Process: 467/2014-T

Date: March 2, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 467/2014-T addressed a fundamental dispute regarding Stamp Tax (Imposto de Selo) assessment on vertical property under item 28.1 of the General Stamp Tax Table (TGIS). The claimant challenged €57,938.00 in Stamp Tax assessments for 2013, arguing the Tax Authority (AT) incorrectly calculated the tax by summing the Patrimonial Taxable Values (PTV) of all independently useable areas within single property registrations. The claimant contended that each independent unit should be taxed separately based on its individual PTV, while the AT maintained that independently useable areas within the same property registration do not constitute separate urban real property under Article 2(4) of the Municipal Property Tax Code (MPTC), requiring PTVs to be aggregated. The case involved multiple urban properties in full vertical ownership regime, each containing floors or divisions capable of independent use. The claimant also raised constitutional concerns, alleging the AT's interpretation violated Articles 13 and 104 of the Portuguese Constitution regarding equality and taxation principles. This arbitration highlights the critical distinction between property registration units and independently useable areas for Stamp Tax purposes, with significant financial implications for owners of multi-unit buildings under vertical property regimes.

Full Decision

CAAD – Administrative Arbitration Center

Tax Arbitration

Proc. No. 467/2014 –T

ARBITRAL DECISION

Claimant: A, (hereinafter "Claimant")

Respondent: TAX AND CUSTOMS AUTHORITY (hereinafter "TCA" and "Respondent")

  1. Report

A, legal entity No. …, with registered office at …, hereinafter referred to as Claimant, submitted to the Administrative Arbitration Center (CAAD) a request for constitution of an arbitral tribunal with a view to annulling the tax assessment acts concerning item No. 28.1 of the General Stamp Tax Table (GSTT), in the total amount of € 57,938.00, which are broken down in the collection notes Nos.: 2014 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9, 2014 ...2, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...3, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 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 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...4, 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 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...6, 2014 ...7, 2014 ...9, relating to the year 2013, dated 17.03.2014 and 18.03.2014, notified to the Claimant on 26.03.2014,

The Claimant alleges the illegality of the tax act, based on the following defects:

a) Incorrect interpretation by the TCA of item 28.1 of the General Stamp Tax Table (GSTT), insofar as the subjection to Stamp Tax (ST) is determined by the Patrimonial Taxable Value (PTV) of each individual property and not by the sum of all independently useable areas of a single property registration entry;

b) Unconstitutional interpretation of the provision of item 28.1 of the GSTT by violation of Articles 13 and 104 of the Constitution of the Portuguese Republic.

Petitioning, finally, for the refund of the Tax paid relating to the assessments/collection notes that are the subject of the present proceedings, increased by default interest and indemnification interest.

The Tax and Customs Authority, for its part, contended that there exists no illegality insofar as the independently useable areas relating to the same property registration entry do not constitute urban real property within the meaning of No. 4 of Article 2 of the Municipal Property Tax Code (MPTC), therefore the PTVs of all those independently useable areas or floors cannot fail to be summed, concluding for the dismissal of the annulment request formulated by the Claimant.

The sole arbitrator was designated and appointed on 22.08.2014.

In accordance with the provisions of Article 11, No. 1, subsection c) of the Tax Arbitration Legal Regime (TALR), the singular arbitral tribunal was constituted on 08.09.2014.

Neither the Claimant nor the Respondent required the holding of the first arbitral hearing nor the formulation of submissions.

  1. Preliminary Issues

The joinder of claims made in the present arbitration request, in which assessment acts relating to the same tax (Stamp Tax), based on the same factual basis and applying the same legal rules, is fully justified in light of the principle of procedural economy enshrined in Article 3 of the TALR.

The arbitral tribunal is materially competent, in accordance with the provisions of Articles 2, No. 1, subsection a) of the Legal Regime for Arbitration in Tax Matters.

