Process: 466/2015-T

Date: March 10, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 466/2015-T addressed whether Stamp Tax under item 28.1 of the TGIS applies to building land (terrenos para construção) valued over €1,000,000. The taxpayer owned construction land in Sintra with a taxable property value of €1,680,810, and the Tax Authority assessed €8,404.05 in Stamp Tax for 2012, applying the 1% rate for 'property with residential use.' The taxpayer argued that construction land should not be classified as residential property under item 28.1, as it constitutes a separate legal category under Article 6 of the Municipal Property Tax Code (CIMI). The Tax Authority contended the property had the legal nature of residential use property. The central legal issue required interpreting the undefined concept of 'property with residential use' introduced by Law 55-A/2012. The CIMI distinguishes urban properties into residential, commercial, industrial/services, construction lands, and others, with construction lands specifically defined as land with building permits or authorizations but without existing residential structures. The arbitral tribunal analyzed whether construction lands, as a distinct statutory category lacking actual residential use, could fall within the scope of item 28.1's taxation of residential properties. This case exemplifies how taxpayers can challenge Stamp Tax assessments through CAAD arbitration when legal interpretation of taxable categories is disputed, particularly regarding high-value property classifications.

Full Decision

Case 466/2015-T

ARBITRAL DECISION

Arbiter Raquel Franco, appointed by the Ethics Council of the Center for Administrative Arbitration (CAAD) to form the sole arbitral tribunal constituted on 06 October 2015, decides as follows:

I. REPORT

  1. On 23.07.2015, taxpayer A..., NIF..., filed a petition for the constitution of a sole arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter designated solely as RJAT), in which the Tax and Customs Authority (AT) is the respondent.

  2. The petition for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and automatically notified to the Tax and Customs Authority on 07.08.2015.

  3. Pursuant to the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph b) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed as arbiter of the sole arbitral tribunal the undersigned, who communicated acceptance of the assignment within the applicable time period, and notified the parties of this appointment on 21.09.2015.

  4. Thus, in accordance with the provisions of subparagraph c) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the sole arbitral tribunal was constituted on 06.10.2015, with the relevant legal procedures following thereafter.

  5. In the present case, the claimant seeks that the Arbitral Tribunal declare the illegality of the Stamp Tax assessment no. 2012..., relating to the year 2012, as well as of the dismissal of the hierarchical appeal presented against the said tax assessment.

  6. Specifically, the said stamp tax assessment fell upon the taxable property value (VPT) of construction land situated in the municipality of Sintra, registered in the property record of the parish of ... under article..., of which the claimant is the owner.

  7. To the said construction land was assigned a VPT exceeding €1,000,000.00 (one million euros), in effect in the year 2012, to which the assessment refers.

  8. In the claimant's understanding, construction land should not be considered a "property with residential use" for the purposes of the application of item 28.1 of the General Table of Stamp Tax in the wording that was in effect in 2012.

  9. It is the understanding of AT that the property on which the assessment in question falls has the legal nature of a property with residential use, whereby the assessment acts which are the subject of the present request for arbitral decision should be maintained, as they embody a correct interpretation of Item 28.1 of the TGIS, in the wording in effect at the date on which the taxable event occurred.

II. SANITATION OF THE PROCEEDINGS

  1. The Tribunal is competent and is regularly constituted, pursuant to articles 2, paragraph 1, subparagraph a), 5 and 6, all of the RJAT.

  2. The parties have legal standing and capacity, are legitimately entitled to appear, and are legally represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

  3. The proceedings do not suffer from any defects that would render them invalid.

III. FACTUAL MATTERS

Before proceeding to the examination of the legal questions, it is necessary to present the factual matters relevant to their understanding and decision, which, having examined the documentary evidence attached to the record and taking into account the facts alleged, are established as follows:

III.1. Established Facts

a. The claimant is the owner of the urban property described as "construction land" situated in the municipality of Sintra and registered in the property record of the parish of ... under article....

b. The taxable property value of the property referred to in a. is €1,680,810.00.

c. With reference to the property indicated in a. and for the tax year 2012, the Tax and Customs Authority assessed the total amount of €8,404.05 as stamp tax calculated in accordance with item 28.1 of the TGIS.

d. The claimant filed an administrative claim against the stamp tax assessment in question.

e. The administrative claim was dismissed by decision of 09.01.2014.

f. The claimant filed a hierarchical appeal against the dismissal of the administrative claim on 19.02.2014.

g. The claimant was notified of the dismissal of the hierarchical appeal on 28.04.2015.

h. On 23.07.2015, the claimant filed the petition for constitution of an arbitral tribunal.

