Process: 462/2016-T

Date: March 16, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration case addresses whether Stamp Tax under Verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS) applies to the aggregate property value or to each independent housing unit separately when a property is held under full ownership (propriedade total). The claimant, A... S.A., challenged 12 stamp tax assessments totaling €26,136.60 for 2015, arguing that their building contains 12 autonomous residential units, each with a taxable property value (VPT) below the €1,000,000 threshold established in Verba 28.1 TGIS. Despite the total combined VPT of €2,613,660, the claimant contended that Article 12(3) of the CIMI mandates separate consideration of each floor or unit capable of independent use in the property register. The claimant had previously succeeded in identical challenges for 2012-2014. The Tax Authority countered that under full ownership, as opposed to condominium ownership, the relevant VPT is the total property value, citing Arbitral Decision 668/2015-T. The case highlights the critical distinction between propriedade total and propriedade horizontal for stamp tax purposes, the interpretation of CIMI provisions regarding property registration and valuation, and whether independent residential units within a single property title should be taxed individually or collectively. The dispute also raised procedural issues regarding the sufficiency of reasoning in automated tax assessments and the proper application of compensatory interest under Article 43(1) LGT.

Full Decision

Arbitral Decision

I – Report

  1. On 28 July 2016, A..., S.A., with tax identification number..., with registered office at..., no...., ... floor, ...-... Lisbon filed, pursuant to articles 2, no. 1, paragraph a) and 10, no. 1, paragraph a) and no. 2 of the Legal Framework for Tax Arbitration (RJAT), a request for arbitral pronouncement and assessment by the arbitral tribunal of the lawfulness of Stamp Tax Assessments (item no. 28 of the General Table of Stamp Tax), identified under numbers 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016... and 2016..., relating to the year 2015, in the total amount of € 26,136.60 (twenty-six thousand, one hundred and thirty-six euros and sixty cents), with a view to their annulment as well as restitution of the tax paid plus compensatory interest. In addition to the power of attorney and proof of payment of the initial arbitration fee, it attached 18 documents[1].

  2. In the Request for Arbitral Pronouncement, the Claimant chose not to designate an arbitrator, and was therefore, pursuant to no. 1 of article 6 of the RJAT, by decision of the President of the Deontological Council, appointed as sole arbitrator the undersigned, who accepted the office within the legally stipulated period.

  3. Once the parties were notified of this appointment, they expressed no intention to challenge it, and the arbitral tribunal was constituted on 19 October 2016.

  4. On 17 November 2016, the Tax and Customs Authority (TA or Respondent) filed a Reply, requesting exemption from producing witness evidence, from holding the meeting provided for in article 18 of the RJAT and from filing written submissions.

  5. With the agreement of the Claimant, the tribunal decided to exempt the meeting provided for in article 18 of the RJAT as well as the filing of written submissions, indicating 31 March 2017 as the date for communication of the arbitral decision.

  6. The Request for Pronouncement

The Claimant states, in summary (at our responsibility):

  • It is the owner of the real property registered under article ... in the urban real property register of the parish of ..., municipality of Lisbon, which is divided into twelve floors or separate units with independent use and residential purpose - floors 1stD, 1stE, 2ndD, 2ndE, 3rdD, 3rdE, 4thD, 4thE, 5thDE, 6th, 7thD and 7thE, with taxable property values: € 180,410.00, € 194,980.00, € 182,410.00, € 200,290.00, € 182,410.00, € 200,290.00, € 181,350.00, € 199,130.00, € 355,040.00, € 271,080.00, € 214,250.00 and € 252,020.00, respectively.

  • Each of the floors in question was considered a "taxable property value of the property - total subject to tax: 2,613,660.00", and the total value of the assessments is € 26,136.60, so that despite having made full payment of all amounts within the time limits set for it, it contests the lawfulness of the 12 assessments, as it had previously done successfully with respect to identical assessments relating to 2012, 2013 and 2014.

  • Law no. 55-A/2012, which added item no. 28 of the GTST, also amended article 67, no. 2, which mandates the subsidiary application of the CIMI, whose article 12, no. 3, provides that: "Each floor or part of property capable of independent use is considered separately in the property register, which also discriminates the respective taxable property value".

