Process: 462/2014-T

Date: October 10, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This 2014 CAAD arbitration case addresses whether Portugal's Tax Authority (AT) can aggregate the taxable property values (VPT) of individual residential units within a vertical property building to determine Stamp Tax liability under Item 28.1 of the General Stamp Tax Table (TGIS). The claimant, A SA, challenged Stamp Tax assessments totaling €43,155.60 for 2013 relating to three multi-unit residential buildings. The AT aggregated the VPT of all units in each building to exceed the €1,000,000 threshold triggering Stamp Tax under Item 28.1, despite no individual unit reaching this threshold. The claimant argued this interpretation violates the legal scope of Item 28.1, contending that each autonomous unit should be assessed individually based on its own VPT, consistent with Municipal Property Tax (IMI) treatment and the subsidiary application of the IMI Code to Stamp Tax matters. Additionally, the claimant raised constitutional challenges under Articles 13 and 104(3) of the Portuguese Constitution, arguing the AT's aggregation method creates unequal treatment between vertical property owners (whose units are aggregated) and those owning separate properties (assessed individually). The AT defended its position by asserting that while IMI assesses each independent unit separately, Stamp Tax legislation requires specific adaptations, treating the entire building in vertical ownership as a single taxable property. The arbitral tribunal was constituted under the Legal Regime for Arbitration in Tax Matters (RJAT), with parties waiving the oral hearing. The case references CAAD precedent 32/2013-T suggesting similar aggregation interpretations may violate constitutional equality principles.

Full Decision

THE PARTIES

Claimant: A SA, NIPC PT …, with registered office at ….

Respondent: Tax and Customs Authority (AT).

DECISION

REPORT

a) On 02-07-2014, A SA, NIPC PT …, submitted to CAAD a request requesting, under the Legal Regime for Arbitration in Tax Matters (RJAT), the constitution of a singular arbitral tribunal (TAS).

b) The request is signed by a lawyer whose power of attorney has been attached.

THE REQUEST

c) The Claimant petitions for the annulment of the assessment acts of Stamp Duty (IS) contained in the following documents:

ü 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6;

ü 2014 ...03, 2014 ...06, 2014 ...09, 2014 ...12, 2014 ...15, 2014 ...18, 2014 ...21, 2014 ...24, 2014 ...27, 2014 ...30, 2014 ...33, 2014 ...36, 2014 ...39, 2014 ...42;

ü 2014 ...822, 2014 ...825, 2014...828, 2014 ...831, 2014 ...834, 2014 ...837, 2014 ...840, 2014 ...843, 2014 ...846, 2014 ...849, 2014 ...852, 2014 ...855,

relating to the year 2013 and dated 17.03.2014, generating total taxes of 43 155.60 euros, with the first instalment in the total amount of 14 385.44 euros, having payment terms until 30.04.2014, relating to urban properties in full ownership with units or divisions capable of independent use, more specifically relating to the housing units that constitute them, namely:

ü Property located at …, in …, no. …, registered in the urban property matrix of the parish of …, municipality of …, under article … - CV D, CV E, R/C D, R/C E, 1º D, 1º E, 2º D, 2º E, 3º D, 3º E, 4º D, 4º E, 5º D and 5º E;

ü Property located at .., in ..., nos ..ª …C, registered in the urban property matrix of the parish of ..., municipality of ..., under article U-…º - 1º D, 1º E, 2º D, 2º E, 3º D, 3º E, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D and 7º E.

ü And property located at ..., in ..., no. 13 to 13B, registered in the urban property matrix of the parish of ..., municipality of ..., under article U-…º - 1º D, 1º E, 2º D, 2º E, 3º E, 4º D, 4º E, 5º D, 5 E, 6º D and 6º E.

d) It argues that the assessment acts are illegal due to violation of the scope of item 28.1 of the General Table of Stamp Duty (TGIS), inasmuch as the AT added the tax property values of the units in full ownership and none of them by itself has a TPV equal to or greater than 1 000 000.00 euros, and it argues that it should be the TPV of each unit and not their sum that is relevant for tax purposes.

e) And that the scope of the norm, in the interpretation put into practice by the AT, is unconstitutional due to violation of the principle of equality enshrined in article 13 of the Fundamental Law, as well as what is provided in article 104-3 of the Constitution of the Portuguese Republic (CRP).

f) It ends by petitioning for the annulment of the tax acts identified in c) and the condemnation of the AT to repay what was unduly paid, plus compensatory interest.

