Process: 426/2014-T

Date: January 20, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 426/2014-T addressed whether Stamp Tax under item 28.1 of the TGIS applies to construction land (terrenos para construção) in 2013. A real estate development company challenged a €21,151.10 stamp tax assessment on urban construction land, arguing that item 28.1 TGIS (as amended by Law 55-A/2012) applies only to 'urban properties with residential allocation,' not undeveloped construction land. The Tax Authority countered that construction land has residential nature because its patrimonial tax value (VPT) calculation incorporates the residential allocation coefficient under article 41 of CIMI, citing TCA South ruling 04950/11. The claimant's key argument was that if construction land were already covered, Law 83-C/2013 would not have needed to amend item 28.1 specifically to include building plots starting in 2014, demonstrating legislative recognition that such land was previously excluded. The case highlights the critical distinction between actual residential properties and land with future construction potential. The arbitral tribunal at CAAD constituted under RJAT provisions examined whether the use of CIMI residential coefficients for valuation purposes automatically extends stamp tax liability to undeveloped land. This decision has significant implications for real estate developers holding construction land portfolios valued above €1,000,000, as it clarifies the temporal application of stamp tax provisions and the interpretation of 'residential allocation' before the 2013 legislative amendment took effect in 2014.

Full Decision

I – REPORT

1 A… – Real Estate Development, SA NIPC[1] …, with registered office at … filed a request for constitution of the arbitral tribunal, pursuant to the provisions of paragraph a) of no.1 of article 2, of no.1 of article 3 and of paragraph a) of no.1 of article 10, all of the RJAT[2], with the AT[3] being requested, with a view to annulment of a tax deed of imposition of stamp tax on the ownership of real property registered in the property register under urban article no. … of the parish of … of the city of …, composed of land for construction, as per notification duly received with no. 2014…, relating to the year 2013, in the total amount of € 21,151.10, whose justification invoked for such imposition is reduced to the application of item 28.1 of the TGIS[4], which the claimant considers inapplicable to the specific situation.

2 The request for constitution of the arbitral tribunal was filed without exercising the option of designation of arbitrator, being accepted by the Honorable President of the CAAD[5] and automatically notified to the AT on 31/03/2014.

3 Pursuant to and for the purposes of the provisions of no.2 of article 6 of the RJAT, by decision of the Honorable President of the Deontological Council, duly communicated to the parties, within legally applicable periods, on 31/07/2014, Arlindo José Francisco was designated, in the capacity of sole arbitrator, who communicated to the Deontological Council of Administrative Arbitration, the acceptance of the assignment within the legally stipulated period.

4 The tribunal was constituted on 18/08/2014 in accordance with the provisions contained in paragraph c) of no.1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December.

5 With its request, the claimant seeks the annulment of the imposition in question because, in its understanding, the justification invoked (item 28.1 of the TGIS) is clearly inapplicable to the ownership of the real property in question.

6 It supports its point of view, in summary, on the fact that one is in the presence of land for construction only suitable for constructing dwellings or other types of buildings, it itself not being a property susceptible of being inhabited.

7 In its response, the AT considers that building plots have the legal nature of properties with residential allocation, since in the determination of its VPT[6] the residential allocation coefficient, provided for in article 41 of the CIMI[7], is taken into account.

8 In this sense it cites Ruling 04950/11 of 14/02/2012 of the TCA[8] South which considers that the regime for evaluation of the tax value of building plots is enshrined in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project.

9 In this perspective, it considers that the imposition under challenge should be upheld as being in accordance with applicable legislation.

II - SANITATION

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

The parties have legal personality and capacity, prove themselves legitimate and are regularly represented in accordance with articles 4 and 10, no.2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

The claimant was notified to pronounce on the request formulated by the defendant with a view to dispensing with the meeting referred to in article 18 of the RJAT, but said nothing within the stipulated period, the tribunal having understood the silence as agreement with the request and with the unnecessary production of written or oral submissions.

The tribunal chose to dispense with hearing the witnesses enrolled by the claimant since the case already contains the necessary and sufficient factual elements to decide on the law.

The case does not suffer from nullities and no issues have been raised that prevent the merits of the case from being considered, with the conditions being met for a final decision to be issued.