  • The floors in question constitute, all of them, autonomous units with independent use, as stated in their respective property register entries and is attested, in an unequivocal manner, by the property record card itself, with the result that the taxable property value of each of these floors is below the minimum threshold for the incidence of the tax, as stated in their respective property register entries for IMI purposes, so that none of the floors in question is covered by stamp tax liability under item no. 28 of the GTST, which is in itself sufficient reason for the complete annulment of the contested assessments, as has been repeatedly affirmed by arbitral tribunals in successive Arbitral Decisions and to the same effect has concluded in jurisprudence that is constant, reiterated and uniform.

  • And it must further be concluded that the tax acts in question do not have the support of coherent and sufficient reasoning (quite the contrary, they are contradictory to the actual TPV notified), as is legally required in the administrative and tax procedure, furthermore in acts of tax assessment and collection notified in an "automatic" manner and without any explanation to the taxpayer, as is the case.

  • Accordingly, and notwithstanding the notifications indicating incidence norms, "tax values" and "collections", given the absence of any minimum explanation by the TA to justify taxing values far below the threshold subject to taxation, it is concluded that the underlying tax acts are ineffective, having been notified in violation of the provisions of articles 268, no. 3 of the CRP and 77 of the LGT, a procedural defect that is also invoked here for all legal purposes.

  • In any event, as has been demonstrated, the assessments which are the subject of the present request are based on a presumed or fictitious TPV, when the law requires that the actual TPV be considered – as stated in the notifications of the contested acts themselves, in the case, not covered by item no. 28 of the General Table of Stamp Tax invoked by the TA – which gave it a scope that it does not have, in violation of this incidence norm.

  • Compensatory interest is furthermore due, on the basis of article 43, no. 1, of the LGT and article 61, no. 5, of the CPPT.

  1. The Reply

The Respondent replied, in summary (at our responsibility):

  • The subjection to stamp tax of item 28.1 of the General Table annexed to the CIS results from the combination of two facts: residential purpose and the taxable property value of the urban real property registered in the property register being equal to or exceeding € 1,000,000.00.

  • As for residential purpose, the property was evaluated taking into account the residential and commercial destination and is described in the register under the regime of full ownership, consisting of 8 floors and 13 units, the TPV having been calculated by applying a coefficient of 1.00 to units allocated to residential use and 1.20 to units allocated to commercial use.

  • In accordance with article 23, no. 7 of the CIS, the stamp tax assessment in question was carried out by the Tax Administration, taking into account the nature of the urban real property, namely its units allocated to residential use, at the date of the taxable event, applying, with the necessary adaptations, the rules contained in the CIMI and not being affected by any illegality.

  • The concept of property is defined in article 2, no. 1 of the CIMI, and its no. 4 provides that under the regime of condominium ownership, each autonomous fraction is deemed to constitute a property, which does not apply to "property in full ownership with floors or units capable of independent use". Article 12 of the CIMI establishes the concept of property register, and its no. 3 relates exclusively to the manner of recording property register data. As for IMI assessment, where properties are in full ownership, the VP that serves as the basis for its calculation will be indisputably the VP that the now Claimant defines as "total value of the property", the collection document being sent with discrimination of the parts capable of independent use, respective taxable property value and the collection imputed to each municipality of the property location in compliance with the provisions of article 119, no. 1 of the CIMI.

  • Reference is made to the Arbitral Decision in case no. 668/2015 – T, which considered valid stamp tax assessments item 28 GTST in a situation identical to that of the present case[2].

  • As the assessments are not illegal, compensatory interest is not due.

  1. Question to be Decided

The fundamental legal question to be decided is whether the scope of the incidence of Stamp Tax provided for in Item 28 of the GTST includes urban properties not constituted under condominium ownership but comprised of floors or units capable of independent use with residential purpose, when the taxable property value assigned to each of these distinct parts is below the value of € 1,000,000.00, although the aggregate of the independent units allocated to residential use reaches a total TPV equal to or exceeding that amount.

  1. Preliminary Matters

The arbitral tribunal is materially competent, pursuant to the provisions of articles 2, no. 1, paragraph a), of the Legal Framework for Tax Arbitration.

The parties have legal personality and capacity and have standing under articles 4 and 10, no. 2, of the Legal Framework for Tax Arbitration (RJAT) and article 1 of Order no. 112-A/2011, of 22 March.

The proceedings do not suffer from any nullity nor have the parties raised any exceptions that prevent the assessment of the merits of the case, so that the conditions for rendering the arbitral decision are met.

II – Grounds

  1. Proven Facts

It is considered proved that:

10.1. The Claimant, A..., SA, is the owner of the real property located at Ave..., no. ... to..., registered under article ... in the urban real property register of the parish of ..., municipality of Lisbon.

