Process: 61/2015-T

Date: September 3, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 61/2015-T addressed whether Stamp Tax under item 28.1 of the General Stamp Tax Table (TGIS) applies to land for construction (terrenos para construção). The claimant challenged tax impositions of €18,704.20 on two urban plots registered as construction land, each with a taxable property value of €1,870,420.00. Law 55-A/2012 introduced a 1% stamp tax on urban properties with residential designation valued at €1,000,000 or more. The central legal issue was whether construction land qualifies as property with residential designation. The claimant argued the impositions violated constitutional principles of legality and typicality under Article 106 of the Portuguese Constitution. The Tax Authority maintained the properties had residential designation. The arbitral tribunal followed extensive precedent from both CAAD and the Supreme Administrative Court, particularly decision 0676/14, which established that the Property Tax Code (article 6) clearly distinguishes between urban residential properties and land for construction. Since the legislature did not define 'properties with residential designation' in the stamp tax context, and the Property Tax Code makes an explicit distinction, construction land cannot be considered as having residential designation for item 28.1 TGIS purposes. The decision favored the taxpayer, annulling the stamp tax impositions and confirming that land for construction, lacking residential classification in the urban property register, falls outside the scope of item 28.1 TGIS, thereby respecting constitutional tax principles of strict legality and typicality.

Full Decision

Arbitral Decision

CAAD: Tax Arbitration

Case no. 61/2015 – T

Subject Matter: Stamp Tax – item 28.1 of the General Stamp Tax Table – land for construction

Claimant / Applicant: A...., LDA

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

1. Report

On 23-02-2015, the limited liability company A..., LDA, corporate entity no. ..., with registered office at Rua ..., no. ..., ...-... ..., hereinafter referred to as the Applicant, submitted to the Administrative Arbitration Center (CAAD) a request for the constitution of an arbitral tribunal with a view, immediately, to the annulment of the decision dismissing the Administrative Review, and indirectly, to the annulment of the tax acts imposing Stamp Tax for item no. 28 of the General Stamp Tax Table (GSTT), relating to the year 2013 and concerning urban properties (land for construction) registered in the urban property tax register under articles ... and ..., of the union of parishes of ... and ..., municipality of ..., and each article with a taxable property value of € 1,870,420.00.

The Applicant alleges that the properties to which the Stamp Tax impositions refer are two plots of land for construction, and therefore, do not have residential designation, whereby the impositions in question are unlawful as they are based on item 28.1 of the General Stamp Tax Table (GSTT) which, in its understanding, clearly violates the principles of legality and typicality provided for in article 106 of the Constitution of the Portuguese Republic (CPR).

A single arbitrator, Suzana Fernandes da Costa, was appointed on 26-03-2015.

In accordance with the provisions of article 11, no. 1, subparagraph c) of the TAR, the singular arbitral tribunal was constituted on 14-04-2015.

The Tax and Customs Authority submitted its response on 27-05-2015 (within the legal deadline therefor).

The T.C.A. argues that the request for a declaration of unlawfulness and consequent annulment of the disputed impositions should be ruled unfounded, since the impositions at issue constitute a correct interpretation of item 28.1 of the General Stamp Tax Table, given that the aforementioned property has the legal nature of a property with residential designation.

The T.C.A. further requested, on the same date, the dispensing of the meeting provided for in article 18 of the Tax Arbitration Regime.

Notified of the T.C.A.'s request, the Applicant informed, on 05-06-2015, that it had no objection to the dispensing of the meeting.

On 17-06-2015, a ruling was issued dispensing with the meeting provided for in article 18 of the TAR, and granting a period of 15 days for the Applicant and Respondent, in that order and successively, to submit their written submissions. It was also decided in the same ruling to set 11-09-2015 as the date for the pronouncement of the arbitral decision.

Neither the Applicant nor the T.C.A. submitted any written submissions within the period granted therefor.

The parties have legal personality and capacity and are legitimate (articles 4 and 10, no. 1 and 2 of the TAR and article 1 of Ordinance no. 112-A/2011 of 22 March).

The present request for arbitral pronouncement was submitted in a timely manner, in accordance with article 10, no. 1 subparagraph a) of Decree-Law no. 10/2011 of 20 January.

The proceedings do not suffer from nullities and no preliminary questions were raised.

2. Statement of Facts

2.1. Proven Facts:

Having analyzed the documentary evidence produced, the following facts are considered proven and of interest for the resolution of the case:

  1. The Applicant is the owner of the urban property registered in the property tax register under article ... of the union of parishes of ... and ..., municipality of ..., described as land for construction and with a taxable property value of € 1,870,420.00.

