Process: 513/2016-T

Date: February 24, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 513/2016-T) addresses whether Stamp Tax under Verba 28.1 of the TGIS applies to individual divisions within a vertical property building or to the entire building. The taxpayer challenged multiple 2015 Stamp Tax assessments, arguing that none of the individual divisions had a Tax Property Value (VPT) exceeding €1,000,000. The claimant contended that divisions susceptible to independent use in vertical property should be treated identically to autonomous fractions under horizontal property regime for CIMI purposes. According to Verba 28.1 TGIS, three cumulative requirements must be met: (i) holding ownership, usufruct, or surface rights; (ii) VPT equal to or greater than €1,000,000 recorded in cadastre under CIMI; and (iii) classification as residential property. The claimant argued that CIMI Code serves as the reference framework, and since Article 2(4) CIMI treats autonomous fractions as independent real properties, divisions with independent use should receive equivalent treatment. Both possess permanent territorial connection, patrimonial character, and autonomous economic value. The taxpayer maintained that aggregating VPT values of separate divisions contradicts CIMI principles, as the intended use and tax base must be assessed division by division, not by building. The case involved the CAAD arbitral procedure under Decree-Law 10/2011, seeking declaration of illegality and reimbursement with compensatory interest.

Full Decision

ARBITRAL DECISION

I. REPORT

I.1

On 25 August 2016, the taxpayer A…, S.A., legal entity no. …, with registered office at Av…, no.…, ..., …-… Lisbon, requested, pursuant to and for the purposes of the provisions of Article 2 and Article 10, both of Decree-Law No. 10/2011, of 20 January, the constitution of an Arbitral Tribunal with appointment of the sole arbitrator by the Ethics Council of the Administrative Arbitration Centre, in accordance with the provisions of no. 1 of Article 6 of the aforementioned legislation.

The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD and was notified to the Tax and Customs Authority (hereinafter designated as AT or "Respondent") on 19 September 2016.

The Claimant did not proceed to appoint an arbitrator, wherefore, under the provisions of Article 5, no. 2, subsection b) and Article 6, no.1, of the RJAT, the signatory was appointed by the President of the Ethics Council of CAAD to serve on the present sole Arbitral Tribunal, having accepted in accordance with legal provisions.

The AT submitted its response on 15 December 2016.

By order of 16.12.2016, the holding of the meeting provided for in Article 18 of the RJAT was dispensed with and it was decided that the proceedings would continue with written final submissions.

On 11 January 2017, the Claimant filed copies of the third instalments of Stamp Tax and respective proof of payment.

The Claimant seeks to have the Arbitral Tribunal declare the illegality of the Stamp Tax Assessments, relating to 2015, nos. 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…

nos. 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016… and 2016…

nos. 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2061…, 2016…, 2016…, 2016…, 2016…, 2016… and 2016…, with all legal consequences, namely the reimbursement to the claimant of this amount, plus compensatory interest.

I.A. The Claimant sustains its claim, in summary, on the following grounds:

In accordance with the provision of item no. 28.1 of the TGIS, introduced by Law 55-A/2012 and in the wording introduced by the State Budget Law for 2014 (Law No. 83-C/2013, of 31 December), Stamp Tax is levied on "Ownership, usufruct or right of surface of urban real properties whose tax property value recorded in the cadastre, in accordance with the Code of Municipal Tax on Real Property (CIMI), is equal to or greater than €1,000,000 - on the tax property value used for purposes of CIMI: - For residential property (…)" - 1%.

Item no. 28.1 of the TGIS therefore provides three requirements for taxation under Stamp Tax of the said properties:

i) The taxpayer being the holder of one of the following real rights over the property – right of ownership, right of usufruct or right of surface;

ii) The property having a Tax Property Value (TPV) equal to or greater than €1,000,000, recorded in the cadastre, in accordance with the CIMI Code; and

iii) It being a "residential property".

The requirements established in the said item 28.1 of the TGIS were and continue to be cumulative, which means that, in the absence of any one of the said requirements, the tax rate provided for in item 28.1 of the TGIS cannot be applied.

