Process: 450/2014-T

Date: January 9, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (450/2014-T) addresses the application of Stamp Tax under Item 28 of the General Table (TGIS) to urban residential properties. The taxpayer owned a single property containing 12 independent residential units, each registered separately with individual taxable property values (VPT) ranging from €42,690 to €114,340. The Tax Authority assessed Stamp Tax on each unit individually, totaling €11,740.90. The core legal dispute centered on whether Item 28's €1,000,000 VPT threshold should apply to each independent unit separately or to the aggregate value of the entire property. The Claimant argued that since the property was not constituted as condominium ownership, the threshold should be calculated based on the total property value, and individual units falling below €1 million should be exempt. The Tax Authority contended that each independent unit with residential use must be assessed separately, regardless of whether they belong to the same overall property. The case highlights crucial interpretive questions regarding the incidence criteria for Stamp Tax on high-value residential properties, the relevance of property registration structure, and whether formal condominium constitution affects tax liability. Both parties waived the oral hearing and requested a decision based on written submissions, demonstrating the procedural flexibility available in tax arbitration proceedings at CAAD.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 450/2014 – T

Subject Matter: IS - Item 28; VPT of urban residential properties.

  1. REPORT

1.1. A (Claimant), taxpayer no. …, having been notified of the Stamp Duty assessments (1st instalment) corresponding to the numbers …1; …2; …3; …4; …5; …6; …7; …8; …9; …10; …11; …12 submitted, on 27/06/2014, an application for arbitral determination, pursuant to the provisions of art. 95 of the General Tax Law (LGT); art. 99, letter a) of the Tax Procedure and Process Code (CPPT) and articles 2, no. 1, letter a) and 10 of Decree-Law no. 10/2011, of 20 January (RJAT), in which it petitions for a declaration of illegality of the Stamp Duty assessments in the amount of € 11,740.90.

1.2. On 01/09/2014 the tribunal was constituted with a sole arbitrator.

1.3. In compliance with the provision of art. 17, no. 1 of RJAT, the Tax Administration (AT) was, on 11/09/2014, notified to, if it so wished, submit a response and request the production of additional evidence.

1.4. The Claimant, on 16/09/2011, came to submit a petition in which it attached the assessments and proofs of payment of the 2nd instalment of Stamp Duty, relating to the year 2013, in the amount of € 3,984.89, corresponding to documents no. …13; …14; …15; …16; …17; …18; …19; …20; …21; …22 and …23.

1.5. Consequently, the tribunal, on 27/09/2014, issued an order in which it ordered the notification of AT to, if it so wished, exercise the right to be heard with respect to the same.

1.6. On 15/10/2014 AT submitted its Response, in which it requested, namely, the waiver of holding the meeting referred to in art. 17, no. 1 of RJAT, as well as the submission of arguments.

1.7. Considering the position of AT identified in 1.6. and under the principle of free determination of evidence production procedures and the tribunal's autonomy in conducting the proceeding, on 13/11/2014 the Claimant was ordered to be notified to state whether it intended the holding of such procedures.

1.8. On 14/11/2014 the Claimant submitted an email in which it also requested the waiver of the meeting and the submission of arguments.

1.9. Given the position of the parties and with the legal grounds described in the order of 25/11/2014, the tribunal determined to waive the meeting referred to in art. 17, no. 1 of RJAT and the submission of final arguments and, in consequence, scheduled the date for the pronouncement of the judgment for 09/01/2015.

  1. PROCEDURAL CLARIFICATION

The joinder of claims underlying the application for arbitral determination is admissible, insofar as it has as its object assessments of the same tax, stamp duty. As there is also an identity between the matter of fact and because the success of the claim depends on the interpretation of the same legal principles and rules, cfr. art. 3, no. 1 of RJAT.

The proceeding does not suffer from defects and no questions have been raised that obstruct the consideration of the merits of the case.

Thus, the arbitral tribunal is regularly constituted and is materially competent to know and decide the claim, with the conditions being met for a final judgment to be pronounced.

