Process: 560/2015-T

Date: March 14, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to buildings held under full vertical ownership when individual units have patrimonial values below €1,000,000 but the aggregate exceeds this threshold. The case involves an inherited estate containing a building with 8 independent units (7 residential, 1 industrial) with a total tax patrimonial value (VPT) of €1,128,920. Each unit individually was valued below €1,000,000. The Tax Authority issued seven separate Stamp Tax assessments totaling €10,851.50, treating each unit independently for taxation purposes. The applicant contested these assessments on two grounds: (1) legal error in applying item 28.1, arguing that since each unit's VPT is below €1,000,000, the tax should not apply, particularly citing article 12(3) of the Municipal Property Tax Code (CIMI) which requires separate registration of each floor or independently usable unit; and (2) unconstitutionality, claiming violation of the equality principle under articles 13 and 104(3) of the Portuguese Constitution, as the legislative intent was to tax high-value properties exceeding one million euros. The Tax Authority defended its position by distinguishing between horizontal property (propriedade horizontal) and full ownership (propriedade vertical). Under article 2(4) of CIMI, in horizontal property regimes each fraction constitutes a separate property, but under full ownership the entire building remains one property unit. Therefore, the aggregate VPT of €1,128,920 triggers the Stamp Tax obligation. The case highlights the critical distinction between property ownership structures and their tax implications, particularly for inherited estates with buildings containing multiple independent units not formally constituted under horizontal property regime.

Full Decision

ARBITRAL DECISION

REPORT

At page 2 appears A…, widow, with the duly marked case file, taxpayer no.…, resident at Street…, …-… in Lisbon, in her capacity as head of household of the estate opened by the death of B…, Tax ID no.…, notified of seven Stamp Tax assessments for the year 2014, in the total amount of €10,851.50, hereby submits a request for arbitral determination in the following terms and with the following grounds:

THE FACTS

  1. The undivided estate of B… consists of real property, namely an urban property located at Street…, nos…, … and…, in the parish of…, municipality of Lisbon, registered in the property register under article no.…

  2. This property, not being held under horizontal property division, is composed of 5 storeys (ground floor and 4 upper floors), with 8 (eight) units susceptible of independent use, dedicated to residential purposes and one dedicated to warehouse and industrial activity.

  3. The tax patrimonial value (TPV) of the property was determined on 18-09-2013, in the amount of €1,128,920.00, and results from the sum of the TPV of each independent unit, in which each unit individually has a TPV value below €1,000,000.00.

  4. Each independent unit with residential dedication has the following TPV:

Ground floor left 73,020.00

1st floor 213,760.00

2nd floor 278,230.00

3rd floor 262,000.00

4th floor (rear) 61,870.00

4th floor right 131,860.00

4th floor left 64,330.00

  1. On 20 March 2015, the Tax Authority issued seven Stamp Tax assessments, pursuant to item 28.1 of the General Stamp Tax Table, for the year 2014, with the first instalment due on 30 April 2015, the second on 30 June 2015, as follows.

Assessment 2015… Assessment 2015…

Ground floor left €730.20 €243.40 €243.40

Assessment 2015… Assessment 2015…

1st floor 2,137.60 €712.54 €712.53

Assessment 2015… Assessment 2015…

2nd floor 2,782.30 €927.44 €927.43

Assessment 2015… Assessment 2015…

3rd floor 2,620.80 €873.60 €873.60

Assessment 2015… Assessment 2015…

4th rear 618.70 €206.24 €206.23

Assessment 2015… Assessment 2015…

4th right 1,318.60 €439.54 €439.53

Assessment 2015… Assessment 2015…

4th left 643.30 €214.44 €214.43

Total 10,851.50 7,234.35

  1. Each of the seven tax assessments was carried out separately, with reference to each independent unit, and was levied on the respective individualized TPV.

  2. The Applicant contends that the aforementioned assessments are illegal, on the grounds that:

A) Error as to the legal prerequisites in the application of item 28.1 of the General Stamp Tax Table

B) Unconstitutionality of the interpretation of item 28.1, by violation of the principle of equality.

