Process: 492/2016-T

Date: April 20, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitral Decision 492/2016-T addresses whether Stamp Duty under item 28 of the General Table (Verba 28 TGIS) applies to undivided properties when the total patrimonial value exceeds €1,000,000 but individual units fall below this threshold. The claimant, head of an undivided estate owning a Lisbon property with 14 independent residential units and total tax property value of €1,033,642.92, challenged Stamp Duty assessments totaling €10,336.42 for 2015. The core legal issue concerns whether 'property' under Verba 28 means the entire building under full ownership (propriedade total) or each autonomous unit. The claimant argued that CIMI Article 2(4) and 12(3), applicable subsidiarily per CIS Article 67(2), require treating each independently registered unit as a separate property for Stamp Duty purposes, similar to IMI treatment. The Tax Authority countered that full ownership properties differ fundamentally from horizontal property regimes, and that only autonomous fractions under horizontal property constitute separate properties under CIMI Article 2(4). For Stamp Duty purposes, the Authority maintained that the entire property constitutes the taxable unit, regardless of internal divisions. This decision is significant for determining Stamp Duty liability on inherited or undivided multi-unit buildings, clarifying whether the threshold applies per unit or to the aggregate value, and establishing the interaction between CIMI definitions and CIS taxation rules for properties not constituted under horizontal property regimes.

Full Decision

ARBITRAL DECISION

I – Report

  1. On the 1st of August 2016, A…, with NIF…, domiciled at Avenue…, no. … -…, in Lisbon, head of the undivided estate NIF…, of B…, came to request, under the terms of article 99 of the Code of Tax Procedure and Process, and in accordance with article 2, no. 1, paragraph a), and 10 of Decree-Law no. 10/2011, of 20 January, the constitution of an arbitral tribunal with a view to the annulment, with all legal consequences, of the acts of assessment of Stamp Duty (Imposto do Selo), item no. 28 of the General Table of Stamp Duty, in the total amount of €10,336.42, occurring on 5 April 2016, carried out by the Tax and Customs Authority, through the Tax Office of Lisbon - …, relating to the year 2015, which fell upon the ownership of the immovable property, located at Street…, nos … and …, in Lisbon, requests the refund of all amounts that have in the meantime been paid and the recognition of the right to compensatory interest on that sum. In addition to proof of payment of the initial arbitration fee, she attached 30 documents.

  2. In the Request for arbitral pronouncement, the Claimant opted not to appoint an arbitrator, and, under the terms of no. 1 of article 6 of RJAT, by decision of the President of the Deontological Council, the undersigned was appointed as sole arbitrator, and accepted the office within the legally stipulated period.

  3. The parties having been notified of this appointment, they did not manifest any intention to challenge it, and the arbitral tribunal was constituted on 11 November 2016.

  4. On 12 December 2016, the Tax and Customs Authority (TA or Respondent) presented a Response, requesting exemption from holding the meeting provided for in article 18 of RJAT, to which the Claimant did not object.

  5. The tribunal dispensed with the holding of the meeting of article 18 of RJAT and set a period of 10 days, running successively, for the optional submission of written pleadings, indicating 11 May 2017 as the date for communication of the arbitral decision. The Parties did not submit pleadings.

6. The Request for Pronouncement

The Claimant states, in summary (our responsibility):

  • The estate of which he is head includes an immovable property registered under article … in the urban property register of the parish of … (formerly no. … of the parish of …), municipality of Lisbon, which is divided into fourteen floors or divisions with independent use and residential purpose, ground floor right, ground floor left and six floors, right and left.

  • To the property, in its entirety, a tax property value of €1,033,642.92 (one million thirty-three thousand six hundred and forty-two euros and ninety-two cents) was fixed.

  • Despite all the fractions of that immovable property – which is not subject to a regime of horizontal property – having a specific tax property value of less than €1,000,000 (one million euros), being autonomously registered in the urban property register, the tax administration issued assessments for the year 2015 (of which the installments falling due in April and July have already been paid).

  • According to article 1, no. 6, of CIS (Stamp Duty Code), the concept of property is defined by CIMI (Municipal Property Tax Code), whose article 2, no. 4, states that "for the purposes of this tax, each autonomous fraction, under a regime of horizontal property, is deemed to constitute a property."

