Process: 536/2014-T

Date: February 12, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral case concerns the legality of Stamp Tax assessments under item 28.1 of the General Stamp Tax Table (TGIS) on high-value urban properties. The claimant, a real estate investment company, challenged 14 Stamp Tax liquidations totaling €245,435.47 relating to seven urban properties with tax patrimonial values (VPT) ranging from €1.7 million to €5.5 million for the 2013 tax year. The central legal issue is whether building land (terrenos para construção) falls within the scope of 'urban properties with residential use' subject to the 1% Stamp Tax rate under item 28.1 TGIS, as introduced by Law no. 55-A/2012 of 29 October. The Tax Authority applied the 1% rate to all seven properties, which were registered in the property records as building land. The claimant argues these assessments are illegal and seeks declaration of their illegality, reimbursement of amounts already paid in installments, and compensatory interest (juros indemnizatórios). The case was brought before CAAD (Administrative Arbitration Center) under the Legal Framework for Arbitration in Tax Matters (RJAT), with a collective arbitral tribunal constituted on 7 October 2014. The Tax Authority filed a response defending the legality of the assessments. The dispute highlights a fundamental interpretive question regarding Law no. 55-A/2012: whether the concept of 'residential use' property subject to the additional Stamp Tax encompasses undeveloped building land with high patrimonial values, or whether it should be restricted to properties actually used or suitable for immediate residential purposes. The tribunal's decision would establish important precedent for similar properties throughout Portugal and clarify the tax treatment of valuable building land under the post-2012 Stamp Tax regime.

Full Decision

ARBITRAL DECISION

  1. Report

On 28-07-2014, the company A – Real Estate Investments Individual Limited, with tax identification number …, with registered office at Av. …, in Lisbon, filed a request for arbitral pronouncement, under the terms and for the purposes of the provisions contained in articles 2.º, no. 1, paragraph a) and 10.º, no. 1, paragraph a) of the Legal Framework for Arbitration in Tax Matters (RJAT), approved by Decree-Law no. 10/2011, of 20 January, with the Tax and Customs Authority as Respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 31-07-2014.

Under the terms of paragraph a) of no. 2 of article 6.º and paragraph b) of no. 1 of article 11.º of the RJAT, the Deontological Council appointed the arbitrators of the collective tribunal: Councilor Jorge Lino Ribeiro Alves de Sousa, Dr. Maria Manuela do Nascimento Roseiro and Dr. Ricardo Reigada Pereira, who communicated their acceptance within the applicable time period.

The Parties were notified of this appointment on 17-09-2014 and made no objections.

Thus, under the terms of paragraph c) of no. 1 of article 11.º of the RJAT, the collective arbitral tribunal was constituted on 07-10-2014.

By order of 04-02-2015, of the President of the Deontological Council of CAAD, given the circumstance of impediment of Councilor Jorge Lino Ribeiro Alves de Sousa, Councilor Jorge Lopes de Sousa was appointed in his place, as President of the Arbitral Tribunal.

The Claimant seeks to have declared illegal the assessments of Stamp Tax nos. 2014…; 2014…; 2014…; 2014…; 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014… and 2014….

The Claimant further requests the reimbursement of the amounts paid in the meantime as well as the payment of indemnity interest.

The Tax and Customs Authority filed a response, arguing for the rejection of the claim.

By order of 06-02-2015, the Arbitral Tribunal dispensed with the holding of the meeting provided for in article 18.º of the RJAT and final submissions, communicating that it would render a final decision in the case by 10-03-2015.

The Arbitral Tribunal was duly constituted.

The parties have legal personality and capacity and are legitimate (arts. 4.º and 10.º, no. 2, of the same statute and article 1.º of Order no. 112-A/2011, of 22 March).

The Parties are duly represented and no nullity occurs.

