Process: 605/2014-T

Date: April 6, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This arbitral decision concerns a dispute between a Closed Special Real Estate Investment Fund and the Portuguese Tax and Customs Authority (AT) regarding stamp duty assessments under Verba 28.1 of the General Stamp Tax Table (TGIS). The case involves a building held in full vertical property ownership, comprising multiple independent residential units (floors and separately used portions) located on an avenue in Lisbon. The Tax Authority issued 34 separate stamp tax assessments covering three annual installments for 12 distinct property registry articles, with individual amounts ranging from €273.76 to €561.67, based on each unit's Taxable Asset Value (VPT). The total contested tax liability exceeded €17,000 across all assessments. The investment fund, represented by its management company, challenged these assessments before the Administrative Arbitration Centre (CAAD) in August 2014, arguing the illegality of the liquidation acts. The central legal question revolves around whether stamp tax under Verba 28.1 should be calculated and assessed separately for each independent unit within a vertically owned building, or whether the entire property should be treated as a single taxable unit. This distinction is crucial because Verba 28.1 applies an annual stamp tax rate to urban buildings with high taxable values, and the method of calculation significantly impacts the overall tax burden. The case exemplifies common disputes arising from the 2013 introduction of the annual stamp tax on high-value real estate, particularly regarding properties with complex ownership structures like vertical property arrangements where a single building comprises multiple autonomous fractions, each with separate registry entries and individual VPT assessments for property tax purposes.

Full Decision

ARBITRAL DECISION

Case No. 605/2014-T

Claimant/Applicant: Closed Special Real Estate Investment Fund A...

Respondent: Tax and Customs Authority (hereinafter AT)

1. Report

B... – Real Estate Investment Fund Management Company, S.A., Tax Number ..., with registered office at Avenue ... Lisbon, in its capacity as management company of the Closed Special Real Estate Investment Fund A..., taxpayer number ..., with registered office at the same location, hereinafter referred to as the applicant, submitted on 04-08-2014 to the Administrative Arbitration Centre (CAAD) a request for the constitution of an arbitral tribunal, with a view to declaring the illegality of stamp duty tax assessment acts relating to item no. 28 of the General Stamp Duty Schedule, concerning floors and separately used portions of the urban property in full ownership located on Avenue ..., in the parish of ..., in Lisbon, registered in the urban property registry under article ... of the said parish, namely:

i. Assessment No. 2014..., in the amount of € 551.00, relating to the property described in the property registry article no. ... – 1st right, whose TPV is € 165,296.12, referring to the first instalment;

ii. Assessment No. 2014..., in the amount of € 273.78, relating to the property described in the property registry article no. ... – 1st left, whose TPV is € 82,129.94, referring to the first instalment;

iii. Assessment No. 2014..., in the amount of € 551.00, relating to the property described in the property registry article no. ... – 2nd right, whose TPV is € 165,296.12, referring to the first instalment;

iv. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 2nd left, whose TPV is € 156,162.27, referring to the first instalment;

v. Assessment No. 2014..., in the amount of € 551.00, relating to the property described in the property registry article no. ... – 3rd right, whose TPV is € 165,296.12, referring to the first instalment;

vi. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 3rd left, whose TPV is € 156,162.27, referring to the first instalment;

vii. Assessment No. 2014..., in the amount of € 561.67, relating to the property described in the property registry article no. ... – 4th right, whose TPV is € 168,500.99, referring to the first instalment;

viii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 4th left, whose TPV is € 156,162.27, referring to the first instalment;

ix. Assessment No. 2014..., in the amount of € 555.18, relating to the property described in the property registry article no. ... – 5th right, whose TPV is € 166,552.34, referring to the first instalment;

x. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 5th left, whose TPV is € 156,162.27, referring to the first instalment;

xi. Assessment No. 2014..., in the amount of € 532.84, relating to the property described in the property registry article no. ... – 6th right, whose TPV is € 159,847.86, referring to the first instalment;

xii. Assessment No. 2014..., in the amount of € 501.42, relating to the property described in the property registry article no. ... – 6th left, whose TPV is € 150,424.56, referring to the first instalment;

xiii. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 1st right, whose TPV is € 165,296.12, referring to the second instalment;

xiv. Assessment No. 2014..., in the amount of € 273.76, relating to the property described in the property registry article no. ... – 1st left, whose TPV is € 82,129.94, referring to the second instalment;

xv. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 2nd right, whose TPV is € 165,296.12, referring to the second instalment;

xvi. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 2nd left, whose TPV is € 156,162.27, referring to the second instalment;

xvii. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 3rd right, whose TPV is € 165,296.12, referring to the second instalment;

xviii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 3rd left, whose TPV is € 156,162.27, referring to the second instalment;

xix. Assessment No. 2014..., in the amount of € 561.67, relating to the property described in the property registry article no. ... – 4th right, whose TPV is € 168,500.99, referring to the second instalment;

xx. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 4th left, whose TPV is € 156,162.27, referring to the second instalment;

xxi. Assessment No. 2014..., in the amount of € 555.17, relating to the property described in the property registry article no. ... – 5th right, whose TPV is € 166,552.34, referring to the second instalment;

