Process: 410/2015-T

Date: December 15, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision addresses the application of Stamp Tax under Item 28.1 of the General Table (Verba 28.1 TGIS) to high-value residential properties. The dispute concerns a Lisbon property with a total taxable value of €1,796,135.21, comprising 23 independently usable units in full ownership, with residential portions totaling €1,558,250.00. The Portuguese Tax Authority (AT) assessed stamp duty of €5,567.33 on the first installments for 2014, applying the tax to each residential unit because their combined value exceeded €1 million, despite each individual unit being valued below this threshold.

The claimant company challenged these assessments on multiple grounds. First, it argued that since the property was acquired for resale in December 2014, it benefited from IMI (property tax) suspension under article 9(1)(e) of CIMI, which defers taxation until the third year following inventory inclusion. The claimant contended this suspension extends to stamp duty through article 5(U) of the Stamp Duty Code, which incorporates CIMI rules for Item 28 assessments. Therefore, the 2014 assessments were premature and violated the principle of commencement of taxation.

Additionally, the claimant argued the assessments violated equality principles and substance-over-form doctrine. The central legal controversy involves whether the €1 million threshold should apply to the aggregate value of all residential units or each unit individually. The AT maintained that the threshold applies to the sum of residential portions' taxable values. Conversely, the claimant relied on majority arbitral case law holding that each independently usable residential unit should be assessed separately against the threshold.

The CAAD arbitral tribunal confirmed its absolute material competence under article 2(1)(a) of RJAT to adjudicate stamp tax disputes. The sole arbitrator was appointed on August 31, 2015, with the tribunal formally constituted on September 15, 2015. Both parties submitted written arguments after waiving the hearing. This case exemplifies the recurring interpretative conflict regarding Verba 28.1 application to properties with multiple autonomous units under unified ownership.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A…, Ltd., legal entity no.…, with registered office at Rua…, no.…, …, …-…, Amadora, requested the establishment of an arbitral tribunal in tax matters, raising a petition for arbitral pronouncement with a view to declaring illegal the stamp duty tax assessments - Item 28.1, of the General Table - relating to first instalments for the year 2014, in the total amount of € 5,567.33.

  2. The request for the establishment of the arbitral tribunal was submitted on 3 July 2015, was accepted by the President of CAAD and automatically notified to the respondent, the Tax and Customs Authority (AT), on the 15th of that month.

  3. Pursuant to the provisions of paragraph a) of section 2 of article 6 and paragraph b) of section 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December (RJAT), the Deontological Council appointed the undersigned as arbitrator of the sole arbitral tribunal, who communicated acceptance of the appointment within the applicable time limit and notified the parties of such designation on 31 August 2015.

  4. Duly notified of such appointment, the parties did not express their intention to challenge the designation of the arbitrator, in accordance with the combined provisions of article 11, section 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  5. Thus, in compliance with the provision of paragraph c) of section 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the sole arbitral tribunal was established on 15 September 2015.

  6. Duly constituted, the arbitral tribunal is materially competent given the provisions of articles 2, section 1, paragraph a), of the RJAT.

  7. The parties possess juridical personality and capacity and have standing (arts. 4 and 10, section 2, of the RJAT, and art. 1 of Ordinance no. 112-A/2011, of 22/03).

  8. By order of 4 November 2015, the date of 15 of that month was set for the holding of the meeting provided for in article 18 of the RJAT. The parties being duly notified, the respondent requested dispensation from holding the said meeting. With the consent of the claimant and given the knowledge that flows from the procedural documents, deemed sufficient, the request for dispensation was accepted, and the parties were given the possibility of submitting written submissions.

  9. Both parties submitted submissions in which, essentially, they reaffirm their respective positions expressed in the petition and response.

II. FACTUAL MATTERS

  1. At issue in the present proceedings is the application of stamp duty, provided for in article 1 of the Stamp Duty Code and Item 28.1 of the respective Table, to urban residential properties with a value equal to or greater than 1 million euros, when referred to immovable property in a regime of full ownership or separate ownership, but composed of parts capable of independent use.

