Process: 488/2015-T

Date: March 11, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision addresses the application of Stamp Tax (Imposto do Selo) under item 28.1 of the General Stamp Tax Table (TGIS) to high-value urban properties. Three co-owners challenged stamp duty assessments totaling €11,062.50 on a Lisbon property comprising 13 residential units with an aggregate taxable patrimonial value of €1,106,250.00 for the 2014 tax year. The case establishes important procedural principles for tax arbitration under Decreto-Lei 10/2011 (RJAT). The arbitral tribunal clarified that taxpayers challenging stamp duty assessments may amend their initial petition to include subsequent installments, as the subject matter is the assessment act itself rather than individual collection documents. The tribunal accepted jurisdiction and confirmed that when challenging tax assessments, the case value must reflect the total amount assessed, not merely installments due at filing. The decision demonstrates that item 28.1 TGIS applies to properties held under total ownership (propriedade total) where multiple autonomous units exist, with the tax calculated on the aggregate taxable value. Property owners can utilize CAAD arbitration to contest these assessments within the statutory deadlines under article 10 of RJAT, providing an alternative to traditional court proceedings for resolving stamp tax disputes on real estate holdings.

Full Decision

ARBITRAL DECISION

Arbitrator Raquel Franco, appointed by the Ethics Council of the Administrative Arbitration Centre (CAAD) to form the sole arbitral tribunal constituted on 12.10.2015, decides as follows:

I. REPORT

  1. On 27.07.2015, the taxpayers A…, B… and C…, with the tax identification numbers…, … and …, respectively, filed an application for the constitution of an arbitral tribunal, in accordance with the combined provisions of articles 2nd and 10th of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), in which the Tax and Customs Authority (hereinafter referred to only as "AT") is the Respondent.

  2. The application for constitution of the arbitral tribunal was accepted by the Illustrious President of CAAD and automatically notified to the AT on 13.08.2015.

  3. In accordance with the provisions of subparagraph a) of paragraph 2 of article 6th and subparagraph b) of paragraph 1 of article 11th of Decree-Law no. 10/2011, of 20 January, as amended by article 228th of Law no. 66-B/2012, of 31 December, the Ethics Council appointed the undersigned as arbitrator of the sole arbitral tribunal, and she communicated acceptance of the appointment within the applicable deadline.

  4. The parties were notified of this appointment on 25.09.2015, and raised no objection thereto.

  5. Thus, in accordance with the provision of subparagraph c) of paragraph 1 of article 11th of Decree-Law no. 10/2011, of 20 January, as amended by article 228th of Law no. 66-B/2012, of 31 December, the sole arbitral tribunal was constituted on 12.10.2015, and the relevant legal procedures were followed.

  6. The claim of the Claimants in the present proceedings is for a declaration of the illegality of the stamp duty assessments issued under item 28.1 of the TGIS and which were assessed on the urban property in absolute ownership located at Avenue …, nos …/…, parish of … (currently…), municipality of Lisbon, registered in the property register of the respective parish under article…, in the total amount of € 11,062.50 and relating to the year 2014.

  7. Through an application filed on 25.11.2015, the Claimants made a request to amend the initial application, under the provisions of article 265, paragraph 2, of the CPC, in order to include therein the second and third instalments of the stamp duty assessed in accordance with item 28.1 relating to the property identified above. In the words of the Claimants:

"3 – When the application for arbitral pronouncement was filed, since the claimants had a deadline for this (article 10, paragraph 1, subparagraph a) of Law no. 10/2011), only the 1st instalment of the assessments relating to the various units was due, and moreover the collection documents relating to the 3rd instalment had not even been received.

4 – Which is now verified at this point.

5 - Therefore the three instalments are now included, all arising from the assessments which are the subject of the challenge contained in the application for arbitral pronouncement

(…)

7 - Thus, the value of the claim becomes € 11,062.50 (Eleven thousand sixty-two euros and fifty cents)."

  1. The initial application of the Claimants correctly referred to the challenge of the stamp duty assessments issued by the AT with reference to the property identified above, although they had only been notified of the collection documents for the 1st instalment. Indeed, as is known, the subject-matter of the challenge is the assessment acts themselves and not each one of the instalments collected. It is therefore verified that the initial application was correctly formulated and that, in light of that application, the Claimants were not obliged to request the amendment thereof as they did through the application filed on 25.11.2015.