xxii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 5th left, whose TPV is € 156,162.27, referring to the second instalment;

xxiii. Assessment No. 2014..., in the amount of € 532.82, relating to the property described in the property registry article no. ... – 6th right, whose TPV is € 159,847.86, referring to the second instalment;

xxiv. Assessment No. 2014..., in the amount of € 501.42, relating to the property described in the property registry article no. ... – 6th left, whose TPV is € 150,424.56, referring to the second instalment;

xxv. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 1st right, whose TPV is € 165,296.12, referring to the third instalment;

xxvi. Assessment No. 2014..., in the amount of € 273.76, relating to the property described in the property registry article no. ... – 1st left, whose TPV is € 82,129.94, referring to the third instalment;

xxvii. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 2nd right, whose TPV is € 165,296.12, referring to the third instalment;

xxviii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 2nd left, whose TPV is € 156,162.27, referring to the third instalment;

xxix. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 3rd right, whose TPV is € 165,296.12, referring to the third instalment;

xxx. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 3rd left, whose TPV is € 156,162.27, referring to the third instalment;

xxxi. Assessment No. 2014..., in the amount of € 561.67, relating to the property described in the property registry article no. ... – 4th right, whose TPV is € 168,500.99, referring to the third instalment;

xxxii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 4th left, whose TPV is € 156,162.27, referring to the third instalment;

xxxiii. Assessment No. 2014..., in the amount of € 555.17, relating to the property described in the property registry article no. ... – 5th right, whose TPV is € 166,552.34, referring to the third instalment;

xxxiv. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 5th left, whose TPV is € 156,162.27, referring to the third instalment;

xxxv. Assessment No. 2014..., in the amount of € 532.82, relating to the property described in the property registry article no. ... – 6th right, whose TPV is € 159,847.86, referring to the third instalment;

xxxvi. Assessment No. 2014..., in the amount of € 501.42, relating to the property described in the property registry article no. ... – 6th left, whose TPV is € 150,424.56, referring to the third instalment;

All of the aforementioned assessments bear the date of 17-03-2014.

The applicant petitions for the annulment of the above-mentioned stamp duty assessment acts as well as the reimbursement of the amounts assessed, plus compensatory interest.

The applicant alleges, to that effect, that the property to which the stamp duty assessments in question refer, whose legality is being disputed, is a property in full ownership, comprised of 13 floors and separately used portions, of which 12 are devoted to residential use, and none of the floors or portions has a TPV equal to or exceeding € 1,000,000, and that, in its view, the legal prerequisite for the applicability of item 28.1 of the General Stamp Duty Schedule does not occur.

A sole arbitrator, Ricardo Marques Candeias, was designated on 19-09-2014. In accordance with the provisions of art. 11(1)(c) of the Arbitration Rules for Tax Matters, the singular arbitral tribunal was constituted on 06-10-2014.

The respondent submitted on 14-11-2014 the case file concerning the assessments in question in the proceedings.

Notified to that effect, the AT filed its response on 18-11-2014. It argues that the patrimonial value relevant for purposes of the applicability of the tax is the total patrimonial value of the urban property and not the patrimonial value of each of the parts that comprise it, even if they are susceptible of separate use, because the property is not constituted in condominium ownership.

Notified to pronounce themselves regarding the proposed dispensation with the holding of the meeting referred to in art. 18 of the Arbitration Rules for Tax Matters and dispensation with oral arguments, neither the AT nor the applicant made any statements or requests.

The arbitral tribunal considered, in light of the elements brought before it, and with no exceptions to be resolved, that it was not necessary to hold the envisaged meeting or to produce oral arguments. Consequently, on 02-04-2015 the date of 06-04-2015 was fixed for the delivery of the decision.

The parties have legal personality and capacity and are entitled to participate (arts. 4 and 10(1) and (2) of the Arbitration Rules for Tax Matters, and art. 1 of Ordinance No. 112-A/2011, of 22 March). The proceedings are free from nullities and no prior questions were raised that require examination.

2. Findings of Fact

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

a) The urban property located on Avenue ..., in the parish of ..., in Lisbon, registered in the urban property registry under article ..., is owned by the applicant;

b) The property is in full ownership;

c) It is comprised of 13 floors or separately used portions, 12 of which have residential use, and is not constituted in condominium ownership;

d) On 17-03-2013, the AT assessed the Stamp Duty for the year 2013, relating to part of the floors or separately used portions existing in the above-identified property, in the amount corresponding to 1% of its taxable patrimonial value, as follows:

i. Assessment No. 2014..., in the amount of € 551.00, relating to the property described in the property registry article no. ... – 1st right, whose TPV is € 165,296.12, referring to the first instalment;

ii. Assessment No. 2014..., in the amount of € 273.78, relating to the property described in the property registry article no. ... – 1st left, whose TPV is € 82,129.94, referring to the first instalment;

iii. Assessment No. 2014..., in the amount of € 551.00, relating to the property described in the property registry article no. ... – 2nd right, whose TPV is € 165,296.12, referring to the first instalment;

iv. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 2nd left, whose TPV is € 156,162.27, referring to the first instalment;

