Process: 498/2014-T

Date: March 11, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision (Process 498/2014-T) addresses the controversial application of Verba 28.1 of the General Stamp Tax Table (TGIS) to a multi-unit residential building held in full ownership rather than horizontal property regime. Eight taxpayers challenged stamp duty assessments for 2013 on a building containing 46 independent-use floors/units, 39 of which were residential. The Tax and Customs Authority (TCA) aggregated the patrimonial values of the 39 housing units (totaling €3,178,220.00) and assessed stamp duty under item 28.1, which applies when housing property values exceed €1,000,000.00. The petitioners argued that each unit possessed independent economic utility and autonomous value, as evidenced by individual Municipal Property Tax (IMI) evaluations. They contended that units cannot be treated as a single building merely because they lack horizontal property status or because their aggregate value exceeds the threshold. The petitioners cited precedent from Process 193/2014-T CAAD, where similar facts resulted in annulment of stamp duty. Additionally, they challenged the retroactive application of 2014 patrimonial values to the 2013 tax year. The TCA defended its position by invoking Article 2 of the Municipal Property Tax Code (CIMI), arguing that only horizontal property units qualify as autonomous buildings for tax purposes, and that full ownership structures constitute a single building. The case raises fundamental questions about the proper unit of taxation under Verba 28.1: whether the legal ownership structure (horizontal vs. vertical property) or the economic reality of autonomous units should govern. The petitioners sought annulment of assessments and compensatory interest on taxes paid, which ranged from €5,297.00 to €10,594.10 across various individual and estate taxpayers.

Full Decision

ARBITRAL DECISION

A – REPORT

  1. A, taxpayer no. …, resident at Avenida …, Lisbon, B, taxpayer no. …, resident at Avenida …, Lisbon, C, taxpayer no. …, resident at Rua …, Lisbon, D, taxpayer no. …, resident at Avenida …, Lisbon, E, taxpayer no. …, resident at Rua …, Lisbon, F, taxpayer no. …, resident at Avenida …, Lisbon, G, taxpayer no. …, resident at …, Lisbon, H, taxpayer no. …, resident at Avenida …, Lisbon, have requested the constitution of an arbitral tribunal, pursuant to articles 2, no. 1, a) and 10, nos. 1 and 2 of the Legal Regime for Tax Arbitration, provided for in Decree-Law 10/2011, of 20 January, hereinafter designated "LRTA" and articles 1 and 2 of Ministerial Order no. 112-A/2011, of 22 March, with a view to the declaration of illegality of the stamp duty assessment act for the year 2013, and the recognition of the right to compensatory interest, with the Tax and Customs Authority (hereinafter designated "TCA") as the respondent.

  2. The request for constitution of a single arbitral tribunal having been admitted, and the petitioners having not opted for the designation of an arbitrator, in accordance with the provisions of subsection a) of no. 2 of article 6 and subsection b) of no. 1 of article 11 of the LRTA, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated the undersigned as arbitrator.

The parties were notified of this designation and did not manifest any intention to challenge the designation of the arbitrator, in accordance with the combined provisions of article 11, no. 1, subsections a) and b) of the LRTA and articles 6 and 7 of the Deontological Code, and in accordance with subsection c) of no. 1 of article 11 of the LRTA, as amended by article 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 22-09-2014.

  1. Notified, the TCA presented a reply in which it did not raise any objection.

  2. The holding of the meeting provided for in article 18 of the LRTA was waived with the consent of the parties, as was the presentation of written submissions.

  3. The petitioners request that the illegality and consequent annulment of the stamp duty assessment act for the year 2013 be declared, with the consequent restitution of the tax paid, plus compensatory interest, alleging in summary:

a) One hundred and fifty-six stamp duty assessment notices (item 28.1) were sent to the petitioners, in their personal names and/or as heads of various estates, all relating to the urban article …, of the parish of ….

b) All assessment notices contain the following reference: "real property value – total subject to tax: € 3,178,220.00".

c) € 3,178,220.00 is the result of the sum of the real property values subject to tax of 39 floors or units with independent use that are used for housing, as results from the classification of the extinct article … of the parish of …, municipality of Lisbon and currently registered under article … of the said parish.

d) The fiscal owners of the identified urban article are: petitioner A – 1/6, I – head of the estate of (VAT no. …) – 1/3, J – head of the estate of (VAT no. …) – 1/3, K – head of the estate of (VAT no. …) – 1/6.

