Process: 573/2014-T

Date: March 27, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 573/2014-T before the Portuguese Administrative Arbitration Center (CAAD) addressed the controversial application of Item 28.1 of the General Stamp Tax Table (TGIS) to vertical properties. Twelve co-owners challenged stamp tax assessments totaling €13,327.83 on an urban property in Lisbon valued at €1,242,560.00. The building comprised six floors with 100 divisions serving both commercial and residential purposes, including hostels, healthcare facilities, retail shops, and residential units. The central dispute concerned whether the Tax Authority could aggregate the tax property value (VPT) of all divisions when calculating stamp tax liability under Verba 28.1, which applies to properties exceeding one million euros. The claimants argued three main points: first, that most divisions served commercial rather than residential purposes, falling outside Verba 28.1's scope; second, that independent divisions, if constituted as autonomous units, would not individually reach the one million euro threshold; and third, that aggregating VPTs violated the constitutional principle of taxpaying capacity under Article 104(3) of the Portuguese Constitution. The Tax Authority countered that independent-use areas not formally constituted as autonomous property units under Article 2(4) of the Municipal Property Tax Code (CIMI) must have their VPTs summed for stamp tax purposes, and that this approach neither violated equality principles nor created arbitrary discrimination. The case highlighted the complexity of applying stamp tax to mixed-use vertical properties where ownership remains undivided despite functional independence of various floors and divisions, raising fundamental questions about the intersection of property registry formalities and tax incidence rules.

Full Decision

CAAD – Administrative Arbitration Center

Tax Arbitration

Case No. 573/2014 –T

ARBITRAL DECISION

Claimant: A...; B...; C..., D...; E...; F...; G...; H...; I...; J...; K...; L...; (hereinafter "Claimants")

Respondent: TAX AND CUSTOMS AUTHORITY (hereinafter "TA" and "Respondent")

  1. Report

A..., TIN …, resident at Rua …; B..., TIN …, resident at Av. …; C..., TIN …, resident at Av. …; D…, TIN …, resident at Rua …; E…, TIN …, resident at Rua …; F..., TIN …, resident at Av. …; G..., TIN …, resident at Rua …; H..., TIN …, resident at Av. …; I..., TIN …, resident at Rua …; J..., TIN …, Resident at Tv. …; K..., TIN …, resident at Rua…; L…, resident at Rua …, hereinafter referred to as Claimants, submitted to the Administrative Arbitration Center (CAAD) a request for the constitution of an arbitral tribunal with a view to annulling the tax acts establishing the levy under item 28.1 of the General Stamp Tax Table (GSTT), in the total amount of € 13,327.83, as identified below:

  • 2014..., 2014..., 2014..., 2014..., 2014..., 2014..., 2014..., 2014..., 2014..., 2014..., 2014... and 2014...

The Claimants base the illegality of the tax act on the following defects:

a) Incorrect interpretation by the TA regarding Item 28.1 of the General Stamp Tax Table (GSTT), in that most of the divisions of the urban property, in addition to being autonomous, have a commercial purpose and not a residential purpose, whereby there is a violation with respect to the aforementioned rule of incidence; furthermore, contending that where there are autonomous divisions, although not constituted as autonomous units, these would not reach, in terms of individualized TPC, one million euros;

b) Unconstitutional interpretation of the provision of item 28.1 of the GSTT by violation of Article 104(3) of the Constitution of the Portuguese Republic.

Petitioning, ultimately, for the annulment of the aforementioned tax acts, reimbursement of Stamp Tax paid relating to the assessments/collection notices subject to the present proceedings, plus compensatory interest, and likewise for the condemnation of the TA to refrain from issuing new tax acts with reference to Item 28.1 of the GSTT of the Stamp Tax Code, as regards the real property in question.

The Tax and Customs Authority, in turn, defended that there is no illegality attributable to the tax acts subject to the present arbitral decision, since even if there are areas of independent use relating to the same property, those areas do not constitute urban property within the meaning of Article 2(4) of the Municipal Property Tax Code (CIMI), and therefore cannot but sum the tax property values (TPVs) of all those areas or floors of independent use, and likewise contended that there is no violation of the principles of equality and taxpaying capacity, since there are no arbitrary or unjustified discriminations, concluding for the dismissal of the annulment petition filed by the Claimant and consequent acquittal of the Respondent from the petition.

