Process: 445/2018-T

Date: March 13, 2019

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 445/2018-T) addresses whether Stamp Tax under Item 28.1 of the TGIS applies to construction land designated for mixed uses including housing, commerce, services, and parking. The Claimant, a Portuguese company, challenged Stamp Tax assessments totaling €130,563.85 levied on two construction plots with taxable property values exceeding €1 million. The Tax Authority applied the 1% rate under Item 28.1, treating the land as exclusively residential. The Claimant argued that Item 28.1 requires land for construction to be exclusively allocated for residential use under the IMI Code. Since both properties had valid construction permits authorizing mixed-use developments (residential, commercial, services, and parking areas), they should not fall within Item 28.1's scope. The Claimant filed an ex officio revision request which was rejected, prompting arbitration proceedings. The central legal question concerns the interpretation of 'terreno para construção' (construction land) under Item 28.1 and whether mixed-use authorization excludes properties from this tax provision. The Claimant also argued that a single taxable property value without individual allocation breakdown cannot support taxation under Item 28.1 for mixed-use properties. Additionally, the Claimant contended that ownership acquired through credit default enforcement does not demonstrate the additional contributory capacity Item 28.1 targets. The arbitral tribunal majority ruled in the Claimant's favor, finding that Item 28.1 applies exclusively to land designated solely for residential construction, not mixed-use developments, ordering tax reimbursement with compensatory interest.

Full Decision

ARBITRATION DECISION

The arbitrators José Baeta de Queiroz, Magda Feliciano and Marisa Almeida Araújo, appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, agree, by majority, as follows:

1. Report

1.1

A..., legal entity no. ..., (hereinafter referred to as the "Claimant") with registered office at Rua ..., no. ..., ...-... Funchal, filed a request for the constitution of an arbitral tribunal and for an arbitral decision, on 7 September 2018, pursuant to article 4 and article 10, no. 2 of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in which the Tax and Customs Authority (hereinafter referred to as the "Respondent" or "TA") is the respondent.

1.2

In the said request for an arbitral decision, the Claimant seeks to have declared the illegality of the rejection decision issued in the ex officio revision procedure no. ...2015... and of the tax assessment acts for Stamp Duty (IS) no. 2014... and no. 2014..., relating to the year 2014, reflected in the collection documents numbered 2015..., 2015..., 2015..., 2015..., 2015... and 2015..., with all other consequences, in particular the restitution of the amount paid, plus compensatory interest.

1.3

The request for the constitution of the Arbitral Tribunal was accepted by the President of CAAD and notified to the Respondent on 10 September 2018.

1.4

The Claimant did not appoint an arbitrator, therefore, pursuant to article 6, no. 2, paragraph a) and article 11, no. 1, paragraph b) of the RJAT, the President of the Deontological Council of CAAD appointed the signatories as arbitrators, who communicated their acceptance of the assignment within the applicable time limit; and the parties did not express refusal of the appointment, pursuant to article 11, no. 1, paragraphs a) and b) of the RJAT and article 7 of the Deontological Code.

1.5

On 20 November 2018, the arbitral tribunal was constituted.

1.6

Notified for this purpose on 20 November 2018, the Respondent submitted its Reply on 4 January 2019, and forwarded a copy of the administrative file on the same date.

1.7

On 7 January 2019, the arbitral meeting provided for in article 18 of the RJAT was waived, and the Claimant and the Respondent were invited to submit written arguments.

1.8

The Claimant submitted written arguments on 29 January and the Respondent on 21 February 2019, maintaining their previously assumed positions. In the subsequent order of 25 February 2019, 2 April 2019 was set as the date for pronouncement of the decision.

