Process: 589/2014-T

Date: February 11, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 589/2014-T addressed a critical interpretive question regarding Stamp Tax (Imposto do Selo) on building land under item 28.1 of the General Table (Tabela Geral do Imposto do Selo). A real estate company contested a €12,657.00 Stamp Tax assessment for 2012 on a construction lot (terreno para construção) in the municipality of ..., arguing that the pre-2014 version of item 28.1 GTIS applied only to 'residential property' and did not encompass undeveloped building land. The claimant's central argument focused on legislative history: Law 83-C/2013 (2014 State Budget) amended item 28.1 to expressly include 'land for construction whose construction, authorized or envisioned, is for residential purposes,' which the taxpayer argued constituted implicit legislative acknowledgment that no legal basis existed before January 1, 2014 for taxing building land. The claimant alleged violations of Articles 2(4), 23(7), and 44(5) of the Stamp Tax Code and Articles 6, 41, and 45 of the IMI Code. The Tax and Customs Authority defended the assessment, contending that property use classification under Articles 41 and 45 of the IMI Code provided sufficient legal basis for applying Stamp Tax to building land with residential destination. The arbitration proceeded under Decree-Law 10/2011 (RJAT) with a sole arbitrator appointed by CAAD's Deontological Council on October 1, 2014. Both parties waived the oral hearing, agreeing the matter involved purely legal questions without factual disputes. The case represents a significant dispute over tax incidence on development property held by real estate companies during the transitional period before the 2014 legislative clarification.

Full Decision

CLAIMANT: A... – Real Estate Company, Ltd.

RESPONDENT: Tax and Customs Authority

Arbitral Decision[1]

I - REPORT

A) The Parties and the Constitution of the Arbitral Tribunal

  1. A... – Real Estate Company, Ltd., a legal entity with no. ..., with registered office at Street ..., in ..., hereinafter referred to as "Claimant", comes, pursuant to the provisions of Art. 2, No. 1, letter a), 5, No. 2, letters a) and b), 6, No. 1, 10, No. 1 letter a) and No. 2, all of Decree-Law No. 10/2011, of 20 January (hereinafter "RJAT"), to request the constitution of a sole arbitral tribunal.

The Claimant requests a pronouncement seeking the declaration of illegality of the assessment of Stamp Tax ("IS") No. 2014 ..., of 14.07.2013, referring to the year 2012, issued by the Tax and Customs Authority, in the total amount of €12,657.00, with issuance date of 15/05/2014 and payment deadline in August 2014. The contested assessment, which is hereby fully reproduced, is contained in document No. 1 attached to the arbitral pronouncement request, submitted on 1/08/2014.

The Claimant concludes its arbitral request by petitioning for the annulment of the contested tax assessment.

  1. The request for constitution of the Arbitral Tribunal was filed on 1/08/2014, which was accepted by the Honourable President of CAAD and automatically notified to the Tax and Customs Authority. The Claimant chose not to appoint an arbitrator, whereupon, under the provisions of No. 1 of Article 6 of the RJAT, the undersigned was appointed by the Deontological Council of the Centre for Administrative Arbitration as arbitrator of the sole Arbitral Tribunal. The appointment was accepted and the parties, having been notified of the acceptance, did not refuse the appointment, in accordance with the provisions of letters a) and b) of No. 1 of Article 11 of the RJAT, combined with the provisions of Articles 6 and 7 of the Code of Ethics. Thus, in accordance with the provisions of letter c) of No. 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, with the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the sole Arbitral Tribunal was constituted on 1 October 2014.

  2. On 6/10/2014, the Respondent "AT" was notified, pursuant to the provisions of Article 17 of the RJAT, to submit a response within the statutory period, in accordance with the provisions of Nos. 1 and 2, Article 17 of the RJAT. On 6/11/2014 AT submitted its Response to the proceedings.

By arbitral order issued on 2/12/2014 the parties were notified to pronounce on the possibility of dispensing with the holding of the meeting provided for in Article 18 of the RJAT, as well as on the submission of arguments, given that no exceptional matter was raised in the proceedings, it appeared unnecessary for any further evidence to be produced beyond that which resulted from the documentary evidence attached to the proceedings and there was no divergence regarding the matter of fact, whereby the question to be decided was exclusively one of law. The parties pronounced, by request, agreeing with the dispensing of the holding of the meeting and the submission of arguments, whereupon the proceedings proceeded to final decision. In this context an arbitral order was issued on 5/01/2015, in which the meeting referred to in Article 18 of the RJAT was dispensed with, as was the submission of arguments by the parties and the date for the pronouncement of the arbitral decision was set until 13/02/2015, and in the same period the Claimant should pay the respective subsequent fee.

