Process: 529/2014-T

Date: February 20, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 529/2014-T, A… SA challenged stamp duty assessments totaling €47,776.24 on two building land plots in Porto for the 2013 tax year under item 28.1 of the General Table of Stamp Duty (TGIS). The central dispute concerned whether building land (terrenos para construção) qualifies as 'immovable property with residential use' subject to stamp duty under the version of item 28 amended by Law 55-A/2012. The applicant argued that the new wording introduced by Law 83-C/2013, which explicitly referenced building land, only applied from January 1, 2014, and could not be applied retroactively to 2013 assessments due to constitutional principles (Article 103(3) CRP) and tax law provisions (Article 12(2) LGT) prohibiting retroactive tax legislation. Additionally, the applicant contended that building land with mere construction capacity does not constitute 'residential use' property under the 2012 version. The Tax Authority countered that building land possesses the legal nature of residential-use property because the patrimonial tax value (VPT) determination applies the residential use coefficient from Article 41 of CIMI, citing TCA South Judgment 04950/11. The Tax Authority relied exclusively on Law 55-A/2012's provisions, not the 2013 amendments. The CAAD arbitral tribunal, constituted on September 26, 2014, with sole arbitrator Arlindo José Francisco, analyzed whether the application of the residential use coefficient in valuation methodology suffices to classify building land as residential-use property for stamp duty purposes, examining the distinction between valuation techniques and actual property use classification under the TGIS taxable event definitions.

Full Decision

DECISION

I – REPORT

1 A…, SA, NIPC[1] …, with registered address in …, MAIA filed a request for constitution of an arbitral tribunal, pursuant to the provisions of article 2(1)(a), article 3(1) and article 10(1)(a), all of the RJAT[2], requesting the AT[3] with a view to the annulment of a tax act imposing stamp duty on the ownership of immovable property registered in the property roll under urban articles nos. ... and ... of the parish of ... of the municipality of Porto, relating to two plots of land for construction, in accordance with notifications duly received referring to the year 2013, in the total amount of € 47,776.24, the justification invoked for such assessment being reduced to the application of item 28.1 of the TGIS[4], which the applicant considers inapplicable to the concrete situation.

2 The request for constitution of the arbitral tribunal was made without exercising the option to designate an arbitrator, and was accepted by His Excellency the President of the CAAD[5] and automatically notified to the AT on 28/07/2014.

3 Pursuant to the provisions of article 6(2) of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties, within the legally applicable periods, on 11/09/2014, Arlindo José Francisco was designated as sole arbitrator, who communicated to the Deontological Council of Administrative Arbitration his acceptance of the appointment within the legally prescribed period.

4 The tribunal was constituted on 26/09/2014 in accordance with the provisions contained in article 11(1)(c) of the RJAT, as amended by article 228 of Law no. 66-B/2012 of 31 December.

5 With its request, the applicant seeks the annulment of the assessment in question on the grounds that the new wording given to item 28.1 of the TGIS by Law 83-C/2013 only has applicability from 1 January 2014 and the assessment in question relates to 2013.

6 It supports its point of view, in summary, in addition to what is provided in article 103(3) of the CRP, in what is established in article 12(2) of the LGT and in the fact that item 28 of the TGIS, as worded by Law 55-A/2012 of 29 October, does not contemplate the taxation in stamp duty of plots of land for construction.

7 In its reply, the AT does not invoke the applicability of item 28 of the TGIS as worded by Law 83-C/2013, but rather considers that item 28 of the TGIS as worded by Law 55-A/2012 determines the taxation of plots of land for construction, since these have the legal nature of immovable property with residential use, considering that in the determination of their VPT[6] the residential use coefficient provided for in article 41 of the CIMI[7] is taken into account.

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

9 In this perspective, it considers that the assessment put in issue should be maintained as it complies with the applicable legislation.

II - PROCEDURAL SANITATION

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

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

The applicant was notified to make a statement on the request formulated by the respondent with a view to dispensing with the hearing to which article 18 of the RJAT refers, and said nothing within the prescribed period, the tribunal understanding the silence as agreement with the request and with the unnecessary nature of written or oral submissions, considering that the necessary and sufficient factual elements are assembled to decide on the law.

The proceedings do not suffer from defects and no issues have been raised that prevent consideration of the merits of the case; it is therefore necessary to decide.

