Process: 550/2015-T

Date: March 10, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 550/2015-T addresses a critical Stamp Tax (Imposto do Selo) dispute concerning the application of item 28.1 of the General Stamp Tax Table (TGIS) to urban properties with multiple independent units. The claimant contested a €12,624.06 stamp duty assessment for 2013 on an urban property comprising 22 divisions with independent use, 20 designated as residential, with a global tax patrimonial value (VPT) of €1,391,443. The central legal question examined whether the relevant VPT threshold should be calculated based on the aggregate value of all divisions or on each independent unit separately. Item 28.1 of TGIS imposes a 1% annual stamp tax on ownership, usufruct, or surface rights of urban properties with residential designation where the VPT equals or exceeds €1,000,000. The Tax Authority assessed the tax based on the global VPT exceeding this threshold. However, the property was not constituted under horizontal ownership (condominium regime) until May 2014, after the relevant tax year. The arbitral tribunal applied subsidiary rules from the Municipal Real Estate Tax Code (CIMI), examining the legal definition of 'property' (prédio) and whether multiple independent divisions within a single building not yet under horizontal ownership should be treated as separate properties for stamp tax purposes. The tribunal followed precedents from previous CAAD decisions addressing similar situations, analyzing Articles 2, 4, and 6 of CIMI regarding property classification and the distinction between properties based on their independent economic use and legal characterization. This decision has significant implications for taxpayers holding multi-unit properties valued over €1 million that have not been formally subdivided under horizontal ownership legislation.

Full Decision

ARBITRAL DECISION

The Arbitrator Raquel Franco, appointed by the Ethical Council of the Centre for Administrative Arbitration (CAAD) to form the single arbitral tribunal constituted on 25.11.2015, decides as follows:

I. REPORT

  1. On 24.08.2015, the Head of Household of A…, Tax Identification Number …, filed a request for constitution of the arbitral tribunal, in accordance with the joint provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), in which the Tax and Customs Authority (hereinafter referred to only as "TA") is the Respondent.

  2. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the TA on 14.09.2015.

  3. In accordance with the provisions of paragraph a) of No. 2 of Article 6 and paragraph b) of No. 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 Ethical Council appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable period.

  4. The parties were notified of this appointment on 10.11.2015 and did not object to it.

  5. Accordingly, in compliance with the provisions of paragraph c) of No. 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 single arbitral tribunal was constituted on 25.11.2015, and the relevant legal procedures were followed.

  6. The claim of the Claimant in the present proceedings is for a declaration of the invalidity of the stamp duty assessment issued under item 28.1 of the TGIS and which fell upon the urban property under full ownership regime located at Rua…, No.…, … registered in the property register of the respective parish under article…, in the total amount of €12,624.06 and relating to the year 2013.

III. PRELIMINARY MATTERS

  1. The Tribunal is competent and is regularly constituted, in accordance with Articles 2, No. 1, paragraph a), 5 and 6, all of the RJAT.

  2. The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Regulation No. 112-A/2011, of 22 March.

  3. The proceedings do not suffer from defects that would invalidate them.

IV. FACTUAL MATTERS

IV.1. Proven Facts

Before entering into consideration of the legal questions, it is necessary to present the factual matter relevant to its understanding and decision, which, having examined the documentary evidence attached to the proceedings and having regard to the facts alleged, is established as follows:

  • The Claimant is the owner and legitimate proprietor of the urban property located at Rua…, No.…, in…, registered in the register of the respective parish under article…, corresponding to a property in full ownership comprising 22 divisions capable of independent use.

  • Following the assessment to which it was subject in 2013, the above-identified property was assigned a global tax patrimonial value (VPT) of €1,391,443.00, corresponding to the sum of the VPTs assigned to each of the divisions capable of independent use.

  • Of the 22 divisions capable of independent use that make up the property, 20 have, according to the property record, a residential designation.

  • The global tax patrimonial value of these 20 divisions amounts to €1,262,406.00.

  • In the year 2014, for the year 2013, the TA issued the stamp duty assessment that is contested, in the amount of €12,624.06.