OF THE ARBITRAL TRIBUNAL

g) The request to constitute the TAS was accepted by the President of CAAD and automatically notified to the AT on 04.07.2014.

h) By the Deontological Council of CAAD, the signatory of this decision was appointed as arbitrator, and the parties were notified thereof on 20.08.2014.

i) Therefore, the Singular Arbitral Tribunal (TAS) has been, since 04.09.2014, duly constituted to examine and decide on the subject matter of this dispute.

j) All these acts are documented in the communication of constitution of the Singular Arbitral Tribunal dated 04.09.2014, which is hereby reproduced.

k) Since this proceeding raises questions entirely identical to those already raised in many other proceedings already decided at CAAD, the TAS, by order of 04.09.2014, invited the parties to pronounce themselves on the waiver of the meeting referred to in article 18 of RJAT and likewise on the production of submissions.

l) In its response, the AT proposed not holding the parties' meeting and likewise not producing submissions. The Claimant, by request of 30.09.2014, stated that it did not object to not holding the meeting and likewise to not producing submissions.

m) Therefore, by order of 02.10.2014, the TAS waived the holding of the parties' meeting and the production of additional submissions, having in that order scheduled the date of final decision for 10.10.2014.

n) By order of 03.10.2014, the TAS fixed the amount in dispute at 43 155.60 euros (in substitution of the amount indicated by the Claimant, which corresponded only to the first instalment of the disputed assessments), as this is the amount corresponding to the sum of the Stamp Duty collections whose annulment is raised in the request for decision.

PROCEDURAL REQUIREMENTS

o) Standing, capacity and representation - the parties have legal personality and capacity, are properly standing and are duly represented.

p) Contradictory procedure - the AT attached to the proceedings, on 26.09.2014, its response to the request for decision submitted by the Claimant. It did not attach the procedural file because it would certainly coincide with the documents attached by the Claimant together with the request for decision. All orders issued in the proceedings and all attached documents were notified to both parties.

q) Dilatory exceptions - the proceedings do not suffer from defects and the request for arbitral decision is timely since it was submitted within the period prescribed in subsection a) of no. 1 of article 10 of RJAT.

SUMMARY OF THE CLAIMANT'S POSITION

Regarding the possible illegality of the assessment acts due to non-conformity with the scope of item 28.1 of the TGIS

r) The Claimant understands that the tax property value (TPV) in the case under discussion, since it is a property in full ownership that comprises units or divisions with independent use, is not the sum of all those units or divisions, but the TPV of each one.

s) Expressing that when it comes to property in full ownership comprising units or divisions with independent use "the subjection to stamp duty is determined, not by the TPV of the properties, but by the TPV attributed to each one of those units or divisions capable of independent use".

t) It advocates that the taxable base of stamp duty of item 28.1 of the TGIS should be the same as that of the Municipal Property Tax (IMI), since the law determines the subsidiary application of the IMI Code with respect to matters not regulated in the Stamp Duty Code.

Regarding the possible unconstitutionality of the norm contained in item 28.1 of the TGIS, in the interpretation put into practice by the AT

u) The Claimant reproduces a part of the arbitral decision issued in CAAD Case 32/2013-T, concluding that the assessments of Stamp Duty, in the implicit interpretation put into practice by the AT, of items 28 and 28.1 of the TGIS (in which the TPVs of the units are added to determine the threshold for taxation of 1 000 000.00 euros or more), are not in conformity with the principle of equality enshrined in article 13 of the CRP, as well as with what is provided in no. 3 of article 104 of the CRP.

SUMMARY OF THE TAX AND CUSTOMS AUTHORITY'S POSITION

Regarding the possible illegality of the assessment acts due to non-conformity with the scope of item 28.1 of the TGIS.

v) The AT advocates that "although the assessment of Stamp Duty, under the conditions provided in item 28.1 of the TGIS, is carried out in accordance with the rules of the Municipal Property Tax Code (CIMI), the fact is that the legislator makes exceptions for those aspects that require proper adaptations".

w) As is the case with properties in full ownership, even with units or divisions capable of independent use, for although the Municipal Property Tax is assessed in relation to each part capable of independent use",

x) For the purposes of Stamp Duty, the property as a whole is relevant, as the units capable of independent use are not considered as property, but only autonomous fractions under the horizontal property regime, as provided in article 2-4 of the CIMI"

Regarding the possible unconstitutionality of the norm contained in item 28.1 of the TGIS, in the interpretation put into practice by the AT

y) There is no violation of the principle of equality because there is no discrimination between properties in horizontal ownership and properties in full ownership with units or divisions capable of independent use, or between properties with residential use and properties with other uses.

z) Since item 28.1 of the TGIS is a general and abstract norm, applicable indiscriminately to the cases provided for therein.

aa) The different valuation and taxation of a property in full ownership compared to a property in horizontal ownership results from the different legal effects inherent to these two figures.

bb) These are distinct realities, valued by the legislator in different ways.

cc) Arguing for the legality of the tax acts because they constitute a correct application of the law to the facts.

