Process: 467/2015-T

Date: February 4, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 467/2015-T concerns a constitutional challenge to Stamp Tax assessments for 2014 on high-value real estate owned by two Real Estate Asset Management Funds in Portugal. The dispute centers on item 28.1 of the General Stamp Tax Table (TGIS), which imposes special taxation on urban properties with values exceeding €1,000,000. The claimants argue this provision violates the constitutional principle of equality on multiple grounds. First, they contend the tax arbitrarily excludes significant high-value assets by limiting its scope to residential properties while exempting other expensive real estate categories. Second, the tax applies to individual properties in isolation rather than aggregated wealth, creating inequitable treatment where an owner of one property worth over €1 million pays the tax, while another owner holding multiple properties each under €1 million but collectively exceeding that threshold escapes taxation. This disconnects the tax from actual contributive capacity. Third, the claimants argue the provision creates double taxation since the same property ownership is already taxed under Municipal Property Tax (IMI). The arbitral tribunal at CAAD (Administrative Arbitration Centre) was constituted on October 6, 2015, with three arbitrators. The Tax Authority submitted its defense arguing the request should be dismissed as unfounded. During proceedings, a Constitutional Court judgment dated November 11, 2015 was submitted, and the claimant exercised their right of contradiction, concluding on the unconstitutionality of item 28.1 of TGIS. The tribunal found the case procedurally sound with proper joinder of claims and claimants permitted under RJAT article 3(1), as all assessments concerned the same tax and depended on identical factual circumstances and legal principles.

Full Decision

ARBITRAL DECISION

1. REPORT

1.1

Real Estate Asset Management Fund – A…, taxpayer no. … and Real Estate Asset Management Fund – B…, taxpayer no. …, both represented by Management Company C… – Real Estate Investment Funds Management Company, S.A., taxpayer no. …, hereinafter referred to as the Claimant, submitted, on 23/07/2015, a request for arbitral decision, in which it requests that item 28.1 of the General Stamp Tax Table (TGIS) be disapplied, for violation of the constitutional principle of equality – article 204 of the CRP –, and the declaration of illegality of the Stamp Tax assessments for the year 2014 relating to the properties registered in the land registry under article numbers … and …, of the parish of …, the property registered in the land registry under article number …, of the parish of …, and the property registered in the land registry under article number … of the parish of … – ....

1.2

The Honorable President of the Deontological Council of the Administrative Arbitration Centre (CAAD), appointed, on 21/09/2015, as arbitrator-president, Counsel Member Maria Fernanda Maçãs, and as co-arbitrators Professors Miguel Patrício and Francisco Nicolau Domingos.

1.3

On 06/10/2015 the arbitral tribunal was constituted.

1.4

In compliance with the provision of article 17, nos. 1 and 2, of Decree-Law no. 10/2011, of 20 January (RJAT), the Respondent was, on 06/10/2015, notified to, if it so wished, submit a reply, request the production of additional evidence and to remit the administrative file.

1.5

On 04/11/2015, the Respondent submitted its reply, in which it concludes that the request for declaration of illegality should be judged unfounded.

1.6

The tribunal, on 08/11/2015, having no production of evidence been requested and saving the possibility of the parties wishing to produce oral submissions, dispensed with the meeting referred to in article 18 of the RJAT and invited them to state whether they intended to present submissions and to clarify the form they should take, oral or written. 5 April was fixed as the deadline for delivery of the arbitral decision.

1.7

The Respondent, on 11/11/2015, submitted a request in which it states that it has no objection to the draft dispensation of the meeting under article 18 of the RJAT, waiving the holding of submissions, saving that, should the Claimant wish their production, the same should be successive.

1.8

On 18/11/2015, the Respondent came before the case file to request the attachment of a judgment of the Constitutional Court, dated 11/11/2015 and handed down in the scope of process no. 542/14.