  • On 14.05.2014, the property in question was constituted in horizontal ownership.

  • On 25.08.2014, the Claimant filed a gracious claim against the assessment act.

  • The gracious claim was rejected by order of 29.05.2015 from the Head of Division of the Administrative Justice Division of the Tax Authority of Lisbon, notified to the Claimant through the official communication from the Tax Authority of Lisbon No.…, of 01.06.2015.

  • On 24.08.2015, the Claimant filed the request for constitution of the single arbitral tribunal.

IV.2. Unproven Facts

There are no facts with relevance to the cause that have been considered unproven.

V. MATTER FOR DECISION

The essential question at issue in the present proceedings is to determine, with reference to an urban property not constituted in a horizontal ownership regime, comprised of various areas with independent use, with residential designation, whether the VPT relevant for purposes of taxation under stamp duty under item 28.1 of the TGIS should be the amount corresponding to the sum of the tax patrimonial values assigned to the different parts or independent floors or storeys or whether, on the contrary, the VPT assigned to each floor or division with independent use should be taken into account for purposes of the incidence of stamp duty under item 28.1 of the TGIS.

VI. LEGAL REASONING

Item 28 of the TGIS in force in 2013 provided as follows:

"28. Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value entered in the register, in accordance with the Municipal Tax Code on Real Estate (CIMI), is equal to or greater than (euro) 1,000,000 - based on the tax patrimonial value used for purposes of IMI:

28.1 Per property with residential designation – 1%

28.2 – Per property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, as entered on the list approved by order of the Minister of Finance – 7.5%."

In the present proceedings, it must be decided whether the VPT relevant as a criterion for the incidence of stamp duty under item 28.1 of the TGIS is the amount corresponding to the sum of the tax patrimonial values assigned to the various divisions capable of independent use (global VPT) or, rather, the VPT assigned to each of those divisions.

This question has already been examined in various tax arbitration proceedings, and there are no grounds for adopting a different understanding from that which was adopted in previously decided decisions. Accordingly:

In accordance with No. 2 of Article 67 of the CIMI, as to "matters not regulated in this Code relating to item 28 of the General Table, the CIMI applies subsidiarily." The incidence rule of item 28.1 of the TGIS referring to urban properties, it is important to seek the concept of urban property in the CIMI.

The CIMI establishes, in Article 2, No. 1, the concept of property. It defines it as "any portion of territory, including waters, plantations, buildings and constructions of any nature incorporated or situated therein, with a permanent character, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the aforementioned circumstances, endowed with economic autonomy in relation to the land where they are located, even if situated in a portion of territory that constitutes an integral part of a different patrimony or does not have a patrimonial nature".

Article 4 of the CIMI establishes that urban properties are "all those that should not be classified as rustic, without prejudice to the provisions of the following article".

Furthermore, Article 6 of the same Code classifies the various types of urban properties, distinguishing them, in No. 1, into four subcategories: "a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others". In turn, No. 2 establishes the criterion used for this distinction, defining that "Residential, commercial, industrial or for services are the buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal destination each of these uses".

With regard to the specific question that is the subject of the present decision, it is important to heed Article 12, No. 3, of the CIMI, in accordance with which "each floor or part of a property capable of independent use is considered separately in the property register, which also discriminates its respective tax patrimonial value".

Finally, in accordance with Article 119, No. 1 of the CIMI, "The services of the General Tax Authority send to each taxpayer, by the end of the month preceding that of payment, the competent collection document, with discrimination of the properties, their parts capable of independent use, respective tax patrimonial value and the tax collected charged to each municipality of the location of the properties."

As legal doctrine recognizes, the fiscal concept of property differs from the civil law concept of property, contrary to what the Respondent maintains, in that "For tax purposes, No. 1 of this article [2 of the CIMI] provides for the existence of three necessary requirements for there to be the concept of property, namely, physical structure, patrimonial nature and economic value."

(Cf. J. Silvério Mateus and L. Corvelo de Freitas, "Real Estate Taxes, Stamp Duty, Annotated and Commented", Engifisco, 1st edition, 2005, p. 101).