B) THE REQUEST FORMULATED BY THE CLAIMANT

  1. The Claimant formulates the present arbitral pronouncement request arguing for the illegality and consequent annulment of the act of assessment of Stamp Tax, referring to the year 2012, with No. 2014..., of 15.05.2014 in the total amount of €12,657.00 with reference to an urban property, composed of a parcel of land intended for construction (Lot ...), located in the Parish of ..., Municipality of ..., registered in the property register under article No. ..., on the grounds set out in Art. 10, No. 1 and 2 of the RJAT. The property and the respective contested tax assessment are duly identified in documents Nos. 1 and 4, which are hereby fully reproduced.

  2. It bases its request on the illegality of the stamp tax assessment on the grounds that it considers, in summary, that the property in question, as land for construction, should not be considered as "property with residential use", in accordance with and for the purposes of the provisions of item 28.1 of the General Table of the Stamp Tax Code, in the version introduced by Law No. 55-A/2012, of 29 October.

  3. Thus, the contested assessment, issued pursuant to the provisions of item 28.1 of the GTIS, is illegal, by violation of the provisions of Articles 2, No. 4, 23, No. 7 and 44, No. 5 of the Stamp Tax Code and the provisions of Articles 6, 41 and 45 of the IMI Code. It further alleges that the entry into force of Law 83-C/2013 of 31 December (State Budget Law for 2014) amended the wording of item 28.1 of the GTIS, and implicitly acknowledged that until 1/01/2014, there was no rule of taxation that permitted the collection of stamp tax in the case of land for construction. This is evident from the new wording of that legal provision, namely: "28.1 – For residential property or for land for construction whose construction, authorized or envisioned, is for residential purposes, in accordance with the provisions of the IMI Code."

C) – THE RESPONDENT'S RESPONSE

  1. The Respondent alleges in its response, in summary, that the Claimant is not correct. The Tax and Customs Authority (ATA), defends in its response the legality of the assessment on the grounds that it complies with the letter of the law and that the request for a declaration of illegality and consequent annulment of the assessment should be judged unfounded, with its absolution from the request. It defends that the use of the urban property is grounded in the part relating to the valuation of real estate, provided for in Articles 41 and 45 of the CIMI. It further invokes other arguments around the concept of residential property, as best appears from the response submitted which is hereby fully reproduced.

It concludes by the unfoundedness of the arbitral request, arguing for the legality of the contested tax acts and for the absolution of the Respondent from the request.

D) OF THE PROCEDURAL REQUIREMENTS

  1. The Arbitral Tribunal is regularly constituted and materially competent, in accordance with Article 2, No. 1, letter a) of Decree-Law No. 10/2011, of 20 January.

  2. The parties have legal personality and capacity, are legitimate and are duly represented (Articles 4 and 10, No. 2, of DL No. 10/2011 and Article 1 of Ordinance No. 112/2011, of 22 March).

The proceedings do not suffer from nullities that would invalidate it and no exceptions were raised that would prevent the judgment of the merits of the case, whereby the Tribunal is in a position to pronounce the arbitral decision.

The proceedings do not suffer from nullities.

II. QUESTION TO BE DECIDED

  1. Taking into account the positions of the Parties assumed in the arguments presented, it falls to the Tribunal to decide the question of whether or not it is in accordance with the law in force in the year in which the taxable event occurred that gave rise to the assessment the incidence of stamp tax, as provided for in item 28.1 contained in the General Table of the Stamp Tax Code (GTIS) applies to the specific case of the urban property, characterized as land for construction, described in the proceedings.

