Process: 600/2015-T

Date: February 2, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision (Process 600/2015-T) addresses whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to building land valued over €1 million. The claimant owned urban property in Mafra registered as 'land for construction' with a taxable value of €1,074,362.38. The Tax Authority assessed Stamp Tax of €10,743.62 for 2012 under item 28.1 TGIS, which imposes a 1% tax on 'properties with residential allocation' valued at or above €1,000,000. The claimant challenged this assessment, arguing that building land lacks residential allocation and therefore falls outside the scope of item 28.1. The Tax Authority contended the property had the legal nature of property with residential allocation. The arbitral tribunal examined extensive jurisprudence from both CAAD and the Supreme Administrative Court. The STA established in case 0676/14 that since the legislator did not define 'properties with residential allocation,' and Article 6 of the IMI Code distinguishes between 'residential urban properties' and 'land for construction,' the latter cannot be considered as having residential allocation for Stamp Tax purposes. This interpretation was consistently upheld across numerous CAAD decisions (42/2013-T, 49/2013-T, 53/2013-T, among others) and multiple STA rulings. The claimant also raised subsidiary constitutional arguments that taxing building land under item 28.1 violates equality principles under Articles 13 and 104(3) of the Portuguese Constitution. Additionally, the claimant requested reimbursement of the tax paid plus compensatory interest under Article 43 of the General Tax Law. Based on the established jurisprudence distinguishing land for construction from residential property, the tribunal would likely annul the assessment and order a refund with interest.

Full Decision

Arbitral Decision

Claimant/Applicant: A…–…, represented by B…–…, S.A.

Respondent: Tax and Customs Authority (hereinafter A.T.A.)

1. Report

On 16-09-2015, A…–…, with tax identification number…, with registered office at Avenue…, no.…, …-… Lisbon, and represented by the managing company B…–…, S.A., legal entity no.…, with registered office at Avenue…, no.…, …-… Lisbon, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal with a view, immediately, to the annulment of the decision refusing the Request for Official Review, and mediately, to the annulment of the tax acts regarding the assessment of Stamp Tax on item no. 28.1 of the General Stamp Tax Table (TGIS), relating to the year 2012 and concerning the urban property registered in the urban property matrix under the article… of the union of parishes of … and …, municipality of Mafra, with a taxable property value of 1,074,362.38 €.

The Claimant alleges that the property subject to the Stamp Tax assessment is land for construction, and therefore does not have residential allocation, whereby the assessment in question is illegal. It refers to the following CAAD decisions that have already addressed this issue: 42/2013-T, 48/2013-T, 49/2013-T, 53/2013-T, 75/2013-T, 288/2013-T and 310/2013-T.

Subsidiarily, the Claimant submits that the special taxation provided for in item 28 of the TGIS is contrary to the fundamental principle of equality, enshrined in Article 13 of the Constitution of the Portuguese Republic (CRP), and contrary to the principle of tax equality and contributive capacity enshrined in Article 104, no. 3 of the CRP.

Finally, the Claimant requests the reimbursement of the Stamp Tax paid, plus compensatory interest for undue payment of the tax obligation, in accordance with Article 43 of the General Tax Law (LGT).

A sole arbitrator was appointed on 13-11-2015, Suzana Fernandes da Costa.

In accordance with the provisions of Article 11, no. 1, paragraph c) of the RJAT, the sole arbitral tribunal was constituted on 30-11-2015.

The Tax and Customs Authority submitted its response on 21-12-2015 (within the legal time period).

The A.T.A. contends that the request for a declaration of illegality and consequent annulment of the disputed assessment should be judged inadmissible, since the assessment in question constitutes a correct interpretation of item 28.1 of the General Stamp Tax Table, given that the aforementioned property has the legal nature of property with residential allocation.

The A.T.A. further requested, on the same date, the waiver of the hearing provided for in Article 18 of the Tax Arbitration Regime, as well as the waiver of arguments.

After the Claimant was notified of this request by the A.T.A., it informed on 07-01-2016 that it had no objection to the waiver of the hearing and the waiver of arguments.

On 11-01-2016, an order was issued waiving the holding of the hearing provided for in Article 18 of the RJAT and waiving arguments, having regard to the position of the parties and since there were no exceptions to be considered. In this order, the date for rendering the decision was set as 05-02-2016, and the Claimant was warned to pay the subsequent arbitration fee by that date.

The parties have legal personality and capacity and are properly parties to the proceedings (Articles 4 and 10, no. 1 and 2 of the RJAT and Article 1 of Ordinance no. 112-A/2011 of 22 March).

The present request for an arbitral decision was submitted within the legal time period, pursuant to Article 10, no. 1, paragraph a) of Decree-Law no. 10/2011 of 20 January.

