Process: 47/2016-T

Date: June 22, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration case (Process 47/2016-T) concerns the application of Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) to building land (terreno para construção) with a taxable property value exceeding €1,000,000. The claimant, A... S.A., challenged a Stamp Tax assessment of €11,401.92 for 2012 on urban property classified as construction land with an assigned residential use value of €1,140,191.75. The central legal dispute focuses on whether Item 28.1 TGIS applies to undeveloped construction land where no building license has been issued and no construction has commenced. The claimant argues that 'residential use' requires actual, effective use of the property for residential purposes, not merely potential or virtual use based on property registry classification. Since no construction authorization was granted and no building exists, the claimant contends the land lacks residential use and falls outside Item 28.1 TGIS scope. Additional grounds include procedural irregularities (lack of notification of the assessment act prior to collection documents), double taxation concerns (simultaneous IMI and Stamp Tax on the same property), and constitutional challenges based on the equality principle. The Tax Authority defends the assessment, arguing it results from direct application of the tax law to construction land with residential use assigned in the property assessment records. The AT emphasizes that Item 28.1 refers to 'property with residential use' determined by the use coefficient under Article 41 of the IMI Code, which applies to the property's classification rather than actual occupation. The case raises important interpretive questions about whether Stamp Tax on high-value properties applies based on registry classifications or requires actual residential use, with significant implications for owners of undeveloped land zoned for residential construction.

Full Decision

ARBITRAL DECISION

REPORT

A..., S.A., with registered office at Street..., ...-... -..., with the NIPC ... (hereinafter referred to as the Claimant), comes, pursuant to the combined provisions of Articles 2, no. 1, subparagraph a), and 10, nos. 1, subparagraph a), and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters (RJAT), to request the constitution of an Arbitral Tribunal, with the intervention of a single arbitrator, in which the Tax and Customs Authority (AT) is named as Defendant, with a view to the declaration of illegality and consequent annulment of the Stamp Duty assessment (Item 28.1 of the GTIS) for the year 2012, evidenced by collection documents nos. 2013..., 2013... and 2013..., relating to the urban property recorded under Article ... of the parish of ..., municipality of ..., in the total amount of € 11,401.92, on the following grounds:

  1. Preliminary Issue: regarding the disputed assessment act and the collection documents:

a. The Claimant was notified of the collection documents regarding the Stamp Duty of item 28.1 of the GTIS for the year 2012, without having been notified of the underlying assessment, made in accordance with no. 7 of Article 23 of the Stamp Duty Code, which refers to Articles 113 to 118 of the IMI Code;

b. The assessment, which should not be confused with the collection documents, being initiated by the AT, must be previously notified to taxpayers, for the purposes of Article 60 of the General Tax Code;

c. Having not been notified of the Stamp Duty assessment for 2012, the Claimant filed a gracious complaint on 23/07/2013, only making reference to the collection documents of which it had been notified (1st and 2nd installments);

d. Following the dismissal of the gracious complaint, the Claimant filed a hierarchical appeal on 4/10/2013, mentioning only the collection notices for the 1st and 2nd installments, as it had not yet been notified for payment of the 3rd installment;

e. On 10/12/2013, the Claimant filed a gracious complaint against the Stamp Duty assessment for 2012, following the collection notice for the 3rd installment;

f. This last gracious complaint was subject to a dismissal decision, on the grounds that "(…) It turns out that, in this case, the Tax Administration (AT) ruled, less than 2 years ago, on a request from the same author, the present claimant, with identical subject matter and grounds, therefore there is no duty for the AT to decide.";

g. The tax act whose legality was disputed in the gracious complaint and in the hierarchical appeal was the assessment act and not the collection notices, as the AT agreed;

  1. Regarding the lack of factual and legal grounds and violation of law in the assessment under review:

a. The Stamp Duty assessment of item 28.1 of the GTIS, with collection divided into three installments, was levied on the ownership of the identified urban property, with the VPT of € 1,140,191.75;

b. The said urban property is construction land, whose assessment was carried out on the assumption that the construction to be implemented would be intended for housing;

c. However, no construction or building license or authorization was requested or issued approved by the competent authority, nor was any construction commenced;

d. Thus, the Claimant contends that there can be no mention of any residential use, the plot of land being excluded from the taxation referred to in item 28.1 of the GTIS;

e. The AT errs in applying, to the concrete case, a concept of merely virtual use and not effective, as the expression "residential use" presupposes an effective use of the property for residential purposes and not the possibility or potential that it may have;

f. Being questioned the residential use of the property on the date of the tax event (31 December 2012), item 28.1 of the GTIS was not applicable;