III - GROUNDS

1 – The issues to be resolved, with interest for the proceedings, are the following:

a) Whether plots of land for construction, to which in the determination of their VPT the residential use coefficient was applied and a value of equal to or greater than € 1,000,000.00 was determined, fall within the scope of the taxation in stamp duty provided for in item 28 of the TGIS, as amended by Law no. 55-A/2012 of 29 October.

b) And whether in the assessment of the stamp duty in the present proceedings there was error attributable to the authorities.

2 – Matters of Fact

The relevant matters of fact proven on the basis of the elements attached to the proceedings are as follows:

a) The applicant is the owner of plots of land for construction registered in the urban property roll of the parish of ..., municipality of Porto, under articles ... and ....

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

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

d) At no time did the AT invoke the new wording given to item 28 of the TGIS by Law 83-C/2013 of 31 December with a view to justifying the assessments of stamp duty here in issue.

e) According to documents attached, the stamp duty in question was paid on 28 April 2014 for the 1st instalment, on 25 July 2014 for the 2nd instalment and the 3rd and final instalment was paid on 25/11/2014.

3 – Matters of Law

a) The applicant, in its request for arbitral determination considers, in the first place and in summary, the inapplicability of item 28 of the TGIS as worded by Law 83-C/2013 of 31 December to plots of land for construction.

b) The taxable facts subject to taxation occurred in 2013 and, relying both on article 103(3) of the CRP and article 12 of the LGT, concludes that the new wording of the said item 28 will only have application from 1 January 2014, and by this means the assessments in issue are illegal.

c) In the wording given by Law no. 55-A/2012, given that it is not a matter of immovable property with residential use, but only with building capacity and that the legislator in using the expression "residential use" cannot in any way be accepted as having wished to make a reference to article 41 of the CIMI, there will be error as to the assumptions and at the same time considers there to be a defect in reasoning, which ground also, by this means, the assessments suffer from illegality.

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

e) Having summarised the positions of the applicant and the respondent, we shall proceed hereinafter to an analysis of the norm of incidence of stamp duty on urban immovable property with residential use and it should be said from the outset that the respondent, at no time invoked the new wording of item 28.1 of the TGIS given to it by Law 83-C/2013 of 31 December whose applicability only takes place from 1 January 2014.

f) Item 28 of the TGIS, as amended by Law no. 55-A/2012, subjects to stamp duty urban immovable property with residential use whose VPT, determined in accordance with the CIMI, is equal to or greater than €1,000,000.00.

g) The CIS[10] refers to the CIMI the regulation of the concept of immovable property and of matters not regulated as to item 28 of the TGIS (see article 1(6) and article 67(2) both of the CIS).

h) If we look at article 6 of the CIMI, it establishes that urban immovable property is divided into residential, commercial, industrial or service property, plots of land for construction and others.

i) From its paragraph 2 it is apparent that urban residential immovable property "are buildings or constructions licensed for such purpose or in the absence of a licence, which have such a purpose as their destination" and paragraph 3 tells us that plots of land for construction "are those situated within or outside an urban agglomeration, for which a licence or authorisation for a subdivision or construction operation has been granted, and also those which have been so declared in the acquisition title…".

j) From these concepts we can already conclude for the existence of autonomy between urban immovable property "residential" and urban immovable property "plots of land for construction".

k) The legislator of stamp duty, when establishing the taxation of urban immovable property "with residential use", did not concretise the concept, wherefore we must, by force of the reference, go to the CIMI and this, as has been seen, autonomises them in relation to plots of land for construction.

l) The expression "residential use" is in no way apparent in plots of land for construction, nor can it, as the respondent contends, be understood as an integrating expression of other realities.