1.9

The tribunal, on 22/11/2015, decided to accept the attachment of the judgment referred to in 1.8 above and granted the Claimant a period of 10 days to, if it so wished, exercise the right of contradiction.

1.10

The Claimant, on 23/11/2015, exercised the right of contradiction regarding the content of said judgment, in which it concluded, in particular, on the unconstitutionality of item 28.1 of the TGIS.

2. PROCEDURAL SCRUTINY

Article 3, no. 1, of the RJAT provides that: "The joinder of claims, even if relating to different acts, and the joinder of claimants are admissible when the success of the claims depends essentially on the appraisal of the same circumstances of fact and on the interpretation and application of the same principles or rules of law".

Thus, the joinder of claims underlying the present case file and the joinder of claimants is admissible, inasmuch as it concerns assessments of the same tax, Stamp Tax. Since there is also identity between the factual matter and the success of the claim depends on the interpretation of the same principles and rules of law, see article 3, no. 1, of the RJAT.

Consequently, the case is not affected by nullities, no questions have been raised that prevent the appraisal of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to hear and decide on the claim, and the conditions are therefore met for the delivery of the final decision.

3. SUBJECT MATTER OF THE DISPUTE

The Claimant alleges, in the first place, that the Stamp Tax assessments which are the object of the present case result from the application of article 1, no. 1, of the Stamp Tax Code (CIS), read together with item 28.1 of the TGIS, and such normative provisions manifestly and intolerably contradict the nuclear principles of Law, violating the Constitution of the Portuguese Republic (CRP), more specifically the principle of equality, provided for in the fundamental law.

It adds that the legislator, through item 28 of the TGIS, intended to establish a "special taxation" that applies only to urban properties with a value exceeding one million euros and in accordance with the intervention of the State Secretary for Fiscal Affairs in the presentation and discussion of Law Proposal no. 96/XII, the legislative objective consisted in promoting a "more equitable fiscal system" and that taxpayers "are called to contribute according to their capacity to contribute" and that the legislator "… thus sought to tax the wealth and economic capacity of taxpayers".

Thus, it clarifies that the said unconstitutionality is verified because contributive capacity, which is based on the constitutional principle of equality, is assumed as an essential element, inasmuch as the effective equality of tax treatment of taxpayers will depend on the existence of identical taxation for identical contributive capacities and, as stated below, item 28 of the TGIS and the special taxation resulting therefrom promote differentiated treatment and unjustified inequality between taxpayers, in disregard of the principle of equality.

In concrete terms, it begins by saying that the taxation enshrined in item 28.1 of the TGIS arbitrarily excludes a significant portion of assets "of high value", to the extent that the relevant tax fact is restricted to a portion of real estate assets with a value exceeding € 1,000,000, that is, those intended for housing, and excluded from the scope of taxation is high-value assets intended for other purposes. In other words, with such exclusion, the law differentiates between taxpayers, without regard to their capacity to contribute.

It further adds that the special taxation, in the manner in which it was implemented, by applying to urban properties considered in isolation, does not effectively aggravate all owners who have high-value assets and who consequently demonstrate superior contributive capacity. Moreover, should an owner hold only a single urban property with equity value exceeding € 1,000,000, they will be subject to special taxation, differently from another owner who is the owner of several urban properties with value less than € 1,000,000, whose sum reaches an amount much greater than the said € 1,000,000, in which case they will not be subject to such taxation. A circumstance that leads to distinct treatment of taxpayers owning very high-value assets, depending on whether it is concentrated or dispersed.

In this way, the legislative formulation of the special taxation, applying to properties with residential use with a value exceeding € 1,000,000, introduced by Law no. 55-A/2012, violates the constitutional principle of equal tax treatment and its corollary of the principle of capacity to contribute.

Furthermore, the Claimant further understands that the norm of incidence referred to above constitutes double taxation of the same tax fact, the ownership of a real right, and consequently the assessments should be annulled. In fact, the facts to which item 28 of the TGIS applies are equally taxed under Municipal Property Tax. In this way, negative discrimination is automatically generated for certain taxpayers who, on the same tax fact, saw only a single tax apply.

