Process: 574/2017-T

Date: September 10, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 574/2017-T) addresses whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to building land valued over €1,000,000 intended for non-residential purposes. The claimant owned an urban property registered as 'land for construction' with a tax value of €1,802,140. The Tax Authority assessed Stamp Tax of €18,021.40 for 2015 under item 28.1 TGIS, which applies to residential properties or building plots where authorized or planned construction is for residential purposes. The subdivision permit designated the land for a 'horse-riding complex' and the Land Registry described it as intended for a 'tourist complex'. The Tax Authority argued the tribunal lacked jurisdiction, claiming the dispute concerned property valuation classification rather than tax assessment. The arbitral tribunal rejected this preliminary objection, confirming its competence to review tax assessment acts under Article 2(1)(a) of the Legal Framework for Arbitration in Tax Matters. On the merits, the tribunal analyzed the three cumulative requirements of item 28.1 TGIS: (i) tax value equal to or exceeding €1,000,000, (ii) classification as residential property or building land, and (iii) authorized or planned construction for residential purposes. The decision turned on interpreting 'authorized or planned construction' under the Municipal Property Tax Code, examining whether land designated for tourist or equestrian purposes in official permits could be subject to the residential property Stamp Tax provision. This case clarifies the role of subdivision permits and land registry classifications in determining Stamp Tax liability on high-value undeveloped land.

Full Decision

ARBITRAL DECISION

The arbitrator João Taborda da Gama, designated by the Deontological Board of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 11-01-2018, hereby agrees as follows:

Report

A..., S.A., Tax Identification Number..., with registered address at ..., ..., ...-... ..., (hereinafter the "Claimant"), filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter "LFATM"), in which the Tax and Customs Authority is named as Respondent (hereinafter also identified as "TCA").

The request for constitution of the arbitral tribunal was accepted by the President of the Centre for Administrative Arbitration and automatically notified to the TCA on 11-01-2018. Pursuant to Article 6, paragraph 2, paragraph (a) and Article 11, paragraph 1, paragraph (b), both of the LFATM, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Board designated the undersigned as arbitrator of the arbitral tribunal, who communicated acceptance of the appointment within the applicable deadline.

By order dated 04-06-2018, the meeting provided for in Article 18 of the LFATM was dispensed with and it was decided that the proceedings would continue with written submissions. The parties submitted their arguments.

On 10 July 2018, taking into account the circumstances of the case, an order was issued extending the deadline for the decision by a period of 2 months.

The arbitral tribunal was duly constituted pursuant to Articles 2, paragraph 1, paragraph (a) and 10, paragraph 1 of the LFATM and is competent.

The parties are duly represented, possess legal capacity and standing, are legitimate and are represented (Articles 4 and 10, paragraph 2, of the LFATM and Article 1 of Ordinance No. 112-A/2011, of 22 March).

The proceedings are free from nullities.

Findings of Fact

Proven Facts

Based on the evidence contained in the proceedings and the administrative file ("AF") attached to the record, the following facts are considered proven:

The Claimant is the owner of the urban property located at ..., in ..., described at the ... Land Registry Office of ... with file number..., and registered in the property register of the parish of ... with property code number... (corresponding to the former article number...);

It follows from the Urban Property Register as to the type of property that it is a plot of land for construction.

The tax value attributed to the property was €1,802,140;

It follows from the subdivision permit No. .../88, issued by the Municipality of ... that the property (Lot 7) is intended for a "horse-riding complex";

It follows from the Land Registry Certificate that the property (Lot 7) is a "Plot of land intended for tourist complex";

No construction has been erected on the said property;

The Respondent proceeded to assess Stamp Duty (hereinafter "SD"), in the amount of €18,021.40, for the year 2015, under item 28.1 of the General Table of Stamp Duty (hereinafter "GTSD").

Unproven Facts

There are no facts relevant to the determination of the case that should be considered unproven.

Justification for the Findings of Fact

The proven facts are based on the documents submitted by the Claimant with the request for arbitral determination.