III – MATTER OF FACT

A) Facts Established

  1. As a matter of fact relevant to the decision to be rendered, the Tribunal considers the following facts to be established:

a) The Claimant A..., Ltd., a real estate company, is the owner of a parcel of land intended for construction (Lot ...), located in the Parish of ..., Municipality of ..., registered in the property register under article No. ...

b) In the year 2012 the urban property described in the present proceedings was composed of land intended for construction, lot No. ..., titled by subdivision permit No. .../01 issued by the Municipal Council of ... on 8/06/2001.

c) The lot described above, in the year 2012, had an area of 1990.60 m² and with construction capacity for a building with eight storeys, for a maximum of 35 residential units and 56 commercial spaces or services and a minimum of 36 parking spaces.

d) By official communication dated 5/12/2012 the claimant was notified of the result of the general valuation performed on the urban property which assigned it a value of €1,260,730.00;

e) Not accepting the result of that valuation the Claimant requested a second valuation of the property, which resulted in the increase of that value to €1,265,700.00. - See: Documents 1 to 7 attached to the PI.

f) The urban property described in the present proceedings had no built construction in 2012.

g) Already in 2013 the Claimant promoted the obtaining of the alteration of the subdivision permit, by amendment No. 1/2013, having been authorized the joining of this same lot (No. 10) to Lot No. 11 and the subsequent subdivision into four lots, with alteration of the number of storeys, units of occupation and areas of implantation and volume of construction to be carried out in the new lots.

h) The Claimant was notified on 19 June 2014 of assessment No. 2014..., referring to the year 2012, issued by the Tax and Customs Authority, in the total amount of €12,657.00, as a result of the application of a rate of 1% carried out under item 28.1 of the General Table of the Stamp Tax Code, with payment deadline in "August 2014" - See: Document No. 1 attached to the Arbitral Request.

i) On 1-08-2014, the Claimant filed the request for constitution of the arbitral tribunal (CAAD computer system), to contest the tax assessment.

B) Facts Not Established

  1. There are no facts relevant to the decision that have not been established.

C) Basis of the Established Matter of Fact

  1. The facts established, as described above, are based on the documentary evidence that the Parties attached to the present proceedings and are based on the documents indicated for each of the points, whose authenticity and correspondence to reality were not questioned.

IV – MATTER OF LAW

  1. Having fixed the matter of fact, it is important to address the sole question of law at issue in the present proceedings, corresponding, in summary, to the question of illegality raised by the Claimant in the present arbitral request.

It is necessary to decide.

  1. The question that is the subject of the present action is whether land intended for urban construction for "residential use, services and commerce" falls within the scope of the rate of incidence of No. 28.1 of the General Table of the Stamp Tax Code (GTIS), in its original wording. On this question, there is already very abundant case law of CAAD, and its understanding is unanimous. Despite this it is important to analyze the legal framework of reference to justify the correct analysis of this question.

  2. The taxation, under stamp tax, of urban properties with residential use was introduced by Law No. 55-A/2012, of 29 October (SOL) which made several amendments to the Stamp Tax Code and added to the GTIS item 28, which presents the following wording:

"28 - Ownership, usufruct or right of surface of urban properties whose tax asset value recorded in the register, in accordance with the Real Estate Tax Code (CIMI), is equal to or greater than €1,000,000 – on the tax asset value used for the purpose of IMI:

28.1 – For property with residential use – 1%;

28.2 – For property, when the tax subjects who are not individuals are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%."

In the transitional provisions contained in Article 6 of that Law No. 55-A/2012, the following rules were established concerning the assessment of the tax provided for in that item:

"1 – In 2012, the following rules should be observed by reference to the assessment of the stamp tax provided for in item No. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012;

b) The tax subject is the one mentioned in No. 4 of Article 2 of the Stamp Tax Code on the date referred to in the preceding letter;

c) The tax asset value to be used in the assessment of the tax corresponds to that resulting from the rules provided for in the Real Estate Tax Code by reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority should be carried out by the end of November 2012;

e) The tax should be paid, in a single installment, by the tax subjects by 20 December 2012;

f) The applicable rates are the following:

i) Properties with residential use valued in accordance with the IMI Code: 0.5%;

ii) Properties with residential use not yet valued in accordance with the IMI Code: 0.8%;

iii) Urban properties when the tax subjects who are not individuals are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance: 7.5%.

2 – In 2013, the assessment of the stamp tax provided for in item No. 28 of the respective General Table should be based on the same tax asset value used for the purposes of real estate tax assessment to be carried out in that year.

3 – The non-delivery, in whole or in part, within the indicated period, of the amounts assessed as stamp tax constitutes a tax violation, punishable in accordance with the law."

