Process: 419/2015-T

Date: March 2, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to the total patrimonial taxable value (VPT) of properties constituted as vertical ownership, or to each independent unit separately. The claimant, A... S.A., challenged Stamp Tax assessments totaling €56,260 for 2014 on three Lisbon properties organized as vertical ownership with independently usable divisions. While the global VPT of these properties exceeded €1,000,000, no individual floor or unit surpassed this threshold. The claimant argued that tax incidence should be determined by examining each independent unit's VPT, not the aggregate property value, asserting that the Tax Authority's approach violated principles of legality, fiscal equality, and the prevalence of material truth over formal legal constructs. The Tax and Customs Authority defended its position that the relevant patrimonial value for Stamp Tax purposes is the total property value, regardless of internal divisions. Additionally, the Authority raised a preliminary exception arguing that the arbitral tribunal lacked material competence since the claimant challenged only collection notices rather than assessment acts themselves. The arbitral tribunal, following procedural requirements under the RTAT, first addressed the competence exception by analyzing the concept of assessment in both broad and strict senses. The case highlights the critical distinction between properties registered as single units versus those with registered independent fractions, a recurring issue in CAAD jurisprudence regarding high-value urban properties. The claimant sought reimbursement of amounts paid plus default and compensatory interest, citing consistent CAAD precedents supporting the unit-by-unit assessment approach for vertically divided properties.

Full Decision

Arbitral Decision

1. Report

On 08-07-2015, A…, S.A., collective entity no. …, with registered office at …, no. …, …-… Lisbon, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal with a view to the declaration of illegality of the acts of Seal Tax assessments in the total value of 56,260.00 €, relating to the year 2014 and item 28.1 of the General Seal Tax Table. Said assessments relate to three urban properties: one located on Rua…, no. … to…, parish of…, municipality of Lisbon, registered in the urban property matrix of said parish under article…; another located on Rua…, no. …, … and…, parish of…, municipality of Lisbon, registered in the urban property matrix of said parish under article…; and another located on Rua…, no. …, … and … and …, parish of…, municipality of Lisbon, registered in the urban property matrix of said parish under article… . These three properties are constituted as vertical ownership and have divisions capable of independent utilization.

The Claimant alleges that subjection to seal tax is determined, not by the global patrimonial taxable value (VPT) of the property, but by the VPT attributed to each one of the floors or independently used divisions. And since none of the floors with independent utilization has a patrimonial taxable value (VPT) exceeding one million euros (1,000,000 €), neither Seal Tax nor any amount thereof could be assessed or collected. The Claimant refers that the criteria adopted by the T.A.A. violate the principles of legality and fiscal equality, as well as the prevalence of material truth over juridical-formal reality. The Claimant further refers to several CAAD decisions that have already ruled on this matter.

The Claimant finally requests the reimbursement of the amounts paid relating to the first installments of the Seal Tax assessments in question, plus default interest and compensatory interest.

A sole arbitrator was designated on 28-08-2015, Suzana Fernandes da Costa. In accordance with the provision of article 11, no. 1, paragraph c) of the RTAT, the singular arbitral tribunal was constituted on 14-09-2015.

The Tax and Customs Authority submitted a reply on 14-10-2015, defending the maintenance of the tax acts in question, requested the dismissal of the claim, and alleged that the patrimonial value relevant for purposes of seal tax incidence is the total patrimonial value of the urban property and not the patrimonial value of each one of the floors or divisions that compose it, even if they are capable of independent utilization.

The T.A.A. presented, in its reply, a defense by exception, stating that the Arbitral Tribunal is materially incompetent to assess the legality of a payment of an assessment act, which is not in itself a tax act, stating that the Claimant challenges exclusively the collection notices that constitute the first installments of the tax relating to the three properties.

On 03-11-2015, a writ was issued scheduling the meeting provided for in article 18 of the RTAT, for the day 24-11-2015 at 11:30 hours.

And on 24-11-2015 a writ was issued to annul the meeting, due to illness of the arbitrator judge, and a new date was set for the meeting, day 05-01-2016 at 14:30 hours.

At the meeting, the illustrious representative of the Claimant and the illustrious legal experts in representation of the Director-General of the Tax and Customs Authority were present.

The representative of the Claimant ruled on the exception invoked by the Respondent, in the sense of its lack of merit.

