Process: 56/2014-T

Date: July 31, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 56/2014-T addressed the controversial application of Portuguese Stamp Tax (Imposto de Selo) to building land (terrenos para construção) under items 28 and 28.1 of the General Stamp Tax Table (TGIS). The taxpayer, A... Lda., challenged a stamp duty assessment of €5,105.04 imposed on urban property classified as building land in Porto, arguing that the tax unlawfully applied to undeveloped land. The core dispute centered on whether building land constitutes taxable property under TGIS Verba 28, which references properties with residential use. The claimant contended that building land possesses only potential for future construction, not actual residential use, making the tax inapplicable. The company argued that assigning residential purpose to undeveloped land is inherently impossible, and the mere possibility of future construction cannot establish present taxable use. Additionally, the taxpayer raised subsidiary grounds including formal defects in the assessment notice, violation of the participation principle in the gracious complaint decision, and alleged unconstitutionality based on equality and proportionality principles. The Portuguese Tax and Customs Authority (AT) defended the assessment by arguing that the property use coefficient under Article 41 of CIMI applies to building land valuation pursuant to Article 45(2) CIMI, which references 'authorized buildings.' The AT maintained that use coefficients contribute to property valuation regardless of current development status, making building land subject to Stamp Tax under item 28.1 when property values exceed applicable thresholds. This CAAD tax arbitration case represents significant Portuguese tax jurisprudence on the scope of Stamp Tax charging provisions and whether fiscal obligations attach to property based on potential versus actual use, with implications for real estate developers and landowners throughout Portugal.

Full Decision

ARBITRAL DECISION

Process 56/2014-T

THE PARTIES

Claimant: A…, Lda. NIPC …, with registered office in Rua … Lisbon.

Defendant: Tax and Customs Authority (AT).

DECISION

REPORT

a) On 24.01.2014, the limited liability company A…, Lda., NIPC PT … (hereinafter referred to as the Claimant) submitted to CAAD a petition requesting, under the Legal Regime for Tax Arbitration (RJAT), the constitution of a Singular Arbitral Tribunal.

b) The petition is signed by a lawyer whose power of attorney was attached.

THE PETITION

c) The Claimant petitions for the annulment of the Stamp Duty (IS) assessment no. …, dated 07.11.2012, in the amount of € 5,105.04, relating to the urban property of the type "building land" registered in the urban property register of the Union of Parishes of …, municipality of Porto, under article U-…º.

d) Having previously lodged a gracious complaint against this assessment – process … – the same was dismissed by a decision notified to it on 28.10.2013.

e) It states that the tax act is vitiated by illegality "insofar as building land is not a taxable reality subject to item 28 of the TGIS".

f) It subsidiarily invokes that in the assessment notice there is no indication of the authority that performed the act and therefore there is a defect that results in its annulment in accordance with article 135º of the CPA.

g) It further argues, subsidiarily, regarding the dismissal of the gracious complaint the defect of violation of the principle of participation, insofar as the AT did not rule on the alleged unconstitutionality invoked in the aforementioned gracious remedy, since

h) It had raised in the gracious complaint: "without dispensing with" "… this tax, for not being based on a real and effective greater taxpaying capacity of the respective taxpayers, constitutes a violation of the principle of tax equality and proportionality, as it represents an excessive and discriminatory tax burden" and having concluded by petitioning for the "…annulment of the assessment notice complained of because the CIS does not tax the ownership of building land, but buildings erected with residential use"; further arguing that "annulment of this assessment notice should be carried out, on grounds of unconstitutionality, for violation of the principle of equality and tax proportionality".

i) Similarly, because at the preliminary hearing in the gracious procedure the Claimant invoked the non-applicability, in this case, of article 41º of the CIMI, it now petitions for the annulment of the dismissal decision referred to in d), because the AT failed to rule on this ground.

