Process: 433/2016-T

Date: December 7, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 433/2016-T addressed a critical Stamp Tax dispute concerning the application of Verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS) to properties in full ownership regime with multiple independently usable units. A Real Estate Investment Company challenged 2015 Stamp Duty assessments totaling €26,989.99 on a building with 15 floors and 57 units, arguing the tax should apply separately to each residential unit rather than to the entire property's taxable value exceeding €1,000,000. The claimant contended that Verba 28.1 targets luxury residential properties and should not apply globally to buildings containing modest apartments merely because the aggregate value exceeds the threshold. The Tax Authority maintained that properties in full ownership regime constitute a single legal and tax reality under IMI Code Article 2(4), distinguishing them from condominium properties where each autonomous unit is deemed a separate property. The dispute centered on whether the total taxable property value or individual unit values should determine Stamp Tax liability, with constitutional implications regarding equality and proportionality principles. This case highlights the complex interplay between IMI valuation rules and Stamp Tax legislation, particularly the distinction between propriedade total (full ownership) and propriedade horizontal (condominium ownership) for tax purposes.

Full Decision

ARBITRAL DECISION

  1. REPORT

1.1. A... – Real Estate Investment Company, SA, taxpayer no. ..., with registered address at Av. ..., ..., ..., in Lisbon (hereinafter referred to as "Claimant"), submitted on 25/07/2016 a request for arbitral ruling with a view to the examination and declaration of illegality of the Stamp Duty assessments for the year 2015, relating to the application of Item no. 28.1 of the General Table of Stamp Duty (General Table), in the total amount of €26,989.99 (twenty-six thousand, nine hundred and eighty-nine euros and ninety-nine cents) to a property of which it is the owner.

1.2. His Excellency the President of the Ethics Council of the Administrative Arbitration Center (CAAD) designated, on 26/08/2016, as sole arbitrator the signatory of this decision.

1.3. On 19/10/2016 the arbitral tribunal was constituted.

1.4. In compliance with the provision in Article 17(1) of the Legal Framework for Tax Arbitration (RJAT), the Tax and Customs Authority (AT) was notified, on 19/10/2016, to, if it so wished, submit a response and request the production of additional evidence.

1.5. On 17/11/2016 the AT submitted its response, requesting the dispensing with the holding of the meeting described in Article 18 of the RJAT and dispensing with the production of any submissions.

1.6. Being a matter exclusively of law, the arbitral tribunal on 18/11/2016 decided to dispense with the holding of the meeting referred to in Article 18(1) of the RJAT, on the grounds of the principle of autonomy of the arbitral tribunal in the conduct of proceedings, inviting both parties to, if they so wished, submit optional written submissions and scheduled the date for the rendering of the final decision.

1.7. On 02/12/2016, the Claimant also dispensed with the production of any submissions.

  1. PRELIMINARY EXAMINATION

The arbitral tribunal was regularly constituted and is materially competent.

The parties have legal personality and capacity and are properly entitled, with no defects in legal representation.

There are no nullities, exceptions or preliminary issues which prevent examination of the merits and which are required to be addressed ex officio.

Consequently, the conditions are met for the final decision to be rendered.

  1. POSITIONS OF THE PARTIES

Two positions are in issue: that of the Claimant, set out in the request for arbitral ruling, and that of the AT in its response.

In summary, the Claimant alleges that:

a) Item no. 28.1 of the General Table applies only to residential urban properties. It does not apply to properties that fall within more than one of the categories provided for in Article 6(1) of the Municipal Property Tax Code (IMI).

b) With regard to urban properties in the regime of full ownership with storeys or units capable of independent use, Item no. 28.1 of the General Table applies only to each of the units capable of independent use allocated to residential use, with regard to which, separately, the condition for application of said item is met, in relation to the respective taxable property value.

c) Under the IMI Code, in urban properties in the regime of full ownership, the property registration records indicate, separately, the taxable property value of each of the units capable of independent use that compose them.

d) In these properties there is no single reference to the allocation of the property, such reference being made only separately with regard to each of the storeys or units capable of independent use.

e) In these properties the IMI is assessed, also separately, for each of these units capable of independent use.

f) Now, the legislator's purpose would be perverted if, under Item no. 28.1 of the General Table, it were permitted to tax small residential dwellings of medium or low quality, each with a taxable property value of slightly more than €100,000.00, as if they were luxury properties, merely because the property in which they are included is not constituted in the regime of condominium ownership and contains more than ten such dwellings.

