Process: 436/2015-T

Date: January 6, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 436/2015-T addresses the application of Verba 28.1 of the General Stamp Tax Table (TGIS) to a co-owned urban property in Lisbon valued over €1,000,000. Twelve co-owners challenged the 2014 stamp duty assessment before the CAAD arbitral tribunal. The property, registered as a single vertical building with ground floor through fifth floor, contains both commercial and residential spaces, with most areas leased for commercial purposes. The claimants argued that the commercial portions should be deducted from the taxable property value (VPT), contending that if the building were organized as horizontal property (condominium), individual fractions would not reach the €1,000,000 threshold triggering Verba 28.1. They further asserted that the Tax Authority's interpretation violated constitutional principles of tax equality. The Tax Authority raised preliminary objections regarding the tribunal's material competence and argued that Verba 28.1 applies to properties with any residential use, with the €1,000,000 threshold applying to the entire property's VPT rather than separate parts. The Authority maintained that vertical property unity is not fragmented by independent economic use of constituent parts and that alternative interpretations would violate the principle of tax legality under Article 103(2) of the Portuguese Constitution. The case illustrates key issues in Portuguese stamp tax law concerning high-value properties, the distinction between vertical and horizontal property regimes, and the scope of arbitral jurisdiction in tax matters.

Full Decision

ARBITRAL DECISION

  1.  REPORT

1.1. A…, taxpayer no. …, B…, taxpayer no.…, C…, taxpayer no.…, D…, taxpayer no.…, E…, taxpayer no.…, F…, taxpayer no. …, G…, taxpayer no. …, H…, taxpayer no. …, I…, taxpayer no.…., J…, taxpayer no.…, K…, taxpayer no. … and L…, taxpayer no. …, hereinafter designated as Claimants, submitted on 14/07/2015 a request for arbitral pronouncement, in which they seek the annulment of the stamp duty tax assessment act relating to the year 2014.

1.2. His Excellency the President of the Deontological Council of the Administrative Arbitration Center (CAAD) appointed on 28/08/2015 as arbitrator Francisco Nicolau Domingos.

1.3. On 14/09/2015 the arbitral tribunal was constituted.

1.4. In compliance with the provision of article 17, no. 1 of Decree-Law no. 10/2011, of 20 January (RJAT), the Respondent was notified on 23/09/2015 to present a reply, if it wished, and to request the production of additional evidence.

1.5. On 26/10/2015 the Respondent presented its reply, in which it raised the material incompetence of the arbitral tribunal, alleged grounds of challenge and requested, in view of the absence of disputed facts, the waiver of the hearing referred to in article 18 of the RJAT, as well as the presentation of arguments.

1.6. The Claimants on 05/11/2015 replied, in accordance with the principle of adversarial proceeding, to the exception of material incompetence of the tribunal raised by the Respondent.

1.7. On 13/11/2015 the tribunal invited the Claimants to indicate the facts of their request for arbitral pronouncement on which they intended to question the listed witnesses, in order to assess the relevance of such evidence.

1.8. On 16/11/2015 the Claimants indicated such facts.

1.9. On 02/12/2015 the tribunal determined, in particular, that the requested evidence would not be produced, with the grounds better described in that order and waived the holding of the hearing referred to in article 18, no. 1 of the RJAT, on the basis of the principle of autonomy of the arbitral tribunal in the conduct of the proceedings and in the determination of the rules to be observed in order to obtain, within a reasonable time, a substantive pronouncement on the claims formulated, see article 16, letter c) of the RJAT, as well as that the parties, if they wished, present written arguments and scheduled a date for the delivery of the final decision.

1.10. The Claimants presented on 11/12/2015 their final written arguments.

  1.  SUBJECT MATTER OF THE DISPUTE

The Claimants argue that they are co-owners of the urban property recorded in the register under article …, of the parish of …, municipality of Lisbon and that in accordance with the respective property record it has the following description: "Property consisting of ground floor, 1st, 2nd, 3rd, 4th and 5th floors, intended for commerce and residence."