  1. In the aforementioned item 28.1 and in sub-letters i) and ii) of letter f) of No. 1 of Article 6 of Law No. 55-A/2012, the legislator used the concept of "property with residential use", which is not found referenced in any other legislative instrument, whereby the clarification of the same is necessary.

The Real Estate Tax Code (CIMI) is mentioned in various provisions of the Stamp Tax Code introduced by that Law and is indicated as the instrument of subsidiary application concerning the tax provided for in the aforementioned item No. 28, as is the case in Articles 2, No. 4, 3, No. 3, letter u), 5, letter u), 23, No. 7, and 46 and 67 of the STC. However, in none of these provisions is a concept with that designation used.

Law No. 83-C/2013, of 31 December, amended that item No. 28.1, giving it the following wording:

"28.1 - For residential property or for land for construction whose construction, authorized or envisioned, is for residential purposes, in accordance with the provisions of the Real Estate Tax Code – 1%"

Such formulation applies, naturally, only from 1 January 2014, but it can be said in advance that it did nothing to help clarify the qualification of the concept in question. However, there is no doubt that it helped clarify, albeit implicitly, that the previous version did not contemplate the taxation of this type of property, namely, land for construction.

  1. It is important, however, to verify the possible contribution to be drawn from the concepts of properties used in the CIMI, in its Articles 3 to 6.

Thus, according to Article 2 of the CIMI, property means:

"1 – For the purposes of this Code, property is any fraction of territory, including water, plants, buildings and constructions of any nature incorporated into or situated on it, with a character of permanence, provided it forms part of the estate of an individual or legal entity and, under normal circumstances, has economic value, as well as water, plants, buildings or constructions, in the aforementioned circumstances, having economic autonomy in relation to the land on which they are located, although situated on a fraction of territory that constitutes an integral part of an estate belonging to another or does not have a patrimonial nature.

2 – Buildings or constructions, although moveable by nature, are deemed to have a character of permanence when devoted to non-transitory purposes.

3 – The character of permanence is presumed when buildings or constructions are located on the same site for a period exceeding one year.

4 – For the purposes of this tax, each autonomous fraction, under the horizontal property regime, is deemed to constitute one property."

Article 3 further provides, defining what rural properties are:

"1 – Rural properties are land situated outside an urban agglomeration that are not to be classified as land for construction, pursuant to No. 3 of Article 6, provided that:

a) They are devoted to or, in the absence of concrete use, have as their normal destination a use generating agricultural income, such as are considered for the purposes of personal income tax (IRS);

b) Not having the use indicated in the preceding letter, are not built or have only buildings or constructions of an accessory nature, without economic autonomy and of reduced value.

2 – Also rural properties are land situated within an urban agglomeration, provided that, by force of legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are actually having this use.

3 – Also rural properties are:

a) Buildings and constructions directly devoted to the production of agricultural income, when situated on the land referred to in the preceding numbers;

b) Water and plants in the situations to which No. 1 of Article 2 refers.

4 – For the purposes of this Code, urban agglomerations are considered, beyond those situated within legally fixed perimeters, the clusters with a minimum of 10 residential units served by public use streets, their perimeter being delimited by points at 50 m from the axis of the streets, in the transversal direction, and 20 m from the last building, in the direction of the streets."

Article 4 qualifies as urban properties "all those that should not be classified as rural, without prejudice to the provisions of the following article."

And Article 6 indicates the types of urban properties, as follows:

"1 – Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction; (underlined by us)

d) Other.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such or, in the absence of a license, that have as their normal destination each of these purposes.

3 – Land for construction is considered to be land situated within or outside an urban agglomeration for which a license or authorization has been granted, admitted prior notification or issued favorable prior information concerning subdivision or construction operations, and also those that have been declared as such in the acquisition title, excepting land where the competent entities prevent any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal land-use planning, are devoted to spaces, infrastructure or public facilities. (Wording of Law No. 64-A/08, of 31-12)

4 – The provision of letter d) of No. 1 applies to land situated within an urban agglomeration that is not land for construction nor is covered by the provision of No. 2 of Article 3, and also buildings and constructions licensed or, in the absence of a license, that have as their normal destination purposes other than those referred to in No. 2, and also those in the exception of No. 3."