II - ISSUES FOR THE TRIBUNAL TO RESOLVE

On this specific matter, CAAD has already pronounced itself in several decisions in which the substantive issue is the same, namely, there is a discussion about the scope of the provision of items 28 and 28-1 of the TGIS.

The limit of interpretation is the letter, the text of the norm. There then remains the "task of interconnection and evaluation that escapes literal interpretation".

Proceeding from the principle that every norm has a provision (and a ruling), the issue here is to determine, by delimiting, whether the scope of the norm, as it is drafted – in its provision - (ownership of urban properties … with residential use … whose tax property value recorded in the matrix, in accordance with the IMI Code, is equal to or greater than 1 000 000.00 euros – based on the tax property value used for the purposes of the Municipal Property Tax), permits or not the understanding that as to properties "with residential use" in vertical ownership, with units or divisions capable of independent use, held by an entity, the TPV on which the rate will apply should be their sum or should the individual TPV of each unit or division capable of independent use be considered, similar to what occurs with properties in horizontal ownership.

In essence, what is at issue is the adoption of an appropriate reading of the scope of the provision of items 28 and 28.1 of the TGIS, in light of what no. 7 of article 23 of the Stamp Duty Code (CIS) says regarding the determination of the taxable matter and subsequent operation of assessment of the tax:

"Where the tax is due for the situations provided in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the IMI Code."

As we have already stated in other decisions, regarding the interpretation of tax norms there is a rule, although it may be considered residual, quite specific that is set forth in no. 3 of article 11 of the General Tax Law (LGT): "if the doubt persists about the meaning of the scope norms to be applied, the economic substance of the tax facts should be considered". This is a criterion to be used in the context of hermeneutics of interpretation of the norms.

We do not advocate for an "economic interpretation" of tax law norms.

But it seems to us that one may also appeal to the analysis of the "economic substance of the tax facts" to properly concretize the "necessary adaptations of the rules contained in the IMI Code", with a view to resolving the issue posed.

We are thus, only and solely, within the scope of the activity of interpretation and application of norms, that is, in the task of delimiting the legal-factual situations that should be considered as covered by the provision of the scope of this new tax and which results from the combination of items 28 and 28-1 of the TGIS, and in this case what should be considered acceptable at the level of the "necessary adaptations of the rules contained in the IMI Code", following the command of no. 7 of article 23 of the CIS.

The issue of conformity of the provision of the scope of the norm, vis-à-vis the constitutional text, will only arise if the interpreter concludes that a certain and unequivocal reading of the law – correctly applied to a specific case - violates one or more constitutional principles with such intensity that the legislative option adopted could not have been, taking into account that the AT cannot, based on possible unconstitutionalities of norms not declared by the courts, fail to apply the law, in the sense it considers most assertive.

It seems to us that the central issue to which the TAS should respond is the following:

Do items 28 and 28-1 of the TGIS as norms of tax scope, as they are drafted – in their provision - (ownership of urban properties … with residential use … whose tax property value recorded in the matrix, in accordance with the IMI Code, is equal to or greater than 1 000 000.00 euros – based on the tax property value used for the purposes of the Municipal Property Tax), permit or not the understanding that as to properties "with residential use" in vertical ownership, with units or divisions capable of independent use, held by an entity, the TPV on which the rate will apply should be their sum or should the individual TPV of each unit or division capable of independent use be considered, similar to what occurs with properties in horizontal ownership?

The answer to this issue will determine whether the claim is well-founded or not, and if the answer is not in accordance with what has been learnedly argued by the AT, the TAS would not need to pronounce itself on the remaining grounds invoked by the Claimant in the request for decision, with possible reflection on the validity of the assessment acts now in question.

III. PROVEN AND UNPROVEN FACTUAL MATTERS. GROUNDS

With relevance to the decision to be adopted, these are the facts considered proven, indicating the respective documents (proof by documents) and/or the articles of the Claimant's request and the AT's response regarding facts admitted by agreement, as grounds:

Proven Facts

  1. The claimant, A SA, NIPC PT …, is registered as the holder of the right of ownership of urban properties in full ownership regime, with units or divisions capable of independent use, more specifically relating to the housing units that constitute them, namely:

Property located at ..., in ..., no. 50, registered in the urban property matrix of the parish of ..., municipality of ..., under article U-…º - CV D, CV E, R/C D, R/C E, 1º D, 1º E, 2º D, 2º E, 3º D, 3º E, 4º D, 4º E, 5º D and 5º E;