  1. Factual Matters

2.1. Proven Facts

The following facts are considered proven:

a) The Claimant is the owner of the following urban properties:

  •      Property registered in the urban property register in the parish of …, district and municipality of Lisbon, under registration article …, with the Tax Patrimonial Value of € 2,749,053.38 (determined in 2011);

  •      Property registered in the urban property register in the parish of …, district and municipality of Lisbon, under registration article …, with the Tax Patrimonial Value of € 4,240,999.13 (determined in 2011);

  •      Property registered in the urban property register in the parish of …, district and municipality of Porto, under registration article …, with the Tax Patrimonial Value of € 1,793,733.75 (determined in 2011);

  •      Property registered in the urban property register in the parish of …, district and municipality of Lisbon, under registration article…, with the Tax Patrimonial Value of € 4,618,611.65 (determined in 2012);

  •      Property registered in the urban property register in the Union of Parishes of … and …, district of Lisbon and municipality of Sintra, under registration article …, with the Tax Patrimonial Value of € 5,552,126.63 (determined in 2013);

  •      Property registered in the urban property register in the parish of …, district and municipality of Porto, under registration article …, with the Tax Patrimonial Value of € 2,994,173.13, (determined in 2012);

  •      Property registered in the urban property register in the parish of …, district and municipality of Porto, under registration article …, with the Tax Patrimonial Value of € 2,594,849.75 (determined in 2012).

(Documents no. 15 to 21, attached to the request for arbitral pronouncement, the contents of which are reproduced herein)

b) In accordance with the respective property record books, the aforementioned urban properties are building land (Documents nos. 15 to 21).

c) The Claimant was notified of the assessments, dated 17 and 18 March 2014, of Stamp Tax relating to the year 2013, under item 28.1 of the General Table of Stamp Tax (TGIS), applying to the seven urban properties referred to in a) the rate of 1% on the Tax Patrimonial Values (TPV) of each of the properties, determining the amounts collected, respectively, of € 27,490.53, € 42,409.99, € 17,937.34, € 46,186.12, € 55,521.27, € 29,941.73 and € 25,948.50, in a total of € 245,435.47.

d) The notification for payment of the first and second installments of the tax (payable by the end of April 2014 and end of July 2014, respectively) was made through collection documents with the numbers nos. 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; (Documents no. 1 to 14 attached to the request for arbitral pronouncement, the contents of which are reproduced herein), with the corresponding first installment being paid on 24.06.2014 (already in execution proceedings), and the corresponding second installment being paid on 17.07.2014.

e) The notifications for payment of the 3rd installment were made through documents nos. 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; corresponding to six of the properties, with the respective amounts paid on 24.11.2014 (12 documents and request attached to the file by the Claimant on 07.01.2015).

f) The notification for payment of the 3rd installment relating to the property under registration article … of the parish of … was not received in 2014 by the Claimant (Request attached to the file on 07.01.2015).

2.2. Unproven Facts

There are no facts relevant to the assessment of the merits of the case that have been classified as unproven.

2.3. Substantiation of the Proven Factual Matters

The proven facts are based on the documents indicated for each of the points, the authenticity and correspondence to reality of which were not questioned by the parties.

  1. Legal Matters

The essential question in the present case is reduced to the definition of the scope of item 28.1 of the General Table of Stamp Tax in the wording given to it by Law no. 55-A/2012 of 29.10, namely whether in that rule should be included building land and, in concrete, whether building land with tax patrimonial value equal to or greater than €1,000,000 come under, or not, the category of urban properties "with residential use".

3.1. Regime of Law no. 55-A/2012, of 29 October

Law no. 55-A/2012, of 29 October, made various amendments to the Stamp Tax Code and added to the TGIS item 28, with the following wording:

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

28.1 – For property with residential use – 1 %;

28.2 – For property, when the taxpayers who are not natural persons are residents 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 %.

In the transitional provisions contained in article 6.º of that Law no. 55-A/2012, the following rules were established concerning the assessment of the tax provided for in that item:

1 – In 2012, the following rules shall be observed by reference to the assessment of stamp tax provided for in item no. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012;

b) The taxpayer for the purposes of the tax is the one mentioned in no. 4 of article 2.º of the Stamp Tax Code on the date referred to in the preceding paragraph;

c) The tax patrimonial value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Municipal Property Tax Code by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority shall be effected by the end of November 2012;

e) The tax shall be paid, in a single installment, by the taxpayers by 20 December 2012;

f) The applicable rates are as follows:

i) Properties with residential use assessed under the terms of the IMI Code: 0.5 %;

ii) Properties with residential use not yet assessed under the terms of the IMI Code: 0.8 %;

iii) Urban properties when the taxpayers who are not natural persons are residents 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 %.

