Process: 550/2014-T

Date: December 10, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

This tax arbitration decision addresses whether Stamp Duty under item 28.1 of the General Stamp Duty Table (TGIS) applies to land for construction (terrenos para construção). The taxpayer A, S.A. challenged Stamp Duty assessments totaling €39,767.40 for 2013 on urban property classified as building land with a patrimonial value of €3,976,740. Law 55-A/2012 introduced item 28.1 TGIS, imposing a 1% tax on properties with residential designation valued at €1,000,000 or more. The central legal issue is interpreting 'property with residential designation' - a concept not defined in the Municipal Property Tax Code (CIMI) or other tax legislation. The taxpayer argued that land for construction lacks residential designation and therefore falls outside the scope of item 28.1. The Tax Authority contended the property has residential legal nature. The arbitral tribunal analyzed the distinction between 'residential properties' under CIMI Article 6(2) - buildings licensed or intended for residential purposes - and the unique terminology 'residential designation' used in item 28.1. The tribunal referenced multiple CAAD precedents (cases 53/2013-T, 49/2013-T, 180/2013-T) and Supreme Administrative Court rulings consistently addressing this classification issue. The decision examines whether undeveloped building land, lacking actual residential use or construction, can be considered as having residential designation for Stamp Duty purposes, with significant implications for property taxation on high-value development land throughout Portugal.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 550/2014 – T

Subject Matter: Stamp Duty – item 28.1 of the General Stamp Duty Table – land for construction

Claimants/Petitioners: A, S.A.

Respondent: Tax and Customs Authority (hereinafter ATA)

  1. Report

On 28-07-2014, the limited company A, S.A., collective entity no. …, with registered office at Street … Lisbon, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Center (CAAD) a request for constitution of an arbitral tribunal with a view to annulling the tax assessment acts relating to Stamp Duty on item no. 28 of the General Stamp Duty Table (TGIS), relating to the urban immovable property registered in the property matrix under the article … of the parish of …, municipality of ….

The Claimant alleges that the immovable property to which the Stamp Duty assessments refer is land for construction, and therefore, does not have residential designation for the purposes of the taxation provided for in item 28.1 of the General Stamp Duty Table.

The Claimant further requests the condemnation of the ATA to pay compensation for undue provision of security.

A sole arbitrator, Suzana Fernandes da Costa, was designated on 15-09-2014.

In accordance with the provisions of article 11 no. 1 letter c) of the RJAT, the singular arbitral tribunal was constituted on 30-09-2014.

The Tax and Customs Authority submitted a reply on 31-10-2014 (within the legal deadline for such), arguing that the request for declaration of illegality and consequent annulment of the disputed assessments should be judged unfounded, since the assessments in question embody a correct interpretation of item 28.1 of the General Stamp Duty Table, given that the said property has the legal nature of property with residential designation.

The ATA requested on 31-10-2014 the waiver of holding the meeting provided for in article 18 of the Tax Arbitration Regime.

The Claimant was notified of this request from the ATA, and on 17-11-2014 informed that it had no objection to the request for waiver of the said meeting.

On 27-11-2014, a ruling was issued waiving the holding of the meeting, since there were no exceptions to be considered. The production of submissions was also dispensed with. The date of 10-12-2014 was set for the pronouncement of the arbitral decision.

The parties have legal personality and capacity and are legitimate (articles 4 and 10 no. 1 and 2 of the RJAT and article 1 of Order no. 112-A/2011 of 22 March).

The present request for arbitral pronouncement was submitted in a timely manner, in accordance with article 10 no. 1 letter a) of Decree-Law no. 10/2011 of 20 January.

The process is not affected by nullities and no prior questions were raised, beyond the request for joinder of claims which will be decided hereinafter.

The Claimant requested joinder of claims, alleging that the assessments relate to the same tax, arise from the same taxable event and correspond to the same taxation period.

In this case joinder of claims is admissible, in accordance with articles 104 of the CPPT and 3 of the RJAT, and therefore is admitted.