g) Indeed, the interpretation which is defended is the only one compatible with the proper rules of legal interpretation and is further evident from the very fact that the AT proceeds to assess the Stamp Duty separately for each of the storeys.

h) For there is residential allocation only for each of the storeys separately and not for the property as a whole.

i) The taxable property value for IMI purposes is the value of each of the storeys separately and not the total taxable property value of the property.

j) On the other hand, the choice to classify the concrete situation of these proceedings under Item no. 28.1 of the General Table would, moreover, result in a flagrant and serious breach of the constitutionally enshrined principles of equality and proportionality in tax matters.

Otherwise, the AT maintains that:

a) At the time in question, the Claimant held full ownership of the urban property under analysis, valued in accordance with the IMI Code, in the context of the general valuation, the urban property listed in Article ... of the property registration record of the parish of ..., municipality and district of Lisbon, described as "property in regime of full ownership with storeys or units capable of independent use", with 15 storeys and 57 units capable of independent use, with taxable property value exceeding €1,000,000.00.

b) With reference to the year 2015, in compliance with Item no. 28.1 of the General Table [1], whose rule of incidence refers to urban properties valued in accordance with the IMI Code with taxable property value equal to or exceeding €1,000,000.00, and residential allocation, the AT proceeded to notify the collection documents with a view to payment of the assessment in question.

c) It adds that the concept of property is defined in Article 2(1) of the IMI Code, with Article 2(4) thereof establishing that, in the regime of condominium ownership, each autonomous unit is deemed to constitute a property.

d) Now, a "property in regime of full ownership with storeys or units capable of independent use" is, unequivocally, different from an immovable in the regime of condominium ownership, constituted by autonomous units, that is, several properties.

e) As regards the assessment of IMI, in the case of properties in regime of full ownership, the value which serves as the basis for its calculation will unquestionably be that registered in the property record as "total taxable property value".

f) Thus, the assessment being correct and the tax being due, no compensatory interest is owed, not least because there is no error attributable to the services, which merely acted, as they should, in strict compliance with the legal rule.

g) As regards the alleged breach of the principles of equal contribution and proportionality, the AT maintains that although the assessment of Stamp Duty, in the situations provided for in Item no. 28.1 of the General Table, is carried out in accordance with the rules of the IMI Code, the legislator reserves those aspects which require appropriate adaptation, namely: those in which, as is the case with properties in regime of full ownership, even with storeys or units capable of independent use, for Stamp Duty purposes the property as a whole is relevant because the units capable of independent use are not deemed to be a property, but only the autonomous units in the regime of condominium ownership, as provided in Article 2(4) of the IMI Code.

h) For the AT, what results from the letter of the law is that the legislator intended to tax under Item no. 28.1 of the General Table properties as a single legal and tax reality.

i) Now, in accordance with the property registration information, with the property being in regime of full ownership (not having autonomous units, to which tax law attributes the qualification of property), it is the global taxable property value of the property which must, therefore, be relevant, so that the defect of breach of law due to error as to the factual and legal premises should be judged unfounded.

j) On the other hand, the AT considers that the provision of Item no. 28.1 of the General Table does not constitute any breach of the principle of equality, with no discrimination existing in the taxation of properties constituted in condominium ownership and properties in regime of full ownership with storeys or units capable of independent use, or between properties with residential allocation and properties with other allocations.

k) The establishment of condominium ownership entails a mere legal alteration of the property, there being no valuation, but the legislator may, nevertheless, submit to a distinct tax legal framework, and therefore discriminatory, properties in the regime of condominium and full ownership, in particular, benefiting the legally more evolved institute of condominium ownership, without such discrimination being necessarily considered arbitrary.

l) The AT further adds that the property registration entry of each part capable of independent use is not autonomous, by record, but is contained in a description in the record of the property as a whole.

m) To this extent, the rules of the valuation procedures, the rules on property registration, and also the rules on the assessment of parts capable of independent use, do not permit the assertion that there should be an assimilation of the property in regime of full ownership to the regime of condominium ownership.

n) It results, therefore, from the fact that Item no. 28.1 of the General Table is incurred upon the ownership of urban properties whose taxable property value contained in the register, in accordance with the IMI Code, is equal to or exceeding €1,000,000.00, that the taxable property value relevant for purposes of the incidence of the tax is clearly the total taxable property value of the urban property and not the taxable property value of each of the parts that compose it, even when capable of independent use.

o) The AT concludes that the different valuation and taxation of an immovable in regime of full ownership as opposed to an immovable constituted in regime of condominium ownership also flows from the different legal effects inherent to these two figures.