  1. Given the legal framework set out above, and considering the rules on the interpretation of legal norms, in particular those resulting from Article 11 of the General Tax Law[2] (LGT), it is necessary to conclude that the general principles of interpretation of laws, to which No. 1 of Article 11 of the LGT refers, are established in Article 9 of the Civil Code, which establishes the following:

"1. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intent, 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.

  1. However, the interpreter cannot regard as the legislative intent that which does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express its intent in adequate terms."

Thus, it is important to determine the meaning and scope of the concept of "property with residential use", a fundamental task for the interpretation and correct application of the provision contained in items 28 and 28.1 of the GTIS. As is evident from the above, the CIMI, does not use in the classification of properties it adopts the concept of "property with residential use". Nor is this concept, with this terminology, found in any other statute.

Thus, following the reasoning already undertaken in previous arbitral decisions, in particular those rendered in proceedings Nos. 53/2013-T, 144/2013-T, 306/2014-T, and 328/2014-T (among others) "in the absence of exact terminological correspondence of the concept of 'property with residential use' with any other used in other statutes, several interpretive hypotheses can be ventured."

The starting point for the interpretation of that expression "properties with residential use" is, naturally, the text of the law, and it is on the basis of it that the "legislative intent" must be reconstructed, as required by No. 1 of Article 9 of the Civil Code, applicable by virtue of the provisions of Article 11, No. 1 of the LGT.

  1. The concept closest to the literal meaning of this expression used is manifestly that of "residential properties", defined in No. 2 of Article 6 of the CIMI as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, that have as their normal destination residential purposes.

If it is understood that the expression "property with residential use" coincides with that of "residential properties", it is manifest that the assessments will suffer from error as to the presuppositions of fact and law, for all properties for which Stamp Tax was assessed under the aforementioned item No. 28.1 are land for construction, without any building or construction, required by that No. 2 of Article 6, to satisfy that concept of "residential properties".

For this reason, it would suffice to adopt the interpretation that "property with residential use" means "residential property", and the assessment whose declaration of illegality is requested would be illegal, as there is no building or construction.

However, the non-coincidence of the terms of the expression used in item No. 28.1 of the GTIS with that derived from No. 2 of Article 6 of the CIMI points to the direction that it was not intended to use the same concept. Therefore, the Respondent is not correct in this matter in what it alleges in its response.

However, a more thorough interpretation of the meaning to be given to the concept in question leads to the conclusion that "use", in this context, means "the action of devoting something to a specific use". And, if we take into account the objectives defined in the statement of principles made in the Parliament on the intention of the legislator to introduce a taxation on "luxury homes", there is no doubt that the purpose or underlying ratio legis is to tax the "use" of the property considered in the full degree of comfort it provides.

To this end, Baptista Machado[3] notes the following: "when, as is usually the case, the norms (legislative formulas) admit more than one meaning, then the positive function of the text is expressed in giving stronger support or more strongly suggesting one of the possible meanings. For of the possible meanings, some will correspond to the most natural and direct significance of the expressions used, while others will only fit within the verbal framework of the norm in a forced, contrived manner. Now, in the absence of other elements that would lead to the choice of the less immediate meaning of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural significance of the verbal expressions used, and in particular its technical-legal significance, on the assumption (not always exact) that the legislator knew how to correctly express its intent."

The relevance of the text of the law is especially emphasized in the interpretation of tax provisions, and in this context Stamp Tax appears as a tax of difficult texture and confused identity, the interpreter frequently encountering successive difficulties, whereby the guiding thread should be, in the first place, the principle of the unity of the legal system, attempting to impose some coherence of application.

And, in this line of thinking, we cannot dispense with the use of the Explanatory Memorandum of the Bill No. 96/XII/2., on which Law No. 55-A/2012 was based. In this explanatory memorandum, the government's concern to reinforce the principle of social equity in austerity is evident, ensuring an effective distribution of the sacrifices necessary to comply with the adjustment program and its commitment to ensure that the distribution of those sacrifices will be made by all and not just by those who live off the income from their work.

In this context, in the absence of other interpretive coordinates the content of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same No. 3 of Article 9, that the legislator knew how to express its intent in adequate terms. Now, taking into account the meaning of the words "use" and "use", which are "to give purpose" or "to apply", the formula used in that item No. 28.1 of the GTIS, manifestly encompasses properties that are already being used for residential purposes, and cannot encompass properties that, although not yet applied for residential purposes, may eventually be destined for these, as is the case with land for residential construction.

