Process: 506/2014-T

Date: March 24, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to construction land (terrenos para construção) valued over €1 million. The claimant company challenged a €29,808.38 Stamp Tax assessment on construction land with a patrimonial value of €2,980,838.01, arguing five main grounds: (1) procedural defect due to lack of assessment act identification in payment notifications; (2) error in legal interpretation, claiming item 28.1 targets 'luxury housing' and should exclude building plots; (3) construction land cannot constitute residential property since it has no habitable structure, only potential future use; (4) unconstitutional double taxation since the land already pays Municipal Property Tax (IMI), violating equality and proportionality principles; and (5) the 2014 amendment to item 28.1 by State Budget Law 83-C/2013 is not an interpretive norm and lacks retroactive effect. The Tax Authority countered that property allocation coefficients apply to construction land valuation under Articles 41 and 45 of the IMI Code, and item 28.1's reference to 'properties with housing allocation' should be interpreted broadly to encompass both built residential properties and building plots. The AT argued this interpretation correctly integrates realities beyond strict IMI Code categories. The case centers on fundamental questions of tax law interpretation: whether potential use equals actual allocation, whether statutory construction should be narrow (literal) or broad (teleological), and whether subjecting only some resident taxpayers to cumulative taxation violates constitutional equality guarantees. The proceedings dispensed with oral hearings given the purely legal nature of the dispute.

Full Decision

ARBITRAL DECISION

I. REPORT

A..., S. A. (hereinafter referred to only as "Claimant"), with the collective person identification number ..., with registered office in …, PORTO, filed a petition for constitution of a singular arbitral tribunal, pursuant to the provisions of subsection a) of paragraph 1 of Article 2 and Article 10, both of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as "LRAT"), whereby the Tax and Customs Authority is requested (hereinafter referred to as "AT" or "Respondent"), with a view to:

a) Declaration of the illegality of the Stamp Duty assessment act issued by the AT, relating to the year 2013, dated 17 March 2014, on the basis of item 28.1 of the General Table of Stamp Duty ("GTSD"), contained in the collection documents nos. 2014 ..., 2014 ... (documents nos. 1 and 2 attached to the request for arbitral pronouncement – first and second installment) and 2014 ... (document attached to the application subsequent to the request for arbitral pronouncement - third installment), in the total amount of 29,808.38 euros, and consequently annulment of said act;

b) Condemnation of the Respondent to repay the tax paid, together with the corresponding indemnity interest.

To this end, it alleges, in summary, that:

  1. Defect of absence of legal grounds, since the notifications of the documents for payment of Stamp Duty do not contain the identification number of the underlying assessment act, which constitutes an essential element;

  2. Error in the legal assumptions, for, in a teleological interpretation of item 28.1, the legislator's intention was to tax properties of higher patrimonial value, "luxury housing," immediately excluding "building land";

  3. A building plot, by its very nature, cannot be considered a property for housing purposes, given that there is no property that could be used for housing purposes or any other purposes, but only exists a mere potential or virtual expectation of this occurring, and cannot have the characteristics of a habitable property;

  4. Defect of Double taxation, since the same reality is taxed twice, for building plots are already annually subject to Municipal Property Tax and now to Stamp Duty, but only some resident taxpayers would be subject to this double taxation, with violation of the principle of tax equality and legality, undermining the principles of justice and proportionality;

  5. The change in the wording of item 28.1 of the GTSD carried out by Article 193 of Law No. 83-C/2013, which approved the State Budget for 2014, which came into force on 1 January 2014, does not have the legal nature of an interpretative rule and as such retroactive.

The Claimant opted not to designate an arbitrator, whereby a singular arbitrator was designated by CAAD, in accordance with the provisions of paragraph 1 of Article 6 and subsection b) of paragraph 1 of Article 11 of the LRAT.

The arbitral tribunal was constituted on 25-09-2014, in accordance with the provisions of subsection c) of paragraph 1 of Article 11 of the LRAT.

Duly notified, the Respondent Entity filed a response, in which it invokes, in short:

i) The notion of property allocation (aptitude or purpose) is a coefficient that contributes to the property valuation in determining the patrimonial tax value, and the allocation coefficient is equally applicable in the valuation proceedings for building plots, as provided for in Article 41 and paragraph 2 of Article 45, both of the Municipal Property Tax Code, and cannot be ignored;

ii) Item No. 28 of the GTSD, by referring to the expression "properties with housing allocation," appeals to a qualification that overrides the categories provided for in paragraph 1 of Article 6 of the Municipal Property Tax Code, and should be understood in a broad manner, "encompassing both built residential properties and building plots," and, "whose meaning must be found in the need to integrate other realities beyond those identified in Article 6, paragraph 1 of the Municipal Property Tax Code";

iii) Therefore, the assessment in dispute constitutes a correct interpretation and application of law to the facts, suffering from no defect of violation of law.