  1. POSITIONS OF THE PARTIES

There are two positions in conflict, that of the Claimant, set forth in the application for arbitral determination, and that of AT in its response.

Summarizing:

The Claimant contends that:

a) "The subjection to stamp duty contained in item no. 28.1 of the TGIS is determined by the combination of two facts: residential use and the VPT recorded in the tax register equal to or exceeding €1,000,000.00";

b) "Thus, in the case of a property with the characteristics described in the proceedings, the subjection to stamp duty is determined, not by the VPT of the property, but by the VPT attributed to each of these floors or divisions";

c) "...what matters to the legislator is not the legal-formal rigor of the concrete situation of the property but rather its normal use, the purpose to which the property is destined";

d) "The AT cannot consider as the reference value for the incidence of the new tax the total value of the property, when the legislator established a different rule in the matter of CIMI, and this is the code applicable to matters not regulated with respect to item no. 28 of the TGIS...";

e) It ends by invoking the unconstitutionality of the AT's interpretation, by violation of the principle of fiscal equality.

On the other hand, the AT argues that:

a) "One cannot understand, on pain of violation of the literal element of the norm itself, contrary to what results from the stamp duty assessment under challenge, how this value could in any way be understood as the sum of the taxable property value of urban properties susceptible of residential use";

b) "Such interpretation has no correspondence with the wording of item 28.1 of the General Table";

c) "If the subjection of each dwelling to the stamp duty of item 28 of the General Table should be determined as a function of the other dwellings of the property, as is underlying the assessment under challenge, the tax fact would cease to be the taxable property value susceptible of being imputed to each dwelling, but the full taxable property value of each urban property";

d) "The concentration in each property of independent dwellings is not, therefore, susceptible of triggering the incidence of stamp duty on each of them";

e) It further argues that any other interpretation would be unconstitutional because: "...it would violate (...) the letter and the spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in art. 103, no. 2, of the Constitution of the Portuguese Republic (CRP)".

  1. MATTER OF FACT

4.1. FACTS FOUND TO BE PROVEN

4.1.1. The Claimant is the owner of a property located on Avenue … no. … and Avenue …, no. …, ….

4.1.2. Such property comprises 12 units with independent use, entered in the urban property tax register of the parish of … (…) as follows:

a) Unit E, with a VPT of € 42,690, residential;

b) Unit D, with a VPT of € 72,880, residential;

c) Ground Floor E, with a VPT of € 100,890, residential;

d) Ground Floor FT, with a VPT of € 94,990, residential;

e) Ground Floor D, with a VPT of € 113,180, residential;

f) Ground Floor E, with a VPT of € 101,930, residential;

g) 1st Floor D, with a VPT of € 101,930, residential;

h) 1st Floor E, with a VPT of € 113,180, residential;

i) 2nd Floor D, with a VPT of € 101,930, residential;

j) 2nd Floor E, with a VPT of € 113,180, residential;

l) 3rd Floor D, with a VPT of € 102,970, residential;

m) 3rd Floor E, with a VPT of € 114,340, residential.

4.1.3. The Claimant was notified of Stamp Duty assessments relating to the year 2013, in respect of each of such entries in the total amount of € 11,740.90 which break down as follows:

a) 1st Floor E, document …1, in the amount of € 1,131.80;

b) 1st Floor D, document …9, in the amount of € 1,019.30;

c) 2nd Floor D, document …2, in the amount of € 1,019.30;

d) 2nd Floor E, document …3, in the amount of € 1,131.80;

e) 3rd Floor D, document …4, in the amount of € 1,029.70;

f) 3rd Floor E, document …5, in the amount of € 1,143.40;

g) Ground Floor FT, document …6, in the amount of € 949.90;

h) Ground Floor D, document …7, in the amount of € 1,131.80;

i) Ground Floor E, document …8, in the amount of € 1,019.30;

j) Unit D, document …10, in the amount of € 728.80;

l) Unit E, document …11, in the amount of € 426.90;

m) Ground Floor E, document …12, in the amount of € 1,008.90.