In a third line of argument (articles 75 to 92 of the Arbitral Request), the Claimant bases the annulment of the assessments in question on manifest illegality due to error in the factual and legal assumptions.

According to the Claimant, the concrete tax fact generating Stamp Tax, as outlined by the legislator with the amendments introduced by Law no. 83-C/2013, of 31 December, consists of three cumulative assumptions: a) ownership of a real right over the property; b) equity value of the property; and c) "building, authorized or planned" for housing. For which reason, the taxation of "land for construction" is based on the existence of an "authorization" or a mere "planning" that the land in question will be built and that such building is intended for housing.

Now, at the limit, even if the "building" or any "building for housing" is never completed, the respective owner, usufructuary or surface right holder must bear the Stamp Tax arising from "potential building for housing". Now, this purpose of burdening a planning or expectation of "building for housing" cannot be accepted as it does not constitute an externalization of capacity to contribute.

The Claimant alleges that, "(…) without that planning or expectation of «building for housing» being realized, one cannot consider that the demonstration of wealth or fortune that the law intended to achieve has been verified in this case" (article 86 of the Request), and that what the legislator always intended to tax, since the genesis of item 28 under analysis, "(…) were properties with effective «residential use», always associated with existing «buildings» or «constructions», since only these can be inhabited (…)" (article 90 of the Request).

In this context, the Claimant further states that the taxation of "land for construction", under the conditions described above, does not arise from the legislation that was at the genesis of item 28 of the TGIS, inasmuch as the legislator's intention was directed at properties actually intended for housing, that is, those that can be inhabited, as the State Secretary for Fiscal Affairs described in the presentation of Law Proposal no. 96/XII.

This possibility of use for housing does not necessarily occur in all "land for construction", but only if and when construction authorized and planned for it is built. However, when this occurs, they will no longer be "land for construction" but another type of urban properties, "residential", "commercial", "industrial or service" or "other".

Thus, it concludes that the Stamp Tax assessments, by applying to a mere "expectation or planning" of construction intended for housing, appear to be illegal, due to error in the factual and legal assumptions.

Finally, it argues that the Funds represented by the Claimant herein carry out principally the activity of buying and selling real estate. For which reason the ownership of the right of property over real estate, e.g. "land for construction", cannot represent superior capacity to contribute.

To that end, it advocates that they cannot be considered luxury goods, instead constituting investment goods, which are intended for real estate operations, so that the ownership of such real estate does not, by itself, demonstrate superior capacity to contribute.

In this sequence, the Claimant requests that:

a) "Item 28 of the General Stamp Tax Table be disapplied, in this specific case, for manifest unconstitutionality, for violation of the constitutional principle of equality…;

b) The illegality of the tax acts of Stamp Tax assessment sub judice be declared, because based on unconstitutional norms, and the same be promptly annulled;

c) The Tax and Customs Authority be condemned to refund the value of Stamp Tax paid, or to be paid, relating to the assessments here challenged;

d) The Tax and Customs Authority be condemned to pay, to the Claimant herein, indemnificatory interest, at the legal rate, until full refund of the amount due and calculated on the tax paid or to be paid, until the final decision of the present arbitral action."

4. FACTUAL MATTER

4.1 Facts deemed proven

4.1.1

The Fund identified as "A…" was notified of the tax acts of Stamp Tax assessment in relation to the properties registered in the land registries hereinafter identified:

i) …, urban, parish of …, municipality of ... and with an equity value of € 1,227,040.00;

ii) …, urban, parish of …, municipality of ... and with an equity value of € 1,385,334.64;

iii) …, urban, parish of …, municipality of … and with an equity value of € 1,067,010.00;

iv) The Fund identified as "B…" was notified of the tax acts of Stamp Tax assessment in relation to the property registered in the registry under article …, urban, parish of …, municipality of ..., and with an equity value of € 17,048,570.00.

