Process: 551/2016-T

Date: March 7, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 551/2016-T, the CAAD Arbitral Tribunal analyzed the legality of Stamp Tax (Imposto do Selo) assessments under Item 28.1 of the General Table (TGIS) applied by the Portuguese Tax Authority to 21 properties registered as 'terrenos para construção' (land for construction) for the year 2013. The taxpayer, a real estate company engaged in civil construction and property trading, challenged the assessments arguing that Verba 28.1, which applies to urban residential properties (prédios urbanos habitacionais), cannot be extended to undeveloped land designated for future construction. The Tax Authority had assessed Stamp Duty on these properties based on their Taxable Patrimonial Value as of December 31, 2013. Following an administrative complaint and hierarchical appeal (recurso hierárquico), the Tax Authority partially granted relief, acknowledging that seven properties had dual residential and commercial use, thus only the residential portion should be subject to Verba 28.1. However, the Authority failed to annul the illegal assessments or reimburse the amounts paid. The Arbitral Tribunal, constituted as a collective court under the RJAT (Legal Regime of Arbitration in Tax Matters), examined whether land for construction falls within the scope of Verba 28.1. The court noted that the regulation of the subdivision project indicated the land was intended for mixed-use buildings (residential and commercial/services), and one lot was exclusively designated for automatic parking with ancillary residential units. Drawing on consistent CAAD jurisprudence, the tribunal analyzed the prerequisites for applying Stamp Duty to urban properties with residential use, emphasizing the distinction between actual built residential properties and undeveloped construction land. The decision addresses fundamental issues regarding the proper interpretation of tax law provisions, the principle of legality in taxation, and the scope of administrative arbitration in challenging tax assessments under the CAAD framework.

Full Decision

ARBITRAL DECISION

The Arbitrators José Poças Falcão (Presiding Arbitrator), Nuno Cunha Rodrigues and Nuno de Oliveira Garcia, appointed by the Ethics Council of the Administrative Arbitration Centre (CAAD) to form the Collective Arbitral Court, constituted on 25-11-2016, agree as follows:

I – REPORT

On 05-09-2016, the company A…, S.A., tax identification number…, with head office at Rua…, no.…, …-..., in Lisbon (hereinafter only 'Claimant'), pursuant to the provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter only 'LRAT'), files a request for arbitral pronouncement on the declaration of illegality of the decision of the Hierarchical Appeal No. …2015… and the acts of assessment of Stamp Duty (hereinafter only SD) carried out by the Tax and Customs Authority (hereinafter only TCA or 'Respondent') subsequently better identified.

The assessments in question concern the year 2013 and result from the application by the TCA of Item No. 28.1 of the General Table attached to the Stamp Duty (hereinafter only GTSD), and have the following numbering: nos.…, …, …, …, …, …, …, … ,… …, …, …, …, …, …, …, …, …, …, …, and ….

The Claimant did not proceed to appoint an arbitrator and therefore, pursuant to the provisions of Article 6, No. 2, subparagraph a) of the LRAT, the present signatories were appointed by His Excellency the President of the Ethics Council of the CAAD to constitute the present Collective Arbitral Court, the appointment having been accepted within the prescribed time and in accordance with the legally provided terms.

On 10-11-2016, the parties were duly notified of this appointment, and did not express any intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of Article 11, No. 1, subparagraphs a) and b) of the LRAT and Articles 6 and 7 of the Ethics Code.

In accordance with the provisions of subparagraph c) of No. 1 of Article 11 of the LRAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Collective Arbitral Court was constituted on 25-11-2016.

II – PRELIMINARY MATTERS

The Arbitral Court is competent and is regularly constituted, pursuant to the provisions of Articles 2, No. 1, subparagraph a), and 30, No. 1, all of the LRAT.

The Parties have legal personality and capacity, are legitimate and are represented, in accordance with Articles 4 and 10 of the LRAT and Article 1 of Order No. 112-A/2011, of 22 March.

There are no nullities or preliminary questions that affect the proceedings, and therefore it is now necessary to rule on the merits of the claim, starting with the factual matters.

