Process: 586/2014-T

Date: February 2, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 586/2014-T addresses whether Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) applies to building land (terrenos para construção). Company A, CRL challenged a €13,239.80 Stamp Tax assessment for 2013 before the CAAD arbitral tribunal, arguing that Item 28.1 exclusively targets urban properties with residential character, not vacant land designated for construction. The claimant contended that building land, as defined in article 6(3) of the Municipal Property Tax Code (CIMI), cannot have residential allocation since no habitable structure exists. The company argued the Tax Authority committed factual assessment errors under article 99(a) of the CPPT by incorrectly classifying investment property as residential. Additionally, the claimant alleged the assessment lacked proper reasoning, failing to identify concrete facts supporting residential use classification. The Tax Authority defended the assessment, asserting the property possessed legal residential allocation characteristics and that CIMI provisions apply subsidiarily under article 67(2) of the Stamp Tax Code. The authority maintained that Item 28.1, as amended by Law 55-A/2012, properly applied to the property. The arbitration followed standard RJAT procedures: tribunal establishment, response filing within 30 days, and hearing waiver by mutual consent. The case raises fundamental questions about the legislative intent behind Item 28.1—whether targeting luxury residential holdings or broader property ownership—and proper classification methodologies when properties lack physical structures defining their use character.

Full Decision

ARBITRAL DECISION

I. Report

  1. A, CRL, with registered office …, collective entity number …, requested the Administrative Tax Arbitration Centre (CAAD), on 30 July 2014, the establishment of an arbitral tribunal in tax matters, pursuant to the provisions of article 10, nos. 1 and 2 of Decree-Law no. 10/2011, of 20 January (Legal Regime for Tax Arbitration "RJAT"), in which the Tax and Customs Authority (AT) is the Respondent, with a view to the declaration of illegality and consequent annulment of the Stamp Tax (IS) assessment act of the year 2013, referring to item 28.1 of the General Stamp Tax Table (TGIS), in the total amount of €13,239.80 (thirteen thousand two hundred and thirty-nine euros and eighty cents).

  2. The Claimant opted not to appoint an arbitrator.

  3. The request for establishment of an arbitral tribunal was accepted by the President of the CAAD on 1 August 2014 and automatically notified to the AT on the same date.

  4. The Signatory was appointed by the President of the Ethics Council of the CAAD as arbitrator of a sole arbitral tribunal, pursuant to the provisions of article 6 of the RJAT.

  5. The Signatory communicated to the President of the Ethics Council of the CAAD her acceptance of the appointment, within the legal time period, pursuant to the provisions of article 4 of the Ethics Code of the CAAD.

  6. The Parties were notified of the appointment of the Signatory, on 16 September 2014, pursuant to article 11, no. 1, paragraphs a) and b) of the RJAT, and did not object thereto.

  7. The sole arbitral tribunal was thus regularly established on 1 October 2014, in accordance with the provisions of paragraph c) of no. 1 of article 11 of the RJAT.

  8. The AT was notified, by arbitral order of 2 October 2014, to present its response within 30 days.

  9. The AT presented its response on 10 November 2014, and likewise requested, on 19 November 2014, the waiver of the hearing referred to in article 18 of the RJAT.

  10. The Claimant did not object to such waiver.

  11. On 5 December 2014, the Claimant presented a subsequent request requesting the attachment of a new document, namely the third installment of the IS assessed, as she had protested to attach in her initial petition.

  12. This request was attached to the file and notified to the Respondent, who did not pronounce on it.

  13. The Arbitral Tribunal is materially competent, pursuant to article 2, no. 1, paragraph a) of the RJAT.

  14. The Parties have legal personality and legal capacity and are legitimate (articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

  15. The cumulation of claims is admissible, as the requirements established in article 3, no. 1 of the RJAT are met.

  16. The proceedings are not affected by defects that would invalidate them.

II. The Claimant's Request

The Claimant presented a request for an arbitral decision aimed at the declaration of illegality and consequent annulment of the Stamp Tax (IS) assessment acts corresponding to documents no. 2014…, no. 2014… and no. 2014…, in the global amount of €13,239.80 (thirteen thousand two hundred and thirty-nine euros and eighty cents).

