Process: 469/2015-T

Date: March 18, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitral Decision 469/2015-T addresses the controversial application of Stamp Tax under Item 28.1 of the General Table to construction land (terreno para construção). The case involved a mixed-use plot in Matosinhos authorized for collective housing and commerce, with a total patrimonial value of €1,356,610. The taxpayer challenged the €13,566.10 Stamp Tax assessment, arguing that construction land without existing buildings falls outside Item 28.1's scope, particularly when introduced by Lei 83-C/2013. Central to the dispute was whether the housing portion value (€952,521.16) should be assessed separately from the commercial portion (€404,086.35), potentially placing the taxable base below the minimum threshold for Stamp Tax incidence. The applicant raised constitutional concerns, alleging violation of equality principles and taxpaying capacity under the Portuguese Constitution, arguing that taxing undeveloped land intended for future construction imposes tax liability without corresponding economic capacity. The Tax Authority defended the assessment's legality, maintaining that Item 28.1 applies to all urban property as valued for IMI purposes, regardless of construction status or designation breakdown. This decision is significant for real estate developers and property owners holding construction land, as it clarifies whether Portugal's 2013 Stamp Tax reform extended the annual wealth tax to undeveloped plots. The arbitral tribunal procedure demonstrates CAAD's role in resolving tax disputes efficiently, with the singular arbitrator constituted on October 6, 2015, after the August 7 notification. The case highlights critical interpretation issues regarding patrimonal valuation methodology under IMI Code articles 38 and 45, particularly for mixed-use authorizations, and whether partial values can trigger threshold exemptions under Stamp Tax legislation.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A…, Ltd., legal entity no. …, with registered office at … Street no. …, applied for the establishment of an arbitral tribunal in tax matters, submitting a request for arbitral pronouncement against the stamp tax assessment act, carried out under Item 28.1 of the respective General Table, relating to the year 2014 and to the urban property registered in the respective property register under article … of the parish of … and …, municipality of Matosinhos.

  2. As the basis for the request, presented on 23-07-2015, the Applicant alleges, in summary, that the property in question is not covered by the scope of stamp tax provided for in article 1, no. 1, of the respective Code and Item 28.1 of the General Table, since it is a plot of land intended for construction, whose designation, in accordance with the legal authorizations that assign it, shall be for collective housing and commerce, resulting from the definitive patrimonial value assigned to the part intended for housing a value lower than the minimum threshold established in the scope rule.

  3. The Applicant further alleges, in relation to the illegality it imputes to the contested assessment, the unconstitutionality of the scope rule on which it is based, for breach of the principle of equality in the aspect of taxpaying capacity.

  4. In response to the request made, the Tax and Customs Authority (AT) – the Respondent, pronounced itself in the sense of the inadmissibility of the present request for arbitral pronouncement, maintaining in the legal order the disputed tax act and, accordingly, by the discharge of the respondent entity, sustaining the legality of the assessment made on the basis of correct interpretation and application of Item 28.1 of the TGIS, in the wording of Law no. 83-C/2013, of 31/12, not suffering from any defect of violation of law, whether of the CRP or of the CIS.

  5. The application for establishment of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 07-08-2015.

  6. Pursuant to the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20/01, with the wording introduced by article 228 of Law no. 66-B/2012, of 31/12, the Deontological Council appointed as arbitrator of the singular arbitral tribunal the undersigned, who communicated acceptance of the task within the applicable period, and notified the parties of that appointment on 21-09-2015.

  7. Duly notified of that appointment, the parties did not express their will to reject the appointment of the arbitrator, pursuant to the combined provisions of article 11, no. 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  8. Thus, in accordance with the provisions of subparagraph c) of no. 1 of article 11 of the RJAT, with the wording introduced by article 228 of Law no. 66-B/2012, of 31/12, the singular arbitral tribunal was constituted on 06-10-2015.

  9. Duly constituted, the arbitral tribunal has material competence, in light of the provisions of articles 2, no. 1, subparagraph a), of the RJAT.

  10. The parties possess juridical personality and capacity and have legitimacy (arts. 4 and 10, no. 2, of the RJAT, and art. 1 of Ordinance no. 112-A/2011, of 22/03).

  11. Given the knowledge that derives from the procedural documents, which is deemed sufficient, the Tribunal decided to dispense with the meeting referred to in article 18 of the RJAT.

  12. The process does not suffer from defects that would invalidate it nor are there preliminary issues to consider that would prevent examination of the merits of the case, with the conditions being met for a final decision to be rendered.