As well as, despite such registration, each of the floors is composed of apartments completely autonomous from the remaining floors, and most of the divisions of the property are intended for commerce and to such an extent is this the case that they are leased.

They state that the facts relating to these proceedings are identical to those which were established in arbitration case no. 573/2014-T which has as its subject matter the stamp tax assessments of the above-identified property, but relating to the year 2013.

They observe that, in view of the circumstance that the property in question is primarily intended for commerce, this should lead to a deduction from the taxable property value (VPT) of the value of the parts of the property that have such use. In this regard, they add that, if the property were established under a horizontal property regime, with certain parts being intended for commerce, item 28.1 of the General Stamp Tax Table (TGIS) would never apply to them, especially because none of the putative fractions would have a VPT of € 1,000,000.00.

The Claimants conclude by stating that the interpretation of item 28.1 of the TGIS carried out by the Respondent violates the constitutional principle of tax equality.

For its part, the Respondent argues, in the first place, that the arbitral tribunal is incompetent to assess the legality of a payment of assessments that does not constitute a tax act, as is evidenced by the case value and all the documents attached thereto.

On the other hand, and alternatively, it states that there are assessments that result exclusively from the direct application of the legal provision, which amounts to objective elements, without any subjective or discretionary assessment. Therefore, the fact that, in the tax rule – item 28.1 of the TGIS – provision was made for "property with residential use" rather than "residential property" makes appeal to the use coefficient, which applies equally to all urban properties.

It presents the following conclusions in its reply: i) Item 28.1 of the TGIS applies to properties with residential use; ii) The taxable property value equal to or exceeding € 1,000,000.00 upon which the application of such legal provision depends is, as expressly appears from its text, the taxable property value of each property and not of its distinct parts, even though they may be capable of independent use; iii) The unity of the urban property in vertical property composed of various floors or divisions is not, however, affected by the fact that all or parts of those floors or divisions are capable of independent economic use; iv) Any other interpretation would violate the principle of legality set forth in article 103, no. 2 of the CRP; v) The principles of tax equality and contributive capacity prohibit only arbitrary or unjustified discriminations, but not discriminations that may be justified by the more developed nature of the institutions or by the coherence of the tax system; vi) Law no. 55-A/2012, of 29 October not representing any violation of the principle of non-retroactivity of tax law and vii) For which reason the assessments that are the subject of these proceedings have not violated any legal or constitutional provision, and should therefore be maintained in the legal order.

  1. FACTS

3.1. Facts Deemed to be Proven

3.1.1. The Claimants are owners of the property to which corresponds registration number …, urban, parish …, municipality of Lisbon, as property in full ownership without floors or divisions capable of independent use.

3.1.2. The property consists of ground floor, 1st, 2nd, 3rd, 4th and 5th floors and is intended for commerce and residence.

3.1.3. The property is located at Street …, … to …; Street …, no. … to … and Street …, no. … to … in Lisbon.

3.1.4. The property identified in 3.1.1 of the present proceedings is owned in co-ownership by the Claimants, with each having the following share:

a) A… – 35/384;

b) B… – 36/384;

c) C… – 19/384;

d) L… – 51/384;

e) D… – 27/384;

f) E… – 33/384;

g) F… – 16/384;

h) G… – 51/384;

i) H… – 32/384;

j) I… – 9/384;

l) J… – 24/384;

m) K… – 51/384.

3.1.5. The parts of the property described below are leased:

a) Ground floor, Street …, … to …, to the company …, Ltd. for commercial use;

b) Ground floor, Street …, … to …, to …, for commercial use;

c) Ground floor, Street … …/…, to …, Ltd., for commercial use;

d) Ground floor, Street …, …/…, to …, Ltd., for commercial use;

e) Ground floor and 1st floor, Street …, … to …, to …, S.A., for commercial use;

f) 2nd floor left side and 4th floor right and left side, Street …, … to …, to …, Ltd., for commercial use;

g) 2nd floor right side, Street …, …, to …, Ltd., for commercial use;

h) 3rd floor right and left side, Street …, …, to …, for operation of a health care facility;

i) 5th floor left side, Street … …, to …, for residential use;

j) 5th floor right side, Street … …, to …, Ltd., for commercial use.