  1. Regarding double taxation:

a. The Claimant contends that the assessment under review is also illegal for taxing the same fact or legal situation already subject to taxation under IMI;

b. Insofar as, as owner of real estate with VPT exceeding € 1,000,000.00, recorded in the real estate register with residential use, the Claimant is a taxpayer of two taxes on the same property;

c. The Stamp Duty assessment that it contests violates the principle of prohibition of double taxation;

  1. Regarding unconstitutionality due to violation of the principle of equality:

a. Taxation under Stamp Duty, in that it applies only to real estate intended for residential purposes, violates the principle of fiscal equality;

b. The argument regarding the need to tax luxury properties is discriminatory, because it only affects properties with residential use, even though they may be a source of income taxed under IRS or IRC;

c. Taxation under Stamp Duty (item 28.1 of the GTIS) violates the principles of equality of taxpayers and non-discrimination in fiscal treatment of identical situations, which determines the unconstitutionality and non-applicability to the concrete case of Law no. 55-A/2012;

  1. Regarding timeliness of the request:

a. The Claimant was notified of the dismissal of the hierarchical appeal on 8 January 2016;

b. In accordance with no. 1 of Article 102 of the Tax Procedure Code, applicable subsidiarily to the RJAT, the Claimant has 90 days after notification of the decision of dismissal of the hierarchical appeal to file a judicial challenge or request for arbitral decision.

The Claimant concludes by making the request for declaration of illegality of the assessment act of the Stamp Duty of item 28.1 of the GTIS, for the year 2012 and for the identified real estate, attaching power of attorney and documents and assigning to the request the economic value of € 11,401.92.

Notified in accordance with and for the purposes provided in Article 17 of the RJAT, the AT submitted to the file the administrative case and filed a response, in which it argues that the disputed assessment should be upheld, invoking, in summary, the following grounds:

The assessment disputed by the Claimant results from the direct application of the tax rule, without any subjective or discretionary consideration;

The assessment was levied on construction land to which residential use was assigned within the scope of its respective assessment, as recorded in the real estate register, which is subject to Stamp Duty;

"The fact that, in the tax rule – item 28.1 of the GTIS – the property with residential use was established to the detriment of the residential property, appeals to the coefficient of use, cf. Article 41 of the IMI Code, which applies, indiscriminately, to all urban properties";

Item 28 of the General Table of Stamp Duty, added by Law no. 55-A/2012, determines that stamp duty began to fall on the ownership, usufruct or surface right of urban properties whose taxable asset value recorded in the real estate register, in accordance with the IMI Code, is equal to or greater than € 1,000,000.00;

Not existing in the Stamp Duty Code definition of what is meant by "urban property", "construction land" and "residential use" it is necessary to resort subsidiarily to the IMI Code, in accordance with the provision in Article 67, no. 2 of the Stamp Duty Code, in the version given to it by Law no. 55-A/2012, of 29/10;

No. 1 of Article 6 of the IMI Code identifies the types of urban properties, including "construction lands" as being the «…lands located inside or outside an urban agglomeration, for which a license or authorization has been granted, prior notice admitted or a favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the title of acquisition, excepting lands where the competent entities prohibit any of those operations…»;

"However, the notion of 'urban property' is founded in the part relating to the assessment of real estate, since the purpose of assessing real property is to incorporate value into it, constituting a determining factor of distinction – coefficient – for assessment purposes";

"The legislator chose to determine the application of the methodology for assessing properties in general to the assessment of 'construction lands', as results from the expression 'value of authorized buildings' referred to in Article 45, no. 2 of the IMI Code and accordingly applying to it the coefficient of use provided for in Article 41 of the IMI Code";

In the concrete case, we are dealing with a plot of urban construction land, with the areas of building implantation and construction perfectly defined and identified in the urban real estate register, with the residential use of the building being evident;

