Process: 471/2016-T

Date: December 19, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 471/2016-T addresses a significant challenge to Stamp Tax (Imposto de Selo) assessments on vertical property ownership in Portugal. The claimant company owned an 18-unit urban property in Lisbon with a total patrimonial value of €1,742,320.00, not constituted under horizontal property regime. The Tax Authority assessed €13,906.20 in Stamp Tax under Verba 28.1 of the General Stamp Tax Table (TGIS), which imposes a 1% annual rate on urban properties with taxable patrimonial value exceeding €1,000,000.00.

The taxpayer's central argument challenged whether the €1,000,000.00 threshold applies to the entire building or to each independent floor/division. Since individual units ranged from €72,910.00 to €122,880.00—all below the threshold—the claimant argued the assessments violated tax law. The company emphasized that the IMI Code (Municipal Property Tax Code), which article 67(2) of the Stamp Duty Code references subsidiarily, grants tax autonomy to floors capable of independent use through separate registrations and individual patrimonial valuations under article 7(2)(b) of the IMI Code.

The taxpayer contended that vertical properties with independent divisions should receive identical treatment to autonomous fractions in horizontal property regimes, where each fraction is evaluated separately. The argument stressed that for IMI purposes, these floors constitute distinct economic units with different parameters based on specific use (residential, commercial, industrial, or services), each with independent registry registration and individual patrimonial value.

Additionally, the claimant raised a constitutional challenge under articles 13 and 104(3) of the Portuguese Constitution, arguing that the Tax Authority's interpretation violated equality principles by treating economically identical situations differently based solely on property regime classification. The case highlights critical interpretative issues surrounding Verba 28.1 TGIS taxation of "luxury homes," particularly regarding the distinction between vertical ownership and horizontal property regimes in Portuguese tax law.

Full Decision

ARBITRAL AWARD

REPORT

A – PARTIES

A…, LDA., with registered office at Rua … no.…, …, and with NIPC …, hereinafter referred to as Claimant or taxpayer.

TAX AND CUSTOMS AUTHORITY (which succeeded the General Directorate of Taxes, by means of Decree-Law no. 118/2011, of 15 December) hereinafter referred to as Respondent or AT.

The application for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was regularly constituted, on 08-11-2016, to examine and decide upon the subject matter of the present proceedings, and automatically notified the Tax and Customs Authority on 08-11-2016, as shown in the respective minutes.

The Claimant did not proceed with the appointment of an arbitrator, wherefore, pursuant to the provisions of no. 1 of article 6 and subparagraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed Paulo Ferreira Alves as arbitrator, the appointment having been accepted in accordance with legal provisions.

On 06-10-2016 the parties were duly notified of such appointment, and did not manifest any intention to refuse the appointment of the arbitrators, in accordance with article 11 no. 1, subparagraphs a) and b), of the TAR Rules and Articles 6 and 7 of the Deontological Code.

In accordance with the provision of subparagraph c) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the singular arbitral tribunal is regularly constituted on 08-11-2016.

Both parties agree to the dispensation of the meeting provided for in article 18 of the TAR Rules.

The arbitral tribunal is regularly constituted. It is materially competent, in accordance with articles 2, no. 1, subparagraph a), and 30, no. 1, of Decree-Law no. 10/2011, of 20 January.

The parties possess legal personality and capacity, are legitimate and are legally represented (articles 4 and 10, no. 2, of the same statute and article 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings do not suffer from defects that would invalidate it.

B – CLAIMS

  1. The Claimant seeks a declaration of illegality of the tax assessment acts for Stamp Duty (Imposto de Selo): nos: 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, which fixed a total tax liability of €13,906.20 (thirteen thousand, nine hundred and six euros and twenty cents).

C – BASIS FOR CLAIM

  1. To support its request for an arbitral award, the Claimant alleged, with a view to obtaining a declaration of illegality of the tax assessment acts for Stamp Duty, already described in item 1 of this Award, in summary, the following:

I. With a view to the declaration of illegality and annulment of the tax assessment acts for Stamp Duty, relating to the year 2015, resulting from the application of item no. 28.1 of the General Table of Stamp Duty (TGIS), to the urban property located at Rua … no.…, registered in the urban property registry of the parish of …, under the registry article…, which resulted in a tax assessment in the amount of € 13,906.20.

II. The Claimant is the owner of the urban property, not constituted under a horizontal property regime, located in Lisbon, at Rua … no. … and Rua … no.…, registered in the urban property registry of the parish of … under article….

III. The referred urban property constitutes a property in full ownership with floors/divisions susceptible to independent use, with 18 floors/divisions, with a total patrimonial value of € 1,742,320.00.

IV. The property is composed of two blocks as follows: a) Block I, located at Rua …, consisting of a ground floor intended for commercial use and 4 floors intended for residential use, and b) Block II, located at Rua …, consisting of a warehouse, 1 office on the ground floor and 3 floors.

V. The payment of the tax assessment calculated for each one of the floors was divided into 3 installments, with the deadline for payment of the first being 30 April 2015, as shown in the collection documents issued by the Tax Authority following the assessments made.

VI. The assessments made contain the following notation: Patrimonial Value of the property – Total subject to tax € 1,390,620.00.

VII. However, the taxable patrimonial value shown in the registry, of each one of the floors susceptible to independent use intended for residential purposes, amounts to values ranging between € 72,910.00 and € 122,880.00.

VIII. Since the floors susceptible to independent use of the property do not have, individually and autonomously, a taxable patrimonial value exceeding € 1,000,000.00, there is no place in the present case for the application of the 1% rate provided for in item no. 28.1 of TGIS and, consequently, those assessments are illegal.

IX. Despite all the doubts raised by linguistic imprecision, it appears that the legislator intended to tax residential properties whether they are properties, autonomous fractions or independent floors or divisions, with a view to taxing "luxury homes".

X. Which certainly is not the case in the present matter if one bears in mind that some of the floors susceptible to independent use have a patrimonial value of € 72,910.00.

XI. On the other hand, item no. 28 of TGIS makes reference to "urban properties with taxable patrimonial value shown in the registry, in accordance with the Code of the Municipal Tax on Real Property" and to "the taxable patrimonial value used for purposes of IMI".

XII. Reference is therefore made to the IMI Code in the determination of the taxable patrimonial value relevant for purposes of item no. 28 of TGIS, and it is further added that in matters not regulated "in the present code concerning item no. 28 of the General Table" the provisions of the IMI Code shall apply subsidiarily" – see article 67, no. 2 of the Stamp Duty Code.

