Process: 541/2014-T

Date: September 30, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 541/2014-T addresses the application of Verba 28.1 of the General Stamp Tax Table (TGIS) to a property in Lisbon held in total ownership by Sociedade Imobiliária A..., Lda. The property, registered under urban property number ..., comprises 21 independent units, of which 14 are residential with a combined taxable patrimonial value (VPT) of €1,912,470.00. The Tax Authority issued 14 separate Stamp Tax assessment notices totaling €6,375.06, applying the 1% rate under Verba 28.1 to each residential unit individually. The applicant challenged these assessments, arguing that Verba 28.1, introduced by Law 55-A/2012, was intended to tax luxury residential properties with individual VPT equal to or exceeding €1,000,000.00, not to aggregate units within a single property held in total ownership. The company contended that the legislative purpose was to tax manifestations of wealth through high-value residential property ownership, a rationale that does not apply when a legal entity owns the property for commercial rental purposes rather than personal use. The applicant cited CAAD precedents (cases 50/2013-T and 132/2013-T) supporting unit-by-unit assessment methodology, which paradoxically suggests that individual units below the €1,000,000 threshold should not be taxed. The arbitral tribunal, constituted on October 1, 2014, under the Legal Regime of Arbitration in Tax Matters (RJAT), examined whether Stamp Tax could be assessed on each independent unit separately or whether the property should be treated as a single taxable entity. The case illustrates the complexity of applying wealth-based taxation to properties with multiple independent units held under single ownership, particularly when owned by corporate entities rather than individuals.

Full Decision

Case No. 541/2014 - T

ARBITRAL DECISION

The arbitrator Guilherme W. d'Oliveira Martins, designated by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the present Arbitral Tribunal, constituted on 01.10.2014, decides as follows:

I. Report

  1. On 28-07-2014, the Company Sociedade Imobiliária A..., Lda presented a petition concerning the combined provisions of the articles under the Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as RJAT, in which the Tax and Customs Authority (hereinafter AT) is the Respondent.

  2. The petition for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD on 30-07-2014 and notified to the AT on 31.07.2014.

  3. Pursuant to the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council designated the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the corresponding charge within the applicable time period.

  4. On 16.09.2014, the parties were duly notified of this designation, and did not manifest any intention to refuse the arbitrator's designation pursuant to the combined provisions of Article 11, paragraph 1, subparagraphs a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code.

  5. Accordingly, pursuant to the provisions of subparagraph c) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Law No. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 01.10.2014.

  6. On 11.03.2015, the meeting required by Article 18 of the RJAT was dispensed with, given the position evidenced by the parties.

  7. The Tribunal set 01.04.2015 as the date for rendering the arbitral decision.

  8. As it was not possible to render the decision by the announced date, the initial deadline was successively extended until the final date of 30.09.2015, by orders dated 31.03.2015, 15.04.2015, 22.04.2015, 28.04.2015, 12.05.2015, 21.05.2015, 16.06.2015, 15.07.2015, 16.09.2015 and 29.09.2015.

  9. In the present case, the Company Sociedade Imobiliária A..., Lda seeks to have declared illegal and annulled the assessment notes Nos. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014... for Stamp Tax in the total amount of €6,375.06, relating to the year 2013, issued by the Tax and Customs Authority – as per documents Nos. 1 to 14 attached to the initial petition.

I2. Grounds of the Applicant's Request

  • The taxes now contested were assessed individually on the taxable property value (VPT) of the divisions or parts capable of independent utilization (divisions) of the property, held in full ownership, located at Avenue …, parish of …, municipality of Lisbon, registered in the urban property register with No. …, as per documents 1 to 14 already attached to the present proceedings.

  • The applicant is the full owner of the property in question, located at Avenue …, registered in the urban property register with No. …, parish of …, Lisbon, as per the urban property register booklet attached as doc. 15 and considered to be fully reproduced herein.

  • The property comprises a total of 21 (twenty-one) divisions with independent utilization whose VPT, determined under the Municipal Property Tax Code, hereinafter referred to as CIMI, is €3,075,530.00, as per the urban property register booklet (doc. No. 15) and considered to be fully reproduced herein.

  • Of the twenty-one divisions with independent utilization, only five are devoted to commerce/services, with the remainder devoted to residential purposes, whose total VPT amounts to €1,912,470.00 (a value that appears in the assessments), (as per doc. No. 15).

  • On the VPT of each division, the Tax Administration assessed the stamp tax provided for in item No. 28.1 of the General Table of Stamp Tax (TGIS) attached to the Stamp Tax Code (CIS) as amended by Article 4 of Law No. 55-A/2012, of 29 October, at the rate of 1% provided for in subparagraph i) of paragraph f) of paragraph 1 of Article 6 of that same law.

  • The AT issued assessment notes for the tax claimed herein because fourteen of the twenty-one divisions with independent utilization have residential purposes and their respective fourteen VPT amounts total €1,912,470.00 (cf. document Nos. 1, "property value of the property – total subject to tax").

  • Item No. 28.1 of the TGIS, created by Law 55-A/2012 of 29 October 2012, more specifically by its Article 4, provides that on the ownership of each urban property with residential purposes, whose VPT registered in the property matrix, pursuant to the CIMI, has a value equal to or greater than €1,000,000.00, stamp tax is assessed on its VPT used for the purpose of Municipal Property Tax (IMI) at the rate of 1%.

