Process: 608/2016-T

Date: February 5, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 608/2016-T addresses the critical question of how Stamp Tax (Imposto do Selo) under Item 28.1 of the General Table applies to properties held in vertical ownership (propriedade vertical) with multiple independently usable residential units. The dispute centers on whether the €1 million threshold triggering Stamp Tax liability should be calculated per individual unit or as the aggregate sum of all units within a single property. The Claimant owned an urban property in Lisbon with a total patrimonial value of €1,976,910, composed of 8 floors with various units capable of independent use. While each individual unit was valued below €1 million, the Tax Authority assessed Stamp Tax based on the aggregate value, issuing collection notices totaling €3,838.22 for second installments of 2015. The Claimant challenged these assessments, arguing that Article 12(3) of CIMI requires each independently usable unit to be considered separately in property registry entries with individual patrimonial values, and that Article 67(2) of the Stamp Tax Code applies CIMI rules subsidiarily to Item 28 matters. The arbitral tribunal noted that majority case law supports determining the threshold according to the tax patrimonial value assigned to each residential unit capable of independent use, rather than aggregating values. This interpretation respects the legal framework established by CIMI for property valuation and taxation, where units capable of independent economic use receive separate assessments for municipal property tax purposes. The case exemplifies a fundamental conflict between the Tax Authority's aggregation approach and taxpayers' unit-by-unit interpretation, with significant implications for owners of vertical properties containing multiple residential units, particularly in urban centers where property values frequently approach or exceed the €1 million threshold when aggregated but remain below it when assessed individually.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. ..., a legal entity number ..., with registered office at ..., n.º ..., ..., in Lisbon, requested the establishment of an arbitral tribunal in tax matters, raising a request for an arbitral decision with a view to the declaration of illegality of Stamp Tax assessments - Item 28.1 of the General Table - relating to second installments of the year 2015, in the total amount of € 3,838.22.

  2. The request for the establishment of the arbitral tribunal, presented on 12-10-2016, was accepted by the President of CAAD and automatically notified to the Respondent, Tax and Customs Authority (AT), on 17 of the same month.

  3. Pursuant to the provisions of paragraph a) of article 6(2) and paragraph b) of article 11(1) of Decree-Law no. 10/2011, of 20/01, as amended by article 228 of Law no. 66-B/2012, of 31/12, the Deontological Council designated the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the office within the applicable time period, and notified the parties of such designation on 30-11-2016.

  4. Duly notified of such designation, the parties did not express a will to challenge the appointment of the arbitrator in accordance with the combined provisions of article 11(1), paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  5. Thus, in accordance with the provisions of paragraph c) of article 11(1) of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31/12, the single arbitral tribunal, to examine and decide the dispute that is the object of the present proceedings, was constituted on 19-12-2016.

  6. The parties possess legal personality and judicial capacity and have standing (arts. 4 and 10(2) of the RJAT, and art. 1 of Administrative Order no. 112-A/2011, of 22/03).

  7. The proceedings are not affected by nullities and no exceptions have been raised.

  8. Thus, given the knowledge that derives from the procedural documents, in particular from the administrative proceedings and documents presented by the Claimant, which is deemed sufficient, the Tribunal decided to dispense with, as unnecessary, the hearing referred to in article 18 of the RJAT.

II. STATEMENT OF FACTS

  1. At issue in the present proceedings is the scope of application of Stamp Tax, as provided for in article 1 of the Stamp Tax Code and Item 28.1 of its respective Table, on residential urban properties valued at or above one million euros, when referring to properties held in full or vertical ownership, but composed of parts capable of independent use.

  2. With respect to properties that have such characteristics, the Tax Administration holds that the threshold value to be considered for purposes of tax liability is the value resulting from the sum of the patrimonial values of the residential units, which are subject to separate valuation. Conversely, it is the understanding of the majority of arbitral case law that such threshold value should be determined according to the tax patrimonial value assigned to each of the residential units capable of independent use.[i]

  3. It is thus within the legal framework thus very summarily outlined that the object of the present request for an arbitral decision is situated, for whose examination the factual elements referred to in the following points are relevant, which are here considered fully proven.

  4. The Claimant, in the year 2015, was the owner of the urban property located at ..., n.º ... to ..., parish of ..., in Lisbon, registered in the respective property registry under article ... .

