Process: 577/2014-T

Date: February 20, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 577/2014-T addresses the constitutionality and application of Stamp Tax under Verba 28.1 of Portugal's General Stamp Tax Table (TGIS). This provision imposes annual Stamp Tax on ownership of residential urban properties with tax patrimony values equal to or exceeding €1,000,000. The claimant, a property-holding company, challenged a €12,149 Stamp Tax assessment, arguing that Verba 28.1 violated constitutional principles including the prohibition of double taxation, equality, proportionality, and fiscal neutrality. The CAAD arbitral tribunal conducted a comprehensive constitutional analysis, examining whether the tax constituted an improper wealth tax, discriminated against property companies, or violated principles of tax justice. The tribunal concluded that Verba 28.1 does not constitute a wealth tax but rather a tax on property ownership, which is constitutionally permissible under Article 104(3) of the Portuguese Constitution. Regarding double taxation claims, the tribunal found no constitutional prohibition against cumulative taxation of the same taxable material by different taxes with distinct incidence presuppositions. The equality and proportionality challenges were rejected because Verba 28.1 applies uniformly to all holders of real rights over qualifying residential properties—whether companies, individuals, foundations, or associations—not specifically targeting corporate entities. The tribunal emphasized that the €1,000,000 threshold legitimately restricts the tax's scope to high-value properties. The fiscal neutrality argument failed because this principle applies specifically to competitive distortions among companies, whereas Verba 28.1 has broader application beyond corporate taxpayers. Following the unfavorable ruling, the claimant was ordered to pay arbitration costs of €918. The decision reinforces that Portugal's tax arbitration system, while allowing constitutional challenges, maintains rigorous standards for finding fiscal norms unconstitutional, balancing taxpayer rights against the State's constitutional mandate to collect taxes for public needs under Article 103 of the Portuguese Constitution.

Full Decision

has its expression in the freedoms of economic initiative and of enterprise, contemplated in articles 61, 80, al. c) and 86 of the Constitution"; "[b]ut the freedom of fiscal management of companies, seen from the side of the State, is embodied in the principle of fiscal neutrality, which has clear expression in article 81, al. e) of the Constitution", "a principle which, having been created owing to the influence of community law, translates into the State being obligated not to provoke and to prevent others from provoking distortions in competition among companies".

Well, without discussing hic et nunc the constitutional consistency of these principles and the terms of their embodiment before the normative options of the ordinary legislator, it is important immediately to note that these principles must have their incidence reported to regulations directed at companies as such.

Well, item 28.1 of the GTSD concerns a taxation of property, without specifically aiming at companies, as it encompasses every species of taxpayer that is the holder of the real rights set out over the residential properties in question, independently of assuming an entrepreneurial character or not, thus encompassing, in addition to companies, foundations, associations, natural persons, in sum any and all entity that is the holder of real rights over residential urban properties of tax patrimony value equal to or greater than €1,000,000.

In this way, it is considered inviable to invoke, in attention to the scope of application of the norm under consideration, principles of a strictly entrepreneurial vocation such as the said "principle of fiscal neutrality" in the sense cited above.

In any case, it cannot be failed to recall what was stated exemplarily in the judgment of the Constitutional Court No. 846/2014, of 3.12: "Doctrine and constitutional case law have been firm in concluding that the exercise, by the State, of the power of taxation cannot be conceived as an impairment or restriction of fundamental rights, in light of which it is legitimate to invoke the regime of the requirements or exigencies that are valid, constitutionally, for laws restricting rights, liberties and guarantees. This very thing flows, from the outset, from the existence of the (improperly) so-called «tax constitution», in which are defined the guarantees of taxpayers, the formal and material principles that shape the constitutional concept of tax, and the configuration of the latter not as an impairment of a right but rather as a public obligation of all citizens, when constituted in accordance with article 103 of the CPR".