v. Assessment No. 2014..., in the amount of € 551.00, relating to the property described in the property registry article no. ... – 3rd right, whose TPV is € 165,296.12, referring to the first instalment;

vi. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 3rd left, whose TPV is € 156,162.27, referring to the first instalment;

vii. Assessment No. 2014..., in the amount of € 561.67, relating to the property described in the property registry article no. ... – 4th right, whose TPV is € 168,500.99, referring to the first instalment;

viii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 4th left, whose TPV is € 156,162.27, referring to the first instalment;

ix. Assessment No. 2014..., in the amount of € 555.18, relating to the property described in the property registry article no. ... – 5th right, whose TPV is € 166,552.34, referring to the first instalment;

x. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 5th left, whose TPV is € 156,162.27, referring to the first instalment;

xi. Assessment No. 2014..., in the amount of € 532.84, relating to the property described in the property registry article no. ... – 6th right, whose TPV is € 159,847.86, referring to the first instalment;

xii. Assessment No. 2014..., in the amount of € 501.42, relating to the property described in the property registry article no. ... – 6th left, whose TPV is € 150,424.56, referring to the first instalment;

xiii. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 1st right, whose TPV is € 165,296.12, referring to the second instalment;

xiv. Assessment No. 2014..., in the amount of € 273.76, relating to the property described in the property registry article no. ... – 1st left, whose TPV is € 82,129.94, referring to the second instalment;

xv. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 2nd right, whose TPV is € 165,296.12, referring to the second instalment;

xvi. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 2nd left, whose TPV is € 156,162.27, referring to the second instalment;

xvii. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 3rd right, whose TPV is € 165,296.12, referring to the second instalment;

xviii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 3rd left, whose TPV is € 156,162.27, referring to the second instalment;

xix. Assessment No. 2014..., in the amount of € 561.67, relating to the property described in the property registry article no. ... – 4th right, whose TPV is € 168,500.99, referring to the second instalment;

xx. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 4th left, whose TPV is € 156,162.27, referring to the second instalment;

xxi. Assessment No. 2014..., in the amount of € 555.17, relating to the property described in the property registry article no. ... – 5th right, whose TPV is € 166,552.34, referring to the second instalment;

xxii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 5th left, whose TPV is € 156,162.27, referring to the second instalment;

xxiii. Assessment No. 2014..., in the amount of € 532.82, relating to the property described in the property registry article no. ... – 6th right, whose TPV is € 159,847.86, referring to the second instalment;

xxiv. Assessment No. 2014..., in the amount of € 501.42, relating to the property described in the property registry article no. ... – 6th left, whose TPV is € 150,424.56, referring to the second instalment;

xxv. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 1st right, whose TPV is € 165,296.12, referring to the third instalment;

xxvi. Assessment No. 2014..., in the amount of € 273.76, relating to the property described in the property registry article no. ... – 1st left, whose TPV is € 82,129.94, referring to the third instalment;

xxvii. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 2nd right, whose TPV is € 165,296.12, referring to the third instalment;

xxviii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 2nd left, whose TPV is € 156,162.27, referring to the third instalment;

xxix. Assessment No. 2014..., in the amount of € 550.98, relating to the property described in the property registry article no. ... – 3rd right, whose TPV is € 165,296.12, referring to the third instalment;

xxx. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 3rd left, whose TPV is € 156,162.27, referring to the third instalment;

xxxi. Assessment No. 2014..., in the amount of € 561.67, relating to the property described in the property registry article no. ... – 4th right, whose TPV is € 168,500.99, referring to the third instalment;

xxxii. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 4th left, whose TPV is € 156,162.27, referring to the third instalment;

xxxiii. Assessment No. 2014..., in the amount of € 555.17, relating to the property described in the property registry article no. ... – 5th right, whose TPV is € 166,552.34, referring to the third instalment;

xxxiv. Assessment No. 2014..., in the amount of € 520.54, relating to the property described in the property registry article no. ... – 5th left, whose TPV is € 156,162.27, referring to the third instalment;

xxxv. Assessment No. 2014..., in the amount of € 532.82, relating to the property described in the property registry article no. ... – 6th right, whose TPV is € 159,847.86, referring to the third instalment;

xxxvi. Assessment No. 2014..., in the amount of € 501.42, relating to the property described in the property registry article no. ... – 6th left, whose TPV is € 150,424.56, referring to the third instalment;

e) The total patrimonial value of the property is € 1,847,994.13.

f) The applicant was notified to proceed with payment of the said assessment notes, in the total amount of € 18,479.93.

g) The applicant proceeded on 30-04-2014 to pay assessments Nos. 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014... and 2014..., referring to the first instalment; on 31-07-2014 to pay assessments Nos. 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014... and 2014... referring to the second instalment; and on 29-11-2014 to pay assessments Nos. 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014... and 2014..., referring to the third instalment, all in the total amount of € 18,479.93.

The arbitrator's conviction was founded on the documentary evidence submitted to the proceedings, specifically points a), b), c), and e) result from the contents of the property registration card submitted to the proceedings and points d), f), and g) result from the assessment notes and respective payment proof relating to the first instalment, submitted with the initial petition as documents 1 and 3 to 14; assessment notes and respective payment proof relating to the second instalment, submitted via a request from the applicant of 03-09-2014, as document 1; assessment notes and respective payment proof relating to the third instalment, submitted via a request from the applicant of 4-12-2014, as document 1.