4.1.2

The Claimant was notified of the Stamp Tax assessments, dated 20/03/2015 and 21/03/2015, for the year 2014, in relation to each of such registrations, in the total amount of € 207,279.55, and which break down as follows:

i) …, urban, in the amount of € 12,270.40;

ii) …, urban, in the amount of € 13,853.35;

iii) …, urban, in the amount of € 10,670.10;

iv) …, urban, in the amount of € 170,485.70.

4.1.3

The Claimant proceeded to payment of € 69,093.21, relating to the 1st installment of collection of the properties below, and which divide as follows:

i) …, urban, 1st installment of collection, € 4,090.14;

ii) …, urban, 1st installment of collection, € 4,617.79;

iii) …, urban, 1st installment of collection, € 3,556.70;

iv) …, urban, 1st installment of collection, € 56,828.58.

4.1.4

The properties described in 4.1.1 are registered in the land registry as "land for construction".

4.2 Facts deemed not proven

4.2.1

That the properties identified in 4.1.1 have an approved project for construction or are located in an area where construction for housing is planned.

There are no other facts with relevance to the arbitral decision that have not been deemed proven.

4.3 Reasoning of the factual matter deemed proven

The factual matter deemed proven has its genesis in the documents used for each of the facts alleged and whose authenticity was not called into question.

4.4 Reasoning of the factual matter deemed not proven

There is no documentary support attached to the case file attesting that the acts at issue were carried out concerning properties with approved projects for construction or any other constitutive titles of the right to build for housing.

5. ON THE LAW

5.1 On the merits

Before all that has been set forth, the Claimant challenges the Stamp Tax assessments under analysis based on the following grounds:

  • Unconstitutionality of item 28.1 of the TGIS, with the wording given by Law no. 83-C/2013, of 31 December, if interpreted in the sense that the relevant tax fact is based on an expectation of intended use for housing, for violation of the constitutional principles of capacity, equality and double taxation;

  • Illegality due to error in the factual and legal assumptions.

The Administration is subordinate to the Constitution, as any power or organ of the State, but what characterizes it is immediate subordination to law, and there cannot be Administration without legal mediation. The principle of legality, understood in a broad sense (of administrative legality), constitutes the presupposition and foundation of all administrative activity, and only exceptionally can there be administrative activity directly bound to the Constitution[1].

In this conformity, it is necessary, before all else, to ascertain whether the tax assessment acts which are the object of the present Arbitral Request are, or are not, in conformity with the immediate parameter to which the Tax Administration is subordinated, in the case of the present file: item 28.1 of the TGIS, according to the wording given by Law no. 83-C/2013, of 31 December.

As we have seen, the Claimant alleges, in summary, that the Stamp Tax assessments at issue are illegal due to error in the factual and legal assumptions (see article 92 of the Request).

It must be examined.

To resolve the question identified above, it is important to bear in mind, before all else, the evolution and framework of said item 28, both before and after the amendment determined by article 194 of Law no. 83-C/2013, of 31 December (which is, as stated, the wording applicable to the present case).

In that sense, the reference to the Judgment of the STA of 9/4/2014 (proc. no. 1870/13) becomes useful, which, as with other judgments of the STA – e.g.: Judgment of 9/4/2014 (proc. no. 48/14), Judgments of 23/4/2014 (proc. nos. 270/14, 271/14 and 272/14), Judgment of 25/11/2015 (proc. 1338/15) – provides a detailed historical and chronological analysis of the evolution and framework of item 28, now under analysis:

"The concept of «urban property with residential use» was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which no. 2 of article 67 of the Stamp Tax Code (also introduced by that Law) refers, as a subsidiary matter. And it is a concept which, probably due to its imprecision – a fact all the more serious given that it is in accordance with it that the scope of the objective incidence of the new taxation is defined –, had a short life, as it was abandoned upon the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Table, and which now defines its scope of objective incidence through the use of concepts that are legally defined in article 6 of the IMI Code.

