Process: 592/2014-T

Date: February 9, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

In arbitration process 592/2014-T, the CAAD (Administrative Arbitration Centre) addressed whether Stamp Duty under clause 28.1 of the General Stamp Duty Table (TGIS) applies to construction land not intended for residential use. The claimant, a real estate investment company, challenged a €12,549.02 Stamp Duty assessment for 2013 on a construction land plot designated for services, commerce, and parking facilities. The Tax Authority argued that clause 28.1 applied because the property register indicated a residential location coefficient. However, the claimant presented compelling evidence including Land Registry certificates, municipal construction approvals from Lisbon City Council, and property declarations from 2005 onwards, all consistently showing the land's intended non-residential purpose. The arbitral tribunal ruled in favor of the claimant, holding that even under the Tax Authority's interpretation that clause 28.1 applies to land with planned residential construction, the taxation was undue since the proven intended use was exclusively for commercial services and parking. The tribunal emphasized that documentary evidence of actual intended use prevails over property matrix classifications. The assessment was annulled for violation of law, with costs awarded against the Tax Authority. This decision established an important precedent that Stamp Duty under clause 28.1 TGIS does not apply to construction land lots designated for non-residential purposes, regardless of administrative classifications in the property register. Taxpayers can successfully challenge such assessments by demonstrating the actual intended use through municipal approvals, registry documents, and construction project documentation.

Full Decision

ARBITRATION DECISION

I – Report

  1. On 30.07.2015, the Claimant, A – REAL ESTATE INVESTMENT COMPANY, LTD, tax identification number …, with registered office at Av. …, Lisbon, requested the CAAD to constitute an arbitral tribunal, in accordance with article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as LFATM), in which the Tax and Customs Authority is the Respondent, with a view to annulling the act of Stamp Duty Assessment, provided for in item 28.1 of the General Stamp Duty Table, relating to the year 2013, dated 17.03.2014, in the amount of € 12,549.02.

  2. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of the CAAD and notified to the Tax and Customs Authority.

In accordance with and for the purposes of the provisions in paragraph 1 of article 6 of the LFATM, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, the signatory was appointed as arbitrator, who communicated to the Deontological Council and to the Administrative Arbitration Centre his acceptance of the appointment within the regularly applicable period.

The Arbitral Tribunal was constituted on 1.10.2014.

  1. Following a Request presented by the Respondent, to which the Claimant did not object, by order dated 7.01.2015, on the grounds of its being unnecessary, the hearing provided for in article 18 of the LFATM was dispensed with, and it was also determined that no oral arguments would be heard, also on the grounds of its being unnecessary.

  2. The grounds presented by the Claimant, in support of its claim, were, briefly, the fact that the real property in question was not a residential property, but a plot of land for urban construction and also the circumstance that the land was intended, not for residential construction, but for the construction of services, commerce and private and public parking facilities.

  3. The ATA – Tax and Customs Administration, called upon to make representations, contested the Claimant's claim, defending itself against the challenge.

The Respondent, although not expressly contesting the circumstance that the plot of land in question was intended for the construction of services, commerce and private and public parking facilities, and not having contested the documents presented by the Claimant proving such fact, argued for the legality of the assessment, contending that item 28.1 of the General Stamp Duty Table is applicable to plots of land for urban construction with planned residential construction (as we shall see, at the date of the tax event, the following appeared in the property register of the property: "type of location coefficient: residential" and "Ca 1.00").

  1. The tribunal is materially competent and is regularly constituted in accordance with the LFATM.

The parties have legal personality and legal capacity, are legitimate and are legally represented.

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

II – The relevant factual matter

  1. The tribunal considers the following facts to be proven:

  2. The Claimant is the owner of the plot of land for construction called "Plot …", situated in "Expo 98 Intervention Zone", registered in the register under urban article …, parish of … and described in the Land Registry Office of Lisbon under no. ….

