Process: 461/2015-T

Date: November 12, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision addresses whether Stamp Duty under Item 28.1 of the General Table of Stamp Duty (TGIS) applies to vertical property ownership when individual units are valued below €1,000,000. The petitioner challenged a Stamp Duty assessment of €12,665.40 for the 2014 tax year before the CAAD Arbitral Tribunal under Decree-Law 10/2011. The property consisted of a covered parking area valued at €186,800.75 and multiple residential units totaling €1,266,540.32, with no individual unit reaching the €1,000,000 threshold. The core legal dispute centered on determining the relevant taxable property value (valor patrimonial tributário) for applying Item 28.1 TGIS. The taxpayer argued that each independent residential unit should be assessed separately for Stamp Duty purposes, applying the Municipal Property Tax Code concept of urban property subsidiarily per Article 67(2) of the Stamp Duty Code. Since no individual unit exceeded €1,000,000, the taxpayer contended no Stamp Duty was due. Conversely, the Tax Authority maintained that for properties not constituted under horizontal ownership (propriedade horizontal), the global taxable value of all residential units and fractions determines tax incidence. The Authority argued that under Article 2 of the Municipal Property Tax Code, the entire property—not individual parts—constitutes a single property for tax purposes, thus triggering Item 28.1 when the aggregate value exceeded €1,000,000. The tribunal was regularly constituted under Article 2(1)(a) LFAT with jurisdiction over this stamp duty dispute. The procedural framework allowed the taxpayer to contest the assessment through CAAD arbitration without requiring prior administrative appeals.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 461/2015-T

ARBITRAL DECISION

I. REPORT

A..., SA, with registered office in ..., …, in ..., legal entity No. ..., filed a petition for the constitution of a singular Arbitral Tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as LFAT), in which the Tax and Customs Authority (hereinafter TA) is the Respondent, with the objective of obtaining a declaration of illegality of the Stamp Duty assessment act relating to the year 2014 identified in the case, in the amount of €12,665.40.

The petition for the constitution of the Arbitral Tribunal was accepted by the Illustrious President of CAAD on 6.08.2015 and automatically notified to the TA.

In accordance with the provision in paragraph c) of No. 1 of Article 11 of the LFAT, the singular Arbitral Tribunal was constituted on 28.10.2015.

The TA responded by challenging the merits of the petition.

The meeting referred to in Article 18 of the LFAT was waived and final arguments were not made, given the nature of the matter contained in the case file.

The Arbitral Tribunal is regularly constituted and materially competent, pursuant to paragraph a) of No. 1 of Article 2 of the LFAT.

The parties have legal personality and capacity, are legitimate, and are represented (Article 4, and No. 2 of Article 10 of the LFAT and Article 1 of Regulation No. 112/2011, of 22 March).

No nullities, exceptions, or preliminary issues exist that would prevent the immediate examination of the merits of the case.

II. FACTS

Based on the elements contained in the case file, the following facts are considered proven:

A) On 2 April 2015, the Petitioner was notified of the Stamp Duty assessment act relating to the urban property described in the Urban Property Register under article ... for payment of the first installment of Stamp Duty;

B) On 14 April 2015, the Petitioner made payment of the first installment of the Stamp Duty assessment act relating to the aforementioned Property;

C) On 18 June 2015, the Petitioner was notified to proceed with payment of the second installment of Stamp Duty;

D) On 26 June 2015, the Petitioner made payment of the second installment of the Stamp Duty assessment act sub judice;

E) The Property in question is located in the municipality of ..., district of ... and is registered in the Property Register with the entry ..., parish code ...;

F) The Property consists of distinct parts: a covered parking area, with a taxable property value of €186,800.75 and a set of other parts intended for residential use, susceptible to independent use, with a property value of €1,266,540.32;

G) The parts of the Property intended for residential use were assessed separately for purposes of Municipal Property Tax (IMI);

H) None of the independent residential units has a taxable property value equal to or exceeding €1,000,000.

With relevance to the decision, there are no facts that should be considered as unproven.

Taking into account the positions assumed by the parties, in light of Article 110, No. 7 of the Tax Procedure Code (CPPT) and the documentary evidence attached to the case file, the above-listed facts are considered proven, with relevance to the decision.

