Process: 449/2016-T

Date: March 1, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

In arbitration case 449/2016-T, decided at CAAD (Centro de Arbitragem Administrativa), a taxpayer challenged stamp duty assessments totaling €50,271.30 imposed on urban building land under item 28.1 of the General Stamp Tax Table (TGIS). The central dispute concerned whether stamp tax applies to building land when there is no evidence that construction was authorized or foreseen specifically for residential purposes. The claimant argued that verba 28.1 TGIS requires building land to have authorized or foreseen residential construction, which was not present in this case. The Tax Authority countered that building land with residential purpose falls within the scope of item 28.1, relying on CIMI (Municipal Property Tax Code) concepts to interpret undefined terms in stamp tax legislation. Critically, the proven facts established that no subdivision permit, building license, approved project, prior communication, favorable prior information, or any document evidencing constructive viability existed to demonstrate that residential construction was authorized or foreseen for the property. The taxpayer also raised constitutional challenges based on equality principles and ability to pay. The Tax Authority raised a preliminary exception arguing that arbitral tribunals lack competence to review constitutionality of legislative norms under Article 2(1) RJAT. This decision addresses important interpretative questions regarding the scope of stamp duty on building land, the evidentiary requirements for taxation under verba 28.1 TGIS, and the boundaries of tax arbitration jurisdiction in constitutional matters, with significant implications for property owners holding undeveloped urban land in Portugal.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, L.da, with registered office at Rua …, nº…, …-… Lisbon, holder of the unique number of registration and identification of legal person…, hereinafter simply designated as Claimant, filed, on 28/07/2016, a request for the establishment of an arbitral tribunal in tax matters and a request for arbitral award, pursuant to the provisions of articles 2º no. 1 a) and 10º no. 1 a), both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, briefly designated by RJAT), petitioning the declaration of illegality and the consequent annulment of the stamp duty (IS) assessments nos. 2016…, 2016… and 2016…, relating to the year 2015, in the global amount of € 50.271,30, as well as the condemnation of the TA to reimburse to the Claimant the amount of the stamp duty paid and to pay indemnitary interest.

To support its request, it alleges, in summary:

a) The Claimant is the owner and legitimate proprietor of the urban property corresponding to a building land, inscribed in the urban property register under the article … of the Civil Parish Union of … and …, municipality and district of Porto;

b) With respect to the aforementioned property, the Claimant was notified of the Stamp Duty assessments, relating to the year 2015, with the following nos. and amounts:

i) assessment no. 2016…, in the amount of € 16.757,10, relating to the first installment of stamp duty;

ii) assessment no. 2016…, in the amount of € 16.757,10, relating to the second installment of stamp duty; and

iii) assessment no. 2016…, in the amount of € 16.757,10, relating to the third installment of stamp duty;

c) Such assessments were made under item 28.1 of the General Stamp Duty Table (TGIS);

d) The assessments in question lack legal foundation since the rule of incidence invoked does not apply to the property in question, inasmuch as the same does not constitute a "building land whose construction, authorized or foreseen, is for residential purposes";

e) The rule of item 28.1 of the TGIS, when interpreted in the manner in which the Tax Authority and Customs Authority does, violates the constitutional principles of equality, namely of tax equality, and of taxpaying capacity.

The Claimant attached five documents and did not call any witnesses.

In the request for arbitral award, the Claimant chose not to appoint an arbitrator, whereby, in accordance with the provisions of article 6º no. 1 of the RJAT, the undersigned was appointed by the Ethics Council of the Centre for Administrative Arbitration, the appointment having been accepted in accordance with legal provisions.

The arbitral tribunal was established on 19 October 2016.

Notified in accordance with the provisions of article 17º of the RJAT, the Respondent presented a response, defending itself by exception and by objection, alleging, in summary, the following:

By exception, it invoked the incompetence of the arbitral tribunal to review the petition for declaration of material unconstitutionality of item no. 28 of the TGIS.

By objection, it invoked, in summary, the following:

a) the property in question in the present proceedings has the legal nature of property with residential purpose, whereby it should be taxed, as it was, under item 28.1 of the TGIS;

b) in the absence of any definition regarding the concepts of urban property, building land and residential purpose in the context of IS, one must resort to the concepts provided for in the CIMI;

c) the concept of "properties with residential purpose", for the purposes of item 28 of the TGIS, comprises both constructed properties and building land;

d) there is no place for payment of any indemnitary interest, since there is no error attributable to the services;

e) in the event that it is understood that there is place for payment of indemnitary interest, such would in any case be due only from one year after the submission of the request for review, in accordance with the provisions of article 43º no. 3 c) of the LGT.

