Process: 492/2015-T

Date: April 13, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision (Process 492/2015-T) addresses the application of Stamp Tax under Verba 28.1 of TGIS to a property held in total ownership (propriedade total) with independently usable units. A limited liability partnership challenged the 2014 assessment of €21,612.96 levied on a building worth €2,137,555.08 comprising 20 independent apartments valued individually between €53,788.03 and €112,958.07. The central legal question concerns whether Stamp Tax at 1% applies based on the global property value or individual unit values when the property is not constituted under horizontal property regime. The claimant argued that taxing based on aggregate value violates constitutional principles of equality and contributive capacity, since each unit represents independent economic value similar to horizontal property fractions, and none individually exceeds the €1,000,000 threshold triggering Verba 28. The Tax Authority contended that Article 2(4) of CIMI distinguishes horizontal property fractions from properties in total ownership with independent divisions, requiring application of the global patrimonial value for tax assessment purposes. This distinction is critical because Verba 28.1 TGIS, introduced by Law 55-A/2012, targets luxury real estate manifestations of wealth. The case raises fundamental questions about whether legal form should prevail over economic substance in stamp tax law, and whether families occupying modest apartments should bear tax burdens designed for high-value luxury properties merely due to collective ownership structures. The decision has significant implications for civil partnerships and similar entities holding multi-unit properties outside horizontal property regimes.

Full Decision

ARBITRAL DECISION

I – REPORT

  1. On 28 July 2015, A…, Lda, taxpayer nº…, with registered office at …, nº…, came before this tribunal, invoking the provisions of article 99, paragraphs a) and c) of the CPPT, by referral from article 10, nº 2, paragraph c) of article 2 of Decree-Law nº 10/2011 of 20 January, to submit a Request for Arbitral Pronouncement regarding the legality of the assessment of Stamp Duty (IS) for the year 2014 levied on the property located at the same address, in the total amount of €21,612.96 (twenty-one thousand six hundred and twelve euros and ninety-six cents).

  2. The Claimant opted not to appoint an arbitrator, and pursuant to nº 1 of article 6 of the RJAT, by decision of the President of the Deontological Council, the undersigned was appointed as sole arbitrator, who accepted the position within the legally prescribed period.

  3. The arbitral tribunal was constituted on 13 October 2015.

  4. On 9 November 2015, the Tax and Customs Authority (AT or Respondent) submitted its Reply and attached the administrative file, raising a plea and preliminary issues.

  5. The Parties were notified to pronounce themselves on the waiver of the meeting provided for in article 18 of the RJAT as well as on the submission of written pleadings, and only the Respondent responded agreeing to waive the meeting and pleadings.

  6. Having received no response, subsequently, to orders of the arbitral tribunal regarding possible completion of the Request and, further, for optional pleadings, 13 April 2016 was set as the date for the rendering of final decision.

  7. The Request for Pronouncement

The Claimant maintains, in summary:

  • As a civil partnership in the form of a limited liability partnership which, according to its bylaws, has as its object "to own urban properties in order, in principle, to satisfy the housing needs of the partners and to perform all acts concerning the exercise of its property rights", it is the owner of the urban property located at …, nº…, in Lisbon.

  • Currently the property in question is already constituted in horizontal property ownership, but at the time of the assessment in question in these proceedings, it was, according to the respective property register, a "property in full ownership, with floors or divisions capable of independent use", with each partner having housing rights with respect to each of the 20 apartments of independent use that make up the property.

  • On 20 March 2015, the AT assessed item 28.1 of the TGIS at the rate of 1% with reference to the year 2014, having issued to date 40 collection documents corresponding to the 1st and 2nd instalments, individualizing each of the apartments of independent use, with patrimonial values between €53,788.03 and €112,958.07 but taking into account the global value of the property in the amount of €2,137,555.08.

  • The first and second instalments, payable respectively in April and July 2015, have already been paid, and the third will be paid in due course.

  • The autonomous economic units in question in these proceedings, with VPT between €53,788.03 and €112,958.07 do not fall within the objectives of Law nº 55-A/2012 which, by introducing item 28 of the TGIS applying the rate of 1% to properties of value equal to or greater than €1,000,000.00, intended to tax a manifestation of wealth, luxury goods.

  • On the contrary, the families living in the property experienced enormous difficulty in paying the tax burden that was imposed on them over the years 2012, 2013 and 2014.

  • Taking into account article 67, nº 2, of the CIS and article 2, nº 1 and 4, of the CIMI, the application to the fractions of the rate provided for in item 28 of the TGIS for properties with residential use of VPT greater than €1,000,000.00 is abusive and violatory of contributive capacity, because each of the floors or parts of independent use is characterized as having its own economic value, and despite a different legal form from horizontal property ownership the economic realities are similar, making it impossible, for purposes of taxation, to distinguish where the law does not distinguish.