1.9

The Claimant supports its request, in summary, as follows:

i. In 2014, the Claimant was the owner of two plots of land for construction located in ..., registered in the urban property matrix under articles U-... of the parish of ..., and U-... of the parish of ..., both in the municipality and district of ..., and at that date, they had no building or construction erected on their soil, being "land for construction."

ii. Those lands were registered in the urban property matrix as "allocated to residential use" and with a taxable property value in 2014 of € 10,191,858.02 (ten million, one hundred and ninety-one thousand, eight hundred and fifty-eight euros and two cents) for the property with article U-... of the parish of ..., and € 2,864,527.13 (two million, eight hundred and sixty-four thousand, five hundred and twenty-seven euros and thirteen cents) for the property with article U-... of the parish of ...

iii. On 20 March 2015, the tax authority issued Stamp Duty assessments numbered 2014... and 2014..., resulting from the application, in the year 2014, of the 1% rate provided for in item 28.1 of the TGIS to the taxable property value of the properties, qualified as land for construction, and notified the Claimant of the respective collection documents numbered 2015..., 2015..., 2015..., 2015..., 2015... and 2015....

iv. In the said Stamp Duty assessments, the tax authority calculated a total tax of € 101,918.58 for the property with article U-... (parish of ...) and a total tax of € 28,645.27 for the property with article U-... (parish of ...).

v. The Claimant made full payment of the calculated tax in the amount of € 130,563.85 (one hundred and thirty thousand, five hundred and sixty-three euros and eighty-five cents), within the deadlines indicated in the respective collection documents.

vi. Raising an error as to the prerequisites, the Claimant submitted a request to promote an ex officio revision, alleging that the land for construction in question in the records was not covered by item 28.1 of the TGIS since, at the date of the tax events, the land for construction, despite having subdivision authorization and construction authorization, did not have the allocation restricted to residential use, and were also provided allocations for commerce or services and parking.

vii. According to permit no. .../2009, of 30 September 2009, authorization was granted for the construction of a building with a gross construction area of 1,785 m² intended for commerce, an area of 6,950 m² intended for residential use, and an area of 4,742.50 m² allocated to parking, for the property registered in the property matrix of the parish of ... with number U-....

viii. For the property registered in the property matrix of the parish of ..., with article U-..., the Subdivision Permit no. .../07 was issued, through which the City Council of ... classified the land as "plot 1" and authorized the construction on that same plot of a building with a total gross construction area of 44,849 m².

ix. Although these lands for construction had an approved construction simultaneously for residential use, commerce and parking, the property matrix showed a single taxable property value, with the taxable property value corresponding to each of the allocations of the property to be built not being determined.

x. In May 2018, the Claimant was notified of the draft decision on the ex officio revision request filed, whereby complete rejection of said request was proposed.

xi. The Claimant exercised its right to be heard and submitted to the Tax Authority documents intended to prove that the properties, qualified as land for construction and on which the tax was levied, had, during the tax period in question, authorizations issued by the competent City Council for the construction of buildings intended not only for residential use but also for commerce, services and parking.

xii. On 12 June 2018, the Claimant was notified of the rejection order.

xiii. According to the Claimant, the subjection of land for construction to Item 28.1 of the TGIS depends on the cumulative satisfaction of the following requirements (in addition to ownership of the property): (i) the taxable property value contained in the matrix, in accordance with the IMI code, being equal to or greater than €1,000,000.00; (ii) being land for construction; and (iii) the authorized and planned building for it being exclusively for residential use, in accordance with the IMI Code, which in its view is not the case.

xiv. Concluding that land for construction that have, jointly, different allocations (other allocations than only for residential use) and whose taxable property value is not determined on an individual basis by reference to each of those allocations, cannot be subject to Stamp Duty under Item 28.1 of the TGIS.

xv. The Claimant further submits that the ownership of such properties does not indicate the additional contributory capacity that is implicit in the taxation that was established in item 28.1 of the TGIS, since the acquisition of real property ownership by A... occurs in scenarios of non-compliance with credit granted, particularly by performance in satisfaction.

xvi. For this additional reason, the subjection of those properties of the Claimant to item 28.1 of the TGIS is contrary to the constitutionally enshrined principle of equality, in that, during the year 2014, A... was in a different (or unequal) situation in relation to the remaining taxpayers of this tax (for whom the holding of real property in the situations described constituted, in fact, a manifestation of additional contributory capacity).

xvii. The Claimant concludes that the assessment acts reflected in the collection documents numbered 2015..., 2015..., 2015..., 2015..., 2015... and 2015... should be annulled, with the appropriate consequences.