III.2. Unestablished Facts

There are no facts relevant to the decision that have been established as not proven.

IV. QUESTION FOR DECISION

The question to be decided in the present case comes down to whether, under the wording of item 28.1 of the TGIS that was in effect in the year 2012, construction lands should be considered as falling within the scope of the taxable base of the norm.

V. LEGAL REASONING

Item 28 of the TGIS in effect at the date of the facts provided for the following:

  1. "Ownership, usufruct or right of superficies of urban properties whose taxable property value shown in the property record, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 - on the taxable property value used for the purposes of IMI:

28.1 For property with residential use – 1%

28.2 – For property, when the taxable persons who are not 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 – 7.5%."

In the claimant's understanding, construction lands cannot be considered, for the purposes of being subject to Stamp Tax under item 28.1 of the TGIS, as properties with residential use.

To the contrary, the respondent contends that the property on which the contested assessment falls has the legal nature of a property with residential use, and the contested act does not suffer from illegality or unconstitutionality.

Item 28.1 of the TGIS, added by Law no. 55-A/2012, of 29 October, used an innovative concept - that of property with residential use - which is not found in tax legislation, namely in the Municipal Property Tax Code ("IMI"), which constitutes the subsidiary legislation for the purposes of stamp tax assessment (see articles 23, paragraph 7, 46 and 67 of the Stamp Tax Code).

Pursuant to article 2 of the CIMI, "property is any fraction of land, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or erected thereon, having a permanent character, provided it is part of the patrimony of a natural or legal person and, under normal circumstances, has economic value."

Properties are divided into rural (article 3), urban (article 4) or mixed (article 5), with urban properties subdividing into 4 types: residential, commercial, industrial or for services; construction lands and others (article 6).

Paragraph 3 of article 6 of the CIMI clarifies that construction lands are considered "lands situated within or outside an urban agglomeration, for which a building or development licence or authorization has been granted, a prior notification admitted or a favourable prior information issued for a subdivision or construction operation, and also those which have been so declared in the acquisition document."

Combining the indicated provisions, it is verified that there is, in none of the indicated norms, any reference to property with residential use.

Therefore, in order to determine what constitutes a property with residential use, an exercise of interpretation must be undertaken, resorting to the general rules of legal hermeneutics contained in article 9 of the Civil Code.

This question has already been examined in various cases, both within the scope of tax arbitration (see decisions rendered in cases numbered 42/2013-T, 48/2013-T, 49/2013-T, 51/2013-T, 144/2013-T, 2/2015-T, 54/2015-T and 84/2015-T, among others[1]), as well as by the successive judgments rendered by the Supreme Administrative Court, which have pronounced themselves, repeatedly and uniformly, on the question to be decided (see Judgment SAC of 22/04/2015, rendered in case 347/15, and all the case law cited therein, and Judgment SAC of 29/04/2015, rendered in case 21/15, Judgment SAC of 8/7/2015 rendered in case 573/15 among others[2]), with no arguments being identified so far that would allow breaking the unanimity that has been achieved by the decisions already rendered, in which it was decided that "construction lands" cannot be considered, for the purposes of Stamp Tax incidence, provided for in item no. 28.1 of the TGIS, under the wording of Law no. 55-A/2012, of 29 October, as properties (urban) with residential use.

In effect, the expression residential use cannot have any meaning other than "utilization" for residential purposes, that is, urban properties with actual utilization for residential purposes, whether because they are licensed for such, or because such is their normal destination.

Construction lands, not being built upon, do not per se satisfy any condition for being considered properties with residential use, since they do not have a license for residential use and, on the other hand, are not, by their very nature, habitable.

In fact, the residential use referred to in the CIMI always appears associated with "buildings" or "constructions" that exist, are authorized or are envisaged, because only these can be inhabited, which does not occur, naturally, with construction lands. Or, put another way, construction lands are not susceptible to being used for residential purposes.

The fact that in determining the VPT of urban properties classified as construction lands account is taken of the use that will be authorized or envisaged for it for the determination of the respective value of the site area (see art. 45, paragraphs 1 and 2 of the CIMI) does not transform construction lands into properties with residential use.

