Process: 46/2016-T

Date: October 10, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 46/2016-T) addresses whether Stamp Tax under clause 28.1 of the General Table of Stamp Tax (TGIS) applies to urban properties classified as 'green zones' (zonas verdes). The claimant company challenged Stamp Tax assessments totaling €31,651.20 for years 2012-2014 on a property with a patrimonial value of €1,055,040. The central dispute concerned whether property fiscally classified as 'green areas,' with no construction permitted or erected, qualifies as 'building land' or property with 'residential use' under item 28.1 TGIS. The claimant argued that green zone classification precludes residential use designation and building land status, making Stamp Tax assessments illegal. The Tax Authority countered that the Municipal Property Tax Code (CIMI) definitions should apply, and that use coefficients in property valuation indicate residential purpose, triggering Stamp Tax liability. A procedural question arose regarding joinder of claims for different tax years (2012-2013 versus 2014) due to legislative amendments. The claimant also sought compensatory interest (juros indemnizatórios) under Article 43 GTC for unduly paid tax obligations. This case illustrates the complexity of applying Stamp Tax to properties with planning restrictions and highlights how fiscal classification as green zones impacts taxation of high-value urban properties under Portuguese tax law.

Full Decision

ARBITRAL DECISION

  1. REPORT

A - General

1.1. A…– ..., Lda., with the unique registration number and legal entity number …, with registered office at …, …, …-… … (hereinafter designated "Claimant"), filed, on 28.01.2016, a request for constitution of an arbitral tribunal in tax matters, which was accepted, seeking, on the one hand, a declaration of illegality of the Stamp Tax assessment acts of 02.10.2015, relating to item 28.1 of the General Table of Stamp Tax (hereinafter "GTST"), concerning a property of which it is the owner, as shall be better seen hereinafter, which gave rise to collection notices n.º 2015…, n.º 2015… and n.º 2015…, relating to the years 2012, 2013 and 2014, in the amount of € 10.550,40 (ten thousand five hundred and fifty euros and forty cents) each, and, on the other hand, recognition of the right to compensatory interest for payment of tax obligations unduly charged.

1.2. Pursuant to the provisions of subparagraph a) of item 2 of Article 6 and subparagraph b) of item 1 of Article 11 of Decree-Law n.º 10/2011, of 20 January, in the wording given to it by Article 228 of Law n.º 66-B/2012, of 31 December, the Ethics Council of the Administrative Arbitration Centre (CAAD) appointed the undersigned as arbitrator, and the Parties, after being duly notified, did not manifest opposition to that appointment.

1.3. By dispatch of 16.02.2016, the Tax and Customs Administration (hereinafter designated "Respondent") proceeded with the appointment of Mrs. Dr. B… and C… to intervene in the present arbitral proceedings, in the name and representation of the Respondent.

1.4. In accordance with the provisions of subparagraph c) of item 1 of Article 11 of Decree-Law n.º 10/2011, of 20 January, in the wording given to it by Article 228 of Law n.º 66-B/2012, of 31 December, the arbitral tribunal was constituted on 13.04.2016.

1.5. On 15.04.2015 the highest-ranking official of the Respondent's service was notified to, if so desired, within a period of 30 days, present a response and request additional evidence production.

1.6. On 17.05.2015 the Respondent presented its response.

B – Position of the Claimant

1.7. The Claimant is the sole owner of the urban property located at …, described in the Land Registry Office of …, parish of …, with file n.º … and registered in the property tax matrix under article …, of the parish and municipality of …, with a patrimonial value of € 1.055.040,00 (one million fifty-five thousand and forty euros), to which corresponds the certificate that the Claimant annexes to its request as document n.º 2, whose content is hereby reproduced (hereinafter designated "Property").

1.8. The Claimant was notified of the Stamp Tax assessments (hereinafter designated "ST") referred to in 1.1., whose collection documents were annexed to the arbitral opinion request as document numbers 5, 6 and 7, whose contents are hereby reproduced, which were based on Article 1 of the Stamp Tax Code (hereinafter "STC") and on item 28.1 of the GTST.

1.9. The Claimant did not proceed with payment of the assessed amounts, and consequently tax enforcement proceedings (n.º …2016…, n.º …2016… and n.º …2016…, relating, respectively, to the years 2012, 2013 and 2014) were instituted against it, the first two of which were annexed to the arbitral opinion request, the last to the Claimant's request of 01.02.2016, as documents n.ºs 8, 9 and 10, whose contents are hereby reproduced.