The legislator does not refer to "properties intended for housing", having chosen the notion "residential use", a broader expression, "whose meaning is to be found in the need to integrate other realities beyond those identified in Article 6, no. 1, subparagraph a) of the IMI Code", since, before the actual construction of the property, it is already possible to determine the use of the land;

Item 28 of the GTIS is a general and abstract rule, applicable in an indiscriminate manner to all cases in which the factual and legal requirements are met, its creation resulting from the "need to correct the budgetary deficit, without neglecting the fairness of the tax system and to «…promote the broadening of the tax base, requiring increased effort from higher income taxpayers…»";

"Additionally, well-founded reasons also grounded in the Constitution justified the creation of the contested rule, namely respect for the principles of proportionality and taxable capacity";

"The very constitutional principle of equality enshrined in Article 13 of the CRP «requires that what is necessarily equal be treated equally and what is essentially different be treated differently, not preventing differentiation in treatment, but only arbitrary, unreasonable discriminations, that is, distinctions in treatment that lack sufficient justification and material grounds»";

"Taxation under Stamp Duty obeys the criterion of adequacy, precisely insofar as it aims to tax wealth embodied in the ownership of high-value real estate, arising in a context of economic crisis that cannot be ignored at all";

"Thus, the choice of this mechanism for obtaining revenue is justified, which would only be censurable, in light of the principle of proportionality, if it were manifestly indefensible";

" (…) Therefore, we must necessarily conclude that the tax acts in question did not violate any legal principle and should thus be upheld".

The AT concludes by requesting the waiver of the meeting referred to in Article 18 of the RJAT, as well as the filing of arguments, since "the facts upon which a decision is requested are fixed" and because "What is at issue here is merely the interpretation of item 28 of the GTIS, added by Article 4 of Law no. 55-A/2012, of 29/10, in conjunction with Article 6, no. 1, subparagraphs f) and i) of the same legal instrument".

The request for constitution of the Arbitral Tribunal was filed with CAAD on 29 January 2016, having been accepted by the Most Excellent President of CAAD and automatically notified to the AT on 12 February 2016.

The Claimant informed that it did not wish to exercise the faculty of designating an arbitrator, therefore, pursuant to no. 1 of Article 6 of the RJAT, the undersigned was appointed arbitrator by the Most Excellent President of the Deontological Council of CAAD, which position was accepted within the legally prescribed period, without opposition from the Parties.

The Singular Arbitral Tribunal was duly constituted on 14 April 2016 and is materially competent to hear and decide the dispute which is the subject matter of the present proceedings.

The Parties enjoy legal personality and judicial capacity, are legitimate and are properly represented (Articles 4 and 10, no. 2, of the RJAT and Article 1 of Ministerial Order no. 112-A/2011, of 22 March).

The proceedings are not affected by any nullities and no exceptions were raised.

The Parties waived the holding of the meeting referred to in Article 18 of the RJAT, as well as the filing of arguments, whether oral or written.

FACTUAL MATTERS

2.1. Facts considered proved:

2.1.1. On 31 December 2012, the Claimant was the owner of the urban property recorded under Article ... of the parish of ..., municipality of ..., described in the real estate register as construction land and which, on that date, had a taxable asset value (VPT) of € 1,140,191.75;

2.1.2. On the said VPT recorded in the real estate register, the AT made, on 21 March 2013, the assessment of Stamp Duty of item 28.1 of the GTIS, with number 2012…, in the amount of € 11,401.92, for payment in three installments, in the months of April, July and November 2013, respectively;

2.1.3. On 24 July 2013, the Claimant filed a gracious complaint against the Stamp Duty assessment for the year 2012 (1st and 2nd installments), on grounds identical to those of the present request for arbitral decision and which gave rise to the opening of procedure no. …2013…;

2.1.4. The gracious complaint was dismissed by order of the Finance Director of..., as per the notification sent to the Claimant by letter no. … of 11 September 2013, from the Tax Justice Division of that Finance Directorate;

2.1.5. On 10 December 2013, the Claimant filed a gracious complaint for annulment of the 3rd installment of the Stamp Duty assessment for 2012, which gave rise to case no. …2014…;