  • On the other hand, as regards patrimonial value, account should be taken of art. 67, nº 2 of the Stamp Duty Code and art. 12 of the CIMI, this article providing that each floor or part of a property capable of independent use is considered separately in the registration record, with the calculation made for each floor or part of a property capable of independent use, as results from the analysis of the property register.

  • The application made of article 28 of the TGIS violates the principles of equality and contributive capacity (articles 13 and 104 of the CRP), and a person cannot be treated differently according to the legal form that regulates the property in which their ownership is situated, nor can persons in equal situations be taxed differently.

  • Properties independent with values between €53,788.03 and €112,958.07 cannot be taxed as luxury properties, as has moreover already been decided regarding this property in proceedings 165/2014T and 752/2014T and, regarding similar situations, in other proceedings.

  • Given the non-existence of a legal prerequisite for the incidence of Stamp Duty due to erroneous qualification and quantification of the tax facts, this is a situation susceptible to challenge of the tax act, the challenge should be considered well-founded and proven and the AT condemned to reimburse the amounts already paid (1st and 2nd instalments) and to pay (3rd instalment), as well as compensatory interest.

  1. The Reply

The Respondent replied, in summary:

By way of a plea:

  • The tribunal is materially incompetent because the Claimant challenges only the collection notices for the 1st and 2nd instalment of the tax relating to the property, such that the arbitral tribunal must be considered incompetent to assess the legality of only one instalment of the assessment act, as has already been decided in various proceedings at the CAAD.

Preliminary issues:

  • The Claimant did not identify the collection notices relating to the 1st instalment, but only those relating to the 2nd instalment, which limits the Request to these, nor did it prove having made payment of the instalments, such that the AT can never be condemned to pay compensatory interest.

By way of challenge to the merits:

  • The Claimant as the full owner of a property of VPT greater than €1,000,000.00 was notified to pay Stamp Duty provided for in item 28 of the TGIS, added by Law nº 55-A/2012 of 29/10, with the amendment made by Law nº 83-C/2013 of 31/12, in 3 instalments, pursuant to articles 44, nº 5, of the CIS and 120 of the CIMI.

a) The concept of property is defined in article 2 of the CIMI, whose nº 4 considers as property the autonomous fractions under the horizontal property ownership regime, a situation different from that of a property in full ownership with floors or divisions capable of independent use, in which case the VP to be considered is the global value of the property.

b) Art. 12 of the CIMI establishes the concept of property matrix, and its nº 3 concerns exclusively the registration of matricial data.

c) The assessment of IS is carried out in accordance with the CIMI but, given the necessary adaptations, what results from the wording of item 28.1 in question is that the legislator intended to tax properties as the sole legal-tax reality, taking into account the residential use and the patrimonial value of the urban property registered in the matrix being equal to or greater than €1,000,000.00.

d) Given the matricial registration - property in full ownership, composed of parts capable of independent use – the AT assessed the tax in accordance with art. 23, nº 7 of the CIS and applied, with the necessary adaptations, the rules of the CIMI, taking into account, concretely and in accordance with art. 113, nº 1, the patrimonial values of the properties in relation to the taxpayers listed in the matrices, without violation of law.

e) The principles of legality, tax equality and contributive capacity were not violated because there is no discrimination in the taxation of different realities – horizontal property ownership and vertical property ownership are differentiated legal institutions, justifying the benefit of the more evolved legal institution of horizontal property ownership, without this discrimination being arbitrary.

f) The matricial registration of each part capable of independent use is not autonomous, by matrix, but rather consists of a description in the matrix of the property as a whole, such that the assessment of the tax on item 28 of the TGIS is based on the total patrimonial value of the urban property and not on each of the parts that compose it.

g) Only the constitution of horizontal property ownership determines the division/partition of full ownership and the independence or autonomy of each of the fractions that constitute it for all legal purposes (art. 4, nº 2, of the CIMI and 1414 and following of the CC), whereas a property in full ownership constitutes, for all purposes, a single legal-tax reality.

h) The taxation under IS obeys the criterion of suitability, in that it aims at the taxation of wealth embodied in the ownership of property of high value, appearing in a context of economic crisis that cannot be ignored, and seeking maximum effectiveness as to the objective to be achieved, with minimum harm to other interests considered relevant.

i) This mechanism for obtaining revenue would only be open to censure under the principle of proportionality if it resulted in being manifestly indefensible, and this is not the case because it applies indiscriminately to all holders of properties with residential use of value greater than €1,000,000.00.

j) The notifications made for payment of tax do not violate any legal or constitutional principle, the collection notices are legal and valid and the Request for arbitral pronouncement should be considered unfounded and the Respondent absolved of the Request, in the event that the plea is not considered well-founded.

  1. Questions to be decided

The object of the Request consists in knowing whether the scope of incidence of Stamp Duty provided for in Item 28 of the TGIS includes urban properties not constituted in horizontal property ownership but integrated by floors or divisions capable of independent use with residential use, when the patrimonial value attributed to each of these distinct parts is less than the value of €1,000,000.00, although the aggregate of the independent units dedicated to residential use reaches a total of VPT equal to or greater than this amount.