1.10. The Claimant paid the assessments referred to in 1.1. already in the enforcement proceedings, spending in total the sum of €31.962,21 (thirty-one thousand nine hundred and sixty-two euros and twenty-one cents), as is evidenced by the documents annexed to the Claimant's request of 01.02.2016 with n.ºs 11, 12 and 13, whose contents are hereby reproduced.

1.11. The Claimant alleges, first, that item 28 of the GTST, in the wording in force until 31.12.2013 could not be applied to the Property since it cannot be classified as residential or as having residential use, with no construction existing thereon.

1.12. Furthermore, the Property is neither classified nor can be classified as "building land".

1.13. The Property is fiscally classified as "green areas", with no construction being permitted thereon and no construction having been erected thereon.

1.14. The requirement of compensatory interest, given that the Claimant paid tax obligations which it considers illegal, is provided for in Article 43 of the General Tax Code (GTC).

C – Position of the Respondent

1.15. The Respondent, in its response, defends itself by exception, considering that joinder of claims cannot be made in the terms formulated by the Claimant.

1.16. Article 3 of the RTAT provides for the possibility of joining various claims, provided that the "success of the claims depends essentially on the assessment of the same factual circumstances and on the interpretation and application of the same principles or rules of law". However, in the present case, the ST assessments relating to the years 2012 and 2013 are based on legislation different from that which underlies the ST assessment for the year 2014.

1.17. The Respondent considers that the Property has the legal nature of a property with residential use, and therefore the assessment acts which are the subject of the present arbitral opinion request should be maintained, as they embody a correct interpretation of item 28 of the GTST.

1.18. The Respondent's understanding results from the fact that there is, in relation to ST, no definition of the concepts of "urban property", "building land" and "residential use", which requires recourse to the Municipal Property Tax Code (the "MPTC"), in compliance with the provisions of item 2 of Article 67 of the STC, in the wording given to it by Law n.º 55-A/2012, of 29 October, resulting in the necessary conclusion that the notion of use of an urban property "is found in the section relating to the valuation of properties" and if "for purposes of determining the patrimonial value of building land the application of the use coefficient is clear in valuation", then "its consideration for purposes of application of item 28 of the GTST cannot be ignored".

1.19. As for the assessment relating to the year 2014, the taxable event is the ownership, by the Claimant, as of 31.12.2014, of a property - building land, the construction of which, authorized or foreseen, is for residential purposes – of patrimonial tax value exceeding € 1.000.000,00.

D – Conclusion of the Report and Clarification

1.20. By request of 23.05.2016, the Claimant came to pronounce itself on the alleged inadmissibility of joinder, in the same proceedings, of claims concerning ST assessments for the years 2012, 2013 and 2014 on the grounds that the applicable legislation differs for the years 2012 and 2013, on the one hand, and for the year 2014, on the other.

1.21. In the Claimant's view, such exception does not hold, since both with respect to the assessments of 2012 and 2013 and to the 2014 assessment, the ST assessment of item 28.1 is inadmissible, because the Property is not building land.

1.22. In fact, in the Claimant's view, the Property cannot be classified as building land, not being devoted to residential use nor having any construction erected, foreseen or even authorized thereon, such that the diversity in the wording of the assessment rule is, for these purposes, irrelevant.

1.23. By dispatch of 20.09.2016 the Arbitral Tribunal waived the hearing provided for in Article 18 of the Legal Regime for Arbitration in Tax Matters (LRATM), considering that the Parties had already produced the factual elements necessary and sufficient for rendering the decision, which was foreseen to take place by 14.10.2016, and the parties waived their right to present arguments.

1.24. The arbitral tribunal is substantively competent, pursuant to the provisions of Articles 2, item 1, subparagraph a) of the LRATM.

1.25. The Parties have judicial personality and capacity and have standing pursuant to Article 4 and item 2 of Article 10 of the LRATM, and Article 1 of Regulation n.º 112-A/2011, of 22 March.

1.26. Without prejudice to what is stated in 1.24., the joinder of claims (declaration of illegality of assessment acts, on the one hand, and recognition of the right to compensatory interest) effected in the present arbitral opinion request, in furtherance of the principle of procedural economy, is justified since Article 3 of the LRATM, while expressly admitting the possibility of "joinder of claims even if relating to different acts", accommodates, without hermeneutical abuse, the assessment of a claim that derives, in necessary terms, from the judgment that the arbitral tribunal sustains regarding the validity of the assessments at issue.

