Process: 545/2015-T

Date: February 23, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitral decision addresses a critical interpretive question regarding Stamp Tax (Imposto de Selo) Item 28.1 of the General Stamp Tax Table, which imposes tax on residential urban properties with patrimonial values equal to or exceeding €1 million. The dispute centers on how to calculate the €1 million threshold for properties in vertical or full ownership (propriedade vertical) composed of multiple independently usable residential units.

The claimant owned a Lisbon property valued at €4,786,400, constituted as full property with 9 floors and divisions capable of independent use. Each individual unit had a tax asset value (TAV) below €1 million. The Tax Authority (AT) assessed Stamp Tax totaling €15,954.58, arguing that the threshold should be determined by aggregating the asset values of all residential units within the property.

The claimant contested this interpretation, asserting that the AT's aggregation method lacked legal foundation and violated constitutional principles of equality and proportionality. The claimant argued that each independently usable unit should be assessed separately for Stamp Tax purposes. This position highlights a fundamental inequity: if the same property were constituted under horizontal property regime (condominium), no individual unit would be subject to the tax since none exceeded €1 million individually.

The arbitral tribunal noted that majority CAAD jurisprudence supports defining the threshold based on the tax asset value of each residential unit capable of independent use, rather than the aggregate sum. This interpretation aligns with valuation standards under CIMI (Municipal Property Tax Code), which separately values each independent unit.

The case represents a significant tax compliance issue for property owners, particularly those holding multi-unit buildings in vertical ownership rather than horizontal property regimes. The outcome determines whether the legal form of property ownership should trigger differential tax treatment when the underlying physical reality—multiple independent residential units—remains identical.

Full Decision

Arbitral Decision

I. Report

1. A…, legal entity number…, with registered office at …Street, …, …, in Lisbon, requested the constitution of the arbitral tribunal in tax matters, raising a petition for arbitral pronouncement with a view to declaring unlawful the assessments of Stamp Tax – Item 28.1, of the General Table – relating to second installments for the year 2014 and the urban property recorded in the respective property register under the article… of the parish of …, Lisbon, in the total amount of € 15,954.58.

2. The petition for constitution of the arbitral tribunal, filed on 14 August 2015, was accepted by the President of CAAD and notified to the Respondent, Tax and Customs Authority (AT) on 7 September 2015.

3. In accordance with 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 Ethics Council appointed the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the appointment within the applicable time limit and notified the parties of such appointment on 17 November 2015.

4. Duly notified of such appointment, the parties did not manifest their will to challenge the designation of the arbitrator, in accordance with article 11, paragraph 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Ethics Code.

5. Thus, in accordance with the provisions of subparagraph c) of paragraph 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the singular arbitral tribunal was constituted on 2 December 2015.

6. Duly constituted, the arbitral tribunal is materially competent, in accordance with articles 2, paragraph 1, subparagraph a), of the RJAT.

7. The parties have legal personality and capacity and have standing (arts. 4 and 10, paragraph 2, of the RJAT, and art. 1 of Administrative Rule no. 112-A/2011, of 22/03).

8. Given that the matter essentially concerns issues of law and taking into account the knowledge derived from the procedural documents, deemed sufficient, the Tribunal decided to dispense with the meeting provided for in article 18 of the RJAT.

II. Statement of Facts

9. The matter at issue in the present proceedings concerns the incidence of stamp tax, provided for in article 1 of the Stamp Tax Code and Item 28.1 of the respective Table, on residential urban properties with a value equal to or greater than 1 million euros, when referring to properties in a full or vertical ownership regime, but composed of parts capable of independent use.

10. With respect to properties with such characteristics, the Respondent (AT) considers that the threshold value to be taken into account for tax purposes is the result of the sum of the asset values of the residential parts, which are subject to separate valuation. Conversely, it is the understanding of the majority arbitral jurisprudence that such threshold value should be defined on the basis of the tax asset value attributed to each of the residential units capable of independent use.[i]

11. It is therefore within the legal framework thus summarily described that the object of the present petition for arbitral pronouncement is situated, for the assessment of which the factual elements referred to in the following points are relevant.

12. The Claimant, in the year 2014, was the owner of the urban property, located in Lisbon, parish of …, recorded in the respective property register under article….

14. The aforementioned property, with a total asset value of € 4,786,400, is constituted as full property, being composed of 9 floors and divisions capable of independent use.

15. In accordance with the standards applicable to the valuation of urban properties composed of units capable of independent use, the asset value of each of these parts was determined separately, with it being found that the total tax asset value of the units with residential allocation was, in the year in question, € 4,786,400.00.

16. The tax asset value of each of the parts that make up the property in question is less than one million euros.

17. Considering that the tax asset value resulting from the sum of the asset values of the residential units was, in that year, greater than one million euros, the AT proceeded with the assessment of Stamp Tax referred to in Item 28 of the respective General Table in relation to each of these units, determining, with reference to the second payment installments, the total amount of € 15,954.58, as shown in the collection notes attached to the petition (Docs. 1 to 27), this amount corresponding to the sum of the values of those second installments.