4.1.4. The Claimant has already voluntarily paid the amount of € 7,969.78, relating to the 1st and 2nd instalment.

4.1.5. The property identified in 4.1.1 was not constituted in condominium ownership on 31 December 2013.

4.2. FACTS NOT FOUND TO BE PROVEN

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

4.3. REASONING OF THE MATTER OF FACT FOUND TO BE PROVEN

The facts found to be proven originate in the documents used for each of the allegations and whose authenticity has not been questioned.

  1. THE LAW

It thus follows from the foregoing that there are two questions that the tribunal must decide: to ascertain whether the subjection to the rule of incidence of art. 28 of the TGIS should be concretized by the VPT corresponding to each of the parts, floors or divisions susceptible of independent use, or, conversely, by the sum of the VPT of each of such parts. And, secondly, to determine whether the interpretation that concludes that there is incidence of Stamp Duty when the sum of the VPT of each of the units susceptible of independent use exceeds € 1,000,000, violates the principle of equality provided for in art. 13 of the CRP and that of legality of the essential elements of the tax provided for in art. 103, no. 2, also of the CRP.

To accomplish such task it is necessary, from the outset, to seek the rule whose parts disagree on its interpretation.

Thus, art. 1, no. 1 of the Stamp Duty Code (CIS) and item 28 of the General Table of Stamp Duty (TGIS), provide that the following are subject to taxation: "Ownership, usufruct or right of superficies of urban properties whose taxable property value recorded in the tax register, pursuant to the Property Tax Code (CIMI), is equal to or exceeding € 1,000,000 – on the taxable property value used for the purposes of IMI:

28.1 - For a residential property or land for construction whose authorized or planned construction is for residential purposes, pursuant to the provisions of the IMI Code -

1%...".

First, for the proper interpretation of the item of the TGIS under analysis, it is necessary to examine the concept of "residential property" to which the rule under interpretation alludes and that of "taxable property value used for the purposes of IMI". Now, as it is not possible to resolve the question by resorting to the CIS, it is by force of the provision of art. 67, no. 2 of the CIS necessary to apply the rules of the Property Tax Code (CIMI).

Consequently, art. 2 of the CIMI provides on the concept of property:

"1 - For the purposes of this Code, property is any tract of land, comprising water, plantations, buildings and constructions of any nature incorporated or based thereon, 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 water, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, although situated in a tract of land that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 - Buildings or constructions, even if movable by nature, are considered to have a character of permanence when devoted to non-transitory purposes.

3 - The character of permanence is presumed when buildings or constructions have been based in the same location for a period exceeding one year.

4 - For the purposes of this tax, each autonomous unit, under a condominium ownership regime, is considered to constitute a property."

Now, the concept of property for purposes of IMI is, as is known, endowed with greater breadth in relation to that set out in art. 204, no. 2 of the Civil Code (CC) and encompasses three elements, more specifically, one of a physical nature, the second of a legal character and the last of an economic nature, cfr. JOSÉ MARTINS ALFARO, Property Tax Code – Commented and Annotated, Áreas Editora, 2004, p. 118 to 123. The first requires reference to a tract of land, comprising, in particular, buildings and constructions incorporated therein with a character of permanence. The element of a legal character requires that the thing, movable or immovable, belong to the assets of a natural or legal person. Third, the element of an economic nature requires that the thing have an economic value.

As regards the concept of urban property, art. 6 of the CIMI describes the various categories of urban properties, with it being fundamental for the subsumption in each of them the nature of the use, that is, the purpose to which it is destined. And, nothing in the economy of art. 6, no. 1, letter a) of the CIMI prevents the classification of parts of a property in vertical ownership, with divisions or floors susceptible of independent use, with residential use, as "residential property". Relevant is, it is repeated, its use. And a different conclusion cannot be reached by the interpretation of art. 2, no. 4 of the CIMI which elevates each autonomous unit in condominium ownership to the category of property. In fact, in this latter rule either, no foundation can be found to discriminate between properties in condominium ownership and properties in vertical ownership, with floors or divisions susceptible of independent use, as regards their subsumption as urban residential properties, in accordance with the entire economy of item 28 of the TGIS. In other words, if the legislator did not treat properties in vertical ownership differently from those constituted in condominium ownership, the interpreter should not do so[1].

