Process: 493/2014-T

Date: January 30, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (493/2014-T) concerns Stamp Tax assessments under Item 28 of the General Stamp Tax Table (TGIS) totaling €3,192.46 imposed on an estate. The central dispute involves how to calculate Stamp Tax on a property in vertical ownership comprising 17 floors with independent use, each with separate Tax Property Values (TPV). The claimant argues that each autonomous unit should be considered separately, with only units exceeding €1,000,000 TPV subject to taxation, analogous to horizontal ownership (condominium) regime. The estate contends the Tax Authority illegally aggregated all TPV values to determine tax liability, violating legality, equality, and proportionality principles. The Tax Authority counters that despite individual IMI valuations under article 12 CIMI, the property remains a single legal unit in vertical ownership, not multiple autonomous units like in horizontal ownership. Therefore, the total aggregated TPV determines Stamp Tax liability under Item 28 TGIS. The TA argues treating vertical ownership units as separate properties would create an unconstitutional lacuna violating the letter and spirit of Item 28 and article 103(2) of the Portuguese Constitution regarding tax legality. The arbitral tribunal was constituted with sole arbitrator Francisco Nicolau Domingos, and both parties waived the oral hearing and final arguments. Note: The provided excerpt does not include the tribunal's final decision, legal analysis, or ruling on the merits.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case nº 493/2014 – T

Issue: Stamp Tax – Item 28 of GTIS

  1. REPORT

1.1. "A" in representation of the estate opened by the death of "B" (Claimant), taxpayer no. …, notified of the assessments of Stamp Tax (1st installment) of the year 2013 and to which correspond the numbers, 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014… and 2014… presented, on 15/07/2014, a request for arbitral decision, in which it petitions the declaration of illegality of the acts of Stamp Tax assessment in the total amount of € 3,192.46.

1.2. The Honorable President of the Deontological Council of the Center for Administrative Arbitration (CAAD), appointed on 02/09/2014 as arbitrator, Francisco Nicolau Domingos.

1.3. On 02/10/2014 the tribunal was constituted with a sole arbitrator.

1.4. In compliance with the provision of article 17, no. 1 of RJAT, the Tax Authority (TA), on 13/10/2014 was notified to, if it so wished, present a response and request the production of additional evidence.

1.5. On 13/11/2014 the TA presented its response.

1.6. The tribunal on 08/01/2015, in the absence of a request for the production of additional evidence, under the principle of free determination of evidence production procedures, of autonomy in the conduct of the process and in view of the request for exemption from holding the meeting referred to in article 17, no. 1 of RJAT by the TA and of final arguments, determined the notification of the Claimant to state whether it intended the holding of the aforementioned meeting and, if not, to, if it so wished, present its arguments.

1.7. The Claimant on 09/01/2015 presented a petition to the case file in which it waived the right to present arguments.

1.8. The tribunal on 15/01/2015, with the reasoning referred to in 1.6 of the present, decided to dispense with the holding of the meeting to which article 17, no. 1 of RJAT refers and scheduled the date for the pronouncement of the final decision on 30/01/2015.

  1. CLARIFICATION OF PROCEDURAL MATTERS

The joinder of requests underlying the request for arbitral decision is admissible, inasmuch as it has as its object acts of assessment of the same tax, that of stamp tax. As there is also verification of the identity between the factual matter and because the success of the request depends on the interpretation of the same principles and rules of law, see article 3, no. 1 of RJAT.

The process is not afflicted with nullities, no issues were raised that impede the examination of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to know and decide the request, with the conditions consequently being met for the final decision to be issued.

  1. POSITIONS OF THE PARTIES

There are two positions in confrontation, that of the Claimant, set forth in the request for arbitral decision, and that of the TA in its response.

