Process: 548/2014-T

Date: December 8, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Case 548/2014-T addressed whether Stamp Duty under Item 28.1 of the General Tax Table applies to land for construction (terrenos para construção) valued over €1,000,000. The claimant challenged a 2014 Stamp Duty assessment of €11,126.60 (1% rate) for fiscal year 2013 on urban land valued at €1,112,660, divided into 9 lots intended for future residential development. The core legal issue centered on whether vacant land for construction qualifies as 'urban property with residential use' under Item 28.1. The claimant argued that the Municipal Property Tax Code (CIMI) Article 6 establishes distinct categories: residential properties require actual buildings or constructions licensed for residential purposes or having residential use as their normal destination, while land for construction constitutes a separate category. Without physical buildings or municipal licensing, the land cannot be classified as having residential use. The claimant contended the assessment violated constitutional principles of tax legality and typicality, as the legislator intended Item 28 to tax luxury residential properties as indicators of taxpayer capacity, not undeveloped construction plots. The arbitral tribunal found no disputed facts and dispensed with oral hearings, focusing exclusively on the legal interpretation of whether terrenos para construção fall within Item 28.1's scope, which requires 'residential use' - a determination that depends on whether mere intended future residential development suffices or actual residential buildings are required.

Full Decision

CAAD: Tax Arbitration

Case no. 548/2014-T

Subject: Stamp Duty - Land for construction - Item 28 of the General Tax Table (TGIS)

THE PARTIES

Claimant: "A", NIPC ..., with registered office at ... (municipality of ...)

Respondent: Tax and Customs Authority

Subject: Land for construction - Stamp Duty - Item 28 of the General Tax Table

ARBITRAL DECISION

I - Subject matter of the request and procedural handling

On 28 July 2014, the Claimant submitted a request for arbitral pronouncement, requesting:

i) The declaration of illegality of a tax act assessing Stamp Duty for the year 2013 (no. 2014 ...), in the amount of €11,126.60;

ii) Consequent refund of the tax paid; and

iii) Payment of indemnity interest.

The said Stamp Duty assessment notice relates to an urban property, described in the respective property deed as "land for construction" (U-..., located in the parish of ..., municipality of ...).

The said Stamp Duty falls due, under item 28.1 of the respective General Table, on "urban properties with residential use" whose "tax value contained in the register, under the terms of the Code on Municipal Property Tax (CIMI), is equal to or greater than €1,000,000". The subjective scope of application rule places the tax on the owner, usufructuary or holder of surface rights (as of 31 December of the year to which the tax applies).

By decision of the President of the Deontological Council (no. 1 of article 6 of the RJAT) the undersigned was appointed as sole arbitrator. The arbitral tribunal was constituted on 1 October 2014.

The Tax and Customs Authority (hereinafter referred to, for short, as TA) submitted its Answer on 4 November. Additionally, the TA requested dispensation from the first arbitral meeting provided for in article 18 of the RJAT, insofar as no exceptions were raised and the controversial issue rests exclusively on matters of law.

Furthermore, the factual matter supporting the Claimant's request was not contested by the TA. And there are no unproven facts.

For this reason, the arbitral tribunal understood that the conditions were met for immediate consideration of the merits of the case. Having, on 10 November, notified the parties of the dispensation both from the arbitral meeting provided for in article 18, as well as from the holding of closing arguments.

The arbitral decision was scheduled for 5 December.

The Arbitral Tribunal was duly constituted and is competent.

The case is not affected by any irregularity. As mentioned, the parties did not raise any exceptions that would prevent consideration of the merits of the case.

II - Factual framework and summary of the legal grounds alleged by the parties

a) The Claimant is the owner of land for construction (located in the municipality of ..., parish of ...), which constitutes an urban property within the meaning of the Code on Municipal Property Tax;

b) In June 2008 the urban property was valued under the valuation regime provided for in the Code on Municipal Property Tax;

c) This valuation resulted in a tax value of €1,112,660. That is, a value greater than the minimum limit of €1,000,000 provided for in item 28.1 of the General Table of Stamp Duty;

d) The land is divided into 9 lots, whose gross construction area is intended for residential use (lots 3 to 6 provide, partially, gross construction areas for commercial use);

e) In 2014 the TA issued the consequent Stamp Duty assessment notice (for the year 2013), at the rate of 1%, in the amount of €11,126.60

f) The payment of the tax is, by reference to the Code on Municipal Property Tax, divided into 3 instalments, to be made in the months of April, July and November;

g) The Claimant paid the first instalment;

h) The Claimant attached copies of the property deeds and Stamp Duty assessment, which includes the payment document for the first instalment (April 2014).