  • Therefore, stamp tax on item No. 28.1 of the TGIS applies when there is a combination of two prerequisites: (i) the property's residential purposes, (ii) the VPT registered in the property matrix is equal to or greater than €1,000,000.00.

  • The legislator, in creating this item 28.1 of the TGIS, intended to tax not real estate property in itself, but real estate property of high value or luxury, which is why the item in question applies only to properties with residential purposes and not to properties with mixed purposes.

  • In this regard, and concerning the legislative intent of this rule, see the arbitral decision issued by CAAD in case 50/2013 T, "The legislator, upon introducing this legislative innovation, considered as the determinative element of contributory capacity urban properties, with residential purposes, of high value (luxury), more precisely, of value equal to or greater than €1,000,000.00, on which a special rate of stamp tax began to apply, intending to introduce a principle of taxation of wealth manifested in the ownership, usufruct or right of superficies of urban luxury properties with residential purposes. Accordingly, the criterion was the application of the new rate to urban properties with residential purposes, whose VPT is equal to or greater than €1,000,000.00" (emphasis added).

  • Now, in the case at hand, since the property is owned by a legal entity, its residential purposes can only apply if it is rented out, and the case does not concern its use as a manifestation of wealth or luxury, which is why it falls outside the scope of item 28.1 of the TGIS.

  • It also follows from Legislative Proposal No. 96/XII that the legislator intended, with this legislative innovation and in consideration of the principles of social equity and fiscal justice, that taxpayers holding high-value properties intended for residential purposes should contribute more intensively.

  • Also in an arbitral decision issued by CAAD in case 50/2013 T, "Clearly the legislator understood that this value, when attributed to a dwelling (house, capable of autonomous use or flat with independent utilization) expresses a contributory capacity above the average and, as such, capable of determining a special contribution to ensure fair distribution of the fiscal burden."

  • See also the arbitral decision issued by CAAD in case 132/2013 T, "Now, if such logic appears to make sense when applied to 'residential purposes' - be it 'house', 'autonomous fraction' or 'part of property with independent utilization' / 'autonomous unit' -, because one assumes a contributory capacity above the average and, to that extent, justifies the necessity of an additional contributory effort, it would make little sense to subsequently disregard the assessments 'unit by unit' when only through the sum of the VPTs of the same (because held by the same individual) would the million euros threshold be exceeded."

  • Now in the case at hand, the property has mixed purposes, with 14 of the divisions capable of independent utilization having residential purposes, and the remainder having commercial or service purposes, which is why it falls outside the scope and application of item 28.1 of the TGIS.

  • For these reasons, we understand that the assessment notes in question were issued by the AT in disregard of the legislative intent of item 28.1 and in clear violation of the applicable legal norms and fiscal principles applicable to the case at hand.

  • Even if not understood in this manner, and as a mere matter of professional duty, the truth is that the fact that the property is held in vertical rather than horizontal ownership cannot in itself be an indicator of greater contributory capacity.

  • To the registration of immovable property held in vertical ownership, even though constituted by different divisions with independent utilization, pursuant to the CIMI, the same registration rules apply as to immovable property constituted in horizontal ownership, and thus the respective Municipal Property Tax (IMI) and Stamp Tax are assessed individually in relation to each of the divisions.

  • Law 55-A/2012, which amended the Stamp Tax Code, more properly, its Article 67, adding thereto paragraph 2, provides that in all matters not regulated by it, and concerning item No. 28, the CIMI shall be applied subsidiarily.

  • The truth is that, both from Article 2 of the CIMI, which defines the concept of property, and from Article 38 thereof, relating to the determination of VPT, no distinction results as to the registration situation of the property, that is, whether it is held in vertical or horizontal ownership.

  • In this regard and as per the arbitral decision issued by CAAD in case 132/2013, "it makes no sense to distinguish in the law what the law itself does not distinguish (ubi lex non distinguit nec nos distinguere debemus). Moreover, to distinguish, in this context, between properties constituted in horizontal and full ownership would be an 'innovation' without associated legal support, particularly because, as has been stated herein, nothing suggests, neither in item No. 28, nor in the CIMI provisions, justification for that particular differentiation."

  • Also in this sense, see the arbitral decision issued by CAAD in case No. 50/2013 T, "Also following these considerations that inspired the legislative innovation under consideration, it must be concluded that the existence of a property in vertical or horizontal ownership cannot in itself be an indicator of contributory capacity. On the contrary, the law provides that both must receive the same fiscal treatment in compliance with the principles of justice, fiscal equality and material truth. Rather, the existence in each property of independent dwellings, under the regime of horizontal or vertical ownership, may be capable of triggering the application of the new tax if the VPT of each of the parts or fractions is equal to or greater than the limit defined by law: €1,000,000.00." (emphasis added).

  • Particularly because it follows from paragraph 3 of Article 12 of the CIMI that each fraction or part of property capable of independent utilization must be considered separately in the property registration.

  • The AT itself, in the assessment notes contested herein, assumed this same principle, by declaring as total value subject to tax only the VPT relating to divisions with residential purposes capable of independent utilization that make up the property (1,912,470.00), excluding the remainder (cf. Doc. Nos. 1 to 14).