  1. It further becomes necessary to clarify when a property can be considered to be used for residential purposes, specifically whether it is when this purpose is fixed for it by a subdivision permit or by an act of licensing or similar, or when the effective assignment of this purpose is realized. The comparison of item No. 28.1 of the GTIS with No. 2 of Article 6 of the CIMI, which defines the concept of residential properties, points in the direction that an "actual use" is necessary.[4]

Thus, a building or construction licensed for residential purposes or, even without a license, but which has residential purposes as its normal destination, is, in accordance with the provision of No. 2 of Article 6 of the CIMI, a residential property, since it is the legislator itself who considers as such "buildings or constructions licensed for such or, in the absence of a license, that have as their normal destination each of these purposes".

For this reason, on the assumption that the legislator of Law No. 55-A/2012 knew how to express its intent in adequate terms if it intended to also refer to properties merely licensed for residential purposes or that have residential purposes as their normal destination, it would certainly not have used the expression "properties with residential use".

  1. In these terms, it should be presumed that the use of a different expression by the legislator was aimed at achieving a different reality, whereby "property with residential use" cannot be a property merely licensed for residential purposes or destined for that purpose, but must be a property that already has actual use for that purpose.

Note that in the present proceedings the property in question is characterized as land for construction, and from the Certificate attached to the proceedings by the Claimant as document No. 2, it is possible to extract that in the construction area in which this lot/parcel of land is located, the construction capacity is already exhausted. Therefore, although it is land for construction with capacity for residential construction, this is merely a potentiality, whose realization will depend on obtaining the necessary building license which does not appear, in light of the information contained in the present proceedings, to even be viable.

For this very reason the only possible meaning for the expression "use" is that of an "actual use". Note that Article 3 of the CIMI, concerning rural properties, refers to those "devoted to or, in the absence of concrete use, having as their normal destination a use generating agricultural income", which shows that use is concrete, actual. As is evident from the latter part of this text, a property can have a determined use as its destination and be or not be devoted to it, which demonstrates the requirement for an actual use.

  1. In the case in question there is no building or construction whatsoever and, given the content of the document issued by the Municipal Council of ..., attached to the proceedings as document No. 2, nor is it certain that any could come to exist, whereby we cannot consider that the property in question has an actual use for residential purposes.

Furthermore, the legislative intention not to extend the scope of incidence to construction land was expressly stated by the Government when presenting to the Plenary of Parliament Bill No. 96-XII in saying, through the State Secretary for Tax Affairs, namely: "First, the Government proposes the creation of a special rate to tax high-value urban residential properties. This is the first time in Portugal that special taxation has been created on high-value properties intended for residential purposes. 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. With the creation of this additional rate, the tax effort required of these owners will be significantly increased in 2012 and in 2013." (underlined by us).

The express reference to "homes" as the target of the incidence of the new tax leaves no room for doubt about the legislative intention.

On the other hand, there is no reference in the discussion of the aforementioned Bill to "land for construction". As regards Article 45 of the CIMI, it has no relation to the classification of properties merely indicating the factors to be considered in the valuation of land for construction. What is considered there, in referring to the "building to be constructed" is the consideration of the destination of the land, which, as has been seen, is something that, in the context of the CIMI, does not imply use and occurs before it. For this reason, the Respondent's invocation in Article 16 of its response does not hold as regards the relevant purpose of the question to be decided in the present proceedings. The same can be said of the Court of Administrative Appeals - Southern Division judgment cited there, which refers, it is true, to the question of the regime of valuation of the tax asset value of land for construction, and is in no way relevant to the decision being considered in the present proceedings.

Finally, it is important to note that Law No. 83-C/2013, of 31 December, also contradicts the position here defended by the Respondent, as it did not come to clarify the logical element underlying the initial wording of item No. 28.1, but rather came to confirm, indirectly, the interpretation that it did not encompass land for construction.

In fact, if the original wording of item No. 28.1 under analysis, in speaking of "property with residential use" intended to encompass buildings and constructions constituting "residential properties" and land for construction for which residential construction was authorized or envisioned, then it would have been natural to give the new wording an interpretive nature, similar to what it does in other provisions contained therein, such as Article 177, No. 7, concerning letters a) and b) of No. 3 of Article 17-A of the Income Tax Code.