Property located at ..., in ..., nos 89ª 89C, registered in the urban property matrix of the parish of ..., municipality of ..., under article U-…º - 1º D, 1º E, 2º D, 2º E, 3º D, 3º E, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D and 7º E. And

Property located at ..., in ..., no. 13 to 13B, registered in the urban property matrix of the parish of ..., municipality of ..., under article U-…º - 1º D, 1º E, 2º D, 2º E, 3º E, 4º D, 4º E, 5º D, 5 E, 6º D and 6º E – Documents nos 41 to 43 attached with the request for decision (urban property records), article 1 of the request for decision and article 2 of the AT's response;

  1. The Claimant was notified of the Stamp Duty assessments relating to the year 2013, dated 17.03.2014, generating total taxes of 43 155.60 euros, with the first instalments in the total amount of 14 385.44 euros, having payment terms until 30.04.2014, according to the documents referred to in c) of the Report, which determines the following tax collections for each unit or division capable of independent use:

Property located at ..., in ..., no. 50, registered in the urban property matrix of the parish of ..., municipality of ...

Assessment Notice Matrix Article Tax Property Value Tax Collection in Euros
2014 ...7 ...º 1º D 104 320.00 1 043.20
2014 ...0 ...º 1º E 104 320.00 1 043.20
2014 ...3 ...º 2º D 103 610.00 1 036.10
2014 ...6 ...º 2º E 103 610.00 1 036.10
2014 ...9 ...º 3º D 104 630.00 1 046.30
2014 ...2 ...º 3º E 104 630.00 1 046.30
2014 ...5 ...º 4º D 105 640.00 1 056.40
2014 ...8 ...º 4º E 105 640.00 1 056.40
2014 ...1 ...º 5º D 106 590.00 1 065.90
2014 ...4 ...º 5º E 106 590.00 1 065.90
2014 ...7 ...º CV D 62 450.00 624.50
2014 ...0 ...º CV E 62 450.00 624.50
2014 ...3 ...º RC D 98 910.00 989.10
2014 ...6 ...º RC E 98 910.00 989.10

Property located at ..., in ..., nos 89ª 89C, registered in the urban property matrix of the parish of ..., municipality of ...

Assessment Notice Matrix Article Tax Property Value Tax Collection in Euros
2014 ...03 ...º 1 D 104 020.00 1 040.20
2014 ...06 ...º 1 E 117 340.00 1 173.40
2014 ...09 ...º 2 D 100 830.00 1 008.30
2014 ...12 ...º 2 E 116 210.00 1 162.10
2014 ...15 ...º 3 D 104 020.00 1 040.20
2014 ...18 ...º 3 E 117 340.00 1 173.40
2014 ...21 ...º 4 D 104 020.00 1 040.20
2014 ...24 ...º 4 E 117 340.00 1 173.40
2014 ...27 ...º 5 D 107 900.00 1 079.00
2014 ...30 ...º 5 E 118 480.00 1 184.80
2014 ...33 ...º 6 D 105 030.00 1 050.30
2014 ...36 ...º 6 E 118 480.00 1 184.80
2014 ...39 ...º RC D 105 030.00 1 050.30
2014 ...42 ...º RC E 118 480.00 1 184.80

Property located at ..., in ..., no. 13 to 13B, registered in the urban property matrix of the parish of ..., municipality of ...

Assessment Notice Matrix Article Tax Property Value Tax Collection in Euros
2014 ...822 ...º 1 D 126 300.00 1 263.00
2014 ...825 ...º 1 E 120 370.00 1 203.70
2014 ...828 ...º 2 D 126 300.00 1 263.00
2014 ...831 ...º 2 E 120 370.00 1 203.70
2014 ...834 ...º 3 D 127 560.00 1 275.60
2014 ...837 ...º 3 E 121 570.00 1 215.70
2014 ...840 ...º 4 D 127 560.00 1 275.60
2014 ...843 ...º 4 E 121 570.00 1 215.70
2014 ...846 ...º 5 D 128 820.00 1 288.20
2014 ...849 ...º 5 E 122 780.00 1 227.80
2014 ...852 ...º 6 E 89 560.00 895.60
2014 ...855 ...º 6 D 55 980.00 559.80

According to documents nos 1 to 40 attached with the request for decision, preamble of the request for decision and article 2 of the AT's response.

  1. The units or divisions capable of independent use subject to taxation, with residential use, have TPV ranging between 55 980.00 euros (the 6th unit D of article ...º) and 128 820.00 euros (the 5th unit D of article ...º), in a total of 1 423 190.00 euros (the sum of the TPVs of the units of article ...º), of 2 193 040.00 (the sum of the TPVs of the units of article ...º) and of 2 108 830.00 (the sum of the TPVs of the units of article ...º) – Documents nos 41 to 43 attached with the request for decision and articles 6, 13 and 20 of the request for decision.