III. LAW

The main issue that arises in the present case comes down to determining what is the taxable property value (TPV) relevant for the purposes of applying item 28 and 28.1 of the General Table of Stamp Duty (GTSD) concerning the residential urban property constituted under a regime of vertical ownership, which integrates floors or units susceptible to independent use, identified above.

To this end, the Petitioner alleges in its petition for arbitral pronouncement the following:

  1. The Petitioner requests that the Stamp Duty assessment act be declared illegal, resulting from item No. 28.1 of the GTSD, as it was applied by the TA in the present case. In fact,

  2. The TA understands that, for a property in vertical ownership, the rule contained in item 28 of the GTSD determines that the criterion for determining its incidence is the global TPV of the property, regardless of whether it is composed of units intended for residential use of independent use.

  3. The Petitioner understands that the property value relevant for the purposes of applying item 28.1 of the GTSD for properties in vertical ownership and with residential use, composed of floors or units with independent use and covered parking, is not the corresponding sum of the taxable property value of the different floors or units, that is, the global property value, but rather the TPV attributed individually to each of those floors or units.

  4. In the absence of qualification by that legal rule of the concept of property, the Petitioner considers it subsidiarily applicable, pursuant to Article 67, No. 2 of the Stamp Duty Code, the concept of property established by the Municipal Property Tax Code;

  5. The Municipal Property Tax Code deems as urban property any and every part of urban property susceptible to independent use, whether directly for the owner's residence or for rental, subjecting it to a taxation regime for purposes of Municipal Property Tax identical to that of horizontal ownership.

  6. In considering as distinct urban properties the parts of the property in question, notwithstanding their economic independence, the tax administration acted, not in accordance with a criterion of legality, but in accordance with a criterion of opportunity, ignoring the concept of urban property that results from the Municipal Property Tax Code;

  7. The interpretation of the TA underlying the Stamp Duty assessment act sub judice, according to which the taxable property value for purposes of that item 28.1 is the global taxable property value and not the taxable property value of each part susceptible to independent use, violates, moreover, in addition to the principle of legality, the principle of equality and its logical corollary of taxation according to contributive capacity and the principle of the prevalence of material truth over formal reality, in accordance with the principle of interpretation in conformity with the Constitution.

For its part, the TA alleges, in summary, the following:

  1. For a property not constituted under a regime of horizontal ownership, the criterion for determining the incidence of stamp duty is the global property value of the fractions and other units intended for residential use;

  2. In the Stamp Duty Code there is no definition of the concepts of urban property, therefore the provisions of the Municipal Property Tax Code must be applied to determine any possible subject matter to Stamp Duty;

  3. Article 2, No. 1 of the Municipal Property Tax Code defines the concept of property, with No. 4 of the same article excepting autonomous fractions of properties constituted under a regime of horizontal ownership, which it considers, exceptionally, as properties;

  4. By contrast, where a property is constituted in full ownership with parts and units susceptible to independent use, it is the property as a whole, and not each of those parts, that integrates the concept of "property," for purposes of Municipal Property Tax and Stamp Duty, by referral to Article 1, No. 6 of the Stamp Duty Code;

  5. The Petitioner, for purposes of Municipal Property Tax and also Stamp Duty, by virtue of the wording of the aforementioned item, is not the owner of autonomous fractions, but rather of a single property;

  6. Accordingly, no error is recognized in the factual or legal assumptions in which the tax assessment acts of the disputed tax may have incurred and, consequently, the right of the taxpayer to payment of indemnity interest provided for in Article 43 of the General Tax Law in case of error attributable to the services is not recognized.

Given the foregoing, regarding the position of the Parties and the arguments presented, to determine whether the Stamp Duty assessment act sub judice is illegal or not, it will be necessary to verify what interpretation should be made of item 28 and 28.1 of the GTSD, namely, whether the TPV on which the Stamp Duty rate should be levied should be the corresponding sum of each floor or unit susceptible to independent use or the TPV attributed individually to each of those floors or units, in the manner that occurs with properties under a regime of horizontal ownership.

Let us see what should be understood.

