Process: 57/2015-T

Date: October 9, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 57/2015-T) addresses the controversial application of Stamp Tax (Imposto do Selo) under item 28.1 of the General Table (TGIS), introduced by Law 55-A/2012 of October 29, 2012, to construction land (terrenos para construção). The applicant, a real estate investment fund governed by Decree-Law 60/2002, challenged a stamp tax assessment of €110,365.92 issued in December 2012, calculated at a 0.50% rate on the taxable value of an urban property classified as construction land. The property, acquired in April 2006 and located in Lisbon, consisted of a plot partially occupied by uncovered parking covering approximately 8,580 m² of its total area. The fund argued that the property lacked the legal requirements for application of Verba 28.1, which was designed to tax certain urban properties but raised questions about its scope regarding undeveloped construction land. After the Tax Authority dismissed the administrative appeal (reclamação graciosa) in November 2014, the fund invoked Article 10(1)(a) of the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011) to request arbitration at CAAD, seeking annulment of both the dismissal decision and the underlying stamp tax assessment. The case highlights critical interpretive issues regarding the 2012 stamp tax reform, particularly whether construction land without completed buildings falls within the scope of taxation under Verba 28.1 of TGIS, and illustrates the procedural path available to taxpayers through CAAD arbitration following unsuccessful administrative appeals against property tax assessments.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 57/2015 – T

Topic: Land for construction; item 28.1. of TGIS

I – REPORT

A… – …, NIF: …, managed and legally represented by the management company B… – …, S.A. (formerly named C… - …, S.A.), with registered office at Av. …, No. …, in Lisbon, with share capital of one million two hundred and fifty thousand Euros, registered at the Commercial Registry Office of Lisbon under the sole registration number and collective person number …, whose administration is entrusted to it pursuant to the deliberation of the Directive Council of CMVM of 16 March 2006, having been notified of the dismissal decision issued by the Finance Directorate of Lisbon – Administrative Justice Division - within the scope of the Administrative Appeal Procedure No. …2013…, notified to the Applicant on 05 November 2014, came, by virtue of and for the purposes of the provisions of Article 10, No. 1, paragraph a) of the Legal Framework for Arbitration in Tax Matters (Decree-Law No. 10/2011 of 20 January, hereinafter LFAT), to request the establishment of an arbitral tribunal and to formulate a request for arbitral ruling of illegality of the dismissal decision issued within the scope of Administrative Appeal No. …2013… and additionally for annulment of the Stamp Tax assessment note No. 2012 …, in the amount of € 110,365.92, made pursuant to item 28.1 of the Table annexed to the Stamp Tax Code (Law No. 55-A/2012 of 29 October), due to the absence of the legal requirements necessary for application of the tax provided in the cited item, with respect to the property (land for construction) which it identifies.

The following are, in summary, the essential grounds invoked:

The Fund A… is an immovable property management fund governed by the "Legal Framework for Real Estate Investment Funds", approved by Decree-Law No. 60/2002, of 20 March and subsequently amended by Decree-Laws 252/2003, of 17 October and 13/2005, of 7 January.

B… – …, S.A. (formerly named C… - …, S.A.), a management company for real estate investment funds, is entrusted with its management, representing it.

The Applicant Fund is the owner and legitimate possessor, as of 17 April 2006, of the following immovable property:

Urban property situated at Avenue …, near No. …, described in the Land Registry Office of Lisbon under No. …, parish of ... and currently registered in the urban property matrix under article ….º, of the parish of ... (previous article ….º of the parish of ... and previously corresponding to article ….º, of the parish of …).

The above-identified urban property is currently allocated in the matrix to uncovered parking, by virtue of the valuation request made by the Applicant, through the declaration of Model 1 of the IMI, presented on 30 December 2013, as shown in the copy attached as Doc. No. 2.

And it was with the aforesaid allocation assessed by the Tax and Customs Authority - see assessment result dated 31 January 2014 attached as Doc. No. 3.

At the time of its acquisition by the Fund and at the date of the Stamp Tax assessment whose annulment is now sought, the property was allocated as land for construction – see Doc. No. 1 with the permanent certificate of the immovable property and old property card corresponding to article 934º, which are attached as Docs. Nos. 4 and 5.