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

3. Law

These are the facts that merit examination. Let us proceed then.

The applicant argues in its initial petition that "(…) the subjection of the various portions of a property with the characteristics of the one in question in the present proceeding should be determined by the TPV attributed to each of the portions of the property, and not by the total TPV thereof. This is because the Municipal Property Tax Code – to which art. 67(2) of the Stamp Duty Code expressly refers as regards matters relating to item 28 of the General Stamp Duty Schedule not regulated therein – provides that each floor or part of a property susceptible of separate use is considered separately in the property registration that distinguishes its respective TPV – the principle of autonomization of independent parts of an urban property, even when not constituted in condominium ownership – (see art. 12 of the Municipal Property Tax Code)."

The applicant contends that "Thus, (…), it is concluded that the Municipal Property Tax Code expressly provides the rule that the tax is assessed by reference to the TPV of each portion (…)."

The applicant continues, arguing that "(…) Item 28 of the General Stamp Duty Schedule can only, legitimately, apply to portions that form part of properties built in condominium ownership when that portion/portion has a TPV equal to or exceeding € 1,000,000.00"

The applicant continues its argument by referring to the fact that "(…) none of the TPVs of the portions that were subjected to Stamp Duty is equal to or exceeding € 1,000,000.00(…). The Stamp Duty assessments sub judice must be annulled as illegal, for all legal purposes."

The applicant further argues that the AT's interpretation violates the constitutional principle of equality, as "the AT distinguishes two factual realities, which should be treated in the same manner, on pain of violation of the principle of equality, one of the fundamental principles of the tax-legal order, provided for in art. 13 of the Constitution of the Portuguese Republic. (…) The AT's interpretation is not in accordance with the Law and the Constitution, due to violation of the principle of equality (art. 13 of the Constitution) as well as what is provided for in art. 104(3) of the Constitution."

To that effect, the applicant concludes by referring to the fact that "(…) the taxation sub judice cannot be considered legal when founded on the legal reality of a property, and not on the economic and material reality of those who bear the tax. In such terms, for purposes of the applicability of item 28.1 of the General Stamp Duty Schedule, the determining criterion of tax capacity should be revealed to be the material truth of each property/portion/division. And not the mere legal-formal reality of the property as "property in condominium/in full ownership", on pain of flagrant violation of the principle of equality, constitutionally established."

The applicant further argues, along another line of reasoning, that "the illegality of the Stamp Duty assessments sub judice is further required given the very ratio legis underlying item 28.1 of the General Stamp Duty Schedule. (…) The legislator intended to impose an increased effort on taxpayers who are owners (and others) of properties with residential use whose TPV exceeds 1 million euros, that is, on "luxury" residential real estate property."

The applicant continues, to that effect, by referring to the fact that "Now, bearing in mind the ratio legis of this item, and analyzing the TPV of the various portions that form part of the urban property corresponding to art. ..., it results in a flagrant manner that the taxpayer – the owners, usufructuaries, or surface rights holders – cannot be considered as owners of a "luxury" property."

It concludes by reinforcing the thesis of "the illegality of the subjection of item 28.1 of the General Stamp Duty Schedule to properties constituted in condominium ownership, when none of their floors or portions have a TPV equal to or exceeding € 1,000,000.00."

The applicant concludes by advocating that "the Stamp Duty assessments sub judice must be annulled, as illegal for all proper legal effects, given the ratio legis of item 28 of the General Stamp Duty Schedule, and in light of the principles of legality and tax equality, as well as the prevalence of material truth over legal-formal reality", petitioning for the reimbursement of the amounts paid plus compensatory interest.

For its part, the AT comes forward to counter the position of the applicant, basing its claim on the fact that the applicant's property is in the regime of full ownership and the concentration in each property of independent dwellings is not susceptible to triggering the applicability of the stamp tax on each one of them.

In the AT's understanding: "At the time, the Applicant held full ownership of the urban property under analysis, evaluated in accordance with the Municipal Property Tax Code, within the scope of the general evaluation of urban properties, contained in article ... of the property registry of the parish of ..., municipality and district of Lisbon, described as 'property in full ownership with floors or separately used portions', with 8 stories and 13 separately used portions devoted to residential use, with a taxable patrimonial value (TPV) exceeding € 1,000,000.00.

(…)

Article 44(5) of the Stamp Duty Code, as amended by Law No. 55-A/2012, of 29/10 provides that, where assessment is required, the tax referred to in item 28 of the General Stamp Duty Schedule is paid, in the deadlines, terms and conditions defined in article 120 of the Municipal Property Tax Code, in three instalments in the months of April, July and November, as per (1)(c) of the said article 120.

(…)

Now, what is at issue here is an assessment that results from the direct application of the legal norm, which translates into objective elements, without any subjective or discretionary assessment."