The Respondent informed that there is no administrative proceeding and did not call any witnesses.

Duly notified to pronounce itself, if it so wished, on the exception invoked, the Claimant said nothing.

Given the position assumed by the parties and there being no need for additional production of evidence, the holding of the meeting referred to in article 18º of the RJAT was dispensed with, as well as the presentation of arguments, oral or written.

II. SANITATION:

The Arbitral Tribunal is regularly constituted.

The parties have legal personality and capacity, are legitimate and are regularly represented.

The proceedings do not suffer from defects that affect its validity.

III. QUESTIONS TO BE DECIDED:

In the present proceedings the questions to be decided are:

a) To rule on the exception of material incompetence of the arbitral tribunal;

b) To determine whether, for the purposes of the application of item 28.1 of the TGIS attached to the CIS, in the wording in effect at the date of the facts, building land is considered as a property with residential purpose.

IV. FACTUAL MATTERS:

a. Proven facts:

With relevance for the decision to be rendered in the present proceedings, the following facts were established as proven:

  1. Inscribed in favor of the Claimant is the urban property corresponding to building land, inscribed in the urban property register under the article … of the Civil Parish Union of … and …, municipality and district of Porto;

  2. The aforementioned property was subject to assessment in accordance with the CIMI, having been assessed at the taxpaying property value of € 5.027.130,00;

  3. On 05/04/2016, the TA assessed, under item 28.1 of the TGIS attached to the CIS, stamp duty on the property inscribed in the urban property register under the article…, relating to the year 2015, in the total amount of € 50.271,30;

  4. The Claimant was notified of the first, second and third installments to be paid of the IS assessed by the TA, relating to the property identified above, corresponding to the collection documents nos. 2016 …, 2016 … and 2016 …, in the amount, each, of € 16.757,10;

  5. On 12/04/2016 and 26/07/2016, the Claimant proceeded to payment, respectively, of the 1st and 2nd installments of stamp duty, relating to the year 2015, which affected the urban property inscribed in the urban property register under the article …;

  6. The deadline for payment of the 3rd installment of stamp duty, relating to the year 2015, which affected the urban property identified above, was 30/11/2016;

  7. The request for the establishment of the arbitral tribunal in tax matters and for arbitral award was presented on 28/07/2016.

b. Unproven facts:

With interest for the proceedings, it was not proven that, with respect to the property referred to in point 1. of the proven facts, there existed, at the date of the tax fact, any subdivision permit, building license permit, approved project, prior communication, favorable prior information or document evidencing constructive viability from which it would result that construction was foreseen or authorized for residential purposes.

c. Rationale for the factual matters:

The conviction regarding the facts established as proven was based on the documentary evidence attached by the Claimant, indicated with respect to each one of the points, whose authenticity and adherence to reality was not questioned by the Respondent.

The matter established as unproven resulted from the absence of any evidence in that regard.

V. ON THE LAW:

a. On the matter of exception:

The TA invokes that the competence of arbitral tribunals, defined in article 2º no. 1 of the RJAT, does not comprehend the review of the constitutionality of legislative acts or their norms.

Concluding, thus, that the arbitral tribunal is incompetent in reason of the matter to review the petition for declaration of material unconstitutionality "of item 28 of the General Stamp Duty Table, by violation of the principle of taxpaying capacity, as an aspect of the principle of equality, provided for in article 13.º and 104.º no. 3 of the CRP" (cf. articles 34.º and 35.º of the initial petition).

Notified to pronounce itself on the matter of exception, the Claimant said nothing.

Let us, then, review this matter.

The competence of the arbitral tribunal is enumerated in article 2º no. 1 of the RJAT, limiting its competence to the review of the matters therein provided.

As to the binding of the tax administration to the jurisdiction of arbitral tribunals, article 4º no. 1 of the cited regime provides that this depends on an ordinance of the members of the Government responsible for the areas of finances and justice.

The competence of the arbitral instance is, thus, delimited, by the ordinance of binding of the Tax Administration to the jurisdiction of the Centre for Administrative Arbitration (Ordinance no. 112-A/2011, of 22 March).

In accordance with the provisions of article 2.º of the indicated Ordinance, the General Directorate of Taxes and the General Directorate of Customs and Special Duties on Consumption bind themselves to the jurisdiction of the arbitral tribunals that function in the CAAD which have as their object the review of claims relating to taxes whose administration is entrusted to them, referred to in no. 1 of article 2.º of Decree-Law no. 10/2011, of 20 January.

