Process: 476/2014-T

Date: February 27, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 476/2014-T) addresses the application of Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) to co-owned property. The claimant owned 1/3 of a building in Lisbon (not constituted as horizontal property) comprising 24 individually leased apartments. Following a 2013 property valuation update, the Tax Authority issued Stamp Tax assessments totaling €11,518.88. The core dispute concerned whether the €1,000,000 threshold in item 28.1 should apply to: (a) each individual apartment/division, (b) the claimant's 1/3 ownership share, or (c) the entire property's collective value. The claimant argued that taxation should consider individual apartment values and their fractional ownership, asserting none exceeded the threshold individually. They also invoked principles of legality, tax equality, and material truth over formal reality. The Tax Authority contended that Stamp Tax under item 28.1 applies to the property as a whole owned by co-owners collectively, not to individual quotas or divisions, and that the €1,000,000 limit should be measured against the total property value. The claimant requested annulment of 48 Stamp Tax liquidation acts (24 for 2012, 24 for 2013), reimbursement of amounts paid, compensatory interest under Article 43(2) and 100 of the General Tax Law, attorney fees, procedural costs, and an order preventing future similar assessments. The case was filed on July 9, 2014, the arbitral tribunal was constituted on September 11, 2014, and the Tax Authority submitted its response on October 17, 2014. The claimant subsequently filed a claim expansion request on December 9, 2014, seeking to include an additional 24 Stamp Tax acts from 2013 (second installment) totaling €3,839.52. The tribunal scheduled the decision for February 27, 2015.

Full Decision

ARBITRAL DECISION

Process no. 476/2014-T

I – Report

1.1. A, taxpayer no. …, resident at Rua … Faro (hereinafter referred to as "claimant"), having been notified of the decision denying the administrative review of the claim presented against the Stamp Duty assessment acts no. 2013 … et seq. (relating to the year 2012) and having been notified of the Stamp Duty assessment acts no. 2014 … et seq. (relating to the year 2014), carried out, respectively, on 14/7/2013 and 17/3/2014, under item 28.1 of the General Table annexed to the Stamp Duty Code, from which resulted a total amount of tax to be paid of €11.518,88, not accepting the same, presented, on 9/7/2014, a request for the establishment of an arbitral tribunal and arbitral pronouncement, pursuant to the provisions of para. a) of no. 1 of art. 2.º, and para. a) of no. 1 of art. 10.º, both of Decree-Law no. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "LFATM"), in which the Tax and Customs Authority (TCA) is requested, with a view to the declaration of "illegality of the [48] Stamp Duty assessment acts [...], with their consequent annulment and return to the Claimant", the condemnation of the TCA to "the payment of indemnification interest" and to "the payment of fees paid by the Claimant to its attorneys [...] and, as well, condemnation to payment of the procedural costs due in the course of this process" and, finally, the condemnation of the TCA "to no longer assess Stamp Duty acts similar to those now discussed, namely, the second installment relating to the year 2013 and onwards."

1.2. On 11/9/2014 this Sole Arbitral Tribunal was established.

1.3. Pursuant to art. 17.º, no. 1, of the LFATM, the TCA was summoned, as the respondent party, to submit a response, in accordance with the said article, on 16/9/2014. The TCA submitted its response on 17/10/2014, having argued for the complete dismissal of the claimant's request. It also submitted a request requesting waiver of the meeting referred to in art. 18.º of the LFATM.

1.4. By request of 9/12/2014, the claimant hereby requested the expansion of the claim, requesting that the Tribunal: a) "accept[s] the joinder to the case file of the 24 Stamp Duty assessment acts no. 2014 … et seq., carried out on 17/03/2014, by His Excellency the Director-General of Taxes, relating to the 2nd (second) installment of Stamp Duty, relating to the year 2013, in the total amount of €3.839,52"; b) recogn[ize] the prejudiciality of the 24 tax acts better identified above and the consequent quantitative expansion of the claim, declaring the illegality of the same with all legal consequences, namely, their annulment and the return to the Claimant of the entirety of the amounts unduly paid, as well as the payment of the respective indemnification interest, in accordance with the provisions of no. 2 of art. 43.º and art. 100.º of the TGL and art. 61.º of the TCPT."

