Process: 511/2015-T

Date: May 9, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 511/2015-T concerns a challenge to Stamp Tax (Imposto do Selo) assessments under Verba 28.1 of the General Stamp Tax Table (TGIS) before the CAAD arbitral tribunal. The claimant contested three Stamp Tax assessments totaling €13,696.70 for the 2014 tax year, levied on an urban residential property in Cascais with a patrimonial tax value of €1,369,670. Verba 28.1 TGIS imposes an annual 1% Stamp Tax rate on ownership of urban properties designated for residential use whose patrimonial value equals or exceeds €1,000,000. The claimant argued this taxation violates fundamental constitutional principles, specifically: (i) the principle of equality under Article 13 of the Portuguese Constitution (CRP), (ii) the principle of tax capacity under Article 104(3) CRP, (iii) the principle of tax equality, and (iv) the prohibition against double taxation. The claimant contended that the assessment suffers from constitutional illegality and requested annulment of the assessments, reimbursement of amounts paid, and compensatory interest pursuant to Articles 43 and 100 of the General Tax Law (LGT) and Article 24(5) RJAT. The Tax Authority defended the legality of the assessments, arguing that application of the CIS and TGIS rules respects constitutional principles of equality and tax capacity and does not constitute prohibited double taxation. The AT further argued that it lacks competence to review constitutionality of laws and merely applied valid legal norms, precluding any error that would trigger compensatory interest under Article 43(1) LGT. The arbitral tribunal was constituted on October 28, 2015, with single arbitrator Nuno Maldonado Sousa, following the RJAT procedural framework. The parties waived the preliminary meeting and oral allegations, proceeding based on written submissions and documentary evidence.

Full Decision

Arbitral Decision[1]

The arbitral tribunal functioning with a single arbitrator constituted at CAAD – Administrative Arbitration Centre in accordance with the legal regime established by Decree-Law No. 10/2011 of 20 January, for which the arbitrator from the Centre's list Nuno Maldonado Sousa was appointed by the respective Ethics Committee, hereinafter delivers its arbitral decision.

1. Report

1.1. Identification of the parties and constitution of the arbitral tribunal

A…, with tax identification number…, resident at Street…, …, …, Cascais, filed a request for constitution of the arbitral tribunal, in accordance with the combined provisions of articles 2-1-a and 10 of RJAT and articles 1 and 2 of Order No. 112-A/2011, of 22 March, in which the Tax and Customs Authority is the Respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 29-07-2015 and was notified to the AT on 31-08-2015.

In accordance with the provisions of article 6, no. 1 and article 11, no. 1, para. b) of RJAT, the Ethics Committee appointed as arbitrator of the single arbitral tribunal the undersigned, who communicated acceptance of the appointment within the applicable period, and notified the parties of this appointment on 13-10-2015. In accordance with the rule set out in article 11, no. 1, para. c) of RJAT, the arbitral tribunal was constituted on 28-10-2015.

On 28-04-2016 this arbitral tribunal extended the period for issuance and notification to the parties of the arbitral decision by 10 days, in accordance with article 21-2 of RJAT.

1.2. Identification of the impugned acts, summary of the Claimant's claim, its grounds and defects attributed to the acts

In these proceedings the Claimant petitions for a declaration of illegality and consequent annulment of the acts assessing Stamp Tax for the year 2014, carried out under item 28.1 of TGIS. The Claimant further requests reimbursement by the AT of the amount paid as tax and payment of compensatory interest.

To support his principal claim the Claimant states that he was notified of the assessment acts relating to his urban property which is designated for residential use and has a patrimonial value of €1,369,670.00 and is registered in the cadastre under article… of the Union of Parishes of… and… in the municipality of Cascais. The assessment acts in question have numbers 2015…, 2015… and 2015…, and had, respectively, payment due dates in April, July and November 2015, totalling the three the amount of €13,696.70.

