Process: 452/2014-T

Date: January 20, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision addresses the application of Stamp Tax under Verba 28 of the General Stamp Duty Table (TGIS) to properties in full ownership containing multiple independent units. The claimant, a real estate company, challenged 14 stamp duty assessments for 2013 concerning an urban property with eight independent units. The core legal dispute centered on whether the €1,000,000 threshold should apply to each individual unit or the aggregate taxable patrimonial value (VPT). The claimant argued that since each residential unit had a VPT below €1,000,000, no stamp duty should apply. Additionally, three units licensed for short-term accommodation services should be excluded from residential classification, reducing the total residential VPT to €739,690. The claimant also contested the omission of prior hearing as a procedural violation. The Tax Authority countered that properties in full ownership constitute a single legal entity, distinct from horizontal property where units have autonomous ownership. Therefore, the aggregate VPT of €1,182,590 exceeded the threshold, justifying the assessment. The Tax Authority also maintained that no prior hearing was required since the VPT derived from the taxpayer's own declaration under Article 60(2) of the General Tax Law. This case illustrates the critical distinction between full ownership and horizontal property regimes for stamp duty purposes, the classification of properties used for local accommodation, and procedural requirements for high-value real estate assessments. The tribunal's jurisdiction to award compensation for bank guarantee costs incurred during fiscal execution suspension was also contested, with the Tax Authority citing Article 2 of RJAT as limiting such claims.

Full Decision

ARBITRAL DECISION

I – REPORT

1 – A – Real Estate and Investment Civil Society, SA, NIPC[1] …, with registered office at … Street, in Cascais, filed on 01/07/2014 a request for constitution of the arbitral tribunal, pursuant to the provisions of paragraph a) of no. 1 of article 2, no. 1 of article 3, and paragraph a) of no. 1 of article 10, all of the RJAT[2], with the TA[3] being requested, with a view to examining the legality of 14 stamp duty assessment notices[4] relating to the year 2013 concerning a property with stories and divisions with independent use registered in the urban property cadastre of the former parish of … under no. … and currently in the Union of Parishes of … and … under article….

2 – The request for constitution of the arbitral tribunal was made without exercising the option to designate an arbitrator, and was accepted by His Excellency the President of the CAAD[5] and automatically notified to the TA on 01/07/2014.

3 – Pursuant to the provisions of no. 1 of article 6 of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable time periods, Arlindo José Francisco was designated as arbitrator, who communicated to the Deontological Council and to the Administrative Arbitration Center his acceptance of the appointment within the regularly stipulated time period.

4 - The tribunal was constituted on 02/09/2014 in accordance with the provisions contained in paragraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012 of 31 December.

5 – With its request, the claimant seeks the declaration of illegality of the tax assessment acts concerning item 28 of the General Stamp Duty Table[6] that affected the taxable patrimonial value of the urban property already identified.

6 - It invokes, in summary, the following:

6.1 - The illegality of the stamp duty assessments, supported, from its perspective, on the fact that there was an omission of prior hearing which, from its perspective, would constitute an omission of essential formality.

6.2 – It further invokes that the TPVs[7] registered in the cadastre under the MPTC[8] are not higher than € 1,000,000.00, since they concern a property in vertical ownership composed of stories or parts of property capable of independent use, and that, just as occurs with municipal property tax, the stamp duty should be calculated for each of the parts capable of independent use.

6.3 – Furthermore, there are 3 parts capable of independent use dedicated to short-term accommodation, and thus to services, therefore the factual requirements for the assessment of the contested stamp duty are not met.

6.4 - Furthermore, the TPV of the fractions with residential dedication, globally considered, is only € 739,690.00, therefore well below the € 1,000,000.00 legally required for taxation.

6.5 – Concluding that there is evident illegality of the assessments due to violation of the Law, rendering their annulment necessary and compensation for the costs that it may incur with the bank guarantee with a view to suspending any eventual fiscal execution process.

7 – The TA, for its part, takes the view:

7.1 - That the claimant is not correct since there was no omission of legal formalities by the lack of prior hearing, as the TPV on which the stamp duty was levied was determined on the basis of a declaration by the taxpayer, as per no. 2 of article 60 of the TGL[9].

