Process: 593/2014-T

Date: March 31, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

CAAD Process 593/2014-T addressed whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to undeveloped building land (terreno para construção) in Portugal. The claimant challenged a €10,434.50 Stamp Tax assessment for 2013 on urban construction land in the Azores, arguing that item 28.1 TGIS only applies to actual residential properties, not vacant building plots. The taxpayer contended that residential purpose requires an existing licensed construction or a building with normal housing use, as defined in article 6 of the CIMI (Property Tax Code). Since the land had no constructed building, it could not have the 'normal purpose of housing' and therefore fell outside the scope of item 28.1. The Tax Authority countered that the concept of 'residential purpose' (afetação habitacional) is broader than 'intended for housing' and encompasses building land. The AT argued that article 45 of CIMI applies purpose coefficients to land valuation, and the legal framework permits determining residential purpose before actual construction occurs. The Authority maintained that construction rights immediately increase property value, justifying Stamp Tax application to building plots with residential classification. The arbitral tribunal was constituted under the RJAT (Decree-Law 10/2011) framework, with proceedings conducted efficiently without oral hearings. This case highlights the critical distinction between building land classification and actual property use for Stamp Tax purposes, particularly regarding high-value properties subject to the annual Stamp Tax regime introduced for residential properties exceeding €1 million in taxable value.

Full Decision

ARBITRAL DECISION

REPORT

  1. On 30 July 2014, A…, Lda, taxpayer number …, with registered office in Ponta Delgada, at Avenue …, hereinafter referred to as the Claimant, requested the establishment of an arbitral tribunal and filed an application for arbitral decision, in accordance with paragraph a) of article 2, paragraph 1 and paragraph a) of article 10, paragraph 1 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter referred to as AT) is the Respondent.

  2. The Claimant is represented in these proceedings by her attorney, Dr. …, and the Respondent is represented by the legal advisors, Dr. … and Dr. ….

  3. The request for establishment of the arbitral tribunal was accepted by the Illustrious President of CAAD and was notified to the Respondent on 1 August 2014.

  4. Through the request for establishment of the arbitral tribunal and for arbitral decision, the Claimant seeks the annulment of the Stamp Tax assessment act, effected under item 28.1 of the TGIS, relating to the year 2013, in the amount of € 10,434.50 (ten thousand, four hundred and thirty-four euros and fifty cents), concerning the urban property consisting of land intended for urban development registered under article ..., parish of ... (...), of which she is the owner.

  5. Once the formal regularity of the application presented was verified, in accordance with the provisions of paragraph a) of article 6, paragraph 2 of the RJAT and as the Claimant did not proceed with the appointment of an arbitrator, Dr. Jorge Carita was appointed by the President of the Deontological Council of CAAD.

  6. The Arbitrator accepted the appointment made, and the arbitral tribunal was constituted on 1 October 2014, at the registered office of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, in accordance with the minutes of the constitution of the arbitral tribunal which were drawn up and are attached to these proceedings.

  7. No exceptions having been raised, there being no need for the production of additional evidence beyond what has already been incorporated in the proceedings in documentary form, no need being foreseen for the parties to correct their respective procedural documents, and the proceedings containing all necessary elements for the rendering of the decision, for reasons of procedural efficiency and expedition, of the prohibition of unnecessary acts, in light of the position expressed by the parties, manifested by the Claimant through the application of 17 December 2014, and tacitly by the Respondent (in light of its silence), the Tribunal deemed it appropriate to dispense with the holding of the meeting referred to in article 18 of the RJAT, as well as with the submission of arguments.

  8. On 17 December 2014, the Claimant submitted an application attaching to the proceedings the notification for payment of the 3rd installment of the Stamp Tax challenged, and its respective payment, which was admitted by this Tribunal.

  9. The Tribunal, in compliance with the provisions of article 18, paragraph 2 of the RJAT, set 31 March 2015 for the rendering of the arbitral decision, having warned the Claimant that she should proceed with the payment of the subsequent arbitral fee, in accordance with article 4, paragraph 3 of the Regulation of Costs in Tax Arbitration Proceedings, and communicate the same payment to CAAD.