2 – In 2013, the assessment of stamp tax provided for in item no. 28 of the respective General Table shall be based on the same tax patrimonial value used for the purposes of the assessment of municipal property tax to be effected in that year.

3 – Failure to pay, in whole or in part, within the specified time period, the amounts assessed as stamp tax constitutes a tax infraction, punished under the terms of the law.

In the aforementioned item 28.1 and in sub-paragraphs i) and ii) of paragraph f) of no. 1 of article 6.º of Law no. 55-A/2012, a concept was used that is not employed in any other tax legislation, in these precise terms, which is that of "property with residential use".

Namely, in the CIMI, which in several rules of the Stamp Tax Code introduced by that Law is indicated as a statute of subsidiary application regarding the tax provided for in the aforementioned item no. 28 [articles 2.º, no. 4, 3.º, no. 3, paragraph u), 5.º, paragraph u), 23.º, no. 7, and 46.º and 67.º of the CIS], a concept with that designation is not employed.

Law no. 83-C/2013, of 31 December, amended that item no. 28.1, giving it the following wording:

28.1 - For residential property or for building land which is authorized or intended for building for residential purposes, under the terms of the provisions of the IMI Code – 1 %

3.2. Concepts of Properties Used in the CIMI

In the IMI, the categories of properties are enumerated in its articles 3.º to 6.º as follows:

Article 2.º

Concept of Property

1 – For the purposes of the present Code, property means any plot of land, including waters, plantations, buildings and structures of any nature incorporated or based therein, of a permanent nature, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or structures, in the circumstances above mentioned, endowed with economic autonomy in relation to the land on which they are situated, although located on a plot of land that forms an integral part of a different patrimony or does not have a patrimonial nature.

2 – Buildings or structures, even if movable by nature, are deemed to have a permanent nature when destined for non-transitory purposes.

3 – The permanent nature is presumed when the buildings or structures are based in the same location for a period of more than one year.

4 – For the purposes of this tax, each autonomous fraction, under the horizontal ownership regime, is deemed to constitute a property.

Article 3.º

Rural Properties

1 – Rural properties are plots of land situated outside an urban agglomeration which should not be classified as building land, under the terms of no. 3 of article 6.º, provided that:

a) They are destined for or, in the absence of concrete use, have as their normal destination a use generating agricultural income, such as those considered for the purposes of personal income tax (IRS);

b) Not having the use indicated in the preceding paragraph, they are not constructed or have only buildings or structures of an accessory nature, without economic autonomy and of reduced value.

2 – Also rural properties are plots of land situated within an urban agglomeration, provided that, by virtue of legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are in fact having this use.

3 – Also rural properties are:

a) Buildings and structures directly destined to the production of agricultural income, when situated on the plots referred to in the previous numbers;

b) Waters and plantations in the situations referred to in no. 1 of article 2.º

4 – For the purposes of the present Code, urban agglomerations are considered, in addition to those situated within legally fixed perimeters, nuclei with a minimum of 10 housing units served by roads of public use, with their perimeter delimited by points spaced 50 m from the axis of the roads, in the transversal direction, and 20 m from the last building, in the direction of the roads.

Article 4.º

Urban Properties

Urban properties are all those which should not be classified as rural, without prejudice to the provisions of the following article.

Article 5.º

Mixed Properties

1 – Whenever a property has rural and urban parts, it is classified, in its entirety, in accordance with the main part.

2 – If neither of the parts can be classified as main, the property is deemed mixed.

Article 6.º

Categories of Urban Properties

1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Building land;

d) Others.

2 – Residential, commercial, industrial or for services are buildings or structures licensed for such purposes or, in the absence of a license, which have as their normal destination each of these purposes.