With respect to the second requirement, the Claimant considers that none of the properties subject to the Disputed Assessments meets such requirements, that is, none of the divisions susceptible to independent use has a TPV exceeding €1,000,000.00, this being an essential requirement, whose verification is necessary for each one of the divisions and not for the building in which they are integrated.

The CIMI Code is the reference framework of the tax base rule provided for in Item no. 28 of the TGIS, as results from the amendments introduced to the Stamp Tax Code and its table, by Law 55-A/2012 (subsection u), of no. 1 of Article 5 of the Stamp Tax Code).

Under the CIMI Code, "real property is every parcel of land, comprising waters, plantations, buildings and constructions of any kind incorporated or built thereon, with a character of permanence, provided that it is part of the patrimony of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land on which they are located, although situated in a parcel of land that constitutes an integral part of a different patrimony or does not have patrimonial nature." (see Article 2, no. 1).

Whereas, "for purposes of this tax, each autonomous fraction, under horizontal property regime, is deemed to constitute a real property" (see Article 2, no. 4 of the CIMI Code).

If we compare the autonomous fractions of a property constituted under horizontal property regime with the divisions susceptible to independent use of a property in full ownership, we readily perceive that, although from a formal perspective there are differences, the two realities are materially identical.

Thus, it must be concluded that both autonomous fractions and divisions susceptible to independent use meet all the aforementioned requirements for their qualification as real property for tax purposes.

Both (i) have a permanent connection to the territory – "physical element"; (ii) form part of the patrimony of their owner – "patrimonial character"; and (iii) allow their separate use, either directly by their owner, or through the transfer of their use to a third party, which gives them autonomous economic relevance – "economic value".

And it cannot be said that the express reference of the legislator to autonomous fractions as real properties contradicts this conclusion.

On the contrary, the reference to autonomous fractions is the concretization of the tax concept of real property, whose assumptions, if applied to divisions susceptible to independent use, allow arriving at precisely the same result that the legislator provided for autonomous fractions, that is, the two realities should be considered as real properties under the CIMI Code.

It is, therefore, an exemplification which not only does not exclude, but reinforces, given the material similarity between these two realities, the conclusion that both should be considered as real properties, for tax purposes.

From the provisions of Article 6, no. 1, of the CIMI Code, it is clear that the principal division of urban real properties under CIMI is based on their intended use or normal destination.

Being considered as residential those buildings or constructions licensed for such purpose or, in the absence of a license, which have residential use as their normal destination.

It is, therefore, indisputable that this intended use is assessed property by property, as Article 6 of the CIMI Code requires and as the wording of item 28.1 of the TGIS presupposes.

Now, as the divisions of a property in full ownership are susceptible to independent use, it is indisputable that – in the same way as occurs with autonomous fractions – their intended use must be assessed division by division.

Item 28.1 of the TGIS provides that the TPV relevant for purposes of levying Stamp Tax corresponds to that which results from the rules provided for in the CIMI Code in the following terms: "on the tax property value used for purposes of CIMI".

In such terms, it should be considered that the tax base provided for in item 28.1 of the TGIS should be assessed in function – and only in function – of each division susceptible to independent use and not of the property in which they are integrated, taking exclusively into account its intended use and TPV.

This is not only the interpretation most consistent with the letter of the law, but also the one that results from the other interpretive elements that must be considered under Article 11 of the LGT and Article 9 of the Civil Code.

Item 28.1 of the TGIS applies, in the words of the Secretary of State for Tax Affairs spoken during the discussion of Bill No. 96/XII/2, which gave rise to Law 55-A/2012, to "houses valued at equal to or greater than 1 million euros" - See Parliamentary Record DAR I Series no. 9/XII/2 of 11-10-2012.

Now, the materiality of divisions susceptible to independent use determines that they have their own intended use and economic value, and, being intended for residential use, it is they that constitute a "house", and it is in relation to them that it should be assessed whether or not that manifestation of wealth exists.

