Process: 441/2015-T

Date: March 21, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 441/2015-T, a company challenged Stamp Tax assessments under Verba 28.1 of the General Stamp Tax Table (TGIS) on two building plots worth €1,550,690 each. The taxpayer argued that mixed-use properties with authorized construction for both housing and commerce should not fall under Verba 28.1, which applies to 'building plots whose construction, authorized or foreseen, was for housing.' The Tax Authority raised a preliminary exception of material incompetence (incompetência em razão da matéria), arguing the CAAD arbitral tribunal lacked jurisdiction because the claimant merely contested collection documents rather than the underlying tax acts. On the merits, the Tax Authority contended that properties with 'housing allocation' (afetação habitacional) in the cadastral register are subject to Stamp Tax, regardless of mixed-use authorization. The Authority relied on the Municipal Property Tax Code (CIMI) for definitions of 'urban property,' 'building plot,' and 'housing allocation,' arguing that allocation coefficients used for patrimonial valuation purposes must also apply for Verba 28.1. The claimant maintained that only the housing portion of the tax patrimonial value should be taxed and that no individual unit post-construction would exceed the €1,000,000 threshold. This case highlights critical jurisdictional and substantive issues in Portuguese Stamp Tax law, including CAAD's competence to hear collection document challenges and the proper interpretation of Verba 28.1's scope regarding mixed-use construction land.

Full Decision

ARBITRAL DECISION

  1. Report

A - General

1.1. A…, S.A., with the unique identification number and registration in the commercial registry office…, with registered office at Street…, no.…, …, …-… ... (hereinafter designated the "Claimant"), submitted, on 15.07.2015, an application for the constitution of a single arbitral tribunal in tax matters, which was accepted, aimed, on the one hand, at the declaration of illegality of the Stamp Tax assessment acts of 20.03.2015, concerning item 28.1 of the General Table of Stamp Tax (hereinafter "GTST"), relating to real properties of which it is the owner, as shall be seen further below, and which gave rise to the collection notes no. 2015 … and no. 2015…, these in the total amount of € 10,337.96 (ten thousand three hundred and thirty-seven euros and ninety-six cents), relating to the first installment, and, on the other hand, the compensation for damages suffered by it through the improper payment of tax installments.

1.2. In accordance with the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council of the Administrative Arbitration Center (CAAD) appointed the undersigned as arbitrator, and the Parties, after being duly notified, did not express opposition to such appointment.

1.3. By order of 07.09.2015, the Tax and Customs Administration (hereinafter designated the "Respondent") appointed Ms. B… and Ms. C… to intervene in the present arbitral proceedings, in the name and representation of the Respondent.

1.4. In accordance with the provisions of subparagraph c) of paragraph 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 01.10.2015.

1.5. On the same day 01.10.2015, the highest-ranking official of the Respondent's service was notified to, if so wished, within a period of 30 days, submit a response and request the production of additional evidence.

1.6. On 02.11.2015, the Respondent submitted its response.

B – Position of the Claimant

1.7. The Claimant is the owner of two building plots located in the municipality of ..., parish of…, at Quinta de…, each with an area of 1,560 m² (one thousand five hundred and sixty square meters) and tax patrimonial value (TPV) at the date of € 1,550,690.00 (one million five hundred and fifty thousand six hundred and ninety euros) designated as lots 38 and 39, registered in the cadastral register of the said parish under articles … and…, respectively, to which correspond the property cards which the Claimant annexes to its application as documents no. 3 and no. 4, the contents of which are deemed to be reproduced (hereinafter designated briefly as "Properties").

1.8. The Claimant was notified of the Stamp Tax assessments (hereinafter designated "ST") referred to in 1.1., the collection documents relating to the first installment of which were annexed to the application for arbitral ruling as documents no. 1 and no. 2, the contents of which are deemed to be reproduced, which were based on Article 1 of the Stamp Tax Code (hereinafter the "STC") and on item 28.1 of the GTST, added by Article 4 of Law no. 55-A/2012, of 29 October.