  • The truth is that the AT issued assessment notes for each division capable of independent utilization and having residential purposes, as it would have done if the property had been constituted in horizontal ownership, however, for purposes of application it considered the global VPT of the property instead of considering the VPT of each fraction.

  • However, given that the applicant's property comprises divisions capable of independent utilization, the subject matter of stamp tax should have been determined, not by the global VPT of the property, but rather by the VPT of those divisions.

  • Particularly because it is precisely the "VPT registered in the property matrix" to which the text of the law directs attention to determine the application of stamp tax on item No. 28.1 of the TGIS.

  • Moreover, as the VPT, calculated pursuant to the CIMI, and that registered in the property matrix of each of these fractions is less than €1,000,000.00, no stamp tax on item No. 28.1 of the TGIS should apply to them, as the AT contends.

  • Regarding the criterion that should determine the application of this rule, see the arbitral decision issued by CAAD in case 132/2013, "The uniform criterion that is required is, therefore, the one that determines that the application of the rule in question only takes place when one of the parts, floors or divisions with independent utilization of property in horizontal or full ownership with residential purposes has a VPT exceeding €1,000,000.00. To establish as the reference value for the application of the new tax the global VPT of the property in question, as the respondent sought, finds no basis in the applicable legislation, which is the CIMI, given the referral made by the cited Art. 67, paragraph 2, of the CIS."

  • The discrimination operated by the AT in the case at hand has thus no foundation whatsoever, being contrary to principles of legality and fiscal justice, arbitrary and illegal, in that, as per the arbitral decision in case 50/2013 T, already cited, "The fiscal legislator cannot treat equal situations differently. Now, if the property were held under the regime of horizontal ownership, none of its residential fractions would be subject to the application of the new tax," when thus and in the AT's understanding, by being held in vertical ownership, it falls within the application of this tax.

  • The concentration of independent divisions in the same property cannot constitute a cause for the application of stamp tax on item No. 28 of the TGIS on each one, just as the concentration of various residential properties under the same person's ownership cannot constitute a cause for such application on one residential property.

  • In this regard see the argumentation contained in the arbitral decision issued by CAAD in case 132/2013 T, "it is concluded that item No. 28, by opening the possibility of taxing differently the ownership of real estate property of equal value held by different persons based on criteria that may contend, without the minimal necessary justification, with namely, the principle of contributory capacity (such as the case of 'dispersion' or 'concentration' of residential real estate property of each one), cannot fail to be considered unconstitutional, given the violation of the principle of equality," emphasis added.

  • Particularly because and as we have already referred to above, the purpose of this legislative innovation is not the taxation of real estate property in itself, but rather the taxation of luxury property, which is why a more intensive effort is required from these taxpayers.

  • And as it cannot constitute, also in accordance with what we have already stated, a cause for such application, the lack of constitution under the regime of horizontal ownership, a property that is constituted by dwellings/divisions with independent utilization.

  • Reasons that lead us to understand that such assessment notes issued by the AT are completely arbitrary and illegal, and should be revoked, particularly because and in this sense arbitral decision 50/2013 T "The AT cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the fiscal system, as well as the principle of fiscal legality provided for in Article 103, paragraph 2 of the CRP, and also the principles of justice, equality and fiscal proportionality."

  • Now, if from paragraph 1 of Article 4 of the General Tax Law (LGT) it follows that taxes are based essentially on the contributory capacity of the taxpayers, which is revealed, pursuant to law, through income or its use and property.

  • And if the form or legal reality regarding how the taxpayer holds his real estate property is in no way relevant, that is, if it is held in vertical or horizontal ownership, concentrated or dispersed, these cannot be criteria of contributory capacity, nor legitimate criterion of taxation.

  • In this sense see arbitral decision 50/2013 T of CAAD, "material truth is what imposes itself as the determinative criterion of contributory capacity and not the mere legal-formal reality of the property."

  • Beyond the foregoing, it follows from the transitional provisions of Law 55-A/2012, more specifically from its Article 6, that taxation provided for by item 28 of the TGIS, for the year 2012, should be effected at the rate of 0.5, on the VPT provided that it is equal to or greater than €1,000,000.00 of urban properties with residential purposes, and not at 1% as done by the AT in its assessment notes.

  • It is abundantly clear that the interpretation of the rule of application of item No. 28.1 of the TGIS attached to the CIS made by the AT and the issuance of the assessment notes is unconstitutional and arbitrary as it constitutes a frontal violation of the principle of equity, the principle of fiscal legality provided for in paragraph 2 of Article 103 of the CRP as well as the principles of justice, equality and fiscal proportionality also provided for in the Constitution of the Portuguese Republic, reasons for which such assessment notes should be revoked.

I3. In Response to the Applicant's Request, the AT:

  • The situation of the applicant's property is subsumed, linearly, which is to say, literally, in the provision of the item in question, which has the following wording: "Ownership, usufruct or right of superficies of urban properties whose taxable property value registered in the property matrix, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1,000,000.00".