II. STATEMENT OF FACTS

  1. With relevance for examination of the issue raised, the following factual elements are highlighted, which, on the basis of documents attached to the case, are considered proven:

13.1. On 31-12-2014, the Applicant was the owner of the urban property, of the type "land for construction," situated at …, … to …, parish of the Union of Parishes of … and …, municipality of Matosinhos, registered, since 2009, in the respective property register under article….

13.2. In accordance with the respective registration description contained in the corresponding property record (Doc. 2), the said property has an area of 1,073.4000 m², with the building footprint area of 1,073.4000 m², the gross construction area of 6,882.6500 m² and the gross dependent area of 2,165.1000 m². It is not indicated that the property in question, at that time, had any building or construction erected on its land.

13.3. On 11-12-2014, the Applicant submitted a complaint of the registration, under article 130, no. 3, subparagraph a), of the IMI Code, on the grounds of the outdating of the property patrimonial value of the land (Doc. 3).

13.4. The said request resulted in the assessment of the property in question, with the result being notified to the Applicant on 30-12-2014.

13.5. From the said notification it is extracted that the property was assigned a patrimonial property value of € 1,285,040.00, determined in accordance with the rules provided in article 45 of the IMI Code, considering for this purpose, among other relevant elements, a coefficient of designation exclusively for housing (Doc. 4).

13.5. On 30-12-2014, the Applicant was notified of the result of the assessment and requested a second assessment, pursuant to article 76 of the IMI Code, on the grounds of error in the assumptions for fixing that patrimonial value.

13.6. This request is based on the circumstance that the coefficients of designation of the authorized and planned building were not considered in that assessment, in accordance with the Plot Division/Consolidation Permit no. …/2008 (Doc. 5) which, issued in accordance with the Municipal Master Plan of Matosinhos, establishes that that building is intended for both collective housing and commerce.

13.7. In the second assessment, the land was assigned a patrimonial property value of € 1,356,610.00, with the areas of the various designations provided for the property to be constructed being considered in its determination, according to the respective Permit.

13.8. In accordance with the formula provided in articles 38 and 45 of the CIMI, that value was determined by the sum of the values assigned to the areas designated for housing (€ 952,521.16) and for commerce (€ 404,086.35), broken down as follows:

a) Vt Commerce (Vtc) Vtc

Vtc= 603x[(1073.4+1082.55x0.3)xCajx29%+0x0.025+0x0.005]x1.2x1.6x1

Vtc= € 404,086.35

Vt Housing (Vth) Vth

603x[(3644.15+1082.55x0.3)xCajx29%+0x0.025+0x0.005]x1x1.7x1

Vth = € 952,521.16

13.9. Notwithstanding the assessment carried out and the patrimonial property value (VPT) resulting therefrom, the AT carried out, on 20-03-2015, a stamp tax assessment referred to in Item 28 of the respective General Table, relating to the year 2014, on the basis of the patrimonial value of the land prior to the second assessment, arriving at the amount of € 16,638.94 of tax to be paid in three installments.

13.10. Subsequently, on 22-04-2015, the AT made a corrective assessment in which, considering the patrimonial property value definitively determined with reference to the land in question, the amount of € 13,566.10 of tax was arrived at to be paid in three installments.

III. LEGAL MATTERS

  1. Considering the facts relevant to the decision, it is verified that in the present process the issue is solely the interpretation of the rule of Item 28.1 of the General Table of Stamp Tax, in the wording given by article 194 of Law no. 83-C/2013, of 31/12, in force at the date of the tax event to which the contested assessment relates.

  2. More specifically, the issue is whether a plot of land for construction, in which, according to the respective municipal permit, a property not intended exclusively for housing may be built, is or is not covered by the objective scope of the said tax and, in the affirmative case, what value is to be considered for purposes of delimiting the respective scope of application.

  3. The answer to these questions does not result directly from the text of the said rule, requiring an interpretive effort to determine its exact meaning and scope.

  4. It should be noted that Item 28 of the General Table of Stamp Tax was added by Law no. 55-A/2012, of 29/10, with the following wording:

"28 - Ownership, usufruct or surface right of urban properties whose patrimonial property value contained in the register, pursuant to the Municipal Property Tax Code (CIMI) is equal to or exceeding € 1,000,000 - on the patrimonial value used for purposes of the IMI;

28.1. For property with housing designation - 1%;

28.2. For property, when the passive subjects who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime contained in the list approved by ordinance of the Minister of Finance - 7.5%."