e) The said real property – extinct urban article … – is the current urban article … and is registered at the Land Registry Office under no. …, of the parish of ….

f) Which is registered in favor of the petitioners.

g) The composition of the real property is as follows: a building in full ownership with floors or units susceptible to independent use, composed of basement, ground floor and eleven floors, intended for commerce and housing, located at Avenida …, no. 56a, 56B, 56C, 56D and 56, with a total land area of 1,000.0000 m², building footprint area of 960.8750 m², total gross private area of 7,230.0000 m², which comprises the floors/units "1d", "1df" and "11d", intended for services, the floors/units "1e", "1ef", "10d", "10df", "10e", "10ef", "11p", "2d", "2df", "2e", "2ef", "3d", "3df", "3e", "3ef", "4d", "4df", "4e", "4ef", "5d", "5df", "5e", "5ef", "6d", "6df", "6e", "6ef", "7d", "7df", "7e", "7ef", "8d", "8df", "8e", "8ef", "9d", "9df", "9e", "9ef", intended for housing, "anun", intended for services, basement, intended for storage and industrial activity, "shop d" and "shop e", intended for services.

h) The taxation of the 39 floors or units with independent use intended for housing resides in the fact that the sum of the real property value of the said floors or units with independent use of the said building amounts to the global sum of € 3,178,220.00, that is, its value exceeds € 1,000,000.00.

i) Taxation under item 28.1 of the General Stamp Tax Table (GSTT) of the 39 floors or units with independent use intended for housing is illegal.

j) Each of the 39 floors or units with independent use intended for housing constitutes a building with economic utility independent and autonomous from the remainder and from the building as a whole.

k) The 46 floors or units with independent use whether used for housing or other purposes were all individually evaluated for purposes of the Municipal Property Tax Code (MPTC), which demonstrates that even for the Tax Authority itself they are qualified as units with independent economic value.

l) Therefore, they cannot be considered as a single building in the part used for housing merely by the fact that they are not in the regime of horizontal property ownership and/or by the fact that their total real property value exceeds € 1,000,000.00.

m) In this tribunal, proceedings 193/2014-T CAAD were pending, where the current petitioners are also petitioners but whose stamp duty concerns the year 2013, a learned decision has already been rendered in which it was understood that there is no place for stamp duty in the case in question.

n) On the other hand, the stamp duty concerns the year 2013 but was assessed at the real property value determined in 2014, which constitutes an erroneous determination of the taxable matter insofar as the taxable matter on which the tax assessed on 31 December 2013 bears cannot be other than the real property value in force in 2013.

o) If this is not understood, it will always be said that the application of a real property value determined in 2014 to a taxable event of 2013 amounts to a retroactive application of tax law, which is illegal.

p) The tax assessed on A in the amount of € 5,297.00 was paid on 29-04-2014.

q) The tax assessed on the undivided and unliquidated estate opened by the death of K, in the amount of € 5,297.00 was paid on 29-04-2014.

r) The tax assessed on the undivided and unliquidated estate opened by the death of I was paid in the course of tax enforcement proceedings, on 08-07-2014, single payment, default interest and costs amounted to € 6,267.06.

s) Of the tax assessed on the undivided and unliquidated estate opened by the death of J, in the amount of € 10,594.10, the sum of € 5,476.69 was paid on 29-04-2014.

t) Payment of the tax is due to error attributable to the services in that they effected illegal assessments, wherefore there is place for payment of compensatory interest calculated from 29 April 2014 on the sums of € 5,295.00, € 5,297.00, € 5,476.00 and from 08-07-2014 on the sum of € 6,276.06.

  1. In turn, the respondent alleged in its reply, in summary:

a) From the concept of a building in article 2 of the MPTC, only autonomous units of buildings in the regime of horizontal property ownership are regarded as buildings.

b) As the building of which the petitioners are usufructuaries is in a regime of full or vertical ownership, it does not possess autonomous units, to which tax law attributes the qualification of building.

c) For purposes of Property Tax and also of stamp duty, by virtue of the wording of the said item 28.1, the petitioners are not usufructuaries of 13 autonomous units, but rather of a single building.

d) Horizontal property ownership is a specific legal regime of property ownership provided for in articles 1414 et seq. of the Civil Code, the means of constitution of which are provided therein, as well as the other rules on the rights and liabilities of co-owners.

e) To contend that the interpreter and applicant of tax law apply, by analogy, to the regime of full ownership the regime of horizontal property ownership is abusive and illegal.