18. For the collection of these second installments, the AT issued the corresponding collection documents for voluntary payment in April 2015.

19. There are no facts relevant to the decision that have not been proven.

III. Legal Issues

20. With respect to the assessments in question, as referred to above, the issue that motivates the Claimant's disagreement is that relating to the application of the provision in Item 28.1 of the General Table of Stamp Tax to urban properties which, constituted as full property, are composed of floors or divisions capable of independent use, with residential allocation, but whose tax asset value, considered separately, is less than the threshold value relevant for the purposes of tax incidence.

21. It is the legality of such taxation that the Claimant comes to contest, arguing essentially that "the criterion sought by the AT, of considering the value of the sum of the TAVs attributed to the parts, floors or divisions with independent use, on the argument that the property is not constituted in a horizontal property regime, finds no legal support and is contrary to the criterion applicable under CIMI and, by reference, under IS [Stamp Tax]".

22. Disagreeing thus with the AT's understanding that underlies and supports the challenged assessments, the Claimant considers it to be "unlawful and unconstitutional to consider as the reference value what corresponds to the sum of the TAVs attributed to each part or division, since such constitutes a clear violation of the principle of equality and proportionality in tax matters."

23. The Claimant thus considers that "The tax legislator cannot treat equal situations differently. Now, if the property were constituted in a horizontal property regime, none of its residential units would be subject to the new tax."

24. With the grounds summarily referred to above, the Claimant concludes by requesting the declaration of nullity or, should that not be understood to be appropriate, the annulment of the assessment acts that constitute the object of the petition.

25. It is further requested of the Tribunal that, in any event, it condemn the AT to "reimburse the Claimant for all amounts incurred by virtue of the request for suspension of any executions instituted, including expenses arising from any provision of guarantees, specifically commissions relating to the issuance thereof, fees, interest and other banking charges to be quantified as soon as they are actually determined."

26. The Respondent (AT) filed a response in which, in addition to defending the lack of merit of the petition for arbitral pronouncement, it raised a dilatory exception relating to the autonomous non-challengeability of the payment installments arising from assessment acts.

27. Following a ruling of 21 January 2016, the Claimant was notified to respond, within 15 days, to the preliminary issue raised by the Respondent. After the said period had elapsed, it is found that the Claimant did not respond to the raised exception.

Preliminary Issue

28. Having summarised the relevant factual elements as well as the positions which, in matters of interpretation of applicable law, are maintained by the parties, it is important, first and foremost, to analyse and decide the preliminary issue raised by the Respondent (AT) which, as referred to above, concerns the autonomous non-challengeability of the acts that constitute the object of the petition.

On the Non-Challengeability of the Acts

29. The Respondent considers that the present proceedings concern the annulment not of a tax act but rather of the payment of installments – the second ones – of a tax act, recorded in collection notes.

30. According to the Respondent's understanding, it is extracted from the procedural elements that what the Claimant is challenging are not the assessment acts but the installments relating to the payment of a single tax amount.

31. It is, according to the Respondent, what is derived from the combination of articles 120 and 113, paragraph 1, of the IMI Code, in addition to paragraph 7 of article 23 of the Stamp Tax Code, as amended by Law no. 55-A/2012, of 29 October: the stamp tax referred to in Item 28 of the TGIS is assessed annually, and its payment in installments is merely a collection technique for the tax.

32. The Respondent thus concludes that there is a single tax assessment, with its payment being made in installments, with it not being permissible to challenge a single installment or collection document for that partial amount.

33. In support of its thesis, the Respondent cites several arbitral decisions, to the effect that payment installments are autonomously non-challengeable, concluding that "given the manifest autonomous non-challengeability of the installments of the assessment acts recorded in the collection notes that constitute the object of the present petition for arbitral pronouncement, the dilatory exception provided for in subparagraph c), of paragraph 1, of article 89 of the CPTA [ii], subsidiarily applicable by article 29, paragraph 1, subparagraph c), of the RJAT, applies, which prevents consideration of the merits and results in the absolution of the AT from the instance".

34. Indeed, as the Respondent argues, the stamp tax assessment of urban properties referred to in Item 28.1 of the TGIS results in an annual assessment for each property meeting the conditions therein stated, following, by express reference, the rules of the IMI Code regarding its collection, as provided in article 23, paragraph 7, of the Stamp Tax Code.

35. In accordance with articles 113 and 120 of the IMI Code, the tax assessed in that annual assessment is subsequently collected in several installments, to be paid over the course of the year, with the number of installments varying depending on the amount of tax assessed.

36. In the present case, as emerges from the procedural elements, the assessments were made in March 2015, with the tax assessed being divided for payment in several installments.

37. For payment of the second installments, the corresponding collection notes were duly issued, with the voluntary payment period running until the end of the following April.

38. As the Respondent points out, the Claimant is challenging partial collection notes relating to the second installments of the tax that was assessed with reference to the property already identified above.

39. Although the references it makes to the tax act and the grounds that constitute the basis of its petition for declaration of unlawfulness of the assessments, there remains no doubt that the object of the challenge, as the Respondent affirms, is merely the payment of the second installments.