3 – Building land is deemed to be plots of land situated inside or outside an urban agglomeration, for which a license or authorization has been granted, prior communication admitted or favorable preliminary information issued for a subdivision or construction operation, and also those that have been so declared in the title of acquisition, excepting plots of land in which the competent entities prohibit any of those operations, namely those located in green zones, protected areas or which, in accordance with municipal land use planning plans, are destined for spaces, infrastructure or public facilities. (Wording of Law no. 64-A/08, of 31-12)

4 – Fall within the provision of paragraph d) of no. 1 plots of land situated within an urban agglomeration which are not building land nor are covered by the provisions of no. 2 of article 3.º and also buildings and structures licensed or, in the absence of a license, which have as their normal destination purposes other than those referred to in no. 2 and also those of the exception in no. 3.

3.3. Rules on Interpretation of Laws

Article 11.º of the General Tax Law establishes the essential rules for the interpretation of tax laws as follows:

Article 11.º

Interpretation

  1. In determining the meaning of tax rules and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

  2. Whenever, in tax rules, terms are used that are specific to other branches of law, they shall be interpreted in the same sense as they have there, unless otherwise directly follows from the law.

  3. If doubt persists as to the meaning of the rules of incidence to be applied, account shall be taken of the economic substance of the tax facts.

  4. Gaps resulting from tax rules covered by the reservation of law of the National Assembly are not subject to analogical integration.

The general principles of interpretation of laws, to which no. 1 of article 11.º of the GTL refers, are established in article 9.º of the Civil Code, which establishes the following:

Article 9.º

Interpretation of Law

  1. Interpretation must not be limited to the letter of the law, but shall reconstruct from the text the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

  2. However, the interpreter cannot consider the legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  3. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its thought in adequate terms.

3.4. Hypotheses of Interpretation of the Concept of "Property with Residential Use"

As can be seen from the rules of the CIMI transcribed above, the concept of "property with residential use" is not used in the classification of properties.

Nor is this concept, with this terminology, found in any other statute.

Thus, in the absence of exact terminological correspondence of the concept of "property with residential use" with any other used in other statutes, several interpretative hypotheses can be advanced.

The starting point for the interpretation of that expression "properties with residential use" is, naturally, the text of the law, and it is on the basis of it that the "legislative thought" must be reconstructed, as required by no. 1 of article 9.º of the Civil Code, applicable by virtue of the provisions of article 11.º, no. 1, of the GTL.

3.5. Concept of "Property with Residential Use" as Referring to Residential Properties

The concept closest to the literal wording of this expression used is manifestly that of "residential properties", defined in no. 2 of article 6.º of the CIMI as comprising "buildings or structures" licensed for residential purposes or, in the absence of a license, which have as their normal destination residential purposes.

Should it be understood that the expression "property with residential use" coincides with that of "residential properties", it is manifest that the assessments will be affected by an error as to the factual and legal premises, since all properties for which Stamp Tax was assessed under the aforementioned item no. 28.1 are building land, without any building or structure, as required by that no. 2 of article 6.º for the fulfillment of that concept of "residential properties".

Therefore, should the interpretation be adopted that "property with residential use" means "residential property", the assessments whose declaration of illegality is requested will be illegal, as there is no building or structure on any of the plots of land.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that extracted from no. 2 of article 6.º of the CIMI suggests that it was not intended to use the same concept.

3.6. Concept of "Property with Residential Use" as a Distinct Concept from "Residential Properties"

The word "use", in this context of the use of a property, has the meaning of "action of designating something for a determined use".

"When, as is usual, rules (legislative formulas) permit more than one meaning, then the positive function of the text is translated into giving stronger support to or suggesting more strongly one of the possible meanings. For among the possible meanings, some will correspond to the most natural and direct significance of the expressions used, while others can only fit within the verbal framework of the rule in a forced, artificial manner. Now, in the absence of other elements that would lead to the choice of the less immediate sense of the text, the interpreter should choose in principle that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and especially to its technical-legal meaning, on the assumption (not always exact) that the legislator knew how to express its thought correctly".

