Process: 459/2016-T

Date: February 10, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration case 459/2016-T addresses whether Stamp Tax (Imposto do Selo) under Verba 28.1 of the General Table applies to building land (terrenos para construção) valued over €1,000,000. The taxpayer challenged €63,414 in assessments on urban property registered as 'land for construction' with residential designation in Porto. The dispute centers on interpreting Verba 28.1 as amended by Law 83-C/2013 (State Budget 2014), which taxes ownership of urban properties with patrimonial value ≥€1,000,000 at 1% rate for residential allocation. The tribunal examined whether land for construction—with subdivision permit authorizing 116 housing units totaling 19,345 m²—falls within the scope of properties 'whose building, authorized or planned, is for housing' under IMI Code provisions. The case distinguishes itself from prior favorable taxpayer decisions under Law 55-A/2012 by operating under the modified legal framework. Key legal issues include interpretation of Article 1 of the Stamp Tax Code (CIS), the scope of Verba 28.1 TGIS, and whether building land qualifies as taxable urban property before actual construction. The taxpayer also claimed compensatory interest (juros indemnizatórios) on amounts paid. This decision provides critical guidance on Stamp Tax application to high-value development land and the boundary between taxable completed properties versus land authorized for future construction under Portuguese tax law.

Full Decision

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (Arbitrator President), Maria Alexandra Mesquita and Rui Ferreira Rodrigues, appointed by the Ethics Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby agree on the following

Arbitral Decision

I – REPORT

A..., NIF..., hereinafter referred to as the Claimant, submitted on 29 July 2016, through its representative company B..., SA, NIPC..., an application for the establishment of a Collective Arbitral Tribunal, in accordance with the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January which approved the Legal Regime of Arbitration in Tax and Customs Matters (hereinafter referred to as RJAT), in which the Tax and Customs Authority (hereinafter referred to as ATA or Respondent) is the Respondent.

The Claimant requests an arbitral ruling on the illegality of the assessments of Stamp Duty (hereinafter referred to as SD) for the year 2015, in the total amount of sixty-three thousand four hundred and fourteen euros, €63,414.00, alleging violation of Article 1 of the Stamp Duty Code (hereinafter CIS), of item 28.1 of the General Table of Stamp Duty (hereinafter GTSD) and of Article 6 of Law No. 55-A/2012, of 29 October, the amount of tax assessed and paid being €42,276.00, and assessed and due for payment by 30 November 2016, of €21,138.00, making up the total amount of €63,414.00 which corresponds to the economic value of the claim, pursuant to subsection e) of paragraph 2 of Article 10 of the RJAT.

It therefore requests the annulment of the said assessments paid and due for payment, as well as the payment of indemnificatory interest on the total amount from the different dates of payment of the tax, calculated at the statutory rate.

The application for establishment of the Arbitral Tribunal was accepted by the His Excellency President of the CAAD on 19 August 2016 and notified to the ATA on 20 August 2016.

In accordance with the provisions of subsection a) of paragraph 2 of Article 6 and subsection b) of paragraph 1 of Article 11 of the RJAT, as amended by Article 228 of Law 66-B/2012, of 31 December, the Ethics Council appointed the arbitrators of the Collective Arbitral Tribunal, who communicated their acceptance of the appointment within the applicable period and notified the parties of such appointment on 3 October 2016.

The Collective Arbitral Tribunal was constituted on 19 October 2016 and notified on the same day to the parties; it is regularly and materially competent in accordance with the provisions of paragraph 1, subsection a) of Articles 2, 5, of paragraph 2, subsection a) of Article 6, and of paragraph 1 of Article 11, all of the RJAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December.

In accordance with paragraphs 1 and 2 of Article 17 of the RJAT, the Respondent ATA was notified on 20 October 2016 to file a Reply.

The ATA filed its Reply and attached the Administrative File (hereinafter referred to as AF) on 15 November 2016.

By Arbitral Order of 18 November 2016, of the President of this Collective, it was determined to dispense with both the meeting referred to in Article 18 of the RJAT, as well as the submission of arguments by the parties, setting a period of 30 days for the delivery of the final Decision in the case.

10. The case is not affected by any nullities and no preliminary or subsequent questions, whether prejudicial or exceptions, were raised that would prevent the consideration of the merits of the case, and the conditions are met for a final Decision to be delivered.