The Respondent also raised the question of the incompetence of the tribunal and the insufficiency of elements regarding the identification of the collection notices, questions to be assessed and decided immediately after the establishment of the facts, in accordance with the provisions of art. 608, nº 1 of the CPC applicable ex vi art. 29, nº1, e) of the RJAT.

  1. Sanitation

The parties have legal personality and capacity and have standing pursuant to articles 4 and 10, nº 2, of the Legal Regime for Arbitration in Tax Matters (RJAT) and article 1 of Ordinance nº 112-A/2011 of 22 March, and the proceeding is not affected by any defect, such that the Tribunal proceeds to decide.

II GROUNDS

  1. Proven facts

The following is considered proven:

11.1. The Claimant, A…, Lda., is a civil partnership in the form of a limited liability partnership, whose bylaws provide as its object "to own urban properties in order, in principle, to satisfy the housing needs of the partners and to perform all acts concerning the exercise of its property rights" (Bylaws, Doc. 1 attached with the Request, the content of which is deemed reproduced).

11.2. In 2014, the Claimant was the owner of the urban property located at …, nº…, in Lisbon, registered in the property matrix under number … of the parish of Alvalade and described in the property register as "low-rent property, composed of ground floor and 10 floors, with the front ground floor serving as the porter's lodge with 3 divisions" (article 2 of the Request for Pronouncement, article 8 of the Reply and information from the AT, dated 5 January 2014, document nº 2 attached with the Request, the content of which is deemed reproduced).

11.3. The property which is the subject of these proceedings is composed of twenty (20) divisions or parts capable of independent use (article 3 of the Request and property register, doc. nº 11 attached with the Request).

11.4. The sum of the patrimonial values of the twenty divisions referred to in the previous number is €2,137,555.08 (articles 3 and 4 of the Request and information provided in the administrative appeal, p. 4, and property register, doc. nº 11 attached with the Request).

11.5. The patrimonial tax values of each of the divisions with independent use and dedicated to residential use, determined in the year 2012 in accordance with the CIMI, are: €53,788.03 (U-…-10thRt); €53,788.03 (U-…-10thLt); €112,958.07 (U-…-1stRt.); €112,958.07 (U-…-1stLt.); €112,141.51 (U-…-2Rt); €112,141.51 (U-…-2Lt); €112,958.07 (U-…-3Rt); €112,958.07 (U-…-3Lt); €112,141.51 (U-…-4Rt) and €112,141.51 (U-…-4Lt); €112,958.07 (U-…-5thRt.); €112,958.07 (U-…-5thLt.); €112,958.07 (U-…-6Rt); €112,958.07 (U-…-6thLt.); €112,958.07 (U-…-7thRt.); €112,958.07 (U-…-7thLt.); €112,958.07 (U-…-8thRt.); €112,958.07 (U-…-8thLt.); €112,958.07 (U-…-9thRt.); €112,958.07 (U-…-9thLt.) (property register and collection documents, attached with the Request, and PA, fls. 22 to 24).

11.6. The divisions referred to in the previous number were subject to assessments of Stamp Duty for the year 2014, numbers 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, levied on 10thRt, 10thLt, 1stRt, 1stLt., 2Rt; 2Lt; 3Rt; 3Lt; 4Rt, 4Lt, 5thRt, 5thLt, 6Rt, 6thLt, 7thRt, 7thLt, 8thRt, 8thLt, 9thRt, 9thLt, respectively (PA, fls. 22 and 23).

11.7. The assessments of Stamp Duty were made on 20 March 2015, of Stamp Duty, payable in three instalments, in accordance with art. 120 of the CIMI, and contained the indication, as grounds, of item 28.1 of the General Table of Stamp Duty, as well as the application of the rate of 1% to the VPT value of each of the divisions, resulting in tax collections in the amounts, respectively, of €537.88 (U-…-10thRt and 10thRt); €1,129.58 (U-…1stRt and 1st Lt.), €1,121.42 (U-…2ndRt and 2nd Lt.); €1,129.58 (U-…3rdRt and 3rd Lt.), €1,121.42 (U-…4thRt); €1,129.58 (U-…-4thLt); €1,129.58 (U-…5thRt and 5th Lt.), €1,121.42 (U-…6thRt); €1,129.58 (U-…-6thLt); €1,129.58 (U-…7thRt and 7thLt), €1,129.58 (U-…8thRt and 8thLt), €1,129.58 (U-…9thRt and 9thLt) (Collection documents attached with the Request and PA, fls. 22 and 23).