The relevance of the text of the law is especially emphasized in the matter of interpretation of Stamp Tax incidence rules, which are reduced to an amalgam, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on patrimony, on acts, etc.), which leaves no appreciable margin for application of the principal interpretative criterion, which is the unity of the legal system, which requires its overall coherence.

The recognized lack of coherence of Stamp Tax is particularly evident in the case of this item no. 28.1, hastily included on the margins of the General State Budget, by a fiscal legislator without perceivable overall fiscal orientation, who is successively implementing rules of fiscal aggravation in the measure of the setbacks in budget execution, the impositions of international institutional creditors (represented by the "troika") and the scrutiny of the Constitutional Court.

In fact, although in the "Explanatory Memorandum" of the Bill no. 96/XII/2.ª, on which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to "strengthen the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary for the fulfillment of the adjustment program" and to its commitment "to ensure that the distribution of these sacrifices will be made by all and not just by those who live from the income of their work", it is manifest, on one hand, that these reasons for equity, certainly existing, did not begin to apply in mid-2012, already existing at the beginning of the year, when the General State Budget came into force, and, on the other hand, that the scope of item no. 28.1, in taxing additionally properties with residential use and not also properties that do not have it, reveals that the concerns of social equity and the proclaimed intention of distribution of sacrifices by all reaches far more some than properly all.

In this context, there being no secure interpretative elements that would allow detecting legislative coherence in the solution adopted in the aforementioned item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in light of no. 3 of article 9.º of the Civil Code), the text of the legal rule must be the primary element of interpretation, in accordance with the presumption, imposed by the same no. 3 of article 9.º, that the legislator knew how to express its thought in adequate terms.

In light of those meanings of the words "use" and "to use", which are "to give destination" or "to apply", the formula used in that item no. 28.1 of the TGIS manifestly covers properties that have already been given destination for residence, properties that are already applied to residential purposes, so it becomes necessary to inquire whether it will also cover properties that, although not yet applied to residential purposes, are intended for these.

To this end, it must be clarified when it can be understood that a property is used for a residential purpose, namely whether it is when that purpose is fixed for it in a subdivision permit or licensing act or similar, or only when the actual attribution of that purpose is concretized.

From the outset, the comparison of item no. 28.1 of the TGIS with no. 2 of article 6.º of the CIMI, which defines the concept of residential properties, suggests that an actual use is necessary.

In fact, a building or structure licensed for residence or, even without a license, but which has residence as its normal destination, is, in light of no. 2 of that article 6.º, a residential property, as it gives such classification to "buildings or structures licensed for such or, in the absence of a license, which have as their normal destination each of these purposes".

Therefore, on the premise that the legislator of Law no. 55-A/2012 knew how to express its thought in adequate terms (as required by article 9.º, no. 3, of the Civil Code that be presumed), if it intended to refer to those properties already licensed for residence or which have residence as their normal destination, it would certainly have used the concept of "residential properties", which would express perfectly and clearly its thought, in light of the definition given by that no. 2 of article 6.º of the CIMI.

Consequently, it must be presumed that the use of a different expression is intended to refer to a different reality, so that, in good hermeneutics, "property with residential use" cannot be merely a property licensed for residence or intended for that purpose (i.e., it will not be enough that it be a "residential property"), but must be a property that already has actual use for that purpose.

That this is the meaning of the expression "use", in the same context of classification of properties as made by the CIMI, is confirmed by article 3.º in which, regarding rural properties, reference is made to those "which are destined for or, in the absence of concrete use, have as their normal destination a use generating agricultural income", which shows that the use is concrete, actual. In fact, as can be seen from the final part of this text, a property may have as its destination a determined use and be or not be actually used for it, which shows that the use is, at the level of the connection of a property to a determined use, something more intense than mere destination and which may or may not occur, downstream of this and not upstream.

Moreover, the text of the law in adopting the formula "property with residential use", instead of "urban properties with residential use", which appears in the aforementioned "Explanatory Memorandum", strongly suggests that it requires that residential use already be concretized, for only thus will the property be with that use.

In the case at hand, one is faced with a reality still more distant in relation to residential use, which is that there is not even any building or structure and, therefore, there cannot be considered an existing use that presupposes its existence.