OF THE ARBITRAL TRIBUNAL

j) The petition for arbitral ruling was accepted by the President of CAAD and automatically notified to the AT on 27.01.2014.

k) By the Deontological Council of CAAD, the signatory of this decision was appointed as arbitrator, with the parties being notified thereof on 03.04.2014.

l) Therefore, the Singular Arbitral Tribunal (TAS) has been, since 21.04.2014, duly constituted to hear and decide on the subject matter of this dispute.

m) All these acts are documented in the communication of constitution of the TAS dated 21.04.2014 which is hereby reproduced.

n) Since identical issues to those already raised in many other cases already decided at CAAD are raised in this process, the TAS by order of 21.05.2014 decided to dispense with the meeting of parties referred to in article 18º of the RJAT, if they were not to object thereto.

o) Notified of the promotion referred to in the preceding point, the AT agreed with the TAS's promotion and further requested the non-submission of statements, by petition of 22.05.2014. The Claimant, notified of the AT's position, by petition of 03.06.2014 gave its assent to the TAS's promotion and agreed with the AT's position regarding the non-submission of statements.

p) Therefore, the meeting provided for in article 18º of the RJAT was not held nor were statements of the parties submitted.

PROCEDURAL PREREQUISITES

q) Legitimacy, capacity and representation - the parties have legal personality and capacity, are legitimate and are properly represented.

r) Contradictory principle - the AT submitted its response to the petition for ruling presented by the Claimant on 19.05.2014. All orders of the TAS and all petitions and documents submitted by the parties were properly notified.

s) Dilatory exceptions - the case has no nullities and the petition for arbitral ruling is timely since it was submitted within the prescribed period in paragraph a) of no. 1 of article 10.º of the RJAT.

SUMMARY OF THE CLAIMANT'S POSITION

Regarding the illegality "insofar as building land is not a taxable reality subject to item 28 of the TGIS"

t) The Claimant considers that the classification of building land under items 28 and 28.1 of the General Table of Stamp Duty is incorrect, since "it is clear from the charging norm that the tax obligation only arises in relation to urban properties with residential use".

u) It considers that in "building land there is only a potential regarding the eventual construction of buildings thereon and not any built property capable of being used".

v) And that "it will, by nature, be impossible to assign building land to a residential purpose", adding "the mere potentiality of construction does not allow one to take as certain the fact that the constructions in question will ever be erected and the moment when such constructions could exist, should they materialize".

Regarding the subsidiary petition for "invalidity of the administrative act": the stamp duty assessment notice

w) It states that the stamp duty assessment notice does not contain an indication of the authority that performed it and therefore there is a defect that results in its annulment in accordance with article 135º of the CPA.

Regarding the subsidiary petition for annulment of the gracious complaint for violation of the principle of participation – unconstitutionality of items 28 and 28.1 in the interpretation applied by the AT

x) Since the AT did not rule on the alleged unconstitutionality in its dismissal of the gracious complaint, it considers that it suffers from violation of the principle of participation, which results in the annulment of the decision dismissing the gracious complaint.

Regarding the subsidiary petition for annulment of the gracious complaint for omission of any reference to the new fact invoked at the preliminary hearing.

y) The Claimant considers that because at the preliminary hearing in the gracious procedure it invoked the non-applicability, in this case, of article 41º of the CIMI, the fact that the AT did not rule on this specific matter results in the annulment of the dismissal decision referred to in d).

SUMMARY OF THE TAX AUTHORITY'S POSITION

Regarding the illegality "insofar as building land is not a taxable reality subject to item 28 of the TGIS"

z) The AT argues that the "notion of the use of the urban property is found in the part relating to the valuation of properties, which makes sense since the valuation of the property (purpose) incorporates value into the property, constituting a determining fact of distinction (coefficient) for valuation purposes".

aa) "As results from the expression 'value of authorized buildings', contained in article 45º-2, of the CIMI, the legislator chose to determine the application of the valuation methodology for urban properties in general to the valuation of building land, and therefore the use coefficient provided for in article 41º of the CIMI is applicable to them".

bb) And it argues that "for the purpose of determining the taxable property value of building land, it is clear that the use coefficient applies in the valuation stage, so its consideration for the purpose of applying item 28-1 of the TGIS cannot be ignored".

cc) It clarifies that "the use of the property (capacity or purpose) is a coefficient that contributes to the valuation of the property, in the determination of the taxable property value, applicable to building land".

dd) Summarizing its reasoning, it ultimately expresses: "that item 28 itself of the TGIS refers to the expression 'properties with residential use', calling for a classification that overlaps the types provided for in no. 1 of article 6.° of the CIMI."

ee) The AT contests the fact that the Claimant has only now raised the issue brought before the tribunal because the indication of residential use of the property results from the taxpayer's initiative.