These facts are proven, as shown by the documentation attached to the request for arbitral pronouncement. The TA did not contest the factual matter. As noted above, there remain no disputed or unproven facts.

The Claimant argues that:

· The Stamp Duty assessment issued in 2014 (for the fiscal year 2013) can only be based on the wording of item 28 in force as of the date to which the tax fact relates (31 December 2013);

· Under penalty of violation of the principle of non-retroactivity of the tax rule, which enjoys constitutional protection (article 103) and legal protection (article 12 of the General Tax Law);

· Therefore, the disputed assessment is based on the wording of item 28, as it was created by Law 55-A/2012, of 29 October, i.e. as of 31 December 2013;

· It is manifest that the assessment is defective as to the factual assumptions, since land for construction does not fall within the factual situation capable of being subsumed under the scope of application rule contained in the Stamp Duty Code and its General Table;

· The land in question was acquired with a view to a future real estate development operation;

· In 2013, the year to which the tax fact relates, there is no construction on the said land;

· This type of urban property - land for construction - is not confused with the concept adopted by the enabling tax rule (urban property with residential use);

· The concept of urban property with "residential use" needs to be interpreted and supplemented in accordance with the rules laid down in the Code on Municipal Property Tax;

· Article 6 of the Code on Municipal Property Tax classifies urban properties as "residential", "commercial, industrial or for services", "land for construction" and "others";

· The legislator, in compliance with the principle of typicality (in filling the essential elements constitutive of the tax fact), established that "residential, commercial, industrial or for services are buildings or constructions for which they were licensed or, in the absence of a license, which have as their normal destination each of these purposes";

· The concept of residential property is clearly defined, by reference to "municipal license for residential purposes" or "use or normal destination as residence";

· In the absence of legal provision to implement it, the expression "residential use" must be interpreted in accordance with current law;

· Which requires that "residential use" represent buildings or constructions for which they were licensed or, in the absence of a license, those which have as their normal destination residential use;

· In fact, item 28 of the General Table did not establish a "third category of urban property", nor did it separate the concepts of property in the Code on Municipal Property Tax (to which it refers subsidiarily);

· Therefore, residential nature is based exclusively on the Code on Municipal Property Tax;

· The Claimant refers to a judgment of the Central Administrative Court of the South (of 15 November 2011), which adopts licensing or, in its absence, the economic activity actually carried out, as the only criteria for assessing the residential nature (or commercial, industrial or for services) of a given urban property;

· The property description and deed coincide with physical reality, all converging on the absence of any buildings or constructions. There being no licensing or economic activity;

· In sum, land for construction does not fall within the list of tax facts that generate a tax obligation. Therefore, the disputed Stamp Duty assessment is illegal;

· In defense of this argument, the Claimant cites various judgments of the Administrative Supreme Court;

· It also considers that the legislative intent is directed at the taxation of "luxury properties", as indicators of a given taxpayer capacity;

· Land for construction fails to fall within this concept, insofar as the absence of a building or construction does not allow the realization of the tax value that underlies the land;

· Furthermore, part of the land, in addition to potentially not being intended for any construction, could be divided among various separate units (each of which would have a tax value lower than that of the land);

· Finally, the Claimant holds that the Stamp Duty assessment has the defect of lack of reasoning;

· Specifically, because "this assessment notice has a configuration identical to that of the Municipal Property Tax, being affected by the same defect". The TA would have to "state that on the land there is a building licensed for residential use or a building whose normal destination is residential use";

· The Stamp Duty assessment must demonstrate a clear cognitive and evaluative process, avoiding any doubts or imprecisions. Setting out the factual and legal grounds, in such a way as to allow the taxpayer to decide whether to accept or reject it;

· It notes that the fact that the taxpayer contests the tax act and identifies the corresponding defects does not alter the lack of reasoning inherent in the underlying tax act;

· The TA did not explain "why it assessed Stamp Duty on land for construction, when it is certain that the enabling rule limits taxation to properties with residential use";

· And it ends by citing judgment no. 659/12 of the Administrative Supreme Court, according to which "the reasoning of the act fixing the Tax Value, whether resulting from valuation or from updating, must be communicated to the Municipal Property Tax taxpayer". And "if this has not been done, and also the Municipal Property Tax assessment does not make known the manner in which the Tax Value was determined, that assessment cannot be considered sufficiently reasoned".

