Process: 464/2016-T

Date: December 28, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitral decision 464/2016-T addresses the critical issue of Stamp Duty (Imposto do Selo) application to vertical property buildings under Item 28.1 of the General Stamp Duty Table (TGIS). The taxpayer, owner of an urban property in Loures composed of 18 residential divisions, 15 commercial units, and 2 service divisions—all capable of independent use but not constituted under horizontal property regime—challenged €11,813.30 in stamp duty assessments for 2015. The core legal dispute centers on whether the €1,000,000 tax property value (VPT) threshold triggering stamp duty incidence should be calculated per independent residential unit or aggregated across all residential divisions within the single property article. The taxpayer argued that since each residential division has a separately determined VPT under CIMI Article 7(2)(b) and none individually exceeds €1,000,000, no stamp duty is due. The Tax Authority (AT) contended that the relevant VPT is the sum of all residential units (€1,181,330), thus triggering taxation. This case highlights fundamental interpretative questions regarding vertical property taxation in Portuguese law, the relationship between IMI valuation methodology and stamp duty incidence, and the application of Item 28 TGIS to properties with autonomous divisions lacking horizontal property formalization. The arbitral tribunal established jurisdiction under RJAT Article 2(1)(a), with the case presenting purely legal questions requiring no evidentiary hearing, making it significant precedent for similar multi-unit property taxation disputes.

Full Decision

ARBITRAL DECISION

I. Report

1. A…, Ld.ª, NIPC …, with registered office at …, …, …, …, …-… …, requested the constitution of an arbitral tribunal in tax matters in view of the declaration of illegality of the acts of assessment of stamp duty tax, in the total amount of € 11,813.30, relating to the urban property, not established under a horizontal property regime, registered in the respective property matrix of the Union of Parishes of …, … and …, Municipality of Loures, under article U-… . The aforesaid assessments, made on the basis of the provision of article 1 of the Stamp Duty Tax Code (CIS), combined with Item no. 28.1 of the respective General Table, relate to the year 2015. As a consequence of the declaration of illegality of the aforementioned acts, the Applicant requests that the annulment of the assessments in question be determined and the consequent reimbursement of the amount paid, increased by the respective indemnificatory interest calculated in accordance with legal terms.

2. As the basis for the request, the Applicant alleges, in summary, that the taxation provided for in the cited provisions has as its object urban properties with residential use, whose tax property value used for purposes of IMI is equal to or greater than € 1,000,000.00. In the case of properties not established in horizontal property but integrated by parts or divisions susceptible of independent use, the property value used for purposes of IMI, and consequently, relevant for purposes of the incidence of stamp duty, is, in accordance with the aforementioned provision, the value determined with reference to each of those parts or divisions.

3. For its part, the Respondent - Tax and Customs Administration (AT) - in response to the allegations, pronounces itself in favour of the dismissal of the request and, consequently, the maintenance of the questioned tax assessment acts, on the ground that there is a single urban property, and what is relevant for purposes of the incidence of stamp duty is the value resulting from the sum of the tax property values attributed to the various parts that compose it.

4. The request for constitution of the arbitral tribunal, presented on 20-07-2016, was accepted by the President of CAAD and automatically notified to the Respondent (AT) on 19-08-2016.

5. Pursuant to the provisions of sub-paragraph a) of paragraph 2 of article 6 and sub-paragraph b) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of 20/01, as amended by article 228 of Law no. 66-B/2012, of 31/12, the Deontological Council appointed the undersigned as arbitrator of the sole arbitral tribunal, who communicated acceptance of the appointment within the applicable period, and notified the parties of such appointment on 03-10-2016.

6. Having been duly notified of such appointment, the parties did not manifest any intention to challenge the designation of the arbitrator, in accordance with the combined provisions of article 11, paragraph 1, sub-paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

7. Thus, in conformity with the provision of sub-paragraph c) of paragraph 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31/12, the sole arbitral tribunal was constituted on 19-10-2016.

8. Being duly constituted, the arbitral tribunal is materially competent, in view of the provision of articles 2, paragraph 1, sub-paragraph a), of the RJAT.

9. The parties possess legal personality and capacity and have standing (articles 4 and 10, paragraph 2, of the RJAT, and article 1 of Ordinance no. 112-A/2011, of 22/03).

10. Given the knowledge arising from the procedural documents submitted by the parties, which is deemed sufficient for the decision, the Tribunal decided to dispense with the meeting to which article 18 of the RJAT refers.

11. The proceedings do not suffer from any nullities and no other issues have been raised that would prevent consideration of the merits of the case, with the conditions being met for a final decision to be rendered.