10.2. The property which is the subject of the present case comprises eight (8) floors and 13 units capable of independent use, twelve (12) of which are intended for residential use (article 1 to 8 of the Request and Doc. no. 13 attached with the Request the content of which is given as reproduced).

10.3. The sum of the taxable property values of the thirteen units referred to in the preceding number is € 2,805,320.00, with € 2,613,660.00 being the total amount of the twelve (12) independent units allocated to residential use (article 10 of the Request and documents 1 to 12 and 13 attached with the Request).

10.4. The taxable property values of each of the twelve units with independent use and allocated to residential use, determined according to the CIMI, in the year 2012, are: € 180,410.00 (U... - 1st Right); € 194,980.00 (U...-1st Left); € 182,410.00 (U...-2nd Right); € 200,290.00 (U...-2nd Left.); € 182,410.00 (U...-3rd Right) and € 200,290.00 (U...-3rd Left.); € 181,350.00 (U...-4th Right); € 199,310.00 (U...-4th Left.); € 355,040.00 (U...º); € 271,080.00 (U...-6th), € 214,250.00 (U...-7th Right) and € 252,020.00 (U...-7th Left.) (Documents 1 to 12 attached with the Request).

10.5. The collection documents indicate as the taxable property value of the property being the basis for calculation of the tax € 2,613,660.00 corresponding to the total value of the twelve units allocated to residential use and that the Stamp Tax assessment, carried out on 5 April 2015, had as its basis item 28.1 of the General Table of Stamp Tax, applying the rate of 1% to the value of the TPV of each of the units, which results in collection amounts of € 1,804.10, € 1,949.80, € 1,824.10, € 2,002.90, € 1,824.10, € 2,002.90, € 1,813.50, € 1,991.30, € 3,550.40, € 2,710.80, € 2,142.50 and € 2,520.20 (Collection documents attached with the Request).

10.6. The Claimant was notified of assessments, dated 5 April 2016, of Stamp Tax provided for in item 28.1 of the GTST, relating to the year 2015, with respect to the units allocated to residential use, payable in three instalments, according to article 120 of the CIMI (Collection documents appearing in Doc. no. 1, attached with the Request).

10.7. The Claimant paid all instalments relating to the assessments referred to in the preceding number (Document no. 18 delivered by the Claimant).

  1. Unproven Facts

There are no unproven facts relevant to the decision of the case at hand.

  1. Grounds of Proof

The proof established was based on the documents submitted by the Claimant (Request for Arbitral Pronouncement and the documents attached to the proceedings with the request and subsequently) and by the Respondent (Reply and administrative file).

  1. Assessment of Law

13.1. Item 28 of the General Table of Stamp Tax (GTST)

13.1.1. Regime Approved by Law no. 55-A/2012, of 29 October

The fundamental legal question, which is contested in the present case, is whether in the case of properties in full ownership, with floors or units of independent use but not constituted under a condominium ownership regime, the TPV to be considered for purposes of the incidence of Stamp Tax provided for in item 28.1 of the GTST should correspond to the TPV of each floor or unit with residential purpose and independent use or to the sum of the TPVs corresponding to the floors or units of independent use with residential purpose.

That is, it must be decided whether the TPV relevant as a criterion for the incidence of the tax is the TPV assigned to each of the parts or residential floors or corresponding to the summation of the taxable property value assigned to each of the different parts or floors (total TPV).

This question has already been assessed in many proceedings within the scope of Tax Arbitration[3], and no arguments have been identified so far that would break the unanimity that has been achieved as to the conclusion of the decisions rendered.

Item 28 of the General Table of Stamp Tax, annexed to the Code of Stamp Tax (CIS), was added by article 4 of Law no. 55-A/2012, of 29 October, with the following content:

"28 – Ownership, usufruct or surface right of urban properties whose taxable property value appearing in the property register, in accordance with the Code of Municipal Tax on Real Property (CIMI), is equal to or exceeding € 1,000,000 – on the taxable property value for IMI purposes:

28-1 – Per property with residential purpose – 1%;

28.2 – Per property, when the tax subjects who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, listed in a regulation approved by order of the Minister of Finance – 7.5%."

Pursuant to the amendments to the Code of Stamp Tax introduced by article 3 of Law no. 55-A/2012, of 29/10, the Stamp Tax provided for in item 28 of the GTST is levied on a legal situation (no. 1 of article 1 and no. 4 of article 2 of the CIS), in which the respective tax subjects are those referred to in article 8 of the CIMI (no. 4 of art. 2 of the CIS), to whom falls the burden of the tax (paragraph u) of no. 3 of article 3 of the CIS).