On the other hand, the legislative intention not to extend the scope of incidence to building land was expressly stated by the Government when presenting to the Plenary of the National Assembly the Bill 96-XII in the words of the Secretary of State for Tax Matters:

"First, the Government proposes the creation of a special rate to tax residential urban properties of higher value. It is the first time that in Portugal a special taxation has been created on properties of high value destined for residence. This rate will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and will apply to houses valued at equal to or greater than 1 million euros. With the creation of this additional rate, the fiscal burden required of these owners will be significantly increased in 2012 and in 2013".

The express reference to "houses" as the target of the incidence of the new tax leaves no room for doubt as to the legislative intention.

Moreover, there is found in the discussion of the aforementioned Bill no reference to "building land".

With regard to article 45.º of the CIMI, it has no relation to the classification of properties, only indicating the factors to be considered in the appraisal of building land. What is considered there, in making reference to the "building to be constructed", is the consideration of the destination of the land, which, as has been seen, is something that, in the context of the CIMI, does not imply use and occurs before it.

Law no. 83-C/2013, of 31 December, contrary to what the Tax and Customs Authority argues, was not intended to clarify the logical element underlying the initial wording of item no. 28.1, but rather came to confirm, indirectly, the interpretation that it did not cover building land.

In fact, if the original wording of that item no. 28.1, in speaking of "property with residential use", already intended to cover buildings and structures that constituted "residential properties" (under the terms of article 6.º, no. 2, of the CIMI), and building land for which residence was authorized or provided for, it would be natural that an interpretative nature be attributed to the new wording, in the manner that the same Law no. 83-C/2013 does in other provisions [article 177.º, no. 7, concerning paragraphs a) and b) of no. 3 of article 17.º-A of the IRS Code, and article 185.º, no. 1, concerning article 3.º-A of the Value Added Tax Code] and is customary to be done in budgetary laws, when it is intended that the new wordings apply to situations potentially covered by the previous wordings.

Therefore, the fact that an interpretative nature was not attributed to the new wording suggests that it was intended to alter the scope of incidence of the aforementioned item no. 28.1 of the TGIS and not to maintain it, clarifying it.

Based on the foregoing, the assessments subject to the present proceedings are affected by a vice of error as to the legal premises, embodied in violation of item no. 28.1 of the TGIS, which justifies its annulment (article 135.º of the Administrative Procedure Code).

  1. Reimbursement of Amounts Paid and Indemnity Interest

There is entitlement to reimbursement of the amounts of tax paid in the meantime by the Claimant, by application of articles 24.º, no. 1, paragraph b) of the RJAT and 100.º of the GTL (the Administration is obliged to restore the situation that would have existed if the tax acts had not been performed) and to the payment of indemnity interest.

The Claimant is entitled to indemnity interest, under the terms of art. 43.º, no. 1, of the GTL and 61.º of the CPPT, because the illegality of the assessment acts is attributable to the Tax Administration in incorrectly interpreting the law.

Indemnity interest shall be paid with regard to each of the assessments and each of the installments from the date on which the Claimant made the respective payment until the reimbursement of the amount paid, at the supplementary legal rate, under the terms of articles 43.º, no. 4, and 35.º, no. 10, of the GTL, article 61.º of the CPPT, article 559.º of the Civil Code and Order no. 291/2003, of 8 April.

  1. Decision

In harmony with the foregoing, the members of this Arbitral Tribunal agree to:

a) Find the claim for a declaration of illegality of the assessments of Stamp Tax 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; 2014…; subject to appraisal in the present proceedings, in the total amount of € 245,435.47, to be well-founded.

b) Condemn the Tax and Customs Authority to reimburse the claimant the amounts paid, as well as to the payment of indemnity interest, with regard to each of the assessments and each of the installments from the date on which the Claimant made the respective payment until the reimbursement of the amount paid.

  1. Value of the Case

In accordance with the provisions of article 315.º, no. 2, of the CPC and 97.º-A, no. 1, paragraph a), of the CPPT and 3.º, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 245,435.47.