In its answer, the TA begins with the understanding that "the property in question has the legal nature of a property with residential use".

Subsequently arguing that:

· In the absence of a definition, in the Stamp Duty Code, of the concept of urban property, one must resort to the Code on Municipal Property Tax (applicable subsidiarily by express reference in the Stamp Duty Code);

· "The notion of the intended use of an urban property is found in the section concerning the valuation of properties";

· This, because the determination of the tax value of a given property (valuation) is based, inter alia, on the purpose to which it is intended. This criterion presents itself as an autonomous factor in the procedure of direct valuation;

· The legislator established, in article 45 of the Code on Municipal Property Tax, the specific criteria for determining the tax value of land for construction. As results from the expression "value of authorized buildings", reason why the intended use coefficient (purpose) of the property must be applied;

· Both built properties and land for construction share the application of the intended use coefficient, as an element in determining their respective tax values;

· It cites a judgment of the Central Administrative Court of the South (judgment no. 4950/11, of 14 February 2012), in which it is concluded that "the valuation model [of land for construction] is the same as that of built buildings, although starting from the building to be constructed";

· So much so that land for construction must correspond to a legal expectation, namely the prospect of erecting on it a building with certain characteristics and volume;

· Therefore, "the legislator intended that the valuation methodology of urban properties in general be applied, and thus all coefficients must be taken into account (...) namely the intended use coefficient";

· Now, given that the use of the intended use coefficient in valuation is clear, its consideration is required for the purposes of applying item 28;

· One must value the literal element of item 28, whose concept of "residential use" is broader than "properties intended for residence". This greater breadth requires the need to integrate other realities, not being limited to the categories of properties listed in article 6 of the Code on Municipal Property Tax;

· It being certain that for any land for construction it is possible - and legally required - to determine the corresponding intended use. All the more so since this is part of the valuation procedure, as happens in this case;

· Additionally, the alleged defect of lack of reasoning must be refuted;

· Given that the disputed tax act identifies the property subject to taxation, the nature of the tax and the enabling rule, quantifies the tax obligation and states the payment date;

· And if the reasoning is adequate and sufficient when a normal recipient would understand the cognitive and evaluative process of the author of the tax act, the Claimant attests to compliance with this parameter. As can be seen from the arguments put forward in the request for arbitral pronouncement;

· And if it had doubts, it would be up to it to request the certificate provided for in article 37 of the Tax Procedure and Process Code.

III - On the law

The disputed issue can be narrowed down to the following question: can land for construction be considered as a property with residential use?

This implies a set of prior and concurrent questions:

i) Does the Stamp Duty Code (as worded on 31 December 2013) present an autonomous category of urban property or, conversely, is it based on the categories of urban property contained in the Code on Municipal Property Tax?

ii) Should the concept of "residential use" be sought in the criteria for determining the tax value or in the typology (categories) of urban property?

iii) Do the scope of application rules of a tax precede the rules for quantifying the taxable value or, conversely, can they be affected by these latter rules?

In the case at hand, the urban property (land for construction) was valued in 2008. Among the criteria for determining the tax value, residential use stands out.

Which appeared as decisive in the calculation of the tax value, through the fixing of location and intended use coefficients.

The valuation of the land for construction was notified to the Claimant. Constituting a separate act. Not only in the Municipal Property Tax, but, additionally, in all taxes based on the concept of tax value.

Among which we could highlight the Income Tax Code, the Corporate Income Tax Code, the Real Estate Transfer Tax Code and the Stamp Duty Code.

It suffices to exemplify with the onerous transfer of a property, in which the tax obligation is based on the contractual value or, if higher, on the tax value. This being determined exclusively in accordance with the rules contained in the Code on Municipal Property Tax.
A value that results from the direct valuation act, notified to the interested party. And which the latter can challenge through a request for second valuation (while, as a general rule, a necessary and prior act to a possible judicial review).

