Process: 596/2014-T

Date: March 11, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 596/2014-T addressed whether building land (terreno para construção) is subject to stamp duty under Entry 28 of the General Stamp Duty Table (TGIS), added by Law 55-A/2012. The taxpayer, a real estate company, challenged a €12,661.20 stamp duty assessment on building land in Guimarães with a patrimonial tax value (VPT) exceeding €1,000,000. Entry 28 TGIS applies to 'urban immovables with residential purpose' valued at €1,000,000 or more. The central legal question was whether building land qualifies as property with 'residential purpose' (afetação habitacional). The taxpayer argued that undeveloped building land cannot be considered residential property, as there is merely a possibility or expectation of future residential use after construction. The Tax Authority (AT) contended that building land has the legal nature of residential property because Article 45 of the Property Tax Code (CIMI) applies the residential purpose coefficient from Article 41 CIMI when calculating VPT for building land. The AT argued that 'residential purpose' is a broader classification than the specific urban property types listed in Article 6(1) CIMI, which distinguishes between residential buildings, commercial/industrial/services buildings, building land, and others. This case examines whether the application of residential valuation coefficients during VPT calculation is sufficient to classify building land as having residential purpose for stamp duty purposes, raising important questions about the interpretation of tax incidence norms and the relationship between CIMI valuation methodology and stamp duty legislation.

Full Decision

ARBITRAL DECISION

I – REPORT

1 A – Real Estate Company Ltd., with registered office at Street … in the area of the 2nd Finance Services office of the municipality of Guimarães, NIPC[1] … filed a request for constitution of an arbitral tribunal, pursuant to the provisions of subsection a) of no. 1 of article 2, of no. 1 of article 3 and subsection a) of no. 1 of article 10, all of RJAT[2], whereby the AT[3] is requested, for the purpose of annulment of tax act relating to stamp duty on the property of an immovable registered in the land register under urban article no. … of the parish of … municipality of Guimarães concerning a plot of land for construction, as per liquidation note 2014 … in the amount of € 12,661.20, duly notified to the applicant who, not accepting the taxation, as considering it manifestly unlawful, filed the present request.

2 Which was filed without exercing the option to designate an arbitrator, and was accepted by His Excellency the President of CAAD[4] and automatically notified to the AT on 01/08/2014.

3 Pursuant to the terms and for the purposes of the provisions of no. 2 of article 6 of RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the legally applicable deadlines, on 16/09/2014, Arlindo José Francisco was appointed arbitrator of the tribunal, who communicated his acceptance of the appointment within the legally prescribed deadline.

4 The tribunal was constituted on 01/10/2014 in accordance with the provisions contained in subsection c) of no. 1 of article 11 of RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December.

5 With its request, the applicant seeks the annulment of the liquidation acts in question, on the grounds that such liquidation is unlawful, given that it violates article 1 of CIS[5] and entry 28.1 of TGIS[6], as amended by Law 55-A/2012 of 29 October.

6 It supports its position, in summary, on the grounds that plots of land for construction in no way can be considered immovables with residential purpose, there being an error in the factual assumptions in the AT's procedure.

7 In its reply, the respondent considers that entry 28 of TGIS as amended by Law 55-A/2012 determines the taxation of plots of land for construction, since these have the legal nature of immovables with residential purpose, considering that in the determination of its VPT[7] account is taken of the residential purpose coefficient, provided for in article 41 of CIMI[8].

8 That the legislator does not speak of immovables intended for habitation, but of residential purpose, an expression far more extensive, aimed at integrating other realities beyond those identified in article 6, no. 1 subsection a) of CIMI.

9 In this perspective, it considers that the liquidation in question should be maintained as it reflects a correct interpretation and application of law to the facts, and does not violate the Law nor does it contain error as to the factual assumptions.

II – PRELIMINARY EXAMINATION

The tribunal has been regularly constituted and is competent ratione materiae, in accordance with article 2 of RJAT.

The parties have legal personality and legal capacity, show themselves to be legitimate and are regularly represented in accordance with articles 4 and 10, no. 2 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

The respondent in its reply raised a preliminary objection which is not, in the tribunal's view, an impediment to the examination and decision on the request, whereby the tribunal refrains from ruling on it.

Considering that the applicant waived the witness listed, the expressed will of the parties regarding the non-necessity of holding the meeting provided for in article 18 of RJAT, as well as the production of written or oral submissions and that the case does not suffer from nullities and no issues were raised that prevent the examination of the merits of the case, it is necessary to decide.

