Process: 499/2014-T

Date: February 6, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 499/2014-T addresses a fundamental question in Portuguese tax law: whether building land (terrenos para construção) is subject to Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS). A Closed Real Estate Investment Fund challenged Stamp Tax assessments totaling €1,014,482.61 for 2013, arguing that undeveloped building land cannot be classified as 'property with residential use' as required by item 28.1. The claimant contended that item 28.1, introduced by Law 55-A/2012, applies only to constructed buildings with actual residential use, not to land with merely potential future residential use. The fund's legal arguments centered on several key points: first, that the Civil Code of Municipal Property Tax (CIMI) defines residential properties as necessarily requiring a building or structure; second, that article 6(3) of CIMI classifies building land separately from residential properties; third, that residential use must be concrete and actual, not abstract or projected; and fourth, that the patrimonial tax value calculation for building land under article 45 of CIMI should not include use coefficients applicable only to constructed properties. The arbitration proceeded under the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011), with the Tax Authority defending the assessments' validity. Additional complexity arose regarding a mixed-use property where the claimant argued that even if Stamp Tax applied, it should only apply proportionally to the residential portion, not the entire property value including commercial and service areas. The case exemplifies how real estate investment funds can access administrative arbitration through CAAD to contest significant tax assessments, with the tribunal constituted to resolve disputes over the interpretation of 'residential use' in Stamp Tax legislation.

Full Decision

Process no. 499/2014-T

I – Report

1.1. Closed Real Estate Investment Fund A…, with tax identification number …, and with registered office at Avenue …, in Lisbon (hereinafter referred to as "claimant"), represented and managed by B… – … Real Estate Funds, S.A., with tax identification number …, and registered office at the same address, having been notified of Stamp Duty assessments for the year 2013 (assessments with numbers …, … and …), in the total amount of €1,014,482.61, filed on 18/7/2014 a request for constitution of an arbitral tribunal and for an arbitral award, in accordance with the provisions of paragraph a) of article 2, paragraph 1, and paragraph a) of article 10, paragraph 1, both of Decree-Law no. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in which the Tax and Customs Authority (AT) is requested, seeking, in summary, the "declaration of illegality of the Stamp Duty assessments for the year 2013 and item 28.1 of the General Table of Stamp Duty".

1.2. On 1/10/2014 the present Collective Arbitral Tribunal was constituted.

1.3. Pursuant to article 17, paragraph 1, of the RJAT, the AT was cited, as the respondent party, to submit its response, in accordance with the aforementioned article, on 1/10/2014. The AT submitted its response on 3/11/2014, arguing for the complete dismissal of the claimant's request. It also submitted a request seeking waiver of the meeting referred to in article 18 of the RJAT.

1.4. On 12/11/2014, the claimant requested the joinder to the case file of the bank guarantee which it had sought to attach in order to suspend the enforcement proceedings instituted, in accordance with articles 169 and 199 of the General Tax Procedure Code (CPPT), applicable by virtue of article 13, paragraph 5, of the RJAT.

1.5. Between 3/11/2014 and 3/12/2014, the present Tribunal was presided over on a temporary basis by Mr. Counselor Judge Jorge Lopes de Sousa, and on a permanent basis as of 4/2/2015, in observance of the (and for the reasons stated in the) Orders, of those dates, of the Mr. President of the Deontological Council of CAAD.

1.6. In a request of 9/12/2014, the claimant, in response to the AT's request submitted on 3/11/2014, declared that it had nothing to object to regarding the waiver of the meeting provided for in article 18 of the RJAT.

1.7. By order of 05/02/2015, the Tribunal considered, pursuant to article 16, paragraphs c) and e), of the RJAT, that the meeting of article 18 of the RJAT was dispensable and that the case was ready for decision. The date of 13/02/2015 was also set for the pronouncement of the arbitral award.

1.8. The Arbitral Tribunal was duly constituted, is materially competent, the case is not affected by vices that would invalidate it, and the Parties have legal personality and capacity, being legitimately constituted.