11. The Claimant filed the requisite power of attorney in the case and the Respondent ATA proceeded to designate its representatives in the case, with both Parties thus being duly represented.

12. The Respondent ATA has legal personality and judicial capacity in accordance with Articles 4 and 10, paragraph 2 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March, and the Claimant has judicial capacity in accordance with Article 26 of the Code of Civil Procedure applicable to the present case, by virtue of subsection e) of Article 29 of the RJAT and of the articles cited above with the exception of Article 1 of Ordinance 112-A/2011, of 22 March, and therefore both have procedural standing.

II – GROUNDS: The Facts

II.A. Facts Considered Proven

a) The Claimant received documents Nos. 2016..., 2016... and 2016... issued by the Respondent ATA, which contain the assessments of SD relating to the urban property with registration number..., of the Union of Civil Parishes of ... and ..., municipality and district of Porto, corresponding to the property located at Rua de ..., No...., Lot ..., in the city of Porto.

b) These assessments in the total amount of €63,414.00 were issued under item 28.1 of the GTSD, with reference to the year 2015, with the new wording given to the item by the State Budget for 2014 - Law No. 83-C/2013, of 31 December.

c) The claimant is the owner and legitimate proprietor of the property that is the subject of the SD assessments in question.

d) The said property, during the period to which those assessments refer, was registered in the respective land register as "land for construction," and also indicated as "Type of Location Coefficient" the notation "Housing."

e) In accordance with Subdivision Permit No. ALV/.../.../ DMU, with reference to File No. .../.../CMP, which evidences the subdivision operation and respective urbanization works on the property located at Rua..., No...., Lot... is described as having an area of 4,883.00 m², intended for the construction of a building, whose construction area is 27,722.00 m² and implantation area of 4,270.00 m², with the gross area intended for housing being 19,345.00 m², corresponding to 116 units, and the gross construction area intended for parking being 8,377.00 m².

f) The amount of tax was assessed and paid by the Claimant in two initial installments, respectively, in April and July 2016, with the third installment due for payment by 30 November of the same year.

II.B. Facts Not Yet Considered Proven

No proof has been made of the payment of the third installment of the tax which, as we have mentioned, should have been made by 30 November 2016.

III – GROUNDS: The Law

The sole issue to be determined in the present arbitral tax proceedings relates to the application of item 28.1 of the table annexed to the CIS, to land intended for construction.

In the present case, what is at issue is the definition of the scope of application of item No. 28.1 of the GTSD, as worded by Law No. 83-C/2013, of 31 December, more specifically to determine whether the land for construction in question in the present case may fall within the concept of "land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the Code on IMI" to which the said item refers, taking into account that its respective patrimonial value is equal to or greater than €1,000,000.00.

The issue arises due to taxation under stamp duty of the ownership, usufruct or right of superficies of urban properties whose patrimonial tax value shown in the land register is equal to or greater than €1,000,000, in which case tax is due at the rate of 1% on the patrimonial tax value used for purposes of IMI, per property with residential allocation.

This issue is not new, having been the subject of consideration both in arbitral jurisdiction and in the case law of the Supreme Administrative Court, and within the scope of the wording of the CIS given by Law No. 55-A/2012, of 29 October, the decisions delivered were always contrary to what was sought by the Tax Authority[1].

The situation sub iudice, however, occurs within a differentiated legal framework, to the extent that the facts should be assessed in light of the wording of the CIS given by the State Budget for 2014, Law No. 83-C/2013, of 31 December (Article 194, under the heading - Amendment to the General Table of Stamp Duty), according to which item 28.1 of the General Table of Stamp Duty, annexed to the Stamp Duty Code, approved by Law No. 150/99, of 11 September, now has the following wording:

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

Within this new legal framework, decisions have already been delivered in arbitral proceedings, equally unfavorable to what was argued by the ATA[2].

