Process: 523/2014-T

Date: January 8, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision addresses whether Stamp Tax under Item 28.1 of the General Stamp Tax Table applies to vacant land classified as 'land for construction' with no authorized or planned residential development. The taxpayer owned urban land valued at €2,329,990 and challenged three Stamp Tax assessments totaling €23,299.90 (1% rate) for 2013. The central legal dispute concerns the interpretation of 'property with residential designation' in the original 2012 version of Item 28.1, before it was amended in December 2013 to explicitly include 'land for construction whose building, authorized or planned, is for housing.' The taxpayer argued that vacant land without any material authorization or planning for residential construction cannot fall within Item 28.1's scope, and that the Tax Authority's broad interpretation violates constitutional principles including tax legality, typicality, legal certainty, and property rights. The taxpayer also alleged procedural violations regarding the duty of collaboration and insufficient grounds in the liquidation acts. The Tax Authority defended that 'property with residential designation' encompasses both built properties and building land based on literal interpretation. This case highlights critical timing issues in tax law application, as the assessments were issued for 2013 under legislation that was later clarified but could not be applied retroactively. The arbitral tribunal must determine whether the pre-amendment statutory language was sufficiently clear to encompass undeveloped land, balancing literal interpretation against constitutional principles of tax certainty and the requirement that tax obligations be clearly established by law before enforcement.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A, with NIPC …, registered in the Commercial Register of …, under No. …/…, with headquarters in …, came, under the provisions of Articles 2, No. 1, paragraph a) and 10, Nos. 1 and 2, of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters – RJAT), and of Articles 1 and 2 of Order No. 112-A/2011, of 22 March, to request the constitution of an Arbitral Tribunal and to file a petition for arbitral determination.

  2. The respondent is the Tax and Customs Authority.

  3. The Claimant seeks the annulment of the assessment acts for Stamp Tax (item No. 28 of the General Table of Stamp Tax), relating to the year 2013, evidenced by the following documents:

a) Doc. No. 2014-..., of 2014/03/17, in the amount of € 7,766.64, corresponding to the 1st installment;

b) Doc. No. 2014-..., of 2014/03/17, in the amount of € 7,766.63, corresponding to the 2nd installment;

c) Doc. No. 2014-..., of 2014/03/17, in the amount of € 7,766.63, corresponding to the 3rd installment.

  1. The Claimant bases its claim on the allegation that:

4.1. The property that underlies the assessments now contested "does not constitute 'land for construction whose building, authorized or planned, is for housing', as it is a completely vacant plot of land without persons, goods or any constructions, with no simple material fact being verified or identified in the acts sub judice from which the authorization or licensing of buildings for housing on that land would result, by express reference to the standards of any territorial management instrument (cf. Article 74 of the LGT and Article 100 of the CPPT), and therefore could never have been covered by any of the rules of incidence established in item 28 of the GTST […]";

4.2. "Item No. 28 of the GTST, with the scope and normative meaning attributed to it by the Tax Administration in the assessment acts sub judice, clearly integrates an unconstitutional provision, by violation of the principles of typicality and justice, as well as the rights of property and private economic initiative of the now claimant […]", further violating the constitutional principles of tax legality, equality before public charges, fair distribution of income and wealth, proportionality, and legal certainty and confidence;

4.3. The assessment acts now contested are illegal by virtue of the Respondent having violated the procedural principles of collaboration and participation, enshrined in the General Tax Law, and also due to "manifest lack of factual and legal grounds".

  1. The Claimant opted for non-designation of an arbitrator.

  2. Pursuant to the provisions of paragraph a) of No. 2 of Article 6 and paragraph b) of No. 1 of Article 11 of the RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council designated the arbitrator of the arbitral tribunal, who communicated acceptance of the designation within the applicable time limit.

  3. The parties were notified of this designation and did not express any intention to refuse the arbitrator's designation, in accordance with Article 11, No. 1, paragraphs a) and b) of the RJAT and Articles 6 and 7 of the Ethics Code of CAAD.

  4. Thus, in accordance with the provisions of paragraph c) of No. 1 of Article 11 of the RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 26-09-2014.