Therefore, the tax value, determined on the basis of the regime set out in the Code on Municipal Property Tax, is fully adopted in item 1 of the General Table of Stamp Duty.

In sum, the scope of application rule contained in item 1 of the General Table is entirely autonomous from the Code on Municipal Property Tax, but is based on it for the purposes of quantifying the tax obligation.

Can we say the same for item 28?

This rule - as worded in the year 2013 to which the disputed Stamp Duty assessment relates - has the following wording:

"28 - Ownership, usufruct or right of surface of urban properties whose tax value contained in the register, under the terms of the Code on Municipal Property Tax (CIMI), is equal to or greater than €1,000,000 - on the tax value used for the purpose of Municipal Property Tax:

28.1 - For property with residential use - 1%";

28.2 - For property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a regime clearly more favorable, contained in the list approved by regulation of the Minister of Finance - 7.5%."

The Stamp Duty Code completes the scope of application rule by defining territoriality (properties located in Portuguese territory) and subjective scope (the owner, usufructuary or holder of surface rights).
Also establishing the rules for assessment and payment (single or by instalments) of the tax.

Returning to the concept of "property with residential use", the Claimant and Respondent differ as to the categories of property. As well as the extent and scope of the rules for determining the tax value of an urban property.

For the Claimant, the Code on Municipal Property Tax does not contain a third category of urban property (the property with residential use), providing only for residential properties or land for construction. The existence of which must be determined on the basis of the corresponding license or, in the absence of this, its normal destination.

For the Respondent, the concepts of land for construction and the respective rules for determining the tax value are inseparable. Since any urban property must, regardless of its categorization, present residential, industrial, or commercial or services intended use.

This disputed issue has already been the subject of various decisions. Both from the Administrative Supreme Court as from CAAD.

These decisions are uniform in content, denoting the existence of a clear line of case law. Which holds that land for construction cannot be subsumed under the scope of application rule of Stamp Duty, as contained in item 28 of its General Table (as worded for tax facts occurring before 1 January 2014).

It is this line of case law that the present arbitral decision adopts.

And because it is a matter widely discussed in case law, the present arbitral decision follows closely the recent judgment of the Administrative Supreme Court (Case no. 0739/14). From which various excerpts are transcribed.

First, "the concept of "property (urban) with residential use" was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the Code on Municipal Property Tax, to which no. 2 of article 67 of the Stamp Duty Code (also introduced by that Law), refers by way of subsidiary reference".

From the letter of the law "(...) nothing unequivocal follows, indeed, as it itself [uses] a concept that it did not define and that was also not defined in the act to which it referred by way of subsidiary reference (...)".

From the legislator's intent "nothing more follows than the concern to generate new tax revenue (...) reasons which make no relevant contribution to the clarification of the concept of "urban properties with residential use", since they take it for granted, without any concern to clarify it".

It is especially concerning that this imprecision affects the scope of this new normative rule imposing Stamp Duty. Leaving the TA and taxpayers at the mercy of the uncertainty of the literal scope and legislative intent of this scope of application rule.

Which explains the particular litigiousness of this new tax, measured by the significant number of judicial challenges and requests for arbitral pronouncement. As well as the subsequent amendment of item 28 in the framework of the State Budget for 2014 (Law no. 83-C/2013, of 31 December), which is not unrelated to the line of case law that was subsequently established regarding this disputed issue.

Specifically, Stamp Duty whose tax fact occurs after 1 January 2014 will fall on "residential property or land for construction whose building, authorized or planned, is for residential use".

Thus, the ambiguity that surrounded the term "intended use" was removed. Furthermore, the reference to authorized or planned constructions is added, thus covering land for construction that does not present any buildings.

But this new law did not take on the nature of an interpretive law, "(...) clarifying nothing (...) in relation to prior situations (assessments of 2012 and 2013)".

In any case, even if the new law were assigned such a scope, it would always be necessary to determine whether it would present itself, or not, as innovative. Since we are dealing with an objective scope of application rule, to which it falls to circumscribe the tax fact, without which the tax legal relationship does not exist.

The truth is that the legislator did not even take care to qualify the new law as interpretive. Which allows affirming the general principle of non-retroactivity of law, under which the new law only applies to future events. Covering, in this case, tax facts arising after 1 January 2014.

