Process: 418/2017-T

Date: March 12, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 418/2017-T, the CAAD arbitral tribunal examined a stamp duty assessment of €10,121.93 levied under item 28.1 of the General Stamp Duty Table. This provision imposes a 1% annual tax on residential properties with a Valor Patrimonial Tributário (VPT/TPA) equal to or exceeding €1,000,000. The claimant owned an urban property originally valued at €954,140.00 (notified in 2008-2009), which underwent an automatic registry update to €1,012,193.46, triggering the stamp duty obligation. The claimant challenged the assessment on two grounds: (1) defect in reasoning (vício de fundamentação), arguing the assessment notice lacked necessary information, and (2) failure to notify the updated TPA value that served as the tax base. The Tax Authority argued that automatic registry updates under article 138 of the Property Tax Code do not require notification, unlike new property evaluations, and that the assessment notice contained sufficient reasoning. The tribunal emphasized that the claimant was never notified of the TPA change from the original €954,140.00 to €1,012,193.46, which crossed the critical €1 million threshold. While the decision text is incomplete, the tribunal's factual findings and legal analysis suggest concern about assessing stamp duty based on a non-notified TPA value. The case highlights critical issues regarding taxpayer notification rights, the effectiveness of administrative acts, and the procedural requirements for stamp duty assessments on high-value properties, with implications for property owners nationwide facing similar automatic valuation updates.

Full Decision

ARBITRAL DECISION

The Arbitrator Dr. Maria Antónia Torres, appointed by the Ethics Council of the Administrative Arbitration Centre ("CAAD") to form this Single Arbitral Tribunal, constituted on 18 September 2017, decides as follows:

REPORT

1.1. A…, taxpayer no. …, residing at… Street, no. …, …, notified of the stamp duty assessment act no. 2014…, with collection notes no. 2015…, no. 2015… and no. 2015…, and following the dismissal order of the hierarchical appeal filed, requested the establishment of an arbitral tribunal, pursuant to article 2, paragraph 1, subparagraph a), and article 10, both of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"[1]).

1.2. The request for arbitral determination has as its object the declaration of illegality, and consequent annulment, of the stamp duty assessment act no. 2014…, with collection notes no. 2015…, no. 2015… and no. 2015…, relating to the year 2014, and relating to the property, in full ownership, recorded in the urban property registry no. …, of the Union of Parishes of … and …-…, better identified in the initial petition presented by the Claimant, which is hereby considered articulated and reproduced for all legal purposes.

According to the initial petition, the Claimant was notified of the assessment act referred to above, with the amount payable being the total sum of €10,121.93 (ten thousand one hundred and twenty-one euros and ninety-three cents), to be paid in three installments on 30 April 2017, 31 July 2015 and 30 November 2015, which it did. Not agreeing with such stamp duty assessment, and after dismissal of the voluntary claim and hierarchical appeal filed by the Claimant, the latter requested the establishment of this Arbitral Tribunal, a request that was accepted.

1.3 The Claimant considers, from the outset, that the assessment act should be considered illegal due to a defect in reasoning, considering that the assessment notice does not contain all the information necessary for the taxpayer to understand the act in question.

The Claimant further maintains the illegality of the act under analysis, given that it was not notified of the TPA assigned to the property and which served as the basis for the stamp duty assessment. The Claimant states that it is a property in full ownership, without units or divisions capable of independent use, with respect to which, through Official Letters no. …, of 21 October 2008, and no. …, of 29 January 2009, was notified that, as a result of the evaluation carried out on the property, was assigned a TPA of €954,140.00. As appears from the record, and was confirmed by the Respondent during the voluntary procedure, as evidenced by documents attached to the record, the Claimant was not notified of any changes to the TPA.

However, the stamp duty assessment under dispute was made pursuant to item 28.1 of the General Stamp Duty Table, with reference to a TPA of €1,012,193.46.