  1. SUBJECT MATTER OF THE REQUEST

In the case in question, the question which the Claimant seeks to have decided is whether Item no. 28.1 of the General Table, in the case of properties not constituted in the regime of condominium ownership, is incurred upon the sum of the taxable property values attributed to the different parts or storeys, or rather, upon the tax value of each part of the property with independent economic use.

  1. FACTUAL MATTERS

5.1. FACTS CONSIDERED PROVEN

In light of the documents brought into the proceedings, it is hereby established as proven that:

5.1.1. The Claimant is the owner of the urban property registered in the property record of the parish of ..., municipality of Loures under the property article no. U-... and described in the Land Registry Office of ... under no. ... (of the extinct parish of...).

5.1.2. The property is in regime of full ownership with storeys or units capable of independent use and is composed of 15 storeys and 57 units with independent use, of which only 36 are allocated to residential use, whose taxable property value, determined under the IMI Code, varies between €145,384.88 and €326,677.63.

5.1.3. The property in question was registered in the record in 2010 and the sum of the taxable property values of the aforementioned units allocated to residential use amounts to €8,096,930.23, each of them individually having a taxable property value below €1,000,000.00.

5.1.4. The Claimant was notified of the Stamp Duty assessment acts relating to the year 2015, carried out under Item no. 28.1 of the General Table, on the storeys and units with independent use allocated to residential use, in the total amount of €26,989.99 (twenty-six thousand, nine hundred and eighty-nine euros and ninety-nine cents), namely:

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AA", in the amount of €485.17;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AB", in the amount of €681.43;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AC", in the amount of €658.37;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AD", in the amount of €510.83;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AE", in the amount of €484.63;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AF", in the amount of €676.63;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AG", in the amount of €661.55;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AH", in the amount of €514.13;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AI", in the amount of €486.90;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AJ", in the amount of €675.69;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AK", in the amount of €659.02;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AL", in the amount of €510.81;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AM", in the amount of €488.08;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AN", in the amount of €680.37;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AO", in the amount of €659.76;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AP", in the amount of €513.64;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AQ", in the amount of €1,077.03;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AR", in the amount of €1,080.35;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AS", in the amount of €1,078.84;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AT", in the amount of €1,081.53;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AU", in the amount of €1,077.21;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AV", in the amount of €1,079.56;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AW", in the amount of €1,077.77;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AX", in the amount of €1,080.14;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AY", in the amount of €1,087.52;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-AZ", in the amount of €1,088.94;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-BA", in the amount of €1,082.77;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-BB", in the amount of €1,081.85;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-S", in the amount of €485.86;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-T", in the amount of €678.40;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-U", in the amount of €658.75;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-V", in the amount of €512.98;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-W", in the amount of €485.17;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-X", in the amount of €677.73;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-Y", in the amount of €657.50;

· Document no. 2016 ..., relating to the storey or unit with independent use identified as "U-...-Z", in the amount of €513.08.

5.2. FACTS NOT CONSIDERED PROVEN

There are no facts with relevance to the decision that have not been established as proven.

  1. THE LAW

On the Incidence of Item no. 28.1 of the General Table

The question to be decided consists in determining whether the Stamp Duty assessment acts are illegal, due to erroneous interpretation and application of Item no. 28.1 of the General Table, added by Law no. 55-A/2012 of 29 October, in considering that the taxable property value of an urban property constituted in regime of full ownership, with storeys or units of independent use allocated to residential use which is relevant for purposes of incidence is constituted by the value resulting from the sum of the taxable property value attributed to each of those storeys or units.

Furthermore, whether the Stamp Duty assessments further suffer from the defect of unconstitutionality, due to breach of the constitutional principles of equality and proportionality in tax matters.

On this matter there is already abundant case law from the Supreme Administrative Court [2] (STA) and, as well, arbitral case law, which we indicate, by way of example, in proceedings no. 277/2013-T, no. 291/2013-T, no. 35/2014-T, no. 464/2014-T, no. 639/2014-T, no. 724/2014-T, no. 245/2014-T, no. 152/2015-T and no. 21/2015-T, which we follow. [3]

According to the established facts, the AT assessed Stamp Duty by considering that the taxable property value of the urban property constituted in regime of full ownership is in excess of €1,000,000.00, taking into account the sum of the taxable property value of each of the 36 storeys or units with independent use allocated to residential use, which compose the said property.