II – Grounds: Factual Matter

2.1. The present claimant alleges in its initial petition that: a) "urban properties classified as 'land for construction' for purposes of IMI are not subject to Stamp Duty provided for in item 28 of TGIS"; b) "the CIS does not contain a definition of the concept of 'property with residential use' used in item 28 of TGIS, limiting itself to referring to the concept of 'property' provided for in CIMI"; c) "it results from the definition of residential, commercial, industrial or service properties provided for in CIMI that they necessarily must correspond to a building or structure. The same is to say that, for purposes of IMI, only buildings and other structures may be considered as residential, commercial, industrial or service properties"; d) "furthermore, tax law does not provide the concept of each of the types of urban properties enumerated in paragraph 1 of article 6 of CIMI, limiting itself to refer, in the first place, to the use conferred by licensing and, in the absence of a license, to the criterion of normal use"; e) "the concept of 'properties with residential use' provided for in item 28.1 of TGIS is not defined in Law no. 55-A/2012, of 29 October, which introduced it, nor in CIMI, to which paragraph 2 of article 67 of CIS, likewise introduced by that statute, refers subsidiarily"; f) "for purposes of taxation under item 28.1 of TGIS, the residential use of urban properties refers to the concrete and actual use of a constructed building, and not to an abstract, future and merely potential or projected use, under penalty of violation of applicable legal and constitutional norms"; g) "from the understanding set forth in the Legislative Proposal no. 96/XII, which was the origin of Law no. 55-A/2012, of 29/10, it results that the special taxation provided for in item 28.1 should apply only to properties intended for housing, specifically 'houses', whose patrimonial value exceeds the limit provided for in that item"; h) "from the definition contained in paragraph 3 of article 6 of CIMI it follows that properties classified as 'land for construction' do not include (yet) any 'construction' that could confer upon them a real 'residential use'"; i) "in light of the wording of item 28.1 of TGIS in force at the date of the facts now in question, and considering the legal succession above set forth [of judicial and arbitral decisions], the Claimant understands that, with respect to the Stamp Duty assessments that are the object of the present request for arbitral award, there is no rule of incidence that authorizes the Tax Administration to tax land for construction under Stamp Duty pursuant to item 28.1 of TGIS, whereby the assessments now in question violate the provisions of item 28.1 of TGIS and article 6 of CIMI"; j) "in determining the patrimonial value for tax purposes of land for construction there is no place for consideration of the use coefficient inasmuch as the same is not only not provided for in article 45 of CIMI, but applies only to already built properties"; l) "in light of the case law exposed, one must conclude that the use coefficient does not apply indiscriminately to all urban properties, being excluded, by virtue of the wording of articles 45 and 41 of CIMI, from the methodology for calculating the patrimonial value for tax purposes of land for construction, whereby the assessments now in question also violate the provisions of articles 41 and 45 of CIMI"; m) "in the evaluation of the property registered in the matrix under article 3593 (i) different uses were taken into account and not solely residential use (ii) different use coefficients for residential use were utilized (iii) the part assigned to residential use is neither predominant nor principal"; n) "since the rule of incidence of item 28.1 of TGIS refers to a property with 'residential use', it cannot be considered as included therein a property with different uses, including commerce and services, uses that the legislator expressly intended to exclude from the scope of the rule, and if this is not understood that way, then Stamp Duty should apply only to the part of the property with residential use [€46,548,299.03]"; o) "[although] the Stamp Duty assessment act no. 2011 … [was] partially revoked by the Tax Administration, in the part in which it applied to the patrimonial value for tax purposes corresponding to 'commercial and service use', thereby giving partial support to what was alleged by the Claimant, the Stamp Duty assessments under item 28.1 for subsequent years, including that for the year 2013, continued to apply to the entire patrimonial value of that property"; p) "[in summary,] it must also be concluded that, with respect to the property registered in the matrix under article 3593, residential use does not result from its evaluation, whereby, to that extent, its Stamp Duty assessment is also manifestly illegal"; q) "[should] any of the above-stated illegalities not be upheld, the Claimant understands that item 28.1 of TGIS is manifestly unconstitutional for violation of the principles of equality and proportionality"; r) "by treating as identical situations that are materially and manifestly distinct, the assessments in question manifestly violate the principle of equality, a vice capable of resulting in their annulment"; s) "item 28.1 is also unconstitutional for violation of the principle of proportionality, inherent in article 266, paragraph 2, of the CRP, article 5, paragraph 2, of the CPA and, within the scope of tax law, article 55 of the LGT"; t) "pursuant to the provisions of paragraphs 1 and 2 of article 53 of the LGT, in case of success in the present request for arbitral award, compensation is hereby requested for the damages resulting from the guarantees that come to be provided".