It concludes for the dismissal of the request for arbitral pronouncement, and should be absolved thereof.

By subsequent application, the Claimant was permitted to attach to the present proceedings the collection document relating to the third installment of Stamp Duty assessed on 17.03.2014, as it had been received on a date subsequent to the submission of the present request for arbitral pronouncement, with the AT having been notified of said attachment.

Since this is a matter of strictly legal nature, the arbitral tribunal decided to dispense with the holding of the meeting provided for in Article 18 of the LRAT, by proposal of the Respondent Entity and with the consent of the Claimant. As the Claimant did not waive the submission of written pleadings, duly notified to that effect, it maintained its position and request.

The AT submitted no pleadings.

The Arbitral Tribunal was duly constituted and is materially competent, in accordance with the provisions of Article 2, paragraph 1, subsection a) of the LRAT.

The parties have legal personality and capacity, are entitled and are duly represented, as provided for in Articles 4 and 10, paragraph 2 of the LRAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings do not suffer from any defects and there are no exceptions or preliminary issues that must be addressed or that impede the examination of the merits of the case.

II. GROUNDS

a) On the Facts

Based on the elements contained in the proceedings and material to the decision, the following facts are established as proven:

  1. The Claimant is the owner of the urban property described in the Land Registry of Porto under the number ... and registered in the urban property matrix of the parish of ... under article ..., as building land.

(cf. Property card attached as document No. 4 to the request for arbitral pronouncement, whose contents are reproduced herein.)

  1. The identified building plot has a patrimonial tax value of € 2,980,838.01.

(cf. Collection documents and property card attached to the arbitral request and to the application subsequent to that request as documents Nos. 1, 2 and 4, respectively, whose contents are reproduced herein);

  1. The identified urban property has no building or construction erected on its land.
    (Property card attached as document No. 4 to the request for arbitral pronouncement and proven by agreement).

  2. In March 2014, the Claimant was notified of the document for payment of Stamp Duty for the year 2013, relating to the first installment, with indication of the assessment date on 2014-03-17 and with the payment deadline in April 2014, with a tax collection of 29,808.38 euros, detailed below:

IDENTIFICATION OF THE DOCUMENT (COLLECTION) DESCRIPTION OF THE PROPERTY ITEM OF THE GTSD PATRIMONIAL TAX VALUE RATE (%) TAX COLLECTION 1ST INSTALLMENT Payment date

2014 ... ... ... -U-0... 28.1 2.980.838.01 1 29.808,38 9.936,14 17-04-2014

(cf. Collection document and proof of payment attached to the request for arbitral pronouncement as Documents 1 and 3, whose contents are reproduced herein.)

  1. In July 2014, the Claimant was notified of the document for payment of Stamp Duty for the year 2013, relating to the second installment, with indication of the assessment date on 2014-03-17 and with the payment deadline in July 2014, detailed below:

IDENTIFICATION OF THE DOCUMENT (COLLECTION) DESCRIPTION OF THE PROPERTY ITEM OF THE GTSD PATRIMONIAL TAX VALUE RATE (%) TAX COLLECTION 2ND INSTALLMENT Payment date

2014 ... ... ... -U-0... 28.1 2.980.838.01 1 29.808,38 9.936,14 07-07-2014

(cf. Collection document and proof of payment attached to the request for arbitral pronouncement as Documents 2 and 3.1, whose contents are reproduced herein);

  1. The Claimant was notified of the document for payment of Stamp Duty for the year 2013, relating to the third installment, with indication of the assessment date on 2014-03-17 and with the payment deadline in November 2014, detailed below:

IDENTIFICATION OF THE DOCUMENT (COLLECTION) DESCRIPTION OF THE PROPERTY ITEM OF THE GTSD PATRIMONIAL TAX VALUE RATE (%) TAX COLLECTION 3RD INSTALLMENT Payment date

2014 ... ... ... -U-0... 28.1 2.980.838.01 1 29.808,38 9.936,14 25-11-2014

(cf. Collection document and proof of payment, attached to the application subsequent to the request for arbitral pronouncement as Documents 1 and 2, whose contents are reproduced herein);

  1. The assessment of Stamp Duty, in the amount of 29,808.38 euros, was carried out under item 28.1 of the GTSD.

(cf. Collection documents attached as documents Nos. 1 and 2 to the request for arbitral pronouncement and to the autonomous application to that request, whose contents are hereby fully reproduced).

Given the positions assumed by the parties and given that the matter to be resolved by this arbitral tribunal is strictly legal (identified below), the factual findings were based on the request for arbitral pronouncement, the response submitted by the Respondent and the official documents, noted in each of the points of the factual matter, which were not challenged.