III – MATTERS OF FACT

III. I. PROVEN FACTS

In March 2014, the Claimant was notified of the Stamp Duty assessments identified above concerning 21 properties identified in the Initial Petition at p. 2, in § 2, which were registered, at the date of the facts, as 'land for construction' – see documents attached to the Initial Petition as docs. nos. 23 to 43.

In March, June and October 2014, the Claimant was notified to pay the 1st, 2nd and 3rd installments, respectively, relating to the Stamp Duty assessments identified above – see collection documents attached to the Initial Petition as docs. nos. 2 to 22, 44 to 64, and 65 to 85.

The Taxable Patrimonial Value (hereinafter only 'TPV') of each of the properties as of 31.12.2013, as well as the amount of the Stamp Duty collection, are contained in a table that appears in the Initial Petition at pp. 3 and 4, to which reference is made for all legal purposes.

Considering that the SD assessments concerning the 2nd and 3rd installments were not paid within the legal period for that purpose, the respective tax enforcement proceedings were instituted, for compulsory collection of the amounts owed in those assessments, as identified in the Initial Petition at p. 4 in the respective Article 9.

In 2015, being a creditor of the Claimant, B…, S.A. requested from the Finance Office of Lisbon … payment, by subrogation, of the amounts owed in the tax enforcement proceedings mentioned and identified above, and those amounts were paid in full on 30 December 2015 – see docs. nos. 86 to 127 attached to the Initial Petition as submitted by the Claimant.

In August 2014, the Claimant filed an Administrative Complaint concerning the aforementioned SD assessments, complaint that bore the number …2014… and which was subject to a dismissal order, and from this order a Hierarchical Appeal was filed – see doc. no. 128 attached to the Initial Petition as submitted by the Claimant.

On 7 June 2016, the Claimant was notified of the partial granting order of the aforementioned Hierarchical Appeal – see doc. no. 1 attached to the Initial Petition as submitted by the Claimant.

In the decision of the aforementioned Hierarchical Appeal, the TCA acknowledged that 7 of the properties in question have two uses, namely residential and commercial, and therefore are likely to fall within the scope of Item 28.1 of the GTSD only as far as the residential part is concerned, and the TCA corrected the respective SD assessments.

Nevertheless, to date, the TCA has not annulled the aforementioned assessments, which it acknowledged to be illegal, and has not reimbursed the Claimant any amount relating to them.

Apart from the properties which the TCA acknowledged to have two uses, the land for construction registered in the urban property matrix identified by the Claimant is also intended for the construction of properties with more than one use, namely residential and commercial/services, in accordance with the regulation of the subdivision project of the Subdivision License No. …/03, issued by the Municipal Council of …– see document that is part of the set of documents identified as doc. no. 129 attached to the Initial Petition as submitted by the Claimant.

The property registered in the urban property matrix under the article…, corresponding to Lot 23 is intended exclusively for the construction of a building for automatic parking, as well as a condominium room and living unit intended for the doorman – see Article 9, No. 4 (and not No. 3 as identified by the Claimant) of the regulation of the subdivision project of the subdivision license that is part of the set of documents identified as doc. no. 129 attached to the Initial Petition, and property registration certificate protested to be attached and later (19-09-2017) attached.

The Claimant is engaged in the activity of "civil construction, purchase, sale and resale of real estate" (sic) – see Certificate of Commercial Registration protested to be attached and later (19-09-2017) attached.

III. II. UNPROVEN FACTS

With relevance to the decision, there are no facts that should be considered as unproven.

III. III. ISSUES TO BE DECIDED

Two issues are submitted to the Arbitral Court for decision – the illegality of the assessments in question, and the violation of the Principle of Equality. However, as established in jurisprudence, especially in arbitral matters, the present Court is not required to rule on all the issues raised by the parties. This applies to the issues raised regarding the alleged unconstitutionality by violation of the Principle of Legality,[1] since this is raised, necessarily, in a subsidiary manner to the illegality of the SD assessments and the Hierarchical Appeal also in question.

IV. – LEGAL MATTERS

Considering the factual matters set out above, it is important first and foremost to analyse the prerequisites for the application of stamp duty on urban properties with residential use, by reference to the relevant tax provisions for the definition of their respective legal concepts.