  2. In the assessment notices, the AT stated "Tax Property Value of the total property subject to tax: 1 372 000.00" euros as to the sum of the TPV of the units with residential use of the matrix article ...º; "1 554 520.00" euros as to the sum of the TPVs of the units with residential use of the matrix article ...º; "1 388 740.00" euros as to the sum of the TPVs of the units with residential use of the matrix article ...º - Documents no. 1 to 40 attached with the request for decision;

  3. This tax was assessed based on item 28.1 of the TGIS, as redrafted by Law 55-A/2012, of 29 October - Documents no. 1 to 40 attached with the request for decision.

  4. The Claimant paid on 29.04.2014 the 1st instalment relating to the disputed assessments, in the amount of 14 385.44 euros – Documents nos 44 to 64 attached with the request for decision.

Unproven Facts

There is no other alleged factuality that is relevant to the proper composition of the dispute.

The agreed factual matters result from the attached documents, whose contents and evidentiary valuations did not merit disagreement between the parties.

IV. EXAMINATION OF THE ISSUES FOR THE TRIBUNAL TO RESOLVE

Do items 28 and 28-1 of the TGIS as norms of tax scope, as they are drafted – in their provision - (ownership of urban properties … with residential use … whose tax property value recorded in the matrix, in accordance with the IMI Code, is equal to or greater than 1 000 000.00 euros – based on the tax property value used for the purposes of the Municipal Property Tax), permit or not the understanding that as to properties "with residential use" in vertical ownership, with units or divisions capable of independent use, held by an entity, the TPV on which the rate will apply should be their sum or should the individual TPV of each unit or division capable of independent use be considered, similar to what occurs with properties in horizontal ownership?

The subjection to stamp duty of properties with residential use resulted from the addition of items 28, 28-1 and 28-2 of the General Table of Stamp Duty, carried out by article 4 of Law 55-A/2012, of 29/10, which typified the following tax facts:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax property value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1 000 000 – based on the tax property value used for the purposes of the Municipal Property Tax:

28-1 – For property with residential use - 1%;

28-2 – For property, when the taxpayers other than natural persons are residents in a country, territory or region subject to a clearly more favourable tax regime, listed in a decree approved by the Minister of Finance – 7.5%."

With relevance to the case, the following are mentioned:

· No. 7 of article 23 of the CIS regarding the assessment of the tax: "Where the tax is due for the situations provided in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the IMI Code."

· No. 4 of article 2 of the CIMI: "For the purposes of this tax, each autonomous fraction, in the horizontal property regime, is considered as constituting a property."

· No. 3 of article 12 of the CIMI: "Each unit or part of a property capable of independent use is considered separately in the matrix registration, which also determines its respective tax property value".

It seems to us that the answer to the issue posed in this request for decision relates to the reading made by the AT of no. 7 of article 23 of the CIS.

The AT considered, in order to proceed with the addition of the TPVs of the units or divisions/parts of urban property, in order to determine whether the minimum TPV threshold of 1 000 000.00 euros is achievable, for each urban property, that the units or divisions capable of independent use are not by formal legal definition considered urban properties.

And it considers that this addition of TPV is required because the law refers to proceeding with "necessary adaptations" of the "rules of the IMI Code" (no. 7 of article 23 of the CIS).

That is what results from what is alleged in the AT's response in article 6 of the response. But is this reading of the law correct?

In truth, although items 28 and 28.1 speak of "urban properties" and "per property" and no. 7 of article 23 of the CIS refers to "the tax is assessed annually, in relation to each urban property", what is relevant here is that, at the level of determining the eligible taxable matter and assessment of this tax, "… with the necessary adaptations, the rules contained in the IMI Code" are applied as referred to in the aforementioned no. 7 of article 23 of the IMI Code. But, obviously, "adaptations" provided they are necessary.

What happened – as to urban properties with residential use, in vertical ownership, with units or divisions capable of independent use – was that the AT made the relevant "adaptation" in the operations for assessing Stamp Duty, which was to add the TPVs of each unit or independent division dedicated to residential purposes (excluding the TPVs of units or divisions dedicated to other purposes), creating a new legal reality, without legal support, which is a total TPV of urban properties in vertical ownership, with residential use.

This operation of the tax process (scope – determination of taxable matter – assessment – payment) would violate the literal element of the scope norm, item 28 of the TGIS, which refers to this tax applying to "the tax property value used for the purposes of the Municipal Property Tax".