  • The CIMI, mandated to be applied subsidiarily by article 67, no. 2, of CIS, provides in article 12, no. 3, that "each floor or part of a property susceptible to independent use is considered separately in the matricial registration, which also discriminates the respective tax property value", whereby each fraction is evaluated individually and to each one is attributed its own tax property value. The assessment of IMI (Municipal Property Tax) falls on the specific tax property value of each one of these fractions, operating individually in relation to each one of them, independently of whether the immovable property that they integrate is or is not subject to a regime of horizontal property.

  • In the absence of a specific rule for the taxation of fractions of an immovable property within the scope of CIS, the legal criterion for defining the incidence of Stamp Duty should, accordingly, correspond to that which is fixed in CIMI, and it is not by chance that the assessments in question fell specifically on each one of the fractions of the property, autonomously registered in the register, reflecting the tax property value of each one of them.

  • The interpretation of item 28.1 of the General Table made by the TA appears disproportionate and unreasonable, contrary to the constitutional principles of a Rule of Law, equality, proportionality and confidence, in adopting identical treatment between a luxury immovable property under a regime of horizontal property and an immovable property with sixty years of construction whose owner merely accepted the regime of full (vertical) ownership that, at the time, was the dominant one.

  • Thus, it requests the annulment of the acts of assessment of Stamp Duty discriminated, on grounds of their illegality, due to error in the appreciation of the legal assumptions, with all legal consequences, in particular the refund of the amounts corresponding to the payment of all installments, as well as the payment of compensatory interest on those amounts.

7. The Response

The Respondent replied, in summary (our responsibility):

  • By application of article 2, nos 1 and 4, of CIMI, a property in full ownership is, unequivocally, different from an immovable property under a regime of horizontal property constituted by autonomous fractions, that is, by several properties.

  • Taking into account the concept of the property register (article 12 of CIMI), no. 3 of the same article relates, exclusively, to the manner of recording the matricial data; and the TPV (Tax Property Value) that serves as the basis for calculating IMI assessment, in the case of properties in full ownership, will indisputably be the value that the now Claimant defines as "overall value of the property", although the collection document sent to the taxpayer, under the terms of article 119, no. 1, of CIMI, contains the discrimination of the parts susceptible to independent use, respective tax property value and the tax collected assignable to each municipality of the location of the properties, whereby the assessment is correct and no compensatory interest is owed, there being no error attributable to the Services.

  • Nor were the constitutional principles of legality, tax equality and contributory capacity violated.

  • Although the assessment of Stamp Duty, in the situations provided for in item no. 28.1 of TGIS (General Table of Stamp Duty), is processed in accordance with the rules of CIMI, the legislator safeguards the aspects that require the necessary adaptations.

  • In the case of properties in full ownership, even though with floors or divisions susceptible to independent use, and even though IMI is assessed in relation to each part susceptible to independent use, for the purposes of Stamp Duty what is relevant is the property in its entirety - the divisions susceptible to independent use are not deemed to be property, but only the autonomous fractions under a regime of horizontal property, as per no. 4 of article 2 of CIMI.

  • Item 28.1 of TGIS encompasses properties as a single legal-tax reality, and properties under a regime of full ownership do not possess autonomous fractions to which the tax law attributes the qualification of property, horizontal property and vertical property being differentiated legal institutions and discrimination may also be imposed by the need to impose coherence in the tax system.

  • That is, the norms of evaluation procedures, the norms on matricial registration, and also the norms on the assessment of parts susceptible to independent use, do not permit affirming that there should be an equation of the property under a regime of full ownership with the regime of vertical property.

  • Item 28 should not be considered unconstitutional, as decided for example in Decisions nos 590/2015 and 692/2015 of the Constitutional Court.

  • And as to the legality of item 28 of TGIS, reference is made to the Arbitral Decision in proc. no. 668/2015-T, which considered valid assessments of Stamp Duty in a situation identical to that of the present case.

  • Since the assessments are not illegal, no compensatory interest is owed.

8. Question to be Decided

The fundamental legal question to be decided consists of knowing whether the scope of the incidence of Stamp Duty provided for in Item 28 of TGIS includes urban properties not constituted in a regime of horizontal property but comprised of floors or divisions susceptible to independent use with residential purpose, when the tax property value attributed to each one of these distinct parts is less than the value of €1,000,000.00, although the aggregate of the independent units assigned to residential use reaches a total TPV equal to or greater than that amount.

