Process: 591/2014-T

Date: November 28, 2014

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Case 591/2014-T addresses a critical dispute regarding the application of Stamp Tax under Verba 28.1 of the TGIS (General Table of Stamp Duty) to properties held in total ownership (propriedade total) with multiple independent residential units. The claimant, a real estate investment company, challenged stamp duty assessments totaling €26,902.63 for 2013, arguing that the Portuguese Tax Authority unlawfully aggregated the patrimonial tax values (VPT) of 36 separate apartments to exceed the €1,000,000 threshold triggering the additional 1% annual stamp tax rate.

The core legal dispute centers on whether Verba 28.1 applies to each independent unit separately or to the aggregated value of all units within a single property in total ownership. The claimant contended that under the CIMI (Municipal Property Tax Code), cadastral matrices register each apartment's VPT separately, with no single designation for the entire property. Since no individual apartment reached the €1,000,000 threshold, the claimant argued the stamp tax should not apply.

The company raised significant constitutional challenges, invoking the principles of equality and proportionality. The equality argument highlighted discriminatory treatment: identical apartments would face different tax burdens solely based on whether the property is held in horizontal ownership (condomínio) versus total ownership. The proportionality challenge emphasized the unreasonable result of applying a 1% tax rate designed for high-value properties to apartments worth only €100,000 individually.

This case exemplifies the interpretive challenges surrounding stamp duty on high-value real estate and the proper application of the €1,000,000 threshold. The outcome has significant implications for real estate investment companies and property owners regarding the taxation of buildings with multiple independent units, particularly concerning whether the legal ownership structure (total vs. horizontal ownership) should determine substantially different tax consequences for economically equivalent situations.

Full Decision

THE PARTIES

Claimant: A... – REAL ESTATE INVESTMENT COMPANY, S.A., with registered office at Avenue … Lisbon, Portuguese Tax ID PT ....

Respondent: TAX AND CUSTOMS AUTHORITY (TA).

DECISION

REPORT

a) On 30-07-2014, A... – REAL ESTATE INVESTMENT COMPANY, S.A., Portuguese Tax ID PT ..., filed a request with the CAAD seeking, under the Legal Framework of Tax Arbitration (LFTA), the constitution of a Singular Arbitral Tribunal (SAT).

b) The request is signed by an attorney representing the Claimant.

THE REQUEST

c) The Claimant petitions for the annulment of the assessment acts for Stamp Duty (SD) relating to item 28 of the General Table of Stamp Duty (GTSD), contained in the following documents: 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …; 2014 …, (first installment), relating to the year 2013, acts generating a total collection of 26,902.63 euros, dated 17.03.2014 and referring to an urban property in full ownership, with separate apartments or units susceptible of independent use, more specifically regarding the apartments intended for residential use that comprise it, namely:

ü Urban property registered in the cadastral matrix of the parish of ... (former parish of ...), municipality of Lisbon, articles U-...º-AA, U-...º-AB, U-...º-AC, U-...º-AD, U-...º-AE, U-...º-AF, U-...º-AG, U-...º-AH, U-...º-AI, U-...º-AJ, U-...º-AK, U-...º-AL, U-...º-AM, U-...º-AN, U-...º-AO, U-...º-AP, U-...º-AQ, U-...º-AR, U-...º-AS, U-...º-AT, U-...º-AU, U-...º-AV, U-...º-AW, U-...º-AX, U-...º-AY, U-...º-AZ, U-...º-BA, U-...º-BB, U-...º-S, U-...º-T, U-...º-U, U-...º-V, U-...º-W, U-...º-X, U-...º-Y, U-...º-Z.

d) It argues, in summary, that the assessment acts are unlawful due to violation of the operative norm of item 28.1 of the GTSD insofar as the TA added the patrimonial values of the apartments in full ownership and none of them individually has a PVT equal to or greater than 1,000,000.00 euros, contending that it should be the PVT of each apartment and not their sum that is relevant for taxation purposes.