ff) The AT understands that "the concept of 'properties with residential use', for the purposes of item 28 of the TGIS, comprises both built properties and building land, firstly in view of the literal element of the norm", since "the legislator does not refer to 'properties intended for housing', having opted for the notion of 'residential use', an expression that is different and broader whose meaning must be found in the need to integrate other realities beyond those identified in article 6.°- 1, paragraph a), of the CIMI".

gg) It concludes for the legality of the assessment act in light of the CIMI and the Portuguese Constitution, so the impugned assessment should remain in the legal order, as it constitutes a correct application of the law to the facts.

Regarding the subsidiary petition for annulment of the gracious complaint for violation of the principle of participation – unconstitutionality of items 28 and 28.1 in the interpretation applied by the AT

hh) The AT contends that there is no non-conformity with constitutional principles in the interpretation of the law that led to the performance of the impugned act, particularly the principles of equality and proportionality, both because the tax law in this case is general and abstract and applicable indiscriminately to all cases in which the factual and legal prerequisites are met and taxation under stamp duty complies with the criterion of suitability, applying indiscriminately to all holders of properties with residential use valued above € 1,000,000.00, affecting the wealth embodied and manifested in the value of the properties.

ii) It did not rule specifically on the alleged omission in the decision referred to in d).

Regarding the subsidiary petition for "invalidity of the administrative act": stamp duty assessment notice and regarding the subsidiary petition for annulment of the gracious complaint for omission of any reference to the new fact invoked at the preliminary hearing.

jj) The AT did not rule specifically on this matter.

II - ISSUES FOR THE TRIBUNAL TO RESOLVE

The issues before the Tribunal concern only the interpretation and application of legal rules.

On this matter, in particular, CAAD has already ruled in various decisions in which the underlying issue is the same, as has the SAT itself, that is, the discussion concerns the scope of the charging norm of items 28 and 28-1 of the TGIS.

The limit of interpretation is the letter, the text of the norm. What then follows is the "task of interconnection and evaluation that escapes the literal domain".

Starting from the principle that every norm has a provision and an enactment, the question here is to ascertain, by delimiting, whether the charging norm, as it is worded – in its provision - (urban properties … with residential use), encompasses or not the legal-fiscal reality defined in law as "building land".

Or rather, in the case of this process, taking into account the way the Claimant places its requests, namely:

  • Requests the annulment of the stamp duty assessment, on the basis of the illegality of the assessment/inapplicability of item 28.1 of the TGIS … to building land, for not being included in its scope of application (section e) of the Report);

  • and then, subsidiarily, places the requests referred to in sections f) to i) of the Report;

what must be ascertained is, first and foremost, whether the tax act of stamp duty assessment now impugned suffers from any illegality, any non-conformity with the law, in particular "error in the qualification of the tax fact" that affects its maintenance in the tax legal order.

The other grounds, being presented in a successive and subsidiary manner, should only be considered if it is concluded that there is no non-conformity of the impugned tax act with the law that affects its maintenance in the tax legal order.

It appears to the TAS that the issue it must resolve, first and foremost, is the following:

  • Does the tax act of stamp duty assessment now impugned suffer from any non-conformity with the law, in particular "error in the qualification of the tax fact" that affects its maintenance in the tax legal order?

The AT did not submit the PA, basically accepting that the documents 2 to 6 attached by the Claimant with the petition for ruling form what would be its content.

III. PROVEN AND UNPROVEN FACTS. SUBSTANTIATION

For the purposes of the decision to be adopted, these are the facts considered proven, indicating the respective documents and/or the articles of the Claimant's petition and the AT's response as to the facts admitted by agreement, as substantiation:

  1. The Claimant is recorded as the owner in full of the urban property of the type "building land" registered in the urban property register of the Union of Parishes of …, municipality of Porto, under article U-…º – Document no. 2 (urban property register) attached with the petition for ruling and articles 1st of the petition for ruling and the AT's response;

  2. The description of the urban property is made as follows: "Type of property: building land" - Document no. 2 (urban property register) attached with the petition for ruling;

  3. Document no. 2 (urban property register) attached with the petition for ruling in "valuation data" refers "type of location coefficient: residential" and contains a grid indicating "Ca – 1.00";