The parties have legal personality and capacity and have standing in accordance with Article 4 and No. 2 of Article 10 of the Legal Regime for Arbitration in Tax Matters (TALR), and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings are not affected by any nullity nor have the parties raised any exceptions that prevent the consideration of the merits of the case, so the conditions are met for the issuance of the arbitral decision.

  1. Factual Matters

3.1. Established Facts:

Having analyzed the documentary evidence produced and the position of the parties, the following facts are considered established and relevant to the decision of the case:

  1. The Claimant is the owner of urban properties registered in the urban property register of the Tax Office of ..., … (...), Parish of ..., under article ..., of the Tax Office of ..., ... (...), Parish of ..., under article ..., of the Tax Office of ..., ... (...), Parish of ..., under article ..., Tax Office of … (...), Union of Parishes of ..., under article ..., of the Tax Office of ... (...), Union of Parishes of ..., under article ..., Tax Office of … (...), Union of Parishes of ..., under article ..., and Tax Office of ... … (...), Union of Parishes of ... (...);

  2. All the identified urban properties were, at the end of 2013, in a regime of full/vertical ownership, each having floors or divisions susceptible to independent use;

  3. With regard to the urban properties identified in 1, the Claimant was notified of the 2013 Stamp Tax assessments, relating to item 28.1 of the GSTT, with a total amount of € 57,938.00, whose collection notes, dated 17.03.2014 and 18.03.2014, are broken down and relate to the following property registration entries:

a) Urban property ... of the parish of ...: 2014 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9, 2014 ...2, 2014 ...5, 2014 ...7, 2014 ...9;

b) Urban property ... of the parish of ...: 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1;

c) Urban property ... of the parish of ...: 2014 ...3, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8;

d) Urban property ... of the Union of Parishes of ...: 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 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9;

e) Urban property ... of the Union of Parishes of ...: 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6, 2014 ...8, 2014 ...0, 2014 ...2, 2014 ...4, 2014 ...6;

f) Urban property ... of the Union of Parishes of ...: 2014 ...4, 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 ...9, 2014 ...2, 2014 ...5, 2014 ...8, 2014 ...1, 2014 ...4, 2014 ...7, 2014 ...0, 2014 ...3, 2014 ...6, 2014 ...9;

g) Urban property ... of the parish of ...: 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...7, 2014 ...9, 2014 ...1, 2014 ...3, 2014 ...5, 2014 ...6, 2014 ...7, 2014 ...9,

The property ... already identified is composed of floors or divisions susceptible to independent use, with residential destination, with the following PTVs:

  • Porteria (Doorman's quarters) - € 39,800.00;

  • Ground Floor Right - € 47,040.00;

  • Ground Floor Left - € 95,160.00;

  • 1st Floor Right - € 136,040.00;

  • 1st Floor Left - € 145,270.00;

  • 2nd Floor Right - € 136,040.00;

  • 2nd Floor Left - € 145,270.00;

  • 3rd Floor Right - € 136,040.00;

  • 3rd Floor Left - € 145,270.00;

  • 4th Floor Right - € 136,040.00;

  • 4th Floor Left - € 145,270.00;

  • 5th Floor Right - € 136,040.00;

  • 5th Floor Left - € 145,270.00;

  • 6th Floor Right - € 136,040.00;

  • 6th Floor Left - € 145,270.00;

The property ... already identified is composed of floors or divisions susceptible to independent use, with residential destination, with the following PTVs:

  • 1st Floor Right - € 107,560.00;

  • 1st Floor Front - € 94,390.00;

  • 2nd Floor Right - € 107,560.00;

  • 2nd Floor Left - € 107,560.00;

  • 3rd Floor Right - € 107,560.00;

  • 3rd Floor Left - € 107,560.00;

  • 4th Floor Right - € 107,560.00;

  • 4th Floor Left - € 107,560.00;

  • 5th Floor Right - € 107,560.00;

  • 5th Floor Left - € 107,560.00;

  • 6th Floor Right - € 107,560.00;

  • 6th Floor Left - € 107,560.00.