The representative of the Respondent declared to maintain what was alleged in the reply.

The arbitral tribunal also decided to designate the day 25-01-2016 for the pronouncement of the arbitral decision. Finally, the Claimant was warned to pay the subsequent arbitral fee by that date, and to communicate said payment to the CAAD.

Having it been found that the record did not reflect whether or not the parties opposed the waiver of arguments, on the same day a writ was issued ordering the notification of the parties so that within 5 days they would rule on the possible waiver of arguments.

On 07-01-2016, the Claimant communicated that it had no objection to the waiver of arguments. And the Respondent did not rule on the matter.

On 21-01-2016 a writ was issued ordering the notification of the Claimant and Respondent to, if they so desired, in this order and successively, submit written arguments within 15 days. In the same writ, the deadline for the pronouncement of the arbitral decision was extended to the day 02-03-2016.

The Claimant submitted its arguments on 04-02-2016, and the T.A.A. presented arguments on 18-02-2016.

The parties possess legal personality and capacity and are legitimate (articles 4 and 10, no. 1 and 2 of the RTAT and article 1 of Regulation no. 112-A/2011 of 22 March).

The arbitral claim is timely, in accordance with article 10, no. 1, paragraph a) of Decree-Law no. 10/2011 of 20 January and article 102, no. 1, paragraph a) of the Code of Procedure and Tax Process.

The process does not suffer from nullities and no preliminary questions were raised.

2. On the Exception of Incompetence of the Arbitral Tribunal

The T.A.A. presented, in its reply, a defense by exception, stating that "the Arbitral Tribunal is materially incompetent, in light of the provision of art. 2 of the RTAT, to assess the legality of a payment of an assessment act, which is not in itself a tax act, there being no doubt whatsoever, even by the value of the case and by all documents attached to it, that the Claimant challenges exclusively the collection notices that constitute the 1st installments of the tax relating to the three properties". And it transcribes parts of the decision of the CAAD case no. 726/2014-T.

In accordance with article 608 of the Code of Civil Procedure, the judgment shall first know of procedural questions that may determine the absolution of the instance, according to the order imposed by its logical precedence, the judge being required to resolve all questions that the parties have submitted for assessment, except those whose decision is affected by the solution given to others.

Having the T.A.A. invoked the exception of incompetence of the Arbitral Tribunal to assess the arbitral ruling request lodged by the Claimant, it is necessary that the Tribunal rule on the same immediately.

In accordance with the provision of article 2 of the RTAT, the competence of arbitral tribunals comprises the declaration of illegality of acts of assessment of taxes, self-assessments, withholding at source and payment on account, as well as the declaration of illegality of acts of determination of taxable matter when it does not give rise to assessment of any tax, of acts of determination of taxable matter and of acts of fixing patrimonial values.

Let us examine the concept of assessment. In accordance with José Casalta Nabais, in the book Tax Law, 3rd edition, Almedina 2015, page 318, "assessment in the broad sense, that is, as a set of all operations intended to ascertain the amount of the tax, comprises subjective assessment intended to determine or identify the taxpayer or passive subject of the tax legal relationship, objective assessment through which the taxable or taxable matter of the tax is determined (and, likewise, the rate to be applied, in case of plurality of rates)", while "assessment in the strict sense" translates to "the determination of the collection through the application of the rate to the taxable or taxable matter and the (possible) deductions to the collection".

Article 23, no. 7 of the Seal Tax Code states that where the tax is due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, applying, with the necessary adaptations, the rules contained in the Property Tax Code. And article 113, no. 2 of the Property Tax Code states that assessment is carried out in the months of February and March of the year following that to which it relates.

Thus, even though it may be paid in various installments, this fact does not imply that multiple assessments have occurred.

In the present case, the Claimant presents the arbitral claim "with a view to the declaration of illegality and unconstitutionality and consequent annulment of the acts of assessment of Seal Tax, item 28.1 of the GSTT, relating to the year 2014, with a collection of 56,260.00 € (…)". Thus, taking into account the Claimant's petition and the Seal Tax assessments attached by it, we understand that the Claimant intended, with the present case, to request the annulment of the Seal Tax assessments of the three properties in question, for the year 2014, in the total value of 56,260.00 €, and not merely one of the three installments of said Seal Tax.

