Process: 542/2014-T

Date: December 11, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision from the Administrative Arbitration Centre (CAAD) addresses whether building land (terrenos para construção) is subject to additional Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS). A Real Estate Investment Fund challenged twelve assessment acts totaling €216,128.47 issued for ownership of building plots in Vila Nova de Gaia with Tax Patrimonial Values exceeding €1,000,000. The central legal question concerns whether building land qualifies as urban property with 'residential use' under item 28.1 GSTT. The claimant argued that item 28.1 requires three cumulative elements: ownership/usufruct/superficies rights over urban properties, that such properties have residential use, and Tax Patrimonial Values equal to or above €1,000,000. While the first and third requirements were undisputed, the claimant contended that building land lacks residential use until actual construction occurs. The taxpayer distinguished between land designated for future residential construction and completed residential properties, arguing that land for construction possesses no current use—residential or otherwise. Even when building permits for residential purposes exist, the land remains classified as building land until construction completion triggers new property registration. The claimant invoked constitutional principles, alleging violations of the equality principle and proper taxation nature under Articles 13 and 104(3) of the Portuguese Constitution. The challenge was brought under Decree-Law 10/2011 establishing the arbitral tax regime (RJAT), with the tribunal constituted by three arbitrators appointed by the CAAD Ethics Council. The case exemplifies disputes arising from Law 55-A/2012 which introduced special Stamp Tax on high-value real estate, raising interpretative questions about whether undeveloped building land falls within the residential property taxation scope.

Full Decision

ARBITRAL DECISION

The arbitrators, Jorge Lino Ribeiro Alves de Sousa (arbitrator-president), Paulo Ferreira Alves, and Diogo Feio, appointed by the Ethics Council of the Administrative Arbitration Centre (CAAD) to form the arbitral tribunal, constituted on 2014-10-02, agree as follows:

I – REPORT

A – PARTIES

On the 28th of July 2014, the company A... – Real Estate Investment Fund (Closed), with the NIPC ..., with registered office at Rua …, Lisbon, legally represented by B... – …, S.A., with registered office at Rua …, legal person no. ..., (hereinafter referred to as the Claimant or taxpayer), requested, in accordance with the terms and for the purposes of articles 2nd and 10th, both of Decree-Law no. 10/2011, of 20 January, the constitution of a collective arbitral tribunal.

The Tax and Customs Authority is the respondent (which succeeded the General Tax Directorate, through Decree-Law no. 118/2011, of 15 December), hereinafter referred to as the Respondent or AT.

The Claimant did not proceed with the appointment of an arbitrator, wherefore, in accordance with the provisions of article 6th no. 1 and article 11th no. 1 paragraph b) of Decree-Law no. 10/2011, of 20 January, with the wording introduced by article 228th of Law no. 66-B/2012, of 31 December, the Ethics Council appointed the aforementioned arbitrators, who accepted the assignment, in accordance with the legally provided terms.

The parties were duly notified of this appointment and have not manifested the will to refuse the appointment of the arbitrators, in accordance with article 11th no. 1, paragraphs a) and b) of the RJAT and articles 6th and 7th of the Ethics Code.

The arbitral tribunal is regularly constituted.

It is materially competent, in accordance with articles 2nd no. 1 paragraph a) and 30th no. 1 of Decree-Law no. 10/2011, of 20 January.

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

The proceedings do not suffer from defects that invalidate it.

B – CLAIM

  1. The present Claimant seeks the declaration of illegality of the additional Stamp Tax assessment acts nos. 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ... and 2014 ..., from which results a total tax to be paid of €216,128.47 (two hundred and sixteen thousand one hundred and twenty-eight euros and forty-seven cents).

C – CAUSE OF ACTION

  1. To substantiate its request for arbitral pronouncement, the Claimant alleged, with a view to the declaration of illegality of the additional Stamp Tax assessment acts nos. 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ... and 2014 ..., in summary, the following:

  2. All assessments were issued under the same legal norm of item 28.1 of the General Stamp Tax Table and all relate to the ownership of land for construction, wherefore there is identity of the nature of the taxes and the factual and legal grounds invoked.