II. The Claimant bases her claim, in summary, as follows:

The Claimant sustains the request for annulment of the Stamp Tax assessment act to which she was subject, concerning the land for construction of which she is the owner, located in the Autonomous Region of the Azores, registered under article ..., parish of ... (...), Azores, on grounds that it is illegal, as it suffers from the defect of error regarding the prerequisites for application of item 28.1 of the TGIS, insofar as:

a) She understands that "the CIMI defines 'residential urban properties' as '(…)' the buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal purpose one of these uses (paragraph 2 of article 6). Thus, the legislator makes this classification depend on a requirement of a formal nature – licensing – or in the absence thereof, on the subsidiary criterion of the normal purpose affecting the immovable property. That is to say, in the specific case, that this is typically intended for housing", therefore, "it must be a construction for which a license for use for housing has already been issued or, in the absence thereof, that has as its normal purpose housing."

b) She further argues that: "In land for construction there exists nothing more than the expectation or potentiality of an urban property, after construction, being able to have a 'residential purpose', but only when this is realized is the property able to fall within the scope of the objective scope of item 28.1 of the TGIS, as written before the amendment contained in Law 83-C/2013 of 31 December,"

c) Concluding, the Claimant, to the effect that: "as the urban property in question is land for construction, and considering that there is no construction built on it (documents 8, 9 and 10) this cannot have the normal purpose of 'housing', therefore it does not fall within the scope of the objective scope norm of item 28.1 of the TGIS, which undermines the legality of the assessment that is the subject of this arbitral proceeding."

III. In its Response the Respondent invoked, in summary, the following:

For its part, the AT comes to argue, in its response:

a) Regarding the alleged error regarding the prerequisites of the assessments, the Respondent understands that: "the notion of purpose of the urban property is found in the section relating to the valuation of immovable property, which is understandable since the valuation of the immovable property (purpose) incorporates value to the immovable property, constituting a fact of distinctive determination (coefficient) for purposes of valuation. As results from the expression '…value of authorized buildings', contained in article 45, paragraph 2 of the CIMI the legislator opted to determine the application of the methodology of valuation of properties in general, to the valuation of land for construction, being therefore applicable to them the purpose coefficient provided for in article 41 of the CIMI."

b) The Respondent argues that: "for purposes of determining the tax patrimonial value of land for construction the application of the purpose coefficient in the valuation context is clear, therefore its consideration for purposes of application of item 28 of the TGIS cannot be ignored."

c) In this sequence, the AT understands that "the concept of 'properties with residential purpose', for the purposes of item 28 of the TGIS, comprises both constructed properties and land for construction, from the outset having regard to the literal element of the norm," since "the legislator does not refer to 'properties intended for housing', having opted for the notion of 'residential purpose'. An expression different and broader whose meaning is to be found in the need to integrate other realities beyond those identified in article 6, paragraph 1 letter a) of the CIMI."

d) Moreover, it states that: "the mere constitution of a right of potential construction immediately increases the value of the immovable property in question, hence the rule contained in article 45 of the CIMI which directs the separation of the two parts of the land. (…) As for the value of the land adjacent to the implantation area, this is determined in the same terms in which the value of the free land area and the excess land area is determined for purposes of any urban property."

e) Concluding, to the effect that: "(…) much before the actual construction of the property, it is possible to ascertain and determine, by the legal framework of urbanization and construction and by the Municipal Master Plans the purpose of land for construction", therefore, the thesis of the Claimant as to the illegality of the Stamp Tax assessment challenged is lacking in merit.

f) It further invokes that "the provision of item 28 of the TGIS does not constitute any violation of the principle of equality of article 13 of the CRP."

g) Concluding, thus, to the effect that "the assessments in question constitute a correct interpretation and application of law to the facts, not suffering from the defect of violation of law, whether of the CRP or of the CIS".

IV. Case Management

The Claimant raises a preliminary question in her initial petition regarding the territorial jurisdiction of the arbitral tribunal. She understands that the tax services of the Autonomous Region of the Azores, where the property – land for construction on which the tax here in question is levied – is located, and the registered office of the Claimant, have not regionalized their tax services, contrary to what occurs in the Autonomous Region of Madeira, therefore fiscal jurisdiction is – as in mainland Portugal – of the Government of the Republic through the Tax and Customs Authority. The Respondent did not pronounce itself on this aspect, therefore it falls to the arbitral tribunal to determine whether we are or are not facing an exception of official knowledge – territorial incompetence.

Let us see.