XIII. Wherefore to the floors susceptible to independent use – as is the case in these proceedings – a specific and individual taxable patrimonial value is assigned which is subject to independent registration in the respective property registry.

XIV. A separation is thus made for purposes of IMI of the floors susceptible to independent use which are subject to a specific evaluation in accordance with article 7, no. 2, subparagraph b) of the IMI Code, with independent registry registration and individual patrimonial value.

XV. In the case of properties in vertical or full ownership with floors or divisions susceptible to independent use, but not constituted under horizontal property regime, there is a clear tax autonomy which is evidenced by the different economic units (evaluated with different parameters according to the specific use – residential or commercial, industrial or for services – of each independent unit), indication of the floor/story, all as if they were autonomous fractions.

XVI. There being, thus, no reason for – in the context of the incidence of Stamp Duty, provided for in item no. 28.1 of TGIS – to treat the floors/divisions susceptible to independent use integrated in properties in vertical ownership a treatment distinct from that granted to properties in horizontal property regime.

XVII. Moreover, without prejudice to the illegality of the assessments in question, due to violation of law and error regarding the factual presuppositions, the truth is that the application of item no. 28.1 of TGIS, in the interpretation given by the Tax Authority, is unconstitutional, due to violation of the constitutional principle of equality arising from articles 13 and 104, no. 3 of the Constitution of the Portuguese Republic.

XVIII. In summary, given the referral to the IMI Code, one cannot fail to consider that the taxable patrimonial value relevant for purposes of application of item no. 28.1 of TGIS corresponds to the taxable patrimonial value shown in the registry for each floor susceptible to independent use for residential purposes, since it is this taxable patrimonial value that is used for purposes of IMI.

  1. The Claimant concludes by arguing for the illegality and voidability of the assessment acts for Stamp Duty due to violation of law.

D – RESPONDENT'S REPLY

  1. The Respondent, duly notified for this purpose, presented its reply in a timely manner in which, in abbreviated summary, it alleged the following:

I. The subjection to stamp duty of item 28.1 of the General Table annexed to the Stamp Duty Code results from the combination of two facts: the residential use and the patrimonial value of the urban property shown in the registry being equal to or exceeding € 1,000,000.00.

II. Urban properties may be, among others, residential or for services, in accordance with subparagraphs a) and b) of no. 1 of article 6 of the IMI Code.

III. The property is described in the registry under a full ownership regime, consisting of 4 floors and 18 divisions or floors susceptible to independent use.

IV. For the calculation of the TPV (taxable patrimonial value), the coefficient varies according to its intended use, and being the total taxable patrimonial value of the property relating to the divisions intended for residential purposes exceeding €1,000,000.00, the use coefficient applied was 1.00.

V. Being this the registry information, in accordance with article 23, no. 7 of the Stamp Duty Code, the stamp duty assessment in question was made by the Tax Administration, taking into account the nature of the urban property, namely its divisions allocated to residential purposes, as of the date of the tax event, applying, with the necessary adaptations, the rules contained in the IMI Code.

VI. Thus, taking into account the registry information shown in the property registry notebook, the Claimant fails, with the documents now attached to the proceedings, to prove that the nature of the divisions with residential character is otherwise.

VII. Therefore, the stamp duty assessments contested were issued in accordance with the information contained in the property registry notebook of the property, and are thus valid and do not suffer from any illegality.

VIII. At the time the Claimant held full ownership of the urban property in question, evaluated in accordance with the IMI Code, within the scope of the general evaluation of urban properties, described as "property in full ownership with floors or divisions susceptible to independent use", with taxable patrimonial value (TPV) exceeding € 1,000,000.00.

IX. In compliance and in accordance with the provisions of article 6, no. 2 of Law no. 55-A/2012, of 29/10, which added item no. 28 to TGIS, with the amendment made by Law no. 83-C/2013 of 31/12 and whose respective rule of incidence refers to urban properties, evaluated in accordance with the IMI Code, with TPV equal to or exceeding € 1,000,000.00 and, in accordance with its no. 28.1, residential use, the AT proceeded with notification of collection documents for payment of the assessments in question.

X. Now, what is at issue here are collection notes/assessments which result from the direct application of the legal norm, which translates into objective elements, without any subjective or discretionary appraisal.

XI. The concept of property is defined in article 2, no. 1 of the IMI Code, and it is provided in its no. 4 that under the horizontal property regime, each autonomous fraction is considered as constituting a property.

XII. It follows from the analysis of the normative provision that a "property in full ownership with floors or divisions susceptible to independent use" is, unequivocally, distinct from a property under horizontal property regime, consisting of autonomous fractions, that is, several properties.

XIII. As for IMI assessment, in the case of properties in full ownership, the TPV that serves as the basis for its calculation will undoubtedly be the "total value of the property".

XIV. The provision of item 28.1 of TGIS does not constitute any violation of the principle of equality, with no discrimination existing in the taxation of properties constituted in horizontal property regime and properties in full ownership with floors or divisions susceptible to independent use, nor between properties with residential use and properties with other uses.

XV. Horizontal property and vertical property are differentiated legal institutes.

XVI. The constitution of horizontal property entails, in fact, a mere legal alteration of the property, not even requiring a new evaluation (office – circular no. 40.025, of 11.08.2008, of DSCA), but the legislator may, however, subject to a distinct tax legal framework, and thus discriminatory, properties under horizontal and vertical property regimes, in particular, benefiting the legally more evolved institute of horizontal property, without such discrimination necessarily being considered arbitrary.

XVII. What is intended to be concluded is that these norms and evaluation procedures, the norms on registry registration, and also the norms on the assessment of the parts susceptible to independent use, do not permit the assertion that there should be an equalization of the property under full ownership regime to the vertical property regime, because this would be illegal and unconstitutional.

XVIII. It is thus a consequence of the tax event of stamp duty of item 28.1 consisting of ownership of urban properties whose taxable patrimonial value shown in the registry, in accordance with the IMI Code, is equal to or exceeding € 1,000,000.00, that the patrimonial value relevant for purposes of the incidence of stamp duty is thus the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even when susceptible to independent use.

XIX. Item 28.1 thus covers ownership, usufruct or right of superficies of urban properties with residential use, whose taxable patrimonial value shown in the registry, in accordance with the IMI Code, is equal to or exceeding € 1,000,000.00.

XX. It is a general and abstract norm, applicable uniformly in all cases where the respective factual and legal presuppositions are met.

XXI. Also the different valuation and taxation of a property in full ownership as opposed to a property constituted in horizontal property regime derives from the different legal effects inherent to these two figures.