Therefore, the exception of incompetence of the Arbitral Tribunal to know the claim is without merit, since it is not the assessment of the legality of a payment of an assessment act, but rather the assessment of the legality of an act of assessment of Seal Tax.

3. Factual Matter

3.1. Proven Facts:

After examining the documentary evidence produced and the position of the parties contained in the procedural documents, the following facts are considered proven and of interest for deciding the case:

  1. The Claimant was, in 2014, owner of the urban property located on Rua…, no. … to…, parish of…, municipality of Lisbon, registered in the urban property matrix of said parish under no. …, and is constituted in full ownership with 19 divisions capable of independent utilization, as per the property card attached to the arbitral claim as document 1.

  2. The Claimant was notified of the following Seal Tax assessments for the year 2014, attached to the arbitral claim as documents 4 to 19:

  • assessment no. 2015… in the value of 1,688.90 €, relating to the 1st floor right of the aforesaid property, whose VPT is 168,890.00 €;

  • assessment no. 2015 … in the value of 1,688.90 €, relating to the 1st floor left of the aforesaid property, whose VPT is 168,890.00 €;

  • assessment no. 2015 … in the value of 1,603.50 €, relating to the 2nd floor right of the aforesaid property, whose VPT is 160,350.00 €;

  • assessment no. 2015… in the value of 1,688.90 €, relating to the 2nd floor left of the aforesaid property, whose VPT is 168,890.00 €;

  • assessment no. 2015 … in the value of 1,619.50 €, relating to the 3rd floor right of the aforesaid property, whose VPT is 161,950.00 €;

  • assessment no. 2015 … in the value of 1,705.80 €, relating to the 3rd floor left of the aforesaid property, whose VPT is 170,580.00 €;

  • assessment no. 2015… in the value of 1,619.50 €, relating to the 4th floor right of the aforesaid property, whose VPT is 161,950.00 €;

  • assessment no. 2015 … in the value of 1,705.80 €, relating to the 4th floor left of the aforesaid property, whose VPT is 170,580.00 €;

  • assessment no. 2015… in the value of 1,635.50 €, relating to the 5th floor right of the aforesaid property, whose VPT is 163,550.00 €;

  • assessment no. 2015 … in the value of 1,722.70 €, relating to the 5th floor left of the aforesaid property, whose VPT is 172,270.00 €;

  • assessment no. 2015 … in the value of 1,635.50 €, relating to the 6th floor right of the aforesaid property, whose VPT is 163,550.00 €;

  • assessment no. 2015 … in the value of 1,722.70 €, relating to the 6th floor left of the aforesaid property, whose VPT is 172,270.00 €;

  • assessment no. 2015… in the value of 1,651.60 €, relating to the 7th floor left of the aforesaid property, whose VPT is 165,160.00 €;

  • assessment no. 2015 … in the value of 1,739.60 €, relating to the 7th floor left of the aforesaid property, whose VPT is 173,960.00 €;

  • assessment no. 2015 … in the value of 978.30 €, relating to the 8th floor right of the aforesaid property, whose VPT is 97,830.00 €;

  • assessment no. 2105 … in the value of 978.30 €, relating to the 8th floor left of the aforesaid property, whose VPT is 97,830.00 €.

  1. The Claimant was also, in 2014, owner of the urban property located on Rua…, no. …, … and…, parish of…, municipality of Lisbon, registered in the urban property matrix of said parish under no. …, and is constituted in full ownership with 21 divisions capable of independent utilization, as per the property card attached to the arbitral claim as document 2.

  2. The Claimant was notified of the following Seal Tax assessments for the year 2014, attached to the arbitral claim as documents 20 to 36:

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 2A of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 3A of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 3B of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 3C of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 3D of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015… in the value of 656.60 €, relating to floor 4A of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 4B of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 4C of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 4D of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 5A of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 5B of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 5C of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 5D of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 6A of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 6B of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 6C of the aforesaid property, whose VPT is 65,660.00 €;

  • assessment no. 2015 … in the value of 656.60 €, relating to floor 6D of the aforesaid property, whose VPT is 65,660.00 €.

  1. The Claimant was also, in 2014, owner of the urban property located on Rua…, no. …, …, … and…, parish of…, municipality of Lisbon, registered in the urban property matrix of said parish under no. …, and is constituted in full ownership with 25 divisions capable of independent utilization, as per the property card attached to the arbitral claim as document 1.