  1. Subsequently, the wording of Item 28.1 was altered by Law no. 83-C/2013, of 31/12, such that it now provides that the scope of the tax is extended to plots of land for construction, in the following terms:

"28.1 - For residential property or for land for construction whose building, authorized or planned, is for housing, pursuant to the provisions of the Municipal Property Tax Code - 1%."

  1. The assessment contested in the present process was issued during the validity of Item 28.1 of the General Table of Stamp Tax, in the wording given by Law no. 83-C/2013 which, in the terms set forth above, determined the extension of the scope of the rule to plots of land for construction "whose building, authorized or planned, is for housing," provided that their VPT is equal to or exceeding € 1,000,000.

  2. Thus, the issue is, from the outset, to determine whether within the scope of the tax are contained plots of land whose authorized or planned building is exclusively for housing or whether, differently, it contains any plots of land for construction of buildings intended for housing, even though these are not intended to be exclusively dedicated to that purpose.

  3. Resorting to the literal element of the rule it seems possible to conclude that its scope of application extends to all plots of land for construction, whose VPT is equal to or exceeding € 1,000,000.00 provided that the building that may be constructed on them is intended for housing, even though, together with this, it may also be intended for other purposes, namely commerce, services or industry. It is this mixed designation that is verified in the present case and, moreover, in the majority of plots of land for construction of high value.

  4. Also bearing in mind the literal element of the rule, such conclusion is reinforced if we consider that if the legislator intended to delimit its scope of application to plots of land exclusively intended for housing, it would have left this clearly expressed, as indeed it has done regarding other situations in which such delimitation proves necessary.[i]

  5. It is emphasized that this conclusion is peacefully assumed by the Parties, with no divergences arising therefore as to the interpretation of the rule regarding this aspect. However, diverse are the positions they express concerning the determination of the threshold value which, in the case of plots of land intended for construction of housing and other designations, should be considered for purposes of the scope of the tax.

  6. According to the Applicant, the rule of the scope of stamp tax provided for in Item 28.1 of the respective General Table has as its object properties with housing designation, or plots of land for construction with housing designation authorized or planned, whose VPT is equal to or exceeding € 1,000,000;

  7. Considering that the taxation in question has in its genesis "social equity in austerity," namely, through the taxation of urban properties with housing designation, or plots of land for construction that are intended for the construction of properties for housing purposes - whose housing purpose is authorized or planned - the Applicant concludes that only the portion of the VPT considered for purposes of IMI resulting from the application of the "housing" designation coefficient, pursuant to article 45 of the CIMI, is covered by the tax scope.

  8. In the present case, it is verified that in the determination of the VPT of the land, the value of € 952,521.16 was assigned to the part intended for housing of the building to be constructed, through the application of the "housing" designation coefficient, pursuant to article 45 of the CIMI.

  9. The Applicant concludes, thus, that "In the present case, there is no plot of land for construction, whose building, authorized or planned, for housing, exceeds € 1,000,000, and therefore, naturally, the situation in question does not fall within either the letter or the spirit of the Law, and therefore Item 28.1 of the General Table is not applicable to it."

  10. Hence, the stamp tax assessment act, which is the object of the present request for arbitral pronouncement, "when applied to a plot of land for construction, whose housing designation is less than € 1,000,000, should be considered illegal and cannot be maintained in the legal order, and therefore should be subject to annulment in all its legal effects."

  11. For its part, the Respondent maintains that the land in question, according to the respective permit, is intended for "the construction of residential buildings, the property being indivisible and the respective value in the future dedicated to commerce, with the latter appearing as a complement to the predominant designation which is housing...".

  12. Expressing this understanding better, the Respondent says, referring to the permit relating to the land identified in this process, that "The document itself is clear in referring to the fact that the property in question is intended predominantly for housing, since 34 units are planned with this designation and only 4 intended for commerce. Therefore, this part intended for commerce will always be a complement to the housing part, as the assessed asset itself shows."

  13. From the positions summarized above it follows, with clarity, that the issue to be analyzed and decided centers on the interpretation of the rule of Item 28 of the General Table of Stamp Tax, when referred to plots of land for construction whose authorized or planned building is for housing, in cases where, for the same building, other designations, namely, commerce and or services, are also authorized or planned.

  14. According to the Applicant, in the case of plots of land in which the building that may be erected on them will have mixed designation, the portion of the VPT of the land that corresponds to the construction area intended for housing will be relevant for purposes of the scope of stamp tax.

  15. For the Respondent, if we properly extract from the text transcribed above, the entirety of the VPT assigned to the land will be relevant whenever the property to be constructed is intended predominantly for housing. Inversely, it seems possible to extract from the same that whenever the predominance is of other designations, the land will be excluded from taxation.

