Process: 612/2017-T

Date: April 30, 2018

Tax Type: IMI

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 612/2017-T) addresses the proper classification of fuel service stations for IMI property tax purposes in Portugal. The taxpayer, A... SA, challenged the Tax Authority's (AT) classification of two fuel service stations as 'other urban buildings' under Article 6(1)(d) of the CIMI code, arguing they should be classified as 'commercial properties' instead. The classification determines the valuation methodology: Article 46(2) CIMI uses the construction cost method for 'other' properties, while Article 38 CIMI applies a formula-based approach for commercial properties. The taxpayer contended that the AT's reliance on the Valuation Manual (Manual de Avaliação) superseded both the CIMI statute and judicial precedent. The AT defended its classification, distinguishing between simple 'fuel service stations' (postos de abastecimento) where only refueling occurs, and broader 'service stations' that include restaurants, convenience stores, and rest areas. Since these properties functioned primarily as fuel supply points with only ancillary activities, the AT maintained they properly fell under the 'other' category requiring the construction cost method. The case highlights the tension between statutory classification rules and administrative guidance, the importance of determining a property's principal use versus ancillary activities, and the taxpayer's right to challenge patrimonial tax values through CAAD arbitration when disagreeing with property classification and valuation methodology.

Full Decision

ARBITRATION DECISION

I – REPORT

A..., SA, Tax Identification Number[1]..., with registered office in ..., ..., ...-... Lisbon, area of the ... Lisbon Finance Service, filed a request for arbitral decision, pursuant to the provisions of paragraph a) of no. 1 of article 2, no. 1 of article 3, and paragraph a) of no. 1 of article 10, all of the LTAT[2], requesting the ATA[3], with a view to annulling the acts fixing the patrimonial values of urban properties registered in the respective tax rolls under the ... of the parish of ... and ... (former article ...) of the parish of ..., and the consequent repetition of the assessment procedures, now considering the properties as commercial, with the application of the formula provided in no. 1 of article 38 of the MPIT[4], assigning to each of them the following TPV[5]: article ... € 104,640.00; article ... € 146,220.00.

The request was made without exercising the option to designate an arbitrator and was accepted by the Honourable President of CAAD[6] on 27/11/2017 and notified to the ATA on the same date.

Pursuant to and for the purposes of the provisions of no. 2 of article 6 of the LTAT, by decision of the Honourable President of the Deontological Council, duly communicated to the parties within the legally applicable time periods, on 18/01/2018, Arlindo José Francisco was appointed as arbitrator of the tribunal, who communicated his acceptance of the appointment within the legally stipulated time period.

The tribunal was constituted on 07/02/2018 in accordance with the provisions contained in paragraph c) of no. 1 of article 11 of the LTAT, as amended by article 228 of Law no. 66-B/2012, of 31 December.

With its request, as has been seen, the claimant seeks the annulment of the acts fixing the TPV of the urban articles already identified, relating to fuel service stations, the repetition of the same, but classifying the properties as commercial and using in the assessment the formula provided in no. 1 of article 38 of the MPIT.

It considers that the Valuation Manual appears to supersede both the MPIT and judicial precedent, by considering fuel service stations urban properties "other" and subjecting them to assessment pursuant to no. 2 of article 46 of the MPIT.

It believes that, even if classified as "other," the formula provided in article 38 of the MPIT was possible and would have avoided using the construction cost method used without presenting any objective criterion for doing so, merely stating that it was through consultation with entrepreneurs and experienced municipal technical staff and through the professional knowledge and experience of the appraiser.

Thus the acts fixing the TPV of the properties in question should be annulled and the procedure repeated, but now considering fuel service stations as urban commercial properties.

In its response, the respondent, and also in summary, states that in both the first and second assessments, the construction cost method provided in no. 2 of article 46 of the MPIT was used.

Both the operating licenses and the assessment reports mention that the properties are used as "fuel service station," despite the claimant using the term "service station," which are different things. In the first case, it is the place where vehicles are refueled; in the second case, in addition to fuel supply, there are food service areas, convenience stores, rest areas, among others.