It offers, thus, no doubt whatsoever that the review of "the constitutionality of legislative acts or their norms" is not included in the competence of the arbitral tribunal.

And, should the Claimant have raised the intervention of the arbitral tribunal for review of the constitutionality of item 28.1 of the TGIS, no doubt would remain that the arbitral tribunal would be incompetent in reason of the matter.

However, upon analysis of the petition formulated by the Claimant, it is easily verified that the latter did not formulate any petition for review of the constitutionality of this item.

In fact, regarding this matter, the following is the petition formulated by the Claimant, subsidiarily:

"that item 28 of the General Stamp Duty Table be disapplied, in the present case, by manifest unconstitutionality, by violation of the constitutional principle of equality (cf. article 204.º of the CRP) and, consequently, that the illegality of the stamp duty assessment acts of Stamp Duty sub judice be declared, because based on unconstitutional norms, the same being promptly annulled, with all legal consequences".

Whereby it is verified that the Claimant does not formulate any petition for declaration of unconstitutionality of item 28 of the TGIS but only and exclusively its disapplication in the present case, which is quite different.

Note that the petition constitutes the concrete form of legal protection sought by the Claimant, and the tribunal cannot substitute itself for the party, condemning to an object different from what is petitioned – cf. article 609º of the CPC.

Thus, having the Claimant formulated only the subsidiary petition for disapplication of item 28 of the TGIS by unconstitutionality, the tribunal or the opposing party cannot substitute itself for the Claimant, defending that the petition formulated was another, namely that of declaration of unconstitutionality of item 28 of the TGIS, in order to thereby conclude that the arbitral tribunal is materially incompetent to hear that petition.

Note that, even had the Claimant formulated a petition for declaration of unconstitutionality of item 28 of the TGIS, which, as we have seen, did not occur, even then such petition would have been formulated only subsidiarily, whereby no impediment existed for the tribunal to hear the other petitions.

Whereby, even then, it was incumbent upon the tribunal to review the principal petition and, only in the event that this did not succeed, could it declare itself incompetent to review the subsidiary petition formulated.

Thus collapses the argumentation invoked by the TA regarding the incompetence of the arbitral tribunal.

The exception of material incompetence of the arbitral tribunal is, thus, unfounded.

b. On the merits:

Having established the factual matters, it is now incumbent, by reference to these, to ascertain the applicable law.

At issue in the present proceedings is the delimitation of the scope of incidence of item 28.1 of the TGIS, in the wording given by Law no. 83-C/2013, of 31 December and its application to the Claimant's property.

As to the objective incidence, article 1.º no. 1 of the CIS provides that stamp duty is levied on all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the General Table.

Article 4.º of Law no. 55-A/2012, of 29 October added to the TGIS, attached to the CIS, approved by Law no. 150/99, of 11 September, item no. 28, with the following wording:

"28 - Ownership, usufruct or right of surface of urban properties whose taxpaying property value contained in the register, in accordance with the Code of Municipal Property Duty (CIMI), is equal to or greater than € 1,000,000 - based on the taxpaying property value used for purposes of IMI:

28.1 - For property with residential purpose - 1%;

The wording of this item 28.1 came to be amended by Law no. 83-C/2013, of 31 December, the following being its current wording:

"28.1 - For residential property or for building land whose construction, authorized or foreseen, is for residential purposes, in accordance with the provisions of the Code of IMI - 1%."

If within the scope of the wording of item 28.1 given by Law no. 55-A/2012, of 29 October it was debated whether building land could be qualified as property with residential purpose, for purposes of its subjection to item 28.1 of the TGIS, within the scope of the current wording of the aforementioned item, no doubt remains that this item applies to building land whose construction, authorized or foreseen, is for residential purposes.

Note that the norm does not apply to all and any building land but only to those whose construction, authorized or foreseen, is for residential purposes.

First of all, let us see what should be understood by authorized and foreseen construction for residential purposes.

In accordance with the provisions of article 6º no. 3 of the CIMI, "building land shall be considered the land situated within or outside an urban agglomeration, for which a license or authorization has been granted, a prior communication admitted or a favorable prior information issued for a subdivision or construction operation, and also those that have thus been declared in the acquisition title, excepting land where the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal spatial planning plans, are assigned to public spaces, infrastructure or equipment".