The CIS, as amended by Law no. 55-A/2012, both in article 4, no. 6 ("In situations provided for in item 28 of the General Table, the tax is due whenever the properties are located in Portuguese territory"), and in article 23, no. 7 ("Where the tax is due for situations provided for 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 CIMI"), in conjunction with article 1 of the CIMI, considers the property itself as the taxable event (the situation that triggers taxation) provided it reaches the value provided for in item 28 of the General Table of Stamp Tax, regardless of the number of tax subjects, possessors (as owners, usufructuaries or superficiaries) of the goods in question.

At the time of the situation under analysis, the amendment introduced by Law no. 83-C/2013, of 31 December (Budget for 2014), in item 28.1., which came to read: "Per residential property or per land for construction whose building, authorized or intended, is for residential purposes, in accordance with the provisions of the Code of IMI", was already in force.

That is, the relevant concept in a case such as the present – assessment relating to 2015 – changed from "property with residential purpose" to "residential property", and it appears to us that this amendment is not capable of altering the interpretation that we have been supporting in situations relating to years prior to 2014.

13.1.2. The Concept of Property Used in Item 28 of the GTST

Neither the concept of "properties with residential purpose" in the original version of item 28.1 nor that of "residential property" in the later version is expressly defined in any provision of the CIS nor in the CIMI, the statute to which no. 2 of art. 67 of the CIS refers.

In the present case, the property registered under article ... in the urban real property register of the parish of ..., municipality of Lisbon, is in full ownership divided into thirteen floors or units with independent use, twelve of which with residential purpose. As for the independent units allocated to residential use, it is verified that their respective taxable property values range between € 180,410.00 (the lowest) and € 355,040.00 (the highest). In no case does the TPV reach the amount of € 1,000,000.00. (cf. proven facts, supra 10.3. to 10.5.)

At issue is the precise meaning of the segment of the stamp tax incidence rule in the body of item 28 of the GTST that refers to the taxable property value under the CIMI: in the case of properties in full ownership but with floors or units capable of independent use, with residential purpose, the TPV relevant corresponds to the sum of the TPV of the various units/floors with residential purpose, with the aggregate considered as a single property, as the TA argues, or what must be taken into account is the TPV of each of the respective autonomous floors or units with the said residential purpose, as the Claimant argues?

Now the said segment (taxable property value considered for IMI purposes) is integrated into a text that defines as the object of the incidence of stamp tax the "Ownership, usufruct or surface right of urban properties whose taxable property value appearing in the property register, in accordance with the Code of Municipal Tax on Real Property (CIMI), is equal to or exceeding € 1,000,000 - (...)" (emphasis ours).

As has been repeatedly invoked and accepted, the IMI Code enshrines, both as to property register entry and discrimination of the respective taxable property value and as to tax assessment, the autonomization of parts of urban property capable of independent use and the segregation/individualization of the TPV relating to each floor or part of property capable of independent use[4].

Thus, each property (building) corresponds to a single article in the register (no. 2 of article 82 of the CIMI) but, according to no. 3 of art. 12 of the same Code, relating to the concept of property register (registration of the property, its characterization, location, TPV and ownership), "each floor or part of property capable of independent use is considered separately in the property register entry, which discriminates the respective taxable property value", not taking as reference the sum of the taxable property values attributed to the autonomous parts of the same property but the value attributed to each of them individually considered.

As to the assessment of IMI - application of the rate to the taxable base - article 119, no. 1, of the CIMT provides that "the competent collection document" contains the "discrimination of the properties, their parts capable of independent use, respective taxable property value and collection (...)".

That is, for tax purposes the rule is autonomization, the qualification also as "property" of each part of a building, provided it is functionally and economically independent, capable of independent use[5], in accordance with the concept of property defined in no. 1 of article 2 of the CIMI: property is any portion (of territory, encompassing waters, plantations, buildings and constructions of any kind incorporated therein or resting thereon, with a character of permanence) provided it forms 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 circumstances above, endowed with economic autonomy (our presentation and underlining).[6]

Thus, when no. 4 of article 2 provides that "For purposes of this tax, each autonomous fraction, under the condominium ownership regime, is deemed to constitute a property", it does not properly establish a regime that is exceptional or special for properties under condominium ownership.

