Process: 620/2016-T

Date: June 30, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitral Decision 620/2016-T addresses whether land for construction (terrenos para construção) with a taxable value exceeding €1,000,000 is subject to Stamp Tax under item 28.1 of the General Stamp Tax Table, and whether a canonically erected entity equivalent to a Private Social Solidarity Institution (IPSS) qualifies for exemption under Article 6(d) of the Stamp Tax Code. The claimant challenged Stamp Tax assessments totaling €49,299.60 for years 2012, 2014, and 2015 on urban land registered in Lisbon. The Tax Authority argued that item 28.1 applies equally to land for construction and that the claimant acknowledged this classification. Procedurally, the tribunal ruled the 2012 assessment challenge untimely, as it exceeded the 90-day deadline under Article 10 RJAT counted from the voluntary payment deadline in April 2016. The claimant's argument that the deadline should run from the last 2015 installment when challenging multiple years together was rejected. The core substantive issue centered on whether canonically erected legal entities, whose existence was communicated by the Patriarchate of Lisbon pursuant to the Concordat between Portugal and the Holy See, qualify for Stamp Tax exemption. The case also addressed formal defects including alleged lack of substantiation in assessment notices and violation of the right to prior hearing (audição prévia). The decision has significant implications for religious entities holding high-value real estate and the interpretation of IPSS-equivalent status for tax exemption purposes under Portuguese tax law.

Full Decision

ARBITRAL DECISION

The Arbitrator Dr. Maria Antónia Torres, appointed by the Deontological Council of the Administrative Arbitration Center ("CAAD") to constitute the Singular Arbitral Tribunal, constituted on 30 December 2016, decides as follows:

1. REPORT

1.1. A A..., taxpayer no. ... with registered office in ..., ..., Lisbon, requested the constitution of an arbitral tribunal, pursuant to article 2, no. 1, paragraph a), and article 10, both of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"[1]).

1.2. The request for arbitral pronouncement has as its object the declaration of illegality, and consequent annulment, of the tax acts of assessment of Stamp Duty with nos. 2016..., 2016..., 2016... and 2016..., in the total amount of €49,299.60 (forty-nine thousand two hundred and ninety-nine euros and sixty cents), relating to the years 2012, 2014 and 2015, and further identified in the initial petition presented by the Claimant, and which are hereby stated to be articulated and reproduced, for all legal purposes, which concern the land for construction owned by the Claimant, located in the Parish of ..., Municipality of Lisbon, registered in the urban real property registry under article no. ..., with the taxable asset value of €1,832,930.00 (one million eight hundred and thirty-two thousand nine hundred and thirty euros).

The Claimant further requests the condemnation of the Defendant to restitution of the sums unduly paid and that it be recognized the right to compensatory interest on all sums paid.

1.3. The Claimant presented its request on the grounds that, as the property in question is land for construction, it does not see how it could have the referred residential purpose, which is a necessary prerequisite for the application of the norm sub judice. The Claimant further alleges that the assessments do not present sufficient substantiation for understanding the reasons therefor, nor the rules concretely applied, nor the authority that performed the acts. And, finally, that it was not afforded the legitimate exercise of the right to prior hearing. For all this, the acts sub judice are afflicted with a formal defect.

The Claimant further questions the taxable asset value attributed by the Tax Authority to its property, having made a request for reassessment that is said to have been dismissed.

In its arguments, the Claimant presents the fact that, being a canonically erected legal entity, it is assimilated to a Private Social Solidarity Institution (IPSS), and, consequently, exempt from stamp duty.

1.4. The Tax Authority defends that the request sub judice should be judged to lack merit. First, with regard to Stamp Duty relating to the year 2012, the Defendant defends itself by exception, considering that the challenge of the respective collection note is manifestly untimely, implying the lapse of the right of action.

By challenge on the merits, the Defendant defends itself saying that item 28.1 of the General Table of Stamp Duty applies equally to land for construction and that the Claimant itself recognizes that the property sub judice qualifies as such. The Defendant also does not consider that, for that reason, item 28.1 violates any constitutional principle. The Defendant also disagrees that the collection notes in question suffer from a formal defect of lack of substantiation, given that the Claimant demonstrated that it fully understood the logical and legal process that led to the taxation decision in question. The Defendant further disagrees that there was a violation of the right to prior hearing.