The proceedings are not affected by any nullities and no preliminary issues were raised.

2. Factual Matters

2.1. Proven Facts:

Having analysed the documentary evidence produced, the following facts are considered proven and relevant to the resolution of the case:

  1. The Claimant is the owner of the urban property registered in the property matrix under article… of the union of parishes of … and …, municipality of Mafra, described as land for construction and with a taxable property value of 1,074,362.38 €, as per the property record attached to the arbitral request as document 5.

  2. The Claimant was notified of the Stamp Tax assessments no. 2013…, in the amount of 10,743.62 €, relating to the urban property identified in the previous point, payable in three instalments: one by 30-04-2013, another by 31-07-2013 and another by 30-11-2013, as per the assessment and collection documents attached to the arbitral request as documents 1 to 3.

  3. The Claimant filed a Request for Official Review of the Stamp Tax assessment in question in the present proceedings.

  4. The Request for Official Review of the said Stamp Tax assessment was expressly denied, and the Claimant was notified of its refusal by registered letter with acknowledgement of receipt on 19-06-2015, as per a copy of the decision attached to the arbitral request as document 1.

  5. The Claimant proceeded to pay the Stamp Tax contained in the collection notices attached to the arbitral request.

No other facts with relevance to the resolution of the case were proven.

2.2. Grounds for the Proven Factual Matters:

With regard to the proven facts, the arbitrator's conviction was based on the documentary evidence attached to the case file and on facts admitted by agreement.

3. Legal Matters:

3.1. Object and Scope of the Present Proceedings

The issue to be decided in the present proceedings is whether the property that was subject to the Stamp Tax assessment, being land for construction, has residential allocation and whether item 28.1 of the General Stamp Tax Table (TGIS) applies to it.

On this same issue, CAAD decisions have already pronounced themselves, including those in cases number 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 284/2013-T, 288/2013-T, 310/2013-T, 12/2014-T, 151/2014-T, 202/2014-T, 210/2014-T, 276/2014-T, 514/2014-T, 516/2014-T, 523/2014-T, 599/2014-T and 663/2014-T.

The Supreme Administrative Court has also pronounced itself on this issue, namely in the decisions of cases no. 048/14 of 09-04-2014, 07/14 of 02-07-2014, no. 0676/14 of 09-07-2014, no. 0395/14 of 28-05-2014, no. 01871/13 of 14-05-2014 and no. 055/14 of 14-05-2014, no. 0425/14 of 28-05-2014, no. 0396/14 of 28-05-2014, no. 0274/14 of 14-05-2014, no. 046/14 of 14-05-2014, 01481/14 of 15-04-2015, 0764/14 of 15-04-2015, no. 0279/15 of 22-04-2015, no. 021/15 of 29-04-2015 and no. 01479/14 of 17-06-2015. As stated in the decision rendered in case no. 0676/14 of 09-07-2014: "Since the legislator has not defined the concept of 'properties (urban) with residential allocation', and a clear distinction results from Article 6 of the IMI Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table – between 'residential urban properties' and 'land for construction', the latter cannot be considered, for the purposes of the incidence of Stamp Tax (Item no. 28.1 of the TGIS, as worded by Law no. 55-A/2012, of 29 October) as urban properties with residential allocation."

3.2. Issue of the Framing of Land for Construction within the Scope of Incidence of Item 28.1 of the TGIS

3.2.1. Regime of Law no. 55-A/2012, of 29 October

Law no. 55-A/2012, of 29 October, added item 28 to the General Stamp Tax Table (TGIS), with the following wording:

28 – Ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the register, in accordance with the Code of Municipal Tax on Real Estate (CIMI), is equal to or greater than € 1,000,000 – on the taxable property value used for IMI purposes:

28.1 – For property with residential allocation – 1% (…);

In the transitional provisions contained in Article 6 of Law no. 55-A/2012, the following rules were established:

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

f) The applicable rates are as follows:

i) Properties with residential allocation assessed in accordance with the IMI Code: 0.5%;

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

Item 28.1 TGIS and sub-items i) and ii) of paragraph f) of no. 1 of Article 6 of Law no. 55-A/2012, contains a concept that is not used in any other tax legislation, which is that of "property with residential allocation".

Let us examine this:

3.2.2. Concept of Properties Used in the CIMI

In the CIMI, the types of properties are enumerated in its Articles 3 to 6. The concept of "property with residential allocation" is not found in any of these articles.

The most approximate notion to the literal meaning of this expression used is that of "residential properties", which no. 2 of Article 6 of the CIMI defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, which have as their normal purpose residential ends.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the TGIS with that extracted from no. 2 of Article 6 of the CIMI, indicates that the same concept was not intended to be used. Neither is this concept found in any other statute.