e) And on the grounds that "under the terms of the MPTC, in urban properties in full ownership regime, the cadastral matrices indicate, separately, the patrimonial value for tax purposes of each of the units susceptible of independent use that comprise them" and "in those properties there is no single reference to the designation of the property, such reference being made only separately with regard to each of the apartments or units susceptible of independent use".

f) And that the operative norm, in the interpretation implemented by the TA, is unconstitutional because of "... flagrant and serious violation of the constitutionally enshrined principles of equality and proportionality in tax matters".

g) It concludes by requesting the annulment of the tax acts identified in c), for lack of legal basis or subsidiarily because none of the apartments has a PVT equal to or greater than 1,000,000.00 euros and finally because the reading of item 28.1 of the GTSD implemented by the TA is not in conformity with the CRP, as regards the principles aforementioned.

OF THE ARBITRAL TRIBUNAL

h) The request for constitution of the SAT was accepted by the President of the CAAD and automatically notified to the TA on 01.08.2014.

i) By the Ethics Council of the CAAD, the signatory of this decision was appointed arbitrator, with the parties being notified thereof on 16.09.2014.

j) Therefore, the Singular Arbitral Tribunal (SAT) has been duly constituted, as of 01.10.2014, to hear and decide on the subject matter of this dispute.

k) All these acts are documented in the communication constituting the Singular Arbitral Tribunal dated 01.10.2014, which is hereby reproduced.

l) On 07.10.2014 the TA was notified in accordance with article 17-1 of the LFTA. It responded on 06.11.2014.

m) Since questions entirely identical to those already raised in many other cases already decided at the CAAD are presented in this case, the SAT in the aforementioned order invited the parties to pronounce themselves on the waiver of the hearing referred to in article 18 of the LFTA as well as of further pleadings.

n) In its response the TA stated that it did not object to the non-holding of the hearing of the parties and likewise to the non-submission of further pleadings.

o) By order of 06.11.2014 the SAT waived the holding of the hearing of the parties aforementioned, provided that the Claimant did not expressly object thereto within a period of 5 days.

p) Therefore, both parties having dispensed, expressly or tacitly, with the holding of the hearing of the parties under article 18 of the LFTA and the submission of further pleadings, these procedural acts were not held.

PROCEDURAL REQUIREMENTS

q) Legitimacy, capacity and representation - the parties have legal personality and capacity, are legitimate and are duly represented.

r) Adversarial proceedings - the TA was notified in accordance with point l). All orders issued in the proceedings and all documents attached were notified to the respective counterparty.

s) Dilatory exceptions - the proceedings are not affected by any irregularities and the request for arbitral decision is timely, as it was submitted within the prescribed period in subparagraph a) of n.º 1 of article 10 of the LFTA.

SUMMARY OF THE CLAIMANT'S POSITION

Regarding the possible illegality of the assessment acts for non-compliance with the operative norm of item 28.1 of the GTSD

t) The Claimant contends that the patrimonial value for tax purposes (PVT) relevant in the case under discussion, given that it is a property in full ownership comprising apartments or units with independent use, all with residential designation, is not the sum of all these apartments or units, but the PVT of each one.

u) And on the grounds that "under the terms of the MPTC, in urban properties in full ownership regime, the cadastral matrices indicate, separately, the patrimonial value for tax purposes of each of the units susceptible of independent use that comprise them" and "in those properties there is no single reference to the designation of the property, such reference being made only separately with regard to each of the apartments or units susceptible of independent use".

v) It argues that the taxable base of the stamp duty of item 28.1 of the GTSD should be the same as that of the MPT, since the law provides for the subsidiary application of the MPTC Code to matters not regulated in the Stamp Duty Code.

Regarding the possible unconstitutionality of the norm contained in item 28.1 of the GTSD, in the implicit reading implemented by the TA

w) The Claimant considers that the assessments of SD, in the implicit interpretation implemented by the TA, of items 28 and 28.1 of the GTSD, (whereby the PVT of the apartments is added to determine the taxation threshold of 1,000,000.00 euros) constitute "... flagrant and serious violation of the constitutionally enshrined principles of equality and proportionality in tax matters".

x) Arguing that non-compliance with the principle of equality results from the unequal treatment of materially similar situations: "two apartments with the same composition and the same patrimonial value for tax purposes would be taxed differently, solely because one is part of a property in horizontal ownership regime and the other is part of a property in full ownership regime with apartments susceptible of independent use".

y) The violation of the principle of proportionality results from the imposition of a tax rate entirely disproportionate to the value of the property taxed: "The TA would be taxing at the additional rate of 1% per year, apartments with a patrimonial value for tax purposes of € 100,000, when this additional rate was only provided for property with a patrimonial value for tax purposes at least 10 times higher".