  2. The Claimant was notified of the following Seal Tax assessments for the year 2014, attached to the arbitral claim as documents 37 to 56:

  • assessment no. 2015 … in the value of 1,157.70 €, relating to the 1st floor right of the aforesaid property, whose VPT is 115,770.00 €;

  • assessment no. 2015 … in the value of 650.10 €, relating to the 1st floor front of the aforesaid property, whose VPT is 65,010.00 €;

  • assessment no. 2015 … in the value of 1,365.20 €, relating to the 1st floor left of the aforesaid property, whose VPT is 136,520.00 €;

  • assessment no. 2015 … in the value of 1,157.70 €, relating to the 2nd floor right of the aforesaid property, whose VPT is 115,770.00 €;

  • assessment no. 2015 … in the value of 650.10 €, relating to the 2nd floor front of the aforesaid property, whose VPT is 65,010.00 €;

  • assessment no. 2015 … in the value of 1,155.20 €, relating to the 2nd floor left of the aforesaid property, whose VPT is 115,520.00 €;

  • assessment no. 2015 … in the value of 1,157.70 €, relating to the 3rd floor right of the aforesaid property, whose VPT is 115,770.00 €;

  • assessment no. 2015 … in the value of 650.10 €, relating to the 3rd floor front of the aforesaid property, whose VPT is 65,010.00 €;

  • assessment no. 2015 … in the value of 1,155.20 €, relating to the 3rd floor left of the aforesaid property, whose VPT is 115,520.00 €;

  • assessment no. 2015… in the value of 1,157.70 €, relating to the 4th floor right of the aforesaid property, whose VPT is 115,770.00 €;

  • assessment no. 2015 … in the value of 650.10 €, relating to the 4th floor front of the aforesaid property, whose VPT is 65,010.00 €;

  • assessment no. 2015 … in the value of 1,155.20 €, relating to the 4th floor left of the aforesaid property, whose VPT is 115,520.00 €;

  • assessment no. 2015 … in the value of 1,155.20 €, relating to the 5th floor right of the aforesaid property, whose VPT is 115,520.00 €;

  • assessment no. 2015 … in the value of 650.10 €, relating to the 5th floor front of the aforesaid property, whose VPT is 65,010.00 €;

  • assessment no. 2015 … in the value of 1,155.20 €, relating to the 5th floor left of the aforesaid property, whose VPT is 115,520.00 €;

  • assessment no. 2015 … in the value of 1,157.70 €, relating to the 6th floor right of the aforesaid property, whose VPT is 115,770.00 €;

  • assessment no. 2015 … in the value of 650.10 €, relating to the 6th floor front of the aforesaid property, whose VPT is 65,010.00 €;

  • assessment no. 2015 … in the value of 1,155.20 €, relating to the 6th floor left of the aforesaid property, whose VPT is 115,520.00 €;

  • assessment no. 2015… in the value of 835.80 €, relating to the 7th floor right of the aforesaid property, whose VPT is 83,580.00 €;

  • assessment no. 2015 … in the value of 891.50 €, relating to the 7th floor left of the aforesaid property, whose VPT is 89,150.00 €.

None of the floors or divisions with independent utilization possesses a patrimonial taxable value exceeding one million euros.

The Claimant proceeded to pay the first installment of the Seal Tax assessments aforementioned, as evidenced by the proof attached to the arbitral claim as document 57.

No other facts with relevance for deciding the case were proven.

3.2. Justification of Proven Factual Matter:

With respect to the proven facts, the arbitrator's conviction was based on the documents attached to the proceedings by the Claimant, namely the assessments and the property cards.

4. Matter of Law:

4.1. Subject and Scope of the Present Case

The question to be decided in the present proceedings is whether item 28.1 of the General Seal Tax Table (GSTT), in the case of properties not constituted as condominium ownership, applies to the sum of the patrimonial taxable value attributed to the different parts or floors (global VPT), or rather to the patrimonial taxable value of each part of the property with independent economic utilization.

On this question, among others, the following CAAD decisions have already ruled in cases number 280/2013-T, 26/2014-T, 88/2014-T, 206/2014-T, 290/2014-T, 428/2014-T, 451/2014-T, 457/2014-T, 458/2014-T and 567/2014-T, 724/2014-T, 152/2015-T, 174/2015-T, 236/2015-T, 311/2015-T, 411/2015-T, 431/2015-T, 449/2015-T, 461/2015-T, 463/2015-T, 474/2015-T and decision no. 047/15 of the Supreme Administrative Court (SAC).