There are no other facts not proven with interest for the resolution of the case.

c) On the Law

The issues to be decided in the present arbitral proceedings consist of determining whether:

i. the tax act assessing Stamp Duty suffers from the defect of violation of law, by erroneous interpretation and application of item No. 28.1 of the GTSD, added by Law No. 55-A/2012, of 29 October, in its original wording, in the sense that "building plots" are encompassed within the scope of the incidence of that item 28, paragraph 1;

ii. the assessment act in question also suffers from the defects of duplication of tax collection, unconstitutionality and lack of grounds.

On the disputed issue in the proceedings, the present Tax Arbitral Tribunal has already pronounced itself, namely in the decisions delivered in cases Nos. 42/2013-T, 48/2013-T, 49/2013-T, 53/2013-T, 75/2013-T, whose arbitral jurisprudence we follow here, and which has also been the subject of jurisprudence of the Supreme Administrative Court, with decisions being unanimous in considering that "building plots" do not fall within the provision of item 28.1 of the GTSD, added by Law No. 55-A/2012, of 29 October, in its original wording.

As results from the established facts, the AT proceeded to assess Stamp Duty to the Claimant, considering that the building plot with the property article U-0... of the parish of ..., of which it is the owner, falls within the provision of item 28.1 of the GTSD.

The Claimant alleges that in a "building plot," given its nature, there is no property capable of being used either for housing purposes or for other purposes, as only a potential or merely virtual expectation exists of this occurring. It further contends that the qualification of a property or its allocation depends on its normal use, which can only be conferred on it in light of its current and actual characteristics, and the normal use of a building plot can never be housing, given that there is no built property capable of allowing such use.

For its part, the Respondent maintains, in short, that "for purposes of determining the patrimonial tax value of building plots, the application of the allocation coefficient in the valuation proceedings is clear, so that its consideration for purposes of applying item 28 of the General Table of Stamp Duty cannot be ignored (…)"

Let us examine this.

Article 4 of Law No. 55-A/2012, of 29 October, added to the General Table of Stamp Duty item No. 28, with the following wording:

"28 — Ownership, usufruct or right of superficies of urban properties whose patrimonial tax value contained in the matrix, under the terms of the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000 — on the patrimonial tax value used for purposes of Municipal Property Tax:

28.1 — For property with housing allocation — 1%;

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

Providing Article 6 of the above-cited Law as to the year 2013 that "the assessment of stamp duty provided for in item No. 28 of the respective General Table must be calculated on the same patrimonial tax value used for purposes of assessing municipal property tax to be carried out in that year."

At the date of the facts, the prerequisites for incidence of item 28.1 of the GTSD are thus urban properties with housing allocation, whose patrimonial tax value contained in the matrix, under the terms of the Municipal Property Tax Code, is equal to or greater than 1,000,000.00 euros.

With a view to the application of item 28 added to the GTSD, Law 55-A/2012, of 29 October established several amendments to the Stamp Duty Code ("SDC"), namely with respect to its assessment and payment, expressly referring to the rules provided for in the Municipal Property Tax Code (cf. Article 23, paragraph 7, Article 44, paragraph 5, Article 46, paragraph 5, Article 49, paragraph 3 of the SDC), with the necessary adaptations, further providing in paragraph 2 of Article 67 of the SDC that "To matters not regulated in the present Code relating to item No. 28 of the General Table, the provisions of the Municipal Property Tax Code shall apply, subsidiarily."

From the aforementioned rules, it is immediately apparent that the concept of "property with housing allocation" provided for in item No. 28.1 is not defined in the SDC, nor in the cited Law, so it is necessary to ascertain the applicable rules in the Municipal Property Tax Code, since these are of subsidiary application, as provided for in paragraph 2 of Article 67 of the SDC.

Thus, we find from the outset a concept of property in paragraph 1 of Article 2 of the Municipal Property Tax Code (to which concept Article 1, paragraph 6 of the SDC refers), which translates as follows: "(…) property is any portion of land, including water, plantations, buildings and constructions of any nature incorporated or built thereon, with a character of permanence, provided that it is part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as water, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of land that constitutes an integral part of a diverse patrimony or does not have patrimonial nature."

The Municipal Property Tax Code provides for three categories of properties: rural, urban and mixed, whose concepts are defined, respectively, in Articles 3, 4 and 5 of the same statute.

And, regarding urban properties, paragraph 1 of Article 6 of the Municipal Property Tax Code further established a categorization in the following categories:

(…)

a) Residential;

b) Commercial, industrial or for services;

c) Building plots;

d) Others."

Understanding as residential, commercial, industrial or for services "buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal destination each of these purposes," in accordance with the provisions of paragraph 2 of the rule in question.