SUMMARY OF THE TAX AUTHORITY'S POSITION

Regarding the possible illegality of the assessment acts for non-compliance with the operative norm of item 28.1 of the GTSD.

z) The TA contends that "although the assessment of SD, under the conditions provided for in item 28.1 of the GTSD is carried out in accordance with the rules of the MPTC, the truth is that the legislator reserves the aspects that require necessary adjustments".

aa) "As is the case with properties in full ownership, even though with apartments or units susceptible of independent use, since although the MPT is assessed with respect to each part susceptible of independent use",

bb) "For purposes of SD, the property as a whole is relevant, since the separately usable units are not regarded as property, but only autonomous fractions in the horizontal ownership regime, in accordance with article 2-4 of the MPTC".

Regarding the possible unconstitutionality of the norm contained in item 28.1 of the GTSD, in the implicit reading implemented by the TA

cc) There is no violation of the principle of equality because there is no discrimination between properties in horizontal ownership and properties in full ownership with apartments or units susceptible of independent use or between properties with residential designation and properties with other designations.

dd) Since item 28.1 of the GTSD is a general and abstract norm, applicable indiscriminately to all cases in which its respective factual and legal presuppositions are met.

ee) The different valuation and taxation of a property in full ownership in relation to a property in horizontal ownership stems from the different legal effects inherent to these two figures.

ff) These are distinct realities, valued by the legislator differently.

gg) Contending for the legality of the tax acts because they constitute a correct application of the law to the facts, both as regards their consonance with ordinary law and their conformity with constitutional principles.

II - ISSUES FOR THE TRIBUNAL TO RESOLVE

On this specific matter, the CAAD has already pronounced in various decisions in which the fundamental question is the same, namely, the scope of the operative norm of items 28 and 28-1 of the GTSD is disputed.

The limit of interpretation is the letter, the text of the norm. Then follows the "task of interconnection and valuation that escapes the literal domain".

Starting from the principle that every norm has a prediction (and a disposition), the question here is to determine, by delimiting, whether the operative norm, as drafted – in its prediction - (ownership of urban properties ... with residential designation ... whose patrimonial value for tax purposes stated in the matrix, under the terms of the MPTC, is equal to or greater than 1,000,000.00 euros – on the patrimonial value for tax purposes used for MPT purposes), allows or not the understanding that as regards properties "with residential designation" in vertical ownership, with apartments or units susceptible of independent use, held by an entity, the PVT on which the rate is to be imposed should be their sum or should the individual PVT of each apartment or unit susceptible of independent use be considered, similarly to what happens with properties in horizontal ownership regime.

Essentially what is at issue is the adoption of an adequate reading of the scope of the operative norm of items 28 and 28.1 of the GTSD, in light of what n.º 7 of article 23 of the SDC refers to regarding the determination of the taxable base and subsequent operation of tax assessment:

"In the case of tax due for situations provided for in item n.º 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adjustments, the rules contained in the MPTC."

The TA clearly states in article 15 of its learned response that the addition of the PVT of the apartments of the urban property in question was carried out based on the legal basis of this norm reading (article 23-7 of the SDC).

As we have stated in other decisions, regarding the interpretation of tax norms there is a rule, although it may be considered residual, very specific that is contained in n.º 3 of article 11 of the GTL: "persisting doubt about the meaning of the operative norms to be applied, the economic substance of the tax facts should be taken into account". This is a criterion to be used in the context of the hermeneutics of interpretation of norms.

We do not advocate for an "economic interpretation" of tax law norms.