3.2.3. Concept of "Property with Residential Allocation"

Item 28.1 of the TGIS referred in 2013 to "property with residential allocation".

The word "allocation" (afetação), in this context of the use of a property, has the meaning of "the action of destining something to a determined use".

As stated in the decision of CAAD rendered in case no. 53/2013-T, in which the arbitrators were Counsellor Judge Jorge Lopes de Sousa, Dr. Conceição Pinto Rosa and Dr. Alberto Amorim Pereira:

"it is to be concluded that the available interpretative elements, including the 'circumstances in which the law was drafted and the specific conditions of the time in which it is applied', clearly point to the fact that it was not intended to encompass within the scope of incidence of item no. 28.1 situations of properties that are not yet allocated to residential use, namely land for construction held by companies".

Those classified as land for construction are, having regard to the provision of Article 6, no. 3 of the IMI Code, those in which the owner has acquired the right to build or to carry out subdivision operations, as well as those that have been acquired expressly for that purpose. In this sense, see JOSÉ MARIA FERNANDES PIRES in Lessons on Property and Stamp Taxes, Almedina, 2010, page 97.

It should be noted that in the classification as land for construction, the allocation that future constructions may have is irrelevant, namely residential, commercial, industrial or for services.

Furthermore, in the decision of the Supreme Administrative Court of 09-07-2014, of case no. 0676/14, in which the reporting judge is Counsellor Dulce Neto, it is stated that "residential allocation always appears in the IMI Code referred to 'buildings' or 'constructions', existing, authorized or foreseen, as only these can be inhabited, which is not the case with land for construction, which do not have, in themselves, conditions for this, and are not capable of being used for residence unless and when the construction authorized and foreseen for them is built thereon (but in that case they would no longer be 'land for construction' but another type of urban property – 'residential', 'commercial, industrial or for services' or 'others' – Article 6 of the CIMI)."

Similarly, in the decision of the Supreme Administrative Court, of 14-05-2014, case no. 046/14, in which the reporting judge is Ascenção Lopes, it is stated that "since the legislator has not defined the concept of 'properties (urban) with residential allocation', and a clear distinction results from Article 6 of the IMI Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table – between 'residential urban properties' and 'land for construction', the latter cannot be considered, for the purposes of the incidence of Stamp Tax (Item 28.1 of the TGIS, as worded by Law no. 55-A/2012, of 29 October), as urban properties with residential allocation."

We can thus conclude that "land for construction" cannot be considered as "property with residential allocation" for the purposes of applying item 28.1 of the General Stamp Tax Table.

Prohibition of Analogy and Extensive Interpretation

On the other hand, the question may be raised as to the possibility of applying analogy to the provision contained in item 28.1 of the TGIS. Now, on this matter, no. 4 of Article 11 of the General Tax Law provides that:

"4. Gaps resulting from tax rules covered by the reservation of law of the Assembly of the Republic are not susceptible to analogical integration"

As to matters covered by the reservation of law, attention should be paid to Article 103, no. 2 of the CRP and Article 8 of the LGT. According to these rules, the principle of tax legality encompasses incidence, rate, tax benefits and the guarantees of taxpayers. This is also referred to in the work "The Principle of Tax Legality" by Ana Paula Dourado, Almedina, 2007, page 106.

Since item 28.1 TGIS is a rule of incidence, covered by the principle of tax legality, its analogical application to situations not expressly provided therein is prohibited.

Similarly, neither should an extensive interpretation of the said item be admitted, which would allow the inclusion in the expression contained in the law of land for construction. On interpretation, Article 11, no. 1 to 3 of the LGT and Article 9 of the Civil Code apply. We understand that an extensive interpretation of the said item that would include land for construction therein is not possible, since the same would always have to have a minimum correspondence in the letter of the law, which does not occur.

With regard to the historical element, the fact that item 28.1 TGIS was subsequently expressly amended, by the State Budget Law for 2014, so as to include, from 01.01.2014, land for construction, also allows the conclusion that such properties were not taxed in the wording in force until 31.12.2013.

Application of the Regime to the Claimant's Situation

The Claimant's property is land for construction. For the reasons stated above, this is not a property with residential allocation, and therefore Stamp Tax provided for in item 28.1 of the TGIS does not apply to this property.

For this reason, the assessment whose declaration of illegality is requested is vitiated by a violation of item no. 28.1 TGIS, by error regarding the legal preconditions, which justifies the declaration of its illegality and annulment (Article 135 of the CPA).