For this purpose, and in summary, citing various doctrine and case law, the Claimant presents the following allegations:

  1. The Claimant was notified of the IS assessment provided for in Item 28 of the General Stamp Tax Table (TGIS) referring to real property located at …, registered in the urban property register of the parish of … under article ….

  2. The Claimant alleges that retroactive taxes cannot be created, so if in the case the taxable event refers to ownership of the real property on 31 December 2013, and if Law no. 83-C/2013, of 31 December, entered into force on 1 January 2014, then the new wording will only apply to a taxable event after that date.

  3. Consequently, the assessment in question should be regulated by the regime enshrined in the TGIS with the wording introduced by Law no. 55-A/2012.

  4. Thus, it is under this Law that the conformity of the assessment in question should be assessed.

  5. The urban property in question is classified as land for construction.

  6. On such land there is no building or construction erected.

  7. The concept of land for construction is contained in article 6, no. 3 of the Municipal Property Tax Code (CIMI), and the facts contained in that definition are objective.

  8. Thus, when the nature of the property is compared with the legal definition contained in the CIMI and with the scope rule of Item 28 of the TGIS, it can be seen that the assessment in question does not have a competent legal provision.

  9. Only urban properties with residential character will be subject to IS, in relation to that item, but there is no definition of this type of property.

  10. Consequently, that concept should be integrated based on the CIMI.

  11. The classification of a property or its allocation depend on the normal use that can be given to it in view of its current and actual characteristics, and on land for construction the normal use cannot be residential use, because there is no built property apt to allow such type of use.

  12. In view of the above, the AT cannot conclude that the Claimant's property is allocated to residential use because it is only intended for construction.

  13. Thus, there was an error regarding the assumptions of the assessment, whereby the act is illegal, pursuant to article 99, paragraph a) of the General Tax Code (CPPT).

  14. The Claimant also states that the legislator's intention with the amendment to the TGIS was to tax taxpayers with increased tax capacity, in this case, through the taxation of luxury properties.

  15. Now, land for construction is not a luxury good, but rather an investment good allocated to real estate development operations.

  16. The Claimant also alleges that the assessment is illegal, due to lack of reasoning.

  17. The AT should have supported the assessment on the existence of a licensed building for residential use, based on real facts.

  18. The assessment in question has no reasoning whatsoever, not allowing a normal recipient to reconstruct the cognitive and evaluative itinerary followed by the AT.

  19. The Claimant paid the first and second installments, and will pay the third when notified thereof.

  20. However, being the act voidable, and unable to be maintained in the legal order, in case of acceptance of the challenge, the amounts paid should be reimbursed.

  21. As well as indemnity interest, pursuant to articles 100 and 43 of the General Tax Law (LGT).

III. The Respondent's Response

  1. The Respondent states that it cannot be ordered to refund the tax in full since the 3rd installment is neither due nor paid, the same reasoning being applied to indemnity interest.

  2. It is the AT's understanding that the property on which the disputed assessments fall has the legal nature of a property with residential allocation, whereby the assessment act object of the present arbitral decision request should be maintained, as it constitutes a correct interpretation of Item 28 of the TGIS, amended by Law no. 55-A/2012, of 29 October.

  3. In the absence of any definition regarding the concepts of urban property, land for construction and residential allocation, in the context of IS, it is necessary to resort to the CIMI, in search of a definition that allows to assess the possible subject to IS, in accordance with the provisions of article 67, no. 2 of the Stamp Tax Code (CIS) in the wording given by Law no. 55-A/2012, of 29 October.

  4. Pursuant to the said legal provision, to matters not regulated in the Code, with respect to item no. 28 of the TGIS, the provisions of the CIMI are applied subsidiary.

  5. Article 2, no. 1 of the CIMI provides that "property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or situated thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, under the foregoing circumstances, endowed with economic autonomy in relation to the land on which they are situated, although located in a portion of territory that constitutes an integral part of assets that are different or do not have a patrimonial nature".

  6. In turn, article 6, no. 1 of the CIMI provides about the species of existing urban properties, integrating in this concept land for construction, that is, "land situated within or outside an urban agglomeration, for which a license or authorization has been granted, admitted prior communication or issued favorable prior information of subdivision or construction operation, and also those that have been thus in the title of acquisition, except for land in which the competent entities forbid any of those operations…"

  7. The notion of allocation of urban property is found in the section relating to the assessment of immovable property, since the assessment of the immovable property (purpose) incorporates value to the immovable property, constituting a fact of distinction that is determining (coefficient) for assessment purposes.