7.2 - The TA further states that a property in full ownership and a property in horizontal property have different valuations and taxation, from which different legal effects result; while in horizontal property there is a division of full ownership and autonomy of each of the units, in the property in full ownership there is a single legal reality;

7.3 - Each part capable of independent use is not autonomous, by cadastre, having a description of the property in its entirety;

7.4 – It concludes that the tax acts at issue herein are legal and should be upheld, the TA should be absolved of the request, and that as regards the costs to be incurred by the claimant with a view to suspending the FEP, it considers the tribunal without jurisdiction to examine the request, in accordance with the provision contained in article 2 of the RJAT.

II – PRELIMINARY EXAMINATION

The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.

The parties have legal personality and capacity, are shown to be legitimate, and are regularly represented in accordance with articles 4 and 10 no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

In its reply, the TA requested exemption from the hearing referred to in article 18 of the RJAT and that the tribunal proceed directly to deciding the case, should the claimant not object.

The parties agree regarding exemption from the hearing of article 18 of the RJAT, from witness testimony and from the production of written or oral submissions; the tribunal finds that the conditions are met for issuing the final decision.

III – REASONING

1 – The issues to be resolved with relevance to the proceedings are as follows:

a) To determine whether a property in full ownership with parts or divisions capable of independent use, with residential dedication, should be taxed in stamp duty on the TPV corresponding to the sum of each of the parts or independent divisions with residential dedication when equal to or greater than €1,000,000.00, or whether stamp duty should only apply to the TPV of each of the parts or independent divisions when, individually considered, equal to or greater than €1,000,000.00;

b) To determine further whether, in the event of a declaration of illegality of the assessment, the claimant shall be entitled to compensation for the costs incurred in obtaining the guarantee to suspend the fiscal execution process that may be brought against it as a consequence of non-voluntary payment of the contested assessments.

2 – Factual Matter

The relevant factual matter proven on the basis of the elements in the proceedings is as follows:

a) The claimant is the owner of an urban property in full ownership with parts or divisions capable of independent use, registered in the urban property cadastre of the parish of the Union of Parishes … under no. … (… of the extinct parish of …), municipality of Cascais.

b) It is composed of eight parts of property capable of independent use, one of which is for catering and three are for short-term accommodation.

c) The sum of the TPV of the parts or divisions capable of independent use, cadastrally dedicated to residential purposes, is € 1,182,590.00.

d) Each of the stories or divisions capable of independent use cadastrally dedicated to residential purposes has a TPV well below € 1,000,000.00, which item 28 of the General Stamp Duty Table requires for taxation in stamp duty.

e) The TA calculated the stamp duty individually for each of the stories or divisions capable of independent use, adding them up at the end, totalling stamp duty to be paid of € 11,825.90.

f) As appears in the Property Record, the property is composed of 8 parts or divisions capable of independent use (Ground Floor Right, Ground Floor Left, 1st Right, 1st Left, 2nd Right, 2nd Left and 3rd Right) with residential dedication, with global TPV of € 1,182,590.00 and one for commerce with TPV of € 1,049,200.00.

g) However, the Ground Floor Right, 1st Left and 2nd Left are licensed by the Cascais Municipal Council for short-term accommodation services with total TPV of € 442,900.00

h) The claimant did not pay the stamp duty in question.

3 – Legal Grounds

3.1 – Regarding Stamp Duty

a) The legal question to be resolved first is whether, in accordance with item 28.1 of the General Stamp Duty Table, the sum of the TPV of each of the parts or divisions capable of independent use should be considered, given that none of them has a value equal to or greater than €1,000,000.00.

b) Given that the Stamp Tax Code[10] refers to the Municipal Property Tax Code for the regulation of the concept of property and matters not regulated regarding item 28 of the General Stamp Duty Table (no. 6 of article 1 and no. 2 of article 67, both of the Stamp Tax Code), it is in the Municipal Property Tax Code that we must observe the concepts that will allow us to resolve the issue.

c) The generalist concept of property is contained in article 2 of the Municipal Property Tax Code. In article 3 of the same statute, the legislator, using criteria of dedication and location, established the concept of rural properties, coming later, in a classification by negation, in its article 4, to establish that urban properties are all those that should not be classified as rural.

d) Article 6 of the cited Municipal Property Tax Code divides urban properties into: residential, commercial, industrial or for services, land for construction and others.

e) In the present case we are dealing with an urban property with parts or divisions capable of independent use with residential dedication and others with commercial dedication.

