Process: 418/2015-T

Date: July 18, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision concerns the proper calculation methodology for Stamp Tax under item 28.1 of the General Stamp Duty Table (TGIS) on urban properties. The claimant, A..., S.A., challenged €55,228.48 in Stamp Duty assessments for 2014 on four urban properties held in full vertical ownership with multiple floors and divisions capable of independent use. The central legal dispute involves whether Stamp Tax liability should be determined by (1) the total global patrimonial value of the entire property, as applied by the Tax and Customs Authority, or (2) the individual patrimonial tax values of each floor or division capable of independent use, as argued by the claimant. The claimant contended that Stamp Duty under item 28.1 only applies when an individual division has a patrimonial value equal to or exceeding €1,000,000, combined with residential use designation. The claimant based this interpretation on the subsidiary application of the IMI Code (pursuant to Article 67(2) of the Stamp Duty Code), which treats divisions in vertical ownership similarly to horizontal property units for registration and taxation purposes. The claimant cited precedent from arbitral decision 50/2013-T, which emphasized that the legislator focused on material use rather than formal legal structure, making no distinction between vertical and horizontal ownership arrangements. The claimant argued that the Tax Authority's interpretation violated the principle of fiscal legality by applying inconsistent valuation criteria compared to IMI taxation. The case raises important questions about material jurisdiction of the CAAD Arbitral Tribunal over Stamp Tax disputes and the permissibility of constitutional challenges through arbitration proceedings.

Full Decision

ARBITRAL DECISION

REPORT

A..., S.A., legal entity no. ..., with registered office in Lisbon at ..., no. ..., ...-... LISBON, hereby requests the constitution of an Arbitral Tribunal and presents a petition for arbitral pronouncement, with a view to declaring the illegality and unconstitutionality as well as the consequent annulment of the acts assessing Stamp Duty, item 28.1 of the TGIS for the year 2014, with a collection of € 55,228.48, relating to urban properties registered in the urban property register as follows:

Parish of ..., of ... District of Lisbon
Property registered under article ...
Property registered under article ...
Union of parishes of ... and ... of ...
Property registered under article ...
Parish of ..., of ... District of Lisbon
Property registered under article ...

THE FACTUAL MATTERS

  1. The Claimant was notified on 01-04-2015 by the Tax and Customs Authority to pay, by 30 April 2015, the following assessments:

Article ... Parish of ...

2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015...;

Article ... Parish of ...

2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015...;

Article ... Union of parishes of ... and ... of Vila Nova Gaia.

2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015...;

Article ... Parish of ..., of ... District of Lisbon.

2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2015..., 2105...;

  1. The properties described are in full ownership of the claimant, none is constituted as horizontal property, but rather as full property with floors or divisions capable of independent use.

  2. Composition of the properties subject to taxation

a) The property registered under article ..., located on Rua ... is composed of basement, ground floor, shop and 6 floors, with residential use applied to the 1st and 6th floors, right and left, two divisions in the basement and a ground floor, and is assigned the following patrimonial tax value:

Basement 25 23,150.00 € 3rd Left 120,540.00 € 6th Right 149,560.00 €
1st Right 149,560.00 € 4th Right 149,560.00 € 6th Left 120,540.00 €
1st Left 120,540.00 € 4th Left 120,540.00 € Basement 57 72,360.00 €
2nd Right 149,500.00 € 5th Right 149,500.00 € Ground Floor Right 77,570.00 €
2nd Left 120,540.00 € 5th Left 120,540.00 €
3rd Right 149,560.00 €

b) The property registered under article ..., located on Rua ..., ... to ... in Lisbon, is composed of six floors used for residential purposes - the ground floor and from the 1st to the 5th floors (right and left) which constitute divisions with independent use, whose patrimonial tax value was calculated separately, and has the following patrimonial tax value:

1st Right 85,390.00 € 4th Right 85,390.00 €
1st Left 85,390.00 € 4th Left 85,390.00 €
2nd Right 85,390.00 € 5th Right 85,390.00 €
2nd Left 85,390.00 € 5th Left 85,390.00 €
3rd Right 85,390.00 € Ground Floor Right 78,880.00 €
3rd Left 85,390.00 € Ground Floor Left 85,390.00 €

c) The property, located on Av. ... ... to ... in ..., in vertical ownership, comprises 14 floors with 68 divisions capable of independent use, with residential use applied to the divisions from the 3rd to the 9th floors, under the letters DRT/EFT/EDT. It is registered under article ..., whose patrimonial tax value was determined separately:

3rd DRT 79,325.55 € 5th DRT 82,168.10 € 7th DRT 82,710.02 € 9th DRT 83,793.88 €[i]
3rd EFT 48,476.73 € 5th EFT 49,867.33 € 7th EFT 50,358.13 € 9th EFT 50,859.15 €
3rd ETD 56,585.15 € 5th ETD 49,867.33 € 7th EDT 59,560.63 € 9th EDT 60,143.45 €
4th DRT 81,759.10 € 6th DRT 59,264.10 € 8th DRT 83,348.88 €
4th EFT 49,621.93 € 6th EFT 82,577.10 € 8th EFT 50,577.10 €
4th EDT 58,681.28 € 6th EDT 50,112.73 € 8th EDT 59,846.96 €

d) The property, located on Avenue ..., ... in Lisbon, is composed of storage units (A to J), basement, ground floor and 5th floors, with residential use applied to basement, ground floor and 1st to 5th floors, with right and left divisions which constitute divisions with independent use, with the following patrimonial tax value.

1st Right 104,320.00 € 3rd Left 104,630.00 € Basement Right 62,450.00 €
1st Left 104,320.00 € 4th Right 105,640.00 € Basement Left 62,450.00 €
2nd Right 103,610.00 € 4th Left 105,640.00 € Ground Floor Right 98,910.00 €
2nd Left 103,640.00 € 5th Right 106,590.00 € Ground Floor Left 98,910.00 €
3rd Right 104,630.00 € 5th Left 106,590.00 €

THE LAW

  1. The Claimant requests that the assessment acts relating to the real property assets contained in item no. 28.1 of the TGIS be declared illegal and unconstitutional as applied by the Tax Authority.

  2. The Tax Authority contends that, for a property in vertical ownership, the provision contained in item 28 of the TGIS determines that the criterion for its applicability is the global patrimonial tax value of the property which, in the Claimant's understanding, is illegal, since in this case, the subjection to stamp duty is determined by the combination of two facts:

         1. Residential use designation

     and

     2. The patrimonial tax value assigned to each of those floors or divisions capable of independent use contained in the register being equal to or greater than 1,000,000.00

  3. Thus, the subjection to Stamp Duty is determined not by the patrimonial tax value of the property, but by the patrimonial tax value of each floor or division capable of independent use.

  4. As the Claimant correctly notes, the legislator adopted not formal legal rigor, as contained in the arbitral decision in case no. 50/2013-T "formal legal rigor of the specific situation of the property does not matter, but rather its normal use but the purpose for which the property is intended. We further conclude that for the legislator the situation of the property in vertical or horizontal ownership was not relevant, since no reference or distinction is made between them. What matters is the material truth underlying its existence as an urban property and its use."

  5. The Claimant further contends that regarding the question of the relevant value for determining the stamp duty amount, the Tax Authority's position does not appear to comply with the principle of fiscal legality.

  6. As established in article 67, no. 2 of the Stamp Duty Code, to matters not regulated in the Code, the IMI Code shall apply subsidiarily.