The referred case law, notwithstanding having concluded in favor of the arbitral claim, is based on the understanding that the following should be considered as meeting the requirements of the new item 28.1 of the GTSD:

"with regard to land for construction, whether or not located within an urban agglomeration, as defined in art. 3./4 of this act [CIMI Code], should, as such, be considered as land in relation to which has been granted: - license for subdivision operation; - building license; - authorization for subdivision operation; - authorization for construction; - admitted favorable prior notification of subdivision or construction operation; issued favorable prior information of subdivision or construction operation, as well as; - those that have been declared as such in the acquisition deed, and it should be noted that, for this purpose as well, only the acquisition deed with the form prescribed by civil law should be relevant, namely, the public deed or the authenticated private document referred to in art. 875 CC." [see ANTÓNIO SANTOS ROCHA / EDUARDO JOSÉ MARTINS BRÁS – Taxation of Patrimonial Assets. IMI-IMT and Stamp Duty (Annotated and Commented). Coimbra, Almedina, 2015, p. 44]."[3]

Also in the decision delivered in arbitral case 142/2016T, already cited, which likewise concluded in favor of the claim, the following may be read:

"There is no indication in these provisions of the GTSD and the CIMI Code of what should be understood by 'planned building,' but, taking into account the documents required to be submitted for the evaluation of land for construction, indicated in Article 37, paragraph 3, of the CIMI Code, it is concluded that one can only speak of authorized or planned construction when the 'building to be constructed,' referred to in paragraph 1 of Article 45, is defined in a subdivision permit or building license permit, or approved project, or prior notification, or favorable prior information or document proving constructive viability."

The understanding of the said decisions is fully endorsed here, regarding what, in light of the new wording of the CIS, should be understood as "land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the IMI Code."

In fact, in accordance with the CIMI Code, land for construction, which, in accordance with Article 6, paragraph 1, c) of that Code, constitutes a type of urban property, may have housing as its allocation, as follows from Article 41, also of the CIMI Code, an allocation that, as follows, inter alia, expressly from Article 45, paragraph 5 of the CIMI Code, shall be determined on the basis of the elements referred to in Article 37 of the same Code, and paragraph 3 of this article states that:

"With regard to land for construction, a photocopy of the subdivision permit must be presented, which must be replaced, should no subdivision exist, by a photocopy of the building license permit, approved project, prior notification, favorable prior information or document proving constructive viability."

It is thus concluded here, as in the case law cited above, that "land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the IMI Code" should be considered as those plots of land in which the 'building to be constructed' is defined as intended for housing in a subdivision permit or building license permit, or approved project, or prior notification, or favorable prior information or document proving constructive viability.

Now, in the present case, it is found that the land to which the Stamp Duty assessment relates, the subject of the present arbitral action, is covered by Subdivision Permit No. ALV/.../.../ DMU, with reference to File No. .../.../CMP, which evidences the subdivision operation and respective urbanization works on the property located at Rua ..., No...., Lot..., as having an area of 4,883.00 m², intended for the construction of a building, whose construction area is 27,722.00 m² and implantation area of 4,270.00 m², with the gross area intended for housing being 19,345.00 m², corresponding to 116 units, and the gross construction area intended for parking being 8,377.00 m².

Thus, there is no doubt that the 'building to be constructed' on the land in question is defined in the subdivision permit as having the purpose of housing.

In light of the foregoing, such land must be considered as "land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the IMI Code," thus satisfying the provision of item 28.1 of the Table annexed to the CIS, as worded, there being nothing to censure in the tax act challenged and the arbitral claim should, as such, be entirely dismissed.

IV – DECISION

For these reasons, this Arbitral Tribunal decides to dismiss the arbitral claim filed and, in consequence,

a) Absolves the Respondent from the claim; and

b) Condemns the Claimant in the costs of the proceedings, fixed below.

V. Value of the Case

The value of the case is fixed at €63,414.00, in accordance with Article 97-A, paragraph 1, a), of the Code of Tax Procedure and Process, applicable by virtue of subsections a) and b) of paragraph 1 of Article 29 of the RJAT and of paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

VI. Costs

The arbitration fee is fixed at €2,448.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Claimant, since the claim was entirely dismissed, in accordance with Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4, of the said Regulation.

Notify the parties.

Lisbon, 10 February 2017

The Arbitrator President

(José Pedro Carvalho)

The Arbitrator Member

(Maria Alexandra Mesquita)

The Arbitrator Member

(Rui Ferreira Rodrigues)

[1] See, for example, Decisions 49/2013-T of 18 September 2013, 53/2013-T of 2 October, 231/2013-T of 3/2/2014, Case No. 7/2014-T, of 3 July, 56/2014-T of 31 July, 210/2014-T of 30 July, Case No. 125/2015-T, of 12 October, all of the CAAD (available at www.caad.org.pt) and the Decision of the STA of 9 April 2014, P1870/2013, followed by several others of similar content, available at http://www.dgsi.pt/jsta.