III - GROUNDS

1 – The issues to be decided, with relevance for the case, are as follows:

a) To determine whether building plots, to which the residential allocation coefficient was applied in the determination of its VPT and a value equal to or greater than €1,000,000.00 was calculated, fall within the scope of stamp tax provided for in item 28 of the TGIS, as amended by Law no. 55-A/2012, of 29 October.

b) And whether the imposition of stamp tax in question in the present case violates the said rule.

2 – Factual Matter

The relevant factual matter proved on the basis of the elements attached to the case is as follows:

a) The claimant is a joint-stock company whose object is the promotion, real estate management and purchase for resale or lease of real property.

b) It is the owner of the building plot registered under urban article … of the parish …, of the municipality of ….

c) The said plot is intended for the construction of buildings to be constituted in horizontal property, with a view to the sale of the units.

d) The imposition under challenge concerns the said real property and the year 2013 and was notified to the claimant in accordance with notification 2014….

e) The amount calculated of € 21,151.10 was paid in 3 installments, the first on 30 April 2014, the second on 30 July 2014 and the third on 28 November 2014.

3 – Legal Matter

a) The claimant, in its request for arbitral decision, argues, in essence, that the building plot cannot be considered for the purposes of the incidence of stamp tax provided for in item 28 of the TGIS, as amended by Law no. 55-A/2012, given that it is not a property with residential allocation, but only with building capacity and that the legislator in using the expression "residential allocation" in no way can it be accepted that it wished to make a cross-reference to article 41 of the CIMI, nor can this be deduced from the statement of reasons of the proposed Law 55-A/2012 nor from the words of the State Secretary in his debate in the Assembly of the Republic.

b) On the other hand, article 194 of Law 83-C/2013 of 31 December amended the wording of item 28.1 of the TGIS, now broadening the scope of incidence to building plots, but its application will only occur from 2014 on pain of violation of article 103, no.3 of the CRP[10].

c) For its part, the defendant considers that building plots have the legal nature of properties with "residential allocation" since in the determination of its VPT the residential allocation coefficient, provided for in article 41 of the CIMI, is taken into account and cites in this sense Ruling 04950/11 of 14/02/2012 of the TCA South which considers that the regime for evaluation of the tax value of building plots is enshrined in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project, whereby it considers that the impositions in question should be upheld and the AT be absolved of the request.

d) Having summarized the positions of the claimant and defendant, we shall proceed below to an analysis of the rule of incidence of stamp tax on urban properties with residential allocation and it should be noted that the defendant, at no moment invokes, nor could it do so, the new wording of item 28.1 of the TGIS which was given by Law 83-C/2013 of 31 December whose application only occurs in 2014.

e) Item 28 of the TGIS, as amended by Law no. 55-A/2012, subjects to this tax urban properties with residential allocation whose VPT, calculated in accordance with the CIMI, is equal to or greater than €1,000,000.00.

f) The CIS[11] refers to the CIMI for the regulation of the concept of property and matters not regulated as to item 28 of the TGIS (see no.6 of article 1 and no.2 of article 67, both of the CIS).

g) If we look at article 6 of the CIMI, it establishes that urban properties are divided into residential, commercial, industrial or service properties, building plots and others.

h) From its no.2 it follows that urban residential properties "are buildings or constructions licensed for such purpose or in the absence of a license, which have such purpose as their destination" and its no.3 tells us that building plots "are those located within or outside an urban agglomeration, for which a license or authorization for a subdivision or construction operation has been granted, and also those that have been declared as such in the acquisition title…".

i) From these concepts we can already conclude the existence of autonomy between urban properties "residential" and urban properties "building plots".

j) The legislator of stamp tax, in establishing the taxation of urban properties "with residential allocation", did not specify the concept, so we have, by force of the cross-reference, to go to the CIMI and this, as has already been seen, autonomizes them, relative to building plots.

k) The expression "residential allocation" is in no way evident in building plots, nor can it, as the defendant claims, be understood as an integrating expression of other realities.