The immovable property in question is merely a plot of land for construction, without any constructed building (nor under construction), except for being partially occupied, with approximately 8,580 m2 of the total area of the property, by an uncovered parking lot, as can be confirmed through an aerial view image attached as Doc. No. 6.

Following the acquisition of the property, on 20 April 2007, the Applicant Fund proceeded, pursuant to Article 13, No. 1, paragraph i), combined with Article 37, both of the Municipal Property Tax Code (CIMI), by submission of the Model 1 declaration of the IMI, under the reason "First transmission during the vigency of CIMI".

And by such declaration was declared the nature/type of the property and its respective purpose – Land for Construction, in accordance with the physical reality of the same – see Model 1 declaration of the IMI which in simple copy is attached as Doc. 7.

The respective valuation was carried out by the then competent Finance Service (Lisbon …), based on the declared elements and on the property documents presented, the result of which was notified to the Applicant on 10 October 2007, as shown in the copy of the Valuation Sheet attached as Doc. No. 8.

From the valuation sheet notified, it resulted that the property is a Land for Construction, see Doc. No. 8.

From the valuation carried out until 30 December 2013, when the Applicant submitted a new Model 1 declaration of the IMI, the urban property in question remained registered in the matrix as a plot of land for construction – see Doc. No. 5.

On 5 December 2012 - without any indication of this occurring, given the history described below - the Applicant received notification of the assessment/collection (single payment), in the amount of € 110,365.92, which resulted from the application of the 0.50% rate on the taxable value of the property in question, issued pursuant to item 28.1 of the General Table annexed to the Stamp Tax Code, by virtue of Article 6, No. 1, paragraph i) of Law No. 55-A / 2012 of 29 October, assessment note which is attached as Doc. No. 9.

Judging this to be an error, given the physical reality and purpose of the property in question, and that was registered in the respective matrix, the Applicant sent, on 13 December 2012, to the Finance Service of Lisbon … (service, currently competent by reason of the location of the property), a simple request - which is attached as Doc. No. 10 - in which the just and proper annulment of the assessment note made under Stamp Tax was petitioned.

The request referred to in the preceding number originated the opening of the Administrative Appeal Procedure, which under No. …2013…, proceeded before the Finance Directorate of Lisbon (Administrative Justice Division).

On 23 May 2013, the Applicant was, surprisingly, notified of the draft dismissal decision of Administrative Appeal No. …2013…, within the scope of which it requested the just and proper annulment of the assessment/collection note issued pursuant to item 28.1 of the General Table annexed to the Stamp Tax Code, by virtue of Article 6, No. 1, paragraph i) of Law No. 55-A/2012 of 29 October, as not applicable to the case sub judice, as shown in Doc. No. 11 which is attached, whose content is considered fully reproduced for all legal purposes.

Having been notified to exercise the right to prior hearing within the scope of the Administrative Appeal in question, established in Article 60, No. 1, paragraph b) of the General Tax Law, the Applicant submitted its defense in writing on 11 June 2013, as shown in the copy of the document submitted attached as Doc. Nos. 12, whose content is fully reproduced.

Summarily, in the written defense submitted within the scope of the Administrative Appeal in question, the Applicant attempted to demonstrate that the draft dismissal decision notified was based on erroneous factual and legal assumptions for the application of the cited item 28.1 of the General Table annexed to the Stamp Tax Code (added by Law No. 55-A/2012 of 29 October).

Completely disregarding the information brought by the Applicant regarding the characteristics of the property in question, the Finance Directorate of Lisbon (Administrative Justice Division) maintained the draft dismissal decision of Administrative Appeal No. …2013…, making it final, as shown in the copy of the decision which in simple copy is attached as Doc. No. 13.

The indicated final dismissal decision was notified to the Applicant on 05 November 2014 – see receipt stamp affixed to Doc. No. 13.

As of the date of the dismissal decision of the Administrative Appeal in question – 30 October 2014 - the Tax Authority already had full knowledge of the arbitral ruling (and final!) issued within the scope of case No. 274/2014-T – on 16 September 2014 - which proceeded before this Arbitral Tribunal, which declared illegal and consequently ordered the annulment of the Stamp Tax assessment notes - 1% rate calculated on the taxable value – which had as their object the same property! – see correspondence of e-mails attached as Doc. No. 14 and copy of arbitral ruling attached as Doc. No. 15.