The general orientation of the RJAT, as stated in the preamble of Decree-Law no. 10/2011, of 20 January, is to promote tax arbitration as an alternative means of dispute resolution in tax matters. This principle is corroborated by article 1 of the RJAT, which states: "This decree-law regulates arbitration as an alternative means of jurisdictional dispute resolution in tax matters".

Following the reasoning postulated by the regulation, we find article 2 of the RJAT, in the wording given by Law 64-A/2011, of 30 December, which specifies, on the objective plane, the jurisdiction of tax arbitral tribunals, to the effect that: "1 - The jurisdiction of arbitral tribunals comprises the consideration of the following claims:

a) The declaration of illegality of tax assessment acts, self-assessment acts, withholding at source and payments on account;

b) The declaration of illegality of acts fixing the taxable matter when it does not give rise to the assessment of any tax, of acts determining the taxable amount and of acts fixing tax patrimonial values;"

However, and as stated in case no. 178/2013-T, regarding the matter of territorial jurisdiction of the arbitral tribunal concerning the question that occupies us here, "the effectiveness of tax arbitral tribunals, to be innovatively established in Portuguese Law through the RJAT, does not present itself as self-sufficient, since it is dependent on the approval of a binding order", namely: Order no. 112-A/2011, of 22 March which provides, in its article 1, that: "By means of this order the following services of the Ministry of Finance and Public Administration are bound to the jurisdiction of arbitral tribunals which function, pursuant to Decree-Law no. 10/2011, of 20 January, at CAAD — Center for Administrative Arbitration:

a) The General Directorate of Tax (DGCI); and

b) The General Directorate of Customs and Special Taxes on Consumption (DGAIEC)."

In fact, the DGCI and DGAIEC were subsequently merged into a single entity, the AT - Tax and Customs Authority.

Now, considering that what is at issue is the act of assessment of Stamp Tax, effected under item 28, introduced by Law no. 55-A/2012, of 29.10 which, on the one hand, made urban properties subject to Stamp Tax under the conditions therein provided, and on the other, establishes a set of exceptions to the general rule of subjection to Stamp Tax, exceptions which are relevant and refer to a tax that is under the competence of the Tax and Customs Authority, and that article 4 of the CIS, under the heading "Territoriality", considers that, in the situations provided for in item 28 of the General Table, Stamp Tax is due whenever the properties are located in Portuguese territory.

Now, considering that the property on which the assessment act here challenged is levied is located in the Autonomous Region of the Azores, as well as the registered office of the taxpayer, we have that, from the combination of the CIS and the Law on Regional Finances, "Revenue of each autonomous region is constituted by the stamp tax owed by the taxpayers referred to in paragraph 1 of article 2 of the Stamp Tax Code which: a), which have their registered office, effective management, permanent establishment or domicile in the Autonomous Regions". (article 31, paragraph 1 of the LFR). However, paragraph 2 of article 31 of this Law on Regional Finances clarifies the rule of territorial jurisdiction provided for in paragraph 1, providing that: "In the situations referred to in the preceding number the revenues of each autonomous region are necessary adaptations, in accordance with the rules of territoriality provided for in paragraphs 1 and 2 of article 4 of the Stamp Tax Code, concerning the tax events occurring in those regions".

This means that, considering: (i) the binding of the General Directorate of Tax (current Tax and Customs Authority), by the aforementioned Order no. 112-A/2011, of 22 March, to the jurisdiction of arbitral tribunals which have as their object the consideration of claims relating to taxes whose administration belongs to them, (ii) the provision of paragraph 3 of article 27 of the CIS to the effect that: "In the case of tax owed by the situations provided for in item no. 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, with the necessary adaptations applying the rules contained in the CIMI", and (iii) article 113 of the CIMI, according to which this tax is assessed annually, in relation to each municipality, by the central services of the General Directorate of Tax (today integrated into the Tax and Customs Authority), we conclude, in accordance with the arbitral jurisprudence established in arbitral decisions no. 8/2011-T, no. 19/2011-T, no. 2/2012-T, no. 24/2011-T, no. 10/2011-T, no. 4/2012-T, no. 5/2012-T, no. 23/2012-T, no. 54/2012-T, no. 54/2012-T, no. 39/2012-T, no. 82/2012-T, no. 98/2012-T, no. 87/2012-T, no. 88/2012-T, and no. 94/2012-T1, that the administration of the tax is entrusted to the entity legally competent to (consider the act graciously and) proceed with the assessment of the tax, namely, the AT.