XXII. Indeed, the constitution in horizontal property determines the division/partition of full ownership and the independence or autonomy of each of the fractions that compose it, for all legal purposes, in accordance with no. 2 of article 4 of the IMI Code and articles 1414 et seq. of the Civil Code, while a property in full ownership constitutes, for all purposes, a single legal-tax reality.

  1. The Respondent concludes by arguing for the legality of the stamp duty assessment acts, and in substance, they did not violate any legal or constitutional provision, and should be maintained in the legal order.

E – FACTUAL FOUNDATION

  1. Before proceeding to examine these issues, it is necessary to present the factual matter relevant to their understanding and decision, which was carried out on the basis of documentary evidence and taking into account the facts alleged.

  2. On the factual matter relevant, the present tribunal considers the following facts as established:

  3. The Claimant is the owner of the urban property, not constituted under a horizontal property regime, located in Lisbon, at Rua … no. … and Rua … no.…, registered in the urban property registry of the parish of … under article….

  4. The referred urban property constitutes a property in full ownership with floors susceptible to independent use, with 18 floors/divisions, with a total patrimonial value of € 1,742,320.00.

  5. The referred property is composed of two blocks as follows: a) Block I, located at Rua …, consisting of a ground floor intended for commercial use and 4 floors intended for residential use, and b) Block II, located at Rua …, consisting of a warehouse, 1 office on the ground floor and 3 floors.

  6. The assessments made contain the following notation: Patrimonial Value of the property – Total subject to tax € 1,390,620.00.

  7. The patrimonial value of the property is € 1,742,320.00, and the value of the fractions of independent use with residential use of the property is € 1,390,620.00.

  8. The assessment notices for the respective property relate to the following floors and divisions, whose patrimonial value of the said divisions with independent use, which compose the urban property, was determined separately, in accordance with the provisions of article 7, no. 2, subparagraph b), of the Code of the Municipal Tax on Real Property (IMI Code), resulting in the issuance of the following tax acts, here challenged:

i. Tax Act no. 2016…, with a stamp duty tax assessment of €1,228.80, and with a TPV of € 122,880.00, relating to …-1D;

ii. Tax Act no. 2016…, with a stamp duty tax assessment of €1,228.80, and with a TPV of € 122,880.00, relating to R…-1E;

iii. Tax Act no. 2016…, with a stamp duty tax assessment of €1,228.80, and with a TPV of € 122,880.00, relating to …-2D;

iv. Tax Act no. 2016…, with a stamp duty tax assessment of €1,228.80, and with a TPV of € 122,880.00, relating to …-2E;

v. Tax Act no. 2016…, with a stamp duty tax assessment of €1,228.80, and with a TPV of € 122,880.00, relating to …-3D;

vi. Tax Act no. 2016…, with a stamp duty tax assessment of €1,228.80, and with a TPV of € 122,880.00, relating to …-3E;

vii. Tax Act no. 2016…, with a stamp duty tax assessment of €1,228.80, and with a TPV of € 122,880.00, relating to …-4D;

viii. Tax Act no. 2016…, with a stamp duty tax assessment of €1,228.80, and with a TPV of € 122,880.00, relating to …-4E;

ix. Tax Act no. 2016…, with a stamp duty tax assessment of €729.10, and with a TPV of € 72,910.00, relating to …-BL1D;

x. Tax Act no. 2016…, with a stamp duty tax assessment of €729.10, and with a TPV of € 72,910.00, relating to …-BL1E;

xi. Tax Act no. 2016…, with a stamp duty tax assessment of €729.10, and with a TPV of € 72,910.00, relating to …-BL2D;

xii. Tax Act no. 2016…, with a stamp duty tax assessment of €729.10, and with a TPV of € 72,910.00, relating to …-BL2E;

xiii. Tax Act no. 2016…, with a stamp duty tax assessment of €1,159.40, and with a TPV of € 115,940.00, relating to …-BL3.

  1. The patrimonial value of the fractions of independent use with residential use of the property at the date of the assessments is € 1,390,620.00, and none of the parts or floors with residential use and with independent use has a taxable patrimonial value exceeding €1,000,000.00.

  2. The AT assessed the stamp duty provided for in item no. 28 and 28.1 of the General Table of Stamp Duty (TGIS), at the rate of 0.5% and 1%, considering as "TPV – total subject to tax", of the stamp duty assessments resulted a tax assessment to pay in the total amount of € 13,906.20.

  3. The Claimant proceeded with the payment of the stamp duty in the amount of € 13,906.20 (thirteen thousand, nine hundred and six euros and twenty cents), corresponding to the assessment and respective single and three installments.

  4. The Claimant attached all proof of payment of the stamp duty assessed in the amount of € 13,906.20 (thirteen thousand, nine hundred and six euros and twenty cents).

F – UNPROVEN FACTS

  1. Of the facts with interest for the decision of the case, contained in the challenge, all objects of concrete analysis, those not included in the factual description above did not prove.

G – QUESTIONS TO BE DECIDED

  1. Given the positions of the parties assumed in the arguments presented, the central questions to be decided are the following, which must be examined and decided:

a. As alleged by the Claimant:

(i) The declaration of illegality of the tax assessment acts for Stamp Duty, nos: 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, which fixed a total tax liability of € 13,906.20 (thirteen thousand, nine hundred and six euros and twenty cents).

H – LEGAL ISSUES

  1. Given the positions of the parties assumed in the pleadings presented, the central issue to be decided by the present arbitral tribunal consists of examining the legality of the stamp duty assessment acts, which fell upon the residential fractions of the Claimant in the urban property described above, due to violation of law, by the erroneous interpretation and application of item 28.1 of TGIS in the amendments introduced by article 4 of Law no. 55-A/2012, of 29 October.

  2. In the case sub judice, it must be determined whether the fractions subject to the stamp duty are covered by the criteria of incidence of stamp duty, in accordance with item no. 28 of TGIS, in the amendments introduced by article 4 of Law no. 55-A/2012, of 29 October.

  3. It is necessary to verify first whether the fractions are for residential purposes, and second whether the TPV of the fractions shown in the registry is equal to or exceeding €1,000,000.00, for this it is necessary to examine the fundamental issue, of which TPV of a property in vertical property (that is, not horizontal) to consider for purposes of the said item. Whether the TPV corresponds to each of the parts of the property for residential purposes individually, or whether, instead, it is determined by the total TPV of the property, which would correspond to the sum of all the TPVs of the residential fractions that compose it.

