Process: 582/2014-T

Date: January 21, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 582/2014-T, the CAAD addressed whether Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) applies to properties held in vertical ownership (propriedade vertical) when no individual unit exceeds €1 million in taxable patrimonial value (VPT). The applicant, owner of a building with 12 independent units (11 residential, 1 commercial) totaling €1,235,750, challenged the Tax Authority's assessment methodology. The Authority aggregated the VPT of all residential units (€1,117,490) and applied the 1% Stamp Tax rate introduced by Law 55-A/2012. The applicant argued that Item 28.1 should apply only when individual units exceed €1 million, and raised constitutional challenges based on retroactivity, proportionality, equality principles, and rule of law violations. Additionally, procedural defects were alleged, including lack of proper reasoning and violation of the prior hearing requirement under Article 60 LGT. The Tax Authority defended that under vertical ownership, the property constitutes a single taxable unit, unlike horizontal property regime where independent units are legally separate properties under CIMI. The tribunal consolidated 21 assessment acts relating to multiple installments under Article 3(1) RJAT, given common factual and legal grounds. The central legal question involves interpreting whether the €1 million threshold applies per independent unit or to the aggregate property value in vertical ownership structures, with significant implications for property taxation, constitutional tax law principles, and the distinction between propriedade total and propriedade horizontal for Stamp Tax purposes on high-value real estate.

Full Decision

ARBITRAL DECISION

I. Report

  1. The S.A., with tax identification number (NIF) …, with registered office in Lisbon, at … Lisbon, and registered at the Commercial Registry Office of Lisbon, came, pursuant to the provisions of Article 99 of the Code of Tax Procedure and Process (CPPT) and Articles 2, no. 1, paragraph a) and 10, no. 1, paragraph a) and no. 2, of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters – RJAT), to request the constitution of a Single Arbitral Tribunal and an arbitral ruling.

  2. The Respondent is the Tax and Customs Authority.

  3. The Applicant seeks the annulment of the assessment acts for Stamp Tax (item no. 28 of the General Table of Stamp Tax), and respective payment notices, relating to the year 2013, dated 17/03/2014, evidenced by the following documents, relating to the 1st and 2nd instalments:

a) Doc. no. 2014 …;
b) Doc. no. 2014 …;
c) Doc. no. 2014 …;
d) Doc. no. 2014 …;
e) Doc. no. 2014 …;
f) Doc. no. 2014 …;
g) Doc. no. 2014 …;
h) Doc. no. 2014 …;
i) Doc. no. 2014 …;
j) Doc. no. 2014 …;
k) Doc. no. 2014 …;
l) Doc. no. 2014 …;
m) Doc. no. 2014 …;
n) Doc. no. 2014 …;
o) Doc. no. 2014 …;
p) Doc. no. 2014 …;
q) Doc. no. 2014 …;
r) Doc. no. 2014 …;
s) Doc. no. 2014 …;
t) Doc. no. 2014 …;
u) Doc. no. 2014 ….

  1. The Applicant formulates a cumulation of claims, on the grounds that there are "multiple assessments relating to the same tax and property, belonging to the same taxpayer, and that the merits of the claims derive from the assessment of the same factual circumstances and the interpretation and application of the same principles or rules of law, as provided in Article 3, no. 1 of RJAT)".

  2. The Applicant further requests that the Tribunal declare the existence of an error by the authorities and recognize its right to indemnity interest on the amounts of taxes already paid.

  3. The Applicant bases its claim alleging the unconstitutionality of the provisions contained in Articles 3, 4 and 6 of Law no. 55-A/2012, of 29 October, by violation of the constitutional principles of the rule of law of a democratic state, equality, proportionality and the prohibition of retroactivity of tax law.

  4. The Applicant also alleges that the contested assessments suffer from factual error "because they considered that the mixed properties of the Applicant, in which none of the 'floors susceptible to independent use' that compose the property in 'full ownership' and whose individual value for purposes of VPT is less than €1,000,000, were erroneously subsumed under the species of buildings or constructions licensed or intended for 'residential, commercial, industrial' purposes mentioned in Article 6, nos. 1, a) and b) and no. 2 of CIMI, to which item nos. 28 and 28.1 of the General Table attached to CIS refer, by virtue of Article 67/2 of CIS, both amended by Articles 3 and 4 of Law 55-A/2012, also violating, and in addition to the raised unconstitutionalities, all the cited provisions".