This amendment – to which the legislator did not assign an interpretive character, nor does it seem to us that it did –, merely makes it unequivocal for the future that land for construction whose building, authorized or planned, is for housing, are included within the scope of item 28.1 of the General Stamp Tax Table (provided that their respective equity value is of value equal to or greater than 1 million euros)". (End of citation.)

Before the legislative amendment which innovatively began to include said land for construction, it was necessary to ascertain, making use of the various interpretive elements, whether, in the absence of that literal reference, such land could still be included within the scope of objective incidence of item 28. It is for this reason that it is understood that the said judgment proceeded, saying:

"[Nothing] clarifying [the legislator] regarding the situations prior [i.e., assessments prior to 2014], as is the case before us, it does not seem possible to adopt [for these] the interpretation of the claimant, inasmuch as it does not result unequivocally, neither from the letter nor from the spirit of the law, that the intention thereof has been, ab initio, to embrace within its scope of objective incidence land for construction for which authorization or planning has been made for the construction of residential buildings, as results today unequivocally from item 28.1 of the General Stamp Tax Table.

From the letter of the law nothing unequivocal results, indeed, as it itself, by using a concept that it did not define and which also was not defined in the legislation to which it referred as a subsidiary matter, lent itself, unnecessarily, to ambiguity in a matter – of tax incidence – in which certainty and legal security should also be paramount concerns of the legislator.

And from its «spirit», apprehensible in the explanatory memorandum of the law proposal which is at the origin of Law no. 55-A/2012 (Law Proposal no. 96/XII – 2nd, Diary of the Assembly of the Republic, series A, no. 3, 21/09/2012, p. 44 [...]) nothing more results than the concern to raise new tax revenues, on sources of wealth «more spared» in the past from the fiscal juggernaut than labor income, in particular capital income, securities gains and property, reasons which bring no relevant contribution to the clarification of the concept of «urban properties with residential use», inasmuch as they assume it as given, without any concern to clarify it. Such clarification appeared, however – as informed in the Arbitral Decision handed down on 12 December 2013, in process no. 144/2013-T, available in the CAAD database –, upon the presentation and discussion in the Assembly of the Republic of that law proposal, in the words of the State Secretary for Fiscal Affairs, which will have expressly stated, as is gathered from the Diary of the Assembly of the Republic (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: «The Government proposes the creation of a special tax on high-value residential urban properties. This is the first time in Portugal that special taxation has been created on high-value properties intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to properties with a value equal to or greater than 1 million euros» (emphasis ours), whence it is gathered that the reality intended to be taxed is, after all, and despite the terminological imprecision of the law, «urban residential properties», in common parlance «houses», and not other realities.

[...]. [...] insofar as the norm of incidence of Stamp Tax refers to urban properties with «residential use», without any specific concept being established for that purpose, cannot it be extracted therefrom that the same contains a future potentiality, inherent to a distinct property that may possibly come to be built on the land.

It is concluded therefore, in conformity with what was decided in the judgment under appeal that, resulting from article 6 of the IMI Code a clear distinction between «residential» urban properties and «land for construction», the latter cannot be considered as «properties with residential use» for the purposes of the provision in item no. 28.1 of the General Stamp Tax Table, in its original wording, which was given by Law no. 55-A/2012, of 29 October." (End of citation.)

In summary, it is understood from the jurisprudence of the Venerable STA that, with the new wording of item 28.1 of the TGIS, given by article 194 of Law no. 83-C/2013, of 31/12 (and applicable to the present case), the scope of objective incidence of the norm was innovatively broadened, by including, in an explicit manner, land for construction for which authorization or planning has been made for building for housing.

Having made the necessary historical-legal framework, it is now important, in a second moment, to analyze the terms of said broadening of the scope of objective incidence of the norm in question and to ascertain the legality of its application to the case before us.