The AT argues to the effect that "The concept of property is defined in article 2(1) of the Municipal Property Tax Code, and its (4) provides that in the condominium ownership regime, each autonomous unit is held to constitute a property. It follows from the analysis of the normative provision that a 'property in full ownership with floors or separately used portions' is, unequivocally, different from a property in condominium ownership regime, comprised of autonomous units, that is, several properties. Article 12 of the Municipal Property Tax Code establishes the concept of property registry, and its (3) refers, exclusively, to the manner of recording registry data."

The AT refers that "In compliance with the provisions of article 119(1) of the Municipal Property Tax Code, the collection document is sent to the taxpayer with a breakdown of the portions susceptible of separate use, their respective taxable patrimonial value and the tax amount attributable to each municipality where the properties are located."

Concluding, in that respect, that "with the assessment being correct and the tax being due as calculated, no compensatory interest is owed."

As regards the alleged violation of the principle of legality, the respondent argues as follows: "although the assessment of Stamp Duty, in the situations provided for in item no. 28.1 of the General Stamp Duty Schedule, is processed in accordance with the rules of the Municipal Property Tax Code, the truth is that the legislator reserves the aspects that require the necessary adaptations, namely those where, as is the case with properties in full ownership, even though with floors or separately used portions (although the Municipal Property Tax is assessed in relation to each portion susceptible of separate use) for purposes of Stamp Duty what is relevant is the property in its entirety because the separately used portions are not held to be a property, but only the autonomous units in the condominium ownership regime, as per (4) of art. 2 of the Municipal Property Tax Code. What, expressly, results from the letter of the law is that the legislator wished to tax with item 28.1 in question the properties as a single legal-tax reality (…). The subjection to the stamp tax of item 28.1 of the General Schedule attached to the Stamp Duty Code results from the combination of two facts: residential use and the taxable patrimonial value of the urban property registered in the registry being equal to or exceeding € 1,000,000.00."

The AT contends for the rejection of the alleged defect of violation of law by error as to the legal prerequisites, because "With the property being in the full ownership regime, not possessing autonomous units, to which the tax law attributes the qualification of property, because from the notion of property in article 2 of the Municipal Property Tax Code, only the autonomous units of property in condominium ownership regime are held to be properties – (4) of the cited article 2 of the Municipal Property Tax Code."

Regarding the violation of the principle of tax equality and tax capacity, the AT argues as follows: "Regarding the violation of this principle, the AT understands that the provision of item 28.1 of the General Stamp Duty Schedule does not constitute any violation of the principle of equality, there being no discrimination in the taxation of properties constituted in condominium ownership and properties in full ownership with floors or separately used portions, or between properties with residential use and properties with other uses.

The AT argues that "Condominium ownership and full ownership are differentiated legal institutions. The constitution of condominium ownership implies, it is a fact, a mere legal alteration of the property, there being no evaluation (office – circular no. 40.025, of 11.08.2008, of the General Directorate of Tax Collection), but the legislator may, however, subject to a distinct legal-tax framework, and consequently, discriminatory, properties in condominium and full ownership regimes, in particular, by benefiting the legally more evolved institution of condominium ownership, without such discrimination being necessarily considered arbitrary. This discrimination may also be imposed by the need to impose coherence to the tax system."

From the AT's perspective, it is important to emphasize the different civil-legal regime attributed to condominium ownership as opposed to full ownership, which would consist, even for tax purposes, of different legal institutions. Hence the different treatment in terms of the applicability of item 28.1 of the General Stamp Duty Schedule: "What is intended to be concluded is that these norms procedures of evaluation, the norms regarding property registration, and also the norms regarding the assessment of the portions susceptible of separate use, do not allow one to assert that there should be an equalization of property in full ownership regime with the condominium regime, this because, and as has been mentioned, it would be illegal and unconstitutional. These civil-legal regimes are different, and the tax law respects them!"

It concludes its line of argument by referring to the fact that "It is thus a consequence of the taxable fact of the stamp tax of item 28.1 consisting of the ownership of urban properties whose taxable patrimonial value contained in the registry, in accordance with the Municipal Property Tax Code, equals or exceeds € 1,000,000.00, the patrimonial value relevant for purposes of the applicability of the tax being, thus, the total patrimonial value of the urban property and not the patrimonial value of each of the parts that comprise it, even when susceptible of separate use. Item 28.1 thus applies to the ownership, usufruct or surface rights of urban properties with residential use, whose taxable patrimonial value contained in the registry, in accordance with the Municipal Property Tax Code, equals or exceeds € 1,000,000.00.

The AT concludes that "In this manner, one cannot conclude for an alleged discrimination in violation of the principle of equality when, in truth, we are dealing with distinct realities, valued by the legislator in a different manner. It is also important to note that taxation under Stamp Duty obeys the criterion of suitability, precisely insofar as it aims at the taxation of wealth embodied in the ownership of property of high value, arising in a context of economic crisis that cannot be ignored at all. (…) Thus, the choice of this mechanism for obtaining revenue is legitimated, which would only be censurable, in light of the principle of proportionality, if it resulted in manifestly indefensible form. (…) Therefore, we must necessarily conclude that the tax acts in question did not violate any legal or constitutional principle, and should thus be upheld."

Having briefly described the argumentative range presented by the parties, let us proceed.