In such terms, it should be considered that the tax base provided for in item 28.1 of Stamp Tax should be assessed in function – and only in function – of each division susceptible to independent use and not of the property in which they are integrated, taking exclusively into account its intended use and TPV.

For all the reasons set out in the preceding points, it is evident that the understanding adopted by the AT according to which a property composed of storeys or divisions susceptible to independent use intended for residential use, whose separately determined TPVs are less than €1,000,000.00 but which in total amount to or exceed that value, is subject to Stamp Tax under item 28.1 of the TGIS should be declared illegal, for violation of the provisions of the said item, in Articles 23, no. 7, of the Stamp Tax Code and in Articles 6, 7, no. 2, subsection d) and 12, no. 3 of the CIMI Code, these latter applicable by virtue of Article 67, no. 2, of the Stamp Tax Code.

The Claimant also requests that, upon granting of the present claim, it be paid, under the terms of Article 43 of the LGT, the respective compensatory interest for payment of the tax obligation in an amount exceeding that legally due.

I.B In its Response the AT invoked the following:

  1. It was precisely the wealth deriving from real property ownership that Law No. 55-A/2012 came to, in an innovative manner, tax, subjecting to Stamp Tax the ownership and other real rights over urban real properties whose tax property value (TPV) were to prove to be equal to or greater than €1,000,000.

  2. The AT has reiterated the understanding that if the building is constituted in full ownership with parts or divisions susceptible to independent use (so-called full property), it integrates the tax legal concept of "real property", that is, a single unit, and the tax property value thereof is determined by the sum of the parts with residential intended use, and if this equals or exceeds €1,000,000.00, there is subject to Stamp Tax of item 28 of the Table General annexed to the Stamp Tax Code.

  3. In the Stamp Tax Code there is no definition of the concepts of urban real property, wherefore it will have to be applied the provisions of the CIMI, to ascertain any subjection to Stamp Tax (See Article 67, no. 2 of the Stamp Tax Code as amended by Law No. 55-A/2012).

  4. Article 2, no. 1 of the CIMI defines the concept of real property.

  5. Article 2, no. 4 of the CIMI saves autonomous fractions of properties constituted under horizontal property regime, which it considers, exceptionally, as real properties.

  6. On the contrary, where a property is constituted in full ownership with parts or divisions susceptible to independent use, it is the property as a whole, and no longer each one of those parts, that integrates the concept of "real property", for purposes of CIMI and of Stamp Tax, by reference of Article 1, no. 6 of the Stamp Tax Code.

  7. This is not hindered by the fact that each storey/division appears separately in the cadastral registration, and with the respective tax property values, as such discrimination is only relevant, for tax purposes, in view of the concept of property registers contained in Article 12 of the CIMI and in the matters regulated in this Code for the organization of registers.

  8. The obligation to organize registers in this manner is due to the need to reflect the autonomy that, within the same property, belongs to each of its parts, which may be functionally and economically independent.

  9. This individualization is only justified because in the same property there may occur use for commerce or residence, with or without lease, which is determinant in the rules of tax evaluation within the scope of CIMI, in view of the different intended use coefficients provided for in Article 41 of that code.

  10. To advocate an understanding to the contrary is to confuse realities that are teleologically distinct, full ownership, on the one hand, and horizontal property, on the other, whose differentiation finds its foundation from the outset in civil law.

  11. The present claimant, for purposes of CIMI and also of stamp tax, by force of the wording of the said item, is not the owner of autonomous fractions, but rather of a single property, the AT considering that this is the understanding that best accords with the principle of legality inherent in Article 8 of the LGT, to which all its activity is devoted.

  12. In consonance, no error is recognized in the assumptions of fact or law in which the tax assessment acts for the disputed tax may have incurred, and, consequently, the right of the taxpayer to payment of the compensatory interest provided for in Article 43 of the LGT in case of error imputable to the services is not recognized.

II. PRELIMINARY EXAMINATION

The Tribunal is competent and is regularly constituted, in accordance with Articles 2, no.1, subsection a), 5 and 6, all of the RJAT.

The parties have legal personality and capacity.

The parties are legitimate and are legally represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The proceedings are proper.