That is, the AT, in the operation of determining the taxable matter and subsequent assessment of the Stamp Duty of items 28 and 28.1 of the TGIS (operation of applying a rate to the taxable matter), as to urban properties with residential use, in vertical ownership, with units or divisions capable of independent use, should not consider any tax property value other than what results exclusively from no. 3 of article 12 of the CIMI. Either for the Municipal Property Tax, or for this Stamp Duty.

And for the reason that urban properties in vertical ownership, in their entirety, do not have TPV. The law determines in these cases that the TPV is attributed to each unit or part of the property separately.

The above conclusion will not be affected by the fact that in the property records of this type of property there is indicated the "total property value" which corresponds to the sum of the TPVs of all units, regardless of their use. What is relevant for this taxation is not the "total property value", it is only the "tax property value" of urban properties with residential use.

Creating a new legal reality, in order to find a new way of determining the taxable matter (a TPV for units or parts of property capable of independent use, with residential use, separated from the TPV of others with different purposes), does not constitute having support in the law in the "necessary adaptations" referred to in no. 7 of article 23 of the CIS.

Furthermore, there is, it is perceived, non-conformity with the literal element of the final part of the scope norm (item 28 of the TGIS) which refers to the tax applying to "the tax property value used for the purposes of the Municipal Property Tax" and therefore, should not apply to the sum of tax property values of properties, parts of properties or units, no legal support being seen for the operation of adding tax property values of units or parts of property capable of independent use, with residential use, excluding the TPVs of others with different purposes, so as to reach the eligible taxation threshold of 1 000 000.00 euros or more.

That is, it does not conform to the law, the creation of a new TPV for purposes of taxation in Stamp Duty regarding item 28 of the TGIS, as results from the insertion in all collection notices of "property value – total property subject to tax" – section 4 of the agreed factual matter.

What is meant is that when no. 7 of article 23 refers to "…the tax is assessed annually, in relation to each urban property", this expression "each urban property" will intend to encompass, in light of the interpretation and application principles of norms stated above, urban properties in horizontal ownership and units or parts of urban properties in properties in vertical ownership, provided they are dedicated to residential purposes, but always starting from a single tax base for all legal purposes: the tax property value used for the purposes of the Municipal Property Tax (final part of item 28 of the TGIS).

The issue does not need, in our view, to be raised at the level of violation of the Constitution, being sufficient, in compliance with what is referred to in no. 7 of article 23 of the CIS, to carry out a reading, "with the necessary adaptations of the rules of the IMI Code", which will be to consider that the expression "each urban property" encompasses not only units in horizontal ownership (which are urban properties ope legis) but also "units or parts of property capable of independent use" (no. 3 of article 12 of the CIMI).

If, for example, for the units that comprise the autonomous fractions of residential urban properties, in horizontal ownership (although they are by definition and "ope legis" urban properties), the TPVs are not added to determine the threshold of the TPV eligible for subjection to Stamp Duty (1 000 000.00 euros) of item 28 of the TGIS (operation of determining the taxable matter), why should this occur as to the "parts of property or units" of properties in vertical ownership?

In both cases, the same taxpayers' ability to contribute is manifested (their level of wealth in terms of real estate assets). It is the same "economic substance" analyzed from different angles.

In truth, it is the aforementioned norm, in its literalness, particularly the final part of item 28 of the TGIS, combined with no. 7 of article 23 of the CIS, that permits the conclusion, with the "necessary adaptations of the rules of the IMI Code", that the AT should not add the TPVs of the units or parts of the property identified above to find a new TPV relating to those dedicated to residential purposes, separated from the TPV of those dedicated to other purposes.

The Claimant argues, in essence, the non-conformity of the tax acts with tax law, alleging the non-conformity stated in subsection a) of article 99 of the Tax Procedure Code (CPPT): "erroneous characterization ... of tax facts".

In fact, with the grounds expressed above, the Stamp Duty assessments challenged, carried out in the manner in which they were, are not in harmony with the scope norm of items 28 and 28-1 of the TGIS, occurring, therefore, the illegality provided for in subsection a) of article 99 of the CPPT.

With the first ground of the claim formulated by the Claimant in the request for decision (section d) of the Report) being well-founded, it does not become necessary to examine the other ground (section e) of the Report), by manifest futility.

Request for Interest

In the legislative authorization on which the Government based itself to approve the RJAT, granted by article 124 of Law no. 3-B/2010, it is stated that "the arbitration process in tax matters should constitute an alternative procedural means to the judicial review process and to the action for the recognition of a right or legitimate interest in tax matters".