It is also beyond dispute to conclude that from the new law it does not result that the intention or will of the legislator "(...) was, ab initio, to include within its objective scope of application land for construction for which authorization or planning of construction of residential buildings has been given (...) ".

Therefore, the disputed case must be governed by the law in force on 31 December 2013.

And what can be said about the intended use coefficient used as a variable in determining the tax value of most urban properties?

"The fact that it can be considered that in determining the tax value of urban properties classified as land for construction the intended use that the building authorized or planned for it will have must be taken into account for determining the respective value of the implantation area (cf. nos. 1 and 2 of article 45 of CIMI), does not determine that land for construction can be classified as "properties with residential use" (...)".

Indeed, "(...) "residential use" always appears in the Code on Municipal Property Tax referred to "buildings" or "constructions", existing, authorized or planned, since only these can be inhabited, which is not the case with land for construction, which does not, in themselves, have conditions for this, not being capable of being used for residential purposes except if and when the construction authorized and planned for it is built on them (...)".

And after the completion of works, the land for construction will give rise to a new urban property among the other typologies provided for in article 6 of the Code on Municipal Property Tax (residential property, industrial, commercial, for services or others).

In truth, every urban property presents a tax value, whose quantification rules could not be confused with the prior categorization of the properties themselves. Under penalty of the tax fact (subjection of a given economic-legal reality, in this case an urban property, to Stamp Duty) being confused with the tax obligation (the quantification of an obligation as a consequence of the prior tax fact).

In other words, the scope of application rule of a tax always precedes the subsequent rules for quantifying the tax obligation.

If a given urban property is not subsumed under the scope of application rule of a particular tax, the birth of a tax fact cannot be deemed to have occurred and, therefore, of a subsequent tax obligation capable of quantification. Under penalty of the rules for quantifying that tax obligation being valued as true scope of application rules.

And, as the Administrative Supreme Court states, "it would indeed be strange if the determination of the scope of the scope of application rule of the tax of item no. 28 of the General Table of Stamp Duty were to be found, at the end of the day, in the rules for determining the tax value of the Code on Municipal Property Tax, and that the terminological imprecision of the legislator in drafting that rule were, in fact, clarified and finally elucidated through an indirect and equivocal reference to the intended use coefficient established by the legislator in relation to built properties (article 41 of the Code on Municipal Property Tax)".

A contrary interpretation would imply accepting that any rule for quantifying the tax obligation (tax value) could be used in interpreting the meaning and scope of a scope of application rule (the subjection to Stamp Duty of properties classified as urban).

"Considering that land for construction - whatever the type and purpose of the building that will be, or could be, erected on it - does not satisfy, by itself, any condition to be licensed as such or to be defined as having residential use as its normal destination, and the scope of application rule of stamp duty referring to urban properties with "residential use", without any specific concept being established for this purpose, cannot extract from it that it contains a future potential, inherent to a different property that may possibly be built on the land".

Thus concluding about the "(...) clear distinction between urban properties "residential" and "land for construction"". The latter not being able to be qualified as "properties with residential use" for the purposes of item no. 28.1 of the General Table of Stamp Duty (as worded in the year 2013, to which the disputed Stamp Duty assessment issued in 2014 relates).

In conclusion, the urban property held by the Claimant is classified, in the year 2013, as land for construction. Not constituting an urban property with residential use. Being, consequently, excluded from the scope of Stamp Duty provided for in item 28.1 of its General Table.

For this reason, the assessment notice issued by the TA violates the principle of legality. It should be annulled. The sums paid by the Claimant should be refunded.

As for the indemnity interest requested by the Claimant, as a consequence of the damage caused by the loss of economic resources channeled to the payment of Stamp Duty, the same appear to be due.

Indeed, the right to receive indemnity interest results, inescapably, from the provision of no. 1 of article 43 of the General Tax Law.
With the principal issue decided, which is based on the illegality of the tax act, it is beyond doubt that there was error attributable to the TA. From which resulted the "payment of the tax debt in an amount greater than that legally due", as provided in the aforesaid rule of the General Tax Law.

The indemnity interest, at the rate of 4%, is due for the period of time between the payment of the Stamp Duty collection notices and the date of issuance of the credit note, respecting the 90-day period for voluntary execution of the present arbitral decision.

Finally, and although knowledge of the defect of lack of reasoning of the tax act is necessarily moot, it is important to note that the Claimant is not right.

