Process: 507/2014-T

Date: February 20, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 507/2014-T addressed whether stamp duty under Item 28.1 of the General Stamp Duty Table (TGIS), introduced by Law 55-A/2012, applies to building plots (terrenos para construção) with no existing construction. A real estate company challenged €54,270.73 in stamp duty assessments for 2013 on two building plots in Matosinhos with a tax patrimonial value (VPT) exceeding €1,000,000. The central dispute concerned whether building land qualifies as 'urban property with residential use' under the original Item 28.1 wording. The applicant argued that building plots lack actual residential use and possess only building capacity, emphasizing that Article 194 of Law 83-C/2013 subsequently amended Item 28.1 to explicitly include building plots, but only with effect from January 1, 2014, implying they were not covered for 2013. The Tax Authority contended that building plots constitute residential use property because their VPT determination applies residential use coefficients under Article 41 of the Property Tax Code (CIMI), citing TCA South precedent that building plot valuation follows the regime for constructed buildings under Article 45 CIMI. The tribunal's analysis focused on whether the legislative amendment's non-retroactive application indicated that building plots without construction were not 'residential use' property under the 2013 stamp duty regime, highlighting the interpretative challenge of applying tax incidence rules to undeveloped land based solely on valuation methodology rather than actual property use.

Full Decision

CAAD TAX ARBITRATION DECISION

I – REPORT

  1. Sociedade Imobiliária A…, SA, with NIPC[1] …, with headquarters at Rua … – Porto, filed a request for constitution of an arbitral tribunal, under the provisions of paragraph a) of no. 1 of article 2, of no. 1 of article 3 and paragraph a) of no. 1 of article 10, all of the RJAT[2], and the AT[3] was summoned, with a view to annulling a tax assessment act imposing stamp duty on the ownership of real property registered in the property registry under urban articles no. ... and ... of the Union of Civil Parishes of Matosinhos and Leça da Palmeira in the city of Matosinhos referring to two building plots, according to notifications duly received relating to the year 2013, in the total amount of € 54,270.73, the justification invoked for such assessment being limited to the application of item 28.1 of the TGIS[4], which the applicant considers inapplicable to the concrete situation.

  2. The request for constitution of the arbitral tribunal was filed without exercising the option of designating an arbitrator, having been accepted by the Honorable President of the CAAD[5] and automatically notified to the AT on 25/07/2014.

  3. Under the terms and for the purposes of the provisions of no. 2 of article 6 of the RJAT, by decision of the Honorable President of the Deontological Council, duly communicated to the parties within the legally applicable periods, on 10/09/2014, Arlindo José Francisco was designated in the capacity of sole arbitrator, who communicated to the Deontological Council of Administrative Arbitration his acceptance of the assignment within the legally stipulated period.

  4. The tribunal was constituted on 25/09/2014 in accordance with the provisions contained in paragraph c) of no. 1 of article 11 of the RJAT, in the version introduced by article 228 of Law no. 66-B/2012, of 31 December.

  5. With its request, the applicant seeks the annulment of the assessment in question on the grounds that, in its view, the justification invoked (item 28.1 of the TGIS) is clearly inapplicable to the ownership of the property in question.

  6. It supports its point of view, in summary, on the fact that there are building plots suitable only for the construction of housing or other types of buildings, and as such not susceptible to residential use.

  7. In its reply, the AT considers that building plots have the legal nature of urban property with residential use, since in the determination of their VPT[6] the residential use coefficient provided for in article 41 of the CIMI[7] is taken into account.

  8. In this sense, it cites Ruling 04950/11 of 14/02/2012 of the TCA[8] South which considers that the regime for evaluating the patrimonial value of building plots is established in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project.

  9. From this perspective, it considers that the assessment questioned should be maintained as it complies with the applicable legislation.

II - CLARIFICATION

The tribunal was regularly constituted and is competent ratione materiae, in accordance with article 2 of the RJAT.

The parties have legal personality and capacity, are legitimate and are regularly represented in accordance with articles 4 and 10, no. 2 of the RJAT and article 1 of Decree-Law no. 112-A/2011, of 22 March.

The applicant was notified to comment on the request made by the respondent with a view to dispensing with the hearing to which article 18 of the RJAT refers, and made no statement within the stipulated period, the tribunal understanding the silence as agreement with the request and with the unnecessary production of written or oral submissions, considering that the factual elements necessary and sufficient for deciding the law have been gathered.