Furthermore, article 18 of the General Tax Law, relating to subjects of the tax relationship, provides that the active subject of the tax relationship is the entity of public law holding the right to exact the performance of tax obligations, whether directly or through a representative, and paragraph 2 of this rule establishes that, when the active subject of the tax relationship is not the State, all documents issued by the tax administration shall mention the denomination of the active subject – which in the case sub judice is the Tax and Customs Authority.

Given this, and considering that the property - land for construction on which the tax here in question is levied - and the registered office of the Claimant are located in the Azores, and that the assessment act here in question was assessed by the Finance Service of Ponta Delgada, which is an integral part of the AT – Tax and Customs Authority, we conclude regarding the jurisdiction of this tribunal, insofar as the legality of a tax whose administration is within the domain of the Tax and Customs Authority is being discussed, which bound itself to the jurisdiction of the Arbitral Tribunals, and is regularly constituted, in accordance with paragraph a) of article 2, paragraph 1 and articles 5 and 6, all of the RJAT.

The parties have legal personality and capacity, show themselves to be legitimate and are regularly represented.

No nullities, exceptions or preliminary questions exist which would prevent the consideration of the merits of the claim.

V. Matters of Fact

With relevance to the decision, the following facts are deemed proven:

  • The Claimant is a company engaged in "the trade of decorative arts, diverse furniture, decoration and flowers, toys, handicrafts, perfumery and costume jewelry, food for fish and domestic animals and trade therein, ready-to-wear clothing, chocolates and their derivatives; tourism and hotel activities, operation of accommodation and catering establishments, rural tourism, agro-tourism. Activities of maritime-tourism operators; real estate activities on its own account or on behalf of others, including the leasing of immovable property and the purchase of immovable property and resale of those acquired for this purpose; provision of technical services for administration and management." (see Doc. no. 1 attached with the initial petition)

  • The Claimant has been the owner, since 2011, of the land for construction registered in the urban property tax roll under article ..., parish of ... (…), Ponta Delgada, described in the land registry office of ... with the number … (see Docs no. 3 and 4 attached with the initial petition);

  • The land for construction was valued as such in 2013, with a tax patrimonial value (VPT) of € 1,043,450.00 (one million, forty-three thousand, four hundred and fifty euros) being determined (Doc. no. 3 attached with the initial petition);

  • In carrying out that patrimonial valuation, the AT understood it to apply a purpose coefficient, which in this case was that of "housing". (Doc. no. 3 attached with the initial petition);

  • On the land there are no constructions of any kind whatsoever, nor were any subdivision infrastructure works carried out, with no licensing having been issued or requested from the respective Municipal Council (see Docs. no. 8 and 9 attached with the initial petition).

  • In April, and then in July 2014, the Claimant was notified to proceed with payment of the 1st and 2nd installment, respectively, of the Stamp Tax assessment act relating to the year 2013, effected under item no. 28.1 of the General Table of Stamp Tax, in the amount of € 6,956.32 (six thousand nine hundred and fifty-six euros and thirty-two cents) (see Docs. no. 5 and 6 attached with the initial petition).

  • In November 2014 she was notified to proceed with payment of the 3rd installment of the Stamp Tax relating to the year 2013, effected under item no. 28.1 of the General Table of Stamp Tax, in the amount of € 3,478.16 (three thousand, four hundred and seventy-eight euros and sixteen cents). (see Document attached with application submitted by the Claimant on 17.12.2014);

  • The Claimant proceeded with the payment of the 3 installments of Stamp Tax relating to the year 2013 here challenged, on 30.04.2014, 30.07.2014 and 27.11.2014, respectively, in a total amount of € 10,434.50 (ten thousand, four hundred and thirty-four euros and fifty cents); (see Doc. no. 5 and 7 attached with the initial petition and document attached with the application submitted by the Claimant on 17.12.2014)

VI. Reasoning on Matters of Fact

For the conviction of the Arbitral Tribunal, regarding the proven facts, the documents attached to the proceedings were relevant, as well as the administrative file, all analyzed and weighed in conjunction with the pleadings, from which consistency results regarding the factuality presented by the Claimant in the request for arbitral decision.

VII. Facts Deemed Not Proven

There are no facts deemed not proven, because all facts relevant to the consideration of the claim were deemed proven.