  5. In the respective property registry, said property, with a total patrimonial value of € 1,976,910.00, is described as held in full ownership, with 8 floors, and various units or divisions capable of independent use.

  6. In accordance with the rules applicable to the valuation of urban properties composed of units capable of independent use, the patrimonial value of each of those parts was determined separately, and it was found that the tax patrimonial value of each of the parts composing the property in question is less than one million euros.

  7. Considering that the tax patrimonial value resulting from the sum of the patrimonial values of the residential units was, in the year 2015, higher than one million euros, the Tax Administration proceeded with the assessment of Stamp Tax referred to in Item 28 of the respective General Table with respect to each of those units.

  8. The amount determined in said assessments was divided for payment in installments, with the total amount relating to the second installments being € 3,838.22, as shown in the annex to the request.

  9. For the collection of those second installments, the Tax Administration issued the corresponding collection notices, with the voluntary payment period running during the month of July 2016.

  10. There are no material facts relevant to the decision that have not been proven.

III. LEGAL ANALYSIS

  1. With respect to the assessments in question, as stated above, the question that motivates the Claimant's disagreement is one relating to the application of Item 28.1 of the General Table of Stamp Tax (GTST) to urban properties, which, held in full ownership, are composed of units or divisions capable of independent use, with residential designation, but whose tax patrimonial value, considered separately, is below the threshold value that is relevant for purposes of tax liability.

  2. It is the legality of such taxation that the Claimant contests, considering the assessments in question to be illegal, on the grounds of erroneous qualification and quantification of income, patrimonial values and other tax facts, and violation of the principle of tax equality, alleging, in summary, that:

"There is no concept of property with residential designation enshrined in law, but the CIMI, pursuant to article 12(3) of the CIMI, establishes that each unit or part capable of independent use is considered separately in the property registry entry, which also individually identifies the respective patrimonial value.

Article 67(2) of the Stamp Tax Code establishes that to matters not regulated in the S.T.C. concerning Item 28 of the G.T.S.T. the norms of the CIMI apply subsidiarily.

For purposes of municipal property tax, each unit has an autonomous and distinct patrimonial value.

This is the case with each of the units of the urban property in vertical ownership located in the parish of ... and, in particular, those that are the subject of the assessment notices here in question.

The patrimonial value of each of the units is less than one million euros."

The assessments are illegal because the value considered for purposes of the stamp tax assessment was not the patrimonial value of each unit capable of independent economic use but rather the sum of all of them."

  1. With the grounds that, in essence, are set forth above, the Claimant concludes by requesting the declaration of illegality of the assessment acts, to which correspond the collection notices identified in the annex to the request relating to the second installments of the tax pertaining to the property in question and for the year 2015, in the total amount of € 3,838.22, with the consequent annulment thereof and restitution of the amounts wrongfully collected, together with the corresponding compensatory interest.

  2. The Respondent (AT) presented a response, defending the dismissal of the request for an arbitral decision, alleging, in essence, that:

"Liability to stamp tax under Item 28.1 of the General Table attached to the S.T.C. results from the combination of two facts: the residential designation and the patrimonial value of the urban property registered in the property registry being equal to or greater than € 1,000,000.00.

In fact, it appears from the property register that the property is held in full ownership, composed of various parts capable of independent use.

Given this registered information, in accordance with article 23(7) of the S.T.C., the stamp tax assessments for the year 2015 were made by the Tax Administration, taking into account the nature of the urban property on the date of the tax event, applying, with the necessary adaptations, the rules contained in the CIMI.

In accordance with the rules of the CIMI, specifically article 113(1), the assessment is made on the basis of the tax patrimonial values of the properties and in relation to the taxpayers registered in the property registries on 31 December of the year to which they pertain (in the case of the 2015 tax).

Since the property is held in full ownership, not possessing separate units to which tax law attributes the qualification of property, because from the definition of property in article 2 of the CIMI, only separate units of property in a regime of horizontal ownership are deemed to be properties – article 2(4) of the aforementioned CIMI.

From the foregoing, the defect of violation of law due to error regarding the legal prerequisites should be judged without merit, with the impugned assessments remaining valid in the legal order as they constitute a correct application of law to the facts."

IV. LEGAL ANALYSIS

  1. Having summarized the relevant factual elements as well as the positions that, in matters of interpretation of applicable law, are held by the parties, it is important, first of all, to analyze, as a preliminary matter of the tribunal's sua sponte knowledge, the issue of the arbitral tribunal's jurisdiction to examine and decide on the object of the request.