Although subsections a) and b) of no. 1 of article 2 of RJAT use the expression "declaration of illegality" to define the jurisdiction of the arbitral tribunals operating at CAAD and do not make reference to constitutive (annulling) and condemning decisions, it should be understood, in harmony with the said legislative authorization, that the powers are encompassed in their jurisdiction which in the review process are attributed to tax tribunals in relation to acts whose examination of legality falls within their jurisdiction.

Therefore, a condemnation of the tax administration in the payment of compensatory interest may be issued here.

Article 43 of the General Tax Law (LGT) "does nothing but establish an expedient and, so to speak, automatic means of indemnifying the injured party. Independently of any allegation and proof of damages suffered, he has the right to the indemnification established therein, translated into compensatory interest in the cases included in the provision (…)" Decision of the Supreme Administrative Court of 2-11-2006, case 604/06, available at www.dgsi.pt"

In the case at hand, the Claimant paid, at least, the sum of the first instalments relating to the assessments notified to it, for the year 2013, on 29.04.2014, in the total amount of 14 385.44 euros, therefore it has the right to compensatory interest counted from the date of payment, in whole or in part, of the tax assessments hereby annulled until the date of issue of the respective tax credit note, with the period for that payment counting from the beginning of the period for the spontaneous execution of this decision (article 61, nos 2 to 5, of the CPPT), at the rate determined in accordance with what is provided in no. 4 of article 43 of the LGT.

As a consequence of the above, the claims for annulment of the tax acts submitted by the Claimant to the Arbitral Tribunal are well-founded, since the Stamp Duty assessments carried out by the AT are not in conformity with the law, in the reading advocated above, including the claim for condemnation of the AT to repay the partial payments made and for payment of interest.

In fact, it results from the proven facts (section 3) of part III of this decision) that none of the units or parts of property has, on its own, a TPV that is equal to or greater than the taxation threshold indicated in item 28 of the TGIS (TPV equal to 1 000 000.00 euros).

V. DECISION

Based on the grounds set forth above, the following is decided:

  1. The claim of the Claimant is well-founded, and the following Stamp Duty assessments are annulled:

2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6;

2014 ...03, 2014 ...06, 2014 ...09, 2014 ...12, 2014 ...15, 2014 ...18, 2014 ...21, 2014 ...24, 2014 ...27, 2014 ...30, 2014 ...33, 2014 ...36, 2014 ...39, 2014 ...42; and

2014 ...822, 2014 ...825, 2014...828, 2014 ...831, 2014 ...834, 2014 ...837, 2014 ...840, 2014 ...843, 2014 ...846, 2014 ...849, 2014 ...852, 2014 ...855;

relating to the year 2013 and dated 17.03.2014, generating total taxes of 43 155.60 euros, relating to urban properties in full ownership with units or divisions capable of independent use, more specifically relating to the housing units that constitute them, namely:

Property located at ..., in ..., no. 50, registered in the urban property matrix of the parish of ..., municipality of ..., under article U-...º - CV D, CV E, R/C D, R/C E, 1º D, 1º E, 2º D, 2º E, 3º D, 3º E, 4º D, 4º E, 5º D and 5º E;

Property located at ..., in ..., nos 89ª 89C, registered in the urban property matrix of the parish of ..., municipality of ..., under article U-...º - 1º D, 1º E, 2º D, 2º E, 3º D, 3º E, 4º D, 4º E, 5º D, 5º E, 6º D, 6º E, 7º D and 7º E.

And property located at ..., in ..., no. 13 to 13B, registered in the urban property matrix of the parish of ..., municipality of ..., under article U-...º - 1º D, 1º E, 2º D, 2º E, 3º E, 4º D, 4º E, 5º D, 5 E, 6º D and 6º E;

condemning the AT to proceed with the refund of what has been paid.

  1. The claim for condemnation of the AT to pay compensatory interest to the Claimant is well-founded, with such interest to be counted from the date of payment of the Stamp Duty tax instalments, in whole or in part, until the date of issue of the respective tax credit note, with the period for that payment counting from the beginning of the period for the spontaneous execution of this decision (article 61, nos 2 to 5, of the CPPT), at the rate determined in accordance with what is provided in no. 4 of article 43 of the LGT.

Amount in dispute: in accordance with what is provided in article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (and subsection a) of no. 1 of article 97A of the CPPT), the amount in dispute for this case is set at 43 155.60 euros.

Costs: in accordance with what is provided in article 22, no. 4, of RJAT, the amount of costs is set at € 2 142.00, according to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the respondent.

Notify.

Lisbon, 10 October 2014

Singular Arbitral Tribunal,

Augusto Vieira

Text drawn up by computer in accordance with what is provided in article 138, no. 5, of the Code of Civil Procedure, applicable by remission of article 29 of RJAT.