VIII. Legal Grounds

In the present case, the question arises as to whether, in the year 2013, land for construction is subject to stamp tax, as provided for in item no. 28 of the TGIS;

Let us see.

I – Classification of land for construction within the scope of item 28.1 of the TGIS

  1. Law no. 55-A/2012, of 29 October (which we shall hereinafter refer to as Law no. 55-A/2012, of 29.10 or simply Law) made amendments, among others, to various articles of the Stamp Tax Code, more specifically to 12 of its articles. We shall not pronounce ourselves on all of them, but only on those we consider most relevant for the analysis of the case sub judice.

  2. Thus, in the scope of incidence provided for in article 1 of the CIS, the legislator determined that, in addition to acts, contracts, documents, securities, papers and other facts provided for in the General Table, including gratuitous transfers of property, stamp tax would also apply to "legal situations", now also provided for in the TGIS.

  3. The new wording of paragraph 4 of article 2, came to determine that for these "legal situations", the taxpayers are those referred to in article 8 of the CIMI, that is to say, in most cases, the tax is owed by the owner of the property on 31 December of the year to which the tax relates.

  4. In these "legal situations", the tax constitutes a burden on the taxpayer provided for in paragraph 4 of article 2 of the CIS, that is to say, the owner of the property identified above (general rule), by referral for application of the rule of article 8 of the CIMI.

  5. In these "legal situations", the application of the principle of territoriality causes the tax to be owed whenever the properties are located on national territory, in accordance with the addition to article 4 of the CIS of its paragraph 6, by Law no. 55-A/2012.

  6. As regards the birth of the tax obligation, for these new "legal situations" it is considered constituted "… at the moment and in accordance with the rules provided for in the CIMI, with the necessary adaptations" (See letter u) of article 5 of the CIS, added by Law no. 55-A/2012, of 29 October), which refers us to the rules provided for in articles 9 and 10 of the CIMI.

  7. Now, the fundamental amendment, which conditions all the others, is contained in article 4 of Law no. 55–A/2012, which adds to the General Table of Stamp Tax (TGIS), attached to the Stamp Tax Code (CIS), a new item, no. 28, with the following wording:

"28. Ownership, usufruct or right of superficies of urban properties whose tax patrimonial value shown in the tax roll, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or greater than (euros) 1,000,000 - on the tax patrimonial value used for IMI purposes:

28.1 For property with residential purpose ------------------------------------- 1%

28.2 For property, when the passive subjects that are not natural persons are residents 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%"

  1. Thus, in accordance with the aforementioned item, and insofar as it concerns us, stamp tax applies only to the ownership, usufruct, right of superficies of:

a) "urban properties,

b) with residential purpose,

c) and whose tax patrimonial value shown in the tax roll, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or greater than (euros) 1,000,000;" (underlined in original)

  1. In truth, the greatest difficulty with which the taxpayer has been confronted, given the amendments introduced by Law no. 55-A/2012, of 29.10, with expression in the case sub judice, has manifested itself in the interpretation of the expression "property with residential purpose".

  2. A concept which determines, or does not determine, the application of land for construction to item 28.1 of the TGIS, whose assessment is here being challenged.

  3. Now, the obstacle arises from the absence of a definition of the concept "property with residential purpose" in tax legislation, specifically in the Code of IMI, to which the CIS refers, as subsidiary law, in accordance with its article 67, introduced by Law no. 55-A/2012, 29.10.

  4. In truth, the CIMI provides, in its articles 2 to 6, as to: the concept of property (article 2), defines what should be understood as rural properties (article 3), what should be understood as urban properties (article 4); what should be understood as mixed properties (article 5) and enumerates the species of urban properties (article 6), to whose wording we refer.

  5. However, none of the legal norms identified above admits the concept of "property with residential purpose", therefore, and in accordance with the essential rules of legal hermeneutics and interpretation of tax laws, we shall have to resort firstly to the letter of the law, presuming that the legislator expressed himself appropriately, and then to its systematic integration with the norms contained in the CIMI, without, however, neglecting the intention or spirit of the legislator.

  6. Thus, the question arises: what did the legislator intend when drafting item 28.1 of the TGIS, by indicating as a prerequisite for its application "property with residential purpose". Did the legislator intend to encompass in this concept land for construction – the matter that occupies us here –?

