomization of the parts of urban property capable of independent use and the segregation/individualization of the TAV relating to each floor or part of a property capable of independent use.

Thus to each property, in accordance with the concepts legally defined by Article 2 of the CIMI, corresponds a single article in the register (no. 2 of Article 82 of the CIMI) but, according to no. 3 of Article 12 of the same Code, concerning the concept of property records (…), "each floor or part of a property capable of independent use is considered separately in the property registration, which also separately specifies the respective tax-assessed property value (…).

In other words, the rule is the autonomization, the characterization as "property" of each part of a building, insofar as functionally and economically independent, capable of independent use, in accordance with the concept of property defined in no. 1 of Article 2 of the CIMI: property is any portion (of land, including waters, plantations, buildings and constructions of any nature incorporated or based thereon, with a permanent character) insofar as it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the previous circumstances, endowed with economic autonomy.".

Given that under the IMI Code, the floors or divisions with independent use that comprise an urban property under full ownership or vertical ownership regime are taxed autonomously, since IMI is assessed individually on the tax-assessed property value attributed to each of those floors or divisions with independent use, given the relevance of their autonomy, necessarily the principles and rules must be the same under Stamp Tax (in particular, regarding what is prescribed concerning registration in the matrix and IMI assessment), both because Item no. 28.1 of the General Table expressly so requires at the end, and by subsidiary application, by virtue of the provisions of paragraph 2 of Article 67 of the Stamp Tax Code.

Consequently, and on the presumption that the legislature in question "consecrated the most appropriate solutions and knew how to express its thinking in adequate terms" (cfr. the provisions of paragraph 3 of Article 9 of the Civil Code ("CC"), by reference of Article 11 of the LGT), only are encompassed by the rule of incidence of Item no. 28.1 of the General Table the floors, parts or divisions with independent use with residential allocation, whose tax-assessed property value is equal to or exceeding € 1,000,000.00.

Thus, and as referred to in the arbitral decision delivered in case no. 132/2013-T, "The uniform criterion which is thus required is that which determines that the incidence of the rule in question takes place only when any of the parts, floors or divisions with independent use of a property in horizontal or full ownership with residential allocation, possesses a TAV exceeding € 1,000,000.00" and not when this value results from the sum of the tax-assessed property value attributed to each floor or division with independent use.

As similarly mentioned in the arbitral decision delivered in case no. 50/2013-T, "The criterion sought by the AT, of considering the value of the sum of the TAV attributed to the parts, floors or divisions with independent use, with the argument that the property is not constituted under horizontal ownership regime, finds no legal support and is contrary to the criterion that is applicable under CIMI and, by reference, under IS. To which is added the fact that the law itself expressly establishes, in the final part of Item 28 of the TGIS, that IS to apply to urban properties of value equal to or exceeding € 1,000,000.00 – "on the tax-assessed property value used for purposes of IMI.".

For all the foregoing, we cannot agree with the AT's understanding.

In fact, if it is the rule itself provided for in Item no. 28.1 of the General Table at the end which determines that Stamp Tax applies "on the tax-assessed property value used for purposes of IMI", what is relevant for purposes of tax incidence is the tax-assessed property value individualized for each of the parts, floors or divisions with independent use on which IMI is assessed annually, that is, the assessment of Stamp Tax complies with the rules provided for in the IMI Code, by express reference of the said Item no. 28 of the General Table and of paragraph 2 of Article 67 of the Stamp Tax Code.

This is so much the case that, the AT to assess Item no. 28.1 of the General Table, under examination, starts from each of those floors or divisions with independent use, applying the respective rate on the tax-assessed property value attributed to each of those divisions with residential allocation, in accordance with the rules of the IMI Code, and then adds that tax-assessed property value.

The interpretation in the sense that what is relevant in the rule of incidence of Item no. 28.1 of the General Table is the tax-assessed property value attributed to each of the autonomous parts, floors or divisions with independent use with residential allocation and not the value resulting from the sum of those tax-assessed property values is also that which results from the respective ratio legis, as required by paragraph 1 of Article 9 of the CC, applicable by virtue of the provisions of Article 11 of the LGT.

In fact, in the presentation and discussion of the Bill no. 96/XII/2nd [8] in the Parliament, the Secretary of State for Tax Affairs declared the following:

"It is the first time in Portugal that a special taxation is created on properties of high value intended for residential purposes. This rate will be of 0.5% to 0.8%, in 2012, and of 1%, in 2013, and shall apply to houses of value equal to or exceeding 1 million euros. With the creation of this additional tax rate, the tax burden required from these owners will be significantly increased in 2012 and in 2013" [emphasis ours].