After all, each building under condominium ownership (article 92) has only one property register entry (no. 1), describing the building generically and mentioning the fact that it is under a condominium ownership regime (no. 2), and the autonomy from a register perspective is realized in the assignment to each of the autonomous fractions, described in detail and individually identified, of a capital letter, according to alphabetical order (no. 3). This appears to be the specificity of buildings under condominium ownership.

But in other cases, of properties in vertical or full ownership, the units or floors with independent use and autonomy but without the status of condominium ownership, the property register also establishes autonomy from a tax perspective, evidencing the different units with an indication of the type of floor/unit.

Thus, the Respondent's thesis that would result from article 2 of the CIMI a great diversity of treatment in stamp tax (item 28) of two types of realities – properties with independent fractions under a regime of full (or vertical) ownership and properties with independent fractions under a regime of condominium ownership – considering the first situation as constituting a single unit, with irrelevance of the economic and tax autonomy established in the same CIMI.

But the thesis that these properties are only one for purposes of item 28 of the GTST is not convincing, as is demonstrated by the near unanimity of arbitral and administrative decisions, and it is certain that it is supported at the level of the STA.

A defense of an interpretation based on an institutional difference between the two situations of ownership – and in which the TA has frequently seen in item 28 of the GTST an intent of the legislature to develop the figure of condominium ownership – does not appear to us to result either from the letter of the provision or from its confrontation with other norms of the legal system, from which there results no justification for, in the matter of the incidence of Stamp Tax provided for in item 28.1 of the GTST, giving fractions of properties in "vertical ownership", endowed with autonomy, treatment different from that granted to properties in condominium ownership, when in any of these situations the IMI is applied to the taxable property value evidenced in the register for each of the autonomous units.

And there exists in the legislative process that led to the approval of Law no. 55-A/2012, of 29 October, no element that makes it possible to identify and legitimize a purpose (extra-fiscal or fiscal) in the sense of the difference sustained by the Respondent between the two situations: ownership of a building in full ownership or its division into units with the status of condominium ownership.

13.2. The Ratio Legis of Items 28 and 28.1 of the GTST

The interpretation sustained above, resulting from the analysis of the letter of the law and its insertion in the body of other applicable tax norms, is still the most consonant with the spirit of the legislative amendments introduced by Law no. 55-A/2012, of 29 October.

As has already been highlighted in other arbitral decisions, "the legislature, in introducing this legislative innovation, considered as the determining element of taxable capacity urban properties, with residential purpose, of high value (luxury), more precisely, of value equal to or exceeding € 1,000,000.00 on which a special rate of stamp tax came to be levied, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or surface right of urban luxury properties with residential purpose. For this reason, the criterion was the application of the new rate to urban properties with residential purpose, whose TPV is equal to or exceeding € 1,000,000.00" (...). "The justification for the measure designated as 'special rate on the highest value residential urban properties' is based on the invocation of the principles of social equity and tax justice, calling on the holders of high-value properties intended for residential use to contribute in a more intense manner, applying the new special rate to 'houses of value equal to or exceeding 1 million euros. Clearly the legislature understood that this value, when assigned to a residence (house, autonomous fraction or floor with independent use) translates a taxable capacity above average and, as such, capable of determining a special contribution to guarantee fair distribution of the tax burden."[7]

Given the legislative purpose, it is further concluded that the holding of fractions in full or vertical ownership does not reveal a greater taxable capacity than if they were constituted under the form of condominium ownership.

On the contrary, in most cases, as evidenced by Arbitral Decision no. 50/2013, "many of the properties existing in vertical ownership are old, with an undeniable social utility, since in many cases they house residents with modest and more accessible rents, factors that must necessarily be taken into account."

Also the analysis from this perspective confirms the correctness of the interpretation that item 28 of the GTST does not encompass each of the floors, units or parts capable of independent use when only from the sum of their respective taxable property values results a TPV exceeding that provided for in the said item.

The legislature did not intend to treat differently residential properties distinguishing between those which are or are not under a condominium ownership regime, but to give relevance to divisions or property fractions allocated to residential purposes and considered for IMI purposes as autonomous units, identifying those whose TPV is above one million, understanding that such a value configures them as luxury and justifies specific taxation, as Stamp Tax.