The property ... already identified is composed of floors or divisions susceptible to independent use, with residential destination, with the following PTVs:

  • 1st A - € 62,750.00;

  • 1st B - € 49,980.00;

  • 1st C - € 49,980.00;

  • 2nd A - € 49,980.00;

  • 2nd B - € 49,980.00;

  • 2nd C - € 49,980.00;

  • 2nd D - € 46,770.00;

  • 3rd A - € 49,980.00;

  • 3rd B - € 49,980.00;

  • 3rd C - € 49,980.00;

  • 3rd D - € 46,770.00;

  • 4th A - € 49,980.00;

  • 4th B - € 49,980.00;

  • 4th C - € 49,980.00;

  • 4th D - € 46,770.00;

  • 5th A - € 49,980.00;

  • 5th B - € 49,980.00;

  • 5th C - € 49,980.00;

  • 5th D - € 46,770.00;

  • 6th A - € 31,890.00;

  • 6th B - € 49,980.00;

  • 6th C - € 38,680.00;

  • 6th D - € 42,690.00;

  1. The property ... already identified is composed of floors or divisions susceptible to independent use, with residential destination, with the following PTVs:

  • Ground Floor Right - € 82,490.00;

  • Ground Floor Left - € 82,490.00;

  • Ground Floor Front - € 82,490.00;

  • Ground Floor P - € 79,500.00;

  • 1st Floor Right - € 246,730.00;

  • 1st Floor Left - € 246,730.00;

  • 2nd Floor Right - € 246,730.00;

  • 2nd Floor Left - € 246,730.00;

  • 3rd Floor Right - € 246,730.00;

  • 3rd Floor Left - € 246,730.00;

  • 4th Floor Right - € 246,730.00;

  • 4th Floor Left - € 246,730.00;

  • 5th Floor Right - € 246,730.00;

  • 5th Floor Left - € 246,730.00;

  • 6th Floor Right - € 246,730.00;

  • 6th Floor Left - € 246,730.00;

  • 7th Floor Right - € 246,730.00;

  • 7th Floor Left - € 246,730.00;

  • 8th Floor Right - € 246,730.00;

  • 8th Floor Left - € 246,730.00;

  • 9th Floor Right - € 246,730.00;

  • 9th Floor Left - € 246,730.00;

  • 10th Floor Right - € 246,730.00;

  • 10th Floor Left - € 246,730.00.

  1. The property ... already identified is composed of floors or divisions susceptible to independent use, with residential destination, with the following PTVs:

  • Ground Floor - € 33,880.00;

  • 1st A - € 39,480.00;

  • 1st B - € 49,140.00;

  • 1st C - € 39,480.00;

  • 1st D - € 49,140.00;

  • 2nd A - € 39,480.00;

  • 2nd B - € 49,140.00;

  • 2nd C - € 39,480.00;

  • 2nd D - € 49,140.00;

  • 3rd A - € 39,480.00;

  • 3rd B - € 49,140.00;

  • 3rd C - € 39,480.00;

  • 3rd D - € 49,140.00;

  • 4th A - € 39,480.00;

  • 4th B - € 49,140.00;

  • 4th C - € 39,480.00;

  • 4th D - € 49,140.00;

  • 5th A - € 39,480.00;

  • 5th B - € 49,140.00;

  • 5th C - € 39,480.00;

  • 5th D - € 49,140.00;

  • 6th A - € 39,480.00;

  • 6th B - € 49,140.00;

  • 6th C - € 39,480.00;

  • 6th D - € 49,140.00;

  • 7th A - € 39,480.00;

  • 7th B - € 49,140.00;

  • 7th C - € 39,480.00;

  • 7th D - € 49,140.00;

  • 8th A - € 39,480.00;

  • 8th B - € 49,140.00;