  2. However, it transpires that the initial value of the case (or the economic utility of the claim) was not correctly stated, since if the subject-matter is the assessments, the value of the case should correspond to the total of the assessments challenged and not to the total of the values collected through the collection documents already issued at the time the application for arbitral pronouncement was filed. In fact, what the Claimants intend to obtain is the annulment of the assessments in their entirety and not merely the instalments already due (which could never be annulled independently of the annulment of the assessments, since they are not autonomous acts). This error in the indication of the case value was corrected by the Claimants through the application of 25.11.2015, in which they requested that the value be changed to € 11,062.50. The Respondent did not comment on this aspect of the application for arbitral pronouncement in the Reply it filed, nor did it do so later when it was notified of the application of 25.11.2015, which has the effect of acceptance of the value attributed to the case by the Claimants, in accordance with the provisions of article 305, paragraph 4, of the CPC, applicable by virtue of article 29, paragraph 1, subparagraph e) of the RJAT. Thus, the value of the claim after correction is accepted, which is therefore € 11,062.50.

II. PRELIMINARY ASSESSMENT

  1. The Tribunal is competent and properly constituted, in accordance with articles 2, paragraph 1, subparagraph a), 5th and 6th, all of the RJAT.

  2. The parties have legal personality and capacity, are legitimately interested and are properly represented, in accordance with articles 4th and 10th of the RJAT and article 1st of Ordinance no. 112-A/2011, of 22 March.

  3. The proceedings do not suffer from defects that would invalidate them.

III. FACTS

III.1. Established Facts

Before entering into the examination of questions of law, it is necessary to present the factual matters relevant to their understanding and determination, which, having examined the documentary evidence attached to the file and having regard to the facts alleged, is established as follows:

  • The Claimants are owners and legitimate proprietors of the urban property in absolute ownership located at Avenue …, nos …/…, parish of … (currently …), municipality of Lisbon, registered in the property register of the respective parish under article….

  • The property in question consists of thirteen units capable of independent use, the value of which was determined separately.

  • The taxable patrimonial values of each of the units capable of independent use are as follows:

  • Right basement, with a taxable patrimonial value of € 27,980.00;

  • Right ground floor, with a taxable patrimonial value of € 97,560.00;

  • Left ground floor, with a taxable patrimonial value of € 95,130.00;

  • 1st right floor, with a taxable patrimonial value of € 100,110.00;

  • 1st left floor, with a taxable patrimonial value of € 100,110.00;

  • 2nd right floor, with a taxable patrimonial value of € 100,110.00;

  • 2nd left floor, with a taxable patrimonial value of € 100,110.00;

  • 3rd right floor, with a taxable patrimonial value of € 100,110.00;

  • 3rd left floor, with a taxable patrimonial value of € 100,110.00;

  • 4th right floor, with a taxable patrimonial value of € 100,490.00;

  • 4th left floor, with a taxable patrimonial value of € 100,490.00;

  • Right mansard (AF), with a taxable patrimonial value of € 41,970.00;

  • Left mansard (AF), with a taxable patrimonial value of € 41,970.00.

  • The total taxable patrimonial values of the units capable of independent use is € 1,106,250.00.

  • The 13 units capable of independent use that constitute the property have, in accordance with their respective property deeds, residential use.

  • The overall taxable patrimonial value of these 13 units amounts to € 1,262,406.00.

  • In the year 2015, with respect to the year 2014, the AT issued the stamp duty assessments challenged, in the total amount of € 11,062.50.

III.2. Unestablished Facts

There are no facts with relevance to the case that have been considered unestablished.

IV. ISSUE FOR DECISION

The essential question at issue in the present proceedings is to determine, with reference to an urban property not constituted in horizontal property regime, composed of various areas with independent use, with residential use, whether the TPV relevant for purposes of taxation under the stamp duty regime in item 28.1 of the TGIS should be that corresponding to the sum of the taxable patrimonial value attributed to the different parts or independent units, or whether, on the contrary, the TPV attributed to each unit or division with independent use should be taken into account for purposes of the incidence of stamp duty under item 28.1 of the TGIS.

V. LEGAL GROUNDS

Item 28 of the TGIS in force in 2014 provided as follows:

"28. Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 - on the taxable patrimonial value used for purposes of IMI:

28.1 For each residential property or land for construction whose construction, authorized or provided, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code – 1%

28.2 – For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a tax regime clearly more favorable, listed in accordance with an ordinance approved by the Minister of Finance – 7.5%."

In the present proceedings it is necessary to determine whether the TPV relevant as a criterion for the incidence of stamp duty in accordance with item 28.1 of the TGIS is that corresponding to the sum of the taxable patrimonial value attributed to the various units capable of independent use (global TPV) or, rather, the TPV attributed to each one of those units.

