Process: 557/2015-T

Date: February 17, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Case 557/2015-T, two co-owners of a Lisbon property challenged the 2014 stamp duty assessment under Verba 28 of the General Stamp Duty Table (TGIS). The property, held in vertical ownership (not horizontal property regime), had a total Tax Property Value (VPT) of €1,075,080. While the aggregate value exceeded the €1,000,000 threshold, the property comprised five independent floors, each valued between €154,180 and €234,050. The claimants argued that stamp duty under Verba 28 TGIS should apply only when individual units exceed €1,000,000, not when merely the collective property value crosses this threshold. They challenged the second installment payment of €3,583.58. The Tax Authority raised a preliminary jurisdictional objection, arguing that CAAD (Administrative Arbitration Center) lacks competence to review installment payments rather than the underlying assessment act itself, citing Article 2 of the Legal Framework for Tax Arbitration. The Authority also contended that failure to challenge the first installment precluded challenging subsequent installments. The claimants countered that challenging any installment effectively challenges the underlying assessment act, noting that collection documents explicitly reference the right to appeal. They cited jurisprudence supporting partial annulment of tax acts and argued the Tax Authority's position violated good faith principles. The arbitral tribunal had to determine: (1) whether CAAD had jurisdiction over challenges to installment payments; (2) if jurisdictionally competent, whether the stamp duty assessment was legally correct when applied to properties with independently-valued units below the threshold; and (3) whether refunds with compensatory interest were due if illegality was established.

Full Decision

ARBITRAL DECISION

I – REPORT

1 A…, Tax Identification Number[1] …, residing at … no. … – … …-… Lisbon and B…, Tax Identification Number …, residing at … no. … – … …-… Lisbon filed a request for arbitral determination, pursuant to the provision contained in subparagraph a) of paragraph 1 of Article 2nd, paragraph 1 of Article 3rd and subparagraph a) of paragraph 1 of Article 10th, all of the Legal Framework for Tax Arbitration[2], with the Tax Authority[3] being named as respondent, in order to review the legality of the tax acts relating to the assessment of stamp duty tax, regarding the year 2014, affecting the ownership of a property in vertical ownership, registered in the property matrix under urban article no. … of the parish of ... area of the … Lisbon Tax Service, as per the collection documents filed with the request, relating to the 2nd installment.

2 Which was filed without exercising the option of appointing an arbitrator, and was accepted by the Distinguished President of the Administrative Arbitration Center[4] and automatically notified to the Tax Authority on 31/08/2015.

3 Pursuant to the provisions of paragraph 2 of Article 6th of the Legal Framework for Tax Arbitration, by decision of the Distinguished President of the Deontological Council, duly communicated to the parties within the legally applicable periods, on 27/10/2015, Arlindo José Francisco was designated as the tribunal's arbitrator, who communicated his acceptance of the assignment within the legally stipulated period.

4 The tribunal was constituted on 11/11/2015 in accordance with the provisions contained in subparagraph c) of paragraph 1 of Article 11th of the Legal Framework for Tax Arbitration, in the wording introduced by Article 228th of Law no. 66-B/2012, of 31 December.

5 With its request, the claimant seeks the annulment of the stamp duty tax assessment act, regarding the year 2014 (second installment) that affected the Tax Property Value[5] of the property already identified.

6 It supports its position, in summary, on the understanding that the Tax Property Value of each of the independent floors varies between € 154,180.00 and € 234,050.00, well below the amount of € 1,000,000.00 that item 28 of the General Stamp Duty Table[6] establishes for subjection to Stamp Duty[7].

7 Concluding that such assessments are affected by illegality and therefore cannot be maintained in the legal order.

8 In its response, the respondent, primarily, considers that the request exceeds the tribunal's jurisdiction, since the claimants are not challenging a tax act, but rather the payment of the 2nd installment of a tax act, a matter which it considers absolutely beyond the tribunal's jurisdiction, by virtue of the provision contained in Article 2nd of the Legal Framework for Tax Arbitration.

9 It cites the decision already handed down in Case no. 736/2014 of the Administrative Arbitration Center, which goes in the direction it advocates, nevertheless proceeding, by way of challenge, to rebut the claimants' position to conclude that the tax acts in question do not violate any legal provision and should be maintained in the legal order.

II - PRELIMINARY EXAMINATION

The tribunal was regularly constituted.

The parties have legal personality and judicial capacity, are shown to be legitimate and are regularly represented in accordance with Articles 4th and 10th, paragraph 2 of the Legal Framework for Tax Arbitration and Article 1st of Ordinance no. 112-A/2011, of 22 March.