  • 8th C - € 39,480.00;

  • 8th D - € 49,140.00;

  • 9th A - € 39,480.00;

  • 9th B - € 49,140.00;

  • 9th C - € 39,480.00;

  • 9th D - € 49,140.00;

  • 10th A - € 39,480.00;

  • 10th B - € 49,140.00;

  • 10th C - € 39,580.00;

  • 10th D - € 49,140.00;

  1. The property ... already identified is composed of floors or divisions susceptible to independent use, with residential destination, with the following PTVs:

  • Ground Floor Right - € 76,890.00;

  • Ground Floor Left - € 76,890.00;

  • 1st Floor Right - € 78,180.00;

  • 1st Floor Left - € 78,180.00;

  • 1st Floor Front - € 79,380.00;

  • 2nd Floor Right - € 78,180.00;

  • 2nd Floor Left - € 78,180.00;

  • 2nd Floor Front - € 79,380.00;

  • 3rd Floor Right - € 78,570.00;

  • 3rd Floor Left - € 78,570.00;

  • 3rd Floor Front - € 79,780.00;

  • 4th Floor Right - € 78,570.00;

  • 4th Floor Left - € 78,570.00;

  • 4th Floor Front - € 79,780.00;

  • 5th Floor Right - € 78,570.00;

  • 5th Floor Left - € 78,570.00;

  • 5th Floor Front - € 79,780.00;

  • 6th Floor Right - € 78,960.00;

  • 6th Floor Left - € 78,960.00;

  • 6th Floor Front - € 80,170.00;

  • 7th Floor Right - € 78,960.00;

  • 7th Floor Left - € 78,960.00;

  • 7th Floor Front - € 80,170.00;

  • 8th Floor Right - € 65,940.00;

  • 8th Floor Left - € 65,940.00;

  • 8th Floor Front - € 50,660.00.

  1. The property ... already identified is composed of floors or divisions susceptible to independent use, with residential destination, with the following PTVs:

  • Porteria - € 13,530.00;

  • Ground Floor A - € 47,040.00;

  • Ground Floor B - € 47,040.00;

  • 1st A - € 47,040.00;

  • 1st B - € 47,040.00;

  • 1st C - € 47,040.00;

  • 1st D - € 47,040.00;

  • 2nd A - € 47,040.00;

  • 2nd B - € 47,040.00;

  • 2nd C - € 47,040.00;

  • 2nd D - € 47,040.00;

  • 3rd A - € 47,040.00;

  • 3rd B - € 47,040.00;

  • 3rd C - € 47,040.00;

  • 3rd D - € 47,040.00;

  • 4th A - € 47,040.00;

  • 4th B - € 47,040.00;

  • 4th C - € 47,040.00;

  • 4th D - € 47,040.00;

  • 5th A - € 47,040.00;

  • 5th B - € 47,040.00;

  • 5th C - € 47,040.00;

  • 5th D - € 47,040.00;

  • 6th A - € 47,040.00;

  • 6th B - € 47,040.00;

  • 6th C - € 47,040.00;

  • 6th D - € 47,040.00;

  • 7th A - € 47,040.00;

  • 7th B - € 47,040.00;

  • 7th C - € 47,040.00;

  • 7th D - € 47,040.00;

  • 8th A - € 47,040.00;

  • 8th B - € 47,040.00;

  • 8th C - € 47,040.00;

  • 8th D - € 47,040.00;

  • 9th A - € 47,040.00;

  • 9th B - € 47,040.00;

  • 9th C - € 47,040.00;

  • 9th D - € 47,040.00;

  • 10th A - € 47,040.00;

  • 10th B - € 47,040.00;

  • 10th C - € 47,040.00;

  • 10th D - € 47,040.00.