Summarizing:

The Claimant understands that:

a) "…the tax event is deemed to have occurred on 31 October 2012 and that the tax property value to be used in the assessment of the tax corresponds to that which results from the rules of the Municipal Property Tax Code by reference to the year 2011.";

b) "However, Law no. 55-A/2012, of 29 October, says nothing regarding the qualification of the concepts in question, namely, regarding the concept of property with residential use.";

c) "…for the legislator, the situation of the property (in vertical ownership or in horizontal ownership) is not relevant, as no reference or distinction is made between one and the other.";

d) "…as regards the determination of the value relevant for the incidence of Stamp Tax on properties in vertical ownership, it is found that the position assumed by the Tax Authority – according to which these must be considered as a whole despite being constituted by various autonomous parts for dwelling, with independent use – does not appear acceptable in light of the principle of tax legality.";

e) "… if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, then this criterion must also be taken into account for the definition of the rule of incidence of the new tax.";

f) "Thus, there would only be incidence of the new Stamp Tax if one of the parts, floors or units with independent use presented a TPV greater than 1,000,000 EUR.";

g) "The criterion defended by the Tax Authority, of considering the value of the sum of the TPV attributed to the parts, floors or units with independent use, finds no legal support and is contrary to the criterion applicable in the context of IMI and, by referral, in the context of Stamp Tax.";

h) It concludes arguing that: "…it is illegal and unconstitutional to consider as reference value that corresponding to the sum of the TPV attributed to each part or unit and would thus be, right away, because it would be a clear violation of the principle of equality and proportionality in tax matters.".

On the other hand, the TA argues that:

a) "…for purposes of IMI and also of stamp tax, by virtue of the wording of the said item, it is not the owner of 9 autonomous units, but rather of a single property.";

b) "Having taken this fact as established, what the claimant intends is for the TA to consider that, for purposes of the assessment of the present tax, there is analogy between the regime of full ownership and that of horizontal ownership, since there should not be discrimination in the legal-tax treatment of these two ownership regimes, as it would be illegal.";

c) The "tax law contains no lacuna! The CIMI, to which the cited item refers, determines that in the horizontal ownership regime the units constitute properties. The property not being subject to this regime, legally the units are parts capable of independent use, without there being common parts.";

d) "The property being subject to the regime of full ownership, but being physically constituted by parts capable of independent use, the tax law attributed relevance to this materiality, evaluating these parts individually, pursuant to article 12 and consequently, pursuant to article 12, no. 3, of the CIMI, each floor or part of a property capable of independent use is considered separately in the registration record, but in the same matrix, proceeding to assess the IMI taking into account the tax property value of each part.";

e) "The unity of the urban property in vertical ownership composed of various floors or units is not, however, affected by the fact that all or part of these floors or units are capable of independent economic use.";

f) "Such property does not cease, by the fact of being only one, not being thus its distinct parts legally equated to autonomous units in the horizontal ownership regime.";

g) "The fact that the IMI was calculated according to the tax property value of each part of property with independent economic use does not equally affect the application of item 28, no. 1 of the General Table.";

h) It further argues that another interpretation would be unconstitutional because: "…it would violate (…) the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in article 103, no. 2, of the Constitution of the Portuguese Republic (CRP).".

  1. FACTUAL MATTERS

4.1. FACTS CONSIDERED PROVEN

4.1.1. The Claimant is the owner of a quota of 4/7 of the property to which corresponds the registration…, Urban, … (…)

4.1.2. Such property comprises in particular 17 floors with independent use, registered in the urban property matrix of the parish of … (…) as follows:

a) RC D, with a TPV of € 65,111.82, residential;

b) RC E, with a TPV of € 50,914.02, residential;

c) 1 D, with a TPV of € 72,216.10, residential;

d) 1 E, with a TPV of € 72,216.10, residential;

e) 1 F, with a TPV of € 55,833.20, residential;

f) 2 D, with a TPV of € 72,216.10, residential;

g) 2 E, with a TPV of € 72,216.10, residential;

h) 2 F, with a TPV of € 55,833.20, residential;

i) 3 D, with a TPV of € 72,216.10, residential;

j) 3 E, with a TPV of € 72,216.10, residential;

l) 3 F, with a TPV of € 55,833.20, residential;

m) 4 D, with a TPV of € 72,216.10, residential;

n) 4 E, with a TPV of € 72,216.10, residential;

o) 4 F, with a TPV of € 55,833.20, residential;

p) 5 E, with a TPV of € 72,216.10, residential;

q) 5 D, with a TPV of € 72,216.10, residential;

r) 5 F, with a TPV of € 55,833.20, residential.