  4. The property has a current taxable property value (CIMI) of € 1,021,008.80 determined in 2010 - Document no. 2 (urban property register) attached with the petition for ruling;

  5. And such taxable property value resulted from "Model 1 of IMI no. … submitted on 2007.07.05, valuation form 1778056, valued on 2007.08.01" - Document no. 2 (urban property register) attached with the petition for ruling;

  6. The Claimant was notified of the Stamp Duty assessment no. …, dated 07.11.2012, pursuant to the provisions of article 6º no. 1 paragraph f) point i) of Law 55-A/2012, of 29 October, from which results a stamp duty collection of € 5,105.04 - articles 4º and 5º of the petition for ruling and article 1º of the AT's response;

  7. This tax assessed on the basis of item 28.1 of the TGIS, with the wording introduced by Law 55-A/2012, of 29 October - articles 4º and 5º of the petition for ruling and preamble of the AT's response;

  8. On 19.04.2013 the Claimant filed a gracious complaint against the assessment referred to in the two preceding numbers and on 28.10.2013 was notified of its dismissal – articles 7º and 15º of the petition for ruling and documents nos. 3 and 6 attached with the petition for ruling.

There is no other factual matter alleged that is relevant to the proper resolution of the procedural dispute.

IV. ASSESSMENT OF THE ISSUES FOR THE TRIBUNAL TO RESOLVE

It appears to us that with the creation of a new item in the TGIS, item 28 (by article 4º of Law 55-A/2012, of 29.10) in essence creating a new "fact or legal situation" subject to tax, it was merely intended to extend the scope of stamp duty to a new legal-factual reality, but not altering the division of the various types of urban properties existing.

The tax act in question occurred during the validity of the previous wording of item 28.1 of the TGIS so the current wording given to it by article 194.º of Law no. 83-C/2013, of 31 December (State Budget for 2014) is not applicable here, since it only applies as of 01 January 2014.

We are thus, only and solely, within the scope of the activity of interpretation and application of norms, that is, in the task of delimiting the legal-factual situations that should be considered as comprised in the charging norm of this new tax and which results from the combination of items 28 and 28-1 of the TGIS.

Only that afterwards, the law, its literal element which is always the limit of any interpretation, in item 28-1 TGIS, comes to add "… by property with residential use".

That is, this specific charging norm of the tax, should not then be interpreted, delimited, as if it had the literalness of "residential urban properties", because the interpreter, in respect of the command of no. 3 of article 9º of the Civil Code, cannot start from the assumption that the legislator did not know the exact terms of no. 1 of article 6º of the CIMI which makes the division of the various types of urban properties.

But it also does not appear that it can be understood that in the charging norm it automatically includes, beyond the type of urban properties "residential", the type "building land".

It appears to us, therefore, that in light of the literal element of the charging norm (revealing the legislator's intent): "urban properties … with residential use" it was intended to reach other types of urban properties, beyond the "urban properties … residential" according to the division of no. 1 of article 6º of the IMI Code.

We do not mean, however, with this that the type of urban property "building land" (or any other type of urban property) is clearly and without further question (that is, "ope legis"), comprised in the charging norm of item 28-1 of the TGIS.

For this purpose we transcribe, aiming at simplification and uniformization, what is stated in the arbitral decision CAAD Process 48/2013-T (by way of example), in the part to which we adhere:

"The subjection to stamp duty of properties with residential use resulted from the addition of item 28 of the General Table of Stamp Duty, carried out by article 4º of Law 55-A/2012, of 29/10, which typified the following tax facts:

28 – Ownership, usufruct or right of surface of urban properties whose taxable property value contained in the register, in accordance with the Real Estate Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the taxable property value used for the purpose of IMI:

28-1 – By property with residential use - 1%;

28-2 – By property, when the taxpayers who are not individuals are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by Order of the Minister of Finance – 7.5%.

…

With respect to the situations typified in item 28.1, only properties with residential use are subject to taxation.

Law no. 55-A/2012, of 29 October, nowhere clarifies what properties with residential use are. However, in no. 2 of article 67º of the Stamp Duty Code, added by the aforementioned legislation, it was stipulated that 'to matters not regulated in this Code relating to item 28 of the General Table, the CIMI applies subsidiarily'.