  • The applicant is the owner of a property held under the regime of full or vertical ownership. From the notion of property in Article 2 of the CIMI, only autonomous fractions of property held under the regime of horizontal ownership are considered property - paragraph 4 of the cited Article 2 of the CIMI. Accordingly, the property of which it is owner, being held under the regime of full ownership, does not possess autonomous fractions, to which tax law attributes the qualification of property.

  • Accordingly, the applicant, for purposes of IMI and also stamp tax, by force of the wording of the referred item, is not the owner of 21 autonomous fractions, but rather of a single property.

  • Having established this fact, what the applicant seeks is that the AT consider, for purposes of assessment of the present tax, that there exists an analogy between the regime of full ownership and that of horizontal ownership, since there should be no discrimination in the legal-fiscal treatment of these two property ownership regimes as this would be illegal.

  • As is well known, horizontal ownership is a specific legal regime of property provided for in Article 1414 and following of the Civil Code, the manner of constitution of which is provided therein, as well as the other rules regarding the rights and obligations of co-owners, and one must recognize in this provision the existence of a more evolved regime of ownership.

  • Now, to seek that the interpreter and applicator of tax law apply, by analogy, to the regime of full ownership, the regime of horizontal ownership is what is abusive and illegal, as we shall see in detail.

  • These two property ownership regimes are regimes of civil law, which were imported into tax law, specifically in the terms referred to by Article 2 of the CIMI.

  • And the interpreter of tax law cannot equate these regimes, in accordance with the rule whereby concepts from other branches of law have in tax law the sense given to them in those branches of law, or in the words of Article 11, paragraph 2 of the LGT, on the interpretation of tax law: "Whenever terms proper to other branches of law are employed in tax norms, they should be interpreted in the same sense as they have there, unless otherwise directly follows from the law".

  • On the other hand, also taking into account that in determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed, as per Article 11, paragraph 1 of the LGT which thus refers to the Civil Code, its Article 10 on the application of analogy, determines that this shall only be applicable in case of gaps in the law.

  • Now, the tax law contains no such gap.

  • The CIMI determines, to which the referred item refers, that under the regime of horizontal ownership the fractions constitute properties. The property not being subject to this regime, legally the fractions are parts capable of independent utilization, without there being common parts.

  • We cannot, therefore, accept that it be considered that for purposes of item 28.1 of the General Table attached to the CIS, the parts capable of independent utilization have the same tax regime as the autonomous fractions under the regime of horizontal ownership.

  • Finding itself the property subject to the regime of full ownership, but being physically constituted by parts capable of independent utilization, tax law attributed relevance to this materiality, evaluating these parts individually, pursuant to Article 12 and consequently, pursuant to Art. 12, paragraph 3, of the C.I.M.I., each floor or part of property capable of independent utilization is considered separately in the property registration, but in the same property matrix, with the assessment of IMI taking into account the taxable property value of each part.

  • The floors or independent divisions, evaluated pursuant to Article 12, paragraph 3, of the CIMI, are considered separately in the property registration, which also discriminates the respective taxable property value on which IMI is assessed.

  • Such legal norm is not unprecedented, having correspondence in the body of Article 232, rule 1Q, of the Code of Land Contribution and Tax on Agricultural Industry (C.C.P.I.I.A.), which provided that each dwelling or part of property be automatically taken for purposes of determining the collective income on which the assessment should apply.

  • So, in the scope of the C.C.P.I.I.A., the collective income necessarily had to correspond to the sum of the rent or rental value of each of the components of the property with economic autonomy.

  • Such legal norm is thus relevant for purposes of registration in the property matrix regarding the autonomy that, within the same property, can be attributed to each of its parts, economically and functionally independent.

  • In that case, the property registration must make reference to each of the parts and also to the taxable property value corresponding to each of them, ascertained separately pursuant to Articles 370 and following of the CIMI.

  • The unity of the urban property in vertical ownership composed of various floors or divisions is not, however, affected by the fact that all or some of these floors or divisions are capable of independent economic utilization.

  • Such property does not cease, by the fact of being only one, from being so, and thus its parts are not distinct legally equated to autonomous fractions under the regime of horizontal ownership.

  • Without prejudice to the regime of co-ownership, when applicable, its ownership cannot be attributed to more than one owner.

  • However, as stated by Silvério Mateus and Leonel Curvelo de Freitas, "Taxes on Immovable Property and Stamp Tax Commented and Annotated", Lisbon 2005, pages 159 and 160, each of the parts of the property can be the object of lease or any other type of utilization by the holder, which should be expressed in the respective property register.

  • The fact that IMI has been calculated on the basis of the taxable property value of each part of property with independent economic utilization equally does not affect the application of item 28, paragraph 1, of the General Table.

  • This is what results from the fact that the determinative element of the application of that item of the General Table is the total taxable property value of the property and not separately that of each of its parcels.

  • Any other interpretation would violate, indeed, the letter and spirit of item 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in Article 103, paragraph 2, of the Constitution of the Portuguese Republic (CRP).

  • It is the responsibility of the law - Law of the Assembly of the Republic and authorized Decree-Law - to establish the essential elements of the incidence of taxes.

  • A type of application according to which the taxable property value of urban properties on which the application of item 28.1 of the General Table depends is the taxable property value of each floor or division capable of independent utilization and not the total taxable property value of the urban property with residential purposes certainly has no expression in the law.