In accordance with Article 11(1)(c) of the Legal Regime for Tax Arbitration (RJAT), the singular arbitral tribunal was constituted on 01.10.2014.

A first arbitral meeting was held for proper composition of the procedural conduct, and it was decided to examine the witnesses called by the Claimants on 19 March 2015, followed by oral arguments; examination and arguments that took place on the scheduled date.

  1. Sanitation

The joinder of claims made in the present arbitral decision petition and the joinder of claimants, designated as claimants, in which tax acts assessing the same tax (Stamp Tax) are involved, are based on the same factual basis – the nature of the urban property identified under No. ... of the Parish of ... – applying the same rules of law – possible subjection to Item 28.1 of the GSTT – whereby it is fully in accordance with the principle of procedural economy enshrined in Article 3 of the RJAT.

The singular arbitral tribunal is materially competent, pursuant to Article 2(1)(a) of the Legal Regime for Tax Arbitration.

The parties have legal standing and capacity and have legitimacy pursuant to Article 4 and Article 10(2) of the Legal Regime for Tax Arbitration (RJAT), and Article 1 of Ordinance No. 112-A/2011, of 22 March.

The petition was filed in a timely manner, the case does not suffer from any nullity, and the parties did not raise any exceptions preventing the examination of the merits of the case, whereby the conditions for the rendering of the arbitral decision are met.

  1. Matter of Fact

3.1. Proven Facts:

Having analyzed the documentary and testimonial evidence produced and the positioning of the parties, the following facts are considered proven and relevant to the decision of the case:

  1. The present Claimants are co-owners of the urban property inscribed in the urban property register of the parish of ..., municipality of Lisbon, under entry ..., with each of them having the following share:

-A...: 35/384

-B...: 36/384

-C...: 19/384

-D…: 51/384

-E…: 27/384

-F...: 33/384

-G...: 16/384

-H...: 51/384

-I...: 32/384

-J...: 9/384

-K...: 24/384

-L…: 51/384

  1. The identified urban property is inscribed in the urban property register as property in full ownership without floors or divisions capable of independent use;

  2. The urban property in question is composed of ground floor, 1st, 2nd, 3rd, 4th and 5th floors, intended for commerce and residential purposes;

  3. The property is composed of 6 floors and 100 divisions, located at Rua …, Rua …, Rua … and Rua …;

  4. The urban property is inscribed in the urban property register with a Tax Property Value of € 1,242,560.00 and has a building footprint area of 483 m² and gross private area of 2,808 m²;

  5. From the 1st to the 5th floor, the building is divided into floors - left and right side - each having autonomous entrances;

  6. On the 2nd left floor and 4th left and right floor of Rua …, a hostel is installed, by way of a lease contract, where M…, Ltd. is the tenant;

  7. On the 3rd right and left floor of Rua …, a healthcare facility is installed, by way of a lease contract, where N… is the tenant;

  8. On the 2nd right floor of Rua …, a customs brokers' firm is installed, by way of a lease contract, where the company O…, Ltd. is the tenant;

  9. On the 5th left floor of Rua …, it is allocated for residential purposes, by way of a lease contract, where P… is the tenant;

  10. On the 5th right floor of Rua…, a publishing company is installed, by way of a lease contract, where the company Q…, Ltd. is the tenant;

  11. On the ground floor of Rua … a ready-to-wear shop is installed, by way of a lease contract, where the company R…, Ltd. is the tenant;

  12. On the ground floor of Rua … a tourist articles shop is installed, by way of a lease contract, where S… is the tenant;

  13. On the ground floor of Rua …, a food service establishment is installed, by way of a lease contract, where the company T…, Ltd. is the tenant;

  14. At 107/109 Rua …, a ready-to-wear shop is installed, by way of a lease contract, where the company U…, Ltd. is the tenant;

  15. At S/L, ground floor and 1st floor of Rua de …, a decoration shop is installed, by way of a lease contract, where the company X…, S.A. is the tenant;

