Process: 468/2015-T

Date: July 25, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitral Decision 468/2015-T addressed whether Stamp Tax under item 28.1 of the General Table applies to properties held in total vertical ownership when individual units are valued below €1,000,000 but collectively exceed this threshold. The claimant owned an urban property in vertical ownership with multiple independent-use units, each with a Tax Property Value (VPT) below €1,000,000, but aggregating above this amount. The Tax Authority assessed Stamp Tax individually on each unit under item 28.1, which imposes a 1% annual tax on residential properties with VPT equal to or exceeding €1,000,000. The claimant argued this was illegal, contending that each independent unit should be treated as a separate 'urban property' for tax purposes, similar to horizontal ownership condominiums. Since each unit's individual VPT fell below the threshold, item 28.1 should not apply. The claimant invoked Article 12(3) of the Municipal Property Tax Code (CIMI), which requires separate registration and independent VPT assignment for each floor or part capable of independent use, and argued the principle of equality mandated identical tax treatment regardless of whether ownership was horizontal or vertical. The Tax Authority countered that in vertical ownership, the entire building constitutes a single 'property' under Article 2(1) of CIMI, with Article 2(4) creating an exception only for horizontal ownership. Therefore, the relevant VPT should be the aggregate value of all residential units. If this sum equals or exceeds €1,000,000, Stamp Tax applies to the property as a whole. The Authority maintained that separate registration serves administrative purposes within CIMI but does not create multiple properties for Stamp Tax incidence. This case illustrates the critical distinction between horizontal and vertical ownership structures in determining Stamp Tax obligations on high-value residential real estate.

Full Decision

ARBITRAL DECISION

The Arbitrator Francisco de Carvalho Furtado, appointed by the Ethics Council of the Administrative Arbitration Centre (CAAD), to form the Arbitral Tribunal constituted on 6 October 2015, decides as follows:

A) Report

  1. On 23 July 2015, A..., taxpayer no..., resident at Street..., no..., ...-... Lisbon, hereinafter identified as Claimant, filed a request for arbitral decision, pursuant to the provisions of articles 2, no. 1, paragraph a) and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), in conjunction with paragraph a) of article 99 and paragraph d) of no. 1 of article 102 of the Tax Procedure and Process Code (CPPT), applicable ex vi article 10, no. 1, paragraph a) of Decree-Law no. 10/2011, of 20 January.

  2. In the said request for arbitral decision, the Claimant seeks that the Arbitral Tribunal declare the illegality of the Stamp Tax assessment acts issued by the Tax and Customs Authority, with reference to the year 2014, in the total amount of € 10,072.38.

  3. The request for constitution of the arbitral tribunal was accepted on 24 July 2015, by the Honourable President of CAAD and was notified to the Tax and Customs Authority (hereinafter identified as Respondent), on the same date.

  4. The Claimant did not proceed with the appointment of an arbitrator, so, under the provisions of article 6, no. 1, of the RJAT, the undersigned was appointed by the President of the Ethics Council of CAAD to form the present Singular Arbitral Tribunal, with the appointment having been accepted in accordance with legal provisions.

  5. The Tribunal was constituted, pursuant to the provisions of article 11 of the RJAT, on 6 October 2015.

  6. On 26 October 2015, the Respondent filed its Reply.

  7. The Parties waived both the holding of the meeting referred to in article 18 of the RJAT and the submission of pleadings.