3.1.6. Each of the Claimants was notified of the stamp tax assessment relating to his/her share, dated 20/03/2015, relating to item 28.1 of the TGIS, in the total amount of € 13,577.05 and which is broken down as follows:

a) A…, in the amount of € 1,237.49;

b) B…, in the amount of € 1,272.85;

c) C…, in the amount of € 671.78;

d) L…, in the amount of € 1,803.20;

e) D…, in the amount of € 954.64;

f) E…, in the amount of € 1,166.78;

g) F…, in the amount of € 565.71;

h) G…, in the amount of € 1,803.20;

i) H…, in the amount of € 1,131.42;

j) I…, in the amount of € 318.21;

l) J…, in the amount of € 848.57;

m) K…, in the amount of € 1,803.20.

3.1.7. The Claimants made the following payments relating to the first installment, in the total amount of € 4,578.83 and which are itemized as follows:

a) A…, in the amount of € 412.51;

b) B…, in the amount of € 424.29;

c) C…, in the amount of € 223.94;

d) L…, in the amount of € 601.08;

e) D…, in the amount of € 318.22;

f) E…, in the amount of € 388.94;

g) F…, in the amount of € 188.57;

h) G…, in the amount of € 601.08;

i) H…, in the amount of € 377.14;

j) I…, in the amount of € 159.11;

l) J…, in the amount of € 282.87;

m) K…, in the amount of € 601.08.

3.1.8. The Claimants in their request for arbitral pronouncement describe that: "…notified of the 1st installment of Stamp Tax assessments relating to the year 2014, with numbers 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015…, which are attached as documents 1 to 12 in the total amount of € 13,327.83 (thirteen thousand, three hundred and twenty-seven euros and eighty-three cents), determining that these suffer from illegality,…".

3.2. Facts Not Deemed to be Proven

There are no facts with relevance for the arbitral decision that have not been deemed to be proven.

3.3. Grounds for the Facts Deemed to be Proven

The facts deemed to be proven originate from the documents used for each of the alleged facts and whose authenticity was not questioned.

  1. PRELIMINARY MATTER

The Respondent argues the material incompetence of the tribunal, in that, in its judgment, the 1st installment is not a tax act capable of being challenged by means of a request for arbitral pronouncement. And, to such an extent is this the case that, in its view, the case value and all the attached documents point to the conclusion that the subject matter of challenge are the billing notices that constitute the first installments of tax.

In this regard, the tribunal must of its own motion consider the dilatory exceptions provided for in article 16 of the Code of Tax Procedure and Process (CPPT) and in articles 577, letter a) and 578, both of the Code of Civil Procedure (CPC), applicable by virtue of article 29 of the RJAT.

Thus, it is imperative to consider from the outset the tribunal's competence to assess the Claimants' claims.

In this respect and in commentary on article 16 of the CPPT, doctrine maintains that: "Issues of absolute competence are to be considered of the tribunal's own motion and their consideration precedes that of any other issue (…) Thus, incompetencies by reason of subject matter and by reason of hierarchy, in legal proceedings, must be considered of the tribunal's own motion, preceding the consideration of any other issues and may be raised by the interested parties…"[1].

Accordingly, it is necessary to consider the relevant legal framework, namely the RJAT. More specifically, article 2, no. 1 of the RJAT provides that: "The competence of arbitral tribunals includes the assessment of the following claims: a) The declaration of illegality of acts of tax assessment, of self-assessment, of withholding at source and of payment on account; b) The declaration of illegality of acts establishing the taxable matter when it does not give rise to the assessment of any tax, of acts determining the collective matter and of acts establishing taxable property values;".

Furthermore, article 97, no. 1 of the CPPT provides that: "The tax judicial process comprises: a) The challenge of tax assessments, including parafiscal taxes and acts of self-assessment, withholding at source and payment on account;".