But it seems to us that here too recourse may be made to the analysis of the "economic substance of the tax facts" to properly effect the "necessary adjustments of the rules contained in the MPTC", with a view to resolving the issue raised.

We are thus, merely and solely, within the scope of the activity of interpretation and application of norms, that is, in the task of delimiting the legal-factual situations that should be understood as falling within the prediction of the operative norm of this new tax and which results from the combination of items 28 and 28-1 of the GTSD and in this case what should be considered acceptable in terms of the "necessary adjustments of the rules contained in the MPTC", following the command of n.º 7 of article 23 of the SDC.

The question of the conformity of the prediction of the operative norm with the constitutional text will only arise if the interpreter reaches the conclusion that a determined and unequivocal reading of the law – correctly applied to a concrete case - violates one or several constitutional principles with such intensity that the legislative option adopted could not have been so, while also taking into account that the TA cannot, on the basis of possible unconstitutionalities of norms not declared by courts, fail to apply the law in the sense it deems most assertive.

It seems to us that the central question to which the SAT should respond is the following:

Do items 28 and 28-1 of the GTSD, as operative norms for tax purposes, as drafted – in their prediction - (ownership of urban properties ... with residential designation ... whose patrimonial value for tax purposes stated in the matrix, under the terms of the MPTC, is equal to or greater than 1,000,000.00 euros – on the patrimonial value for tax purposes used for MPT purposes), allow or not the understanding that as regards properties "with residential designation" in vertical ownership, with apartments or units susceptible of independent use, held by an entity, the PVT on which the rate is to be imposed should be their sum or should the individual PVT of each apartment or unit susceptible of independent use be considered, similarly to what happens with properties in horizontal ownership regime?

The answer to this question will determine the merits or lack of merits of the request, and should the answer be in a sense not in conformity with what is learnedly advocated by the TA, it will not be necessary for the SAT to pronounce on the remaining grounds invoked by the Claimant in the request for arbitral decision, with possible reflection on the validity of the assessment acts in question.

III. FACTUAL MATTER PROVED AND NOT PROVED. REASONING

With relevance to the decision to be adopted, these are the facts that are considered proved, with reference to the respective documents (proof by documents) and/or the articles of the Claimant's request and the TA's response as to the facts admitted by agreement, as reasoning:

Facts Proved

  1. The Claimant, A... – REAL ESTATE INVESTMENT COMPANY, S.A., Portuguese Tax ID PT ..., appears as holder of the right of full ownership of the urban property in full ownership regime, with apartments or units susceptible of independent use, more specifically regarding the apartments intended for residential use that comprise it, namely: urban property registered in the cadastral matrix of the parish of ... (former parish of ...), municipality of Lisbon, articles U-...º-AA, U-...º-AB, U-...º-AC, U-...º-AD, U-...º-AE, U-...º-AF, U-...º-AG, U-...º-AH, U-...º-AI, U-...º-AJ, U-...º-AK, U-...º-AL, U-...º-AM, U-...º-AN, U-...º-AO, U-...º-AP, U-...º-AQ, U-...º-AR, U-...º-AS, U-...º-AT, U-...º-AU, U-...º-AV, U-...º-AW, U-...º-AX, U-...º-AY, U-...º-AZ, U-...º-BA, U-...º-BB, U-...º-S, U-...º-T, U-...º-U, U-...º-V, U-...º-W, U-...º-X, U-...º-Y, U-...º-Z - Articles 6 and 7 of the request for arbitral decision, Document n.º 37 attached with the request for arbitral decision (urban cadastral certificate), Documents n.ºs 1 to 36 referred to in the request for arbitral decision (stamp duty assessment notes) and article 3 of the TA's response.

  2. The Claimant was notified, on an undetermined date, of the assessments of Stamp Duty of item 28 of the GTSD, expressed in point c) of the Report, generating a total collection of 26,902.63 euros – Preamble of the request for arbitral decision, Documents n.ºs 1 to 36 referred to in the request for arbitral decision (stamp duty assessment notes).