  16. The Claimants proceeded to pay the assessments subject to the present proceeding, in accordance with what is evidenced below:

-assessment No. 2014 ... – paid on 22.04.204;

-assessment No. 2014 ... - paid on 30.04.204;

-assessment No. 2014 ... - paid on 12.04.204;

-assessment No. 2014 ... - paid on 30.04.204;

-assessment No. 2014 ... - paid on 20.04.204;

-assessment No. 2014 ... - paid on 30.04.204;

-assessment No. 2014 ... - paid on 30.04.204;

-assessment No. 2014 ... - paid on 22.04.204;

-assessment No. 2014 ... - paid on 24.04.204;

-assessment No. 2014 ... - paid on 17.04.204;

-assessment No. 2014 ... - paid on 11.04.204;

-assessment No. 2014 ... - paid on 16.04.2014;

  1. On 29.07.2014 the Claimants submitted, via electronic platform, the request for the constitution of an arbitral tribunal;

  2. The Claimants proceeded on 23.03.2015 to pay the subsequent court fee;

No other facts with relevance to the decision of the case were proven.

3.2. Substantiation of the Proven Facts:

With regard to the proven facts, the conviction of this arbitral tribunal was based on the documentary evidence attached to the file, on the testimonial evidence produced, whose testimony appeared credible and spontaneous, as well as on the positioning of the parties as to the factual matters brought to these proceedings by the Claimants (see, in this regard, what is stated in Article 69 of the TA's reply).

  1. Matter of Law:

4.1. Object and Scope of the Present Proceeding

The arbitral decision petition has as its object the declaration of illegality of the Stamp Tax assessment acts of 2013, in the total amount of € 13,327.83, which are broken down in the collection documents identified above, pursuant to item 28.1 of the GSTT, for the year 2013, as well as the examination of the alleged violation of the principle of equality established in the Constitution of the Portuguese Republic.

Additionally, the Claimants petition for reimbursement of the tax paid as allegedly unduly collected and the payment of compensatory interest, as well as the condemnation of the Respondent TA to refrain from issuing future Stamp Tax assessments regarding the real property in question.

4.2. On the Alleged Illegality of the Stamp Tax Assessments, Item 28.1 of the GSTT, Due to Incorrect Interpretation by the TA Regarding the Subjection of the Real Property to Item 28.1 of the GSTT

In summary, the question at issue is to ascertain whether the interpretation performed by the Tax and Customs Authority to subject the urban property under No. ... of the parish of ... to taxation under Item 28.1 of the GSTT is legal or not, and in concrete terms, for such purpose it is essential to assess whether the immovable reality in question falls within the scope of the rule of incidence, and this will require, first of all, understanding whether the presumption of residential allocation of the property is met and, if so, what TPV is considered relevant for the purposes of subjection to Stamp Tax regarding the residential allocation.

In this regard, it is important to take into account that the tax act in question occurred during the validity of the wording given by Law No. 55-A/2012, of 29 October, whereby the current wording given to it by Article 194 of Law No. 83-C/2013, of 31 December (State Budget for 2014) is not applicable here, since it only came into force on 1 January 2014.

And it is without losing sight of the legislative framework surrounding this innovation in Stamp Tax that the question relating to the scope of the rule of incidence contained in Article 28.1 of the GSTT should also be examined.

Let us thus consider, first and foremost, the legal framework for the Stamp Tax assessment in question:

Law No. 55-A/2012, of 29 October, added item 28.1 to the General Stamp Tax Table (GSTT), with the following wording:

"28 – Ownership, usufruct or superficies right of urban property whose tax property value shown in the register, pursuant to the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000 – on the tax property value used for the purposes of Municipal Property Tax:

28.1 – For property with residential allocation – 1% (…);"

In turn, Article 67(2) of the Stamp Tax Code, added by the aforementioned Law, provides that "to matters not regulated in this code relating to item 28 of the General Table, the CIMI applies on a subsidiary basis."

The rule of incidence refers to urban property, the base concept of property being derived from Article 2 of the CIMI, with the determination of TPV following the terms set out in Article 38 et seq. of the same code.