  2. With respect to properties that have such characteristics, the respondent (AT) takes the position that the threshold value to be considered for purposes of tax incidence is the value resulting from the sum of the taxable property values of the residential parts, subject to separate assessment. Conversely, it is the understanding of the majority arbitral case law that such threshold value should be determined on the basis of the taxable property value attributed to each of the residential units capable of independent use.[i]

  3. It is therefore within the legal framework thus very briefly defined that the object of the present petition for arbitral pronouncement is situated, for whose assessment the factual elements referred to in the following points are relevant, which are hereby deemed fully proven.

  4. The claimant, in the year 2014, was the owner of the urban property situated at Rua…, nos.…, …A, …B, …C and Rua de… …, nos.… and… A, parish of…, in Lisbon, registered in the respective property register under article U-….

  5. In the respective property record card, the said property, with a total taxable property value of € 1,796,135.21, is described as constituted in full ownership, with 23 storeys or divisions capable of independent use.

  6. In accordance with the rules applicable to the valuation of urban properties composed of units capable of independent use, the taxable property value of each of those parts was determined separately, it being verified that the total taxable property value of the units with residential allocation was € 1,558,250.00.

  7. The taxable property value of each of the parts that make up the property in question is less than one million euros.

  8. Considering that the taxable property value resulting from the sum of the taxable property values of the residential units was, in the year 2014, greater than one million euros, the respondent (AT) proceeded to assess the Stamp Duty referred to in Item 28 of the respective General Table with respect to each of those units, calculating, with reference to the first instalments of payment, the total amount of € 5,567.33, as appears in the annex to the petition, this value corresponding to the sum of the values of those first instalments.

  9. For the collection of these first instalments, the respondent (AT) issued the corresponding collection documents for voluntary payment in April 2015.

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

III. LEGAL MATTERS

  1. With respect to the assessments questioned, as mentioned above, the issue that motivates the claimant's disagreement is that relating to the application of the rule of Item 28.1 of the General Table of Stamp Duty to urban properties, which, constituted in full ownership, are composed of storeys or divisions capable of independent use, with residential allocation, but whose taxable property value, considered separately, is less than the threshold value that is relevant for purposes of tax incidence.

  2. It is the legality of such taxation that the claimant comes to contest, alleging, essentially, that:

  • The property in question was acquired for resale on 17 December 2014, and therefore its taxation, under property tax (IMI), is suspended, the tax being due only from the 3rd year following, inclusive, that year in which it passed to feature in the inventory of the acquiring company, as flows from article 9, section 1, paragraph e), of the Property Tax Code (CIMI).

  • This provision is applicable to the stamp duty in question by express referral of paragraph U of article 5 of the respective Code, which, with respect to situations covered by the incidence provided for in Item 28 of the General Table, establishes that the tax obligation is to be considered constituted "at the moment and in accordance with the rules provided for in CIMI, with the various adaptations."

  • From said rule it results, thus, that the assessment of the stamp duty in question could only be effected after the third year following that year in which the property passed to feature in the inventory of the acquiring company.

  • From the foregoing, the claimant concludes that the questioned assessment "suffers from the defect of violation of the principle of commencement of taxation."

  • The claimant further invokes other defects which, according to its understanding, determine the illegality of the questioned assessments, namely, "violation of the principle of equality or of identical situations and the principle of the prevalence of substance over form."

  • Disagreeing with the position of the respondent (AT) with respect to the consideration of the sum of the taxable property value of each of the parts capable of independent use that compose a property in full ownership for delimitation of the scope of incidence of stamp duty, the claimant considers that "In considering the total value of the property and issuing separate collection assessments for purposes of IMI and even of stamp duty, the AT's interpretation, in addition to being a formal incongruence, has no correspondence with the letter and spirit of the law, nor does it even possess any affinity with the historical element, especially because the AT is taxing the property and not the taxpayer, which constitutes a manifest violation of the principle of equality."