The Claimant supports its request, in summary, as follows:

a) The Claimant is the owner of an urban property, in vertical ownership, consisting of several units with independent use;

b) The Tax Property Value of each of the units with independent use individually considered is less than € 1,000,000.00 (one million euros);

c) The aggregate value of said units is greater than € 1,000,000.00 (one million euros);

d) The Stamp Tax assessments challenged were made under item 28 and 28.1 of the General Table of Stamp Tax;

e) The Stamp Tax assessment acts were made individually in relation to each of the units with independent use;

f) The assessment acts fell upon properties whose tax property value is less than one million euros, and therefore are illegal;

g) The Claimant thus considers that, given the Tax Property Value of each of the units with independent use, individually considered, is less than € 1,000,000.00 (one million euros), item 28.1 of the General Table of Stamp Tax is not applicable;

h) Being units with independent use, the same would be subsumed in the concept of "urban property" for purposes of applying item 28.1 of the General Table of Stamp Tax;

i) Pursuant to the provisions of article 12, no. 3 of the IMI Code – applicable by virtue of the provisions of article 67 of the Stamp Tax Code –, each floor or part of a property capable of independent use is considered separately in the property registration, being assigned its own tax property value.

j) These are, therefore, for tax purposes, autonomous and distinct properties, and thus it is irrelevant whether or not the property is constituted in horizontal ownership, with taxation falling upon the tax property value of each floor or part of a floor capable of independent use;

k) Since the registration in the real estate register in vertical ownership follows the same rules for registration of properties constituted in horizontal ownership, with the respective IMI(s) being, like the Stamp Tax of no. 28 of the GTIS, assessed individually in relation to each of the parts, the legal criterion for defining the incidence of Stamp Tax must be the same as that established for IMI;

l) It is contrary to the principle of equality that two properties exactly identical, with tax property values of the various units exactly identical, would have differentiated taxation, only because in one of them there was constitution of horizontal ownership and in the other not.

In its Reply, the Respondent, invoked, in summary, the following:

a) Stamp Tax, being classified among types of taxes on consumption or expenditure, can be defined as an indirect tax that falls upon the formalization of legal acts or other taxable facts, provided for in a General Table (attached to the CIS);

b) With respect specifically to real estate, the determination of the taxable value came to be based on the new evaluation system, contained in the Municipal Property Tax Code;

c) The new architecture of item 28 of the CIS Table came to provide for the subjection to stamp tax of "28 - Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the register, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 - on the tax property value used for purposes of IMI: (Added by article 3 of Law no. 55-A/2012 of 29 October)

28.1 Per residential property or land for construction whose authorized and planned building is for residential purposes, pursuant to the provisions of the IMI Code – 1%". (Law 83-C/2013, of 31 December);

d) In the situation in question, it is important to determine whether, for purposes of subjection or non-subjection to Stamp Tax, the total TPV of the property (of the legal unit) should be considered or whether, on the contrary, the TPV of each of the parcels should be considered;

e) The Tax and Customs Authority has repeatedly stated the understanding that if the building is constituted in full ownership with parts or divisions capable of independent use (so-called full ownership), it integrates the tax legal concept of "property", that is, a single unit, and the tax property value of the same is determined by the sum of the parts with residential use, and being this equal to or greater than €1,000,000.00, there is subjection to Stamp Tax of item 28 of the General Table attached to the CIS;

f) This conclusion is based on the following premises:

§ In the CIS there is no definition of the concepts of urban property, so the provisions of the CIMI must be applied to determine possible subjection to ST (See article 67, no. 2 of the CIS in the wording given by Law no. 55-A/2012);

§ Article 2, no. 1 of the CIMI defines the concept of property;

§ Article 2, no. 4 of the CIMI provides for autonomous units of properties constituted under the horizontal ownership regime, which it considers, exceptionally, as properties;

§ On the other hand, where a property is constituted in full ownership with parts or divisions capable of independent use, it is the property as a whole, and no longer each of those parts, that integrates the concept of "property", for purposes of IMI and ST, by reference to article 1, no. 6 of the CIS;

§ This is not prevented by the fact that each floor/division appears separately in the property registration, and with the respective tax property values, as such discrimination only matters, for tax purposes, in face of the concept of property registers contained in article 12 of the CIMI and in the matter regulated in this Code for the organization of registers;

§ The requirement to organize registers in this manner is due to the need to reflect the autonomy that, within the same property, belongs to each of its parts, which may be functionally and economically independent;