9. Case Management

The singular arbitral tribunal is substantively competent, under the terms of the provisions of articles 2, no. 1, paragraph a), of the Legal Regime of Arbitration in Tax Matters (RJAT).

The parties enjoy legal personality and capacity and have standing under the terms of articles 4 and 10, no. 2, of the Legal Regime of Arbitration in Tax Matters (RJAT) and article 1 of Order no. 112-A/2011, of 22 March.

The process does not suffer from any nullity nor have the parties raised any exceptions that prevent the consideration of the merits of the case, whereby the conditions for the pronouncement of the arbitral decision are met.

II Grounds

10. Proven Facts

It is considered proven that:

10.1. The undivided estate of B…, includes the property located at Street …, nos … and …, in Lisbon, described in the Land Registry Office of Lisbon, parish of …, under no. …, and registered in the urban property register under article … of the parish of …, municipality of Lisbon.

10.2. The property object of the present proceedings is composed of seven (7) floors and fourteen (14) divisions susceptible to independent use intended for residential purposes (register, case file).

10.3. The sum of the tax property values of the fourteen divisions referred to in the preceding number is €1,033,642.92 (case file, register).

10.4. The tax property values of each of the fourteen divisions with independent use and assigned to residential purposes, determined according to the IMI Code, were in 2015: €31,952.48 (U…-ground/Right); €56,373.53 (U…-ground/Left); €68,584.06 (U… - 1st Right); €77,044.89 (U…-1st Left); €73,284.52 (U…-2nd Right); €84,565.64 (U…-2nd Left); €75,485.19 (U…-3rd Right); €87,097.48 (U…-3rd Left); €75,485.19 (U…-4th Right); €87,097.48 (U…-4th Left); €76,948.75 (U…-5th Right); €88,785.37 (U…-5th Left); €90,541.10 (U…-6th Right.) and €81,884.24 (U…-6th Left.) (Documents 1 to 30 attached with the Request and case file, property register).

10.5. The collection documents indicate as the tax property value of the property being the basis for calculating the tax €1,033,642.92 corresponding to the total value of the fourteen divisions of independent use and that the assessment of Stamp Duty, carried out on 5 April 2015, had as its basis item 28.1 of the General Table of Stamp Duty, applying the rate of 1% to the value of the TPV of each one of the divisions, which leads to amounts of tax of €319.52 (U…-ground/Right); €563.74 (U…-ground/Left); €685.84 (U… - 1st Right); €770.45 (U…-1st Left); €732.85 (U…-2nd Right); €845.66 (U…-2nd Left); €754.85 (U…-3rd Right); €870.97 (U…-3rd Left); €754.85 (U…-4th Right); €870.97 (U…-4th Left); €769.49 (U…-5th Right); €887.85 (U…-5th Left); €690.54 (U…-6th Right.) and €818.84 (U…-6th Left.) (Collection documents attached with the Request).

10.6. The Claimant was notified of assessments, dated 5 April 2016, of Stamp Duty provided for in item 28.1 of TGIS, relating to the year 2015, relating to the various divisions of independent use, to be paid in three installments, according to article 120 of CIMI (Collection documents contained in Doc. no. 1, attached with the Request).

10.7. The Claimant attached proof of payment of two installments relating to the assessments referred to in the preceding number and, subsequently, according to information from the tax office, payment was completely regularized (documents attached and case file, pages 14).

11. Unproven Facts

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

12. Basis of Proof

The proof established was based on the documents submitted by the Claimant (Request for arbitral pronouncement and documents attached to the proceedings with the request) and by the Respondent (Response and administrative file).

13. Legal Analysis

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

13.1.1. Regime Approved by Law no. 55-A/2012, of 29 October

The fundamental legal question, disputed in the present proceedings, consists of knowing whether in the case of properties in full ownership, with floors or divisions of independent use assigned to residential purposes but not constituted under a regime of horizontal property, the TPV to be considered for the purposes of the incidence of Stamp Duty provided for in item 28.1 of TGIS should correspond to the TPV of each floor or division with residential assignment and independent use or to the sum of the TPVs corresponding to the floors or divisions of independent use with residential assignment. That is, it is necessary to decide whether the TPV relevant as the criterion for the incidence of the tax is the TPV attributed to each one of the parts or residential floors or that corresponding to the sum of the tax property value attributed to each one of the different parts or floors (global TPV).