The properties in question are used as fuel service stations and as such must be classified as "other," pursuant to the provision of paragraph d) of no. 1 and no. 4 of article 6 of the MPIT.

Other activities existing in these locations are ancillary to the principal activity (fuel service), and therefore are not the main activity of the location nor of the claimant.

From this perspective, the assessment rules used and to be used can only be those provided in article 46 of the MPIT, since we are dealing with an urban property of the species "Other."

II - CLARIFICATION

The tribunal was properly constituted. The parties have legal personality and capacity, demonstrate themselves to be legitimate, and are properly represented in accordance with articles 4 and 10, no. 2 of the LTAT and article 1 of Regulatory Order no. 112-A/2011, of 22 March.

In view of the respondent's response, the tribunal issued, on 13/03/2018, the following order:

"Notify the claimant to pronounce itself, if it wishes, within 10 days, on the respondent's proposal to waive the presentation of the contested assessment, the holding of the meeting provided for in article 18 of the LTAT, as well as the production of oral or written submissions."

On 15/03/2018, the claimant informed the tribunal that the response submitted by the ATA in the present case had nothing to do with it.

On the same date, the respondent admitted the oversight and submitted the appropriate response, requesting relief for the failure.

On 16/03/2017, the following order was issued: "As was noted by the claimant, the response attached to the case file on 12/03/2013 by the ATA had nothing to do with the same, therefore, given the oversight that occurred, I admit its replacement, as requested. Notify the claimant to pronounce itself, if it wishes, within 5 days."

As nothing was stated by the claimant, on 27/03/2018, a new order was issued: "In view of my order of the 16th of the current month, the claimant's silence, and that no production of additional evidence is required beyond the documentary evidence already incorporated into the case file, there being no matter of exception on which the parties need to pronounce themselves, and taking into account that in arbitral proceedings the general procedural principles of procedural economy and prohibition of useless acts apply, the tribunal considers unnecessary the holding of the meeting to which article 18 of the LTAT alludes, as well as the presentation of submissions, whereby, within 10 days, the parties may, if they wish, pronounce themselves on this understanding."

After the fixed period elapsed, as nothing was stated, the tribunal considered the conditions met to issue a decision, fixing 30 April for that purpose.

Thus, the proceedings being free from nullities and no exceptions being invoked, it is necessary to decide.

III – REASONING

The question to be resolved, with relevance for the case, is as follows:

Whether the assessment acts performed by the ATA suffer from the defect of violation of law, due to error in the factual and legal premises, since they proceeded from the classification of the urban property intended as a fuel service station as belonging to the species "Other," when in the claimant's view, the property should have been classified in the species "Commercial," which will determine the method to be used in the assessment: that provided in no. 2 of article 46 of the MPIT, already used by the ATA, or the method provided in article 38 of the MPIT if they are "Commercial" as the respondent contends.

2 – Factual Matters

The claimant submitted two standard form 1 declarations of MPIT[7], with a view to the assessment of urban properties ... of the parish and municipality of ... and ... (formerly ...) of the parish of ..., municipality of ....

After assessments of article ... of the parish of ..., a TPV of € 376,630.00 was assigned, and to article ... (formerly ...) of the parish of ..., a TPV of € 323,150.00 was assigned.

Against these assessments, the claimant filed a request for second assessment, considering that the properties were classified as urban properties of the species "other," a fact that led the assessments to fix the TPV of each of the properties based on the method provided in no. 2 of article 46, when it believes that the properties in question should be considered as commercial.

However, the ATA maintained in the second assessments the same classification of "Other" and continued to use the method of the aforementioned no. 2 of article 46 of the MPIT.

From these second assessments, article ... of the parish of ... was left with a TPV of € 452,730.00 and article ... (formerly ...) was left with a TPV of € 318,120.00, with the claimant's appraiser voting against, considering that the properties belong to the species (urban Commercial) and as such the method provided in no. 1 of article 38 of the MPIT should be applied.

The Operating License relating to the property ... of the parish of ..., issued by the respective Municipal Chamber states that the operation of a Fuel Service Station was authorized and in an addendum that it also includes a convenience store.