1.5. By order of 6/2/2015, the Tribunal considered, in accordance with art. 16.º, paras. c) and e), of the LFATM, that the meeting of art. 18.º of the LFATM was dispensable and that the process was ready for decision. The date of 27/2/2015 was further set for the pronouncement of the arbitral decision.

1.6. The Arbitral Tribunal was duly constituted, is materially competent, the process does not suffer from vices that would invalidate it, and the Parties have legal personality and procedural capacity, being legitimate.

II – Grounds: The Matters of Fact

2.1. The claimant alleges, in its initial petition, that: a) "in the case of the real property with the characteristics of the present Claimant [not constituted in horizontal property regime] the subjection to Stamp Duty is determined, not by the TPV of the real property, but by the TPV attributed to each of these floors or divisions of which the present Claimant is the owner"; b) "moreover [...] the present Claimant is the owner of 1/3 of the real property in question and not of the entirety as is proven by the Property Schedule [...]. And this 1/3 is less than 1 million euros even if the global TPV were considered"; c) "the Stamp Duty assessments [should] be annulled, and consequently the amount unduly paid returned, because the same are illegal by violating the principles of legality and fiscal equality, as well as that of the prevalence of material truth over legal-formal reality".

2.2. The claimant concludes that should be "declared the illegality of the [said] Stamp Duty assessment acts [...] with their consequent annulment and return to the Claimant", "condemned the tax administration to payment of indemnification interest" and to "payment of fees paid by the Claimant to its attorneys [...] and, as well, condemnation to payment of the procedural costs due in the course of this process" and, finally, the condemnation of the TCA "to no longer assess Stamp Duty acts similar to those now discussed, namely, the second installment relating to the year 2013 and onwards."

2.3. For its part, the TCA alleges, in summary, in its defense, that: a) "each quota of co-owner does not constitute a real property for purposes of the incidence of item 28.1 of the General Table"; b) "the stamp duty of item 28.1 of the General Table falls upon the collectivity of co-owners and not upon the ideal quota of each co-owner"; c) "the limit of €1.000.000,00 referred to in that legal norm should not be measured co-owner to co-owner, as if the quota of each co-owner constituted a real property"; d) "the limit of €1.000.000,00 to which item 28.1 refers should be measured according to the total patrimonial value of the real property subject to the right of co-ownership". The TCA concludes that, to the extent of the above mentioned, "the present claim should be dismissed."

2.4. The following facts are considered proven:

i) The claimant is the owner of 1/3 of the real property located on Avenue …, municipality of Lisbon, registered in the respective property matrix under article …. The said real property is not constituted in horizontal property regime, but is constituted by 24 apartments/divisions that are individually leased (see urban property schedule in doc. 50 attached to the arbitral pronouncement petition).

ii) The claimant is one of the 3 heir children of the sole owner B, deceased in 1993. The registration of the acquisition of the real property in favor of the said heirs was made at the Property Registry Office on 30/1/1996 (see urban property schedule in doc. 50 attached to the arbitral pronouncement petition).

iii) The real property in question is composed of basement, ground floor and 8 floors. It has 2 shops, one doorman's apartment and 24 apartments, all susceptible to independent use and individually leased.

iv) On 13/2/2013, the patrimonial value of that real property was updated. In this context, the claimant was notified of Stamp Duty assessments no. 2013 … et seq., under item 28.1 of the TGIS, having as reference the 24 apartments, from which resulted a total amount of tax to be paid of €7.679,20 (see docs. 1 to 24 attached to the arbitral pronouncement petition). The said amount was paid on 6/11/2013. None of the apartments, by itself, has a TPV equal to or greater than €1.000.000,00 (see docs. 1 to 24).