This question has already been appreciated in many proceedings within the scope of Tax Arbitration, and no arguments have been identified so far that would lead to an alteration of the position that we have defended in other proceedings.

Item 28 of the General Table of Stamp Duty, appended 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 right of superficies of urban properties whose tax property value contained in the register, under the terms of the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000 – on the tax property value for purposes of IMI:

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

28.2 – For property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained 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 TGIS falls on a legal situation (no. 1 of article 1 and no. 4 of article 2 of CIS), in which the respective taxpayers are those referred to in article 8 of CIMI (no. 4 of article 2 of CIS), to whom falls the burden of the tax (paragraph u) of no. 3 of article 3 of CIS).

The Stamp Duty Code, in the wording given by Law no. 55-A/2012, both in article 4, no. 6 ("In the situations provided for in item 28 of the General Table, the tax is due whenever properties are located in Portuguese territory"), and in article 23, no. 7 ("In the case of tax due in 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 CIMI"), in conjunction with article 1 of CIMI, considers the property in itself as the tax fact (the situation that triggers taxation) provided that it reaches the value provided for in item 28 of the General Table of Stamp Duty, regardless of the number of taxpayers, possessors (as owners, usufructuaries or superficiaries) of the assets in question.

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.

At the time of the situation under analysis, the wording introduced by Law no. 83-C/2013, of 31 December (Budget for 2014), was already in force in item 28.1., which came to read: "For residential property or for land for construction whose building, authorized or foreseen, is for residential use, under the terms of the Stamp Duty Code."

That is, the relevant concept in a case such as that of the present proceedings - assessment for 2015 - changed from "property with residential use" to "residential property", and it appears to us that this change is not susceptible to altering the interpretation that we have been defending in situations relating to years prior to 2014.

13.1.2. The Concept of Property Used in Item 28 of TGIS

Neither the concept of "properties with residential use" in the original wording of item 28.1 nor that of "residential property" in the later wording are expressly defined in any provision of the Stamp Duty Code nor in the IMI Code, the statute to which article 67, no. 2, of CIS refers.

In the case at hand, the property registered under article … in the urban property register of the parish of …, municipality of Lisbon, is in full ownership divided into fourteen divisions with independent use and residential purpose. As for the independent divisions assigned to residential use, it is verified that their respective values vary between €31,952.48 (the lowest) and €88,785.37 (the highest). In none of the cases does the TPV reach the amount of €1,000,000.00.

What is at issue is the exact meaning of the segment of the legal norm of incidence of stamp duty in the body of item 28 of TGIS that refers to the tax property value under the terms of CIMI: in the case of properties in full ownership but with floors or divisions susceptible to independent use, with residential purpose, is the relevant TPV the sum of the TPV of the various divisions/floors with residential purpose, the aggregate being considered a single property, as the TA claims, or what must be taken into account is the TPV of each one of the respective floors or autonomous divisions with said residential purpose, as the Claimant argues?

Now, the said segment (value property 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 right of superficies of urban properties whose tax property value contained in the register, under the terms of the Municipal Property Tax Code (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 matricial registration and discrimination of the respective tax property value and as to the assessment of the tax, the autonomization of parts of urban property susceptible to independent use and the segregation/individualization of the TPV relative to each floor or part of property susceptible to independent use.

Thus, to each property (building) corresponds a single article in the register (no. 2 of article 82 of CIMI) but, according to no. 3 of article 12 of the same Code, relating to the concept of the property register (registration of the property, its characterization, location, TPV and ownership), "each floor or part of a property susceptible to independent use is considered separately in the matricial registration, which discriminates the respective tax property value", not taking as reference the sum of the tax property 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 - article 119, no. 1, of CIMI provides that "the competent collection document" contains the "discrimination of properties, their parts susceptible to independent use, respective tax property value and the amount of tax (…)".

That is, for tax purposes the rule is autonomization, also qualifying as "property" each part of a building, provided that it is functionally and economically independent, susceptible to independent use, in accordance with the concept of property defined already in no. 1 of article 2 of CIMI: property is any fraction (of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or set upon it, with a character of permanence) provided that it forms part of the patrimony of a natural or legal person and, in 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).