To this effect, we follow the arbitral decision delivered in case no. 50/2013-T when referring that "The legislature, in introducing this legislative innovation, considered as determining element of tax capacity the urban properties, with residential allocation, of high value (luxury), more rigorously, of value equal to or exceeding € 1,000,000.00, on which it proceeded to apply a special tax rate of stamp tax, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of luxury urban properties with residential allocation. For this reason, the criterion was the application of the new rate to the urban properties with residential allocation, whose TAV be equal to or exceeding € 1,000,000.00.

This same conclusion is reached from the analysis of the discussion of the bill no. 96/XII in the Parliament, available for consultation in the Parliamentary Gazette, I series, no. 9/XII/2, of 11 October 2012.

The basis for the measure designated as "special rate on high value residential urban properties" rests, therefore, in the invocation of the principles of social equity and tax justice, calling on to contribute in a more intense manner the holders of properties of high value intended for residential use, applying the new special rate to the "houses of value equal to or exceeding 1 million euros".

Clearly the legislature understood that this value, when attributed to a residence (house, autonomous unit or floor with independent use) translates into a tax capacity above the average and, as such, capable of determining a special contribution to ensure the fair allocation of the tax burden.".

For all the foregoing, and in accordance with the established facts, the tax-assessed property value of each of the 23 floors or divisions with independent use allocated to residential use, which comprise the property constituted in full ownership, and, which was determined in accordance with the rules of the IMI Code, is below € 1,000,000.00, thus not being the presuppositions for taxation under Item no. 28.1 of the General Table met.

Therefore, the tax acts assessing Stamp Tax, subject of the present arbitral pronouncement process, in the total amount of € 12,528.72, suffer from the defect of violation of the provisions of Item no. 28.1 of the General Table and of paragraph 2 of Article 67 of the Stamp Tax Code, due to error regarding its legal presuppositions, declaring the illegality of those assessment acts, with the consequent annulment of the same.

In fact, examination of the other issues raised by the Petitioners is thus prejudiced, in particular, the alleged defect of unconstitutionality, due to having been declared the illegality of the assessments above identified, due to a substantive defect which prevents the renewal of the acts, effectively ensuring protection of the rights of the Petitioners, in accordance with the provisions of Article 124 of the CPPT [9].

7. DECISION

With the grounds set out, the arbitral tribunal decides:

a) To grant the request for arbitral pronouncement and, in consequence, declare illegal the assessments of Stamp Tax, contained in the identified collection documents, with all legal consequences;

b) To grant the Petitioners' request for recognition of their right to payment of compensatory interest;

c) To order the AT to refund to the Petitioners the Stamp Tax unduly paid, in the amount of € 12,528.72;

d) To order the AT to pay costs.

8. VALUE OF THE CASE

The value of the case is set at € 12,528.72 (twelve thousand, five hundred and twenty-eight euros and seventy-two cents), in accordance with Article 97-A of the Code of Procedure and Tax Process (CPPT), applicable by virtue of paragraphs a) and b) of Article 29(1) of the RJAT and of paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Processes (RCPAT).

9. COSTS

Costs to be borne by the AT, in the amount of € 918 (nine hundred and eighteen euros), in accordance with Table I of the Regulation of Costs of Tax Arbitration Processes, in accordance with paragraph 2 of Article 22 of the RJAT.

Notify.

Lisbon, 13 December 2016

The Arbitrator,

(Hélder Filipe Faustino)

Text prepared by computer, in accordance with the provisions of paragraph 5 of Article 131 of the CPC, applicable by reference of paragraph e) of Article 29(1) of the RJAT. The wording of the present decision follows the orthography prior to the Orthographic Agreement of 1990.

[1] As amended by Law no. 83-C/2013, of 31 December.

[2] By way of example, we highlight the Decision delivered in case no. 047/15, of 09/09/2015, pursuant to which: "I - With respect to properties in vertical ownership, for purposes of incidence of Stamp Tax (Item 28.1 of the TGIS, as amended by Law no. 55-A/2012, of 29 October), the subjection is determined by the combination of two factors: residential allocation and the TAV recorded in the matrix equal to or exceeding € 1,000,000. II - In the case of a property constituted in vertical ownership, the incidence of IS should be determined, not by the TAV resulting from the sum of the TAV of all divisions or floors capable of independent use (individualized in the property article), but by the TAV attributed to each of these floors or divisions intended for residential use.", available at www.dgsi.pt

[3] Cfr. Andreia Gabriel Pereira, "The «Luxury Houses» and Stamp Tax. Commentary on the Decision of the Supreme Administrative Court (2nd Section), of 5 February 2015, delivered in case no. 0993/14, Reporting Councillor Francisco Rothes", Journal of Public Finance and Tax Law, Year VII, No. 4, July 2015, pp. 235 et seq.