For this purpose, we rely on abundant, consistent and uniform jurisprudence of arbitral courts, namely, and inter alia, from the decisions 14/2015-T, 28/2015-T, 54/2015-T, 57/2015-T, 61/2015-T, 78/2015-T, 80/2015-T, 84/2015-T, 86/2015-T, 87/2015-T, 94/2015-T, 111/2015-T, 117/2015-T, 125/2015-T, 130/2015-T, 134/2015-T, 135/2015-T, 143/2015-T, 154/2015-T, 155/2015-T, 156/2015-T, 172/2015-T, 184/2015-T, 185/2015-T, 186/2015-T, 224/2015-T, 229/2015-T, 232/2015-T, 235/2015-T, 266/2015-T, 288/2015-T, 290/2015-T, 367/2015-T and 652/2015-T and 35/2016-T, the latter two of which we follow closely in the present decision.

It should also be noted the following set of judgments from the Supreme Administrative Court, which we follow in the case sub judice: procs. 1870/13, 1871/13, 46/14, 48/14, 55/14, 270/14, 197/14, 271/14, 274/14, 317/14, 467/14, 396/14, 425/14, 676/14, 707/14, 739/14, 740/14, 796/14 and 1338/15.

Let us see:

As a result of the approval of Law No. 55-A/2012, of 29/10, Item 28 was added to the GTSD, which subject to this tax urban properties whose taxable patrimonial value registered in the matrix, pursuant to the Code of the Municipal Real Estate Tax (hereinafter only CMRET), is equal to or greater than €1,000,000.

The taxable base is constituted by the taxable patrimonial value considered for purposes of the Municipal Real Estate Tax (IMI), this tax being annually assessed by the TCA with respect to each urban property – see Stamp Duty Code Article 23, No. 7 – at the rate of:

§ 1%, per urban property with residential use;

§ 7.5%, per property, when the taxable persons, not being natural persons, are resident in a country, territory or region subject to a clearly more favourable tax regime, as listed in an order approved by the Minister of Finance.

For the years 2012 and 2013, the transitional regime provided for in Article 6 of Law No. 55-A/2012, of 29/10, was applicable, with the following specificities:

a) The tax event occurs on 31 October 2012;

b) The taxable person of the tax is the one mentioned in No. 4 of Article 2 of the Stamp Duty Code on the date referred to in the preceding subparagraph;

c) The taxable patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided in the Code of the Municipal Real Estate Tax by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be made by the end of November 2012;

e) The tax must be paid, in a single installment, by the taxable persons by 20 December 2012;

f) The applicable rates are as follows:

i) Properties with residential use assessed in accordance with the Code of the Municipal Real Estate Tax: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the Code of the Municipal Real Estate Tax: 0.8%;

iii) Urban properties when the taxable persons who are not natural persons are resident in a country, territory or region subject to a clearly more favourable tax regime, as listed in an order approved by the Minister of Finance: 7.5%.

2 - In 2013, the assessment of the stamp duty provided for in item no. 28 of the respective General Table must be based on the same taxable patrimonial value used for the purposes of assessing the municipal real estate tax to be carried out that year.

Within the scope of the tax legal relationship in question, the taxable persons and holders of economic interest (tax debtors) are the owners, usufructuaries or superficiaries of the properties on 31 December of the year to which the tax relates - with respect to 2012, in accordance with the transitional regime referred to in the previous point, this date was moved forward to 31 October - as provided for in Article 8 of the CMRET, by express reference to Articles 3, No. 3, subparagraph u), and 2, No. 4, of the Stamp Duty Code.

On the other hand, and with regard to the date of the creation of the tax obligation, tax nexus, assessment and payment of the stamp duty in question, the corresponding rules of the CMRET are applicable, also by express reference to Articles 5, No. 1, subparagraph u), 4, No. 6, 23, No. 7, 44, No. 5, 46, No. 5 and 49, No. 3, of the Stamp Duty Code. In general, by reference to Article 67, No. 2, of the same code, the provisions of the CMRET are applicable as subsidiary provisions to matters not specifically regulated.

Referring to the scope provision of the SD to urban properties, it is important to bear in mind that the relevant concept is contained in Article 2 of the CMRET, as, moreover, provided for in No. 6 of Article 1 of the Stamp Duty Code.