  3. The plot of land for urban construction in question is intended for the construction of services, commerce and private and public parking facilities, a situation which existed at the date of the tax event and had already occurred, at least since the year 2005.

  4. At the date of the tax event, the following appeared in the property register of the property: "type of location coefficient: residential" and "Ca 1.00".

  5. The Respondent assessed to the Claimant the Stamp Duty Assessment, provided for in item 28.1 of the respective General Table relating to the year 2013, dated 17.03.2014, with the amount payable of € 12,549.02, to be paid during the month of April 2014.

  6. The Tribunal's conviction regarding the determination of the factual matter was based on the documents in the proceedings, as well as the pleadings presented, it being noteworthy that the parties did not expressly manifest any disagreement regarding the factual matter alleged and the documents attached to the initial petition were not contested by the Respondent.

Regarding the proof of fact no. 2 of the facts alleged, the Tribunal's conviction is based, essentially, on the certificate issued by the Land Registry Office of Lisbon, which states that the plot of land is intended for the construction of services, commerce and private and public parking facilities (document no. 5 attached to the initial petition) and, also, the declaration for registration or updating of the urban property register, form 1, presented on 21.11.2005 and the annexed document issued by company B, which states that on the plot only the construction of services, commerce and private and public parking facilities is envisaged (documents no. 3 and 4 attached to the initial petition) and also notification from the Lisbon City Council to the Claimant dated 19.04.2010, which states the approval of the construction process with the purpose mentioned above.

These documents are suitable to establish that the supposed purpose of residential construction arising from the property register is not verified, given that, from the same, in a consistent manner, a purpose different from that mentioned in the register results, particularly since the same appears in the Request dated 15.01.2015, presented by the Claimant to the Respondent (document no. 7 attached to the initial petition), accompanied by the notification from the Lisbon City Council in the context of the process …, which also states the purpose of construction of services, commerce and private and public parking facilities, with the Respondent having made no note of any disagreement regarding the document presented or the factual matter invoked therein by the Claimant.

-III- The applicable law

  1. In light of the facts proven, there is no doubt that item 28.1 of the General Stamp Duty Table is not applicable to the property in question. Even in light of the interpretation of the same supported by the ATA, to the effect that the provision in question would permit the taxation of the plot of land for construction with planned residential construction[1], in the case at hand, having proven that the planned construction is only that of services, commerce and private and public parking facilities, it is manifest that the taxation in question is undue, the act of assessment in question being affected by the defect of violation of law, whereby the assessment cannot but be annulled.

-IV- Decision

Thus, the Arbitral Tribunal decides:

To uphold the challenge, declaring the annulment of the assessment that is the subject of these proceedings.

Value of the action: € 12,549.02 (twelve thousand five hundred and forty-nine euros and two cents) in accordance with the provisions of article 315, paragraph 2, of the Code of Civil Procedure and article 97-A, paragraph 1, letter a), of the Code of Tax Procedure and article 3, paragraph 2, of the Regulation on Costs in Arbitration Proceedings.

Costs against the Respondent, in the amount of nine hundred and eighteen euros, in accordance with paragraph 4 of article 22 of the LFATM.

Let notification be made.

Lisbon, CAAD, 9 February 2015

The Arbitrator

(Marcolino Pisão Pedreiro)

[1] A position which we do not consider to be correct given the wording of the rule resulting from Law no. 55-A/2012, of 29 October, as has been consistent case law, both from the arbitral tribunals and from the Supreme Administrative Court. See, for all, arbitration decision issued in process no. 53/2013-T of 2.10.2013 (https://caad.org.pt/tributario/) and judgment of the Supreme Administrative Court issued in process 0530/14 of 5.11.2014 (http://www.dgsi.pt).