Specifically, pursuant to that legal provision:

"1 - For the purposes of this Code, property is any parcel of land, comprising waters, plantations, buildings and constructions of any kind incorporated in it or standing on it, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, under the circumstances above, endowed with economic autonomy in relation to the land on which they are located, although situated on a parcel of land that constitutes an integral part of a different patrimony or does not have a patrimonial nature." (emphasis ours)

And Article 6 of the CIMI clarifies that:

"1 - Urban property is divided into:

a) Residential;

2 - Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal purpose each of these uses." (emphasis ours)

The legislator's concept regarding property and the subsequent division into urban property is, for fiscal purposes, undoubtedly a criterion based on economic value and functional autonomy by reason of purpose.

That is, we are dealing with a concept of material or substantive root and not a concept of formal legal cutting, as the Respondent TA seems to intend.

Now, in the case at hand, the Respondent TA does not even place in question that, in substantive terms, the property in question is allocated to a multiplicity of purposes (commerce, services and residential use), nor that that same property subdivides into areas, floors or divisions that in their materiality allow independent use (by tenants, for example) of those same floors or areas, given the existence of autonomous entrances for each of them.

What is, it should be noted, curious, given that the property record describes the property as not divided into floors or divisions capable of independent use, notwithstanding that the property record itself refers to the presence of 100 divisions.

As proven and in continuation of what was established above, such capability for independent use of floors and divisions not only exists, but is materially consumed through rental for various purposes and by different persons and entities, which demonstrates the independent use that is given to the different floors that make up the building in question.

The Respondent, however, defends, with relevant pertinence, that the fact that a part of the property may currently (on the date of the tax event generating the assessments under review) be allocated to services and commerce does not mean that those same areas cannot potentially be allocated and used in substantive terms for residential purposes.

Although it can be recognized that such reasoning has argumentative potential, it is certain that in casu there exists, upstream, a question that requires resolution, and that question passes through establishing what part of the urban property is considered, already by the TA, via the register to which the property record refers, as allocated to residential use and what part is intended for commerce.

Pursuant to Article 12(1) of the CIMI: "Property registers are records that include, in particular, the characterization of real property, its location and tax property value, the identity of the owners and, where applicable, usufructuaries and superficiaries."

And Article 91(1) of that legal code states that:

"1 - Urban registers must specify:

a) The name, tax identification and residence of the owners, usufructuaries or superficiaries;

b) The location and name of the property, where applicable, boundaries or police number, where it exists;

c) Description of the property or indication of its typology, where this exists;

d) The elements considered for the calculation of the tax property value of the property;

e) The tax property value."

It thus follows undeniably that in the urban property register whose information appears in the property record (pursuant to Article 93 of the Municipal Property Tax Code) should be expressed the elements necessary for, pursuant to law, proceeding to the establishment of the Tax Property Value of the property, cf. subparagraph (d).

Now, in the case of the present proceedings, the property record is clear in stating that the property in question has residential and commercial allocation, and at no time makes known what part or parts of the property should be considered as allocated to one or the other purpose.

Taking this objective fact into account, it is important to revisit the legal norm that in the TA's view legitimizes the subjective subjection of the already identified immovable reality to Stamp Tax.

Item 28.1 of the GSTT states that property should be subject to taxation in this regard, urban property with residential allocation, whose TPV is equal to or exceeding € 1,000,000.00.

Which amounts to saying, by contrapositive, that all urban property with allocation provided for in Article 41 of the CIMI - with the exception of residential, evidently - are not within the scope of subjection of the tax rule of incidence in question.

It does not appear doubtful, given the terms of the rule of incidence under analysis and the interpretive principle that should guide the interpreter and contained in Article 9 of the Civil Code, that the reality subject to taxation is limited to residential urban property reality and not to the cumulative taxation of this and any other allocation expressly typified by the legislator in Article 41 of the CIMI, such as commerce and services are examples.

The subjection of the property in question to Item 28.1 of the GSTT would be equivalent to taxation of allocations different from those which the legislator expressly intended to tax and which are urban property with residential allocation and land for construction, both provided they have a TPV equal to or exceeding € 1,000,000.00.

