Process: 508/2014-T

Date: January 29, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 508/2014-T) addresses whether Stamp Tax under item 28 of the General Stamp Duty Table (TGIS) applies to construction land (terrenos para construção). The claimant, a property development company, challenged a €13,046.15 stamp duty assessment for 2013 on urban construction land with a patrimonial tax value exceeding €1,000,000. The land had an approved subdivision permit for a mixed-use building (residential, commercial, and services), but construction was suspended due to litigation. The company argued that construction plots do not constitute 'urban properties with residential use' under item 28 TGIS, as they are uninhabitable working tools for construction companies, not manifestations of wealth like luxury homes that the legislator intended to tax. The claimant emphasized that construction land demonstrates no contributive capacity until development occurs, and that the future building would create multiple units each valued below the €1,000,000 threshold. Additionally, commercial and service areas were planned, not purely residential use. The Tax Authority countered that construction plots are urban properties under the Municipal Property Tax Code (CIMI), and that valuation rules consider authorized buildings, making the residential use coefficient applicable. The Authority argued that establishing construction rights increases property value, justifying taxation. The claimant also noted that subsequent amendments to item 28.1 TGIS in the 2014 State Budget Law demonstrated the original wording did not clearly encompass construction plots, supporting claims for tax reimbursement with compensatory interest. This case exemplifies fundamental disputes over the scope of stamp duty on high-value urban properties and whether undeveloped construction land falls within the legislative intent of taxing residential property wealth.

Full Decision

ARBITRATION DECISION

Case No. 508/2014-T

Claimant: A, S.A.
Respondent: Tax and Customs Authority

I – Report

  1. On July 23, 2014, A, S.A., a public limited company with Tax Identification Number …, with registered office at …Avenue, Oeiras, pursuant to the provisions of articles 2, no. 1, point a), and 10, no. 1, point a), of Decree-Law No. 10/2011, of January 20 (Legal Regime for Tax Arbitration – RJAT) and articles 99 et seq. of the Code of Tax Procedure (CPPT), requested the establishment of an arbitral tribunal and filed a challenge to the assessment and collection of stamp duty for the year 2013, in the total amount of € 13,046.15 (thirteen thousand and forty-six euros and fifteen cents) relating to the urban property …, of the Union of Parishes of … and …, … and …, municipality of Oeiras, requesting that the challenged act be declared null or annulled, and that the Tax Administration be ordered to refund the amounts paid, with reimbursement of the paid amount plus compensatory interest.

  2. In the Request for Arbitral Opinion, the Claimant chose not to designate an arbitrator.

  3. Pursuant to no. 1 of article 6 of the RJAT, by decision of the President of the Deontological Council, the undersigned was appointed as sole arbitrator and accepted the position within the legally prescribed period.

  4. The arbitral tribunal was constituted on September 29, 2014.

  5. Notified in accordance with article 17 of the RJAT, the Tax and Customs Authority (TA) presented its Response on October 30, 2014 and a motion requesting, in light of the absence of any exception and need for additional evidence production, dispensation with the hearing provided for in article 18 of the RJAT.

  6. The Claimant, notified for this purpose, declared its opposition to the dispensation with the hearing of article 18 of the RJAT and, given the existing jurisprudence on the matter, dispensed with presenting additional arguments.

  7. Taking into account the position manifested by the Parties, the tribunal decided on November 26, 2014 to dispense with any other formalities and to issue a decision by January 29, 2015.

  8. Verification being made of the lack of evidentiary elements invoked by the Claimant and taking into account the failure by the TA to send the administrative file, the parties were notified accordingly, and the Claimant joined, on January 15, 2015, documents invoked in the initial Request.

  9. The Request for Arbitral Opinion

In the Request for Arbitral Opinion, the Claimant states, in summary:

  • That, due to its business of purchase and sale of real property, carrying out urbanization projects and building construction and purchase for resale of property acquired for those purposes, it is the owner of the land with article …, of the Union of Parishes of … and …, … and ….