  • And, thus, unconstitutional, as offensive to the principle of tax legality, is the interpretation of item 28.1 of the General Table, to the effect that the taxable property value on which its application depends is to be ascertained globally and not floor by floor or floor or division by division.

  • It is not apparent how, moreover, the taxation in question could have violated the principle of equality referred to by the applicant.

  • In fact, horizontal ownership and vertical ownership are differentiated legal institutes.

  • The constitution of horizontal ownership implies, it is fact, a mere legal alteration of the property, with no new evaluation taking place (Circular Official Letter No. 40,025, of 11 August 2000, of the Directorate of Autonomous Municipal Contribution Services, D.S.C.A.).

  • The legislator can, however, subject to a distinct tax legal framework, thus discriminatory, properties held under regimes of horizontal and vertical ownership, in particular, favoring the legally more evolved institute of horizontal ownership, without such discrimination necessarily being required to be considered arbitrary.

  • Such discrimination can also be imposed by the necessity to impose coherence on the tax system.

  • The fact that the applicant legitimately disagrees with such discrimination does not imply a violation of any constitutional principle.

  • Finally, it is emphasized that the property registration of each part capable of independent utilization is not autonomous, per property matrix, but rather appears in a description in the property matrix of the property in its entirety - see the property register booklet of this property which represents the property owner's document containing the property registration elements.

  • What one seeks to conclude is that these procedural norms of evaluation, property registration and assessment of the parts capable of independent utilization do not permit one to state that there exists an equation of the property held under the regime of full ownership with the regime of vertical ownership, this because, and as already stated,

  • These civil-legal regimes are different, and tax law respects them.

  • The tax fact of stamp tax on item 28.1, consisting as it does in the ownership of urban properties whose taxable property value registered in the property matrix, pursuant to the C.I.M.I., is equal to or greater than €1,000,000.00, the taxable property value relevant for purposes of the application of the tax is, thus, the total taxable property value of the urban property and not the taxable property value of each of the parts that compose it, even when capable of independent utilization.

  • And this interpretation of the rule of application of stamp tax results from the conjunction of the other rule of application of IMI which is Article 1, according to which IMI applies to the taxable property value of urban properties, taking into account the notion of property in Article 2 and of urban property contained in Article 4 and further from the types of urban properties described in Article 6.

  • In this regard, the applicant's request that the regime of horizontal ownership be applied, by analogy, to its property, considering each of the fractions capable of independent utilization to constitute a property, fails, since that would not be interpreting the norms of the CIMI, and as a consequence of the CIS, that would be subverting the entire regime established there, with the violations of the principles above referred to.

  • Finally, the argument that the property is not wholly devoted to residential purposes, which would taint the application of the rule of application of item 28.1 of the TGIS.

  • Note from the outset that no illegality was committed, because from the assessment was purged the parts devoted to commerce, and thus were only taxed the parts devoted to residential purposes, as the law literally determines.

  • And note that a property devoted to commerce or to residential purposes ceases not to be an urban property, Article 6 of the CIMI classifies urban properties in types, according to their utilization.

  • Having the parts, or the fractions (not being this the case), different uses, the law gives relevance to this fact, for example, for purposes of evaluation and of exclusion or taking advantage of certain tax benefits.

  • In the case of item 28.1, the legislator included in the application only the type of residential urban properties.

  • And the taxation of the applicant was thus carried out, without any illegality having been committed in the assessments now contested.

  • All things considered, we necessarily must conclude that the tax acts, without cause, in substantive terms, do not violate, thus, any legal or constitutional provision, and should, therefore, be maintained.

II. PRELIMINARY MATTERS

  1. The Tribunal is competent and is regularly constituted, pursuant to Articles 2, paragraph 1, subparagraph a), 5 and 6, all of the RJAT.

  2. The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March.

  3. The case does not suffer from any nullities and no preliminary questions were raised that require examination.

  4. The conditions for examining the merits of the petition are therefore met.

II. REASONING

III.A PROVEN FACTS

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

  1. The applicant is the full owner of the property in question, located at Avenue …, registered in the urban property register with No. …, parish of …, Lisbon, as per the urban property register booklet attached as doc. 15 and considered to be fully reproduced herein.

  2. The property comprises a total of 21 (twenty-one) divisions with independent utilization whose VPT, determined under the Municipal Property Tax Code, hereinafter referred to as CIMI, is €3,075,530.00, as per the urban property register booklet (doc. No. 15) and considered to be fully reproduced herein.

  3. Of the twenty-one divisions with independent utilization, only five are devoted to commerce/services, with the remainder devoted to residential purposes, whose total VPT amounts to €1,912,470.00 (a value that appears in the assessments), (as per doc. No. 15).

  4. On the VPT of each division, the Tax Administration assessed the stamp tax provided for in item No. 28.1 of the General Table of Stamp Tax (TGIS) attached to the Stamp Tax Code (CIS) as amended by Article 4 of Law No. 55-A/2012, of 29 October, at the rate of 1% provided for in subparagraph i) of paragraph f) of paragraph 1 of Article 6 of that same law.

  5. The AT issued assessment notes for the tax claimed herein because fourteen of the twenty-one divisions with independent utilization have residential purposes and their respective fourteen VPT amounts total €1,912,470.00 (cf. document Nos. 1, "property value of the property – total subject to tax").