  4. The factual matter is fixed and proven, for which reason we will now determine the law applicable to the disputed facts, giving priority, in compliance with the provisions of subparagraph a) of no. 2 of article 124 of the Code of Civil Procedure (CPPT), to the defects whose recognition will determine more stable and effective protection of the interests of the Claimant, as to the defect of violation of law due to error concerning the presuppositions of the law of assessment, as to the issue of the classification of urban properties under a full or vertical ownership regime, within the scope of the incidence of article 28, no. 1 of TGIS, introduced by the Regime of Law no. 55-A/2012, of 29 October.

  5. The amendment to the regime regarding stamp duty subjection of properties with residential use by the addition of item 28 of the General Table of Stamp Duty, made by article 4 of Law 55-A/2012, of 29/10 and amended by Law no.83-C/2013, of 31 December, began to typify the following tax facts, through the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value shown in the registry, in accordance with the Code of the Municipal Tax on Real Property (IMI Code), is equal to or exceeding (euro) 1,000,000 – on the taxable patrimonial value used for purposes of IMI:

28.1 – Per residential property or per land for construction whose construction, authorized or provided for, is for residential purposes, as provided for in the Code of the IMI - 1%;

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

  1. Contained in article 6 of Law no. 55-A/2012, are the transitional provisions which established the rules relating to the assessment of the stamp duty, provided for in that item:

"1 – In 2012, the following rules must be observed by reference to the assessment of stamp duty provided for in item no. 28 of the respective General Table:

a) The tax event occurs on 31 October 2012;

b) The taxpayer of the stamp duty is the one mentioned in no. 4 of article 2 of the Stamp Duty Code on the date referred to in the previous subparagraph;

c) The taxable patrimonial value to be used in the assessment of the stamp duty corresponds to that which results from the rules provided for in the Code of the Municipal Tax on Real Property by reference to the year 2011;

d) The assessment of the stamp duty by the Tax and Customs Authority must be carried out by the end of November 2012;

e) The stamp duty must be paid, in a single installment, by the taxpayers by 20 December 2012;

f) The applicable rates are as follows:

i) Properties with residential use evaluated in accordance with the IMI Code: 0.5%;

ii) Properties with residential use not yet evaluated in accordance with the IMI Code: 0.8%;

iii) Urban properties when the taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, shown in the list approved by ordinance of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of stamp duty provided for in item no. 28 of the respective General Table must fall upon the same taxable patrimonial value used for purposes of assessment of municipal tax on real property to be made in that year.

3 – The non-delivery, in full or in part, within the time indicated, of the amounts assessed as stamp duty constitutes a tax infraction, punished in accordance with the law."

  1. On the interpretation of this statute the award 53/2013-T[1] has already ruled, which writes:

"The term used in said item 28.1 and in the sub-items i) and ii) of subparagraph f) of no. 1 of article 6 of Law no. 55-A/2012, is a concept that is not used in any other tax legislation in these precise terms, which is that of 'property with residential use'. Namely in the IMI Code, which in several norms of the Stamp Duty Code introduced by that Law is indicated as a statute of subsidiary application regarding the tax provided for in said item no. 28 [articles 2, no. 4, 3, no. 3, subparagraph u), 5, subparagraph u), 23, no. 7, and 46 and 67 of the Stamp Duty Code], is not used a concept defined in those terms."

  1. As for the concept of property, it is necessary for this purpose to resort to the concepts of properties used in the IMI Code, in which the species of properties are enumerated in its articles 2 to 6, which is transcribed:

Article 2

Concept of Property

1 – For purposes of the present Code, property is every fraction of territory, including waters, plantations, buildings and constructions of any nature incorporated therein or situated thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although located in a fraction of territory that constitutes an integral part of a different asset or does not have a patrimonial nature.

2 – Buildings or constructions, even if movable by nature, are considered as having a character of permanence when allocated to non-transitory purposes.

3 – The character of permanence is presumed when the buildings or constructions are situated in the same location for a period exceeding one year.

4 – For purposes of this tax, each autonomous fraction, under the horizontal property regime, is considered as constituting a property.

Article 3

Rural Properties

1 – Rural properties are lands situated outside an urban agglomeration that are not to be classified as lands for construction, in accordance with no. 3 of article 6, provided that:

They are allocated to, or, in the absence of concrete allocation, have as normal destination a use generating agricultural income, such as they are considered for purposes of the tax on income of natural persons (IRS);

Not having the allocation indicated in the previous subparagraph, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Also rural properties are lands situated within an urban agglomeration, provided that, by force of legally approved provision, they may not have use generating any income or can only have use generating agricultural income and are in fact having this allocation.

3 – Also rural properties are:

Buildings and constructions directly allocated to the production of agricultural income, when situated on the lands referred to in the above numbers;

Waters and plantations in the situations to which no. 1 of article 2 refers.

4 – For purposes of the present Code, urban agglomerations are considered, in addition to those situated within legally fixed perimeters, the nuclei with a minimum of 10 dwellings served by public use streets, with their perimeter delimited by points distanced 50 m from the axis of the streets, in the transversal direction, and 20 m from the last building, in the direction of the streets.

Article 4

Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5

Mixed Properties

  1. Whenever a property has rural and urban parts it is classified, in its entirety, in accordance with the main part.

  2. If neither of the parts can be classified as main, the property is considered as mixed.

Article 6

Species of Urban Properties

1 - Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Lands for construction;

Others.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such or, in the absence of a license, which have as normal destination each of these purposes.

3 – Lands for construction are considered lands situated within or outside an urban agglomeration, for which a license or authorization has been granted, admitted prior notification or issued favorable prior information of a subdivision or construction operation, and also those that have been declared as such in the acquisitive title, excepting lands in which 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 spaces, infrastructure or public facilities. (Wording of Law no. 64-A/08, of 31-12)

4 – Those falls within the provision of subparagraph d) of no. 1 lands situated within an urban agglomeration that are not lands for construction nor are they covered by the provisions of no. 2 of article 3 and also buildings and constructions licensed or, in the absence of a license, which have as normal destination other purposes than those referred to in no. 2 and also those of the exception of no. 3.

  1. On the interpretation of Tax Norms, for the case sub judice, article 11 of the General Tax Law tells us, which establishes the essential rules of interpretation of tax laws, which it does in the following terms:

Article 11

Interpretation

In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

Whenever in tax norms, terms peculiar to other branches of law are used, they must be interpreted in the same sense that they have there, unless otherwise arises directly from the law.

Persisting doubt about the meaning of the norms of incidence to be applied, account must be taken of the economic substance of the tax facts.