m) We adopt the position advocated in proceedings 49/2013 which is transcribed: "The expression 'with residential use' conveys, upon simple reading, an idea of real and present functionality. From the norm in question it is not possible to extract, by interpretation, that, as is asserted in the response of the respondent, the legislator's choice of that expression is aimed at integrating 'other realities beyond those identified in article 6(1)(a) of the CIMI.' Such interpretation has no legal support, in light of the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law. Indeed, if the legislator intended to encompass within the scope of the tax other realities than those resulting from the classification governed by article 6 of the CIMI, it would have said so expressly. But it does not, rather referring, en bloc, to the concepts and procedures provided for in the said Code. On the other hand, the respondent's understanding that the concept of "residential use" derives from the norm of article 45 of the CIMI cannot be accepted either. This article refers to the rules applicable in determining the tax patrimonial value of plots of land for construction establishing that this is what results from the value of the implantation area of the building to be constructed added to the land adjacent to the implantation. In fixing the value of that area a variable percentage between 15% and 45% of the value of the authorised or envisaged buildings is considered. According to the respondent, in fixing the value of the authorised or envisaged buildings on the land to be assessed, the coefficients applicable in determining the tax patrimonial value are used, in particular the use coefficient provided for in article 1 of that Code. Concluding therefrom that the consideration of such a coefficient, dependent on the type of use envisaged for the immovable property to be built on the land, will be determinant for the purposes of application of Item 28 of the TGIS. This conclusion is supported on the assumption that the expression 'immovable property with residential use' appeals to a classification that overlays the species provided for in article 6(1) of the CIMI. It is not possible, however, to follow such conclusion. [...]. In these terms, resulting from article 6 of the CIMI a clear distinction between urban immovable property "residential" and "plots of land for construction", these cannot be considered, for the purposes of incidence of stamp duty, as 'immovable property with residential use'."

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

o) Nor should it be said that the fact that article 45 of the CIMI provides for the application of a residential use coefficient in determining the VPT of plots of land for construction will be a sufficient condition, in itself, to permit their inclusion in the norm of incidence of item 28 as amended by Law no. 55-A/2012, nor indeed alter their nature as a plot of land for construction, given that what is at issue here is only to determine the VPT which will be influenced by the type of buildings to be carried out (which, it should be said, are not always realised).

p) Judgment 04950/11 of 14/02/2012 of the TCA South cited by the AT which considers that the assessment regime for the tax patrimonial value of plots of land for construction is established in article 45 of the CIMI, being equal to that of constructed buildings, although starting from the building to be constructed, based on the project, this point of view being confined to assessment and nothing more.

q) Now, as has been seen, article 6 of the CIMI results in a clear distinction between residential immovable property and plots of land for construction, which prevents these from being taxed in stamp duty on the terms sought by the respondent.

r) To this effect several arbitral decisions have already been rendered, namely proceedings 42, 48, 49 and 75, all of 2013.

s) The taxation put in issue here occurred only due to error attributable to the services of the AT, since item 28 of the TGIS, as worded by Law 55-A/2012, did not permit the taxation in stamp duty of plots of land for construction.

IV – DECISION

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

a) To declare that plots of land for construction are excluded from taxation in stamp duty provided for in item 28.1 of the TGIS as worded by Law 55-A/2012 of 29 October.

b) Consequently to declare the request for arbitral determination well-founded, due to error attributable to the authorities, annulling the act assessing stamp duty for the year 2013 in the amount of € 47,776.24 since the assessment in question is illegal as it violates the said norm of incidence with all the legal consequences arising therefrom, in particular the payment of indemnity interest pursuant to article 43(1) of the LGT[11], calculated at the legal rate from the date of payment of the stamp duty unduly paid until the date of its refund.

c) To fix the value of the proceedings at € 47,776.24 in accordance with the provisions contained in article 299(1) of the CPC[12], article 97-A of the CPPT[13], and article 3(2) of the RCPAT[14].

Costs to be borne by the respondent, pursuant to article 22(4) of the RJAT, fixing the respective amount at € 2,142.00, in accordance with the provisions of table I referred to in article 4 of the RCPAT.

Notify.

Lisbon, 20 February 2015

Document drawn up by computer, pursuant to article 131(5) of the CPC, applicable by reference from article 29(1)(e) of the RJAT, with blank lines and reviewed by the tribunal.

The present decision is written in accordance with the orthography prior to the orthographic agreement.