  1. Factual Basis

2.1. Established facts:

Having examined the documentary evidence produced, the following facts are considered established and with relevance for the decision of the case:

  • The Claimant is the owner of the urban immovable property registered in the urban property matrix under the article … of the parish of …, municipality of …, as per the property record attached to the arbitral request as document 3;

  • The property is land for construction and has a patrimonial value of 3,976,740.00 €, as per the property record attached to the arbitral request;

  • The Claimant was notified of the assessment of Stamp Duty for the year 2013, in the amount of 39,767.40 €, payable in installments, contained in the collection documents no. 2014 …, in the amount of 13,255.80 €, payable by 30-04-2014 (first installment), and from the collection document no. 2014 …, in the amount of 13,255.80 €, payable by 31-07-2014 (second installment), as per documents 1 and 2 attached to the arbitral request.

No other facts with relevance for the decision of the case were established.

2.2. Reasoning of the established factual basis:

With regard to the established facts, the arbitrator's conviction was based on the documentary evidence attached to the case file.

2.3. Unestablished facts:

It was not established that the Claimant provided security in fiscal enforcement proceedings.

  1. Legal Reasoning:

3.1. Object and scope of the present proceedings

The issue to be decided in the present proceedings is whether the property which was the subject of the stamp duty assessment, being land for construction, has residential designation and whether item 28.1 of the General Stamp Duty Table (TGIS) is applicable to it.

This same issue has been addressed, among others, by awards of the CAAD issued in cases number 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 310/2013-T and 284/2013-T, 151/2014-T and 202/2014-T.

The Supreme Administrative Court has also ruled on this issue, namely in awards of cases no. 0467/14 of 02-07-2014, no. 0676/14 of 09-07-2014, no. 0395/14 of 28-05-2014, no. 01871/13 of 14-05-2014 and no. 055/14 of 14-05-2014, no. 0425/14 of 28-05-2014, no. 0396/14 of 28-05-2014, no. 0274/14 of 14-05-2014 and no. 046/14 of 14-05-2014.

3.2. Issue of the classification of land for construction within the scope of item 28.1 of the TGIS

3.2.1. Regime of Law no. 55-A/2012, of 29 October

Law no. 55-A/2012, of 29 October, added item 28 to the General Stamp Duty Table (TGIS), with the following wording:

28 – Ownership, usufruct or right of superficies of urban immovable properties whose tax patrimonial value registered in the matrix, in accordance with the Municipal Property Tax 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 designation – 1% (…);

In the transitional provisions set out in article 6 of that Law no. 55-A/2012, the following rules were established:

c) 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 Property Tax Code with reference to the year 2011; (…)

f) The rates applicable are as follows:

i) Properties with residential designation assessed in accordance with the IMI Code: 0.5%;

ii) Properties with residential designation not yet assessed in accordance with the IMI Code: 0.8%;

Item 28.1 TGIS and sub-items i) and ii) of letter f) of no. 1 of article 6 of Law no. 55-A/2012, contains a concept that is not used in any other tax legislation which is that of "property with residential designation".

Let us consider:

3.2.2. Concept of properties used in the CIMI

In the CIMI, the types of properties are enumerated in its articles 3 to 6. There is no concept of "property with residential designation" to be found in any of these articles.

The most approximate notion to the literal meaning of this expression used is that of "residential properties", which no. 2 of article 6 of the CIMI defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of licensing, that have as their normal purpose residential purposes.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that which is extracted from no. 2 of article 6 of the CIMI, points to the fact that it was not intended to use the same concept.

Nor is this concept found, with this terminology, in any other legal instrument.

3.2.3. Concept of "property with residential designation"

Item 28.1 of the TGIS stated in 2013 that "for property with residential designation - 1%".

The word "designation", in this context of the use of a property, has the meaning of "action of designating something for a particular purpose".

As it is stated in the award of the CAAD issued in case no. 53/2013-T, in which the arbitrators were Judge Counsellor Jorge Lopes de Sousa, Ms. Dr. Conceição Pinto Rosa and Mr. Dr. Alberto Amorim Pereira:

"it can be concluded that the available interpretative elements, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', point clearly to the fact that it was not intended to encompass within the scope of item 28.1 situations of properties that are not yet designated for residential purposes, namely land for construction held by companies".

Those classified as land for construction, and having regard to the provision of article 6 no. 3 of the IMI Code, are those in which the owner has acquired the right to construct thereon or to carry out land subdivision operations, as well as those acquired expressly for that purpose. In this sense, see JOSÉ MARIA FERNANDES PIRES in Lectures on Patrimony and Stamp Taxes, Almedina, 2010, page 97.

It should be noted that in the classification as land for construction it is irrelevant the designation that future constructions may have, namely residential, commercial, industrial or for services.