f) Each of the parts or divisions capable of independent use that compose the property in question meets the concept of property established in article 2 of the Municipal Property Tax Code, insofar as they are physically and economically independent and form part of the patrimony of a natural or legal person, in the present case a legal person.

g) Under no. 4 of article 2 of the Municipal Property Tax Code, each autonomous unit, under the regime of horizontal property, is deemed to constitute a property, but there is nothing in the law that permits discrimination between properties in horizontal and vertical ownership regarding their identification as urban residential properties.

h) When making the valuation, the TA made it separately for each of the parts or divisions capable of independent use.

i) When making the taxation in stamp duty it calculated on the TPV of each of the parts or divisions with independent use with residential dedication, except that at the end it considered the global TPV and, verifying it to be greater than €1,000,000.00, it added up the stamp duty values calculated individually.

i) But this procedure has no legal support, since none of the parts or divisions with independent use with residential dedication, each meeting the concept of property set out in article 2 of the Municipal Property Tax Code, has a TPV equal to or greater than €1,000,000.00, a requirement necessary for there to be taxation in stamp duty.

j) Nor should it be said that there is different valuation and taxation of a property in full ownership with parts or divisions capable of independent use, compared to a property in horizontal ownership. In fact, it does not exist in municipal property tax, just as it cannot exist in stamp duty, since the applicable legislation is the same.

k) The taxation criterion must be uniform, that is, if a residential unit of a property in horizontal ownership is only taxed in stamp duty if its TPV is equal to or greater than €1,000,000.00, equally a story or part of property capable of independent use of a property in vertical ownership with residential dedication will only be taxed in stamp duty if its TPV is equal to or greater than €1,000,000.00.

l) As already stated, the story or part of property capable of independent use of a property in vertical ownership meets the concept of property established in the Municipal Property Tax Code, just as the autonomous units of properties in horizontal ownership do.

m) From this perspective and considering that none of the parts or divisions capable of independent use with destination or residential dedication has TPV equal to or greater than €1,000,000.00, it is necessary to conclude that the stamp duty assessment acts are illegal because the conditions defined in item 28 of the General Stamp Duty Table were not observed.

n) We follow the conclusion of Professor Miguel Patrício in case 132/2013 in considering the interpretation made by the TA to be inconsistent with the Law and the Constitution.

o) But even following the TA's perspective, which, as already seen, we completely reject, the assessments would always be illegal, insofar as the residential dedication that appears in the cadastre does not correspond to reality.

p) In fact, in addition to the part of the property dedicated to catering, there are 3 more divisions of independent use dedicated to short-term accommodation services, similar to hotel services, duly authorized by the competent Administrative entity.

q) Leaving only 4 independent divisions with residential dedication whose global TPV is only € 739,690.00, well below the TPV that item 28 of the General Stamp Duty Table requires for taxation in stamp duty.

r) By this route as well, one would conclude for the illegality of the assessments in question.

3.2 – Regarding the Request for Compensation for Costs with Guarantee to Suspend the FEP

a) The claimant, in addition to the annulment of the stamp duty, further requests that the TA bear the costs with the guarantee that it may have to provide to suspend the FEP that may be brought against it due to non-voluntary payment of the stamp duty;

b) No proof was made regarding the institution of the FEP, nor regarding the type of guarantee provided or to be provided;

c) It should be noted that seizure of assets necessary to ensure payment can serve as a guarantee, which in the event of annulment of the debt will have no cost for the defendant;

d) From this perspective, the tribunal finds that the request, although legitimate, lacks better proof both regarding its implementation and regarding the necessity of costs for the claimant, and therefore considers it unfounded.

IV - OPERATIVE PART

In light of the foregoing, the tribunal decides as follows:

a) To declare the request for arbitral pronouncement well-founded with the consequent annulment of the stamp duty assessment acts here contested;

b) To declare the request for compensation sought by the claimant unfounded as formulated.

c) Value of the proceedings: € 11,825.90 with a view to the provisions contained in article 299 no. 1 of the Code of Civil Procedure[12], 97-A of the Tax Code of Procedure and Process[13], and article 3 no. 2 of the Rules of Costs in Tax Arbitration Proceedings[14];

d) Costs to be borne by the respondent, under no. 4 of article 22 of the RJAT, set at € 918.00 in accordance with Table I of the Rules of Costs in Tax Arbitration Proceedings.