It is easy to reason that a property whose allocation is for habitation is a property intended to be habitable, in which someone resides or at least has a set of functional characteristics that allow its use for that purpose (even in potential terms).

Wherefore it results that an urban property composed of a plot of land for construction was not covered by the provision created in 2012 – previous wording of item 28.1 of the table annexed to the Stamp Tax Code.

The property in question has been temporarily and partially leased, on a very precarious basis, since 1996, pursuant to the Protocol Agreement executed by the former owner of the property, within the scope of which authorization was granted for the use of part of the property for the operation of an uncovered parking lot – see Doc. 6 attached to the written defense submitted by the Applicant within the scope of the Administrative Appeal (Doc. No. 12).

Reason which led the Applicant to register the said occupation in the matrix.

Without prejudice to the current version of item 28.1 of the Table annexed to the Stamp Tax Code, amended/added by Law 83-C/2013 of 31 December, at the time of the assessment, it had in its provision, among other things, properties with residential allocation.

Unequivocally, there was no legal definition for the concept of "residential allocation" – circumstance confirmed, moreover, by the new wording given to this legal provision by Law 83-C/2013 of 31 December.

Given the absence of legal definition, under the terms of the Stamp Tax Code, for the concept of "residential allocation", one must take into account the concept and classification of properties contained in the terms of the CIMI – Article 6 - as expressly results from the reference made by Article 67, No. 2 of the Stamp Tax Code.

Under the terms of the cited normative provision (Article 6 of the CIMI), urban properties are divided into: "a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others".

The Tax Administration, by subjecting the taxation under Stamp Tax, disregards what has been decided – exhaustively – on this matter and persists in wanting to make believe that the property in question was intended for habitation.

However, Article 6 of the CIMI unequivocally clarifies the definition of the concepts listed.

Thus, No. 2 of Article 6 of the CIMI provides that "Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal purpose each of these ends" (emphasis of the Applicant).

If doubts remained, No. 3 of Article 6 of the CIMI provides "Land for construction is considered to be land situated within or outside an urban agglomeration, for which a license or authorization has been granted, admitted prior communication or issued favorable prior information of a subdivision operation (...)", a concept that in no way is confused with the legal definition of residential properties.

It is thus noted that, for tax purposes and under the terms of the Code of Municipal Property Tax (CIMI), land for construction constitutes a species of property autonomous and completely distinct from properties typified as "Residential".

The creation of taxes is – historically – a matter of the greatest sensitivity: since time immemorial it has been the reserve of parliaments or courts.

The dignity of the subject is evident and has constitutional basis: "2. Taxes are created by law, which determines the incidence, the rate, tax benefits and guarantees of taxpayers". – Article 103 of the CRP.

In the Arbitral Ruling issued within the scope of case No. 231/2013-T – in which it was understood that "the text of the law by adopting the formula "property with residential allocation" instead of urban properties with residential allocation" (…) points strongly to the effect that it requires that residential allocation already be realized, as only then will the property be with such allocation.".

Adding that "in the case in question (land for construction), one is faced with a reality even more remote in relation to residential allocation, which is that of not even having any building or construction and, therefore, one cannot consider existing an allocation that presupposes its existence" (emphasis of the Applicant).

And also the Judgment of the Supreme Administrative Court of 09.04.2014 – Proc. No. 048/14: "The concept of "property (urban) with residential allocation" was not defined by the legislator, nor in Law No. 55-A/2012, which introduced it, nor in the Property Tax Code, to which No. 2 of Article 67 of the Stamp Tax Code (…) subsidiarily refers. And it is a concept that probably due to its imprecision – (…) – had a short life, as it was abandoned upon the entry into force of the State Budget for 2014 (Law No. 83-C/2013 of 31 December)".

Adding that, "this amendment – to which the legislator did not attribute interpretive character, nor does it seem to us that he did -, merely makes it clear for the future that land for construction whose construction, authorized or envisaged, is for habitation are covered within the scope of item 28.1 of the Table annexed to the Stamp Tax Code (…) but clarifies nothing, however, in relation to past situations (assessments of 2012 and 2013)".