1.27. The proceedings do not suffer from any nullity, however, the exception of inadmissibility of joinder, in the same proceedings, of claims concerning ST assessments for the years 2012, 2013 and 2014 on the grounds that the applicable legislation differs for each of the years in question requires more detailed analysis, which shall be carried out hereinafter.

  1. THE EXCEPTION OF INADMISSIBILITY OF JOINDER, IN THE SAME PROCEEDINGS, OF CLAIMS CONCERNING ST ASSESSMENTS FOR THE YEARS 2012, 2013 AND 2014

2.1. The Respondent considers that joinder of the claims sought by the Claimant is not possible, since, in the present case, the ST assessments relating to the years 2012 and 2013 are based on legislation different from that which underlies the ST assessment for the year 2014.

2.2. In fact, Article 3 of the LRATM provides for the possibility of joining various claims, provided that the "success of the claims depends essentially on the assessment of the same factual circumstances and on the interpretation and application of the same principles or rules of law".

2.3. It must be recognized that the LRATM provides for greater scope of possibilities for joinder of claims than those established in Article 104 of the Code of Tax Procedure and Process (CTPP).

2.4. The Claimant, in its arbitral opinion request, seeks a declaration of illegality of tax acts relating to the same Property on the grounds that the said Property is not building land, is not devoted to residential use, nor has any construction erected, foreseen or even authorized thereon.

2.5. These are the factual circumstances that the arbitral tribunal must assess with respect to each of the assessments at issue and, indeed, the solution to adopt with respect to each of them will depend on the interpretation and application of the same principles or rules of law.

2.6. The fact that there has been, in the meantime, an alteration in the wording of item 28.1 of the GTST does not contradict this conclusion, in that the law does not require attention to the identity of the literal content of the norms invoked, but rather to the application "of the same principles or – note the alternative – rules of law".

2.7. The requirement of the "same rule of law" cannot be read in isolation, outside the actual claim that is effectively presented. Now, the claim formulated by the Claimant, in the terms in which it is presented to this arbitral tribunal, does not violate the rules that govern, in the LRATM, the generous admissibility of joinder of claims, since the alteration in wording of item 28.1 that has meanwhile occurred does not prove relevant to the decision, in concrete terms, of this dispute.

2.8. Thus, the arbitral tribunal considers that the exception invoked by the Respondent does not hold, and is therefore in a position to assess the merits of the case.

  1. FACTUAL MATTERS

3.1. Proven Facts

3.1.1. The Claimant is the sole owner of the Property (docs. n.ºs 1 and 2, attached to the arbitral opinion request).

3.1.2. The Property is described in the urban property tax matrix as "green areas" (doc. n.º 2, attached to the arbitral opinion request).

3.1.3. The total area of the Property is 174.964,0000 m2 (doc. n.º 2, attached to the arbitral opinion request).

3.1.4. The Property was assigned the patrimonial tax value of € 1.055.040,00 (one million, fifty-five thousand and forty euros) (doc. n.º 2, attached to the arbitral opinion request).

3.1.5. The Property is included in a group of properties on which a subdivision permit n.º …/1999 was issued (docs. n.ºs 2 and 3, attached to the arbitral opinion request).

3.1.6. The said subdivision contemplated as "free green areas" the area of 174.964 m2 (doc. n.º 4, attached to the arbitral opinion request), which coincides with the area of the Property (doc. n.º 2, attached to the arbitral opinion request).

3.1.7. The Claimant was notified of the ST assessment acts of 02.10.2015, relating to item 28.1 of the GTST, concerning the Property, which gave rise to collection notices n.º 2015…, n.º 2015… and n.º 2015…, relating to the years 2012, 2013 and 2014, in the amount of € 10.550,40 (ten thousand five hundred and fifty euros and forty cents) each (docs. n.ºs 5, 6 and 7, attached to the arbitral opinion request).

3.1.8. The Respondent, following the Claimant's non-voluntary payment of the taxes required by the assessments now at issue, instituted against the Claimant the tax enforcement proceedings n.º …2016…, n.º …2016… and n.º …2016…, relating, respectively, to the years 2012, 2013 and 2014 (docs. n.ºs 8, 9 and 10, the first two attached to the arbitral opinion request and the last to its request of 01.02.2016).