A) Error as to the legal prerequisites in the application of item 28.1 of the General Stamp Tax Table

  1. Item no. 28.1 of the General Stamp Tax Table was added by Law no. 55-A of 2012, of 29 October with the following wording:

"28 – ownership, usufruct or superficiary right of urban properties whose tax patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (CIMI) is equal to or greater than 1 million Euros on the tax patrimonial value for purposes of Municipal Property Tax (IMI):

28.1 For residential property or land for construction whose authorized or foreseen building is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code – 1% (amended by Law no. 83-2013, of 31 December)"

  1. Given that there are properties held under horizontal property division and full ownership, how is the relevant TPV determined for the application of item 28 of the General Stamp Tax Table.

  2. Pursuant to no. 2 of article 67 of the Stamp Tax Code, matters not regulated in the Stamp Tax Code, in relation to item 28, are regulated by the Municipal Property Tax Code.

  3. Furthermore, pursuant to no. 3 of article 12 of the Municipal Property Tax Code: "each floor or part of property susceptible of independent use shall be registered separately in the property register, which shall also discriminate its respective tax patrimonial value"

  4. The floors, "or rather" each of the floors that comprise the property has a TPV below €1,000,000, the Applicant contends that the assessments are illegal.

B. UNCONSTITUTIONALITY OF THE INTERPRETATION OF ITEM 28.1 BY VIOLATION OF THE PRINCIPLE OF EQUALITY

  1. The Applicant contends that the interpretation given by the Tax Authority to item 28.1 of the General Stamp Tax Table is not in accordance with the Constitution, namely its article 13, which establishes the principle of equality, nor the principle set forth in article 104, no. 3 which provides that "the taxation of property must contribute to equality among citizens"

  2. The legislator cannot treat equal situations differently, that is, treat equal situations in a different manner.

  3. In the discussion of the proposal of Law 96/XII in the Assembly of the Republic, the basis for the measure, requiring those who hold high-value properties designated for housing to contribute more heavily, was to impose a new special tax on properties valued over one million euros.

  4. However, to tax differently, exclusively for Stamp Tax purposes, constitutes a violation of the principle constitutionally enshrined.

  5. The Applicant concludes by requesting:

a) that this request be granted and the illegitimacy of the seven Stamp Tax assessments for the year 2014, totaling €10,851.50, be declared, with annulment of the aforementioned assessments and all other legal consequences.

b) payment of compensation for damages resulting from the provision of bank guarantees, in accordance with article 53 of the General Tax Law.

  1. Notified in accordance with the terms and purposes of article 17 of the Tax Arbitration Regulations, the Tax Authority submitted its defence, raising objections and exceptions, with the following grounds:

  2. The Tax Authority contends that the Applicant's request is without merit for the following reasons:

  3. At the relevant date, the Applicant held full ownership of the urban property in question, evaluated in accordance with the Municipal Property Tax Code, within the scope of the general evaluation of urban properties, described as "property held under full ownership with floors or units susceptible of independent use, with a tax patrimonial value (TPV) greater than €1,000,000.00"

  4. With reference to the year 2014, in compliance with and pursuant to article 6, no. 2 of Law no. 55-A/2012, of 29/10, which added item 28 to the General Stamp Tax Table, with the amendment made by Law no. 83-C/2013, of 31/12 and whose rule of incidence refers to urban properties evaluated in accordance with the Municipal Property Tax Code, with TPV equal to or greater than €1,000,000.00 and, pursuant to its item 28.1, with residential dedication, the Tax Authority proceeded to notify the payment documents for collection of the assessments in question.

  5. Now, what is at issue are payment notices resulting from the direct application of the legal rule which consists of objective elements, without any subjective or discretionary interpretation.

  6. The concept of property is contained in no. 1 of article 2, which in its no. 4 provides that under the horizontal property regime, each fraction is considered as constituting a property, and therefore a property held under full ownership is distinct from the horizontal property regime.