The Regional Directorate of Lisbon and Vale do Tejo of the Ministry of Economy and Innovation issued a permit for the property ... of the parish of ..., granting a license for the sale of products derived from crude oil, valid until 31 August 2020.

Proof of these facts results from documents attached to the case file that were not contested by the parties. There are no unproven facts with relevance to the decision of the case.

3 – Matters of Law

What is at issue here is whether the properties should be classified in the species "Other," as the ATA believes, or whether, on the contrary, they should be classified in the species "Commercial" as the claimant contends.

The respondent theorizes about the concept of service station and fuel service station, concluding that they are different realities but that in practice they serve the same purpose of fueling vehicles with fuel. It considers the claimant's activity to be diversified, holding in Portugal service areas and service stations, with the former located near major cities and the latter on motorways, and that in both the retail sale of fuel is practiced, and that the constructive characteristics of the buildings, given the purpose for which they are intended, prevent their classification as urban properties "Other," and the fact that fuel is sold there is not determinative for them to be classified as commercial. It emphasizes the difficulty of carrying out the assessment pursuant to article 38 of the MPIT and that the same can only be done in accordance with article 46 no. 2 of the said Code. It points out as an example the bullring which, according to what was decided in the Supreme Administrative Court[8] Decision in Case 0770/12, of 10/04/2013, is an urban property classified as "Other," a situation which it considers similar to that of the present case.

The claimant considers that errors of law were committed in the act of fixing the TPV, both in the first and second assessment, by using the Valuation Manual that determines that fuel service stations be classified as urban properties of the species "Other," but nevertheless believes that the formula provided in article 38 of the MPIT could be used, since the property in question comprises a building and equipment assets. In its view, a service station is a commercial property, taking into account the provisions contained in the MPIT, and the Valuation Manual cannot supersede this legislation, with commercial or service properties being assessed in accordance with the rules of article 38 of the aforementioned MPIT.

Let us see what the MPIT tells us regarding the classification of urban properties.

The concept of property is given to us by no. 1 of article 2 of the MPIT, which is transcribed as follows: "For the purposes of this Code, property is any portion of territory, encompassing waters, plantations, buildings and constructions of any nature incorporated or based therein, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances above mentioned, endowed with economic autonomy in relation to the land where they are located, although situated in a portion of territory that constitutes an integral part of a different patrimony or does not have patrimonial nature."

Article 4 of the same Code tells us what urban properties are, with the parties agreeing with respect to the condition of urban properties of the properties already identified, diverging in their species.

The division of urban properties into different species is regulated by article 6 of the said MPIT, which is transcribed:

"1 - Urban properties are divided into:

a) residential;

b) commercial, industrial or for services;

c) land for construction;

d) other.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, that have as their normal purpose each of these aims.

3 – Land for construction is considered as land situated within or outside an urban agglomeration, for which a license or authorization for real estate development or construction has been granted, prior notice admitted or favorable prior information issued on real estate development or construction operations, and also those that have been declared as such in the acquisition title, with the exception of land in respect of which the competent entities prohibit any of those operations, namely those located in green zones, protected areas or which, in accordance with municipal territorial planning plans, are allocated to spaces, infrastructure or public facilities.

4 – Encompassed in the provision of paragraph d) of no. 1 are land situated within an urban agglomeration that is neither land for construction nor falls under the provisions of no. 2 of article 3 and also buildings and constructions licensed or, in the absence of a license, that have as their normal purpose other aims than those referred to in no. 2 and also those under the exception of no. 3."

We can already conclude that the species "Other" is residual, encompassing only those that cannot at all belong to another species.

As highlighted in no. 2 of the norm under analysis, commercial properties are those licensed for commercial purposes, or in the absence of a license, that have that purpose as their normal destination. We must determine what constitutes commercial purposes and whether these or other purposes are pursued by the claimant in the properties in question, whose assessments it contests.