II. Factual Matter

12. With relevance for the assessment of the question raised, the following factual elements are highlighted:

12.1. The Applicant is the owner of the urban property situated at …, …, …, …, registered in the respective property matrix of the Union of Parishes of …, … and …, municipality of Loures, under article U-…;

12.2. The property in question is located within an A.U.G.I., and is awaiting the urban redevelopment of the location in order to permit the constructions to be licensed;

12.3. The said property, in full ownership, in accordance with its respective registration, is composed of 18 divisions intended for residential use, 15 commercial shops and 2 divisions intended for services, all susceptible of independent use (cf. Doc. 1);

12.4. To each of the independent divisions a tax property value was attributed separately determined in accordance with the provision of sub-paragraph b) of paragraph 2 of article 7 of the Municipal Property Tax Code (CIMI).

12.5. None of the parts or floors with residential use has a tax property value exceeding € 1,000,000.00, with the sum thereof resulting in a total tax property value of € 1,181,330.00.

12.6. Considering the sum of the tax property values of the floors with independent use assigned to residential purposes, AT proceeded to assessments of stamp duty, provided for in Item 28.1 of the respective General Table, with reference to the year 2015 and to each of the units susceptible of independent use.

12.7. For payment in April, July and November 2016, collection notes relating to three instalments of the assessments in question were sent to the Applicant, totalling € 11,813.30, with this amount being paid in due course.

13. There are no other facts relevant to the merits of the decision that have not been established.

III. Legal Matter

14. As previously mentioned, the Applicant in its request for arbitral pronouncement sustains, in essence, that the provision of Item 28.1 of the General Table of Stamp Duty is not applicable to properties in full ownership composed of parts or divisions susceptible of independent use, whenever the tax property value attributed to each of those intended for residential use does not exceed € 1,000,000.00.

15. To the allegations made by the Applicant, AT responded, in summary, that Item 28 of the General Table of Stamp Duty applies to urban properties with residential use and that the tax property value on which the application of that legal provision depends is, as expressly results from the law, the property value of each property and not of its distinct parts, even though susceptible of independent use. Concluding, thus, that the tax acts in question, having not violated any legal provision, should be maintained.

16. From the positions expressed by the Applicant and the Respondent, summarized above, it follows that the assessment concerns strictly legal matters, making the production of evidence unnecessary beyond the documentary elements attached to the proceedings.

17. In fact, the question to be decided focuses solely on whether within the scope of the incidence of stamp duty to which Item 28 of the General Table of Stamp Duty (TGIS) refers, there are contained, or not, residential urban properties which, although not established in horizontal property, are composed of floors or divisions susceptible of independent use, whenever the tax property value attributed to each of those distinct parts does not exceed the value of € 1,000,000.00.

18. In other words, it is a matter of knowing whether the quantitative element relevant to the aforementioned provision should be considered on the basis of the tax property value attributed to each of the parts, as the Applicant contends, or whether this element is that which results from the sum of the tax property values attributed to them, as the Respondent argues.

19. It is therefore necessary, first and foremost, to conduct an analysis, albeit brief, of the assumptions of the incidence of stamp duty on urban properties with residential use, using the relevant tax provisions for the definition of the respective legal concepts.

Regarding Tax Incidence.

20. Through Law no. 55-A/2912, of 29/10, Item 28 was added to the General Table of Stamp Duty, subjecting to this tax urban properties whose tax property value shown in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000.00.

21. The taxable base is constituted by the tax property value considered for purposes of IMI, with that tax being assessed annually by AT with respect to each urban property (CIS, article 23, paragraph 7), at the rate of:
- 1%, for urban property with residential use;
- 7.5%, for property, when the taxpayers, not being natural persons, are residents in a country, territory or region subject to a clearly more favourable tax regime, listed in the list approved by ordinance of the Minister of Finance.

22. Passive subjects, and liable for the tax, are the owners, usufructuaries or surface holders of properties on 31 December of the year to which the tax relates, as follows from article 8 of the CIMI, by express reference of articles 3, paragraph 3, sub-paragraph u), and 2, paragraph 4, of the CIS.

23. Regarding the date of constitution of the tax obligation, tax nexus, determination of the taxable base, assessment and payment of the stamp duty in question, the corresponding rules of the CIMI are applicable, by express reference of articles 5, paragraph 1, sub-paragraph u), 4, paragraph 6, 23, paragraph 7, 44, paragraph 5, 46, paragraph 5 and 49, paragraph 3, of the CIS. In general, by reference of article 67, paragraph 2, of the same Code, the provisions of the CIMI are applicable on a subsidiary basis to matters not specially regulated.

24. With the type of property in question not being disputed, classified as urban and with residential use, in accordance with the criteria established in articles 2, 4 and 6 of the IMI Code, the only matter at issue is to determine the exact meaning of "tax property value considered for purposes of IMI" contained in the provision regarding the incidence of stamp duty.