Thus, "the physical element is defined by the reference to 'any portion of territory', including waters, plantations and constructions of any nature incorporated or situated therein with a permanent character. On the legal plane, relevance is given to patrimonial nature. The property, in the physical sense, must be capable of integration into the patrimony of a natural or legal person. (…) The requirement of economic value is naturally associated with the requirement of patrimonial nature, resulting from this the susceptibility to generate income or other types of utilities for its owner." (op.cit.).

In the present case, it appears to us that all three requirements mentioned are met, insofar as the parts or divisions capable of independent use that are the object of the assessment act in question have physical correspondence with reality, form part of the Claimant's patrimony and possess an economic value which, at the very least, derives from the VPT that was assigned to them by the assessment carried out by the TA.

Accordingly, it appears to us that the parts or divisions capable of independent use, fulfilling all the requirements to qualify as a "property", in economic, physical and patrimonial terms, should be considered autonomously for purposes of the incidence of item 28.1 of the TGIS.

Furthermore, in the incidence rule contained in item 28.1 of the TGIS, the legislator did not consider it relevant to distinguish between properties in horizontal ownership and properties in vertical ownership. And this, in our view, because what is ultimately relevant is the economic purpose of the property, as also results from Article 6 of the CIMI, in light of the constitutional principles inherent in Articles 103, No. 1 and 104, No. 3 of the CRP. In fact, in terms of economic substance, there is no difference whatsoever between a building in horizontal ownership and a building in vertical or full ownership comprised of parts or divisions capable of independent use, justifying, therefore, in terms of incidence rules – and in particular the rule contained in item 28.1 of the TGIS – equal treatment of these two situations. Moreover, the tax legislator also determines this equal treatment, in Article 119 of the CIMI, when establishing that tax should be assessed individually on each part or division capable of independent use, taking into account the VPT of each part or division capable of independent use, individually considered.

It results from the foregoing that the rule contained in item 28.1 of the TGIS should be applied indistinctly both to residential urban properties constituted in horizontal ownership and to those in full or vertical ownership, with tax being assessed on the VPT assigned by the Respondent, through general assessment, to each of the parts or divisions capable of independent use.

In view of the foregoing, and in light of the fact that none of the parts or divisions capable of independent use that are the object of the contested assessment act has a tax patrimonial value equal to or greater than €1,000,000.00, as has been demonstrated in the present proceedings, it is concluded that the Claimant's claim should be upheld, deeming illegal the contested assessment act, due to error in the factual and legal grounds and violation of Article 1, No. 1 of the Stamp Duty Code and item 28.1 of the TGIS, and the said act should be annulled, with the consequent restitution of tax paid.

As to indemnity interest, Article 43 of the LGT provides that "indemnity interest is due when it is determined, in a gracious claim or judicial challenge, that there was an error attributable to the services which resulted in payment of the tax debt in an amount greater than that legally due".

As to the existence, in this case, of an error attributable to the services, it is considered verified, according to uniform jurisprudence of the STA (see in this regard, the Decisions of the STA of 22-05-2002, Case No. 457/02; of 31.10.2001, Case No. 26167 and of 2.12.2009, Case No. 0892/09).

Accordingly, there is no doubt that the Claimant has the right to be compensated through receipt of indemnity interest, calculated in accordance with Article 43, No. 1 of the LGT and Article 61, Nos. 2, 3 and 5, on the sums paid relating to the annulled assessments.

VII. DECISION

In accordance with what is set forth above, it is decided:

(i) To uphold the claim for arbitral pronouncement and, consequently, to declare the illegality of the contested stamp duty assessment, with the consequent annulment and restitution of tax paid;

(ii) To condemn the Respondent to payment of indemnity interest;

(iii) To condemn the Respondent to payment of costs of the proceedings.

Value: in accordance with the provisions of Articles 97-A, No. 1, paragraph a), of the CPPT and Article 3, No. 2 of the Rules of Costs in Tax Arbitration Proceedings, the proceedings are valued at €12,624.06.