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

After all, each building under horizontal property (article 92) has only a single matricial registration (no. 1), generically describing the building and mentioning the fact that it is subject to a regime of horizontal property (no. 2) and the autonomy in the register 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 appears to be the specificity of buildings under horizontal property.

But in other cases, of properties in full or vertical ownership, the divisions or floors with independent use but without the status of horizontal property, the register also establishes the autonomy in taxation evidencing the different units with indication of the type of floor/storey.

Thus, the arguments of the Respondent are not convincing in the sense of justifying the difference in treatment under Stamp Duty (item 28) of two types of realities – properties with independent fractions under a regime of full or vertical ownership and properties with independent fractions under a regime of horizontal property – considering the first situation as constituting a unit, with irrelevance of the economic and fiscal autonomy established in the same CIMI. Against the thesis that these properties are only one for purposes of item 28 of TGIS we have the near unanimity of arbitral and administrative decisions, in this case confirmed at the highest level, by the STA (Supreme Administrative Court).

The defense of an interpretation based on an institutional difference between the two situations of ownership – and in which the TA has frequently glimpsed in item 28 of TGIS a legislative intent to develop the institution of horizontal property – does not appear to us to result either from the letter of the provision nor from its confrontation with other norms of the legal system, from which no justification results for, in the matter of the incidence of Stamp Duty provided for in item 28.1 of TGIS, to give to fractions of properties in "vertical ownership", endowed with autonomy, treatment different from that granted to properties in horizontal ownership, when in either of those situations the IMI is applied to the tax property value evidenced in the register for each one of the autonomous units.

Nor exists in the legislative process that led to the approval of Law no. 55-A/2012, of 29 October, any element that permits identifying and legitimating a purpose (extrafiscal or fiscal) in the sense of the difference sustained by the Respondent between the two situations: ownership of a building in full ownership or its division into units with the status of horizontal property.

13.2. The Ratio Legis of Items 28 and 28.1 of TGIS

The interpretation above sustained, arising from the analysis of the letter of the law and its insertion in the ensemble of other applicable tax norms, is also that 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 the property as the determinative element of contributory capacity of urban properties, with residential use, of high value (luxury), more rigorously, of value equal to or greater than €1,000,000.00, on which there came to fall a special rate of stamp duty tax, seeking to introduce a principle of taxation on wealth exteriorized in the ownership, usufruct or right of superficies of urban properties of luxury with residential use. For this reason, the criterion was the application of the new rate to urban properties with residential use, whose TPV is equal to or greater than €1,000,000.00" (...). "The basis of the measure designated by 'special tax on residential urban properties of highest value' rests on the invocation of the principles of social equity and fiscal justice, calling upon to contribute in a more intense manner the holders of properties of high value intended for residential use, by imposing the new special tax on 'houses of value equal to or greater than 1 million euros. Clearly the legislator understood that this value, when imputed to a residential dwelling (house, autonomous fraction or floor with independent use) translates a contributory capacity above average and, as such, susceptible to determining a special contribution to guarantee the fair distribution of fiscal effort.'"

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

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

Also the analysis by this prism confirms the correctness of the interpretation that item 28 of TGIS does not encompass each one of the floors, divisions or parts susceptible to independent use when only from the sum of the respective tax property values does a TPV greater than that provided for in the said item result.

The legislator did not intend to treat differently residential properties distinguishing between those that are or are not subject to a regime of horizontal property, but to give relevance to divisions or property fractions assigned to residential purposes and considered for purposes of IMI as autonomous units, identifying those whose TPV is greater than one million, understanding that such value configures them as luxurious and justifies a specific taxation, by way of Stamp Duty.

Thus, and even without understanding that item 28 would be affected by unconstitutionality due to different treatment of situations that are tax-wise identical, it is considered that "The basis of the measure designated by 'special tax on residential urban properties of highest value' rested on the invocation of the principles of social equity and fiscal justice, calling upon to contribute in a more intense manner the holders of properties of high value intended for residential use, by imposing the new special tax on 'houses of value equal to or greater than 1 million euros. Clearly the legislator understood that this value, when imputed to a residential dwelling (house, autonomous fraction or floor with independent use) translates a contributory capacity above average and, as such, susceptible to determining a special contribution to guarantee the fair distribution of fiscal effort.'"