1.4. The Respondent's position is that the allegation of a defect in reasoning should not succeed, given that such duty does not require an exhaustive description of all the reasons underlying the decision of the Tax Authority, but sufficient ones will suffice for the taxpayer to be informed as to the Respondent's cognitive and evaluative process. This occurs, according to the Respondent, when the addressee demonstrates having understood its grounds, which it believes is the case.

The Respondent also understands that the assessment act depends on two elements: (i) residential use of the property and (ii) TPA exceeding €1,000,000, and that both are satisfied in the case at hand.

The Respondent also maintains its position that, as the TPA of the property in 2014 resulted from a mere update of the registry, as provided for by law, and not from an evaluation of the property, there is no need to have the value resulting from the update notified to the Claimant.

The Respondent further states, which we understand to be an error, that it is a property in full ownership with divisions capable of independent use, and setting out its position on the matter. However, this does not appear to be the case, based on the documents attached to the record.

1.5. The meeting of the arbitral tribunal provided for in article 18 of the RJAT was dispensed with.

PROCEEDINGS

The Tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.

The parties have legal personality and judicial capacity, are legitimate and are regularly represented (cf. articles 4 and 10, paragraph 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

No nullities were identified in the proceedings.

FACTUAL MATTER

As relevant to the substantive decision, the Tribunal considers the following facts proven:

  • The Claimant is the owner of a property in full ownership, recorded in the urban property registry no. …, of the Union of Parishes of … and… – …;

  • It is, in accordance with the documentation attached to the record, a property in full ownership without units or divisions capable of independent use;

  • The Claimant received the stamp duty assessment notice no. 2014…, with collection notes no. 2015…, no. 2015… and no. 2015…, relating to the year 2014 and to the property referred to above, having made payment of the amount of tax due;

  • The said assessment is made pursuant to item 28.1 of the Stamp Duty Table, considering (i) the existence of residential use (which is the case) and (ii) a TPA equal to or exceeding €1,000,000;

  • The Claimant filed a Hierarchical Appeal and Voluntary Claim of the said assessment notice, both requests having been dismissed;

  • The Claimant was notified by Official Letter no. …, of 21 October 2008, and by Official Letter no. …, of 29 January 2009, of the evaluation carried out on the property, having been assigned a TPA of €954,140.00.

  • As appears from the record, and was confirmed by the Respondent during the voluntary procedure, the Claimant was not notified of any changes to the TPA.

  • Subsequently, an update of the registry value occurred, in accordance with article 138 of the Property Tax Code, which was not notified to the Claimant, and which served as the basis for the assessment notice under dispute, and better identified in the record, with the TPA changing to €1,012,193.46.

Facts Not Proven:

No essential facts with relevance to the assessment of the merits of the case were found which have not been proven.

Basis of Factual Findings:

The conviction about the facts deemed proven was based on the evidence presented by the Claimant and the Respondent, attached to the record.

4. ON THE LAW

With the factual matter established, it is important to examine the legal issues raised by the parties.

The issue arises due to taxation in the form of stamp duty of ownership, usufruct or right of surface of urban properties whose taxable property value recorded in the registry is equal to or exceeding €1,000,000, the tax being due at the rate of 1% on the taxable property value used for Property Tax purposes, for a property with residential use.

The Claimant begins by raising the lack of notification of the act determining the TPA which preceded the stamp duty assessment which is the subject of this action, an act which, consequently, would be ineffective as far as it is concerned. In fact, it was notified by Official Letter no. …, of 21 October 2008, and by Official Letter no. …, of 29 January 2009, that as a result of the evaluation carried out on the property, was assigned a TPA of €954,140.00. Following such notifications, the Claimant was not notified of any other evaluation of the property. In fact, it is clear from what was stated by both the Claimant and the Respondent that the TPA of the property which served as the basis for the disputed assessment was not notified to the Claimant, resulting from automatic update of the registry.

Now, we believe it is undeniable that the act determining the TPA of an urban property must be notified to its addressee, regardless of the nature, official or otherwise, of the procedure in which it is inserted.