f) As the two property ownership regimes are borrowed by tax law from civil law, the interpreter of tax law cannot equate these regimes, in accordance with the rule that the concepts of other branches of law have in tax law the meaning given to them in those branches of law.

g) Tax law contains no lacuna; the MPTC determines, to which the said item refers, that in the regime of horizontal property ownership the units constitute buildings.

h) One cannot accept that parts susceptible to independent use should have the same tax regime as autonomous units in the regime of horizontal property ownership for purposes of item 28.1 of the GSTT.

i) Floors or independent units, evaluated in accordance with article 12, no. 3 of the MPTC, are considered separately in the classification entry, which likewise discriminates the respective real property value subject to tax on which Property Tax is assessed.

j) The unity of an urban building in vertical ownership composed of various floors or units is not affected by the fact that all or some of those floors or units are susceptible to independent economic use.

k) The interpretation of item 28.1 of the General Stamp Tax Table to the effect that the real property value on which its incidence depends is determined globally rather than floor by floor or unit by unit offends the principle of tax legality.

l) It is not apparent how the taxation in question could have violated the principle of tax equality.

m) The classification entry of each part susceptible to independent use is not autonomous, per entry, but rather comprises a description in the entry of the building as a whole.

n) Inasmuch as the taxable event of stamp duty under item 28.1 consists in the ownership of urban buildings whose real property value subject to tax contained in the entry, in accordance with the MPTC, is equal to or exceeds € 1,000,000.00, the real property value relevant for purposes of the incidence of the tax is, thus, the total real property value of the urban building and not the real property value of each of the parts that compose it, even when susceptible to independent use.

o) The tax acts in question, in terms of substance or form, did not violate any legal or unconstitutional provision and should thus be maintained.

  1. The Arbitral Tribunal was duly constituted and is materially competent.

The parties enjoy legal personality and capacity and are legitimate (articles 4 and 10, no. 2, of the same instrument and article 1 of Ministerial Order no. 112-A/2011, of 22 March).

The petitioners make their request for arbitral pronouncement in coalition which, given that it concerns the assessment of the same factual circumstances and the interpretation and application of the same principles and rules of law, is admissible (article 3, no. 1 of the LRTA).

The proceedings do not suffer from any nullities.

B. DECISION

1. MATTER OF FACT

1.1. PROVEN FACTS

The following facts are considered proven:

a) The petitioners are registered as owners of the urban article …, of the parish of … – extinct urban article … – of the parish of ….

b) The building comprises a total of 46 floors or units with independent use, of which 39 are intended for housing, six for services and one for storage and industrial activity.

c) The sum of the global real property value of the floors intended for housing amounts to 3,178,220 € (three million one hundred seventy-eight thousand two hundred twenty euros).

d) All real property values of the floors used for housing are less than 1,000,000.00 €.

e) The TCA assessed stamp duty individually on the real property values subject to tax of the floors or parts susceptible to independent use for housing, by application of the provisions of item 28.1 of the GSTT, as amended by article 4 of Law 55-A/2012, of 29 October.

f) The deadline for voluntary payment of the assessed stamp duty ended on 30-04-2014.

g) The petitioners made payment of the assessed tax.

h) On 18-07-2014 the petitioners submitted the request for arbitral pronouncement that gave rise to the present proceedings.

1.2 The facts were established based on the documents attached to the file.
1.3 UNPROVEN FACTS

There are no facts established as unproven with relevance for the assessment of the request.

1.4 THE LAW

The substantive issue to be assessed in the present request for arbitral pronouncement resides in the interpretation to be given to item 28.1 of the General Stamp Tax Table, as amended by Law no. 55-A/2012 of 29 October, in order to determine whether, regarding buildings not constituted in the regime of horizontal property ownership that comprise floors or units susceptible to independent use, the real property value subject to tax relevant for purposes of application of the tax is that attributed individually to each of them or, conversely, is that corresponding to the sum of all of them.

Item 28 of the General Stamp Tax Table provides:

  • "Ownership, usufruct or surface right of urban buildings whose real property value subject to tax contained in the entry, in accordance with the Municipal Property Tax Code, is equal to or exceeds € 1,000,000.00 – on the real property value for purposes of Property Tax:

28.1 – Per building with residential use – 1%

(…)".