The issue to be decided concerns whether the rule of applicability of item 28.1 of the General Stamp Duty Schedule is applicable to properties that are not constituted in condominium ownership. In effect, in such cases the question is raised whether the said item should apply to the sum of the TPV attributed to the different floors, that is, to the total TPV of the property, or, rather, to the TPV of each floor with independent economic use.

This question has already been the subject of various decisions by the CAAD, namely those rendered in cases 132/2013-T, 14/2014-T, 30/2014-T and 88/2014-T, which we shall follow closely.

Item 28 of the General Stamp Duty Schedule was added by Law No. 55-A/2012, of 29 October. It establishes the following:

"28 – Ownership, usufruct or surface rights of urban properties whose taxable patrimonial value contained in the registry, in accordance with the Municipal Property Tax Code (CIMI), equals or exceeds € 1,000,000 – on the taxable patrimonial value used for purposes of Municipal Property Tax:

28.1 – Per property with residential use – 1% (…);"

With the addition of (2) of article 67 of the Stamp Duty Code (CIS), also carried out by the said Law, it was established that as regards "matters not regulated in the present code relating to item 28 of the General Schedule, the Municipal Property Tax Code shall apply subsidiarily."

By virtue of this reference, the rule of applicability of item 28.1 of the General Stamp Duty Schedule referring to urban properties, the concept of urban property shall be the one resulting from the Municipal Property Tax Code.

The Municipal Property Tax Code establishes in art. 2(1) the concept of property. It defines it as "any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or erected thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land on which they are located, although situated on a portion of territory that forms an integral part of assets that are otherwise comprised or have no patrimonial nature."

Article 4 of the same Code establishes that urban properties are "all those that should not be classified as rural, without prejudice to what is provided in the following article."

Article 6, likewise, proceeds to classify the various species of urban properties, distinguishing them, in (1) of the said article, into four subcategories: "a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others."

In (2) of the same article we find the criterion used for this distinction, considering that "Residential, commercial, industrial or for services are the buildings or constructions licensed for such purpose or, in the absence of a license, which have as their normal destination each of these purposes."

Now, we observe that the legal provisions of the said diploma do not provide for any classification of urban properties that distinguishes them between properties in condominium ownership versus properties in full ownership.

If the legislator qualifies them as the same legal-tax reality, there will be lacking legal support for the application of different tax regimes by virtue of the civil-legal nature that an urban property with residential use may have.

It is true that art. 2(4) of the Municipal Property Tax Code determines that, "for purposes of this tax, each autonomous unit, in the condominium ownership regime, is held as constituting a property." However, it is also true that the same does not establish any differentiation between the autonomous units of properties in condominium ownership and the parts of the property with independent use regardless of their classification as residential urban properties.

From this it follows that the legislator intended only, as it did, to differentiate urban properties by considering their normal destination, that is, by considering the destination to which each one is assigned. In this manner, it thus prevents, from a tax perspective, a distinction that civil law provides, between properties in condominium ownership and properties in full ownership, not permitting, however, that such legal characterization be relevant for what interests us, which is the scope of application of the tax, both of the Municipal Property Tax as well as of item 28.1 of the General Stamp Duty Schedule, resulting from the said reference.

Being thus, we conclude that it is irrelevant, for tax purposes, whether the property is in full or condominium ownership. What is rather relevant is the material truth underlying its existence as an urban property and its residential use.

Indeed, considering the intention of the legislator in creating item 28 of the General Stamp Duty Schedule and the application that the AT has been giving to it, it is considered that the criterion adopted by the latter regarding properties in full ownership does not conform to the principles of legality, equality and tax proportionality, established constitutionally in our legal order.

The principle of tax equality should be understood in its material sense. Therefore, the emphasis of this principle will always rest on the tax capacity of each taxpayer. This is to say that we shall have equal tax for those with equal tax capacity, and different tax for those with different tax capacity. It is certain that the difference in tax will be proportional to the different tax capacity.

This principle is imposed upon us by the articulation of art. 13 of the Constitution of the Portuguese Republic with arts. 103 and 104 of the same diploma.

Now, the tax established by item 28 of the General Stamp Duty Schedule intends to harmonize the distribution of the tax burden of taxpayers, making this tax apply to the holders of high-value properties intended for residential use, exceeding € 1,000,000.00, per each floor with independent use.

Indeed, with the principle of tax equality determining that one must treat fiscally in an equal manner what is equal and in a different manner what is different, the differentiated treatment for tax purposes of the floors of a property simply because the same is already in condominium ownership is not justified, provided that those floors have independent use.

And by referring the Stamp Duty Code to the Municipal Property Tax Code, we consider that the registration in the property registry of properties in full ownership, constituted by different floors with independent use, should comply with the same registration rules as properties constituted in condominium ownership.

Note, from the outset, what is provided for in (3) of art. 12 of the Municipal Property Tax Code, according to which "each floor or part of a property susceptible of independent use is considered separately in the property registration, which also discriminates its respective taxable patrimonial value."

To establish as the reference value for the applicability of the new tax the global TPV of the property in question, as the AT seeks to do, finds no basis in the applicable legislation referred to above.