It follows from Article 11 of the General Tax Law (GTL) that the interpretation of tax law must be carried out in accordance with general principles of interpretation.

The general principles of interpretation are established in Article 9 of the Civil Code (CC), as follows:

"1. Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was drafted, and the specific conditions of the time in which it is applied.

  1. However, the interpreter cannot consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In fixing the meaning and scope of the law, the interpreter shall presume that the legislator established the most correct solutions and knew how to express his intent in adequate terms."

Taking into account the rules of interpretation of the Law, it is important to note that Law No. 55-A/2012, of 29 October, added item 28 and 28.1 to the GTSD, creating the Stamp Duty rate on high-value urban properties.

The creation of this new tax fact occurred in the context of economic crisis and serious public finance crisis, with the purpose of increasing the State's tax revenues, through the taxation of those who reveal greater indicators of wealth.

The special Stamp Duty rate on properties valued above €1,000,000.00, also known as the "luxury tax," aimed to ensure the distribution of sacrifices to all and not only to those who live from the income of their work.

Under these circumstances, item 28 and 28.1 established the incidence of Stamp Duty in the following terms:

"Ownership, usufruct, or surface right of urban properties whose taxable property value contained in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than €1,000,000 – on the taxable property value used for the purpose of Municipal Property Tax:

28.1 – For residential property or for land for construction whose construction, authorized or planned, is for residential use, in accordance with the provisions of the Municipal Property Tax Code... 1%."

It results, therefore, from the letter of the law that the rate provided for in item 28.1 is applicable to the ownership right over properties with residential use, whose TPV used for the purpose of Municipal Property Tax is equal to or greater than €1,000,000.

In accordance with the provision in Article 1, No. 6 of the Stamp Duty Code, "For purposes of this Code, the concept of property is the one defined in the Municipal Property Tax Code (MPTC)."

For its part, the Municipal Property Tax Code determines in its Article 2 the following:

Concept of Property

"1 - For purposes of this Code, property is any fraction of territory, encompassing waters, plantations, buildings, and constructions of any nature therein incorporated or installed, with a character of permanence, provided that it is part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the aforementioned circumstances, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of a diverse 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 in the same location for a period exceeding one year.

4 - For purposes of this tax, each autonomous fraction, in the regime of horizontal ownership, is considered as constituting a property."

To the extent that the property in question (hereinafter Property) is, in accordance with the provisions of Article 2 of the Municipal Property Tax Code, a property, it is literally covered by item 28 and 28.1.

In fact, the law does not distinguish, at any point, between property in horizontal ownership and property in vertical ownership, with No. 4 of Article 2 of the Municipal Property Tax Code merely establishing that, in the regime of horizontal ownership, each autonomous fraction is considered a property.

From what is stated in No. 4 of Article 2, it does not result, contrary to what the Respondent argued in the response presented, that only the autonomous fractions of property in a regime of horizontal ownership are considered properties.

Notwithstanding, the special Stamp Duty rate established in the item in question applies only if the Property constitutes residential property, whose TPV contained in the register, in accordance with the Municipal Property Tax Code, is equal to or greater than €1,000,000.

Since the Stamp Duty Code does not establish what is meant by "residential," by virtue of the provision in No. 2 of Article 67 of said Code, the rules provided for in the Municipal Property Tax Code are also applicable here, namely those established in Articles 6 and 41 of that Code.

From the analysis of said rules, it follows that the Property in question is covered by item 28.1, as urban property with residential use.

It remains, therefore, to ascertain whether the TPV contained in the register of the Property, in accordance with the Municipal Property Tax Code, is equal to or greater than €1,000,000.

Now, as follows from the letter of the Law, the TPV of the Property shall be that which is used for purposes of Municipal Property Tax.

To this end, it is determined in No. 1 of Article 7 of the Municipal Property Tax Code, applicable ex vi of No. 7 of Article 23 of the Stamp Duty Code, that "The taxable property value of properties is determined in accordance with the present Code."

For its part, in Nos. 2 and 3 of Article 7 of the Municipal Property Tax Code, the rules for determining the TPV of properties with two or more classifications are established.