  5. The Tax and Customs Authority submitted a reply in which it defends the inadmissibility of the petition for arbitral determination, having raised no exceptions.

  6. The Tax and Customs Authority sustains in its Reply, in summary, "that the concept of 'properties with residential designation', for the purposes of item No. 28 of the GTST, comprises both built properties and land for construction, particularly taking into account the literal element of the norm" (19), and therefore the assessment acts that are the object of the petition for arbitral determination should be maintained, as they result from a correct interpretation of Item 28 of the General Table of Stamp Tax, which does not violate any constitutional command.

  7. By Order of 01/12/2014, the Tribunal decided to dispense with the holding of the meeting provided for in Article 18 of the RJAT, to dispense with the examination of the witnesses cited by the Claimant, considering that the dispute concerns matters exclusively of law, and to dispense with the production of arguments.

  8. Through Order of 15/12/2014, the Tribunal decided to admit the expansion of the petition, and the subject matter of the proceedings thus came to cover also the challenge of the Stamp Tax assessment relating to the 3rd installment, as referred to in § 3, paragraph c), of the present Arbitral Decision.

  9. The Arbitral Tribunal was duly constituted.

  10. The parties have legal capacity and standing and are legitimate (Articles 4 and 10, No. 2, of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March).

  11. No nullity is apparent.

II. FACTUAL MATTER

a. Proven Facts

  1. The following facts are deemed proven:

16.1. The Claimant is the owner of the urban property located at ..., in the parish of ..., municipality of ..., registered in the urban property matrix of the parish of ..., under Article ..., and described in the Land Registry Office of ... under No. …/…, with an area of 1,386.25 m²;

16.2. The property identified above is classified and described as "land for construction", and has a Tax Property Value (VPT) of € 2,329,990.00;

16.3. On the basis of this VPT, the Tax and Customs Authority carried out the assessments of Stamp Tax of item 28.1 of the GTST, now contested by the Claimant, at the rate of 1%, in the total amount of € 23,299.90, to be paid in three installments.

b. Unproven Facts

  1. Of the facts of interest for the decision of the case, those not contained in the factuality described above were not proven.

c. Grounds for the decision on the factual matter

  1. The facts were deemed proven on the basis of documentary evidence.

III. LEGAL MATTER

  1. With the relevant facts established, it appears that the present proceedings concern exclusively a matter of law.

  2. The central question to be decided by the Tribunal is whether land for construction should, for purposes of the application of Article 1, No. 1, of the Stamp Tax Code (CIS) and Item 28.1 of the GTST, be considered "property with residential designation".

  3. Item 28 of the GTST was added by Law No. 55-A/2012, of 29 October, with the following wording:

"28 – Ownership, usufruct or surface right of urban properties whose tax property value contained in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeds € 1,000,000.00 – on the tax property value for purposes of IMI:

28.1 – For property with residential designation – 1%

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

  1. Law No. 83-C/2013, of 31 December, through Article 194, made changes to item 20.1 of the GTST, which then had the following wording:

"28.1 - For residential property or for land for construction whose building, authorized or planned, is for housing, in accordance with the provisions of the IMI Code – 1%"

  1. However, the assessment acts now under examination pertain to the year 2013, prior, therefore, to the amendment to the text of item 28.1 introduced by Law No. 83-C/2013, of 31 December, and therefore this new wording should not be taken into account for the decision of the present dispute.

  2. Now, the Stamp Tax Code (CIS) and its respective General Table, in the wording introduced by Law No. 55-A/2012, of 29 October, does not clarify what is meant by the expression "property with residential designation".

  3. Article 67, No. 2 of the CIS, added by Law No. 55-A/2012, of 29 October, provides that "[m]atters not regulated in the present Code relating to item No. 28 of the General Table shall be governed, subsidiarily, by the provisions of the CIMI."

  4. The legislator, in No. 1 of Article 2 of the CIMI, adopts the following concept of property:

"For purposes of the present Code, property is any plot of land, including water, plantations, buildings and constructions of any kind incorporated therein or erected thereon, with a character of permanence, provided it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as water, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land where they are located, although situated on a plot of land that is an integral part of a different patrimony or does not have a patrimonial nature."