  3. The Claimant argues that the assessments issued in accordance with the provisions of item 28.1 of the GSTT are illegal.

  4. The Claimant maintains that it is the owner of several plots of land for construction, located in the Municipality of Vila Nova de Gaia, Parish of ....

  5. To said plots of land for construction, Tax Patrimonial Values (TPV) equal to or greater than €1,000,000.00 (one million euros) were set, in force in the year 2013.

  6. The Claimant alleges that item 28.1 of the GSTT comprises three elements that constitute the taxable event: ownership, usufruct or the right of superficies over urban properties; that these urban properties have "residential use" and that such properties have a tax patrimonial value equal to or greater than €1,000,000.

  7. Furthermore, it states, regarding these elements, that the Claimant is the owner of the immovable properties at issue herein and that such properties have a tax patrimonial value equal to or greater than €1,000,000, are undisputed facts.

  8. But the third prerequisite that integrates the taxable event is not present: the immovable properties at issue do not have "residential use".

  9. It is therefore undisputable that land for construction is not confused with residential properties.

  10. Thus, and as is evident, land for construction is not urban property with residential purposes.

  11. The Claimant defends its position by alleging that urban properties with residential use are, therefore, those which, in accordance with the respective construction process to which articles 62nd and following of the Legal Regime of Urban Buildings (LRUB, approved by article 1st of Decree-Law no. 555/99, of 16/12) refer, have been, as such, licensed, or, in accordance with their physical characteristics, had as normal destination habitation.

  12. That such authorization or provision for building, even if destined for habitation, in the area of implantation of land for construction, does not make them, thus, into properties with residential use.

  13. Even if the land is intended for the construction of properties affected by habitation, that use is only verified with the effective construction of the property, with the consequent elimination of the matriculation entry of the land for construction and its replacement by new matriculation entry of the urban property or autonomous fraction constructed.

  14. The authorization or provision for any building does not alter, thus, the classification of land for construction, but merely requires its assessment in accordance with the new tax patrimonial value that results from the authorization or provision of the building.

  15. Furthermore, the Claimant states that even if one were to adhere to the thesis that this coefficient of use is an element to be taken into account in the setting of the Tax Patrimonial Value, the truth is that what is at issue is the determination of the value of a plot of land for construction and in that determination the value of the land is influenced by the provision of buildings that may exist thereon.

  16. But such circumstance does not transform the land for construction into property with residential use. That is: from this it does not result that there is a use, namely residential – only if and when the building in question is constructed will there be a true use.

  17. The Claimant argues that the core point consists in the fact that land for construction does not possess a use, be it residential or otherwise, and it follows from the law that such uses only take place in relation to constructed buildings. Moreover, that the spirit of the legislator was that taxation should only apply to constructed properties is derived from the words spoken in the Assembly of the Republic by the State Secretary for Fiscal Affairs.

  18. Now, "residential urban properties" and "houses", obviously do not comprise land for construction. Thus, the land for construction, on whose ownership the Stamp Tax assessments fell that had the Claimant as recipient, do not fall within the provision of item 28.1 of the GSTT.

  19. Furthermore, the Claimant maintains that the contested assessments violate the nature of taxation and the principle of equality, provided for in articles 13th and 104th no. 3 of the Constitution of the Portuguese Republic.

  20. The Claimant concludes by alleging the voidability of the Stamp Tax assessment acts due to violation of law, in the qualification of the taxable event, the item 28.1 of the General Stamp Tax Table being erroneously applied, in the version in force in the year 2013, which constitutes grounds for judicial challenge and annulment of the contested acts (article 99th of the CPPT - ex vi article 10th no. 2 paragraph c) of the RJAT).

D – RESPONSE OF THE RESPONDENT

  1. The Respondent, duly notified for this purpose, timely submitted its response in which, in summary, alleged the following:

  2. Law no. 55-A/2012, of 29/10/2012 amended article 1st of the CIS, and added to the GSTT item 28; with this legislative amendment, the Stamp Tax would now also apply to ownership, usufruct or the right of superficies of urban properties whose tax patrimonial value contained in the tax roll, in accordance with the Municipal Tax on Immovable Property Code (CIMI), is equal to or greater than €1,000,000.00.