  2. The Applicant is the owner of the urban property registered in the property tax register under article ... of the union of parishes of ... and ..., municipality of ..., described as land for construction and with a taxable property value of € 1,870,420.00.

  3. The Applicant was notified of Stamp Tax imposition no. 2014 ..., in the amount of € 18,704.20, relating to the urban article ..., better identified above, which notification also included a payment document for the first installment of the tax for the year 2013, in the amount of € 6,234.74, payable by 30-04-2014, as evidenced by a copy of the imposition attached to the arbitral request.

  4. The Applicant was notified of Stamp Tax imposition no. 2014 ..., in the amount of € 18,704.20, relating to the urban article ..., better identified above, which notification also included a payment document for the first installment of the tax for the year 2013, in the amount of € 6,234.74, payable by 30-04-2014, as evidenced by a copy of the imposition attached to the arbitral request.

  5. The Applicant filed an administrative review of the two Stamp Tax impositions at issue in the present proceedings.

  6. The administrative review of the aforementioned Stamp Tax impositions was expressly dismissed, and the Applicant was notified of its dismissal by registered letter on 07-11-2014, as evidenced by a copy of the decision attached to the arbitral request.

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

2.2. Justification of the Proven Statement of Facts:

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

3. Law:

3.1. Subject Matter and Scope of the Present Proceedings

The question to be decided in the present proceedings is whether the properties that were subject to the Stamp Tax impositions, being land for construction, have residential designation and whether item 28.1 of the General Stamp Tax Table (GSTT) is applicable to them.

On this same question, among others, the decisions of CAAD handed down in case numbers 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 have already ruled.

The Supreme Administrative Court has also already ruled on this question, namely in the decisions of case numbers 048/14 of 09-04-2014, 07/14 of 02-07-2014, 0676/14 of 09-07-2014, 0395/14 of 28-05-2014, 01871/13 of 14-05-2014 and 055/14 of 14-05-2014, 0425/14 of 28-05-2014, 0396/14 of 28-05-2014, 0274/14 of 14-05-2014, 046/14 of 14-05-2014, 01481/14 of 15-04-2015, 0764/14 of 15-04-2015, 0279/15 of 22-04-2015, 021/15 of 29-04-2015 and 01479/14 of 17-06-2015. As stated in the decision handed down in case number 0676/14 of 09-07-2014: "Since the legislator has not defined the concept of 'properties (urban) with residential designation', and resulting from article 6 of the Property Tax Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table – a clear distinction exists between 'urban residential 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 GSTT, as amended by Law no. 55-A/2012, of 29 October) as urban properties with residential designation."

3.2. Question of the Classification of Land for Construction Within the Scope of Incidence of Item 28.1 of the GSTT

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 (GSTT), with the following wording:

28 – Ownership, usufruct or right of superficies of urban properties whose taxable property value shown in the register, pursuant to the Property Tax Code (PTC), is equal to or greater than € 1,000,000 – on the taxable property value used for the purpose of Property Tax:

28.1 – For properties with residential designation – 1% (…);

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

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

f) The applicable rates are as follows:

i) Properties with residential designation assessed pursuant to the Property Tax Code: 0.5%;

ii) Properties with residential designation not yet assessed pursuant to the Property Tax Code: 0.8%;

Item 28.1 GSTT and subitems i) and ii) of subparagraph f) of no. 1 of article 6 of Law no. 55-A/2012 contain a concept that is not used in any other tax legislation, namely that of "property with residential designation".

Let us examine this:

3.2.2. Concept of Properties Used in the PTC

In the PTC, the types of properties are enumerated in articles 3 to 6. In none of these articles is found the concept of "property with residential designation".

The notion most closely corresponding to the literal meaning of this expression used is that of "residential properties", which no. 2 of article 6 of the PTC defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, that have normal residential purposes as their destination.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of the GSTT with that derived from no. 2 of article 6 of the PTC indicates that it was not intended to use the same concept. Nor is this concept found in any other legal instrument.

3.2.3. Concept of "Property with Residential Designation"

Item 28.1 of the GSTT referred in 2013 to "property with residential designation".

The word "designation" in this context of the use of a property has the meaning of "the action of assigning something to a particular use".