2.1.6. The gracious complaint no. …2014… received a dismissal decision, notified to the Claimant by letter no. … from the Finance Directorate of..., dated 16 December 2014, on the grounds that "the subject of the complaint will not be the collection notice issued and relating to this specific installment, but the underlying assessment, that is, assessment no. 2012…, made on 2013-03-21 (…)"; "(…) on the basis of the same grounds, on 2013-07-23 the present complainant filed a gracious complaint (…) which proceeded under no. …2013…, and within which the above-mentioned assessment, with no. 2012 … was subject to analysis (…)" and "(…) It turns out that, in this case, the Tax Administration (AT) ruled, less than two years ago, on a request from the same author, the present complainant, with identical subject matter and grounds, therefore there is no duty for the AT to decide.";

2.1.7. On 7 October 2013, following the notification of the decision of dismissal of the gracious complaint no. …2013…, the Claimant filed a hierarchical appeal, which would come to be registered at the Finance Service of … on 15 December 2015, under no. …2013…;

2.1.8. The said hierarchical appeal no. …2013… was subject to dismissal by order of the Director of Services of IMT, of 18 December 2015, notified to the Claimant on 6 January 2016, by letter no. …, from the Tax Justice Division of the Finance Directorate of…;

2.1.9. The non-payment of assessment no. 2012… gave rise to the initiation of tax enforcement proceedings nos. …2013… and related, which are suspended by providing security (mortgage).

2.2. Basis for the factual matters proved:

The Tribunal's conviction as to the factual matters considered proved resulted from the critical analysis of the documentary evidence attached to the request for arbitral decision and to the administrative case, presented together with the Respondent's answer.

2.3. Facts not proved

There are no facts relevant to the decision of the case that should be considered not proved.

LEGAL MATTERS - GROUNDS

3.1. Preliminary Issue – regarding the subject matter of the request for arbitral decision

The Claimant raises, as a preliminary issue, the identification of the act subject of the present request for arbitral decision, clarifying that it consists of the assessment act of Stamp Duty for the year 2012, with number 2012…, in the amount of € 11,401.92 and not each of the collection notices relating to the installments into which the assessment was subdivided.

Indeed, regarding the tax due by the situations provided in item 28.1 of the GTIS, Article 23, no. 7 of the Stamp Duty Code, added by Law no. 55-A/2012, of 29 October, establishes that the tax is assessed annually, applying, with the necessary adaptations, the rules of the IMI Code.

On the other hand, no. 5 of Article 44 of the Stamp Duty Code, added by the same Law no. 55-A/2012, of 29 October, provides that "the tax is paid in the periods, terms and conditions defined in Article 120 of the IMI Code", from which results the issuance of a single annual assessment and not of as many assessments as installments into which the assessment is subdivided for payment purposes. It should thus be understood that the challengeable act is the assessment act and not each of those installments.

And that was precisely the understanding expressed by the AT, both in the decision on gracious complaint no. …2013…, in which the Claimant requested the annulment of the 1st and 2nd installments of the Stamp Duty assessment for 2012, as well as in the dismissal decision of the gracious complaint no. …2014…, concerning the third installment, in which it expressly found that there was no duty to decide, given that the AT had ruled less than two years ago "on a request from the same author, the present complainant, with identical subject matter and grounds".

The AT not having put into doubt, neither at the administrative level nor at the arbitral level, that the subject matter of the gracious complaints, of the hierarchical appeal no. …2013… and of the present request for arbitral decision was the tax assessment act of Stamp Duty for the year 2012, it should be concluded that this is the act being challenged, with no obstacle to the examination of the merits of the case.

3.2. Order of examination of defects

The main issue brought before the tribunal by the Claimant is whether in 2012 construction lands with taxable asset value of value equal to or greater than € 1,000,000.00 were covered by the tax rule of item 28.1 of the GTIS in its original version, in which was established the incidence of Stamp Duty on the following situations:

«28 — Ownership, usufruct or surface right of urban properties whose taxable asset value recorded in the real estate register, in accordance with the Municipal Tax on Real Estate Code (CIMI), is equal to or greater than € 1,000,000 — on the taxable asset value used for IMI purposes:

28.1 — For property with residential use — 1 %;

28.2 — For property, when the taxpayers who are not individuals are residents in a country, territory or region subject to a clearly more favorable tax regime, listed in a ministerial order approved by the Minister of Finance — 7.5 %.»