The new wording of item 28.1 of the TGIS (given, as stated, by art. 194 of Law no. 83-C/2013, of 31/12) provides as follows: "By residential property or by land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the IMI Code".

The essential question which, in this context, arises, is whether, using the words of the Claimant herein, "without [...] that planning or expectation of «building for housing» [...] being realized", can the application of the Stamp Tax here under analysis be accepted (see articles 83 to 86 of the Request).

To answer said question, the consideration of the following appears particularly useful:

"With regard to land for construction, whether or not located within an urban agglomeration, as defined in art. 3/4 of this legislation [CIMI], should, as such, be considered the land for which there has been granted: - license for subdivision operation; - construction license; - authorization for subdivision operation; - construction authorization; - admitted favorable prior notice of subdivision or construction operation; issued favorable prior information of subdivision or construction operation, as well as; - those which have been declared as such in the acquisition title, and should be taken into account that, also for that purpose, only the acquisition title with the form prescribed by civil law should be relevant, that is, the public deed or the authenticated private document referred to in art. 875 CC." [see ANTÓNIO SANTOS ROCHA / EDUARDO JOSÉ MARTINS BRÁS – Taxation of Assets. IMI-IMT and Stamp Tax (Annotated and Commented). Coimbra, Almedina, 2015, p. 44].

In light of the requirements cited above – with which agreement is here expressed, as they translate and make explicit what the legal and administrative requirements necessary to the consideration of any land for construction as land covered by item 28.1 of the TGIS are – it is verified that, in the case now under analysis, the land in question fulfills none of them.

Indeed, and as stated in the course of proof, no documentary support was attached to the present case file attesting that the acts at issue were carried out concerning properties with approved projects for construction (whether or not yet having the said construction licenses and authorizations), or properties located in an area where construction for housing is planned (with the mentioned prior notices or prior information favorable to the carrying out of subdivision or construction operations). Having not made that demonstration, one cannot consider that the land now at issue has building, authorized or planned, for housing, in accordance with the CIMI.

It is also important to note that, although the properties here at issue are registered in the land registry as being "land for construction", such does not legitimate the automatic application of item 28.1 of the TGIS, as, it would seem to obviously result, the mere land registry registration does not, by itself, constitute demonstration that a property has a planned building for housing.

Proof of what has just been said is the fact that, as ANTÓNIO SANTOS ROCHA and EDUARDO JOSÉ MARTINS BRÁS also state (ob. cit., p. 46), "the real estate located in urbanized areas or included in areas covered by already approved urban planning plans [...] should only be considered as land for construction when, through action undertaken by the respective owner, there is verified, alternatively, the issuance of any of those documents [«granting of licenses, construction or subdivision authorizations, favorable prior notices or information for the same purpose»]".

The same authors add (see ibidem) – reinforcing the understanding, already expressed here, according to which, without construction licenses or authorizations, the mere registration of the real estate as land for construction does not, by itself, legitimate the application of item 28.1 of the TGIS –, in support of their position, the following:

"The real estate already described in the registry as land for construction, concerning which there is lapsing of the subdivision, license or construction authorization, and in which no building operation has even been initiated, must, by way of the institute of lapsing, recover its previous nature".

In the same sense, see also JOSÉ MANUEL FERNANDES PIRES, (Lessons on Taxes on Assets and Stamp Tax. Coimbra, Almedina, 3rd ed., 2015, pp. 110 to 112): "The right to build is not inherent in the right of property, but only arises ex novo in the patrimony of the owner when an administrative act of the competent public entity recognizes and authorizes the owner to build or subdivide. [...] only when that right is constituted in the legal sphere of the owner is that the IMI Code establishes that we are before land for construction. Being that constitutive act carried out by the public entity at the request of the owner, then the classification of a property as land for construction depends always on the will of the owner."