As stated in the decision of CAAD handed down in case number 53/2013-T, in which the judges were Judge Counsellor Jorge Lopes de Sousa, Ms. Dr. Conceição Pinto Rosa and Mr. Dr. Alberto Amorim Pereira:

"it is to be concluded that the available interpretative elements, including the 'circumstances in which the law was enacted 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 dedicated to residential use, namely land for construction held by companies".

Land for construction is classified, having regard to the provisions of article 6, no. 3 of the Property Tax Code, as that in which the owner has acquired the right to construct on it or to carry out subdivision operations, as well as that which has been expressly acquired for that purpose. In this sense, see JOSÉ MARIA FERNANDES PIRES in Lessons on Taxes on Patrimony and Stamp Tax, Almedina, 2010, page 97.

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

For its part, in the decision of the Supreme Administrative Court of 09-07-2014, case number 0676/14, reported by Counsellor Dulce Neto, it is stated that "residential designation always appears in the Property Tax Code referred to 'buildings' or 'constructions', existing, authorized or intended, because only these can be inhabited, which is not the case with land for construction, which does not have, in itself, conditions for such, and cannot be used for residential purposes unless and until construction authorized and intended for it is built on it (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 'other' – article 6 of the PTC)."

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

We can thus conclude that "land for construction" cannot be considered as "properties with residential designation" 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 of the possibility of applying analogy to item 28.1 of the GSTT. Now, on this matter, no. 4 of article 11 of the General Tax Law provides as follows:

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

As for the matters covered by the reservation of law, attention should be paid to article 103, no. 2 of the CPR and article 8 of the GTL. According to these norms, the principle of tax legality encompasses incidence, rate, tax benefits and 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 GSTT is a norm of incidence, covered by the principle of tax legality, its analogical application to situations not expressly provided therein is prohibited.

Similarly, an extensive interpretation of the aforementioned item that would permit the inclusion in the expression contained in the law of land for construction should not be admitted. Interpretation is governed by article 11, nos. 1 to 3 of the GTL and article 9 of the Civil Code. We understand that an extensive interpretation of the aforementioned item that would include land for construction is not possible, since it would always have to have a minimum correspondence in the letter of the law, which is not the case.

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

Application of the Regime to the Applicant's Situation

The Applicant's properties are land for construction held by a company. Based on what has been stated, we are not dealing with properties with residential designation, whereby Stamp Tax provided for in item 28.1 of the GSTT does not apply to these properties.

For this reason, the impositions whose declaration of unlawfulness is sought are defective due to a violation of item no. 28.1 GSTT, on account of error regarding the legal prerequisites, which justifies the declaration of their unlawfulness and annulment (article 135 of the Administrative Procedure Code).

The foregoing necessarily implies that the act dismissing the administrative review filed by the Applicant against the Stamp Tax impositions that are the subject of these proceedings is similarly defective due to a violation of law, on account of error regarding the legal prerequisites, which also leads to the declaration of its unlawfulness and consequent annulment (cf. article 135 of the Administrative Procedure Code).

4. Decision

In light of the foregoing, the request formulated by the Applicant in the present tax arbitration proceeding is ruled founded, with respect to the unlawfulness of the Stamp Tax impositions for the year 2013, nos. 2014 ... in the amount of € 18,704.20 and no. 2014 ... in the amount of € 18,704.20.

5. Value of the Action:

In accordance with the provisions of article 315, no. 2, of the Code of Civil Procedure and article 97-A, no. 1, subparagraph a) of the Code of Tax Procedure and article 3, no. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the action is fixed at € 37,408.40.

6. Costs:

In accordance with article 22, no. 4, of the TAR, and Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 1,836.00, payable by the Tax and Customs Authority.

Let it be notified.

Lisbon, 3 September 2015.

Text prepared by computer, in accordance with article 138, no. 5 of the Code of Civil Procedure (CCP), applicable by referral of article 29, no. 1, subparagraph e) of the Tax Arbitration Regime, reviewed by me.