l) We follow the position advocated in case 49/2013 which is transcribed: "The expression 'with residential allocation' inculcates, in a simple reading, an idea of real and present functionality. From the rule in question it is not possible to extract, by interpretation, that, as is stated in the defendant's response, the legislator's choice of that expression is intended to integrate 'other realities beyond those identified in article 6, no.1, paragraph a), of the CIMI.' Such interpretation has no legal basis, given the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law. Indeed, if the legislator intended to encompass within the scope of incidence of tax other realities than those resulting from the classification governed by article 6 of the CIMI, it would have said so expressly. But it does not, rather referring, in bulk, to the concepts and procedures provided for in the said Code. On the other hand, nor can the defendant's understanding be accepted that the concept of "residential allocation" derives from the rule of article 45 of the CIMI. This article refers to the rules applicable in determining the tax value of building plots, establishing that this is what results from the value of the building footprint area added to the land adjacent to the footprint. In fixing the value of that area, a percentage is considered varying between 15% and 45% of the value of the buildings authorized or foreseen. According to the defendant, in fixing the value of the buildings authorized or foreseen on the land to be evaluated, the coefficients applicable in determining the tax patrimonial value are used, namely the allocation coefficient provided for in article 1 of that Code. Concluding from this that the consideration of such a coefficient, dependent on the type of use foreseen for the property to be built on the land, will be determinative for the purposes of application of Item 28 of the TGIS. This conclusion is supported on the premise that the expression 'properties with residential allocation' appeals to a classification that overlaps with the species provided for in no.1 of article 6 of the CIMI. However, such a conclusion cannot be followed. [...]. In these terms, resulting from article 6 of the CIMI a clear distinction between urban properties "residential" and "building plots", these cannot be considered, for the purposes of incidence of stamp tax, as 'properties with residential allocation'."

m) The legislator, in seeking to tax in stamp tax building plots, revisited item 28 of the TGIS, through Law no. 83-C/2013, of 31 December, and introduced them there, which serves to prove that in the formulation of Law no. 55-A/2012, building plots were excluded from stamp tax under item 28 of the TGIS and now, through Law no. 83-C/2013, they have come to be taxed, whereby it seems clear to us that the legislator considers that the expression "residential allocation" did not include building plots.

n) Nor should it be said that the fact that article 45 of the CIMI provides for the application of a residential allocation coefficient in determining the VPT of building plots will be a sufficient condition, in itself, to allow them to be included in the rule of incidence of item 28 as amended by Law no. 55-A/2012, nor indeed alter its nature as building plot, given that what is at issue here is solely to determine the VPT which will be influenced by the type of buildings to be carried out (which, it should be said, are not always realized).

o) Ruling 04950/11 of 14/02/2012 of the TCA South cited by the AT which considers that the regime for evaluation of the tax value of building plots is enshrined in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project, but this point of view is circumscribed to valuation and nothing more.

p) Now, as has already been seen, it results from article 6 of the CIMI a distinction unmistakable between residential properties and building plots, which prevents these from being taxed in stamp tax as intended by the defendant.

q) In this sense several arbitral decisions have already been issued, namely, cases 42, 48, 49 and 75, all of 2013.

IV – DECISION

In light of the foregoing, the tribunal decides as follows:

a) To declare that building plots are excluded from stamp tax provided for in item 28.1 of the TGIS, with the wording that was given by Law 55-A/2012 of 29 October.

b) Consequently, to declare the request for arbitral decision well-founded, annulling the deed of imposition of stamp tax relating to the year 2013 in the amount of € 21,151.10 given that the imposition in question is illegal as it violates the said rule of incidence with all legal consequences arising therefrom.

c) To set the value of the case at € 21,151.10 in accordance with the provisions contained in article 299, no.1, of the CPC[12], article 97-A of the CPPT[13], and article 3, no.2, of the RCPAT[14].

Costs charged to the defendant, pursuant to no.4 of article 22 of the RJAT, setting the respective amount at € 1,224.00, in accordance with the provisions of Table I referred to in article 4 of the RCPAT.

Notify.

Lisbon, 20 January 2015

Text drafted on computer, pursuant to article 131, no.5 of the CPC, applicable by cross-reference of article 29, no.1, paragraph e) of the RJAT, with blank lines and reviewed by the tribunal.

The wording of this decision is governed by the orthography prior to the orthographic agreement.