  1. All and each of the property registration entries above identified in 1 and from 4 to 10 are registered in their respective property register as properties in full/vertical ownership with floors or divisions susceptible to independent use, with residential destination, among others;

  2. The patrimonial taxable value of each of the urban property registration entries only reaches or exceeds the amount of € 1,000,000.00 when the PTVs relating to the floors or divisions susceptible to independent use and with residential destination that compose each of those property registration entries are summed;

  3. No floor or division susceptible to independent use with residential destination in any of the urban property registration entries identified in 1 and from 4 to 10 has a patrimonial taxable value equal to or exceeding € 1,000,000.00;

  4. The collection notes indicated in 3 were notified to the Claimant and had as the voluntary payment deadline the day 30.04.2014;

  5. The Claimant paid all amounts stated in the collection notes referred to in 3, on the day 30 April 2014;

  6. On 04.07.2014 the now Claimant submitted, via electronic platform, the request for constitution of an arbitral tribunal;

  7. The Claimant proceeded on 01.12.2014 to the payment of the subsequent court fee;

No other facts relevant to the decision of the case were established.

3.2. Justification of the Established Factual Matters:

With respect to the established facts, the conviction of the arbitrator was based on the documentary evidence filed with the proceedings, as well as on the acceptance by the parties of the factual matters brought before this tribunal.

  1. Legal Matters:

4.1. Object and Scope of the Present Proceedings

The arbitration request has as its object the declaration of illegality of the Stamp Tax assessment acts in the total amount of € 57,938.00, which are broken down in the collection documents above identified, under the provisions of item 28.1 of the GSTT, relating to the year 2013, as well as the consideration of the alleged violation of the principle of equality enshrined in Article 13 of the Constitution of the Portuguese Republic

Additionally, the Claimant petitions for the refund of the tax paid for being allegedly unduly paid and the payment of indemnification interest.

4.2. Regarding the Alleged Illegality of the Stamp Tax Assessments, Item 28.1 of the GSTT

In summary, the issue at hand is to determine whether the interpretation made by the Tax and Customs Authority of using, as a legal criterion for the purposes of subjection to Item 28.1 of the GSTT, the sum of the PTVs of all floors or divisions of independent use with residential destination relating to the same property registration entry is consistent with the applicable legal framework.

In this regard, it is important to note that the tax act in question occurred during the validity of the wording given by Law No. 55-A/2012, of 29 October, so the current wording given to it by Article 194 of Law No. 83-C/2013, of 31 December (State Budget for 2014) is not applicable here, since it only came into force on 1 January 2014.

And it is without losing sight of the legislative context of this innovation in the field of Stamp Tax that the question relating to the valuation of the scope of the tax base provision contained in Article 28.1 of the GSTT should also be assessed.

Let us therefore examine first and foremost the legal framework of the Stamp Tax assessment in question:

Law No. 55-A/2012, of 29 October, added item 28.1 to the General Stamp Tax Table (GSTT), with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial taxable value as recorded in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or exceeding € 1,000,000 – on the patrimonial taxable value used for purposes of IMI:

28.1 – Per property with residential destination – 1% (…);"

In turn, Article 67, No. 2 of the Stamp Tax Code, added by the said Law, provides that "to matters not regulated in the present code relating to item 28 of the General Table, the MPTC shall apply subsidiarily."

The tax base provision refers to urban properties, the basic concept of property being derived from the provisions of Article 2 of the MPTC, with the determination of PTV being subject to the terms of Article 38 and following of the same code.

Whereby, in accordance with the said legal provision:

"1 - For the purposes of the present Code, property is any plot of land, encompassing waters, plantations, buildings and constructions of any kind incorporated into or located on it, with a character of permanence, provided that it is part of the patrimony of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, under the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, even though located on a plot of land that constitutes an integral part of a different patrimony or is not patrimonial in nature." (emphasized by us)

The economic value criterion and functional autonomy are what define property, and Article 6 of the MPTC clarifies that:

"1 - Urban properties are divided into:

a) Residential;

2 - Residential, commercial, industrial or service properties are buildings or constructions licensed for such purpose or, in the absence of a license, which have as their normal destination each of these purposes." (emphasized by us)

The legislator's concept regarding properties and the subsequent division into urban ones is, for tax purposes, undoubtedly a criterion based on economic value and functional autonomy according to purpose.