  5. The Applicant alleges that the contested assessments also suffer from legal error, by virtue of having resulted from an incorrect interpretation of the law by the Respondent.

  6. The Applicant further alleges that the contested assessments "suffer from obvious lack of reasoning, in violation of the provisions of Articles 36 et seq. of CPPT, Article 77/6 of LGT, Article 125 of CPA and Article 268, no. 3 of CRP", and that the principle of prior hearing, enshrined in Article 60, no. 1, paragraph a) of LGT, was violated.

  7. The Applicant opted for not designating an arbitrator.

  8. Pursuant to the provisions of paragraph a) of no. 2 of Article 6 and paragraph b) of no. 1 of Article 11 of RJAT, as worded by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated the arbitrator of the arbitral tribunal, who communicated acceptance of the designation within the applicable period.

  9. The parties were notified of this designation, having manifested no intention to challenge the arbitrator's designation, in accordance with the combined provisions of Article 11, no. 1, paragraphs a) and b) of RJAT and Articles 6 and 7 of the Deontological Code of CAAD.

  10. Thus, in compliance with the provisions of paragraph c) of no. 1 of Article 11 of RJAT, as worded by Article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 02-10-2014.

  11. The Tax and Customs Authority submitted a reply, in which it defends the dismissal of the request for an arbitral ruling, having raised no exception.

  12. The Tax and Customs Authority sustains its position by stating that "[t]he situation of the Applicant's property is linearly subsumed, which is to say, literally, within the provision of the said item".

  13. The Tax and Customs Authority further sustains the following:

"29.

Now the tax law contains no gap! The CIMI determines, to which the said item refers, that under the horizontal property regime the units constitute properties. The property not being subject to this regime, legally the units are parts susceptible to independent use, with no common parts".

  1. The Tax and Customs Authority further sustains that no constitutional principle is violated.

  2. By order of 19/11/2014, the Tribunal, having heard the parties, decided to dispense with the holding of the meeting provided for in Article 18 of RJAT, as well as to dispense with the submission of pleadings.

  3. The Arbitral Tribunal was duly constituted.

  4. The parties enjoy legal personality and capacity and are legitimate (Articles 4 and 10, no. 2, of RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March).

  5. No invalidity is apparent.

II. Matter of Fact

a. Facts Proven

  1. The following facts are considered proven:

22.1 The Applicant is the owner of the urban property located at Rua …, currently registered in the real estate register of the Parish …, Municipality of Lisbon, under article … (former article … of the parish of …);

22.2 The real estate identified above is registered in the urban real estate booklet in full ownership, also designated vertical ownership, with 12 floors or units susceptible to independent use, of which 11 have residential allocation and 1 has commercial allocation, with a total patrimonial value of €1,235,750.00;

22.3 None of the floors or units susceptible to independent use has a tax patrimonial value (VPT) exceeding the value of €1,000,000.00;

22.4 For purposes of Item no. 28 of the General Table of Stamp Tax (TGIS), the Tax and Customs Authority considered the sum of the VPT of the various floors or units with residential allocation, corresponding to the total value of €1,117,490.00;

22.5 On the basis of this value, the Tax and Customs Authority carried out the assessments for Stamp Tax of item 28.1 of TGIS, now contested by the Applicant, at the rate of 1%;

22.6 From these stamp tax assessments resulted a global amount of €10,759.00;

22.7 At the date of filing of the initial petition, the Applicant had already proceeded with partial payment of the tax, in the amount of €6,578.33.

b. Facts Not Proven

  1. Of the facts of interest to the decision of the case, those not contained in the factuality described above were not proven.

c. Reasoning of the Decision on the Matter of Fact

  1. The facts were taken as proven on the basis of documentary evidence.

III. Matter of Law

  1. Having established the relevant factuality, it appears that the present proceedings concern exclusively matters of law.

  2. The question to be decided by the Tribunal is that relating to whether the tax patrimonial value (VPT) to be considered for the purposes of applying Item 28 of TGIS, where a property not subject to the horizontal property regime is concerned, is the VPT assigned to each floor or unit with independent use and residential allocation, or whether it is the global VPT, corresponding to the sum of the VPT of each floor or unit susceptible to independent use and residential allocation.

  3. Item 28 of TGIS, now under consideration, was amended by Law no. 55-A/2012, of 29 October, with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000.00 – on the tax patrimonial value for the purposes of IMI:

28.1 – For property with residential allocation – 1%

28.2 – For property, when the taxpayers are not natural persons and are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%."