In accordance with article 41º of the same code, building land may have residential purpose, which shall be determined based on the elements referred to in article 37º of the CIMI, with no. 3 of this article providing that "with respect to building land, a photocopy of the subdivision permit must be presented, which must be replaced, should there be no subdivision, by a photocopy of the building license permit, approved project, prior communication, favorable prior information or document evidencing constructive viability".

As has come to be defended by the most recent arbitral jurisprudence "as regards building land, whether or not located within an urban agglomeration, as defined in art. 3.º/4 of this statute [CIMI], should, as such, be considered the land with respect to which has been granted: - license for subdivision operation; - building license; - authorization for subdivision operation; - authorization for construction; - admitted favorable prior communication for subdivision or construction operation; issued favorable prior information for subdivision or construction operation, as well as; - those that have thus been declared in the acquisition title, and it should be noted that, also for that purpose, only the acquisition title with the form prescribed by civil law shall be relevant, that is, the public deed or the authenticated private document referred to in art. 875.º CC." – cf. ANTÓNIO SANTOS ROCHA and EDUARDO JOSÉ MARTINS BRÁS, in "Taxation of Patrimony. IMI-IMT and Stamp Duty Annotated and Commented", Coimbra, Almedina, 2015, page 44[1].

The same understanding is propounded in the aforementioned decision rendered in arbitral proceeding no. 142/2016-T, according to which "there is no indication in these norms of the TGIS and CIMI of what should be understood by 'foreseen construction', but, taking into account the documents required for the assessment of building land to be carried out, indicated in article 37.º, no. 3, of the CIMI, it is concluded that one can only speak of authorized or foreseen construction when the 'building to be constructed', referred to in no. 1 of article 45.º, is defined in a subdivision permit or building license permit, or approved project, or prior communication, or favorable prior information or document evidencing constructive viability".

Whereby it is concluded, as in the jurisprudence cited, with which one agrees entirely, that item 28.1 of the TGIS applies to land in which the building to be constructed is intended for residential purposes, thus defined in a subdivision permit or building license permit, or approved project, or prior communication, or favorable prior information or document evidencing constructive viability.

In the present proceedings, as results from the unproven factual matter, it was not proven that on the land in question there existed any subdivision permit or building license permit, or approved project, or prior communication, or favorable prior information or document evidencing constructive viability that foreseen that the building to be constructed is intended for residential purposes.

In this regard, the Claimant alleged that, with respect to the property in question, there did not exist, at the date to which the challenged assessment relates, any construction license or authorization or any approved project, and that the Claimant "should never submit any request for licensing/authorization or any project for any type of construction on that 'land'", the same to "remain intact", and had no intention "of assigning this property to any type of construction or urban project" – cf. articles 35º to 37º of the initial request.

The TA alleged nothing with a view to refuting the aforementioned allegations of the Claimant, nor attached any document apt to demonstrate that, contrary to what was alleged by the Claimant, the land in question had a construction, authorized or foreseen, for residential purposes.

Now, constituting this possibility of construction of a building intended for residential purposes the foundation of the IS assessment act challenged, it would be upon the TA that the burden of proof of such fact would rest – cf. article 74º no. 1 of the LGT.

Not having done so, the doubt regarding the existence or not of the possibility of construction of a building intended for residential purposes on the land in question in the present proceedings shall have to be resolved against the TA, in favor of the Claimant.

In view of everything that has been set forth, it is verified that it was not demonstrated that the property in question in the present proceedings constitutes a "building land whose construction, authorized or foreseen, is for residential purposes", whereby this property cannot be subject to taxation under item 28.1 of the TGIS.

It is thus verified that the assessment in question in the present proceedings is clearly illegal, for it has no legal foundation or support.

Whereby, there being no legal foundation for the assessment act effected, its annulment tout court is imperative.

With respect to the petition for payment of indemnitary interest, article 43º no. 1 of the LGT provides that "indemnitary interest is due when it is determined, in a gracious complaint or judicial objection, that there was error attributable to the services from which results payment of the tax debt in an amount greater than legally due."

In the case now under review, the error that affects the challenged assessment is attributable to the TA, which assessed the tax without any factual or legal support, whereby no doubt exists that the Claimant has the right to receipt of the indemnitary interest, calculated at the supplementary legal rate and counted from the date of each of the payments made until effective and complete reimbursement of the amounts paid.

Nor should it be said, as the TA does, that in this case the provision of article 43º no. 3 c) of the LGT should apply, with interest only to be counted after the lapse of one year after the submission of the request for review, since, as clearly results from this norm, it shall only be applicable in cases of "revision of the tax act by initiative of the taxpayer".