2.2. The claimant concludes that "the present request for arbitral award should be judged meritorious as proven, declaring the illegality of the Stamp Duty assessments for the year 2013, effected under item 28.1 of TGIS, with all legal consequences". It further requests "compensation for damages resulting from the undue provision of guarantee, pursuant to article 53 of the LGT."

2.3. For its part, the AT alleges in its defense that: a) "it is the AT's understanding that the property on which each of the assessments challenged applies has the legal nature of a property with residential use, whereby the assessment acts that are the object of the present request for arbitral award should be upheld, as they embody the correct interpretation of Item 28 of the General Table, as amended by Law 55-A/2012, of 29/12"; b) "in the absence of any definition of the concepts of urban property, land for construction and residential use under Stamp Duty, recourse must be made to CIMI, in search of a definition that permits assessment of any subjection to Stamp Duty, in accordance with the provisions of article 67, paragraph 2, of CIS, in the wording given by Law no. 55-A/2012, of 29/10"; c) "pursuant to the aforementioned legal provision [article 67, paragraph 2, of CIS], to matters not regulated in the Code, concerning item no. 28 of TGIS, the provisions of CIMI shall apply subsidiarily"; d) "for purposes of determining the patrimonial value for tax purposes of land for construction it is clear that the use coefficient applies in the course of evaluation, whereby its consideration for purposes of applying item 28 of TGIS cannot be ignored, being valid, in this sense, this order of considerations: [i)] in applying the law to concrete cases it is important to determine the exact meaning and scope of the norm, so that the rule contained therein is revealed, an indispensable condition for it to be applied, in accordance with the provisions of article 9 of the Civil Code, by virtue of article 11 of the LGT; [ii)] article 67, paragraph 2, of CIS mandates the subsidiary application of the provisions of CIMI; [iii)] the use of the property (aptitude or purpose) is a coefficient that contributes to the evaluation of the property, in determining patrimonial value for tax purposes, applicable to land for construction; [iv)] item 28 TGIS itself refers to the expression 'properties with residential use', appealing to a classification that overlays the species provided for in paragraph 1 of article 6 of CIMI"; e) "contrary to what is advocated by the Claimant, the AT understands that the concept of 'properties with residential use', for purposes of the provisions of item 28 of TGIS, comprises both built properties and land for construction, not least given the literal element of the norm"; f) "the mere constitution of a right of potential construction immediately increases the value of the property in question, hence the rule contained in article 45 of CIMI that mandates the separation of the two parts of the land"; g) "[having regard to the legal framework for urbanization and construction and, in particular, its article 77, it may be concluded that] long before the construction of the property it is possible to ascertain and determine the use of the land for construction"; h) "with respect to the alleged violation of constitutional principles, the AT cannot fail to emphasize that the Constitution of the Republic requires that like be treated alike and unlike be treated as unlike, not preventing differentiation of treatment, but only arbitrary, unreasonable discriminations, that is, distinctions of treatment that have no justification and sufficient material foundation, whereby it is understood that the provision of item 28 of TGIS does not constitute a violation of any constitutional command"; i) "the different aptitude of properties (housing/services/commerce) sustains the different treatment, having been a choice of the legislator, for political and economic reasons, to exclude from the incidence of Stamp Duty properties intended for purposes other than residential, namely given that their concrete use depends on their final construction"; j) "[the legal choice of application is not manifestly indefensible] inasmuch as such measure shall apply uniformly to all holders of properties with residential use of value exceeding €1,000,000.00"; l) "for all the foregoing, the assessments in dispute embody a correct interpretation and application of the law to the facts, suffering from no vice of violation of law, whether of the CRP or of the CIS, whereby, as a consequence, the alleged claim should be judged meritless and the Respondent Entity should be absolved of the request."