1.10

For its part, the Respondent replied supporting the lack of merit of the request for an arbitral decision and alleging, in summary, that:

i. From the certificates of contents of urban properties and property cards that form the basis of these assessments, it is verified that the lands for construction are allocated to residential use, with the percentage for calculating the installation area of 35%.

ii. The valuations carried out on the lands (notified and not contested) were made on the basis of statements and documents submitted by the taxpayer – valuation request and IMI form 1 – where residential allocation was declared, subsequently registered in the matrix, and resulting in taxable property values exceeding €1,000,000.00.

iii. The Respondent subsumed the facts to the rule of incidence, in which urban properties that are land for construction and whose authorized or planned building is for residential use are subject to Stamp Duty.

iv. The rule of incidence – item 28.1 of the TGIS – by having recognized the property with residential allocation to the detriment of the residential property, appeals to the allocation coefficient, cf. article 41 of the IMI Code, which applies indistinguishably to all urban properties.

v. Thus concluding in the lack of merit of the request for an arbitral decision.

2. Preliminary Determination

2.1

The Tribunal is competent and regularly constituted, pursuant to articles 2, no. 1, paragraph a), 5 and 6, all of the RJAT.

2.2

The parties have standing and legal capacity, are legitimately parties and are represented, pursuant to articles 4 and 10 of the RJAT and 1 of Ordinance no. 112-A/2011, of 22 March.

2.3

There are no nullities or other preliminary issues affecting the entire process, therefore it is incumbent to now address the merits of the claim.

3. Factual Matters

3.1 Proven Facts

It is incumbent on the tribunal to select the facts that matter for the decision of the case and to distinguish the proven facts from the unproven facts [pursuant to article 123, no. 2, of the Code of Tax Procedure and Process (CPPT) and article 607, no. 3 of the Code of Civil Procedure (CPC), applicable under article 29, no. 1, paragraphs a) and e), of the RJAT].

Thus, the facts pertinent to the judgment of the case are selected and delimited according to their legal relevance, which is established in attention to the various plausible solutions to the legal question(s) (pursuant to former article 511, no. 1, of the CPC, corresponding to current article 596, applicable under article 29, no. 1, paragraph e), of the RJAT).

Thus, having regard to the positions assumed by the parties, the documentary evidence and the Administrative File attached to the records, the following facts are considered proven, with relevance for the decision.

i. In 2014, the Claimant was the owner of two plots of land for construction located in ..., registered in the urban property matrix under articles U-... of the parish of ..., and U-... of the parish of ..., both in the municipality and district of ..., and at that date, they had no building or construction erected on their soil.

ii. The lands identified in i. were registered in the urban property matrix as allocated to residential use and with a taxable property value in 2014 of € 10,191,858.02 (ten million, one hundred and ninety-one thousand, eight hundred and fifty-eight euros and two cents) for the property with article U-... of the parish of ..., and € 2,864,527.13 (two million, eight hundred and sixty-four thousand, five hundred and twenty-seven euros and thirteen cents) for the property with article U-... of the parish of ....

iii. On 20 March 2015, the tax authority issued Stamp Duty assessments numbered 2014... and 2014..., resulting from the application, in the year 2014, of the 1% rate provided for in item 28.1 of the TGIS to the taxable property value of the properties.

iv. The Claimant was notified of the respective collection documents numbered 2015..., 2015..., 2015..., 2015..., 2015... and 2015....

v. A tax of € 101,918.58 was calculated for the property with article U-... (parish of ...) and a total tax of € 28,645.27 for the property with article U-... (parish of ...).

vi. The Claimant made full payment of the calculated tax in the amount of € 130,563.85 (one hundred and thirty thousand, five hundred and sixty-three euros and eighty-five cents).

vii. The Claimant submitted a request to promote an ex officio revision with grounds that coincide, in essence, with those invoked in the present proceedings.