11.8. Payment in three instalments derived from the amount of the collections, each instalment being in the amount of €537.88 (U-…-10thRt and 10thRt); €376.52 (U-…1stRt and 1st Lt.), €373.80 (U-…2ndRt and 2nd Lt.); €376.52 (U-…3rdRt and 3rd Lt.), €373.80 (U-…4thRt); €376.52 (U-…-4thLt.); €376.52 (U-…5thRt and 5th Lt.), €373.80 (U-…6thRt.); €376.52 (U-…-6thLt); €376.52 (U-…7thRt and 7thLt), €376.52 (U-…8thRt and 8thLt), €376.52 (U-…9thRt and 9thLt) (Collection documents attached to the file with the Request).

11.9. The collection documents indicate as patrimonial value of the property subject to tax €2,137,555.08 corresponding to the total value of the twenty divisions capable of independent use dedicated to residential use (Collection documents attached with the Request).

11.10. The request for arbitral pronouncement was submitted to the CAAD on 28 July 2015.

11.11. As of 1 September 2015, the collection notices relating to the 1st and 2nd instalments had, with the exception of two (2015… and 2015…), been paid within the voluntary payment period, on 24 April and 30 July 2015, respectively (PA, fls. 24).

  1. Unproven facts

There are no material unproven facts for the decision of the case in these proceedings.

  1. Grounds for the evidence

The evidence established was based on the documents submitted by the Parties - Request for Pronouncement and Reply - as well as on the documents attached with the Request and on the administrative file attached by the Respondent.

  1. Legal assessment

14.1. Plea and preliminary issues

The Respondent maintains that, given the value of the case and all documents attached to it, the Claimant challenges exclusively the collection notices that constitute the 1st and 2nd instalments of the tax relating to the property, such that the Arbitral Tribunal is materially incompetent to know of the Request since art. 2 of the RJAT only attributes to it competence to assess the legality of a tax act and not of an instalment thereof.

Moreover, the Respondent considers that the Request should even be restricted to the 2nd instalment of the tax because the Claimant only attaches collection notices relating to this and not to the 1st instalment. As well as it would have no right to payment of compensatory interest for not having attached proof of having made payment of the 1st and 2nd instalments of the tax.

Let us see, and even beginning with the so-called preliminary issues because they characterize the matter of fact.

Recall that from the Request and the established facts it results that the Claimant invokes the stamp duty assessment made by the AT dated 20 March 2015, under item 28.1 of the TGIS, at the rate of 1% and with reference to the year 2014, relating to a global property value in the amount of €2,137,555.08. It stated that 40 collection documents had already been issued corresponding to the 1st and 2nd instalments, individualizing each of the apartments of independent use, with patrimonial values between €53,788.03 and €112,958.07. And, invoking the non-existence of a legal prerequisite for the incidence of Stamp Duty due to erroneous qualification and quantification of the tax facts, it ended by requesting that the challenge be considered well-founded and proven and, consequently, the AT condemned to reimburse the amounts already paid (1st and 2nd instalments) and to pay (3rd instalment), as well as compensatory interest. As for the value of the case, the amount of €21,612.96 (twenty-one thousand six hundred and twelve euros and ninety-six cents) is indicated, which does not correspond solely to the sum of the 1st and 2nd instalment but to the total of all instalments.

As for payment, despite the Claimant not having presented proof stated that it had done so and the Respondent itself in the administrative file sent to this tribunal, in accordance with the provisions of the RJAT, proved that it had been done, almost entirely, by September 2015, indicating that the collection notices relating to the 1st and 2nd instalments had, with the exception of two (2015… and 2015…), been paid within the voluntary payment period, on 24 April and 30 July 2015, respectively (PA, fls. 24). As for the 3rd instalment it would only be payable in November.

In any case, if the illegality of an assessment is recognized, the taxpayer has the right, in addition to the reimbursement of the amounts improperly paid (and whose amount the AT cannot be unaware of...), to compensatory interest pursuant to the legal provisions.

As for the "incompetence of the tribunal" raised by the Respondent, it is unfounded: beyond any other considerations that could be made about the possibility of challenging only part of the instalments, it is verified, having regard to the tenor of the Request (cf. Request, articles 8, 10 and 11 and point 2 of the conclusions), that the Claimant requests the assessment of the challenge to the assessment and not only of the first two instalments, stating rather that the collection notices for these have already been issued and paid.

14.2. Item 28 of the General Table of Stamp Duty (TGIS)

14.2.1. Regime approved by Law nº 55-A/2012 of 29 October

The fundamental legal issue, which is controversial in these proceedings, consists in knowing whether in the case of properties in full ownership, with floors or divisions of independent use but not constituted under the horizontal property ownership regime, the VPT to be considered for purposes of incidence of Stamp Duty provided for in item 28.1 of the TGIS should correspond to the VPT of each floor or division with residential use and independent use or to the sum of the VPT corresponding to the floors or divisions of independent use with residential use.

That is, it must be decided whether the VPT relevant as a criterion for the incidence of the tax is that corresponding to the aggregate of the patrimonial value attributed to the different parts or floors (global VPT) or, rather, the VPT attributed to each of the parts or residential floors individually considered.