And that result – taxation of property with allocation different from those contained in Item 28.1 of the GSTT – is exactly what the legislator intended to keep outside the scope of incidence of the norm, but the one that is obtained through the assessments now subject to arbitral scrutiny, to the extent that in taking into consideration the totality of the urban property present and its TPV, one is inexorably and indistinctly taxing allocations different from those provided for in that rule, with the aggravation that those same non-residential areas contribute in the measure of their quantitative proportion (which in concrete terms is unknown) to the TPV of the property, being moreover questionable whether areas with residential allocation could or could not, by themselves, reach a TPV equal to or exceeding the minimum threshold fixed by the legislator in Item 28.1 of the GSTT for purposes of subjection - €1,000,000.00.

We are thus dealing with property with two distinct allocations, as follows from the information contained in the register (as collected from the property record), in which the active subject of the legal-tax relationship does not make the determination of what part has residential or commercial allocation.

If to this factuality we add the facts given as proven that go in the unequivocal sense that, effectively, the majority of the floors or divisions, in addition to being substantively capable of independent use (by way of autonomous entrances), are allocated to commerce and services, a fact which, moreover, the Respondent did not contest, it does not appear sustainable that the TA intends to feign on a reality that it itself recognizes to have two different allocations, as if such commercial allocation does not exist and on the basis of that deception, tax an urban property relating to the area with commercial and services allocation.

Which, as we have already stated above, is exactly a result contrary to that which the legislator intended when drafting the legal norm in question.

Therefore, such a solution finds no support in the legal rule of incidence under analysis, whereby one cannot but conclude, given the existence of two different allocations, indeterminacy as to the part or parts to which those same allocations correspond for purposes of quantifying the possible taxable base subject to the GSTT and indiscriminate taxation on the three existing allocations, that the rule of tax incidence under examination – Item 28.1 of the GSTT of the Stamp Tax Code – is violated in casu.

Given the foregoing, a judgment of legal non-conformity cannot but be rendered with respect to the tax acts subject to the present arbitral decision with respect to the legal-tax order, in light of the regulatory framework set forth above, declaring illegal the Stamp Tax assessments in question.

Thus, the annulment of the tax acts subject to the present proceedings cannot but be determined.

The non-fulfillment of the presumption relating to the allocation of the property, in the manner evidenced above, prejudices the examination of the remaining issues arising from the illegality of the assessments in question.

4.3. Prejudiced Questions: Unconstitutionality by Violation of the Principle of Equality, Fiscal Legality and Fiscal Coherence – Article 104(3) of the Constitution of the Portuguese Republic

As the singular arbitral tribunal accepted the understanding of the inapplicability of item 28.1 of the GSTT to the instant case, examination of the remaining defects alleged and that may affect the contested assessments is prejudiced as procedurally moot.

Examination of the question of the unconstitutionality of the norm introduced into the GSTT (item 28/28.1) by Law No. 55-A/2012, of 28 October, by violation of the principle of equality enshrined in Article 13 of the Constitution is thus prejudiced.

4.4. On the Reimbursement to the Claimant of the Stamp Tax Paid, Plus Payment of Compensatory Interest:

In light of all the foregoing and the conclusion reached at point 4.2, a judgment of illegality rendered against the tax acts subject to the present arbitral decision, it is important to note the petition also made by the Claimant for payment of compensatory interest.

Pursuant to Article 43(1) of the General Tax Law, "Compensatory interest is due when it is determined, in gracious reclamation or judicial review, that there was an error attributable to the services resulting in payment of the tax debt in an amount exceeding that legally due."

Article 43(2) of the General Tax Law further provides that "It is also considered that there is an error attributable to the services in cases where, although the assessment is made on the basis of the taxpayer's declaration, the latter has followed, in completing it, generic guidance from the tax administration, duly published."

Now, in the specific case, the legitimacy of the aforementioned petition for payment of compensatory interest in favor of the Claimant is unequivocally established, since the assessments under review are shown to be affected by illegality, and therefore compensatory interest is due from the day following that of the unduly payment until the date of issuance of the respective credit note, in accordance with that established in Article 43 of the General Tax Law and Article 61 of the Code of Tax Procedure and Process.