First of all, because the valuation act of the land for construction was duly notified to it, during the procedure of direct valuation of the property.
Being clear that the valuation result was based on the residential use of the property, with the consequent impact at the level of location coefficients (which can vary depending on the intended use) and intended use.

Furthermore, the procedure for valuing land for construction is based - depending on the subdivision - on the property susceptible of construction. Therefore, it will not be unknown to the Claimant that the subdivision permit provides, mostly, for the construction of residential buildings.

If this were not the case, the Claimant would have been entitled to - at that time - contest the valuation act, through a request for second valuation and subsequent judicial challenge.

And it could also, after the more than 3 years that have already elapsed, have requested a new valuation, in order to correct, if applicable, the buildings planned for the land or the implantation area or even the percentage of the implantation area.
Correcting the prior valuation and/or adjusting it, for example, to reflect the gross construction areas intended for commercial use and parking (as provided in the subdivision permit).

In sum, the Claimant cannot be unaware of the reasoning that led the TA to assess Stamp Duty on this land for construction. Since the prior valuation is clear, having been based on the residential use of the constructions susceptible of being built.

There is, moreover, a divergence of understanding between the parties regarding the meaning and scope of item 28 of the TGIS. Which the Claimant understood well and was able to contest.

A final note on the citation, by the Claimant, of the judgment of the Administrative Supreme Court (case no. 0659/12), which was accompanied by other decisions of the same court (cases no. 036/12, no. 0822/12 and no. 668/13).

What unites these judgments is the fact that we are faced with Municipal Property Tax assessment notices resulting from the updating of tax values. Which resulted from the application of monetary correction factors to unrented urban properties, as part of the transitional regime inherent in the entry into force of the Code on Municipal Property Tax (in November 2003).

This, given the need to update the tax value of urban properties prior to the date of entry into force of the Municipal Property Tax. Whose marked discrepancy (kept unchanged in the years following the valuation under the former regime) was introducing an element of discrimination in terms of the taxpayers' capacity.

This update would be transitional and temporary, pending the valuation of urban properties. Which would occur at the time of the first onerous or gratuitous transfer after the entry into force of the CIMI or in the general valuation procedure.

This transitional update of tax values was not notified to taxpayers. Who thus found themselves unable to know the basis for the update and the criteria on which it was based.
That notification was postponed to the Municipal Property Tax assessment notice. Which, once again, did not make known all elements of the calculation of the update to the tax value.

Which led the Administrative Supreme Court to conclude that there was a manifest lack of reasoning in the Municipal Property Tax assessment notice.

None of this occurs in the case at hand, given that, as noted above, the Claimant was fully aware of the criteria used in determining the tax value. Having had all the means to, if it wished, contest the procedure and/or result of the valuation.

IV - Decision

Under the terms and on the grounds set out, the arbitral tribunal decides:

i) To uphold the request for arbitral pronouncement, with the consequent annulment of the Stamp Duty assessment notice for the fiscal year 2013;

ii) Refund of the sums paid by the Claimant; and

iii) Payment of indemnity interest on the total amount to be refunded by the TA.

The economic value of the request is fixed at €11,126.60.

Costs on the Respondent.

The parties are hereby notified.

Lisbon, 8 December 2014

Singular Arbitral Tribunal

José Luís Ferreira

		[i] Judgments of the STA of 9 April (cases no. 1870/13 and no. 48/14), 23 April (cases no. 270/14 and no. 272/14), 14 May (cases no. 055/14, no. 01871/13 and no. 0317/14), 28 May (cases no. 425/14, no. 0396/14 and no. 0395/14), 2 July (case no. 0467/14), 9 July (case no. 0676/14), 10 September (case no. 0740/14) and 24 September (case no. 739/14).


	
		[ii] Arbitral decisions of CAAD in cases no. 42/2013-T, no. 48/2013-T, no. 49/2013-T, no. 53/2013-T, no. 75/2013-T, no. 144/2013-T, no. 158/2013-T, no. 180/2013-T, no. 189/2013-T, no. 191/2013-T, no. 215/2013-T, no. 231/2013-T, no. 288/2013-T and no. 310/2013-T.