3.1.9. The Claimant paid the assessments referred to in 3.1.7. on 28.01.2016, already in the enforcement proceedings, spending in total the sum of €31.962,21 (thirty-one thousand nine hundred and sixty-two euros and twenty-one cents), as is evidenced by the documents annexed to the Claimant's request of 01.02.2016.

3.2. Unproven Facts

There are no facts relevant to the assessment of the merits of the case that have been deemed unproven.

  1. LEGAL MATTERS

4.1. Questions to Be Decided

It follows from what has been stated above that the questions to be assessed are, fundamentally, two:

a) To determine whether, as of the date to which the facts relate, the Property is a property "with residential use", a "residential property" or "building land the construction of which, authorized or foreseen, is for residential purposes in accordance with the provisions of the Municipal Property Tax Code", for purposes of applying Article 1 of the STC and item 28.1 of the GTST; and

b) To clarify whether, if the claim for declaration of illegality and consequent annulment of the contested assessments is upheld, the Claimant, within the scope of the present arbitral proceedings, may obtain a judgment condemning the Respondent to payment of compensatory interest relating to the sums paid by it for satisfaction of the tax obligations unduly charged by the latter.

4.2. Item 28.1 of the GTST in the Wording Applicable to the 2012 and 2013 Assessments

Law n.º 55-A/2012, of 29 October, among several amendments it made to the STC, added, by its Article 4, item 28 to the GTST, which contained, until 31.12.2013, the following wording:

"28 - Ownership, usufruct or right of superficies of urban properties whose patrimonial value contained in the property tax matrix, in accordance with the Municipal Property Tax Code (MPTC), is equal to or exceeding € 1.000.000 - on the patrimonial value used for purposes of municipal property tax:

28.1 - For property with residential use - 1%;

As can be seen, item 28.1 refers to "properties with residential use". Now, not only is this concept not defined in any provision of the STC, but nor is it used in the MPTC, legislation to which item 2 of Article 67 of the STC expressly refers when matters not regulated in the STC concerning item 28 are at issue.

4.3. The Meaning and Scope of the Concept of "Property with Residential Use"

The meaning and scope of the concept of "property with residential use" cannot be determined without bearing in mind the meaning of the term "use" itself. And that must be found in dictionaries, drawing on them the benefit of careful lexicographic study. Thus, "use" (afectação), according to the Dictionary of Contemporary Portuguese Language, of the Academy of Sciences of Lisbon, is the action of designating something for a particular use and "use" (afectar), consequently, is synonymous with designating for a specific use or function.

a) The Rules of Interpretation of Tax Norms

The question to which it is necessary to give an answer first does not dispense with, rather implies, that we ascertain the meaning and scope of the concept of "property with residential use" to which item 28.1 of the GTST appealed. In the absence of a legal definition, whether in the STC or in any other legislation, the interpreter-applier of this provision has the duty to invoke the norms that govern the necessary hermeneutical exercise.

There is not truly a special regime for interpretation of tax norms. Item 1 of Article 11 of the GTC orders that in "the determination of the meaning of tax norms and in the classification of facts to which they apply", "the general rules and principles of interpretation and application of laws" be observed.

The general principles of interpretation and application of laws are those established in Article 9 of the Civil Code:

ARTICLE 9

(Interpretation of the Law)

  1. Interpretation should not limit itself to the letter of the law, but should reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

  2. The interpreter cannot, however, consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  3. In establishing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express its thought in adequate terms.

Note, however, that the interpretation of norms, also of tax norms, does not exhaust itself in a lexical exercise. It does not involve only, or even mainly, verbal analysis. What is at issue, therefore, is not to know exactly what "property with residential use" means, but rather to ascertain the meaning and scope of this concept within the framework of what item 28.1 of the GTST provided. In other words, and this should be emphasized, there will be procedural utility to the hermeneutical effort, within the scope of this specific arbitral opinion request, only if it is directed at ascertaining whether the legislator, with the wording then chosen for item 28.1 of the GTST, intended to include in it urban properties with the characteristics of the Property.

b) "Residential Use" – Residential Properties and Properties with Residential Use

The Respondent contends that the use of the property is a coefficient that contributes to its valuation, which we consider indisputable. However, what is now at issue is to determine whether item 28 of the GTST, in the wording which we must consider regarding the acts assessing 2012 and 2013, comprises both constructed properties and those deemed to be building land (a classification which, moreover, is rejected by the Claimant).