Let us examine this.

According to the provision in Item no. 28 of the General Table, the scope of incidence of Stamp Duty includes:

"Ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the register, in accordance with the Municipal Property Tax Code (IMI Code), is equal to or exceeding €1,000,000 - on the taxable property value used for IMI purposes:

28.1 Per residential property or per land for construction whose authorized or planned building is for residential purposes, in accordance with the provision in the IMI Code - 1%. [4]

28.2 - Per property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in a list approved by regulation of the Minister of Finance - 7.5%".

The prerequisites for incidence of Item no. 28.1 of the General Table are therefore urban properties, with residential allocation, whose taxable property value contained in the register and used for purposes of assessment of IMI, is equal to or exceeding €1,000,000.00.

However, Law no. 55-A/2012 of 29 October says nothing as to the qualification of the concepts in question, namely, as to the concept of "property with residential allocation", which is relevant here.

Now, Law no. 55-A/2012 of 29 October, by reference to Item no. 28 of the General Table, came to establish several amendments to the Stamp Duty Code, in particular, as to its assessment and payment, expressly referring to the rules provided for in the IMI Code [5] with appropriate adaptation, with it being also provided in Article 67(2) of the Stamp Duty Code that, "To matters not regulated in the present Code relating to Item no. 28 of the General Table, the provisions of the IMI Code shall apply, on a subsidiary basis.".

From analysis of said rules, it is thus verified that the concept of "property with residential allocation" provided for in Item no. 28.1 of the General Table is not defined in the Stamp Duty Code, nor in said Law no. 55-A/2012 of 29 October, nor even in the IMI Code, whose rules apply on a subsidiary basis, given the provision in Article 67(2) of the Stamp Duty Code.

It is therefore unequivocal that a property in regime of full ownership or in the regime of condominium ownership constitutes an urban property, in accordance with the provisions of Articles 2(1) and 4(1) of the IMI Code, applicable on a subsidiary basis, and it is also certain that, both for purposes of incidence of Item 28.1 of the General Table, and for purposes of classification of urban properties [6], the legislator makes no distinction between properties constituted in condominium ownership and in regime of full ownership (as mentioned in the arbitral decisions rendered in proceedings no. 50/2013-T and no. 132/2013-T), being a tax prerequisite of Item no. 28.1 of the General Table properties that are actually already allocated to residential use, because what is relevant is the actual and current use of each of the properties.

What then is the relevant taxable property value in the case of urban properties in regime of full ownership composed of storeys or units capable of independent use with "residential allocation", for purposes of incidence of Item 28.1 of the General Table?

As results from Item no. 28.1 of the General Table itself and from Article 6(1) of Law no. 55-A/2012 of 29 October, Stamp Duty shall be incurred upon the taxable property value used for IMI purposes.

Let us examine, therefore, what taxable property value is used for IMI purposes.

The taxable property value of each property is determined in accordance with Articles 38 et seq. of the IMI Code, in compliance with the provision in Article 7(1) of the IMI Code.

In the case of a property in regime of full ownership or condominium, each storey or unit with independent use that forms part of it is equally subject to valuation, being attributed a taxable property value to each of those storeys or units, in compliance with the provisions of Articles 12 and 38 of the IMI Code.

Indeed, Article 12(1) of the IMI Code establishes that "property records are registrations which contain, in particular, the characterization of properties, their location and their taxable property value, the identification of owners (...)", further providing in Article 12(3) thereof that, "Each storey or part of property capable of independent use is considered separately in the property registration record, which also indicates the respective taxable property value", and, in compliance with the provision in Article 119(1) of the IMI Code, it is upon that separately considered taxable property value that IMI shall be assessed and levied in relation to each storey or part with independent use that make up an urban property in regime of condominium or full ownership, in view of the autonomy of each of those units.

This understanding is further shared by J. Silvério Mateus and L. Corvelo de Freitas [7] according to whom, "Another aspect that must be highlighted in the register relates to the need to make the autonomy that, within the same property, can be attributed to each of its parts, functionally and economically independent, stand out. In these cases, the property registration record should not only make reference to each of these parts but should expressly reference the value attributable to each one of them. An example that can illustrate this situation is the case of an urban property, not constituted in the regime of condominium ownership and which is composed of various storeys. (...) However, since each of these units can be the subject of leasing or any other use by the respective holder, the register should highlight these units and a taxable property value should be attributed to each one of them." [underlined in original].