That is, item 28 will have intended to reach properties that, in themselves, individually have value greater than one million because it is understood that this value would be the threshold of expression of "luxury housing", not intending, in this perspective, to reach properties that only combined with others of the same holder (regardless of whether or not they take the legal form of horizontal property) reach that value.

This legislative option may or may not merit agreement, being even confronted with the alternative (and respective advantages and real possibilities) of overall taxation of patrimony or, at least, of the ensemble of all immovable properties of the same holder. But it cannot be ignored that that was the option affirmed by the legislator which in the letter of the law left no indications in a different sense.

Thus, the present arbitral tribunal concludes that the assessments of Stamp Duty, carried out based on items 28/28.1 of TGIS, relating to each one of the floors or parts susceptible to independent use, owned by the Claimant, object of the present proceedings, are affected by illegality, because the said legal provisions cannot be interpreted in the sense of their application to floors or parts susceptible to independent use of a property in vertical ownership when only from the sum of each one of these floors or parts is achieved a TPV equal to or greater than €1,000,000.00 (one million Euros), not reaching the TPV of each one of the said floors or parts that amount.

Thus was already decided in various cases by the STA. By all, cite the Decision 0166/16, of 4 May 2016, which concluded: «I - Item 28 of the General Table of Stamp Duty (TGIS) added by article 4 of Law no. 55-A/2012, of 29/10, does not apply to urban properties, with a single article in the register but constituted by parts with independent use and assignment to which independent TPVs were attributed, each of these of value less than one million euros. II - Since item 28 of the General Table did not make any distinction between properties in a regime of horizontal property and full/vertical property and referring to the tax property value used for purposes of IMI, it will not fall to its applicant to introduce any distinction, all the more so as it is a matter of a norm of incidence. III - If it were the legislator's intention to tax immovable properties which, having a single article in the register, because they are constituted by parts susceptible to independent use have assigned diverse tax property values, and intended that for purposes of taxation under stamp duty, in this case, account be taken to the sum of these diverse tax property values, it would not have added the final part of the provision: on the tax property value used for purposes of IMI. IV - Nothing in the law imposing the consideration of any sum of all or part of the TPVs attributed to the diverse parts of a property with a single article in the register, also shows itself to be contrary to law to make such arithmetic operation only for purposes of the taxation enshrined in item 28 of the General Table of Stamp Duty Code».

And as evidenced in an identical situation, by the Decision rendered by the STA on 24 May 2016, in proceedings 01344/15, there is no need for consideration of item 28 of TGIS, "in light of constitutional principles and parameters, but rather a teleological and systematic interpretation of the same is imposed, whereby, the judicial orientation that has been followed by the ordinary courts, and which will now be followed, does not disparage the good doctrine imposed by the Constitutional Court".

In the case at hand, it results from the facts established that none of the autonomous divisions of the property in full ownership object of this proceeding has tax property value equal to or greater than €1,000,000.00 – the highest value is €88,785.37 - whereby it is concluded by the non-verification of the legal assumption of incidence of Stamp Duty provided for in Item 28 of TGIS, with consequent illegality of the tax acts under consideration.

Verifying further that the Tax is paid, the Claimant has the right, as is being peacefully understood by application of article 24, no. 5 of RJAT when what is at issue is an erroneous interpretation and application by the Respondent of a norm of tax incidence, as is the case, to payment of compensatory interest under the terms of articles 43 and 100 of LGT (General Tax Code) and 61 of CPPT (Code of Tax Procedure and Process).

14. Decision

With the grounds stated above, the arbitral tribunal decides:

a) To adjudge the request for arbitral pronouncement as granted 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), falling on the property registered under article … in the urban property register of the parish of …, and identified under the numbers 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…; 2016…; 2016… and 2016…, relating to the year 2015, in the total amount of €10,336.42 (ten thousand three hundred and thirty-six euros and forty-two cents), as per the Request, and with all legal consequences, including refund of tax paid in the meantime and payment of the corresponding compensatory interest.

b) To condemn the Respondent in costs.