  3. The stamp tax would thus apply to all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the general table, including gratuitous transfers of property.

  4. In the absence of any definition of the concepts of urban property, land for construction and residential use in connection with Stamp Tax, one must resort to the CIMI, in search of a definition that permits assessment of possible Stamp Tax liability, in accordance with what is provided for in article 67th no. 2 of the CIS in the version given by Law no. 55A/2012, of 29/10.

  5. The Respondent argues that, in accordance with the aforementioned legal provision, to matters not regulated in the Code, relating to item no. 28th of the GSTT, the provisions of the CIMI apply subsidiarily.

  6. The notion of use of the urban property is found in the section relating to the evaluation of immovable properties.

  7. Thus, for purposes of determining the tax patrimonial value of land for construction, the application of the use coefficient for purposes of evaluation is clear, wherefore its consideration for purposes of application of item 28 of the GSTT cannot be ignored.

  8. The AT understands that the provision of item 28 of the GSTT does not constitute a violation of any constitutional command.

  9. Item 28 of the GSTT applies to ownership, usufruct or the right of superficies of urban properties with residential use, whose tax patrimonial value contained in the tax roll, in accordance with the CIMI, is equal to or greater than €1,000,000.00, that is, it applies to the value of the immovable property.

  10. The Respondent concludes by supporting its position to the effect that the assessment in question constitutes a correct interpretation and application of the law to the facts, not suffering from the defect of violation of law, either of the CRP or of the CIS, and that, in consequence, the Claimant's claim should be judged without merit and the Respondent absolved of the claim.

E – FACTUAL FINDINGS

  1. Before proceeding to the examination of these issues, it is necessary to present the factual matter relevant to its understanding and decision, based on documentary evidence, and taking into account the alleged facts.

  2. As to material facts relevant, the present tribunal finds the following facts to be established:

  3. The Claimant is the owner of urban properties composed of "land for construction", respectively as to the properties:

a. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,287,996.88;

b. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,409,097.53;

c. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,543,364.95;

d. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,255,621.98;

e. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €3,301,113.63;

f. With the Matriculation Article no. ... NIP, described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,586,696.36;

g. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,859,651.73;

h. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €2,336,286.88;

i. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €2,652,352.63;

j. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,055,962.73;

k. With the Matriculation Article no. ... NIP, described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,817,435.95;

l. With the Matriculation Article no. ... NIP described in the C.R.P. of Vila Nova de Gaia, under registration ..., ..., with the TPV for the year 2013 of €1,507,264.20.

  1. The Claimant was notified of the Stamp Tax assessment acts, from which results a total tax to be paid of €216,128.47 (two hundred and sixteen thousand one hundred and twenty-eight euros and forty-seven cents), respectively:

a. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ..., with a tax to be assessed of €4,293.33 (relating to 1st Payment) and a levy of €12,879.97.

b. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €5,144.55 (relating to 1st payment) and a levy of €15,433.65.

c. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €4,185.42 (relating to 1st payment) and a levy of €12,556.22.

d. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €11,003.72 (relating to 1st payment) and a levy of €33,011.14.

e. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €4,697.00 (relating to 1st payment) and a levy of €14,090.98.

f. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €5,289.00 (relating to 1st payment) and a levy of €15,866.96.

g. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €6,198.84 (relating to 1st payment) and a levy of €18,596.52.

h. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €7,787.63 (relating to 1st payment) and a levy of €23,362.87.

i. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €8,841.19 (relating to 1st payment) and a levy of €26,523.53.

j. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €3,519.89 (relating to 1st payment) and a levy of €10,559.63.

k. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €6,058.12 (relating to 1st payment) and a levy of €18,174.36.

l. Stamp Tax Assessment Act No. 2014..., referring to the immovable property registered with article no. ... with a tax to be assessed of €5,024.22 (relating to 1st payment) and a levy of €15,072.64.