4.2. Question of Patrimonial Taxable Value Relevant to the Application of Item 28.1 of the GSTT and the Alleged Violation of the Principle of Equality

According to the T.A.A., in a property under vertical ownership (or not constituted under condominium ownership regime) the criterion for determining the incidence of seal tax is the global patrimonial taxable value of the floors and divisions intended for housing.

For the Claimant, subjection to seal tax contained in item no. 28.1 of the GSTT should be assessed not by the total value of the property but by the value attributed to each one of the parts with independent utilization, according to their respective VPT.

Let us examine:

Law no. 55-A/2012, of 29 October, added item 28 to the General Seal Tax Table (GSTT), with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial taxable value contained in the matrix, in accordance with the Code of Property Tax (CIMI), is equal to or exceeding € 1,000,000 – on the patrimonial taxable value used for purposes of Property Tax:

28.1 – For property with housing designation – 1 % (…);

In the transitional provisions contained in article 6 of said Law no. 55-A/2012, the following rules were established:

c) The patrimonial taxable value to be used in the assessment of the tax corresponds to that which results from the rules provided for in the Code of Property Tax by reference to the year 2011; (…)

f) The applicable rates are the following:

i) Properties with housing designation assessed in accordance with the Code of Property Tax: 0.5 %;

ii) Properties with housing designation not yet assessed in accordance with the Code of Property Tax: 0.8 %;"

Item 28.1 GSTT and sub-paragraphs i) and ii) of paragraph f) of no. 1 of article 6 of Law no. 55-A/2012 contain a concept that is not used in any other tax legislation, which is that of "property with housing designation".

In turn, article 67, no. 2 of the Seal Tax Code, added by said Law, provides that "to matters not regulated in the present code relating to item 28 of the General Table, the CIMI is applied subsidiarily."

The rule of incidence refers to urban properties, the concept of which results from the provision of article 2 of the CIMI, with the determination of the VPT subject to the terms of the provision of article 38 and following articles of the same code.

In turn, article 6 of the CIMI indicates the different categories of urban properties, and determines that "housing, commercial, industrial or for services are buildings or constructions for which such licenses have been issued or, in the absence of a license, which have as their normal destination each of these purposes." (see paragraph a) of no. 1 of article 6 CIMI).

It is thus to be concluded that for the legislator it is irrelevant that the property is under vertical ownership or condominium ownership, what matters is only the material truth underlying its existence as an urban property and its utilization.

Since the Seal Tax Code (STC) refers to the Property Tax Code, we should consider that the registration in the property matrix of properties under vertical ownership, constituted by different parts, floors or divisions with independent utilization, obeys the same registration rules as those constituted under condominium ownership.

It follows therefrom that the respective Property Tax, as well as Seal Tax, are assessed individually in relation to each one of the parts. For this reason, the legal criterion for defining the incidence of the new tax must be the same.

Thus it is concluded as in decision no. 50/2013-T of the CAAD and in decision no. 047/15 of the SAC, according to which "if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties under vertical ownership, in the same manner as it establishes for properties under condominium ownership, it clearly established the criterion, which must be unique and unequivocal, for defining the incidence rule of item 28.1 of the GSTT".

It results thus from the law that seal tax under item 28.1 of the GSTT would only apply if one of the parts, floors or divisions with independent utilization presented a VPT exceeding one million euros (1,000,000.00 €), which does not occur in the present case.

The criterion defended by the T.A.A., which takes into account the sum of the parts, with the argument that the property would not be constituted under condominium ownership regime, finds no legal support and is contrary to the criterion that results from the CIMI and that applies by referral, in the context of Seal Tax.

Furthermore, the law itself expressly establishes, in the final part of item 28 of the GSTT, that Seal Tax applying to urban properties of value equal to or exceeding one million euros (1,000,000.00 €) applies "on the patrimonial taxable value used for purposes of Property Tax."

In conclusion, the patrimonial value relevant for purposes of applying item 28.1 of the GSTT is the VPT of the part, floor or division with independent utilization with housing designation, as concluded in decision no. 047/15 of the SAC.