  7. Was it the legislator's intention to interpret the expression "property with residential purpose" in the sense that the Respondent makes, that "the concept of properties with residential purpose", for purposes of item 28 of the TGIS, comprises both constructed properties and land for construction, from the outset having regard to the literal element of the norm. Note that the legislator does not refer to "properties intended for housing", having opted for the notion of "residential purpose". An expression different and broader whose meaning is to be found in the need to integrate other realities beyond those identified in article 6, paragraph 1 letter a) of the CIMI."?

  8. Or, rather and, as the Claimant refers, that "properties with residential purpose" are those that "have actual residential use, through licensing or their normal purpose."?

Let us see.

  1. For clarity in the exposition, and regarding the matter of the concept of "properties with residential purpose" we recall what was held in the arbitral decision rendered in case no. 53/2013 T, with which we agree, according to which: "The concept most closely corresponding to the literal content of this expression used is manifestly that of «residential properties», defined in paragraph 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 purpose residential purposes. (…) However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that which is extracted from paragraph 2 of article 6 of the CIMI points in the direction of an intention not to use the same concept."

  2. Furthermore, and in this logical sequence, there is the position taken in the Decision of the Superior Administrative Court rendered in appeal no. 317/14, which we accompany, to the effect that: "residential purpose" always appears in the Code of IMI referred to "buildings" or "constructions", existing, authorized or planned, since only these can be inhabited, which is not the case with land for construction, which does not have, in itself, conditions for such, not being susceptible of being used for housing unless and when a construction authorized and planned for them is built thereon (but in that case they would no longer be "land for construction" but another species of urban property – "residential", "commercial, industrial or for services" or "other" – article 6 of the CIMI)".

  3. Thus being, following this path, with which we fully agree, it seems clear that the thesis of the Respondent regarding the possible connection of the concept of "purpose for housing" to land for construction, without any construction susceptible of being inhabited, is lacking in merit.

  4. It should also be noted that the imprecision of the concept under consideration – "property with residential purpose" - was amended by the State Budget for 2014, approved by Law no. 83-C/2013, 31.12, giving new wording to item 28 of the TGIS, now specifying its scope and objective scope with the use of objective concepts legally defined in article 6 of the CIMI.

  5. In truth, this amendment – to which the legislator does not attribute an interpretive character – reinforces the unequivocal character, for the future, that land for construction whose construction, authorized or planned, is for housing is encompassed within the scope of item 28 of the TGIS (provided that its respective tax patrimonial value is equal to or greater than € 1,000,000.00), saying nothing or clarifying regarding the situations prior to this legislative amendment, namely that which is sub judice, but in accordance with the provision of article 103, paragraph 3 of the CRP and article 12 of the LGT, out of respect for the principle prohibiting retroactivity of taxes, it is to be concluded unequivocally that, in the year 2013, land for construction was not included in the provision of item 28 of the TGIS.

  6. Furthermore, the Respondent invokes, even further sustaining its position, that "the notion of purpose of the urban property is found in the section relating to the valuation of immovable property, which is understandable since the valuation of the immovable property (purpose) incorporates value to the immovable property, constituting a fact of distinctive determination (coefficient) for purposes of valuation." Particularly, because and "as results from the expression «---value of authorized buildings», contained in article 45, paragraph 2 of the CIMI, the legislator opted to determine the application of the methodology of valuation of properties in general, to the valuation of land for construction, being therefore applicable to them the purpose coefficient provided for in article 41 of the CIMI".

  7. Concluding, to the effect that: "(…)for purposes of determining the tax patrimonial value of land for construction the application of the purpose coefficient in the valuation context is clear, therefore its consideration for purposes of application of item 28 of the TGIS cannot be ignored."

  8. Now, the truth is that even here it does not seem to us appropriate to consider and accept the legitimacy or legality of the stamp tax assessment on land for construction in the terms alleged by the Respondent, because, and as stated in the arbitral decision rendered in case no. 53/2013-T, to which we adhere in its entirety, "With respect to article 45 of the CIMI, it has no relation whatsoever to the classification of properties, merely indicating the factors to be considered in the valuation of land for construction."