The requirement of notification is, first and foremost, a constitutional imperative (article 268, paragraph 3 of the Constitution of the Portuguese Republic ("CRP"), according to which "[a]dministrative acts are subject to notification to the interested parties, in the form provided for by law, and require express and accessible reasoning when they affect legally protected rights or interests"). In the same sense, article 36, paragraph 1 of the Tax Procedure and Process Code reinforces this, which provides that acts in tax matters "which affect the rights and legitimate interests of taxpayers only produce effects as regards them when they are validly notified to them", with the effectiveness of the decision being dependent on notification, as also expressed by article 77, paragraph 6 of the General Tax Law.

Thus, an act that was not notified to the taxpayer is ineffective and is not legally enforceable against him. It is irrelevant whether we are dealing with (i) an official update within the framework of the general evaluation scheme of urban properties, whose initiative is attributed to the central services of the Directorate-General for Tax Affairs; or (ii) an official update contemplated in article 13, paragraph 3 of the Property Tax Code, under the responsibility of the Finance Chief; or (iii) an update based on a declaration submitted by the taxpayer (article 13, paragraph 1 of the Property Tax Code). Any of the evaluation procedures are subject to the same rules and evaluation operations, and must in any case be notified to the taxpayer.

The jurisprudence of the Supreme Administrative Court ("SAC") corroborates that "the reasoning of the act determining the TPA, whether resulting from evaluation or from update, must be communicated to the taxpayer of the Property Tax to be assessed on the basis of such taxable matter":

"I – Tax acts are subject to reasoning requirements (art. 268, para. 3, art. 77 of the General Tax Law and art. 125 of the Administrative Procedure Code).

II – The reasoning of the act determining the TPA, whether resulting from evaluation or from update, must be communicated to the taxpayer of the Property Tax to be assessed on the basis of such taxable matter.

III – If it has not been, and also the Property Tax assessment does not disclose how the TPA was determined, that assessment cannot be considered sufficiently reasoned, all the more so since paragraph 2 of article 77 of the General Tax Law requires that the reasoning of tax acts be comprised, among other things, of the operations for determining the taxable matter."

In the same line, Decision 036/12 of 19 April 2012 states that "the Property Tax assessment that does not account in any way for how the taxable property value was determined cannot be considered sufficiently reasoned, unless it could be demonstrated that the Tax Authority had previously made the pertinent communication of the reasons why that value was set at the amount considered in that act." – see in this regard the Decisions rendered in proceedings no. 036/12, of 19 April 2012, no. 0659/12, of 19 September 2012 (Reporter: Francisco Rothes) and no. 0822/12, of 17 October 2012 (Reporter: Fernanda Maçãs).

Having not been notified of the determination of the taxable matter, i.e., of the establishment of the TPA, it is sustainable his position that the fact that the assessment act does not indicate the reason for the new taxable value, exceeding the TPA that had previously been notified to him, and does not allow him to understand in what the evaluation procedure in question originated in the general evaluation scheme provided for in articles 15-A to 15-P of Decree-Law no. 287/2003, or in articles 37 to 46 of the Property Tax Code, or in any other legal provisions, constitutes a violation of the duty to reason tax acts, under articles 268, paragraph 3 of the Constitution of the Portuguese Republic, 77, paragraphs 1 and 2 of the General Tax Law and 125 of the Administrative Procedure Code, as set out above, and constitutes a formal defect that invalidates the assessment.

On the Request for Compensatory Interest:

The Claimant petitions the condemnation of the Respondent to pay compensatory interest, provided for in articles 43 of the General Tax Law and 61 of the Tax Procedure and Process Code.

It is clear in the record that the illegality of the disputed tax assessment act is directly attributable to the Respondent, which, on its own initiative, engaged in it without respecting all legal procedures.

Consequently, the Claimant is entitled to receive compensatory interest on the amounts paid, pursuant to the provisions of articles 43, paragraph 1 of the General Tax Law and 61 of the Tax Procedure and Process Code.

5. DECISION:

In light of the foregoing, it can only be concluded that the Claimant was incorrectly taxed, terms in which, and with the reasoning set out above, this arbitral tribunal decides to find well-founded the request for a declaration of illegality of the stamp duty assessment tax act, relating to the year 2014, better identified above, with reimbursement of the amount of tax paid and respective compensatory interest.