§ This autonomization is only justified because within the same property there may be use for commerce or housing, with or without lease, which is determinative of the rules of tax assessment within the CIMI, in light of the different use coefficients provided for in article 41 of that code.

g) One cannot confuse legally distinct realities such as "full ownership" and "horizontal ownership";

h) Being realities of fact and law distinct, they deserve differentiated tax treatment because only this path is favored by the principle of closed typicality;

i) We are faced with a rule of incidence, therefore one cannot, through interpretative means, lead to a result that is not provided for in law.

j) According to the facts, the Claimant, for purposes of IMI and also of Stamp Tax, by force of the wording of said item, is not the owner of autonomous units, but rather of a single property, considering that this is the understanding that best accords with the principle of legality inherent in article 8 of the TGL, to which all its activity is devoted;

k) It concludes by requesting the dismissal of the claim filed by the Claimant with the consequent maintenance of the assessment acts practiced.

B) Sanitation

The Tribunal is competent and is regularly constituted, pursuant to articles 2, no. 1, paragraph a), 5 and 6, all of the RJAT.

The parties have legal personality and capacity, are legitimate and are represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

There are no nullities and prior issues affecting the entire proceeding, therefore it is now necessary to proceed to adjudication on the merits of the request.

C) Object of the Arbitral Decision

The following question is placed before the Tribunal, pursuant to the foregoing description:

a) Should item 28.1 of the General Table of Stamp Tax be interpreted as encompassing, within its scope, properties, with residential use, in full ownership with units capable of independent use, characterized by the fact that none of the divisions capable of independent use has a Tax Property Value greater than € 1,000,000.00 (one million euros), but the sum of the individual Tax Property Values is greater than the said value of € 1,000,000.00 (one million euros)?

D) Factual Matters

D.1 – Proven Facts

The following facts are considered proven with relevance to the decision, based on the documentary evidence attached to the file:

a) The Claimant is the owner of the property registered in the urban property register under article ... of the parish of ..., municipality and district of Lisbon - see documents 1 to 10 attached to the Initial Request;

b) The property consists of units capable of independent use, in relation to which Stamp Tax assessment acts were individually issued - see documents 1 to 10 attached to the Initial Request;

c) The Tax Property Value of each of the divisions with independent use is less than € 1,000,000.00 (one million euros) - see documents 1 to 10 attached to the Initial Request;

d) The Claimant was notified of the Stamp Tax assessment acts relating to the year 2014 identified in the collection documents nos..., ..., ..., ..., ..., ..., ..., ..., ... and ... practiced on 20 March 2015, assessed in accordance with item 28.1 of the General Table of Stamp Tax ("GTIS").

With respect to the proven facts, the Tribunal's conviction was based on the documentary evidence referenced, attached to the file and in the attached administrative proceeding.

No other facts capable of affecting the decision on the merits, in light of the possible legal solutions, and which it would therefore be important to register as unproven, were proven.

E) Law

As emerges from the pertinent procedural documents, the question to be decided concerns the interpretation of item 28.1 of the General Table of Stamp Tax, namely the question of whether it is intended to apply to properties with residential use, in full ownership, with divisions capable of independent use, characterized by the fact that none of those divisions has a Tax Property Value greater than € 1,000,000.00 (one million euros), but the sum of the individual Tax Property Values is greater than the said value of € 1,000,000.00 (one million euros). In accordance with the general canons of legal hermeneutics, particularly in light of the provisions of no. 1 of article 9 of the Civil Code, applicable in the interpretation of tax law ex vi no. 1 of article 11 of the General Tax Law, "interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied." It is, therefore, this interpretative exercise that must now be undertaken.

First, in light of the rules of legal exegesis, it is important to pay attention to the literal element of the relevant norms and, immediately, to item 28 of the General Table of Stamp Tax. Thus:

"28 - Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax property value used for purposes of IMI:

28.1 — For residential property or land for construction whose authorized or planned building is for residential purposes, in accordance with the IMI Code — 1%;

28.2 — For property, when the taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by ordinance of the Minister of Finance — 7.5%."