The Claimants are therefore creditors of the TA for the amount corresponding to Stamp Tax unduly paid, in the amount of € 13,327.83, plus the respective compensatory interest accrued and accruing, to be calculated until the issuance of the respective credit note.

4.5. On the Condemnation of the Respondent TA to Refrain from Issuing Future Stamp Tax Assessment Notes Regarding the Real Property in Question – Article ... of the Parish of ...:

The Claimants petition, finally, for, through the present proceedings, the TA to be condemned to refrain from issuing any future Stamp Tax assessment act regarding article ... of the parish of ....

This arbitral tribunal understands that such petition falls within the logic of a subordinate petition, that is, dependent on the result of the examination to be performed regarding the petition for annulment of the tax acts, and that only in the event of a declaration of illegality of those same tax acts would the question of the petitioned condemnation of the Respondent arise, as is the case here, given what was established above at point 4.2 of this arbitral decision.

Thus, it is now important to analyze such petition, bearing in mind the legal framework in which it operates and is governed by arbitration as an alternative means of resolving jurisdictional conflicts in tax matters.

No. 1 of Article 2 of Decree-Law No. 10/2011, of 20 January, under the authority granted by Article 124 of Law No. 3-B/2010, of 28 April [State Budget for 2010], in the version introduced by Articles 228 and 229 of Law No. 66-B/2012, of 31 December [State Budget for 2013]) provides, under the heading of Competence of Arbitral Tribunals and Applicable Law, the following:

"1 — The competence of arbitral tribunals comprises the examination of the following claims:

a) The declaration of illegality of tax assessment acts, self-assessment, withholding and payment on account;

b) The declaration of illegality of acts establishing the taxable matter when not giving rise to the assessment of any tax, of acts determining the assessable income and of acts setting tax property values;"

As can be seen from the terms of the cited rule, the present arbitral tribunal has competence only to examine and decide claims relating to the declaration of the illegality of tax assessment acts, self-assessment, withholding, payments on account, as well as relating to acts establishing the taxable matter not giving rise to assessment and also of acts determining the assessable income and of acts setting tax property values.

We thus have that the scope of the competence of tax arbitration comprises only a limited portion of claims, when we compare the claims provided for in the rule cited above with the spectrum of claims susceptible to being examined by tax tribunals, by force of Article 49 and 49-A of the Tax Courts Organization Law, Article 101 of the General Tax Law and Article 97 of the Code of Tax Procedure and Process.

The portion susceptible to being examined at this arbitral instance, as noted above, comprises only claims directed at the declaration of illegality and possible consequent determination of annulment of the tax act subject to arbitral scrutiny.

Constituting the list in Article 2(1) of the RJAT a list of a taxative or closed clause nature, this singular arbitral tribunal is prevented from pronouncing itself on such petition for condemnation, since the same manifestly lacks framing within the scope of competencies legally attributed by means of that rule, reason for which this arbitral tribunal cannot take cognizance of such condemnatory claim.

  1. DECISION:

In these terms and with the substantiation that is set forth decides this arbitral tribunal:

  1. To find founded, as proven, the petition for declaration of illegality of the Stamp Tax assessment tax acts, identified at item 17 of the proven facts, referring to the property identified by the urban property entry contained at item 1, for defect of violation of law as to the rule contained in item 28.1 of the GSTT, by error on the legal premises and consequent reimbursement by the Respondent to the Claimants of the tax paid by them regarding the tax acts subject to these proceedings;

  2. To find founded, as proven, the petition for payment of compensatory interest by the Respondent to the Claimants from the date of the unduly payment until the date of issuance of the credit note, in accordance with that established in Article 43 of the General Tax Law and in Article 61 of the Code of Tax Procedure and Process;

  3. To refuse to examine the petition for condemnation of the Respondent to refrain from issuing future Stamp Tax assessment notes and referring to article ... of the parish of ..., given that such claim goes beyond the scope of competence of this singular arbitral tribunal;

Value of the case: € 13,327.83 – Articles 97-A of the Code of Tax Procedure and Process, 12 of the Legal Regime for Tax Arbitration (Decree-Law 10/2011), 3-2 of the Regulations on Costs in Tax Arbitration Proceedings (RCPAT).