The CIMI also does not clarify what properties with residential use are, but only what the various types of properties are, qualifying no. 2 of article 6º as 'residential, commercial, industrial or for services buildings licensed as such or, in the absence of a license, that have as their normal destination each of these purposes'.

That is, for the CIMI, both are residential property licensed for housing, even if they are not being used for that purpose, as well as, in the case of absence of a license, that have this as their normal destination.

As for building land, which is relevant in the present case, given the assessment carried out and impugned on building land, the CIMI, in no. 3 of article 6º, tells us that "they are those located inside or outside an urban agglomeration, for which a license or authorization for development or construction operations has been granted, and also those that have been declared as such in the acquisition title, excepting lands where the competent entities prohibit any of these operations, namely those located in green areas, protected areas or which, in accordance with municipal land use planning plans, are allocated to spaces, infrastructure or public facilities".

From the two norms transcribed above, it is not possible to extract what the legislator intended to say when speaking of properties with residential use.

Law no. 55-A/2012, of 29/10, has no preamble, hence from it is not possible to extract the legislator's intent.

This Assembly of the Republic law originated from the proposal for law no. 96/XII (2nd), which, in the statement of reasons, speaks of the introduction of tax measures inserted in a larger set of measures to combat budget deficit.

In the statement of reasons of the aforementioned bill, it is stated that, "these measures are fundamental to reinforce the principle of social equity in austerity, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment program. The Government is strongly committed to ensuring that the distribution of these sacrifices will be made by all and not only by those who live from the income of their work. In accordance with this objective, this legislation expands the taxation of capital and property, equitably covering a broad set of sectors of Portuguese society".

It is also stated in this statement of reasons that, in addition to the increase in taxation of capital income and securities gains, a rate is created under stamp duty affecting urban properties of residential use whose taxable property value is equal to or greater than one million euros.

That is, in such statement of reasons, it is also not clarified what is meant by urban properties with residential use.

…

In his intervention in the Assembly of the Republic, in the presentation and discussion of the aforementioned bill, the Secretary of State for Tax Affairs stated the following:

"The Government has chosen as a priority principle of its tax policy social equity. This is even more important in times of rigor as a way to ensure the fair distribution of the tax effort.

In the demanding period the country is going through, during which it is obliged to comply with the economic and financial assistance program, it becomes even more pressing to assert the principle of equity. It cannot always be the same – employees and retirees – who bear the tax burden.

For the tax system to be more just, it is crucial to promote the expansion of the tax base by demanding an increased effort from taxpayers with higher income and thereby protecting Portuguese families with lower income.

For the tax system to promote more equality, it is fundamental that budget consolidation efforts be shared by all types of income, covering with special emphasis capital income and high-value properties. This matter, it should be noted, was extensively addressed in the Constitutional Court ruling.

Finally, for the tax system to be more equitable, it is crucial that all be called upon to contribute according to their taxpaying capacity, giving the tax administration strengthened powers to control and audit situations of tax fraud and evasion.

In this sense, the Government presents today a set of measures that effectively reinforce a just and equitable distribution of adjustment efforts across a broad and comprehensive set of sectors of Portuguese society.

This proposal has three essential pillars: the creation of special taxation on urban properties valued above 1 million euros; the increase in taxation on capital income and securities gains and the strengthening of rules to combat tax fraud and evasion.

First of all, the Government proposes the creation of a special rate on the highest-value residential urban properties. It is the first time that Portugal has created special taxation on high-value properties intended for housing. This rate will be 0.5% to 0.8% in 2012, and 1%, in 2013, and will affect homes valued at equal to or greater than 1 million euros. With the creation of this additional rate, the tax effort required of these owners will be significantly increased in 2012 and 2013".

In their interventions, in the discussion of such bill, deputies Pedro Filipe Soares, from BE, and Paulo Sá, from PCP, speak of the taxation of high-end real estate assets, arriving at references to previous bills on the same subject that were not approved."

First, it must be noted that there is no doubt that the type of urban properties considered "residential" (paragraph a) of no. 1 of article 6º of the CIMI) which are "… buildings or structures licensed as such or, in the absence of a license, that have as their normal destination this purpose", automatically fall within the provision of the charging norm of items 28 and 28-1 of the TGIS.