  1. The Claimant did not proceed with payment of the contested assessments.

F – UNPROVEN FACTS

  1. There are no unproven facts that have interest for the decision of the case.

G – MATTER OF LAW

  1. The question to be decided is whether the stamp tax assessment acts, in the amount of €216,128.47 relating to urban properties – "land for construction" – suffer from the formal defects specifically raised by the Claimant, as regards lack of reasoning, and of violation of law, by the erroneous interpretation and application of item 28.1 of the GSTT and of article 6th no. 1 paragraph f), i) of the cited Law no. 55-A/2012, of 29 October.

  2. From the proven factual matter it results that we are in the presence of "land for construction", without any erected or constructed structure, and, thus, the same legal regime is applicable to all the contested assessments.

  3. First of all, the question of the defect of law due to error regarding the prerequisites of the right to assessment shall be analyzed, as to the question of the classification of land for construction within the scope of application of article 28th no. 1 of the GSTT, introduced by the regime of Law no. 55-A/2012, of 29 October.

  4. The amendment of the regime as to the liability to stamp tax of properties with residential use by the addition of item 28 of the General Stamp Tax Table, effected by article 4th of Law 55-A/2012, of 29/10, proceeded to classify the following taxable events, through the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the tax roll, in accordance with the Municipal Tax on Immovable Property Code (CIMI), is equal to or greater than €1,000,000 – on the tax patrimonial value used for purposes of IMI:

28.1 – For property with residential use – 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, contained in the list approved by order of the Minister of Finance – 7.5 %."

  1. Article 6th of Law no. 55-A/2012 contains the transitional provisions which established the rules relating to 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:

The taxable event occurs on the 31st of October 2012;

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

The tax patrimonial value to be used in the assessment of the tax corresponds to that which results from the rules provided for in the Municipal Tax on Immovable Property Code by reference to the year 2011;

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

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

The applicable rates are the following:

Properties with residential use evaluated in accordance with the Code of IMI: 0.5 %;

ii) Properties with residential use not yet evaluated in accordance with the Code of IMI: 0.8 %;

iii) Urban properties when the taxpayers that 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 apply to the same tax patrimonial value used for purposes of assessment of the municipal tax on immovable property to be effected in that year.

3 – The failure to deliver, in whole or in part, within the indicated period, of the amounts assessed as stamp tax constitutes a tax offense, punished in accordance with the law."

On the interpretation of this statute, the arbitral decision 53/2013-T of the CAAD has already pronounced, which writes "In the aforementioned item 28.1 and in the sub-paragraphs i) and ii) of paragraph f) of no. 1 of article 6th of Law 55-A/2012, a concept is used that is not used in any other tax legislation in these precise terms which is that of "property with residential use". Namely in the CIMI, which in several norms of the CIS introduced by that Law is indicated as diploma of subsidiary application with respect to the tax provided for in the aforementioned item no. 28 [articles 2nd no. 4, 3rd no. 3 paragraph u), 5th paragraph u), 23rd no. 7, and 46th and 67th of the CIS], a concept defined in those terms is not used." On this matter the arbitral decisions in the cases no. 42/2013-T, 48/2013-T, 49/2013-T, 189/2013-T, 207/2013-T, 247/2013, 284/2013-T, 288/2013-T, 308/2013-T, 31/2014-T, 202/2014-T, 310/2014-T of the CAAD have already decided.

  1. As to the concept of "properties", it is for this purpose necessary to resort to the concepts of "properties" used in the CIMI, in which the types of properties are enumerated in its articles 2nd to 6th, which is transcribed:

Article 2nd

Concept of property

1 . For purposes of this Code, property is any fraction of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or based therein, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above, endowed with economic autonomy in relation to the land on which they are implanted, although situated in a fraction of territory that constitutes an integral part of a different asset or does not have a property nature.

2 . Buildings or constructions, even if movable by nature, are deemed to have a character of permanence when used for non-transitory purposes.

3 . The character of permanence is presumed when the buildings or constructions are based in the same place for a period exceeding one year.

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

Article 3rd

Rural properties

1 – Rural properties are land situated outside of an urban agglomeration that cannot be classified as land for construction, in accordance with no. 3 of article 6th, provided that:

They are used or, in the absence of concrete use, have as normal destination an activity generating agricultural income, such as are considered for purposes of personal income tax (IRS);

Not having the use indicated in the preceding paragraph, they are not built or only have buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Rural properties are also land situated within an urban agglomeration, provided that, by force of a legally approved provision, they may not have an activity generating any income or may only have an activity generating agricultural income and are actually having this use.