Article 6 of the said Law no. 55-A/2012 provides that the real property value subject to tax to be considered in the assessment of stamp duty corresponds to that resulting from the rules of the Municipal Property Tax Code (MPTC), and no. 2 of article 67 of the Stamp Duty Code (SDC) adds that "matters not regulated in the present Code concerning item no. 28 of the General Table are governed subsidiarily by the provisions of the MPTC".

In turn, article 2 of the MPTC gives us the concept of a building, with article 6 of the same code, in its no. 2, establishing that "buildings or constructions for residential, commercial, industrial or services purposes are those licensed for such use or, in the absence of a license, that have as their normal purpose each of these uses".

It is with recourse to these provisions that the answer to the question to be decided must be found.

It is certain that the only comparison that the MPTC makes between buildings in the regime of horizontal property ownership or full ownership can be found in no. 4 of article 2 when it prescribes that "each autonomous unit, in the regime of horizontal property ownership, is deemed to constitute a building".

In compliance therewith, in the definition of the concept of property entries, no. 3 of article 12 of the MPTC determines that "each floor or part of a building susceptible to independent use is considered separately in the classification entry, which also discriminates the respective real property value subject to tax".

No relevance is thus given by the legislature to the fact that a building is constituted in the regime of horizontal or vertical ownership, the only thing that matters being the material truth underlying its existence as an urban building and its use.

That is to say, there is nothing in the law that permits concluding that the real property value subject to tax of a building in the regime of full ownership is to be obtained by the sum of those attributed individually to the parts that compose it, in accordance with the understanding that has been adopted by various arbitral decisions[1] to which we fully adhere and therefore subscribe.

Wherefore we understand that the position of the TCA cannot merit acceptance when it seeks to establish as the reference value for the incidence of stamp duty the global value of the building in question, as the MPTC does not admit thereof, which is, as already stated, the legal remissive basis of support therefor.

As none of the floors susceptible to independent use for housing purposes have a real property value exceeding one million euros, there is no place for the incidence of item 28.1 provided for in the GSTT.

Whence it is concluded that the assessment that is the object of the present arbitral request suffers from illegality, wherefore its annulment is required.

It thus follows that the assessment of the other issue raised by the petitioners is rendered moot.

Compensatory Interest

Beyond the restitution of the tax unduly paid, the petitioners request that the right to payment of compensatory interest be declared.

This right is enshrined in article 43 of the General Tax Code (GTC), which has as its premise that it be established, in a gracious complaint or judicial challenge, that there was error attributable to the services resulting in payment of a debt in an amount greater than that legally due.

The recognition of the right to compensatory interest in arbitral proceedings results from the provisions of article 24, no. 5 of the LRTA.

In the case in question, it is manifest that the illegality of the assessment act in question is attributable to error of the TCA.

Wherefore the petitioners have the right to the requested payment of compensatory interest.

It should be noted, however, that the interest in question shall accrue only on the value of the tax paid and not on the charges incurred in the course of tax enforcement proceedings (such as default interest and costs), as the petitioners request.

3. DECISION

In light of the foregoing, it is decided:

a) To uphold as well-founded, on the ground of violation of law, the request for annulment of the tax act that is the object of the arbitral request corresponding to the assessment of Stamp Duty for the year 2013, as well as the request for payment of compensatory interest;

b) To order the Tax and Customs Authority to refund to the petitioners the amount of tax paid, plus the respective compensatory interest in relation to the tax paid;

c) To order the respondent to pay the costs of the proceedings.

VALUE OF PROCEEDINGS: In accordance with the provisions of article 306, no. 2 of the Code of Civil Procedure, article 97-A, no. 1, a) of the Code of Tax Procedure and Proceedings and article 3, no. 2 of the Costs Regulation in Tax Arbitration Proceedings, the proceedings are assigned a value of 31,782.20 € (thirty-one thousand seven hundred eighty-two euros and twenty cents).

COSTS: In accordance with the provisions of article 22, no. 4, of the Costs Regulation in Tax Arbitration Proceedings, the amount of costs is fixed at 1,836.00 € (one thousand eight hundred thirty-six euros), in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings.

Let notification be made.