III – REASONING

1 – The questions to be resolved, with interest for the record, are as follows:

a) Whether plots of land for construction, to which, in the determination of their VPT, the residential purpose coefficient was applied and a value equal to or greater than € 1,000,000.00 was determined, fall within the scope of the stamp duty subjection provided for in entry 28 of TGIS, added by Law no. 55-A/2012, of 29 October.

b) If not, whether the liquidation of stamp duty in the present case should be annulled.

2 – Statement of Facts

The facts considered relevant and proven on the basis of the evidence contained in the record are as follows:

a) The applicant was, in the year 2012, the owner of a plot of land for construction registered, at the time, in the urban land register of the parish of …, municipality of Guimarães, under article ….

b) No construction was carried out on said plot and an alteration to the subdivision was authorized.

c) The AT levied stamp duty pursuant to entry 28 of TGIS concerning the year 2012 and the immovable in question in the amount of € 12,661.20.

d) The applicant did not furnish proof of payment of the stamp duty in question.

3 – Statement of Law

3.1 - Regarding Stamp Duty:

a) The applicant, in its request for arbitral ruling considers, firstly and in summary, the inapplicability of entry 28 of TGIS, as amended by Law 55-A/2012 of 29 October, to plots of land for construction.

b) It argues that plots of land for construction cannot be considered immovables with residential purpose, relying on the provisions contained in article 1 no. 1 of CIS and entry 28 of TGIS, as amended by Law 55-A/2012, already cited.

c) It considers there to be merely a possibility or expectation that the immovable, after construction, could have residential use and that the expression "residential purpose" of the Law cannot be confused with that expectation.

d) It refers to the Arbitral Decision rendered in case 42/2013.

e) For its part, the respondent understands that plots of land for construction have the legal nature of immovables with "residential purpose" since in the determination of their VPT account is taken of the residential purpose coefficient, provided for in article 41 of CIMI, and cites, in this sense, Judgment 04950/11 of 14/02/2012 of TCA[10] Sul which considers that the regime for valuation of the patrimonial value of plots of land for construction is established in article 45 of CIMI, being equal to that of constructed buildings, although based on the building to be constructed, taking as basis the project.

f) It understands that the expression "residential purpose" of entry 28 of TGIS appeals to a classification that overlaps the types of urban immovables provided for in no. 1 of article 6 of CIMI and that the legislator in using it intended to integrate other realities beyond those mentioned in the normative provision of CIMI, concluding that the liquidations in question should be maintained and the AT absolved of the request.

g) Having summarized the positions of the applicant and the respondent, we shall proceed below to an analysis of the norm of incidence of stamp duty on urban immovables with residential purpose.

h) Entry 28 of TGIS, added by Law no. 55-A/2012, subjects to stamp duty urban immovables with residential purpose whose VPT, ascertained pursuant to CIMI, is equal to or greater than € 1,000,000.00.

i) The CIS refers to CIMI the regulation of the concept of immovable and of matters not regulated as to entry 28 of TGIS (see no. 6 of article 1 and no. 2 of article 67, both of CIS).

j) If we look at article 6 of CIMI, it establishes therein that urban immovables are divided into residential, commercial, industrial or service, plots of land for construction and others.

k) From its no. 2 it is drawn that urban residential immovables "are buildings or constructions licensed for that purpose or, in the absence of license, that have such as their destination" and its no. 3 tells us that plots of land for construction "are those situated within or outside an urban agglomeration, for which a license or authorization for subdivision or construction operation has been granted, and also those that have been declared as such in the acquisition document…".

l) From these concepts we can already conclude the existence of autonomy between urban immovables "residential" and urban immovables "plots of land for construction".

m) The legislator on stamp duty, in establishing the taxation of urban immovables "with residential purpose", did not concretize the concept, so that we must, by force of the referral, go to CIMI and this, as already seen, distinguishes them in relation to plots of land for construction.

n) The expression "residential purpose" is in no way evident in plots of land for construction, nor can it, as the respondent contends, be understood as an integrating expression of other realities.

