Process: 547/2014-T

Date: March 20, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 547/2014-T addresses a critical dispute regarding Stamp Tax (Imposto de Selo) under Verba 28.1 of the General Table (TGIS) applied to vertical properties. The taxpayer A... Lda challenged stamp duty assessments totaling €12,808.80 for 2013 on an urban property owned in full ownership (propriedade vertical), comprising 18 residential units, 17 commercial premises, and one warehouse space. The central legal issue concerns whether the €1,000,000 threshold for Verba 28.1 TGIS application should be calculated per individual independent unit or by aggregating all units' patrimonial values. The Tax Authority summed the individual TPVs (Valor Patrimonial Tributável) of each autonomous division, reaching €1,280,880.00, despite no single unit exceeding €1,000,000 individually (each valued at €71,160.00). The applicant argued this interpretation violates the tax incidence rule and constitutional equality principles, contending that since the property was not constituted under horizontal property regime, each floor or division with independent use should be assessed separately for stamp tax purposes, not collectively. The distinction between IMI (Municipal Property Tax) assessment methodology and Stamp Tax application became crucial, as IMI assesses each autonomous unit separately while the Tax Authority sought to apply an aggregated approach for stamp duty. The taxpayer requested annulment of the assessments, restitution of amounts paid, and compensatory interest through CAAD arbitration under Decree-Law 10/2011.

Full Decision

Case No. 547/2014-T

Applicant: A..., Lda.

Respondent: Tax and Customs Authority

The arbitrator Dr. Maria Antónia Torres, appointed by the Deontological Council of the Administrative Arbitration Center ("CAAD") to constitute the Single Arbitral Tribunal, constituted on 1 October 2014, hereby decides as follows:

  1. REPORT

1.1. A..., Lda., taxpayer no. …, hereinafter referred to as the "Applicant", with registered address at …, …, requested the constitution of an arbitral tribunal, pursuant to Article 2, paragraph 1, subparagraph a), and Article 10, both of Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT"[1]).

1.2. The request for arbitral decision concerns the declaration of illegality and consequent annulment of the tax assessments for stamp duty (IS) in the total amount of €12,808.80 (twelve thousand eight hundred and eight euros and eighty cents), relating to the year 2013, and contained in the assessment notices submitted by the Applicant in its initial petition and subsequent request, which are hereby deemed articulated and reproduced for all legal purposes, which concern the urban property owned by the Applicant, located at …, …, registered in the urban real estate registry under entry no. U-…, currently part of the Union of Parishes of Camarate, Unhos and Apelação, as per documents attached to the initial petition.

The Applicant further requests the condemnation of the Respondent to restitution of the amounts wrongfully paid and recognition of the right to compensatory interest on all amounts paid.

1.3. To support its request, the Applicant alleges that the stamp duty assessments subject to this petition are illegal due to violation of the incidence rule of item 28 of the TGIS. The Applicant considers that, with the property, as it was on that date, divided into 18 units intended for residential use, 17 commercial premises and a space intended for warehouse and industrial activity, the Tax Authority cannot, as it did, sum the patrimonial values of the floors and divisions susceptible to independent use, given that none of those floors or divisions, by itself, has a TPV equal to or exceeding 1,000,000.00 euros. And that the incidence rule, in the interpretation practiced by the Tax Authority, is unconstitutional due to violation of the principle of equality.

1.4. The Tax Authority argues that the request for declaration of illegality and consequent annulment of the contested assessments should be judged unfounded, given that it contends that although the stamp duty assessment, under the conditions provided for in item 28 of the TGIS, is processed in accordance with the rules of the CMPI, the fact is that the legislator reserves the aspects that require appropriate adjustments.

The Tax Authority understands that this is the case for properties in full ownership, even though with floors or divisions susceptible to independent use, because although the municipal property tax is assessed in relation to each part susceptible to independent use, for purposes of stamp duty the property as a whole is relevant, thus arguing for the legality of the tax acts because they constitute a correct application of law to the facts.

1.5. The parties agreed to waive arguments and the meeting of the arbitral tribunal provided for in Article 18 of the RJAT.

  1. SANITATION

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

The parties have legal personality and capacity, are legitimately represented and are regularly represented (cf. Articles 4 and 10, paragraph 2 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March).

No procedural irregularities were identified.