3 – The following are also rural properties:

Buildings and constructions directly used for the production of agricultural income, when situated on the land referred to in the preceding numbers;

Waters and plantations in the situations to which no. 1 of article 2nd refers.

4 – For purposes of this Code, urban agglomerations are deemed to be, in addition to those situated within legally fixed perimeters, clusters with a minimum of 10 dwellings served by public use streets, with their perimeter delimited by points distant 50 m from the axis of the streets, in the transverse direction, and 20 m from the last building, in the direction of the streets.

Article 4th

Urban properties

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

Article 5th

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 the main part, the property is deemed to be mixed.

Article 6th

Types of urban properties

1 – Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Land for construction;

Other.

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

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

4 – The provision of paragraph d) of no. 1 encompasses land situated within an urban agglomeration that are not land for construction nor are covered by the provisions of no. 2 of article 3rd and also buildings and constructions licensed or, in the absence of a license, that have as normal destination purposes other than those referred to in no. 2 and also those of the exception in no. 3.

  1. On the interpretation of tax norms, for the case sub judice, article 11th of the General Tax Law tells us, by establishing the essential rules of interpretation of tax laws, the following:

Article 11th

Interpretation

In the determination of the meaning of tax norms and in the qualification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

Whenever tax norms employ terms specific to other branches of law, they shall be interpreted in the same sense as they have there, unless otherwise directly derives from the law.

Persistent doubt about the meaning of the norms of incidence to be applied, attention shall be paid to the economic substance of the taxable events.

Gaps resulting from tax norms covered by the reservation of law of the Assembly of the Republic are not susceptible of analogical integration.

  1. To this provision, it is equally necessary to resort to the general principles of interpretation of laws, for which no. 1 of article 11th of the LGT refers, established in article 9th of the Civil Code, which establishes the following:

Article 9th

Interpretation of law

The interpretation should not be limited to the letter of the law, but reconstruct from the texts the legislative thought, taking above all 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.

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

In the fixing of the meaning and scope of the law, the interpreter will presume that the legislator enshrined the most accurate solutions and knew how to express his thought in adequate terms.

  1. Faced with the aforementioned and enumerated articles, the following interpretative hypotheses of the concept of «property with residential use» arise: «property with residential use» as referring to residential properties; and «property with residential use» as a concept distinct from residential properties.

  2. Articles 2nd to 6th of the CIMI above transcribed are not used by the legislator in the classification of properties as «property with residential use». Equally, this concept is not found in any other statute.

  3. The lack of exact terminological correspondence of the concept of «property with residential use» with any other used in other statutes can give rise to various interpretative hypotheses.

  4. The text of the law is the starting point for the interpretation of the expression «properties with residential use», and it is on the basis of it that the «legislative thought» must be reconstructed, as imposed by no. 1 of article 9th of the Civil Code, applicable by force of the provisions of article 11th no. 1 of the LGT, already transcribed.

  5. On the interpretation of the concept of «property with residential use», reference is made here to the arbitral decision 53/2013-T of the CAAD.

  6. It is written in the cited arbitral decision 53/2013-T, on the concept of «property with residential use» as referring to residential properties:

"The concept closest to the literal tenor of this expression used is manifestly that of «residential properties», defined in no. 2 of article 6th of the CIMI as encompassing «buildings or constructions» licensed for residential purposes or, in the absence of a license, that have as normal destination residential purposes.

If it is understood that the expression «property with residential use» coincides with that of «residential properties», it is manifest that the assessments will suffer from error regarding the factual and legal prerequisites, for all properties in relation to which the Stamp Tax was assessed under the aforementioned item no. 28.1 are land for construction, without any building or construction, required to fulfill that concept of «residential properties».

For this reason, if the interpretation is adopted that «property with residential use» means «residential property», the assessments whose declaration of illegality is sought will be illegal, because there is in any of the land no building or construction.