viii. According to permit no. .../2009, of 30 September 2009, authorization was granted for the construction of a building with a gross construction area of 1,785 m² intended for commerce, an area of 6,950 m² intended for residential use, and an area of 4,742.50 m² allocated to parking, for the property registered in the property matrix of the parish of ... with number U-....

ix. For the property registered in the property matrix of the parish of ..., with article U-..., the Subdivision Permit no. .../07 was issued, through which the City Council of ... classified the land as "plot 1" and authorized the construction on that same plot of a building with a total gross construction area of 44,849 m², of which 12,508 m² were intended for residential use, 15,048 m² for commerce and services, and 17,294 m² for parking.

x. In May 2018, the Claimant was notified of the draft decision on the ex officio revision request filed.

xi. On 22 May 2018, the Claimant exercised its right to be heard and on 12 June 2018 was notified of the rejection order.

3.2 Unproven Facts

With relevance for the consideration of the merits of the case, taking into account the possible legal solutions, there are no facts that have not been proven.

3.3 Reasoning of the Factual Matters Deemed Proven

The conviction as to the factual matters resulted from the arguments of the parties, with no general controversy, and supported by documentary evidence attached to the process as well as by elements contained in the administrative file submitted by the Respondent.

4. Legal Matters

The subjection to Stamp Duty of properties with residential allocation resulted from the amendment of Item no. 28 to the General Table of Stamp Duty (TGIS), carried out by article 4 of Law 55-A/2012, of 29 October, which typified the following tax facts:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the matrix, in accordance with the Code of Municipal Property Tax (IMI Code), is equal to or greater than €1,000,000.00 – on the taxable property value used for IMI purposes:

28.1 – For a property with residential allocation – 1%

28.2 – For a property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, as listed in a list approved by order of the Minister of Finance – 7.5%".

In turn, Law no. 83-C/2013, of 31 December, amended the wording of the rule, which then became as follows:

"28.1 For a residential property or for land for construction whose authorized or planned building is for residential use, in accordance with the provisions of the IMI Code" (articles 2 to 6 of the IMI Code enumerate the types of properties).

It is within this legal framework that it is important to assess the legal characterization of the property on which the tax at issue was levied.

With the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to item no. 28 of the General Table, it becomes clear that land for construction whose authorized or planned building is for residential use are covered under item 28.1 of the TGIS (provided that the respective taxable property value is equal to or greater than 1 million euros).

Referring to the judgment of the Administrative Supreme Court (STA) of 09/04/2014 (case no. 1870/13), it follows that "(t)he fact that it can be considered that in determining the taxable property value of urban properties classified as land for construction, account should be taken of the allocation that the authorized or planned building for it will have for determining the respective value of the installation area (cf. nos. 1 and 2 of article 45 of the IMI Code), does not determine that land for construction can be classified as 'properties with residential allocation', since residential allocation always appears in the IMI Code referred to existing, authorized or planned 'buildings' or 'constructions', since only these can be inhabited, which is not the case with land for construction, which does not have, in itself, conditions for such, and cannot be used for residential purposes except if and when the construction authorized and planned for it is erected on it (but in that case they will no longer be 'land for construction' but another type of urban property – 'residential', 'commercial, industrial or service properties' or 'other' – article 6 of the IMI Code)".

Thus, "(a)ttending to the fact that land for construction – whatever the type and purpose of the building that will, or might be, erected on it – does not satisfy, by itself alone, any condition to be licensed as such or to define residential use as its normal destination, and given that the rule of incidence of stamp duty refers to urban properties with 'residential allocation', without any specific concept being established for this purpose, from it cannot be extracted that it contains a future potentiality, inherent to a distinct property that might possibly be built on the land".

Likewise, in the judgment of the STA of 14-05-2014, case no. 046/14, it is stated that "as the legislator has not defined the concept of 'urban properties with residential allocation', and as article 6 of the IMI Code results in a clear distinction between 'residential urban properties' and 'land for construction', these cannot be considered, for the purposes of the incidence of Stamp Duty (Item 28.1 of the TGIS, as worded by Law no. 55-A/2012, of 29 October), as urban properties with residential allocation."