25. It is therefore necessary to resort to the rules of the IMI Code relating to the treatment given in that tax to the parts of urban properties susceptible of independent use, in particular concerning the determination of the respective tax property value and the rules applicable to the assessment and payment of such tax.

26. In accordance with paragraph 3 of article 12 of the said Code, which establishes the concept of the property matrix, "each floor or part of a property susceptible of independent use is considered separately in the property registration, which specifies the respective tax property value."

27. The autonomization in the matrix of the functionally and economically independent parts of a property in full ownership is due to reasons of a fiscal and extrafiscal nature. On the fiscal plane, this autonomization relates to the very determination of the tax property value, which constitutes the taxable base of IMI, given that the formula for determining that value, provided for in article 38 of the same Code, includes indices that vary depending on the use attributed to each of those parts. On the extrafiscal plane, this autonomization continues to find justification in the relevance attributed to the tax property value of properties and their autonomous parts in urban lease legislation.[i]

28. However, in the economy of IMI, the autonomization of the parts of urban property susceptible of independent use is not limited to their separation in the property registration and specification of the respective tax property value. This autonomy extends to the assessment of the tax itself.

29. Indeed, article 119, paragraph 1, of the mentioned Code determines that the tax collection document should contain the specification of the properties, their parts susceptible of independent use and the respective tax property value. For compliance with this provision, the assessment of IMI, in the strict sense of application of the rate to the taxable base, does not take as reference the sum of the tax property values attributed to the autonomous parts of the same property, but the value attributed to each of them individually considered.

30. In the same sense of the individualization, for tax purposes, of the autonomous parts of urban properties, the provision of paragraph 1 of article 15-O of Decree-Law no. 287/2003, of 12/11, added by Law no. 60-A/2011, of 30/11, is also relevant.

31. In accordance with the provision of the aforementioned rule, the safeguard clause relating to the increase in taxation in IMI resulting from the general evaluation of urban properties is applicable per property or part of urban property that is subject to such evaluation.

32. It thus results from the relevant provisions of the CIMI, applicable by reference to the stamp duty referred to in Item 28 of the respective Table, that the autonomous parts of urban properties assume full autonomy, in terms of evaluation and description in the property matrix and assessment of the tax.

33. When referring to the tax property value considered for purposes of IMI, the provision regarding the incidence and quantification of stamp duty referred to in Item 28 of the respective Table can only appeal to the reality described above, that is, to the tax property value considered in the context of IMI with respect to each part of urban property susceptible of independent use.

34. As, moreover, is reflected in the assessments that are questioned in the present request for arbitral pronouncement: AT, after operating without legal support the sum of the tax property values of the various autonomous parts of the property to extract therefrom the quantitative assumption of the incidence of stamp duty, operates the assessment with reference to each of those parts even though, individually, none of them reaches that value.

35. It is noted that the question raised in this proceeding is, in all respects, identical to those raised and decided in numerous arbitral decisions[ii], as well as in judgments of the Supreme Administrative Court[iii], to whose conclusion, to the effect that the illegality of the Tax Administration's decision to subject the taxation of the residential parts of a property in full ownership on the basis of the global TPV of the property and not of what is actually attributed to each of the parts separately, is fully adhered to.

IV. Right to Indemnificatory Interest

36. Alongside the declaration of illegality and annulment of the assessments with the consequent reimbursement of the amounts that have meanwhile been improperly paid, the Applicant further requests that it be recognized as having the right to indemnificatory interest, under article 43 of the General Tax Law (LGT).

37. In fact, pursuant to the provision of paragraph 1 of the aforementioned provision, indemnificatory interest is due "when it is determined, in an amicable reclamation or judicial challenge, that there was an error attributable to the services as a result of which the tax debt was paid in an amount greater than legally due." Beyond the means referred to in the provision transcribed, we understand that, as follows from paragraph 5 of article 24 of the RJAT, the right to the aforementioned interest can be recognized in the arbitral proceeding and, thus, the request is known.

38. The right to indemnificatory interest to which the provision of the LGT above referred to alludes presupposes that tax has been paid in an amount greater than due and that such derives from an error, of fact or of law, attributable to the services of AT. In the present case, both conditions are met, and thus the obligation for indemnificatory interest is constituted in favour of the taxpayer, which is hereby declared.

V. Decision

In these terms, and with the grounds set out, the Arbitral Tribunal decides to uphold the request for arbitral pronouncement, determining the annulment of the questioned assessments with the consequent reimbursement of the amounts that have been paid, increased by the respective indemnificatory interest, due and quantified in accordance with legal terms.

Value of the Proceedings: The value of the proceedings is fixed at € 11,813.30, in accordance with article 97-A, paragraph 1, sub-paragraph a) of the CPPT, applicable by reference of article 29, paragraph 1, sub-paragraphs a) and b), of the RJAT and article 3, paragraph 2, of the Regulations on Costs in Tax Arbitration Proceedings.