1.9. The Claimant, on 20.04.2015, proceeded to pay the amounts collected, relating to the first installment, wherefore it requests the compensation for damages suffered by it with the improper payment of tax installments.

1.10. The Claimant alleges, in the first place, that item 28 of the GTST, in the wording it adopted after the entry into force of the State Budget Law for 2014, taxes "building plots whose construction, authorized or foreseen, was for housing", which is equivalent to saying that for the purposes of the application of this item, building plots for which there is authorized or foreseen construction that is simultaneously for housing and commerce are irrelevant, regardless of what their respective TPV may be.

1.11. Now, for the Properties there are authorized constructions allocated simultaneously to housing and commerce. In fact, by permit no. …/2006, which the Claimant attached as doc. no. 5 to its application for arbitral ruling, the contents of which are deemed to be reproduced, each of the buildings authorized therein has an area of 6,750.00 m² allocated to housing, another of 840 m² allocated to commerce and yet another of 3,160.00 m² allocated to parking and storage, which automatically removes the Properties from the field of subjection of the said item of the GTST.

1.12. Even if such were not the case, it seems clear that the part of the TPV of the Properties attributable to areas allocated to commerce and to parking and storage cannot be subject to this tax, wherefore the tax and customs administration, instead of considering a global TPV for each of the Properties, should have discriminated the TPV relating exclusively to housing, equally quantifying the TPVs relating to commerce and to parking and storage, which was not done.

1.13. The Claimant further alleges that it is certain and sure that, after the buildings authorized for the said building plots are constructed, none of its parts susceptible to separate income will have a TPV equal to or greater than €1,000,000.00, wherefore in light of the principles of contributive capacity, equality and justice, there can be no taxation prior to such construction.

C – Position of the Respondent

1.14. Defending itself by way of exception, the Respondent argues the material incompetence of the arbitral tribunal, since in its view the Claimant merely contests the collection document of a tax installment, which in itself is not a tax act, wherefore, in light of the provisions of Article 2 of the LRTAT, the arbitral tribunal cannot examine the application.

1.15. By way of counter-argument, the Respondent also defends itself, sustaining that urban properties which are building plots and to which housing allocation has been attributed in the context of their respective assessments, appearing such allocation in their respective cadastral registers, are subject to ST.

1.16. The Respondent's understanding results from the fact that there is no, under the Stamp Tax regime, any definition of the concepts of "urban property", "building plot" and "housing allocation", which requires resort to the Municipal Property Tax Code (the "MPTC"), in compliance with the provisions of paragraph 2 of Article 67 of the STC, as amended by Law no. 55-A/2012, of 29 October, resulting in the necessary conclusion that the notion of allocation of an urban property "finds its basis in the part relating to the assessment of real properties" and if "for the purposes of determining the tax patrimonial value of building plots the application of the allocation coefficient is clear in the assessment context", then "its consideration for the purposes of application of item 28 of the GTST cannot be disregarded".

1.17. It is not doubted, therefore, that the Properties have housing allocation, and it is certain that "housing allocation", an expression used by the legislator, is not equivalent to the concept of "properties intended for housing". That is a broader expression.

1.18. Nor can it be ignored that the permit for the carrying out of urban development operations should contain, in accordance with Article 77 of the Legal Regime of Urban Development and Building, the specification of a series of elements, wherefore, long before actual construction takes place, it is possible to determine and ascertain the allocation of building plots.

1.19. The legislative amendment which makes it possible, without hesitation, to tax building plots whose construction, authorized or foreseen, is for housing, aimed to broaden the tax base, by the need to correct the budget deficit, respecting the constitutional principles of proportionality and contributive capacity.

1.20. The Respondent finally understands that compensatory interest is not owed to the Claimant, since the payment made by it was not improper.