Since the rate provided for in item 28 and 28.1 of the GTSD applies only to properties with residential use, the rules established in Nos. 2 and 3 of Article 7 of the Municipal Property Tax Code are not applicable to the determination of the TPV relevant within the scope of said item.

In fact, the TPV of properties with residential use, provided for in item 28 and 28.1, must be determined taking into account No. 3 of Article 12 of the Municipal Property Tax Code, according to which:

"Each floor or part of a property susceptible to independent use is considered separately in the property register entry, which also discriminates its respective taxable property value."

Thus, taking into account that the legislator does not give any relevance to the fact that the property is constituted under a regime of vertical ownership, what is relevant is the material truth underlying its existence as urban property and its use.

In fact, there is no rule in the Municipal Property Tax Code that permits the conclusion that the TPV of property in a regime of vertical ownership should be obtained by summing the TPV that was assigned separately to the parts that constitute it (See, among others, the arbitral decisions rendered in Case 50/2013-T, 131/2013-T, 177/2014-T, 396/2014-T).

Taking into account that the incidence rules are subject to the principle of tax legality (See Article 103 of the Constitution of the Portuguese Republic (CPR) and Article 8 of the GTL), it appears that there is no legal basis for the assessment of Stamp Duty based on the sum of the TPV of each one of the parts of the Property.

Since the incidence rules of taxes must be interpreted in their exact terms, without recourse to analogy, rendering prevalent the certainty and security in their application (See Ruling of the Central Administrative Court of the South, rendered in the scope of case 7648/14, of 10.07.2014), the TA cannot carry out an assessment operation based on a rule of incidence that does not expressly provide for the tax base in the terms assessed.

For this reason, it was also recently decided by the Supreme Administrative Court, in Ruling No. 047/15, of 9.09.2015, that "II – Where a property is constituted in vertical ownership, the incidence of Stamp Duty must be determined, not by the TPV resulting from the sum of the TPV of all units or floors susceptible to independent use (individualized in the property register entry), but by the TPV attributed to each of those units or floors intended for residential use."

It is understood, thus, that there is no legal basis that permits the TA to add the taxable property values of the floors or parts of property susceptible to independent use, so as to reach the eligible taxation threshold of €1,000,000 provided for in item 28.1 of the GTSD.

In view of the foregoing, since none of the floors, susceptible to independent use of the Property, has a taxable property value exceeding €1,000,000, there is no basis for the incidence of the rate provided for in item 28.1 of the GTSD.

As a consequence, the annulment of the Stamp Duty assessment act sub judice is required, and recognition of the Petitioner's right to indemnity interest on the Stamp Duty installments already paid, since the illegality of the assessment act is attributable to error of the Respondent, in accordance with the provisions of Article 43 of the GTL.

IV. DECISION

For these reasons, this Arbitral Tribunal decides:

A) To find the petition for annulment of the Stamp Duty assessment act concerning the urban property registered in the urban Property Register of the parish of ... under No. ..., relating to the year 2014 to be entirely well-founded and, as a consequence, to annul the collection notices issued;

B) To order the Tax and Customs Authority to refund to the Petitioner the amount of tax paid, plus indemnity interest;

C) To order the Respondent to pay the costs of the present proceedings, as the unsuccessful party.

V. VALUE OF THE CASE

In accordance with the provision in Article 306, No. 2 of the Code of Civil Procedure, 97-A, No. 1 a) of the Tax Procedure Code (CPPT) and Article 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the petition is fixed at €12,665.40.

VI. COSTS

In accordance with the provisions of Articles 12, No. 2 and 22, No. 4, both of the LFAT, and Article 4, No. 4 of the Regulation of Costs of Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €918.00, in accordance with Table I of the aforementioned Regulation, to be borne by the Respondent.

Notify.

Lisbon, 12 November 2015

The Arbitrator

Magda Feliciano

(The text of this decision was prepared by computer, in accordance with Article 131, No. 5, of the Code of Civil Procedure, applicable by referral to Article 29, No. 1, paragraph e) of Decree-Law No. 10/2011, of 20 January (LFAT), and its drafting is governed by the orthography prior to the Orthographic Agreement of 1990.)