v) On 29/1/2014, the claimant presented an administrative review against the said Stamp Duty assessment acts (see doc. 51 attached to the arbitral pronouncement petition). On 15/4/2014, the claimant was notified of the final decision denying the review (Order of 9/4/2014, notified by Official Letter no. 2351).

vi) The claimant was further notified of 24 new Stamp Duty assessments, dated 17/3/2014, by reference to the aforementioned 24 apartments, based on the year 2013, 1st installment (see docs. 25 to 48 attached to the arbitral pronouncement petition). These were also paid, on 24/4/2014, totaling the amount of €3.839,68.

vii) By request for expansion made by the claimant on 9/12/2014, the claimant requested that the Tribunal "accept[ed] the joinder to the case file of the 24 Stamp Duty assessment acts no. 2014 … et seq., carried out on 17/03/2014, by His Excellency the Director-General of Taxes, relating to the 2nd (second) installment of Stamp Duty, relating to the year 2013, in the total amount of €3.839,52".

viii) The request for expansion is considered admissible, given the relationship of dependence and prejudiciality alleged, and the identity of the tax facts and their grounds. In that measure, the process value changes from €11.518,88 (= €7,679,20 + €3.839,68) to €15.358,40 (= €11.518,88 + €3.839,52).

2.5. There are no unproven facts relevant to the decision of the case.

III – Preliminary Issue: Cumulation of Claims

Given the identity of the tax facts, the competent tribunal for the decision and the factual and legal grounds invoked, nothing prevents, in light of the provisions of art. 104.º of the TCPT and 3.º of the LFATM, the intended cumulation (see vii) and viii) of the proven matter of fact).

IV – Grounds: The Matters of Law

In the present case, there is only one disputed question of law: whether the limit of €1.000.000,00, to which item 28.1 of the TGIS refers, should be measured according to the total patrimonial value of the real property subject to the right of co-ownership [I)]. The answer to be given to this question will have implications for the answer to be given to the request for condemnation of the TCA to payment of indemnification interest [II)].

I) On this specific question, diverse arbitral jurisprudence has already ruled (see, for example, the AD in processes no. 151/2014, of 18/8/2014, and no. 181/2013, of 10/2/2014), in uniform and general terms with which we agree. However, for a better clarification of the position adopted here, reference will be made to the (also recent) AD that was delivered in process no. 194/2014, of 28/7/2014:

"The concept of 'real properties with residential use' used in item 28.1 is not expressly defined in any provision of the Stamp Duty Code nor in the IMPI, the statutory instrument to which no. 2 of art. 67.º of the Stamp Duty Code refers.

In the case of the file, whether one takes into account each of the Properties of the Claimant in vertical ownership or each of the respective divisions endowed with autonomy, it is (not contested) real properties classified as urban and residential in accordance with the criteria established in arts. 2.º, 4.º and 6.º of the IMI Code, applicable by reference of art. 67.º of the Stamp Duty Code.

Thus, only the exact meaning of the segment 'patrimonial value considered for purposes of IMI', contained in the norm of incidence of stamp duty in the body of item 28 of the TGIS: in the case of real properties in full ownership but with floors or divisions susceptible of independent use, the TPV relevant corresponds to the sum of the TPV of the various divisions/floors, as the TCA claims, or what must be taken into account is the TPV of each of the respective floors or autonomous divisions, as the Claimant argues?

[...]. [T]o each real property, in terms conceptually defined by article 2.º of the IMPI, corresponds a single article in the matrix (no. 2 of article 82.º of the IMPI) but, according to no. 3 of art. 12.º of the same Code, referring to the concept of property matrix (registration of the real property, its characterization, location, TPV and ownership), 'each floor or part of real property susceptible of independent use is considered separately in the matricial registration, which discriminates the respective tax patrimonial value', not taking as reference the sum of the patrimonial values attributed to the autonomous parts of the same real property, but the value attributed to each of them individually considered.