Frequently Asked Questions

Automatically Created

Does Verba 28 of the General Stamp Tax Table apply to building land (terrenos para construção) in Portugal?
Item 28 of the General Stamp Tax Table (Tabela Geral do Imposto de Selo) applies to 'urban properties with residential use' valued at €1,000,000 or more. According to CAAD Case 548/2014-T, the critical issue is whether land for construction (terrenos para construção) qualifies as property with 'residential use.' Under Article 6 of the Municipal Property Tax Code (CIMI), urban properties are classified into distinct categories: residential, commercial/industrial/services, land for construction, and others. Residential properties are defined as buildings or constructions licensed for residential purposes or having residential use as their normal destination. Land for construction, without actual buildings or constructions, constitutes a separate legal category. The case established that residential use requires physical buildings with appropriate licensing or actual residential function, not merely land designated for future residential development.
What is the Stamp Tax threshold for urban properties with residential designation under Portuguese law?
Under Portuguese law, Item 28.1 of the General Stamp Tax Table establishes a threshold of €1,000,000 for annual Stamp Duty on urban properties with residential designation. Properties with a tax value (patrimonial value) equal to or exceeding €1,000,000 as registered under the Municipal Property Tax Code (Código do Imposto Municipal sobre Imóveis - CIMI) are subject to Stamp Duty at a rate of 1% annually. The tax is assessed on the property's registered tax value as of December 31 of the relevant fiscal year and is payable by the owner, usufructuary, or holder of surface rights. Payment is divided into three installments due in April, July, and November. This threshold and rate structure was introduced by Law 55-A/2012 of October 29, 2012, as part of measures targeting high-value residential properties.
Can a construction plot be classified as a property with residential allocation for Stamp Tax purposes?
According to CAAD Case 548/2014-T, a construction plot (terreno para construção) cannot be classified as a property with residential allocation for Stamp Tax purposes under Item 28 of the General Tax Table. The Municipal Property Tax Code (CIMI) Article 6 establishes clear categorical distinctions: residential properties require actual buildings or constructions that were either licensed for residential use or have residential use as their normal destination. Land for construction is a distinct category separate from residential, commercial, industrial, or service properties. Without physical buildings, municipal licensing for residential purposes, or actual residential occupation, vacant land intended for future development cannot meet the legal definition of 'property with residential use.' The principle of tax legality (tipicidade tributária) requires strict interpretation of tax obligation elements, preventing extension of Stamp Duty beyond properties with actual residential characteristics to encompass undeveloped construction land.
How did CAAD Process 548/2014-T rule on the Stamp Tax liquidation for building land valued over €1,000,000?
CAAD Process 548/2014-T ruled on a Stamp Tax liquidation challenging the Tax Authority's assessment of €11,126.60 (1% of €1,112,660 valuation) for fiscal year 2013 on land for construction divided into 9 residential lots. The claimant argued that terrenos para construção do not fall within Item 28.1's scope, which applies to 'urban properties with residential use.' The arbitral tribunal, constituted on October 1, 2014, dispensed with oral hearings as the Tax Authority did not contest the facts and the matter involved purely legal interpretation. The case centered on whether Item 28 extends to vacant construction land or requires actual residential buildings. The claimant cited CIMI Article 6's categorical distinctions, Constitutional protections against retroactive taxation (Article 103), court precedents from the Administrative Supreme Court and Central Administrative Court, and the legislative intent to tax luxury residential properties as wealth indicators - not undeveloped land awaiting construction.
What are the grounds for requesting arbitration against a Stamp Tax assessment on construction land in Portugal?
Grounds for requesting arbitration against a Stamp Tax assessment on construction land in Portugal include: (1) Violation of the principle of tax legality (tipicidade tributária) - the property does not meet the legal definition of 'urban property with residential use' required by Item 28.1 of the General Stamp Tax Table; (2) Incorrect legal classification - terrenos para construção constitute a distinct category under CIMI Article 6, separate from residential properties which require actual buildings or constructions; (3) Defective factual assumptions in the assessment - absence of buildings, municipal licensing, or residential occupation means the property lacks residential use; (4) Violation of constitutional principles including non-retroactivity of tax laws (Article 103) and legal certainty; (5) Misapplication of the Code on Municipal Property Tax definitions; (6) Excess of legislative intent - Item 28 targets luxury residential properties as taxpayer capacity indicators, not undeveloped construction plots; (7) Precedential support from Administrative Supreme Court and other judicial decisions establishing strict interpretation requirements for residential property classification.