  • That land is a construction plot corresponding to Lot No. … created by the subdivision permit with No. …, issued on April 15, 2004, by the President of the Oeiras Municipal Chamber, which authorizes the construction of a building for housing, commerce and services, comprising 1,304.00 m² of area for commerce and 1,100.00 m² of area for services.

  • The planned building would result in the creation of 17 units susceptible to independent use.

  • The effects of the subdivision permit were suspended due to proceedings filed by the Public Prosecutor's Office in the Administrative Court of Sintra seeking declaration of nullity of said subdivision permit, preventing works on said property;

  • In March 2014, it was notified of the assessment of stamp duty (item 28) for the year 2013 relating to said plot and paid the corresponding amounts, but the assessment is illegal.

  • Construction plots are not included in the tax base of new item 28 of the General Stamp Duty Table (TGIS), since a "construction plot" is not an urban property with residential use, especially since it is not habitable, not being suitable for any use other than construction, and only once this is carried out, in the future, could there exist a building used for housing (and/or commerce, services or other purposes).

  • From nos. 1, 2 and 3 of article 6 of the Municipal Property Tax Code (CIMI) results the distinction between residential properties and construction plots and that the purposes or uses of housing, commerce, industry or services are only provided for properties that are buildings and not for "construction plots".

  • With the introduction of this special stamp duty the legislator established as the tax base only "residential properties", as results from the reference to luxury homes, did not intend to tax the working tools of companies engaged in civil construction by burdening them with a tax levied on future income, but taxpayers who possess in their patrimony residential properties of high economic value subjecting manifestations of wealth to increased taxation.

  • For this reason, it also excluded properties used for commercial, services, logistics or warehousing purposes.

  • Construction plots do not evidence the contributive capacity of companies that acquire them as raw material, and in the present case there was not even any guarantee that construction would take place due to pending proceedings.

  • And even if such construction were carried out, there would result various residential units with different tax identification numbers, each with patrimonial value below € 1,000,000.00.

  • In any case, the construction plot provides for use with commerce and services, areas that cannot be considered as residential.

  • The very fact that the 2014 State Budget Law amended the wording of item 28.1 of the TGIS proves that previously the assessment and collection of this tax was not provided for regarding construction plots, for which reason there is grounds for reimbursement of the tax paid and payment of compensatory interest.

  1. The Response

The Respondent responds, in summary:

  • With the legislative amendment introduced by Law No. 55-A/2012, of October 29, 2012, in article 1 of the Stamp Duty Code (CIS), and the addition of item 28 to the TGIS, Stamp Duty came to apply also to ownership, usufruct or surface right of urban properties whose patrimonial tax value recorded in the register, under the terms of the Municipal Property Tax Code (CIMI) is equal to or greater than € 1,000,000.00.

  • In the absence of any definition of the concepts of urban property, construction plot and residential use, in the context of Stamp Duty, one must resort to the CIMI, which is expressly referred to subsidiarily by article 67, no. 2 of the Stamp Duty Code when matters not regulated in the CIS regarding item 28 are at issue.

  • One must take into account the concept of property in no. 1 of article 2 of the CIMI, as well as the provision in article 6, no. 1 of the CIMI, regarding the types of existing urban properties (integrating in this concept construction plots).

  • The mere establishment of a potential construction right increases the value of the property in question, therefore the notion of use of the urban property is based on the evaluation of properties, and one must take into account article 45, no. 2, of the CIMI which mandates considering the "…value of authorized buildings", and therefore the use coefficient provided for in article 41 of the CIMI is applicable.

  • Thus, if for purposes of determining the patrimonial tax value of construction plots it is clear that the application of the use coefficient applies in the context of valuation, it cannot be ignored in its consideration for purposes of application of item 28 of the TGIS.

  • The legislator does not refer to "properties intended for housing" but to "residential use" whose meaning must be found not in article 6, no. 1, letter a) of the CIMI but in article 45 of the CIMI which distinguishes the part of the land where the building to be constructed will be implanted and the area of free land; having determined the amount of the first part, the determined value is reduced to a percentage between 15% and 45% as provided in no. 2 of said provision, by virtue of the fact that construction has not yet been completed.