For its part, the award of the Supreme Administrative Court of 09-07-2014, from case no. 0676/14, in which Counsellor Dulce Neto is the reporter, states that "residential designation always appears in the IMI Code referred to 'buildings' or 'constructions', existing, authorized or foreseen, because only these can be inhabited, which is not the case with land for construction, which do not have, in themselves, conditions for such, not being susceptible to be used for habitation unless and when the authorized and foreseen construction is built thereon (but in that case they will no longer be 'land for construction' but another type of urban properties – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of the CIMI)."

In the same way, in the award of the Supreme Administrative Court, of 14-05-2014, case no. 046/14, in which Ascenção Lopes is the Reporter, it is stated that "having the legislator not defined the concept of 'properties (urban) with residential designation', and it resulting from article 6 of the IMI Code – subsidiarily applicable to the Stamp Tax provided for in the new item 28 of the General Table – a clear distinction between 'urban residential properties' and 'land for construction', these cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of the TGIS, as worded by Law no. 55-A/2012, of 29 October), as urban properties with residential designation."

We can thus conclude that "land for construction", cannot be considered as "property with residential designation" for purposes of application of item 28.1 of the General Stamp Duty Table.

Prohibition of analogy and extensive interpretation

One might, on the other hand, raise the question of the possibility of application of analogy to the item provided for in item 28.1 of the TGIS. Now, on this matter, no. 4 of article 11 of the General Tax Law provides, according to which:

"4. Gaps resulting from tax rules covered by the reservation of law of the Assembly of the Republic are not susceptible to analogic integration"

As to the matters covered by the reservation of law, note article 103, no. 2 of the CRP and article 8 of the LGT. According to these rules the principle of tax legality encompasses the incidence, the rate, tax benefits and guarantees of taxpayers. This is also referred to in the work "The Principle of Fiscal Legality" by Ana Paula Dourado, Almedina, 2007, page 106.

Since item 28.1 TGIS is a rule of incidence, covered by the principle of fiscal legality, its analogic application to situations not expressly provided for therein is prohibited.

Similarly, nor would it be admissible an extensive interpretation of the said item that would allow the inclusion in the expression contained in the law of land for construction. On interpretation articles 11, no. 1 to 3 of the LGT and article 9 of the Civil Code govern. We understand that an extensive interpretation of the said item that includes therein land for construction is not possible, since it would always have to have a minimum correspondence in the letter of the law, which does not occur.

With regard to the historical element, the fact that item 28.1 TGIS was subsequently expressly amended, by the State Budget Law for 2014, so as to include, as from 01.01.2014, land for construction, also allows the conclusion that these properties were not taxed in the wording in force until 31.12.2013.

Application of the regime to the Claimant's situation

The Claimant's property is land for construction held by a company. For the reasons referred to, we are not dealing with a property with residential designation, and therefore the Stamp Tax provided for in item 28.1 of the TGIS does not apply to that property.

For this reason, the assessments whose declaration of illegality is requested are affected by a defect of violation of that item 28.1 TGIS, due to error regarding the legal assumptions, which justifies the declaration of its illegality and annulment (article 135 of the CPA).

Regarding the request for compensation for undue provision of security

The Claimant requests the condemnation of the AT to pay compensation for undue provision of security, in accordance with article 53 no. 1 of the General Tax Law.

However, it does not appear from the established factual basis nor from the documents attached to the case file that the Claimant provided any security and for a period exceeding three years.

Therefore, the request for payment of compensation for undue provision of security must be dismissed.

  1. Decision

In light of the above, it is determined:

  • to judge as well-founded the request formulated by the Claimant in the present tax arbitral proceedings, regarding the illegality of the Stamp Duty assessment for the year 2013, contained in the collection document no. 2014 …, in the amount of 13,255.80 € and collection document no. 2014 …, in the amount of 13,255.80 €;

  • to judge as unfounded the request for condemnation of the Tax and Customs Authority to pay compensation for undue provision of security.

  1. Value of the action:

In accordance with the provision of article 315, no. 2, of the CPC and 97-A, no. 1, letter a) of the CPPT and 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the action is set at 26,511.60 €.

  1. Costs:

In accordance with article 22, no. 4, of the RJAT, and Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 1,530.00 € owed by the Tax and Customs Authority.

Notify.

Lisbon, 10 December 2014.