  1. No. 1 of Article 6 of the CIMI enumerates the various types of urban properties, based on their respective designation: residential; commercial, industrial or service; land for construction; others.

  2. From the classification adopted by the legislator in Article 6 of the CIMI, there results a distinction between (i) built properties, which may be designated for housing, commerce, industry or services, this designation being assessed based on their respective licensing or, in the absence of a license, the normal use of the property (Article 6, No. 2, of the CIMI) and (ii) land for construction, in accordance with the definition contained in No. 3 of Article 6 of the CIMI.

  3. Thus, we subscribe to the grounds expressed by the STA in its Decision of 23/04/2014, in case 0271/14, when it states that "[s]ince the legislator did not define the concept of 'properties (urban) with residential designation', and resulting from Article 6 of the IMI Code – subsidiarily applicable to the Stamp Tax provided for in the new item No. 28 of the General Table – a clear distinction between 'residential urban properties' and 'land for construction', these cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of the GTST, in the wording of Law No. 55-A/2012, of 29 October), as urban properties with residential designation".

  4. The understanding expressed in the same STA Decision appears to us to be correct, according to which "[t]he fact that it may be considered that in determining the tax property value of urban properties classified as land for construction, account must be taken of the designation that the building authorized or planned for it will have for determining the respective value of the area of implantation (cf. Nos. 1 and 2 of Article 45 of the CIMI), does not determine that land for construction can be classified as 'properties with residential designation', inasmuch as residential designation' in the IMI Code is always referred to 'buildings' or 'constructions', existing, authorized or planned, inasmuch as only these can be inhabited, which does not occur in the case of land for construction, which do not have, in themselves, conditions for such, and cannot be used for housing unless and until the construction authorized and planned for it is erected thereon (but in that case they will no longer be 'land for construction' but another type of urban properties – 'residential', 'commercial, industrial or service' or 'others' – Article 6 of the CIMI)".

  5. An interpretation such as that adopted by the Respondent, according to which land for construction is covered by the expression "property with residential designation" has no minimum correspondence in the letter of the law, leading to a legal solution that constitutes a true analogical application of the norm contained in Article 1, No. 1, of the Stamp Tax Code (CIS) and Item 28.1 of the GTST, in non-compliance with the law (Article 11, No. 4, of the General Tax Law), with the principle of typicality of tax law, inherent to the principle of tax legality (Article 103, No. 2, and 165, No. 1, paragraph i), of the Constitution of the Portuguese Republic) and with the principle of legal certainty and protection of the confidence of citizens.

  6. Since it is possible to interpret item 28.1 of the GTST in conformity with the Constitution, it is, however, proper to dismiss the judgment of unconstitutionality of the norm contained therein.

  7. In this case, an interpretation in conformity with the Constitution implies the non-subjection to Stamp Tax, by application of Item 28.1 of the GTST, of land for construction, with respect to the year 2013.

  8. Finally, as to the alleged violation of tax procedural rules, invoked by the Claimant, it must be clarified that the assessment acts now contested were not carried out within the scope of an administrative procedure in which there was an inquiry (cf. Decision of 17/12/1997, of the Plenum of the Administrative Litigation Section of the STA, rendered in appeal No. 36001, published in BMJ No. 472, p. 246, and in Cadernos de Justiça Administrativa, No. 12, p. 3) and therefore the procedural norms that the Claimant considers to have been violated by the Respondent are not applicable in this case, nor is it considered that there was a lack of grounds for the acts performed.

IV. DECISION

For these reasons, and based on the grounds set out above, the Arbitral Tribunal decides to judge the petition for arbitral determination as well-founded, with the consequent annulment, with all legal effects, of the contested assessment acts.

V. VALUE OF THE PROCEEDING

The value of the proceeding is fixed at € 23,299.90, in accordance with the provisions of Article 97-A, No. 1, paragraph a), of the Tax Procedure and Process Code and Article 3, No. 2, of the Regulation of Costs in Tax Arbitration Proceedings.