The process does not suffer from nullities and no issues have been raised that prevent the examination of the merits of the case; it is necessary to decide.

III - GROUNDS

1 – Issues to be Resolved

The issues to be resolved, with interest for the case, are the following:

a) To determine whether building plots, to which the residential use coefficient was applied in the determination of their VPT and a value equal to or greater than € 1,000,000.00 was ascertained, fall within the scope of the stamp duty imposed by item 28 of the TGIS, added by Law no. 55-A/2012, of 29 October.

b) And whether the assessment of stamp duty in the present case violates the said provision.

2 – Factual Matters

The relevant factual matters proved on the basis of the documents attached to the case are as follows:

a) The applicant is the owner of building plots registered in the urban property registry of the Union of Civil Parishes Matosinhos and Leça da Palmeira under articles ... and ….

b) On the said plots there is no construction whatsoever.

c) The stamp duty in question relates to the year 2013.

d) The applicant was notified to pay stamp duty of € 18,090.25 in April 2014, according to documents 2014 … and 2014 ….

e) It was notified to pay stamp duty of € 18,090.23 in July 2014, according to documents 2014 … and 2014 ….

f) And it was further notified to pay stamp duty of € 18,090.23 in November 2014, according to documents 2014 … and 2014 ….

g) On the plots in question, the construction of collective housing and commercial premises is planned.

h) No proof of payment of the stamp duty in question was made.

3 – Matters of Law

a) The applicant, in its request for arbitral pronouncement, argues, in essence, that building land cannot be considered for the purposes of the incidence of stamp duty provided for in item 28 of the TGIS, added by Law no. 55-A/2012, since it is not property with residential use, but merely with building capacity and that the legislator, in using the expression "residential use", cannot in any way be understood as having intended to refer to article 41 of the CIMI.

b) On the other hand, article 194 of Law 83-C/2013 of 31 December amended the wording of item 28.1 of the TGIS, expanding the scope to building plots, but its application will only occur from 1 January 2014, since such provision does not assume the nature of an interpretive provision and therefore has no retroactive application.

c) The respondent, for its part, considers that building plots have the legal nature of property with "residential use" since in the determination of their VPT the residential use coefficient provided for in article 41 of the CIMI is taken into account and cites in this sense Ruling 04950/11 of 14/02/2012 of the TCA South which considers that the regime for evaluating the patrimonial value of building plots is established in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project, and therefore considers that the assessments in question should be maintained and the AT absolved of the request.

d) Having summarized the positions of the applicant and the respondent, we shall proceed below to an analysis of the provision governing the incidence of stamp duty on urban property with residential use and it must be said that the respondent, at no point invokes, nor could it invoke, the new wording of item 28.1 of the TGIS which was given to it by Law 83-C/2013 of 31 December, the applicability of which only takes place from 1 January 2014.

e) Item 28 of the TGIS, added by Law no. 55-A/2012, subjects to this tax urban property with residential use whose VPT, ascertained in accordance with the CIMI, is equal to or greater than €1,000,000.00.

f) The CIS[10] refers to the CIMI for the regulation of the concept of property and matters not regulated regarding item 28 of the TGIS (see no. 6 of article 1 and no. 2 of article 67, both of the CIS).

g) If we look at article 6 of the CIMI, it establishes that urban property is divided into residential, commercial, industrial or for services, building plots and others.

h) From its no. 2 it is clear that urban residential property "are buildings or constructions licensed for such purpose or in the absence of a license, which have such purpose as their destination" and its no. 3 tells us that building plots "are those situated within or outside an urban agglomeration, for which a license or authorization for a subdivision or construction operation has been granted, and also those which have been declared as such in the acquisition instrument…".

i) From these concepts we can already conclude about the autonomy between urban property classified as "residential" and urban property classified as "building plots".

j) The legislator of stamp duty, in establishing the taxation of urban property "with residential use", did not specify the concept, so we must, by force of the referral, go to the CIMI and this, as already seen, gives them autonomy, in relation to building plots.

k) The expression "residential use" is in no way evident in building plots, nor can it, as the respondent intends, be understood as an expression integrating other realities.