  • The value of the land adjacent to the implantation area is determined in the same manner as the value of the free land area and the excess land area for any urban property.

  • It is possible, before the actual construction of the property, to determine and establish the use of construction plot taking into account the urbanization and building regime, RJUE and Municipal Master Plans.

  • The Constitution of the Republic does not prevent differentiation of treatment, but only arbitrary, unreasonable discriminations without justification and sufficient material basis, but item 28 of the TGIS does not violate the Constitution because it bases the different treatment of properties (housing/services/commerce) on a choice of the legislator, for political and economic reasons.

  • Taxation under stamp duty follows criteria of suitability, applying equally to all holders of residential properties with value exceeding € 1,000,000.00, impacting on the wealth embodied and manifested in the value of properties, being legitimized as a mechanism for obtaining revenue, and not violating the principle of proportionality by applying equally to all holders of residential properties with value exceeding € 1,000,000.00.

  • The assessment does not suffer from a defect of violation of law, whether of the Constitution or of the CIS, and therefore the claimed demand should be judged unfounded and the Respondent Entity absolved of the claim.

  1. Object of the Claim

The legal issue raised in the present request for review of the legality of the Stamp Duty assessment consists in determining whether a construction plot should be considered a "property with residential use" for purposes of applying item 28.1 of the General Table of Stamp Duty, added by Law No. 55-A/2012, of October 29.

  1. Procedural Matters

The arbitral tribunal is materially competent, pursuant to the provisions of articles 2, no. 1, letter a), of the Legal Regime for Arbitration in Tax Matters (RJAT).

The parties have legal personality and capacity and have standing under articles 4 and no. 2 of article 10 of the Legal Regime for Arbitration in Tax Matters (RJAT), and article 1 of Ordinance No. 112-A/2011, of March 22.

The case does not suffer from any nullity nor have any exceptions been raised by the parties that would prevent consideration of the merits of the case, therefore the conditions are met for pronouncement of the arbitral decision.

II – Reasoning

  1. Established Facts

The following facts are considered established:

13.1. The Claimant is the owner of the urban property recorded in the property register of the parish of the Union of Parishes of … and …, … and …, municipality of Oeiras, under article … (Document No. 1 attached to the Request for Arbitral Opinion, the contents of which are incorporated herein).

13.2. Said property was the subject of subdivision permit No. …, issued on April 15, 2004, by the President of the Oeiras Municipal Chamber, which granted authorization for construction of a building for housing, commerce and services (Document No. 1 attached to the file by the Claimant on 15/01/2015, the contents of which are incorporated herein; articles 4, 5 and 6 of the Request for Opinion, not contested by the Response).

13.3. Following decrees authorizing construction works for the plots covered by Permit No. …, proceedings were filed by the Public Prosecutor's Office against the Municipality of Oeiras under article 51 of the Code for Administrative Proceedings (ETAF) and articles 9, no. 2 and 55, no. 1 of the Code of Administrative Procedure (CPTA), invoking nullity of authorization acts, deriving from the nullity of the licensing act itself for violation of norms of the Municipal Master Plan (RPDM), with suspension of the effects of the subdivision permit (Documents Nos. 2 and 3 joined by the Claimant on 15/01/2015, the contents of which are incorporated herein; articles 7 and 8 of the Request, not contested by the Response).

13.4. The action No. … was judged unfounded (challenging the licensing act for subdivision - deliberation of the Oeiras Municipal Chamber of 8/10/2013 approving the subdivision project - and all consequent acts), by sentence of the Administrative Court of Sintra, confirmed by Decision of 12/04/2012 of the Court of Administrative Appeal, which led to the unfoundedness of dependent actions, as was the case with action No. …, 3rd Administrative Unit (Document No. 4 joined by the Claimant on 15/01/2015, the contents of which are incorporated herein).

13.5. In 2014, the Claimant was notified by Receipt No. 2010… of the Stamp Duty assessment dated 18/03/2014, for the year 2013, resulting from the application of the 1% rate provided in TGIS item 28.1 to the property identified in 13.1, recorded under article …, parish of … and …, with patrimonial tax value of € 1,304,614.00 (Document No. 1 attached to the Request for Arbitral Opinion).