  2. The present request for an arbitral decision has as its object the declaration of illegality and consequent annulment of second installments of stamp tax assessments provided for in Item 28 of the respective Table, thereby raising, from the outset, the question of the independent challengeability of payment installments of a tax.

  3. In the request it formulates, the Claimant clearly specifies that its object is the second installments of stamp tax assessments provided for in Item 28 of the General Table with reference to the year 2015 and to the urban property it identifies.

  4. In that sense, the Claimant maintains that "the right to object to or challenge the assessments in question is stated in each of the notifications sent by the Tax and Customs Authority to the Claimant, conferring on them a divisible character, as appears therefrom." According to the Claimant, the Tax and Customs Authority "in issuing the stamp tax collection notices as it does, grants to the taxpayer the space to oppose separately the payment thereof, that is to say, by installment."

  5. Thus, the object of the request is clearly delineated, as the Claimant maintains and, moreover, as is evident from the other elements of the file: what is being challenged is not the assessment acts but the second installments relating to the payment of a unit amount of tax.

On the Non-Challengeability of Installments as Independent Acts

  1. Stamp Tax liability on urban properties referred to in Item 28.1 of the GTST originates an annual assessment, for each property that meets the conditions stated therein, following, by express reference, the rules of the Municipal Property Tax Code as regards its collection, as is provided for in article 23(7) of the Stamp Tax Code.

  2. In accordance with the provisions of articles 113 and 120 of the Municipal Property Tax Code, the tax determined in that annual assessment is subsequently collected in various installments, to be paid throughout the year, with the number of installments varying according to the amount of tax assessed.

  3. In the present case, as is evident from the procedural documents, the assessments were made in 2016, with the determined tax divided for payment in installments.

  4. For payment of the second installments, the corresponding collection notices were duly issued, with the voluntary payment period running until the end of July of that same year.

  5. Thus, it results that the Claimant is challenging installments to which partial collection notices refer, relating to the second installments of the tax assessed to it with reference to the property already identified above.

  6. On the non-challengeability of installments as independent acts, the Arbitral Tribunal has already ruled in situations identical to that of the present proceedings, with emphasis on, among other decisions going in the same direction[ii], the conclusions formulated in Case no. 726/2014, to which it fully adheres:

"The payment installments of a Municipal Property Tax assessment or, in the situation under analysis, a Stamp Tax assessment, pursuant to Item 28 of the GTST, are not independently challengeable, as they originate in a single annual obligation. Since each of the payment installments of the Stamp Tax assessments identified in the file is not independently challengeable, ... this constitutes a case of lack of jurisdiction of the arbitral tribunal to examine and declare its illegality and consequent annulment. The conclusion that the Stamp Tax assessment under Item 28 of the GTST is indivisible, such that each of its installments cannot be independently challenged, determines the lack of jurisdiction of the arbitral tribunal and bars the continuation of the proceedings, as well as the examination of the merits of the case. For which reasons, it is decided to absolve the Tax and Customs Authority from the suit."

  1. The reasoning of the decision cited above, which is subscribed to without reservation, is identically applicable to the present request for an arbitral decision, and therefore, since each of the installments relating to the Stamp Tax assessment is not independently challengeable, it remains to conclude, with the grounds set forth above, that this Arbitral Tribunal lacks jurisdiction to examine and decide on the request that constitutes the object of the present proceedings, which thus cannot proceed, as is provided for in article 89(4), paragraph i) of the CPTA, applicable by reference to article 29(1), paragraph c) of the RJAT.

  2. In these terms, an exception to the jurisdiction, of the tribunal's sua sponte knowledge, preventing examination of the merits of the case, precludes examination of the present request and leads to the dismissal of the Respondent (AT) from the suit, in accordance with the provisions of articles 576(2) and 577, paragraph a) of the Code of Civil Procedure (CCP), and 89(2 and 4), paragraph a) of the CPTA, applicable to the arbitral proceedings by reference to article 29 of the RJAT.

V. DECISION

Pursuant to the foregoing and with the grounds set forth above, the Arbitral Tribunal decides:

a) To declare the lack of jurisdiction of this Arbitral Tribunal to examine the request submitted by the Claimant, which bars the continuation of the request and examination of the merits of the case, dismissing the Respondent (AT) from the suit.

b) To condemn the Claimant to pay the costs of the proceedings.