This question has already been examined in various tax arbitration proceedings, and there is no reason to adopt a different understanding from that adopted in decisions handed down previously. Thus:

In accordance with paragraph 2 of article 67 of the Stamp Tax Code, as to "matters not regulated in the present code relating to item 28 of the General Table, the CIMI is applied subsidiarily." Since the rule of incidence of item 28.1 of the TGIS refers to urban properties, it is important to seek the concept of urban property in the CIMI.

The CIMI establishes, in article 2, paragraph 1, the concept of property. It defines it as "any fraction of territory, encompassing water, plantations, buildings and constructions of any nature incorporated or resting in it, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as water, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, although situated on a fraction of territory that constitutes an integral part of other assets or does not have a property nature."

Article 4 of the CIMI establishes that urban properties are "all those that should not be classified as rural, without prejudice to the provisions of the following article."

In turn, article 6 of the same Code classifies the various types of urban properties, distinguishing them, in paragraph 1, into four subcategories: "a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others." Paragraph 2 states the criterion used for this distinction, defining that "Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, that have each of these purposes as their normal destination."

With regard to the concrete question which is the subject of the present decision, it is important to heed article 12, paragraph 3, of the CIMI, in accordance with which "each floor or part of a property capable of independent use is considered separately in the matricial registration, which also specifies the respective taxable patrimonial value."

Finally, in accordance with article 119, paragraph 1 of the CIMI, "The services of the Directorate-General of Taxes send to each taxpayer, before the end of the month prior to payment, the relevant collection document, with specification of the properties, their parts capable of independent use, respective taxable patrimonial value and the tax payable to each municipality where the properties are located."

As acknowledged by legal doctrine, the fiscal concept of property differs from the civil law concept of property, contrary to what the Respondent maintains, and that, "For tax purposes, paragraph 1 of this article [2nd of the CIMI] provides for the existence of three requirements necessary for there to be the concept of property, namely, the physical structure, the property nature and the economic value."

(Cf. J. Silvério Mateus and L. Corvelo de Freitas, "Real Property Taxes, Stamp Duty, Annotated and Commented", Engifisco, 1st edition, 2005, p. 101).

Thus, "the physical element is defined by the reference to 'any fraction of territory', encompassing water, plantations and constructions of any nature incorporated or resting in it with a character of permanence. On the legal plane, relevance is given to the property nature. The good, in the physical sense, must be susceptible of integration into the assets of a natural or legal person. (…) The requirement of economic value is naturally associated with the requirement of property nature, resulting therefrom the susceptibility to generate income or other type of utilities for its holder." (op.cit.).

In the concrete case, it appears to us that all three requirements mentioned are met, in that the parts or units capable of independent use which are the subject of the assessment acts at issue have physical correspondence with reality, form part of the assets of the Claimants and possess an economic value which, at the very least, derives from the TPV that was attributed to them by the valuation carried out by the AT.

Thus, it appears to us that the parts or units capable of independent use, meeting all the requirements to be classified as a "property", in economic, physical and property terms, should be considered autonomously for purposes of the incidence of item 28.1 of the TGIS.

Furthermore, in the rule of incidence set out in item 28.1 of the TGIS, the legislator did not deem it relevant to distinguish between properties in horizontal property regime and properties in vertical property regime. And this, in our understanding, is because what is relevant, in the final analysis, is the economic destination of the property, as also follows from article 6 of the CIMI, in light of the constitutional principles embodied in articles 103, paragraph 1 and 104, paragraph 3 of the Portuguese Constitution. In fact, in terms of economic substance, there is no difference between a building in horizontal property regime and a building in vertical property regime or absolute ownership composed of parts or units capable of independent use, justifying therefore, in terms of rules of incidence – and in particular the rule contained in item 28.1 of the TGIS – the equal treatment of these two situations. Moreover, the fiscal legislator also determines this equal treatment, in article 119 of the CIMI, when it establishes that the tax should be assessed individually on each part or unit capable of independent use, taking into account the TPV of each part or unit capable of independent use, considered individually.

It follows from the foregoing that the rule contained in item 28.1 of the TGIS should be applied indistinctly, both to urban residential properties constituted in horizontal property regime and to those in absolute or vertical ownership, and the tax should be assessed on the TPV attributed by the Respondent, through general valuation, to each one of the parts or units capable of independent use.

In light of the foregoing, and having regard to the fact that none of the parts or units capable of independent use which are the subject of the assessment acts challenged has a taxable patrimonial value equal to or greater than € 1,000,000.00, as was demonstrated in the present proceedings, it is concluded that the Claimants' claim should be upheld, and it is determined that the assessment acts challenged are illegal, due to error as to the factual and legal premises and violation of article 1, paragraph 1 of the Stamp Tax Code and item 28.1 of the TGIS, and the said acts should be annulled, with all legal consequences.