And continuing: "Now, as for these, (…), it does not result unequivocally either from the letter or from the spirit of the law that the intention of the latter was, ab initio, to include within its scope of objective incidence land for construction".

Deciding in the sense of: "It is concluded, then, a clear distinction between urban properties "residential" and "land for construction", these cannot be considered, (…) as "properties with residential allocation" for the purposes of the provision in item No. 28.1 of the General Table of Stamp Tax, in its original wording, as given to it by Law No. 55-A/2012, of 29 October."

The Applicant must still (and naturally) highlight the learned Arbitral Ruling issued within the scope of Case No. 274/2014 – T, for the assessments made on the property in question, in which it can be read that "Property with "residential allocation" will be that which is intended for habitation" (...)" "Besides, such conclusion is reached equally through the reconstruction of the legislative thinking, taking into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied (...)"

In accordance with the provision of paragraph c) of No. 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, in the wording given to it by Article 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was established on 6-5-2015.

Notified for this purpose, the Respondent submitted its response and attached the administrative file, having ruled for dismissal of the request for ruling, defending, in essence, that Article 67-2 of the Tax Code and the subsidiary application of the CIMI (Articles 2-1, 6-1, 41 and 45-2) permit interpretation of the regime in the sense that the concept of "properties with residential allocation", for the purposes of the provision in item 28 of TGIS, comprises both built properties and land for construction, at the very least given the literal element of the norm.

The tribunal dispensed with the hearing provided in Article 18 of the Legal Framework for Arbitration in Tax Matters (LFAT) and the final arguments of the parties, having fixed 15-10-2015 as the deadline for the pronouncement of the final decision.

Procedural Order.

The parties have personality and procedural capacity and have standing pursuant to Article 4 and No. 2 of Article 10 of the LFAT, and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The case does not suffer from any nullity nor were any exceptions raised by the Parties that would prevent the consideration of the merits of the case, therefore the conditions are met for the pronouncement of the arbitral ruling.

II – REASONING

FACTUAL MATTERS

The following essential facts are proven:

a) The Applicant is the owner and legitimate owner of the urban property situated at Avenue …, near No. …, parish of ..., municipality of Lisbon, described in the Land Registry Office of Lisbon under the number … and registered in the urban property matrix (article ….º of the parish of ..., previous article ….º of the parish of …) – see Docs. No. 2, No. 3 and No. 4 attached to the request for arbitral ruling;

b) The property referred to in a) above is land for construction, with the taxable value of € 21,746,980.00, allocated in the matrix to uncovered parking, not possessing any constructed building – see Docs. No. 2, No. 4, No. 5 and No. 6 attached to the request for arbitral ruling;

c) By agreement executed on 20/02/1996, authorization was granted, by the former owner, for the use of the property in question for the operation of an uncovered parking lot, partially occupying (approximately 8,580 m2) the total area of the property referred to in a), whose content is that stated in Doc. No. 6, attached with the right to defense to the case file with the initial petition as Doc. No. 12;

d) On 20/04/2007, the Applicant submitted the Model 1 declaration of the IMI, under the reason "First transmission during IMI vigency" – see Doc. No. 7 attached to the request for arbitral ruling;

e) As a consequence of the Model 1 IMI declaration submitted, the property referred to in a) above was subject to assessment, notified to the Applicant on 10/10/2007 – see Doc. No. 8 attached to the request for arbitral ruling;

f) To the property in question, assessed as land for construction, the taxable value of € 21,746,980.00 was assigned – see Doc. No. 8 attached to the request for arbitral ruling;

g) The Applicant was notified of the assessment/collection now disputed, referring to the single payment of Stamp Tax, item 28.1 of TGIS, relative to the financial year 2012, in the amount of € 110,365.92, pursuant to which the taxable value of the property referred to in a) amounted, 31/12/2011, to € 22,073,184.70 – see Doc. No. 9 attached to the request for arbitral ruling;

h) By simple request submitted on 13/12/2013, the Applicant requested the annulment of the amount collected under Stamp Tax, which gave rise to the opening of the administrative appeal procedure referred to in i) below – see Doc. No. 10 attached to the request for arbitral ruling;