The first conclusion to be drawn is that the claim for declaration of illegality of assessment acts may be the subject of judicial challenge or, alternatively, of a request for arbitral pronouncement.

However, can billing notices for the 1st installment relating to the stamp tax assessment for the year 2014 be the subject of a request for arbitral pronouncement?

To answer this question, it is first necessary to clarify the concept of "assessment" in order to determine the tribunal's competence.

In clarification of such concept, VÍTOR FAVEIRO taught: "…it is an administrative act, applying the rule of incidence and the respective rate of apportionment to the collective matter previously or allegedly determined; the arithmetic expression of the pecuniary value of the corresponding tax obligation and its imputation to the person of the taxpayer; and the declaration, substantive and formal, of such operation and its notification to the taxpayer, with definitive and enforceable effects of actual obligation of the taxpayer and subjective right of credit of the State". In this regard, BRAZ TEIXEIRA adds: "It is necessary not to confuse periodic payments, which, although being made by successive acts at different times, have their origin in the same obligation and constitute the various portions of the same payment that has been divided, with payments that must be made periodically, not due to a global payment, but rather to the periodic birth of new obligations by the persistence of the factual presuppositions of taxation".[3]

Now, such definitions share a common denominator, namely that there will be a single assessment for each tax fact, through which the amount of the collection will be determined. Consequently, if this is the case, each assessment may be the subject of only one challenge.

Within the Stamp Tax Code (CIS) it is possible to see what was stated above in article 23, no. 7 by providing that "As for tax due for situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property,…applying, with the necessary adaptations, the rules contained in the CIMI". Article 113, no. 1 of the CIMI provides that: "The tax is assessed annually…" and no. 2 adds that: "The assessment referred to in the preceding number is carried out in the months of February and March of the following year".

Thus, the fact that the assessment may be paid in installments does not mean that, as a general rule, several assessments have been made. Strictly speaking, the assessment is one and, if this is the case, can only support a single request for challenge.[4]

Applying such interpretation to the case under review, it is first necessary to determine what was the subject matter of challenge. In this regard, the Claimants proceed to the following delimitation: "…notified of the 1st installment of the assessments of Stamp Tax relating to the year 2014 with numbers 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015…, which are attached as documents 1 to 12 in the total amount of € 13,327.83 (thirteen thousand, three hundred and twenty-seven euros and eighty-three cents), determining that these suffer from illegality,…".

Now, it is clear that the Claimants subsume the 1st installment of tax to an assessment, inasmuch as they delimit the subject matter of challenge with: "…notified of the 1st installment of the assessments (our emphasis) of Stamp Tax relating to the year 2014…". That is, they intend to challenge the 1st installment. In truth, if this were not the case, they would not have made any reference to the 1st installment.

But this conclusion could appear to be shaken by the position taken by the Claimants when exercising the right to adversarial proceeding regarding the exception of material incompetence raised by the Respondent in its reply, when they state that the taxable property value of the property in question is € 1,357,706.87, therefore the total tax value would be € 13,577.07 and, consequently, request the correction of the case value that was indicated in the request for arbitral pronouncement (€ 13,327.83).

We believe this is not the case, since from the outset, if it is possible for the tribunal to accept the correction regarding the case value, the same cannot happen regarding the act itself that is the subject of the request and that, in the case under review, was concretized as the 1st installment of the stamp tax of the year 2014. In this regard, jurisprudence states in the context of the arbitral decision delivered in case no. 741/2014-T and in which counselor JORGE LOPES DE SOUSA served as president arbitrator: "…the corrections of procedural documents referred to in letter c) of no. 1 of article 18 must be understood as relating to its lack of adequacy for assessment of the legality of the act that is the subject of the request for arbitral pronouncement and not of any other, such possibility not extending to the substitution of the act that is the subject of the request. Certainly they will be covered by the possibility of correction of deficiencies in the identification of the act that the Taxpayer challenged, such as error in the indication of its number or its date or the assessment value, as these will be cases where the correction does not involve substitution of the act that is the subject matter of the proceedings, merely aiming to make clear the expression of intent of the Taxpayer to challenge it. But, different from such corrections will be the cases in which the act that was the subject of the request for arbitral pronouncement is perfectly identified and there was no error in the expression of the intent of the Taxpayer".