Value of the claim: € 3,838.22

Costs: Pursuant to article 22(4) of the RJAT and in accordance with Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, the amount of costs is set at € 612.00, to be borne by the Claimant.

Lisbon, 5 February 2017

The Arbitrator, Álvaro Caneira

[i] By way of illustration only, and referring only to the most recent arbitral decisions, reference may be made to those decided in the following cases: 749/2014-T, 752/2014-T, 754/2014-T, 808/2014-T, 812/2014-T, 818/2014-T, 822/2014-T, 824/2014-T, 849/2014-T, 41/2015-T, 65/2015-T, 70/2015-T, 73/2015-T, 110/2015-T, 174/2015-T, 236/2015-T, 449/2015-T, 461/2015-T and 463/2015-T.

[ii] See Cases 120/2012-T, 408/2014-T, 797/2014-T, 37/2015-T, 90/2015-T, 137/2015-T and 140/2015-T, among others.

Frequently Asked Questions

Automatically Created

What is Stamp Tax (Imposto do Selo) under Verba 28.1 and how does it apply to residential properties valued at €1 million or more?
Stamp Tax under Item 28.1 of the General Table (Verba 28.1 da TGIS) applies to residential urban properties with a tax patrimonial value equal to or exceeding €1 million. This tax was introduced as an annual levy on high-value residential real estate. The liability arises from the combination of two factors: the property's residential designation and its patrimonial value registered in the property registry meeting or exceeding the €1 million threshold. The tax is typically paid in installments throughout the year.
How does the CAAD arbitral tribunal determine the taxable value for properties held under vertical ownership (propriedade vertical)?
The CAAD arbitral tribunal determines taxable value for vertical property ownership by examining whether properties are composed of units capable of independent use. According to majority arbitral case law cited in this decision, when a property held in full ownership contains independently usable residential units, the €1 million threshold should be determined according to the tax patrimonial value assigned to each individual unit, rather than aggregating all units. This approach aligns with Article 12(3) of CIMI, which requires each independently usable unit to be considered separately in property registry entries with individual patrimonial values.
Should the €1 million threshold for Stamp Tax be calculated per individual unit or as the sum of all units in a vertical property?
According to the majority arbitral case law position referenced in this decision, the €1 million threshold should be calculated per individual unit capable of independent use, not as the sum of all units. The Claimant argued that Article 67(2) of the Stamp Tax Code applies CIMI rules subsidiarily, and CIMI treats each independently usable unit with separate patrimonial values. Since each unit in the subject property was valued below €1 million individually, despite the aggregate value of €1,976,910 exceeding the threshold, the Stamp Tax assessments were contested as illegal. This contrasts with the Tax Authority's position that the threshold should be based on the aggregate sum of all residential units.
What is the majority arbitral case law position on Stamp Tax incidence for properties with independently usable parts?
The majority arbitral case law position holds that for properties with independently usable parts (unidades suscetíveis de utilização independente), the €1 million Stamp Tax threshold under Item 28.1 should be determined according to the tax patrimonial value assigned to each individual residential unit capable of independent use. This interpretation is based on the subsidiary application of CIMI rules to Stamp Tax matters per Article 67(2) of the Stamp Tax Code, and specifically Article 12(3) of CIMI, which establishes that each independently usable unit is considered separately in property registry entries with distinct patrimonial values. This position favors taxpayers over the Tax Authority's aggregation approach.
What was the procedural timeline and legal basis for the arbitral proceedings in CAAD Process 608/2016-T?
The arbitral proceedings in CAAD Process 608/2016-T followed this timeline: the arbitral tribunal request was filed on October 12, 2016, accepted by the CAAD President and notified to the Tax Authority on October 17, 2016. The arbitrator was designated on November 30, 2016, pursuant to Article 6(2)(a) and Article 11(1)(b) of Decree-Law 10/2011 as amended by Law 66-B/2012. After no challenges were raised under the Deontological Code (Articles 6-7), the single arbitral tribunal was formally constituted on December 19, 2016, per Article 11(1)(c) of RJAT. The legal basis includes the RJAT (Regime Jurídico da Arbitragem Tributária), the Stamp Tax Code, CIMI, and Item 28.1 of the General Table of Stamp Tax.