Item 1 of Article 6 of the MPTC, with taxonomic concern, distinguishes "residential properties" from "building land". The former shall be, pursuant to the provisions of item 2 of the same article, buildings or constructions licensed for that purpose or, in the absence of such license, those having that as their normal purpose. As for building land, item 3 of the provision to which we have been referring clarifies, are those for which a license or authorization has been granted, prior notice admitted or favorable prior information issued for a subdivision or construction operation, and also those declared as such in the title of acquisition, with some exceptions.

It is therefore clear that building land (to admit that the Property can thus be qualified, which we have not yet resolved), is not, according to this classification, a residential property. The question is now to determine whether "property with residential use", the concept then used by item 28.1 of the GTST, corresponds, despite the literal diversity, to "residential property", a notion employed in the classification just reviewed.

Use, as we learned from the lexicographers, summons the purpose given to a certain thing. Now "residential" relates to residence, which is in turn, and according to the Dictionary we have been using, a place or house in which one lives or dwells. Now, residential use cannot suggest any meaning other than the action of giving to a certain thing – in the case the Property, even if for these purposes it is admitted to be building land – the purpose of a house or place where one dwells.

It is known that the MPTC makes, in various provisions, use of the expression "use" (afectação). It does so, for example:

  • In Article 3, when it refers, regarding rural properties, to use generating agricultural income;

  • In Article 9, when it imposes on taxpayers the duty to notify the tax services that building land has come to be included in the inventory of a company whose purpose is the construction of buildings for sale or that a property has come to be included in the inventory of a company whose purpose is its sale;

  • In Article 27, when it relates certain buildings and constructions to the production of agricultural income.

In all the situations presented, as can be seen, use is not referred to in potential terms, of vocation or of expectation. It is precisely the contrary. It suggests an actual or direct purpose, to use an expression to which the legislator appeals in Article 27.

However, the MPTC also makes abundant use of the expression "use" when it sets out the rules that should apply to the determination of the patrimonial tax value of urban properties (Articles 38 and following of the MPTC). It is important to see, then, whether we can extract from the rules for determining patrimonial value any useful element that allows us to ascertain the meaning and scope of the concept of "property with residential use".

c) The Relevance of the Rules for Determining Patrimonial Tax Value

The Respondent contends that the "notion of use of the urban property is found in the section relating to the valuation of properties" and, moreover, that "for purposes of determining the patrimonial value of building land the application of the use coefficient in valuation is clear, so its consideration for purposes of applying item 28 of the GTST cannot be ignored".

It is true that in determining the patrimonial tax value of properties, "use" of what may be constructed thereon has been taken into account.

As the Respondent rightly points out, "the mere constitution of a right of potential construction immediately increases the value of the property in question", precisely in function of what may be constructed thereon. That is why, as the Respondent well explains, Article 45 of the MPTC "orders the separation of the two parts of the land": on one side, we must consider "the part of the land where the building to be constructed [correctly, where the building may come to be constructed] is to be implanted, and on the other the free land area. Once the amount of the first part is ascertained, the value determined is reduced to a percentage between 15% and 45% (…), by reason of the fact that construction is not yet effectuated". It is clear that the application of that percentage allows precisely for taking into account the circumstance that there is not yet construction, but does not authorize the legislator to ignore that the economic, or market, value of land is related to its construction capacity.

To say what precedes does not mean, however, asserting that the legislator feels the need to impose automatic and necessary taxation, under Municipal Property Tax, on all land. It suffices to read what is provided in subparagraph d) of the aforementioned Article 9 of the MPTC:

ARTICLE 9

(Beginning of Taxation)

  1. Tax is due from:

(…)

d) The 4th year following, inclusive, the year in which building land has come to be included in the inventory of a company whose purpose is the construction of buildings for sale;

(…)

That is, although the legislator considers it reasonable, as it seems to, to determine the patrimonial tax value of land taking into account its construction capacity and, let us concede by way of argument, the nature or vocation of what may be constructed thereon, it is nonetheless symptomatic that it has chosen, at the same time, to suspend that taxation in cases where such land is included in the inventory of a company whose purpose is the construction of buildings for sale. In cases where, one could also say, such urban properties form part of a productive process that tends to continue and to produce, downstream, also taxable fruits.

If the primary sense of "use", as we have said, suggests an actual, direct purpose given to a certain thing, we do not see how this understanding can be refuted by the finding that the legislator, within the scope of the valuation of building land, authorizes the use of the use coefficient, having in view what may come to be constructed thereon. In fact, it does not seem reasonable to admit in this scenario the recourse to norms for determining taxable matter to broaden the prediction of rules of incidence.