  3. The apartments or units susceptible of independent use subject to taxation with residential designation have PVT ranging between 146,121.50 euros (article U-...º-AE) and 328,285.75 euros (article U-...º-AZ) – Document n.º 37 attached with the request for arbitral decision (urban cadastral certificate), Documents n.ºs 1 to 36 referred to in the request for arbitral decision (stamp duty assessment notes).

  4. In the cadastral certificate of the real property referred to in 1) there is stated: "Total patrimonial value: € 9,848,728.27" – Document n.º 37 attached with the request for arbitral decision (urban cadastral certificate).

  5. In the assessment notes is stated "Patrimonial Value of the property-total subject to tax: 8,070,722.95" euros, which corresponds to the sum of the PVT of the apartments with residential designation of the real property identified in 1) – Documents n.ºs 1 to 36 referred to in the request for arbitral decision (stamp duty assessment notes).

  6. Tax assessed on the basis of item 28.1 of the GTSD as amended by Law 55-A/2012, of 29 October, respectively – Documents n.ºs 1 to 36 referred to in the request for arbitral decision (stamp duty assessment notes) and article 4 of the TA's response.

Facts Not Proved

There is no other factual matter alleged that is relevant to the proper determination of the issues in the proceedings.

The settled factual matter results from the documents submitted by the Claimant, whose contents and probative valuations were not disputed by the TA and facts admitted, expressly or tacitly, by agreement of the parties.

IV. CONSIDERATION OF THE ISSUES FOR THE SAT TO RESOLVE

Do items 28 and 28-1 of the GTSD, as operative norms for tax purposes, as drafted – in their prediction - (ownership of urban properties ... with residential designation ... whose patrimonial value for tax purposes stated in the matrix, under the terms of the MPTC, is equal to or greater than 1,000,000.00 euros – on the patrimonial value for tax purposes used for MPT purposes), allow or not the understanding that as regards properties "with residential designation" in vertical ownership, with apartments or units susceptible of independent use, held by an entity, the PVT on which the rate is to be imposed should be their sum or should the individual PVT of each apartment or unit susceptible of independent use be considered, similarly to what happens with properties in horizontal ownership regime?

The subjection to stamp duty of properties with residential designation resulted from the addition of items 28, 28-1 and 28-2 to the General Table of Stamp Duty, effected by article 4 of Law 55-A/2012, of 29/10, which typified the following tax facts:

"28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial value for tax purposes stated in the matrix, under the terms of the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000 – on the patrimonial value for tax purposes used for MPT purposes:

28-1 – For property with residential designation - 1%;

28-2 – For property, when the taxpayers who are not individuals 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%."

Matters of relevance to the case refer to:

· N.º 7 of article 23 of the SDC regarding the assessment of the tax: "In the case of tax due for situations provided for in item n.º 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adjustments, the rules contained in the MPTC."

· N.º 4 of article 2 of the MPTC: "For purposes of this tax, each autonomous fraction, in the horizontal ownership regime, is regarded as constituting a property."

· N.º 3 of article 12 of the MPTC: "Each apartment or part of property susceptible of independent use is considered separately in the cadastral entry which also determines its respective patrimonial value for tax purposes".

It seems to us that the answer to the question posed in this request for arbitral decision is related to the reading made by the TA of n.º 7 of article 23 of the SDC.

The TA will have considered, in proceeding to add the patrimonial values for tax purposes (PVT) of the apartments or units/parts of urban property, to determine whether the minimum taxation threshold of 1,000,000.00 euros is reached, for each urban property, that apartments or units susceptible of independent use are not by formal legal definition regarded as urban properties.

This is what results from the TA's response – see article 15.

And it will have considered that this addition of PVT is required because the law refers to the need to proceed to the "necessary adjustments" of the "rules of the MPTC" (n.º 7 of article 23 of the SDC).

But is this reading of the law configured as the most assertive?

In truth, although items 28 and 28.1 speak of "urban properties" and "per property" and n.º 7 of article 23 of the SDC refers to "the tax is assessed annually, in relation to each urban property", what is relevant here is that, at the level of determining the eligible taxable base and assessment of this tax, the "... necessary adjustments of the rules contained in the MPTC" are applied as referred to in the aforementioned n.º 7 of article 23 of the SDC. But, obviously, "adjustments" provided they are necessary.