  1. The present arbitral tribunal, following, in this case, the jurisprudence of the CAAD (and also of the STA), which (quite to the contrary) has no good arguments to contradict, but rather to confirm, concludes that, when it is a question of a "land for construction, one is not in the case of property with residential use currently, wherefore Stamp Tax provided for in item 28.1 of the GSTT does not apply to it.

  2. In this manner, the assessments sub judice, whose declaration of illegality is sought, suffer from the defect of violation of that item no. 28.1, due to error regarding the legal prerequisites, which justifies the declaration of its illegality and annulment (article 135th of the CPA).

H – INDEMNIFICATION FOR GUARANTEE IMPROPERLY PROVIDED

  1. The Claimant further petitions for indemnification for guarantee improperly provided, in accordance with article 53rd of the LGT and article 169th of the CPPT, with the intent of suspending the fiscal enforcement proceedings relating to the collection of the tax debts referred to in the present arbitral pronouncement.

  2. In accordance with the provisions of no. 1 of article 53rd of the General Tax Law, the debtor who, to suspend enforcement, offers a bank guarantee or equivalent shall be indemnified in whole or in part for the losses resulting from its provision, provided that it has maintained it for a period exceeding three years in proportion of the success in administrative recourse, challenge or opposition to enforcement that have as object the debt guaranteed.

  3. As follows from no. 2 of the cited article, all losses incurred with the provision of guarantees provided to suspend enforcement are indemnified, without dependence on the aforementioned period, in the event of total success in an action in which it is verified that there has been error imputable to the services in the assessment of the tax.

  4. For its part, article 171st of the CPPT establishes that "indemnification in case of bank guarantee or equivalent improperly provided shall be requested in the proceedings in which the lawfulness of the enforceable debt is controverted» and that «indemnification must be requested in the complaint, challenge or recourse or in case its grounds are subsequent within 30 days after its occurrence"

  5. The judicial challenge proceeding, in which the lawfulness of the tax act is decided, constitutes, therefore, the adequate procedural means to formulate the request for indemnification for improper guarantee.

  6. Pursuant to reiterated arbitral jurisprudence, " The request for constitution of the arbitral tribunal has as a corollary that it is in the arbitral proceeding that the «lawfulness of the enforceable debt» will be discussed, wherefore, as results from the express tenor of that no. 1 of the aforementioned article 171st of the CPPT, it is also the arbitral proceeding that is adequate to examine the request for indemnification for improper guarantee."

  7. Faced with the foregoing, the Stamp Tax assessments, in the part encompassed by the annulment to be decreed, result from errors of fact and law imputable exclusively to the Tax Administration.

  8. However, in the present case, the Claimant does not have the right to indemnification for provision of guarantee improperly provided, in accordance with articles 53rd of the LGT and article 169th of the CPPT, since the Claimant at the time of bringing the present action had not yet provided a guarantee, nor paid the tax resulting from the assessment acts here in question, nor during the course of the present action did it provide proof of the provision of a guarantee.

  9. Faced with the foregoing, the present tribunal, on this part (indemnification for guarantee improperly provided), does not uphold the Claimant's request.

I – DECISION

Therefore, considering all the foregoing, the present arbitral tribunal decides:

I. Uphold the requests for declaration of illegality of the Stamp Tax assessment acts, nos. 2014..., 2014 ..., 2014..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014..., 2014 ..., 2014 ..., 2014 ... and 2014 ..., due to the defect of violation of law as regards the provision in item 28th no. 1, due to error regarding the legal prerequisites, which justifies the declaration of its illegality and annulment.

II. The value of the case is fixed at €216,128.47 in light of the economic value of the case assessed by the value of the stamp tax assessments contested, and in conformity the costs are fixed at the respective amount of €4,284.00 (four thousand two hundred and eighty-four euros), to be borne by the Respondent, in accordance with article 12th no. 2 of the Regime of Tax Arbitration, article 4th of the RCPAT and Table I annexed to the latter – no. 10 of article 35th, and nos. 1, 4 and 5 of article 43rd of the LGT, articles 5th no. 1 paragraph a) of the RCPT, 97th-A no. 1 paragraph a) of the CPPT and 559th of the CPC).

Notify.

Lisbon, 11 December 2014.