  1. For all the reasons set out above it is the understanding of this Tribunal that item 28.1 does not apply to land for construction, even if such land demonstrates potential for residential construction.

It is important to note that on this same question several arbitral decisions have already been rendered, among which the following stand out: those rendered in arbitral proceedings Nos. 42/2013-T, 48/2013-T, 53/2013-T, 144/2013-T, 180/2013-T and 189/2013-T, 306/2014-T, among others.

Also the Supreme Administrative Court has already pronounced on this question, in particular in the Judgments rendered on 9 and 23 April 2014 (in which Isabel Marques da Silva was the reporter) and 9 May 2014 (in which Dulce Neto was the reporter).

To this end, the Supreme Administrative Court judgment of 9 April 2014 (which makes express reference to arbitral decision No. 144/2013-T) concludes that "as the legislator has not defined the concept of 'urban properties with residential use', and resulting from Article 6 of the Real Estate Tax Code - subsidiarily applicable to Stamp Tax provided for in the new item No. 28 of the General Table - a clear distinction between 'urban residential properties' and 'land for construction', these cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of the GTIS, in the wording of Law No. 55-A/2012, of 29 October), as urban properties with residential use."

In accordance with the foregoing, if the letter of the law – of Item 28.1 of the GTIS – (grammatical element) does not present sufficiently clear for, without difficulty, to specify the concept of "property with residential use", the logical element (the systematic element and 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), to which No. 1 of Article 9 of the Civil Code points, allows the conclusion, as has been concluded in various arbitral decisions and also by the Supreme Administrative Court in the aforementioned Judgments, that, resulting from Article 6 of the Real Estate Tax Code a clear distinction between urban properties "residential" and "land for construction", these cannot be considered as "properties with residential use" for purposes of the provision of item No. 28.1 of the General Table of the Stamp Tax Code, in its original wording, which was conferred by Law No. 55-A/2012, of 29 October", which justifies the annulment of the contested assessment, by error in the presuppositions on which its issuance was based.

  1. As regards the alleged violation of constitutional principles to which the Claimant alludes, this Tribunal understands that the assessment and decision of the question to be decided concerns the correct interpretation of the provision contained in item 28.1 of the GTIS, whereby we are faced with clear violation of the provision itself, as has been amply demonstrated above.

  2. As a consequence of all the foregoing, it results that the contested assessment is illegal, suffering from the vice of violation of law due to error regarding the presuppositions of law, embodied in violation of the provision of item No. 28.1 of the GTIS, whereby it should be subject to annulment, pursuant to Article 135 of the Administrative Procedure Code.

  3. It does not appear that there are other relevant questions raised by the parties.

V - DECISION

In view of the foregoing, this Arbitral Tribunal decides to judge the arbitral pronouncement request well-founded, to declare the illegality of the contested assessment and to annul the Stamp Tax assessment contested in the present proceedings – assessment of IS No. 2014....

Value of the case: In accordance with the provisions of Article 315, No. 2 and 2 of the CPC, Article 97-A, No. 1, letter a), of the CPPT and Article 3, No. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the case is fixed at €12,657.00.

Costs: Pursuant to the provision of No. 4 of Article 22 of the RJAT and in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, to be borne by the Respondent Tax and Customs Authority.

Let it be registered and notified.

Lisbon, 11 February 2015

The Arbitrator,

(Maria do Rosário Anjos)

[1] The present decision is written in accordance with traditional Portuguese spelling.

[2] Article 11 of the LGT provides, concerning the interpretation of tax provisions, that:

"1. In determining the meaning of tax provisions and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

  1. Whenever tax provisions employ terms specific to other branches of law, these should be interpreted in the same sense as they have there, unless otherwise directly provided for by law.

  2. If doubt persists regarding the meaning of the applicable rules of incidence, regard should be had to the economic substance of the taxable facts.

  3. Gaps resulting from tax provisions covered by the reserve of law of the Parliament are not susceptible to integration by analogy."

[3] In this regard, see BAPTISTA MACHADO, J. Introduction to Law and the Legitimizing Discourse, latest ed. Almedina, page 182 et seq.

[4] In this regard, see arbitral decisions rendered in proceedings Nos. 53/2013-T, 144/2013-T, 178/2013-T, 285/2014-T, among others.