  16. Applying the criterion of "predominance" to the present case, the Respondent concludes that the land in question, in which, according to the respective municipal permit, a property with 34 units intended for housing and 4 for commerce may be built, is covered by the scope of stamp tax, considering that "the part intended for commerce will always be a complement to the housing part."

  17. However, the position of the Respondent cannot be accepted. Indeed, from the text of the scope rule it does not follow that it contains, or is excluded from it, plots of land for construction of buildings intended for housing and other designations based on the predominance of one and the others, whether this is determined based on areas, the value assigned in assessment or on any other criterion, which the Respondent does not specify.

  18. However, it also cannot be overlooked that the text of the rule does not prove sufficiently clarifying as to its scope regarding plots of land for construction, limiting itself to refer to those "whose building is for housing," on the condition, however, that "the patrimonial property value contained in the register, pursuant to the Municipal Property Tax Code (CIMI) is equal to or exceeding € 1,000,000."

  19. There must, therefore, following the guidance of the rules on the interpretation of law contained in article 9 of the Civil Code, adopted, with respect to tax law, in article 11 of the LGT, be extracted from the text of the rule of Item 28.1, in the segment relating to plots of land for construction, what exactly its meaning and scope. For this purpose, resorting to its literal element, it is important to reconstitute "the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied."

  20. As is well known, Law no. 55-A/2012, of 29/10, introduced, among others, changes to the rule of article 1 of the Stamp Tax Code and added Item 28 to the respective General Table. The said law, which entered into force on the day following its publication, thus created a new tax event: the situation represented in the "Ownership, usufruct or surface right of urban properties whose patrimonial property value contained in the register pursuant to the Municipal Property Tax Code (CIMI) is equal to or exceeding € 1,000,000."

  21. Falling on the patrimonial property value used for purposes of IMI, the tax, assessed at the rate of 1% regarding urban properties with housing designation (TGIS Item 28.1) or 7.5% on any properties whose holders, not being natural persons, are residents in countries, territories or regions with privileged tax status (TGIS, Item 28.2).

  22. According to the Statement of Reasons of Bill no. 96/XII/2nd,[ii] which is at the origin of the said Law, the taxation in question "pursuing the achievement of the public interest in light of the country's economic and financial situation, requires an effort of consolidation that will require, in addition to permanent activism in reducing public spending, the introduction of fiscal measures inserted in a broader set of measures to combat the budget deficit.

These measures are fundamental to reinforce the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to fulfill the adjustment program. The Government is strongly committed to ensuring that the distribution of these sacrifices will be made by all and not just by those who live on the income of their work. In accordance with that goal, this law broadens the taxation of returns on capital and property, equitably covering a broad set of sectors of Portuguese society.

...

On the other hand, a tax rate is created under Stamp Tax covering urban properties with housing designation whose patrimonial property value is equal to or exceeding one million euros."

  1. The subsequent discussion of the diploma in the Assembly of the Republic served to clarify that such taxation had as its object "residential properties of higher value," or in other words "properties of high value intended for housing" or, even more precisely, according to the words of the then Secretary of State for Tax Affairs, "homes of value equal to or exceeding 1 million euros".[iii]

  2. Notwithstanding it following, with reasonable consistency, from the scope rule that this fell on "residential urban properties," the AT came to understand that it also contained plots of land for construction, whenever the building authorized, or planned thereon, was housing.

  3. Such an understanding completely lacked legal support, as would be declared in numerous Arbitral Decisions[iv] as well as in various Supreme Administrative Court judgments.[v]

  4. In this regard, emphasis is placed on the detailed analysis of the historical evolution and framing of the rule of Item 28 of the General Table of Stamp Tax contained in the SAC Judgment of 09-04-2014, which was decided by the Honorable Judge Counselor Isabel Marques da Silva, from which the following is transcribed:

"The concept of 'property (urban) with housing designation' was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which no. 2 of article 67 of the Stamp Tax Code (equally introduced by that Law) refers on a subsidiary basis. And it is a concept that, probably due to its imprecision – a fact all the more serious given that it is in function of it that the objective scope of the new taxation is defined - had a short life, since it was abandoned when Law no. 83-C/2013, of December 31, which provided a new wording to that Item 28 of the General Table, entered into force, and which now defines its objective scope through the use of concepts that are legally defined in article 6 of the IMI Code.