Costs: Under article 22, paragraph 4, of the RJAT, and in accordance with Table I annexed to the Regulations on Costs in Tax Arbitration Proceedings, I fix the amount of costs at € 918.00, to be borne by the Respondent (AT).

Lisbon, 28 December 2016,

The Arbitrator, Álvaro Caneira

[i] See Silvério Mateus and Leonel Corvelo de Freitas, "Real Estate Tax Impositions and Stamp Duty Commented and Annotated", Engifisco, Lisbon 2005, pages 159 and 160.

[ii] Among many others, and referring only to the most recent: CAAD, Procs. 544/2015-T, 552/2015-T, 554/2015-T, 560/2015-T, 562/2015-T, 573/2015-T, 576/2015-T, 581/2015-T, 589/2015-T, 597/2015-T, 606/2015-T, 632/2015-T, 643/2015-T, 644/2015-T, 651/2015-T, 659/2015-T, 681/2015-T, 718/2015-T, 755/2015-T, 768/2015-T, 777/2015-T, 10-2016-T, 20/2016-T.

[iii] See STA, Procs. 047/15, 01352/15, 01354/15, 01504/15, 01534/15, 0166/16, 0498/16.

Frequently Asked Questions

Automatically Created

How is Stamp Tax (Imposto do Selo) applied to vertical property buildings not constituted under horizontal property regime?
Stamp Tax on vertical property buildings not constituted under horizontal property regime depends on Item 28.1 TGIS interpretation. When a property comprises multiple autonomous residential divisions with separate VPT determinations under CIMI Article 7(2)(b), the central issue is whether the €1,000,000 threshold applies individually to each division or collectively. The Tax Authority's position treats the entire property article as the taxable unit, aggregating all residential VPTs, while taxpayers argue that autonomous divisions with independent VPT calculations should be assessed separately for stamp duty purposes, particularly when individual valuations fall below the threshold.
Is the €1,000,000 VPT threshold under Verba 28.1 TGIS assessed per independent unit or on the total building value?
The €1,000,000 VPT threshold under Item 28.1 TGIS presents interpretative ambiguity for multi-division properties. In Process 464/2016-T, the Tax Authority applied the threshold to the aggregate VPT of all residential units (€1,181,330), triggering taxation. The taxpayer challenged this methodology, asserting that since each of the 18 residential divisions has individually determined VPT under CIMI provisions—none exceeding €1,000,000—the threshold should apply per autonomous unit. This dispute fundamentally questions whether 'property' under Item 28 refers to the matrix article registration or to economically and physically independent divisions, especially when each receives separate municipal tax valuation.
Can a taxpayer challenge Stamp Tax liquidations on urban properties through CAAD arbitration?
Yes, taxpayers can challenge Stamp Tax liquidations through CAAD (Centro de Arbitragem Administrativa) arbitration under RJAT (Regime Jurídico da Arbitragem Tributária). Process 464/2016-T demonstrates this mechanism: the taxpayer filed for arbitral tribunal constitution on 20-07-2016, which was accepted and notified to the Tax Authority on 19-08-2016. The sole arbitrator was appointed on 03-10-2016, with the tribunal constituted on 19-10-2016. CAAD provides material competence for stamp duty disputes per RJAT Article 2(1)(a), offering an alternative to judicial tax courts with specialized arbitral procedures for efficient resolution of tax assessment legality challenges.
What is the legal distinction between vertical and horizontal property for Stamp Tax incidence purposes?
The legal distinction between vertical and horizontal property for Stamp Tax purposes under Item 28.1 TGIS is not explicitly codified but emerges from property law and IMI valuation methodology. Horizontal property (propriedade horizontal) involves formal legal division under the Código Civil with separate matrix articles for each autonomous fraction, each independently subject to taxation. Vertical property refers to buildings with physically and economically autonomous divisions capable of independent use but registered under a single matrix article without horizontal property regime formalization. Process 464/2016-T addresses whether such vertical properties should be treated as single units (aggregating VPT) or as multiple autonomous divisions (individual VPT assessment) for stamp duty threshold application.
Are taxpayers entitled to reimbursement with compensatory interest upon annulment of unlawful Stamp Tax assessments?
Yes, taxpayers are entitled to reimbursement with compensatory interest upon annulment of unlawful tax assessments. In Process 464/2016-T, the taxpayer specifically requested not only annulment of the €11,813.30 stamp duty assessments but also 'reimbursement of the amount paid, increased by the respective indemnificatory interest calculated in accordance with legal terms.' Portuguese tax law provides for indemnificatory (compensatory) interest when tax payments are deemed unlawful and reversed, compensating taxpayers for the State's temporary use of funds. The interest calculation follows statutory provisions ensuring taxpayers are made whole when administrative acts are invalidated through arbitral or judicial proceedings.