Process: 469/2014-T

Date: December 30, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 469/2014-T) addresses the application of Stamp Tax under Verba 28 of the General Stamp Tax Table (TGIS) to properties held in vertical or total ownership. The claimants owned a Lisbon building with nine residential units and one commercial unit, each with independent use and economic autonomy, but not constituted as horizontal property (condominium). The Tax Authority assessed Stamp Tax totaling €10,984.00 for 2013, treating the entire building as a single property with an aggregate tax value of €1,098,400, exceeding the €1 million threshold under Verba 28.1 TGIS. The claimants challenged these assessments through CAAD arbitration, arguing that each economically autonomous unit should be taxed separately based on its individual property tax value, not aggregated. They contended that the CIMI (Municipal Property Tax Code) definition of property should apply subsidiarily, emphasizing economic autonomy over legal form. The claimants further argued that each floor, being distinct with independent access and capable of horizontal property regime, constitutes a separate taxable unit. Additionally, they raised constitutional concerns about discrimination, noting that non-residential properties are exempt from Verba 28 taxation regardless of value. The arbitral tribunal had jurisdiction under RJAT (Legal Regime for Tax Arbitration) to review the legality of these Stamp Tax assessments. The claimants sought annulment of the assessment acts, cancellation of collection documents, and reimbursement with compensatory interest for amounts already paid. This case exemplifies the interpretative challenges in applying Verba 28 TGIS to buildings with multiple independent units held under vertical ownership, requiring careful analysis of property tax concepts, economic autonomy principles, and the interplay between Stamp Tax and Municipal Property Tax legislation.

Full Decision

ARBITRAL DECISION

Case No. 469/2014-T

Claimants – A…, D… and M…

Respondent: Tax and Customs Authority

Subject: Stamp Tax – item 28 of the General Stamp Tax Table – full or vertical ownership

I – REPORT

  1. On 7 July 2014, A… and wife, D…, taxpayers numbered … and 1…, respectively, resident on Rua D… Lisboa and M…, taxpayer no. 1…, resident on Rua … Viseu (hereinafter "Claimants"), came forth in accordance with Decree-Law no. 10/2011, of 20 January (RJAT), and Order no. 112-A/2011, of 22 March, requesting the constitution of an arbitral tribunal for declaration of illegality of the acts of assessment of Stamp Tax (IS), relating to 2013, which gave rise to Collection Documents numbered 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…, 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… (these relating to the 1st installment, with payment deadline in April 2013), 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… (these relating to the 2nd installment, with payment deadline in July 2013) and no. 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… and 2014… (these relating to the 3rd installment, with payment deadline in November 2013), totalling the amount of € 10,984.00, as well as condemnation to reimbursement of amounts unduly paid and payment of compensatory interest. With the initial Request were attached, in addition to the powers of attorney and proof of payment of the fee, 56 documents.

  2. In the Request for arbitral pronouncement, the Claimants opted not to designate an arbitrator, and by decision of the President of the Deontological Council, in accordance with no. 1 of article 6 of the RJAT, the undersigned was designated as sole arbitrator, who accepted the position within the legally stipulated period.

  3. The arbitral tribunal was constituted on 8 September 2014.

  4. The Claimants further requested the joinder to the file, on 4 August 2014, of documents relating to payments concerning the 2nd installment, and, on 8 September 2014, an arbitral decision rendered on 28 August 2014, in the CAAD in case no. 201/2014-T, relating to Stamp Tax levied on the same properties, in the year 2012.

  5. The Tax and Customs Authority (TA or Respondent) presented, on 9 October 2014, its Response as well as the administrative file (PA), proposing waiver of the hearing provided for in article 18 of the RJAT and of submissions, on the ground that only questions of law were at issue.

  6. The Claimants were notified of an arbitral order to pronounce themselves on the waiver of the hearing under article 18 of the RJAT and the necessity of submitting pleadings, with an indication that the decision would be rendered by the end of the period for such submission. In the absence of a response, it was understood, as also provided in the same order, that there was agreement with the Respondent's proposal, and the case proceeded to the decision phase (Arbitral orders of 25/10 and 30/11).

  7. On 3 December 2014, the Claimants further requested the joinder to the file of documents relating to the payment of third installments of IS.

8. THE REQUEST FOR PRONOUNCEMENT

In the initial Request, the Claimants sustain, in summary:

  • They are owners of the urban property located on Rua …, in Lisbon, registered in the property matrix under article … of the parish of … (current article … of the parish of …), composed of various floors with independent use, nine intended for residential purposes and one store intended for commercial use, as evidenced in the property register.

  • Upon the said independent units, endowed with economic autonomy, distinct and isolated from each other, with their own exit to a common part of the property or with direct exit to the public road, Stamp Tax assessments were levied, relating to the year 2013, in accordance with item 28.1 of the General Stamp Tax Table, whose payments they made, despite not agreeing with the tax acts practiced.

  • The tax property value relating to the totality of the units comprising the property (intended for residential and commercial use) is € 1,141,550.00, being the tax property values resulting from the appraisal recorded in the matrix, attributed to each of the floors with independent use.