D – Conclusion of the Report and Determination of Facts

1.21. By order of 09.03.2016, the arbitral tribunal notified the Claimant to, if so wished, pronounce itself on the exception invoked by the Respondent in its response, which it did on 14.03.2016, contending for its rejection, since it contests the first installment as suggested by the Respondent, and it is certain that "nowhere does the law state that only the assessment can be contested and not the installments which, because they are installments, are nonetheless, for all purposes, parts of an assessment".

1.22. By order of 12.03.2016 the arbitral tribunal, for the purposes of determining the procedural costs, fixed the value of the case at € 31,013.80 (thirty-one thousand and thirteen euros and eighty cents).

1.23. By petition of 17.03.2016, the Claimant came to oppose the order referred to in 1.22, acknowledging that it had contested by arbitration, in separate proceedings, each of the three installments of the assessment which now concerns us.

1.24. By order of the same day 17.03.2016 the arbitral tribunal revoked the order referred to in 1.22 and, as requested by the Respondent, dispensed with the meeting provided for in Article 18 of the Legal Regime of Arbitration in Tax Matters (LRTAT), considering that the Parties had already supplied to the proceedings the elements of fact necessary and sufficient for the rendering of the decision, which provided could take place until 21.03.2016.

1.25. The Parties have legal capacity and standing in accordance with Article 4 and paragraph 2 of Article 10 of the LRTAT, and Article 1 of Ordinance no. 112-A/2011, of 22 March.

1.26. The joinder of claims effected in the present application for arbitral ruling, in homage to the principle of procedural economy, is justified since Article 3 of the LRTAT, by expressly admitting the possibility of "joinder of claims even if relating to different acts", accommodates, without hermeneutical abuse, the examination of a claim which arises, of necessity, from the judgment which the arbitral tribunal holds regarding the validity of the assessment called into question.

1.27. The proceedings are not affected by any nullity. Given that the Respondent raised the exception of material incompetence of the arbitral tribunal, the acceptance of which will prevent the examination of the merits of the case, it is important to begin with that examination, although it is useful the prior determination of the facts.

  1. Facts

2.1. Proven Facts

2.1.1. The Claimant is the sole owner of the Properties (docs. no. 3 and no. 4, attached to the application for arbitral ruling).

2.1.2. The Properties are described as building plots with housing allocation (docs. no. 3 and no. 4, attached to the application for arbitral ruling).

2.1.3. Each of the Properties, at the date of the facts, was assigned the tax patrimonial value of € 1,550,690.00 (one million five hundred and fifty thousand six hundred and ninety euros) (docs. no. 3 and no. 4, attached to the application for arbitral ruling).

2.1.4. By permit no. …/2006 each of the buildings authorized on the Properties has an area of 6,750.00 m² allocated to housing, another of 840 m² allocated to commerce and yet another of 3,160.00 m² allocated to parking and storage (doc. no. 5, attached to the application for arbitral ruling).

2.1.5. The Claimant was notified of the ST assessments to which the collection notes of the first installment annexed to the application for arbitral ruling as documents no. 1 and no. 2 refer.

2.1.6. The Claimant, on 20.04.2015, proceeded to pay the first installment of what was assessed to it, in the amount of € 10,337.96 (ten thousand three hundred and thirty-seven euros and ninety-six cents) (docs. no. 1 and no. 2, attached to the application for arbitral ruling).

2.2. Unproven Facts

There are no facts relevant to the examination of the merits of the case that have been declared as unproven.

  1. On the Exception of Material Incompetence of the Arbitral Tribunal

The Respondent argues that the arbitral tribunal cannot examine the present application for arbitral ruling inasmuch as the law does not provide for the autonomous challenge of an installment of item 28, contained in collection notes, which is what the Claimant intends. In the Respondent's view it follows from the law that the assessment is only one and only it constitutes truly the injurious act susceptible to being challenged.