l) We agree with the position advocated in case 49/2013 which is transcribed: "The expression 'with residential use' conveys, in a simple reading, an idea of real and present functionality. From the provision in question it is not possible to extract, by interpretation, that, as is claimed in the respondent's reply, the legislator's choice of that expression is intended to integrate 'other realities beyond those identified in article 6, no. 1, paragraph a), of the CIMI.' Such interpretation has no legal basis, in light of the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law. In effect, if the legislator intended to encompass within the scope of the tax provision other realities than those resulting from the classification governed by article 6 of the CIMI, it would have said so expressly. But it does not, instead referring, wholesale, to the concepts and procedures provided for in the said Code. On the other hand, the respondent's understanding cannot be accepted either that the concept of "residential use" derives from the provision of article 45 of the CIMI. This article refers to the rules applicable in determining the patrimonial value of building plots, establishing that this is what results from the value of the building footprint area added to the land adjacent to the footprint. In fixing the value of that area, a percentage varying between 15% and 45% of the value of the authorized or foreseeable buildings is considered. According to the respondent, in fixing the value of the buildings authorized or foreseeable on the land to be evaluated, the coefficients applicable in determining the taxpayer's patrimonial value are used, namely the use coefficient provided for in article 1 of that Code. Concluding from this that the consideration of such a coefficient, dependent on the type of use foreseen for the property to be built on the land, will be determinative for the purposes of applying Item 28 of the TGIS. This conclusion is based on the assumption that the expression "property with residential use" appeals to a classification that overlaps the types provided for in no. 1 of article 6 of the CIMI. It is not possible, however, to follow such conclusion. [...]. In these terms, resulting from article 6 of the CIMI a clear distinction between urban property classified as "residential" and "building plots", the latter cannot be considered, for purposes of the incidence of stamp duty, as "property with residential use"."

m) The legislator, in intending to tax building plots in stamp duty, revisited item 28 of the TGIS through Law no. 83-C/2013, of 31 December, and introduced them there, which proves that in the formulation of Law no. 55-A/2012, building plots were excluded from stamp duty taxation by item 28 of the TGIS and now, through Law no. 83-C/2013, they have come to be taxed, which makes it clear to us that the legislator considers that the expression "residential use" did not include building plots.

n) Neither should it be said that the fact that article 45 of the CIMI provides for the application of a residential use coefficient in determining the VPT of building plots will be a sufficient condition, in itself, to allow their inclusion in the provision governing item 28 added by Law no. 55-A/2012, nor indeed alter their nature as building plots, since what is at issue here is only to ascertain the VPT which will be influenced by the type of buildings to be carried out (which, it must be said, are not always realized).

o) Ruling 04950/11 of 14/02/2012 of the TCA South cited by the AT which considers that the regime for evaluating the patrimonial value of building plots is established in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project, a viewpoint which is confined to valuation and nothing more.

p) Now, as already seen, article 6 of the CIMI results in an unmistakable distinction between residential property and building plots, which prevents them from being taxed in stamp duty in the terms intended by the respondent.

q) In this sense, various arbitral decisions have already been rendered, namely cases 42, 48, 49 and 75, all of 2013.

IV – DECISION

In view of the above, the tribunal decides as follows:

a) To declare that building plots are excluded from stamp duty taxation provided for in item 28.1 of the TGIS, in the version given to it by Law 55-A/2012 of 29 October.

b) Consequently, to declare the request for arbitral pronouncement well-founded, annulling the stamp duty assessment act relating to the year 2013 in the amount of € 54,270.73, since the assessment in question is unlawful as it violates the said provision governing incidence with all legal consequences flowing therefrom.

c) To fix the value of the case at € 54,270.73 in accordance with the provisions contained in article 299, no. 1, of the CPC[11], article 97-A of the CPPT[12], and article 3, no. 2, of the RCPAT[13].

Costs to be borne by the respondent, under the terms of no. 4 of article 22 of the RJAT, the respective amount being fixed at € 2,142.00, in accordance with the provisions of Table I referred to in article 4 of the RCPAT.

Notify.

Lisbon, 20 February 2015

Text prepared by computer, in accordance with article 131, no. 5 of the CPC, applicable by referral of article 29, no. 1, paragraph e) of the RJAT, with blank lines and reviewed by the tribunal.

The present decision is governed by the spelling prior to the orthographic agreement.