  7. For purposes of constituting the register, article 12, no. 3 of the Municipal Property Tax Code which establishes the concept of the register, tells us that for purposes of registration of registration data that "each floor or part of property susceptible of independent use shall be registered separately in the property register, which shall also discriminate its respective tax patrimonial value"

  8. In accordance with no. 1 of article 119 of the Municipal Property Tax Code, the payment document is sent to the taxpayer, discriminating the parts susceptible of independent use, their respective tax patrimonial value and the tax due attributable to each municipality where the properties are located.

  9. Being the tax due, no interest indemnity is owed, as there is no error attributable to the services that acted in strict compliance with the legal rule.

  10. In the opinion of the Tax Authority, there is no violation of the principle of legality, tax equality and taxpaying capacity, as was determined in the decision of the Constitutional Court, in a proceeding brought by the Applicant in case no. 219/2013 of this Arbitral Centre.

  11. The Applicant contests the TPV of the property on the grounds that it is a property held under full ownership with floors or units susceptible of independent use and, as such, do not possess a TPV greater than €1,000,000.00

  12. It argues that there is no rule that, in the case of full ownership, stipulates that the TPV corresponds to the sum of the various parts, a rule which constitutes a defect of violation of law, by error as to the legal prerequisites, as there is no legal provision that makes the TPV dependent on the sum of the respective parts.

  13. The subjection to Stamp Tax of item 28.1 of the General Stamp Tax Table results from the combination of two factors:

  • residential dedication

  • TPV being greater than €1,000,000.00

  1. Since the property is held under the full ownership regime, it does not possess autonomous fractions (which pursuant to no. 4 of article 2 of the Municipal Property Tax Code exist only in horizontal property).

  2. The Tax Authority accordingly contends that the error of law as to the prerequisites should be judged unfounded, maintaining the contested assessments as they constitute a correct interpretation.

  3. The Applicant further contends that there is a violation of the principles of tax equality and taxpaying capacity which is not evident, since there is no discrimination.

  4. Horizontal and vertical property are legal institutions which the legislator may subject to a distinct tax legal framework, without this discrimination being deemed arbitrary, and it may be imposed for coherence of the tax system.

  5. The taxable fact of Stamp Tax item 28.1 consists in the ownership of urban properties whose tax patrimonial value contained in the register, in accordance with the Municipal Property Tax Code, is equal to or greater than €1,000,000.00

  6. The constitution of horizontal property determines the division of full ownership and the independence or autonomy of each of the fractions that constitute it, whereas the property held under full ownership constitutes for all purposes a single tax-legal reality, and therefore one cannot conclude that there is an alleged violation of the principle of equality when, in truth, we are dealing with distinct realities.

  7. It concludes that the payment notices for Stamp Tax item 28 of the General Stamp Tax Table for 2014 remain entirely valid and legal.

  8. Finally, regarding the Respondent's contention as to the request for compensation for the alleged undue provision of guarantee, the Tax Authority contends that the Arbitral Tribunal lacks jurisdiction not only because we are dealing with the legality of a tax act, but also because the Administrative Procedure Tax Code provides a special procedural means for this purpose.

  9. It concludes by submitting that this request for arbitral determination should be judged unfounded, given the legality of the payment notices issued, and that the Respondent be absolved of the request.

PROCEDURAL PREREQUISITES

a) The Arbitral Tribunal is duly constituted and is materially competent pursuant to article 2, no. 1, letter a) of the Tax Arbitration Regulations.

b) The parties have legal personality and capacity, are legally entitled and are duly represented (cf. articles 4 and 10, no. 2 of the Tax Arbitration Regulations and no. 1 of Ordinance no. 112/2011, of 22 March).

c) The proceedings do not suffer from defects that would render them invalid.

Having regard to the administrative tax proceedings, the documentary evidence contained in the case file, it is necessary to determine the material facts relevant to understanding this decision, which are established as follows.

MATERIAL FACTS

A) Facts Established

As material facts relevant to the present proceedings, this Tribunal finds the following facts to be established:

a) The Applicant was the owner, at the date of the taxable event in the present proceedings, of a property held under full ownership.

b) The Tax Authority assessed, with reference to the economic year 2014, and to item no. 28.1 of the General Stamp Tax Table, with the total TPV, calculated on the basis of the sum of the TPV attributed to each part or independent unit, with a value exceeding €1,000,000.00

B) Facts Not Established

There are no facts that are considered not established as relevant to the decision.