The value of the case is set at €10,121.93 (ten thousand one hundred and twenty-one euros and ninety-three cents), in accordance with the provisions of articles 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97-A, paragraph 1, subparagraph a) of the Tax Procedure and Process Code and 306 of the Civil Procedure Code.

The amount of costs is set at €918 (nine hundred and eighteen euros) under article 22, paragraph 4 of the Legal Regime of Tax Arbitration and of Table I attached to the RCPAT, to be paid by the Respondent, in accordance with the provisions of articles 12, paragraph 2 of the Legal Regime of Tax Arbitration and 4, paragraph 4 of the Regulation of Costs in Tax Arbitration Proceedings.

Notification shall be made.

Lisbon, 12 March 2018

The Arbitrator

(Maria Antónia Torres)

Text prepared by computer, in accordance with article 131, paragraph 5 of the Civil Procedure Code, applicable by virtue of article 29, paragraph 1, subparagraph e) of the Legal Regime of Tax Arbitration.

The text of this arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] Acronym for Legal Regime of Tax Arbitration.

Frequently Asked Questions

Automatically Created

What is the Imposto do Selo (Stamp Tax) obligation under clause 28.1 of the General Stamp Tax Table for properties exceeding €1 million?
Under item 28.1 of the General Stamp Duty Table, ownership, usufruct, or surface rights of urban properties with residential use are subject to annual stamp duty at a rate of 1% when the Valor Patrimonial Tributário (taxable property value) equals or exceeds €1,000,000. The tax is calculated on the VPT registered for Property Tax (IMI) purposes.
Can a Stamp Tax assessment be annulled if the taxpayer was not notified of changes to the Valor Patrimonial Tributário (VPT)?
Yes. This arbitral decision suggests that a Stamp Tax assessment can be annulled if based on a VPT that was not properly notified to the taxpayer. The tribunal found that while the Tax Authority claimed automatic registry updates under article 138 of the Property Tax Code do not require notification, the lack of notification of the updated VPT (from €954,140.00 to €1,012,193.46) raised serious questions about the effectiveness of that valuation for stamp duty purposes and the validity of the resulting assessment.
What constitutes a valid notification of the VPT for purposes of Imposto do Selo on high-value residential properties?
Valid notification of the VPT requires formal communication to the taxpayer of the property valuation. The case distinguishes between new property evaluations (which clearly require notification via official letter) and automatic registry updates. While the Tax Authority argued that automatic updates do not require notification, the tribunal's analysis suggests that for a VPT to serve as a valid basis for stamp duty assessment, the taxpayer must be informed of the value, particularly when it crosses the €1,000,000 threshold triggering the tax obligation.
How does the CAAD arbitral tribunal review the legality of Stamp Tax assessments based on insufficient grounds (vício de fundamentação)?
The CAAD arbitral tribunal reviews whether the assessment notice contains sufficient grounds (fundamentação) for the taxpayer to understand the Tax Authority's cognitive and evaluative process. While not requiring exhaustive detail of all underlying reasons, the reasoning must be adequate for the addressee to comprehend the basis for the decision. The tribunal examines whether the taxpayer received enough information to understand why the tax was assessed, considering factors such as identification of the legal basis, tax calculation elements, and the property value used.
What remedies are available to taxpayers who disagree with an Imposto do Selo assessment after an unsuccessful hierarchical appeal (recurso hierárquico)?
After an unsuccessful hierarchical appeal (recurso hierárquico), taxpayers can request the establishment of an arbitral tribunal before the Centro de Arbitragem Administrativa (CAAD) pursuant to article 2, paragraph 1, subparagraph a), and article 10 of Decree-Law no. 10/2011 (RJAT - Tax Arbitration Legal Regime). This provides an alternative dispute resolution mechanism to challenge the legality of tax assessments outside the traditional court system, as demonstrated in this case where the claimant successfully initiated arbitration proceedings.