The Claimant alleges that the application of item 28.1 of the GSTT violates the principle of equality enshrined in articles 13 and 104, no. 3 of the Constitution of the Portuguese Republic.

In accordance with the interpretation upheld above, the taxation of parts with independent utilization of value below one million euros is not covered by the incidence rule; therefore, its taxation effectively violates the principle of equality, more specifically in its corollaries of contributive capacity and fiscal proportionality.

Regarding the principle of equality, see CAAD decisions no. 50/2012-T and 218/2013-T, and Constitutional Court decisions no. 142/04 and 187/2013.

We conclude, as in CAAD decision no. 218/2013-T, by saying that "the Seal Tax assessment now under consideration manifestly violates the principle of fiscal equality provided for in article 13 of the CRP, because: i) it is based on a rule that treats taxpayers in identical situations very differently, with the measure of the difference not being assessed by their actual contributive capacity; ii) it is based on an arbitrary legal solution devoid of any rational foundation."

In the case of the proceedings, the three properties in question are under vertical ownership and contain various floors and divisions with independent utilization intended for housing, as proven above. Given that none of the floors intended for housing has patrimonial value equal to or exceeding one million euros (1,000,000.00 €), as results from the documents attached to the proceedings, it is concluded that the legal condition for seal tax incidence provided for in Item 28 of the GSTT is not met.

Looking now at the ratio legis of the provision in question in item 28.1 GSTT and citing CAAD decision no. 50/2013-T, "the legislator, in introducing this legislative innovation, considered as the determining element of contributive capacity urban properties, with housing designation, of high value (luxury), more precisely, of value equal to or exceeding one million euros (1,000,000.00€), on which it proceeded to apply a special rate of seal tax, intending to introduce a principle of taxation on wealth evidenced in the ownership, usufruct or right of superficies of luxury urban properties with housing designation. Therefore, the criterion was to apply the new rate to urban properties with housing designation, whose VPT is equal to or exceeding one million euros (1,000,000.00 €). Clearly the legislator understood that this value, when attributed to a housing unit (house, autonomous unit or floor with independent utilization) evidences a contributive capacity above average and, as such, capable of determining a special contribution to guarantee fair distribution of fiscal burden." Already when applied to a part or fraction that does not exceed said value of one million euros, the incidence rule is not met.

The principle of fiscal equality determines that equal treatment should be given fiscally to what is equal and different treatment to what is different. Now, the differentiated treatment of fractions or parts of a property is not justified merely by the fact that it is already under condominium ownership, as long as the fractions or parts have independent utilization.

As referred to in CAAD decision of case no. 218/2013-T, "The principle of fiscal equality is based on the general principle of equality provided for in article 13 of the CRP, resulting therefrom the principle of contributive capacity which, by constitutional imperative, is the presupposition and criterion of taxation."

Professor Casalta Nabais states that the principle of fiscal equality has inherent therein especially "the idea of generality or universality, in accordance with which all citizens are bound to comply with the duty to pay taxes, and of uniformity, requiring that such duty be assessed by the same criterion — the criterion of contributive capacity. This thus implies equal tax for those who have equal contributive capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those who have different contributive capacity in proportion to this difference (vertical equality)" (Casalta Nabais, Tax Law, 5th edition, Coimbra, 2009, page 151-152).

In CAAD decision of case no. 50/2013-T it can be read that "the tax legislator cannot treat equal situations differently. Now, if the property were under condominium ownership regime, none of its residential fractions would be subject to incidence of the new tax."

Thus, and in line with the jurisprudence of the Constitutional Court and the CAAD, we conclude on the violation of the principle of fiscal equality and contributive capacity.

5. On Compensatory Interest and Default Interest

The Claimant requested the condemnation of the T.A.A. to return the tax improperly paid, plus default interest and compensatory interest.

Article 43, no. 1 of the GTL establishes that "compensatory interest is due when it is determined, in gracious objection or judicial impugnation, that there was error attributable to the departments from which results payment of the tax debt in an amount higher than legally due".

In the case at hand, the error affecting the Seal Tax assessments is attributable to the Tax and Customs Authority which performed the assessment acts on its own initiative, therefore the Claimant is entitled to compensatory interest from the date of payment of each of the amounts until reimbursement, at the legal supplementary rate, in accordance with articles 43, nos. 1 and 4, and 35, no. 10, of the GTL, article 559 of the Civil Code and Regulation no. 291/2003, of 8 April.