  1. Thus, for the claimant, it is "illegal and unconstitutional by violation of the equality of taxpayers before the same tax reality, to consider as the reference value that corresponding to the sum of the TPVs attributed to each part or division, because if the owner had constituted horizontal property over the same property there would be no place for the incidence of the tax, everything depending ultimately on the same legal modality of constitution of property adopted."

  2. With the grounds above briefly referred to, the claimant concludes by requesting the declaration of illegality of the assessment acts, to which correspond the collection documents identified in annex to the petition relating to the first instalments of the tax relating to the property in question and to the year 2014, with a total value of € 5,567.33, further petitioning the reimbursement of future instalments, plus the corresponding compensatory interest.

  3. The respondent (AT) submitted a response in which, in addition to defending the lack of merit of the petition for arbitral pronouncement, raised exceptions of incompetence of the arbitral tribunal as well as the unenforceability of the acts.

  4. The claimant replied in writing to the exceptions raised by the respondent, in essence, maintaining the position that it had already expressed in the petition for arbitral pronouncement.

PRELIMINARY MATTERS

  1. Having summarised the relevant factual elements as well as the positions that, as to the interpretation of applicable law, are sustained by the parties, it is important, first of all, to analyse and decide the preliminary matters raised by the respondent (AT) which, as mentioned above, concern the incompetence of the arbitral tribunal to appreciate and decide on the object of the petition and the unenforceability of the acts.

ON THE INCOMPETENCE OF THE ARBITRAL TRIBUNAL

  1. The respondent considers that the present proceedings have as their object the annulment not of a tax act but, rather, of the payment of one instalment - the first - of a tax act, contained in collection notes.

  2. This is a matter that is not at all part of the set of rules that delimits the competence of tax arbitral tribunals, contained in article 2 of the RJAT.

  3. From which, according to the respondent, it follows that the object of the petition for arbitral pronouncement goes beyond the competence of the arbitral tribunal.

ON THE UNENFORCEABILITY OF THE ACTS

  1. In addition to the exception relating to the incompetence of the arbitral tribunal, the respondent (AT) further invokes another exception, this one relating to the separate unenforceability of the payment instalments of a tax.

  2. On this matter, the respondent (AT) considers that from the elements of the proceedings it is clear that what the claimant is challenging is not the assessment acts but the instalments relating to the payment of a unit value of tax.

  3. According to the respondent, this is what is drawn from the combination of articles 120 and 113, section 1, of the Property Tax Code, in addition to section 7 of article 23 of the Stamp Duty Code, in the wording given to it by Law no. 55.A/2012, of 29 October: the stamp duty referred to in Item 28 of the SGST is assessed annually, its payment in instalments being nothing more than a collection technique for the tax.

  4. The respondent concludes, therefore, that there is a single tax assessment, its payment being effected in instalments, and it is not permitted to challenge a single instalment or collection document of that partial value.

  5. In support of its thesis, the respondent cites various arbitral decisions, to the effect of the separate unenforceability of tax payment instalments.

  6. In submissions, the respondent maintains its position on this matter. The claimant, for its part, reaffirms that it requested the Tribunal "expressly and clearly, the declaration of illegality of the tax act of assessment of Stamp Duty of Item 28, no. 1, of the General Table of Stamp Duty, relating to the taxation period mentioned in the petition, identified the local peripheral body that performed it and mentioned the documents in which the said tax act was recorded for collection, with the respective value."

  7. Indeed, as the respondent (AT) sustains, the taxation in stamp duty of urban properties referred to in Item 28.1 of the SGST gives rise to an annual assessment, for each property that meets the conditions referred to therein, following, by express referral, the rules of the Property Tax Code as regards its collection, as flows from article 23, section 7, of the Stamp Duty Code.

  8. In accordance with the provisions of articles 113 and 120 of the CIMI, the tax calculated in that annual assessment is subsequently collected in various instalments, to be paid throughout the year, the number of instalments varying depending on the amount of tax assessed.

  9. In the present case, as flows from the elements of the proceedings, the assessments were effected in March 2015, the tax calculated being divided for payment in various instalments.