13.6. The Claimant paid, on 29/04/2014, the amount of € 4,348.73, corresponding to the first installment of the total collection of € 13,046.15.

  1. Unestablished Facts

There are no unestablished facts material to the decision of the case.

  1. Basis for Establishment of Factual Matters

The fixing of facts was based on documents joined (solely) by the Claimant to the file, whose authenticity and correspondence to reality were not challenged by the Respondent.

  1. Legal Analysis

16.1. Item 28 of the General Table of Stamp Duty (TGIS)

Item 28 of the General Table of Stamp Duty (TGIS), attached to the Stamp Duty Code (CIS), was added by article 4 of Law No. 55-A/2012, of October 29, with the following content:

"28 – Ownership, usufruct or surface right of urban properties whose patrimonial tax value recorded in the register, under the terms of the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the patrimonial tax value for purposes of Municipal Property Tax:

28.1 – For properties with residential use – 1%;

28.2 – For properties, when the taxpayers are not individuals and are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in a list approved by ordinance of the Minister of Finance – 7.5%".

According to the amendments to the CIS introduced by article 3 of Law No. 55-A/2012, of 29/10, the Stamp Duty provided for in item 28 of the TGIS applies to a legal situation (no. 1 of article 1 and no. 4 of article 2 of the CIS), in which the respective taxpayers are those referred to in article 8 of the CIMI (no. 4 of article 2 of the CIS), upon whom the tax burden falls (letter u) of no. 3 of article 3 of the CIS).

The provision in the CIS, as amended by Law No. 55-A/2012, both in article 4, no. 6 ("In situations provided for in item 28 of the General Table, the tax is due whenever the properties are located in Portuguese territory") and in article 23, no. 7 ("With respect to tax due for situations provided for in item no. 28 of the General Table, the tax is assessed annually, for each urban property, by the central services of the Tax and Customs Authority, applying, with necessary adaptations, the rules contained in the CIMI"), combined with article 1 of the CIMI, consider the property itself as the taxable event (the situation that triggers taxation) provided it reaches the value set forth in item 28 of the General Stamp Duty Table, regardless of the number of taxpayers, possessors (as owners, usufructuaries or surface holders) of the property in question.

Item 28.1, in the wording effective at the time of the facts, refers to "properties with residential use". Now, not only is this concept not defined in any provision of the CIS, but it is also not used in the CIMI, the instrument to which article 67, no. 2 of the CIS expressly refers when matters not regulated in the CIS regarding item 28 are involved.

This question has been subject to consideration both by arbitral tribunals [1] and by administrative and tax courts, there being already a considerable number of decisions issued at the highest level [2] (Tax Litigation Section of the Supreme Administrative Court), with great unanimity of positions.

We cannot fail to agree with the analysis made in these different decisions, and we shall cite some excerpts from them that seem to us to address the issues raised here.

Recall that, in summary, the Claimant argues that neither residential properties are confused with construction plots nor is the construction plot of which it is owner a residential property with high patrimonial value, such as "luxury homes", which the State Secretary for Tax Affairs is reported to have stated in his speech to Parliament was intended to be reached by the addition to item 28 of the TGIS.

The TA, on the other hand, considers that the reason the legislator did not use the expression "properties intended for housing" but rather "residential use" must be found not in article 6, no. 1, letter a) of the CIMI but in article 45 of the CIMI, in the interpretation of the expression "residential use", a notion that rests on the evaluation of properties. Article 45, no. 2, of the CIMI by mandating consideration of the "…value of authorized buildings" refers to the use coefficient provided for in article 41 of the CIMI, which would have to be taken into account for purposes of applying item 28 of the TGIS.