Thus, and even without it being understood that item 28 would be affected by unconstitutionality due to differential treatment of situations that are identical from a tax perspective[8], it is considered that "The justification for the measure designated as 'special rate on the highest value residential urban properties' was based on the invocation of the principles of social equity and tax justice, calling on the holders of high-value properties intended for residential use to contribute in a more intense manner, applying the new special rate to 'houses of value equal to or exceeding 1 million euros. Clearly the legislature understood that this value, when assigned to a residence (house, autonomous fraction or floor with independent use) translates a taxable capacity above average and, as such, capable of determining a special contribution to guarantee fair distribution of the tax burden."[9]

That is, item 28 will have intended to reach properties that, in themselves, individually have value exceeding one million, understood to be that the threshold for expression of "luxury housing", not intending, from that perspective, to reach properties that only in conjunction with others of the same holder (regardless of whether or not they have the legal form of condominium ownership) reach that value.

This legislative choice may or may not deserve agreement, being even confronted with the alternative (and its advantages and actual possibilities) of global taxation of patrimony or, at least, of the aggregate of all real property of the same holder. But it cannot be disregarded that this was the choice affirmed by the legislature which in the letter of the law left no indicia in a different sense[10].

Thus, the present arbitral tribunal concludes that the Stamp Tax assessments, carried out on the basis of items 28/28.1 of the GTST, relating to each of the floors or parts capable of independent use, property of the Claimant, which is the subject of the present case, are affected by illegality, because the said legal provisions cannot be interpreted in the sense of their application to floors or parts capable of independent use of a property in vertical ownership when only from the sum of each of these floors or parts is it possible to obtain a TPV equal to or exceeding € 1,000,000.00 (one million Euros), with the TPV of each of the said floors or parts not reaching that amount.

This has already been decided in several cases by the STA. For all, it is cited the Ruling 0166/16, of 4 May 2016, which concluded: "I - Item 28 of the General Table of Stamp Tax (GTST) added by art. 4 of Law no. 55-A/2012, of 29/10, does not apply to urban properties, with one property register article but composed of parts with affectation and independent use to which independent TPVs were assigned, each of these of value below one million euros. II - As item 28 of the General Table has made no distinction between properties under a condominium ownership regime and full/vertical ownership and refers to the taxable property value used for IMI purposes, it will not be incumbent upon the one applying it to introduce any distinction, all the more so as this is a norm of incidence. III - If it were the intention of the legislature to tax real property that, having a single property register article, because they are composed of parts capable of independent use, have assigned to them various taxable property values, and intended that for purposes of taxation under stamp tax, in this case, account be taken of the sum of these various taxable property values, it would not have added the final part of the provision: on the taxable property value used for IMI purposes. IV - Nothing in the law imposing consideration of any sum of all or part of the TPVs assigned to the various parts of a property with a single property register article, also makes it not in accordance with the law to perform such an arithmetic operation only for purposes of the taxation established in item 28 of the General Table of Stamp Tax."

And as evidenced in an identical situation, by the Ruling handed down by the STA on 24 May 2016, in case 01344/15, there is no need for assessment of item 28 of the GTST, "in light of constitutional principles and parameters, before it is necessary to impose a teleological and systematic interpretation of it, whereby the jurisprudential orientation that has been followed by the ordinary courts, and which will now be followed, does not tarnish the good doctrine imposed by that Constitutional Court".[11]

In the present case, it results from the established facts that none of the floors, intended for residential use, of the property in full ownership which is the subject of this proceeding has a taxable property value equal to or exceeding € 1,000,000.00, whereby it is concluded that the legal prerequisite for the incidence of Stamp Tax provided for in Item 28 of the GTST is not met, with consequent illegality of the tax acts under assessment and right to reimbursement in the amount of tax already paid.

And, as has been peacefully understood by application of article 24, no. 5 of the RJAT, when there is an incorrect interpretation and application by the Respondent of a tax incidence norm, as is the case, the Claimant further has the right to payment of compensatory interest under articles 43 and 100 of the LGT and 61 of the CPPT.

  1. Decision

With the grounds set out, the arbitral tribunal decides:

a) To uphold the request for arbitral pronouncement and, consequently, to declare illegal the tax acts of Stamp Tax assessment (items 28 and 28.1 of the General Table of Stamp Tax) relating to the property identified in the present case, identified under numbers 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016..., 2016... and 2016..., relating to the year 2015, in the total amount of € 26,136.60 (twenty-six thousand, one hundred and thirty-six euros and sixty cents), as per the Request, and with all legal consequences, including restitution of tax paid in the meantime and payment of the corresponding compensatory interest.

b) Condemn the Respondent in costs.