Let notice be given.

Lisbon, 20 January 2015

Text prepared on computer, in accordance with article 131, no. 5 of the Code of Civil Procedure, applicable by referral of article 29, no. 1, paragraph e) of the RJAT, with blank lines, and reviewed by me.

The drafting of this decision is governed by the spelling prior to the orthographic agreement.

The sole arbitrator,

Arlindo José Francisco

[1] Acronym for Number of Identification of Collective Person

[2] Acronym for Legal Regime for Arbitration in Tax Matters

[3] Acronym for Tax Authority and Customs

[4] Acronym for Stamp Duty

[5] Acronym for Administrative Arbitration Center

[6] Acronym for General Table of Stamp Duty

[7] Acronym for Taxable Patrimonial Value

[8] Acronym for Municipal Property Tax Code

[9] Acronym for General Tax Law

[10] Acronym for Stamp Tax Code

[11] Acronym for Fiscal Execution Process

[12] Acronym for Code of Civil Procedure

[13] Acronym for Tax Code of Procedure and Process

[14] Acronym for Rules of Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto de Selo) under Verba 28 TGIS apply to properties with independently valued units below €1,000,000?
Under Verba 28 TGIS, the application depends on whether the property is in full ownership or horizontal property. For properties in full ownership with multiple independent units, the Tax Authority position is that the aggregate taxable patrimonial value (VPT) of all residential units determines taxation, not individual unit values. If the total exceeds €1,000,000, stamp duty applies even if each unit individually falls below this threshold. The claimant argued each independent unit should be taxed separately, but the Tax Authority maintained that full ownership creates a single legal entity unlike horizontal property where each unit has autonomous ownership and separate taxation.
Must the tax authority provide a prior hearing before issuing Stamp Tax assessments on high-value real estate?
According to the Tax Authority, prior hearing is not mandatory when stamp duty assessments are based on the taxpayer's own declaration of the taxable patrimonial value, as provided in Article 60(2) of the General Tax Law (LGT). The claimant contested this, arguing that omission of prior hearing constituted an essential procedural formality. However, the Tax Authority defended that when the VPT is determined from information provided by the taxpayer rather than through administrative valuation procedures, the prior hearing requirement does not apply, as the taxpayer already had the opportunity to declare the correct values.
How is the taxable patrimonial value (VPT) calculated for buildings with multiple independent units under vertical ownership?
For buildings with multiple independent units under vertical ownership (propriedade vertical), the calculation depends on the property regime. In horizontal property (propriedade horizontal), each autonomous unit is separately described in the cadastre and taxed individually. In full ownership with independent parts capable of separate use, the Tax Authority treats the property as a single legal entity. The VPT is the sum of all cadastral values of residential units, even if they are physically and functionally independent. This distinction is crucial because horizontal property involves division of full ownership with autonomous units, while vertical ownership maintains a unified legal status despite having parts capable of independent use.
Are property units used for local accommodation (alojamento local) exempt from Verba 28 Stamp Tax on residential properties?
The claimant argued that units licensed by the municipal council for short-term accommodation (alojamento local) should be classified as service properties rather than residential, thus excluding them from Verba 28 taxation which applies to residential properties. Three units with total VPT of €442,900 were licensed for this purpose. The claimant contended that only the remaining residential units (VPT €739,690) should be considered, falling below the €1,000,000 threshold. This raises the question whether the cadastral designation as residential or the actual licensed use determines tax classification. The functional use for tourism services versus residential purposes could affect whether these units fall within Verba 28's scope.
Can taxpayers challenge Stamp Tax liquidations through CAAD arbitration and claim reimbursement of bank guarantee costs?
Yes, taxpayers can challenge Stamp Tax liquidations through CAAD (Administrative Arbitration Center) under Article 2(1)(a) of RJAT, which grants jurisdiction over legality review of tax assessment acts. However, regarding bank guarantee costs incurred to suspend fiscal execution proceedings, the Tax Authority argued the tribunal lacks jurisdiction under Article 2 of RJAT to award such compensation. The claimant sought reimbursement for costs of obtaining guarantees to prevent enforcement collection during the arbitration process. This illustrates the distinction between the tribunal's clear jurisdiction to review tax assessment legality versus contested jurisdiction over ancillary damages or costs arising from collection suspension mechanisms.