There are no other preliminary questions to be examined nor defects that invalidate the proceedings.

It is now necessary to examine the merits of the claim.

III. THEMA DECIDENDUM

The question which constitutes the thema decidendum can be reduced to ascertaining whether, in a property not subject to the horizontal property regime, the subjection to stamp tax, under item 28.1 of the General Table of Stamp Tax, is determined by the tax property value (TPV) that corresponds to each one of the parts of the property, economically independent and with residential intended use, as advocated by the Claimant, or whether, on the contrary, it is determined by the global TPV of the property, which would correspond to the sum of all the TPVs of the storeys or divisions of independent use and with residential intended use that comprise it, as sustained by the AT.

IV. MATTERS OF FACT

IV.1. Proven Facts

Before entering into the examination of the legal questions, it is necessary to present the factual matters relevant for their understanding and decision, which, having examined the documentary evidence, the administrative tax file attached and taking into account the facts alleged, is established as follows:

The disputed assessments relate to the taxation under Stamp Tax of two of the properties of which the Claimant is the owner: (i) the property currently registered in the urban property register of the parish of … under cadastral article U-… which originated from the property registered in the urban property register of the parish of … under cadastral article U-… ("Property B…"), and; (ii) the property currently registered in the urban property register of the parish of…, under cadastral article U-…, which originated from the property registered in the urban property register of the parish of … under cadastral article U-… ("Property C…").

Property B… corresponds to a property in full ownership, composed of 14 storeys or divisions susceptible to independent use, each with a tax property value ("TPV") determined separately.

Each of these divisions has a TPV ranging between €7,576.73 and €192,700.35, totalling €2,129,029.09.

Of the 14 divisions susceptible to independent use that constitute Property B…, only 11 have residential as their intended use.

The disputed assessments relating to Property B… were issued only in relation to the divisions with residential intended use.

Property C… constitutes a property in full ownership composed of 13 storeys or divisions susceptible to independent use, each with a TPV determined separately.

The TPV of each of these divisions is comprised between €54,141.38 and €101,176.38, totalling €1,236,130.98.

All the divisions susceptible to independent use that constitute Property C… have residential as their intended use.

The disputed assessments relating to Property C… were issued in relation to such divisions.

It was upon the total tax property values that the AT assessed the stamp tax of item 28.1 of the General Table, at the rate of 1 per cent.

From these stamp tax assessments resulted the total amounts of €20,542.88 and €12,361.30.

The Claimant paid all the disputed assessments, in the total amount of €32,904.18.

IV.2. Facts Not Proven

There are no essential facts not proven, as all the facts relevant for the examination of the claim were considered proven.

IV.3. Motivation of the Matters of Fact

The proven facts comprise matters not contested and documented in the proceedings.

The facts contained in numbers 1 to 12 are established by the examination of the administrative file, by the documents attached by the Claimant (docs. 1 to 30 of the petition for constitution of the Tribunal and document attached with the petition of 11.01.2017) and by the position assumed by the parties.

V. ON THE LAW

1. Item 28.1 of the TGIS

The legal question now under examination is entirely identical to that which was examined extensively, first in various decisions of CAAD (nos. 183/2013-T; 132/2013-T; 50/2013-T; 181/2013-T; 218/2013-T; 248/2013-T; 280/2013-T and 272/2013-T) and subsequently by the STA (case no. 47/15 of 09.09.2015, case no. 1354/15 of 02.03.2016, case no. 1534/15 of 27.04.2016, case no. 1504/15 of 04.05.2016, case no. 172/16 of 04.05.2016, case no. 166/16 of 04.05.2016, case no. 1344/15 of 24.05.2016, case no. 498/16 of 29.06.2016 and case no. 560/16 of 29.09.2016) all in the same direction.

We forthwith note that we entirely endorse the case law of the STA and CAAD, contained in the cited judgments.