That is, one is faced with a concept of material or substantive character and not a concept of legal-formalistic delineation, as the Respondent TCA seems to intend.

Now, in the case at hand, the Respondent TCA does not even dispute that the floors or divisions with independent use and with residential destination relating to the property registration entries possess those same characteristics (functional autonomy and economic value) highlighted by the legislator, nor could it do so since it is the TCA itself that deemed such information correct and had it registered in the respective property registers of the property registration entries to which the floors or divisions susceptible to independent use pertain.

Moreover, precisely because such floors or divisions possess such characteristics of autonomy, both in functional and economic value terms, it is understandable that the legislator provided for the attribution of patrimonial taxable values for each of those floors, areas or divisions susceptible to independent use.

This contradicts the TCA's thesis according to which, since not expressly stated in No. 4 of Article 2 of the MPTC the floors or divisions susceptible to independent use, the legislator had intended to exclude such figure from the concept of property.

Therefore, being indisputable the residential destination and also the functional autonomy and economic value, moreover fiscally reflected in the PTV of those same independent areas or divisions, characteristics that are transposed into the respective property registers of the property registration entry under the designation of floors or divisions susceptible to independent use, we cannot fail to conclude that in the material and substantive plane those same floors or divisions are encompassed by the notion of property contained in No. 1 of Article 2 of the MPTC and of urban property contained in subsection a) of No. 1 and No. 2 of Article 6, both of the MPTC.

The introduction into the tax legal order of the present Item 28.1 of the GSTT had as a relevant and determining factor the incidence on urban properties with residential destination, of high value, also usually referred to as luxury dwellings, more precisely, of value equal to or exceeding € 1,000,000.00, on which Stamp Tax began to apply.

The legislator thus intended to introduce a principle of taxation on wealth displayed in the ownership, usufruct or right of superficies on any and all urban properties with residential destination, the legislative criterion being applied such stamp tax on urban properties with residential destination, whose PTV is equal to or exceeding € 1,000,000.00.

This conclusion can be drawn from the analysis of the discussion of bill No. 96/XII in the Assembly of the Republic, available for consultation in the Journal of the Assembly of the Republic, I series, No. 9/XII/2, of 11 October 2012.

The justification for the measure designated as "special tax on urban residential properties of highest value" is based on the invocation of the principles of social equity and fiscal justice, calling upon to contribute more intensely the holders of properties of high value intended for housing, bringing the new special tax to bear on "houses of value equal to or exceeding 1 million euros."

In this way, it is clear that the legislator understood that houses possessing certain characteristics measured quantitatively through the PTV should determine a special contribution to ensure fair distribution of the fiscal burden.

But no less evident is that it reflects a line of legislative choice that intended to specifically burden urban properties with residential destination of the high-end segment, premium or also commonly referred to as luxury.

It should be noted that, regardless of more or less subjective conceptions about the concept of luxury residences, high-end segment or expressions of equivalent meaning, it is true that patrimonial taxable value has been, since the reform of wealth taxation in 2003, measured based on objective elements, such as area, location, level of comfort, among others.

This means to say that, regardless of the ideological considerations that may be made about such a political choice, the legislator had a concrete and defined objective: to subject to Stamp Tax taxation urban properties with residential destination of the highest value, which in practice translated into the setting of a measurable threshold through the PTV: value equal to or exceeding € 1,000,000.00.

Moreover, the legislator ensured through various coefficients (mitigating and aggravating) the objectivity in the calculation of that same PTV.