The AT concludes that "the request for declaration of illegality and consequent annulment of the disputed assessments [should] be judged meritless, absolving the AT of the request."

2.4. The following facts are found to be proven:

i) The present claimant is a closed real estate investment fund, owner of three urban properties registered in the urban land register of the parish of Campolide, municipality and district of Lisbon, under cadastral articles no. …, … and … (whose property records are respectively contained in docs. 1, 2 and 3, attached to the petition for arbitral award).

ii) The properties referred to are registered in their respective land registers as land for construction and the current patrimonial value for tax purposes thereof, for purposes of CIMI, is respectively €6,844,261.62, €1,205,199.23 and €93,398,800.00 (see docs. 1 to 3, attached to the petition for arbitral award).

iii) On 24/3/2014, the present claimant was notified of the 2013 Stamp Duty assessments, effected on 17/3/2014, under item 28.1 of TGIS and relating to the aforementioned three properties, with a total collection amount of €1,014,482.61 being determined, which is at issue here. The claimant was also notified to make payment of the 1st installment, as may be observed from collection documents no. 2014 .., 2014 … and 2014 … (see docs. 4 to 6, attached to the petition for arbitral award).

iv) On 19/6/2014, the present claimant was notified to make payment of the 2nd installment of the aforementioned Stamp Duty assessments, as is observed from collection documents no. 2014 …, 2014 … and 2014 … (see docs. 7 to 9, attached to the petition for arbitral award).

v) On 26/08/2014, the Claimant presented a bank guarantee to suspend the tax enforcement proceedings nos. …2014…, …2014… and …2014…, instituted for coercive collection of the sums referred to in the above-mentioned collection documents (document presented by the Claimant on 06/11/2014, which was not challenged);

vi) Not conforming to the assessments now in question, the claimant filed the present request for arbitral award on 18/7/2014.

2.5. There are no relevant facts not proven for the decision of the case.

III – Grounds: Legal Matter

The essential question in the present case concerns the definition of the scope of incidence of item 28.1 of the General Table of Stamp Duty, in the wording given to it by Law no. 55-A/2012 of 29/10, namely to know whether land for construction should be included in that norm and, specifically, whether land for construction with patrimonial value equal to or exceeding €1,000,000 falls, or does not fall, within the category of urban properties "with residential use".

This is a question which, regardless of the constitutional questions it raises, particularly regarding the principle of equality and the possibility of the existence of taxation in Stamp Duty on real property from a purely patrimony taxation perspective without any connection to the principle of equivalence or benefit (the fundamental principle of IMI), is abundantly treated both in the case law of CAAD and in the case law of the Supreme Administrative Court.

Indeed, it is today unanimous interpretation of the adjudicating entities that land for construction which has not yet had any type of use defined should be excluded from the scope of incidence of Stamp Duty, as they are not yet applied or intended for residential purposes.

In fact, land for construction, whether from the perspective of urban planning law or from the perspective of tax law, have a nature distinct from properties intended for residential purposes, since, at the moment prior to the completion of the improvement (construction itself) they have no defined use, constituting themselves as mere land assets, and therefore cannot be considered properties with residential use.