  1. Costs

Under the terms of article 22.º, no. 4, of the RJAT, the amount of costs is fixed at € 4,284.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 12-02-2015

The Arbitrators

(Jorge Lopes de Sousa)

(Maria Manuela Roseiro)

(Ricardo Reigada Pereira)

[1] Dictionary of Contemporary Portuguese Language of the Lisbon Academy of Sciences, Volume I, page 102.

The Houaiss Dictionary of the Portuguese Language defines "use", in a context close to this, as "act that gives destination to a public asset".

The Great Dictionary of the Portuguese Language, by JOSÉ PEDRO MACHADO, indicates as "to designate" and "to apply" among the meanings of "to use".

[2] BAPTISTA MACHADO, Introduction to Law and Legitimizing Discourse, page 182.

[3] The Bill no. 99/XII/2.ª is available at http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245

[4] Other rules of the CIMI show that the term "use" is used to reference situations already existing and not merely future, even if foreseeable, like "destination".

This is the case of article 9.º of the CIMI, which, after establishing that "the tax is due from" "the 4th year following, inclusive, that in which building land has come to appear in the inventory of a company whose object is the construction of buildings for sale" or "the 3rd year following, inclusive, that in which a property has come to appear in the inventory of a company whose object is its sale" [paragraphs d) and e) of no. 1], determines that "for the purposes of the provisions of paragraphs d) and e) of no. 1, the taxpayers must communicate to the tax service in the area of the situation of the properties, within 60 days counted from the occurrence of the fact determining its application, the use of the properties for those purposes".

The "use of the properties for those purposes", in the context of this article 9.º, is reduced to the concrete attribution to the properties of the purpose "for sale", materialized by their inventorying, not being enough that they have been constructed or acquired with a view to their sale.

[5] Page 32 of the Diary of the National Assembly, no. 9 of the 2.ª Legislative Session of the XII Legislature, relating to the Plenary Meeting of 10-10-2012, available at http://app.parlamento.pt/darpages/dardoc.aspx?doc=6148523063446f764c324679626d56304c334e706447567a4c31684a5355786c5a79394551564a4a4c305242556b6c42636e463161585a764c7a497577716f6c4d6a42545a584e7a77364e764a5449775447566e61584e7359585270646d4576524546534c556b744d4441354c6e426b5a673d3d&nome=DAR-I-009.pdf

[6] In this sense the Supreme Administrative Court has been deciding, as can be seen from the decisions of 09-04-2014, handed down in cases nos. 01870/13 and 048/14; of 23-04-2014, handed down in cases nos. 0271/14, 0270/14 and 0272/14, and of 14-05-2014, handed down in cases 046/14 and 0274/14 (available at http://www.dgsi.pt/jsta).