Costs pursuant to Table I of the RCPAT, calculated according to the aforementioned value of the claim, at the expense of the Respondent - Articles 4(1) of the RCPAT and 6(2)(a) and 22(4) of the RJAT.

Let this arbitral decision be notified to the parties and, in due course, file the case.

Lisbon, 27 March 2015.

The singular arbitrator

(Luís Ricardo Farinha Sequeira)

Text prepared by computer, pursuant to Article 138(5) of the Code of Civil Procedure (CPC), applicable by reference to Article 29(1)(e) of the Legal Regime for Tax Arbitration, with blank lines and reviewed by me.

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Portuguese Stamp Tax General Table and how does it apply to vertical property?
Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) imposes an annual stamp tax on urban property rights when the tax property value (VPT) exceeds one million euros. In vertical properties, its application depends on whether divisions are formally constituted as autonomous fractions. If the property remains registered as a single undivided unit despite having functionally independent floors or divisions, the Tax Authority's position is to aggregate all VPTs and apply Verba 28.1 to the total value. This interpretation has been challenged as potentially exceeding the provision's scope, particularly when individual divisions would not meet the million-euro threshold if separately assessed.
Can independent divisions of a building be taxed individually under Imposto de Selo when not constituted as autonomous fractions?
According to the Tax Authority's interpretation in Process 573/2014-T, independent divisions that are not formally constituted as autonomous fractions under Article 2(4) of the Municipal Property Tax Code (CIMI) cannot be taxed individually under Imposto de Selo. Instead, the VPTs of all areas or floors with independent use must be summed together. This means that even when a building has functionally separate divisions with different tenants and purposes, if they lack formal autonomous fraction status in the property registry, the stamp tax assessment treats the entire property as a single taxable unit for purposes of Verba 28.1 TGIS.
Does Verba 28.1 TGIS apply only to residential properties or also to commercial-use divisions?
The application of Verba 28.1 TGIS to mixed-use properties was a central issue in Process 573/2014-T. Claimants argued that the provision should apply only to residential properties and not to commercial-use divisions. They contended that most divisions in their building served commercial purposes (hostels, healthcare facilities, customs brokers, publishing companies, retail shops), which should exclude them from Verba 28.1's scope. However, the Tax Authority maintained that when property is registered as a single unit without autonomous fractions, the distinction between residential and commercial use becomes irrelevant for stamp tax purposes, and the provision applies to the aggregated property value regardless of the mixed-use nature of individual divisions.
Is the aggregation of patrimonial tax values (VPT) of independent units in a vertical property constitutional under Article 104(3) CRP?
The constitutionality of aggregating VPTs under Verba 28.1 TGIS was challenged in Process 573/2014-T based on Article 104(3) of the Portuguese Constitution, which establishes that taxation should respect the principles of equality and taxpaying capacity. Claimants argued that summing the values of independent divisions created arbitrary discrimination and violated taxpaying capacity principles, as individual divisions would not trigger stamp tax liability if properly assessed separately. The Tax Authority defended that aggregation does not violate constitutional principles because there are no arbitrary or unjustified discriminations—the treatment follows directly from the property's legal status as an undivided unit. The constitutional analysis hinges on whether formal registry configuration should determine tax treatment when economic reality shows functional independence.
How did the CAAD rule on Stamp Tax liquidation for vertical properties valued over one million euros in Process 573/2014-T?
While the complete arbitral decision is not fully provided in the excerpt, Process 573/2014-T examined stamp tax assessments totaling €13,327.83 on a Lisbon property valued at €1,242,560.00. The CAAD tribunal was constituted on October 1, 2014, and conducted witness examinations and oral arguments on March 19, 2015. The case centered on whether the Tax Authority correctly applied Verba 28.1 TGIS by aggregating the VPTs of all floors and divisions in a building that, despite having 100 functionally independent divisions serving various commercial and residential purposes, remained registered as a single undivided property. The tribunal had to decide between the claimants' position that individual divisions should be assessed separately (which would eliminate stamp tax liability) and the Tax Authority's interpretation that undivided properties require VPT aggregation regardless of internal functional independence.