Commercial purposes are those regulated by commercial laws, that is, they will be the practice of acts of commerce, among which is included the purchase and sale, provided for in articles 463 et seq. of the CC[9]. We hold it to be certain that the sale of fuels, practiced by the claimant in the properties in question is the principal activity exercised therein and because the sale of products acquired for this purpose are commercial sales, at the same time that commercial companies are merchants in accordance with no. 2 of article 13 of the CC, allows us to conclude already that in the locations in question acts of commerce are predominantly exercised at the same time practiced by a commercial company. From this perspective, the properties in question can only be classified as commercial urban properties. It should be noted that the use of concepts from commercial legislation within the scope of tax law is provided for in no. 2 of article 11 of the GTL[10].

The comparison with the bullring does not hold, taking into account the legal definition of "fuel service station," provided in article 2, paragraph q) of the Regulation for the Construction and Operation of Fuel Service Stations, approved by Regulatory Order 131/2002 of 9 February, amended by Regulatory Order 362/2005 of 4 April, which is transcribed: "Fuel service station" the facility intended for the supply, for own, public or cooperative consumption, of gasoline, diesel and LPG for road vehicles, corresponding to the area of the place where the supply units are inserted, the respective reservoirs and the safety and protection zones, as well as integrated buildings and the routes necessary for the circulation of road vehicles to be refueled. Included in this definition, by extension, are similar facilities that are intended for the supply of vessels or aircraft."

A fuel service station is an urban property that comprises in addition to the refueling locations integrated buildings, intended for activities to be provided to users, namely the sale of lubricants, vehicle washing and convenience stores as is the case with the properties of the present case.

Arbitral jurisprudence has variously considered fuel service stations as commercial urban properties, namely in Cases 218, 271, 348, 604 all of 2015 and 244/2016 and 288/2017. Also the Central Administrative Court[11] of the South, in its Decision of 4 June 2015, issued in Case 08035/14, which with due deference is transcribed, in the part which we consider relevant to the question at issue: "IX. As to the classification of urban property as belonging to the species 'other,' the legislator adopted a 'residual' purpose criterion by reference to the purposes stated in no. 2, as results from the provision of no. 4 of article 6 of the MPIT by excluding from this species all buildings and constructions that have as their normal purpose the aims referred to in no. 2;

X. An urban property in the species 'other' provided for in paragraph d) of no. 1 of article 6 of the MPIT may only be classified when the building or construction cannot be classified in the species of commercial, industrial or for services."

Notwithstanding the property located in the parish of ... of the municipality of ..., in which there is no mixed support zone or convenience store, neither does that prevent acts of commerce from being practiced there, given that the retail sale of fuels, only thus, may be classified.

The tribunal considers that fuel service stations, service stations can only be classified in the species of commercial urban properties, and in their assessment for the purposes of determining their TPV, the formula provided in no. 1 of article 38 of the MPIT should be used.

IV – DECISION

Thus the tribunal decides:

To declare the request for arbitral decision well-founded, with the consequent annulment of the assessments in question, determining the repetition of the assessment procedure of the aforementioned properties as commercial urban properties, with the application of the formula provided in no. 1 of article 38 of the MPIT, applying the legislation in force at the date of the facts.

To fix the value of the case at € 3,131.11, in accordance with the provisions contained in article 299, no. 1, of the CPC[12], article 97-A of the CCPT[13], and article 3, no. 2, of the RCAT[14].

To fix the costs, pursuant to no. 4 of article 22 of the LTAT, in the amount of €612.00 in accordance with the provision of Table I referred to in article 4 of the RCAT, which shall be borne by the respondent.

Lisbon, 30 April 2018

Text prepared by computer, in accordance with article 131, no. 5 of the CPC, applicable by reference of article 29, no. 1, paragraph e) of the LTAT, with blank lines and reviewed by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Acronym for Tax Identification Number (Número de Identificação de Pessoa Coletiva)

[2] Acronym for Legal Framework for Tax Arbitration (Regime Jurídico da Arbitragem em Matéria Tributária)

[3] Acronym for Tax and Customs Authority (Autoridade Tributária e Aduaneira)

[4] Acronym for Municipal Property Tax Code (Código do Imposto Municipal sobre Imóveis)

[5] Acronym for Taxable Patrimonial Value (Valor Patrimonial Tributário)

[6] Acronym for Administrative Arbitration Centre (Centro de Arbitragem Administrativa)

[7] Acronym for Municipal Property Tax (Imposto Municipal sobre Imóveis)