Preliminary Matter: Exception of Lack of Jurisdiction of the Arbitral Tribunal

According to the Respondent, the present request for arbitral determination concerns the assessment of the said property by the Arbitral Tribunal, a matter that falls outside its material jurisdiction. Indeed, the TCA argues that "the act that is the subject of the dispute cannot be qualified as an act of tax assessment for the purposes of paragraph (a) of paragraph 1 of Article 2 of the LFATM", adding that what is at issue in the present proceedings "is the act of fixing the Tax Property Value, more specifically the allocation coefficient of the urban property in question". Thus, the TCA concludes that the appropriate means to contest this act is a special administrative action (Articles 14 to 16 of the Response submitted by the TCA).

However, the TCA's argument is not well-founded. In fact, contrary to what was alleged by the Respondent, it follows from the request made by the Claimant "that the request for a declaration of illegality of the act of 27 July 2016, refusing the taxpayer's objection to the assessment of Stamp Duty for 2015, in the amount of €18,021.40, issued by the Tax and Customs Authority on 5 April 2016, under item 28.1 of the General Table of the Stamp Duty Code (…)" is judged to be well-founded.

Thus, the Claimant seeks a declaration of illegality of the act assessing SD assessed under item 28.1 of the GTSD for the year 2015.

Accordingly, since a "declaration of illegality" of an act of tax assessment is requested, this falls within the material jurisdiction of arbitral tribunals, pursuant to Article 2, paragraph 1, paragraph (a) of the LFATM and Article 2 of Ordinance No. 112-A/2011, of 22/03. This Tribunal has already ruled to this effect in cases Nos. 116/2016-T and 117/2016-T, both with factual circumstances very similar to those described above.

For the foregoing reasons, the dilatory exception raised by the Respondent is dismissed.

Matters of Law

Merit of the Request for Arbitral Determination

What needs to be decided in the present case is whether a plot of land for construction, whose assessment was based - as appears from the Urban Property Register – on the location coefficient relating to properties for residential purposes, but which according to the subdivision permit is intended for a horse-riding complex, falls within item 28.1 of the GTSD. Fundamentally, what is at issue is the interpretation that should be given to item 28.1 of the GTSD when it refers to "construction, authorized or planned", in the terms detailed below.

In 2015, item 28.1 of the GTSD, which was the basis for the contested assessment, read as follows:

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

28.1. Per residential property or per plot of land for construction for which construction, authorized or planned, is for residential purposes, pursuant to the provisions of the Municipal Property Tax Code ---------------------- 1%;" (emphasis and underlining ours).

The application of item 28.1 therefore depends on the cumulative fulfillment of three requirements, namely: (i) the tax value shown in the property register, pursuant to the Municipal Property Tax Code (hereinafter "MPTC"), being equal to or greater than €1,000,000; (ii) being either a residential property or a plot of land for construction; and (iii) the construction authorized or planned for it being for residential purposes pursuant to the MPTC.

With respect to the first two requirements: it follows from the Urban Property Register that the tax value is indeed greater than €1,000,000, and further that it is a property classified as a plot of land for construction.

It is therefore necessary only to verify the "authorized or planned" allocation of the property:

Pursuant to Article 4 of the MPTC, "[u]rban properties are all those that should not be classified as rural (…)".

With regard to the classification of types of urban properties, Article 6, paragraph 1 of the MPTC divides them into: a) residential; b) commercial, industrial or for services; c) plots of land for construction; d) others".

In light of Article 6, paragraph 3 of the MPTC, plots of land for construction are considered to be "lands situated within or outside an urban area for which a building or construction permit or authorization has been granted, prior notification admitted or favorable prior information issued for subdivision or construction operations, as well as those which have been declared as such in the title of acquisition, except lands on which the competent entities prohibit any of those operations, namely those located in green spaces, protected areas or which, according to municipal spatial planning plans, are allocated to public spaces, infrastructures or facilities.".