The gaps resulting from tax norms covered by the reservation of law of the Parliament are not susceptible to analogical integration.

  1. To this provision, it is equally necessary to resort to the general principles of interpretation of laws, to which no. 1 of article 11 of the General Tax Law refers, which are established in article 9 of the Civil Code, which establishes the following:

Article 9

Interpretation of Law

1 – The interpretation must not be confined to the letter of the law, but reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

2 – The legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed, cannot, however, be considered by the interpreter.

3 – In determining the meaning and scope of the law, the interpreter will presume that the legislator adopted the most correct solutions and knew how to express his thought in adequate terms.

  1. In light of the legal foundation already set forth, and given the articles transcribed and enunciated, the following hypotheses of interpretation of the concept of "property with residential use" arise, as relating to properties for residential purposes, and as to the Concept of "property with residential use" as a concept distinct from "residential properties".

  2. It results from articles 2 to 6 of the IMI Code transcribed above, that the legislator does not use, in the classification of properties, the concept of "property with residential use", nor is this concept, with this terminology, found in any other statute.

  3. The lack of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes, can give rise to various interpretative hypotheses.

  4. The text of the law, being the starting point for the interpretation of the expression "properties with residential use", and it is on the basis of it that the "legislative thought" must be reconstructed, as required by no. 1 of article 9 of the Civil Code, applicable by force of the provisions of article 11, no. 1, of the General Tax Law, already transcribed.

  5. On the interpretation of the concept of "property with residential use", it is important to cite award 53/2013-T[2] which has already ruled on this matter. An award that likewise sustains two interpretative hypotheses as to the concept of "property with residential use", respectively in the same sense as the present decision, as to the concept of "property with residential use" as relating to residential properties, and as to the Concept of "property with residential use" as a concept distinct from "residential properties"

  6. Award 53/2013-T writes, on the concept of "property with residential use" as relating to residential properties:

"The concept closest to the literal tenor of this expression used is manifestly that of 'residential properties', defined in no. 2 of article 6 of the IMI Code as comprising 'buildings or constructions' licensed for residential purposes or, in the absence of a license, which have as normal destination residential purposes.

To understand that the expression 'property with residential use' coincides with that of 'residential properties', it is manifest that the assessments will suffer from error regarding the factual and legal presuppositions, because all properties in relation to which Stamp Duty was assessed under the said item no. 28.1 are lands for construction, without any building or construction, required to fulfill that concept of 'residential properties'.

For this reason, if one adopts the interpretation that 'property with residential use' means 'residential property', the assessments whose declaration of illegality is requested will be illegal, because there is no building or construction in any of the lands.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of TGIS with that which is extracted from no. 2 of article 6 of the IMI Code, points in the sense of not having intended to use the same concept."

  1. On the interpretation of the second hypothesis: Concept of "property with residential use" as a concept distinct from "residential properties", award 53/2013-T is cited again, in which it writes:

"The word 'allocation', in this context of use of a property, has the meaning of 'action of assigning something to a determined use'. ( [3] )

"When, as is usually the case, the norms (legislative formulas) entail more than one meaning, then the positive function of the text translates itself into giving stronger support to or more strongly suggesting one of the possible senses. That is, of the possible senses, some will correspond to the most natural and direct meaning of the expressions used, while others will only fit within the verbal framework of the norm in a forced, contrived manner. Now, in the absence of other elements that induce the choice of the less immediate sense of the text, the interpreter should opt in principle for that sense which best and most immediately corresponds to the natural meaning of the verbal expressions used, and in particular to their legal-technical meaning, in the supposition (not always exact) that the legislator knew how to express his thought correctly". ( [4] )

The relevance of the text of the law is especially emphasized in matters of interpretation of norms of incidence of Stamp Duty, which are reduced to an amalgam, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on assets, on acts, etc.), which leaves no appreciable margin for application of the primary interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this item no. 28.1, hastily included at the margins of the State General Budget, by a tax legislator without perceivable overall tax guidance, who is implementing successive norms of tax increases as the budgetary execution setbacks, the impositions of international institutional creditors (represented by the "troika") and the supervision of the Constitutional Court dictate.

Indeed, although in the "Statement of Reasons" of the Draft Law no. 96/XII/2nd ( [5] ), on which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to "reinforce the principle of social equity in austerity, ensuring an effective distribution of the necessary sacrifices for compliance with the adjustment program" and to its commitment "to ensure that the distribution of these sacrifices will be made by all and not just by those who live on the income of their work", it is manifest, on the one hand, that these reasons of equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the State General Budget came into force and, on the other hand, that the scope of item no. 28.1, by taxing additionally properties with residential use and not also properties that do not have it, suggests that the concerns of social equity and the proclaimed intention of distribution of sacrifices by all, affects much more some than properly all.

In this context, not existing sure interpretative elements that permit the detection of legislative coherence in the solution adopted in said item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of no. 3 of article 9 of the Civil Code), the content of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same no. 3 of article 9, that the legislator knew how to express his thought in adequate terms.

In light of those meanings of the words "allocation" and "allocate", which are "to assign a destination" or "to apply", the formula used in that item no. 28.1 of TGIS, manifestly covers properties that are already applied to residential purposes, wherefore it is important to inquire whether it will also cover properties that, despite not being yet applied to residential purposes, are assigned to these and those whose destination is unknown. (…)

For this reason, it will be necessary to clarify when it can be understood that a property is allocated to a residential purpose, namely if it is when it is given that destination in a licensing act or similar, or only when the effective assignment of that destination is concretized.

From the outset, the comparison of item no. 28.1 of TGIS with no. 2 of article 6 of the IMI Code, which defines the concept of residential properties, manifestly points in the sense of a need for effective allocation.

Indeed, a building or construction licensed for residential purposes or, even without a license, but which has as normal destination residential purposes, is, in light of no. 2 of that article 6, a residential property.

For this reason, presupposing that the legislator of Law no. 55-A/2012 knew how to express his thought in adequate terms (as article 9, no. 3, of the Civil Code requires to be presumed), if it intended to refer to those properties already licensed for residential purposes or which have residential purposes as their normal destination, it would certainly have used the concept of "residential properties", which would express perfectly and clearly its thought, in light of the definition given by that no. 2 of article 6 of the IMI Code.

Consequently, it must be presumed that the use of a different expression is intended to have a distinct reality, whereby, in good hermeneutics, "property with residential use", cannot be a property merely licensed for residential purposes or destined for that purpose (that is, it will not be sufficient that it be a "residential property"), having to be a property that already has effective allocation to that purpose.