SUBSTANTIATION OF THE ESTABLISHED FACTS

a) Regarding the material facts, the Tribunal does not need to pronounce itself on everything alleged by the parties, it being incumbent upon it instead to select the facts that matter for the decision and to distinguish the facts established from those not established (cf. art. 123, no. 2 of the Administrative Procedure Tax Code and article 607, no. 3 of the Civil Procedure Code) applicable "ex vi" article 29, no. 1, letters a) and e) of the Tax Arbitration Regulations).

b) In this manner, the facts relevant to the adjudication of the case are selected and defined in function of their legal relevance, which is established having regard to the various plausible solutions of the legal question.

c) With the facts delimited, it is necessary to address the legal question raised by the Applicant, which consists in assessing the terms of the configuration of the subjective incidence of Stamp Tax provided for in item 28 of the General Stamp Tax Table, in the case of properties held under vertical ownership composed of various floors with units or parts susceptible of independent use.

d) Regarding the guarantee in case of undue payment, article 53 of the General Tax Law provides that the taxpayer shall be indemnified wholly or partly for damages.

It is necessary to decide.

  1. The fundamental question is to determine whether the TPV of a property held under full (or vertical) ownership, constituted by units susceptible of independent use, with a tax patrimonial value of each unit, is obtained by summing the TPV of all units as the Tax Authority claims, in opposition to the Applicant.

  2. Now, we hold that the Tax Authority is not correct.

  3. In fact, the difference between a property held under full ownership and a property held under horizontal property division is only legal in nature, as they are physically identical. In both cases they are registered separately in the property register, which also discriminates their respective tax patrimonial value.

  4. To tax the same material reality differently solely on the basis of the legal-formal reality would violate the principle of tax equality.

  5. If the property in question were held under horizontal property division it would not be subject to Stamp Tax.

Thus, having regard to the letter of the law we have as elements for properties to be taxed those that meet the following elements:

The properties are held in ownership, usufruct or superficiary right

They are urban properties

They are dedicated to residential purposes

They have a tax patrimonial value contained in the register equal to or greater than €1,000,000.00

The calculation is made on the tax patrimonial value that is used for purposes of the Municipal Property Tax.

Given that, in the present proceedings, none of the floors with respect to which Stamp Tax was assessed by application of item no. 28.1 of the General Stamp Tax Table has a TPV less than €1,000,000.00, it is concluded that the respective assessment acts are illegal.

In case of undue provision of guarantee, article 53 of the General Tax Law provides for indemnification, wholly or partly, for damages resulting from its provision, if it has been maintained for a period exceeding three years in proportion to the amount found due in administrative appeal, challenge or opposition to enforcement that have as their object the guaranteed debt.

  1. The period referred to in the preceding number does not apply when it is verified, in gratuitous reclamation or in judicial challenge, that there was error attributable to the services in the assessment of the tax.

… … … … … …

DECISION

In light of the foregoing, this Arbitral Tribunal decides:

a) That the request for a declaration of illegality is entirely upheld, with the consequent annulment of the Stamp Tax assessment acts duly identified above;

b) That the request for indemnification, in the form of charges for the provision of bank guarantees, is dismissed.

VALUE OF THE CASE

In accordance with the provisions of article 306, nos. 1 and 2, of the Civil Procedure Code and article 97-A, no. 1, letter a) of the Administrative Procedure Tax Code and no. 3, no. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the case is set at €10,851.50.

COSTS

The costs in the amount of €918.00 (Table I attached to the Regulations on Costs in Tax Arbitration Proceedings) are entirely borne by the Respondent (article 22, no. 4 of the Regulations of this Arbitral Centre on tax arbitration matters).

Let it be notified.