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under Verba 28.1 of the General Stamp Tax Table (TGIS) on high-value urban properties?
The Stamp Tax under Verba 28.1 of the General Stamp Tax Table (TGIS) is an annual property tax introduced by Law no. 55-A/2012 of 29 October that applies to the ownership, usufruct, or right of superficies of urban properties with residential use whose tax patrimonial value (VPT) in the property register is equal to or greater than €1,000,000. The tax rate is 1% applied annually on the tax patrimonial value used for Municipal Property Tax (IMI) purposes. This tax was created as an exceptional levy on high-value real estate and represents an additional tax burden beyond regular IMI. The taxable event occurs annually, and the tax is payable in installments. A separate rate of 7.5% applies under item 28.2 for properties owned by non-natural persons resident in tax haven jurisdictions. The key interpretive question in many disputes is whether specific property types, such as building land, qualify as 'property with residential use' subject to this tax.
Can property owners challenge Stamp Tax assessments on properties with a taxable value (VPT) exceeding €1,000,000 through tax arbitration at CAAD?
Yes, property owners can challenge Stamp Tax assessments on properties with taxable values exceeding €1,000,000 through tax arbitration at CAAD (Centro de Arbitragem Administrativa). Under the Legal Framework for Arbitration in Tax Matters (RJAT - Regime Jurídico da Arbitragem em Matéria Tributária), approved by Decree-Law no. 10/2011 of 20 January, taxpayers have the right to file requests for arbitral pronouncement to contest tax assessments. The process involves filing a request that is automatically notified to the Tax and Customs Authority, followed by appointment of arbitrators by the Deontological Council. A collective arbitral tribunal of three arbitrators is typically constituted for such cases. The Tax Authority files a response defending the assessments. This arbitral mechanism provides an alternative to traditional judicial appeals, offering faster resolution of tax disputes. In the case analyzed, the claimant successfully invoked this procedure to challenge 14 Stamp Tax liquidations totaling over €245,000, demonstrating the accessibility and effectiveness of CAAD arbitration for significant property tax disputes.
What legal grounds exist to contest the legality of Stamp Tax liquidations on real estate under Portuguese tax law?
Several legal grounds exist to contest Stamp Tax liquidations on real estate under Portuguese tax law. First, taxpayers can challenge the interpretation and application of item 28.1 TGIS, particularly whether their specific property type (such as building land) qualifies as 'urban property with residential use' subject to the 1% rate. Second, constitutional grounds may be invoked, including potential violations of property rights, equality principles, or confiscatory taxation if the tax burden is deemed excessive. Third, procedural irregularities in the assessment process, including improper notification or calculation errors, can render liquidations illegal. Fourth, incorrect determination or application of the tax patrimonial value (VPT) may be contested. Fifth, taxpayers can argue that the tax violates principles of legal certainty and legitimate expectations if the law's scope is ambiguous. Sixth, compatibility with EU law principles regarding free movement of capital and non-discrimination may be raised. The burden typically falls on the Tax Authority to prove the factual and legal basis for the assessment, while taxpayers must demonstrate specific grounds for illegality supported by evidence and legal argumentation.
How does the CAAD arbitral tribunal process work for disputes involving multiple Stamp Tax assessments on urban properties?
The CAAD arbitral tribunal process for disputes involving multiple Stamp Tax assessments on urban properties follows a structured procedure under the RJAT (Legal Framework for Arbitration in Tax Matters). The process begins with the taxpayer filing a request for arbitral pronouncement identifying all contested liquidations. The request is automatically notified to the Tax and Customs Authority within days. The CAAD Deontological Council then appoints a collective arbitral tribunal of three arbitrators for cases of significant value or complexity. Parties are notified of appointments and may object to arbitrators. Once constituted (typically within 2-3 months of filing), the tribunal proceeds with the case. The Tax Authority files a response defending the assessments. The tribunal may dispense with oral hearings if written submissions are sufficient, as occurred in this case. A final decision must be rendered within statutory deadlines (typically 6 months from constitution, extendable). The tribunal examines the legality of all challenged assessments together, considering common legal issues. Parties must have legal personality, capacity, and standing. The process allows efficient resolution of multiple related assessments in a single proceeding, avoiding the need for separate challenges to each liquidation, which is particularly advantageous when the same legal issue affects multiple properties or tax periods.
Are taxpayers entitled to reimbursement and compensatory interest (juros indemnizatórios) when Stamp Tax liquidations are declared illegal?
Yes, taxpayers are entitled to reimbursement and compensatory interest (juros indemnizatórios) when Stamp Tax liquidations are declared illegal by CAAD arbitral tribunals. Under Portuguese tax law, specifically Article 43 of the General Tax Law (Lei Geral Tributária) and Article 61 of the Tax Procedure Code (Código de Procedimento e de Processo Tributário), taxpayers who have paid taxes that are subsequently declared illegal or annulled have the right to restitution of amounts paid. Additionally, they are entitled to compensatory interest calculated from the date of undue payment until the date of actual reimbursement. The interest rate is established by ministerial order and aims to compensate taxpayers for the loss of availability of funds that should not have been collected. In CAAD arbitration cases, claimants routinely request both reimbursement and compensatory interest as part of their relief sought. When the arbitral tribunal declares liquidations illegal, the decision typically encompasses both the annulment of the tax assessment and the consequent right to full reimbursement with interest. The Tax Authority is bound by the arbitral decision and must process the reimbursement accordingly. This mechanism ensures taxpayers are made whole when subjected to illegal tax collection, protecting their rights and discouraging unlawful administrative action.