The single arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Does Verba 28.1 of the Portuguese Stamp Tax Table apply to building land (terrenos para construção)?
No, Verba 28.1 of the General Stamp Tax Table does not apply to building land (terrenos para construção). According to CAAD Process 61/2015-T and Supreme Administrative Court jurisprudence (particularly decision 0676/14 of 09-07-2014), there is a clear legal distinction between urban residential properties and land for construction under Article 6 of the Property Tax Code. Since the legislator did not define 'properties with residential designation' for stamp tax purposes, the Property Tax Code applies subsidiarily. Land for construction, being a distinct category from residential properties in the urban property tax register, cannot be considered as having residential designation under item 28.1 TGIS introduced by Law 55-A/2012. Therefore, the 1% stamp tax on properties valued at €1,000,000 or more applies only to properties classified with residential designation, excluding construction land.
Can building land without residential designation be subject to Stamp Tax under Verba 28.1 TGIS?
No, building land without residential designation cannot be subject to Stamp Tax under Verba 28.1 TGIS. The Supreme Administrative Court established in multiple decisions (048/14, 0676/14, 0395/14, 01871/13, among others) that item 28.1 of the General Stamp Tax Table requires properties to have residential designation. Properties registered in the urban property tax register as 'land for construction' (terreno para construção) lack this residential classification. The Property Tax Code (Código do IMI) in Article 6 creates distinct categories: urban residential properties versus land for construction. This distinction is legally significant and must be respected in stamp tax application. Imposing the 1% stamp tax on construction land would violate the tax incidence rule, as the taxable event specifically requires 'residential designation.' CAAD consistently annuls stamp tax impositions on construction land, confirming these properties fall outside the scope of item 28.1.
What are the legality and typicality principles under Article 106 of the Portuguese Constitution in tax matters?
Article 106 of the Portuguese Constitution enshrines fundamental principles of legality and typicality in tax matters. The principle of legality requires that taxes can only be created or modified by law, and tax authorities must act strictly within legal boundaries without analogy or extensive interpretation. The principle of typicality demands that taxable events, taxpayers, taxable base, and tax rates be clearly and precisely defined in legislation, preventing arbitrary or expansive tax application. In CAAD Process 61/2015-T, the claimant invoked these constitutional principles, arguing that applying item 28.1 TGIS to construction land violated both principles. Since the stamp tax legislation specified 'properties with residential designation' without defining the term, and the Property Tax Code clearly distinguishes construction land from residential properties, extending the tax to construction land would breach constitutional requirements. Courts must interpret tax laws restrictively, respecting the precise categories established by the legislator. Any ambiguity must be resolved in favor of the taxpayer, ensuring taxes are imposed only on clearly defined taxable events.
How did CAAD Process 61/2015-T decide on the Stamp Tax liquidation for urban building plots?
CAAD Process 61/2015-T decided in favor of the taxpayer, annulling the Stamp Tax liquidations imposed on two urban building plots registered as land for construction. The arbitral tribunal, presided by arbitrator Suzana Fernandes da Costa, followed extensive precedent from both CAAD (over 20 prior decisions including 53/2013-T, 49/2013-T, 240/2013-T, 514/2014-T) and the Supreme Administrative Court (decisions 048/14, 0676/14, 01871/13, among others). The tribunal ruled that properties registered as 'terreno para construção' (land for construction) in the urban property tax register do not constitute properties with residential designation for purposes of item 28.1 of the General Stamp Tax Table. Each plot had a taxable property value of €1,870,420.00, triggering stamp tax impositions of €18,704.20 (1% rate). The decision confirmed that Article 6 of the Property Tax Code creates a clear legal distinction between urban residential properties and construction land, and this distinction applies subsidiarily to stamp tax. The tax impositions violated constitutional principles of legality and typicality, as they extended the tax beyond its legally defined scope.
What is the procedure for challenging Stamp Tax assessments through CAAD tax arbitration in Portugal?
The procedure for challenging Stamp Tax assessments through CAAD tax arbitration in Portugal involves several steps: (1) File an administrative review (reclamação graciosa) with the Tax Authority within the legal deadline (typically within the deadline for voluntary payment or within one year from the tax notification); (2) If the administrative review is rejected or not decided within the legal timeframe, submit a request for arbitration to CAAD (Centro de Arbitragem Administrativa) within 90 days of notification of the rejection or from the expiry of the decision period; (3) The arbitration request must identify the contested tax acts, state the legal and factual grounds, and include supporting documentation (tax impositions, administrative review decision, evidence); (4) Pay the arbitration fee; (5) CAAD appoints an arbitrator (single arbitrator for amounts under €10,000, arbitral panel for higher amounts); (6) The Tax Authority submits its response within the legal deadline; (7) The arbitral tribunal may dispense with the hearing if both parties agree; (8) Parties may submit written statements; (9) The arbitral tribunal issues a decision within the legally established timeframe (typically 6 months, extendable); (10) The arbitral decision has the same force as a court judgment and is binding on both parties, with limited grounds for appeal to administrative courts.