  1. Value of the Proceedings

In accordance with the provisions of no. 2 of article 315 of the CPC, paragraph a) of no. 1 of article 97-A of the CPPT and also of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 26,136.60 (twenty-six thousand, one hundred and thirty-six euros and sixty cents).

  1. Costs

For the purposes of the provisions of no. 2 of article 12 and no. 4 of article 22 of the RJAT and of no. 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 1,530.00 (one thousand five hundred and thirty euros), in accordance with Table I annexed to the said Regulation, to be borne entirely by the Respondent.

Lisbon, 16 March 2017.

The Arbitrator

Manuela Roseiro

[1] Doc. no. 18 was attached with Request of 22/12/2016.

[2] Decision in which it is considered, in particular, that the literal interpretation of the norm allows the conclusion that the value of the property is the sum of the values of its parts and that the law establishes the difference in tax treatment advocated by the Respondent between condominium ownership and full ownership.

[3] On the application of item 28 of the GTST in the case of properties in full/vertical ownership, there is already a very high number (hundreds) of decisions publicly available on the CAAD tax jurisprudence website.

[4] "Another aspect that must be highlighted in the property register relates to the need to highlight the autonomy that, within the same property, may be attributed to each of its parts, functionally and economically independent. In these cases, the property register entry not only should refer to each of the parts but should expressly refer to the taxable property value corresponding to each of them" (Silvério Mateus and Freitas Corvelo, "The Taxes on Real Property and Stamp Tax, Commented and Annotated", Engifisco, Lisbon 2005, pages 159 and 160). And the same authors further stated (ibid., p.160): "This autonomization of the autonomous parts of a property, applicable above all to urban properties, was justified in the context of the former Real Property Contribution in which the taxable income corresponded to the rent or rental value of each of these components, continued to be justified in the case of Municipal Contribution in which the taxable property value had underlying the actual or potential rent and continues to be pertinent under IMI, given that the valuation factors provided for in articles 38 and following may not be the same for all these components (...) the fact that a property is or is not leased continues to be relevant for purposes of determining the taxable property value both for purposes of IMI and for IMT (see Article 17 of Decree-Law 287/2003)" (they referred to the original version "transitional regime for leased urban properties", a norm to be reviewed, according to its no. 5, when there was a revision of the urban lease law, which occurred with Law no. 6/2006, of 27/02).

[5] On this point, and in line with the commentary cited in the previous note, see the grounds contained in the decision of case no. 248/2013-T: "The autonomization in the property register of the functionally and economically independent parts of a property in full ownership is related to reasons of a fiscal and extra-fiscal nature. On the fiscal level, this autonomization relates to the very determination of the taxable property value, which constitutes the taxable base of the IMI, given that the formula for determining that value, provided for in art. 38 of the same Code, comprises indices that vary depending on the use assigned to each of these parts. On the extra-fiscal level, this autonomization continues to find justification in the relevance attributed to the taxable property value of properties and their autonomous parts in urban lease legislation." There is also mentioned no. 1 of art. 15-O, of Decree-Law no. 287/2003, of 12/11, added by Law no. 60-A/2011, of 30/11 (providing that the safeguard clause relating to the aggravation of taxation in IMI resulting from the general evaluation of urban properties, is applicable per property or part of urban property that is the subject of the said evaluation) as confirming the individualization, for tax purposes, of the autonomous parts of urban properties.

[6] As observed in the decision of arbitral case no. 132/2013-T: "The norms (...) listed establish the principle of autonomization of the independent parts of an urban property, even when not constituted in condominium ownership. That is, each part capable of independent use must be, for purposes of IMI, valued in light of its specificities and use, resulting in an autonomous TPV, individualizable and corresponding to each part capable of independent use."

[7] Excerpts from the Decision in case no. 50/2014-T, also referring to the Arbitral Decision in case no. 48/2013-T, as to the analysis of the discussion of the legislative proposal in the Assembly of the Republic.

[8] Various decisions of the Constitutional Court have considered unfounded the invocation, on that basis, of unconstitutionality of item 28 of the GTST.

[9] Excerpts from the Decision in case no. 50/2014-T, also referring to the Arbitral Decision in case no. 48/2013-T, as to the analysis of the discussion of the legislative proposal in the Assembly of the Republic.

[10] On this question, we left some considerations in the arbitral decision of 4 May 2014, in case no. 219/2013-T, where, because it was a single property not divided in condominium ownership nor in independent units, the Request was considered unfounded as to the lawfulness of the assessment, with the thesis of unconstitutionality of item 28 of the GTST not being accepted.