Appealing to elements of a physical, patrimonial and economic nature, that provision of the CMRET defines as a property "every fraction of territory, comprising waters, plantations, buildings and constructions of any kind incorporated or set in it, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value [...]" (sic).

For purposes of the Municipal Real Estate Tax (IMI), properties are classified as rural, urban or mixed, this classification being particularly relevant both for the purposes of applying the rules for determining their taxable patrimonial value and for the purposes of applying the tax rates.

Thus, the CMRET establishes, in Article 3, a positive definition of rural property, defining urban and mixed property, in its Articles 4 and 5 in merely residual terms: all those realities that, integrating the tax concept of property, are not to be classified as rural properties are thus classified.

According to that provision, rural properties are those which, situated outside an urban agglomeration, meet one of the following requirements:

§ Are not to be classified as land for construction;

§ Are devoted, or have as normal use, the production of agricultural income, as considered for purposes of Personal Income Tax;

§ Having no agricultural use, are not built or have only buildings or constructions that are merely accessory, without economic autonomy and of reduced value.

Also classified as such are properties situated within an urban agglomeration which, by force of legal provision, cannot be used to generate income (such as green spaces, gardens, etc.) or can only be used in agricultural activities and have, in fact, that concrete use.

A property that does not meet the above-mentioned requirements is, consequently, classified as urban.

It can therefore be concluded that, for purposes of the Municipal Real Estate Tax and, in this case, stamp duty, land for construction is an urban property, since it meets the requirements constituting the concept of property - physical reality, patrimonial character and economic value - and, whatever use or purpose it may be serving, in the case of vacant land, is expressly excluded from the concept of rural property.

Referring to urban properties, No. 1 of Article 6 of the CMRET distinguishes several types, dividing them into residential, commercial, industrial or service properties, land for construction and others, according to the following criteria:

§ "Residential, commercial, industrial or service" – buildings or constructions licensed for such purpose or, in the absence of a license, which have as normal purpose each of those uses (see Article 6, No. 2 of the CMRET);

§ "Land for construction" – land situated within or outside an urban agglomeration for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation, and also those which have been declared as such in the acquisition title, except for land where the competent authorities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land use planning, are devoted to public spaces, infrastructure or equipment" (see Article 6, No. 3 of the CMRET, as amended by Law No. 64-A/2008, of 31/12);

§ "Others" – are considered as such the land situated within an urban agglomeration that is not land for construction nor classified as rural property, in accordance with its respective legal concept, and also buildings and constructions licensed, or in the absence of a license, which have as normal purpose other uses than those mentioned above (see Article 6, No. 4 of the CMRET).

In defining the scope of Item 28 of the GTSD, the legislator considers, as a relevant element of tax capacity, properties of high value that, in the segment relating to taxable persons resident in Portuguese territory, are held for residential purposes.

However, in subjecting taxation to urban properties "with residential use," the legislator does not establish, in the Stamp Duty Code, any specific concept that should be considered for this purpose, instead referring the application of the tax regime for properties referred to in Item 28 to the rules of the CMRET.

It will be, therefore, in the economy of this Code that the meaning of that expression must be found, an understanding that, moreover, is shared by the Claimant and the Respondent, although with different conclusions.

With regard to the definition of the different types of urban properties, the said Code, as mentioned above, establishes a clear distinction between residential properties and land for construction.

The former are classified based on the respective municipal license, or, if this does not exist, as a result of normal use.

The latter are defined on the basis of their legal potential.

Considering the legislation relating to urban construction and building, particularly with regard to the various types of licensing, the classification of a property as "residential" for tax purposes presents no particular difficulty: those that are classified as such under the law are residential.

In the absence of licensing, the normal purpose of the property is relevant for classification. Here too the tax law does not offer any specific concept. It follows, however, from both general knowledge and from the legislation applicable to urban buildings, that the purpose of residential use presupposes the existence of a minimum of conditions that preserve personal intimacy and family privacy (see Article 65 of the Constitution of the Portuguese Republic).

Licensing, by the competent authority, or the normal use of a property, whose purpose is residential use, refers, as it must, to buildings that meet the characteristics required to be so classified.

A parcel of land for construction - whatever the type and purpose of the building that will be, or may be, erected on it - does not, by itself, satisfy any condition to be so licensed or to be able to define as its normal purpose residential use.