It should be noted that the legislator's intention was clearly restrictive. When using the expression "residential purposes" it clearly expresses a will to include only residential properties within the scope of the norm's incidence, clearly excluding those with commercial and industrial vocation (even if integrated in urban areas which, in a limiting situation of implementation consisting in the existence of an Urbanization Plan or Detailed Plan approved), given that their concrete use depends on their final construction.

In this context, various case law concluded that the assessments challenged suffer from error as to the factual and legal presuppositions, as the properties with respect to which Stamp Duty was assessed under the aforementioned item no. 28.1 constitute themselves as land for construction, without any building or structure, required to fulfill that concept of "residential properties".

The Public Treasury argues that the concept of "properties with residential use" for purposes of the provisions of item no. 28.1 of TGIS, comprises both built properties and land for construction, since the legislator does not refer to "properties intended for housing" but rather has chosen the notion of "residential use", an expression that it considers different and broader, integrating other realities beyond those identified in article 6, paragraph 1, letter a), of CIMI.

Concluding that residential use, for purposes of application of item 28, does not necessarily imply the existence of buildings or structures, thus applying to land for construction with such use.

This does not appear to be correct for the reasons already advanced.

Indeed, the question under examination is, even in its factual presuppositions, entirely identical to the question that was examined and decided in the Supreme Administrative Court in recent date, by judgments of 9/4/2014, issued in processes 1870/13 and 48/14, and of 23/4/2014, issued in processes 270/14, 271/14 and 272/14, in which it was decided that "land for construction" cannot be considered, for purposes of the incidence of Stamp Duty provided for in Item 28.1 of the respective General Table (in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential use.

This is case law which is also adopted here, as we agree fully with its reasoning, whereby we will limit ourselves to reproduce what was stated on the question in the aforementioned Judgment 1870/13:

"The concept of '(urban) property with residential use' was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the Real Estate Taxation Code, to which paragraph 2 of article 67 of the Stamp Duty Code (likewise introduced by that Law), refers on a subsidiary basis. And it is a concept which, probably due to its imprecision – a fact all the more grave given that the definition of its scope determines the objective scope of the new taxation – had a short life, inasmuch as it was abandoned upon the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Table, and which now determines its objective scope of incidence through the use of concepts that are legally defined in article 6 of the Real Estate Taxation Code.

This amendment – to which the legislator did not attribute an interpretative character, nor does it appear to us that it did – merely makes it unequivocal for the future that land for construction whose construction, authorized or provided, is for housing is included within the scope of item 28.1 of the General Table of Stamp Duty (provided that its respective patrimonial value for tax purposes is of value equal to or exceeding 1 million euros), clarifying nothing, however, with respect to past situations (assessments for 2012 and 2013), such as the one at issue in the present case.

Now, as to these, it does not appear possible to adopt the interpretation of the applicant, inasmuch as it does not result unequivocally either from the letter or from the spirit of the law that its intention was, ab initio, to encompass within its objective scope of incidence land for construction for which construction of residential buildings had been authorized or provided, as results today unequivocally from item 28.1 of the General Table of Stamp Duty.

Nothing unequivocal results from the letter of the law, indeed, as it itself, by using a concept that it did not define and that also was not defined in the instrument to which it referred on a subsidiary basis, lent itself, unnecessarily, to ambiguities, in a matter – tax incidence – in which certainty and legal security should also be paramount concerns of the legislator.

And from its "spirit", ascertainable in the statement of reasons of the legislative proposal that is the origin of Law no. 55-A/2012 (Legislative Proposal no. 96/XII – 2nd, Diary of the Assembly of the Republic, series A, no. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more results than the concern to raise new tax revenue, from sources of wealth "more spared" in the past from the voracity of the Tax authorities than labor income, particularly capital income, equity gains and property, reasons which bring no relevant contribution to the clarification of the concept of "(urban) properties with residential use", inasmuch as they take it as settled, without any concern to clarify it. Such clarification did arise, however – as reported in the Arbitral Decision issued on 12 December 2013, in process no. 144/2013-T, available in the CAAD database – at the time of the presentation and discussion in the Assembly of the Republic of that legislative proposal, in the words of the State Secretary for Tax Affairs, who would have expressly referred, as is gathered from the Diary of the Assembly of the Republic (DAR I Series no. 9/XII – 2, of 11 October, p. 32) that: 'The Government proposes the creation of a special tax on high-value urban residential properties. This is the first time that Portugal has created a special taxation on high-value properties intended for housing. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and shall apply to houses with value equal to or exceeding 1 million euros' (emphasis ours), from which it is gathered that the reality intended to be taxed is, after all, and notwithstanding the terminological imprecision of the law, '(urban) residential properties', in common parlance 'houses', and not other realities.