  6. The assessment notes are identified with Nos. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., No. 2014..., relate to Stamp Tax in the total amount of €6,375.06, relating to the year 2013, issued by the Tax and Customs Authority – as per documents Nos. 1 to 14 attached to the initial petition.

III.B UNPROVEN FACTS

There are no alleged or ex officio known facts relevant to the decision that have not been established as proven.

III.C MOTIVATION

The establishment of the factual matters was based on the administrative proceedings, in the documents attached to the initial petition or in the course of the present case.

IV. ON THE LAW

  1. Article 4 of Law No. 55-A/2012, of 29 October, which entered into force on 30 October following, added an item to the TGIS then in force, with the following wording:

"28 - Ownership, usufruct or right of superficies of urban properties whose taxable property value registered in the property matrix, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000 - on the taxable property value used for the purpose of IMI:

28.1 - For property with residential purposes - 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 the list approved by order of the Minister of Finance - 7.5%."

  1. Pursuant to paragraph 7 of Article 23 of the Stamp Tax Code (CIS) "Where the tax is due for the situations provided for in item No. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI."

Additionally, paragraph 2 of Article 67 of the CIS also establishes that "to matters not regulated in the present Code concerning item No. 28 of the General Table shall apply, subsidiarily, the provisions of the CIMI".

  1. Let us therefore see what interpretive clues with utility for the question in dispute can be found in the CIMI.

Specifically, paragraph 4 of Article 2 of the CIMI stipulates: "For purposes of this tax, each autonomous fraction, under the regime of horizontal ownership, is considered as constituting a property."

Pursuant to paragraph 3 of Article 12 of the CIMI: "Each floor or part of property capable of independent utilization is considered separately in the property registration which also determines the respective taxable property value".

Accordingly, it is important to analyze the interpretation to which paragraph 7 of Article 23 of the CIS should be subjected. The AT considered that, in urban properties with residential purposes, in vertical ownership, with floors or divisions capable of independent utilization, the referred floors or divisions are not by formal legal definition considered urban properties (but will be "parts of property" according to paragraph 3 of Article 12 of the CIMI).

Accordingly, it proceeded to sum the VPT thereof to determine whether the minimum VPT of 1,000,000.00 euros would be reached, a value upon which, if equal to or greater than this threshold, it applied the 1% rate of Stamp Tax on item 28.1 of the TGIS.

Nevertheless, formally, the assessment note came subdivided into as many assessments as there are floors or parts of the property in vertical ownership, just as occurs at the level of IMI assessment.

Now, the referred action by the AT goes against the interpretation that it makes of the provision in which it advocates the application "with the necessary adaptations" of the "rules of the CIMI" to the situations provided for in item No. 28 of the General Table (paragraph 7 of Article 23 of the CIS).

However, the interpretation made by the AT does not find correspondence with current legal reality. If we examine it,

  1. In summing the VPT of each floor or independent division devoted to residential purposes in order to determine the threshold of 1,000,000.00 euros for taxation, the AT established a legal interpretation, without legal support, which is a global VPT of urban properties in vertical ownership, with residential purposes. This is because, although items 28 and 28.1 make reference to the noun "urban properties" and "per property", the truth is that, for purposes of determining the taxable subject matter one must have regard to the "taxable property value used for the purpose of IMI".

Now, this is the literal element upon which the referred norm is based. Accordingly, the taxable property value to be considered in the operation of determining the taxable subject matter and subsequent assessment of Stamp Tax on items 28 and 28.1 of the TGIS with respect to urban properties with residential purposes, in vertical ownership, with floors or divisions capable of independent utilization, is what results exclusively from paragraph 3 of Article 12 of the CIMI.

  1. The referred article establishing that "Each floor or part of property capable of independent utilization is considered separately in the property registration, which also determines the respective taxable property value".

In the absence of exact terminological correspondence of the concept, the starting point of interpretation is, naturally, the text of the law, and it is on the basis thereof that the legislative intent must be reconstructed, as is required by paragraph 1 of Article 9 of the Civil Code, applicable by force of the provisions of Article 11, paragraph 1 of the General Tax Law (LGT).

The very literal tenor of the expression used in item 28.1 of the TGIS is that of "taxable property value used for the purpose of IMI". The rules of incidence of taxes as well as those granting exemptions or exclusions from taxation must be interpreted in their exact terms, without resort to analogy, making prevalent certainty and security in their application.

  1. Which leads us to the conclusion that urban properties in vertical ownership, as a whole, do not have VPT, the law determining in such cases that the VPT be attributed to each floor or part of the property separately – as per paragraph 3 of Article 12 of the CIMI.

Accordingly, there is no legal support for the sum of the taxable property values of the floors or parts of property capable of independent utilization, with residential purposes, in order to reach the taxation eligibility threshold of 1,000,000.00 euros or more.

Even though paragraph 7 of Article 23 illustrates that "the tax is assessed annually, in relation to each urban property", the expression "each urban property" encompasses, taking into account the principles of interpretation and application of norms stated herein, urban properties in horizontal ownership and floors or parts of urban properties in vertical ownership, provided they are devoted to residential purposes, always departing from the tax base that is referred to in the law, the taxable property value used for the purpose of IMI (final part of item 28 of the TGIS).