The collective tribunal,

Jorge Lino Ribeiro Alves de Sousa (president)

Paulo Ferreira Alves

Diogo Feio

Frequently Asked Questions

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What is the Stamp Tax (Imposto de Selo) under Verba 28 of the TGIS on building land in Portugal?
The Stamp Tax under Verba 28 of the TGIS is a special additional tax introduced for high-value real estate ownership. Item 28.1 specifically targets ownership, usufruct, or superficies rights over urban properties with residential use having Tax Patrimonial Values equal to or exceeding €1,000,000. The tax applies annually and was implemented through Law 55-A/2012 as part of fiscal consolidation measures. The legal interpretation focuses on three cumulative requirements: the type of property right held, the residential use classification, and the minimum valuation threshold. Disputes commonly arise regarding whether specific property types, particularly building land designated for residential construction, qualify as properties with 'residential use' for taxation purposes.
Can building land (terrenos para construção) be subject to additional Stamp Tax assessments under Portuguese law?
Building land (terrenos para construção) can be subject to Stamp Tax assessments under Portuguese law, but its qualification under item 28.1 GSTT is legally disputed. Tax authorities have issued assessments on building land with Tax Patrimonial Values exceeding €1,000,000, particularly when designated for residential construction. However, taxpayers frequently challenge these assessments, arguing that building land lacks actual 'residential use' until construction occurs. The controversy centers on whether future intended use (reflected in building permits or urban planning designations) constitutes present residential use for tax purposes. Taxpayers contend that land for construction remains a distinct property category until buildings are completed and new property registrations replace the original land entries. This interpretative conflict has generated significant arbitral litigation before CAAD.
How does the CAAD arbitral tribunal handle disputes over Stamp Tax on real estate investment funds?
The CAAD arbitral tribunal handles Stamp Tax disputes over real estate investment funds through the arbitral procedure established by Decree-Law 10/2011. Real estate investment funds, represented by their management entities, can request collective arbitral tribunal formation to challenge tax assessment acts. The tribunal comprises three arbitrators appointed by the CAAD Ethics Council when parties don't designate arbitrators. The proceedings follow formal requirements including proper party representation, verification of legal capacity and legitimacy, and compliance with statutory deadlines. Tribunals examine both procedural regularity and substantive legality of assessments, analyzing statutory interpretation, constitutional compliance, and proper tax law application. Real estate funds commonly challenge assessments involving multiple properties under unified legal grounds when assessments share identical legal bases and factual circumstances.
What are the grounds for challenging additional Stamp Tax liquidations before the CAAD?
Grounds for challenging additional Stamp Tax liquidations before CAAD include violation of law in qualifying the taxable event, erroneous application of tax table items, unconstitutionality, and procedural defects. Taxpayers may argue that assessments incorrectly classified properties or misapplied legal requirements for taxation. Common challenges involve interpretative disputes about statutory language—such as what constitutes 'residential use'—and claims that assessments violate constitutional principles including equality (Article 13 CRP) and proper taxation capacity (Article 104 CRP). Challenges must demonstrate that assessment acts suffer from voidability due to legal violations under Article 99 CPPT. Taxpayers can contest both the legal interpretation applied and the factual characterization of properties, seeking annulment of assessment acts and corresponding tax obligations.
What is the procedure for requesting arbitration at CAAD under Decree-Law 10/2011 for tax disputes?
The procedure for requesting arbitration at CAAD under Decree-Law 10/2011 requires taxpayers to submit formal arbitration requests within statutory deadlines, identifying contested acts and legal grounds. Requests must comply with Articles 2 and 10 of the RJAT, specifying the tax assessment acts challenged and legal basis for dispute. Taxpayers may appoint an arbitrator or allow the CAAD Ethics Council to appoint the tribunal. When collective tribunals are required, three arbitrators are designated under Article 6(1) and Article 11(1)(b) RJAT. Parties receive notification of arbitrator appointments and may exercise refusal rights under the Ethics Code. The tribunal verifies its material competence, party legitimacy, legal capacity, and proper representation before proceeding. Proceedings follow arbitral procedural rules with claimant submissions followed by respondent answers within established timeframes.