  8. As results from the expression "…value of authorized buildings", contained in article 45, no. 2 of the CIMI, the legislator chose to determine the application of the methodology for assessing properties in general, to the assessment of land for construction, being therefore applicable to them the allocation coefficient provided for in article 41 of the CIMI.

  9. Thus, for purposes of determining the tax patrimonial value of land for construction, it is clear the application of the allocation coefficient in the assessment context, whereby its consideration for purposes of application of item 28 of the TGIS cannot be ignored, because:

    a. In the application of law to concrete cases it is important to determine the exact meaning and scope of the rule, so that the rule contained therein is revealed, an indispensable condition for it to be applied, in accordance with the provisions of article 9 of the Civil Code, ex vi article 11 of the General Tax Law;

    b. Article 67, no. 2 of the CIS mandates the subsidiary application of the provisions of the CIMI;

    c. The allocation of the immovable property (aptitude or purpose) is a coefficient that contributes to the assessment of the immovable property, in the determination of the tax patrimonial value, applicable to land for construction;

    d. Item 28 of the TGIS itself refers to the expression "properties with residential allocation", appealing to a classification that overlaps the species provided for in no. 1 of article 6 of the CIMI.

  10. The AT understands that the concept of "properties with residential allocation", for purposes of the provisions of item 28 of the TGIS, comprises both built properties and land for construction, in particular given the literal element of the rule.

  11. The legislator does not refer to "properties intended for residential use", having opted for the notion "residential allocation" - a different and broader expression, whose meaning must be found in the need to integrate other realities beyond those identified in article 6, no. 1, paragraph a) of the CIMI.

  12. The mere constitution of a potential construction right immediately increases the value of the immovable property in question, hence the rule contained in article 45 of the CIMI that orders the separation of the two parts of the land.

  13. With regard to the legal regime for urbanization and construction (RJUE), it should be noted that it has as its premise buildings already constructed.

  14. Not being able to ignore that the license permit for the performance of urbanization operations should contain, among other elements, the number of plots and the indication of the location area, purpose, implantation area, construction area, number of floors and number of units of each of the plots, with specification of units intended for housing at controlled costs, when foreseen, pursuant to paragraph a) of article 77 of the RJUE;

  15. And also that article 77 of the RJUE contains mandatory specifications, in particular for subdivision operation permits or urbanization works, and for construction works.

  16. Also, the Municipal Master Plans establish the strategy for municipal development, the municipal policy for land use and urbanism and other urban policies. It integrates and articulates the guidelines established by land use management instruments of national and regional scope and establishes the model of spatial organization of municipal territory.

  17. In these terms, long before the actual building of the property, it is possible to determine and establish the allocation of the land for construction.

  18. As for land for construction not being luxury goods, the AT understands that the argument cannot proceed, since article 13 of the Constitution of the Portuguese Republic requires that what is equal be treated equally and what is different be treated differently.

  19. Item 28 of the TGIS applies to ownership, usufruct or right of superficies of urban properties with residential allocation, whose tax patrimonial value exceeds €1,000,000.00, that is, it applies to the value of the immovable property;

  20. It is a general and abstract rule, applicable indiscriminately to all cases in which the factual and legal requirements are met.

  21. Taxation in the context of IS follows the criterion of suitability, applying indiscriminately to all holders of immovable properties with residential allocation of value exceeding €1,000,000.00, falling on the wealth embodied and manifested in the value of immovable properties, lacking any unconstitutionality due to violation of the principle of proportionality or tax capacity.

  22. As for the alleged defect of lack of grounds for the assessment, the Respondent disagrees with the Claimant's understanding, because the case law of the Supreme Administrative Court has uniformly understood that the reasoning of the act is a relative concept that varies according to the type of act and the circumstances of the concrete case;

  23. Such reasoning being sufficient when it allows a normal recipient to understand the cognitive and evaluative itinerary followed by the author of the act, that is, when the recipient can know the reasons that led the author of the act to decide in that manner and not in another.

  24. From the collection note relating to the assessment in question contain the date of the assessment, the identification of the property subject to taxation, the type of tax, the tax year, the enabling rule and the respective values and payment dates.