  10. For payment of the first instalments, the corresponding collection notes were duly issued, the respective period for voluntary payment extending until the end of April following.

  11. As the respondent (AT) points out, the claimant comes to challenge partial collection notes, relating to the first instalment of the tax assessed to it with reference to the property already identified above.

  12. Although the claimant makes references to the tax act and to the reasoning that constitutes the basis of its petition for declaration of illegality of the assessments, there remain no doubts that the object of the challenge, as the respondent (AT) affirms, is only the payment of the first instalment.

  13. This is what is drawn from the petition, in which what is indicated is only the total value of the first instalment, from the list annexed to it in which the values relating to the first instalment and each of the autonomous parts to which it refers are itemised, and also from the economic value associated with the petition, which, according to the claimant, corresponds to the amount of tax corresponding to the sum of the same first instalments.

  14. As the respondent (AT) emphasises, the Arbitral Tribunal has already pronounced itself on this matter, in situations identical to that of the present proceedings, standing out, among other decisions going in the same direction [ii], the conclusions formulated in proc. no. 726/2014, to which full adherence is given:

"The payment instalments of an IMI assessment or, in the situation under analysis, of a Stamp Duty assessment, under Item 28 of the SGST, are not separately challengeable, as they originate from a single annual obligation. As each of the instalments of the Stamp Duty assessments identified in the proceedings is not separately challengeable, … there is a case of incompetence of the arbitral tribunal for the appreciation and declaration of its illegality and consequent annulment. The conclusion that the assessment of Stamp Duty, Item 28 of the SGST, is indivisible, and each of its instalments cannot be separately challenged, determines the incompetence of the arbitral tribunal and prevents the continuation of the proceedings, as well as the appreciation of the merits of the case. For which reasons the Tax and Customs Authority is hereby absolved of the instance."

  1. The reasoning of the decision above transcribed, which without reservation is subscribed to, is identically applicable to the present petition for arbitral pronouncement, and accordingly, the exception invoked by the respondent (AT) should equally be declared well-founded, absolving the latter of the instance, by incompetence of the arbitral tribunal for appreciation of the legality of the first payment instalments of stamp duty relating to 2014 and to the property above identified.

  2. With the invoked exception of incompetence of the arbitral tribunal being recognised, the consideration of the other matters raised in the petition is thus prejudiced.

IV. DECISION

On these grounds, and based on the reasoning set out, the arbitral tribunal decides:

a) To hold the exception of absolute incompetence of the arbitral tribunal to be well-founded and, in consequence, to absolve the respondent (AT) of the instance;

b) To condemn the claimant to pay the costs of the proceedings.

Value of the proceedings: € 5,567.33

Costs: Under the protection of art. 22, section 4, of the RJAT, and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, I fix the amount of costs at € 612.00, to be borne by the claimant.

Lisbon, 15 December 2015

The Arbitrator, Álvaro Caneira.

[i] Purely by way of indication and referring only to the most recent arbitral decisions, the following may be seen in this sense: those made in the following proceedings: 749/2014-T, 752/2014-T, 754/2014-T, 808/2014-T, 812/2014-T, 818/2014-T, 822/2014-T, 824/2014-T, 849/2014-T, 41/2015-T, 65/2015-T, 70/2015-T, 73/2015-T, 110/2015-T, 174/2015-T, 236/2015-T, 449/2015-T, 461/2015-T and 463/2015-T.

[ii] See Procs. no. 120/2012-T, 408/2014-T, 797/2014-T, 37/2015-T, 90/2015-T, 137/2015-T and 140/2015-T, among others.