The fact that it may be considered that in determining the patrimonial value for tax purposes of urban properties classified as land for construction account should be taken of the use that the construction authorized or provided for it shall have for determination of the respective value of the construction footprint area (see paragraphs 1 and 2 of article 45 of CIMI), does not determine that land for construction may be classified as 'properties with residential use', inasmuch as 'residential use' always appears in the Real Estate Taxation Code referred to 'buildings' or 'structures', existing, authorized or provided, inasmuch as only these may be inhabited, which does not occur in the case of land for construction, which do not have, in themselves, conditions for such, not being capable of being used for housing unless and when the construction authorized and provided for them is erected therein (but in that case they would no longer be 'land for construction' but another species of urban property – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of CIMI).

It would be strange, indeed, if the determination of the scope of the tax incidence norm of item no. 28 of the General Table of Stamp Duty were to be found, after all, in the norms for determination of the patrimonial value for tax purposes of the Real Estate Taxation Code, and that the terminological imprecision of the legislator in the wording of that rule were, after all, elucidated and finally clarified via an indirect and equivocal remission to the use coefficient established by the legislator with respect to built properties (article 41 of the Real Estate Taxation Code).

Thus, given that a land for construction – whatever the type and purpose of the construction that will be, or may be, erected thereon – does not satisfy, by itself, any condition to be thus licensed or for it to be possible to define housing as its normal destination, and referring the tax incidence norm of Stamp Duty to urban properties with "residential use", without any specific concept being established for that purpose, cannot it be extracted therefrom that the same contains a future potentiality, inherent to a distinct property that may possibly come to be built on the land.

It is concluded therefore, in conformity with what was decided in the judgment under appeal that, resulting from article 6 of the Real Estate Taxation Code a clear distinction between urban properties "residential" and "land for construction", these cannot be considered as "properties with residential use" for purposes of the provisions of item no. 28.1 of the General Table of Stamp Duty, in its original wording, which was given by Law no. 55-A/2012, of 29 October." (end quote).

This is the case law which is here adopted and reiterated, having regard to the rule contained in paragraph 3 of article 8 of the Civil Code – which imposes on the judge the duty to consider all cases that merit analogous treatment, in order to obtain a uniform interpretation and application of the law, and the respondent does not adduce new reasoning that would refute such jurisprudential orientation.

IV – Compensation for Undue Guarantee

The Claimant formulated a request for compensation for undue guarantee, subsequently attaching supporting documentation.

The arbitral process is an appropriate means for recognition of the right to compensation for a guarantee unduly provided, as article 171 of the General Tax Procedure Code is applicable on a subsidiary basis, by virtue of the provisions of article 29, paragraph 1, letter c), of the RJAT.

The regime of the right to compensation for an undue guarantee is contained in article 53 of the General Tax Law (LGT), which provides as follows:

Article 53
Guarantee in case of undue provision

  1. The debtor who, to suspend enforcement, offers a bank guarantee or equivalent shall be compensated totally or partially for damages resulting from its provision, should it have maintained it for a period exceeding three years in proportion to success in administrative appeal, challenge or opposition to enforcement that have as their object the debt guaranteed.

  2. The time period referred to in the preceding paragraph does not apply when it is verified, in an administrative claim or judicial challenge, that there was an error imputable to the services in the assessment of the tax.