In light of the foregoing, it is reiterated, in keeping with the decisions already rendered, that construction lands are not encompassed by the concept of property (urban) with residential use contained in item no. 28.1 of the TGIS, in the wording given to it by Law no. 55-A/2012, of 29 October, whereby, there being no legal ground for the assessment in question in the present case, its annulment outright is required.

VI. DECISION

In accordance with what is set out above, it is decided to find the petition for arbitral decision well-founded and, consequently, declare the illegality of the stamp tax assessment contested, with all legal consequences, as well as of the decision dismissing the hierarchical appeal rendered through decision of the Director of Services of the Services Department of the IMT of 27.03.2015.

Value: in accordance with the provisions of paragraph 2 of art. 315 of the CPC, combined with subparagraph a) of paragraph 1 of art. 97-A of the CPPT and with paragraph 2 of art. 3 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the proceedings is set at €8,404.05.

Costs: pursuant to the provisions of article 22, paragraph 4, of the RJAT and in accordance with Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, the amount of costs is set at €918.00, to be borne entirely by the respondent pursuant to articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and article 4, paragraph 4, of the cited Regulation.

Let it be registered and notified.

Lisbon, 10 March 2016

The Arbiter,

Raquel Franco

[1] All available in the CAAD database (www.caad.org).

[2] All available at www.dgsi.pt.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS apply to building land (terrenos para construção) valued over €1,000,000?
Based on arbitral case law, Stamp Tax under Verba 28.1 of the TGIS generally does not apply to building land (terrenos para construção) even when valued over €1,000,000. Item 28.1 specifically targets 'property with residential use' (prédio de utilização habitacional), and construction land constitutes a separate legal category under Article 6 of the CIMI. Building land lacks the actual residential use required for the tax to apply, as it represents undeveloped land with building authorization rather than property currently used for housing purposes.
Is a building plot classified as a 'residential property' for purposes of the Stamp Tax General Table in Portugal?
No, building plots are not classified as 'residential property' for Stamp Tax purposes under the TGIS. The Municipal Property Tax Code (CIMI) establishes distinct categories of urban properties in Article 6: residential, commercial, industrial/services, construction lands, and others. Construction lands (terrenos para construção) are defined in Article 6(3) as land with building permits or authorizations but constitute a separate category from residential properties. The term 'property with residential use' in item 28.1 refers to actual residential use, not potential future residential development.
What was the CAAD arbitral tribunal's decision in Process 466/2015-T regarding Stamp Tax on high-value building land?
The CAAD arbitral tribunal in Process 466/2015-T examined whether construction land valued at €1,680,810 should be subject to the 1% Stamp Tax rate under item 28.1 of the TGIS. The taxpayer challenged the Tax Authority's assessment of €8,404.05, arguing that building land cannot be considered 'property with residential use.' The tribunal analyzed the legal distinction between construction lands and residential properties under the CIMI, noting that 'property with residential use' is an undefined concept introduced by Law 55-A/2012. The decision focused on interpreting whether undeveloped construction land falls within the scope of residential property taxation.
Can taxpayers challenge Stamp Tax assessments on building land through tax arbitration at CAAD?
Yes, taxpayers can challenge Stamp Tax assessments on building land through tax arbitration at CAAD (Centro de Arbitragem Administrativa). Process 466/2015-T demonstrates this process: the taxpayer filed administrative claims and hierarchical appeals, which were dismissed, then initiated arbitral proceedings under the RJAT (Legal Regime for Arbitration in Tax Matters). Tax arbitration provides an effective forum for disputing the legal classification of properties and interpretation of taxable categories under the TGIS, particularly when the Tax Authority applies item 28.1 to construction lands rather than completed residential properties.
What is the legal distinction between building land and residential property under Portuguese Stamp Tax law?
Portuguese Stamp Tax law distinguishes building land from residential property through the CIMI classification system. Article 6 establishes that construction lands (terrenos para construção) are urban properties with building permits or authorizations but no existing structures, constituting a separate category from residential properties which have actual buildings used for housing. Item 28.1 of the TGIS applies only to 'property with residential use,' requiring actual residential utilization rather than mere potential for future development. This distinction is crucial because construction land represents a preliminary stage before residential use commences, and the 1% Stamp Tax rate should apply only to properties with existing residential character, not undeveloped building plots.