What happened - as regards urban properties with residential designation, in vertical ownership, with apartments or units susceptible of independent use - was that the TA made an "adjustment" in the operations of stamp duty assessment, which was to add the PVT of each apartment or separate unit destined for residential purposes (excluding the PVT of apartments or units destined for other purposes), creating a new legal reality, without legal support, which is a patrimonial value of urban properties in vertical ownership, with residential designation.

This operation of the tax process (incidence – determination of the taxable base – assessment – payment) will violate the literal element of the operative norm of the tax incidence, item 28 of the GTSD, which refers to this tax being levied on "the patrimonial value for tax purposes used for MPT purposes".

This is because the TA, in the operation of determining the taxable base and subsequent assessment of SD of items 28 and 28.1 of the GTSD (operation of applying a rate to the taxable base), as regards urban properties with residential designation, in vertical ownership, with apartments or units susceptible of independent use, should not consider any patrimonial value for tax purposes (on which the ad valorem rate of the tax is imposed) other than what results exclusively from n.º 3 of article 12 of the MPTC. Both for the MPT and for this SD.

And for the reason that urban properties in vertical ownership, in their entirety, do not have a PVT. The law provides that in these cases the PVT be assigned to each apartment or part of the property separately.

The above conclusion will not be affected by the fact that in the cadastral certificates of this type of property the "total patrimonial value" is indicated, which corresponds to the sum of the PVT of all apartments, regardless of their designation. What is relevant for this taxation is not the "total patrimonial value" but solely the "patrimonial value for tax purposes" of urban properties with residential designation, in this case of the apartments separately identified fiscally in terms of eligible PVT.

All the more so because, in the majority of cases of properties in vertical ownership, as occurs in this case, the "residential designation" is characteristic of one or several apartments separately and not of the property as a whole.

Creating a new legal reality, with a view to finding a new way of determining the taxable base that is not used in connection with MPT (a taxable base for apartments or parts of property susceptible of independent use, with residential designation, separated from the PVT of the others with different purposes) does not constitute having legal support in the "necessary adjustments" referred to in n.º 7 of article 23 of the SDC.

This conclusion will be reached taking into account the principle of tax legality, whether in the dimension of n.º 1 of article 8 of the GTL (if we consider that a norm of incidence is at issue), or in the dimension of subparagraph a) of n.º 2 of article 8 of the GTL (if we consider that a norm regulating the determination of the taxable base on which a rate is imposed is at issue, that is, the assessment of the tax).

There is further, it is submitted, non-conformity with the literal element of the final part of the operative norm of tax incidence (item 28 of the GTSD) which refers to this tax being levied on "the patrimonial value for tax purposes used for MPT purposes" and therefore, should not be levied on the sum of patrimonial values for tax purposes of properties, parts of properties or apartments, with no legal support appearing in the operation of adding patrimonial values for tax purposes of apartments or parts of property susceptible of independent use, with residential designation, excluding the PVT of the others with different purposes, so as to reach the eligible taxation threshold of 1,000,000.00 euros or more.

That is, it is not configured in conformity with the law, the creation of a new PVT for purposes of taxation in SD as regards item 28 of the GTSD, as results from the notation in all collection notes of "patrimonial value of property – total subject to tax" – point 5 of the settled factual matter.

What this means is that when n.º 7 of article 23 refers to "... the tax is assessed annually, in relation to each urban property", this expression "each urban property" will intend to encompass, in light of the principles of interpretation and application of norms stated, urban properties in horizontal ownership and apartments or parts of urban properties of properties in vertical ownership, provided they are destined for residential purposes, but always starting from a single taxable base for all legal purposes: the patrimonial value for tax purposes used for MPT purposes (final part of item 28 of the GTSD).

The issue, in our view, does not need to be raised at the level of violation of the CRP, sufficing, in compliance with what is referred to in n.º 7 of article 23 of the SDC that an interpretation be made, "with the necessary adjustments of the rules of the MPTC" which will be to consider that the expression "each urban property" encompasses not only apartments in horizontal ownership (which are urban properties ope legis) but also "apartments or parts of property susceptible of independent use" (n.º 3 of article 12 of the MPTC).