The drafting of this decision follows the orthography prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Can the Portuguese Tax Authority aggregate the taxable asset values (VPT) of individual units in a vertical property building for Stamp Tax purposes under TGIS Item 28.1?
No, according to the claimant's interpretation supported by CAAD precedent, the Portuguese Tax Authority should not aggregate the individual taxable property values (VPT) of separate units in a vertical property building for Stamp Tax purposes under TGIS Item 28.1. Each autonomous unit or division capable of independent use should be assessed individually based on its own VPT. The Tax Authority's practice of adding together all unit values to reach the €1,000,000 threshold has been challenged as illegal and unconstitutional, violating both the scope of Item 28.1 and the principle of equality under Article 13 of the Portuguese Constitution. The proper interpretation treats each independent unit as a separate property for Stamp Tax assessment purposes, consistent with how Municipal Property Tax (IMI) operates.
What is the €1,000,000 threshold rule under Item 28.1 of the General Stamp Tax Table (TGIS) for residential properties?
Item 28.1 of the General Stamp Tax Table (TGIS) establishes that Stamp Tax applies annually to urban properties located in Portuguese territory with a taxable property value (valor patrimonial tributário/VPT) equal to or exceeding €1,000,000. This threshold serves as the trigger point for Stamp Tax liability on high-value residential real estate. The key dispute in this case involves whether, for buildings in vertical property ownership with multiple independent units, the €1,000,000 threshold should be assessed by aggregating all unit values together (the Tax Authority's position) or by evaluating each autonomous unit individually (the taxpayer's position). This distinction is critical because a building with multiple units each valued below €1,000,000 might collectively exceed this threshold when aggregated, potentially subjecting the owner to Stamp Tax that would not apply if units were assessed separately.
Is it constitutional to apply different Stamp Tax treatment to properties in vertical ownership versus horizontal ownership (propriedade vertical vs. horizontal)?
The constitutionality of different Stamp Tax treatment between vertical and horizontal property ownership is precisely the constitutional challenge raised in this case. The claimant argues that the Tax Authority's interpretation violates Articles 13 and 104(3) of the Portuguese Constitution by creating unequal treatment. Under the AT's aggregation approach, owners of vertical properties (buildings with multiple units under single ownership) face Stamp Tax liability when unit values are combined to exceed €1,000,000, while owners of the same number of separate properties (horizontal ownership) with identical individual values below €1,000,000 would face no Stamp Tax. This discriminatory treatment, without reasonable justification, allegedly breaches the constitutional principle of equality in taxation. CAAD precedent (Case 32/2013-T) referenced in this decision suggests such differential treatment may indeed be unconstitutional, favoring individual unit assessment regardless of ownership structure.
How does CAAD arbitration work for challenging Stamp Tax (Imposto de Selo) assessments on urban properties in Portugal?
CAAD (Centro de Arbitragem Administrativa) arbitration provides an alternative dispute resolution mechanism for challenging Portuguese tax assessments, including Stamp Tax on urban properties. Under the Legal Regime for Arbitration in Tax Matters (RJAT), taxpayers can request constitution of an arbitral tribunal (singular or collective) within the statutory deadline after receiving assessment notices. The process involves: (1) submitting a formal arbitration request with legal representation; (2) automatic notification to the Tax Authority; (3) appointment of arbitrator(s) by CAAD's Deontological Council; (4) constitution of the tribunal; (5) the Tax Authority's response; (6) optional parties' meeting and submissions (which can be waived by mutual agreement); and (7) final decision within established timeframes. In this case, the parties waived the oral hearing, streamlining the process. CAAD arbitration offers advantages including specialized tax expertise, faster resolution than judicial courts, and binding decisions subject to limited appeal grounds, making it an increasingly popular forum for resolving Portuguese tax disputes.
Are property owners entitled to refund and compensatory interest (juros indemnizatórios) when Stamp Tax liquidations on individual building units are annulled?
Yes, when Stamp Tax assessments are annulled through CAAD arbitration or judicial proceedings, property owners are entitled to both refund of amounts unduly paid and compensatory interest (juros indemnizatórios). This principle applies to Stamp Tax liquidations on individual building units that are determined to be illegal or unconstitutional. Compensatory interest compensates taxpayers for the State's use of funds that were wrongfully collected, calculated from the payment date until refund. The claimant in this case specifically requested both annulment of the contested Stamp Tax assessments totaling €43,155.60 and condemnation of the Tax Authority to repay what was unduly paid plus compensatory interest. This reflects the general Portuguese tax law principle that taxpayers should be made whole when tax authorities erroneously collect taxes, including compensation for the time value of money through interest payments on refunded amounts.