  1. The Stamp Tax Code (CIS) and its respective General Table, with the amendments introduced by Articles 3 and 4 of Law no. 55-A/2012, of 29 October, do not clarify the meaning of the expression "property with residential allocation".

  2. Article 67, no. 2 of CIS, amended by Law no. 55-A/2012, of 29 October, provides that "[t]o matters not regulated in this Code relating to item no. 28 of the General Table, the provisions of CIMI shall apply, on a subsidiary basis."

  3. The legislator, in no. 1 of Article 2 of CIMI, adopts the following concept of property:

"For the purposes of this Code, property is every fraction of territory, encompassing waters, plantations, buildings and constructions of any kind incorporated or built thereon, with a character of permanence, provided it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the foregoing circumstances, endowed with economic autonomy in relation to the land on which they are located, although situated in a fraction of territory that constitutes an integral part of a diverse asset or does not have a patrimonial nature."

  1. As noted by SILVÉRIO MATEUS and CURVELO DE FREITAS, "no. 1 of this article [of Article 2] provides for the existence of three requirements necessary for there to be the concept of property, namely, physical structure, patrimonial character and economic value" (Taxes on Real Property. Stamp Tax, Lisbon, Engifisco, 2005, p. 101, annotation no. 1.1).

  2. In this way, the concept of property, relevant for the purposes of CIMI and CIS, does not exclude floors or units of independent use of a real estate registered in the urban real estate booklet in full ownership.

  3. No. 4 of Article 2 of CIMI further provides that:

"for the purposes of this tax [IMI], each autonomous unit, under the horizontal property regime, is deemed to constitute a property".

  1. Once again, from this provision does not result the exclusion from the concept of property of floors or units of independent use of property in full ownership.

  2. In no. 4 of Article 2 of CIMI, the legislator clarifies, unequivocally, that autonomous units of real estates registered under horizontal property are considered properties, for the purposes of IMI.

  3. But this does not entitle the interpreter to make an interpretation a contrario, in the sense of excluding from the concept of property the units of independent use of real estates registered in full ownership.

  4. It appears, in fact, that the ratio of no. 2 of Article 4 is precisely to allow an extensive interpretation of the provision in no. 1 of Article 2, so as to include in the concept of property the units (units, floors or divisions) of independent use.

  5. This understanding appears, moreover, to be confirmed by the provision in no. 3 of Article 12 of CIMI, which is transcribed below:

"Each floor or part of property susceptible to independent use is considered separately in the real estate registration, which also discriminates its respective tax patrimonial value."

  1. Whereby it results that the units of independent use of real estates registered in full ownership are subject to evaluation on the basis of the criteria provided in Article 38 of CIMI.

  2. Article 6 of CIMI, however, enumerates the species of urban properties, and provides that "[r]esidential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of licence, that have as their normal purpose each of these purposes".

  3. As stated in the Arbitral Decision rendered in Case no. 50/2013,

"From this we can conclude that, in the legislator's view, the rigorous legal-formal situation of the concrete property does not matter but rather its normal use, the purpose to which the property is intended. We further conclude that for the legislator the situation of the property in vertical or in horizontal ownership did not matter, as no reference or distinction is made between them. What matters is the material truth underlying its existence as an urban property and its use."

  1. When we consider the literal element of the interpretation we note that, in the final part of the provision contained in item 28.1 of TGIS, it is determined that the taxable value corresponds to the "tax patrimonial value used for the purposes of IMI".

  2. The Tax and Customs Authority considers as the relevant VPT for the purposes of applying item 28.1 of TGIS the global VPT of the real estate registered in full ownership, in manifest contradiction with the practice of a plurality of assessment acts relating to the various floors susceptible to independent use.

  3. From the literal element of the interpretation, in conjunction with the systematic and teleological elements, it results that the tax patrimonial value to be considered for the purposes of applying item 28.1 of CIS is that corresponding to each of the units susceptible to independent use.

  4. And it appears to us that this is also the understanding most in accordance with the principle of the prevalence of substance over form.

  5. Moreover, this is the understanding most in accordance with the Constitution of the Portuguese Republic, namely the principles of typicality, equality, proportionality and legal certainty and protection of the trust of citizens, inherent in the principle of the rule of law.

  6. The Tax and Customs Authority, by applying item 28.1 of TGIS differently depending on whether the residential unit is inserted in a real estate registered under horizontal or full ownership, is causing a formal criterion of differentiation to prevail, to the detriment of the material equality required by the Fundamental Law.