  7. As extracted from the aforementioned arbitral decision: "considering that the registration in the property register of properties in vertical ownership, constituted by different parts, floors or divisions with independent use, in accordance with the IMI Code, follows the same registration rules as properties constructed in horizontal ownership, without any doubt that IMI is levied individually in relation to each of the parts, it is clear that the legal criterion for defining the applicability of the new stamp duty tax must be the same.

  8. Thus, the incidence of the new stamp duty shall only occur if one of the parts, floors or divisions with independent use presents a patrimonial tax value exceeding 1,000,000.00 €

  9. The Tax Authority cannot consider as the reference value the total value of the property when the legislator established different rules in the context of IMI.

  10. It concludes by requesting the declaration of illegality of the identified assessments with all legal consequences such as the amounts of the assessments, accrued with default interest and indemnification interest.

RESPONSES OF THE TAX AND CUSTOMS AUTHORITY

DEFENCE BY EXCEPTION

  1. The Claimant asserts the material incompetence of the Arbitral Tribunal and the merits of the exception raised.

  2. The Respondent contends that the Arbitral Tribunal is materially incompetent to assess the legality of an assessment act, which is not in itself any tax act, there being no doubt, even given the value of the case, that the Claimant challenges exclusively the collection notices which constitute the first installments of the tax relating to the four properties.

DEFENCE BY OBJECTION

  1. At the relevant date the Claimant held ownership of urban properties A, B, C and D, evaluated within the scope of the general evaluation of urban properties, described as properties in "full ownership with floors or divisions capable of independent use", composed respectively of 8, 1, 14 and 8 floors and 19, 12, 68 and 29 divisions capable of independent use, with a patrimonial tax value exceeding € 1,000,000.00 each.

  2. Law no. 83-C/2013 of 31/12 contemplates properties evaluated in accordance with the IMI Code, with patrimonial tax value equal to or exceeding € 1,000,000 and, in accordance with its no. 28.1, residential use designation, whereby the Tax Authority proceeded to notify the collection documents for payment of the 1st installment of the assessments in question.

  3. Article 44, no. 5 of the Stamp Duty Code provides that, where assessment is due, the tax is paid at the times, in the manner and conditions of article 120 of the IMI Code, that is, in three installments in the months of April, July and November.

  4. The concept of property is set out in article 2, no. 1 of the IMI Code, where in its no. 4 it is provided that in the horizontal ownership regime, each autonomous fraction is considered as constituting a property.

  5. It follows from the analysis of the normative provision that a property in full ownership with floors or divisions capable of independent use is unequivocally different from a property in the horizontal ownership regime, constituted by autonomous fractions, that is, several properties.

  6. Article 12 of the IMI Code establishes the concept of property register, and in its no. 3 addresses the manner of registering property data.

  7. In compliance with article 119, no. 1 of the IMI, the collection document is sent to the taxpayer with a breakdown of the parts capable of independent use, their respective patrimonial tax value and collection amount attributed to each municipality of the location of the properties.

  8. The assessment being correct and the calculated tax being due, default interest and indemnification interest are not owed, not least because there is no error attributable to the services.

OF THE VIOLATION OF THE PRINCIPLE OF LEGALITY, TAX EQUALITY AND CONTRIBUTIVE CAPACITY

  1. The Claimant questions the patrimonial tax values of the properties on the ground that they are properties in full ownership with floors and divisions capable of independent use and as such do not have a patrimonial tax value exceeding 1,000,000.00

  2. There is no provision stipulating that the patrimonial tax value of a property composed of several floors or divisions capable of independent use corresponds to the sum of the respective parts. This is an error constituting a violation of law regarding the factual assumptions of law.

  3. Although the assessment proceeds in accordance with the IMI Code rules, the legislator makes exceptions for aspects that require appropriate adaptations, as is the case here, since floors or divisions capable of independent use are not considered as property, but only autonomous fractions in the horizontal ownership regime are, as provided in no. 4 of article 2 of the IMI Code.

  4. What results from the law and what the legislator intended to tax with item 28.1 is properties as a single legal-tax reality.