Analyzing precisely this type of argument, it was stated in the arbitral decision issued in case 53/2013-T: "With respect to article 45 of the CIMI, it has no relationship with the classification of properties, only indicating the factors to be considered in the evaluation of construction plots. What is weighed there, in referring to the "building to be constructed" is the weighing of the destination of the land, which, as we have seen, is something that, in the context of the CIMI, does not imply use and occurs before this."[3]

Also, arbitral decisions Nos. 158/2913-T and 288/2013-T rejected the TA's thesis on the application of the methodology for evaluating properties in general to construction plots, which would make applicable to such property the use coefficient provided for in article 41 of the CIMI, as follows:

"It is true that the CIMI determines the application, to the evaluation of construction plots, of the evaluation methodology applicable to constructed buildings, incorporating for this purpose, in the value of the land, the estimated value of the building to be constructed; and that this value is determined, in turn, by the type of use provided for the properties to be built. Put more simply, the law (CIMI) says that to determine the patrimonial value of construction plots, one incorporates in this a portion of the estimated value of the buildings to be constructed; and to estimate the value of buildings to be constructed, one takes into account the use provided for them. Contrary to what the TA argues, it results precisely from the letter of these provisions the inapplicability of the concept of "use" to construction plots. The use that is taken into account, for purposes of evaluation, even of construction plots, is always and only the use of buildings to be constructed. The use provided for buildings to be constructed influences the patrimonial tax value of construction plots, but nothing more. From the norm regarding the determination of the value of properties that determines that, in the value of construction plots one incorporates the estimated value of buildings to be built, which, in turn, is influenced by the future use of those buildings, one cannot extract that the use in question is a use of the plots themselves, and this for two reasons: First, because this interpretation would be contrary to the very letter of the provisions that mandate taking into account, in the evaluation of construction plots, the use of properties to be built; And second, because the manner in which the law mandates evaluating a particular patrimonial reality cannot be determinative of the nature or legal qualification of that reality, having regard above all to the principle of typicality of norms establishing tax incidence. The fact that the law mandates applying to a particular patrimonial reality the same evaluation methodology that is applied to another different reality does not cause the first reality to share in the nature of the second. Thus, if it is true that the value of authorized or planned buildings influences the real value of construction plots, and therefore that value must be reflected in the patrimonial value of those plots, it does not follow that a plot acquires residential use by virtue of planned construction of residential properties on it, this distinction being extracted clearly from the very norms governing evaluation of the CIMI."

The TA's argument has also been rejected by the Supreme Administrative Court, reproducing for all purposes an excerpt from one decision (Decision of 14-05-2014, in case 0317/14) which also refers to other decisions: "From the letter of the law nothing unequivocal follows, indeed, for by itself using a concept that it did not define and which was also not defined in the instrument to which it referred subsidiarily it lent itself, unnecessarily, to ambiguity, in a matter – of tax incidence - in which certainty and legal security should also be paramount concerns of the legislator. And from its "spirit", apprehensible in the explanatory statement of the bill that is at the origin of Law No. 55-A/2012 (Bill No. 96/XII – 2nd, Official Journal of the Republic, series A, No. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows than a concern to generate new tax revenue, from sources of wealth "more spared" in the past from the fiscal appetite than labor income, in particular capital income, securities gains and property ownership, reasons which bring no relevant contribution to the clarification of the concept of "properties (urban) with residential use", since they take it as settled, without any concern to clarify it. Such clarification seems, however, to have come - as reported in the Arbitral Decision issued on December 12, 2013, in case No. 144/2013-T, available in the CAAD database -, when the said bill was presented and discussed in the National Assembly, in the words of the State Secretary for Tax Affairs, who is reported to have stated, as noted in the Official Journal of the National Assembly (DAR I Series No. 9/XII – 2, of October 11, p. 32) that: "The Government proposes the creation of a special rate on high-value residential urban properties. It is the first time that Portugal creates special taxation on high-value properties intended for housing. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to homes valued at equal to or greater than 1 million euros" (underlined), from which it is gathered that the reality to be taxed envisioned is, after all, and notwithstanding the imprecision in the law's terminology, "properties (urban) for housing", in common language "homes", and not other realities. The fact that one can consider that in determining the patrimonial tax value of urban properties classified as construction plots one should take into account the use that the authorized or planned building for it will have for determination of the respective value of the implantation area (cf. nos. 1 and 2 of article 45 of the CIMI) does not determine that construction plots can be classified as "properties with residential use", since "residential use" appears always in the Municipal Property Tax Code referred to "buildings" or "constructions", existing, authorized or planned, for only these can be inhabited, which is not the case with construction plots, which do not have, in themselves, conditions for this, not being susceptible of being used for housing except if and when on them is built the construction authorized and planned for them (but in that case they would no longer be "construction plots" but another type of urban property – "residential", "commercial, industrial or for services" or "other" – article 6 of the CIMI)". It would be strange, indeed, if the determination of the scope of the objective incidence rule of item No. 28 of the General Table of Stamp Duty were, in the end, found in the rules for determining the patrimonial tax value of the Municipal Property Tax Code, and if the imprecision in terminology of the legislator in drafting that rule were, after all, elucidated and finally clarified by way of an indirect and ambiguous reference to the use coefficient established by the legislator in relation to built properties (article 41 of the Municipal Property Tax Code). Thus, given that a construction plot – whatever the type and purpose of the building that will be, or could be, erected on it – does not satisfy, in itself, any condition to be licensed as such or to be defined as having housing as its normal purpose, and referring the incidence rule of Stamp Duty to urban properties with "residential use", without any specific concept being established for this purpose, one cannot extract from it that it contains a future potentiality, inherent to a distinct property that possibly will be built on the plot. It is concluded therefore, in accordance with what was decided in the sentence under appeal that, resulting from article 6 of the Municipal Property Tax Code a clear distinction between urban properties "residential" and "construction plots", these cannot be considered as "properties with residential use" for purposes of the provision in item No. 28.1 of the General Table of Stamp Duty, in its original wording, as given by Law No. 55-A/2012, of October 29."