Now, as is very well stated in the arbitral pronouncement made in the course of case No. 203/2014-T, "at the level of interpretation of tax norms there may be used the very particular rule found in paragraph 3 of Article 11 of the LGT: 'if doubt persists as to the meaning of the rules of incidence to be applied, the economic substance of the tax facts must be considered'."

  • Now, if for the floors that make up the autonomous fractions of residential urban properties, in horizontal ownership, (albeit they are by definition and "ope legis" urban properties), per taxpayer, the VPT are not added to determine the threshold of eligible value for Stamp Tax (1,000,000.00 euros) on item 28 of the TGIS (operation of determining the taxable subject matter), why should this occur with respect to the "parts of property or floors" of urban properties in vertical ownership?"

And it continues:

  • "In both cases the same contributory capacity of the taxpayers manifests itself (their level of wealth at the level of immovable property). It is the same "economic substance" analyzed from different perspectives, revealing the same "ability-to-pay".

  • From the literality of items 28 and 28-1 of the TGIS, especially the final part of item 28 of the TGIS, read in conjunction with paragraph 7 of Article 23 of the CIS, the conclusion must be drawn, with the "necessary adaptations of the rules of the CIMI" that the VPT of the floors or parts of the property identified above should not be added so as to find a new global VPT of urban property, in the part with residential purposes, an operation of determining eligible taxable subject matter that the law does not contemplate."

In assessing the tax against the applicant, by considering that the VPT would be determined on the basis of the sum of the VPT of each floor or independent division devoted to residential purposes in order to determine the taxation threshold of 1,000,000.00 euros, the AT incurred in error in the application of the law.

  1. The referred procedure presents itself in total opposition to the spirit underlying the norm contained in the added item 28 of the General Table of Stamp Tax, which expressly mandates taking into account the "taxable property value for the purpose of IMI".

As follows from the principle of legality as it is provided for in Article 103, paragraph 2 of the C.R.P., and as the norm in question is a rule of incidence, one cannot through interpretation arrive at a result that is not expressly stated in the law.

This error constitutes a defect of violation of law that determines the voidability of the assessment in question, pursuant to the provisions of Article 135 of the Code of Administrative Procedure ("CPA"), applicable ex vi Article 29, paragraph 1, subparagraph d), of the RJAT.

  1. In the same manner, the interpretation by the AT violates the principle of equality established in Articles 13 and paragraph 3 of 104 of the Constitution. This is because it makes no sense to establish a different VPT for two types of taxes, VPT without legal support for the application of different criteria that will influence the tax base.

The principle of equality is one of the structuring principles of the Rule of Law, which has as its fundamental equation: to treat equally what is equal and differently what is different. The jurisprudence of the Constitutional Court has recognized the principle of contributory capacity as an expression of tax equality, from which it extracts the precise technical requirements for the conformity of the laws with the referred principle (cf. Decision No. 106/2013, of 20.02.2013).

Now the distinction between "full ownership" and "horizontal ownership" is not sufficient to justify differentiated treatment regarding the scope of application of item 28 of the Stamp Tax Table, since in both cases the same contributory capacity is verified.

See the position advocated by CAAD, emphasizing, by way of merely exemplary reference, what was stated in the arbitral pronouncement made in case No. 132/2013-T:

"Indeed, how can one justify, even in light of principles of social equity and fiscal justice defended by the legislator – note, in this regard, that the Communiqué of the Council of Ministers of 20/9/2012 referred to the measure, among others, as fundamental 'to reinforce the principle of social equity in austerity' –, that this taxation applies only to residential immovable property and not to non-residential immovable property? And how can this discrimination be made compatible with what is provided in Article 104, paragraph 3, of the CRP?

Given the above, it is concluded that item No. 28, by opening the possibility of taxing in different manner the ownership of immovable property of equal value held by different persons based on criteria that may contend, without the minimal necessary justification, with namely, the principle of contributory capacity (such as the case of 'dispersion' or 'concentration' of residential immovable property of each one), cannot fail to be considered unconstitutional, given the violation of the principle of equality."

For this reason, and additionally, the act of assessment of stamp tax that is the subject of the present petition for arbitral pronouncement is an act consequent to the violation of a constitutional principle, and is therefore void.

V. DECISION

Accordingly, and with the grounds set forth, the Arbitral Tribunal decides to fully uphold the petition for annulment of the stamp tax assessments contested, with the consequent annulment of those assessments.

The value of the case is established at €6,375.06, pursuant to subparagraph a) of paragraph 1 of Article 97-A of the Code of Tax Procedure and Proceedings (CPPT), applicable by force of subparagraphs a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The arbitration fee is established at €612.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings. Payment of the arbitration fee, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, falls to the Respondent, pursuant to Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4, of the cited Regulation.