From a legal standpoint the Claimant contends that the application of the rules of incidence used, in particular article 1-1 of CIS in conjunction with item 28.1 of TGIS is illegal, as it violates the principles and constitutional rules of equality (article 13 CRP), of tax capacity (article 104-3 CRP), of tax equality and of the prohibition of double taxation. In the Claimant's thesis the assessments thus suffer from the defect of violation of law (constitutional).

The Claimant anchors his request for compensatory interest in the provisions of LGT, namely its articles 43 and 100 and article 24-5 of RJAT.

1.3. Summary of the AT's position

The AT submitted its Response and argued that the application made of the rules of CIS and TGIS respects the principles of equality, of tax capacity and does not significantly infringe the principle of prohibition of double taxation.

The AT also contended that since it is not within its legally defined functions to inquire into the constitutionality of laws, it acted in accordance with the normative commands in force, and it is therefore not imputable any error wherefore the provision of article 43-1 of LGT is not applicable.

It concludes by defending its acquittal.

2. Sanitation

2.1. Instruction of the proceedings and allegations

The AT requested dispensation of the holding of the 1st meeting of the arbitral tribunal with the parties as well as the submission of allegations (article 67 R-AT) and the Claimant, when invited to comment, manifested its consent. Since no additional evidence beyond the documentary evidence attached to the case has been requested and the case is addressed in the Parties' submissions, the tribunal considers the holding of the said meeting pointless and the submission of allegations unnecessary.

2.2. Sanitation

The arbitral tribunal was regularly constituted and has competence ratione materiae in accordance with the rules of article 2, no. 1, para. a) of RJAT.

The Parties possess legal personality and capacity (that of the AT in accordance with the discipline set out in article 4, no. 1 of RJAT and article 10, no. 2, of the same statute and article 1, para. a) of Order No. 112-A/2011, of 22 March), are legitimate and are regularly represented.

There are no nullities that affect the proceedings.

Accordingly, there is no impediment to the tribunal's examination of the merits of the case and therefore it is necessary to decide.

3. Decision

3.1. Findings of fact

3.1.1. Facts considered proven

In these proceedings the following facts have been established:

A. There is registered in the cadastre in favour of the Claimant under article… of the Union of Parishes of… and…, municipality of Cascais, an urban property in full ownership, without susceptibility of independent use of individual floors or divisions, with a current patrimonial value of €1,369,670.00, determined in 2013 [9th and 10th RI; doc. 4].

B. The Claimant received from the Tax Office of Cascais –… the following 3 assessments for the tax year 2014, relating to the property identified in A) and relating to "item 28.1 of TGIS", with a total of €13,696.70 [11th and 12th RI: docs. 1, 2 and 3]

Instalment Amount to pay Payment due date
1st instalment €4,565.58 April/2015
2nd instalment €4,565.56 July/2015
3rd instalment €4,565.56 November/2015

C. The assessments corresponding to the 1st instalment and the 2nd instalment were paid by the respective due dates [15th RI: docs. 5 and 6].

3.1.2. Facts considered not proven

No other facts of interest to the decision of the case were alleged.

3.1.3. Grounds for the proven facts

The Tribunal's conviction was based on the documentary evidence in the case file and on the position taken with respect to each fact by the Parties in their pleadings, duly identified.

3.2. Matters of law

3.2.1. Main issue: The refusal to apply item 28.1 of TGIS

The main issue to be examined in these proceedings consists of determining whether, on the basis of article 204 of CRP, the application of item 28.1 of TGIS should be refused, which establishes the application of a 1% rate of Stamp Tax on the ownership of urban properties designated for residential use, whose patrimonial value for tax purposes used for purposes of IMI is equal to or greater than €1,000,000, on the grounds that this rule is contrary to the principle of equality provided for in CRP. If it is concluded that the tax rule should not be applied, it must consequently be declared that the impugned assessment is invalid.