  9. On this matter, a pronouncement has already been made at CAAD in case no. 158/2013-T, with which we agree and adhere, to the effect that: "It is true that the CIMI determines the application, to the valuation of land for construction, of the valuation methodology applicable to constructed buildings, incorporating for this purpose, in the value of the land, the estimated value of the building to be constructed; and that this value is determined, in turn, by the type of purpose provided for the properties to be built. Put in simpler terms, the law (CIMI) says that to determine the tax patrimonial value of land for construction, one incorporates in this a part of the estimated value of the buildings to be built; and to estimate the value of the buildings to be built, one takes into account the purpose provided for the same. Contrary to what the AT argues, it follows precisely from the letter of these provisions the inapplicability of the concept of "purpose" to land for construction. The purpose that is taken into account, for purposes of valuation, even of land for construction, is always and only the purpose of the buildings to be built. The purpose provided for the buildings to be built influences the tax patrimonial value susceptible to taxation of land for construction, but nothing more. From the norm relating to the determination of the value of immovable property which determines that, in the value of land for construction the estimated value of buildings to be built is incorporated, which, in turn, is influenced by the future purpose of the same buildings, one cannot extract that the purpose in question is a purpose of the lands themselves, and this for two reasons: The first, because this interpretation would be contrary to the very literality of the provisions which direct one to take into account, in the valuation of land for construction, the purpose of the properties to be built; And the second, because the manner in which the law directs one to value a given patrimonial reality cannot be determinative of the nature or of the legal qualification of the same reality, having in view, above all, the principle of typicality of tax scope norms. The fact that the law directs one to apply to a patrimonial reality the same valuation methodology that is applied to another different reality does not cause the first reality to share the nature of the second. Thus, if it is true that the value of authorized or planned buildings influences the actual value of land for construction, and therefore that value must be reflected in the tax patrimonial value of the same land, it does not follow therefrom that land comes to have residential purpose by virtue of planned construction, thereon, of residential properties, extracting this distinction clearly from the very provisions on valuation of the CIMI."

  10. Thus being, what matters for purposes of application of item no. 28.1 of the TGIS is that the property be urban, that it have a VPT equal to or greater than € 1,000,000.00 and that it be actually dedicated to housing, which does not occur with the land for construction, whose assessment is challenged in these proceedings.

  11. This is what results from the jurisprudence of the arbitral tribunals[1] and of the higher tax courts[2] which have been interpreting item no. 28.1 of the TGIS and its prerequisites for application, and with which we fully agree.

  12. To be noted, lastly, the position of the Supreme Administrative Court, the summary of one of whose Decisions referenced here is transcribed and which has been the orientation in the various decisions rendered in that esteemed Court, regarding the illegality of stamp tax under item 28.1 of the TGIS on land for construction:

"Having the legislator not defined the concept of '(urban) properties with residential purpose', and resulting from article 6 of the Municipal Property Tax Code (subsidiarily applicable to Stamp Tax provided for in 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 application of Stamp Tax (Item 28.1 of the TGIS, in the wording of Law no. 55-A/2012, of 29 October), as urban properties with residential purpose."

  1. Thus being, the AT could never have subjected the present Claimant to stamp tax, under item 28 of the TGIS, of the year 2013, which is now being challenged, and therefore the same must be annulled, as illegal.

DECISION

In accordance with the foregoing, the following is decided:

  1. The Stamp Tax assessment act challenged by the Claimant, relating to the year 2013, is hereby annulled.

  2. The Tax and Customs Authority is hereby ordered to reimburse the Claimant the amount that was paid.

Value of the Case

The value of the case is set at € 10,434.50 (ten thousand, four hundred and thirty-four euros and fifty cents) in accordance with article 97-A, paragraph 1, a), of the CPPT, applicable by force of letters a) and b) of article 29, paragraph 1 of the RJAT and of paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

Costs

Costs charged to the Respondent in accordance with article 22, paragraph 2 of the RJAT, article 4 of the RCPAT, and Table I attached to the latter, which are set in the amount of € 918.00.

Notification ordered.

Lisbon, 31 March 2015

The Arbitrator

(Jorge Carita)

[1] Decisions of CAAD rendered in cases no. 50/2013-T, no. 132/2013-T, no. 181/2013-T, no. 183/2013-T, no. 185/2013-T, no. 248/2013 T, among others

[2] Decisions of the STA rendered in cases no. 046/14, of 14.05.2014; no. 0271/14, of 14.05.2014; no. 0395/14, of 28.05.2014, 01871/13, of 14.05.2014, 055/14, of 14.05.2014, among others.