  25. And the grounds were extensively understood and referenced and attacked by the Claimant in its request for arbitral decision.

  26. Additionally, even if a situation of lack or insufficiency of grounds were to occur, it was incumbent upon the Claimant to request the issuance of the certificate provided for in article 37 of the CPPT.

  27. Not having the Claimant used that faculty, it is necessary to conclude that the act in question contained and contains all the elements necessary for its full understanding, the alleged defect being thereby cured.

  28. The act should be maintained, not being affected by any defect alleged by the Claimant.

IV. Subsequent Request of the Claimant

As mentioned previously, the Claimant presented, on 5 December 2014, a subsequent request attaching the assessment of the 3rd installment of IS, as well as the respective proof of payment. By arbitral order, the request was attached to the file, and the Respondent was notified to pronounce on it, without the latter having pronounced thereon.

V. Questions to be Decided

Considering the facts and legal matters contained in the request for arbitral decision presented by the Claimant and the response of the Respondent, the questions to be decided by the Arbitral Tribunal are:

a. Whether land for construction should be considered, for purposes of the scope of IS, as to item 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October, as properties with residential allocation;

b. Whether the assessment in question is illegal due to lack of grounds.

VI. Proven Facts

With relevance for the assessment of the request, the following are the facts that are taken as proven, based on the documents attached to the file, not contested by the Respondent:

a. The Claimant is the owner of the urban property registered in the competent urban property register under article …, classified as land for construction, with no building or construction thereon.

b. The urban property in question is described in the register as land for construction.

c. The property has the tax patrimonial value of €1,323,980.00 (one million, three hundred and twenty-three thousand nine hundred and eighty euros).

d. In the evaluation data contained in the property certificate, the property has as "type of location coefficient" residential.

e. There is no construction whatsoever on the identified property.

f. The Claimant was notified of collection documents no. 2014…, no. 2014… and no. 2014…, in the global amount of €13,239.80 (thirteen thousand two hundred and thirty-nine euros and eighty cents).

g. The Claimant proceeded to pay all the IS installments in question, in the total amount referred to above.

There are no other facts with relevance for the proceedings that are not considered proven.

The conviction about the facts given as proven was based on the documentary evidence indicated, attached by the Claimant, whose authenticity and correspondence to reality were not questioned by the Respondent.

VII. Legal Matters

Having the Claimant imputed various defects to the disputed tax act, it is necessary to determine the order of knowledge thereof, the order contained in article 124 of the CPPT being observed, applicable by virtue of article 29, no. 1, paragraph a) of the RJAT.

The defect of violation of law invoked by the Claimant is the most relevant one, in that its eventual acceptance would prevent the renewal of the act. Accordingly, the Arbitral Tribunal will assess in the first place the question indicated in V. a. above.

The question in question has already been subject to assessment several times by the Supreme Administrative Court (STA) (see, by way of example, the recent Judgments of 24/9 and 9/7 of 2014) and by arbitral case law (in particular in the context of proceedings 42/2013-T, of 18/10/2013; 48/2013-T, of 09/10/2013; 49/2013-T, of 18/09/2013; 53/2013-T, of 02/10/2013; 75/2013-T, of 01/11/2013; 144/2013-T, of 12/12/2013; 158/2013-T, of 10/02/2014; 308/2013-T, of 28/04/2014; 310/2013, of 22/04/2014 and 202/2014-T, of 16/10/2014).

The cited case law decided, in all cases, against the understanding of the Respondent, decisions which, as indicated from now, this Arbitral Tribunal follows, as will be detailed.

For the assessment of the question in issue it is important, first and foremost, to analyze article 4 of Law no. 55-A/2012, of 29 October, which added to the TGIS, annexed to the CIS, item no. 28, with the following wording:

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

28.1 — For property with residential allocation — 1%;

28.2 — For property, when the passive subjects that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance — 7.5%."

The legislative text in question introduced a concept not used in any other tax provision – that of property with residential allocation – nor defined it. To understand its content, the concepts of property contained in the CIMI (articles 2 to 6) should be consulted – under the provisions of article 67, no. 2 of the CIS, according to which, to matters not regulated in the CIS regarding item no. 28 of the TGIS, the provisions of the CIMI are applied subsidiary.