For which reason, if the intent of the Claimants consisted in the challenge of the 1st installment of stamp tax of the year 2014, as appears from the procedural document, any alteration became impossible.

Finally, even if it is argued that the value attributed in the request for pronouncement of € 13,327.83 is close to the amount of stamp tax for the year 2014 (€ 13,577.05), the tribunal must always consider the tax act that is the subject of challenge by the Claimants and this, as appears from the pleadings, relates to the "...1st installment of the assessments of Stamp Tax relating to the year 2014...".

Consequently, the act underlying the request for arbitral pronouncement does not constitute "acts of tax assessment" described in article 2, no. 1, letter a) of the RJAT, for which reason the tribunal is materially incompetent, a dilatory exception that is declared in accordance with the provision of article 16, no. 1 of the Code of Tax Procedure and Process (CPPT), which determines the dismissal of the Respondent from the instance, see article 99, no. 1 and article 576, no. 2 of the Code of Civil Procedure (CPC), applicable by virtue of article 29 of the RJAT.

Thus, the consideration of the other questions raised in the proceedings is rendered moot.

However, with the declaration of such dilatory exception, the right of access to Justice is not barred. In truth, the termination of the legal-processual relationship does not prevent the Claimants from, in accordance with article 279 of the CPC, applicable supplementarily by virtue of article 29 of the RJAT, filing a new request for arbitral pronouncement in which they delimit that its subject matter is the act of assessment of stamp tax relating to the year 2014, in the total amount of € 13,577.05. And, we understand that this is the case by virtue of the provision of article 44, no. 5 of the CIS: "Where there is an assessment of the tax referred to in item no. 28 of the General Table, the tax is paid in the periods, terms and conditions defined in article 120 of the CIMI".

Accordingly, article 120 of the CIMI provides that: "1 – The tax must be paid: a) in one installment, in the month of April, when its amount is equal to or less than € 250; b) in two installments, in the months of April and November, when its amount is greater than € 250 and equal to or less than € 500; c) in three installments, in the months of April, July and November, when its amount is greater than € 500".

Now, in the concrete case, the tax amount is greater than € 500, that is, the Claimants will have been notified for the voluntary payment of the billing notice relating to the 3rd installment of the stamp tax assessment by 30 November 2015 and, if this is the case, they are still within the time limit.

  1. DECISION

For these reasons and with the grounds described above, the decision is to recognize the absolute incompetence of the tribunal and, as a consequence, dismiss the Respondent from the instance, with all legal consequences.

  1. CASE VALUE

The case value is set at € 13,577.05 in accordance with article 97-A of the CPPT, applicable by virtue of the provision in article 29, no. 1, letter a) of the RJAT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs to be borne entirely by the Claimants in the amount of € 918, see article 22, no. 4 of the RJAT and Table I attached to the RCPAT.

Let notice be given.

Lisbon, 6 January 2016

The Arbitrator,

(Francisco Nicolau Domingos)

[1] JORGE LOPES DE SOUSA, Code of Tax Procedure and Process – Annotated, 4th edition, Vislis Publishers, 2003, p. 141.

[2] The Status of the Taxpayer. The Person of the Taxpayer in the Social State of Law, Coimbra Publisher, 2002, p. 683.

[3] Principles of Tax Law, Volume I, 3rd edition, Almedina, 1993, p. 244, footnote 3.

[4] See in this sense the arbitral decision delivered in case no. 346/2015-T, in which Master MARIANA VARGAS served as arbitrator, and that relating to case no. 736/2014-T, in which Master MARCOLINO PISÃO PEDREIRO served as arbitrator.