This amendment - to which the legislator did not attribute an interpretive character, nor does it seem to us that it did – merely makes it unambiguous for the future that plots of land for construction whose building, authorized or planned, is for housing are covered within the scope of Item 28.1 of the General Table of Stamp Tax (provided that the respective patrimonial property value is equal to or exceeding 1 million euros), clarifying nothing, however, regarding prior situations (assessments of 2012 and 2013), such as the one at issue in the present proceedings.

Now, as to these, it does not seem possible to adopt the interpretation of the appellant, since it does not result unambiguously either from the letter or from the spirit of the law that its intention was, ab initio, to include within its objective scope plots of land for construction for which authorization or planning had been made for the construction of residential buildings, as clearly results today from Item 28.1 of the General Table of Stamp Tax.

From the letter of the law nothing unambiguous follows, moreover, for it itself, when using a concept that it did not define and which was also not defined in the diploma to which it referred on a subsidiary basis, unnecessarily lent itself to ambiguities, in a matter – of tax scope – in which certainty and legal security should also be paramount concerns of the legislator.

And from its "spirit," discernible in the statement of reasons of the bill that is at the origin of Law no. 55-A/2012 (Bill no. 96/XII – 2nd, Official Journal of the Assembly of the Republic, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows than the concern to raise new tax revenues, from sources of wealth "more spared" in the past from the Tax authorities' grip than labor income, in particular capital returns, securities gains and property, reasons which provide no relevant contribution to clarifying the concept of "properties (urban) with housing designation," since they give it as settled, without any concern to clarify it. Such clarification must, however, have emerged – as reported in the Arbitral Decision delivered on December 12, 2013, in proceedings no. 144/2013-T, available in the CAAD database – when the said bill was presented and discussed in the Assembly of the Republic, in the words of the Secretary of State for Tax Affairs, who is reported to have said expressly, as drawn from the Official Journal of the Assembly of the Republic (Official Journal I Series no. 9/XII – 2, of October 11, p. 32) that: 'The Government proposes the creation of a special tax on residential urban properties of higher value. It is the first time that in Portugal a special taxation has been created on properties of high value intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will fall on homes of value equal to or exceeding 1 million euros' (emphasis ours), from which it is gathered that the reality to be taxed taken into account is, after all, and notwithstanding the imprecision of the law's terminology, 'residential (urban) properties,' in common language 'homes,' and not other realities.

The fact that it may be considered that in determining the patrimonial property value of urban properties classified as plots of land for construction account should be taken of the designation that the building authorized or planned for it will have for determining the respective value of the area of footprint (cf. nos. 1 and 2 of article 45 of the CIMI) does not determine that plots of land for construction may be classified as 'properties with housing designation,' since 'housing designation' always appears in the IMI Code referred to 'buildings' or 'constructions,' existing, authorized or planned, since only these can be inhabited, which is not the case with plots of land for construction, which do not have, in themselves, conditions for such use, not being susceptible to being used for housing unless and until building construction authorized and planned for them is erected on them (but in that case they would no longer be 'plots of land for construction' but another type of urban property – 'residential,' 'commercial, industrial or for services' or 'other' – article 6 of the CIMI).

It would be strange, moreover, if the determination of the scope of the objective scope rule of Item 28 of the General Table of Stamp Tax were found, in the end, in the rules for determining the patrimonial property value of the IMI Code, and if the legislator's imprecision of terminology in the wording of that rule were, after all, clarified and finally elucidated by way of an indirect and ambiguous reference to the designation coefficient established by the legislator in relation to built properties (article 41 of the IMI Code).

Thus, given that a plot of land for construction – whatever the type and purpose of the building that will be, or may be, erected on it – does not satisfy, in itself, any condition to be licensed as such or for housing to be defined as its normal destination, and given that the scope rule of Stamp Tax refers to urban properties with 'housing designation,' without any specific concept being established for this purpose, cannot from it be extracted that it contains a future potentiality, inherent in a distinct property that might perhaps be built on the land.

It is concluded, therefore, in accordance with what was decided in the judgment under appeal, that, since article 6 of the IMI Code establishes a clear distinction between 'residential' urban properties and 'plots of land for construction,' these cannot be considered as 'properties with housing designation' for purposes of Item 28.1 of the General Table of Stamp Tax, in its original wording, which was given to it by Law no. 55-A/2012, of October 29."

  1. Following the consolidated case law of the Supreme Administrative Court, it is understood that the new wording of Item 28.1 of the TGIS, given by article 194 of Law no. 83-C/2013, of 31/12, which extended the objective scope of the tax so as to include plots of land for construction for which building for housing has been authorized or planned, has innovative nature, providing only for the future.[vi]

  2. It is, therefore, under the said rule, in force from 01-01-2014, that the assessment which is the object of the present process was made, with the VPT assigned to the property following complaint filed by the now Applicant being considered, both for delimiting the scope of the rule and for purposes of determining the tax base, pursuant to and under article 130, no. 3, subparagraph a) and no. 8 of the CIMI.