In truth, the Constitution requires that an articulation and weighing be made between recognized fundamental rights and goods or interests constitutionally protected, which implies that the content and limits of such rights be determined in attention to those protected goods. Now, it is manifest that among the interests clearly protected by the Constitution are found the collection of taxes in order to satisfy public needs (article 103, no. 1 of the CPR), whereby the duty to contribute to public expenditure by way of taxes is an immanent limit to the rights of property and of freedom of economic initiative.

In these terms, it is understood that it is not possible to configure the unconstitutionality of a fiscal norm based simply on the fact that it has significant influence on the economic decisions of taxpayers – by nature, that is a typical effect of fiscal rules.

In any case, it is not demonstrated the intended significant influence on the ownership of residential properties by real estate companies, given that item 28.1 of the GTSD does not have general reach, but has its scope of application restricted to properties with tax patrimony value equal to or greater than €1,000,000.

For all these reasons, it is not considered fitting to invoke the unconstitutionality of item 28.1 of the GTSD for infraction to the alleged "principle of fiscal neutrality".

e) Conclusion

28.

It is concluded, therefore, that it is not fitting to censure from the point of view of the constitutional parameters configured by the Claimant the regime established by item 28.1 of the GTSD, whereby the judgment of unconstitutionality that is sought in its regard does not succeed.

As the proceedings do not encompass any other question regarding the legality of the contested assessment, the arbitral petition presented does not succeed, whereby the controversial assessment is maintained in the legal system.

f) Compensatory Interest

29.

Bearing in mind that, in the terms set out above, the request for annulment of the contested tax act does not succeed, the request for compensatory interest necessarily does not succeed, which is raised in terms consequential to that request.

IV. DECISION

Whereby it is decided:

i) to judge the request formulated in the present tax arbitral proceedings to be unfounded and, in consequence, to maintain the tax act of assessment of Stamp Duty with No. 2014..., contested in the case, absolving the Tax and Customs Authority from the request;

ii) to judge the request for compensatory interest to be unfounded, absolving the Tax and Customs Authority from the request;

iii) to condemn the Claimant in the costs of the proceedings.

V. VALUE OF THE PROCEEDINGS

In accordance with the provision of article 306, nos. 1 and 2 of the Code of Civil Procedure, article 97-A, no. 1, al. a), and no. 3 of the Code of Tax Procedure and Process, applicable by force of paragraphs a), c) and e) of no. 1 of article 29 of the RFTA and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCTAP), the value of €12,149.00 is fixed for the proceedings, which constitutes the total amount of the tax covered by the contested assessment.

VI. COSTS

In accordance with the provision of articles 12, no. 2, and 22, no. 4, both of the RFTA, and article 4, no. 4 of the Regulation of Costs of Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €918.00, in accordance with Table I of the aforementioned Regulation, at the charge of the Claimant, given the unfoundedness of the request for arbitral decision.

Let notification be made.

Lisbon, 20 February 2015.

The Arbitrator

(João Menezes Leitão)

[1] The spelling resulting from the Orthographic Agreement of the Portuguese Language of 1990 is adopted, the spelling contained in the citations having been updated accordingly.

[2] Available, as are the other judgments of the Constitutional Court cited below, at www.tribunalconstitucional.pt.

[3] Ministry of Finance, State Budget for 2013, Report, October 2012.