With respect to building plots, paragraph 3 of the same legal provision stipulates that they are "plots of land situated within or outside an urban agglomeration, for which a license or authorization has been granted, advance communication admitted or favorable prior information issued for subdivision or construction operations, and also those that have been declared as such in the acquisition deed, except for plots where the competent entities prohibit any of these operations, namely those located in green areas, protected areas or that, in accordance with municipal land planning plans, are allocated to public spaces, infrastructure or equipment."

Establishing paragraph 4 of Article 6 of the Municipal Property Tax Code that fall "within the provision of subsection d) of paragraph 1 plots of land situated within an urban agglomeration that are not building plots nor are covered by the provisions of paragraph 2 of Article 3 and also buildings and constructions licensed or, in the absence of a license, which have as their normal destination purposes other than those referred to in paragraph 2 and also those in the exception of paragraph 3."

It results from the rules cited above that, both in the classification of properties and in the division of urban properties, the legislator makes no reference to the concept of "properties with housing allocation," nor does it do so in other provisions of the Municipal Property Tax Code, nor in any other provision of a fiscal nature.

Therefore, in the interpretation of the concept under discussion here, it is necessary to take into account the provisions of Article 9 of the Civil Code, applicable by virtue of the provisions of paragraph 1 of Article 11 of the General Tax Law.

On this matter, this Arbitral Tribunal has already pronounced itself in the decision delivered in case No. 53/2013-T, whose doctrine we hereby adopt, which we will follow closely:

"(…)

Thus, in the absence of exact terminological correspondence of the concept of «property with housing allocation» with any other used in other statutes, several interpretative hypotheses can be suggested.

The starting point for the interpretation of that expression «properties with housing allocation» is, naturally, the text of the law, and it is based on it that we must reconstruct the «legislative thought,» as required by paragraph 1 of Article 9 of the Civil Code, applicable by virtue of the provisions of Article 11, paragraph 1, of the General Tax Law.

3.2.5. Concept of «property with housing allocation» as referring to residential properties

The concept closest to the literal sense of this expression used is manifestly that of «residential properties,» defined in paragraph 2 of Article 6 of the Municipal Property Tax Code as encompassing «buildings or constructions» licensed for housing purposes or, in the absence of a license, which have as their normal destination housing purposes.

To understand that the expression «property with housing allocation» coincides with that of «residential properties» is manifest that the assessments will suffer from error in the factual and legal assumptions, for all properties in relation to which Stamp Duty was assessed under the referred item No. 28.1 are building plots, without any building or construction, required to meet that concept of «residential properties.»

For this reason, if we adopt the interpretation that «property with housing allocation» means «residential property,» the assessments for which declaration of illegality is sought will be illegal, due to the absence of any building or construction on any of the plots.

However, the non-coincidence of the terms of the expression used in item No. 28.1 of the GTSD with that extracted from paragraph 2 of Article 6 of the Municipal Property Tax Code points in the direction that it was not intended to use the same concept.

3.2.6. Concept of «property with housing allocation» as a concept distinct from «residential properties»

The word «allocation,» in this context of use of a property, has the meaning of «action of designating something for a certain use.»

«When, as is usually the case, the rules (legislative formulas) allow for more than one meaning, then the positive function of the text translates into giving stronger support to or more strongly suggesting one of the possible meanings. For among the possible meanings, some will correspond to the more natural and direct significance of the expressions used, while others can only fit within the verbal framework of the rule in a forced, artificial manner. Now, in the absence of other elements that lead to the election of the less immediate sense of the text, the interpreter should opt in principle for that sense which best and most directly corresponds to the natural significance of the expressions used, and in particular to their technical-legal significance, in the assumption (not always exact) that the legislator was able to express his thought correctly.»

The relevance of the text of the law is particularly emphasized in the matter of interpretation of rules regarding the incidence of Stamp Duty, which are reduced to an amalgamation, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on assets, on acts, etc.), which leaves no appreciable margin for application of the primary interpretative criterion, which is the unity of the legal system, which demands its overall coherence.

The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this item No. 28.1, hastily included in the margins of the State Budget, by a fiscal legislator without the perceivable overall fiscal orientation, who successively implements fiscal aggravation rules according to the setbacks in budget execution (…).

«In truth, although in the «Explanatory Memorandum» of Bill No. 96/XII/2, on which Law No. 55-A/2012 was based, reference is made to the laudable concern of the Government to «reinforce the principle of social equity in austerity, ensuring an effective sharing of the sacrifices necessary to comply with the adjustment program» and to its commitment «to ensure that the sharing of these sacrifices will be made by all and not just by those who live on their employment income,» it is manifest, on the one hand, that these reasons of equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year when the General State Budget came into force, and on the other hand, that the scope of item No. 28.1, in taxing additionally properties with housing allocation and not also those that do not have it, allows us to infer that the concerns of social equity and the stated intention to share sacrifices among all, affects much more some than all.