In light of the foregoing, the arbitral tribunal considers that in the interpretation of the provisions of item 28.1 of the GTST in the wording applicable to the assessments of 2012 and 2013, the understanding must be that residential use of an urban property suggests that it be given that actual purpose, or that it can directly be given that purpose. Being as it seems to us, the Property is not included in that item, in terms of objective incidence. It seems to us therefore that to land, even if for construction, by its very nature, cannot be associated a residential use such as that suggested by item 28.1 of the GTST.

It should not be said that this judgment conflicts with the possibility of seeing the use coefficient referred to in Section II of Chapter VI of the STC applied to construction land. In truth, one thing is the rules that the legislator imposes to determine the patrimonial tax value of building land, it not being unusual that account be taken of its construction capacity and the nature and vocation of what may be constructed thereon, another, quite different, is to pretend that such rules are invoked to determine the field of prediction of the rules of incidence.

Moreover, the interpretation adopted here is in harmony with what seems to have been the intention of the Government, author of the proposal that resulted in this rather imprecise legislative intervention.

Upon the presentation and discussion, in Parliament, of bill proposal n.º 96/XII (2nd), the State Secretary for Fiscal Affairs expressly stated[1]:

"The Government proposes the creation of a special tax on residential urban properties of higher value. This is the first time that Portugal has created special taxation on high-value properties intended for residence. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses valued at equal to or exceeding 1 million euros."

Now, the State Secretary for Fiscal Affairs presents this bill proposal referring to the expressions "residential urban properties", which are those contained in subparagraph a) of item 1 of Article 6 of the STC and "houses", and it is clear that, in one case and the other, such concepts do not, without more, encompass land, even if for construction.

Thus, notwithstanding the infelicity of the legislative technique and without prejudice to the wording now in force, it results with meridian clarity that item 28.1 of the GTST, as of the date of the facts, cannot be interpreted to mean that the Property is encompassed therein, for the reasons set forth above. Rather, it seems that the meaning and scope of the concept of "properties with residential use" is equivalent to that of "residential properties" mentioned in subparagraph a) of item 1 of Article 6 of the STC.

4.4. The Current Wording of Item 28.1 of the GTST

With the amendment introduced by Law n.º 83-C/2013, of 31 December, item 28.1 of the GTST now reads as follows:

28.1 - For residential property or for building land the construction of which, authorized or foreseen, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code;

Let us now concern ourselves with determining whether the Property, as regards the 2014 ST assessment, is encompassed by the rule of incidence.

We have seen that the Respondent considers the Property to be building land, contending that this is also the understanding of the Claimant (v. Article 8 of the Response), a conclusion all the more unusual given that the procedural documents presented by the Claimant advocate precisely the opposite.

Now, we have already reviewed item 1 of Article 6 of the MPTC, regarding the distinction between "residential properties" and "building land", that is, those for which a license or authorization has been granted, prior notice admitted or favorable prior information issued for a subdivision or construction operation, and also those declared as such in the title of acquisition, with some exceptions, as can be read in item 3 of the same provision.

However, the concern of the interpreter-applier of the norm should not be limited to the concept of "building land". Such an exercise would be devoid of any utility if it ignored the rule of incidence that invokes it.

In truth, more than to know whether the Property is, or is not, building land, it is important to ascertain whether the Property is, for purposes of item 28.1 of the GTST, "building land the construction of which, authorized or foreseen, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code". This is the point, as regards the 2014 assessment.

It is not the registry inscription as "building land" that carries the inevitable application of item 28.1 of the GTST, since it does not constitute, by itself, conclusive demonstration that a property has construction for residential purposes foreseen. If this is so for properties registered as "building land" we do not see why it should not be so for those – like the Property – that are registrially registered as "green areas".

See in this regard JOSÉ MANUEL FERNANDES PIRES, (Lessons of Property and Stamp Taxes. Coimbra, Almedina, 3rd ed., 2015, pages 110 to 112): "The right to construct is not inherent in the right of ownership, but only arises anew in the patrimony of the owner when an administrative act of the competent public entity recognizes and authorizes the owner to construct or to subdivide. [...] only when that right is established in the legal sphere of the owner does the Municipal Property Tax Code establish that we are faced with building land".