But from the mere consideration of the literal element of the law it will result that it was intended to encompass more than this legal-fiscal reality encompasses.

Since, as has already been stated, by virtue of the command of no. 3 of article 9º of the Civil Code, it does not appear possible for the interpreter to understand that the expression "urban properties … with residential use" has the same practical scope (field of application) as if it said "residential urban properties", starting from the assumption that it was intended to encompass more than would be encompassed through the use of the first literal element.

In the present case, the AT argues that "the notion of the use of the urban property is found in the part relating to the valuation of properties, which makes sense since the valuation of the property (purpose) incorporates value into the property, constituting a determining fact of distinction (coefficient) for valuation purposes" and therefore one should resort to article 41º (use coefficient) of the IMI Code.

And it further states: "the tax law considers as an integrating element for the purpose of valuation of building land the value of the development area, which varies between 15% and 45% of the value of authorized or envisaged buildings based on the urbanization and construction design."

That is, it understands that the "residential use" of the urban property in question is clear in light of what appears in the property register which resulted from a declaration by the taxpayer (Model 1 declaration of IMI) – matter which above was taken to the proven facts (sections 3) and 5)).

But then does the expression "urban properties … with residential use", encompass or can encompass "building land" as urban properties not yet built but with constructive capacity for residential properties?

Now, only with the elements contained in the property register, as is the case, in which a mere constructive or building potential is demonstrated, it appears to us that without additional substantiation of the tax act, without demonstration that the type of urban property "building land" already has any economic utility at the level of residential use, it will not be possible to consider it as comprised in the charging norm of items 28 and 28-1 of the TGIS.

First, it appears to us to be inappropriate, in light of general legal principles, to depart from the consideration that the urban property of the type "building land" with potential for construction of residential properties should be considered to have "residential use", relying on the use coefficient (CA) because the taxpayer made a declaration to that effect, for the reason that it was made at a time when this tax did not exist.

Second, even if that declaration was made stating that only residential buildings would be constructed, this could be changed in accordance with the local municipality's urban planning plans, so that commercial or other properties could also be constructed.

Third, discrepancies may occur between what in reality may be constructed (buildings for residential purposes and for non-residential purposes) according to urban planning plans and what may appear in the register at the time the property is registered, so there is a lack of consistent legal certainty.

Does this mean that the expression "urban properties … with residential use", cannot encompass "building land" as urban properties not yet built but with constructive capacity for residential properties?

It appears to us that situations can occur in the immense complexity of economics, economic utility, even informal, situations of subjection, given the commands that are placed on the interpreter contained in no. 3 of article 9º of the Civil Code and no. 3 of article 11º of the LGT.

Only that as for "building land" as urban properties not yet built but with constructive capacity for residential properties, it appears to us that it is not sufficient to demonstrate the "residential use" the elements that appear in the register. There will be a need for substantiation, other factual matter, beyond what appears in the register that evidences economic utility with this specific purpose.

It does not appear to us possible through extensive interpretation, using reasoning by parity with buildings considered residential urban properties, to conclude, without further ado, that the type of urban properties considered "building land" fall "ope legis" within the tax charging norm, it being sufficient to allege the legal-formal qualification and the elements of the register, since there will need to be demonstrated its "residential use" in concrete.

The Claimant alleges the non-conformity of the tax act with the law of erroneous qualification of the tax fact.

In fact, even if it is understood, as it appears to us should be understood, in general and abstract terms, that "building land" as well as any other urban property beyond the type of urban properties "residential" (because these always have residential use by definition) can have, in terms of practical, economic and functional utility a "residential use" in concrete (even in the informal economy), the truth is that its consideration "ope legis" as having "residential use" based solely on the elements of the register and the fact that its valuation is made with reference to the coefficients applicable to residential urban properties, constitutes non-conformity with the charging norm of items 28 and 28-1 of the TGIS, thereby occurring, therefore, the illegality provided for in paragraph a) of article 99º of the CPPT and the illegality provided for in paragraph c) of article 99º of the CPPT is also verified by the occurrence of a lack of substantiation which the law, in the reading expressed above, requires.

The impugned act contains no substantiation in the sense expressed above, beyond the consideration that it is an urban property of the type "building land" "with constructive capacity for residential properties" in hypothetical terms, which is deemed to be insufficient.