In this context, in the absence of safe interpretative elements that would allow us to detect legislative coherence in the solution adopted in the referred item No. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of paragraph 3 of Article 9 of the Civil Code), the content of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same paragraph 3 of Article 9, that the legislator was able to express his thought in adequate terms.

In light of those meanings of the words «allocation» and «allocate,» which are «to give destination» or «to apply,» the formula used in that item No. 28.1 of the GTSD manifestly encompasses properties that are already applied to housing purposes, so it is necessary to determine whether it will also encompass properties that, although not yet applied to housing purposes, are intended for such purposes and those whose destination is unknown.

In light of the literal content of item No. 28.1, it is necessary to exclude from the scope of the incidence of the Stamp Duty provided therein the building plots of some Claimants that do not yet have any defined use, as they are neither applied nor intended for housing purposes. That is, building plots that do not have defined use cannot be considered properties with housing allocation, as they do not yet have any allocation or destination other than construction of an unknown type. An interpretation in the sense that item No. 28.1 refers to properties whose allocation is unknown has no minimum of verbal correspondence in the letter of that rule, so a hypothetical legislative thought of that type cannot be considered by the interpreter of the law, in light of the prohibition contained in paragraph 2 of Article 9 of the Civil Code.

But this is not sufficient to clarify the situation of those building plots that, although not yet applied to housing purposes, already have a determined destination, namely in the subdivision license (…). .

Therefore, it will be necessary to clarify when it can be understood that a property is allocated to a housing purpose, namely whether it is when that destination is fixed in a licensing act or similar, or only when the effective assignment of that destination is realized.

From the outset, the comparison of item No. 28.1 of the GTSD with paragraph 2 of Article 6 of the Municipal Property Tax Code, which defines the concept of residential properties, manifestly points in the direction that an effective allocation is necessary.

In truth, a building or construction licensed for housing or, even without a license, but which has housing as its normal destination, is, in light of paragraph 2 of that Article 6, a residential property.

Therefore, on the assumption that the legislator of Law No. 55-A/2012 was able to express his thought in adequate terms (as required by Article 9, paragraph 3, of the Civil Code that is presumed), if it intended to refer to those properties already licensed for housing or which have housing as their normal destination, it would certainly have used the concept of «residential properties,» which would express perfectly and clearly his thought, in light of the definition given by that paragraph 2 of Article 6 of the Municipal Property Tax Code.

Consequently, it must be presumed that the use of a different expression is intended to refer to a different reality, so, in sound hermeneutics, «property with housing allocation» cannot be a property merely licensed for housing or intended for that purpose (that is, it will not be sufficient that it be a «residential property»), but must be a property that already has effective allocation to that purpose.

That this is the sense of the expression «allocation,» in the same context of property classification used by the Municipal Property Tax Code, is confirmed by Article 3, in which, with respect to rural properties, reference is made to those «that are allocated or, in the absence of concrete allocation, have as their normal destination a use that generates agricultural income,» which shows that allocation is concrete, effective. In truth, as can be seen from the latter part of this text, a property can have a certain use as its destination and be or not be allocated to it, which shows that allocation is, at the level of the connection of a property to a certain use, something more intense than the mere destination and which may or may not occur, downstream of this and not upstream of it."

In light of the grounds set forth, which we hereby adopt, a "building plot" cannot thus fall within the provision of item 28.1 of the GTSD, in its original wording, as it is not a «property with housing allocation.»

The Respondent further contends that the allocation of the property (aptitude or purpose) is a coefficient that contributes to the valuation of the property in determining the patrimonial tax value, and the allocation coefficient is equally applicable in the valuation proceedings for building plots, as provided for in paragraph 2 of Article 45 of the Municipal Property Tax Code, "so that its consideration for purposes of applying item 28 of the General Table of Stamp Duty cannot be ignored."

It further argues that item No. 28 of the GTSD, by referring to the expression "properties with housing allocation," appeals to a qualification that "overrides the categories provided for in paragraph 1 of Article 6 of the Municipal Property Tax Code," and should be understood in a broad manner, "encompassing both built residential properties and building plots," and, "whose meaning must be found in the need to integrate other realities beyond those identified in Article 6, paragraph 1 of the Municipal Property Tax Code."

The Respondent further contends that fiscal law considers as an integrating element for purposes of valuation of building plots the value of the building implantation area, and it is possible to determine the allocation of the building plot before the effective building of the property.

We cannot agree with the thesis defended by the Respondent, in light of the grounds set forth above.

In fact, paragraph 1 of Article 45 of the Municipal Property Tax Code provides that the "patrimonial tax value of building plots is the sum of the value of the building implantation area, which is that situated within the perimeter of the building's foundation on the land, measured by the exterior, added to the value of the land adjacent to the implantation," adding in its paragraph 2 that the "value of the implantation area varies between 15% and 45% of the value of the authorized or anticipated buildings," further providing in paragraph 3 of the same rule that in "setting the percentage value of the implantation land, consideration is given to the characteristics referred to in paragraph 3 of Article 42."