This question has already been assessed in many proceedings within the scope of Tax Arbitration[1], with recording of great concordance regarding the conclusion resulting from the decisions rendered[2].

Item 28 of the General Table of Stamp Duty, annexed to the Stamp Duty Code (CIS), was added by article 4 of Law nº 55-A/2012 of 29 October, with the following content:

"28 – Ownership, usufruct or surface right of urban properties whose patrimonial value contained in the matrix, pursuant to the Code of Municipal Property Tax (CIMI), is equal to or greater than €1,000,000 – on the patrimonial value for purposes of IMI:

28-1 – For property with residential use – 1%;

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

According to what results from the amendments to the Stamp Duty Code introduced by article 3 of Law nº 55-A/2012 of 29/10, the Stamp Duty provided for in item 28 of the TGIS is based on a legal situation (nº 1 of article 1 and nº 4 of article 2 of the CIS), in which the respective taxpayers are those referred to in article 8 of the CIMI (nº 4 of art. 2 of the CIS), to whom the burden of the tax falls (paragraph u) of nº 3 of article 3 of the CIS).

The CIS, as amended by Law nº 55-A/2012, whether in article 4, nº 6 ("In the situations provided for in item 28 of the General Table, the tax is due whenever the properties are located in Portuguese territory"), or in article 23, nº 7 ("Where it is a question of tax due for the situations provided for in item nº 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI"), in conjunction with art. 1 of the CIMI, considers the property itself as the tax fact, provided that it reaches the value provided for in item 28 of the General Table of Stamp Duty.

The provision of Law nº 55-A/2012 of 29 October, as to the new item 28 of the General Table of Stamp Duty, came into force on the day following the publication of the law, that is, 30 October 2012[3].

14.2.2. The concept of property used in item 28 of the TGIS

The concept of "property with residential use" used in item 28.1 is not expressly defined in any provision of the CIS or in the CIMI, the legislation to which nº 2 of art. 67 of the CIS refers.

In the case of these proceedings, the property in full ownership (building with the … of … in Lisbon) is composed of twenty (20) divisions or parts capable of independent use intended for residential purposes. The patrimonial tax values of these twenty divisions dedicated to residential use range between €53,788.03 and €112,958.07, totaling the amount of €2,137,555.08.

The question is the exact meaning of the segment "patrimonial value considered for purposes of IMI", contained in the rule of incidence of stamp duty in the body of item 28 of the TGIS: in the case of properties in full ownership but with floors or divisions capable of independent use, with residential use, does the relevant VPT correspond to the sum of the VPT of the various divisions/floors with residential use, considered as a single property, as the AT contends, or is what must be taken into account the VPT of each of the respective autonomous floors or divisions with residential use, as the Claimant contends?

Now the referred segment (patrimonial value considered for purposes of IMI) is integrated in a text that defines as the object of incidence of stamp duty the "Ownership, usufruct or surface right of urban properties whose patrimonial value contained in the matrix, pursuant to the Code of Municipal Property Tax (CIMI), is equal to or greater than €1,000,000 - (...)" (emphasis ours).

As has been repeatedly invoked and admitted, the IMI Code establishes, both as to the matricial registration and discrimination of the respective patrimonial value and as to the assessment of the tax, the autonomization of the parts of urban property capable of independent use and the segregation/individualization of the VPT relating to each floor or part of property capable of independent use[4].

Thus, each property corresponds to a unique article in the matrix (nº 2 of article 82 of the CIMI) but, pursuant to nº 3 of art. 12 of the same Code, relating to the concept of property matrix (registration of the property, its characterization, location, VPT and ownership), "each floor or part of property capable of independent use is considered separately in the matricial registration, which discriminates its respective patrimonial value", not taking as reference the aggregate of patrimonial values attributed to the autonomous parts of the same property but the value attributed to each of them individually considered.

As to the assessment of IMI - application of the rate to the taxable base - art. 119, nº1, of the CIMT provides that "the competent collection document" contains the "discrimination of properties, their parts capable of independent use, respective patrimonial value and the collection (…)".

That is, the rule is the autonomization, the characterization as "property" of each part of a building, insofar as it is functionally and economically independent, capable of independent use[5], in accordance with the concept of property defined in nº 1 of article 2 of the CIMI: property is any fraction (of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated in or resting on it, with a character of permanence) provided that it is part of the patrimony 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 (emphasis and underlining ours).[6]

Thus, when nº 4 of article 2 provides that "For purposes of this tax, each autonomous fraction, under the horizontal property ownership regime, is deemed to constitute a property", it does not properly establish an exceptional or special regime for properties in horizontal property ownership.

After all, each building in horizontal property ownership (article 92) has only a single matricial registration (nº 1), describing the building generically and mentioning the fact that it is in the horizontal property ownership regime (nº 2) and the matricial autonomy is materialized in the assignment 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 property ownership. But in other cases, of properties in vertical or full ownership, the divisions or floors with independent use and autonomy but without the status of horizontal property ownership, the matrix also establishes the fiscal autonomy evidencing the different units with indication of the type of floor/story.