On the other hand, and as evidenced in the arbitral decision rendered in proceedings no. 194/2014-T, which we also follow, "the IMI Code enshrines, both as regards the property registration record and the discrimination of the respective taxable property value, and as regards the assessment of the tax, the autonomization of the parts of urban property capable of independent use and the segregation/individualization of the taxable property value relating to each storey or part of property capable of independent use.

Thus, to each property, in accordance with the concepts defined by Article 2 of the IMI Code, corresponds a single article in the register (Article 82(2) of the IMI Code) but, according to Article 12(3) of the same Code, referring to the concept of property register (...), "each storey or part of property capable of independent use is considered separately in the property registration record, which also indicates the respective taxable property value (...).

That is, the rule is autonomization, characterization as a "property" of each part of a building, provided that it is functionally and economically independent, capable of independent use, in accordance with the concept of property defined right from Article 2(1) of the IMI Code: property is any portion (of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated in or resting on it, with a character of permanence) provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances referred to above, endowed with economic autonomy.".

Given that in light of the IMI Code, the storeys or units with independent use that compose an urban property in regime of full ownership or condominium are taxed autonomously, since IMI is assessed individually on the taxable property value attributed to each of those storeys or units with independent use, in view of the relevance of their autonomy, necessarily, the principles and the rules must be the same in the context of Stamp Duty (notably, as to what is provided regarding the property registration record and assessment of IMI), both because Item no. 28.1 of the General Table so requires at the end, and by subsidiary application, by virtue of the provision in Article 67(2) of the Stamp Duty Code.

Consequently, and, on the assumption that the legislator in question "set forth the most appropriate solutions and knew how to express its thinking in adequate terms" (cfr. the provision in Article 9(3) of the Civil Code ("CC"), by reference from Article 11 of the General Tax Law (LGT)), only the storeys, parts or units with independent use with residential allocation whose taxable property value is equal to or exceeding €1,000,000.00 are covered by the scope of incidence of Item no. 28.1 of the General Table.

Thus, and as mentioned in the arbitral decision rendered in proceedings no. 132/2013-T, "The uniform criterion which is required is, therefore, the one which determines that the incidence of the rule in question takes place only when any of the parts, storeys or units with independent use of property in condominium or full ownership with residential allocation possesses a taxable property value exceeding €1,000,000.00" and not when this value results from the sum of the taxable property values attributed to each storey or unit with independent use.

As also mentioned in the arbitral decision rendered in proceedings no. 50/2013-T, "The criterion sought by the AT, of considering the value of the sum of the taxable property values attributed to the parts, storeys or units with independent use, with the argument that the property is not constituted in the regime of condominium ownership, finds no legal support and is contrary to the criterion applicable in the context of the IMI Code and, by reference, in the context of Stamp Duty. To which must be added the fact that the law itself expressly establishes, in the final part of Item 28 of the General Table of Stamp Duty, that Stamp Duty to be incurred upon urban properties of a value equal to or exceeding €1,000,000.00 - "on the taxable property value used for IMI purposes.".

For all the foregoing, we cannot agree with the understanding of the AT.

In fact, if it is the very provision in Item no. 28.1 of the General Table at the end which determines that Stamp Duty is incurred "on the taxable property value used for IMI purposes", what is relevant for purposes of tax incidence is the taxable property value individualized for each of the parts, storeys or units with independent use on which IMI is assessed annually, that is, the assessment of Stamp Duty follows the rules provided for in the IMI Code, by express reference in said Item no. 28 of the General Table and Article 67(2) of the Stamp Duty Code.

This is so much the case that the AT in order to assess Item no. 28.1 of the General Table under examination, proceeds from each of those storeys or units with independent use, applying the respective rate to the taxable property value attributed to each of those units with residential allocation, in accordance with the rules of the IMI Code, and then sums that taxable property value.

The interpretation that what is relevant in the scope of incidence of Item no. 28.1 of the General Table is the taxable property value attributed to each of the autonomous parts, storeys or units with independent use with residential allocation and not the value resulting from the sum of those taxable property values is also that which results from its ratio legis, as required by Article 9(1) of the CC, applicable by virtue of the provision in Article 11 of the LGT.