Furthermore, as regards matters covered by the reservation of law, note article 103, no. 2 of the Constitution of the Portuguese Republic (CRP) and article 8 of the General Tax Law (LGT). According to these rules, the principle of fiscal legality encompasses the incidence, the rate, tax benefits and taxpayer guarantees. This is also referred to in the work "The Principle of Fiscal Legality" by Ana Paula Dourado, Almedina, 2007, page 106.

As item 28.1 TGIS is a rule of incidence, covered by the principle of fiscal legality, its analogical application to situations not expressly provided therein is prohibited.

Similarly, an extensive interpretation of said item should not be admitted that would allow the inclusion in the expression contained in the law of land for construction. Interpretation is governed by articles 11, nos. 1 to 3 of the LGT and 9 of the Civil Code.

Also in the arbitral decision handed down in case no. 467/2015-T, of 4/2/2016 and cited in the arbitral decision handed down in case 294/2016/T and 454/2016-T, it should not be immediately and without further ado concluded that the property in question could, at the date of the facts, be subject to Stamp Duty under item 28.1 of the TGIS (in its current wording), and this is because: "(…) the essential question that, [in the context of the new wording of item 28.1 of the TGIS, given by art. 194 of Law no. 83-C/2013, of 31/12,] is raised, is whether, … 'without [...] that provision or expectation of 'building for residential use' [...] concretized', can the application of the Stamp Duty here under analysis be accepted [....

To answer this question, the following consideration appears to be particularly useful: "With regard to land for construction, whether or not located within an urban settlement, as defined in art. 3/4 of this statute [IMI Code], they should, as such, be considered the lands with respect to which have been granted: - license for subdivision operation; - construction license; - authorization for subdivision operation; - construction authorization; - favorable prior notice of subdivision or construction operation admitted; or favorable prior information issued for subdivision or construction operation, as well as; - those so declared in the acquisition title, it being necessary to be noted that, also for that purpose, only the acquisition title with the form required by civil law should be relevant, that is, the public deed or the authenticated private document referred to in art. 875 CC." [see. António Santos Rocha / Eduardo José Martins Brás – Taxation of Assets. IMI-IMT and Stamp Duty (Annotated and Commented). Coimbra, Almedina, 2015, p. 44]".

Thus, we conclude, as well stated in decision no. 478/2017-T of CAAD:

"(T)hat, from the entry into force of Law 83-C/2013, urban properties subject to Stamp Duty are those whose taxable property value is greater than €1,000,000;

  • all such properties, provided that the holders are not natural persons and reside in a country, territory or region subject to a clearly more favorable tax regime;

  • properties with residential allocation and

  • land for construction, authorized or planned, for residential use, regardless of the person holding title to it".

That judgment adds that "(a)rticle 1, no. 6 of the Stamp Duty Code provides that the concept of property is that defined in the Code of Municipal Property Tax (IMI Code), that is, in accordance with article 2, no. 1 of that statute, '(...) property is any fraction of territory, including waters, plantations, buildings and constructions of any nature incorporated or built 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 above, endowed with economic autonomy in relation to the land on which they are built, although located in a fraction of territory that constitutes an integral part of a different asset or has no property nature'".

Urban properties are those that do not fit the definition of rural properties in article 3 of the IMI Code (article 4), and in accordance with no. 1 of article 6, may be

  • residential properties,

  • commercial properties,

  • industrial or service properties, land for construction, and others".

In turn, following the same decision, "(l)and for construction are, in accordance with article 6, no. 3 of the IMI Code, '(...) the lands situated within or outside an urban settlement, for which have been granted a license or authorization, favorable prior notice admitted, or favorable prior information issued of subdivision or construction operation, and also those so declared in the acquisition title, excepting the lands in which the competent entities prohibit any of those operations (...)'.

And, "(a)ccording to article 3 of the Stamp Duty Code, 'the tax is a charge on the holders of the economic interest in the situations referred to in article 1', its no. 3 specifying, in paragraph u), that 'holder of the economic interest' is considered to be 'the taxpayer referred to in no. 4 of the preceding article', that is, the taxpayer mentioned in article 8 of the IMI Code, namely, the 'owner of the property on 31 December of the year to which the tax relates' (no. 1 of said article 8)'.