As for the assessment of IMI – application of the rate to the taxable base – art. 119.º, no. 1, provides that 'the competent collection document' contains the 'discrimination of the real properties, their parts susceptible of independent use, respective tax patrimonial value and of the collection (...)'.

That is, the rule is the autonomization, the characterization as 'real property' of each part of a building, provided it is functionally and economically independent, susceptible of independent use, in accordance with the concept of real property defined in no. 1 of article 2.º of the IMPI: real property is any fraction (of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or based thereon, with character of permanence) provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as the waters, plantations, buildings or constructions, in the aforementioned circumstances, endowed with economic autonomy [...].

Thus, when no. 4 of article 2.º provides that 'For purposes of this tax, each autonomous fraction, in the horizontal ownership regime, is considered as constituting a real property', it does not properly consecrate an exceptional or special regime for real properties in horizontal ownership.

After all, each building in horizontal ownership (article 92.º of the IMPI) has only one single matricial registration (no. 1), the building being described generically and mentioning the fact that it is in the regime of horizontal ownership (no. 2) and matricial autonomy is realized in the attribution to each of the autonomous fractions, described in detail and individualized, of a capital letter, according to alphabetical order (no. 3). This seems to be the specificity of buildings in horizontal ownership; in other cases, of real properties in vertical or full ownership, the divisions or floors with autonomy but without the status of horizontal ownership, the matrix also consecrates autonomy but evidencing the units with indication of the type of floor/story.

[...]. [Does] not convince the argument [...] that in the case of real properties in full ownership, even with floors or divisions susceptible of independent use, notwithstanding the IMI being assessed relative to each part susceptible of independent use, the tax patrimonial value on which the incidence of Stamp Duty of item no. 28.1 of the General Table depends had to be, as it was, the global patrimonial value of the real properties, and not that of each of its floors or independent parts, because item no. 28.1 of the TGIS is applied in accordance with the rules of the IMPI but 'with the exception of aspects that require due adjustments' [...]. The question is that, precisely, the reason for which the 'adjustments' to the norms of the IMPI, advocated by the TCA, should be accepted requires demonstration.

Everything said, we see no reason for, in the matter of incidence of Stamp Duty provided for in item 28.1 of the TGIS, to give to fractions of real properties in 'vertical ownership', endowed with autonomy, different treatment from that granted to real properties in horizontal ownership, when in any of these situations the IMI is applied to the tax patrimonial value evidenced in the matrix for each of the autonomous units." [End of quotation.]

Indeed – and contrary to what may have occurred in the case analyzed by the AD delivered in proc. no. 4/2014, of 11/7/2014 –, in the case of the present file the independent use of parts or fractions of the real property [and not merely] the holding of the real property in co-ownership was "alleged and proven." It is noted, moreover, that in that AD no. 4/2014 (contrary to the thesis of the then claimant), it was recognized that this proof would have direct implication in the "substantive decision to be made": "[the decision is contrary to the claim of the claimant because, there not being] independent use of part or fractions, it is irrelevant that the real property be held in co-ownership for purposes of the completion of the norm of incidence of table 28 of the TGIS."

Agreeing with the cited reasoning, and applying it to the present case, it is concluded that the respondent has no reason, since it is concluded that: 1) for purposes of assessment of Stamp Duty provided for in item 28.1 of the TGIS, the TPV as determined in accordance with the IMPI should be taken into account, that is, in the specific case of real properties in full ownership with floors or divisions of independent use, in accordance with the individual TPV of each of the floors or divisions of independent use; 2) the assessments for which declaration of illegality is requested by the claimant suffer from the vice of violation of law, given that none of the divisions of independent use of the urban real property now in question has a TPV equal to or greater than €1.000.000,00 (see docs. 1 to 24 attached to the arbitral pronouncement petition), reason for which Stamp Duty under item 28.1 of the TGIS should not be assessed thereon.