In accordance with no. 1 of Article 124 of the Tax Procedure Code, of subsidiary application to the tax arbitral proceedings, in accordance with Article 29, no. 1, subparagraph a) of the RJAT, if there are no defects that lead to a declaration of non-existence or invalidity of the challenged act, the tribunal should examine the alleged defects that determine its voidability, providing no. 2, subparagraph b) of the same article, that, as to the latter, the order of their examination shall be that indicated by the challenger, provided that there is established between them a relationship of subsidiarity, without prejudice to being primarily examined the defects whose validity ensures the most stable or effective protection of the interests harmed.

It appearing that from the validity of the defect of violation of law due to error in the application of law arising from erroneous interpretation of the rule provided in item no. 28.1 of the GTIS will result the most effective protection of the interests harmed, we will proceed to its examination.

3.3. On the concept of urban property with residential use

In its original version, applicable to the situation under analysis, item 28.1 of the GTIS provided that the ownership, usufruct and surface right of urban properties "with residential use" whose taxable asset value recorded in the real estate register in accordance with the IMI Code was equal to or greater than € 1,000,000.00 were subject to stamp duty, without the Stamp Duty Code containing any definition of the concept of property with residential use.

Such definition should in principle be found in the rules of the IMI Code, for whose subsidiary application it refers in block, no. 2 of Article 67 of the Stamp Duty Code, added by the same Law no. 55-A/2012, of 29 October, by providing that "2 - To matters not regulated in this Code relating to item no. 28 of the General Table, the provisions of the IMI Code shall apply subsidiarily".

However, despite the express reference to the IMI Code which the legislator wished to establish in no. 2 of Article 67 of the Stamp Duty Code, by reference to matters relating to Item 28 of the GTIS, also that one does not give us the concept of "properties with residential use".

In fact, Article 6 of the IMI Code, inserted in Chapter I under the heading "Incidence", does not use that expression when enumerating, in no. 1, the types of urban properties, which may be classified as: a) Residential; b) Commercial, industrial or for services; c) Construction lands; d) Other, delimiting nos. 2, 3 and 4 of the same article what should be understood by each of those designations.

Thus, "Residential, commercial, industrial or service properties are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal destination each of these purposes" (no. 2) and construction lands "lands located inside or outside an urban agglomeration, for which a license or authorization has been granted, prior notice admitted or a favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the title of acquisition, excepting lands where the competent entities prohibit any of those operations, namely those located in green areas, protected areas or that, in accordance with municipal territorial planning plans, are allocated to public spaces, infrastructure or equipment" (no. 3).

Now, taking into account the interpretative elements referred to in Article 9 of the Civil Code and, in order to "reconstruct (…) 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", it should be concluded that the type of urban property that best corresponds to the concept of "property with residential use" is that of residential properties, as buildings or constructions licensed for housing or that, in the absence of a license, have housing as their normal destination (residential purposes), the legislator having been very clear in the distinction between residential properties and construction lands.

However, the Respondent argues that "The notion of use of the urban property is founded in the part relating to the assessment of real estate, since assessment (purpose) incorporates value into the real estate, constituting a determining factor of distinction (coefficient) for assessment purposes", relying on the Judgment of the Southern Administrative Court of Appeal issued on 14/02/2012 in case no. 04950/11, which it partially quotes.

However, the word "use" only appears in Articles 38 onwards of the IMI Code, systematically inserted in Chapter VI – On the taxable asset value of urban properties; Section II – On evaluation operations.

Specifically, Article 41 of that Code, under the heading "Coefficient of use", determines that it "depends on the type of use of the built properties".

It may thus be surely concluded that, in accordance with Article 41 of the IMI Code, the "Coefficient of use" always refers to buildings or constructions, since "depends on the type of use of the built properties"; from which it also seems to result as a certain conclusion that the word "use" has the meaning of "utilization".

As was noted, Articles 38 onwards of the IMI Code are systematically inserted in the Chapter relating to the determination of the taxable asset value.

The taxable asset value constituting the taxable base on which the tax rate will be levied, it will hardly be acceptable that from the rules relating to the assessment of urban properties any rule of incidence could be extracted, as a phase that in the theory and technique of taxes logically precedes that of the determination of the taxable base.