Thus, it seems clear that for the verification of the norm's prediction it is not sufficient the mere registry inscription of a property as building land devoted to residence – registry inscription as building land which, we repeat, does not even exist in the case of the Property – since the delineation of the objective incidence now at issue does not waive the demonstration of an effective construction potential, necessarily revealed by the existence of documentary supports that authorize it. In other words, the incidence of the tax, for purposes of item 28.1 of the GTST, materializes only with the verification of an "actual use", to use the apt expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507). In the same sense, see, among others, the Decision of CAAD rendered in proceedings n.º 524/2015-T.

Now, without the demonstration of such effective construction potential, item 28.1 of the GTST does not prove applicable. Moreover, the documents brought to the proceedings clearly demonstrate precisely the contrary: that the Property has no construction erected, foreseen or even authorized thereon. It is not that construction is not authorized. It is more than that. It is expressly established that the entire area of the Property be "green areas".

As is clear, this arbitral tribunal cannot fail to conclude that the assessments at issue commit the error invoked by the Claimant, such that they are not valid and, for that reason, cannot be maintained in the legal order.

4.5. On Compensatory Interest

Subparagraph b) of item 1 of Article 24 of the LRATM provides that "the arbitral decision on the merits of the claim as to which there is no recourse or remedy binds the tax administration from the end of the period provided for such recourse or remedy, and must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for voluntary execution of judicial tax court decisions, restore the situation that would exist if the tax act which is the subject of the arbitral decision had not been performed, adopting the necessary acts and operations for that purpose".

It is not ignored that the legislative authorization granted to the Government by Article 124 of Law n.º 3-B/2010, of 28 April, on the basis of which the LRATM was approved, determines that the tax arbitral proceedings constitute an alternative procedural means to the judicial challenge proceedings and to the action for recognition of a right or legitimate interest in tax matters. Even though subparagraphs a) and b) of item 1 of Article 2 of the LRATM found the competence of arbitral tribunals in "declarations of illegality", it seems reasonable the understanding that their competences comprise the powers that in judicial challenge proceedings are attributed to tax courts, it being certain that in judicial challenge proceedings, beyond the annulment of tax acts, claims for compensation may be assessed, notably regarding compensatory interest.

Indeed, the principle of cognoscibility of compensation claims, in administrative review or in judicial proceedings, is justified whenever the damage which is sought to be compensated results from a fact attributable to the Tax and Customs Administration. We find manifestations of this principle in item 1 of Article 43 of the General Tax Code and in Article 61 of the Code of Tax Procedure and Process.

Thus, the assessment of the claim for payment of compensatory interest filed by the Claimant is justified.

Compensatory interest is due when it is determined, in administrative review or judicial challenge, that there has been an error attributable to the services from which resulted payment of the tax debt in an amount exceeding that legally due.

Now, given that the Claimant paid the tax which by the assessments objected to it was, by an error attributable to the services, charged, it has the right not only to reimbursement of all amounts paid but also to receive compensatory interest calculated from the date of payment of each of the installments, until its full reimbursement.

DECISION

In the terms and with the grounds set forth, the arbitral tribunal decides:

a) To dismiss the exception invoked by the Respondent as to the impossibility of joinder of claims in the terms in which it was presented by the Claimant;

b) To uphold the claim in the arbitral opinion request with the consequent annulment of the contested assessments, with all legal consequences, notably the reimbursement to the Claimant of all amounts paid by it, relating to the assessments now annulled;

c) To uphold the claim condemning the Respondent to payment of compensatory interest, at the legal rate, calculated from the date of payment of each of the three tax installments now declared unduly charged, until its full reimbursement.

VALUE OF THE CASE

In accordance with the provisions of item 2 of Article 306 of the Code of Civil Procedure, Article 97-A of the Code of Tax Procedure and Process and item 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at € 31.962,21 (thirty-one thousand nine hundred and sixty-two euros and twenty-one cents).

COSTS

For purposes of the provisions of item 2 of Article 12 and item 4 of Article 22 of the LRATM and item 4 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 1.836,00 (one thousand eight hundred and thirty-six euros), pursuant to Table I annexed to the said Regulation, to be borne entirely by the Respondent.

Lisbon, 10 October 2016

The Arbitrator

(Nuno Pombo)

Document prepared on computer, pursuant to item 5 of Article 131 of the Code of Civil Procedure, applicable by referral of subparagraph e) of item 1 of Article 29 of Decree-Law n.º 10/2011, of 20 January and with the spelling prior to the said Orthographic Agreement of 1990.