4.1.3. The Claimant was notified of the assessments of Stamp Tax relating to the year 2013 (1st installment), in relation to each of such registrations in the total amount of € 3,192.46 and which are broken down as follows:

a) RC D, document 2014…, in the amount of € 186.04;

b) RC E, document 2014…, in the amount of € 145.47;

c) 1 D, document 2014…, in the amount of € 206.33;

d) 1 E, document 2014…, in the amount of € 206.33;

e) 1 F, document 2014…, in the amount of € 159.53;

f) 2 D, document 2014…, in the amount of € 206.33;

g) 2 E, document 2014…, in the amount of € 206.33;

h) 2 F, document 2014…, in the amount of € 159.53;

i) 3 D, document 2014…, in the amount of € 206.33;

j) 3 E, document 2014…, in the amount of € 206.33;

l) 3 F, document 2014…, in the amount of € 159.53;

m) 4 D, document 2014…, in the amount of € 206.33;

n) 4 E, document 2014…, in the amount of € 206.33;

o) 4 F, document 2014…, in the amount of € 159.53;

p) 5 E, document 2014…, in the amount of € 206.33;

q) 5 D, document 2014…, in the amount of € 206.33;

r) 5 F, document 2014…, in the amount of € 159.53.

4.1.4. The property identified in 4.1.1. was not constituted in horizontal ownership on 31 December 2013.

4.2. FACTS CONSIDERED NOT PROVEN

There are no facts with relevance for the arbitral decision that have not been given as proven.

4.3. REASONING OF THE FACTUAL MATTERS CONSIDERED PROVEN

The facts given as proven have their origin in the documents used for each of the alleged facts and whose authenticity was not called into question. Equally, facts that were not contested were also taken as established.

  1. THE LAW

Firstly, there are two questions that the tribunal must decide, to determine whether the subjection to the rule of incidence of item 28 of GTIS must be concretized by the TPV corresponding to each of the parts, floors or units capable of independent use, or, if on the contrary, by the sum of the TPV of each of such parts. And, secondly, to determine whether the interpretation that concludes that Stamp Tax is incurred only when the TPV of each of the units capable of independent use is greater than € 1,000,000 violates the principle of legality of the essential elements of the tax, provided for in article 103, no. 2 of the CRP.

To accomplish such task, it is necessary, from the outset, to seek the rule whose parts are in disagreement over its interpretation.

Thus, article 1, no. 1 of the Stamp Tax Code (CIS) and item 28 of the General Table of Stamp Tax (GTIS), provide that the following are subject to taxation: "Ownership, usufruct or right of surface of urban properties whose tax property value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax property value used for purposes of IMI:

28.1 - For property with residential use - 1%..."[1].

First, it is necessary to examine the concept of "property with residential use" to which the rule under interpretation refers and that of "tax property value used for purposes of IMI". Since it is not possible to resolve the question by resorting to the CIS, it is by virtue of the provision of article 67, no. 2 of the CIS necessary to apply the rules of the Municipal Property Tax Code (CIMI).

Consequently, article 2 of the CIMI provides on the concept of property:

"1 - For purposes of this Code, property is any portion of territory, including waters, plantations, buildings and constructions of any nature incorporated in or erected upon it, with a character of permanence, provided that it is part of the assets 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 in relation to the land where they are located, although located in a portion of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature.

2 - Buildings or constructions, even though movable by nature, are deemed to have a character of permanence when allocated to non-transitory purposes.

3 - The character of permanence is presumed when the buildings or constructions are located in the same place for a period exceeding one year.

4 - For purposes of this tax, each autonomous unit, in the horizontal ownership regime, is deemed to constitute a property."

Now, the concept of property under IMI is, as we know, endowed with greater breadth in relation to that set forth in article 204, no. 2 of the Civil Code (CC) and encompasses three elements, more specifically, one of a physical nature, the second of a legal character and the last of an economic nature, see JOSÉ MARTINS ALFARO, Municipal Property Tax Code – Commented and Annotated, Áreas Editora, 2004, pages 118 to 123. The first requires reference to a portion of territory, including, in particular, buildings and constructions incorporated in it with a character of permanence. The element of a legal character requires that the thing, movable or immovable, belongs to the assets of a natural or legal person. Thirdly, the element of an economic nature requires that the thing have economic value.