i) As a consequence of the request submitted, the Applicant was notified on 23/05/2013 of the draft dismissal of administrative appeal No. …2013… – see Doc. No. 11 attached to the request for arbitral ruling;

j) On 11/06/2013, the Applicant submitted written defense, which was not accepted by the Tax Authority, maintaining the draft dismissal of the administrative appeal referred to in i) from whose decision the Applicant was notified on 05/11/2014 – see Docs. No. 12 and 13 attached to the request for arbitral ruling;

k) On 14/07/2013, the assessment/collection now disputed was replaced by another, in the amount of € 108,734.90, due to the change in the taxable value of the property referred to in a) from € 22,073,184.70 to € 21,746,980.00 – see the Tax Authority's response to the request for arbitral ruling;

l) On 30/12/2013, the Applicant requested a second assessment of the property, through submission of the new Model 1 IMI declaration, under the reason "New Property (Article 106 b)" – see Doc. No. 2 attached to the request for arbitral ruling;

m) By letter dated 31/01/2014, the Tax Authority notified the Applicant of the second assessment requested, which changed the taxable value to € 1,086,480.00 – see Doc. No. 3 attached to the request for arbitral ruling;

FACTS NOT PROVEN:

With interest for the case file, there are no facts not proven.

REASONING ON FACTUAL MATTERS:

The conviction regarding the facts given as proven and not proven was based on the documentary evidence indicated in relation to each point, submitted by the Applicant, whose authenticity and correspondence to reality were not questioned by the Respondent.

II – REASONING (Continued)

THE LAW

The first question that should be subject to consideration by the tribunal consists of delimiting the scope of application of item No. 28.1 of the General Table of Stamp Tax (TGIS) in its wording at the date of the taxable event. That is, one must inquire whether land for construction falls within the scope of the norm, as the Respondent contends, or whether, on the contrary, it is excluded from the same.

To accomplish such a task, one must first seek the norm whose parts disagree on its interpretation.

Thus, item No. 28 of TGIS provides that the following are subject to taxation: "Ownership, usufruct or surface right of urban properties whose taxable value contained in the matrix, under the terms of the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000 – on the taxable value used for the purpose of IMI:

28.1 - For property with residential allocation – 1%...".

In this way it is, from the outset, necessary to delineate the concept of "property (urban) with residential allocation" referred to in the norm under interpretation. However, as it is not possible to resolve the question by resorting to the Stamp Tax Code, it is by force of the provision of Article 67, No. 2 of the same instrument necessary to apply the norms of the CIMI as to the concept and species of urban properties.

Consequently, Article 4 of the CIMI provides on the concept of urban property: "…are all those that should not be classified as rustic…". And Article 6, No. 1 of such instrument continues: "Urban properties are divided into: a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others". No. 2 provides that: "Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal purpose each of these ends".

Thus, for the classification of a property into each of the enumerated categories, the nature of the utilization is relevant, that is, the purpose for which it is intended.

Now, the stamp tax item under analysis includes properties that are already bound to residential purposes, that is, those which have been given such purpose. But it is legitimate to formulate the following question: and with respect to those properties (land for construction) with such purpose or, those in which the purpose is unknown, do they fall within "properties with residential allocation"?

The answer to the said question cannot but be negative. Indeed, the literal content of the item under analysis allows one to exclude from the scope of application those land for construction that have not realized any type of utilization, to the extent that they have not yet been applied or intended for residential purposes. In other words, it is not possible to proceed to their classification as "properties with residential allocation", because they do not yet have any allocation or other purpose, except for construction of unknown type.

Still, one may question: do land for construction that are not yet applied to residential purposes and already have a determined right, such as a subdivision license, fall within the scope of application of item No. 28.1 of TGIS? We believe not. In fact, Article 6, No. 2 of the CIMI, subsidiary applicable, points to the effect that an actual allocation is necessary.

In fact, the legislator did not use the expression "residential properties", but rather "properties with (our emphasis) residential allocation", that is, the property must already have the allocation to that purpose effectively.