As a consequence of the above, the petition filed by the Claimant before the TAS must be upheld, since the stamp duty assessment carried out by the AT is not in conformity with the law.

Given that the first petition filed by the Claimant in the petition for ruling (section e) of the Report) is upheld, it is not necessary to consider the other successive and subsidiary requests (sections f) to i) of the Report).

V. DECISION

On the basis and for the reasons set out above, the petition of the Claimant seeking the annulment of the Stamp Duty assessment no. …, dated 07.11.2012, in the amount of € 5,105.04, relating to the urban property of the type "building land" registered in the urban property register of the Union of Parishes of …, municipality of Porto, under article U-…º, is upheld, annulling the tax act expressed in this document, for being in non-conformity with the stamp duty charging norm contained in items 28 and 28-1 of the TGIS.

Value of the case: in accordance with the provisions of article 3.º, no. 2, of the Regulation of Costs in Tax Arbitration Processes (and paragraph a) of no. 1 of article 97ºA of the CPPT), the value of the case is fixed at € 5,105.04.

Costs: in accordance with the provisions of article 22.º, no. 4, of the RJAT, the amount of costs is fixed at € 612.00, according to Table I annexed to the Regulation of Costs in Tax Arbitration Processes, charged to the Defendant.

Notify.

Lisbon, 31 July 2014

The Singular Arbitral Tribunal,

Prepared using a computer in accordance with the provisions of article 138.º, no. 5, of the CPC, applicable by reference to article 29.º of the RJAT.

The drafting of this decision follows the spelling prior to the 1990 Orthographic Agreement.

Frequently Asked Questions

Automatically Created

Does Portuguese Stamp Tax (Imposto de Selo) apply to building land (terrenos para construção) under TGIS Verba 28?
According to CAAD process 56/2014-T, the applicability of Portuguese Stamp Tax to building land under TGIS Verba 28 is disputed. Taxpayers argue that building land lacks actual residential use and possesses only construction potential, making it outside the scope of Verba 28. However, the Portuguese Tax Authority contends that the use coefficient under Article 41 CIMI applies to building land valuation, bringing it within the stamp tax charging provisions when property values exceed thresholds.
Can building land be taxed under Verba 28.1 of the Portuguese General Stamp Tax Table?
The Portuguese Tax Authority argues that building land can be taxed under Verba 28.1 of the General Stamp Tax Table based on Article 45(2) CIMI, which applies urban property valuation methodology to building land including use coefficients. The AT maintains that for determining taxable property value of building land, the use coefficient cannot be ignored, thus subjecting high-value building land to stamp tax rates under item 28.1 despite its undeveloped status.
How to challenge a Stamp Tax assessment on building land through CAAD tax arbitration in Portugal?
To challenge a Stamp Tax assessment on building land through CAAD arbitration, taxpayers must first file a gracious complaint (reclamação graciosa) with the Tax Authority. After the complaint is decided, taxpayers have the statutory deadline under Article 10(1)(a) of RJAT to submit a petition for arbitral ruling to CAAD. The petition must be signed by a lawyer with proper power of attorney, specify the contested assessment, and present legal grounds for annulment, as demonstrated in process 56/2014-T.
Is the Stamp Tax on high-value building land unconstitutional under Portuguese equality and proportionality principles?
In CAAD process 56/2014-T, the taxpayer raised constitutional challenges arguing that Stamp Tax on building land violates equality and proportionality principles because it is not based on actual taxpaying capacity. The claimant contended the tax represents an excessive and discriminatory burden on undeveloped property. However, the Tax Authority failed to address these constitutional arguments in the gracious complaint decision, leading to additional procedural grounds for challenging the administrative decision based on violation of the participation principle.
What is the procedure for filing a CAAD arbitration request after a rejected gracious complaint (reclamação graciosa)?
After a rejected gracious complaint, the CAAD arbitration procedure involves: (1) submitting a petition for arbitral ruling within the RJAT deadline; (2) automatic notification to the Tax Authority; (3) appointment of arbitrator(s) by CAAD's Deontological Council; (4) constitution of the Arbitral Tribunal; (5) the Tax Authority's response to the petition; and (6) optional hearing of parties under Article 18 RJAT, which may be dispensed with by agreement when issues have been decided in similar prior cases, as occurred in process 56/2014-T.