That this is the sense of the expression "allocation", in the same context of classification of properties that the IMI Code makes, is confirmed by article 3 in which, regarding rural properties, reference is made to those "that are allocated to or, in the absence of concrete allocation, have as normal destination a use generating agricultural income", which evidences that the allocation is concrete, effective. Indeed, as seen from the final part of this text, a property may have as its destination a determined use and be or not allocated to it, which evidences that the allocation is, at the level of the connection of a property to a determined use, something more intense than mere destination and which may or may not occur, downstream of this and not upstream. ( [6] )

The correctness of this interpretation in the sense that only properties that are effectively allocated to residential purposes, fall within the scope of incidence of item no. 28.1 of TGIS is also confirmed by the perceivable legislative intent of the restriction of the field of application of the norm to properties with residential use, in the context of the "circumstances in which the law was elaborated and the specific conditions of the time in which it is applied", which article 9, no. 1, of the Civil Code also erects as interpretative elements. ( [7] ).

From the outset, the limitation of Stamp Duty taxation to "properties with residential use" leaves one to perceive that it was not intended to cover within the scope of incidence of the tax properties with use for services, industry or commerce, that is, properties allocated to economic activity, which makes sense in a context in which, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching maximum historical levels, with an avalanche of business closures derived from economic unsustainability. (bold in original)

Bearing in mind this situation and being well known and public that the reanimation of economic activity and the increase in exports are the ways out of the crisis, it is comprehensible that legislative measures were not taken that would hinder economic activity, namely the increase in the tax burden that hinders it and affects competitiveness in international terms.

For this reason, it is to be concluded that the interpretative elements available, including the "circumstances in which the law was elaborated and the specific conditions of the time in which it is applied", clearly point in the sense of not having intended to cover within the scope of incidence of item no. 28.1 the situations of properties that are not yet allocated to residential purposes, namely lands for construction held by companies. ( [8] )"

  1. In light of the foregoing, it is verified that the fractions intended for residential purposes, are covered by the rule of incidence by item 28.1, because they are urban properties and properties with residential use, the concept of which results from article 2 of the IMI Code.

  2. However, it now becomes necessary to decide for purposes of application of item no. 28 of TGIS, which TPV to consider in properties under vertical regime (that is, not horizontal) whether individually determined by the TPV corresponding to each of the parts of the property for residential purposes, or whether determined by the total TPV of the property, which would correspond to the sum of all the TPVs of the residential fractions that compose it.

  3. On this issue, the Arbitral Tribunal of CAAD has already decided through decisions nos 50/2013-T, 132/2013-T, 48/2013-T, 50/2013-T, 144/2013-T, 132/2013-T, 95/2013-T, 248/2013-T, 240/2013-T, 183/2013-T, 185/2013-T, 280/2013-T, 26/2014-T, 182/2013-T, 30/2014-T, 35/2014-T, 88/2014-T, 72/2014-T, 428/2014-T, 639/2014-T, 724/2014-T, 754/2015-T, 755/2015-T, 766/2015-T, 10/2016-T, 20/2016-T, 43/2016-T, 45/2016-T, 134/2016-T, 120/2016-T, 298/2016-T, 203/2016-T 214/2016-T, 214/2016-T and 327/2016-T.

  4. It is important for purposes of the case sub judice, to refer regarding decision 50/2013-T, which tells us, about the treatment to be conferred for purposes of item 28.1 of TGIS to properties in vertical ownership and cumulatively which TPV (individual or global) to consider:

"From this we can conclude that, in the view of the legislator, what matters is not the legal-formal rigor of the concrete situation of the property but rather its normal use, the purpose to which the property is destined. We further conclude that for the legislator the situation of the property in vertical or horizontal ownership did not matter, since no reference or distinction is made between one and the other. What matters is the material truth underlying its existence as an urban property and its use."

  1. It is further important to refer from the respective decision:

"Using the criterion which the law itself introduced in article 67, no. 2 of the Stamp Duty Code, 'to matters not regulated in the present code concerning item 28 of the General Table applies subsidiarily'.

Now, being thus, considering that the registry of properties under vertical ownership, constituted by different parts, floors or divisions with independent use, in accordance with the IMI Code, obeys the same registration rules of properties constituted in horizontal ownership, with the respective IMI, as well as the new Stamp Duty, assessed individually in relation to each of the parts, it offers no doubt that the legal criterion to define the incidence of the new tax must be the same. (…)

Therefore, if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.

Thus, there would only be cause for incidence of the new stamp duty if one of the parts, floors or divisions with independent use presented a TPV exceeding €1,000,000.00.

Thus, the AT cannot consider as the reference value for the incidence of the new stamp duty the total value of the property, when the legislator himself established a different rule in the context of the IMI Code, and this is the code applicable to matters not regulated regarding item 28 of TGIS.

The criterion sought by the AT, of considering the value of the sum of the TPVs attributed to the parts, floors or divisions with independent use, on the argument that the property is not constituted under the horizontal property regime, finds no legal support and is contrary to the criterion that applies in the context of the IMI Code and, by referral, in the context of Stamp Duty.

To which is added the fact that the law itself expressly establishes, in the final part of item 28 of TGIS, that the Stamp Duty to be assessed on urban properties of value equal to or exceeding €1,000,000.00 – 'on the taxable patrimonial value used for purposes of IMI'.

Thus, the adoption of the criterion defended by the AT violates the principles of legality and tax equality, as well as the prevalence of material truth over legal-formal reality.

The tax legislator in article 12, no.3 of the IMI Code says that 'each floor or part of property susceptible to independent use is considered separately in the registry registration which equally discriminates the respective taxable patrimonial value.', makes no distinction as to the regime of properties that are in horizontal or vertical ownership, if the property were in horizontal ownership regime, none of its residential fractions would suffer incidence of the new tax, whereby the AT cannot treat equal situations differently.

  1. In the same sense decided the decision of the CAAD arbitral tribunal, no.132/2013-T:

"Furthermore, it is also the case that admitting differentiation of treatment could produce results that are incomprehensible from a legal standpoint and detrimental to the objectives that the legislator said it had in adding item no. 28. By way of example, suppose the following hypothesis, which appears plausible in light of the interpretation made by the now respondent: a citizen who is owner of a property constituted in full ownership intended for residential purposes, with the total value of the autonomous units equal to or exceeding €1,000,000.00 and the TPV of each one less than €1,000,000.00, is subject to an annual taxation of 1% of that value (as occurred in the situation under analysis); whereas another citizen who holds a property with the exact same characteristics as the previous one but which has been constituted in horizontal ownership, with the total value of the autonomous fractions equally equal to or exceeding €1,000,000.00 and the TPV of each one less than €1,000,000.00, will not be subject to taxation in accordance with the said item no. 28...