  • In the Stamp Tax assessments to be made in accordance with the amendments to the Stamp Tax Code (CIS), introduced by Law no. 55-A/2012 of 29 October – taxation of urban properties with tax property value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), equal to or exceeding € 1,000,000.00 (one million euros) – the subsidiary application of the rules of the CIMI must be taken into account for matters not regulated in Stamp Tax relating to the aforementioned item no. 28 (art. 67 no. 2 CIS), with express determination of its application as to the birth of the tax obligation (art. 5 al. u), competence for assessment (art. 23 no. 7), term and place of payment (art. 44 no. 5), collection of the tax (art. 46 no. 5) and guarantees of taxpayers (art. 49 no. 3).

  • And the determination of the concept of "property" is made in accordance with articles 11 of the General Tax Code (LGT) and 9 no. 1 of the Civil Code, as well as article 2, nos. 1 and 4, and article 12, no. 3, of the CIMI.

  • Now the property of which the floors described above form part, notwithstanding that it is in vertical ownership, is entirely composed of parts endowed with economic autonomy and susceptible of independent use, being leased to different tenants.

  • Although the building is not divided into horizontal property, each of the floors comprising it has an individual tax property value in the property registration certificate.

  • The said floors, distinct and isolated from each other, with their own exit to a common part of the property, or direct exit to the public road, are in a position to be subject to horizontal property, in accordance with the articles of the Civil Code governing this regime (article 1414 et seq.), a legal regime which aims solely to grant legal autonomy to the fractions of the property so that they can belong to more than one owner, not being in itself attributive of any economic significance to those fractions.

  • For purposes of Property Tax (IMI) and Stamp Tax (IS), the economic autonomy of the floor resulting from it being susceptible of independent use is relevant, not the legal autonomy granted by the figure of horizontal property.

  • The analysis of the incidence (or otherwise) of Stamp Tax upon each of the floors under item 28.1 of the General Stamp Tax Table should have been carried out separately in view of the tax property value of each of those fractions, and not the tax property value of € 1,098,400.00.

  • On the other hand, the exclusion from subjection to the Stamp Tax provided in the aforementioned item no. 28 of non-residential urban properties, in many cases with tax property values considerably higher than € 1,000,000, constitutes a shocking violation of the constitutional principle of non-discrimination (arts. 13 and 104 no. 1 of the Constitution).

  • The assessment acts in question in the file suffer from a defect of violation of law, due to error attributable to the services of the Tax Authority, due to incorrect qualification, interpretation and application of the law, having violated article 1, no. 1, of the Stamp Tax Code and item no. 28 of the General Stamp Tax Table in conjunction with articles 2, no. 1, and 12, no. 3, of the CIMI and articles 13 and 103 no. 1 and 104 no. 1 of the Constitution, for which reason the same should be revoked, as well as the respective collection documents.

  • In this sense, several decisions have been rendered within the scope of the CAAD.

  • Having opted for payment of the tax, to avoid fiscal enforcement proceedings, the Claimants have unequivocally the right to compensation for the damage caused, by virtue of the unavailability of the amounts paid, in accordance with the provisions of article 43, no. 1, of the General Tax Code (LGT), with respect to all payments made or to be made.

  • The value of the economic utility of the claim is the value corresponding to the assessed tax, in the amount of € 10,984.00, and paid, plus a claim for payment of compensatory interest in accordance with the provisions of articles 43 and 100 of the General Tax Code.

  • There is requested the declaration of illegality of the assessment acts, the reimbursement of the amounts unduly paid as well as compensatory interest.

9. THE RESPONSE

The Respondent responds, in summary:

  • To the totality of the urban property of which the claimants are owners, registered in the property matrix of the parish of …, article …, with a total of 5 stories and 10 divisions susceptible of independent use, 9 intended for residential use and 1 allocated to commercial use, a tax property value of € 1,141,550.00 is attributed.

  • The tax property value was determined separately, in accordance with art. 7, no. 2, subsection b), of the Municipal Property Tax Code (CIMI), the tax property value of the floors/parts with residential allocation being taken into account in the assessments of € 1,098,400.00.

  • Upon this the TA assessed, in accordance with articles 6, no. 1, subsection f), sub-subsection i), the Stamp Tax of item 28.1 of the General Table, in the wording given by art. 4 of Law no. 55-A/2012, of 29 October, at the rate of 1 per cent, resulting in Stamp Tax in the global amount of € 10,984.00.

  • Subjection to the Stamp Tax of item 28.1 of the General Stamp Tax Table results from the conjunction of two facts: the residential allocation and the tax property value of the urban property registered in the matrix being equal to or exceeding € 1,000,000.00.

  • As the property of the Claimants is in the regime of full ownership, there are no autonomous fractions to which the tax law may attribute the qualification of property. The claimants are owners of a property in the regime of full or vertical ownership and according to the notion of property in article 2 of the CIMI; only the autonomous fractions of property in the regime of horizontal property are considered as properties (no. 4 of the cited article 2 of the CIMI).

  • Thus, the now claimants, for purposes of Property Tax (IMI) and Stamp Tax, by force of the wording of the said item, are not owners of 10 autonomous fractions, but rather of a single property.