Now, such interpretive sense becomes clear with the mobilization of a summary of the words of the Most Excellent State Secretary for Tax Affairs, when presenting and discussing in the Assembly of the Republic the bill proposal, to the extent that it advocated that that: i) aimed to create a special rate on urban residential properties of higher value; ii) created special taxation on properties of high value intended for habitation and iii) the rate would apply to houses valued at equal to or exceeding 1 million euros. Or, to put it another way, the category to which the legislator refers with the expression "properties with residential allocation" are "houses".

The same interpretive sense is maintained, even if it is considered that in determining the VPT of urban properties, classified as land for construction, one should take into account the allocation that the building authorized or envisaged for it will have, in order to determine the value of the implantation area. This does not mean that land for construction should be classified as "properties with residential allocation", since this purpose refers, in the context of the CIMI, to properties and constructions that can be inhabited.

It is also important to add that the assessment in question refers to the year 2012 and, consequently, what is contained in Article 6 of Law No. 55-A/2012, of 29 October must be applied. More specifically, such provision provides that: "1 - In 2012, the following rules shall be observed by reference to the assessment of stamp tax provided in item No. 28 of the respective General Table: a) The taxable event occurs on 31 October 2012; b) The person liable for tax is the one mentioned in No. 4 of Article 2 of the Stamp Tax Code on the date referred to in the preceding paragraph; (…)". Thus, the taxable event in the hypothesis in question occurred on 31 October 2012.

Reverting such interpretive sense to the case file, it must be said that the land for construction subject to the present case does not fall within the category of "properties with residential allocation" and, as such, the stamp tax assessment of 2012 should be declared illegal.

Still, this interpretation could be judged as undermined by the entry into force of Law No. 83-C/2013, of 31 December (State Budget Law for 2014) in the segment in which it gave new wording to item 28.1 of TGIS, in which it now refers to the categories described in Article 6 of the CIMI, that is, "residential property" and "land for construction". However, we understand that not, because, as sustained by Judge ISABEL MARQUES DA SILVA: "… the legislator did not attribute interpretive character (…), merely makes it clear for the future that land for construction whose building, authorized or envisaged, is for habitation are covered within the scope of item 28.1 of the General Table of Stamp Tax…". That is, nothing is clarified with respect to acts performed under the previous wording and demonstrates another legislative option with the reference to the species of urban property, i) residential and ii) land for construction. Consequently, such legislative amendment in no way modifies the decision set out in the preceding paragraph.

For this sum of reasons, if the Applicant's property was registered matricially as land for construction at the date of the taxable event relative to the year 2012, the norm of incidence in dispute cannot be applicable to the case sub judice, under penalty of illegality. Reason for which the stamp tax assessment of 2012 should be annulled, with all legal consequences.

III - DECISION

In these terms and with the reasoning described above, this Arbitral Tribunal agrees to deem the request totally merited, with the consequent annulment of the act subject to arbitral ruling.

VALUE OF THE CASE

The value of the case is fixed at € 110,365.92 (the value of the assessment subject to the administrative appeal) under the terms of Article 97-A of the Code of Administrative Procedure and Tax Procedure, applicable by force of the provision of Article 29, No. 1, paragraph a) of the LFAT and of Article 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

COSTS

Costs to be borne entirely by the Respondent, in the amount of € 3,060, see Article 22, No. 4 of the LFAT and Table I annexed to the RCPAT.

Notify.

Lisbon, 9 October 2015

The Collective Arbitral Tribunal,

(José Poças Falcão - President)

(Hélder Faustino)

(Francisco Nicolau Domingos)

Text prepared by computer, pursuant to No. 5 of Article 131 of the Code of Civil Procedure, applicable by referral of paragraph e) of No. 1 of Article 29 of Decree-Law No. 10/2011, of 20/01.