From the analysis of the literal element, it is concluded that the taxable fact relevant for the purpose of applying the item of the General Table of Stamp Tax in question falls upon the rights described, constituted upon:

a) urban properties;

b) "residential";

c) whose tax property value is equal to or greater than € 1,000,000.00;

d) and that tax property value must be the one used for purposes of IMI.

It is also important to bear in mind the provisions of article 23, no. 7, of the Stamp Tax Code which determines that: "Where the tax is due pursuant to the situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI." Likewise, no. 2 of article 67 of the Stamp Tax Code determines that "To matters not regulated in this Code concerning item no. 28 of the General Table, the provisions of the CIMI shall apply subsidiarily."

With relevance to the decision, it is also important to bear in mind article 12, no. 3, of the Municipal Property Tax Code, which determines that "each floor or part of a property capable of independent use is considered separately in the property registration, which also discriminates its respective tax property value."

Finally, article 119, no. 1, of the Municipal Property Tax Code prescribes that "The services of the Directorate-General of Taxes send to each taxpayer, by the end of the month prior to that of payment, the relevant collection document, with discrimination of the properties, their parts capable of independent use, respective tax property value and the tax collection assigned to each municipality of the location of the properties."

It results, therefore, from the letter of the Law that the intention of the legislator was to create a tax whose incidence is assessed by the economic destination of the urban property and by the Tax Property Value used for purposes of the Municipal Property Tax, with assessment being carried out in the same manner as said Municipal Property Tax.

Having analyzed the literal element of the legal norms, it is now important to analyze also the teleological element (see articles 9, no. 1, of the Civil Code and 11, of the General Tax Law).

In order to ascertain the intention of the legislator with this tax innovation, we can avail ourselves of the records of the debate that led to this legislative initiative. As emerges from the discussion of the Bill no. 96/XII (Parliamentary Records, I series, no. 9/XII/2, of 11 October 2012), which led to Law no. 55-A/2012, of 29 October, the aim was to create a special taxation on properties of high value, intended for housing. This measure is part of a set of other measures whose purpose is the creation of a more just and equitable tax system, in which taxpayers are called upon to contribute according to their real tax capacity. It was thus stated that: "This rate will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and will fall upon houses with a value equal to or greater than 1 million euros" and, equally, that "These measures, Madam President, Ladies and Gentlemen Members of Parliament, represent a decisive step in the realization of a more just and equitable tax system in the demanding circumstances the Country faces. By broadening the tax base, requiring an increased effort from taxpayers holding high-value real estate properties, as well as from company shareholders, and reinforcing the powers of the tax administration in controlling the manifestations of wealth and transfers to tax havens, the Government fulfills its programme and creates the conditions for a more just distribution of the tax burden." (see Parliamentary Records, I Series, no. 9, of 10 October 2012, page 32). On the other hand, from reading the interventions of Deputies from various parties, it is verified that, without exception, mention is made in this respect of the taxation of luxury real estate property targeting the wealthy: See in this regard the intervention of Deputy Pedro Filipe Soares who states: "It is that luxury property is not limited to real estate property (...)." Likewise, Deputy Paulo Sá referred to "(…) as the PCP has, on several occasions, proposed, particularly with regard to the taxation of luxury real estate property." (see Parliamentary Records, I Series, no. 9, of 10 October 2012, pages 36, 38, 39 and 40).