  5. The subjection to stamp duty results from the combination of two facts: the residential use designation and the patrimonial value of the urban property registered in the property register being equal to or exceeding € 1,000,000.00

  6. The Claimant thus understands that we are faced with a violation of the principles of tax equality and contributive capacity.

  7. It cannot be seen how the taxation could have violated the principle of equality since there is no discrimination between properties constituted in horizontal ownership and properties in full or vertical ownership or between properties with residential use and properties with other uses.

  8. Horizontal and vertical ownership are differentiated legal institutes which the legislator may subject to distinct and differentiated legal-tax treatment without this being considered arbitrary. They are different civil law regimes which fiscal law respects.

  9. The constitution in horizontal ownership results in the division of full ownership and the independence or autonomy of each of the fractions constituting it, whereas properties in full ownership constitute a single legal-tax reality. They are different realities valued by the legislator in also different ways, whereby the collection notices remain entirely valid.

  10. It concludes by requesting that the present petition for arbitral pronouncement be judged as unfounded, absolving the Respondent from the claim, or if the exception raised regarding the material incompetence of the Arbitral Tribunal is not deemed duly founded.

XXX

THE PLEADINGS

From the Claimant

  1. The Claimant contends that the petition filed does not contemplate solely the first installments, which does not result either from the spirit or the letter of the petition for constitution of the Arbitral Tribunal.

  2. It clearly results from its petition, elaborated with precision, that it challenged the assessment acts and not any of the installments and that the tax can be paid and clarified that the reference made to payment of the first installments concerns solely the purpose of giving notice of payment of the first installments which were the only ones notified.

  3. At the end of the petition it is clearly identified the claim for "declaration of illegality of the acts assessing stamp duty identified above, and the consequent annulment, with all legal consequences, for the same to violate the provision contained in item no. 28.1 of the TGIS.

  4. The reference made to the evidence of payment made by the Claimant aims exclusively to demonstrate the timeliness of the petition filed, clarifying that the economic benefit sought corresponds to the value of the stamp duty assessments, regardless of whether such payment may be made in installments.

  5. The Claimant further invokes the arbitral decisions rendered on these same matters in cases CAAD 417/2015-T and 420/2015-T in which the parties are precisely the same, with the exact same content as these proceedings with the sole difference that they concern different assessments.

From the Respondent

  1. The Tax Authority maintains in full the entire content of its response, demonstrative of the absence of any illegality as well as the absence of any unconstitutionality.

  2. In Decision 590/2015 - Case 542/2014 of 11/11/2015, the Constitutional Court ruled that the stamp duty calculated by the application of item 28 of the TGIS on a property in vertical ownership did not violate either the principle of tax equality, nor the principle of contributive capacity nor the principle of proportionality.

This is the matter in dispute and which is under consideration.

Proven Facts

  1. The Claimant is the legitimate owner of the properties described and subject to taxation.

  2. The properties are not constituted as horizontal property but rather are constituted by floors or divisions capable of autonomous and independent use, that is, they are constituted as full or vertical ownership.

  3. The dwellings referred to have been treated for IMI purposes, unit by unit.

  4. None of the floors or divisions capable of independent use has, in the property register, a patrimonial tax value assigned in evaluation in accordance with the IMI Code equal to or exceeding € 1,000,000.00;

Unproven Facts

There are no other relevant issues.

DECISION

In view of the foregoing, this Arbitral Tribunal decides:

a) To judge wholly founded the petition for declaration of illegality, with the consequent annulment of the identified acts assessing stamp duty.

b) To judge founded the petition for indemnification on the ground of expenses with the provision of the guarantee.

VALUE OF THE CASE

In accordance with the provisions of article 306, nos. 1 and 2 of the Code of Civil Procedure and article 97-A no. 1 (a) of the Code of Tax Procedure and article 3, no. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the case is valued at € 55,228.48

COSTS

The costs in the amount of € 2,142.00 (Table I, attached to the Regulations on Costs in Tax Arbitration Proceedings are borne by the Respondent (article 24 of the CAAD Regulations, in tax arbitration matters.