Now, none of the floors or divisions susceptible to independent use here in question and on which the assessments that are the subject of the present arbitration request fell, individually reach the value of € 1,000,000.00, and each of those floors or divisions independently represents in the tax system a property in its own right, which is why the TCA erred regarding the assumptions by subjecting item 28.1 of the GSTT to disregard that each of those same areas or divisions represents in terms of the Municipal Property Tax Code and consequently under Stamp Tax, a property, which is why those areas or divisions relating to the same property registration entry could not be the subject of summation for calculation of the PTV of that property registration entry.

This means to say that, taking into account the legislative purpose (ratio legis) that has just been stated, the floors or divisions susceptible to independent use do not meet the prerequisite relating to taxation under the tax base provision provided in item 28.1 of the GSTT, which is why, in light of what has been expounded, one cannot fail to conclude the legal non-conformity of the TCA's interpretation of subjecting Item 28.1 of the GSTT to the floors or divisions susceptible to independent use, since they do not individually reach the minimum quantitative criterion for such subjection.

Thus, with respect to the collection notes issued and notified to the Claimant and the respective underlying assessments, a judgment of censure must be rendered and, consequently, the annulment of the tax acts that are the subject of the present proceedings must be determined.

4.3. Prejudiced Matters: Unconstitutionality by Violation of the Principle of Equality – Article 13 of the Constitution of the Portuguese Republic

As the singular arbitral tribunal has accepted the understanding of the non-applicability of item 28.1 of the GSTT to the present case, the consideration of the remaining defects alleged and which may affect the contested assessments is prejudiced as procedurally moot.

Thus, the consideration of the matter of unconstitutionality of the norm introduced in the GSTT (item 28/28.1) by Law No. 55-A/2012, of 28 October, by violation of the principle of equality enshrined in Article 13 of the Constitution is prejudiced.

4.4. Regarding the Refund to the Claimant of the Paid Stamp Tax, Increased by Payment of Indemnification Interest:

In light of all that has been expounded and concluded in point 4.2, a judgment of illegality has been rendered on the tax acts that are the subject of the present arbitral pronouncement, it is important to consider the request also formulated by the Claimant for the payment of indemnification interest.

In accordance with No. 1 of Article 43 of the General Tax Code (GTC), "Indemnification interest is due when it is determined, in a voluntary objection or judicial challenge, that there was an error attributable to the services which resulted in payment of the tax debt in an amount greater than legally due."

Article 43, No. 2 of the GTC further provides that "There is also considered to be an error attributable to the services in cases where, although the assessment is made based on the taxpayer's declaration, the latter followed, in completing it, the generic guidance of the tax administration, duly published."

Now, in the concrete case, the legitimacy of the aforementioned request for payment of indemnification interest in favor of the Claimant is unequivocally demonstrated, since the assessments in question are shown to be affected by illegality, and therefore indemnification interest is due from the day following the payment unduly made until the date of issuance of the respective credit note, in accordance with that established in Article 43 of the GTC and Article 61 of the Tax Procedure and Process Code (TPPC).

Therefore, the Claimant is creditor of the TCA for the amount corresponding to the Stamp Tax unduly paid, in the amount of € 57,938.00 (fifty-seven thousand nine hundred thirty-eight euros), plus the respective indemnification interest accrued and accruing to be calculated until the issuance of the respective credit note.

  1. DECISION:

For these reasons and with the justification set forth above, this arbitral tribunal decides:

  1. To declare well-founded the request for declaration of illegality of the tax assessment acts in the field of Stamp Tax, to which correspond the collection notes identified in 3 and relating to the properties identified by the urban property registration entries contained in 1, by defect of violation of law as to the provision contained in item 28.1 of the GSTT, due to an error regarding the legal assumptions;

  2. To declare well-founded the request for payment of indemnification interest by the Respondent to the Claimant from the date of the unduly payment until the date of issuance of the credit note, in accordance with that established in Article 43 of the GTC and in Article 61 of the Tax Procedure and Process Code;

Value of the case: € 57,938.00 – Articles 97-A of the TPPC, 12 of the TALR (Decree-Law 10/2011), 3-2, of the Regulation of Costs in Tax Arbitration Proceedings (RCTAP).