We therefore consider that "only is a plot of land for construction that in which the owner can legally initiate construction, having a subjective right to do so and not merely a legitimate interest, expectation, hope or desire" (João Taborda da Gama, "Plots of land for construction and transitional regime of real estate gains in Personal Income Tax", Tax Law, Revista de Direito e Gestão Fiscal, No. 30, April-June 2007, p. 103). Thus, "the concept of a plot of land for construction that we find in tax law is a specific concept that is based on a very concrete building potential, already materialized in a public law authorization act that is currently in force and tends to be irrevocable" (João Taborda da Gama, "Plots of land for construction and transitional regime of real estate gains in Personal Income Tax", Tax Law, Revista de Direito e Gestão Fiscal, No. 30, April-June 2007, Higher Institute of Management, p. 106).

Now, as this is a specific concept of Tax Law that is anchored in a legal aptitude, its allocation is linked to the very existence of a plot of land for construction, depending on the building potential materialized in the authorization acts that have it as their subject matter.

Thus, the fact that the property, pursuant to Subdivision Permit No..., is intended for a horse-riding complex (and not for residential purposes), is one of the elements that determines its allocation. According to the subdivision permit, the construction "authorized or planned" for the property in question (Lot 7) is not residential – as provided in item 28.1 of the GTSD – but rather the construction of a "horse-riding complex". In this sense, one can read in Subdivision Permit No.... that "lot 7 with an area of 100,741 m2, intended for horse-riding complex". Indeed, this contrasts with what is expressly stated in the same document concerning lots 9 to 73 "[a]ll these lots are intended for residential purposes, consisting of 1 dwelling unit each (…).". In the same sense, that we are not dealing with a property for which the construction planned or authorized is residential, we also have the Land Registry Certificate from which it follows that it is "a plot of land intended for tourist complex.".

Thus, the third requirement is not fulfilled.

In conclusion, the property identified above is not subject to item 28.1 of the GTSD.

Other arbitral tribunals constituted within the framework of the Centre for Administrative Arbitration have ruled on the same legal question: cases Nos. 116/2016-T, of 14 July 2016, and 117/2016-T, of 30 September 2016. In fact, in case No. 116/2016-T the Arbitral Tribunal considered that "the subdivision permit (the contents of which, it is reiterated, were not contested by the Respondent) is clear: the intended destination (if one considers it as planned) of the land is agricultural exploitation - not residential.

Given that this fact is evident, then the third requirement contained in the tax incidence norm is not fulfilled. The land does not have construction, authorized or planned, allocated for residential purposes.".

Also in case 117/2016-T it is stated that from "the elements in the proceedings, namely in light of the contents of the subdivision permit, it is unequivocal that in the plot of land for construction to which the contested assessment refers, the construction authorized therein does not have a residential allocation.

Thus, since the requirement of the incidence norm is not fulfilled, one cannot but recognize that the Claimant is correct when it alleges that the factual and legal prerequisites on which the contested tax act is based are not fulfilled, with the property identified in the present proceedings not falling within that norm."

Thus, the contested assessments are illegal due to violation of law, as they do not fall within the scope of application of item 28.1 of the GTSD. This defect justifies the annulment of the assessment, pursuant to Article 163, paragraph 1 of the Administrative Procedure Code, subsidiarily applicable by virtue of Article 29, paragraph 1, paragraph (e) of the LFATM.

Decision

Therefore, this Arbitral Tribunal hereby:

Dismisses the dilatory exception of absolute lack of jurisdiction of the arbitral tribunal ratione materiae;

Upholds the request for arbitral determination, with the consequent annulment of the contested assessment, with all legal consequences, in particular the reimbursement to the Claimant of the amount paid by it, relating to the assessment now annulled.

Value of the Case

In accordance with Article 306, paragraph 2 of the Code of Civil Procedure and Article 97-A, paragraph 1, paragraph (a) of the Tax Procedure and Process Code and Article 3, paragraph 2 of the Costs Regulation in Tax Arbitration Proceedings, the value of the case is fixed at €18,021.40 (eighteen thousand, twenty-one euros and forty cents).

Costs

Pursuant to Article 22, paragraph 4 of the LFATM, the amount of costs is fixed at €1,224.00, in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 10 September 2018.