On the other hand, one could ask: if such fractions have the same owner, why does it not make sense to aggregate, for purposes of taxation, their respective TPVs? The answer can be illustrated through another hypothesis: a citizen who is owner of a property in horizontal ownership, in which each of its 20 fractions has a TPV of less than €1,000,000.00, would be subject to taxation if – if such aggregation were admitted – the total TPV exceeded that value; whereas another citizen with identical 20 fractions distributed among 5, 10 or 20 properties would not be subject to any taxation in accordance with said item no. 28...

If this line of reasoning makes sense – thereby justifying, therefore, the non-aggregation of TPVs of fractions of properties in horizontal ownership – no plausible reason is seen for why the same should not be applied to the autonomous units of properties in full ownership.

Observing, now, the case under analysis, it is found that the TPVs of the floors (autonomous units) of the property with residential use range between €104,140.00 and €113,780.00, whereby each of them is less than €1,000,000.00. From this it is concluded, as a result of what was referred to, that stamp duty to which item no. 28 of TGIS refers cannot be assessed on the same, being, therefore, illegal the assessment acts challenged by the claimant."

  1. In light of the foregoing, and applying what is told to us by the decisions transcribed above, to the present case, it results that for purposes of application of item 28 of TGIS to properties in vertical ownership, the same rules of the IMI Code that apply to properties in horizontal ownership are applied, and in the same sense the TPV for purposes of application of the item is the individual TPV of each independent fraction of residential use, it being the case that in the present case none of the fractions exceeds the incidence criterion of 1,000,000.00€.

  2. Material truth is what imposes itself as the determining criterion of tax capacity and not merely the legal-formal reality of the property, since the constitution of horizontal ownership entails, in fact, a mere legal alteration of the property not even imposing a new evaluation, which, such finding does not appear coherent with the AT's decision to tax the residential parts of a property in vertical ownership, according to the total TPV of the property and not what is effectively attributed to each part.

  3. The current legal regime does not impose the obligation to constitute horizontal ownership whereby the AT's action translates into an arbitrary and illegal discrimination. The AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in article 103, no. [3] of the CRP, and also the principles of justice, equality and tax proportionality.

  4. As none of the fractions intended for residential use has a patrimonial value equal to or exceeding €1,000,000.00, as results from the documents attached to the proceedings, it is concluded that the legal presupposition for incidence of the Stamp Duty provided for in Item 28 of TGIS is not met.

  5. In this sense and following the jurisprudence of CAAD and STA in cases 50/2013-T, 132/2013-T, 48/2013-T, 50/2013-T, 144/2013-T, 132/2013-T, 95/2013-T, 248/2013-T, 240/2013-T, 183/2013-T, 185/2013-T, 280/2013-T, 26/2014-T, 182/2013-T, 30/2014-T, 35/2014-T, 88/2014-T, 72/2014-T, 428/2014-T, 639/2014-T, 724/2014-T, 754/2015-T, 755/2015-T, 766/2015-T, 10/2016-T, 20/2016-T, 43/2016-T, 45/2016-T, 134/2016-T, 120/2016-T, 298/2016-T, 203/2016-T 214/2016-T, 214/2016-T and 327/2016-T and the jurisprudence of the Supreme Administrative Court in the same sense, respectively in awards: no. 047/15, of 09/09/2015, Case no. 1354/15, of 02/03/2016, Case no. 1534/15, of 27/04/2016, Case no. 166/16, of 04/05/2016, Case no. 172/16, of 04/05/2016, Case no. 1504/15, of 04/05/2016, Case no. 1352/15, of 24/05/2016, Case no. 1344/15, of 24/05/2016, and Case no. 498/16, of 29/06/2016.

  6. In this manner, the present tribunal concludes for the declaration of illegality of the assessments sub judice, due to suffering from a defect of violation of said item no. 28.1, due to error regarding the legal presuppositions, which justifies the declaration of its illegality and annulment (article 135 of the Administrative Procedure Code).

  7. In view of the foregoing, the Stamp Duty assessment, in the part covered by the annulment, which will be decreed, result from errors of fact and law attributable exclusively to the tax administration, to the extent that the Claimant complied with its declaration obligation and were committed by such administration and the latter could not be unaware of different understandings.

I – DECISION

Therefore, in view of all the foregoing, the present Arbitral Tribunal decides:

To uphold the claim for a declaration of illegality of the tax assessment acts for Stamp Duty, nos: 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, which fixed a total tax liability of €13,906.20 (thirteen thousand, nine hundred and six euros and twenty cents), due to a defect of violation of law regarding the provision contained in item 28, no. 1, due to error regarding the legal presuppositions, which justifies the declaration of its illegality and annulment.

To order the Respondent to refund to the Claimant the amount unduly assessed in the sum of €13,906.20.

The value of the proceedings is fixed at €13,906.20 of the value of the assessment, taking into account the economic value of the proceedings as measured by the value of the stamp duty assessments challenged, and in accordance with this the costs are fixed, in the respective amount of €918.00 (nine hundred and eighteen euros), borne by the respondent in accordance with article 12, no. 2 of the Tax Arbitration Regime, article 4 of the Rules of Civil Procedure for Tax Proceedings and Table I annexed to the latter. – no. 10 of article 35 and nos 1, 4 and 5 of article 43 of the General Tax Law, articles 5, no. 1, subparagraph a) of the Rules of Civil Procedure for Tax Proceedings, 97-A, no. 1, subparagraph a) of the Code of Civil Procedure for Tax Proceedings and 559 of the Code of Civil Procedure).

Notify accordingly.

Lisbon, 19 December 2016

The Arbitrator

Dr. Paulo Ferreira Alves

[1] On this matter the awards of the Arbitral Tribunal of CAAD, no. 42/2013-T, 48/2013-T, 49/2013-T have already decided.

[2] On the interpretation of the concept of "property with residential use" for purposes of item 28.1 of TGIS, see the decisions issued by the Arbitral Tribunal of CAAD in cases no. 42/2013; 48/2013; 49/2013; 53/2013; 75/2013; 158/2013; 251/2013; 310/2013.

[3] Dictionary of Contemporary Portuguese Language of the Academy of Sciences of Lisbon, Volume I, page 102.

[4] BAPTISTA MACHADO, Introduction to Law and Legal Discourse, page 182.