[8] Acronym for Supreme Administrative Court (Supremo Tribunal Administrativo)

[9] Acronym for Commercial Code (Código Comercial)

[10] Acronym for General Tax Law (Lei Geral Tributária)

[11] Acronym for Central Administrative Court (Tribunal Central Administrativo)

[12] Acronym for Code of Civil Procedure (Código de Processo Civil)

[13] Acronym for Code of Tax Procedure and Process (Código de Procedimento e de Processo Tributário)

[14] Acronym for Regulation of Costs in Tax Arbitration Proceedings (Regulamento de Custas nos Processos de Arbitragem Tributária)

Frequently Asked Questions

Automatically Created

How are fuel stations (postos de abastecimento de combustíveis) classified for IMI property tax purposes in Portugal?
Fuel stations in Portugal are typically classified as 'other urban buildings' (prédios urbanos outros) under Article 6(1)(d) and 6(4) of the CIMI code for IMI purposes, rather than as commercial properties. The Portuguese Tax Authority distinguishes between simple fuel service stations (postos de abastecimento de combustíveis), where the primary activity is vehicle refueling, and broader service stations (estações de serviço) that include additional facilities like restaurants, convenience stores, and rest areas. When the principal use is fuel supply with only ancillary commercial activities, the 'other' classification applies, requiring valuation under Article 46(2) using the construction cost method.
What is the difference between the IMI valuation formula under Article 38 and Article 46(2) of the CIMI code?
Article 38 of the CIMI code provides a formula-based valuation method for commercial and industrial properties, calculating patrimonial tax value based on factors like covered area, construction coefficient, location coefficient, quality and comfort coefficient, and age coefficient. In contrast, Article 46(2) applies to 'other urban buildings' and uses the construction cost method, which determines value based on replacement cost derived from consultation with contractors, experienced municipal technical staff, and the professional knowledge and experience of the appraiser. The Article 38 formula provides more objective, predictable valuations, while Article 46(2) involves greater administrative discretion in determining construction costs.
Can fuel station properties be reclassified from 'other urban buildings' to 'commercial properties' for IMI valuation?
Reclassification of fuel station properties from 'other urban buildings' to 'commercial properties' depends on the principal use and activities conducted at the location. Properties used primarily for fuel supply are classified as 'other' under Article 6(4) of the CIMI code, even if ancillary commercial activities exist. However, if the property functions as a comprehensive service station with significant commercial operations (restaurants, retail stores, etc.) beyond mere fuel supply, reclassification as commercial may be warranted. Taxpayers can challenge classifications through the second assessment procedure (pedido de segunda avaliação) and subsequently through CAAD arbitration if disagreement persists, as demonstrated in this case.
What role does the Manual de Avaliação play in determining the patrimonial tax value (VPT) of urban properties in Portugal?
The Manual de Avaliação (Valuation Manual) serves as administrative guidance for tax assessors in determining the patrimonial tax value (VPT) of urban properties in Portugal. However, its legal status and relationship to the statutory CIMI code provisions can be contested. In this case, the taxpayer argued the Manual improperly superseded both the CIMI statute and judicial precedent by treating fuel service stations as 'other' properties subject to Article 46(2) valuation. The Manual provides technical criteria and methodologies for applying statutory valuation rules, but should not contradict or override legislative provisions. When conflicts arise between the Manual's guidance and statutory classification rules, the CIMI code provisions take precedence.
What are the grounds for requesting annulment of property tax valuation acts (VPT) through CAAD arbitration?
Grounds for requesting annulment of property tax valuation acts (VPT) through CAAD arbitration include violation of law due to errors in factual or legal premises, such as incorrect property classification, improper application of valuation methodology, failure to follow statutory procedures, or arbitrary determination of construction costs without objective criteria. Taxpayers must first exhaust administrative remedies by requesting a second assessment (segunda avaliação) before accessing arbitration. The arbitration request must specify the alleged illegality, propose the correct classification and valuation method, and indicate the appropriate patrimonial tax value. CAAD provides an alternative to judicial tax courts for resolving disputes over IMI assessments, offering faster resolution while maintaining procedural guarantees.