  • Horizontal property, a specific legal regime of property provided for in article 1414 et seq. of the Civil Code, is a more advanced regime of property and it would be abusive and illegal to apply, by analogy, to the regime of full property the regime of horizontal property. There being no gap in the law, the CIMI, to which the said item refers, determines that in the regime of horizontal property the fractions constitute properties. Not being the property subject to this regime, the fractions are, legally, parts susceptible of independent use without there being common parts.

  • The property being subject to the regime of full ownership, but being physically composed of parts susceptible of independent use, the tax law attributed relevance to this materiality, evaluating these parts individually, in accordance with art. 12, no. 3, of the CIMI – each floor or part of property susceptible of independent use is considered separately in the property registration but in the same matrix, with the assessment of the Property Tax being carried out taking into account the tax property value of each part.

  • The floors or independent divisions, evaluated in accordance with article 12, no. 3, of the CIMI, are considered separately in the property registration, which likewise discriminates the respective tax property value upon which Property Tax is assessed.

  • Such legal rule has correspondence in the body of art. 232, rule 1, of the Code of Property Tax and Tax on Agricultural Industry (CCPIA), which provided that each dwelling or part of property should be taken automatically for purposes of determining taxable income subject to assessment, but the taxable income had necessarily to correspond to the sum of the rent or rental value of each of the components of the property with economic autonomy.

  • The property registration must make reference to each of the parts and their respective tax property values, ascertained separately in accordance with articles 37 et seq. of the CIMI, but the unity of the urban property in vertical ownership composed of various floors or divisions is not affected by the fact that all or part of those floors or divisions are susceptible of independent economic use.

  • Such property does not cease, by the fact of being only one, not being, thus, its distinct parts legally equated to the autonomous fractions in the regime of horizontal property.

  • The fact that the Property Tax was ascertained according to the tax property value of each part of property with independent economic use does not likewise affect the application of item 28 no. 1 of the General Table, which applies to the total tax property value of the property and not to that of each of its component parts.

  • The interpretation that the tax property value (VPT) of urban properties upon which the application of item 28.1 of the General Table depends is the tax property value of each floor or division susceptible of independent use and not the global tax property value of the urban property with residential allocation has no expression in the law and is unconstitutional, as offensive to the principle of tax legality.

  • The procedural rules for appraisal, property registration and assessment of parts susceptible of independent use do not permit the assertion that there is an equating of the property in the regime of full ownership to the regime of vertical property because these are different civil-legal regimes, so considered by the tax law, the discrimination between horizontal and vertical property not being unconstitutional, justified as it is by the imposition of coherence to the tax system.

  • This interpretation results from the conjunction of the rules of the CIMI relating to incidence (art. 1), the concept of property (art. 2), urban property (art. 4) and types of urban properties (art. 6), and the assailed tax acts should be maintained in the legal order as they violate no legal or constitutional provision.

10. SUBJECT OF THE CLAIM

The fundamental legal question to be decided consists in determining whether the scope of the incidence of the Stamp Tax provided in Item 28 of the General Stamp Tax Table includes urban properties not constituted as horizontal property but composed of floors or divisions susceptible of independent use with residential allocation, when the tax property value attributed to each of these distinct parts is less than € 1,000,000.00, although the aggregate of the independent units allocated to residential use reaches a total tax property value equal to or exceeding that amount.

11. CASE MANAGEMENT

The collective 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 possess legal personality and capacity and have standing in accordance with articles 4 and 10, no. 2, of the Legal Regime for Arbitration in Tax Matters (RJAT) and article 1 of Order no. 112-A/2011, of 22 March.

The case does not suffer from any nullity nor have the parties raised any exceptions that would prevent consideration of the merits of the case, accordingly the conditions are met for the rendering of the arbitral decision.

II – REASONING

12. FINDINGS OF FACT

Based on the documents submitted by the Claimant (Request for arbitral pronouncement, Documents numbered 1 to 56, attached with that request, as well as the documents subsequently introduced in the file, two on 4 August and nine documents on 5 December 2014) and by the Respondent (Response), the following factual findings are established, it being verified that the proven facts are sufficient for the rendering of a pronouncement:

12.1. The Claimants, D…, married to A…, and M… dos Santos, are owners, in equal shares (1/2 each of them) of the property located on Rua … Lisbon, property article … of the parish of … (Property Register, Document no. 53, and Property Identification Certificates 1 to 52, attached with the request for arbitral pronouncement, the content of which is reproduced herein).

12.2. The property subject of the case comprises five floors, is in full ownership with 10 floors or divisions susceptible of independent use, which are the following: basement no. 17-B; Store no. 17-A; Ground Floor Right; Ground Floor Left; 1st Floor Right; 1st Floor Left; 2nd Floor Right; 2nd Floor Left; 3rd Floor Right; 3rd Floor Left (Property register, document no. 2 attached with the request, and the Property Identification Certificates attached with the Request).

12.3. The property in question was registered in the matrix in 2009 and the tax property values of the said divisions susceptible of independent use, determined in 2012 in accordance with the CIMI, are € 128,660.00 (1st R), € 128,660.00 (1st L); € 128,660.00 (2nd R); € 128,660.00 (2nd L); € 128,660.00 (3rd R); € 128,660.00 (3rd L); € 79,910.00 (Bsmt17B); € 43,150.00 (Store17A); € 128,660.00 (GFR); € 117,870.00 (GFL) (Property register, document no. 2 attached with the request, and Property Identification Certificates attached with the Request).