The arbitrator,

Arlindo Francisco

[1] Acronym for Number of Identification of Legal Entity
[2] Acronym for Legal Regime of Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for General Table of Stamp Duty
[5] Acronym for Centre of Administrative Arbitration
[6] Acronym for Taxpayer's Patrimonial Value
[7] Acronym for Code of Municipal Property Tax
[8] Acronym for Central Administrative Court
[9] Acronym for Stamp Duty
[10] Acronym for Code of Stamp Duty
[11] Acronym for Code of Civil Procedure
[12] Acronym for Code of Procedure and Tax Process
[13] Acronym for Regulations on Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the Tabela Geral do Imposto de Selo apply to building land (terrenos para construção)?
Under the original wording of Item 28.1 TGIS (Law 55-A/2012) applicable to 2013, there was significant legal uncertainty whether building land fell within the scope of stamp duty on 'urban property with residential use.' The Tax Authority argued that building plots qualified because their patrimonial valuation applied residential use coefficients from Article 41 CIMI. However, the fact that Article 194 of Law 83-C/2013 explicitly amended Item 28.1 to include building plots effective January 1, 2014, strongly suggests that such land was not clearly covered under the original provision. This legislative clarification indicates building plots were not subject to stamp duty under Item 28.1 for the 2013 tax year.
Can building land be classified as residential property for Stamp Tax purposes under Portuguese law?
The classification dispute centers on interpreting 'residential use' (afetação habitacional). The Tax Authority argued building land should be classified as residential property because the Property Tax Code (CIMI) applies residential use coefficients when determining the tax patrimonial value (VPT) of building plots under Article 45 CIMI, which values them based on planned construction projects. However, the applicant successfully distinguished between actual residential use (occupied housing) and mere building capacity with residential potential. Building plots without any construction lack the essential characteristic of residential use, possessing only development potential. The subsequent 2014 legislative amendment explicitly adding building plots to Item 28.1 reinforces that undeveloped land was not originally encompassed within 'residential use' property for stamp duty purposes.
How did CAAD Process 507/2014-T rule on the Stamp Tax assessment for construction plots in Matosinhos?
CAAD Process 507/2014-T analyzed stamp duty assessments totaling €54,270.73 on two building plots in Matosinhos for 2013, where collective housing and commercial construction was planned but no buildings existed. The tribunal examined whether Item 28.1 TGIS, which subjects 'urban property with residential use' valued at €1,000,000 or more to stamp duty, applied to undeveloped building land. The arbitration focused on the critical timing issue: the original Item 28.1 (Law 55-A/2012) used ambiguous language, while Law 83-C/2013 explicitly amended the provision to include building plots, but only from January 1, 2014. The tribunal analyzed this legislative evolution, noting that the Tax Authority did not and could not invoke the 2014 amendment for 2013 assessments, and examined whether building capacity alone constitutes 'residential use' under tax law principles.
What is the role of the property tax valuation coefficient (coeficiente de afetação) in determining Stamp Tax liability on building land?
The property tax valuation coefficient (coeficiente de afetação) became central to the dispute. Under Article 41 of the Property Tax Code (CIMI), different use coefficients apply when calculating the tax patrimonial value (VPT) of properties—residential, commercial, industrial, or services. The Tax Authority argued that because Article 45 CIMI requires building plots to be valued using the residential use coefficient based on planned construction projects, such land automatically qualifies as 'residential use' property for stamp duty purposes. This interpretation would link stamp duty incidence to valuation methodology rather than actual property use. However, this reasoning conflates two distinct concepts: the technical valuation process (which anticipates future use) and the substantive tax incidence requirement of actual residential use. The tribunal examined whether applying a residential coefficient for valuation purposes alone suffices to classify undeveloped land as residential property for stamp duty liability.
How can property owners challenge unlawful Stamp Tax assessments on building land through CAAD arbitration?
Property owners can challenge unlawful stamp duty assessments on building land by filing an arbitration request with CAAD (Centro de Arbitragem Administrativa) under Article 2(1)(a) and Article 10(1)(a) of the Tax Arbitration Legal Regime (RJAT). The challenge must identify the specific assessment acts, amounts, and legal grounds for annulment—in this case, the inapplicability of Item 28.1 TGIS to building plots for years before the 2014 amendment. Key arguments include: (1) distinguishing building capacity from actual residential use; (2) invoking the principle that tax incidence provisions require strict interpretation; (3) citing the 2014 legislative amendment as evidence of prior non-applicability; and (4) arguing that the amendment is not interpretative and therefore lacks retroactive effect. Arbitration offers a faster alternative to judicial appeal, with the tribunal constituted within months to examine whether the Tax Authority incorrectly applied stamp duty to undeveloped land lacking the essential characteristic of residential use required by the legal provision.