To support the acceptance of the exception invoked, the Respondent recalls what was decided in arbitral case no. 726/2014-T, which in turn cites the decision handed down in arbitral case no. 120/2012-T:

"(…) although the autonomously reviewable act is the Municipal Property Tax assessment act, the deadline for contesting its legality should only be counted from the end of the payment deadline for the tax determined therein. Having to be paid, in accordance with the law, in more than one installment, only with the end of the last of those (naturally presupposing the non-occurrence of situations of early maturity) will the counting of the deadline referred to in article 102, paragraph 1, subparagraph a) of the PTCP thus be able to begin (…).

Such conclusion results, moreover, clearly from the indivisible nature of the assessment act, as well as from the need – indeed, emphasized by the Respondent itself – that, with respect to the same Municipal Property Tax assessment - which, in accordance with the law should be paid in two installments - contradictory administrative or judicial decisions are not handed down.

For – let us reiterate –, none of the Municipal Property Tax payment installments being autonomously reviewable – but only the assessment act to which they refer (…)"

As can be seen, in this latter case mentioned the exception invoked was another: that of untimeliness of the application for arbitral ruling. In fact, the learned arbitral tribunal understood, and rightly so, that the said exception was unfounded. It did so, by the reading we make of that decision, by considering that given the indivisible nature of the assessment act, the deadline for its arbitral challenge is counted from the end of the payment deadline of the last installment.

It was therefore not the issue of the present case that was examined there. What was decided in case 120/2012-T is that the taxpayer may challenge the assessment act "within 90 days following the end of the payment deadline of the last installment". Now, as is clear, from this decision it cannot be inferred that the taxpayer is prevented from challenging the assessment act within 90 days following the end of the payment deadline of the first installment.

Already in arbitral case no. 726/2014-T it was considered, and rightly so, that in the ST of item 28 "a single annual assessment is made", the payment in installments being nothing more than a technique for the collection of tax revenue", having decided on the material incompetence of the arbitral tribunal for the reason that each of the installments of the Stamp Tax assessments relating to item 28.1 of the GTST are not autonomously challengeable.

In that case the arbitral tribunal extracted from the application for arbitral ruling the intention of the petitioner was to challenge one of the installments of a Stamp Tax assessment. Without better judgment, it does not result from what was there decided that the Stamp Tax assessment act cannot be challenged after notification for payment of the first installment in which its collection can be divided. What is extracted from that learned decision is that, also there, the subject matter of the application for arbitral ruling cannot be the challenge of one of those installments but the challenge of the assessment act, which constitutes an indivisible reality.

Returning to the case which occupies our attention, the acceptance or rejection of the exception invoked by the Respondent will depend on knowing whether the Claimant intends to attack the collection act of the first Stamp Tax installment of item 28 or whether, instead, it challenges the assessment act that authorizes it.

The Claimant recognizes in its petitions of 14.03.2016 and 17.03.2016 that in the present case it is challenging not the Stamp Tax assessment act but what it calls the assessment relating to the first installment. The Claimant asks itself "what other means did (it) have (…), if not litigation, to question the assessments required of it, either in totality or in part?" The reasonableness of the question is perceived, which leaves the answer intuited. It is evident to the Claimant the possibility of reacting against the collection of the first Stamp Tax installment that was assessed to it relating to the Properties. However, this evidence does not substitute the necessary examination of the arbitrability of collection documents.

The jurisdiction of the tax arbitral tribunals functioning at CAAD is fixed by Articles 2, paragraph 1, and 10, paragraph 1, both of the LRTAT and, for what concerns us, is limited to the declaration of illegality of assessment acts of taxes, self-assessments, withholding at source and advance payments. It is necessary to recognize that the collection of one of the installments in which the payment of a tax can be divided is not equivalent to a tax assessment in the proper sense, because the Stamp Tax is in this case assessed only once, annually, in accordance with paragraph 7 of Article 23 of the STC, the division of an assessment into different installments being merely a technique for the collection of tax revenue, as has been emphasized.