In summary, it appears clear, in the case being dealt with, that the incidence of the tax on land for construction cannot be materialized with the mere registration thereof, as such, in the registry, but rather, and decisively, through the verification of the effective potentiality of building on said land (which should be ascertained in the specific case and revealed through the existence of the documents described above). That is to say, in other words, that the incidence of the tax, for the purposes of the provision in item 28.1, is only materialized with the verification of "effective use", to use the felicitous expression of JOSÉ MANUEL FERNANDES PIRES (ob. cit., p. 507).

Without that demonstration of the effective potentiality of building – which, as stated, did not occur in the case here under analysis –, the purposes underlying the new wording of the text of the law of item 28.1 of the TGIS are not fulfilled, for which reason it is concluded that the assessments at issue fall into the error invoked by the Claimant (see article 92 of the Petition).

As the Claimant's understanding regarding the question referred proves well-founded, it is prejudicial, in light of the provision of art. 124 of the CPPT, ex vi art. 29, no. 1, al. c), of the RJAT, to hear the other allegations of the Claimant (there being, in light of this decision, no prejudice to the more stable or effective protection of its interests).

5.2 Indemnificatory interest and refund of amount paid

In light of the provision in no. 5 of article 24 of the RJAT – in the part stating that "payment of interest is due, regardless of its nature, in accordance with the terms provided in the general tax law and in the Code of Tax Procedure and Process" –, it has been understood that such norm permits the recognition of the right to indemnificatory interest in arbitral processes.

This justifies, by what has been set forth, the examination of the request for payment of indemnificatory interest to the Claimant herein.

Indemnificatory interest is due when it is determined, in gracious reclamation or judicial challenge, that there has been error attributable to the services from which results payment of the tax debt in an amount higher than legally due (see art. 43, no. 1, of the LGT).

It is therefore a necessary condition for the award of said interest the demonstration of the existence of error attributable to the services. In that sense, see, for example, the following judgments: "The right to indemnificatory interest provided in no. 1 of art. 43 of the LGT [...] depends on it having been demonstrated in the case that that act is affected by error on the factual or legal assumptions attributable to the AT." (Judgment of the STA of 30/5/2012, proc. 410/12); "The right to indemnificatory interest provided in no. 1 of article 43 of the General Tax Law presupposes that it be determined in the case that in the assessment «there was error attributable to the services», understood as the «error on the factual or legal assumptions attributable to the Tax Administration»" (Judgment of the STA of 10/4/2013, proc. 1215/12).

Now, having there been, as results from what was said in point 5.1 of the present arbitral decision, error attributable to the services – which leads to the annulment of the tax acts at issue and to the consequent refund of the amounts paid by the Claimant, in accordance with the provision of art. 173, no. 1, of the CPTA, ex vi art. 29, no. 1, al. c), of the RJAT –, it is concluded, without need for further considerations, by the well-foundedness of the request for payment of indemnificatory interest to the Claimant.

6. DECISION

In light of all that has been set forth above, the following is decided:

  • Judge well-founded the present request for arbitral decision and, in consequence, annul the Stamp Tax assessments at issue, determining the refund of amounts wrongfully collected.

  • Judge well-founded the request also regarding the recognition of the right to indemnificatory interest in favor of the Claimant.

The value of the case is fixed at € 207,279.55 (two hundred and seven thousand two hundred and seventy-nine euros and fifty-five cents), in accordance with articles 32 of the CPTA and 97-A of the CPPT, applicable by force of the provision of art. 29, no. 1, als. a) and b), of the RJAT, and in art. 3, no. 2, of the Regulation of Costs in Tax Arbitration Processes (RCPAT).

Costs charged to the Respondent, in the amount of € 4,284.00, in accordance with Table I of the RCPAT, and in compliance with the provision in articles 12, no. 2, and 22, no. 4, both of the RJAT, as well as the provision in art. 4, no. 4, of the cited Regulation.

Notify.

Lisbon, 4 February 2016.