If, for example, for apartments comprising autonomous fractions of residential urban properties, in horizontal ownership, (even though they are by definition and "ope legis" urban properties) the PVT are not added to determine the threshold of eligible PVT for subjection to SD, per taxpayer, of 1,000,000.00 euros (operation of determining the taxable base), why should the same occur as regards "parts of property or apartments" of properties in vertical ownership?

In both cases the same taxable capacity of the taxpayers is manifested (their level of wealth at the level of real property). It is the same "economic substance" analyzed from various perspectives. In both situations the same "ability-to-pay" is manifested.

In truth it is the referred norm, in its literalness, particularly the final part of item 28 of the GTSD, combined with n.º 7 of article 23 of the SDC, that permits the conclusion, with the "necessary adjustments of the rules of the MPTC" that the TA should not add the PVT of the apartments or parts of the property aforementioned to find a new PVT relating to those destined for residential purposes, separated from the PVT of those destined for other purposes.

The Claimant argues, essentially, the non-conformity of the tax acts with the tax law, alleging the illegality contained in subparagraph a) of article 99 of the TCPC: "erroneous qualification ... of tax facts".

In fact, with the grounds expressed above, the assessments of SD contested, carried out as they were, are not in harmony with the operative norm of items 28 and 28-1 of the GTSD, with the result that the illegality provided for in subparagraph a) of article 99 of the TCPC occurs.

The first ground of the request formulated by the Claimant in the request for arbitral decision (points d) and e) of the Report) obtaining, it is not necessary to proceed with the consideration of the other grounds (points f) and g) of the Report), by manifest futility.

As a consequence of the above, the requests for annulment of the tax acts deduced by the Claimant before the Arbitral Tribunal are upheld, since the assessments of SD carried out by the TA are not in conformity with the law, in the reading advocated above.

In fact, it results from the facts proved (point 3 of Part III of this decision) that none of the apartments or parts of property has, per se, a PVT that is equal to or greater than the taxation threshold indicated in item 28 of the GTSD (PVT equal to 1,000,000.00 euros).

V. DECISION

On the basis of the grounds and reasoning set out above, the request of the Claimant is upheld, and the assessments of Stamp Duty contained in the documents identified in point c) of the Report (which are hereby reproduced), generating a total collection of 26,902.63 euros, relating to the urban property in full ownership, with apartments or units susceptible of independent use, more specifically regarding the apartments intended for residential use that comprise it, namely:

· urban property registered in the cadastral matrix of the parish of ... (former parish of ...), municipality of Lisbon, articles U-...º-AA, U-...º-AB, U-...º-AC, U-...º-AD, U-...º-AE, U-...º-AF, U-...º-AG, U-...º-AH, U-...º-AI, U-...º-AJ, U-...º-AK, U-...º-AL, U-...º-AM, U-...º-AN, U-...º-AO, U-...º-AP, U-...º-AQ, U-...º-AR, U-...º-AS, U-...º-AT, U-...º-AU, U-...º-AV, U-...º-AW, U-...º-AX, U-...º-AY, U-...º-AZ, U-...º-BA, U-...º-BB, U-...º-S, U-...º-T, U-...º-U, U-...º-V, U-...º-W, U-...º-X, U-...º-Y, U-...º-Z;

are hereby annulled, for non-conformity with the norms contained in items 28 and 28.1 of the GTSD and in n.º 7 of article 23 of the SDC.

Value of the case: in accordance with the provisions of article 3, n.º 2, of the Regulations on Costs in Tax Arbitration Proceedings (and subparagraph a) of n.º 1 of article 97A of the TCPC), the value of the case is fixed at 26,902.63 euros.

Costs: in accordance with the provisions of article 22, n.º 4, of the LFTA, the amount of costs is fixed at € 1,530.00 €, according to Table I annexed to the Regulations on Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Notify.