Text prepared by computer, in accordance with article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by reference to article 29, no. 1, letter e) of the Tax Arbitration Regime, with blank lines and reviewed by me.

The sole arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Does Stamp Tax under verba 28.1 of the TGIS apply to building land (terrenos para construção) without residential designation?
No, Stamp Duty under item 28.1 of the TGIS does not apply to building land (terrenos para construção) without residential designation. Item 28.1 specifically targets 'property with residential designation' valued at €1,000,000 or more. Land for construction, being undeveloped land intended for future building, lacks the residential designation required by the statute. The arbitral tribunal emphasized that this concept refers to properties actually designated or licensed for residential use, not vacant land awaiting development. Multiple CAAD decisions and Supreme Administrative Court rulings have consistently held that terrenos para construção fall outside the scope of item 28.1 TGIS, as they constitute a distinct property category under the Municipal Property Tax Code focused on development potential rather than residential function.
What is the legal distinction between residential property and building land for Stamp Tax purposes in Portugal?
The legal distinction lies in the property's actual use and classification under the Municipal Property Tax Code (CIMI). Residential properties under CIMI Article 6(2) are buildings or constructions licensed for residential purposes or intended for habitation. Building land (terrenos para construção) is classified differently - as undeveloped urban land destined for future construction. For Stamp Duty purposes under item 28.1 TGIS, 'property with residential designation' requires an actual residential character, not merely the potential for future residential development. The terminology 'residential designation' (afetação habitacional) differs intentionally from CIMI's 'residential properties' (prédios habitacionais), indicating a narrower scope. Land for construction lacks buildings, licensing for residential use, or actual habitation - elements essential to residential designation. This distinction prevents Stamp Duty taxation on development land that has no present residential function.
Can taxpayers challenge Stamp Tax assessments on building land through CAAD tax arbitration?
Yes, taxpayers can challenge Stamp Duty assessments on building land through CAAD (Centro de Arbitragem Administrativa) tax arbitration. This case demonstrates the proper procedure: the taxpayer filed an arbitration request seeking annulment of Stamp Duty assessments under item 28.1 TGIS. The arbitral tribunal has jurisdiction over such disputes under the Tax Arbitration Regime (RJAT), specifically Decree-Law 10/2011. Challenges must be filed timely, and taxpayers have legal standing to contest assessments they consider illegal. CAAD arbitration offers an alternative to judicial courts for resolving tax disputes, with faster resolution times. The joinder of multiple assessment acts relating to the same tax, taxable event, and period is permitted under Articles 104 CPPT and 3 RJAT, allowing efficient resolution of related claims in a single proceeding.
What are the grounds for annulment of Stamp Tax liquidations on properties classified as terrenos para construção?
The primary ground for annulment is that Stamp Duty under item 28.1 TGIS applies exclusively to 'property with residential designation,' which building land does not possess. Terrenos para construção are classified as undeveloped land for future construction, lacking the residential character required by the statute. The legal interpretation focuses on whether the property has actual residential designation - through licensing, intended use, or existing residential buildings - rather than mere potential for future residential development. Taxpayers can argue: (1) the property classification in the property matrix as land for construction contradicts residential designation; (2) the legislative intent of item 28.1 targets residential properties, not development land; (3) the concept 'residential designation' differs from other CIMI classifications; and (4) extensive CAAD and Supreme Administrative Court precedent supports excluding building land from item 28.1 scope. These arguments establish the assessments embody incorrect legal interpretation warranting annulment.
Is a taxpayer entitled to compensation for an undue guarantee provided during a Stamp Tax dispute under Portuguese law?
Entitlement to compensation for undue guarantees depends on proving the guarantee was improperly required and the taxpayer suffered damages. Under Portuguese tax law, when enforcement proceedings are suspended pending arbitration or judicial review, taxpayers may be required to provide guarantees (bank guarantees, pledges). If the underlying tax assessment is annulled, the guarantee requirement becomes unfounded. However, in this case, the tribunal found it was 'not established that the Claimant provided security in fiscal enforcement proceedings' - meaning no factual proof was presented. For compensation claims to succeed, taxpayers must demonstrate: (1) a guarantee was actually provided; (2) the guarantee was legally unjustified due to the tax assessment's illegality; (3) quantifiable damages resulted (guarantee costs, bank fees, opportunity costs); and (4) causation between the illegal assessment and damages. Without establishing these elements through documentary evidence, compensation requests will fail regardless of the assessment's annulment.