VI. DECISION

In accordance with what is set out above, it is decided to uphold the application for arbitral pronouncement and, consequently, to declare the illegality of the stamp duty assessments challenged, with the legal consequences due.

Value: In accordance with the provisions of article 97-A, paragraph 1, subparagraph a), of the Tax Procedure Code and article 3, paragraph 2 of the Costs Regulation in Tax Arbitration Proceedings, the value of the case is fixed at € 11,062.50.

Costs: In accordance with the provisions of article 22, paragraph 4, of the RJAT and in accordance with Table I annexed to the Costs Regulation in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00, to be paid by the Respondent in accordance with articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and article 4, paragraph 4, of the said Regulation.

Let it be recorded and notified.

Lisbon, 11 March 2016

The Arbitrator,

Raquel Franco

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 high-value properties in Portugal?
Stamp Tax under Verba 28.1 of the TGIS (General Stamp Tax Table) is an annual tax imposed on high-value urban properties in Portugal. It applies to properties held under total ownership (propriedade total) when the aggregate taxable patrimonial value exceeds certain statutory thresholds. In this case, the tax was levied on a property comprising 13 residential units with a total taxable value of €1,106,250.00, resulting in an annual stamp duty of €11,062.50 for 2014. The tax is calculated based on the sum of the taxable patrimonial values (valor patrimonial tributário) of all autonomous units that comprise the property, even when these units are individually assessed for property tax purposes.
Can property owners challenge Stamp Tax assessments on urban properties through tax arbitration at CAAD?
Yes, property owners can challenge Stamp Tax assessments on urban properties through administrative tax arbitration at CAAD (Centro de Arbitragem Administrativa). Under Decreto-Lei 10/2011 (RJAT - Legal Regime of Arbitration in Tax Matters), taxpayers have the right to request arbitration as an alternative to judicial courts. The arbitration request must be filed within the statutory deadline specified in article 10, paragraph 1, subparagraph a) of the RJAT. CAAD provides a faster, specialized forum for resolving tax disputes, with the arbitral tribunal having full jurisdiction to examine the legality of stamp duty assessments issued under item 28.1 of the TGIS and to declare them illegal if warranted.
How is the taxable value determined for properties held under total ownership (propriedade total) with multiple units?
For properties held under total ownership (propriedade total) with multiple units, the taxable value is determined by aggregating the individual taxable patrimonial values (valor patrimonial tributário - VPT) of each autonomous unit capable of independent use. In this decision, the property consisted of 13 residential units (apartments and commercial spaces) each with separately determined VPT values ranging from €27,980.00 to €100,490.00. The total taxable value of €1,106,250.00 was calculated by summing all 13 unit values. This aggregate amount then serves as the basis for calculating the applicable Stamp Tax rate under Verba 28.1 of the TGIS, even though each unit has its own property registry entry.
What is the procedure for requesting arbitration under Decreto-Lei 10/2011 (RJAT) to dispute Stamp Tax liquidations?
To request arbitration under Decreto-Lei 10/2011 (RJAT) to dispute Stamp Tax liquidations, taxpayers must file a petition (pedido de constituição do tribunal arbitral) with CAAD within the statutory deadline. The application must identify the challenged tax assessments, state the grounds for illegality, and indicate the correct case value corresponding to the total amount assessed. The petition is accepted by CAAD's President, notified to the Tax Authority (AT), and an arbitrator is appointed by the Ethics Council. The arbitral tribunal is constituted once the arbitrator accepts and parties are notified without objection. The procedure follows RJAT provisions with subsidiary application of the Civil Procedure Code (CPC), providing a streamlined alternative to traditional court litigation for tax disputes.
Is it possible to extend an arbitration claim to include additional tax installments after the initial petition has been filed?
Yes, it is possible to extend an arbitration claim to include additional tax installments after filing the initial petition. This decision clarifies that when challenging stamp duty assessments, the subject matter is the assessment act itself, not individual collection documents or installments. Therefore, taxpayers who initially referenced only the first installment can amend their petition under article 265, paragraph 2 of the CPC to include subsequent installments (second and third) as they become due. However, the tribunal noted that such amendment is technically unnecessary since the original challenge to the assessment already encompasses all installments. The case value must be corrected to reflect the total assessment amount (€11,062.50), not just installments due at filing, which the Tax Authority accepted by not objecting.