A preliminary question was identified to be decided by the Tribunal concerning the enlargement of the request.

  1. FACTS

With relevance to the decision on the merits, the Tribunal considers the following factual matters to be proven:

  1. The Applicant was, at the date of the assessments sub judice, the owner of the urban property subject to those same assessments, under a regime of "full ownership" (i.e., not subject to the horizontal property regime) to which a global TPV exceeding 1,000,000.00€ was assigned, corresponding to the sum of the partial TPVs of each "floor or division with independent use".

  2. In accordance with the contents of the property records submitted by the Applicant, none of the floors or divisions susceptible to independent use, to which an autonomous TPV was assigned by the Respondent, and regardless of its destination - residential or other - has a TPV exceeding one million Euros. On 17 December 2012, the Applicant was notified of the assessment carried out by the Respondent for each of the divisions of the property, having been assigned to each one a patrimonial value of €71,160.00, as per the document submitted by the Applicant.

  3. The Applicant was notified to assess stamp duty on the said property, with the Respondent considering the Applicant to be a liable party for stamp duty under item 28.1 of the TGIS, for being the owner of a property with a taxable property value of €1,280,880.00.

Facts Not Proven

No essential facts, with relevance to the assessment of the merits of the case, that were not proven were identified.

Reasoning of the Facts

The conviction regarding the facts considered as proven was based on the documentary evidence submitted by the Applicant, whose authenticity and correspondence to reality were not contested by the Respondent.

  1. QUESTION TO BE DECIDED

The essential question to be decided in the case is to determine, with reference to a property not constituted under the horizontal property regime, comprised of various floors and divisions with independent use, some of which with residential designation, which Taxable Property Value is relevant, assessing the correct incidence criterion of the tax in light of the law, in order to determine whether this should be assessed by the sum of the taxable property value attributed to the different parts or floors (global TPV) or, rather, whether it should be attributed to each of the parts or residential floors separately.

Additionally, the Applicant invokes the unconstitutionality of the transitional regime approved by Article 6, paragraph 1 of Law 55-A/2012, of 29 October, for violation of a significant set of constitutional principles that it expressly invokes.

The Applicant also petitions for the payment of compensatory interest.

  1. LAW

As identified above, the question to be decided concerns whether the taxable property value relevant for purposes of determining the applicability of Item 28 of the TGIS, when dealing with a property not constituted in horizontal property regime, is that of each unit autonomously considered or the sum of the taxable property value attributed to each of those units.

The question arises due to taxation under stamp duty of ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the registry is equal to or exceeding € 1,000,000, with the tax being due, at the rate of 1% on the taxable property value used for purposes of the municipal property tax, per property with residential designation.

For this reason, it is important to determine whether, when dealing with a property not constituted in horizontal property regime, the concept of "property with residential designation" should be interpreted as corresponding to each unit autonomously considered and to apply to its respective taxable property value or whether it should correspond to all autonomous units, and consequently apply to the sum of the taxable property value attributed to each of those units.

As neither the Stamp Duty Code, nor its respective General Table, nor Law No. 55-A/2012, of 29 October (which approved the item of TGIS under review) provide a legal definition of "property with residential designation", it is necessary to assess the correct interpretation of this expression, it being presumed that the legislator knew how to express itself in the most appropriate manner (cf. Article 9, paragraph 3, final part, of the Civil Code), in its systematic integration with the rules contained in the Municipal Property Tax Code and, as well, in the spirit of the law.

Item 28 of the TGIS under review was added by Law No. 55-A/2012, of 29 October with the following wording:

"28 - Ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the registry, under the terms of the Municipal Property Tax Code (CMPI), is equal to or exceeding € 1,000,000 — on the taxable property value used for purposes of the municipal property tax:

28.1 — Per property with residential designation — 1%;

28.2 — Per property, when the liable parties 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 ordinance of the Minister of Finance — 7.5%."

(Italics in original)

Law No. 55-A/2012, of 29 October entered into force on 30 October 2012, in accordance with its Article 7, paragraph 1 which determined its entry into force "on the day following its publication".

The applicable rates are as follows:

i) Properties with residential designation evaluated under the terms of the Municipal Property Tax Code: 0.5%;

ii) Properties with residential designation not yet evaluated under the terms of the Municipal Property Tax Code: 0.8%;

iii) Urban properties when the liable parties 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 ordinance of the Minister of Finance: 7.5%.