As results from said article 43, no. 1 of the GTL, the right to compensatory interest depends on payment of a tax debt in an undue amount.

As the Seal Tax assessments are affected by illegality, compensatory interest is due from the date of payment until full reimbursement by the T.A.A., in accordance with articles 43 of the GTL and 61, no. 2 of the CPPT.

With respect to default interest, article 102, no. 2 of the GTL states that in case the judgment implies the restitution of tax already paid, default interest is due from the end of the period of its spontaneous execution.

However, default interest in favor of the taxpayer and compensatory interest pursue the same purpose. As is referred to in the decision of the Full Court of the SAC, of 24/10/2007, rec. no. 01095/05, "compensatory interest is intended 'to compensate the taxpayer for the prejudice caused by the improper payment of the tax obligation' and default interest aims to 'repair prejudices presumptively suffered [by the passive subject], derived from the unavailability of the amount not paid punctually". Thus, these two types of interest serve the same function, both corresponding to compensation awarded on the basis of civil liability and intended to repair prejudices arising to the taxpayer from the dispossession and consequent unavailability of a determined tax obligation.

The SAC decision of 06-02-2013, of case no. 01114/12, states that "since compensatory interest and default interest are intended to compensate the taxpayer for the same deprivation of the availability of the improperly assessed tax obligation, they are not cumulative for the same period of time".

This position is followed in various SAC decisions and in legal doctrine, as noted by Jorge de Sousa when he states that "on the assumption that both compensatory interest and default interest are presumptively from the legislative perspective an adequate compensation for the prejudices that the deprivation of the amount paid illegally causes to the taxpayer, it is to be excluded the possibility of accumulation of default interest and compensatory interest for the same period of time, since one cannot justify double compensation for the same deprivation of the availability of the amount improperly paid" (cf. Code of Procedure and Tax Process, 6th ed. Vol. I, page 547).

Therefore, the request for default interest in favor of the Claimant is without merit.

6. Decision

In light of the foregoing, it is determined:

a) to judge without merit the exception of incompetence of the Arbitral Tribunal;

b) to judge fully meritorious the claim filed by the Claimant, in the present tax arbitral proceeding, regarding the illegality of the Seal Tax assessments relating to the year 2014, no. 2015 … in the value of 1,688.90 €, no. 2015 … in the value of 1,688.90 €, no. 2015 … in the value of 1,603.50 €, no. 2015 … in the value of 1,688.90 €, no. 2015 … in the value of 1,619.50 €, no. 2015 … in the value of 1,705.80 €, no. 2015 … in the value of 1,619.50 €, no. 2015 … in the value of 1,705.80€, no. 2015 … in the value of 1,635.50 €, no. 2015 … in the value of 1,722.70€, no. 2015 … in the value of 1,635.50 €, no. 2015 … in the value of 1,722.70 €, no. 2015 … in the value of 1,651.60 €, no. 2015 … in the value of 1,739.60 €, no. 2015 … in the value of 978.30 €, no. 2015 … in the value of 978.30 €, no. 2015… in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 …in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015… in the value of 656.60€, no. 2015… in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015… in the value of 656.60 €, no. 2015 … in the value of 656.60 €, no. 2015… in the value of 1,157.70 €, no. 2015 … in the value of 650.10 €, no. 2015 … in the value of 1,365.20 €, no. 2015 … in the value of 1,157.70 €, no. 2015 … in the value of 650.10 €, no. 2015 … in the value of 1,155.20 €, no. 2015… in the value of 1,157.70 €, no. 2015 … in the value of 650.10 €, no. 2015… in the value of 1,155.20 €, no. 2015… in the value of 1,157.70 €, no. 2015 … in the value of 650.10 €, no. 2015 … in the value of 1,155.20 €, no. 2015 …. in the value of 1,155.20€, no. 2015 … in the value of 650.10 €, no. 2015 … in the value of 1,155.20 €, no. 2015 … in the value of 1,157.70 €, no. 2015 … in the value of 650.10 €, no. 2015… in the value of 1,155.20 €, no. 2015 … in the value of 835.80 €, no. 2015 … in the value of 891.50 €;

c) to judge meritorious the request for the condemnation of the Tax and Customs Authority to reimburse to the Claimant the value of improperly paid tax, plus compensatory interest in accordance with legal terms, from the date on which such payment was made until the date of full reimbursement thereof.