Moreover, this arbitral tribunal saw in the application filed by the Claimant the challenge of the assessment act that gave rise to the collection notes attached to the case as documents no. 1 and no. 2, so much so that it understood to correct the value of the present case, making it coincide with that of the assessment act. It was not, however, accurate that view. Now being clear, as it is in the present case, that the Claimant, as it itself recognizes, does not challenge the assessment act, which is indivisible, but reacts only against the respective collection note, this arbitral tribunal cannot but recognize itself, by the grounds that can be read in arbitral case no. 726/2014-T, materially incompetent to examine the application for arbitral ruling.

This conclusion does not correspond to the defense of the unchallengeable nature of the collection act. It means only that the arbitral tribunal is materially incompetent to examine it. It is evident that the collection documents can themselves suffer from illegalities, by nature subject to review, but not before the tax arbitral tribunals functioning at CAAD. It is also certain that in the light of a collection note of any of the installments in which the payment of a tax can be divided, the taxpayer can react against what it understands to be the illegality of the assessment itself. In that case, the decision that is handed down will apply to the assessment act in itself and not to the collection note of one of the installments.

Moreover, it is glaringly obvious the need for the legality of an assessment act to be examined in its indivisible unity, because it would not be acceptable for there to be materially opposing decisions for situations that are identical in all respects.

  1. Decision

In accordance with the foregoing grounds and findings, the material incompetence of the arbitral tribunal is determined, which prevents the examination of the merits of the case and requires the discharge of the Respondent from the instance.

  1. Value of the Case

In accordance with the arbitral order of 17.03.2016, the value of the case was fixed at € 10,337.96 (ten thousand three hundred and thirty-seven euros and ninety-six cents).

  1. Costs

For the purposes of the provisions of paragraph 2 of Article 12 and paragraph 4 of Article 22 of the LRTAT and paragraph 4 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00 (nine hundred and eighteen euros), in accordance with Table I annexed to the said Regulation, to be borne entirely by the Claimant.

Lisbon, 21 March 2016

The Arbitrator

(Nuno Pombo)