[4] This wording was amended by Law no. 83-C/2013, of 31 December, without, however, having great relevance for the case at hand.

[5] Cfr. Article 23(7), Article 44(5), Article 46(5) and Article 49(3) of the Stamp Tax Code.

[6] Cfr. Article 6 of the IMI Code (also of subsidiary application).

[7] "Taxes on Real Property and Stamp Tax, Commented and Annotated", pages 159 and 160.

[8] Available in the Parliamentary Gazette, I Series no. 9/XII/2012, of 11/10/2012.

[9] Subsidiarily applicable by virtue of the provisions of paragraph a) of Article 29(1) of the RJAT.

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the Tabela Geral do Imposto do Selo apply to each independent unit or to the total value of a vertical property?
Verba 28.1 of the TGIS applies to the total value of a vertical property (full ownership), not to each independent unit separately. The Tax Authority's position distinguishes between horizontal ownership regimes, where each autonomous unit constitutes a separate property under Article 2(4) of the IMI Code, and full ownership properties with independent divisions, which constitute a single legal-tax reality. For Stamp Tax purposes under Item 28.1, properties held in full ownership are taxed based on their total tax-assessed property value, even when containing multiple floors or divisions capable of independent use.
How is the taxable patrimonial value determined for Stamp Tax purposes on buildings with multiple independent units?
For Stamp Tax purposes on buildings with multiple independent units, the determination depends on the ownership regime. Under horizontal ownership (propriedade horizontal), each autonomous unit is treated as a separate property with its own tax-assessed value under Article 2(4) of the IMI Code. However, for properties in full ownership (propriedade vertical or total) with floors or divisions capable of independent use, the taxable patrimonial value is the total tax-assessed property value registered for the entire property, not the sum of individual units. The IMI Code valuation rules apply, but the legal characterization of ownership determines whether individual or aggregate values are relevant for Item 28.1 of the TGIS.
Can property owners challenge Imposto do Selo assessments on vertical properties through tax arbitration at CAAD?
Yes, property owners can challenge Imposto do Selo assessments on vertical properties through tax arbitration at CAAD. Process 407/2016-T demonstrates that taxpayers may request arbitral pronouncement to examine the legality of Stamp Tax assessments under Item 28.1 of the TGIS. The petitioners challenged the application of Stamp Tax based on arguments regarding the proper interpretation of property ownership structures, constitutional equality principles, and the relationship between IMI valuation methodology and Stamp Tax incidence. The arbitral tribunal confirmed jurisdiction and material competence to adjudicate the dispute.
What is the relationship between IMI property valuation and Stamp Tax liability under Verba 28 of the TGIS?
The relationship between IMI property valuation and Stamp Tax liability under Verba 28 is that Item 28.1 of the TGIS references urban properties 'evaluated in accordance with the IMI Code' with tax-assessed values equal to or exceeding €1,000,000. While Stamp Tax adopts IMI valuation methodology, the legislature reserves adaptations for specific ownership structures. For IMI purposes, Article 2(4) of the IMI Code defines autonomous units under horizontal ownership as separate properties. However, for Stamp Tax under Item 28.1, full ownership properties are taxed as single entities based on total property value, whereas horizontal ownership properties would be taxed on individual autonomous unit values, creating different treatment based on legal ownership characterization rather than physical property configuration.
What was the outcome of CAAD arbitration process 407/2016-T regarding Stamp Tax on vertical property?
The complete outcome of CAAD arbitration process 407/2016-T is not fully provided in the available text excerpt. The decision document presents the parties' positions—with petitioners arguing for unit-by-unit taxation and the Tax Authority defending aggregate valuation for full ownership properties—but the arbitral tribunal's final ruling, legal reasoning, and determination regarding the €12,528.72 Stamp Tax assessment's legality are not included in the excerpt. The procedural history shows the tribunal was constituted on 17/10/2016, both parties submitted their positions, and the hearing was waived as a matter exclusively of law, with a decision scheduled for delivery.