In fact, in the presentation and discussion of Bill no. 96/XII/2nd [8] in the Parliament, the Secretary of State for Tax Affairs declared the following:

"For the first time in Portugal a special taxation on high-value properties intended for residential use is being created. This rate will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and shall be incurred upon dwellings of a value equal to or exceeding 1 million euros. With the creation of this additional tax rate, the tax burden required of these owners will be significantly increased in 2012 and in 2013" [underlined in original].

On this point, we follow the arbitral decision rendered in proceedings no. 50/2013-T by referring to the fact that "The legislator in introducing this legislative innovation considered as the determining element of the tax-paying capacity urban properties, with residential allocation, of high value (luxury), more precisely, of a value equal to or exceeding €1,000,000.00, on which a special Stamp Duty rate was then imposed, intending to introduce a principle of taxation on the wealth manifested in the ownership, usufruct or right of superficies of urban properties of luxury with residential allocation. For this reason, the criterion was to apply the new rate to urban properties with residential allocation whose taxable property value is equal to or exceeding €1,000,000.00.

This is also concluded from analysis of the discussion of bill no. 96/XII in Parliament, available for consultation in the Parliamentary Gazette, Series 1, no. 9/XII/2, of 11 October 2012.

The justification for the measure described as "special tax on the highest-value residential urban properties" is thus based on the invocation of the principles of social equity and fiscal fairness, calling upon the holders of high-value properties intended for residential use to contribute in a more intense manner, imposing the new special rate on "dwellings of a value equal to or exceeding 1 million euros".

Clearly the legislator understood that this value, when attributed to a dwelling (house, autonomous unit or storey with independent use) reflects a tax-paying capacity above average and, as such, capable of determining a special contribution to ensure the just distribution of tax burden.".

For all the foregoing, and according to the established facts, the taxable property value of each of the 36 storeys or units with independent use allocated to residential use, which make up the property constituted in regime of full ownership, and which was determined in accordance with the rules of the IMI Code, is below €1,000,000.00, and the prerequisites for taxation of Item no. 28.1 of the General Table are thus not met.

Therefore, the Stamp Duty assessment acts, which are the subject of this arbitral ruling proceedings, in the total amount of €26,989.99, suffer from the defect of breach of the provision in Item no. 28.1 of the General Table and Article 67(2) of the Stamp Duty Code, due to error as to its legal premises, hereby declaring the illegality of those assessment acts, with the consequent annulment thereof.

In fact, the examination of the other questions raised by the Claimant is thus moot, in particular, the alleged defect of unconstitutionality, due to the declaration of the illegality of the assessments above identified, on a substantive defect which prevents the renewal of the acts, effectively ensuring the protection of the rights of the Claimant, in accordance with the provision in Article 124 of the Code of Tax Procedure and Process [9].

  1. DECISION

On the grounds set out, the arbitral tribunal decides to uphold the request for arbitral ruling and, in consequence, to declare illegal the Stamp Duty assessments contained in the identified collection documents, with all legal consequences.

  1. VALUE OF PROCEEDINGS

The value of the proceedings is fixed at €26,989.99 (twenty-six thousand, nine hundred and eighty-nine euros and ninety-nine cents), in accordance with Article 97-A of the Code of Tax Procedure and Process (CPPT), applicable by virtue of Article 29(1), sub-paragraphs a) and b) of the Legal Framework for Tax Arbitration (RJAT) and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs to be borne by the AT, in the amount of €1,530.00 (one thousand, five hundred and thirty euros), in accordance with Table I of the Regulation of Costs of Tax Arbitration Proceedings, in accordance with Article 22(2) of the RJAT.

Let notice be given.

Lisbon, 7 December 2016

The Arbitrator,

(Hélder Filipe Faustino)

Text prepared by computer, in accordance with the provision in Article 131(5) of the Code of Civil Procedure (CPC), applicable by reference from Article 29(1), sub-paragraph e) of the RJAT. The drafting of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] As amended by Law no. 83-C/2013 of 31 December.