From all of this, the interpretative exercise carried out shows that the intention of the legislator was, unequivocally, to tax those who show to possess increased tax capacity through ownership, usufruct or possession of the right of superficies of luxury houses. Now the use of the word "house" by the State Secretary immediately refers to the concept of physical space used for residential purposes by its owner/usufructuary/holder of the right of superficies. That is, it is suggested that the legislator intends that the incidence of this tax manifests itself in taxpayers who hold urban properties (houses) whose physical configuration and characteristics suggest their use, as a whole, by the holder of the right, for residential purposes. This will not occur in the situation in the file because the configuration of a property composed of units with independent use does not suggest a unitary residential use thereof, but rather a residential use division by division. It does not therefore seem that it was the intention of the legislator to tax, through item 28 of the General Table of Stamp Tax, properties in full ownership composed of divisions capable of independent use, in which each of the divisions, individually considered, does not have the Tax Property Value equal to or greater than € 1,000,000.00 (one million euros). The intention will be to tax urban properties with residential use, whose physical and economic unity has Tax Property Value greater than € 1,000,000.00 (one million euros).

Having established this and taking as the basis the applicable legal provisions, proceeding from the literal analysis and ascending to its spirit, it is important to determine with precision the meaning and scope of the concept of property and its respective Tax Property Value, which determines the incidence of item 28 of the General Table of Stamp Tax. It seems safe to state that the concept of property is not univocal, neither in the various branches of law nor in the various taxes existing, assuming in each case specific contours and characteristics (see GOMES, Nuno de Sá, The Fiscal Concepts of Property, Science and Tax Technique no. 101, May 1967). Thus, it is important to delimit the concept for purposes of applying item 28 of the General Table of Stamp Tax. In taxes on property only the Municipal Property Tax Code establishes, or seeks to establish, this concept, although without precisely defining its contours. Thus, and as correctly pointed out by the Supreme Administrative Court (2nd Section) in the Judgments delivered in Appeals 1109/11 and 1004/11, on 30 May 2012 and 27 June 2012, respectively, "In accordance with art. 2 of the CIMI the concept of property is based on three elements: a physical element (fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or resting thereon, with a character of permanence), a legal element (requirement that the thing - movable or immovable - forms part of the property of a natural or legal person) and an economic element (requirement that the thing have economic value in normal circumstances). This is a concept of property that differs, both from the concept of property contained in no. 3 of art. 8 of the CIRS, (However, for Rui Duarte Morais ("On the IRS", 2nd edition, Almedina, 2008, p. 116) the CIRS does not define what is property, so, in a systematic interpretation, we believe we should avail ourselves of the notion contained in the CIMI. This is because "In reality, no. 3 of art. 8 of the CIRS presents the definitions of rural, urban and mixed property, for purposes of this tax. Beyond such notions, being overly simplistic, they do not proceed to a rigorous delimitation of these concepts (see art. 3 to 6 of the CIMI), there exist property realities not insertable in any of these categories (it would be the case of properties that do not have as a physical component a fraction of soil). and from that contained in no. 2 of art. 204 of the Civil Code. (In this context, see Nuno Sá Gomes, "The Fiscal Concepts of Property", in Notebooks of Science and Tax Technique, no. 54 (and also published in Science and Tax Technique nos. 101 and 102 – May and June 1967), a study that, although reporting on the legislative evolution culminating in the old Code of Real Property Contribution, maintains some relevance.)"

With respect to the physical and legal components, as they are defined by the Supreme Administrative Court, there does not appear to be any dispute. Indeed, in the case in question, the cause of action was structured by the Claimant in the sense of arguing that the divisions capable of individual use have economic value, the constituent elements of which influence their own Tax Property Value, which implies that they be considered autonomously for purposes of the incidence of item 28 of the General Table of Stamp Tax. Now, the value/economic destination of properties has been determinative of the delimitation of the various fiscal concepts of property. Indeed, article 6, no. 2, Municipal Property Tax Code, whose rules should be applied here as we have seen, distinguishes various concepts of urban properties in accordance with their respective economic destination. Indeed, that provision determines the concept proceeding from the physical structure and correcting it through its economic destination. Now, in the case in the file, there is no doubt that the divisions capable of independent use have economic value in normal circumstances, which is revealed in the very attribution of a concrete and autonomous Tax Property Value. On the other hand, it is verified that the tax legislator made no distinction between horizontal ownership and vertical ownership. Indeed, as correctly pointed out in the Arbitral Decision handed down in proceedings no. 50/2013-T, to whose reasoning we adhere, "in the legislator's view, the formal legal accuracy of the specific situation of the property does not matter but rather its normal use, the purpose to which the property is intended. We also conclude that for the legislator the situation of the property in vertical ownership or horizontal ownership did not matter, as no reference or distinction is made between them. What matters is the material truth underlying its existence as an urban property and its use."