This tribunal subscribes to the analyses contained in the excerpts reproduced.

And it is also considered that this interpretation is confirmed by the amendment, by the State Budget Law for 2014 (Law No. 83-C/2013, of December 31), of the wording of item 28.1, which now reads: "For residential properties or for construction plots whose building, authorized or planned, is for housing, under the terms provided in the Municipal Property Tax Code".

Indeed, this change in wording means that it was intended to change the text to encompass what was not previously included in it.

And if someone had previously wished to cover the reality defended by the TA, such an objective would not only find no expression in the letter of the law but was contradicted by the historical element, through the account of parliamentary proceedings.

The SEAF's statements reproduced above are proof of this: the legislator when introducing this legislative innovation considered as an expression of determining contributive capacity, urban properties with residential use, of high value (luxury), more precisely, of value equal to or greater than € 1,000,000.00 on which a special rate of stamp tax came to apply, intending to introduce a principle of taxation on wealth externalized in ownership, usufruct or surface right of high-value urban properties with residential use.

Therefore, the criterion was application of the new rate to urban properties with residential use, whose TPV is equal to or greater than € 1,000,000.00". (...)[4] "The basis for the measure designated 'special rate on high-value residential urban properties' rests on invocation of the principles of social equity and tax justice, calling upon to contribute in a more intensive manner the holders of high-value properties intended for housing, with the new special rate applying to "homes valued at equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to housing (home, independent unit or apartment with independent use) evidences a contributive capacity above average and, as such, susceptible of determining a special contribution to ensure fair apportionment of the tax burden."

Now if the legislator clearly expressed its wish to tax luxury homes used for housing, it is not possible to extract from the letter of the law, with the wording approved in 2012, the interpretation that supports that taxation encompasses construction plots for buildings, even if intended for housing.

Quoting again from the Decision of the Supreme Administrative Court issued in appeal No. 317/14: "residential use" always appears in the Municipal Property Tax Code referred to "buildings" or "constructions", existing, authorized or planned, for only these can be inhabited, which is not the case with construction plots, which do not have, in themselves, conditions for this, not being susceptible of being used for housing except if and when on them is built the construction authorized and planned for them (but in that case they would no longer be "construction plots" but another type of urban property – "residential", "commercial, industrial or for services" or "other" – article 6 of the CIMI)".