Costs: in accordance with the provisions of Article 22, No. 4, of the RJAT and in accordance with Table I attached to the Rules of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, to be paid by the Respondent in accordance with Articles 12, No. 2, and 22, No. 4, both of the RJAT, and Article 4, No. 4, of the aforementioned Rules.

Let it be registered and notified.

Lisbon, 10 March 2016

The Arbitrator,

Raquel Franco

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS and how does it apply to high-value urban properties?
Verba 28.1 of the TGIS (General Stamp Tax Table) establishes an annual 1% Stamp Tax on ownership, usufruct, or surface rights of urban properties with residential designation when the tax patrimonial value (VPT) registered under the Municipal Real Estate Tax Code (CIMI) equals or exceeds €1,000,000. This tax was introduced as a wealth tax on high-value residential real estate and applies based on the VPT used for Municipal Real Estate Tax (IMI) purposes. The tax is due annually and collected by the Tax Authority based on property values registered in the tax records.
How does the CAAD arbitral tribunal assess Stamp Tax liability for properties held in total ownership with multiple independent units?
The CAAD arbitral tribunal examines whether properties held in total ownership (propriedade total) comprising multiple divisions with independent use should be taxed based on the global VPT or individual unit values. The tribunal applies subsidiary rules from CIMI (Article 67(2)) to determine the legal concept of 'property' (prédio). Key factors include whether the property is constituted under horizontal ownership, whether divisions have independent economic use, and how each unit is registered. The tribunal follows precedents establishing that independent divisions not yet legally subdivided may be treated as separate properties for stamp tax purposes, meaning each unit's VPT is assessed individually against the €1,000,000 threshold.
Can a taxpayer challenge a Stamp Tax assessment on urban property through tax arbitration under Decree-Law 10/2011 (RJAT)?
Yes, taxpayers can challenge Stamp Tax assessments through administrative tax arbitration under Decree-Law No. 10/2011 (RJAT - Legal Regime for Arbitration in Tax Matters). The procedure involves filing a request for constitution of an arbitral tribunal with CAAD (Centre for Administrative Arbitration) within the legal deadlines after exhausting or alongside administrative remedies such as gracious claims (reclamação graciosa). Process 550/2015-T demonstrates this right: the claimant filed a gracious claim on August 25, 2014, which was rejected on May 29, 2015, and subsequently filed for arbitration on August 24, 2015, within the applicable timeframe. CAAD arbitration provides a faster alternative to judicial courts for resolving tax disputes.
What criteria determine whether a property in total ownership regime exceeds the taxable threshold under Verba 28.1 of the Tabela Geral do Imposto do Selo?
The critical criterion is determining the relevant 'tax patrimonial value' (VPT) for applying the €1,000,000 threshold. For properties in total ownership with multiple independent divisions, the analysis considers: (1) whether the property is legally constituted under horizontal ownership (regime de propriedade horizontal); (2) the number of divisions capable of independent use (utilização independente); (3) individual VPT assignments to each division versus global VPT; (4) residential versus non-residential designation under CIMI Article 6; and (5) registration status in property records. If independent divisions each have VPT below €1,000,000 but the aggregate exceeds this threshold, the determination depends on legal characterization under CIMI principles and whether each division constitutes a separate 'property' for tax purposes.
What was the outcome of CAAD Process 550/2015-T regarding the annulment of the Stamp Tax liquidation of €12,624.06 for the year 2013?
While the complete decision text is not provided in this excerpt, Process 550/2015-T addressed the claimant's request for annulment of the €12,624.06 stamp duty assessment for 2013. The tribunal analyzed whether the Tax Authority correctly applied item 28.1 of TGIS by using the global VPT of €1,391,443 rather than individual division values. The tribunal examined CIMI definitions and previous CAAD precedents addressing similar situations involving properties with multiple independent units not constituted under horizontal ownership during the relevant tax year. The decision would determine whether the assessment should be annulled based on proper interpretation of 'property' for stamp tax purposes, with significant financial implications for the taxpayer and interpretative guidance for similar cases.