Text prepared by computer, in accordance with paragraph 5 of Article 131 of the Civil Procedure Code, applicable by reference of subparagraph e) of paragraph 1 of Decree-Law no. 10/2011, of 20 January and using the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS applicable to construction land (terrenos para construção)?
Yes, Stamp Tax under Verba 28.1 of the TGIS is applicable to construction land (terrenos para construção) with specific conditions. Item 28.1, introduced by Law 55-A/2012, applies to building plots whose authorized or foreseen construction is for housing, with a tax patrimonial value equal to or exceeding €1,000,000. The Tax Authority interprets 'housing allocation' (afetação habitacional) broadly, referencing the cadastral register and Municipal Property Tax Code (CIMI) definitions. If a building plot has housing allocation attributed in its assessment, it falls within Verba 28.1's scope, even if the authorized construction includes mixed uses (housing plus commerce). However, taxpayers can argue that purely commercial plots or mixed-use properties should be excluded or have only the housing portion taxed. The key determination relies on the property's classification in the cadastral register and the allocation coefficients used for patrimonial valuation under CIMI Article 67(2) of the Stamp Tax Code.
Can the CAAD arbitral tribunal decline jurisdiction on grounds of incompetência em razão da matéria in Stamp Tax disputes?
Yes, the CAAD arbitral tribunal can decline jurisdiction on grounds of material incompetence (incompetência em razão da matéria) in Stamp Tax disputes. Under Article 2 of the Legal Regime of Administrative Tax Arbitration (RJAT), CAAD has jurisdiction over tax acts (atos tributários), not mere collection documents. In Process 441/2015-T, the Tax Authority raised this exact exception, arguing that the claimant only challenged collection notes for tax installments rather than the underlying assessment acts themselves. This distinction is critical: assessment acts (liquidações) are reviewable by CAAD, but collection documents alone may not constitute autonomous tax acts subject to arbitral review. To ensure jurisdiction, taxpayers must explicitly challenge the legality of the Stamp Tax assessment acts that gave rise to the collection notes, not merely the payment demands. The tribunal must analyze whether the application properly identifies contestable tax acts under RJAT before proceeding to the merits.
What are the legal grounds to challenge Stamp Tax assessments on high-value construction plots in Portugal?
Legal grounds to challenge Stamp Tax assessments on high-value construction plots in Portugal include: (1) Incorrect classification - arguing the property lacks 'housing allocation' or has mixed-use authorization excluding it from Verba 28.1 scope; (2) Valuation errors - contesting that the tax patrimonial value (VPT) was incorrectly determined or should be apportioned between housing and non-housing uses; (3) Constitutional principles - invoking principles of contributive capacity, equality, and tax justice, especially when no individual post-construction unit will exceed the €1,000,000 threshold; (4) Legislative interpretation - arguing that 'construction for housing' means exclusively residential, not mixed-use properties; (5) Procedural defects - claiming the Tax Authority failed to properly discriminate VPT between different allocation types (housing, commerce, parking); (6) Temporal issues - asserting that taxation before construction violates ability-to-pay principles. Challenges must be filed within legal deadlines and can be brought before CAAD through arbitral tribunal constitution under Decree-Law 10/2011, ensuring proper identification of the contested tax acts.
How is the patrimonial tax value (valor patrimonial tributário) determined for construction land subject to Verba 28.1 TGIS?
The patrimonial tax value (valor patrimonial tributário - VPT) for construction land subject to Verba 28.1 TGIS is determined using Municipal Property Tax Code (CIMI) assessment methodology, as required by Article 67(2) of the Stamp Tax Code. For building plots (terrenos para construção), the VPT calculation incorporates: (1) Base land value from official valuation tables; (2) Location coefficients reflecting the property's geographic position; (3) Allocation coefficients (coeficientes de afetação) based on the intended use - housing, commerce, services, industry, etc. - as registered in the cadastral matrix; (4) Area of the plot; (5) Construction potential authorized in urban planning permits. The Tax Authority in Process 441/2015-T argued that allocation coefficients used for assessment purposes must also define scope for Verba 28.1 application. If a property shows 'housing allocation' in its cadastral register, this classification determines both VPT calculation and Stamp Tax liability. Taxpayers can challenge the VPT by requesting apportionment between different use types when mixed-use construction is authorized, arguing only the housing-allocated portion should be taxed under Verba 28.1.
What is the procedure for requesting arbitral tribunal constitution to contest Imposto do Selo liquidations at CAAD?
The procedure for requesting arbitral tribunal constitution to contest Imposto do Selo liquidations at CAAD involves: (1) Filing an application (pedido de constituição do tribunal arbitral) within the legal deadline - generally within 90 days from notification of the tax act or tacit deferral/refusal of administrative review; (2) The application must identify the contested tax acts (not merely collection documents), specify the legal grounds for illegality, state the requested relief, and include supporting documentation such as assessment notices, property cards, and building permits; (3) Payment of the arbitration fee; (4) CAAD's Deontological Council appoints an arbitrator within legal timeframes (Article 6(2)(a) and Article 11(1)(b) of Decree-Law 10/2011); (5) Parties are notified and may object to the arbitrator appointment; (6) The Tax Authority appoints representatives to intervene in proceedings; (7) The tribunal is formally constituted (Article 11(1)(c)); (8) The Tax Authority is notified to submit a response within 30 days and may request additional evidence; (9) The proceeding follows arbitral rules with potential hearings and expert evidence; (10) The tribunal issues a final arbitral decision with binding effect equivalent to court judgments.