The arbitrator,

Arlindo Francisco

[1] Acronym for Tax Identification Number of Legal Entity

[2] Acronym for Legal Regime for Arbitration in Tax Matters

[3] Acronym for Tax and Customs Authority

[4] Acronym for General Table of Stamp Tax

[5] Acronym for Administrative Arbitration Center

[6] Acronym for Tax Patrimonial Value

[7] Acronym for Code of Municipal Property Tax

[8] Acronym for Central Administrative Court

[9] Acronym for Stamp Tax

[10] Acronym for Constitution of the Portuguese Republic

[11] Acronym for Code of Stamp Tax

[12] Acronym for Code of Civil Procedure

[13] Acronym for Code of Tax Procedure and Process

[14] Acronym for Regulation of Costs in Tax Arbitration Processes

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto de Selo) under Verba 28.1 of the TGIS apply to construction land (terrenos para construção) in Portugal?
Under the 2012 version of item 28.1 TGIS (Law 55-A/2012), Stamp Tax applied to 'urban properties with residential allocation' with VPT equal to or greater than €1,000,000. The critical issue in Process 426/2014-T was whether construction land (terrenos para construção) qualified as residential property. The claimant argued construction land is not residential property but merely land with building capacity. Significantly, Law 83-C/2013 subsequently amended item 28.1 to explicitly include building plots, but only from 2014 onwards. This legislative amendment strongly suggests that construction land was NOT covered under the original 2012 wording for the 2013 tax year, as the legislature needed to specifically expand the scope to include such properties.
Can construction land be classified as residential property for Stamp Tax purposes under Portuguese tax law?
The debate centers on whether construction land constitutes 'residential property' when its patrimonial tax value uses residential allocation coefficients. The Tax Authority argued that because article 45 of CIMI applies residential allocation coefficients (article 41 CIMI) when calculating VPT for construction land based on projected buildings, this gives construction land residential character. However, the claimant correctly distinguished between valuation methodology and actual property classification. Using residential coefficients for calculating future building value does not transform undeveloped land into residential property. The land itself cannot be inhabited and serves only as development potential. The subsequent 2013 legislative amendment explicitly adding construction land to item 28.1 from 2014 onwards confirms the original interpretation that valuation coefficients alone do not determine stamp tax liability classification.
What was the CAAD arbitral tribunal's decision in Process 426/2014-T regarding Stamp Tax on construction land?
While the complete decision is not provided in the excerpt, the tribunal's analysis framework is clear. The tribunal examined whether item 28.1 TGIS as amended by Law 55-A/2012 applied to construction land in 2013. The tribunal noted that the Tax Authority did not invoke the new wording from Law 83-C/2013, which explicitly included construction land, because that amendment only applied from 2014 onwards. The case hinged on interpreting 'residential allocation' under the 2012 version. Given the claimant's strong argument that subsequent legislative amendment was necessary to include construction land, and the constitutional principle that tax laws cannot be retroactively applied (article 103(3) CRP), the tribunal's reasoning suggests favorable consideration of the claimant's position that construction land was not subject to stamp tax under item 28.1 in 2013.
How does the patrimonial tax value (VPT) coefficient of housing allocation affect Stamp Tax liability on construction land?
The VPT calculation for construction land uses article 45 of CIMI, which applies the residential allocation coefficient from article 41 CIMI based on projected construction. The Tax Authority argued this coefficient usage meant construction land has residential nature for stamp tax purposes. However, this confuses valuation methodology with substantive classification. The residential coefficient is used to estimate the value of future buildings for assessment purposes, projecting what will be constructed based on approved plans. This technical valuation approach does not transform the legal character of the land itself. The land remains non-residential until actual construction occurs. The critical distinction is between using residential metrics to calculate value versus the property actually having residential allocation. Process 426/2014-T established that applying CIMI residential coefficients for valuation does not automatically trigger stamp tax liability under item 28.1 for undeveloped construction land.
What is the legal procedure to challenge a Stamp Tax liquidation on property through CAAD arbitration in Portugal?
The legal procedure under RJAT (Regime Jurídico da Arbitragem Tributária) involves: (1) Filing a request for arbitral tribunal constitution with CAAD within the legal deadline after receiving the tax assessment notification; (2) The request must specify the legal basis (article 2(1)(a), article 3(1), article 10(1)(a) RJAT) and identify the contested tax act; (3) The claimant may designate an arbitrator or allow automatic designation by the CAAD President; (4) The Tax Authority is notified and files a response; (5) The Deontological Council designates the arbitrator (if not chosen), who must accept within the legal period; (6) The tribunal is formally constituted under article 11(1)(c) RJAT; (7) Parties may agree to dispense with hearings (article 18 RJAT); (8) The tribunal examines jurisdiction, legitimacy, and regularity before proceeding to merits. In Process 426/2014-T, the request was filed and accepted on 31/03/2014, the arbitrator was designated on 31/07/2014, and the tribunal was constituted on 18/08/2014, demonstrating the typical five-month timeline from filing to constitution.