And such interpretation should always be carried out in accordance with the provisions of article 11 of the General Tax Law (LGT) and article 9 of the Civil Code, to which it refers.

Article 11 of the LGT establishes that:

  1. In the determination of the meaning of tax rules and in the qualification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

  2. Whenever, in tax rules, terms specific to other branches of law are employed, they must be interpreted in the same sense that they have there, unless otherwise provided directly by law.

  3. If doubt persists about the meaning of the rules of scope to be applied, account should be taken of the economic substance of the tax facts.

  4. Gaps resulting from tax rules covered by the reservation of law of the Assembly of the Republic are not susceptible to analogic integration.

In turn, article 9 of the Civil Code indicates that:

  1. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative thinking, taking especially into account the unity of the legal system, the circumstances in which the law was enacted, and the specific conditions of the time in which it is applied.

  2. However, the interpreter cannot consider the legislative thinking that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  3. In fixing the meaning and scope of the law, the interpreter shall presume that the legislator enshrined the most correct solutions and knew how to express his thinking in adequate terms.

From the analysis of the concepts contained in the aforementioned articles of the CIMI (2 to 6), it is verified that there is no correspondence of any of them with that established in item 28.1 of the TGIS (property with residential allocation). In fact, the CIMI clearly differentiates residential properties from land for construction. The former are classified according to their respective municipal license or, in its absence, their normal use, the latter are defined according to their legal potential.

The licensing or normal use of a property whose purpose is residential naturally refer to built properties that meet the characteristics required for such licensing or use.

As for land for construction – regardless of the potential for construction, or the moment at which that potential is assessed, contrary to what the Respondent states – it will not have any aptitude to be licensed for residential use, or to define this purpose as its normal destination.

Now, if the tax rule in question does not define, in itself, the concept of residential allocation, it is not possible to extract, under the aforementioned normative provisions, and without more, that within its scope would fit any future potential of a building to be constructed on land for construction – it only covers actual residential building.

And contrary to what the Respondent alleges, the rule cannot be interpreted in the sense of stating that the legislator's option with the expression "residential allocation" was to overlap the species contained in article 6 of the CIMI. The rules under which the interpreter must proceed with the activity of interpretation of legal rules, as detailed above, do not provide any legal support for such interpretation.

If such were the legislator's option, it would certainly have expressly indicated it. Now, presuming that the legislator knew how to express his thinking adequately, we find, on the contrary, an express reference to the concepts contained in the CIMI (which the Respondent itself recognizes), and not to other realities not contained therein.

Additionally, this Arbitral Tribunal also does not agree with the Respondent's understanding, according to which the meaning of residential allocation should be extracted from the provisions of article 45 of the CIMI. Article 45 of the CIMI refers to the rules applicable in determining the tax patrimonial value of land for construction, establishing that this is what results from the value of the building implantation area to be constructed added to the land adjacent to the implantation. In fixing the value of that area, a percentage, varying between 15% and 45%, of the value of authorized or foreseen buildings is considered. The Respondent states that in that fixing of value the coefficients applicable in determining the tax patrimonial value are used, in particular the allocation coefficient "residential", and that such should also be a determining element for purposes of application of item 28.1 of the TGIS in question.

As a matter of full clarification of this point, cite the provisions of the STA Judgment of 9 July 2014, with which we agree in full:

"The fact that it can be considered that in the determination of the tax patrimonial value of urban properties classified as land for construction account should be taken of the allocation that will have the building authorized or foreseen for it for determination of the respective value of the implantation area (cfr. nos. 1 and 2 of article 45 of the CIMI) does not determine that land for construction can be classified as 'properties with residential allocation', since residential allocation always appears in the IMI Code referred to 'buildings' or 'constructions', existing, authorized or foreseen, since only these can be inhabited, which does not occur in the case of land for construction, which does not have, in themselves, conditions for such, not being susceptible to being used for residential purposes except if and when the construction authorized and foreseen for them is erected thereon (but in that case they will no longer be 'land for construction' but another species of urban properties – 'residential', 'commercial, industrial or for services' or 'others' – article 6 of the CIMI).

It would be strange, indeed, if the determination of the scope of the rule of scope for taxation of item no. 28 of the General Stamp Tax Table would be, after all, in the rules for determining the tax patrimonial value of the IMI Code, and if the terminological imprecision of the legislator in the wording of that rule would, in the end, be elucidated and finally clarified through an indirect and equivocal reference to the allocation coefficient established by the legislator in relation to built properties (article 41 of the IMI Code)."