Moreover, the respondent itself issued the Assessment Notes that are in the proceedings, each of them referring to each one of the fractions with independent use and residential use. Each of them contains a particular reference to the TPV of each fraction, for purposes of applying item 28.1 of the General Stamp Duty Schedule. It follows from here that the tax was assessed individually in relation to each one of the portions with independent use and not considering the sum of the TPVs of the floors of the property in full ownership.

In light of all that has been stated, the legal criterion to be used to define the applicability of the tax established in item 28.1 of the General Stamp Duty Schedule must be identical to that established for purposes of the Municipal Property Tax.

As can be read in the Arbitral Decision rendered in case 132/2013-T: "there is no indication, in the works relating to the discussion of bill no. 96/XII in the Assembly of the Republic, of the invocation of a different interpretative ratio than the one presented here. In effect, such a measure, called a "special tax on urban residential properties of the highest value", was justified by the need to comply with the principles of social equity and tax justice, burdening more significantly the holders of properties of high value intended for residential use, and, to that extent, making the new "special tax" apply to "homes of a value equal to or exceeding 1 million euros."

The said decision further states that "if such logic seems to make sense when applied to 'residential property' – be it a 'home', 'autonomous unit' or 'part of property with independent use' / 'autonomous unit' – because it is assumed to have above-average tax capacity and, to that extent, justifies the need to make an additional tax effort, it would make little sense to cease to disregard the calculations 'unit by unit' when only through the sum of the TPVs thereof (because held by the same individual) would the million euro threshold be exceeded."

Given that the AT would only be right, and consequently, would the assessment of the tax in question be justified, if any of the floors with independent use corresponded to a TPV exceeding € 1,000,000.00, which is not the case, as the highest value corresponds only to € 168,500.99.

It is deduced from what has been said thus far that the position of the AT is contrary to the Law and the Constitution, violating the principles of legality and tax equality.

The property in question is in full ownership and contains 13 fractions with independent use, of which 12 have residential use. As is proven, none of them has a TPV equal to or exceeding € 1,000,000.00. We thus observe the non-occurrence of the legal prerequisite for the applicability of the Stamp Duty provided for in item 28 of the General Stamp Duty Schedule.

As a consequence of the foregoing, we conclude as to the illegality of the stamp duty assessments challenged by the Applicant. The taxable subject matter that serves as the basis for the rule of applicability of item 28.1 of the General Stamp Duty Schedule should therefore be the TPV determined in accordance with the Municipal Property Tax Code, for each one of the floors of the property that are susceptible of independent use.

It has been proven that the now applicant paid on 30-04-2014, 31-07-2014 and 29-11-2014 the first, second and third instalments relating to the tax resulting from the assessments under discussion, and has petitioned the recognition of the right to compensatory interest.

Arts. 24(1)(b) of the Arbitration Rules for Tax Matters, and 100 of the General Tax Law, provide that, having been paid the tax and subsequently, the assessment supporting that tax being annulled, the taxpayer has the right to reimbursement of the amounts unduly paid.

Art. 43 of the General Tax Law provides that "compensatory interest is due when it is determined, in gracious reclamation or judicial challenge, that there was error imputable to the services resulting in payment of the tax debt in an amount exceeding what is legally due."

As regards the existence, in this case, of error imputable to the services, such error is considered verified, according to uniform case law of the Supreme Administrative Court (see, to that effect, the Decisions of the Supreme Administrative Court of 22-05-2002, Case No. 457/02; of 31.10.2001, Case No. 26167; of 2.12.2009, Case No. 0892/09) whenever they proceed with gracious reclamation or challenge of the assessment (in the same sense, the decision in arbitral case 218/2013-T).

Consequently, the applicant has the right to compensatory interest, in accordance with arts. 43(1) of the General Tax Law, and 61(2)(5) of the General Tax Procedure Code.

Being thus, the AT must reimburse the amount of € 18,479.93 plus interest at the legal rate of 4%, from the date of the said payments (30-04-2014, 31-07-2014 and 29-11-2014) until full restitution of the amounts by the AT.

In accordance with the provisions of arts. 12(2) and 22(4), both of the Arbitration Rules for Tax Matters, and art. 4(3) of Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the costs of the present proceedings shall be borne by the respondent.

4. Decision

Given all that has been described above, it is decided to rule in full favor of the request formulated by the Applicant in the present tax arbitration proceedings, as to the illegality of the Stamp Duty assessments Nos. 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014...; 2014... and 2014... which shall be considered null, with the necessary legal consequences.

Furthermore, the now respondent is condemned to reimburse to the applicant the total of € 18,479.93 as principal, which the latter unduly paid, plus interest at the legal rate of 4%, from 30-04-2014, 31-07-2014 and 29-11-2014 respectively, relating to the first, second and third instalments, until full restitution of the amount in question.

The respondent is furthermore condemned to pay the costs in accordance with what is stated above and below.

Value of the Case:

In accordance with the provisions of arts. 306(2) of the Code of Civil Procedure, and 97-A(1)(a) of the General Tax Procedure Code, and 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at € 18,479.93.

Costs:

Pursuant to article 22(4) of the Arbitration Rules for Tax Matters, and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of the costs is fixed at € 1,224.00 to be paid by the Tax and Customs Authority.

Let it be notified.

Lisbon, 6 April 2015.