In this manner,

The properties of the Claimant – of which it was owner – are "land for construction" as results from the documents attached to the records and was deemed proven.

And, in fact, in accordance also with the proven facts, for the lands, at the date of the facts, permit no. 1/2009, of 30 September 2009, existed, which authorized the construction of a building with a gross construction area of 1,785 m² intended for commerce, an area of 6,950 m² intended for residential use, and an area of 4,742.50 m² allocated to parking, for the property registered in the property matrix of the parish of ... with number U-.... For its part, for the property registered in the property matrix of the parish of ..., with article U-..., the Subdivision Permit no. .../07 was issued, through which the City Council of ... classified the land as "plot 1" and authorized the construction on that same plot of a building with a total gross construction area of 44,849 m², of which 12,508 m² were intended for residential use, 15,048 m² for commerce and services, and 17,294 m² for parking.

But from the analysis of the documentary supports it results that the lands in question are for construction and, for which, building for residential use is also (a term to which emphasis is given) authorized, but not only that. In addition to the taxable property value having been calculated for these lands taking into account the different purposes of their authorized building.

In fact, the inevitable application of item 28.1 of the TGIS entails the clear demonstration that a property has a building planned or approved for residential use, this purpose and no other, in whole or in part, and provided that the respective taxable property value of the building planned for residential use is equal to or greater than 1 million euros.

Following decision 467/2016-T, which transcribes JOSÉ MANUEL FERNANDES PIRES, (Lessons on Taxes on Assets and Stamp Duty. Coimbra, Almedina, 3rd ed., 2015, pp. 110 to 112): "The right to build is not inherent in the right of property, but only arises anew in the property of the owner when an administrative act of the competent public entity recognizes and authorizes the owner to build or subdivide. [...] only when this right is constituted in the owner's legal sphere is that the IMI Code establishes that we are faced with land for construction".

Thus, and continuing following that decision, "(…) it seems clear that to verify the normative provision it is not sufficient to merely register a property in the property matrix as land for construction allocated to residential use, since the definition of the objective incidence now in question does not waive the demonstration of an effective potentiality of this building, necessarily revealed by the existence of documentary supports that authorize it. This means that the incidence of the tax, for the purposes of item 28.1 of the TGIS, is only materialized, and even then not in definitive or complete terms, with the verification of an 'effective allocation', using the felicitous expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507)".

Now, without express demonstration, in the very act of assessment, of that effective potentiality of building for residential purposes, item 28.1 of the TGIS does not appear applicable for a purpose other than residential use, since building for commerce or industry will not give rise to the application of the rules to which we have been referring.

"Residential allocation" requires a building susceptible to concretely serving residential purposes, purging other purposes that have no literal basis in the letter of the rule.

It is true that, in the property matrix, the property is recorded as being "land for construction" allocated to residential use, but it is also true that, in addition to what would be destined for residential purposes, in the proper sense, other purposes are extracted for alternative allocation not provided for in the rule.

What we think we can safely conclude then is that the legislator did not intend to tax in Stamp Duty, through the application of item 28.1 of the TGIS, land for construction whose authorized or planned building was intended for offices or services. It only intended to tax those destined for residential use. Now, given this legislative choice, which can indeed raise the question of whether such an objective is compatible, in particular with the constitutional principle of tax equality, this item cannot be applied to a property for which construction authorization had been granted for other purposes, as is the case.

A position which emerges clearly from judgment no. 478/2017-T of CAAD and which we endorse.

From that decision it is extracted that "(p)atently, the law does not intend to tax in Stamp Duty land for construction intended for commerce and/or services. It does not even seek to encompass buildings for the installation of commerce and services.

It limits the incidence of the tax (setting aside, for now, buildings erected) to land for construction whose authorized or planned building is for residential use.

On the other hand, the property subject to taxation is one, it being impossible to split it into three – one, the part intended for building with residential allocation, another, the part intended for building with commercial allocation, yet another, the part intended for building with service allocation".