On the contrary, the tax entry and the determination of the VPT clearly demonstrate the similarity of legislative treatment. Indeed, the parts endowed with economic independence should each be the subject of a separate tax entry and, consequently, the respective VPT should similarly be recorded separately, cfr. art. 2, no. 4, art. 7, no. 2, letter b) and art. 12, no. 3 all of the CIMI. Which, consequently, has repercussions in the matter of assessment, in that there will be one for each part, division or floor subject to separate use.

Reverting such interpretation to the present proceedings, there are 12 parts of the property with independent residential use which, as of the date of the tax fact, 31 December 2013, was not yet constituted in condominium ownership and, therefore, from the outset, there is no doubt that they should be classified as urban residential properties.

It is also important to elucidate the other graphic aspect of the CIS item still under interpretation, that is, the "taxable property value for purposes of IMI".

In this regard, as already described above, the CIMI provides for the autonomization of parts of urban property susceptible of independent use with respect to the tax entry and the specification of the respective VPT. Such observation is equally valid with respect to the consequent assessment, as provided by art. 113, no. 1 and art. 119, no. 1, both of the latter mentioned act. Indeed, if the tax is assessed "...based on the taxable values of the properties (our emphasis) and in relation to the subjects liable as recorded in the tax registers (our emphasis) ..." and the collection document must contain the "...discrimination of the properties, their parts susceptible of independent use, respective taxable property value and the tax amount...", this means that, not only is the VPT for the purposes of applying item 28.1 of the TGIS to be considered that which is the subject of the separate tax entry, but also nothing prevents the qualification as "residential property" of parts, floors or divisions with independent use.

Now, if none of the Claimant's units (floors) exceeded the VPT of € 1,000,000, the rule of incidence in question cannot be applied to the case sub judice, on pain of illegality.

The AT further contends that it would be unconstitutional, by violation of the principle of legality of the essential elements of the tax, the interpretation of item 28.1 of the TGIS different from that which concludes that the VPT relevant to such rule of incidence must be the global value of the property and not that of each of its independent parts. If such were the case, the express reference to "taxable property value used for purposes of IMI" would not be understood. And that, there is no doubt, is subject to autonomization in relation to each of the parts susceptible of independent use. Equally, we would also not find an argument for the issuance of autonomous assessment notices. Furthermore, given the express reference of art. 67, no. 2 of the CIS to the CIMI, with respect to matters not regulated, the parts with autonomy are subsumable under the properties classified as urban and residential, cfr. art. 2; 3 and 6, all of the CIMI. In this manner, it is understood that such interpretation does not suffer from unconstitutionality.

Finally, if the tribunal has accepted the Claimant's request for a declaration of illegality of the acts of Stamp Duty assessment, the consideration of the other defects attributed by it is prejudiced, cfr. art. 124 of the CPPT applicable by force of the provision of art. 29, no. 1 of RJAT.

  1. DECISION

In these terms and with the reasoning described above, it is decided to judge the arbitral claim as well-founded, with the consequent expulsion from the legal order of the acts which are the subject matter of these proceedings, condemning AT to return to the Claimant the value of the 1st and 2nd instalment of Stamp Duty voluntarily paid.

  1. VALUE OF THE PROCEEDING

The value of the proceeding is fixed at € 11,740.90, pursuant to art. 97-A of the CPPT, applicable by force of the provision of art. 29, no. 1, letters a) and b) of RJAT and art. 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs charged to AT, in the amount of € 918, cfr. art. 22, no. 4 of RJAT and Table I attached to the Regulation on Costs in Tax Arbitration Proceedings.

Notify.