  3. The compensation referred to in paragraph 1 has as its maximum limit the amount resulting from the application to the value guaranteed of the rate of indemnifying interest provided for in this law and may be requested in the very process of claim or judicial challenge, or autonomously.

  4. Compensation for the provision of an undue guarantee shall be paid by deduction from the revenue of the tax in the year in which payment is made.

The Claimant provided a bank guarantee to suspend tax enforcement proceedings instituted for collection of the sums assessed by the acts that are the object of the present proceeding.

In the case at hand, the errors of the assessments are imputable to the Tax and Customs Authority, as it effected them on its own initiative and the Claimant in no way contributed to those errors being committed.

For this reason, the Claimant is entitled to compensation for the guarantee provided.

There being no elements that permit determination of the amount of compensation, the condemnation must be effected with reference to what comes to be assessed in execution of the present judgment (article 609 of the Civil Procedure Code of 2013 and article 565 of the Civil Code).

V – Decision

In light of the foregoing, it is decided:

– To judge the request for arbitral award meritorious;

– To annul the Stamp Duty assessments to which collection documents nos. 2014 …, 2014 …, 2014 …, 2014 …, 2014 … and 2014 … refer;

– To judge the request for condemnation to compensation for undue guarantee meritorious and to condemn the Tax and Customs Authority to pay to the Claimant the sum that comes to be assessed in execution of this judgment.

The value of the case is fixed at €1,014,482.61 (one million fourteen thousand four hundred eighty-two euros and sixty-one cents), in accordance with article 32 of the Administrative Procedure Code and article 97-A of the General Tax Procedure Code, applicable by virtue of the provisions of article 29, paragraph 1, letters a) and b), of the RJAT, and article 3, paragraph 2, of the Regulations for Costs in Tax Arbitration Proceedings.

Costs to the charge of the respondent, in the amount of € 14,076.00 €, in accordance with Table I of the Regulations for Costs in Tax Arbitration Proceedings, and in compliance with the provisions of articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and the provisions of article 4, paragraph 4, of the aforementioned Regulations.

Notify.

Lisbon, 06 February 2015.

The Arbitrators,

Jorge Lopes de Sousa (President)

Carlos Baptista Lobo

Miguel Patrício

Text prepared by computer, in accordance with the provisions of article 138, paragraph 5, of the Code of Civil Procedure, applicable by remission of article 29, paragraph 1, letter e), of the RJAT.