Thus, the statement of the Respondent in the sense that in the case of these proceedings it is a matter of "a property in full ownership" whose "matricial registration of each part capable of independent use is not autonomous, by matrix, but rather consists of a description of the property as a whole" (articles 23 and 35 of the Reply) is not sufficient to make irrelevant the economic and fiscal autonomy that we found above to be established in the CIMI in the case of divisions or floors capable of independent use, without the status of horizontal property ownership, integrated in buildings in full ownership.

Nor is it acceptable the argument that has been presented by the AT based on the civil law establishment of horizontal property ownership, envisioning in the taxation provided for in item 28 of the TGIS a discrimination imposed by the need to impose coherence to the tax system (art. 33 of the Reply).

Indeed, there are neither in the normative text nor in the legislative process that led to the approval of Law nº 55-A/2012 of 29 October, elements that make it possible to identify and legitimize a purpose (fiscal or extra-fiscal) in the sense defended by the Respondent. Rather it seems that such discrimination, unexpected, would risk violating the principle of legal confidence...

All considered, there is no reason to, in matters of incidence of Stamp Duty provided for in item 28.1 of the TGIS, give to fractions of properties in "vertical ownership", endowed with autonomy, treatment different from that given to properties in horizontal property ownership, when in either of these situations the IMI is applied to the patrimonial value evidenced in the matrix for each of the autonomous units.

14.3. The ratio legis of items 28 and 28.1 of the TGIS

The interpretation above sustained, resulting from the analysis of the letter of the law and its insertion in the set of other applicable tax provisions, is the most consonant with the spirit of the legislative amendments introduced by Law nº 55-A/2012 of 29 October.

As has already been evidenced in other arbitral decisions, "the legislator in introducing this legislative innovation considered as a determining element of contributive capacity urban properties, with residential use, of high value (luxury), more precisely, of value equal to or greater than €1,000,000.00 on which a special rate of stamp tax began to apply, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or surface right of urban properties of luxury with residential use. Therefore, the criterion was the application of the new rate to urban properties with residential use, whose VPT is equal to or greater than €1,000,000.00" (...). "The justification for the measure designated as 'special rate on residential urban properties of highest value' is based on the invocation of the principles of social equity and tax justice, calling on those holding high-value properties intended for residential use to contribute in a more intense manner, with the new special rate applying to 'houses of value equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residential unit (house, autonomous fraction or floor with independent use) reflects a contributive capacity above the average and, as such, capable of determining a special contribution to ensure fair apportionment of the tax burden."[7]

Mindful of the legislative purpose, it is further concluded that the holding of fractions in full or vertical ownership does not reveal a greater contributive capacity than if they were constituted in the form of horizontal property ownership.

On the contrary, in most cases, as evidenced by the Arbitral Decision nº 50/2013, "many of the properties existing in vertical ownership are old, with undeniable social utility, as in many cases they shelter residents with modest rents and more accessible, factors which necessarily must be taken into account."

Also the analysis by this perspective confirms the correctness of the interpretation that item 28 of the TGIS does not encompass each of the floors, divisions or parts capable of independent use when only from their aggregate results a VPT greater than that provided for in the same item.

As decided in other arbitral proceedings, this tribunal understands that with respect to the date of constitution of the tax obligation, fiscal nexus, determination of the taxable base, assessment and payment of the stamp duty in question, the corresponding rules of the CIMI are applicable, by express referral of articles 5, nº1, paragraph u), 4, nº 6, 23, nº 7, 44, nº 5, 46, nº 5 and 49, nº 3, of the CIS.

It appears illogical to subject to the new stamp tax autonomous parts without the legal status of horizontal property ownership and not to subject any of the residential fractions if the property were in the horizontal property ownership regime, nor can it be overlooked that the incoherence, in terms of property taxation, of the different treatment given to holders of fractions concentrated in the same property or dispersed through different properties, taxed in the first case and not taxed in the second, although in either situation the total amount of the respective VPT reached the value of 1 million euros.

Thus, the present arbitral tribunal concludes that the assessments of Stamp Duty, made on the basis of item 28/28.1 of the TGIS, relating to each of the floors or parts capable of independent use, property of the Claimant, which are the subject of these proceedings, are affected by illegality, because the referred legal provisions cannot be interpreted in the sense of their application to floors or parts capable of independent use of a property in vertical ownership, when only from the aggregate of each of these floors or parts is it possible to obtain a VPT equal to or greater than €1,000,000.00 (one million euros) not reaching the VPT of each of the said floors or parts this amount.

As results from the established facts, none of the floors intended for residential purposes, in the property in vertical ownership which is the subject of this proceeding, has patrimonial value equal to or greater than €1,000,000.00, such that the legal prerequisite for the incidence of IS provided for in Item 28 of the TGIS is not met, with consequent illegality of the tax acts under assessment.