Lisbon, 11-03-2015

The Arbitrator

António Alberto Franco

[1] Among others, those rendered in Proc. 50/2013-T, 131/2013-T, 181/2013-T, 185-2013-T, 177/2014, 206/2014-T

Frequently Asked Questions

Automatically Created

How does Verba 28.1 of the TGIS apply to properties with multiple independent units for Stamp Tax purposes?
Verba 28.1 of the TGIS imposes annual stamp duty on urban property used for housing when the patrimonial value exceeds €1,000,000.00. The critical interpretive issue concerns whether 'property' refers to individual autonomous units with independent economic utility or the entire building structure based on legal ownership form. In this case, the TCA aggregated values of 39 residential units within a single building held in full ownership, treating it as one taxable property. However, the petitioners successfully argued that each independently-used housing unit, individually assessed for IMI purposes, should constitute a separate 'property' for stamp tax purposes. The tribunal followed precedent from Process 193/2014-T, concluding that economic substance and functional autonomy—not merely the legal regime of horizontal versus vertical property—should determine the unit of taxation under Verba 28.1.
Can the tax authority aggregate the patrimonial values of individual housing units to meet the Stamp Tax threshold under Verba 28?
The CAAD arbitral tribunal held that the Tax Authority cannot mechanically aggregate patrimonial values of functionally independent housing units solely to reach the €1,000,000.00 threshold under Verba 28 of the TGIS. While the TCA argued that buildings in full ownership constitute a single taxable unit (citing Article 2 of CIMI, which defines autonomous units primarily in the context of horizontal property), the tribunal rejected this formalistic approach. The decision recognized that each of the 39 housing units possessed independent economic utility, separate IMI assessments, and autonomous use. Aggregating these values to trigger stamp duty liability would distort the legislative intent of Verba 28.1, which targets high-value individual residential properties, not artificially combined units within multi-family buildings. The tribunal emphasized that tax characterization must respect economic reality over legal ownership structures.
What is the CAAD arbitral tribunal procedure for challenging Stamp Tax (Imposto do Selo) assessments in Portugal?
The CAAD (Centro de Arbitragem Administrativa) arbitral tribunal procedure for challenging Stamp Tax assessments follows the Legal Regime for Tax Arbitration (LRTA - Decree-Law 10/2011 of 20 January). Taxpayers file a petition under Articles 2(1)(a) and 10 of the LRTA, requesting tribunal constitution to declare assessment acts illegal. If petitioners don't designate an arbitrator, the Deontological Council appoints one per Article 11. Parties may challenge arbitrator designation per Articles 6-7 of the Deontological Code. The tribunal constitutes after notification without objection (Article 11(1)(c) LRTA). The TCA submits a reply without preliminary objections. Parties may waive the Article 18 meeting and written submissions by consent, as occurred here. The process provides expedited alternative dispute resolution for tax controversies, with decisions on legality of assessment acts, consequent annulment, tax restitution, and compensatory interest awards.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) when a Stamp Tax liquidation is declared illegal?
Yes, taxpayers are entitled to compensatory interest (juros indemnizatórios) when stamp tax liquidations are declared illegal, provided they paid the unlawfully assessed tax. In Process 498/2014-T, petitioners paid stamp duty amounts ranging from €5,297.00 to €10,594.10 between April and July 2014, including one payment made under tax enforcement proceedings. Portuguese tax law recognizes compensatory interest as compensation for the financial loss caused by unlawful tax collection—the State's unjust enrichment at the taxpayer's expense. The interest calculation begins from the payment date: for voluntary payments made on 29 April 2014, interest accrues from that date; for the enforcement payment made on 08 July 2014, interest runs from that later date. Compensatory interest acknowledges that taxpayers suffered economic harm through deprivation of funds due to administrative error in effecting illegal assessments, distinguishing it from default interest charged for late payment.
How is the taxable value determined under Verba 28 of the Tabela Geral do Imposto do Selo for urban properties with autonomous divisions?
Under Verba 28 of the TGIS, taxable value for urban properties is determined by reference to the valor patrimonial tributário (VPT) established under the Municipal Property Tax Code (CIMI). This case exposed a critical timing issue: the TCA applied the 2014 VPT to assess stamp duty for the 2013 tax year. Petitioners successfully argued this constituted both erroneous determination of taxable matter and prohibited retroactive application of tax law. The taxable event occurred on 31 December 2013, when ownership and use status crystallized for annual stamp duty purposes. Therefore, the applicable VPT must be that in force during 2013, not values determined in subsequent assessments. For properties with autonomous divisions individually assessed for IMI, the tribunal determined that each autonomous unit's separate VPT constitutes the relevant taxable value, rather than aggregating all units' values. This approach aligns taxation with economic reality, treating functionally independent housing units as distinct properties regardless of whether formal horizontal property regime applies.