With regard to the concept of urban property, article 6 of the CIMI describes its various categories, being fundamental for the subsumption in each of them, the nature of the use, that is, the purpose to which it is intended. And, nothing in the economy of article 6, no. 1, paragraph a) of the CIMI prevents the classification of parts of a property in vertical ownership, with divisions or floors capable of independent use, with residential use, as "property with residential use". What is relevant, it is repeated, is its use. And a different conclusion is not possible to reach through the interpretation of article 2, no. 4 of the CIMI which elevates each autonomous unit in horizontal ownership to the category of property. In fact, in this last normative either, it is not possible to discern any foundation for discriminating between properties in horizontal ownership and properties in vertical ownership, with floors or units capable of independent use, as regards their subsumption as urban and residential properties, in accordance with the entire economy of item 28 of GTIS. In other words, if the legislator did not treat properties in vertical ownership differently from those constituted in horizontal ownership, the interpreter should not do so[2].

Quite the contrary, the registration record and the determination of the TPV clearly demonstrate the similarity of legislative treatment. In effect, parts endowed with economic independence must, each one of them, be the subject of separate registration and, consequently, the respective TPV should equally appear autonomously, see article 2, no. 4, article 7, no. 2, paragraph b) and article 12, no. 3 all of the CIMI. What has refraction in the context of assessment, in that there will be one for each part, unit or floor subject to separate use.

Reverting such interpretation to the present case, there are 17 floors of the property with independent residential use which, on the date of the tax event, 31 December 2013, was not yet constituted in horizontal ownership and, consequently, right away, there is no doubt that they must be classified as "property with residential use" of an urban nature.

It is still important to clarify the other textual segment of the item of CIS under interpretation, that is, the "tax property value for purposes of IMI".

In this regard, as already described above, the CIMI provides for the autonomization of parts of urban property capable of independent use as regards the registration record and the specification of the respective TPV. This observation is equally valid regarding the consequent assessment, as provided by article 113, no. 1 and article 119, no. 1, both of the last cited enactment. In effect, if the tax is assessed "…based on the tax property values of the properties (our emphasis) and in relation to the subjects liable for tax shown in the matrices (our emphasis) …" and the collection document must contain the "…specification of the properties, their parts capable of independent use, respective tax property value and the tax collected…", this means that, not only is the TPV for purposes of applying item 28.1 of GTIS to be considered that which is the subject of separate registration, but also nothing prevents the qualification as "property with residential use" of parts, floors or units with independent use.

Now, if none of the Claimant's floors exceeded the TPV of € 1,000,000, the rule of incidence in question cannot be applicable to the case sub judice, under penalty of illegality.

The TA further argues that it would be unconstitutional, by violation of the principle of legality of the essential elements of the tax, an interpretation of item 28.1 of GTIS different from that which concludes that the TPV relevant for such rule of incidence must be the total tax property value of the property and not that of each of its independent parts. If this were so, it would not be understood the express reference to the "tax property value used for purposes of IMI". And that, there is no doubt, is the subject of autonomization in relation to each of the parts capable of independent use. Equally, we would not find argument for the issuance of autonomous assessment notes. It adds further that, in view of the express referral of article 67, no. 2 of the CIS to the CIMI, regarding matters not regulated, the parts, floors or units with autonomy are classifiable among the properties classified as urban and residential, see article 2, 3 and 6, all of the CIMI. In this manner, it is understood that the said interpretation does not suffer from unconstitutionality.

Finally, if the tribunal accepted the Claimant's request for declaration of illegality of the acts of Stamp Tax assessment, the examination of the remaining defects attributed by it is precluded, see article 124 of the CPPT applicable by virtue of the provision of article 29, no. 1 of RJAT.

  1. DECISION

In these terms and with the reasoning described above, it is decided to judge the arbitral request as having merit, with the consequent removal from the legal order of the acts subject to arbitral decision.

  1. VALUE OF THE CASE

The value of the case is set at € 3,192.46 (corresponding to the sum of the assessments subject to arbitral decision) pursuant to article 97-A of the CPPT, applicable by virtue of the provision of article 29, no. 1, paragraphs a) and b) of RJAT and article 3, no. 2 of the Regulation on Costs in Tax Arbitration Processes (RCPAT).