  3. However, the circumstance that led to the said complaint was not taken into consideration, which, as already mentioned above, consisted of the incorrectness of the VPT previously assigned to the land because it had been determined on the basis of the consideration that the building whose construction was authorized was intended exclusively for housing.

  4. As proven from the elements attached to the case, the authorized building on the identified land is intended for housing and commerce. This circumstance was, moreover, considered in the assessment made following the Applicant's complaint, with the land being assigned a total VPT of € 1,356,610.00, resulting from the sum of the value assigned to the areas of the various designations: € 404,086.35, for the part intended for commerce and € 952,521.16, for the part designated for housing.

  5. Indeed, and as well notes the Applicant, the VPT of plots of land for construction is determined in accordance with the rules provided in article 45 of the CIMI, from which the special importance attributed to the various designations authorized, or planned, for the property to be built stands out.

  6. In this sense, article 1 of the cited provision states, "The patrimonial property value of plots of land for construction is the sum of the value of the footprint area of the building to be constructed, which is that situated within the perimeter of the building's foundation on the ground, measured by the exterior part, added to the value of the land adjacent to the footprint." For its part, nos. 2 and 3 of the same article clarify that "The value of the footprint area varies between 15% and 45% of the value of the authorized or planned buildings" and that "In setting the percentage of the value of the footprint land account is taken of the characteristics referred to in no. 3 of article 42."

  7. Additionally, it should be noted that it is still based on the authorized or planned buildings that, in the assessment of plots of land for construction, the area adjustment coefficient provided in article 40-A of the same Code is applied.

  8. From the assessment rules referred to it results, therefore, that in the case of plots of land for construction whose authorized or planned building has various designations, the respective VPT is determined based on the construction area intended for each of them. The total VPT is, therefore, the result of the sum of the values assigned to the different areas, without prejudice to the rule for rounding values established in article 38, no. 2, of the referred Code.

  9. It is recalled that Item 28.1 of the TGIS, in the wording given by Law no. 83-C/2013, of 31/12, subjects to taxation plots of land for construction "whose building, authorized or planned, is for housing, pursuant to the provisions of the Municipal Property Tax Code."

  10. As follows from the historical element of the scope rule and, in particular, from the political, economic and social circumstances surrounding its drafting, already analyzed above, the taxation was circumscribed to residential urban properties, with economic activities (commerce, industry or services) being intentionally and clearly excluded from it.

  11. With the extension of the scope to plots of land for construction of buildings, there is no reason to believe that it was the legislator's intention to modify that scope so as to make taxation fall on values corresponding to properties to be built which, according to the respective authorization or planning, are intended to have a designation different from housing, even though this is present in them together with others.

  12. Following from the rules for assessing plots of land for construction that their VPT corresponds to the sum of values assigned to the areas of the authorized (or planned) building based on the respective designation and resulting from the analysis of the stamp tax scope rule, in particular from consideration of the historical and teleological elements, that the object thereof centered, exclusively, on high-value residential properties, it seems possible to conclude that, for that purpose, the value assigned to the residential portion is relevant, with exclusion of the portions assigned to the other designations, if any.

  13. In the situation under analysis, it is verified that the value assigned in assessment carried out pursuant to tax law to the land in question, the part corresponding to the building authorized to be erected thereon designated for housing was, on December 31, 2014, of € 952,521.16.

  14. Consequently, it is concluded that, being this value less than the minimum threshold of the scope of stamp tax provided for in Item 28 of the TGIS, the land identified in the proceedings is excluded from it.

IV. PREJUDICED MATTERS

  1. The Applicant further raised the issue of the unconstitutionality of the rule of Item 28.1 of the TGIS, on the grounds of breach of the principles of equality, in the aspect of taxpaying capacity. As the interpretation of the applicability of that rule to the case at hand is not accepted by the arbitral tribunal, this issue becomes prejudiced and procedurally futile to examine.

V. DECISION

On the grounds and in the terms set forth, the arbitral tribunal decides to uphold the request for arbitral pronouncement with the consequent annulment of the contested assessment, with all its legal consequences.

Value of the proceedings: The value of the proceedings is set at € 13,566.10, pursuant to article 97-A, no. 1, subparagraph a) of the CPPT, applicable by reference of article 29, no. 1, subparagraphs a) and b), of the RJAT and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings.