Now, in this case, we are not dealing with any request for revision of the tax act by initiative of the taxpayer but only and exclusively with an annulment of the assessment act, in the sequence of the success of the objection raised by the taxpayer.

As to the subsidiary petition formulated, its review is prejudiced, since it is only taken into consideration in the event that the previous petition does not succeed, which has not occurred in this case – cf. article 554º no. 1 of the CPC.

VI. OPERATIVE PART:

In view of the foregoing, it is decided:

a) To rule the dilatory exception of material incompetence of this arbitral tribunal unfounded;

b) To rule the petition for declaration of illegality of the stamp duty assessment acts in the global amount of € 50.271,30 well-founded and in consequence:

i) To annul the tax assessment acts of stamp duty nos. 2016…, 2016… and 2016… and the payment notices issued;

ii) To condemn the Respondent to reimburse to the Claimant the tax unduly paid;

iii) To condemn the Respondent to payment to the Claimant of indemnitary interest, calculated at the supplementary legal rate, from the date of each payment until effective and complete reimbursement.

The value of the proceedings is fixed at € 50.271,30, in accordance with paragraph a) of no. 1 of article 97º-A of the Code of Procedure and Tax Process, applicable by virtue of paragraphs a) and b) of no. 1 of article 29.º of the RJAT and of no. 2 of article 3.º of the Regulation of Costs in Arbitration Proceedings in Tax Matters.

The value of the arbitration fee is fixed at € 2.142,00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, as well as the provisions of no. 2 of article 12.º and of no. 4 of article 22.º, both of the RJAT, and of no. 3 of article 4.º of the cited Regulation, to be paid by the Respondent as the losing party.

Register and notify.

Lisbon, 01 March 2017.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, in accordance with no. 5 of article 131.º of the CPC, applicable by reference of paragraph e) of no. 1 of article 29.º of Decree-Law no. 10/2011, of 20/01, governed in its drafting by the old orthography.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under verba 28.1 TGIS apply to building land not designated for housing construction?
Stamp Tax under verba 28.1 TGIS applies only to building land where construction is 'authorized or foreseen' for residential purposes. According to arbitration decision 449/2016-T, mere classification as building land is insufficient; there must be concrete evidence such as building licenses, approved projects, subdivision permits, or prior communications demonstrating that residential construction was specifically authorized or planned. Without such documentation, the assessment lacks legal foundation.
Can a taxpayer challenge Stamp Tax assessments on building land through CAAD tax arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on building land through CAAD (Centro de Arbitragem Administrativa) tax arbitration under Article 2(1)(a) and 10(1)(a) of RJAT (Decree-Law 10/2011). The request must be filed within the legal deadlines, specify the contested assessments, present legal grounds for annulment, and may include claims for reimbursement and compensatory interest. However, arbitral tribunals have limited competence and cannot directly review the constitutionality of legislative norms.
What constitutional principles of equality and ability to pay are relevant to Stamp Tax on building land in Portugal?
The constitutional principles of equality (Article 13 CRP) and ability to pay (Article 104(3) CRP) require that stamp tax be levied uniformly on similarly situated taxpayers and proportionate to economic capacity. In case 449/2016-T, the claimant argued that applying verba 28.1 TGIS to building land without evidence of residential purpose violates tax equality by treating different situations identically, and contradicts ability to pay by taxing based solely on cadastral value without considering actual use or development potential.
How does the Portuguese Tax Authority interpret verba 28.1 of the General Stamp Tax Table for urban building plots?
The Portuguese Tax Authority interprets verba 28.1 TGIS broadly to include building land classified for residential purposes, relying on CIMI definitions when stamp tax legislation lacks specific definitions. The AT argues that 'properties with residential purpose' encompasses both constructed properties and building land designated for residential development. However, this interpretation is contested when no building license, approved project, or authorization evidences that residential construction was actually foreseen or authorized for the specific plot.
What is the procedure for requesting arbitration at CAAD to annul illegal Stamp Tax assessments and claim compensatory interest?
To request CAAD arbitration for annulling illegal Stamp Tax assessments and claiming compensatory interest: (1) file a request for arbitral tribunal establishment and arbitral award under Articles 2(1)(a) and 10(1)(a) RJAT within the legal deadline; (2) identify the contested assessments with numbers and amounts; (3) present factual and legal grounds for illegality; (4) attach supporting documentation; (5) pay the required fees; and (6) claim reimbursement of amounts paid plus compensatory interest calculated according to Article 43(3) LGT, noting the Tax Authority contests interest if no administrative error occurred.