The cited Article 45 of the Municipal Property Tax Code – under the heading "patrimonial tax value of building plots" – merely establishes the criteria to be considered for purposes of patrimonial valuation of building plots, without any influence on the typology of properties contained in Article 6 of the Municipal Property Tax Code, as it nonetheless remains qualified as a building plot, for tax purposes, in light of its valuation.

Even if it is admitted that the "allocation coefficient" is one of the criteria to apply in determining patrimonial value, which does not clearly result from the provisions of Article 45 of the Municipal Property Tax Code and is a matter that exceeds the scope of the present request for arbitral pronouncement, but nevertheless, in no way does it remove what is stated above regarding the interpretation of the concept of "property with housing allocation" in the sense that it must be a property that already has effective allocation to that purpose, and it is not sufficient that it be a "residential property."

The same applies to the Respondent's understanding in supporting that item No. 28 of the GTSD, by referring to the expression "properties with housing allocation," appeals to a qualification that "overrides the categories provided for in paragraph 1 of Article 6 of the Municipal Property Tax Code," and should be understood in a broad manner, "encompassing both built residential properties and building plots," and, "whose meaning must be found in the need to integrate other realities beyond those identified in Article 6, paragraph 1 of the Municipal Property Tax Code," with the arguments and grounds set forth above applying, that is, the only possible interpretation is that it encompasses, we repeat, only properties that already have effective allocation to that purpose, that is, with current housing allocation, and it is not sufficient that it be a residential property within the terms of paragraph 1 of the rule in question, and thus cannot encompass building plots, nor override or integrate other realities beyond those provided for in the aforementioned paragraph 1 of Article 6.

For which reasons we also do not agree with the Respondent's understanding that, as the law considers the value of the building implantation area, it is possible to determine the allocation of the building plot before the effective building of the property. In fact, the value of the implantation area is one more coefficient, among others, for valuing building plots, which does not alter the classification of this into another type of urban property.

Moreover, as explained above, the fact of the existence of a building permit or subdivision license only means that it has a destination, a future and foreseeable situation, but which in no way corresponds to a situation that already exists, for only are subsumed within the concept of "property with housing allocation," for purposes of the incidence of Stamp Duty provided for in item 28.1 of the GTSD, properties in which housing allocation has already been realized, that is, only when the "effective assignment of that destination is realized" and not when that destination is fixed in a licensing act.

The statement made in the decision delivered by this Tribunal in the aforementioned case No. 53/2013-T applies once more here, in referring to:

"For the rest, the text of the law in adopting the formula «property with housing allocation,» rather than «urban properties with housing allocation,» which appears in the referred «Explanatory Memorandum,» points strongly in the direction that it is required that housing allocation has already been realized, for only then will the property be with that allocation.

With respect to Article 45 of the Municipal Property Tax Code, it has no relation to the classification of properties, merely indicating the factors to be considered in the valuation of building plots. What is considered there, in making reference to the «building to be constructed» is the consideration of the destination of the plot, which, as has been seen, is something that, in the context of the Municipal Property Tax Code, does not imply allocation and occurs before this.

The correctness of this interpretation in the sense that only properties that are effectively allocated to housing are included within the scope of the incidence of item No. 28.1 of the GTSD is also confirmed by the legislative purpose perceivable from the restriction of the scope of application of the rule to properties with housing allocation, in the context of the «circumstances in which the law was elaborated and the specific conditions of the time in which it is applied,» which Article 9, paragraph 1, of the Civil Code also establishes as interpretative elements."

In fact, in the presentation and discussion of the aforementioned Bill No. 96/XII/2 (which can be consulted in the Journal of the Assembly of the Republic, I Series No. 9/XII/2012, of 11-10-2012) in the Assembly of the Republic, the Secretary of State for Tax Affairs declared at one point as follows:

"For the first time in Portugal, a special taxation of high-value properties intended for housing is created. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to houses valued at equal to or greater than 1 million euros. With the creation of this additional rate, the tax burden required of these owners will be significantly increased in 2012 and 2013."
(emphasis and italics ours)

Therefore, in a teleological interpretation what was intended to be taxed was luxury real estate patrimony, having been left out of the scope of the incidence of Stamp Duty properties with allocation to services, industry or commerce, that is, as was written in the decision delivered in case No. 53/2013-T, "properties allocated to economic activity, which is understandable in a context where, as is notorious, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching historical maximum levels, with an avalanche of business closures due to economic unsustainability."

Concluding further that "the available interpretative elements, including the «circumstances in which the law was elaborated and the specific conditions of the time in which it is applied,» clearly point in the direction that it was not intended to encompass within the scope of the incidence of item No. 28.1 situations of properties that are not yet allocated to housing, namely building plots held by companies."