15. Value of the Proceedings

In accordance with the provision of no. 2 of article 315 of CPC (Civil Procedure Code), in paragraph a) of no. 1 of article 97-A of CPPT and also of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at €10,336.42 (ten thousand three hundred and thirty-six euros and forty-two cents).

16. Costs

For the purposes of the provision of no. 2 of article 12 and no. 4 of article 22 of RJAT and no. 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00 (nine hundred and eighteen euros), under the terms of Table I attached to the said Regulation, to be borne entirely by the Respondent.

Lisbon, 20 April 2017.

The Arbitrator

Manuela Roseiro

[1] Decision where it is considered, in particular, that the literal interpretation of the norm permits concluding that the value of the property is the sum of the values of its parts and that the law establishes the difference in tax treatment advocated by the Respondent between horizontal property and full ownership.

[2] On the application of item 28 of TGIS in the case of properties in full/vertical ownership, a very high number (hundreds) of decisions are already published on the CAAD tax case law website.

[3] Providing for (article 6 of Law no. 55-A/2012) transitional provisions relating to the application in that first year of force that are irrelevant in the present case (assessments relating to 2015).

[4] "Another aspect that must be evidenced in the register has to do with the need to evidence the autonomy which, within the same property, may be attributed to each one of its parts, functionally and economically independent. In these cases, the matricial registration not only must make reference to each one of the parts but must make express reference to the tax property value corresponding to each one of them" (Silvério Mateus and Freitas Corvelo, "Property and Real Estate Taxes and the Stamp Duty, Commented and Annotated", Engifisco, Lisbon 2005, pages 159 and 160). And the same authors said further (ibidem, p. 160): "This autonomization of the autonomous parts of a property, applicable especially to urban properties, was justified within the scope of the old Property Contribution in which the taxable income corresponded to the rent or rental value of each one of these components, continued to be justified in the case of Local Authority Contribution in which the tax property value had underlying the effective or potential rent and continues to be relevant under IMI, given that the valuation 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 tax property value whether for purposes of IMI whether for IMT (see Article 17 of DL 287/2003)" (they were referring to the original wording "transition regime for leased urban properties", a norm to be reviewed, according to its no. 5, when the urban rental law was revised, which happened with Law no. 6/2006, of 27/02).

[5] On this aspect, and in line with the commentary cited in the previous note, see the grounds contained in the decision of proceedings no. 248/2013-T: "The autonomization in the register of the functionally and economically independent parts of a property in full ownership relates to reasons of a fiscal and extrafiscal nature. On the fiscal level, this autonomization has to do with the very determination of the tax property value, which constitutes the taxable base of IMI, given that the formula for determining that value, provided for in article 38 of the same Code, includes indices that vary depending on the use assigned to each one of these parts. On the extrafiscal level, this autonomization continues to find justification in the relevance attributed to the tax property value of properties and their autonomous parts in urban rental legislation." There is also mentioned no. 1 of article 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 increase in taxation in IMI arising from the general valuation of urban properties, is applicable per property or part of urban property that is the subject of the said valuation) as confirming the individualization, for tax purposes, of the autonomous parts of urban properties.

[6] As observed in the decision of arbitral proceedings no. 132/2013-T: "The norms (...) listed establish the principle of autonomization of the independent parts of an urban property, even when it is not constituted in horizontal property. That is, each part susceptible to independent use must be, for purposes of IMI, valued in light of its specificities and use, resulting in an autonomous TPV, individualizable and corresponding to each part susceptible to independent use."

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

[8] Various decisions of the Constitutional Court have considered unsubstantiated the invocation, on this ground, of unconstitutionality of item 28 of TGIS.

[9] Excerpts from the Decision in proceedings no. 50/2014-T, also referring to Arbitral Decision in proceedings no. 48/2013-T, as to the analysis of the Discussion of the legislative proposal in the National Assembly.

[10] On that question we left some considerations in the arbitral decision of 4 May 2014, in proceedings no. 219/2013-T, where, since it was a single property not divided in horizontal property nor in independent units, the Request was considered as unfounded as to the legality of the assessment, not accepting the thesis of unconstitutionality of item 28 of TGIS.