12.4. Of the ten floors or divisions registered in the matrix as being of independent use, nine are classified as allocated to residential use and one (Store17A) allocated to commercial use, with all totalling a total tax property value of € 1,141,550.00 (Property register, document no. 2 attached with the request, and the Property Identification Certificates attached with the Request).

12.5. The divisions allocated to residential use were, with respect to the year 2013, subject to the incidence of the Stamp Tax provided in item 28.1 of the General Stamp Tax Table, with the Claimants receiving, successively, the following collection documents, numbered 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…, 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… (Documents nos. 1 to 18, relating to the 1st installment of Stamp Tax, with payment deadline in April 2013, the first nine relating to D…, the next nine relating to M…); 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… (Documents nos. 19 to 34, relating to the 2nd installment of Stamp Tax, with payment deadline in July 2013, the first eight relating to D…, the next eight relating to M…) and 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… and 2014… (Documents nos. 35 to 52, relating to the 3rd installment of Stamp Tax, with payment deadline in November 2013, the first nine relating to D…, the next nine relating to M…). (Documents nos. 1 to 52, Property Identification Certificates, attached to the file with the Request).

12.6. The assessed amounts were, for each of the fractions, and for each owner of ½ of the property, the following: 1R - Tax Property Value €128,660.00 assessment € 643.30, amount to be paid in 3 installments of € 214.44 and € 214.43; 1L - Tax Property Value €128,660.00 assessment € 643.30, amount to be paid in 3 installments of €214.44 and €214.43; 2R - Tax Property Value €128,660.00 assessment € 643.30, amount to be paid in 3 installments of €214.44 and € 214.43; 2L - Tax Property Value € 128,660.00 assessment € 643.30, amount to be paid in 3 installments of € 214.44 and € 214.43; 3R - Tax Property Value € 128,660.00 assessment € 643.30, amount to be paid in 3 installments of € 214.44 and € 214.43; 3L - Tax Property Value € 128,660.00 assessment € 643.30, amount to be paid in 3 installments of € 214.44 and € 214.43; Bsmt17B – Tax Property Value € 79,910.00, assessment € 399.55, amount to be paid in 2 installments of €199.78; GFR €128,660.00 assessment € 643.30 amount to be paid in 3 installments of € 214.44 and €214.43; GFL - Tax Property Value €117,870.00, assessment €589.35, amount to be paid in 3 installments, of €196.45 (Documents nos. 1 to 52, Property Identification Certificates, attached to the file with the Request).

12.7. The collection documents contain the indication "tax property value of the property – total subject to tax: €1,098,400.00" (amount corresponding to the total value of the nine divisions allocated to residential use) and that the assessment of the Stamp Tax, dated 17 March 2014, had as its basis item 28.1 of the General Table of Stamp Tax (Docs. 1 to 52), applying the rate of 1% to the value of the tax property value of each of the floors or divisions with independent use, taking into account the fractional share (1/2) of each co-owner.

12.8. The Claimants paid the first and second installments of the assessed amounts on 29/04/2014 (documents 54 and 55, attached to the file with the Initial Request) and 16/07/2014, respectively.

12.9. The third installments of Stamp Tax assessed in the name of D… were paid (documents 1 to 9 attached to the file, following the request of 3 August 2014).

13. UNPROVEN FACTS

There are no unproven facts with relevance to the decision of the case.

14. LEGAL ANALYSIS

14.1. Regarding the cumulation of claims and scope of the claim

In the present case the Claimants intend to cumulate claims for declaration of illegality of the same tax levied upon the same property, co-ownership of more than one taxpayer, and the application of the same legal rules in assessing the incidence of the Stamp Tax provided in item no. 28.1 of the General Table of Stamp Tax (TGIS), added by article 4 of Law no. 55-A/2012, of 29 October.

Nothing opposes the cumulation of claims effected in the present request for arbitral pronouncement, in accordance with the principle of procedural economy, in accordance with article 3, no. 1, of the RJAT, and accordingly the tribunal will proceed to the assessment and decision on the merits of the case.

14.2. Item 28 of the General Table of Stamp Tax (TGIS)

14.2.1. Regime approved by Law no. 55-A/2012, of 29 October

The fundamental legal question controverted in the present case consists in determining whether in the case of properties in full ownership, with floors or divisions of independent use but not constituted in the regime of horizontal property, the tax property value (VPT) to be considered for purposes of the incidence of Stamp Tax provided in item 28.1 of the TGIS should correspond to the tax property value of each floor or division with residential allocation and independent use or to the sum of the tax property values corresponding to the floors or divisions of independent use with residential allocation.

In other words, it is necessary to decide whether the tax property value relevant as a criterion for the tax's incidence is that corresponding to the aggregate of the tax property value attributed to the different parts or floors (global tax property value) or, rather, the tax property value attributed to each of the parts or residential floors.

This question has already been addressed in several cases within the scope of Tax Arbitration [1], with no arguments having been identified to date that would break the unanimity achieved in the decisions rendered [2].

Item 28 of the General Table of Stamp Tax, attached to the Stamp Tax Code (CIS), was added by article 4 of Law no. 55-A/2012, of 29 October, with the following content:

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

28.1 – For property with residential allocation – 1%;

28.2 – For property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, recorded on a list approved by order of the Minister of Finance – 7.5%."