Given the considerations set forth, the building plot, subject of the present arbitral proceedings, by its very nature cannot have a current housing allocation, and thus does not constitute a property with effective and concrete allocation to that purpose. All the more so, as results from the factual matter proven, there is no building or construction erected on its land.

In light of the above, the property in question does not fall within item 28.1 of the GTSD, as it is not a "property with housing allocation."

Therefore, the Stamp Duty assessment act, in the amount of € 29,808.42, subject of arbitral pronouncement, suffers from the defect of violation of item 28.1 of the GTSD, in its original wording, by error in its legal assumptions, hereby declaring the illegality of that assessment act, with the consequent annulment thereof (Article 135 of the Administrative Procedure Code, applicable subsidiarily by virtue of Article 29, paragraph 1, subsections a) and d) of the LRAT).

Thus, the examination of the other questions raised by the Claimant is rendered moot, namely the alleged defects of duplication of tax collection, defect of unconstitutionality and formal defect due to lack of grounds, as the illegality of the above assessment has been declared due to a substantive defect that prevents the renewal of the acts, effectively ensuring the protection of the Claimant's rights, in accordance with the provisions of Article 124 of the Tax Code of Administrative Procedure, subsidiarily applicable by virtue of the provisions of subsection a) of paragraph 1 of Article 29 of the LRAT.

III. Restitution of Tax Paid and Indemnity Interest

The Claimant further requests the restitution of the tax already paid, together with the corresponding indemnity interest.

Let us examine this.

Subsection b) of paragraph 1 of Article 24 of the LRAT provides that the AT must "restore the situation that would have existed if the tax act subject to the arbitral decision had not been carried out, adopting the acts and operations necessary for that purpose," in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for execution of sentences of the judicial tax courts, in the case that no appeal has been filed or the arbitral decision on the merits of the claim has not been challenged.

Moreover, Article 100 of the General Tax Law – under the heading "effects of the decision favorable to the taxpayer" – determines that the "tax administration is obligated, in case of total or partial success of administrative complaints or appeals, or of judicial proceedings in favor of the taxpayer, to immediate and full restoration of the situation that would have existed if the illegality had not been committed, including the payment of indemnity interest, under the terms and conditions provided for in the law."

Therefore, in light of the provisions of Article 100 of the General Tax Law and subsection b) of paragraph 1 of Article 24 of the LRAT, it is unequivocal that in this case the Claimant has the right to restitution of the tax paid, as a result of the declaration of illegality of the assessment act, subject to arbitral pronouncement in the present proceedings.

Let us examine as to the request for payment of indemnity interest.

Paragraph 5 of the cited Article 24 of the LRAT further provides that payment of interest "is due, regardless of its nature, under the terms provided for in the general tax law and in the Tax Code of Administrative Procedure." It results from the mentioned legal provision that in case of success of an arbitral decision in favor of the taxpayer, there will be entitlement to payment of indemnity interest, under the terms of paragraphs 1 and 2 of Article 43 and Article 100 of the General Tax Law.

Paragraph 1 of Article 43 of the General Tax Law establishes that indemnity interest is "due when it is determined, in administrative claim or judicial challenge, that there was an error imputable to the services from which resulted payment of the tax debt in an amount greater than legally due." Thus, as Jorge Lopes de Sousa tells us, in "Guide to Tax Arbitration," Almedina, March 2013, page 223, the right to indemnity interest depends on the verification of the following requirements:

"- that there is an error in an assessment act of a tax;

  • that it be imputable to the services (directly or through generic guidelines);

  • that the existence of that error is determined in a procedure of administrative claim or judicial challenge;

  • that from that error there resulted payment of a tax debt in an amount greater than legally due."

In the case at hand, there is no doubt that the tax assessment act for Stamp Duty, subject to the present arbitral decision, resulted from an error imputable to the services, that is, an error in the legal assumptions, in light of the considerations described above, to which we refer. From that error resulted the payment of the tax, in the amount of € 29,808.42, as confirmed in the factual matter established.

Therefore, with all the requirements being fulfilled, the Claimant will be entitled to payment of indemnity interest, which shall be calculated and accounted for under the terms of Article 61 of the Tax Code of Administrative Procedure, that is, from the date on which it made the payment, calculated on the basis of the amounts paid until the date of full reimbursement of the paid amount, at the legal rate.

IV. DECISION

On these grounds and with the reasoning set forth, the present Arbitral Tribunal decides:

a) To declare the claim for declaration of illegality of the Stamp Duty assessment, contained in the identified collection documents, in the amount of € 29,808.42, well-founded, with the consequent annulment thereof.

b) To condemn the Tax and Customs Authority to reimburse to the Claimant the sum of € 29,808.42;

c) To condemn the Tax and Customs Authority to pay to the Claimant indemnity interest, at the legal rate, from the date on which it made the payment of the tax, until the date of full reimbursement of that sum, calculated on the basis of the referred sums.