Referring, therefore, the stamp duty scope provision to urban properties with residential use, without any specific concept being established for this purpose, it cannot be inferred from it that it contains a future potential, inherent to a distinct property that may possibly be built on the land.

The phrase "with residential use" conveys, in a simple reading, an idea of real and present functionality.

From the provision in question, it is not possible to extract, by interpretation, that the legislator's choice of that expression is intended to encompass "other realities beyond those identified in Article 6, No. 1 of the CMRET. Such interpretation has no legal support, given the principles contained in Articles 9 of the Civil Code and 11 of the General Tax Law.

Indeed, if the legislator intended to encompass within the scope of the tax realities other than those resulting from the classification governed by Article 6 of the CMRET, it would have said so explicitly. But it did not, instead referring, as a whole, to the concepts and procedures provided for in that Code.

On the other hand, the Respondent's understanding that the concept of "residential use" flows from the provision of Article 45 of the CMRET cannot be accepted either.

This article refers to the rules applicable in determining the patrimonial value of land for construction, establishing that this is what results from the value of the building plot area to be built plus the land adjacent to the plot. In determining the value of that area, a percentage, varying between 15% and 45%, of the value of the authorized or intended buildings is considered.

According to the Respondent, in determining the value of buildings authorized or intended on the land to be assessed, the coefficients applicable in determining the taxable patrimonial value are used, namely the use coefficient provided for in Article 1 of that Code (see Article 5 of the Respondent's Answer).

Concluding from this that the consideration of such a coefficient, dependent on the type of use intended for the building to be erected on the land, will be determinant for the purposes of applying Item 28 of the GTSD (see Article 24 of the Respondent's Answer).

This conclusion is based on the assumption that the phrase "properties with residential use" refers to a classification that overlaps with the types provided for in No. 1 of Article 6 of the CMRET.

However, it is not possible to follow such conclusion.

On the one hand, because nothing in the law allows us to conclude that the stamp duty legislator intended to expand, for the purposes of the application of this tax, the types provided for in No. 1 of Article 6 of the CMRET, as already mentioned above; on the other hand, because the application of a use coefficient refers to one of the elements to be considered in the assessment of the land, that is, in the determination of the value of the authorized or intended buildings.

Regardless of whether, in determining the value of buildings authorized or intended for land for construction, a use coefficient should or should not be considered, it is admitted, as it is obvious and general knowledge, that the value of land is significantly influenced by the type and characteristics of those buildings. However, this is a matter that goes beyond the question which is the subject of the present request for arbitral pronouncement.

Under the conditions mentioned, the fact that, for a certain parcel of land for construction, the building of a property intended for residential use, or for any other purpose, is authorized, even if it should be considered in its assessment, does not determine any change in the classification of the land which, for tax purposes, continues to be considered as such.

In these terms, as Article 6 of the CMRET establishes a clear distinction between, on the one hand, urban residential properties and, on the other hand, land for construction, the latter cannot be considered, for the purposes of stamp duty, as "properties with residential use".

Indeed, the constant and uniform jurisprudence, previously referred to in this decision, has been oriented in this direction.

It is true that Article 194 of Law No. 83-C/2013, of 31/12, changed the wording of No. 1 of Item 28 of the GTSD, such that the taxation in question now applies, at the rate of 1% "Per residential property or per parcel of land for construction whose building, authorized or intended, is for residential use".

However, this is an innovative provision, applicable from the date the said Law came into force - 1 January 2014 - and therefore does not cover the situation that is the subject of this proceeding, where a tax event occurred prior to the beginning of its effectiveness.

This would not be the case only if that amendment had an interpretative nature, then applying to past facts. But, if the legislator intended to give such a nature to the amended provision, it would not fail to state it in its text.

Now, not only did the legislator not do this, but no reference to its interpretative nature can be extracted from the text of the provision. On the contrary, the use, in the text of the new wording, of the disjunctive "or" expresses, in this context, a sense of alternative.

On the other hand, no controversy generated by the previous legal solution is known, since the possible interpretation of the provision in question, in its previous wording, has been peacefully and invariably affirmed by the jurisprudence mentioned above.