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS and how does it apply to property ownership in Portugal?
Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) establishes an annual Stamp Tax on property ownership, not property transactions. It applies to holders of real rights (propriedade total) over residential urban properties with tax patrimony values (valor patrimonial tributário) equal to or exceeding €1,000,000. This tax obligation extends to all types of taxpayers—including companies, natural persons, foundations, and associations—who hold qualifying real rights over such high-value residential properties. The tax is assessed annually based on ownership status, representing a recurring tax on property wealth rather than a one-time transactional tax. Process 577/2014-T confirmed this tax's constitutionality under Article 104(3) of the Portuguese Constitution, which permits taxation on property ownership.
Can a taxpayer challenge the constitutionality of Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) through tax arbitration at CAAD?
Yes, taxpayers can raise constitutional challenges to Verba 28.1 through tax arbitration proceedings at CAAD (Centro de Arbitragem Administrativa), as demonstrated in Process 577/2014-T. However, while arbitral tribunals can analyze constitutional issues and refuse to apply norms they consider unconstitutional, they cannot formally declare a law unconstitutional—that power belongs exclusively to the Constitutional Court (Tribunal Constitucional). In this case, the claimant argued that Verba 28.1 violated constitutional principles including prohibition of double taxation, equality, proportionality, and fiscal neutrality. The CAAD tribunal conducted a thorough constitutional analysis but rejected all grounds, concluding that Verba 28.1 complies with constitutional parameters. The tribunal emphasized that taxes are not constitutional restrictions on fundamental rights but rather public obligations under Article 103 of the Portuguese Constitution.
What is the procedure for filing a request for arbitral ruling (pronúncia arbitral) under Portugal's RJAT (Decreto-Lei 10/2011)?
Under Portugal's RJAT (Regime Jurídico da Arbitragem em Matéria Tributária, established by Decreto-Lei n.º 10/2011), taxpayers file arbitration requests with CAAD to challenge tax assessments. The procedure includes: (1) submitting a written arbitral petition (pedido de pronúncia arbitral) within the legal deadline; (2) appointing or having an arbitrator assigned; (3) the Tax Authority submitting its response; (4) determination whether oral hearings are necessary under Article 18 of RJAT—the tribunal may dispense with oral submissions if parties agree or the tribunal deems it unnecessary for case resolution; (5) written submissions and evidence presentation; and (6) issuance of the arbitral award. Article 29 of the RFTA (Regime de Arbitragem Tributária) incorporates relevant procedural rules from the Tax Procedure Code (CPPT) and Civil Procedure Code (CPC). Proceedings are valued according to the contested tax amount, which determines arbitration fees under the RCTAP (Regulation of Costs in Tax Arbitration Proceedings).
Is a property company entitled to a refund with compensatory interest (juros indemnizatórios) if a Stamp Tax assessment is annulled?
Yes, if a Stamp Tax assessment is annulled through tax arbitration, the taxpayer is entitled to a refund of the improperly paid tax plus compensatory interest (juros indemnizatórios). However, as Process 577/2014-T demonstrates, the entitlement to compensatory interest is consequential to and dependent upon the successful annulment of the contested tax act. In that case, both the primary request for annulment and the consequential request for compensatory interest were denied because the tribunal found the Stamp Tax assessment under Verba 28.1 to be legally valid. Compensatory interest compensates taxpayers for the State's temporary retention of funds when tax assessments are ultimately found improper. The interest calculation follows legal provisions in the Tax Procedure Code (CPPT) regarding timing and rates. Property companies and all other taxpayers have equal rights to such refunds when assessments are successfully challenged.
How does the CAAD arbitral tribunal decide whether to hold an oral hearing or dispense with oral submissions under Article 18 of the RJAT?
Under Article 18 of Portugal's RJAT (Decreto-Lei n.º 10/2011), the CAAD arbitral tribunal has discretion to decide whether oral hearings (audiência de julgamento) are necessary or whether to dispense with oral submissions (alegações orais). The tribunal may dispense with oral hearings in two scenarios: (1) when all parties expressly agree to waive oral arguments, or (2) when the arbitrator determines that oral submissions are not necessary for properly deciding the case, typically because the issues are purely legal rather than factual, or the written submissions adequately address all relevant matters. In Process 577/2014-T, oral submissions were dispensed with, allowing the tribunal to decide based on written pleadings and documentary evidence. This procedural flexibility enables efficient case resolution while preserving parties' rights to be heard. The decision to hold or dispense with hearings considers case complexity, evidentiary needs, and whether oral argument would materially contribute to justice.