And, with respect to the determination of Tax Property Value, the criterion used by the legislator is also decisively influenced by the economic destination of the real estate asset. That is, here too the legislator disregarded formal legal reality in light of material truth. A solution which is well understood in light of the constitutional principles inherent in articles 103, no. 1 (fair distribution of wealth) and 104, no. 3 (taxation of property as a guarantee and contribution to equality among citizens), both of the Constitution of the Portuguese Republic. Now, equality among citizens can only be achieved if, more than to formal reality, taxation, in the present case of property, is based on material truth, on facts of real life. Now, in material terms there is no difference between a building in horizontal ownership and a building (physical element of the concept) in vertical ownership composed of divisions with independent use. Indeed, and as already mentioned, tax law also makes no distinction, either at the level of property registration (articles 12 and 91 and following of the Municipal Property Tax Code), or at the level of taxation, with article 119 of the Municipal Property Tax Code ordering that the tax be assessed individually on each division with independent use and taking as the basis the concrete Tax Property Value (of each of the divisions with independent use) – which, in compliance with the Law, occurred in the case in question. That is, taking the same building as the basis, both the property registration, and the assessment, and the levying of the Municipal Property Tax is processed in the same manner – division by division.

As José Maria Pires argues (Lessons on Taxes on Property and Stamp Tax, Almedina, 2010) with respect to the determination of the tax property value of real estate, the legislator adopted pragmatic criteria related to the actual use of properties, with such pragmatism being more evident in cases, as in those in the file, of properties with autonomous parts capable of independent use. "In these cases the assessment will necessarily have to reflect the existence of more than one use given that such multifunctionality is relevant in determining the value of these properties, regardless of the purpose for which they are licensed. (…) In this second case, naturally it is the effective use of each of the parts capable of independent use that is relevant in determining the use coefficient (….). The legislator here too followed a principle of pragmatism of valuing the effective functionality of each property. (…) In truth, in these cases, the IMI Code provides that the assessment of each of the parts capable of independent use be assessed separately and, furthermore, that each of those parts be registered in an autonomous manner in the property registers. This autonomization, although integrated in the same property registration number, also encompasses the tax property value, with the Law providing that each of those parts have its own value. The Law goes even further, establishing that in the very levying of IMI, this must be carried out separately for each of those parts capable of independent use, as provided for in article 119 of the CIMI" (PIRES, José Maria, Lessons on Taxes on Property and Stamp Tax, Almedina 2010, pages 84 and 85). That is, the assessment, which is carried out in concrete terms for each of the divisions with independent use, is influenced by material truth (effective economic destination of the asset) and not by formal reality.

Therefore, from the interpretative exercise carried out, it results that the essential criterion of the legislator in the field of taxes on property was that of the material substance of the asset. That is, more than formal legal accuracy, what is at issue is the effective use of buildings and their component parts. And this pragmatic criterion and material truth is manifested in the determination of the tax property value which is made individually by reference to each of the divisions capable of individual use, as occurs in a building in horizontal ownership.

Thus, the Tax Property Value that constitutes the incidence of item 28, no. 1 of the General Table of Stamp Tax is that which results from the letter and ratio of the joint application of articles 2, 6, no. 1, paragraph a), 12 and 119 of the Municipal Property Tax Code and item 28, no. 1 of the General Table of Stamp Tax, that is, that which results from the material truth of the configuration and use of the property.