VI. COSTS

Pursuant to Article 22, No. 4, of the RJAT, the costs are fixed at € 1,224.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Lisbon, 8 January 2015

The Arbitrator,

Paulo Nogueira da Costa

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28 of the TGIS apply to vacant building land intended for housing construction?
Under the original 2012 wording of Item 28.1 of the General Stamp Tax Table, whether vacant building land is subject to Stamp Tax depends on whether it qualifies as 'property with residential designation.' The law was amended in December 2013 to explicitly include 'land for construction whose building, authorized or planned, is for housing,' but this clarification does not apply retroactively to 2013 assessments. The core dispute is whether undeveloped land without authorized or planned residential construction can be considered property with residential designation under the pre-amendment text. The Tax Authority interprets this broadly to include building land, while taxpayers argue that without concrete authorization or planning documentation, vacant land lacks the requisite residential designation.
Can a taxpayer challenge Stamp Tax assessments on building land through CAAD tax arbitration proceedings?
Yes, taxpayers can challenge Stamp Tax assessments on building land through CAAD (Centro de Arbitragem Administrativa) tax arbitration proceedings. This case demonstrates the process under Articles 2 and 10 of the Legal Framework for Arbitration in Tax Matters (Decree-Law 10/2011). The taxpayer filed a petition for arbitral determination, an arbitral tribunal was constituted with a single arbitrator designated by the Ethics Council, and the Tax Authority submitted a reply. Tax arbitration provides an alternative dispute resolution mechanism for contesting liquidation acts, offering a faster resolution than traditional administrative courts while maintaining full legal protections and due process rights for both parties.
Is the application of Verba 28.1 of the General Stamp Tax Table to undeveloped land unconstitutional under Portuguese law?
The taxpayer argued that applying Item 28.1 to undeveloped land violates multiple constitutional principles under Portuguese law. Specifically, the challenge alleged violations of: (1) the principle of tax legality, requiring that tax obligations be clearly defined by law; (2) the principle of typicality, requiring precise definition of taxable events; (3) property rights and private economic initiative protections; (4) equality before public charges; (5) proportionality; and (6) legal certainty and legitimate expectations. The taxpayer contended that the vague phrase 'property with residential designation' in the 2012 version, without explicit reference to building land or criteria for determining residential designation, creates unconstitutional legal uncertainty. The Tax Authority countered that literal interpretation supports inclusion of building land and no constitutional violation occurs. The constitutional question remains central when statutory language is ambiguous before later legislative clarification.
What procedural obligations must the Tax Authority follow when issuing Stamp Tax liquidations on real estate properties?
When issuing Stamp Tax liquidations on real estate properties, the Tax Authority must comply with procedural principles established in the General Tax Law (Lei Geral Tributária). Key obligations include: (1) the principle of collaboration, requiring the administration to cooperate with taxpayers in determining tax obligations; (2) the principle of participation, allowing taxpayers to be heard before decisions affecting their rights; (3) adequate factual and legal grounds (fundamentação), clearly explaining the factual basis and legal reasoning supporting the assessment as required by Article 77 of the LGT; and (4) reference to specific legal provisions and, where applicable, territorial management instruments or authorization documents that establish the property's classification or use. In this case, the taxpayer alleged that liquidation acts lacked proper grounds because no specific authorization or planning document was identified to support classification as residential property.
How does the classification of 'terrenos para construção' affect Stamp Tax liability under Portuguese tax law?
The classification of property as 'terrenos para construção' (land for construction) is central to Stamp Tax liability disputes under Item 28 of the General Stamp Tax Table. Under the Municipal Property Tax Code (CIMI), land for construction is urban property classified based on its potential for development rather than current use. For Stamp Tax purposes post-2013 amendment, land for construction is explicitly taxable at 1% under Item 28.1 when the property value exceeds €1 million and the authorized or planned construction is for housing. However, for periods before the 2013 clarification, the decisive issue is whether classification as building land alone constitutes 'residential designation' or whether additional elements—such as approved projects, planning permissions, or territorial management designations—are required. The property's matrix classification as building land and its high tax property value (VPT) trigger potential liability, but the absence of specific residential authorization creates interpretive uncertainty under the original 2012 statutory language.