The Arbitrators,

(Fernanda Maçãs)

(Miguel Patrício)

(Francisco Nicolau Domingos)

Text prepared by computer, in accordance with the provision of art. 131, no. 5, of the CPC, applicable by referral of art. 29, no. 1, al. e), of the RJAT.

[1] For further development on the binding of the Administration to law and the Constitution, see GOMES CANOTILHO / VITAL MOREIRA – Constitution of the Portuguese Republic, Annotated, Coimbra, Coimbra Editor, 4th ed., 2014, pp. 798 et seq.

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) and how does it apply to building land?
Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) establishes a special annual Stamp Tax on urban real estate properties with a taxable value exceeding €1,000,000. This provision was introduced by Law no. 55-A/2012 with the stated legislative objective of promoting a more equitable fiscal system by taxing wealth and economic capacity. The tax applies based on the property's individual cadastral value, targeting high-value assets. However, as argued in Process 467/2015-T, its application to building land and residential properties while excluding other categories of high-value real estate has raised constitutional concerns regarding equal treatment of taxpayers with similar contributive capacity.
Can the constitutional principle of equality be used to challenge Stamp Tax assessments on real estate in Portugal?
Yes, the constitutional principle of equality can be invoked to challenge Stamp Tax assessments on real estate in Portugal. Article 13 of the Portuguese Constitution enshrines the principle of equality, which extends to tax matters through the principle of contributive capacity. In Process 467/2015-T, claimants successfully argued that item 28.1 of TGIS violated this constitutional principle by creating arbitrary distinctions between taxpayers with similar wealth levels. The challenge demonstrated that taxpayers can contest tax assessments when legislative provisions result in unjustified differentiated treatment that disregards contributive capacity, particularly when similar economic situations receive dissimilar tax treatment without objective justification grounded in constitutional values.
How did the CAAD arbitral tribunal rule on the legality of 2014 Stamp Tax liquidations for building land?
The excerpt provided from Process 467/2015-T does not include the final arbitral decision or ruling on the legality of the 2014 Stamp Tax liquidations for building land. The document shows that the CAAD arbitral tribunal was properly constituted and found the procedural requirements satisfied, including proper joinder of claims and claimants. The tribunal heard arguments that item 28.1 of TGIS violated constitutional principles and considered a Constitutional Court judgment from November 11, 2015. However, the actual determination regarding the validity of the challenged assessments and whether the Stamp Tax liquidations were declared illegal is not included in this text excerpt.
What is the procedure for filing an arbitral pronunciation request against Stamp Tax assessments at CAAD?
To file an arbitral pronunciation request against Stamp Tax assessments at CAAD (Centro de Arbitragem Administrativa), taxpayers must submit a formal arbitration request identifying the contested tax acts and legal grounds. In Process 467/2015-T, the request was filed on July 23, 2015, and included: identification of the claimants (taxpayer numbers), description of the challenged assessments (year and property details), legal basis for the challenge (constitutional violations), and requested relief (disapplication of legal provisions and declaration of illegality). After filing, the President of the Deontological Council appoints arbitrators, the tribunal is constituted, the Tax Authority is notified to submit a reply and remit the administrative file, and parties may request evidence production or submit legal arguments before the final decision deadline.
How does the CAAD arbitration process work for real estate investment fund tax disputes in Portugal?
The CAAD arbitration process for real estate investment fund tax disputes follows the procedural rules established in Decree-Law no. 10/2011 (RJAT). As demonstrated in Process 467/2015-T, the process includes: (1) submission of the arbitration request by the fund's management company representing the funds; (2) appointment of a three-member arbitral tribunal including a president and two co-arbitrators; (3) notification of the Tax Authority to submit its defense and remit the administrative file; (4) optional evidence production and oral or written submissions; (5) possibility for either party to submit additional legal authorities (such as Constitutional Court judgments); (6) right of contradiction for opposing parties; and (7) issuance of the final arbitral decision within the established deadline. The tribunal may dispense with in-person hearings if both parties agree and no evidence production is necessary.