As results from the amendments to the Stamp Tax Code, introduced by article 3 of Law no. 55-A/2012, of 29/10, the Stamp Tax provided in item 28 of the General Stamp Tax Table applies to a legal situation (no. 1 of art. 1 and no. 4 of art. 2 of the CIS), in which the respective taxpayers are those referred to in article 8 of the CIMI (no. 4 of art. 2 of the CIS), to whom the burden of the tax falls (subsection u) of no. 3 of article 3 of the CIS).

The CIS, as amended by Law no. 55-A/2012, both in article 4, no. 6 ("In the situations provided for in item 28 of the General Table, the tax is due whenever the properties are located in Portuguese territory"), and in article 23, no. 7 ("In the case of tax due for 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"), in conjunction with art. 1 of the CIMI, considers the property itself as the taxable event (the situation that triggers taxation) provided that it reaches the value provided for in item 28 of the General Table of Stamp Tax, regardless of the number of taxpayers, possessors (whether as owners, usufructuaries or superficiaries) of the assets in question.

The provision of Law no. 55-A/2012, of 29 October, regarding the new item 28 of the General Table of Stamp Tax, came into force on the day following publication of the law, namely 30 October 2012 [3].

14.2.2. The concept of "property" used in item 28 of the TGIS

The concept of "properties with residential allocation" used in item 28.1 [4] is not expressly defined in any provision of the CIS nor in the CIMI, the regulation to which no. 2 of art. 67 of the CIS refers.

In the case at hand, the property (building) in vertical ownership is composed of divisions susceptible of independent use, nine divisions allocated to residential use and one division allocated to commercial use, that is, "parts that fall within more than one of the classifications of properties" provided for in no. 1 of article 6 of the CIMI, properties with residential and commercial allocation (articles 2, 4, 6 and 7 of the Municipal Property Tax Code, applicable by reference of art. 67 of the CIS).

The tax property values of the nine floors or divisions with independent use, allocated to residential purposes, range between €79,910.00 and €128,660.00, totalling the amount of €1,098,400.00.

At issue is the exact meaning of the segment "tax property value considered for purposes of Property Tax (IMI)", contained in the norm of incidence of Stamp Tax in the body of item 28 of the TGIS: in the case of properties in full ownership but with floors or divisions susceptible of independent use, with residential allocation, is the tax property value relevant the sum of the tax property values of the various divisions/floors with residential allocation, considered as a single property as the TA contends, or is what must be taken into account the tax property value of each of the respective floors or divisions autonomous with the said residential allocation, as the Claimant argues?

Now the said segment (tax property value considered for purposes of Property Tax (IMI)) is integrated in a text that defines as the object of the incidence of Stamp Tax the "Ownership, usufruct or right of superficies of urban properties whose tax property value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 (...)" (emphasis added).

As has been repeatedly invoked and admitted, the Municipal Property Tax Code enshrines, both regarding property registration and discrimination of the respective tax property value and regarding the assessment of the tax, the autonomization of the parts of urban property susceptible of independent use and the segregation/individualization of the tax property value relating to each floor or part of property susceptible of independent use [5].

Thus, each property has a single article in the matrix (no. 2 of article 82 of the CIMI) but, according to no. 3 of art. 12 of the same Code, relating to the concept of property matrix (register of the property, its characterization, location, tax property value and ownership), "each floor or part of property susceptible of independent use is considered separately in the property registration, which discriminates the respective tax property value", not taking as reference the aggregate of the tax property values attributed to the autonomous parts of the same property, but the value attributed to each of them individually considered.

Regarding the assessment of Property Tax – application of the rate to the taxable base – art. 119, no. 1 provides that "the competent collection document" contains the "discrimination of the properties, their parts susceptible of independent use, respective tax property value and the assessment (…)".

That is, the rule is autonomization, the characterization as "property" of each part of a building, provided it is functionally and economically independent, susceptible of independent use [6], in accordance with the concept of property defined at the outset in no. 1 of article 2 of the CIMI: property is every fraction (of land, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or situated thereon, with a character of permanence) provided it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances aforesaid, endowed with economic autonomy (presentation and underlining ours). [7]

Thus, when no. 4 of article 2 provides that "For purposes of this tax, each autonomous fraction, in the regime of horizontal property, is deemed to constitute a property", it does not properly establish an exceptional or special regime for properties in horizontal property.

After all, each building in horizontal property (article 92) has only a single property registration entry (no. 1), generically describing the building and mentioning the fact that it is subject to a regime of horizontal property (no. 2), and the autonomy in registration is achieved in the attribution to each of the autonomous fractions, carefully described and individualized, of a capital letter, in alphabetical order (no. 3). This appears to be the specificity of buildings in horizontal property.

But in other cases, of properties in vertical or full ownership, the divisions or floors with independent use autonomy but without the status of horizontal property, the matrix also enshrines the autonomy for taxation purposes, evidencing the different units with indication of the type of floor/story.