The parties agreed to waive the hearing referred to in Article 18th of the Legal Framework for Tax Arbitration, with the claimant having submitted arguments, while the respondent did not exercise this option, despite being notified to do so.

Thus, the proceedings not being affected by nullities, the exception of the tribunal's lack of jurisdiction, raised by the respondent, shall be examined first.

III - REASONING

1 – The issues to be resolved, with interest to the case file, are as follows:

a) To determine whether the review of the legality of the stamp duty assessments corresponding to the collection notices for the 2nd installment, of the year 2014, object of the present request for arbitral determination, exceeds or not the tribunal's jurisdiction as established in Article 2nd of the Legal Framework for Tax Arbitration.

b) In the event the tribunal considers itself competent, to determine whether the assessment acts challenged here are or are not legal.

c) And should their illegality be confirmed, with the consequent annulment, whether or not there shall be a right to the reimbursement of the amounts unduly paid plus compensatory interest.

2 – Facts of the Case

The facts considered relevant and proven based on the evidence attached to the case file are as follows:

a) The claimants were, in the year 2014, owners, in equal proportion, of the property already identified, located at Avenue …, municipality of Lisbon.

b) They were notified to proceed with the payment of the stamp duty (second installment), which they did on 30 July 2015.

c) The property in the year 2014 was not under the horizontal property regime, with its total Tax Property Value being € 1,075,080.00.

d) The property consists of 5 floors or divisions capable of independent use and none of the floors or independent divisions has a Tax Property Value equal to or exceeding € 1,000,000.00 (they vary between € 154,180.00 and € 234,050.00).

e) The economic value attributed by the claimants to the case was € 3,583.58, which corresponds to the amount of the 2nd installment challenged here.

There is no factual matter found to be unproven that is relevant to the decision.

3 – Legal Issues

Regarding the exception of the tribunal's lack of jurisdiction raised by the respondent:

The Tax Authority, in its response, raises the above exception, stating, in summary, that arbitral tribunals are competent to review the tax assessment acts, pursuant to Article 2nd, paragraph 1, subparagraph a) of the Legal Framework for Tax Arbitration, but are not competent to review the payment of a collection notice relating to an installment of that assessment act.

In the present case, the object of these proceedings is the payment of the 2nd installment of stamp duty relating to the year 2014 in the amount of € 3,583.58, a matter which, in its view, absolutely exceeds the established jurisdiction.

It further argues that, having failed to timely question the tax assessment when properly notified to pay the 1st installment, the claimants cannot do so when the 2nd installment is paid.

The claimants consider that the Tax Authority's position lacks any basis and can only be justified by a desperate attempt to avoid analyzing the disputed matter, stating that they have in their possession contradictory positions taken by the Tax Authority regarding the timing for submitting challenges to assessment acts whose payment the law allows in installments.

They consider that the taxpayer is free to challenge the installment of their choosing, since the object of the proceedings will always be the tax assessment, indeed, this position will result from the collection documents themselves which make reference to the possibility of filing a claim or challenge, and with the Tax Authority seeking to exclude this possibility in its response, when the notifications expressly alert to this possibility, there would be, on the respondent's part, conduct violating the principle of good faith.

They also cite the Decision of the Full Bench of the Tax Litigation Section of the Supreme Administrative Court[8] of 10 April 2013, in Case no. 0298/12 which found partial annulment of the tax act to be possible, and further note that there are numerous decisions of superior courts and the Administrative Arbitration Center that support their position, as well as Jorge Lopes de Sousa in comments to the Legal Framework for Tax Arbitration in Guide to Tax Arbitration, Almedina 2013, page 105.

Having reviewed the parties' positions, it is necessary to decide:

The declaration of illegality of tax assessment acts falls within the scope of subparagraph a) of paragraph 1 of Article 2nd of the Legal Framework for Tax Arbitration.

As can be gathered from the first page of the request for arbitral determination, what is sought is the review of the legality of the stamp duty assessments, regarding the year 2014 (second installment).

From the tribunal's perspective, the possibility of payment in installments is a collection technique for a particular assessment act that is unique and only it can constitute an injurious act capable of being challenged. Any installment considered independently is neither an assessment act nor a part of that act; it is, as has been stated, a collection technique, which does not prevent an assessment act from being partially annulled.