Therefore, the wording given to item 28.1 with the 2014 State Budget is clearly innovative, the question of its application to prior years not being raised. That the legislator did not even attempt to do so, it is repeated.

16.2. Conclusion

Given that the Claimant's property is configured as a construction plot (although the property schedule was not provided, such situation results from the procedural documents of the parties and the facts established as proven), one is not dealing with a property with current residential use, therefore Stamp Duty provided for in item 28.1 of the TGIS does not apply to it, in the wording effective at the time of the facts.

For this reason, the assessment whose review of legality and declaration of invalidity is requested suffers from a defect of violation of that item No. 28.1, due to error regarding the legal prerequisites, which justifies the declaration of its illegality and annulment (article 135 of the Code of Administrative Procedure).

  1. Decision

In accordance with and on the grounds set forth, the arbitral tribunal decides to judge the claim founded and with the consequent annulment of the assessments challenged, with all legal consequences, namely the reimbursement of the total amount of tax paid by the Claimant, plus compensatory interest, under the terms of article 24, no. 5, of the RJAT, article 43 of the General Tax Law (LGT) and article 61 of the Code of Tax Procedure (CPPT).

  1. Case Value

In accordance with the provision in no. 2 of article 315 of the Code of Civil Procedure (CPC), letter a) of no. 1 of article 97-A of the Code of Tax Procedure (CPPT) and also no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at € 13,046.15.

  1. Costs

For purposes of the provision in no. 2 of article 12 and no. 4 of article 22 of the RJAT and no. 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at € 918.00, in accordance with Table I attached to said Regulation, to be borne in full by the Respondent.

Lisbon, January 29, 2015

The Arbitrator

Maria Manuela Roseiro

[Text prepared by computer, under article 131, no. 5 of the Code of Civil Procedure (CPC), applicable by reference of article 29, no. 1, letter e) of the Tax Arbitration Regime. The wording of this decision is governed by the spelling prior to the Orthographic Agreement of 1990, with possible exception of citations].

[1] Within the scope of CAAD it is possible to consult a large number of decisions on, precisely the application of item 28.1 to construction plots (cf. case nos. 42/2013-T; 48/2013-T; 49/2013-T; 53/2013-T; 75/2013-T; 144/2013-T; 158/2013-T; 178/2013-T; 180/2013-T; 189/2013-T; 191/2013-T; 207/2013-T; 215/2013-T; 231/2013-T; 240/2013-T; 242/2013-T; 288/2013-T; 308/2013-T; 310/2013-T; 2/2014-T; 10/2014-T; 12/2014-T; 56/2014-T; 66/2014-T; 151/2014-T; 202/2014-T; 210/2014-T; 276/2014-T).

[2] Cf. published at www.dgsi.pt, decisions of the SAT (Tax Litigation Section): in 2014, the Decisions of April 9 (case nos. 1870/13 and 48/14); April 23 (case nos. 270/14; 271/14; 272/14); May 14 (case nos. 1871/13, 46/14; 55/14; 274/14; 317/14); May 28 (case nos. 395/14; 396/14 and 425/14); July 2 (case 467/14); July 9 (case 676/14); and in 2015, the Decision of January 14, case 541/12.

[3] The same decision also concluded that: "it must be presumed that the use of a different expression is intended to have in view a distinct reality, and therefore, in good hermeneutics, "property with residential use" cannot be a property merely licensed for housing or intended for that purpose (that is, it will not suffice that it be a "residential property"), having to be a property that already has effective residential use." And "That this is the meaning of the expression "use" in the same context of property classification that the CIMI does, is confirmed by article 3 in which, regarding rural properties, reference is made to those that "are used for or, in the absence of concrete use, have as normal purpose a use generating agricultural income", which evidences that use is concrete, effective. In truth, as is seen from the latter part of this text, a property may have as purpose a certain use and be or not be used for it, which evidences that use is, at the level of the connection of a property to a certain use, something more intense than mere purpose and which may or may not occur, downstream of this and not upstream of it".

[4] Arbitral decision in case 219/2013-T and decisions cited there (case nos. 48/2013-T and 50/2013-T).