40. This is what is drawn from the petition, in which what is indicated is merely the total amount of the second installments, the collection notes attached to the petition (Docs. 1 to 27) in which the values relating to the second installment and to each of the independent parts to which it refers are itemized, and further from the economic value associated with the petition, which corresponds to the value of the tax resulting from the sum of those second installments.

41. As the Respondent emphasises, the Arbitral Tribunal has already pronounced on this matter in situations identical to that of the present proceedings, with particular note being drawn to, among other decisions going in the same direction [iii], the conclusions formulated in Proc. no. 726/2014, to which full adherence is given:

"The payment installments of an IMI assessment or, in the situation under analysis, of a Stamp Tax assessment, under Item 28 of the TGIS, are not autonomously reviewable, as they originate from a single annual obligation. Since each of the installments of the Stamp Tax assessments identified in the record is not autonomously challengeable, … it will be a case of lack of jurisdiction of the arbitral tribunal to assess and declare their unlawfulness and consequent annulment. The conclusion that the Stamp Tax assessment under item 28 of the TGIS is indivisible, with each of its installments not being autonomously challengeable, determines the lack of jurisdiction of the arbitral tribunal and prevents the continuation of the proceedings, as well as consideration on the merits. For which reasons it is decided to acquit the Tax and Customs Authority from the instance."

42. The reasoning of the decision transcribed above, which is subscribed to without reservation, is identically applicable to the present petition for arbitral pronouncement, and therefore, the exception raised by the Respondent must likewise be declared well-founded, with the Tax and Customs Administration (AT) being acquitted from the instance, with recognition being given to the raised exception of autonomous non-challengeability of the installments recorded in the collection notes that constitute the object of the petition.

43. With the raised exception being recognised, consideration of the other issues raised in the petition is thus foreclosed.

IV. Decision

In these terms, and with the grounds expounded, the Arbitral Tribunal decides:

a) To find the exception of autonomous non-challengeability of the installments of the assessment acts recorded in the collection notes that constitute the object of the present petition to be well-founded and, consequently, to acquit the Tax and Customs Authority (AT) from the instance;

b) To condemn the Claimant to pay the costs of proceedings.

Value of proceedings: € 15,954.58

Costs: Under article 22, paragraph 4, of the RJAT, and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00, to be borne by the Claimant.

Lisbon, 23 February 2016

The Arbitrator, Álvaro Caneira.

Frequently Asked Questions

Automatically Created

How does Stamp Tax Verba 28.1 apply to vertical property (propriedade vertical) with independently usable units?
According to majority CAAD jurisprudence, Stamp Tax Item 28.1 applies to vertical property based on the individual tax asset value of each independently usable residential unit. If a vertical property contains multiple units capable of independent use, each unit should be evaluated separately against the €1 million threshold, not aggregated. This interpretation aligns with CIMI valuation standards, which separately assess each independent unit even within a single property title.
Is the €1 million threshold for Stamp Tax calculated on individual unit values or the total sum of a vertical property?
The prevailing arbitral interpretation holds that the €1 million threshold should be calculated based on individual unit values, not the aggregate sum. While the Tax Authority argues for summation of all residential unit values within a vertical property, majority CAAD jurisprudence supports applying the threshold to each independently usable unit separately. This means a vertical property with multiple units each valued below €1 million would not trigger Stamp Tax liability under Item 28.1, even if the total property value exceeds €1 million.
Can the tax authority aggregate patrimonial values of separate housing fractions to trigger Verba 28.1 liability?
This is the central controversy in these disputes. The Tax Authority contends that for properties not constituted in horizontal property regime, it can aggregate the patrimonial values of all residential units to determine if the €1 million threshold is met. However, taxpayers argue this creates unconstitutional discrimination, as identical properties organized as horizontal property (condominiums) would escape taxation if individual units remain below the threshold. Majority arbitral jurisprudence rejects the aggregation approach, viewing it as lacking legal support and violating equality principles.
What is the CAAD arbitral jurisprudence on Imposto do Selo for residential properties in total ownership regime?
CAAD arbitral jurisprudence predominantly favors taxpayers in these disputes. The majority position holds that properties in vertical or full ownership regime composed of independently usable units should have the €1 million Stamp Tax threshold applied to each individual unit, consistent with CIMI valuation methodology. This jurisprudence rejects differential treatment based solely on whether property is organized as horizontal property (condominium) versus vertical ownership, as such distinction violates constitutional equality and proportionality principles when the physical characteristics—independent residential units—are identical.
How are urban properties with independent parts assessed for Stamp Tax under the Portuguese General Stamp Tax Table?
Under CIMI regulations applicable to urban property valuation, properties composed of units capable of independent use are valued separately for each such unit, regardless of the overall property regime. Majority arbitral interpretation extends this principle to Stamp Tax Item 28.1, concluding that each independently usable residential unit should be assessed individually against the €1 million threshold. This approach ensures consistency between property tax valuation and Stamp Tax incidence, avoiding arbitrary distinctions based on formal ownership structure when the substantive reality—multiple independent residential units—remains unchanged.