The foregoing necessarily implies that the act of refusal of the Request for Official Review filed by the Claimant against the Stamp Tax assessment that is the subject matter of these proceedings is likewise vitiated by a violation of law, by error regarding the legal preconditions, which also leads to the declaration of its illegality and consequent annulment (cf. Article 135 of the CPA).

The present decision is thus in the same direction as the decisions of CAAD in cases no. 134/2015-T and no. 111/2015-T, as in all of them the legality of Stamp Tax assessments on land for construction in the years 2012 and 2013 was discussed, following the express refusal of an official review request.

4. Decision

In view of the foregoing, the request made by the Claimant in the present tax arbitration proceedings is judged to be well-founded regarding the illegality of the Stamp Tax assessment for the year 2012 no. 2013… in the amount of 10,743.62 €.

5. Value of the Case:

In accordance with the provisions of Article 315, no. 2, of the CPC and Article 97-A, no. 1, paragraph a) of the CPPT and Article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is set at 10,743.62 €.

6. Costs:

In accordance with Article 22, no. 4, of the RJAT, and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at 918.00 € to be paid by the Tax and Customs Authority.

Notify.

Lisbon, 02 February 2016.

Text prepared by computer, in accordance with Article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by reference of Article 29, no. 1, paragraph e) of the Tax Arbitration Regime, as reviewed by me.

The sole arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Does Stamp Tax under Verba 28.1 of the TGIS apply to building land (terrenos para construção) valued over €1,000,000?
No, Stamp Tax under item 28.1 of the TGIS does not apply to building land (terrenos para construção) even when valued over €1,000,000. The Supreme Administrative Court and CAAD have consistently ruled that item 28.1, which taxes 'properties with residential allocation' at 1%, does not encompass land for construction. Article 6 of the IMI Code clearly distinguishes between 'residential urban properties' and 'land for construction,' and this distinction applies to Stamp Tax interpretation. Building land, by its nature as undeveloped property intended for future construction, lacks the residential allocation characteristic required by item 28.1.
Can building land be classified as having a housing purpose for Stamp Tax purposes under Portuguese law?
No, building land cannot be classified as having a housing purpose (residential allocation) for Stamp Tax purposes under Portuguese law. The IMI Code, which is subsidiarily applicable to Stamp Tax matters, establishes a clear legal distinction between residential urban properties and land for construction in Article 6. Since the legislator did not define 'properties with residential allocation' in the Stamp Tax context, courts apply the IMI Code framework. The Supreme Administrative Court confirmed in multiple decisions (including case 0676/14) that land for construction constitutes a separate category that cannot be deemed to have residential allocation merely because it may eventually be developed for residential purposes.
Does taxing building land under Verba 28.1 TGIS violate the constitutional principle of equality (Article 13 CRP)?
The constitutional challenge was raised subsidiarily in this case, arguing that applying item 28.1 TGIS to building land would violate the fundamental principle of equality (Article 13 CRP) and tax equality/contributive capacity principles (Article 104(3) CRP). However, this constitutional question typically becomes moot when the primary legal argument succeeds. Since building land does not legally qualify as property with residential allocation, the assessment itself is unlawful on statutory interpretation grounds, eliminating the need to address constitutional violations. The equality argument would center on arbitrary differential treatment of similarly situated taxpayers without rational justification.
What is the procedure for challenging a Stamp Tax assessment through CAAD tax arbitration in Portugal?
To challenge a Stamp Tax assessment through CAAD (Administrative Arbitration Center) in Portugal, taxpayers must first file a Request for Official Review (pedido de revisão oficiosa) with the Tax Authority. If this request is denied or not decided within the legal timeframe, the taxpayer can submit an arbitration request to CAAD pursuant to Article 10(1)(a) of the Tax Arbitration Regime (RJAT). The request must identify the contested tax acts and legal grounds. CAAD appoints an arbitrator, who constitutes the tribunal. The Tax Authority submits its response within the legal deadline. Parties may waive the hearing under Article 18 RJAT. The arbitrator issues a decision, and the claimant must pay arbitration fees by the decision date.
Are taxpayers entitled to a refund and indemnity interest under Article 43 LGT after an unlawful Stamp Tax assessment is annulled?
Yes, taxpayers are entitled to both a refund of unlawfully paid Stamp Tax and compensatory interest (juros indemnizatórios) under Article 43 of the General Tax Law (LGT) when an assessment is annulled. Article 43 LGT provides that when taxes are paid unduly or in excess, the taxpayer has the right to reimbursement plus compensatory interest calculated from the payment date until the refund date. This remedy compensates taxpayers for the financial loss of having funds improperly withheld by the Tax Authority. In this case, the claimant specifically requested reimbursement of the €10,743.62 paid plus compensatory interest, which would be granted upon annulment of the unlawful assessment.