7. Value of the Case:

In accordance with the provision of article 306, no. 2 of the CPC and 97-A, no. 1, paragraph a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at 56,260.00 €.

8. Costs:

In accordance with article 22, no. 4 of the RTAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 2,142.00 €, due by the Tax and Customs Authority.

Let it be notified.

Lisbon, 2 March 2016.

Text prepared by computer, in accordance with article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by referral of article 29, no. 1, paragraph e) of the Tax Arbitration Regime, reviewed by me.

The sole arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Does Stamp Tax under verba 28.1 TGIS apply to the total property value or to each independent unit's VPT?
The central dispute concerns whether Stamp Tax under item 28.1 TGIS applies to the global patrimonial taxable value (VPT) of the entire property or to each independent unit's VPT separately. The claimant argued that for properties constituted as vertical ownership with independently usable divisions, the tax should be assessed on each floor or division individually. Since none of the independent units exceeded €1,000,000 in VPT, no Stamp Tax would be due. The Tax Authority contended that the relevant value is the total patrimonial value of the urban property as a whole, regardless of internal divisions capable of independent use. This interpretation determines the entire property's aggregate VPT for tax incidence purposes.
Can Stamp Tax be charged when no individual unit in a vertical property exceeds €1,000,000 in taxable value?
According to the claimant's position, Stamp Tax cannot be charged when no individual unit in a vertical property exceeds €1,000,000 in taxable value, even if the aggregate property value surpasses this threshold. The claimant asserted that item 28.1 TGIS should apply on a unit-by-unit basis for properties with independent divisions capable of separate utilization. The Tax Authority, however, maintained the opposite view: that Stamp Tax is properly assessed when the total patrimonial value exceeds €1,000,000, regardless of how the property is internally divided. The claimant referenced several CAAD decisions supporting the unit-based assessment approach, arguing that taxation of the global value violates legal principles when independent fractions exist.
How does the principle of fiscal equality apply to Stamp Tax on urban buildings with independent divisions?
The principle of fiscal equality (equality in taxation) requires that taxpayers in similar situations be treated equally. The claimant argued that the Tax Authority's approach of assessing Stamp Tax on the global property value violates this principle because it treats properties differently based solely on their formal registration structure rather than their economic reality. A property registered as separate independent fractions would be taxed on each fraction's VPT, while an identical property registered as vertical ownership with the same independently usable divisions would face tax on the aggregate value. This creates unequal treatment between economically equivalent situations. The claimant also invoked the principle of legality and the prevalence of material truth over juridical-formal reality, asserting that substance should prevail over form in determining tax incidence.
What is the CAAD arbitral procedure for challenging Stamp Tax assessments on high-value properties?
The CAAD (Centro de Arbitragem Administrativa) arbitral procedure for challenging Stamp Tax assessments follows the regime established in the RTAT (Legal Regime of Tax Arbitration). The taxpayer submits a request for constitution of an arbitral tribunal specifying the contested acts and grounds for illegality. A sole arbitrator or panel is designated, and the tribunal is formally constituted. The Tax Authority submits a reply defending the assessments or raising procedural exceptions. The tribunal may schedule a meeting under Article 18 RTAT where parties can present arguments. Parties may submit written arguments if they don't waive this right. The arbitral tribunal must decide within the established deadline, which can be extended. For Stamp Tax on high-value properties, claims must be filed within the statutory limitation period under Article 10 RTAT and Article 102 of the Tax Procedure Code.
Is the taxpayer entitled to a refund with interest when Stamp Tax is unlawfully assessed on vertical property units?
Yes, the taxpayer is entitled to a refund with interest when Stamp Tax is unlawfully assessed. The claimant in this case specifically requested reimbursement of amounts paid relating to the first installments of the contested Stamp Tax assessments, plus default interest (juros de mora) and compensatory interest (juros indemnizatórios). Default interest compensates for the delay in returning amounts that should not have been collected, while compensatory interest addresses the unlawful retention of funds by the State. When an arbitral tribunal declares tax assessments illegal, it orders the Tax Authority to refund the amounts paid. The right to interest on tax refunds is established in Portuguese tax law to ensure taxpayers are made whole when they have paid taxes that were improperly assessed or collected.