o) We follow the position advocated in case 49/2013 which is transcribed: "The expression 'with residential purpose' suggests, in a simple reading, an idea of real and present functionality. From the norm in question it is not possible to extract, by interpretation, that, as stated in the respondent's reply, the legislator's choice of that expression is intended to integrate 'other realities beyond those identified in article 6, no. 1, subsection a), of CIMI.' Such interpretation has no legal support, in light of the principles contained in articles 9 of the Civil Code and 11 of the General Tax Law. Indeed, if the legislator intended to encompass within the scope of incidence of the tax other realities than those resulting from the classification governed by article 6 of CIMI, it would have said so expressly. But it does not, instead referring, as a whole, to the concepts and procedures provided for in the said Code. On the other hand, the respondent's position cannot be accepted either in the sense that the concept of 'residential purpose' derives from the provision of article 45 of CIMI. This article refers to the rules applicable in determining the patrimonial value of plots of land for construction establishing that this is what results from the value of the area of implantation of the building to be constructed added to the land adjacent to the implantation. In fixing the value of that area a percentage varying between 15% and 45% of the value of the authorized or foreseen buildings is considered. According to the respondent, in fixing the value of the authorized or foreseen buildings on the plot of land to be valued, the coefficients applicable in determining the tax patrimonial value are used, namely the residential purpose coefficient provided for in article 1 of that Code. Concluding from this that the consideration of such a coefficient, dependent on the type of use foreseen for the immovable to be built on the land, will be determining for purposes of application of Entry 28 of TGIS. This conclusion is supported on the assumption that the expression "immovables with residential purpose" appeals to a classification that overlaps the types provided for in no. 1 of article 6 of CIMI. However, such a conclusion cannot be followed. [...]. In these terms, resulting from article 6 of CIMI a clear distinction between urban immovables "residential" and "plots of land for construction", these cannot be considered, for purposes of incidence of stamp duty, as "immovables with residential purpose"."

p) The legislator, when intending to tax plots of land for construction in stamp duty, revisited entry 28 of TGIS, through Law no. 83-C/2013, of 31 December, and introduced them there, which proves that in the formulation of Law no. 55-A/2012, plots of land for construction were excluded from taxation in stamp duty by entry 28 of TGIS and now, through Law no. 83-C/2013, they began to be taxed, so it seems clear to us that the legislator considers that the expression "residential purpose" did not include plots of land for construction.

q) Nor should it be said that the fact that article 45 of CIMI provides for the application of a residential purpose coefficient in determining the VPT of plots of land for construction will be a sufficient condition, in itself, to allow their inclusion in the norm of incidence of entry 28 as added by Law no. 55-A/2012, nor should it alter their nature as plots of land for construction, given that what is at issue here is only to ascertain the VPT which will be influenced by the type of buildings to be carried out (which, it should be said, are not always implemented).

r) Judgment 04950/11 of 14/02/2012 of TCA Sul cited by the AT which considers that the regime for valuation of the patrimonial value of plots of land for construction is established in article 45 of CIMI, being equal to that of constructed buildings, although based on the building to be constructed, taking as basis the project, is a finding that is confined to the determination of VPT and nothing more than that.

s) Now, as already seen, from article 6 of CIMI results a clear distinction between residential immovables and plots of land for construction, which prevents these from being taxed in stamp duty in the terms sought by the respondent.

t) In this sense various arbitral decisions have already been rendered, namely cases 42, 48, 49 and 75, all of 2013 and by the STA.

u) The taxation questioned here only occurred due to error attributable to the AT's services, since entry 28 of TGIS, as amended by Law 55-A/2012, did not allow the taxation in stamp duty of plots of land for construction, so it should be annulled with all legal consequences arising therefrom.

IV – DECISION

Given the foregoing, the tribunal decides as follows:

a) To declare that plots of land for construction are excluded from stamp duty taxation provided for in entry 28.1 of TGIS, as amended by Law 55-A/2012 of 29 October.

b) Consequently to declare the arbitral request well-founded, owing to error attributable to the services, annulling the acts of liquidation of stamp duty concerning the year 2012 in the amount of € 12,661.20, with all consequences arising therefrom, since the liquidation in question is manifestly unlawful as it violates the said norm of incidence.

c) To set the value of the case at € 12,661.20 in accordance with the provisions contained in article 299, no. 1, of CPC[11], article 97-A of CPPT[12], and article 3, no. 2, of RCPAT[13].

Costs to be borne by the respondent, pursuant to no. 4 of article 22 of RJAT, setting the respective amount at € 918.00 in accordance with the provisions of table I referred to in article 4 of RCPAT.

Notify.

Lisbon, 11 March 2015

Text drawn up by computer, pursuant to the terms, pursuant to article 131, no. 5 of CPC, applicable by referral of article 29, no. 1, subsection e) of RJAT, with blank verses and reviewed by the tribunal.