The arbitrator,

Arlindo Francisco

[1] Acronym for Collective Person Identification Number
[2] Acronym for Legal Framework for Arbitration in Tax Matters
[3] Acronym for Tax Authority and Customs
[4] Acronym for General Table of Stamp Duty
[5] Acronym for Administrative Arbitration Center
[6] Acronym for Tax Patrimonial Value
[7] Acronym for Municipal Property Tax Code
[8] Acronym for Central Administrative Court
[9] Acronym for Stamp Duty
[10] Acronym for Stamp Duty Code
[11] Acronym for General Tax Law
[12] Acronym for Code of Civil Procedure
[13] Acronym for Code of Tax Procedure and Process
[14] Acronym for Regulation of Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the TGIS apply to building land (terrenos para construção) for the 2013 tax year?
Under the arbitral tribunal's analysis, item 28.1 of the TGIS as worded by Law 55-A/2012 (applicable to 2013) does not clearly encompass building land (terrenos para construção). The key issue is whether building land constitutes 'immovable property with residential use.' While the Tax Authority argued that building land qualifies because the VPT calculation applies the residential use coefficient from Article 41 of CIMI, the applicant maintained that building land with mere construction capacity lacks actual residential use. The tribunal distinguished between valuation methodology and property classification, noting that the use of a residential coefficient in calculating patrimonial value does not automatically transform vacant building land into residential-use property for stamp duty incidence purposes. The explicit inclusion of building land only occurred with Law 83-C/2013's amendments.
Can the revised Stamp Tax provisions under Law 83-C/2013 be applied retroactively to prior tax periods?
No, the revised stamp tax provisions under Law 83-C/2013 of December 31, 2013, cannot be applied retroactively to prior tax periods. This conclusion derives from fundamental constitutional and tax law principles. Article 103(3) of the Portuguese Constitution (CRP) prohibits retroactive tax legislation, and Article 12(2) of the General Tax Law (LGT) explicitly states that tax laws only apply to taxable events occurring after their entry into force. Since Law 83-C/2013 entered into force on January 1, 2014, it applies exclusively to stamp duty assessments from 2014 onwards. The 2013 assessments must be evaluated under Law 55-A/2012's provisions. Importantly, the Tax Authority in this case never invoked the 2013 amendments, recognizing their inapplicability to 2013 tax years, and instead defended the assessments based solely on the interpretation of Law 55-A/2012.
Are building land plots classified as housing-purpose properties for Stamp Tax under the TGIS?
The classification of building land plots as housing-purpose properties for stamp duty under the TGIS represents the core legal controversy. The Tax Authority's position, supported by TCA South Judgment 04950/11, argues that building land possesses residential use character because Article 45 of CIMI establishes that the VPT assessment regime for building land equals that of constructed buildings, applying the residential use coefficient from Article 41 of CIMI based on the projected construction. However, this reasoning conflates valuation methodology with property use classification. The TGIS item 28 taxation targets actual residential use, not potential or projected use. Building land without constructed buildings represents vacant property with construction capacity, not property in residential use. The legislative amendment in Law 83-C/2013 explicitly adding 'terrenos para construção' to item 28.1 confirms that the prior version did not clearly encompass such properties, suggesting legislative recognition that building land required express inclusion.
How does the CAAD arbitral tribunal process work for challenging Stamp Tax assessments on real estate?
The CAAD (Centro de Arbitragem Administrativa) arbitral tribunal process provides taxpayers an alternative dispute resolution mechanism for challenging tax assessments. Under the RJAT (Legal Regime of Tax Arbitration), taxpayers can request arbitral tribunal constitution pursuant to Articles 2(1)(a), 3(1), and 10(1)(a). The process begins with filing a request for arbitration, where parties may designate an arbitrator or leave selection to the CAAD President. In this case, the taxpayer opted for automatic designation, and the CAAD President appointed sole arbitrator Arlindo José Francisco on September 11, 2014, who accepted within the legal deadline. The tribunal was formally constituted on September 26, 2014, under Article 11(1)(c) of RJAT. The Tax Authority received automatic notification and filed a reply defending the assessments. The procedure included a determination under Article 18 of RJAT regarding the necessity of hearings, with the tribunal proceeding without oral arguments based on sufficient documentary evidence. This streamlined process offers faster resolution than traditional administrative courts.
What is the role of the property tax valuation coefficient (coeficiente de afectação) in determining Stamp Tax liability on building land?
The property tax valuation coefficient (coeficiente de afetação) plays a disputed role in determining stamp duty liability on building land. Article 41 of CIMI (Property Tax Code) establishes residential use coefficients applied in calculating the patrimonial tax value (VPT). Article 45 of CIMI prescribes that building land VPT follows the constructed building assessment regime, using the projected building characteristics and applying relevant coefficients including the residential use coefficient. The Tax Authority argued this valuation methodology confers residential use nature on building land for stamp duty purposes. However, this reasoning presents a category error: the coefficient serves as a technical valuation tool for determining property value, not a substantive classification of property use for tax incidence. The stamp duty under item 28.1 of TGIS taxes ownership of property in actual residential use, examining the property's current state and function. Applying a residential coefficient to value vacant building land based on hypothetical future construction does not convert that land into property with present residential use, which requires actual building occupation or availability for residential purposes.