The understanding of the claimant regarding the above-mentioned question proving to be well-founded, it becomes unnecessary, given the provisions of art. 124.º of the TCPT, ex vi art. 29.º, no. 1, of the LFATM, to determine the admissibility of the allegation of other vices in the assessments in question.

II) Indemnification interest is due when it is determined, in administrative review or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than legally due (see art. 43.º, no. 1, of the TGL).

It is, therefore, a necessary condition for the awarding of said interest the demonstration of the existence of error attributable to the services. In that sense, see, for example, the following court decisions: "The right to indemnification interest provided for in no. 1 of art. 43.º of the TGL [...] depends on it having been demonstrated in the process that that act is affected by error regarding the factual or legal presuppositions attributable to the TCA." (Decision of the Supreme Administrative Court of 30/5/2012, proc. 410/12); "The right to indemnification interest provided for in no. 1 of article 43.º of the General Tax Law presupposes that the process determines that in the assessment 'there was error attributable to the services', understood as the 'error regarding the factual or legal presuppositions attributable to the Tax Administration'" (Decision of the Supreme Administrative Court of 10/4/2013, proc. 1215/12).

Now, having there been, as is observed in I), error attributable to the services, we conclude for the admissibility of the said request for payment of indemnification interest in favor of the claimant.

A final note to mention that: a) in this process, it is not possible to know claims for indemnification for expenses incurred by the claimant with legal fees, beyond, naturally, the duty to fix responsibility for procedural costs, in accordance with the provisions of article 22.º, no. 4, of the LFATM, which will be done at the end; b) it will not be possible to know of the request for condemnation of the TCA "to no longer assess Stamp Duty acts similar to those now discussed" because this arbitral decision can only relate to the assessment acts that were challenged here.

V – Decision

In light of the above, it is decided:

  • To declare the arbitral pronouncement request well-founded, with the consequent annulment, with all legal effects, of the impugned assessment acts, and the reimbursement of the amounts unduly paid.

  • To declare the request also well-founded to the extent that it concerns the recognition of the right to indemnification interest in favor of the claimant.

The process value is fixed at €15.358,40 (fifteen thousand three hundred and fifty-eight euros and forty cents), in accordance with the provisions of art. 32.º of the ACPA and art. 97.º-A of the TCPT, applicable by virtue of the provisions of art. 29.º, no. 1, paras. a) and b), of the LFATM, and art. 3.º, no. 2, of the Regulation of Costs in Tax Arbitration Processes (RCPAT).

Costs charged to the respondent, in the amount of €918,00, in accordance with Table I of the RCPAT, and in compliance with the provisions of articles 12.º, no. 2, and 22.º, no. 4, both of the LFATM, and the provisions of art. 4.º, no. 4, of the cited Regulation.

Notify.

Lisbon, 27 February 2015.

The Arbitrator,

Miguel Patrício

Text prepared by computer, in accordance with the provisions of art. 131.º, no. 5, of the Civil Procedure Code, applicable by reference of art. 29.º, no. 1, para. e), of the LFATM.