In the present case, the stamp duty assessment act provided for in item 28 of the General Stamp Duty Table is the single act of determining the total tax to be paid; the possibility of that determined amount being paid in installments does not mean that there are as many assessments as there are installments.

That single assessment act may be challenged either after notification to pay the 1st, 2nd, or 3rd installment; it is sufficient that the request is directed at the single assessment act.

We follow the position advocated in Case 736/2014 of the Administrative Arbitration Center, which, with due deference, is reproduced below:

"… In order to respond to the question at issue, it is pertinent to bear in mind the concept of tax assessment (Art. 97, paragraph 1, subparagraph a) of the Code of Tax Procedure and Process) or tax assessment acts (Art. 2nd, paragraph 1, subparagraph a) of the Legal Framework for Tax Arbitration). According to José Casalta Nabais' doctrine, "assessment in the broad sense, that is, as the set of all operations intended to determine the amount of tax, comprises: 1) The subjective assessment intended to determine or identify the taxpayer or obligated party to the tax legal relationship, 2) The objective assessment through which the taxable or subject matter of the tax is determined and, likewise, the rate to be applied is determined in the case of multiple rates. 3) Assessment in the strict sense, translated into the determination of the tax collected through the application of the rate to the taxable or subject matter, and 4) the (possible) deductions from the tax collected. As follows from the concept of assessment given by the distinguished professor, for each tax fact there will be, in principle, a single assessment, by which the amount of tax to be paid will be determined. This is, moreover, what follows from Art. 23rd, paragraph 7, of the Stamp Duty Code by providing that 'where the tax is due by the situations provided for in item no. 28 of the General Table, the tax is assessed annually (...)' applying, with the necessary adaptations, the rules contained in the Code of Income Tax". In turn, Article 113th, paragraph 2 of the Code of Income Tax, applicable by reference to that provision of the Stamp Duty Code, provides that "the assessment (...) is effected in the months of February and March of the following year". From the fact that, by force of law, it may be paid in several installments, it does not follow that several assessments have occurred. There is only one assessment and it alone constitutes an injurious act, capable of being challenged, which can, of course, only be the subject of a single challenge. Naturally, when the law provides for the payment of the assessed amount in several installments, staggered in time, the annulment of the tax act will have consequences regarding all of them, bringing the obligation to pay to an end or imposing the obligation to refund and interest charges on the Tax Authority, in case of payment by the obligated party. What the law does not provide for, neither in arbitral proceedings nor in judicial challenge proceedings, is the claim for annulment of installment payments per se, since such effect will only follow from the annulment of the tax assessment act, which as we have seen, consists of the quantification of the total amount to be paid and which is only and solely a single tax act."

Sharing this perspective, and considering that the request is directed exclusively at the stamp duty paid under the 2nd installment and that the economic value attributed to the case is precisely the amount of the 2nd installment (€ 3,583.58), it is inescapable to conclude that the object of the request is not directed at the tax assessment act, but at the collection technique itself, in this case, the 2nd installment, and it is certain that the law does not provide for the challenge of installment payments per se.

Given the provision of Article 2nd, paragraph 1, subparagraph a) of the Legal Framework for Tax Arbitration, which establishes the material jurisdiction of arbitral tribunals, we must conclude that the matter submitted for review does not fall within the jurisdiction of the arbitral tribunal, with the dilatory exception provided for in subparagraph c) of paragraph 1 of Article 89th of the Code of Administrative Court Procedure[9], applicable by virtue of Article 29th, paragraph 1, subparagraph c) of the Legal Framework for Tax Arbitration.

Thus, the exception raised by the respondent is upheld, and consequently, the examination of the remaining issues is precluded.

IV – DECISION

In light of the foregoing, the tribunal decides as follows:

a) To declare the exception raised by the respondent to be upheld, dismissing the case against the respondent.

b) To establish the amount in dispute of € 3,583.58 in accordance with the provisions contained in Article 299th, paragraph 1, of the Code of Civil Procedure[10], Article 97th-A of the Code of Tax Procedure and Process[11], and Article 3rd, paragraph 2, of the Rules on Costs in Tax Arbitration Proceedings[12].

c) To establish the costs, pursuant to paragraph 4 of Article 22nd of the Legal Framework for Tax Arbitration, in the amount of € 612.00 in accordance with the provision of Table I referred to in Article 4th of the Rules on Costs in Tax Arbitration Proceedings, to be borne by the claimants.

Notify.