As we have already seen, the criteria for determining the Tax Property Value relevant to assessing the incidence of Stamp Tax provided for in item 28 of the respective General Table must necessarily be those provided for in the Municipal Property Tax Code, not only because it is the regulation subsidiarily applicable (see articles 23, no. 7 and 67, no. 2 of the Stamp Tax Code), but essentially because the said item of the General Table of Stamp Tax orders that account be taken of the "tax property value used for purposes of IMI". Now, having analyzed the Municipal Property Tax Code, it is verified that it makes no distinction between urban properties with residential use in the form of horizontal ownership and urban properties with residential use in the form of full or vertical ownership. In truth, both are provided for in no. 2 of article 6 of the Municipal Property Tax Code under the designation of residential urban properties, and, as we have already seen, the property registration rules are single and uniform. And unique are also the rules for levying the Municipal Property Tax (and thus Stamp Tax provided for in item 28 of the General Table of Stamp Tax), which falls upon the Tax Property Value of each of the divisions capable of independent use. Now, it was precisely this that occurred in the concrete case, with there being as many assessments as there are divisions with independent use assigned to housing.

In light of the foregoing, since the Municipal Property Tax Code requires that the assessment of that tax be made individually upon each of the divisions capable of independent use – which occurred, as we have seen – the same criterion must be used for the assessment of Stamp Tax provided for in item 28, no. 1 of the respective General Table. The incidence of Stamp Tax (provided for in item 28, no. 1 of the General Table of Stamp Tax) must therefore be assessed in light of the Tax Property Value of each of the divisions capable of independent use. Indeed, if the legal criterion of the Municipal Property Tax – which is the one applicable when item 28 of the General Table of Stamp Tax is at issue – requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, assessments which are based on the concrete Tax Property Value of each of the divisions with independent use, it is that concrete Tax Property Value that is relevant to the assessment of the incidence of Stamp Tax.

And this conclusion, in light of the interpretative exercise carried out, is supported both by the literal element and by the ratio of the relevant legal norms. Indeed, on the one hand, the literal element requires that account be taken of the Tax Property Value used for purposes of IMI (which is the concrete tax property value of each division with independent use), and the legislator has always shown the intention of taxing owners/usufructuaries/holders of the right of superficies of houses of high value, thus reaching those who, by means of their ownership used for residential purposes, is an indication of increased tax capacity.

In light of what is set out above, it is important to assess whether any of the divisions capable of independent use has a tax property value greater than € 1,000,000.00 (one million euros). From the evidence produced in the file, it results that this is not the case, and therefore, inexorably, it must be concluded that the assessment acts challenged are illegal due to error as to the assumptions and violation of article 1, no. 1 of the Stamp Tax Code and item 28, no. 1 of the General Table of Stamp Tax, requiring the declaration of illegality and annulment of the same, as requested.

Decision

In light of the foregoing, this Arbitral Tribunal decides to adjudge the claim filed to be wholly procedent and consequently declares the illegality of the Stamp Tax assessment acts, annulling them; and condemns the Respondent to the payment of costs.

The value of the action is set at € 10,072.38 (ten thousand and seventy-two euros and thirty-eight cents), in accordance with the provisions of article 97-A, no. 1, paragraph a) of the CPPT, applicable ex vi article 29, no. 1, paragraph a) of the RJAT.

The value of the Arbitration Fee is set at € 918.00, in accordance with Table I of the Regulations of Costs of Tax Arbitration Proceedings, to be paid by the Respondent, in accordance with articles 12, no. 2, 22, no. 4, of the RJAT and 4 of the said Regulations.

Let notification be made.

Lisbon, 25 July 2016.

The Arbitrator,

Francisco de Carvalho Furtado

Document prepared by computer, in accordance with the provisions of no. 5 of article 131 of the CPC, applicable by reference from paragraph e) of no. 1 of article 29 of the RJAT.