The wording of this decision is governed by the orthography prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under Verba 28.1 of the Portuguese General Stamp Tax Table?
Stamp Tax under item 28.1 of the Portuguese General Stamp Tax Table (Verba 28.1 da TGIS) is a special annual tax introduced by Law 55-A/2012 of October 29, 2012, that applies to urban properties with residential use whose patrimonial tax value (valor patrimonial tributário) exceeds €1 million. This tax targets high-value residential properties and represents an additional tax burden beyond the standard Municipal Property Tax (IMI). The rate and specific thresholds are established in the General Stamp Tax Table, and the tax base corresponds to the property's patrimonial value as determined for IMI purposes under the Civil Code of Municipal Property Tax (CIMI). The key interpretative issue in many disputes involves defining what constitutes 'property with residential use' - specifically whether this includes only constructed buildings actually used for housing or also extends to undeveloped building land with potential residential designation.
Can real estate investment funds challenge Stamp Tax assessments on building land through CAAD arbitration?
Yes, real estate investment funds can challenge Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa - Administrative Arbitration Center) arbitration. Process 499/2014-T demonstrates this right, where a Closed Real Estate Investment Fund, represented by its management company, filed a request for arbitral tribunal constitution under article 2(1)(a) and article 10(1)(a) of Decree-Law 10/2011 (RJAT - Legal Framework for Arbitration in Tax Matters). Real estate investment funds have legal standing and capacity to contest tax assessments affecting their portfolio properties, seeking declarations of illegality regarding tax liquidations. The CAAD arbitration provides an alternative dispute resolution mechanism to traditional judicial tax courts, offering specialized expertise in tax matters and potentially faster resolution. To access arbitration, the fund must file a proper request identifying the contested assessments, present legal arguments, and comply with procedural requirements including potential provision of bank guarantees to suspend enforcement proceedings under articles 169 and 199 of the General Tax Procedure Code (CPPT), as applicable through RJAT article 13(5).
What are the legal grounds for contesting Stamp Tax liquidations on terrenos para construção in Portugal?
Legal grounds for contesting Stamp Tax liquidations on building land (terrenos para construção) in Portugal include several substantive and interpretative arguments. First, taxpayers argue that item 28.1 of TGIS applies only to 'properties with residential use,' which under CIMI article 6 requires an actual constructed building or structure - building land without construction cannot have concrete residential use, only potential future use. Second, the legislative history of Law 55-A/2012 indicates the intention to tax 'houses' (casas) actually used for housing, not undeveloped land. Third, CIMI article 6(3) specifically classifies building land as a separate category distinct from residential, commercial, or industrial properties, which necessarily require construction. Fourth, the calculation methodology under CIMI article 45 for determining patrimonial tax value of building land differs from constructed properties and should not include use coefficients applicable only to buildings. Fifth, taxpayers invoke constitutional principles arguing that taxation must respect legal certainty and cannot extend to abstract or projected future uses. For mixed-use properties, additional grounds include that Stamp Tax should apply only proportionally to the residential portion, not to commercial or service areas explicitly excluded from item 28.1's scope, particularly when residential use is neither predominant nor principal.
How does the CAAD arbitral tribunal process work for Stamp Tax disputes under Decree-Law 10/2011 (RJAT)?
The CAAD arbitral tribunal process for Stamp Tax disputes under Decree-Law 10/2011 (RJAT) follows a structured procedure. First, the taxpayer files a request for constitution of an arbitral tribunal and arbitral award under RJAT article 2(1)(a) and article 10(1)(a), identifying contested assessments and legal grounds. The tribunal is then constituted, typically as a collective panel. Second, pursuant to RJAT article 17(1), the Tax Authority (AT) is cited as respondent to submit its response defending the assessments' legality. Third, parties may request waiver of the oral hearing provided in RJAT article 18 if they agree the case can be decided on written submissions. Fourth, if enforcement proceedings exist, the claimant may provide bank guarantees under CPPT articles 169 and 199, applicable via RJAT article 13(5), to suspend collection. Fifth, the tribunal issues orders on procedural matters and, pursuant to RJAT article 16(c) and (e), determines when the case is ready for decision, setting a deadline for pronouncement of the arbitral award. The tribunal verifies its material competence, proper constitution, parties' legal personality and capacity, and legitimacy. The entire process provides specialized resolution of tax disputes with binding effect, offering an alternative to traditional judicial courts with expertise in complex tax law interpretation.
What was the outcome of CAAD Process 499/2014-T regarding Stamp Tax on building land valued over €1 million?
The provided document excerpt from CAAD Process 499/2014-T does not include the tribunal's final decision or outcome. The text cuts off during the Grounds section (Part II - Factual Matter) while presenting the claimant's arguments, before reaching the legal analysis and decisional part of the arbitral award. From the procedural timeline shown, the tribunal set February 13, 2015 as the date for pronouncement of the arbitral award after determining on February 5, 2015 that the case was ready for decision. The excerpt reveals that the real estate investment fund contested €1,014,482.61 in Stamp Tax assessments (liquidation numbers provided) for 2013, arguing that building land should not be subject to item 28.1 of TGIS because it lacks actual residential use and that the tax base calculation improperly included use coefficients. The Tax Authority opposed these arguments, seeking complete dismissal of the claim. However, without access to the remainder of the decision, including the tribunal's legal reasoning, interpretation of applicable norms, and final ruling on whether the assessments were declared illegal or upheld, the actual outcome and precedential value of this specific case cannot be determined from the provided excerpt.