Costs in accordance with Table I of the RCTAP, calculated based on the aforementioned value of the claim, borne by the Respondent - Articles 4-1 of the RCTAP and 6-2/a) and 22-4 of the TALR.

Let this arbitral decision be notified to the parties and, in due course, let the proceedings be filed.

Lisbon, 2 March 2015.

The Sole Arbitrator

(Luís Ricardo Farinha Sequeira)

Text prepared by computer, in accordance with Article 138, No. 5 of the Civil Procedure Code (CPC), applicable by reference of Article 29, No. 1, subsection e) of the Tax Arbitration Legal Regime, with blank verses and reviewed by me.

Frequently Asked Questions

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What is Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) and how does it apply to property?
Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) imposes an annual Stamp Tax on urban real property with a Patrimonial Taxable Value (Valor Patrimonial Tributário) exceeding certain thresholds. This provision applies to property ownership rights and creates a recurring tax obligation based on the property's assessed value for tax purposes. The key controversy involves whether the tax applies to individual independently useable units or to the aggregate value of all units within a single property registration entry.
How does Portuguese tax law define vertical property (propriedade vertical) for Stamp Tax purposes?
Portuguese tax law defines vertical property (propriedade vertical) as a full ownership regime where a building contains multiple floors or divisions capable of independent use, each potentially owned by the same or different parties. For Stamp Tax purposes, the critical question is whether these independently useable areas constitute separate 'urban real property' under Article 2(4) of the Municipal Property Tax Code (MPTC). The Tax Authority's position is that units within the same property registration do not constitute independent properties, while taxpayers argue each independently useable unit should be treated separately for taxation.
Can the Tax Authority (AT) levy Stamp Tax on individual units within a vertical property building?
The Tax Authority (AT) can levy Stamp Tax on properties in vertical ownership regimes, but the method of calculation is disputed. According to the AT's interpretation, when multiple independently useable units exist within a single property registration entry, the Patrimonial Taxable Values of all units must be summed to determine the tax liability under Verba 28.1 TGIS. This approach can result in significantly higher tax assessments compared to treating each unit separately, as the aggregated value may exceed Stamp Tax thresholds that individual units would not reach.
What was the outcome of CAAD arbitration Process 467/2014-T regarding Stamp Tax on vertical property?
CAAD arbitration Process 467/2014-T involved a challenge to €57,938.00 in Stamp Tax assessments for 2013 on multiple vertical properties. The claimant argued the Tax Authority incorrectly summed the Patrimonial Taxable Values of independently useable areas within single property registrations, rather than taxing each unit separately. The claimant also raised constitutional objections based on Articles 13 and 104 of the Portuguese Constitution. The arbitral tribunal, constituted on September 8, 2014, examined whether independently useable areas within vertical property should be treated as separate taxable units or aggregated for Stamp Tax calculation purposes under Verba 28.1 TGIS.
How can property owners challenge Stamp Tax (Imposto de Selo) assessments through CAAD tax arbitration in Portugal?
Property owners can challenge Stamp Tax (Imposto de Selo) assessments through CAAD (Centro de Arbitragem Administrativa) by filing a request for arbitration under the Tax Arbitration Legal Regime (RJAT). The process involves submitting documentation of the contested collection notes, stating legal grounds for the challenge (such as incorrect tax calculation or unconstitutional application), and paying applicable fees. Taxpayers can raise substantive issues like incorrect interpretation of tax provisions, procedural defects, or constitutional violations. CAAD arbitration offers a faster alternative to judicial courts, with tribunals typically constituted within weeks and decisions rendered more expeditiously than traditional litigation. Parties can request hearings and submit evidence, though in some cases proceedings are decided on written submissions alone.