[11] It expressly refers to the pronouncement of the Constitutional Court (the ruling 247/2016, of 04.05.2016 is cited) on the constitutional dimension of items 28 and 28.1 of the General Table of Stamp Tax, added by article 4 of Law no. 55-A/2012, of 29 October, in light of the principles of tax equality, taxable capacity and proportionality, in which it was concluded that the norm contained in the said item, insofar as it imposes annual taxation on the ownership of urban properties with residential purpose, whose taxable property value is equal to or exceeding € 1,000,000.00, is not unconstitutional.

Frequently Asked Questions

Automatically Created

Is Stamp Tax under Verba 28 of TGIS applied to the total property value or to each independent unit separately?
Verba 28.1 of the TGIS establishes that stamp tax applies to urban real property with residential purposes when the taxable property value (valor patrimonial tributável) equals or exceeds €1,000,000. The central legal controversy is whether this threshold applies to each independent unit separately or to the aggregate value when the property is held under full ownership (propriedade total). The Tax Authority typically applies the tax to the total property value for properties not structured as condominiums, while taxpayers argue that Article 12(3) of the CIMI requires separate consideration of each floor or unit capable of independent use as reflected in property register entries.
Can a property owner challenge Stamp Tax assessments on multiple housing units through CAAD tax arbitration?
Yes, property owners can challenge Stamp Tax assessments through the Centro de Arbitragem Administrativa (CAAD) under the Regime Jurídico da Arbitragem Tributária (RJAT). In this case, the claimant filed an arbitration request pursuant to Articles 2(1)(a) and 10(1)(a) of the RJAT to contest 12 assessments totaling €26,136.60. The arbitration procedure allows taxpayers to seek annulment of unlawful tax assessments and restitution of taxes paid plus compensatory interest. The claimant had previously succeeded in identical challenges for tax years 2012, 2013, and 2014, demonstrating the viability of this legal avenue for contesting stamp tax on properties with multiple independent units.
What is the taxable patrimonial value threshold under Verba 28.1 of the Tabela Geral do Imposto do Selo?
The fundamental issue concerns the interpretation of 'prédio' (property) under full ownership versus condominium ownership for stamp tax purposes. Article 2(4) of the CIMI provides that under condominium ownership (propriedade horizontal), each autonomous fraction constitutes a separate property. However, for properties held under full ownership (propriedade total) with independent units, the Tax Authority argues the total VPT applies. The claimant invokes Article 12(3) CIMI, which states that each floor or part capable of independent use is considered separately in the property register with discriminated VPT. This dispute reflects competing interpretations of whether tax law should follow property registration practices or ownership structure, with significant implications for stamp tax liability on multi-unit residential buildings owned by single entities.
Does full ownership of a building with independent divisions trigger Stamp Tax on the aggregate value exceeding €1 million?
Full ownership of a building with multiple independent divisions can trigger Stamp Tax under Verba 28 TGIS if the aggregate property value exceeds €1,000,000, according to the Tax Authority's interpretation. The controversy arises because while each individual unit may have a VPT below the threshold, the combined total exceeds it. In this case, 12 residential units had individual VPTs ranging from €180,410 to €355,040, totaling €2,613,660. The Tax Authority assessed stamp tax on the total value, while the claimant argued that Law 55-A/2012, which introduced Verba 28, also amended Article 67(2) to mandate subsidiary application of CIMI provisions requiring separate consideration of independent units. The outcome depends on whether courts and arbitral tribunals prioritize ownership structure or functional independence of units.
What precedents exist for annulment of Imposto do Selo liquidations on residential properties with independent units?
Multiple arbitral precedents have addressed stamp tax assessments on residential properties with independent units, with divergent outcomes. The claimant referenced successive arbitral decisions supporting annulment of assessments where individual units fall below the €1,000,000 threshold, and noted previous successful challenges for 2012, 2013, and 2014. However, the Tax Authority cited Arbitral Decision 668/2015-T, which validated stamp tax assessments in a similar situation involving full ownership with independent units. This jurisprudential inconsistency reflects the legal uncertainty surrounding the application of Verba 28 TGIS to properties held under propriedade total versus propriedade horizontal. Additional grounds for annulment have included procedural defects such as insufficient reasoning in automated assessments, violating Articles 268(3) of the Portuguese Constitution and 77 of the LGT, which require adequate justification for tax acts.