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the Tabela Geral do Imposto do Selo apply to building land (terrenos para construção)?
The application of Verba 28.1 da Tabela Geral do Imposto do Selo to building land (terrenos para construção) was highly contested for tax years before 2014. The original version referenced 'property with residential use' without explicitly mentioning building land. Taxpayers argued this excluded undeveloped construction lots, while the Tax Authority contended that property classification under IMI Code Articles 41 and 45 encompassed building land destined for residential construction. The critical development occurred with Law 83-C/2013 (2014 State Budget), which amended item 28.1 to expressly state: 'For residential property or for land for construction whose construction, authorized or envisioned, is for residential purposes.' Taxpayers argued this amendment implicitly acknowledged that the prior version lacked clear legal basis for taxing building land, making pre-2014 assessments on terrenos para construção potentially illegal.
Can a real estate company challenge a Stamp Tax (Imposto do Selo) assessment through CAAD arbitration?
Yes, real estate companies have full legal standing to challenge Stamp Tax (Imposto do Selo) assessments through CAAD (Centro de Arbitragem Administrativa) arbitration. Process 589/2014-T demonstrates this procedure: the real estate company filed its arbitration request on August 1, 2014, under Article 2(1)(a) of Decree-Law 10/2011 (RJAT), seeking declaration of illegality and annulment of the €12,657.00 Stamp Tax assessment. The RJAT provides corporate taxpayers with an alternative dispute resolution mechanism for contesting tax assessments, including those on property held for development purposes. The tribunal confirmed the claimant's legal personality, capacity, legitimacy, and proper representation under Articles 4 and 10(2) of DL 10/2011 and Article 1 of Ordinance 112/2011.
What is the procedure for contesting a Stamp Tax liquidation under Decree-Law 10/2011 (RJAT)?
The procedure for contesting a Stamp Tax liquidation under Decree-Law 10/2011 (RJAT) involves several steps: (1) File an arbitration request with CAAD identifying the contested assessment, specifying grounds for illegality under Article 10 RJAT; (2) The taxpayer may appoint an arbitrator or permit automatic appointment by CAAD's Deontological Council; (3) Upon tribunal constitution, the Tax Authority receives notification to submit a response within the statutory period (Article 17 RJAT); (4) If no factual disputes exist and only legal questions require resolution, parties may waive the oral hearing under Article 18 RJAT; (5) The tribunal issues its decision within the established timeframe. In Process 589/2014-T, the timeline was: request filed August 1, 2014; tribunal constituted October 1, 2014; Tax Authority response filed November 6, 2014; parties waived hearing December 2014; decision deadline set February 13, 2015. The claimant must pay the subsequent arbitration fee.
How is Stamp Tax calculated on high-value building land under Portuguese tax law?
Stamp Tax calculation on high-value building land under Portuguese tax law follows the framework established in item 28.1 of the General Table of Stamp Tax (GTIS), though its application to terrenos para construção was contested before 2014. The tax base derives from the property's taxable value (valor patrimonial tributário) determined under the IMI Code. The Tax Authority relies on Articles 41 and 45 of the IMI Code for property valuation and classification of residential use. In Process 589/2014-T, building land was assessed €12,657.00 for the 2012 tax year. Since January 1, 2014, Law 83-C/2013 provides explicit legal basis by including 'land for construction whose construction, authorized or envisioned, is for residential purposes' within item 28.1, clarifying that building land intended for residential development falls within Stamp Tax incidence, with rates applied to the IMI taxable value.
What was the outcome of CAAD Process 589/2014-T regarding Stamp Tax on terrenos para construção?
The provided excerpt from CAAD Process 589/2014-T does not contain the final decision or outcome, as the document concludes mid-sentence in Section III (Matter of Fact) before presenting the tribunal's legal analysis, reasoning, or ruling. The case record establishes that: the real estate company challenged a €12,657.00 Stamp Tax assessment on building land for 2012; the claimant argued item 28.1 GTIS did not apply to terrenos para construção before the 2014 amendment; the Tax Authority defended the assessment's legality based on IMI Code provisions; procedural requirements were satisfied; and the arbitral decision deadline was set for February 13, 2015. To determine the actual outcome, one would need to access the complete arbitral decision, which would include the tribunal's legal analysis of whether pre-2014 Stamp Tax legislation encompassed building land and the final ruling on the assessment's validity.