Lisbon, 9 January 2015

The sole arbitrator,

Francisco Nicolau Domingos

Text prepared by computer, pursuant to no. 5 of art. 131 of the Civil Procedure Code, applicable by referral of letter e) of no. 1 of art. 29 of Decree-Law no. 10/2011, of 20/01.

The writing of this decision is governed by the former orthography.

[1] See in this sense the arbitral decision handed down in case no. 132/2013-T, of 16 December 2013.

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Stamp Tax and how does it apply to residential urban properties in Portugal?
Item 28 (Verba 28) of the Stamp Tax General Table imposes an annual tax on urban properties with residential use that have a taxable property value (VPT) equal to or exceeding €1,000,000. The tax applies at progressive rates based on property value brackets. This provision was introduced as a wealth tax measure targeting high-value residential real estate. The key incidence elements are: (1) urban property classification, (2) residential use or susceptibility for residential use, and (3) VPT threshold of at least €1 million as recorded in the tax registry on December 31st of the relevant year. The tax is calculated annually and payable in installments.
Can taxpayers challenge Stamp Tax assessments on urban properties based on their taxable property value (VPT)?
Yes, taxpayers can challenge Stamp Tax assessments on urban properties through administrative appeals or by requesting arbitration at CAAD (Centro de Arbitragem Administrativa). As demonstrated in this case, the arbitration procedure allows taxpayers to contest liquidations by filing an application within the legal deadline, identifying the contested tax assessments and legal grounds. The CAAD arbitration offers a faster alternative to judicial courts, with simplified procedures. Taxpayers can waive oral hearings and proceed based on written submissions. Challenges typically focus on issues such as incorrect VPT calculation, misclassification of property use, improper application of the €1 million threshold, or constitutional questions regarding tax equality and legality principles.
How is the taxable property value (VPT) threshold calculated for Stamp Tax purposes under Verba 28?
The calculation of the VPT threshold under Item 28 presents interpretive challenges when a single property contains multiple independent units. The Tax Authority's position is that each separately registered unit with independent use should be assessed individually, meaning the €1 million threshold applies to each unit's VPT separately. Conversely, taxpayers may argue that when a property is not constituted as condominium ownership and belongs to a single owner, the threshold should apply to the aggregate VPT of the entire property. This distinction is critical because individual units rarely exceed €1 million, while the combined value might. The issue involves interpreting whether 'property' in Item 28 refers to each registered unit or to the property as a legal and economic whole.
What is the arbitration procedure at CAAD for contesting Stamp Tax liquidations on residential real estate?
The CAAD arbitration procedure for contesting Stamp Tax liquidations follows the Legal Framework for Tax Arbitration (RJAT). Taxpayers must file an application within the legal deadline, identifying the contested assessments and stating legal grounds. After tribunal constitution with a sole arbitrator or arbitration panel, the Tax Authority is notified to submit a response. Parties may request or waive evidentiary hearings and oral arguments. The process emphasizes procedural flexibility and party autonomy—as seen in this case where both parties waived the hearing. The tribunal examines legality issues including proper tax application, constitutional compliance, and interpretation of tax law provisions. Decisions are binding and have the same effect as judicial court judgments, with limited appeal possibilities.
Is it possible to cumulate multiple Stamp Tax liquidation challenges in a single CAAD arbitration proceeding?
Yes, multiple Stamp Tax liquidation challenges can be cumulated in a single CAAD arbitration proceeding when specific conditions are met. According to Article 3(1) of RJAT, joinder of claims is admissible when they concern the same tax type, share common factual and legal grounds, and depend on interpretation of the same legal principles. In this case, the tribunal explicitly authorized joining 12 separate Stamp Tax assessments (later expanded to 23 with the second installment) because they all involved Item 28 application to residential units within the same property, raised identical legal interpretation questions regarding VPT threshold calculation, and shared the same factual matrix. This procedural economy benefits both taxpayers (reducing costs and avoiding contradictory decisions) and judicial efficiency, allowing comprehensive resolution of related tax disputes in a single proceeding.