  7. From the point of view of contributory capacity, as an operative criterion of the principle of equality, which postulates material equality, it is irrelevant whether the property is in vertical or in horizontal ownership – the contributory capacity evidenced is the same, and the application of item 28.1 of TGIS should be made in the same terms.

  8. Being possible to interpret item 28.1 of TGIS in accordance with the Constitution, the judgment of unconstitutionality of the provision contained therein is to be set aside.

  9. As for the possible unconstitutionality of Article 6 of Law no. 55-A/2012, of 29 October, for alleged retroactivity of the application of item 28 of TGIS, it lacks relevance for the decision of the present dispute, since the contested assessments refer to the year 2013 and the said law entered into force in 2012, with no problem of retroactivity of tax law being raised here.

  10. As for the alleged violation of norms of tax procedure, invoked by the Applicant, it must be clarified that the assessment acts now contested were not carried out within the scope of an administrative procedure in which there was instruction (cf. Judgment of 17/12/1997, of the Plenary of the Administrative Litigation Section of the Supreme Administrative Court, rendered in appeal no. 36001, published in BMJ no. 472, p. 246, and in Notebooks of Administrative Justice, no. 12, p. 3) and therefore the procedural norms that the Applicant considers to have been violated by the Respondent are not applicable in this case, and it is not considered that the obligation to provide reasoning was violated nor was the principle of hearing undermined.

  11. Thus, with respect to real estates registered in full ownership, only the floor or unit susceptible to independent use with residential allocation whose VPT is equal to or greater than €1,000,000.00 is subject to Stamp Tax, by application of item 28.1 of TGIS.

  12. Given that, in the present proceedings, none of the floors for which Stamp Tax was assessed by application of Item 28.1 of TGIS has a VPT equal to or greater than €1,000,000.00, it is concluded that the respective assessment acts are illegal.

  13. As for indemnity interest, no. 1 of Article 43 of the General Tax Law provides that:

"[i]ndemnity interest is due when it is determined, in an administrative complaint or judicial challenge, that there was an error attributable to the authorities from which results payment of the tax debt in an amount greater than legally owed".

  1. It is considered that "[t]he error attributable to the authorities that made the assessment is demonstrated when they proceed to an administrative complaint or challenge of that same assessment and the error is not attributable to the taxpayer" (DIOGO LEITE DE CAMPOS, BENJAMIM SILVA RODRIGUES, JORGE LOPES DE SOUSA, General Tax Law. Annotated and Commented, 4th ed., Lisbon, 2012, p. 342).

  2. The law further determines, in Article 100 of the General Tax Law, that:

"The tax administration is obliged, in case of total or partial success of complaints or administrative appeals, or of judicial proceedings in favour of the taxpayer, to the immediate and full reconstitution of the situation that would have existed had the illegality not been committed, including the payment of indemnity interest, in accordance with the terms and conditions provided by law."

  1. As stated in the Judgment of the Supreme Administrative Court of 11/02/2009, appeal no. 1003/08,

"Having the legislator adopted indemnification in the form of indemnity interest, following the decision to annul an assessment act, presuming the patrimonial loss derived from the deprivation of the amount paid as a result of an illegal assessment act, the interpretation of Article 100 of LGT in accordance with the Constitution is that it recognizes the right to indemnity interest from the date on which the deprivation of the amount illegally assessed occurred and not only from the end of the period for execution of the annulling decision."

  1. In the present proceedings we are before a plurality of Stamp Tax assessments based on an error attributable to the authorities, from which resulted undue payments of tax liabilities by the Applicant, and therefore this right to indemnity interest on the amounts of tax unduly paid is recognized.

  2. In accordance with the provision of no. 1 of Article 61 of the Code of Tax Procedure and Process (CPPT), "[i]nterest is counted from the date of undue payment of the tax until the date of processing of the respective credit note, in which they are included".

IV. Decision

In these terms, and with the grounds stated, the Arbitral Tribunal decides:

a) To judge the claim for annulment, with all legal effects, of the contested assessment acts as well-founded;

b) To judge the claim for condemnation of the Respondent to payment of indemnity interest, at the legal rate, on the amount of tax unduly paid, in accordance with the terms provided in Articles 43 of the General Tax Law and 61 of the Code of Tax Procedure and Process.

V. Value of the Case

The value of the case is fixed at €10,759.00, in accordance with the provisions of Article 97-A, no. 1, paragraph a) of the Code of Tax Procedure and Process and Article 3, no. 2, of the Costs Regulation in Tax Arbitration Proceedings.