  1. COSTS

Costs to be borne by the TA, in the amount of € 612, see article 22, no. 4 of RJAT and Table I attached to the Regulation on Costs in Tax Arbitration Processes.

Notify.

Lisbon, 30 January 2015

The sole arbitrator,

Francisco Nicolau Domingos

Document prepared on computer, pursuant to no. 5 of article 131 of the CPC, applicable by referral from paragraph e) of no. 1 of article 29 of Decree-Law no. 10/2011, of 20/01.

The writing of this decision is governed by the old spelling.

[1] In the wording in force at the date of the tax event.

[2] See in this sense the arbitral decision issued in case no. 50/2013 – T, of 29/10/2013.

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to inherited property?
Item 28 of the General Stamp Tax Table (Verba 28 da TGIS) imposes Stamp Tax on ownership of urban properties with residential use exceeding certain Tax Property Values (Valor Patrimonial Tributário). For inherited property, this tax applies to the estate, with assessments issued based on the TPV registered for IMI purposes. The tax event is generally deemed to occur on a specific reference date (in this case, October 31, 2012), and valuation follows Municipal Property Tax Code (CIMI) rules. Heirs representing the estate may challenge these assessments if they dispute the valuation methodology, property classification, or application of exemption thresholds.
Can heirs challenge Stamp Tax (Imposto do Selo) liquidations through CAAD tax arbitration?
Yes, heirs can challenge Stamp Tax (Imposto do Selo) liquidations through CAAD (Centro de Arbitragem Administrativa) tax arbitration. As demonstrated in this case, an heir representing the estate (herança aberta) filed an arbitration request against 17 separate Stamp Tax assessment notices totaling €3,192.46. The arbitration request was accepted under article 3(1) of RJAT (tax arbitration regime) because all assessments involved the same tax type, similar factual circumstances, and legal interpretation questions. The CAAD tribunal has material competence to review Stamp Tax assessments' legality, and heirs have standing to represent the estate in such proceedings.
How is the taxable event date determined for Stamp Tax under Verba 28 of the TGIS?
The taxable event date for Stamp Tax under Item 28 TGIS is determined by the applicable legislation in force at the time. In this case, the claimant argued the tax event occurred on October 31, 2012, based on Law 55-A/2012 of October 29, which introduced this Stamp Tax regime. The Tax Property Value (TPV) used for assessment corresponds to the value resulting from Municipal Property Tax Code rules by reference to a specific year (2011 in this case). The taxable event timing is crucial because it determines which legal framework applies and which TPV valuation is relevant for calculating the tax liability.
What are the grounds for requesting arbitration against multiple Stamp Tax assessments in a single CAAD proceeding?
Multiple Stamp Tax assessments can be joined in a single CAAD arbitration proceeding under article 3(1) of RJAT when specific conditions are met: (1) all assessments involve the same tax type (Stamp Tax in this case); (2) there is identity of factual circumstances underlying each assessment; and (3) the success of the challenge depends on interpretation of the same legal principles and rules. In this case, 17 separate assessment notices were consolidated because all involved Stamp Tax under Item 28 TGIS on different parts of the same property in vertical ownership, raising the identical legal question of whether TPV should be aggregated or considered separately for each autonomous unit.
How does the property valuation (Valor Patrimonial Tributário) affect Stamp Tax liability under Verba 28 TGIS?
The Tax Property Value (Valor Patrimonial Tributário - VPT or TPV) directly determines Stamp Tax liability under Item 28 TGIS by establishing whether the property exceeds the €1,000,000 threshold for residential properties. The central dispute in this case concerns valuation methodology: should vertical ownership properties with multiple autonomous units use (a) the sum of all units' TPV values (Tax Authority's position) or (b) each unit's individual TPV separately (claimant's position). This distinction is critical because individually, none of the 17 units exceeded €1,000,000, but their aggregate value did. The TPV is determined under CIMI rules, with article 12 requiring separate registration and valuation of parts capable of independent use, though this doesn't necessarily create separate legal properties for Stamp Tax purposes.