The subjection to stamp tax of properties with residential intended use results from the addition of item 28 of the TGIS, effected by Article 4 of Law 55-A/2012, of 29 October, amended by Law 83-C/2013 of 31.12, which typified the following tax events:

"28 - Ownership, usufruct or right of surface of urban real properties whose tax property value recorded in the cadastre, in accordance with the Code of Municipal Tax on Real Property (CIMI), is equal to or greater than €1,000,000 - on the tax property value used for purposes of CIMI:

28.1 - For residential property or for land for construction whose proposed building, authorized or foreseen, is for residential use, in accordance with the provisions of the CIMI Code - 1%;

28.2 - For property, when the taxpayers that are not natural persons are residents 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%."

(bold is our own)

It is important to note that, in stating that the TPV to be considered under this item of Stamp Tax is the TPV recorded in the cadastre, in accordance with CIMI, the legislator intended expressly to establish the unity of that value for both these taxes. The principle of universality of TPV is inherent in the cited rule, as well as in Articles 12, no.1, 14, no.1 of the CIMT, 64 of the CIRC, 44, no.2, 45 and 46 of the CIRS.

The principle of universality of TPV means that the assessment of a property, or part thereof, for purposes of CIMI, has application to the other taxes, whether they are on patrimony or, even, on income. In that sense see José Maria Fernandes Pires, In "Lessons on Taxes on Property and Stamp Tax", Almedina Publisher, 2010, page 41:

"The tax property value determined in the assessment made for purposes of CIMI applies to the other taxes on property and to income taxes.

The efficacy of this principle allows the tax system to produce effects contrary to those we have stated above, providing the tax system with a powerful instrument to combat tax evasion and fraud. Endowed with the capacity to ascertain actual transaction values and to bring tax property values closer to market values, all economic agents intervening in the real estate market are induced by the system to bring the values declared for tax purposes closer to the actual transaction values.

The system thus establishes a harmonization of the values relevant for the taxation of wealth and real estate income, both under income taxes and under taxes on property. (…)

(…) Currently the tax administration has very efficient instruments for monitoring taxpayers' compliance with tax obligations in selling real estate. This monitoring results from the fact that the system now has a reference instrument in assessing the market value of real estate, (…)"

To admit that under Stamp Tax the TPV determined of the property is not taken into account, but rather an aggregated value that does not correspond to its TPV, constitutes a violation of the said principle of universality of TPV.

The interpretation of the Respondent, which essentially proposes an alteration of this rule, cannot, therefore, fail to be considered illegal, for violation of item 28 of the TGIS.

On the other hand, Article 6, no. 2 of the CIMI which is applicable to Stamp Tax by force of the reference in Article 67, no. 2 of the Stamp Tax Code, provides, with respect to the types of property existing for purposes of CIMI, that they are: "2 - Residential, commercial, industrial or for services are the buildings or constructions licensed for such purpose or, in the absence of a license, which have as their normal destination each of these purposes." Then, it is evident, and as has been extensively considered by doctrine and case law, that the legislator intended to enshrine a true principle of prevalence of substance over form, giving prevalence to the actual use to which a given property, or division thereof, is subject, over that for which it is licensed.

In adopting the orientation reflected in the assessment now challenged, the AT is, strictly speaking, distorting this principle established by the legislator, inverting it when it decides to sum the TPVs of the independent divisions.

If the divisions have independent uses, they have individual TPVs for each division for purposes of CIMI and, then, for purposes of Stamp Tax, they become a "mixture of independent and non-independent", it is evident that the established principle of prevalence of substance over form is called into question, which is subject to the nullity of the assessment act.

Moreover, following the reference in Article 67, no.2 of the Stamp Tax Code, it is necessary to take into account what Article 12, no. 3 of the CIMI provides, which states that: "each storey or part of property susceptible to independent use is considered separately in the cadastral registration, which also discriminates the respective tax property value". That is, each storey or division susceptible to independent use has its own TPV, under the CIMI.

Under CIMI (the regime by which Stamp Tax is governed, as we have seen above), each storey/division susceptible to independent use is individualized, receiving its own annual CIMI assessment, the payment of which may or may not, depending on the value, be divided in several instalments.