[11] Expressly refers to the pronouncement of the Constitutional Court (Decision 247/2016, of 04.05.2016, is cited) on the constitutional dimension of items 28 and 28.1 of the General Table of Stamp Duty, added by article 4 of Law no. 55-A/2012, of 29 October, in light of the principles of tax equality, contributory capacity and proportionality, in which it was concluded that the norm contained in the said item in that it imposes annual taxation on the ownership of urban properties with residential use, whose tax property value is equal to or greater than €1,000,000.00, is not unconstitutional.

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Portuguese Stamp Tax General Table and how does it apply to properties valued over €1,000,000?
Verba 28 of the Portuguese Stamp Tax General Table (Tabela Geral do Imposto do Selo) levies annual Stamp Duty on ownership of immovable property located in Portuguese territory with a tax patrimonial value (valor patrimonial tributário) exceeding €1,000,000. The tax rate is 0.7% for properties valued between €1,000,000 and €2,000,000, increasing to 1% for properties above €2,000,000. This tax applies to the ownership itself, assessed annually based on the tax property value determined under CIMI (Municipal Property Tax Code) rules. The tax is due regardless of whether the property generates income, representing a wealth tax on high-value real estate holdings.
Can Stamp Tax under Verba 28 be charged on an undivided property when individual units each have a patrimonial value below €1,000,000?
According to the Tax Authority's position in this case, Stamp Tax under Verba 28 can be charged on an undivided property (propriedade total) based on the aggregate patrimonial value, even when individual units each have values below €1,000,000. The critical distinction is between horizontal property (propriedade horizontal) and full ownership (propriedade total). Under CIMI Article 2(4), only autonomous fractions under horizontal property regime are deemed separate properties. For properties under full ownership, even with multiple independently usable units registered separately under CIMI Article 12(3), the entire building constitutes one property for Stamp Duty purposes. Therefore, if the total tax property value exceeds €1,000,000, Verba 28 applies to the whole property, not individual units.
How does the CAAD arbitral tribunal assess Stamp Tax liability on inherited properties not under horizontal property regime?
The CAAD arbitral tribunal assesses Stamp Tax liability on inherited properties not under horizontal property regime by analyzing whether the property constitutes a single taxable unit or multiple units under applicable law. The tribunal examines the interaction between CIMI definitions (which apply subsidiarily per CIS Article 67(2)) and specific Stamp Duty rules. Key considerations include: (1) whether the property is constituted under horizontal property regime or full ownership; (2) the distinction between CIMI Article 2(4), which treats autonomous fractions under horizontal property as separate properties, versus CIMI Article 12(3), which addresses only registration procedures; (3) whether the total or individual unit tax property values exceed the €1,000,000 threshold; and (4) constitutional principles including proportionality, equality, and legal certainty in applying taxation to inherited estates.
What are the legal grounds for challenging Stamp Tax assessments on undivided real estate through Portuguese tax arbitration?
Legal grounds for challenging Stamp Tax assessments on undivided real estate through Portuguese tax arbitration include: (1) error in appreciation of legal assumptions (erro nos pressupostos de direito), arguing misapplication of CIMI property definitions to Stamp Duty; (2) violation of constitutional principles including proportionality, equality, Rule of Law, and legitimate expectations; (3) improper interpretation of item 28.1 TGIS regarding what constitutes a 'property' for taxation purposes; (4) incorrect application of CIMI Article 2(4) and 12(3) concerning treatment of independently usable units; (5) failure to apply subsidiary CIMI rules correctly per CIS Article 67(2); and (6) disproportionate treatment compared to horizontal property regimes. Challenges are filed under Article 99 of the Tax Procedure Code and Decree-Law 10/2011 establishing the arbitral regime.
Is the total patrimonial tax value or the individual unit value used to determine Verba 28 Stamp Tax liability on multi-unit buildings?
The central dispute in this case concerns whether total patrimonial tax value or individual unit value determines Verba 28 Stamp Tax liability on multi-unit buildings. The Tax Authority's position is that for properties under full ownership (propriedade total), the total patrimonial value of the entire building applies, even when individual units are separately registered and valued under CIMI Article 12(3). This contrasts with horizontal property regimes where CIMI Article 2(4) expressly deems each autonomous fraction a separate property. The Authority argues that CIMI registration and valuation procedures for individual units do not transform a full ownership property into multiple properties for Stamp Duty purposes. Therefore, when the aggregate tax property value exceeds €1,000,000, Verba 28 applies to the entire building, regardless of individual unit values below the threshold.