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Tabela Geral do Imposto do Selo and how does it apply to high-value urban properties?
Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) imposes stamp tax on urban properties with residential use when the taxable property value (VPT) equals or exceeds €1,000,000. According to the Tax Authority's interpretation in Process 436/2015-T, this provision applies to 'properties with residential use' based on the use coefficient, meaning the €1,000,000 threshold refers to the entire property's VPT as registered, not to individual floors or divisions. The tax applies annually to high-value properties, even when the building contains both commercial and residential spaces. The key dispute centers on whether the presence of commercial areas should reduce the taxable base or whether the property's registration as a single unit with any residential component subjects the full value to taxation under this provision.
Can co-owners of an urban building challenge a Stamp Tax (Imposto do Selo) assessment through CAAD arbitration?
Yes, co-owners of urban buildings can challenge Stamp Tax (Imposto do Selo) assessments through CAAD (Centro de Arbitragem Administrativa) arbitration, as demonstrated in Process 436/2015-T where twelve co-owners jointly filed a request for arbitral pronouncement. However, the Tax Authority may raise preliminary objections regarding the tribunal's material competence, particularly when arguing that the assessment results from direct application of law without discretionary evaluation. The CAAD's jurisdiction extends to disputes over tax acts, but there may be questions about whether certain stamp tax liquidations constitute challengeable 'tax acts' or merely automatic calculations. Co-owners can submit collective arbitration requests contesting assessments related to their shared property, with each co-owner identified by their taxpayer number and ownership share in the proceedings.
How does the autonomy of individual apartments affect Stamp Tax liability under Verba 28 TGIS?
The autonomy of individual apartments significantly affects Stamp Tax liability under Verba 28 TGIS, particularly regarding the distinction between vertical and horizontal property regimes. In Process 436/2015-T, claimants argued that if their building were organized as horizontal property (condominium with autonomous fractions), Verba 28.1 would not apply because individual units would fall below the €1,000,000 threshold. However, the Tax Authority maintains that when property is registered as a single vertical building without legally autonomous divisions, the €1,000,000 threshold applies to the entire property's VPT regardless of how floors or spaces are used independently. The legal registration status—not the actual physical or economic autonomy of spaces—determines tax treatment. This creates potential inequality between similar buildings organized under different property regimes, which claimants argue violates constitutional principles of tax equality.
What procedural steps are involved in a CAAD arbitral tribunal case contesting Imposto do Selo liquidation?
The procedural steps in a CAAD arbitral tribunal case contesting Imposto do Selo liquidation include: (1) filing a request for arbitral pronouncement by the claimant(s) identifying the contested tax act; (2) appointment of an arbitrator by the President of CAAD's Deontological Council; (3) constitution of the arbitral tribunal; (4) notification of the Tax Authority (Respondent) to present a reply and request additional evidence under Article 17(1) of RJAT; (5) submission of the Authority's reply, which may raise preliminary exceptions such as material incompetence; (6) claimant's response to any exceptions raised, following the principle of adversarial proceeding; (7) evaluation of requested evidence and witness testimony by the tribunal; (8) tribunal's decision on evidence production and whether to hold an oral hearing under Article 18(1) of RJAT or waive it based on Article 16(c) procedural autonomy; (9) submission of written final arguments by parties; and (10) delivery of the arbitral decision within the scheduled timeframe.
Does the material competence of CAAD arbitral tribunals extend to Stamp Tax disputes on co-owned properties?
The material competence of CAAD arbitral tribunals to hear Stamp Tax disputes on co-owned properties was specifically contested in Process 436/2015-T. The Tax Authority argued that the tribunal lacked material competence because the stamp tax assessment did not constitute a proper 'tax act' subject to arbitration, but rather resulted exclusively from direct application of legal provisions to objective elements without subjective or discretionary evaluation. Under the RJAT (Regime Jurídico da Arbitragem Tributária - Decree-Law 10/2011), CAAD tribunals have jurisdiction over disputes concerning tax acts. The question of whether automatic liquidations based on property values registered in tax databases qualify as challengeable acts or merely computational applications of law remains a key jurisdictional issue. This preliminary question must be resolved before the tribunal can address substantive arguments about the legality of the tax assessment itself.