Thus, the Respondent's assertion that the claimants are, for purposes of Property Tax (IMI) and Stamp Tax, by force of the wording of item 28.1, owners not of 10 autonomous fractions but rather of a single property (article 23 Response) is not sufficient to render irrelevant the economic and tax autonomy which we found above to be enshrined in the CIMI in the case of divisions or floors susceptible of independent use, without the status of horizontal property, integrated in buildings in full ownership.

Nor is the argument that has been presented by the TA based on the civil law establishment of horizontal property, envisioning a legislative intent in the development of the figure, including as an instrument of tax coherence (arts 25 and 52 of the Response), acceptable.

Indeed, there are no elements, either in the normative text or in the legislative process that led to the approval of Law no. 55-A/2012, of 29 October, that would permit the identification and legitimization of a purpose (extra-fiscal or fiscal) in the manner defended by the Respondent. Rather, it seems that such unexpected discrimination risked violating the principle of legal certainty...

All told, there is no reason to, in matters of the incidence of Stamp Tax provided in item 28.1 of the TGIS, treat fractions of properties in "vertical ownership", endowed with autonomy, differently from that accorded to properties in horizontal property, when in either of those situations the Property Tax (IMI) is applied to the tax property value evidenced in the matrix for each of the autonomous units.

14.2.3. The rationale of items 28 and 28.1 of the TGIS

The interpretation above sustained, resulting from the analysis of the letter of the law and its insertion in the set of other applicable tax norms, is the most consonant with the spirit of the legislative amendments introduced by Law no. 55-A/2012, of 29 October.

As has already been evidenced in other arbitral decisions, "the legislator, in introducing this legislative innovation, considered as the determining element of taxpaying capacity urban properties, with residential allocation, of high value (luxury), more precisely, of value equal to or exceeding €1,000,000.00 upon which a special rate of Stamp Tax began to apply, intending to introduce a principle of taxation on wealth manifested in the ownership, usufruct or right of superficies of luxury urban properties with residential allocation. Accordingly, the criterion was the application of the new rate to urban properties with residential allocation, whose tax property value is equal to or exceeding € 1,000,000.00". (...) "The rationale for the measure designated as 'special tax on residential urban properties of higher value' rests on the invocation of the principles of social equity and tax justice, calling upon those holding properties of high value intended for residential purposes to contribute more intensively, with the special new rate applying to 'houses of value equal to or exceeding 1 million euros. Clearly the legislator understood that this value, when imputed to a residential property (house, autonomous fraction or floor with independent use) manifests a taxpaying capacity above the average and, as such, susceptible of determining a special contribution to ensure fair distribution of the tax burden." [8]

Having regard to the legislative purpose, it is further concluded that the holding of fractions in full or vertical ownership does not manifest a greater taxpaying capacity than if they were constituted in the form of horizontal property.

On the contrary, in most cases, as evidenced by Arbitral Decision no. 50/2013, "many of the properties existing in vertical ownership are old, with undeniable social utility, as in many cases they house residents with modest and more accessible rents, factors which must necessarily be taken into account."

Also, analysis from this perspective confirms the correctness of the interpretation that item 28 of the TGIS does not encompass each of the floors, divisions or parts susceptible of independent use when only from their aggregate results a tax property value higher than that provided for in that item.

As decided in other arbitral cases, this tribunal understands that regarding the date of constitution of the tax obligation, fiscal connection, determination of the taxable base, assessment and payment of the Stamp Tax in question, the corresponding rules of the CIMI are applicable, by express reference of articles 5, no. 1, subsection u), 4, no. 6, 23, no. 7, 44, no. 5, 46, no. 5 and 49, no. 3, of the CIS.

Subjecting to the new Stamp Tax autonomous parts without the legal status of horizontal property and not subjecting any of the residential fractions if the property were in the regime of horizontal property would constitute a violation of the constitutional principle of equality, treating equal situations differently.

Just as it cannot be overlooked that there is incoherence, in terms of taxation of assets, in the different treatment given to holders of fractions concentrated in the same property or dispersed across different properties, taxed in the first case and not taxed in the second, even though in either situation the total amount of their respective tax property values would reach 1 million euros.

Accordingly, the present arbitral tribunal concludes that the assessments of Stamp Tax, based on item 28/28.1 of the TGIS, relating to each of the floors or parts susceptible of independent use, property of the Claimants, subject of the present case, are affected by illegality, because the said provisions cannot be interpreted in the sense of their application to floors or parts susceptible of independent use of a property in vertical ownership, when only from the aggregate of each of these floors or parts is a tax property value equal to or exceeding € 1,000,000.00 (one million euros) obtained, the tax property value of each of the said floors or parts not reaching that amount.

As results from the factuality established, none of the floors intended for residential use, of the property in vertical ownership subject of this case, has a tax property value equal to or exceeding €1,000,000.00, and accordingly the legal requirement for the incidence of Stamp Tax provided in Item 28 of the TGIS has not been met, with consequent illegality of the assessment acts under consideration and recognition of the right of the Claimants to reimbursement of the amounts of tax already unduly paid, in conformity with articles 24, no. 1, subsection b) of the RJAT and 100 of the General Tax Code (LGT).

Compensatory interest is further due in accordance with article 24, no. 5, of the RJAT, article 43 of the General Tax Code (LGT), and article 61 of the Tax Procedural Code (CPPT).