However, it happens that neither the Stamp Duty Code, nor Law No. 55-A/2012, of 29 October specify the concept of "urban property with residential designation", and therefore in accordance with Article 67 of the Stamp Duty Code, the interpretation of this concept should be sought in the Municipal Property Tax Code.

Indeed, it results from Article 67 of the Stamp Duty Code that "To matters not regulated in the present Code concerning item no. 28 of the General Table, the provisions of the CMPI shall apply, subsidiarily" - (Wording given by Article 3 of Law No. 55-A/2012 of 29 October).

In the Municipal Property Tax Code, the concept of property is defined in its Article 2, from which it follows that "For purposes of this Code, property is any parcel of land, including waters, plantations, buildings and constructions of any nature incorporated or resting thereon, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, under normal circumstances, has economic value (…), it being clarified in paragraph 4 of this legal provision that "For purposes of this tax, each autonomous unit, under the horizontal property regime, is deemed to constitute a property".

From the isolated reading of this legal provision we could be led, in a somewhat biased interpretation, to understand that under the municipal property tax, the autonomous units, under the horizontal property regime, would have a different treatment from the parts of a property susceptible to independent use.

However, it happens that a more careful analysis of the regime allows us to conclude precisely the opposite.

As emphasized by the Ombudsman to the Secretary of State for Tax Affairs, in a letter dated 2 April 2013, "the registration in the property registry of properties in vertical ownership, constituted by parts susceptible to independent use, follows the same rules as the registration of properties constituted in horizontal ownership, with the municipal property tax respectively, as well as the new Stamp Duty Tax, being assessed individually in relation to each of the parts".

(Italics in original)

Indeed, Article 12, paragraph 3 of the Municipal Property Tax Code provides in this sense, determining that "each floor or part of property susceptible to independent use is considered separately in the matriculation registry which also discriminates the respective taxable property value."

In accordance with Article 119 of the Municipal Property Tax Code "The services of the General Directorate of Taxes send to each liable party, by the end of the month prior to the month of payment, the competent collection document, with discrimination of the properties, their parts susceptible to independent use, respective taxable property value and the levy attributed to each municipality of the location of the properties."

In summary, for purposes of taxation under municipal property tax, each independent unit, even if integrating the same property, is considered separately, being assigned its own taxable property value and being taxed autonomously.

Thus, we cannot fail to follow the understanding upheld in the Arbitral Decision delivered in Case No. 50/2013, according to which "if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax. Thus, the incidence of the new stamp duty tax would only occur if any of the parts, floors or divisions with independent use presented a TPV exceeding € 1,000,000.00."

(Italics in original)

But, moreover, it is this separate treatment of each unit susceptible to independent use that makes it possible that, in the application of the allocation coefficient (cf. Article 41 of the Municipal Property Tax Code), attention is paid to the different purposes of each unit, which comprise a single property.

For this effect, the actual use of each of the parts susceptible to independent use is relevant, regardless of whether the property is classified for residential purposes, under the terms of Article 6 of the Municipal Property Tax Code and, regardless of whether it concerns an autonomous unit or merely a unit susceptible to independent use.

Furthermore, in accordance with this logic of the system, an urban property classified as residential can be composed of several independent units, in which one or more may have a non-residential designation, in accordance with Article 41 of the Municipal Property Tax Code.

This will be verified, for example, if in a property in full ownership with floors or divisions susceptible to independent use, licensed for residential use, one of its independent units is used for commerce or services, which even occurs in the property at issue in the case. In this hypothesis, the units in question will not have residential designation.

From this analysis it can be concluded that the concept of "property with residential designation", used in Item 28 of the TGIS, encompasses each of the autonomous units, with independent use, of the properties in full ownership, with units susceptible to independent use, that have such designation.

In view of the foregoing, we cannot follow the understanding of the Respondent, which would result, moreover, in a violation of the principle of equality, fiscal justice and contributory capacity, constitutionally enshrined.

As stated in the decision delivered in case 132/2013-T of this CAAD:

(…) in the works relating to the discussion of draft law no. 96/XII in the Assembly of the Republic (…) such measure, called "special tax on residential urban properties of higher value", was justified by the need to comply with the principles of social equity and fiscal justice, burdening more significantly the holders of properties with high value intended for residential use, and, to that extent, making the new "special tax" apply to "homes valued at equal to or exceeding 1 million euros."