Costs: Under article 22, no. 4, of the RJAT, and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, I fix the amount of costs at € 918.00, entirely charged to the Respondent (AT).

Lisbon, March 18, 2016

The Arbitrator,

Álvaro Caneira.

[i] This is the case, for example, in the delimitation of the scope of application of the transfer tax rates provided for in article 17, no. 1, subparagraphs a) and b), of the respective Code, in which the legislator left clearly expressed that the same are applicable to "urban property or autonomous fraction of urban property intended exclusively for housing."

[ii] Official Journal of the Assembly of the Republic, Series A, no. 3/XII/2, of September 21, 2012.

[iii] Official Journal of the Assembly of the Republic, Series A, no. 9/XII/2, of October 11.

[iv] Cf., referring only to the most recent, Arbitral Decisions delivered in Proceedings 12/2015-T, 14/2015-T, 28/2015-T, 54/2015-T, 57/2015-T, 61/2015-T, 78/2015-T, 80/2015-T, 84/2015-T, 86/2015-T, 87/2015-T, 94/2015-T, 111/2015-T, 117/2015-T, 125/2015-T, 130/2015-T, 134/2015-T, 135/2015-T, 143/2015-T, 154/2015-T, 155/2015-T, 156/2015-T, 172/2015-T, 184/2015-T, 185/2015-T, 186/2015-T, 224/2015-T, 229/2015-T, 232/2015-T, 235/2015-T, 266/2015-T, 288/2015-T, 290/2015-T, 367/2015-T.

[v] Cf. SAC, Judgments delivered in Proceedings 1870/13, 1871/13, 46/14, 48/14, 55/14, 270/14, 197/14, 271/14, 274/14, 317/14, 467/14, 396/14, 425/14, 676/14, 707/14, 739/14, 740/14, 796/14 and 1338/15.

[vi] In this sense, among others, Cf. SAC Judgments delivered in Proceedings 707/14, 739/14, 740/14 and 796/14.