The Claimant argues that the application of item 28.1 of TGIS which led to the impugned assessment "manifestly and intolerably contradicts the foundational principles of Law, violating the principle of equality". He understands that the principle of equality provided for in article 13 of CRP, which contains the prohibition of discrimination, finds particular expression in the principle of tax equality which requires that all citizens be called upon to fulfil their duty to pay taxes according to the same criterion of assessment, which by constitutional provision is tax capacity. This, in turn, requires that similar taxation be applied to taxpayers with similar tax capacity. Nevertheless, the Claimant believes that tax capacity should not be assessed with respect to a specific tax in concrete but with respect to the overall tax burden that the taxpayer bears, and the overall expression of this should equally reach taxpayers with similar capacity (35th RI). In the thesis he advocates, the Claimant states that the assessment of tax capacity for the concrete application of item 28.1 of TGIS does not in fact comply with the principle of equality, since it only considered as an element in determining that capacity the ownership of properties designated for residential use, arbitrarily excluding from the "scope of taxation all remaining property of high (or very high) value that is devoted or intended to other purposes". He concludes that holders of a particular type of property are thus discriminated against, who now bear a tax that does not apply to properties of a different nature, even though it has a value above the defined threshold or which, even if they are holders of properties of the same type, are not subject to taxation because it is divided in such a way that the VPT of each element is below its respective lower limit, even though the value of the whole is even more valuable than that limit.

The Claimant also considers that the provision in question violates the principle of equality, in its modality of prohibition of double taxation of the same tax fact, arguing that through item 28.1 the ownership of a real right over a property is taxed, which already happens with IMI, which in fact applies to the same fact.

Summarizing the Claimant's position, the non-conformities that he claims exist, between the tax rule and the constitutional text, which justify its non-application, are (i) the manner in which tax capacity is assessed which is arbitrary and violates the principle of equality; (ii) non-compliance with the prohibition of double taxation of the same tax fact, which violates the principle of equality.

To properly understand the claimant's thesis it is first necessary to determine what tax capacity actually is, what role it is assigned in the constitutional framework and whether parameters are fixed for it, what value or expression these assume.

Following Brás Carlos and taking as a starting point the principle of equality, it is believed that "tax equality attends to the patrimonial sacrifice resulting from the tax and to the respective tax capacity of individuals"[2]. It is thus possible to draw from this statement that tax capacity is the parameter by which it is assessed whether taxation is comprehended within the limits imposed by the principle of equality. Going further Casalta Nabais[3] considers that tax capacity is even the sole criterion of taxation, which he rejects that each specific tax and the tax system itself can be based on another differentiating element. In consonance Leite de Campos et al[4] clarifies that tax capacity is the measure that allows one to assert whether the contribution required is within the limits of tax justice.

Since it is uncontroversial that tax capacity is a measure, it is important to determine on what reality it bears. In this regard Leite de Campos et al.[5] states that tax capacity can be measured by wealth, by income or by the spending of the subject and from its determination it follows that those who do not have economic capacity should not be taxed (negative sense) and that all those who incur expenses, earn income and have wealth should pay taxes (positive sense).

In another aspect it is also important to understand on what dimension tax capacity should be assessed; it may be seen in a very basic perspective, measuring the capacity to bear a particular specific tax or across the tax system as a whole. Doctrine appears to be unanimous in response to this question; Leite de Campos et al.[6] understands that the assessment of tax capacity is not assessed with respect to a particular tax but should be considered by reference to the entire tax system. Indeed it is the tax system and not each tax by itself that has the function of ensuring the satisfaction of the State's financial needs and the fair distribution of income and wealth (article 103-1 CRP).

Any critical position that intends to be based on the principle of equality must always bear in mind that it is the impact of the tax system as a whole and not the burden of each specific tax that must be measured or justified. It must also bear in mind that it is the function of the tax system to ensure fair distribution of income and wealth, which implies that not everyone pays the same amount of tax and that "fair distribution must be that in which the tax paid by each one reflects after all his tax capacity" (Brás Carlos)[7], whether this is revealed by income, by spending or by wealth.