Frequently Asked Questions

Automatically Created

Does Stamp Tax under clause 28.1 of the TGIS apply to construction land lots that are not intended for residential use?
No, Stamp Tax under clause 28.1 of the TGIS does not apply to construction land lots not intended for residential use. In process 592/2014-T, the CAAD arbitral tribunal clearly established that item 28.1, which taxes residential properties, cannot be applied to land designated for non-residential purposes such as commercial services, parking facilities, or other non-housing construction. The tribunal held that even under the Tax Authority's interpretation that this provision applies to land with planned residential construction, the tax is inapplicable when documented evidence proves the intended use is non-residential. This means construction land exclusively planned for offices, retail, industrial, or parking purposes falls outside the scope of clause 28.1 taxation.
Can a construction land lot designated for commercial services and parking be subject to the Stamp Tax levy on residential properties?
No, a construction land lot designated for commercial services and parking cannot be subject to Stamp Tax levied on residential properties under clause 28.1 TGIS. The CAAD tribunal in process 592/2014-T ruled that the actual intended use of the property prevails over administrative classifications in the property matrix. Despite the property register showing a 'residential' location coefficient, the tribunal found the Stamp Duty assessment unlawful when comprehensive documentary evidence (including Land Registry certificates, municipal construction approvals, and project documentation) consistently demonstrated the land was exclusively designated for construction of services, commerce, and parking facilities. The court emphasized that substance prevails over form—the real purpose of the construction project determines tax treatment, not merely registry classifications that may be outdated or incorrect.
What was the CAAD arbitral tribunal's decision regarding Stamp Tax on non-residential construction land in process 592/2014-T?
The CAAD arbitral tribunal in process 592/2014-T ruled in favor of the taxpayer, upholding the challenge and annulling the Stamp Tax assessment on non-residential construction land. The tribunal concluded that the €12,549.02 Stamp Duty assessment under clause 28.1 of the TGIS was undue and violated the law. The decision was based on proven facts that the construction land plot was intended exclusively for services, commerce, and public and private parking facilities, not residential construction. The tribunal awarded costs against the Tax Authority in the amount of €918 and declared the assessment null. This decision reinforced that item 28.1 of the General Stamp Duty Table does not apply to land designated for non-residential construction, establishing important precedent for similar cases involving construction land with documented non-residential purposes.
How does the property matrix classification affect the application of clause 28.1 of the General Stamp Tax Table in Portugal?
The property matrix classification does not automatically determine the application of clause 28.1 of the General Stamp Tax Table. In process 592/2014-T, the CAAD tribunal established that actual intended use documented through official records prevails over property register classifications. Although the property matrix showed 'type of location coefficient: residential' and 'Ca 1.00,' the tribunal ruled these administrative entries insufficient to justify Stamp Tax when contradicted by substantive evidence. The court relied on Land Registry certificates, municipal construction approvals from Lisbon City Council, property declarations filed since 2005, and official project notifications—all consistently indicating non-residential purpose. The Tax Authority did not contest these documents or the factual claims they supported. This precedent means taxpayers can successfully challenge assessments based solely on matrix classifications by presenting comprehensive documentary evidence of the property's true intended use and approved construction purpose.
What legal grounds can be used to challenge a Stamp Tax assessment on construction land lots before the CAAD?
Process 592/2014-T established that 'violation of law' constitutes valid legal grounds to challenge Stamp Tax assessments on construction land before the CAAD when the tax is incorrectly applied to property not meeting legal requirements. Successful challenges require documentary evidence proving the land's actual intended use differs from that assumed by the Tax Authority. Key evidence types include: (1) Land Registry Office certificates stating the property's designated purpose; (2) municipal construction approvals and notifications from city councils confirming authorized use; (3) property registration declarations (Form 1) submitted to tax authorities; (4) architectural or construction project documentation from licensed professionals; and (5) official correspondence with municipal or tax authorities regarding the property's classification. The tribunal found these documents suitable to establish that supposed residential purpose indicated in the property register was incorrect. Importantly, when the Tax Authority does not contest submitted documentary evidence, this strengthens the taxpayer's position. The arbitration process under Decree-Law 10/2011 provides an efficient forum for such challenges.