15. DECISION

With the grounds set forth, the arbitral tribunal decides:

a) To adjudge the request for arbitral pronouncement well-founded and, in consequence, to declare illegal the assessments of Stamp Tax which gave rise to collection documents numbered 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…, 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…, 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… and no. 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… and 2014…, with consequent annulment of such assessments;

b) To adjudge well-founded the request for reimbursement of the amounts unduly paid by the Claimants, corresponding to the installments of Stamp Tax assessed and in the meantime paid by the taxpayers.

c) To adjudge well-founded the request for compensatory interest, in accordance with articles 35, no. 1, and 43, no. 1, of the General Tax Code (LGT) and article 61, no. 5, of the Tax Procedural Code (CPPT).

d) To condemn the Respondent in costs.

16. VALUE OF THE CASE

In harmony with the provisions of no. 2 of article 315 of the Code of Civil Procedure (CPC), subsection a) of no. 1 of article 97-A of the Tax Procedural Code (CPPT) and also no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 10,527.80 (ten thousand five hundred and twenty-seven euros and eighty cents).

17. COSTS

For the purposes of the provisions of no. 2 of article 12 and no. 4 of article 22 of the RJAT and no. 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00 (nine hundred and eighteen euros), in accordance with Table I attached to said Regulation, to be borne in full by the Respondent.

Let notification be made.

Lisbon, 30 December 2014.

The Arbitrator

(Maria Manuela Roseiro)

[Text prepared by computer, in accordance with article 131, number 5 of the Code of Civil Procedure (CPC), applicable by reference of article 29, no. 1, subsection e) of the Legal Regime for Tax Arbitration. The wording of this decision is governed by the orthography prior to the Orthographic Agreement of 1990]

[1] Regarding the application of item 28 of the General Stamp Tax Table in the case of properties in vertical ownership, a large number of decisions are already published on the CAAD tax case law site, namely, those rendered in cases 50/2013T; 132/2013-T; 181/2013-T; 182/2013-T; 183/2013-T; 185/2013-T; 240/2013-T; 248/2013-T; 268/2013-T; 272/2013-T; 280/2013-T, 14/2014-T; 26/2014-T, 30/2014-T; 88/2014-T; 100/2014-T; 177/2014-T, 193/2014-T; 194/2014-T, 206/2014-T and 72/2014-T.

[2] We will reproduce, to a large extent, the text of the decision rendered within the scope of the CAAD, in case no. 194/2014-T, judged by a collective tribunal with participation of the undersigned.

[3] Article 6 of Law no. 55-A/2012 provides transitional provisions by virtue of which, in that first year of effectiveness, that is, 2012: the taxable event occurs on 31 October (when, in accordance with article 8 of the CIMI, applicable by reference of no. 4 of art. 2 of the CIS, it would be on 31 December); the taxpayer of the tax is the holder of the property (no. 4 of article 2 of the CIS) also on that 31 October; the tax property value to be used in the assessment of the tax corresponds to that which results from the rules provided for in the CIMI by reference to the year 2011; the assessment of the tax by the TA is carried out by the end of November 2012; the tax shall be paid in a single installment, by the taxpayers, by 20 December of that year 2012. As for the rates, subsection f) of no. 1 of the same article 6, of Law no. 55-A/2012, provides the application in 2012 of a rate lower than the rate of 1%, provided for in item 28.1 of the TGIS for properties with residential allocation, distinguishing further between cases of properties evaluated in accordance with the Municipal Property Tax Code (rate of 0.5%) and properties with residential allocation not yet evaluated in accordance with the Municipal Property Tax Code (rate of 0.8%).

[4] The wording of this number was amended by Law no. 83-C/2013, of 31 December (Budget Law for 2014), now using the concept "residential property", but the assessments subject to the present case relate to the year 2013.

[5] "Another aspect that should be highlighted in the register has to do with the necessity of making relevant the autonomy which, within the same property, can be attributed to each of its parts, functionally and economically independent. In these cases, property registration not only must make reference to each of the parts but must make express reference to the tax property value corresponding to each of them" (Silvério Mateus and Freitas Corvelo, "Property Taxes on Real Estate and Stamp Tax, Commented and Annotated", Engifisco, Lisbon 2005, pages 159 and 160). And the same authors further stated (ibidem, p. 160): "This autonomization of the autonomous parts of a property, applicable especially to urban properties, was justified within the scope of the former Property Tax in which the taxable income corresponded to the rent or rental value of each of these components, continued to be justified in the case of Municipal Contribution in which the tax property value had underlying the actual or potential rent, and continues to be pertinent under Property Tax (IMI), given that the valuation factors provided for in articles 38 et seq. may not be the same for all of these components (...) the fact that a property is or is not leased continues to be relevant for purposes of determining the tax property value both for purposes of Property Tax (IMI) and for Property Transfer Tax (IMT) (see article 17 of Decree-Law 287/2003)" (they referred to the original wording "transitional regime for leased urban properties", a norm to be reviewed, according to its no. 5, when the urban lease law was revised, which occurred with Law no. 6/2006, of 27/02).