Indeed, the taxation of certain taxpayers in a different manner does not by itself constitute a violation of the principle of equality, so long as that differentiated taxation serves to achieve the objectives of distribution of wealth pursued by the tax system. On the contrary, that differentiation may actually be a manifestation of the principle of equality, in the modality of vertical equality, which requires that persons of different income and wealth bear "different taxes in the measure of the difference" (Brás Carlos)[8]. In the same sense also Casalta Nabais[9] states that vertical equality can be achieved through different taxes, either in quantitative terms (higher or lower value) or in qualitative terms (incidence on specific situations).

It seems possible to go even further when the subject is the taxation of property, to which the constitutional text assigns the function of an instrument for reducing inequality among citizens (article 104-3). In this regard Casalta Nabais[10] admits the discrimination of properties, through the taxation of the most valuable and the exemption of those of lesser value.

As a first conclusion it is stated that tax capacity is the measure that allows one to assert whether the contribution required is within the limits of tax justice, this measure bearing on the effort required by the tax system and this being assessed by reference to the manifestations of income, of wealth and of level of spending. Taxation in accordance with tax capacity is also a manifestation of the principle of equality, which from the perspective of "vertical equality" requires that citizens with different tax capacity bear in a different manner also the burden imposed by the tax system, it being admissible that from holders of greater capacity greater effort be demanded not only quantitatively but also qualitatively. At the level of taxation of property this differentiated treatment may assume the discrimination of properties, burdening the more valuable and exempting those that have lesser value.

For complete framing of this topic it is important to verify how it has been viewed by the CC. In its decision no. 590/2015[11] the CC analyzed the relevance of invoking the violation by the rule in question of the principles of proportionality, of equality and of tax capacity. As to the latter, it equated it with economic capacity or "spending capacity" and affirmed the need to reconcile it, as a principle, with other principles with constitutional dignity, such as the principle of the social state, the legislature's freedom of configuration and certain requirements of practicability and cognizability of the tax fact, also indispensable for the fulfilment of the tax system's purposes. It also analyzed the attribution of an arbitrary character to the provision in question, concluding as to the rationality of its foundation. The referral was decided and the rule contained in items 28 and 28.1 of TGIS was not held unconstitutional.

Although with a different object, but with bearing on the same rule, in decision no. 620/2015[12] the CC again affirmed the same parameters for assessing the constitutional conformity of tax rules with the principle of tax equality.

Let us now turn to the topic of double taxation. Legal or economic double taxation arises particularly at the level of the coherence of the tax system itself and its prohibition does not appear to have expression as an individualized constitutional principle. Although one should not underestimate its importance, it is believed, following Casalta Nabais[13], that the existence of double taxation does not constitute a defect that affects the validity of the tax law. Indeed, neither dominant doctrine nor the jurisprudence of the CC have affirmed the existence at the constitutional level, of a principle or rule prohibiting double taxation, notwithstanding that it is recognized that it is not a desirable situation, from the perspective of the organization of the tax system. In concrete terms, the CC already affirmed that line of orientation in the grounds of decision no. 363/01[14] and in that of decision no. 489/02[15].

Having analyzed the legal regime that is abstractly applicable to the two situations listed by the Claimant, it is time to analyze them in concrete terms.

It is important to state here that the doctrine affirmed as to the general conformity of the rule of article 1-1 of CIS combined with items 28 and 28-1 of TGIS by the CC's decision no. 590/2015 is followed, so that it would be pointless to repeat here the grounds expended by the Constitutional Court, in particular as to the adequacy of the rule with the principle of tax legality, in its aspects of generality, uniformity and prohibition of arbitrariness as well as its containment within the acceptable parameters of tax capacity. This does not dispense with the duty of assessing the concrete arguments of the Claimant, which are considered not to be entirely covered by the CC's analysis, because they were not raised in the specific case submitted to it.