The same situation presented itself in the case sub judice and, in this way, we conclude as does that decision, which we follow again:

"Being a single property (land for construction), it cannot be affirmed that the building authorized or planned on it is for residential use. That is only half the truth; truth would also be, equally, if it were said that the building authorized or planned on it is for commerce, or that it is for services".

The same situation in the case in question with the exception that, in this case, we have two plots of land for construction as established by the proven facts.

"Not to understand it this way would be to broaden the scope of the rule of incidence, making it embrace what clearly falls outside it – land for construction whose authorized or planned building is for commerce and/or services.

In sum, the situation in question is not covered by the rule of incidence invoked by the Respondent – item 28.1 of the TGIS – and the Respondent, by applying it, incurred a defect of violation of law".

In view of the foregoing, the question of constitutionality raised by the Claimant is moot, since the tribunal does not make the interpretation of the rule in question that he argues is unconstitutional.

5. Compensatory Interest

Article 43, no. 1 of the LGT provides that "compensatory interest is due when it is determined, in a gracious reclamation or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount exceeding the legally due amount".

In the case in question, the error affecting the Stamp Duty assessments is attributable to the Tax and Customs Authority, therefore the Claimant is entitled to compensatory interest from the date of payment of each amount until reimbursement, at the legal default rate, pursuant to articles 43, nos. 1 and 4, and 35, no. 10, of the LGT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.

6. Decision

Based on the grounds set out above, the Claimant's claims are judged, by majority, to have merit, and the challenged assessments are annulled, ordering the Respondent to refund to the Claimant the stamp duty paid, plus compensatory interest, from the date of the payments made until reimbursement.

7. Value of the Case

In accordance with the provisions of articles 306, no. 2 of the CPC and 97-A, no. 1 of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €130,563.85.

8. Arbitration Fee

The value of the arbitration fee is set at €3,060.00, charged to the Respondent, given its lack of success, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings.

Notify.

Lisbon, 13 March 2019

The Arbitrators

(José Baeta de Queiroz)

(Magda Feliciano)

With dissenting opinion attached

(Marisa Almeida Araújo)

Dissenting Opinion

In line with what is defended in the present decision, it is considered that given the properly interpreted constituted law applicable to the concrete case, it is not possible to accept any answer to the question to be decided as an accomplished, exact evidence with an extreme degree of rigor and exactitude.

In fact, the constant legislative changes that have occurred in recent years on items 28 and 28.1 of the Stamp Duty Code, in the wake of and in the context of the economic and financial crisis experienced, lead to the interpreter having an absolutely thankless task.

In this context, and precisely because of this context, we cannot accompany the present decision, because, in view of the legislative changes made to the rule in question and, consequently, the uncertainties, we tend to seek a solution that is closer to the literal sense of the rules involved. In fact, following J. Baptista Machado[1], we understand that "the grammatical element ('letter of the law') and the logical element ('spirit of the law') must always be used together. Consequently, given that the rule in question was amended by Law no. 83-C/2013, of 31.12, now providing for the incidence of Stamp Duty on land for construction whose authorized or planned building is for residential use, in accordance with the IMI Code, and given that it does not appear in the letter of the rule that Stamp Duty only incides in case the land for construction is exclusively for residential use, it is understood that grammatically and logically Stamp Duty incides on land for construction that have residential allocation (among others). To understand that the incidence of the tax only occurs in case of 'exclusive' allocation to residential use constitutes, in my view, an inadmissible extensive interpretation, since there is in that interpretation no correspondence between the letter of the law (which does not bear the word 'exclusively') and the spirit of the Law (based on the broadening of the base of tax incidence).

Thus, attending to the limit of the search for interpretive sense and to the very nature of the fiscal matter being interpreted, similarly to what has been defended in other decisions of CAAD (no. 527/2015, no. 495/2015, no. 515/2015), it is understood that the rule provided for in item 28.1 of the Stamp Duty Code, applicable to the facts of the present case, should be interpreted in the sense that land for construction are considered encompassed, whose authorized or planned building is for residential use, regardless of such land for construction being also allocated or capable of becoming (allocated) to other activities.