Text prepared by computer, in accordance with art. 131(5) of the Code of Civil Procedure, applicable by reference of art. 29(1)(e) of the Arbitration Rules for Tax Matters, with blank verses and revised by me.

The sole arbitrator

Ricardo Marques Candeias

Frequently Asked Questions

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What is Verba 28.1 of the Portuguese Stamp Tax General Table (TGIS) and how does it apply to high-value properties?
Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) establishes an annual stamp tax on urban buildings or building fractions intended for residential purposes with a Taxable Asset Value (VPT) exceeding €1,000,000. The tax applies at progressive rates: 0.7% for VPT between €1,000,000 and €2,000,000, and 1% for VPT exceeding €2,000,000. This provision was introduced through Law 55-A/2012 as part of austerity measures, creating a recurring annual tax obligation on high-value real estate. The tax is calculated based on the VPT determined for municipal property tax (IMI) purposes and is payable in three installments throughout the year. For properties held in vertical ownership with independent units, the critical issue is whether each autonomous fraction is assessed individually or whether the entire building is considered as a single property for determining if the €1,000,000 threshold is exceeded.
How is Stamp Tax (Imposto de Selo) calculated for buildings held in total vertical property (propriedade vertical) with independent units?
For buildings held in total vertical property (propriedade vertical total), the calculation of Stamp Tax under Verba 28.1 depends on whether independent units are treated separately or collectively. In vertical property arrangements, a building is divided into autonomous fractions, each with independent registry entries and separate VPT assessments for municipal property tax purposes. When the Tax Authority assesses each unit individually, it applies the stamp tax only if that specific unit's VPT exceeds €1,000,000. Conversely, if the entire building is treated as a single taxable unit, the combined VPT of all fractions determines whether the threshold is met. In this case, the Tax Authority issued separate assessments for 12 units with individual VPT values ranging from approximately €82,000 to €168,500—none exceeding the €1,000,000 threshold individually. This suggests the assessments may have been based on an interpretation treating portions of a vertically owned building collectively, raising questions about the proper application of Verba 28.1 to such property structures.
Can a real estate investment fund challenge Stamp Tax assessments on individual units of a vertically owned building before CAAD?
Yes, a real estate investment fund has standing to challenge Stamp Tax assessments before the Administrative Arbitration Centre (CAAD). Under Article 4 of Decree-Law 10/2011, which established CAAD, taxpayers can submit arbitration requests to contest the legality of tax assessment acts, including stamp duty liquidations. Real estate investment funds, as taxpayers with their own tax identification numbers, have full capacity to invoke administrative arbitration for tax disputes. The arbitration request must be filed within 90 days from the notification of the contested act or, if a hierarchical appeal was filed, within 90 days of the tacit or express rejection of that appeal. The fund can contest multiple related assessments in a single arbitration proceeding when they share common legal and factual grounds, as demonstrated in this case where 34 separate stamp tax assessments relating to different units of the same building and multiple installments were challenged collectively. CAAD provides an alternative dispute resolution mechanism to traditional court litigation, offering faster resolution of tax controversies.
Does the Taxable Asset Value (VPT) of each independent unit or the total building value determine Stamp Tax liability under Verba 28?
The determination of Stamp Tax liability under Verba 28 depends on the proper interpretation of 'urban building or building fraction' for properties in vertical ownership. The law's reference to 'building or building fraction' (prédio urbano ou fração autónoma) suggests two possible taxable units. If each independent unit registered separately in the property registry qualifies as a distinct 'building fraction,' then each unit's individual VPT determines whether it exceeds the €1,000,000 threshold triggering stamp tax liability. However, if a building held in complete vertical ownership by a single owner should be treated as one 'urban building' despite being divided into autonomous fractions, then the aggregate VPT of all units would determine tax liability. This interpretation has significant implications: in this case, individual unit VPTs ranged from €82,129 to €168,500, none exceeding the threshold individually, but the total VPT of all 12 units exceeded €1.8 million. The legal question centers on whether ownership unity and the property's physical integration as a single building should prevail over the separate registry entries of constituent units for stamp tax purposes.
What is the arbitral procedure at CAAD for disputing multiple Stamp Tax liquidations on a single urban property?
The arbitral procedure at CAAD for disputing multiple Stamp Tax liquidations on a single urban property begins with filing a written arbitration request within the statutory deadline. The request must identify all contested assessment acts, state the factual and legal grounds for challenging them, and include supporting documentation such as tax notifications, property registry certificates, and evidence of the property's characteristics. When challenging multiple related assessments, taxpayers can consolidate them in one proceeding if they share common legal questions and factual circumstances, improving procedural efficiency. After submission, CAAD verifies admissibility and the respondent Tax Authority files a response. The parties jointly appoint an arbitrator or request CAAD to designate one. The proceeding includes a written phase where parties present arguments and evidence, and may include a hearing if necessary. The arbitrator examines whether the assessments comply with applicable law, particularly the correct interpretation of Verba 28.1, proper identification of the taxable unit, accurate VPT determination, and correct rate application. The arbitral decision is binding, subject to limited appeal grounds to administrative courts, and if favorable to the taxpayer, can annul illegal assessments and order tax refunds with interest.