In the thesis that he advocates the Claimant states that the assessment of the tax capacity of the taxpayers subject to the Stamp Tax obligation through item 28.1 TGIS does not respect the principle of equality, since it only considered as an element in determining that capacity the ownership of properties designated for residential use, arbitrarily excluding from the "scope of taxation all remaining property of high (or very high) value that is devoted or intended to other purposes". As has been seen, tax capacity cannot be assessed with respect to a particular tax without there being a weighing of the contributory effort required by the entire tax system at a given moment.

In the concrete case the legislature simultaneously reviewed several elements of the tax system, namely the IRS (introduced amendments to the liberatory and special rates applying to capital income and to securities gains) the IRC (increase in tax rates for capital income and an adjustment of withholding tax rates) and LGT (indirect evaluation of taxable matter by virtue of manifestations of fortune). Without carrying out a broader analysis – which the Claimant does not do – it is not possible to conclude a violation of the tax capacity of a particular group of taxpayers. It should be said that the legislature outlined how it balanced the amendments it introduced in the system, stating in its presentation to the Parliament[16]:

In this sense, the Government presents, today, a set of measures that effectively strengthen a just and equitable distribution of the effort of adjustment across a broad and comprehensive set of sectors of Portuguese society. This proposal has three essential pillars: the creation of special taxation on urban properties valued above 1 million euros; the increase in taxation on capital income and on securities gains; and the strengthening of anti-fraud and anti-tax avoidance rules.

It should be noted that it has long been accepted by doctrine that the assessment of tax capacity be made on the basis of wealth, as well as the viability of solutions that contribute to the objectives of the tax system and that involve greater taxation of the more valuable real property has always been accepted.

It is clear that it is always possible to state that the recomposition found by the legislature did not contribute to the better balance of the tax system but that assertion lacks demonstration since it is believed that it is to the sovereign bodies with legislative powers that in the first instance lies the "implementation of constitutional principles and the corresponding freedom of configuration"[17], which does not prevent citizens from raising the non-conformity of these measures with the constitutional limits, as the Claimant did here. It is incumbent, however, on whoever seeks to do so to bear the burden of invoking and demonstrating those non-conformities (without failing the obligation of all courts, including obviously this one to detect them ex officio). It is understood that in this concrete case neither did the Claimant do so nor does the arbitral tribunal see a basis for it.

There remains to be concluded the analysis as to the alleged defect of violation of the principle of prohibition of double taxation. As mentioned, constitutional dignity is not recognized to that principle, so it could not be on the basis of that argument that the Claimant's claim could succeed.

The claimant's claim thus fails in its entirety, and the arbitral tribunal sees no reason why the rules of article 1-1 of CIS and items 28 and 28.1 of TGIS should not be applied as they were applied by the AT.

3.2.2. Other claims

The obligation of restitution by the AT is subject to the very scope of the claim's success (article 100 LGT) and since the Claimant's claim is unsuccessful his claims for return of amounts paid and for interest are moot.

4. Decision

Considering the elements of fact and of law gathered and presented, this arbitral tribunal decides to rule the request for arbitral pronouncement unsuccessful. In consequence the AT is acquitted of the claim.

By the decision handed down the examination of the claims for restitution of tax paid and for interest are moot.

The Claimant is ordered to pay the costs, which are to be calculated in the proper place.

5. Value of the case

In accordance with the provision of article 306-2 of CPC, ex-vi article 29-1-e) of RJAT and article 97-A, no. 1-a) of CPPT ex-vi article 3-2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned a value of €13,696.70.

6. Costs

The costs are borne by the party that caused them, it being understood that the unsuccessful party caused them (articles 527-1 and 2 CPC). In these proceedings and considering the said rule, responsibility for costs is that of the Claimant, as the unsuccessful party.

In accordance with article 22-4 of RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs charged to the Claimant is fixed at €918.00.