Lisbon, 28 November 2014

Singular Arbitral Tribunal,

Augusto Vieira

Text prepared by computer in accordance with the provisions

of article 131, n.º 5, of the CPC, applicable by cross-reference to article 29 of the LFTA.

The text of this decision is written in accordance with the spelling prior to the 1990 Orthographic Agreement.

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How is the VPT threshold of €1,000,000 applied under Verba 28.1 of the TGIS for properties in total ownership with independent units?
Under Verba 28.1 of the TGIS, the €1,000,000 VPT threshold application to properties in total ownership with independent units is disputed. The claimant's position is that each independent unit should be evaluated separately against the threshold, not aggregated. Since cadastral matrices under the CIMI register each apartment's VPT individually with separate article numbers, and there is no single property designation encompassing all units, the threshold should apply to each apartment independently. This interpretation means that if no individual apartment has a VPT equal to or exceeding €1,000,000, the stamp tax under Verba 28.1 should not be triggered, regardless of the combined value of all units within the building.
Can the Portuguese Tax Authority aggregate the VPT of individual units in a total ownership property to trigger Stamp Tax under Verba 28.1?
The Portuguese Tax Authority did aggregate the VPT of individual units in the total ownership property to trigger Stamp Tax under Verba 28.1, which is the central issue in this case. The TA summed the patrimonial values of all 36 apartments to exceed the €1,000,000 threshold and issued stamp duty assessments totaling €26,902.63. However, the claimant challenged this aggregation method, arguing it violates the operative norm of Verba 28.1. The claimant contends that the law does not authorize aggregating separate cadastral units, particularly when the CIMI treats each apartment as a distinct taxable unit with its own VPT. The legality of this aggregation methodology by the Tax Authority is precisely what the arbitral tribunal must decide.
What constitutional principles were invoked against the aggregation of VPT values for Stamp Tax purposes in CAAD case 591/2014-T?
Two constitutional principles were invoked against the VPT aggregation: (1) The Principle of Equality - the claimant argued that aggregation creates discriminatory treatment between materially identical situations, where two apartments with the same composition and VPT would be taxed differently solely because one is part of a horizontal ownership property (condomínio) and the other is part of a total ownership property with independent units; and (2) The Principle of Proportionality - the claimant contended that applying the 1% annual tax rate (designed for high-value properties exceeding €1,000,000) to apartments with individual VPTs as low as €100,000 constitutes a disproportionate tax burden entirely inconsistent with the value of the property actually being taxed, violating constitutional proportionality requirements in taxation.
How does the CIMI treat the patrimonial tax value of independent units within a property held in total ownership (propriedade total)?
The CIMI (Código do Imposto Municipal sobre Imóveis) treats independent units within a property held in total ownership by registering each unit separately in the cadastral matrices with its own distinct article number and individual patrimonial tax value (VPT). According to the claimant's arguments, under the CIMI framework, there is no single unified reference to the entire property; instead, each apartment or unit susceptible of independent use receives separate cadastral registration and valuation. This means that for properties in total ownership regime with multiple independent units, the cadastral system creates individual tax identifications for each unit rather than a consolidated entry for the entire building, treating each apartment as a distinct taxable unit for municipal property tax purposes.
What is the procedure to challenge Stamp Tax assessments under Verba 28.1 of the TGIS before the CAAD arbitral tribunal?
To challenge Stamp Tax assessments under Verba 28.1 before the CAAD (Centro de Arbitragem Administrativa), the taxpayer must: (1) File a request for constitution of a Singular Arbitral Tribunal (SAT) within the legally prescribed timeframe under Article 10(1)(a) of the RJAT (Legal Framework of Tax Arbitration); (2) The request must be signed by legal representation (attorney); (3) Specify the contested assessment acts by document number and date; (4) Present legal grounds for annulment (such as violation of the operative tax norm or constitutional principles); (5) Once accepted by the CAAD President, the Tax Authority is automatically notified and must respond within the statutory period; (6) An arbitrator is appointed by the CAAD Ethics Council; (7) The tribunal is formally constituted, and proceedings follow RJAT provisions, including potential waiver of oral hearings if both parties agree, leading to a written decision on the merits of the challenge.