And, even though such "coefficient of use" may be used in the assessment of construction lands because it may relate to future buildings authorized or licensed for a certain type of use, as was admitted by the above-mentioned Judgment of the Southern Administrative Court of Appeal (to the contrary, see the Judgment of the Supreme Administrative Court, of 18/11/2009, case 0765/09), this will certainly not determine that construction lands may come to be considered as "properties with residential use", given the exhaustive classification of urban properties established by the already cited Article 6 of the IMI Code as an objective rule of incidence, which makes a clear distinction between residential properties and construction lands.

Indeed, in accordance with reiterated case law of the Supreme Administrative Court (from the Judgment of 9 April 2014 in case no. 1870/13 to the most recent Judgment of 28 October 2015 in case no. 01148/15, all available at http://www.dgsi.pt/ which, with due respect, are transcribed), "It would be strange indeed if the determination of the scope of the objective rule of incidence of item no. 28 of the General Table of Stamp Duty were found, ultimately, in the rules for determining the taxable asset value of the IMI Code, and if the legislator's terminological imprecision in drafting that rule were, after all, elucidated and finally clarified through an indirect and equivocal reference to the coefficient of use established by the legislator in relation to built properties (Article 41 of the IMI Code)".

On the other hand, as has been cited by case law, both of the Supreme Administrative Court and of CAAD, "When presenting and discussing, in Parliament, draft law no. 96/XII (2nd), the Secretary of State for Tax Affairs expressly stated: "The Government proposes the creation of a special tax on high-value residential urban properties. This is the first time that Portugal has created a special tax on high-value properties intended for housing. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses with a value equal to or greater than 1 million euros."

In accordance with what has been stated, if the letter of the law – of Item 28.1 of the GTIS – (grammatical element) does not sufficiently define the concept of "property with residential use", the logical element ("the systematic element and 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") allows concluding, anticipating the decision, as has been concluded by the Supreme Administrative Court in the above-mentioned judgments, that "(…) resulting from Article 6 of the IMI Code a clear distinction between "residential" urban properties and "construction lands", the latter cannot be considered as "properties with residential use" for purposes of item no. 28.1 of the General Table of Stamp Duty, in its original version, as provided by Law no. 55-A/2012, of 29 October", which justifies the annulment of the disputed assessment due to error in the assumptions on which its issuance was based.

3.4. Questions of prejudiced jurisdiction

In the judgment, the judge must pronounce on all questions that should be examined, abstaining from pronouncing on questions of which it should not know (final segment of no. 1 of Article 125 of the Tax Procedure Code), and the questions on which the tribunal's powers of cognition fall are, in accordance with no. 2 of Article 608 of the Code of Civil Procedure, applicable subsidiarily to tax arbitral proceedings, by reference from Article 29, no. 1, subparagraph e) of the RJAT, "the questions that the parties have submitted for its consideration, except those whose decision is prejudiced by the solution given to others (…)".

In light of the solution given to the question relating to the concept of "property with residential use", the jurisdiction is prejudiced regarding the remaining questions raised by the Claimant, namely those regarding potential double taxation and the invoked unconstitutionality of the rule of incidence contained in Item 28.1 of the GTIS, as it is not susceptible to the interpretation that was made by the AT in this case.

DECISION

Based on the factual and legal grounds stated above and, in accordance with Article 2 of the RJAT, it is decided ruling entirely well-founded the present request for arbitral decision, to declare the illegality of the disputed Stamp Duty assessment due to error in the legal assumptions, determining its annulment, with all legal consequences.

VALUE OF THE CASE

In harmony with the provision of Article 306, nos. 1 and 2 of the Code of Civil Procedure, 97-A, no. 1, subparagraph a) of the Tax Procedure Code and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned the value of € 11,401.92 (eleven thousand, four hundred and one euros and ninety-two cents).

COSTS

Calculated in accordance with Article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I annexed to it, in the amount of € 918.00 (nine hundred and eighteen euros), borne by the Tax and Customs Authority.

Lisbon, 22 June 2016.

The Arbitrator,

/Mariana Vargas/

Text prepared by computer, in accordance with no. 5 of Article 131 of the Code of Civil Procedure, applicable by reference from subparagraph e) of no. 1 of Article 29 of Decree-Law 10/2011, of 20 January.