Now, as Baptista Machado states (in Introdução ao Direito e ao Discurso legitimador, Almedina, Coimbra, 2014, p. 267): "for new law to be interpretative in nature, there must be subject matter for interpretation. If the legal rule was certain in the previous legislation, or if the jurisprudential practice that had long been assigned to it a certain meaning, which remained constant and peaceful, the new law that comes to solve the respective legal problem, in different terms, should be considered an innovative law" (sic).

Thus, considering the literal wording of the new law, as well as the constant and peaceful jurisprudence known, we cannot but conclude that we are not facing an interpretative law, but an innovative law, applicable only for the future.

In these terms, one cannot but conclude that the stamp duty assessments that are the subject of the present request for arbitral pronouncement are illegal, and it is also concluded that, at their origin, there is an error attributable to the Tax Administration.

Unconstitutionality of the provision in Item No. 28 of the GTSD

As previously decided in arbitral proceedings in Case No. 91/2012-T of the CAAD, "... the complete success of breaches of law prejudices consideration of defects of form and procedure, as follows from the order of consideration of defects provided for in No. 2 of Article 124 of the Code of Tax Procedure and Process, subsidiarily applicable by virtue of the provision of subparagraph a) of No. 1 of Article 29 of the Legal Regime of Tax Arbitration".

In fact, the establishment of an order of consideration of defects is only justified by the fact that the possible success of the prioritary defects would make unnecessary the consideration of the remaining ones, because if it were always necessary to consider all defects, the order of their consideration would be irrelevant.

Given the foregoing, as the breaches of law succeed, consideration of the unconstitutionality defect is prejudiced.

V. – DECISION

In these terms, this Arbitral Court decides:

a) To find the request for arbitral pronouncement well-founded;

b) To declare the illegality of the Stamp Duty assessment acts nos.…, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, and …, all relating to the year 2013, to which correspond the collection notices relating to the collection documents attached to the Initial Petition as docs. nos. 2 to 22, 44 to 64, and 65 to 85, with a total value of €836,476.89;

c) To annul the Stamp Duty assessments mentioned above, with all legal consequences.

VI. – Value of the Case

The value of the case is fixed at €836,476.89, in accordance with Article 97-A, No. 1, a), of the Code of Tax Procedure and Process, applicable by virtue of subparagraphs a) and b) of No. 1 of Article 29 of the LRAT and No. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

VII. Costs

The value of the arbitration fee is fixed at €11,934.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Respondent, since the request was wholly successful, in accordance with Articles 12, No. 2, and 22, No. 4, both of the LRAT, and Article 4, No. 4, of the cited Regulation.

Let notification be given.

Lisbon, 7 March 2017

The Presiding Arbitrator

(José Poças Falcão)

The Arbitrator

(Nuno Cunha Rodrigues)

The Arbitrator

(Nuno de Oliveira Garcia)

[1] This is not to say that the Constitutional Court has already ruled on the non-unconstitutionality of the provision in question in light precisely of the Principle of Equality, even if in a factual situation with contours not entirely coinciding with those of the present decision. Thus, see Judgment No. 620/2015, issued by the 2nd Panel in Case No. 305/15 (Reporting Judge: Cons. João Cura Mariano) on 3 December 2015.