The value of the case is set at € 29,808.42, in accordance with the provisions of subsection a) of paragraph 1 of Article 97-A of the Tax Code of Administrative Procedure and paragraph 2 of Article 3 of the Regulations of Costs in Tax Arbitration Proceedings, as well as Article 306 of the Code of Civil Procedure.

Costs charged to the Respondent Entity, in the amount of € 1,530.00, in accordance with the provisions of paragraph 4 of Article 22 of the LRAT and paragraph 4 of Article 4 of the Regulations of Costs in Tax Arbitration Proceedings and Table I annexed to the same Regulations.

Let it be notified.

Lisbon, 24 March 2015.

The Arbitrator,

(Text drawn up by computer, under the terms of Article 131, paragraph 5 of the Code of Civil Procedure, applicable by reference from Article 29, paragraph 1, subsection e) of the LRAT, with blank lines and revised by the signatory.

In drafting this decision the former spelling agreement was adopted.)

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS applicable to construction land (terrenos para construção) valued over €1,000,000?
The applicability of Stamp Tax under item 28.1 TGIS to construction land valued over €1,000,000 is the central dispute. The Tax Authority argues for broad interpretation, contending that 'properties with housing allocation' encompasses building plots because allocation coefficients apply in valuation proceedings under Articles 41 and 45 of the IMI Code. The claimant argues item 28.1 was intended to tax luxury housing with actual residential use, not mere building potential. Construction land lacks habitable structures and represents only virtual expectation of future use, distinguishing it categorically from properties that can actually serve housing purposes. The teleological interpretation supports excluding building plots from item 28.1's scope.
Does the lack of a liquidation act identification number in Stamp Tax payment notifications constitute a grounds for annulment due to insufficient legal reasoning?
The claimant argues that lack of assessment act identification numbers in Stamp Tax payment notifications constitutes grounds for annulment due to insufficient legal reasoning (fundamentação legal). The notifications allegedly failed to contain essential elements required for valid administrative acts. This procedural defect argument invokes the principle that tax assessments must clearly identify the underlying legal basis and administrative act, enabling taxpayers to understand and challenge the taxation grounds. While the Tax Authority's response does not directly address this procedural objection, Portuguese administrative law generally requires assessment acts to contain sufficient identification and reasoning to permit effective defense rights.
Can construction land be classified as residential property for purposes of Verba 28.1 of the General Stamp Tax Table?
Whether construction land qualifies as residential property under item 28.1 TGIS presents a core interpretive conflict. The Tax Authority argues that 'housing allocation' transcends IMI Code categories and includes building plots based on allocation coefficients used in patrimonial valuation. The claimant counters that construction land, by its nature, cannot be considered residential property—it has no building capable of housing use, only potential future construction. The distinction between actual allocation and mere aptitude for future allocation is critical. Construction land represents undeveloped potential, not functional residential use. The claimant emphasizes that equating virtual expectation with actual allocation distorts item 28.1's purpose of taxing high-value residential properties actually used or usable for housing.
Does simultaneous taxation of construction land under both IMI and Imposto do Selo violate the constitutional principles of equality, proportionality, and prohibition of double taxation?
The double taxation argument alleges constitutional violations of equality, proportionality, and prohibition of duplicate taxation. Construction land already pays annual IMI based on patrimonial value, and adding Stamp Tax creates cumulative taxation on the same property base. The claimant argues this violates horizontal equity since only some resident taxpayers with high-value land face this dual burden, while others pay only IMI. This differential treatment lacks rational justification and breaches equality principles. Additionally, the proportionality principle is undermined when tax burdens become excessive relative to taxpayer capacity. The constitutional prohibition against double taxation, though not absolute, requires different legal bases and purposes for overlapping taxes, which may not exist when both IMI and Stamp Tax target property value.
Is the 2014 amendment to Verba 28.1 TGIS by Lei nº 83-C/2013 an interpretive norm with retroactive effect or an innovative provision?
The 2014 amendment to item 28.1 TGIS by Article 193 of State Budget Law 83-C/2013, effective January 1, 2014, raises questions about retroactive application. The claimant argues it is not an interpretive norm with retroactive effect but rather an innovative provision. Interpretive laws clarify existing ambiguous provisions and may apply retroactively, while innovative laws create new obligations and generally apply prospectively per constitutional principles of legal certainty and legitimate expectations. The amendment's substance and legislative context determine its character. If it merely clarified pre-existing legislative intent regarding construction land, it could be interpretive. If it expanded item 28.1's scope beyond prior understanding, it constitutes innovative legislation without retroactive effect. The distinction affects whether the 2013 tax year assessment, notified in 2014, properly applies the amended provision.