The drafting of this decision is governed by the orthography prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Does Stamp Tax under Verba 28.1 apply when individual units in vertical ownership are each valued below €1,000,000?
According to the Tax Authority's position in Decision 468/2015-T, Stamp Tax under item 28.1 does apply to buildings in total vertical ownership even when individual units are each valued below €1,000,000, provided the aggregate VPT of all residential units equals or exceeds this threshold. The Authority argues that in vertical ownership (as opposed to horizontal ownership), the entire building constitutes a single 'property' under Article 2(1) of the Municipal Property Tax Code (CIMI). Article 2(4) creates an exception treating horizontal ownership units as separate properties, but no such exception exists for vertical ownership. Therefore, the relevant VPT for determining Stamp Tax incidence is the sum of all independent units within the building, not each unit's individual value.
How is the taxable value determined for Stamp Tax purposes on buildings held in total vertical ownership?
For Stamp Tax purposes on buildings held in total vertical ownership, the taxable value is determined by aggregating the Tax Property Values (VPT) of all residential units or parts with independent use within the property. The Tax Authority's position is that while Article 12 of CIMI requires separate registration and individual VPT assignment for administrative and IMI assessment purposes, this does not create multiple distinct properties for Stamp Tax incidence. The property as a whole remains the relevant unit under Article 2(1) of CIMI. If the sum of the VPTs of all residential components equals or exceeds €1,000,000, the entire property becomes subject to the 1% annual Stamp Tax under item 28.1, regardless of whether any individual unit independently reaches this threshold.
Can the Tax Authority aggregate the VPT of independent units to exceed the €1,000,000 threshold for Imposto do Selo?
Yes, the Tax Authority's position in Decision 468/2015-T is that it can and must aggregate the VPT of independent units in vertical ownership to determine whether the €1,000,000 threshold is exceeded for Imposto do Selo purposes. The Authority argues this aggregation is legally required because vertical ownership creates a single 'property' under CIMI Article 2(1), unlike horizontal ownership which creates separate properties under Article 2(4). The separate registration of units under Article 12(3) of CIMI serves administrative functions—reflecting functional and economic independence of parts for IMI assessment purposes—but does not fragment the property into multiple taxable units for Stamp Tax. When the aggregate VPT of residential units reaches or exceeds €1,000,000, item 28.1 applies to the property as a unified legal and fiscal entity.
What is the CAAD arbitral procedure for challenging Stamp Tax assessments on high-value residential properties?
The CAAD arbitral procedure for challenging Stamp Tax assessments on high-value residential properties, as illustrated in Decision 468/2015-T, follows the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). The claimant filed a request for arbitral decision under Articles 2(1)(a) and 10 of RJAT, in conjunction with Articles 99(a) and 102(1)(d) of the Tax Procedure and Process Code (CPPT). The request was accepted by the CAAD President and the Tax Authority notified. Since the claimant did not appoint an arbitrator, a sole arbitrator was appointed by the Ethics Council. The arbitral tribunal was constituted within the legal timeframe, the Tax Authority filed its reply, and both parties waived the hearing and submission of pleadings. This streamlined process provides taxpayers an alternative to judicial courts for resolving disputes over Stamp Tax assessments on properties valued at or above €1,000,000 under item 28.1 of the General Table.
What was the outcome of CAAD Decision 468/2015-T regarding Stamp Tax incidence on vertically owned properties?
The excerpt provided from CAAD Decision 468/2015-T contains only the procedural report section and the parties' arguments, not the final ruling (fundamentação and dispositivo). The claimant argued that Stamp Tax under item 28.1 should not apply because each independent unit's VPT was below €1,000,000, and units with independent use should be treated as separate properties similar to horizontal ownership. The Tax Authority argued that in vertical ownership, the building constitutes a single property requiring aggregation of all units' VPTs, and if the sum equals or exceeds €1,000,000, Stamp Tax applies. The complete decision, including the arbitrator's legal reasoning and final determination on whether the tax assessments were lawful or should be annulled, is not included in the provided text excerpt.