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Stamp Tax General Table and how does it apply to properties worth over €1 million?
Verba 28.1 of the Stamp Tax General Table (TGIS) imposes an annual stamp duty on urban residential properties with a taxable property value equal to or exceeding €1 million. The tax applies to properties held under full ownership or separate ownership rights. The critical interpretative issue concerns properties composed of multiple independently usable units: the Tax Authority contends the €1 million threshold applies to the sum of all residential units' taxable values, triggering tax on each unit when the aggregate exceeds €1 million. However, majority arbitral case law holds that each independently usable residential unit should be assessed individually, meaning tax only applies to units individually valued at €1 million or more. This distinction significantly affects taxation of multi-unit properties where individual portions fall below the threshold but collectively exceed it.
Does the CAAD arbitral tribunal have absolute competence to rule on Stamp Tax (Imposto do Selo) disputes under the RJAT?
Yes, the CAAD (Centro de Arbitragem Administrativa) arbitral tribunal has absolute competence to rule on Stamp Tax disputes under article 2(1)(a) of the RJAT (Legal Regime for Tax Arbitration - Decree-Law 10/2011). This competence extends to all taxes included in Portugal's tax system, specifically including Imposto do Selo (Stamp Tax). The arbitral tribunal's jurisdiction covers the legality of tax assessments, including those under Verba 28 of the Stamp Tax General Table. Taxpayers can challenge stamp duty liquidations through tax arbitration as an alternative to administrative and judicial tax courts. The tribunal is composed of arbitrators appointed by CAAD's Deontological Council, and parties have the right to challenge arbitrator appointments. Once constituted, the arbitral tribunal has full authority to examine the legality of contested tax assessments and issue binding decisions.
How is Stamp Tax assessed on properties held under total or vertical ownership with independently usable parts?
Stamp Tax assessment on properties with total or vertical ownership containing independently usable parts has generated significant controversy. Under Verba 28.1 TGIS, the Portuguese Tax Authority (AT) applies the €1 million threshold by aggregating the taxable property values of all residential units within a single property held under unified ownership. If the sum of residential portions exceeds €1 million, AT assesses stamp duty on each individual residential unit, even when each unit's separate value falls below the threshold. This methodology treats the property as an economic whole for threshold determination while issuing separate collection documents for each unit. However, majority arbitral case law adopts a different approach, holding that each independently usable residential unit should be evaluated separately against the €1 million threshold. Under this interpretation, stamp duty only applies to individual units whose own taxable value reaches or exceeds €1 million, regardless of the aggregate property value. This jurisprudential conflict creates legal uncertainty for property owners.
What is the procedure for challenging Stamp Tax liquidations through tax arbitration in Portugal?
The procedure for challenging Stamp Tax liquidations through tax arbitration in Portugal follows the RJAT framework. Taxpayers must submit a request to establish an arbitral tribunal to CAAD, which is automatically notified to the Tax Authority (AT). The CAAD President accepts the request and the Deontological Council appoints an arbitrator (or panel) within the legal timeframe. Parties are notified of the arbitrator designation and may challenge the appointment within the specified period. If no challenge is filed, the arbitral tribunal is formally constituted. The tribunal then schedules a hearing under article 18 RJAT, though parties may waive it and proceed with written submissions. Both parties present their arguments—the claimant through the initial petition and the respondent through a formal response. After examining written submissions and any hearing evidence, the arbitrator issues a binding arbitral decision. The entire process typically spans several months from initial request to final decision, offering taxpayers an alternative dispute resolution mechanism to traditional tax courts.
Can residential urban property owners contest Verba 28.1 Stamp Tax assessments when individual units are valued below €1 million?
Yes, residential urban property owners can contest Verba 28.1 Stamp Tax assessments when individual units are valued below €1 million, particularly in cases involving properties with multiple independently usable units held under unified ownership. This contestation typically arises when the Tax Authority aggregates all residential units' values to determine if the €1 million threshold is met, then assesses tax on each unit despite individual valuations below the threshold. Property owners may challenge such assessments through tax arbitration at CAAD, arguing that majority arbitral case law supports assessing each independently usable unit separately against the threshold. Additional grounds for contestation may include: suspension of tax obligation for properties acquired for resale (under CIMI article 9); premature assessment before the tax obligation is legally constituted; violation of equality principles when similar situations receive different treatment; and substance-over-form arguments. Successful challenges depend on demonstrating that the threshold should apply to individual units rather than aggregate values, though the Tax Authority maintains its contrary interpretation.