And, as has been consistently understood, by application of article 24, nº 5 of the RJAT and given that there is at issue in these proceedings an erroneous interpretation and application by the Respondent of a rule of tax incidence, compensatory interest is due pursuant to articles 43 and 100 of the LGT.

  1. Decision

With the grounds set forth, the arbitral tribunal decides:

a) To judge the request for arbitral pronouncement well-founded and, consequently, to declare illegal the tax acts of assessment of Stamp Duty (items 28 and 28.1 of the General Table of Stamp Duty) levied on the fractions of the property identified in these proceedings, and relating to 2014, ordering the annulment of the Stamp Duty assessed with respect to the year in question, in the total amount of €21,612.96 (twenty-one thousand six hundred and twelve euros and ninety-six cents), the reimbursement of the amounts of tax shown to have been paid, as well as the payment of compensatory interest.

b) To condemn the Respondent in costs.

  1. Value of the case

In accordance with the provision of nº 2 of article 315 of the CPC, paragraph a) of nº1 of article 97-A of the CPPT and also nº 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at €21,612.96 (twenty-one thousand six hundred and twelve euros and ninety-six cents).

  1. Costs

For the purposes of the provision of nº 2 of article 12 and nº 4 of article 22 of the RJAT and nº 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at €1,224.00 (one thousand two hundred and twenty-four euros), in accordance with Table I annexed to said Regulation, to be borne entirely by the Respondent.

Lisbon, 13 April 2016.

The Arbitrator

(Maria Manuela Roseiro)

[1] On the application of item 28 of the TGIS in the case of properties in full/vertical ownership, a very high number of decisions is already published on the tax jurisprudence website of the CAAD.

[2] Much of the text of the decision rendered within the scope of the CAAD, in proceeding nº 194/2014-T judged by panel with participation of the undersigned, is reproduced.

[3] Article 6 of Law nº 55-A/2012 provides transitional provisions by virtue of which, in that first year of effectiveness, that is, 2012, but, given that these proceedings concern the year 2014, these provisions do not apply.

[4] "Another aspect that should be evidenced in the matrix concerns the need to highlight the autonomy that, within the same property, can be attributed to each of its parts, functionally and economically independent. In these cases, the matricial registration must not only make reference to each of the parts but must make express reference to the patrimonial value corresponding to each of them" (Silvério Mateus and Freitas Corvelo, "Real Property Taxes and Stamp Duty, Commented and Annotated", Engifisco, Lisbon 2005, pp.159 and 160). And the same authors further stated (ibidem, p.160): "This autonomization of the autonomous parts of a property, applicable especially to urban properties, was justified within the framework of the former Real Property Contribution in which the taxable income corresponded to the rent or rental value of each of these components, continued to be justified in the case of Local Contribution in which patrimonial value had underlying the effective or potential rent and continues to be pertinent in IMI, given that the appreciation factors provided for in articles 38 et seq. may not be the same for all these components (...) the fact that a property is or is not leased continues to have relevance for purposes of determining the patrimonial value whether for IMI or for IMT (see Article 17 of DL 287/2003)" (they referred to the original wording "transitional regime for leased urban properties", a provision to be reviewed, according to its nº 5, when the law on urban rental was revised, which occurred with Law nº 6/2006 of 27/02).

[5] On this point, and in line with the commentary cited in the previous note, see the grounds contained in the decision of proceeding nº248/2013-T: "The autonomization in the matrix of the parts functionally and economically independent of a property in full ownership is connected with reasons of a fiscal and extra-fiscal nature. On the fiscal level, this autonomization concerns the very determination of the patrimonial value, which constitutes the taxable base of IMI, given that the formula for determining that value, provided for in art. 38 of the same Code, includes indices that vary depending on the use attributed to each of these parts. On the extra-fiscal level, this autonomization continues to find justification in the relevance attributed to the patrimonial value of properties and their autonomous parts in urban rental legislation." It also mentions nº 1 of art. 15-O, of Decree-Law nº 287/2003 of 12/11, added by Law nº 60-A/2011 of 30/11 (providing that the safeguard clause relating to the worsening of taxation in IMI resulting from the general assessment of urban properties, is applicable per property or part of urban property that is subject to said assessment) as confirming the individualization, for tax purposes, of the autonomous parts of urban properties.

[6] As observed in the decision of arbitral proceeding nº132/2013-T: "The provisions (...) listed establish the principle of autonomization of the independent parts of an urban property, even when not constituted in horizontal property ownership. That is, each part capable of independent use must be, for purposes of IMI, valued in light of its specificities and use, resulting in an autonomous VPT, individualizable and corresponding to each part capable of independent use."

[7] Excerpts from the Decision in proceeding nº 50/2014-T, also referring to the Arbitral Decision in proceeding nº 48/2013-T, as to the analysis of the discussion of the legislative proposal in the Assembly of the Republic.