(Italics in original)

Thus, it is presumed a contributory capacity (much) above average that justifies a "special" tax effort for those who have a "home" or "property" whose value is at least one million euros. The intention of the legislator seems, thus, to indicate that the scope of the incidence rule is to tax independent, individualized realities and not resulting from an aggregation or sum, even if legal.

That is, it does not follow from this measure that the legislator intended to tax properties whose units susceptible to independent use would not individually reach that value.

In view of the foregoing, and by virtue of none of the independent units that comprise the Applicant's property having a taxable property value exceeding € 1,000,000, the assessments under review are vitiated by violation of law, due to error in the legal presuppositions, which justifies the declaration of their illegality and the corresponding annulment of the tax acts now under review.

In view of the declaration of illegality of the assessments which are the subject of the present case, due to vicious violation of law due to error in the legal presuppositions, the consideration of the other topics invoked on a subsidiary basis is rendered moot.

Regarding the Request for Compensatory Interest

The Applicant petitions the condemnation of the Respondent to the payment of compensatory interest, as provided for in Article 43 of the General Tax Law and Article 61 of the Tax Procedure and Process Code.

It is clear from the case file that the illegality of the stamp duty assessment acts impugned is directly attributable to the Respondent, which, on its own initiative, practiced them without legal support, suffering from an erroneous interpretation (and, therefore, application) of the legal norms to the concrete case.

Consequently, the Applicant is entitled to receive compensatory interest on the amounts paid, under the terms provided in Article 43, paragraph 1, of the GTL and Article 61 of the TPPC.

  1. DECISION

In view of the foregoing, it is decided:

  1. To judge the request for arbitral decision as well-founded, with the consequent annulment, with all legal effects, of the stamp duty assessment acts better identified in the case file, in the total amount of Euros 12,808.80 (twelve thousand eight hundred and eight euros and eighty cents);

  2. To judge the request for compensatory interest petitioned by the Applicant as well-founded.

The value of the case is fixed at Euros 12,808.80 (twelve thousand eight hundred and eight euros and eighty cents), in accordance with the provisions of Article 3, paragraph 2 of the Regulations for Costs in Tax Arbitration Processes (RCPAT), Article 97-A, paragraph 1, subparagraph a) of the TPPC and Article 306 of the Code of Civil Procedure.

The amount of costs is fixed at Euros 918 (nine hundred and eighteen euros) under Article 22, paragraph 4 of the RJAT and Table I attached to the RCPAT, to be borne by the Tax and Customs Authority, in accordance with the provisions of Article 12, paragraph 2 of the RJAT and Article 4, paragraph 4 of the RCPAT.

Notify the parties.

Lisbon, 20 March 2015

The Arbitrator
(Maria Antónia Torres)

Text produced by computer, under the terms of Article 131, paragraph 5 of the Code of Civil Procedure, applicable by reference from Article 29, paragraph 1, subparagraph e) of the RJAT.

The present arbitral decision wording is governed by the orthography prior to the Orthographic Agreement of 1990.