Frequently Asked Questions

Automatically Created

Is construction land intended for housing subject to Stamp Tax under Verba 28.1 of the General Table?
Under Item 28.1 of the General Stamp Tax Table (as amended by Lei 83-C/2013 of December 31, 2013), the interpretation of whether construction land (terreno para construção) is subject to annual Stamp Tax depends on its classification as urban property with assigned patrimonial value. The 2013 reform expanded Stamp Tax to urban properties exceeding certain thresholds, but controversy exists regarding undeveloped plots. The taxpayer in Process 469/2015-T argued that construction land without erected buildings falls outside the scope because Item 28.1 targets property ownership as a wealth indicator, which requires completed habitable structures. The Tax Authority maintains that all urban property registered with patrimonial values for IMI purposes triggers Stamp Tax obligations, regardless of development status. The key interpretative question is whether 'urban property' (prédio urbano) in Item 28.1 encompasses land classified for future construction or requires existing buildings. This distinction significantly impacts real estate developers holding land banks, as taxation before construction completion may constitute taxation without actual wealth manifestation, potentially violating ability-to-pay principles.
Can the patrimonial value of the housing portion of a mixed-use construction plot be assessed separately for Stamp Tax purposes?
Portuguese tax law faces complex valuation issues when construction land has mixed-use authorization. In Process 469/2015-T, the property received a comprehensive patrimonial value of €1,356,610 under IMI Code articles 38 and 45, calculated by summing distinct portions: €952,521.16 for residential area (3,644.15 m² using housing coefficients) and €404,086.35 for commercial area (using commercial coefficients with different multipliers). The taxpayer argued that for Stamp Tax threshold purposes, only the housing-designated value should be considered when determining tax incidence, potentially exempting the property if that portion falls below minimum taxable thresholds. However, the Tax Authority typically applies Item 28.1 to the total property patrimonial value (VPT) as a single taxable unit, rejecting artificial segregation of designated uses for threshold calculations. This approach prevents taxpayers from avoiding Stamp Tax by obtaining mixed-use permits that individually fall below thresholds but collectively represent substantial property value. The methodology follows the principle that patrimonial value represents the property's overall economic worth as a single asset, despite future construction plans involving multiple uses. This interpretation has significant implications for commercial real estate development projects combining residential and retail components.
Does applying Stamp Tax to construction land below the minimum threshold violate the constitutional principle of equality and ability to pay?
The constitutional challenge in Process 469/2015-T raises fundamental questions about taxing capacity and equality under Portuguese constitutional principles. The applicant argued that applying Stamp Tax to construction land violates Article 13 (equality principle) and Article 104 (taxation according to ability to pay) of the Portuguese Constitution. The core argument contends that undeveloped construction land, particularly when the housing-designated portion falls below statutory thresholds, does not demonstrate the wealth or taxpaying capacity that justifies annual property taxation. Unlike completed buildings generating rental income or providing habitable value, bare land awaiting construction represents illiquid investment capital with carrying costs rather than consumable wealth. The taxpayer alleged horizontal inequity: owners of completed properties below thresholds escape taxation, while owners of undeveloped land with similar or lower designated values face tax liability. Additionally, the principle of taxpaying capacity requires taxation to align with economic ability, yet construction land may generate no income while incurring development costs, financing charges, and IMI obligations. The Tax Authority counters that patrimonial value itself demonstrates wealth regardless of development status, and Lei 83-C/2013's scope intentionally captures high-value property holdings as wealth indicators. Constitutional courts traditionally grant legislators discretion in defining taxable events, requiring clear arbitrariness for unconstitutionality findings. The outcome determines whether Portugal's wealth tax system properly balances revenue objectives with constitutional taxpaying capacity protections.
How does the 2013 amendment (Lei 83-C/2013) affect Stamp Tax incidence on urban properties classified as construction land?
Lei 83-C/2013 of December 31, 2013 (the 2014 State Budget Law) fundamentally reformed Portuguese Stamp Tax by introducing Item 28 of the General Table, creating an annual wealth tax on high-value urban property. Article 194 of this law established Stamp Tax on urban property patrimonial values exceeding specified thresholds, representing a significant policy shift from transaction-based taxation to annual ownership taxation. Before this amendment, Stamp Tax primarily applied to specific transactions and legal acts; the 2013 reform added ongoing taxation of property wealth. Item 28.1 imposes progressive rates on urban properties based on IMI patrimonial values, triggering tax obligations for properties exceeding €600,000 (or €1 million for certain taxpayers). The reform aimed to increase tax revenue from high-value real estate holdings and introduce wealth redistribution elements into Portugal's tax system. However, the amendment's application to 'urban property' (prédios urbanos) created interpretative ambiguities regarding construction land. The statutory language refers to properties with assigned patrimonial values under the IMI Code but does not explicitly distinguish between completed buildings and development land. Process 469/2015-T exemplifies resulting disputes: does construction land constitute 'urban property' subject to Item 28.1 when it has assigned patrimonial value but no physical structure? The 2013 amendment's legislative history and preparatory documents provide limited guidance on this specific scenario, leaving arbitral tribunals and courts to interpret whether the wealth-tax policy rationale extends to undeveloped plots. This uncertainty affects investment decisions, project financing, and land banking strategies throughout Portuguese real estate markets.
What is the CAAD arbitral procedure for challenging Stamp Tax assessments on construction land in Portugal?
The CAAD (Centro de Arbitragem Administrativa - Administrative Arbitration Center) provides an efficient alternative to judicial courts for resolving Portuguese tax disputes, including Stamp Tax challenges on construction land. Process 469/2015-T demonstrates the standard procedure: (1) The taxpayer filed an arbitration request on July 23, 2015, challenging the Stamp Tax assessment under Item 28.1, identifying the contested act, legal grounds (scope limitation and unconstitutionality), and requesting annulment. (2) CAAD's President accepted the application and automatically notified the Tax Authority on August 7, 2015. (3) Under RJAT (Regime Jurídico da Arbitragem Tributária - Tax Arbitration Legal Framework) Article 11, the Deontological Council appointed a sole arbitrator, notifying parties on September 21, 2015. (4) Parties had the right to reject the arbitrator per RJAT Articles 6-7 but did not exercise this right. (5) The arbitral tribunal was constituted on October 6, 2015, confirming material competence under RJAT Article 2(1)(a) for Stamp Tax matters. (6) The Tax Authority submitted its response defending the assessment's legality. (7) The arbitrator dispensed with oral hearings under RJAT Article 18, deeming written submissions sufficient. (8) The tribunal verified procedural requirements: juridical personality, standing (RJAT Articles 4 and 10(2)), absence of invalidating defects, and conditions for merit examination. Benefits of CAAD arbitration include faster resolution (typically 6-12 months versus 3-5 years in administrative courts), specialized tax arbitrators, lower costs, and binding decisions with limited appeal grounds. For construction land Stamp Tax disputes, arbitration permits detailed technical analysis of patrimonial valuation methodologies and constitutional arguments within an expedited framework.