Frequently Asked Questions

Automatically Created

Is Stamp Tax under Verba 28 of TGIS applicable to buildings held in total ownership with independently usable units?
Yes, Stamp Tax under Verba 28.1 of TGIS is applicable to buildings held in total ownership (propriedade total) with independently usable units, according to the Tax Authority's position. When a property is registered as a single unit in total ownership rather than constituted under horizontal property regime, the tax applies to the global patrimonial value if it equals or exceeds €1,000,000. The Tax Authority argues that Article 2(4) of CIMI specifically defines only autonomous fractions under horizontal property as separate properties for tax purposes. Properties in full ownership with divisions capable of independent use remain a single tax unit, requiring application of Verba 28.1 to the aggregate value. However, this interpretation is contested on grounds that it disregards the economic reality of independent housing units and may violate constitutional principles of equality and contributive capacity when individual units fall far below the luxury property threshold.
How does the distinction between total ownership (propriedade total) and horizontal property affect Stamp Tax liability under Verba 28?
The distinction between total ownership (propriedade total) and horizontal property is determinative for Stamp Tax liability under Verba 28. Under horizontal property regime, Article 2(4) of CIMI treats each autonomous fraction as a separate property for tax purposes, meaning Verba 28.1 applies only to individual fractions valued at €1,000,000 or more. In contrast, properties held in total ownership with independently usable divisions are treated as a single patrimonial unit, with Stamp Tax assessed on the global property value. This creates substantially different tax outcomes: a building with 20 apartments worth €50,000-€110,000 each would incur no Verba 28 tax under horizontal property, but faces the 1% levy on €2.1 million under total ownership. The claimant challenged this distinction as violating constitutional equality principles, arguing that economic substance should prevail over legal form when the practical reality—independent family housing—is identical. This legal differentiation significantly impacts civil partnerships and other collective ownership structures.
Can the tax authority assess Stamp Tax based on the global property value when individual units are below the taxable threshold?
Yes, the Tax Authority can assess Stamp Tax based on global property value when individual units are below the taxable threshold, provided the property is held in total ownership rather than horizontal property regime. This position relies on Article 2 of CIMI, which defines 'property' differently depending on legal structure. For total ownership properties with independent divisions, the patrimonial value is determined globally as a single tax unit. The Tax Authority applied Article 23(7) of CIS and adapted CIMI rules to assess tax on the aggregate value of €2,137,555.08, despite each of the 20 apartments being valued between €53,788.03 and €112,958.07—all below the €1,000,000 threshold. However, this approach faces legal challenge on constitutional grounds, with taxpayers arguing it violates principles of contributive capacity by imposing luxury property taxation on modest family dwellings. The jurisprudence cited by the claimant suggests some arbitration tribunals have rejected this approach, recognizing that economic reality and independent use should inform tax treatment regardless of formal ownership structure.
What are the grounds for challenging a Stamp Tax (Imposto do Selo) assessment through CAAD arbitration under the RJAT?
Grounds for challenging Stamp Tax assessments through CAAD arbitration under RJAT include illegality of the tax assessment based on incorrect qualification or quantification of taxable facts. In this case, the claimant invoked Articles 99(a) and (c) of CPPT via Article 10(2)(c) of Decree-Law 10/2011, challenging the assessment's legality. Specific grounds raised included: (1) erroneous application of Verba 28.1 TGIS to properties not constituting luxury goods manifestations of wealth; (2) incorrect determination of patrimonial value by using global rather than individual unit values; (3) violation of constitutional principles of equality (Article 13 CRP) and contributive capacity (Article 104 CRP); (4) improper distinction based on legal form when economic substance is identical to horizontal property; and (5) misapplication of CIMI Articles 2 and 12 regarding property definition and valuation. The claimant sought reimbursement of paid instalments plus compensatory interest. However, the Tax Authority raised preliminary objections regarding tribunal competence and proper identification of challenged collection notices, issues that can affect arbitration proceedings.
How is the taxable value determined for Verba 28.1 TGIS when a property has multiple divisions susceptible to independent use?
The taxable value for Verba 28.1 TGIS when a property has multiple divisions susceptible to independent use depends critically on whether the property is constituted under horizontal property regime. According to the Tax Authority's interpretation, when a property is registered in total ownership (propriedade total) with floors or divisions capable of independent use, the taxable value is the global patrimonial value of the entire property as a single tax unit, determined according to CIMI Article 113(1). This contrasts with horizontal property, where Article 2(4) of CIMI treats each autonomous fraction as a separate property with individual valuation. The claimant argued that Article 67(2) of CIS and Article 12 of CIMI should require separate treatment of each independent division, as each has distinct economic value and appears separately in property registration records. This interpretation would assess Stamp Tax on each division's individual patrimonial value. The dispute reflects fundamental tension between legal form and economic substance: whether tax law should recognize independent economic units based on use and value, or strictly apply ownership structure classifications that may not reflect the practical reality of multiple family dwellings.