In adopting the thesis that the TPV of properties with residential intended use should be calculated by summing the TPV of each of the independent storeys, for purposes of applying item 28 of the TGIS, the AT contradicts the legal regime established for the calculation of TPV.

Revealing that CIMI intended to individualize the storeys susceptible to independent use is, in addition to what has already been mentioned, Article 15, O, no.1 of Decree-Law 287/2003, relating to the regime of protection of urban real properties, when referring to "property or part of urban property".

The subjection to stamp tax contained in item no. 28.1 of the TGIS is determined by the conjunction of three facts: the ownership, usufruct or right of surface of an urban property, the residential intended use and the TPV recorded in the cadastre equal to or greater than €1,000,000.00.

Thus, in the case of a property with the characteristics described in the proceedings, the subjection to stamp tax is determined, not by the TPV of the property in its entirety (even if disregarded, as they were, the divisions with non-residential intended use), but by the TPV attributed to each of these storeys or divisions.

It is also important to stress that, if the same property, exactly as it currently exists on a physical level, were legally constituted as horizontal property, and even if the property values of each of the autonomous fractions were equal to current values, it could no longer be taxed under Stamp Tax by virtue of this item, or any other. All because of the treatment that the legislator gives to each of the autonomous fractions of an urban property, which are considered, under no. 4 of Article 2 of the CIMI, as a real property.

When the AT's interpretation leads to the same factual reality – an urban property constituted as horizontal property and a property in full ownership with units susceptible to independent use – being treated in a manifestly different manner, all because of a legal arrangement that alters nothing in the nature of that same factual reality, necessarily we are faced with a violation of the principle of equality. The principle of tax equality is not expressly enshrined in the current Constitution, deriving from the general principle of equality provided for in its Article 13.

What is at issue here is the principle of tax equality in its material dimension. Objectively, the interpretation advocated by the AT, which led to the issuance of the assessments now challenged, constitutes unequal treatment of citizens.

Finally, it is important to consider the legislator's purpose in creating item 28 in the TGIS, which underlies, as is known, the idea that to a tax-paying capacity well above the average should correspond a tax effort also superior.

Such reasoning, however, cannot be reconciled with interpretive maneuvers that lead to a reality which, at the outset, would not fall within the presuppositions laid down for the said increase in tax effort to occur, ends up having the same consequences.

The existence of tax-paying capacity well above the average, which the law understands to occur when someone is the owner of a property whose TPV is greater than €1,000,000.00, obviously does not exist in the present case. Note, moreover, that the TPV of the most valuable division of the identified properties amounts to "only" €192,700.35.

As well noted in the learned arbitral decision rendered by this same CAAD in the context of case 183/2013-T, at page 14, point 28:

"The legislator's intention seems, therefore, to indicate that the scope of the tax base rule is to tax independent, individualized realities and not resulting from an aggregation or sum, however legal."

Given the above, in the case of a property constituted in vertical ownership, the tax base of Stamp Tax should be determined, not by the tax property value resulting from the sum of the tax property value of all the divisions or storeys susceptible to independent use (individualized in the cadastral article), but by the tax property value attributed to each of these storeys or divisions intended for residential use.

It is thus concluded that the assessments subject to challenge are illegal, essentially for violation of the provisions of item 28 of the TGIS.

2. Compensatory Interest

Under no. 1 of Article 43 of the LGT, "Compensatory interest is due when it is determined, in administrative recourse or judicial challenge, that there was an error imputable to the services from which results payment of the tax debt in an amount greater than that legally due."

Now, in the present case, the legitimacy of the aforesaid request for payment of compensatory interest in favor of the Claimant is unequivocally demonstrated, as the assessments sub judice are shown to be defective with illegality deriving from an error in the legal presuppositions. The error in the legal presuppositions imputable to the respondent led to payment of an amount exceeding that legally due. Therefore, compensatory interest must be considered due from the day following the overpayment until the date of issuance of the respective credit note, in accordance with what is provided for in Article 43 of the LGT and Article 61 of the CPPT.