On 18/07/2016

NOTIFY

The Arbitrator

(Fernando Pinto Monteiro)

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto de Selo) under Verba 28.1 of the TGIS on high-value urban properties in Portugal?
Stamp Tax under Verba 28.1 of the TGIS is a tax levied on high-value urban properties with residential use in Portugal. The critical legal question addressed in this case is the valuation threshold: whether the €1,000,000 patrimonial tax value threshold applies to the entire property's global value or to individual floors and divisions capable of independent use. For properties in vertical ownership (full ownership with divisible floors), taxpayers argue that each division should be evaluated separately, consistent with IMI Code principles. The tax applies to properties registered in the urban property register with residential use designation, assessed annually based on patrimonial tax values.
Does the CAAD Arbitral Tribunal have material jurisdiction to rule on Stamp Tax disputes under Verba 28 of the TGIS?
Yes, the CAAD (Centro de Arbitragem Administrativa) Arbitral Tribunal has material jurisdiction to rule on Stamp Tax disputes under Verba 28 of the TGIS. This case demonstrates that taxpayers can request the constitution of an Arbitral Tribunal to challenge Stamp Duty assessments. The tribunal's jurisdiction extends to declarations of both illegality and unconstitutionality of tax assessment acts, as evidenced by the claimant's petition seeking such pronouncements. The arbitral system provides an alternative dispute resolution mechanism for tax controversies, including complex interpretative questions about the application of stamp duty provisions to different property ownership structures.
How is Stamp Tax calculated for properties held in full ownership without horizontal property division?
For properties held in full vertical ownership without horizontal property division, Stamp Tax calculation depends on the interpretation of applicable law. The Tax Authority's position is to calculate the tax based on the total global patrimonial value of the entire property. However, taxpayers argue that the calculation should follow IMI Code principles (subsidiarily applicable under Article 67(2) of the Stamp Duty Code), treating each floor or division capable of independent use as a separate taxable unit. Under this interpretation, only divisions with individual patrimonial values equal to or exceeding €1,000,000 and residential use designation would be subject to the tax. The resolution of this methodology affects whether properties with multiple divisions below the threshold individually but exceeding it collectively are taxable.
Can taxpayers challenge the constitutionality of Stamp Tax assessments on urban properties through arbitration?
Yes, taxpayers can challenge the constitutionality of Stamp Tax assessments on urban properties through arbitration. This case explicitly demonstrates that arbitration petitions can seek declarations of both illegality and unconstitutionality of tax assessment acts. The claimant requested the Arbitral Tribunal to declare the assessments unconstitutional as applied to properties in vertical ownership. Constitutional challenges in tax arbitration may address violations of fundamental principles such as fiscal legality, equality, and proportionality. The arbitral system permits comprehensive review of tax acts, including constitutional dimensions, providing taxpayers an effective mechanism to contest assessments that allegedly violate constitutional guarantees beyond mere statutory interpretation.
What are the grounds for annulment of Stamp Tax liquidation acts related to the 2014 tax year under Portuguese law?
Grounds for annulment of Stamp Tax liquidation acts for the 2014 tax year include: (1) illegality of the assessment based on incorrect interpretation of item 28.1 of the TGIS regarding which patrimonial value (global versus individual divisions) determines tax liability; (2) unconstitutionality of the assessment as applied; (3) violation of the principle of fiscal legality by applying inconsistent valuation criteria compared to the subsidiarily applicable IMI Code; (4) incorrect determination of the taxable base by using total property value instead of individual division values for properties in vertical ownership; and (5) failure to respect the material nature of property use and the treatment of divisions capable of independent use as established in prior arbitral jurisprudence and IMI registration practices.