Lisbon, 9 May 2016

The Arbitrator,

(Nuno Maldonado Sousa)

[1] In this document the following acronyms, abbreviations and initials are used, with the meaning indicated:

  • AT: Tax and Customs Authority
  • CIS: Stamp Tax Code
  • CRP: Constitution of the Portuguese Republic
  • DL: Decree-Law
  • IS: Stamp Tax
  • IMI: Municipal Property Tax
  • IRC: Corporation Income Tax
  • IRS: Personal Income Tax
  • LGT: General Tax Law
  • R-AT: Response of the AT
  • RI: Initial Request of the Claimant
  • RJAT: Legal Regime of Arbitration in Tax Matters established by Decree-Law No. 10/2011 of 20 January
  • TC: Constitutional Court
  • TGIS: General Table of Stamp Tax
  • VPT: Patrimonial value for tax purposes

[2] See Américo Fernando Brás Carlos - Taxes: General Theory. 4th ed., Coimbra: Almedina, 2014, p. 118.

[3] See José Casalta Nabais - Tax Law. 6th ed., Coimbra: Almedina, 2010, pp. 150-151.

[4] See Diogo Leite de Campos and Mónica Horta Neves Leite de Campos - Tax Law. 2nd ed. (reprint), Coimbra: Almedina, 2000, pp. 124-125.

[5] Op. cit., p. 125.

[6] Op. cit., pp. 126-127.

[7] Op. cit., p. 119.

[8] Op. cit., p. 120.

[9] Op. cit., p. 149.

[10] Op. cit., p. 177.

[11] Constitutional Court Decision No. 590/2015 of 11-11-2015 (Fernando Ventura), in case no. 542/14, accessible at www.tribunalconstitucional.pt.

[12] Constitutional Court Decision No. 620/2015 of 03-12-2015 (João Cura Mariano), in case no. 305/15, accessible at www.tribunalconstitucional.pt.

[13] Op. cit., p. 160.

[14] Constitutional Court Decision No. 363/01 of 12-07-2001 (Maria Fernanda Palma), in case no. 667/2000, accessible at www.tribunalconstitucional.pt.

[15] Constitutional Court Decision No. 489/02 of 26-11-2002 (Paulo Mota Pinto), in case no. 113/02, accessible at www.tribunalconstitucional.pt.

[16] See the Diário da Assembleia da República (Parliament Record), I series, no. 9/XII/2, of 11-10-2012, pp. 31-32.

[17] Constitutional Court Decision No. 590/2015 of 11-11-2015, cited.