The drafting of this decision is governed by the orthography prior to the orthographic agreement.

The arbitrator

Arlindo José Francisco

[1] Acronym for Tax Identification Number
[2] Acronym for Legal Regime of Arbitration in Tax Matters
[3] Acronym for Tax Authority and Customs Authority
[4] Acronym for Centre for Administrative Arbitration
[5] Acronym for Stamp Duty Code
[6] Acronym for General Table of Stamp Duty
[7] Acronym for Tax Patrimonial Value
[8] Acronym for Municipal Property Tax Code
[9] Acronym for Stamp Duty
[10] Acronym for Central Administrative Court
[11] Acronym for Civil Procedure Code
[12] Acronym for Code of Procedure and Tax Procedure
[13] Acronym for Costs Regulation in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Is stamp tax (Imposto do Selo) due on building land (terreno para construção) under Verba 28 of the TGIS?
The determination of whether stamp tax is due on building land under Entry 28 TGIS depends on whether such land qualifies as property with 'residential purpose' (afetação habitacional). Entry 28, added by Law 55-A/2012, subjects urban immovables with residential purpose valued at €1,000,000 or more to stamp duty. The Tax Authority argues that building land falls within this category because Article 45 CIMI applies residential valuation coefficients when calculating patrimonial tax value (VPT). However, taxpayers contend that undeveloped building land cannot have residential purpose as there is only a possibility of future residential use after construction, not actual residential allocation.
Does building land qualify as property with 'housing allocation' (afectação habitacional) for stamp tax purposes?
Building land does not automatically qualify as property with 'housing allocation' for stamp tax purposes merely because residential valuation coefficients are applied during VPT calculation under CIMI. Article 6 of CIMI explicitly distinguishes between different urban property types: residential buildings, commercial/industrial/service buildings, building land (terrenos para construção), and others. The expression 'residential purpose' in Entry 28 TGIS refers to the actual use or destination of property, not the methodology used for tax valuation. Building land lacks actual residential purpose until construction occurs and the property becomes a residential building. The application of valuation coefficients is a technical calculation method that does not transform the legal nature of building land into residential property.
Can the Tax Authority (AT) apply the housing coefficient under Article 41 CIMI to classify building land as residential?
While the Tax Authority applies the housing coefficient under Article 41 CIMI to calculate VPT for building land (following Article 45 CIMI which values building land based on projected construction), this valuation methodology does not automatically classify building land as 'residential' for Entry 28 TGIS purposes. The CIMI valuation regime is distinct from the stamp duty incidence norm. Article 6 CIMI clearly categorizes building land separately from residential buildings. The fact that building land is valued using residential coefficients reflects anticipated future use, not current residential purpose. Taxpayers can challenge such classifications through CAAD arbitral proceedings.
What is the CAAD arbitral tribunal procedure for challenging stamp tax assessments on real estate?
To challenge stamp tax assessments on real estate through CAAD, taxpayers must file a request for constitution of an arbitral tribunal under Article 2(1)(a) and Article 10(1)(a) of the Legal Regime for Tax Arbitration (RJAT). The process involves: (1) filing the arbitration request without prior administrative claim; (2) appointment of arbitrator(s) by the CAAD President; (3) tribunal constitution within legally prescribed deadlines; (4) submission of reply by the Tax Authority; (5) evidence production and hearings if necessary; and (6) issuance of arbitral decision. In Process 596/2014-T, the tribunal was constituted on October 1, 2014, following the appointment of arbitrator Arlindo José Francisco. Parties may waive witness testimony and oral hearings, proceeding directly to written decision.
What was the outcome of CAAD Process 596/2014-T regarding Verba 28.1 TGIS and building land taxation?
Process 596/2014-T examined whether Entry 28.1 TGIS applies to building land valued over €1,000,000. The taxpayer contested a €12,661.20 stamp duty assessment on building land in Guimarães for 2012, arguing that building land cannot be considered property with 'residential purpose' as required by Entry 28 TGIS added by Law 55-A/2012. The case raised fundamental questions about the intersection of CIMI valuation methodology and stamp duty incidence: whether the application of residential coefficients under Articles 41 and 45 CIMI during VPT calculation is sufficient to classify building land as residential for stamp duty purposes. The tribunal analyzed whether 'residential purpose' encompasses building land or refers exclusively to constructed residential buildings per Article 6 CIMI, with implications for all building land valued over the €1,000,000 threshold.