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 urban properties classified as land for construction?
The Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS (General Table) applies to urban properties for residential use (prédios urbanos habitacionais), levied annually on the Taxable Patrimonial Value (Valor Patrimonial Tributário). However, its application to properties registered as 'terrenos para construção' (land for construction) is legally problematic. Construction land, being undeveloped and lacking actual residential use, does not meet the legal requirements of Verba 28.1, which presupposes the existence of a built urban property with residential purpose. CAAD jurisprudence consistently holds that Stamp Tax under this provision cannot be extended to mere construction potential or future intended use, but requires an actual, existing residential building. The distinction is critical: land for construction represents development potential, while Verba 28.1 targets completed residential properties generating housing utility.
Can the Portuguese Tax Authority (AT) apply Verba 28.1 of the Stamp Tax General Table to properties registered as 'terrenos para construção' (land for construction)?
No, the Portuguese Tax Authority (AT) cannot lawfully apply Verba 28.1 of the Stamp Tax General Table to properties registered as 'terrenos para construção' (land for construction). CAAD arbitral tribunals have established consistent jurisprudence on this matter, holding that Verba 28.1 requires the existence of an actual urban property with residential use (prédio urbano habitacional), not merely land designated for future construction. In Process 551/2016-T, the tribunal examined this issue regarding 21 construction land parcels, some intended for mixed residential/commercial use and one exclusively for parking. The legal concept of 'urban property for residential use' under tax law requires a completed, built structure, not undeveloped land. This interpretation respects the principle of legality in taxation (princípio da legalidade fiscal), which prohibits analogical or extensive interpretation of taxable events. Consequently, Stamp Tax assessments on construction land under Verba 28.1 are illegal and subject to annulment through administrative or arbitral challenge.
What is the procedure for filing an arbitral claim (pedido de pronúncia arbitral) against Stamp Tax liquidations before CAAD?
To file an arbitral claim (pedido de pronúncia arbitral) against Stamp Tax liquidations before CAAD, taxpayers must follow the procedure established in the RJAT (Legal Regime of Arbitration in Tax Matters - Decree-Law 10/2011). First, taxpayers must exhaust administrative remedies by filing a reclamação graciosa (administrative complaint) and, if denied or partially granted, a recurso hierárquico (hierarchical appeal) as occurred in Process 551/2016-T. The arbitration request must be submitted within 90 days of notification of the final administrative decision, identifying the contested acts, legal grounds, and requested relief. Taxpayers can appoint an arbitrator or request appointment by the CAAD President. The request must be accompanied by supporting documentation (assessment notices, administrative decisions, proof of payment). In Process 551/2016-T, filed on September 5, 2016, the claimant challenged the hierarchical appeal decision and requested declaration of illegality of the Stamp Duty assessments. The collective arbitral tribunal was constituted on November 25, 2016, after arbitrator appointments were accepted and no recusals filed, demonstrating the timeline and procedural steps involved.
How did the CAAD Arbitral Tribunal rule on the legality of Stamp Tax assessments on land for construction in Process 551/2016-T?
While the excerpt provided does not contain the complete ruling, the CAAD Arbitral Tribunal in Process 551/2016-T examined the legality of Stamp Tax assessments on 21 properties registered as 'terrenos para construção' (land for construction). The tribunal indicated it would rely on 'abundant, consistent and uniform jurisprudence of arbitral courts' regarding the prerequisites for applying Stamp Duty under Verba 28.1 to urban properties with residential use. Based on established CAAD jurisprudence cited in the decision (processes 14/2015-T, 28/2015-T, 54/2015-T, and others), the tribunal likely ruled that Stamp Tax under Verba 28.1 cannot be applied to construction land because such land does not constitute an actual 'prédio urbano habitacional' (urban residential property). The Tax Authority had already partially acknowledged this error in the hierarchical appeal, recognizing that seven properties with dual residential/commercial use should only be taxed on the residential portion. The tribunal addressed both the illegality of the assessments and potential violations of the Principle of Equality, analyzing the legal framework within the context of the principle of legality in taxation.
What legal grounds can taxpayers invoke to challenge Imposto do Selo liquidations on urban land under the RJAT arbitration regime?
Taxpayers can invoke several legal grounds to challenge Imposto do Selo liquidations on urban land under the RJAT arbitration regime: (1) Illegality of the tax assessment (ilegalidade da liquidação) - arguing that Verba 28.1 requires an actual built residential property, not construction land, as the taxable event (facto tributário) has not materialized; (2) Violation of the Principle of Legality (princípio da legalidade fiscal) - tax law must be strictly interpreted without analogical extension, and extending Verba 28.1 to construction land exceeds the legal provision's scope; (3) Violation of the Principle of Equality (princípio da igualdade) - differential treatment of similarly situated taxpayers without objective justification; (4) Error in legal qualification - the Tax Authority incorrectly classified construction land as urban residential property; (5) Violation of substantive tax law provisions - improper application of the TGIS and Stamp Duty Code; (6) Right to reimbursement - amounts paid on illegal assessments must be refunded with compensatory interest. In Process 551/2016-T, the claimant invoked illegality and equality violations, supported by documentation including the subdivision license regulation demonstrating the land's intended mixed-use character and actual construction purpose, strengthening the argument that undeveloped land cannot be equated with completed residential buildings for Stamp Tax purposes.