[1] Acronym for Legal Framework for Tax Arbitration.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto de Selo) under Verba 28.1 TGIS applicable to vertical properties where no individual unit exceeds €1,000,000 VPT?
According to CAAD Process 547/2014-T, the applicability of Stamp Tax under Verba 28.1 TGIS to vertical properties where no individual unit exceeds €1,000,000 VPT is disputed. The taxpayer argued that Verba 28.1 should not apply when the property in full ownership contains multiple independent units, none individually reaching the €1,000,000 threshold, even if their aggregate value exceeds this amount. The case centered on whether 'property with residential designation' (prédio com afetação habitacional) refers to each autonomous unit or the entire building. The applicant contended that the tax incidence rule requires each floor or division susceptible to independent use to be considered separately, and since none reached €1,000,000 individually (each valued at €71,160.00), Stamp Tax should not apply. This interpretation aligns with how IMI treats autonomous units in vertical properties, assessing each division independently rather than aggregating values.
Can the Tax Authority sum the patrimonial values of independent units in a vertical property to meet the Verba 28 TGIS threshold?
The Tax Authority's position in Process 547/2014-T was that it could legitimately sum the patrimonial values of all independent units within a vertical property to meet the Verba 28.1 TGIS threshold of €1,000,000. The Tax Authority argued that although IMI (Municipal Property Tax) is assessed separately for each part susceptible to independent use, Stamp Tax legislation requires different treatment for properties in full ownership. They contended that 'the property as a whole is relevant' for stamp duty purposes, justifying the aggregation of TPVs from 18 residential units, 17 commercial premises, and one warehouse (totaling €1,280,880.00) to trigger the tax obligation. However, the applicant challenged this methodology as illegal, arguing it violates the incidence rule since the law refers to 'property' (prédio) in singular with residential designation, and none of the individual autonomous divisions exceeded the threshold independently. The fundamental dispute concerned whether vertical property should be treated as a single taxable unit or multiple independent units for Verba 28 purposes.
How does CAAD Process 547/2014-T address the distinction between IMI and Stamp Tax liquidation for properties in total ownership?
CAAD Process 547/2014-T specifically addresses the critical distinction between IMI liquidation methodology and Stamp Tax application for properties held in total ownership (propriedade plena) versus horizontal property regime. The case highlights that while IMI consistently assesses each floor or division with independent use separately, assigning individual patrimonial values to autonomous units (€71,160.00 per unit in this case), the Tax Authority attempted to apply a different criterion for Stamp Tax by aggregating these values. The applicant argued this inconsistency creates legal uncertainty and violates the principle that Stamp Tax under Verba 28.1 should follow similar assessment logic as IMI, particularly since the TGIS explicitly references 'taxable property value used for purposes of municipal property tax.' The Tax Authority countered that although stamp duty assessment follows CIMI (Municipal Property Tax Code) rules generally, the legislator intended 'appropriate adjustments' for vertical properties, treating the entire building as one property for stamp duty purposes despite IMI's unit-by-unit assessment. This methodological divergence formed the core of the legal controversy regarding correct tax incidence interpretation.
What constitutional principles, such as equality, are invoked when challenging Stamp Tax on vertical property under Verba 28 TGIS?
The applicant in Process 547/2014-T invoked significant constitutional challenges against the Stamp Tax assessment under Verba 28.1 TGIS, primarily alleging violation of the constitutional principle of equality (princípio da igualdade constitucional). The equality argument centered on discriminatory treatment between taxpayers owning properties constituted under horizontal property regime versus those with vertical properties in full ownership. Under the Tax Authority's interpretation, owners of autonomous fractions in horizontal property would only face stamp duty if their individual unit exceeded €1,000,000, while owners of vertical properties with identical-value units would be taxed based on aggregate values, creating unequal treatment for economically equivalent situations. The applicant further challenged the constitutionality of the transitional regime in Article 6, paragraph 1 of Law 55-A/2012 (which introduced Verba 28), invoking 'a significant set of constitutional principles' beyond equality, potentially including proportionality, legal certainty, and prohibition of excessive taxation. This constitutional dimension elevated the case beyond mere statutory interpretation to fundamental questions about fiscal justice and coherent application of property taxation principles across different ownership structures.
What is the procedure to request tax arbitration at CAAD to annul illegal Stamp Tax liquidations on real estate?
To request tax arbitration at CAAD for annulling illegal Stamp Tax liquidations on real estate, taxpayers must follow the procedure established in Decree-Law 10/2011 (RJAT - Regime Jurídico da Arbitragem Tributária). As demonstrated in Process 547/2014-T, the applicant A... Lda filed a request for arbitral tribunal constitution under Article 2, paragraph 1, subparagraph a) and Article 10 of RJAT. The petition must identify the contested tax assessments (including assessment notice numbers, amounts, and tax year), specify the legal grounds for illegality (such as violation of incidence rules or constitutional principles), and request specific relief (annulment, restitution, and compensatory interest). Parties must have legal personality and capacity, be legitimately represented per Article 4 and Article 10, paragraph 2 of RJAT, and comply with Ordinance 112-A/2011. The CAAD Deontological Council appoints an arbitrator to constitute the tribunal, which verifies its competence ratione materiae under Article 2 RJAT. Parties may waive oral arguments and tribunal meetings per Article 18 RJAT. The arbitral process provides an alternative to judicial courts for resolving tax disputes, offering specialized, expedited resolution of complex taxation matters like the Verba 28.1 TGIS interpretation issues presented in this vertical property case.