Lisbon, 14 March 2016

The Arbitrator,

Fernando Pinto Monteiro

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto de Selo) under Verba 28.1 of the TGIS and how does it apply to high-value residential properties in Portugal?
The Stamp Tax under Verba 28.1 of the TGIS is an annual tax introduced by Law 55-A/2012 that applies to ownership, usufruct, or surface rights of urban residential properties with a tax patrimonial value (VPT) equal to or greater than €1,000,000 as determined under the Municipal Property Tax Code (CIMI). The tax rate is 1% of the VPT and was designed to impose additional taxation on high-value residential properties. The tax applies when the property's registered VPT meets or exceeds the million-euro threshold on the reference date. For buildings not under horizontal property division, the key question is whether the VPT is determined by aggregating all independent units or by treating each unit separately.
How does the CAAD determine whether Stamp Tax applies to individual units in a building not constituted under horizontal property (propriedade vertical)?
The CAAD (Administrative Arbitration Center) must determine whether the building constitutes a single property unit or multiple independent properties for Stamp Tax purposes. In vertical property (full ownership not divided horizontally), the critical factor is the property registration structure under CIMI. According to article 2(4) of CIMI, under horizontal property each fraction is considered a separate property, but in full ownership situations the entire building may constitute one property unit. However, article 12(3) of CIMI requires that each floor or independently usable unit be registered separately with its own discriminated VPT. The arbitral court must interpret whether the requirement for separate registration means each unit should be taxed independently, or whether the aggregate value of the unified property determines tax liability.
Can the tax authority aggregate the patrimonial tax values (VPT) of independent units in a vertical property to exceed the €1,000,000 threshold for Stamp Tax?
This is the central dispute in the case. The Tax Authority argues that for properties held under full vertical ownership (not horizontal property), the entire building constitutes one property unit, and therefore the aggregate VPT of €1,128,920 exceeds the €1,000,000 threshold, triggering Stamp Tax liability. The Tax Authority relies on article 2(4) of CIMI, which distinguishes horizontal property (where each fraction is a separate property) from full ownership situations. The applicant argues against aggregation, contending that article 12(3) of CIMI mandates separate registration of each independently usable unit with discriminated VPT values, and since each unit individually falls below €1,000,000, no Stamp Tax should apply. The resolution depends on whether 'property' for Stamp Tax purposes means the registered building as a whole or each separately registered independent unit.
What are the grounds for filing an arbitral claim (pedido de pronúncia arbitral) against multiple Stamp Tax assessments on inherited property?
The grounds for filing an arbitral claim against Stamp Tax assessments on inherited property include: (1) Legal error in applying item 28.1 of TGIS - arguing that the Tax Authority incorrectly interpreted the legal prerequisites for taxation, specifically the determination of relevant VPT when a building contains multiple independent units not under horizontal property; (2) Unconstitutionality - claiming the Tax Authority's interpretation violates the equality principle under article 13 of the Portuguese Constitution and article 104(3) requiring property taxation to contribute to equality among citizens; (3) Misapplication of CIMI provisions - particularly articles 2(4) and 12(3) regarding property definition and registration requirements; and (4) Claims for compensation for damages resulting from providing bank guarantees required during the dispute process under article 53 of the General Tax Law. The arbitral request must challenge the legality of the assessments and request their annulment.
How does the distinction between horizontal and vertical property affect Stamp Tax liability on buildings with independent divisions in Portugal?
The distinction between horizontal property (propriedade horizontal) and vertical/full ownership (propriedade vertical) is crucial for Stamp Tax liability. Under article 2(4) of CIMI, in horizontal property regimes each autonomous fraction is legally considered a separate property unit for all purposes, meaning Stamp Tax would only apply if an individual fraction's VPT exceeds €1,000,000. In vertical or full ownership situations where the building has not been formally divided under the horizontal property regime, the Tax Authority contends the entire building constitutes one property unit, requiring aggregation of all units' VPT to determine if the €1,000,000 threshold is met. However, article 12(3) of CIMI requires separate registration of each independently usable unit with discriminated VPT values even in non-horizontal property situations, creating interpretative ambiguity. This distinction significantly impacts tax liability: the same building with identical units and values could face different Stamp Tax treatment depending solely on whether it was formally constituted under horizontal property division or remains under unified vertical ownership.