It should also be noted that Law no. 83-C/2013, of 31 December, came to amend the wording of the rule in question, with item 28.1 of the TGIS now providing: "for residential property or for land for construction whose building, authorized or foreseen, is for residential use".

It is the understanding of this Arbitral Tribunal that the new rule only provides for the future (from 1 January 2014), and that it would not be possible – if it were the case – to draw from it any interpretive character of the wording previously in force and now in question. If there had been an intention to confer interpretive nature to the rule, this would have been expressly indicated by the legislator.

Jurisprudential practice has been unanimous, constant and peaceful as to the understanding to be given to the rule in question, so that, in truth, there was no rule that needed authentic interpretation. Thus, the legislator, with the amendment introduced in 2013, merely came to clearly include a new reality subject to item 28.1 of the TGIS, in addition to manifestly residential properties (land for construction, not contained in the previous wording).

Finally, and in the sense of reinforcing the understanding that has been outlined, it is sought to reconstruct the legislative thinking that presided over the approval of the wording of item 28.1 of the TGIS in 2012. On the one hand, from the statement of reasons contained in Proposal of Law no. 96/XII – 2nd, of 21/09/2012 (which gave rise to the aforementioned Law no. 55-A/2012), nothing emerges that would allow clarification of the concept of property with residential allocation.

On the other hand, and as contained in the Journal of the Assembly of the Republic, I Series, no. 9/XII, 2nd legislative session, of 11 October 2012, the State Secretary for Tax Affairs presented this legislative innovation in the following terms:

"This proposal has three essential pillars: the creation of special taxation on urban properties valued above 1 million euros; the increase in taxation on capital income and movable securities gains; and the strengthening of rules to combat tax fraud and tax evasion.

First, the Government proposes the creation of a special rate to tax higher value residential urban properties. It is the first time in Portugal that special taxation is created on high-value properties intended for residential use. This rate will be 0.5% to 0.8% in 2012, and 1% in 2013, and will apply to homes with a value equal to or greater than 1 million euros." (underlined by us).

From the foregoing it appears that it is not possible, and by virtue of the cited legal provisions, to infer that in the expression "properties with residential allocation" land for construction can be subsumed. On the contrary.

Concluding that land for construction is not subject to item 28.1 of the TGIS, the assessments object of the present – all those identified and contested by the Claimant, as attached to the file – will not be able to be maintained.

In view of the conclusion above, the assessment of the other questions raised by the Claimant is rendered moot.

VIII. Indemnity Interest

Having verified the illegality of the assessments corresponding to documents no. 2014…, no. 2014… and no. 2014…, in the global amount of €13,239.80 (thirteen thousand two hundred and thirty-nine euros and eighty cents) referring to the property classified as land for construction, and the Claimant having paid the tax referring to all installments, pursuant to the documents attached to the file, the Claimant is entitled, in accordance with articles 24, no. 1, paragraph b) of the RJAT and 100 of the LGT, to the reimbursement of the tax unduly paid, in the amount of €13,239.80 (thirteen thousand two hundred and thirty-nine euros and eighty cents).

As for indemnity interest, article 43 of the LGT stipulates that "indemnity interest is due when it is determined, in gracious reclamation or judicial challenge, that there was error attributable to the services that results in payment of the tax debt in an amount greater than that legally due". As to the existence, in the case, of error attributable to the services, this error is considered to be verified, in that the allegation of illegality of the assessment is upheld.

Accordingly, the Claimant is entitled to indemnity interest, pursuant to article 43, no. 1 of the LGT and article 61, nos. 2 and 5 of the CPPT, on all amounts paid, counted from the date of the undue payment until its full reimbursement.

IX. Decision

In these terms, and on the basis of the grounds exposed, the Arbitral Tribunal decides:

A. To fully uphold the request for arbitral decision, with the consequent annulment of the Stamp Tax (IS) assessment acts corresponding to documents no. 2014…, no. 2014… and no. 2014..., in the global amount of €13,239.80 (thirteen thousand two hundred and thirty-nine euros and eighty cents);

B. To condemn the Respondent, pursuant to paragraph b) of no. 1 of article 24 of the RJAT, to restore the situation that would exist if the annulled assessment acts had not been performed, adopting the acts and operations necessary for this purpose, through the reimbursement of the amounts of tax unduly paid and payment of the corresponding indemnity interest, counted from the date of the undue payment until its full reimbursement.