The wording of this decision is governed by the old spelling rules.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS apply to construction land (terrenos para construção)?
The application of Stamp Tax under Verba 28.1 of the TGIS to construction land (terrenos para construção) is the central legal question in this arbitration. Item 28.1, introduced by Law 55-A/2012, imposes an annual 0.50% stamp tax on certain urban properties. However, the applicant argued that construction land without completed buildings does not meet the legal requirements for this taxation. The critical issue is whether bare construction land, even when partially occupied by uncovered parking, constitutes a taxable property under this provision. The interpretation depends on whether Verba 28.1 was intended to apply broadly to all urban properties or only to properties with specific characteristics, such as completed buildings or improvements. This case demonstrates the uncertainty surrounding the scope of the 2012 stamp tax reform concerning undeveloped land classified for construction purposes.
What are the legal requirements for applying Verba 28.1 of the Stamp Tax General Table to urban properties?
The legal requirements for applying Verba 28.1 of the Stamp Tax General Table to urban properties involve several key elements. First, the property must qualify as 'urban property' under Portuguese tax law classification. Second, Verba 28.1, introduced by Article 6(1)(i) of Law 55-A/2012, establishes an annual stamp tax at 0.50% of the taxable value (valor patrimonial tributário) for qualifying properties. The critical interpretive question concerns which categories of urban properties fall within this provision's scope. While the Tax Authority in this case applied the tax to construction land based on its matrix classification, the applicant contested whether such land meets the substantive requirements. Key considerations include the property's physical characteristics, its actual use, its matrix classification (urban property matrix), and whether it contains improvements or constructed buildings. The taxable value reference is the property's patrimonial value for IMI (Municipal Property Tax) purposes.
Can a real estate investment fund challenge a Stamp Tax assessment through CAAD tax arbitration?
Yes, a real estate investment fund can challenge a Stamp Tax assessment through CAAD (Centro de Arbitragem Administrativa) tax arbitration. This case demonstrates that investment funds governed by Decree-Law 60/2002 (Legal Framework for Real Estate Investment Funds), represented by their management companies, have legal standing to request arbitration under Article 10(1)(a) of the RJAT (Legal Framework for Tax Arbitration - Decree-Law 10/2011). The fund initiated arbitration after exhausting the administrative appeal process, which is a typical procedural path. Tax arbitration at CAAD provides an alternative dispute resolution mechanism to judicial courts, offering faster resolution of tax disputes. The fund sought both annulment of the dismissal decision issued by the Finance Directorate and direct annulment of the underlying stamp tax assessment note. This demonstrates that institutional investors, including real estate funds, can effectively access CAAD arbitration to contest property tax assessments affecting their portfolio assets.
How does the classification of urban property as construction land affect Stamp Tax liability under Portuguese law?
The classification of urban property as construction land (terrenos para construção) has significant implications for Stamp Tax liability under Portuguese law. In this case, the property was consistently classified in the urban property matrix as 'land for construction' from its 2006 acquisition until December 2013, when the owner requested reclassification. This matrix classification became the basis for the Tax Authority's stamp tax assessment under Verba 28.1 of TGIS. However, the applicant argued that the mere classification as construction land should not automatically trigger stamp tax liability, particularly when the land lacks completed buildings or substantial improvements. The property's physical reality—a plot partially occupied by uncovered parking—created a disconnect between its formal classification and its actual characteristics. This case illustrates the tension between formal matrix classifications used for IMI purposes and the substantive requirements for stamp tax under Verba 28.1, raising questions about whether construction land without developed improvements should be subject to this annual taxation regime introduced in 2012.
What is the procedure for filing a tax arbitration request (pedido de pronúncia arbitral) after rejection of a gracious complaint (reclamação graciosa)?
The procedure for filing a tax arbitration request (pedido de pronúncia arbitral) after rejection of a gracious complaint (reclamação graciosa) follows a structured path demonstrated in this case. First, upon receiving an adverse tax assessment, the taxpayer filed a simple request (pedido de anulação) in December 2012, which the Tax Authority treated as an administrative appeal (reclamação graciosa). The Finance Directorate issued a draft dismissal decision in May 2013, triggering the taxpayer's right to prior hearing (audiência prévia) under Article 60(1)(b) of the General Tax Law (LGT). After submitting written defense in June 2013, the taxpayer received the final dismissal decision in November 2014. Within the legal deadline, the taxpayer then invoked Article 10(1)(a) of the RJAT (Decree-Law 10/2011) to request arbitration at CAAD, seeking review of both the dismissal decision and the underlying assessment. This procedural sequence demonstrates that taxpayers can access CAAD arbitration after exhausting administrative remedies, providing an alternative to judicial appeal in administrative and tax courts. The arbitration request must identify the contested acts and state the legal grounds for challenge.