Lisbon 17 February 2016

Document produced by computer, pursuant to Article 131st, paragraph 5 of the Code of Civil Procedure, applicable by reference to Article 29th, paragraph 1, subparagraph e) of the Legal Framework for Tax Arbitration, with blank lines and reviewed by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Acronym for Tax Identification Number

[2] Acronym for Legal Framework for Tax Arbitration

[3] Acronym for Tax Authority and Customs Authority

[4] Acronym for Administrative Arbitration Center

[5] Acronym for Tax Property Value

[6] Acronym for General Stamp Duty Table

[7] Acronym for Stamp Duty

[8] Acronym for Supreme Administrative Court

[9] Acronym for Code of Administrative Court Procedure

[10] Acronym for Code of Civil Procedure

[11] Acronym for Code of Tax Procedure and Process

[12] Acronym for Rules on Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) due under Verba 28 TGIS when individual units in a vertical property are each valued below €1,000,000?
Under Verba 28 TGIS, the central question is whether stamp duty applies when a property held in vertical ownership has a total VPT exceeding €1,000,000 but individual independent units are each valued below this threshold. In Case 557/2015-T, claimants argued that the €1,000,000 threshold should apply to each independent floor or division, not the aggregate property value. Since their property consisted of five floors each valued between €154,180 and €234,050, they contended no stamp duty was due. The case highlights the interpretative dispute over whether vertical ownership properties should be assessed as a single taxable unit or as separate independent units for Verba 28 purposes.
How does CAAD determine the taxable value (VPT) for properties held in vertical ownership for Stamp Tax purposes?
CAAD faced a critical interpretative question regarding VPT calculation for vertical ownership properties under Verba 28 TGIS. The dispute centered on whether to apply the €1,000,000 threshold to: (a) the total property VPT (€1,075,080 in this case), triggering stamp duty liability; or (b) each independent floor or division capable of autonomous use (ranging from €154,180 to €234,050), which would exempt the property. The claimants emphasized that their property, though not under horizontal property regime, consisted of five floors with independent use capability. This distinction is crucial because horizontal property units are taxed individually, and claimants argued that functionally independent vertical divisions should receive similar treatment for Verba 28 threshold application purposes.
Can taxpayers challenge Stamp Tax assessments on high-value properties through CAAD arbitration proceedings?
Yes, taxpayers can challenge stamp duty assessments on high-value properties through CAAD arbitration under Article 2(1)(a) of the Legal Framework for Tax Arbitration (RJAT), which grants jurisdiction over tax assessment act reviews. However, Case 557/2015-T presented a jurisdictional complication: the Tax Authority argued CAAD lacked competence because claimants challenged the second installment payment rather than the initial assessment act. The Authority contended that failure to challenge the first installment precluded later challenges. Claimants countered that challenging any installment effectively challenges the underlying assessment, noting that collection documents explicitly inform taxpayers of appeal rights. They cited Supreme Administrative Court precedent allowing partial annulment of tax acts and numerous CAAD decisions supporting jurisdiction over installment-related challenges.
What is the legal threshold under Verba 28 of the Tabela Geral do Imposto do Selo for residential property taxation?
Verba 28 of the Tabela Geral do Imposto do Selo establishes a €1,000,000 threshold for residential property taxation. Properties with a Tax Property Value (VPT) at or exceeding this amount are subject to annual stamp duty. The rate structure applies progressively: properties valued between €600,000 and €1,000,000 face lower rates, while those exceeding €1,000,000 incur higher duty obligations. The critical interpretative issue in Case 557/2015-T concerned whether this threshold applies to the aggregate property value or to individual independent units within properties held under vertical ownership. This distinction significantly impacts tax liability, particularly for multi-unit properties where the combined value exceeds €1,000,000 but individual units remain below this threshold.
Does CAAD have jurisdiction to review the legality of individual installment payments of Stamp Tax liquidations?
CAAD jurisdiction over installment payment challenges represents a contested procedural issue in Case 557/2015-T. The Tax Authority argued that Article 2 RJAT limits CAAD competence to reviewing tax assessment acts, not subsequent installment payments. They contended that challenging an installment differs fundamentally from challenging the underlying liquidation, especially when taxpayers failed to contest earlier installments. Claimants argued that installment challenges inherently contest the underlying assessment's legality, supported by collection documents explicitly referencing appeal rights. They cited the Supreme Administrative Court's recognition of partial tax act annulment and numerous CAAD precedents accepting jurisdiction over installment-related disputes. The tribunal had to reconcile these positions, determining whether installment payment review falls within or exceeds CAAD's statutory jurisdiction under the tax arbitration framework.