[2] See, for example, the decisions in arbitral cases 156/2016T, 142/2016T, 524/2015T, 578/2015T, 467/2015T, 260/2016T and 290/2015T, all available at www.caad.org.pt.

[3] See in this sense the decision delivered in case 156/2016T, already cited.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS apply to building land (terrenos para construção)?
The application of Stamp Tax under Verba 28.1 TGIS to building land (terrenos para construção) depends on interpretation of the legal framework post-Law 83-C/2013. The central issue is whether land registered for construction with authorized/planned residential buildings qualifies as urban property with 'residential allocation' under the IMI Code. Prior case law under Law 55-A/2012 consistently ruled against the Tax Authority, finding that mere classification as building land did not trigger Verba 28.1 taxation. However, the 2014 State Budget amendment modified the provision's wording, requiring fresh analysis of whether authorized construction permits for housing constitute sufficient 'residential allocation' to trigger the 1% tax on properties valued ≥€1,000,000.
What are the legal grounds for challenging Stamp Tax assessments on high-value properties in Portugal?
Legal grounds for challenging Stamp Tax assessments on high-value properties include: (1) violation of Article 1 CIS regarding taxable event definition—arguing building land lacks the required characteristics of completed urban property; (2) violation of Verba 28.1 TGIS scope—contending land for construction does not constitute property 'with residential allocation' under IMI Code provisions; (3) violation of Article 6 of Law 55-A/2012 or subsequent amendments; (4) requesting CAAD arbitration under Articles 2 and 10 of RJAT (Decree-Law 10/2011); (5) claiming annulment of assessments (anulação das liquidações); and (6) seeking compensatory interest (juros indemnizatórios) on unlawfully collected amounts at statutory rates from payment dates.
How does Article 1 of the Código do Imposto de Selo define taxable events for building land?
Article 1 of the Código do Imposto de Selo (CIS) defines Stamp Tax as levied on acts, contracts, documents, titles, papers, and other legally defined situations. For building land under Verba 28.1, the critical definition involves whether 'ownership, usufruct or surface rights of urban properties' encompasses land for construction. The taxable event requires: (1) urban property status; (2) patrimonial tax value ≥€1,000,000 in the land register; and (3) residential allocation per IMI Code. The interpretive question is whether land registered as 'terrenos para construção' with authorized residential construction plans meets these criteria before actual building completion, or whether completed, habitable residential structures are required to trigger taxation.
Can taxpayers claim compensatory interest (juros indemnizatórios) on unlawful Stamp Tax payments?
Yes, taxpayers can claim compensatory interest (juros indemnizatórios) on unlawful Stamp Tax payments under Article 43 of the Lei Geral Tributária (LGT). When tax assessments are annulled by CAAD or administrative/judicial review, the State must pay compensatory interest on amounts unduly collected, calculated at the statutory legal rate (taxa legal) from the date(s) of payment until reimbursement. The claim must be included in the arbitration request as ancillary relief. Interest accrues automatically upon judicial/arbitral declaration of illegality without requiring separate administrative claim. In this case, the taxpayer requested juros indemnizatórios on €63,414 total (€42,276 paid in two installments April/July 2016, plus €21,138 due November 2016) from respective payment dates.
What is the procedure for requesting CAAD tax arbitration to annul Stamp Tax liquidations?
The CAAD tax arbitration procedure for annulling Stamp Tax liquidations follows RJAT (Decree-Law 10/2011): (1) File arbitration request within 90 days of tax assessment notification; (2) Include mandatory elements per Article 10 RJAT—parties' identification, contested acts, factual/legal grounds, relief sought, economic value (valor da causa), and supporting documents; (3) Pay arbitration fee; (4) CAAD President reviews and accepts request; (5) Tax Authority (AT) notified and receives case file; (6) Ethics Council appoints arbitral tribunal (singular or collective); (7) Arbitrators accept and tribunal constitutes; (8) AT files reply with administrative file within statutory deadline; (9) Optional hearing under Article 18 RJAT; (10) Parties may submit written arguments; (11) Tribunal delivers decision within legal timeframe. The procedure is adversarial, written, and generally faster than administrative courts.