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

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under verba 28.1 of the TGIS and how does it apply to property owners in Portugal?
Stamp Tax under verba 28.1 of the TGIS (General Stamp Tax Table) is an annual tax levied on real property located in Portuguese territory with a patrimonial tax value (valor patrimonial tributário - VPT) equal to or exceeding €1,000,000. The tax applies at rates of 0.7% for properties used for personal habitation and 1% for other properties. For co-owned properties not constituted in horizontal property regime, the key interpretive question is whether the €1,000,000 threshold applies to the entire property or to each co-owner's ideal share. Tax authorities typically apply it to the total property value owned collectively by all co-owners, regardless of individual ownership percentages or internal divisions, though this interpretation is frequently challenged by taxpayers who argue their fractional interests should be considered separately.
Can taxpayers challenge multiple Stamp Tax liquidation acts through a single arbitration request at CAAD?
Yes, taxpayers can challenge multiple Stamp Tax liquidation acts through a single arbitration request at CAAD (Centro de Arbitragem Administrativa). This case demonstrates that the claimant initially challenged 48 assessment acts (24 relating to 2012 and 24 relating to 2013) in one petition filed under Article 2(1)(a) and Article 10(1)(a) of Decree-Law 10/2011 (RJAT - Legal Framework for Tax Arbitration). The procedural rules allow consolidation of related tax acts concerning the same taxpayer, taxable event, and legal issue to ensure procedural economy and avoid contradictory decisions. Furthermore, as shown in this case, claimants can request expansion (ampliação do pedido) of their initial claim under Article 16(c) and (e) of RJAT to include subsequently issued assessment acts involving the same legal question, provided the request is made before the case is deemed ready for decision.
What legal grounds support contesting Imposto do Selo assessments under the RJAT arbitration framework?
Legal grounds for contesting Imposto do Selo assessments under RJAT include: (1) violation of legality principles - arguing the tax authority incorrectly interpreted or applied item 28.1 of TGIS regarding what constitutes the taxable property unit and how the €1,000,000 threshold should be measured; (2) violation of tax equality principles (Article 13 of the Portuguese Constitution) - contending that similar situations are being treated differently or that the tax burden is disproportionate; (3) prevalence of material truth over legal formalism - asserting that the economic reality (individual apartments with separate use and leasing) should prevail over formal legal characterization (single property in co-ownership); (4) improper assessment methodology - challenging whether co-ownership shares or individual property divisions should be considered; and (5) procedural irregularities in the assessment process. Claimants can also seek ancillary relief including annulment of acts, reimbursement, compensatory interest, attorney fees, and injunctive relief preventing future similar assessments.
Are compensatory interest (juros indemnizatórios) available when Stamp Tax liquidations under verba 28.1 are annulled?
Yes, compensatory interest (juros indemnizatórios) are available when Stamp Tax liquidations under verba 28.1 are annulled. Article 43(2) of the General Tax Law (Lei Geral Tributária) and Article 61 of the Tax Procedure and Process Code (Código de Procedimento e de Processo Tributário) establish that when tax amounts are paid and subsequently determined to be undue through annulment of the assessment acts, the taxpayer is entitled to compensatory interest from the date of payment until reimbursement. In this case, the claimant specifically requested such interest, having paid €7,679.20 on November 6, 2013 and €3,839.68 on April 24, 2014. The compensatory interest compensates taxpayers for the unlawful deprivation of use of their funds during the period the illegal tax was collected. The interest rate is established annually by ministerial order and runs automatically upon annulment without requiring separate proof of damages.
What is the procedure for requesting an extension (ampliação do pedido) of claims in CAAD tax arbitration proceedings?
The procedure for requesting expansion (ampliação do pedido) of claims in CAAD tax arbitration follows Article 16(c) and (e) of RJAT. In this case, the claimant filed an expansion request on December 9, 2014, after the initial petition (July 9, 2014) and the Tax Authority's response (October 17, 2014) but before the tribunal issued its order declaring the case ready for decision (February 6, 2015). The expansion request must: (1) be submitted in writing identifying the additional tax acts to be challenged; (2) demonstrate the connection between the new acts and the original claim (same legal issue, taxpayer, and factual basis); (3) include relevant documentation such as the new liquidation acts; and (4) explain how the expansion affects the quantitative scope of the claim. The opposing party may respond to the expansion request. The tribunal evaluates whether the new acts involve the same prejudicial legal question and whether accepting expansion serves judicial economy without prejudicing the opposing party's defense rights. Here, the 24 additional acts from 2013 involved identical legal issues regarding application of verba 28.1, justifying their inclusion.