The text of this decision is governed by the orthographic agreement of 1990.

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the General Stamp Tax Table apply to building land (terrenos para construção)?
Yes, according to the Tax Authority's position in this case, Verba 28.1 of the General Stamp Tax Table applies to building land (terrenos para construção) when the property has been assigned residential use in its property assessment for IMI purposes and has a taxable value of €1,000,000 or more. The tax authority argues that Item 28.1 refers to 'property with residential use' based on the use coefficient under Article 41 of the IMI Code, which applies to the property's classification in the property registry regardless of whether construction has commenced. However, taxpayers may challenge this interpretation, arguing that 'residential use' should require actual, effective use rather than virtual or potential use based solely on registry classification, particularly when no building license has been issued and no construction exists.
Is the tax authority required to notify taxpayers of the Stamp Tax assessment before issuing collection documents?
Based on the procedural issues raised in this case, there is a legal question whether the Tax Authority must notify taxpayers of the Stamp Tax assessment act before issuing collection documents. The claimant argues that the assessment initiated by the AT under Article 23(7) of the Stamp Tax Code (which refers to Articles 113-118 of the IMI Code) must be notified to taxpayers pursuant to Article 60 of the General Tax Code before collection documents are issued. The claimant contends that the assessment act should not be confused with collection documents, and that taxpayers should receive notification of the assessment itself to properly exercise their right to challenge. This procedural argument suggests potential violations of taxpayer notification rights when only collection documents are sent without prior notification of the underlying assessment decision.
Can a taxpayer challenge Stamp Tax assessments on properties with a taxable value exceeding €1,000,000 through arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on properties with taxable values exceeding €1,000,000 through tax arbitration under the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). This case was filed pursuant to Articles 2(1)(a) and 10(1)(a) and (2) of the RJAT, requesting constitution of an arbitral tribunal with a single arbitrator to declare the illegality and annul the Stamp Tax assessment. Taxpayers must first exhaust administrative remedies (gracious complaint and hierarchical appeal) before requesting arbitration. According to Article 102(1) of the Tax Procedure Code (applicable subsidiarily to RJAT), taxpayers have 90 days after notification of the hierarchical appeal decision to file an arbitration request. The arbitration route provides an alternative to judicial courts for resolving disputes over Stamp Tax assessments under Item 28.1 TGIS.
What are the procedural requirements for filing a gracious complaint against a Stamp Tax assessment under the Portuguese tax code?
Under Portuguese tax law, taxpayers challenging a Stamp Tax assessment must file a gracious complaint (reclamação graciosa) as the first administrative remedy. The complaint must be filed within the legal deadline and clearly identify the contested tax act - which is the assessment act itself, not merely the collection documents. In this case, the claimant initially filed a gracious complaint on July 23, 2013, referencing only the collection documents for the 1st and 2nd installments. After dismissal, a hierarchical appeal was filed on October 4, 2013. A subsequent gracious complaint filed on December 10, 2013 (following the 3rd installment notice) was dismissed on grounds that the AT had already ruled on a request from the same taxpayer with identical subject matter within the previous 2 years. This demonstrates the importance of properly identifying the contested act in the initial complaint and understanding that the AT may refuse to decide repetitive complaints on the same assessment within 2 years under res judicata principles.
How does the CAAD evaluate the legality of Stamp Tax assessments on urban properties classified as building land?
The CAAD (Centro de Arbitragem Administrativa) evaluates the legality of Stamp Tax assessments on urban properties classified as building land by analyzing whether the legal requirements of Item 28.1 TGIS are met. Key evaluation criteria include: (1) whether the property qualifies as an urban property under the IMI Code definitions (Article 6 defines construction lands as lands with granted licenses, authorizations, prior notices, or favorable prior information for subdivision/construction, or declared as such in acquisition title); (2) whether the property has 'residential use' as recorded in the property registry - with the critical interpretive question being whether this requires actual residential occupation or merely classification based on intended use coefficient under Article 41 IMI Code; (3) whether the taxable property value equals or exceeds €1,000,000; (4) procedural legality including proper notification and assessment procedures; and (5) constitutional compliance, including equality principles and prohibition of double taxation. The CAAD must determine whether 'residential use' is established by registry classification or requires physical construction and actual use.