VI. Costs

Pursuant to Article 22, no. 4, of RJAT, the amount of costs is fixed at €918.00, in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, to be borne by the Respondent.

Lisbon, 21 January 2015

The Arbitrator,

Paulo Nogueira da Costa

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Verba 28.1 TGIS) applicable to buildings held in vertical property where no individual unit exceeds €1 million in taxable value?
Yes, according to the Tax Authority's interpretation, Stamp Tax under Item 28.1 TGIS applies to buildings held in vertical property (propriedade total) based on the aggregate taxable patrimonial value, not individual unit values. In Process 582/2014-T, the Authority assessed tax on a property where no single unit exceeded €1 million, but the total residential value was €1,117,490. The Authority argued that under vertical ownership, the property remains a single legal unit with parts susceptible to independent use, unlike horizontal property where units constitute separate properties under CIMI. This interpretation means the €1 million threshold applies to the sum of residential unit values, triggering the 1% Stamp Tax rate even when individual units fall below the threshold.
Can taxpayers challenge the constitutionality of Lei 55-A/2012 regarding retroactivity and proportionality of Stamp Tax on high-value properties?
Yes, taxpayers can challenge the constitutionality of Law 55-A/2012, which introduced Stamp Tax on high-value properties. In Process 582/2014-T, the applicant invoked multiple constitutional grounds: violation of the prohibition on retroactive tax laws (as the tax applied to properties already owned); breach of the proportionality principle (disproportionate tax burden); violation of equality principles; and infringement of the rule of law in a democratic state. The applicant contested Articles 3, 4, and 6 of Law 55-A/2012 through CAAD arbitration under RJAT. While taxpayers have standing to raise constitutional challenges in tax arbitration, the tribunal must assess whether these claims warrant referral to the Constitutional Court under Article 70 LGT, or whether the alleged violations are substantiated by the specific factual circumstances.
How does the CAAD assess cumulative claims involving multiple Stamp Tax liquidations on the same property under Article 3(1) RJAT?
Under Article 3(1) RJAT, the CAAD accepts cumulative claims when multiple tax assessments relate to the same tax, same taxpayer, and same property, where the merits derive from assessing identical factual circumstances and interpreting the same legal rules. In Process 582/2014-T, the tribunal consolidated 21 separate Stamp Tax liquidation acts (covering first and second installments for year 2013) into a single arbitration proceeding. This procedural efficiency avoids contradictory decisions and reduces litigation costs when the legal question—whether Item 28.1 TGIS applies based on aggregate or individual unit values in vertical property—is common to all contested acts. The consolidation applies even though each assessment constitutes a separate administrative act with distinct document numbers.
Are property owners entitled to compensatory interest (juros indemnizatórios) when Stamp Tax liquidations are annulled due to administrative error?
Yes, property owners are entitled to compensatory interest (juros indemnizatórios) under Article 43 LGT when Stamp Tax liquidations are annulled due to administrative error attributable to tax authorities. In Process 582/2014-T, the applicant specifically requested that the tribunal declare the existence of an error by the authorities and recognize the right to compensatory interest on taxes already paid (€6,578.33 of the total €10,759 assessed). The right to compensatory interest depends on establishing that: (1) the tax assessment was unlawful; (2) the taxpayer paid the tax; (3) the error is imputable to the Tax Authority; and (4) the legal requirements under Article 43 LGT are met. Compensatory interest compensates taxpayers for the financial cost of having capital improperly retained by the State.
What distinguishes 'propriedade total' from 'propriedade horizontal' for purposes of applying Verba 28.1 of the Tabela Geral do Imposto do Selo?
The distinction between propriedade total (full/vertical ownership) and propriedade horizontal (horizontal property) is critical for applying Item 28.1 TGIS. Under horizontal property regime (regulated by Civil Code Articles 1414 onwards), independent units constitute separate legal properties with autonomous registration, ownership, and tax treatment under CIMI—each unit has its own taxable patrimonial value. In vertical/full ownership, a single owner holds the entire building as one legal property, with floors or sections being merely 'parts susceptible to independent use' without separate legal personality. For Stamp Tax purposes, this distinction determines whether the €1 million threshold applies per unit or to the aggregate. The Tax Authority's position in Process 582/2014-T was that vertical property constitutes a single taxable unit, requiring aggregation of all residential unit values, whereas under horizontal property, each unit would be evaluated independently against the threshold.