[6] On this aspect, and in line with the commentary cited in the previous note, see the reasoning contained in the decision of case no. 248/2013-T: "The autonomization in the register of the functionally and economically independent parts of a property in full ownership is related to reasons of a fiscal and extra-fiscal nature. On the fiscal plane, this autonomization has to do with the very determination of the tax property value, which constitutes the taxable base of Property Tax (IMI), given that the formula for determining this value, provided for in art. 38 of the same Code, includes indices that vary depending on the use attributed to each of these parts. On the extra-fiscal plane, this autonomization continues to find justification in the relevance attributed to the tax property value of properties and their autonomous parts in urban lease legislation." It also mentions no. 1 of art. 15-O, of Decree-Law no. 287/2003, of 12/11, added by Law no. 60-A/2011, of 30/11 (providing that the safeguard clause relating to the increase in taxation in Property Tax (IMI) resulting from the general evaluation of urban properties is applicable per property or part of urban property which is subject to such evaluation) as confirming the individualization, for tax purposes, of the autonomous parts of urban properties.

[7] As observed in the decision rendered in case no. 132/2013: "The rules (...) listed establish the principle of autonomization of the independent parts of an urban property, even when it is not constituted as horizontal property. That is, each part susceptible of independent use should be, for purposes of Property Tax (IMI), valued in view of its specificities and allocation, resulting in an autonomous tax property value, identifiable and corresponding to each part susceptible of independent use."

[8] Excerpts from the decision in case no. 50/2014-T, also referring to Arbitral Decision in case no. 48/2013-T, regarding the analysis of the discussion of the legislative proposal in the Assembly of the Republic.

Frequently Asked Questions

Automatically Created

Does Verba 28 of the General Stamp Tax Table (TGIS) apply to properties held under total or vertical ownership?
Verba 28 of the TGIS targets urban properties with tax values at or above €1 million. For properties in vertical or total ownership (not horizontal property), the critical issue is whether the building should be treated as a single taxable unit or whether each economically autonomous unit with independent use should be taxed separately. Taxpayers argue that CIMI principles should apply subsidiarily, meaning units with economic autonomy and capable of independent use constitute separate properties. Courts have increasingly recognized that economic autonomy, not merely legal form, determines the taxable unit, potentially exempting individual units below the €1 million threshold even when the aggregate building value exceeds it.
Can taxpayers challenge Imposto do Selo (Stamp Tax) assessments on high-value properties through CAAD arbitration?
Yes, taxpayers can challenge Stamp Tax assessments under Verba 28 TGIS through CAAD (Centro de Arbitragem Administrativa) arbitration. The RJAT (Legal Regime for Tax Arbitration) established by Decree-Law 10/2011 provides jurisdiction for arbitral tribunals to review the legality of Stamp Tax liquidations. Taxpayers must file a request for arbitration, pay the required fee, and can seek declaration of illegality of assessment acts, annulment of collection documents, and reimbursement of amounts paid plus compensatory interest. CAAD arbitration offers an alternative to judicial courts for resolving tax disputes, with several favorable decisions issued regarding Verba 28 applications to properties in vertical ownership.
How is the taxable unit determined under Verba 28 TGIS for buildings in vertical property regime?
The determination of the taxable unit under Verba 28 TGIS for buildings in vertical property regime depends on whether individual units possess economic autonomy and independent use capability. Article 67(2) of the Stamp Tax Code mandates subsidiary application of CIMI rules for matters not specifically regulated. Under CIMI Articles 2 and 12, properties are defined based on economic utility and independent use potential, not solely legal ownership structure. Buildings with multiple floors or units, each with separate entrances, distinct spaces, and capability of being leased independently, may constitute separate taxable units even without horizontal property registration. The tax property value of each autonomous unit, not the aggregate building value, should determine Verba 28 applicability, meaning units individually valued below €1 million would be exempt.
What are the legal grounds for contesting Stamp Tax liquidation on properties valued above €1 million?
Legal grounds for contesting Stamp Tax liquidation on properties valued above €1 million include: (1) Incorrect interpretation of 'property' under Verba 28 by failing to apply CIMI definitions subsidiarily; (2) Violation of law through improper aggregation of economically autonomous units; (3) Error in legal qualification by treating vertical ownership buildings as single properties when units have independent use; (4) Constitutional violations under Articles 13, 103, and 104 regarding equality and proportionality principles, particularly discrimination between residential and non-residential properties; (5) Procedural defects in assessment methodology. Taxpayers can invoke Article 1 of the Stamp Tax Code and demonstrate that assessment services incorrectly qualified, interpreted, and applied the law by ignoring economic autonomy criteria established in property tax legislation.
Are property owners entitled to reimbursement and compensatory interest when Stamp Tax is unlawfully assessed under Verba 28?
Yes, property owners are entitled to reimbursement and compensatory interest when Stamp Tax is unlawfully assessed under Verba 28. Article 43 of the Tax Procedure and Process Code (CPPT) and Article 100 of the General Tax Law (LGT) establish taxpayers' rights to restitution of improperly collected taxes. When assessment acts are annulled by arbitral tribunals or courts due to illegality, the Tax Authority must reimburse amounts paid. Additionally, compensatory interest accrues from the payment date until reimbursement, calculated according to legal rates established in tax legislation. Taxpayers who paid under protest to avoid enforcement proceedings retain full rights to challenge assessments and recover amounts with interest, as payment does not constitute acceptance of the tax debt's legality or waiver of contestation rights.