Lisbon, 30 September 2015

The Arbitrator,

Guilherme W. d'Oliveira Martins

Frequently Asked Questions

Automatically Created

How does Verba 28.1 of the Tabela Geral do Imposto do Selo apply to properties held in total ownership (propriedade total)?
Verba 28.1 of the Tabela Geral do Imposto do Selo (TGIS) applies to properties held in total ownership (propriedade total) by assessing each independent unit (fração autónoma) separately rather than treating the entire property as a single taxable entity. According to CAAD jurisprudence referenced in Process 541/2014-T, including decisions 50/2013-T and 132/2013-T, the tax applies on a unit-by-unit basis to urban properties with residential purposes whose individual taxable patrimonial value (VPT) equals or exceeds €1,000,000.00. When a property comprises multiple independent units held under single ownership, each unit's VPT is evaluated independently to determine if it meets the €1,000,000 threshold. The legislative intent behind Verba 28.1, introduced by Law 55-A/2012 of October 29, 2012, was to tax luxury residential properties as manifestations of wealth and contributory capacity above average levels. The application to properties held in total ownership depends on whether individual units meet the value threshold, not whether the aggregate value of all units exceeds €1,000,000.
Can Stamp Tax (Imposto do Selo) be levied individually on each independent unit of a property in total ownership?
Yes, Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS can be levied individually on each independent unit (fração autónoma or parte suscetível de utilização independente) of a property, even when held under single total ownership. In Process 541/2014-T, the Tax Authority issued 14 separate assessment notices for 14 residential units within a single property owned by Sociedade Imobiliária A..., Lda. This unit-by-unit assessment approach has been supported by CAAD arbitral precedents. Each independent unit with residential purposes is evaluated separately to determine if its individual VPT registered in the property matrix reaches or exceeds the €1,000,000.00 threshold that triggers the 1% Stamp Tax rate under Verba 28.1. The rationale is that each autonomous unit capable of independent utilization represents a distinct manifestation of contributory capacity. However, if individual units fall below the €1,000,000 threshold, the question arises whether they should be aggregated or exempted, which was precisely the legal issue contested in this case where residential units totaled €1,912,470.00 collectively but were assessed individually.
What is the CAAD arbitral tribunal procedure for challenging Stamp Tax liquidation notices?
The CAAD (Centro de Arbitragem Administrativa) arbitral tribunal procedure for challenging Stamp Tax liquidation notices follows the Legal Regime of Arbitration in Tax Matters (RJAT - Regime Jurídico da Arbitragem em Matéria Tributária) established by Decree-Law 10/2011 of January 20. As illustrated in Process 541/2014-T: (1) The taxpayer submits a petition (petição inicial) to CAAD requesting annulment of the contested assessment notices; (2) The CAAD President accepts the petition and notifies the Tax and Customs Authority (AT); (3) The Deontological Council designates an arbitrator for singular tribunals or a panel for collective tribunals; (4) Parties are notified of the arbitrator designation and may exercise their right of refusal within the statutory period; (5) The arbitral tribunal is formally constituted; (6) A preliminary hearing under Article 18 of RJAT may be held or dispensed with by agreement; (7) The tribunal sets a deadline for rendering the arbitral decision, which may be extended; (8) The final arbitral decision is issued, declaring the contested acts legal or illegal and ordering appropriate remedies. The procedure provides an alternative to judicial courts for resolving tax disputes efficiently.
How is the taxable patrimonial value (VPT) determined for Stamp Tax purposes on properties with multiple independent units?
The taxable patrimonial value (VPT - Valor Patrimonial Tributável) for Stamp Tax purposes on properties with multiple independent units is determined according to the Municipal Property Tax Code (CIMI - Código do Imposto Municipal sobre Imóveis) and registered in the urban property matrix (matriz predial urbana). In Process 541/2014-T, the property comprised 21 independent units with a total VPT of €3,075,530.00, of which 14 residential units had a combined VPT of €1,912,470.00. Each independent unit (fração autónoma or parte suscetível de utilização independente) receives an individual VPT assessment based on factors including location, area, quality of construction, comfort, and intended use under CIMI Article 38 and following provisions. For Verba 28.1 Stamp Tax purposes, the relevant VPT is the value attributed to each autonomous unit as registered in the property matrix, not a proportional allocation of the building's total value. The property matrix booklet (caderneta predial) serves as the official document evidencing each unit's VPT. When a property contains both residential and commercial/services units, only residential units are subject to Verba 28.1, and each is evaluated independently against the €1,000,000 threshold.
What was the outcome of CAAD Process 541/2014-T regarding the legality of Stamp Tax assessments on a Lisbon property?
While the complete arbitral decision text for CAAD Process 541/2014-T is not fully provided in the available excerpt, the case involved contestation of 14 Stamp Tax assessment notices totaling €6,375.06 issued by the Tax Authority on residential units of a Lisbon property held in total ownership by Sociedade Imobiliária A..., Lda. The applicant sought to have the assessments declared illegal and annulled, arguing that Verba 28.1 of the TGIS should not apply because: (1) individual residential units did not meet the €1,000,000 VPT threshold when assessed separately; (2) the legislative intent was to tax luxury properties as manifestations of personal wealth, not properties held by legal entities for commercial rental purposes; and (3) the property should be treated as a single entity rather than 14 separate taxable units. The arbitral tribunal, constituted on October 1, 2014, under arbitrator Guilherme W. d'Oliveira Martins, examined these arguments in light of CAAD precedents establishing unit-by-unit assessment methodology. The final decision deadline was extended to September 30, 2015, to allow thorough analysis of the complex legal issues regarding total ownership and Stamp Tax application.