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28 of the TGIS applicable to construction land (terrenos para construção)?
Based on jurisprudence from the CAAD (Centro de Arbitragem Administrativa), Stamp Tax under Verba 28 of the TGIS has generally been ruled as not applicable to construction land (terrenos para construção). The legislative intent behind Verba 28 was to tax high-value residential properties as manifestations of wealth, not undeveloped land held as working capital by construction companies. Construction plots are not habitable and do not constitute 'urban properties with residential use' in the sense intended by the law. Courts have found that terrenos para construção should be distinguished from completed residential buildings, and subsequent legislative amendments clarified this distinction, supporting taxpayer arguments that the original wording was ambiguous regarding construction land.
Can property companies challenge Stamp Tax assessments on urban construction lots through tax arbitration at CAAD?
Yes, property companies can and do successfully challenge Stamp Tax assessments on urban construction lots through tax arbitration at CAAD. The arbitration process under the Legal Regime for Tax Arbitration (RJAT - Decree-Law 10/2011) provides a forum for contesting stamp duty assessments on properties valued at €1,000,000 or more. Companies must file a request for arbitration under articles 2 and 10 of the RJAT and article 99 et seq. of the Tax Procedure Code (CPPT). The arbitral tribunal is constituted with one or three arbitrators, and the Tax Authority submits a response. Many property development companies have successfully challenged these assessments, particularly when the taxed property is undeveloped construction land rather than completed residential buildings.
What are the legal grounds to annul a Stamp Tax liquidation on construction land under Portuguese tax law?
Legal grounds to annul Stamp Tax liquidation on construction land include: (1) construction plots do not qualify as 'urban properties with residential use' under Verba 28 TGIS since they are uninhabitable and not suitable for residential occupation until construction occurs; (2) the legislative intent was to tax luxury residential properties as wealth manifestations, not working tools of construction companies; (3) construction land lacks the contributive capacity demonstrated by completed high-value residences; (4) the Municipal Property Tax Code (CIMI) distinguishes between construction plots (terrenos para construção) and residential buildings; (5) ambiguity in the original Verba 28 wording, later clarified by the 2014 State Budget Law amendments, demonstrates the provision was not intended to cover undeveloped land; and (6) violation of principles of tax legality and typicality when extending taxation beyond the clear legislative scope.
How does the CAAD arbitration procedure work for disputing Imposto do Selo on high-value urban properties?
The CAAD arbitration procedure for disputing Imposto do Selo on high-value urban properties follows these steps: (1) the taxpayer files a request for arbitral opinion under RJAT within the legal deadlines, choosing whether to designate an arbitrator; (2) an arbitral tribunal is constituted (sole arbitrator or three-member panel); (3) the Tax and Customs Authority is notified and submits a Response within the prescribed period; (4) parties may request dispensation of the oral hearing under article 18 RJAT if no factual disputes exist; (5) the tribunal may order production of evidence and request the administrative file; (6) if necessary, an oral hearing is held; (7) the tribunal issues a decision within legally prescribed deadlines; and (8) if the taxpayer prevails, the challenged assessment is annulled and the Tax Authority must refund amounts paid plus compensatory interest. The process typically takes several months from filing to decision.
Are taxpayers entitled to reimbursement and compensatory interest when a Stamp Tax assessment on construction land is annulled?
Yes, taxpayers are entitled to reimbursement and compensatory interest when a Stamp Tax assessment on construction land is annulled. Under Portuguese tax law, when an arbitral tribunal declares a tax assessment null or annuls it, the Tax Administration must refund all amounts paid by the taxpayer. Additionally, compensatory interest (juros indemnizatórios) accrues on the refunded amount from the date of payment until reimbursement, compensating the taxpayer for the time value of money improperly collected. The right to compensatory interest is established in article 43 of the Tax Procedure Code (LGT) and applies automatically when unlawful tax collection is determined. The interest rate is legally defined and calculated according to the applicable regulatory provisions. This ensures taxpayers are made whole when subjected to illegal or unfounded tax assessments.