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the Tabela Geral do Imposto do Selo apply to vertical property (propriedade vertical) when individual units are valued below €1,000,000?
Yes, Verba 28.1 of the TGIS can apply to vertical property (propriedade vertical) even when individual units are valued below €1,000,000, if the Tax Authority's interpretation prevails. The key dispute is whether the threshold applies to the global taxable property value of all residential units combined or to each independent unit separately. The Tax Authority argued that for properties not constituted under horizontal ownership regime, the criterion is the aggregate taxable value of all fractions and residential units. Under this interpretation, if the total value exceeds €1,000,000, Stamp Duty applies regardless of individual unit values. The taxpayer contested this, arguing each independent unit should be assessed separately based on Municipal Property Tax Code principles.
How is the taxable value (valor patrimonial tributário) determined for Stamp Tax purposes on a property with multiple independent units?
The taxable value (valor patrimonial tributário) for Stamp Tax purposes on properties with multiple independent units is determined differently depending on the property ownership structure. For horizontal property (propriedade horizontal), each autonomous fraction is treated as a separate property under Article 2(4) of the Municipal Property Tax Code. For vertical property or full ownership with independent units, the Tax Authority's position is that the global taxable value—the sum of all residential fractions and units—determines Stamp Duty incidence under Item 28.1 TGIS. The Stamp Duty Code lacks its own definition of 'property,' so Article 67(2) requires subsidiarily applying Municipal Property Tax Code concepts. The dispute centers on whether independent units in vertical ownership should be treated like horizontal ownership fractions (separately) or as a single property (globally).
Can a taxpayer challenge an Imposto do Selo assessment through CAAD tax arbitration under Decreto-Lei 10/2011?
Yes, taxpayers can challenge Imposto do Selo (Stamp Tax) assessments through CAAD tax arbitration under Decreto-Lei 10/2011 (Legal Framework for Arbitration in Tax Matters - RJAT). Article 2(1)(a) of the RJAT grants arbitral tribunals jurisdiction over disputes concerning the legality of tax acts, including Stamp Duty assessments. The taxpayer filed a petition for constitution of a singular Arbitral Tribunal under Articles 2 and 10 RJAT. The CAAD President accepted the petition, the tribunal was constituted, and the Tax Authority submitted its response. This arbitration route provides an alternative to traditional administrative and judicial appeals, allowing faster resolution of tax disputes. The tribunal confirmed it was regularly constituted and materially competent to decide the Stamp Duty legality challenge.
What is the distinction between a single property article and independent units for Stamp Tax liability under Verba 28.1?
The distinction between a single property article and independent units for Stamp Tax liability under Verba 28.1 is central to this dispute. According to the Tax Authority, when property is constituted in full ownership (propriedade plena) with parts susceptible to independent use—but not under horizontal ownership regime—it remains a single 'property' for Municipal Property Tax and Stamp Duty purposes under Article 2 of the Municipal Property Tax Code. Each independent unit is not considered a separate property unless constituted as an autonomous fraction under horizontal ownership (Article 2(4) CIMT). Therefore, the Stamp Duty threshold of €1,000,000 applies to the aggregate taxable value. The taxpayer argued that independent residential units should be treated as distinct properties since they have separate IMI assessments and are susceptible to independent use, thus each unit's individual value should determine Stamp Duty applicability.
What procedural steps must be followed to contest a Stamp Tax liquidation before the CAAD Arbitral Tribunal?
To contest a Stamp Tax liquidation before the CAAD Arbitral Tribunal, taxpayers must follow these procedural steps: (1) File a petition for constitution of an Arbitral Tribunal under Articles 2 and 10 of Decreto-Lei 10/2011, identifying the contested assessment act and amount; (2) The CAAD President reviews and accepts the petition; (3) The Tax Authority is automatically notified and given opportunity to respond; (4) The Arbitral Tribunal is constituted according to Article 11 RJAT (singular or collective tribunal); (5) The Tax Authority submits its response contesting or accepting the petition's merits; (6) Parties may waive the Article 18 meeting and final arguments depending on case complexity; (7) The tribunal examines jurisdiction, legitimacy, and any preliminary issues before deciding on merits. In this case, the taxpayer paid both installments under protest before filing arbitration to preserve rights while contesting the assessment's legality.