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS on building land in Portugal?
The Stamp Tax (Imposto do Selo) under item 28.1 of the TGIS is an annual property tax introduced to apply to urban residential properties with a taxable patrimonial value exceeding €1 million. The tax rates are progressive: properties valued between €1-2 million are taxed at 0.7%, and those exceeding €2 million at 1.0% of their taxable value. The key controversy in Portuguese tax law is whether this provision applies to undeveloped building land (terrenos para construção) classified for residential purposes, or only to actual constructed residential properties. The Tax Authority interprets 'residential purpose' broadly to include building plots with residential classification under municipal planning, while taxpayers argue it should only apply to existing buildings with actual housing use.
Can a taxpayer challenge a Stamp Tax assessment on urban construction land through CAAD arbitration?
Yes, taxpayers can challenge Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa) arbitration proceedings. Under the RJAT (Legal Framework for Arbitration in Tax Matters - Decree-Law 10/2011), taxpayers may request arbitration as an alternative to judicial courts. The procedure involves: (1) filing a request for establishment of an arbitral tribunal with CAAD within the legal deadline; (2) payment of the initial arbitration fee; (3) appointment of an arbitrator (by the taxpayer or by CAAD's President if the taxpayer doesn't choose); (4) constitution of the arbitral tribunal; (5) submission of the tax authority's response; (6) optional hearing or written proceedings; and (7) issuance of the arbitral decision, which has the same force as a court judgment. This alternative dispute resolution mechanism provides faster resolution than traditional tax courts.
How is Verba 28.1 of the General Stamp Tax Table applied to terrenos para construção (building plots)?
The application of item 28.1 TGIS to building plots (terrenos para construção) is highly contentious. The Tax Authority's position is that building land with residential classification falls within the scope based on: (1) article 45 of CIMI, which applies purpose coefficients to land valuation including the residential purpose coefficient; (2) the broad interpretation of 'residential purpose' (afetação habitacional) as distinct from 'intended for housing'; and (3) the principle that construction rights immediately add value to land, justifying taxation before actual construction. Taxpayers counter-argue that article 6(2) of CIMI defines residential urban properties as buildings or constructions licensed for housing or having normal housing purpose, which undeveloped land cannot possess. The debate centers on whether 'residential purpose' requires physical habitation capability or merely planning/classification for future residential use. This interpretation significantly impacts developers and landowners holding high-value urban plots.
What is the procedure for requesting arbitral proceedings under the RJAT (Decree-Law 10/2011) against the Tax Authority?
The RJAT procedure for requesting arbitral proceedings against the Tax Authority involves several steps: (1) Submit a written request for establishment of an arbitral tribunal to CAAD, identifying the contested tax act and grounds for challenge; (2) Pay the initial arbitration fee according to the value of the claim; (3) The CAAD President verifies formal regularity and notifies the Tax Authority; (4) The taxpayer may appoint an arbitrator, or CAAD appoints one if no choice is made; (5) The tribunal is formally constituted; (6) The Tax Authority submits its response; (7) Evidence may be produced and hearings held, though tribunals often dispense with hearings for efficiency when proceedings contain sufficient documentary evidence; (8) Written allegations may be submitted; (9) The arbitrator renders a decision within the statutory deadline (extendable); (10) Payment of remaining arbitration fees. The entire process typically concludes within 6-12 months, much faster than traditional litigation.
What was the outcome of CAAD Process 593/2014-T regarding Stamp Tax on building land valued above €1 million?
While the complete decision text is not provided, the case record shows the claimant sought annulment of a €10,434.50 Stamp Tax assessment on building land in the Azores, arguing that undeveloped construction land cannot have 'residential purpose' under item 28.1 TGIS as it existed before the 2014 amendment (Law 83-C/2013). The arbitral tribunal, constituted with Dr. Jorge Carita as arbitrator, proceeded without oral hearings for procedural efficiency. The central legal question was whether the CIMI definition of 'residential urban properties' requiring actual buildings or constructions with housing purpose excludes vacant building plots from Stamp Tax liability. The Tax Authority defended the assessment based on CIMI valuation rules applying residential purpose coefficients to construction land. The case represents an important precedent on the scope of high-value property taxation in Portugal, particularly affecting the real estate development sector and landowners in the Azores and other regions with valuable undeveloped urban land.