Value of the case: €13,239.80 (thirteen thousand two hundred and thirty-nine euros and eighty cents)

Costs: Under the provisions of article 22, no. 4 of the RJAT, and in accordance with Table I attached to the Rules of Costs in Tax Arbitration Proceedings, the value of costs is fixed at €918.00 (nine hundred and eighteen euros), at the expense of the Respondent.

Lisbon, 2 February 2015

The arbitrator

Ana Pedrosa Augusto

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS applicable to building land (terrenos para construção)?
Based on Process 586/2014-T, the applicability of Stamp Tax under Verba 28.1 TGIS to building land (terrenos para construção) is contested. The claimant argued that Item 28.1 only applies to urban properties with residential character, and building land without constructed buildings cannot qualify as residential since no habitable structure exists. Article 6(3) of CIMI defines building land objectively, and such land cannot have residential use as its normal allocation. However, the Tax Authority maintained that the property possessed residential allocation characteristics, applying CIMI provisions subsidiarily under article 67(2) of the Stamp Tax Code to support the assessment.
What are the grounds for challenging a Stamp Tax assessment on building land before the CAAD arbitral tribunal?
The grounds for challenging a Stamp Tax assessment on building land before CAAD include: (1) Error regarding factual assumptions under article 99(a) of the CPPT, specifically incorrect classification of the property as having residential allocation when it is merely building land; (2) Lack of proper reasoning in the assessment act, failing to identify concrete facts supporting residential use classification; (3) Incorrect legal interpretation of 'residential allocation' concepts under Item 28.1 TGIS; (4) Misapplication of CIMI provisions when determining property classification; and (5) Arguments that building land constitutes investment property for real estate development, not luxury residential holdings targeted by the legislation.
How is the taxable value determined for Stamp Tax purposes on building land under Portuguese tax law?
The taxable value for Stamp Tax on building land is determined by reference to the Municipal Property Tax Code (CIMI) provisions, which apply subsidiarily under article 67(2) of the Stamp Tax Code for matters not regulated regarding Item 28 of TGIS. The determination considers the property's patrimonial value (valor patrimonial tributário) and classification. However, the central dispute in Process 586/2014-T focused not on valuation methodology but on whether building land without constructed buildings qualifies for taxation under Verba 28.1, which targets properties with residential character. The classification and allocation determination depend on the property's current and actual characteristics and normal use potential.
What is the procedure for requesting arbitration at the CAAD to annul an illegal Stamp Tax assessment?
The CAAD arbitration procedure for challenging illegal Stamp Tax assessments follows these steps: (1) File a request under article 10 of Decree-Law 10/2011 (RJAT) with the Administrative Tax Arbitration Centre; (2) The claimant may choose to appoint an arbitrator or allow automatic appointment by the CAAD President; (3) CAAD President accepts the request and notifies the Tax Authority; (4) The arbitral tribunal is established, and parties are notified of the arbitrator appointment; (5) The Tax Authority presents its response within 30 days; (6) Parties may waive the hearing under article 18 RJAT by mutual consent; (7) The tribunal issues a decision within the legal timeframe. Legal standing requires demonstrating legitimate interest under articles 4 and 10(2) RJAT.
Can a cooperative (CRL) successfully challenge a Verba 28.1 Stamp Tax assessment on building land?
Yes, a cooperative (CRL) has legal personality, legal capacity, and legitimate standing to challenge a Verba 28.1 Stamp Tax assessment before CAAD, as confirmed in Process 586/2014-T under articles 4 and 10(2) of RJAT and Ordinance 112-A/2011. The success of the challenge depends on substantive legal arguments rather than the entity type. In this case, the CRL argued that building land without constructed buildings cannot constitute property with residential allocation under Item 28.1 TGIS, that the assessment involved factual errors under article 99(a) CPPT, and that the Tax Authority failed to provide adequate reasoning. The CRL's standing as a legal entity was not disputed; the case turned on whether the property classification and Item 28.1's scope supported the assessment.