[1] See DAR I Series n.º 9/XII -2, of 11 October, page 32.

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) liability under clause 28.1 of the TGIS for urban properties classified as green zones?
Under clause 28.1 of the TGIS, Stamp Tax applies to urban properties for residential use or building land intended for residential construction with patrimonial values exceeding €1,000,000. However, properties fiscally classified as 'green zones' (zonas verdes) where no construction is permitted or foreseen should not be subject to this tax. The classification as green areas indicates planning restrictions that prevent residential use or development, which are essential requirements for Stamp Tax liability under item 28.1. The Tax Authority may argue that Municipal Property Tax Code (CIMI) definitions and use coefficients in valuation determine residential character, but properties with explicit green zone classification and construction prohibitions lack the necessary characteristics for taxation under this provision.
Can a property owner challenge Stamp Tax assessments on land designated as 'zonas verdes' through CAAD arbitration?
Yes, property owners can challenge Stamp Tax assessments on land designated as 'zonas verdes' through CAAD (Centro de Arbitragem Administrativa) arbitration under Article 2(1)(a) of the Legal Regime for Arbitration in Tax Matters (RJAT). The process begins with filing an arbitration request within the statutory deadline. The CAAD Ethics Council appoints an arbitrator, the Tax Authority submits a response within 30 days, and the tribunal examines whether the property meets legal requirements for Stamp Tax under item 28.1 TGIS. Taxpayers can join multiple assessment years in one proceeding if they involve the same factual circumstances and legal principles. Arbitration provides an efficient alternative to judicial courts for resolving disputes over incorrect property classifications and tax assessments on green zones.
Are compensatory interest (juros indemnizatórios) available when Stamp Tax payments are deemed unlawful by an arbitral tribunal?
Yes, compensatory interest (juros indemnizatórios) are available when Stamp Tax payments are deemed unlawful by an arbitral tribunal, as provided in Article 43 of the General Tax Law (LGT). When taxpayers pay tax obligations later declared illegal—such as Stamp Tax wrongly assessed on properties classified as green zones—they are entitled to compensatory interest from the payment date until reimbursement. This applies whether payment occurred voluntarily or during enforcement proceedings. The right to compensatory interest recognizes that the State unlawfully retained taxpayer funds and must compensate for that deprivation. Taxpayers should explicitly request this remedy in their arbitration petition, as it constitutes a separate claim requiring specific recognition by the tribunal alongside the declaration of assessment illegality.
How does the CAAD arbitral process work for disputing Imposto do Selo liquidations on high-value urban properties?
The CAAD arbitral process for disputing Imposto do Selo on high-value urban properties involves several stages: (1) Filing an arbitration request identifying the contested assessment acts and legal grounds; (2) Appointment of an arbitrator by CAAD's Ethics Council, with parties having the right to oppose; (3) Constitution of the arbitral tribunal; (4) Notification of the Tax Authority to submit a response within 30 days; (5) Production of evidence, including property certificates, assessment notices, and payment documents; (6) Optional hearing if necessary for clarification; (7) Submission of final arguments (unless waived); and (8) Issuance of the arbitral decision within statutory deadlines. The tribunal examines whether the property meets Stamp Tax requirements under item 28.1 TGIS, analyzing fiscal classification, permitted uses, property valuation, and applicable legal definitions. The process typically concludes within 6-8 months and provides binding resolution of tax disputes.
What are the grounds for declaring illegality of Stamp Tax assessments under verba 28.1 of the Tabela Geral do Imposto do Selo?
Grounds for declaring illegality of Stamp Tax assessments under verba 28.1 of the Tabela Geral do Imposto do Selo include: (1) Property does not constitute 'urban property for residential use'—no dwelling exists or is occupied for residential purposes; (2) Property does not qualify as 'building land' (terreno para construção)—no construction is authorized, foreseen, or permitted under urban planning regulations; (3) Fiscal classification as 'green zones' (zonas verdes) demonstrates the property's purpose as green areas, not residential development; (4) Planning restrictions prohibit construction, precluding classification as building land; (5) Misapplication of Municipal Property Tax Code (CIMI) definitions that conflict with the property's actual legal status; and (6) Incorrect attribution of residential use coefficients in valuation when no residential use is possible. Successful challenges require demonstrating that the property lacks essential characteristics triggering Stamp Tax liability under item 28.1.