[5] Draft Law no. 99/XII/2nd is available at http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245

[6] Other norms of the IMI Code make it appear that the term "allocation" is used to reference situations already existing and not merely future, even if foreseeable, like "destination". This is the case of article 9 of the IMI Code, which, after establishing that "the tax is due from" "the 4th year following, inclusive, the one in which a land for construction has come to appear in the inventory of a company whose object is the construction of buildings for sale" or "the 3rd year following, inclusive, the one in which a property has come to appear in the inventory of a company whose object is its sale" [subparagraphs d) and e) of no. 1], determines that "for purposes of the provisions of subparagraphs d) and e) of no. 1, the taxpayers must communicate to the tax office of the area where the properties are located, within a period of 60 days counted from the verification of the fact determining its application, the allocation of the properties to those purposes". The "allocation of properties to those purposes", in the context of this article 9, is reduced to the concrete assignment to the properties of the purpose "for sale", materialized by their inventory, with it not being sufficient that they have been constructed or acquired with a view to their sale.

[7] This approach is not intended to bear in mind the special cases provided for in item no. 28.2, of ownership of properties by legal persons resident in a country, territory or region subject to a clearly more favorable tax regime, shown in the list approved by ordinance of the Minister of Finance to which, as in other norms, a strong tax penalty is attributed, because these are situations normally associated with tax evasion.

[8] Outside the special cases provided for in item no. 28.2.

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Tabela Geral do Imposto do Selo and how does it apply to vertical property?
Verba 28.1 of the TGIS imposes an annual 1% Stamp Tax on urban properties with taxable patrimonial value exceeding €1,000,000.00 as shown in the property registry according to the IMI Code. For vertical properties (propriedade vertical)—full ownership properties with floors or divisions capable of independent use but not constituted under horizontal property regime—the critical issue is whether the tax applies to the entire building's aggregate value or each independent floor/division separately. The IMI Code provides for separate registration and individual valuation of floors capable of independent use under article 7(2)(b), granting them tax autonomy with different economic parameters based on specific use (residential, commercial, industrial, or services). Article 67(2) of the Stamp Duty Code establishes that IMI Code provisions apply subsidiarily to matters not regulated concerning Verba 28 of TGIS, supporting the argument that each independent division should be treated as a separate taxable unit, similar to autonomous fractions in horizontal property regimes.
Can Stamp Tax (Imposto de Selo) liquidations under Verba 28 TGIS be challenged through tax arbitration at CAAD?
Yes, Stamp Tax assessments under Verba 28 of the General Stamp Tax Table can be challenged through arbitral proceedings at the Centro de Arbitragem Administrativa (CAAD). According to article 2(1)(a) of Decree-Law no. 10/2011 of 20 January, CAAD has material competence to adjudicate disputes concerning the legality of tax assessment acts, including Stamp Tax liquidations. Taxpayers can request constitution of an arbitral tribunal to declare the illegality and annulment of Stamp Tax assessments, as demonstrated in Process 471/2016-T. The procedure involves submitting an application for constitution of the arbitral tribunal, which must be accepted by CAAD's President. The tribunal is constituted according to articles 6 and 11 of the CAAD Arbitration Rules (TAR Rules), with parties having the right to appoint arbitrators or having them appointed by the Deontological Council. The arbitration process provides an alternative to judicial courts for resolving tax disputes, offering specialized expertise and typically faster resolution.
What are the grounds for declaring the illegality of Stamp Tax assessments on vertical property in Portugal?
The primary grounds for challenging Stamp Tax assessments on vertical property under Verba 28.1 TGIS include: (1) Violation of law and error regarding factual presuppositions—misapplication of the €1,000,000.00 threshold by aggregating the entire building's value instead of applying it to each independent floor/division with separate registry and valuation under the IMI Code; (2) Incorrect interpretation of the taxable base, since article 67(2) of the Stamp Duty Code mandates subsidiary application of IMI Code provisions, which grant tax autonomy to floors capable of independent use through separate registrations and individual patrimonial valuations under article 7(2)(b) of the IMI Code; (3) Unequal treatment violating the constitutional principle of equality under articles 13 and 104(3) of the Portuguese Constitution by treating vertical properties with independent divisions differently from horizontal property regimes where autonomous fractions are taxed individually; and (4) Misinterpretation of legislative intent, as Verba 28.1 was designed to tax luxury homes with high individual values, not aggregated multi-unit buildings where individual units fall below the statutory threshold.
How does the CAAD arbitral tribunal process work for contesting Imposto de Selo liquidations?
The CAAD arbitration process for contesting Stamp Tax liquidations begins with the taxpayer submitting an application for constitution of an arbitral tribunal, which must be accepted by CAAD's President. Upon acceptance, the tribunal is constituted according to Decree-Law no. 10/2011 of 20 January and the CAAD Arbitration Rules. Parties may appoint their own arbitrator under article 6(1) and article 11(1)(b) of the TAR Rules; if they decline, the Deontological Council appoints one. The Tax and Customs Authority is automatically notified upon tribunal constitution. Parties have the right to refuse arbitrator appointments within the legal timeframe under articles 6 and 7 of the Deontological Code. For singular arbitral tribunals, constitution is complete when the sole arbitrator is appointed and accepted. Parties may agree to dispense with the preliminary meeting under article 18 of TAR Rules. The tribunal examines its own competence, verifies parties' legal personality, capacity, legitimacy, and legal representation, and ensures no procedural defects exist. The claimant presents grounds for illegality, the Tax Authority responds, and the tribunal issues an arbitral award.
What was the outcome of CAAD Process 471/2016-T regarding Stamp Tax on vertical property under Verba 28.1 TGIS?
The provided excerpt of CAAD Process 471/2016-T does not include the tribunal's final decision regarding the Stamp Tax assessments on vertical property. The document contains the report section establishing the parties, procedural background, tribunal constitution in November 2016, and the claimant's arguments, but concludes at point XVIII without presenting the Tax Authority's response, the tribunal's legal reasoning, or the operative part of the award. The claimant sought declaration of illegality and annulment of 13 Stamp Tax assessment acts totaling €13,906.20 for the 2015 tax year, arguing that Verba 28.1 TGIS should apply to individual floors/divisions rather than the aggregate property value, and raising constitutional equality concerns. To ascertain the tribunal's decision—whether it upheld or annulled the Tax Authority's assessments—the complete arbitral award would need to be consulted. CAAD arbitral awards are typically published on the CAAD website (caad.org.pt) with full reasoning and outcomes.