From the point of view of the constitutionality of the rule, in general, I do not share the sentiment of violation of the principle of tax equality that may result from this interpretation, following the sense expressed on this matter by the judgment of the Constitutional Court no. 568/2016, of 25.11.2016.

This is what I have to say.

For these reasons, I cast a dissenting vote.

Magda Feliciano

[1] In Introduction to Law and to Legitimizing Discourse, Almedina, Coimbra, 1991, p. 182

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS applicable to construction land designated for housing, commerce, and services?
No, Stamp Tax under Verba 28.1 of the TGIS is not applicable to construction land designated for mixed uses including housing, commerce, and services. The CAAD tribunal ruled by majority that Item 28.1 specifically targets construction land exclusively allocated for residential use under the IMI Code. When construction permits authorize mixed-use developments combining residential, commercial, services, and parking areas, the property falls outside Item 28.1's scope. The provision's restrictive language requires exclusive residential designation, and properties with multiple authorized uses do not meet this criterion even if residential use represents a significant portion of the planned construction.
Can a taxpayer challenge Stamp Tax assessments on construction land through a tax arbitration tribunal (CAAD)?
Yes, taxpayers can challenge Stamp Tax assessments on construction land through the CAAD (Centro de Arbitragem Administrativa) tax arbitration tribunal. In this case, the Claimant successfully filed an arbitration request under Article 4 and Article 10(2) of Decree-Law 10/2011 (RJAT - Legal Regime for Arbitration in Tax Matters) after the Tax Authority rejected an ex officio revision request. The arbitration process provides an alternative to judicial courts for resolving tax disputes, with the tribunal constituted by appointed arbitrators who issue binding decisions on the legality of tax assessments and collection acts.
What is the procedural requirement for filing a revision request (revisão oficiosa) against Stamp Tax liquidation acts?
Before filing a tax arbitration case, taxpayers must first submit a request for ex officio revision (revisão oficiosa) to the Tax Authority challenging the liquidation acts. In this case, the Claimant filed the revision request alleging an error as to the legal prerequisites (erro sobre os pressupostos), specifically that the construction land was not exclusively for residential use as required by Item 28.1 of the TGIS. The taxpayer must exercise the right to be heard (direito de audição prévia) when notified of the draft rejection decision and submit supporting evidence. Only after receiving the final rejection decision can the taxpayer proceed to CAAD arbitration within the statutory deadlines, as established in the RJAT.
How does the classification of construction land as mixed-use (housing, commerce, and services) affect Stamp Tax liability under Verba 28.1?
The classification of construction land as mixed-use (housing, commerce, services, and parking) excludes it from Stamp Tax liability under Verba 28.1 of the TGIS. The tribunal determined that Item 28.1 applies exclusively to 'terrenos para construção' with authorized buildings solely for residential use according to the IMI Code. When construction permits authorize multiple uses - such as commercial areas (1,785 m²), residential areas (6,950 m²), and parking (4,742.50 m²) in one property, or mixed-use buildings totaling 44,849 m² - the land does not qualify for Item 28.1 taxation. The presence of non-residential allocations in the construction authorization fundamentally changes the tax treatment, as the provision targets exclusively residential developments to address specific contributory capacity associated with high-value residential land ownership.
Are taxpayers entitled to reimbursement with compensatory interest (juros indemnizatórios) when Stamp Tax liquidations on construction land are declared illegal?
Yes, taxpayers are entitled to reimbursement with compensatory interest (juros indemnizatórios) when Stamp Tax liquidations on construction land are declared illegal by the arbitral tribunal. In this decision, the CAAD ordered the Tax Authority to refund the full amount of €130,563.85 paid by the Claimant plus compensatory interest. Compensatory interest compensates taxpayers for the financial loss resulting from payment of illegally assessed taxes, calculated from the payment date until reimbursement. This right stems from the principle that the State must restore taxpayers to their original financial position when tax collection occurred without legal basis, as established in Portuguese tax procedural law and consistently applied in CAAD jurisprudence.