The Arbitrator,

João Taborda da Gama

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 TGIS applicable to building land (terreno para construção) intended for tourist developments?
Based on CAAD Process 574/2017-T, Stamp Tax under item 28.1 TGIS is not automatically applicable to building land intended for tourist developments. Item 28.1 requires that the authorized or planned construction be for residential purposes pursuant to the Municipal Property Tax Code. Where the subdivision permit (alvará de loteamento) designates land for a 'tourist complex' or 'horse-riding complex' rather than residential use, and no residential construction is authorized, the specific residential requirement of item 28.1 TGIS is not met. The tribunal emphasized that all three cumulative conditions must be satisfied: tax value over €1,000,000, classification as building land, and residential purpose for authorized or planned construction.
How does the CAAD determine whether a building plot with a property value over €1,000,000 is subject to Stamp Tax under Verba 28.1 of the General Stamp Tax Table?
The CAAD determines Stamp Tax liability under item 28.1 TGIS by examining three cumulative requirements: (1) whether the property's tax value registered under the Municipal Property Tax Code equals or exceeds €1,000,000; (2) whether it qualifies as a residential property or building land (terreno para construção); and (3) whether the authorized or planned construction is for residential purposes according to the MPTC. The tribunal reviews the Urban Property Register to verify tax value and property classification, then examines official documents such as subdivision permits (alvarás de loteamento) and Land Registry certificates to determine the intended use. The critical factor is whether construction permits or planning documents specifically authorize residential development, not merely the abstract classification as building land or the allocation coefficient used in property valuation.
Can a landowner challenge a Stamp Tax assessment on undeveloped building land classified for non-residential purposes such as tourist accommodation?
Yes, a landowner can challenge Stamp Tax assessments on undeveloped building land classified for non-residential purposes through CAAD arbitration. In Process 574/2017-T, the claimant successfully argued that land designated for a tourist complex should not be subject to item 28.1 TGIS, which specifically applies to residential properties or building plots with authorized or planned residential construction. The Tax Authority's preliminary objection that the tribunal lacked jurisdiction was rejected. The CAAD confirmed its competence under Article 2(1)(a) of the Legal Framework for Arbitration in Tax Matters to review the legality of Stamp Tax assessments, distinguishing this from challenges to property valuation itself, which would require special administrative proceedings. Taxpayers can request arbitration to contest whether the Tax Authority correctly applied item 28.1 TGIS based on the property's authorized use.
What role does the intended use specified in the allotment permit (alvará de loteamento) play in determining Stamp Tax liability under Verba 28.1 TGIS?
The intended use specified in the allotment or subdivision permit (alvará de loteamento) plays a decisive role in determining Stamp Tax liability under item 28.1 TGIS. In Process 574/2017-T, the tribunal examined the subdivision permit which designated the property (Lot 7) for a 'horse-riding complex,' while the Land Registry described it as 'land intended for tourist complex.' These official documents establish the 'authorized or planned construction' referenced in item 28.1, which requires residential purpose as a condition for Stamp Tax application. The alvará de loteamento constitutes the formal authorization that defines permissible construction on building land. When this permit specifies non-residential uses such as tourism, equestrian facilities, commercial, or industrial purposes, the third requirement of item 28.1 TGIS is not satisfied, regardless of the property's high value or classification as building land. The permit's designation takes precedence over generic property classifications or valuation coefficients.
What is the procedure for requesting arbitration at CAAD to dispute Stamp Tax (Imposto do Selo) assessments on building land in Portugal?
To request arbitration at CAAD for disputing Stamp Tax assessments on building land, taxpayers must file a request for constitution of an arbitral tribunal under Articles 2 and 10 of Decree-Law No. 10/2011 (Legal Framework for Arbitration in Tax Matters - RJAT). The request must name the Tax and Customs Authority as respondent and specify the contested act—typically the decision refusing an objection to the tax assessment. In Process 574/2017-T, the claimant challenged the act of 27 July 2016 refusing the taxpayer's objection to the Stamp Tax assessment of €18,021.40 for 2015. After acceptance by the CAAD President, the Tax Authority is automatically notified, and the Deontological Board designates an arbitrator. The tribunal determines whether to hold an oral hearing or proceed with written submissions. Arbitration provides jurisdiction to review the legality of tax assessments under Article 2(1)(a) RJAT, including whether item 28.1 TGIS was correctly applied based on property classification and authorized use, without requiring prior judicial proceedings.