Accordingly, the Claimant is a creditor of the Respondent AT for the amount corresponding to the Stamp Tax unduly paid, in the amount of €32,904.17, plus the respective compensatory interest accrued and accruing, to be calculated from the date of payment until the issuance of the respective credit note.

VI. DECISION

Given all that is set out above, it is decided:

a) To declare entirely well-founded the claim for declaration of illegality of the Stamp Tax assessments challenged, mentioned in the report (I.1 – seventh point), relating to 2015, annulling those assessments;

b) To declare well-founded the claim for condemnation of the respondent to reimbursement of the amount of €32,904.17, plus compensatory interest, from the date of the overpayments until the date of issuance of the credit note;

c) To condemn the Respondent to payment of the costs of the proceedings, as follows.

The value of the proceedings is fixed at €32,904.17 in accordance with Article 97-A, no. 1, a), of the CPPT, applicable by force of subsection a) of no.1 of Article 29 of the RJAT and of no.2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The arbitration fee is fixed at €1,836.00 in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid entirely by the Respondent, as the claim was entirely well-founded, in accordance with Articles 12, no. 2, and 22, no. 4, both of the RJAT, and Article 4, no. 4, of the said Regulation.

Let notification be made.

Lisbon, 24 February 2017

The Arbitral Tribunal

(André Festas da Silva)

Frequently Asked Questions

Automatically Created

Is Stamp Tax under Verba 28.1 of the TGIS applicable to individual units within a vertical property building?
Under Verba 28.1 TGIS, Stamp Tax applies to individual divisions susceptible to independent use within vertical property buildings, not to the building as a whole. The claimant argued that divisions with independent use should be treated as autonomous real properties under CIMI Code principles, similar to autonomous fractions under horizontal property regime. Each division must independently meet the €1,000,000 VPT threshold requirement for taxation.
What are the three requirements for Stamp Tax liability under Verba 28.1 of the Tabela Geral do Imposto de Selo?
Verba 28.1 of the Tabela Geral do Imposto de Selo establishes three cumulative requirements for Stamp Tax liability: (1) the taxpayer must hold ownership, usufruct, or surface rights over the property; (2) the property must have a Tax Property Value (VPT) equal to or greater than €1,000,000 as recorded in the cadastre under CIMI regulations; and (3) the property must be classified as residential. Absence of any single requirement precludes application of the 1% tax rate.
Can the patrimonial tax values of separate fractions in a vertical property be aggregated to meet the €1,000,000 threshold for Stamp Tax?
The patrimonial tax values of separate fractions or divisions in vertical property cannot be aggregated to meet the €1,000,000 threshold. Under CIMI Code principles, each division susceptible to independent use constitutes an autonomous real property with its own VPT. Article 2(4) CIMI treats autonomous fractions as individual real properties, and this treatment extends to divisions with independent use in vertical property. The tax base must be assessed division by division based on individual VPT and intended use, not aggregated at building level.
What is the CAAD arbitral procedure for challenging Imposto de Selo liquidations issued by the Autoridade Tributária?
The CAAD (Centro de Arbitragem Administrativa) arbitral procedure for challenging Imposto de Selo liquidations is governed by Decree-Law 10/2011 of 20 January. Taxpayers request constitution of an Arbitral Tribunal under Articles 2 and 10, with appointment of arbitrator(s) by the CAAD Ethics Council per Article 6(1). The Autoridade Tributária submits a response, and proceedings may continue with written submissions without a hearing under Article 18 RJAT. The tribunal examines legality of tax assessments and can order reimbursement with interest if illegality is established.
Are taxpayers entitled to reimbursement and compensatory interest when Stamp Tax liquidations on vertical property are declared illegal?
Yes, taxpayers are entitled to reimbursement of illegally collected Stamp Tax amounts plus compensatory interest when liquidations on vertical property are declared illegal by CAAD arbitral tribunals. The claimant specifically requested declaration of illegality of the Stamp Tax assessments with all legal consequences, namely reimbursement of amounts paid plus compensatory interest. This follows from general Portuguese tax law principles requiring return of illegally collected taxes with appropriate compensation for the time value of money.