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to residential properties valued over €1,000,000?
Verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS) establishes an annual Stamp Tax of 1% on the ownership of urban properties designated for residential use (habitação) whose patrimonial tax value (VPT) used for Municipal Property Tax (IMI) purposes equals or exceeds €1,000,000. This tax applies automatically to property owners based on cadastral valuations, with payments typically divided into three instalments due in April, July, and November. The tax is assessed on the property's official patrimonial value as determined by the tax authorities for IMI purposes. In this case, a property valued at €1,369,670 generated an annual Stamp Tax liability of €13,696.70 (exactly 1% of the valuation), demonstrating the direct proportional application of the rate. The tax applies regardless of whether the property generates income and is levied solely on ownership status, making it a wealth tax on high-value residential real estate.
Can Stamp Tax (Imposto do Selo) on high-value urban properties be challenged on constitutional grounds of equality and ability to pay?
Yes, Stamp Tax assessments under Verba 28.1 TGIS on high-value urban properties can be challenged on constitutional grounds before the CAAD arbitral tribunal, though success depends on judicial acceptance of the arguments. Common constitutional challenges include: (1) violation of the principle of equality (Article 13 CRP), arguing arbitrary discrimination against owners of properties above the €1,000,000 threshold; (2) violation of the principle of tax capacity (Article 104(3) CRP), arguing the tax fails to measure actual ability to pay since property ownership doesn't necessarily reflect income or liquidity; (3) violation of tax equality principles, which require similar taxpayers to be taxed according to the same criteria; and (4) prohibited double taxation, since both IMI and Stamp Tax under Verba 28.1 apply to the same property based on the same valuation. However, the Tax Authority typically defends these assessments by arguing that it must apply valid legislation and lacks authority to review constitutionality, and that the differential treatment of high-value properties reflects legitimate policy objectives. Claimants bear the burden of demonstrating the constitutional violations are manifest and intolerable.
How does the CAAD arbitral tribunal process work for disputing Stamp Tax assessments in Portugal?
The CAAD (Centro de Arbitragem Administrativa) arbitral tribunal process for disputing Stamp Tax assessments follows the procedural framework established by the RJAT (Legal Regime for Administrative Arbitration). The process begins with filing a request for constitution of the arbitral tribunal pursuant to Articles 2(1)(a) and 10 RJAT, identifying the Tax and Customs Authority as respondent. The CAAD President accepts the request and notifies the Tax Authority. Under Article 6(1) and 11(1)(b) RJAT, the Ethics Committee appoints an arbitrator from the official list, who must communicate acceptance. The tribunal is constituted 15 days after parties are notified of the appointment. The Tax Authority submits a response defending its position. Parties may request or waive the preliminary meeting and oral allegations under Article 67 of the CAAD Regulation. The arbitrator examines jurisdiction, legal personality, legitimacy, and procedural regularity before deciding on the merits. The tribunal must issue its decision within statutory deadlines, though 10-day extensions are permitted under Article 21(2) RJAT. The decision addresses both the legality of the assessments and ancillary claims such as reimbursement and compensatory interest.
Is the taxation under Verba 28.1 TGIS considered double taxation when applied alongside IMI on the same property?
Whether Stamp Tax under Verba 28.1 TGIS constitutes prohibited double taxation when applied alongside IMI (Municipal Property Tax) on the same property is a contested legal issue. Claimants typically argue that both taxes: (1) apply to the same tax base—the patrimonial value of the property; (2) tax the same taxable event—ownership of real estate; and (3) are levied by the State (even though IMI formally belongs to municipalities), creating cumulative taxation on identical wealth without distinct justification. This, they contend, violates constitutional principles prohibiting double taxation. However, the Tax Authority generally counters that: (1) IMI and Stamp Tax serve different purposes and have different legal foundations; (2) they constitute distinct taxes with separate legal regimes (one municipal, one state-level); (3) the prohibition against double taxation primarily addresses situations where the same tax is levied twice on the same legal basis, not merely cumulative taxation; and (4) the legislature has discretion to establish multiple taxes affecting the same asset. Courts and arbitral tribunals have reached varying conclusions on this issue, with some accepting the double taxation argument and others rejecting it based on the distinct nature and purposes of each tax.
What are the grounds for claiming compensatory interest (juros indemnizatórios) after a successful CAAD arbitration against the Tax Authority?
Compensatory interest (juros indemnizatórios) following successful CAAD arbitration against the Tax Authority is governed by Articles 43 and 100 of the LGT (General Tax Law) and Article 24(5) RJAT. Under Article 43(1) LGT, compensatory interest is due when taxes are paid but later determined to be undue, provided the undue payment resulted from error attributable to the tax services. The interest compensates taxpayers for the State's use of funds that were not legally owed. Article 100 LGT establishes the procedural framework for claiming reimbursement and interest. Article 24(5) RJAT specifically addresses interest in arbitration contexts. Key requirements include: (1) the tax must be declared illegal or annulled; (2) the taxpayer must have actually paid the tax; (3) there must be imputable error by the Tax Authority (though this element is disputed—taxpayers argue systemic application of invalid norms constitutes error, while the AT argues applying formally valid legislation cannot be error); and (4) the interest runs from payment date until reimbursement. The Tax Authority often defends against compensatory interest by arguing that applying legislation in force cannot constitute error justifying interest, particularly when constitutionality challenges are involved, since tax officials lack authority to refuse applying formally valid laws.