[2] By way of example, we highlight the Decision rendered in proceedings no. 047/15, of 09/09/2015, pursuant to which: "I - With regard to properties in condominium ownership, for purposes of incidence of Stamp Duty (Item 28.1 of the General Table of Stamp Duty, as amended by Law no. 55-A/2012, of 29 October), the subjection is determined by the combination of two factors: residential allocation and the taxable property value contained in the register equal to or exceeding €1,000,000. II - In the case of a property constituted in condominium ownership, the incidence of Stamp Duty must be determined, not by the taxable property value resulting from the sum of the taxable property value of all the units or storeys capable of independent use (individualized in the property article), but by the taxable property value attributed to each of those storeys or units intended for residential use.", available at www.dgsi.pt

[3] Cfr. Andreia Gabriel Pereira, "The «Luxury Dwellings» and Stamp Duty. Commentary on the Decision of the Supreme Administrative Court (2nd Section), of 5 February 2015, rendered in proceedings no. 0993/14, Rapporteur Counselor Francisco Rothes", Journal of Public Finance and Tax Law, Year VII, No. 4, July 2015, pp. 235 et seq.

[4] This wording was amended by Law no. 83-C/2013 of 31 December, without, however, having great relevance for the case in question.

[5] Cfr. Article 23(7), Article 44(5), Article 46(5) and Article 49(3) of the Stamp Duty Code.

[6] Cfr. Article 6 of the IMI Code (also applicable on a subsidiary basis).

[7] "Property Taxes on Immovable Property and Stamp Duty, Commented and Annotated", pages 159 and 160.

[8] Available in the Parliamentary Gazette (DAR), Series 1 no. 9/XII/2012, of 11/10/2012.

[9] Applicable on a subsidiary basis by virtue of the provision in Article 29(1), sub-paragraph a) of the RJAT.

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the Tabela Geral do Imposto do Selo apply only to residential urban properties or also to mixed-use buildings?
Verba 28.1 of the TGIS applies to urban properties with residential allocation valued under IMI Code rules with taxable property value equal to or exceeding €1,000,000. The dispute in Process 433/2016-T centered on whether this applies to the entire building in full ownership regime or separately to each independently usable residential unit. The Tax Authority argued that properties in full ownership constitute a single taxable entity, while the claimant contended the provision should apply unit-by-unit to avoid taxing modest apartments as luxury properties.
How is Stamp Tax calculated for vertical property buildings with independently usable units under Verba 28.1?
For buildings in propriedade total (full ownership) with vertical divisions or independently usable units, the Tax Authority calculates Stamp Tax under Verba 28.1 based on the total taxable property value registered for IMI purposes. This differs from condominium properties (propriedade horizontal) where IMI Code Article 2(4) deems each autonomous unit a separate property. The claimant in Process 433/2016-T argued this interpretation violates constitutional equality principles by treating multiple modest apartments as a single luxury property solely because they remain under unified ownership.
Can a property owner challenge Stamp Tax assessments under Verba 28.1 through CAAD tax arbitration?
Yes, property owners can challenge Stamp Tax assessments through CAAD arbitration under the RJAT (Legal Framework for Tax Arbitration). Process 433/2016-T demonstrates this mechanism, where a Real Estate Investment Company successfully filed an arbitral ruling request to contest €26,989.99 in Stamp Duty assessments. The arbitral tribunal was constituted with a sole arbitrator, and both parties submitted written positions without requiring an oral hearing, as the matter involved exclusively questions of law regarding the interpretation of Verba 28.1 of the TGIS.
What is the legal distinction between total property and horizontal property for Stamp Tax purposes under Portuguese law?
Portuguese tax law distinguishes propriedade total (full/total ownership) from propriedade horizontal (condominium/horizontal ownership) primarily through IMI Code Article 2(4). In condominium ownership, each autonomous unit constitutes a separate property for tax purposes with individual taxable values and IMI assessments. In full ownership regime, even when containing multiple floors or independently usable units, the property remains a single legal and tax entity with one aggregate taxable value. This distinction proved crucial in Process 433/2016-T for determining whether Stamp Tax under Verba 28.1 applies to the entire building or individual units.
What was the outcome of CAAD Process 433/2016-T regarding the illegality of Stamp Tax liquidation on mixed-use properties?
The decision text provided does not include the final ruling of CAAD Process 433/2016-T. The case examined whether applying Verba 28.1 of the TGIS to a building in full ownership regime with 57 independently usable units, based on total taxable value exceeding €1,000,000, was illegal. The claimant argued for unit-by-unit application to avoid taxing modest apartments as luxury properties and alleged violations of constitutional equality and proportionality principles. The Tax Authority defended the assessment based on the unified ownership structure distinguishing it from condominium properties where units are separate taxable entities.