1.5. Both parties presented their arguments successively. The meeting of the arbitral tribunal provided for in article 18 of the RJAT was dispensed with, as there was no need for additional presentation of evidence.

2. PRELIMINARY MATTERS

The Tribunal was regularly constituted and is competent as to the subject matter, in accordance with article 2 of the RJAT.

The parties have legal personality and capacity, are shown to be legitimate and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

No procedural nullities were identified.

3. FACTS

With relevance for the decision on the merits, the Tribunal considers the following facts to be proven:

1) The Claimant was, at the date of the assessments sub judice, the owner of the urban property which was the subject of those same assessments;

2) The Claimant was notified to pay Stamp Duty on the referred property, pursuant to item 28.1 of the General Table of Stamp Duty, relating to the years 2012, 2014 and 2015, having made payment of the tax;

3) The property in question is land for construction with a taxable asset value exceeding €1,000,000.00 (1 million euros);

4) The Claimant is a canonically erected legal entity and its existence was communicated on 29 June 1970 by the Vicar General of the Patriarchate of Lisbon, pursuant to articles 3 and 4 of the Concordat celebrated between the Portuguese Republic and the Holy See, as evidenced by the certificate attached to the petition (document no. 2).

5) The deadline for payment of Stamp Duty relating to 2012, which was embodied in a single installment, was April 2016, as evidenced by the collection note annexed to the initial petition by the Claimant.

Unproven Facts

No essential facts, with relevance for the assessment of the merits of the case, which have not been proven, were found.

Substantiation of the Facts

The conviction regarding the facts given as proven was based on the evidence presented by the Claimant, whose authenticity and correspondence to reality were not questioned by the Defendant.

5. ON THE LAW

With the facts established, it is important to know the legal matters raised by the parties.

As identified above, the issue to be decided concerns the declaration of illegality of the acts of assessment of Stamp Duty relating to the years 2012, 2014 and 2015, on the property owned by the Claimant. According to the respective assessment notes, this concerns the application of item 28.1 of the General Table of Stamp Duty on land for construction, owned by the Claimant, whose taxable asset value exceeds €1,000,000.00 (1 million euros).

a) Defense by Exception

Now, the first issue that is important to analyze concerns the defense by exception presented by the Defendant with regard to Stamp Duty for 2012, considering that the challenge of the respective collection note is manifestly untimely, implying the lapse of the right of action.

Let us see. Article 10 of the RJAT establishes that the request for constitution of an arbitral tribunal must be presented within 90 days, counted from the facts provided for in nos. 1 and 2 of article 102 of the Tax Procedure and Process Code.

And paragraph a) of no. 1 of article 102 of the Tax Procedure and Process Code provides that the challenge shall be presented within 3 months counted from the end of the deadline for voluntary payment of the tax installments in question.

Now, in the case at hand, and with regard to 2012, Stamp Duty was assessed in a single installment with a payment deadline in April 2016. Accordingly, it is, in fact, untimely its challenge by the Claimant, not proceeding, because without any legal basis, the Claimant's argument that, in contesting, together, three assessments of Stamp Duty relating to the years 2012, 2014 and 2015, the deadline for the request for constitution of the arbitral tribunal would be counted from the date of payment of the last Stamp Duty installment relating to the year 2015.

b) Defense on the Merits

Now, it is important to analyze, with regard to the assessments of Stamp Duty relating to the years 2014 and 2015, whether the Claimant is or is not exempt from Stamp Duty, as it refers in its arguments. In this context, paragraph d) of article 6 of the Stamp Duty Code is applicable, which provides as follows:

"Are exempt from stamp duty, to the extent this constitutes their burden:

d) Private Social Solidarity Institutions and entities legally assimilated thereto;

In the case at hand, it is important to conclude whether or not the Claimant is assimilated to a Private Social Solidarity Institution (IPSS), in which case it would benefit from the exemption provided above.

The Defendant, in its defense, argues that the Arbitral Tribunal lacks material competence to assess the recognition of tax benefits, requesting that the tribunal abstain from assessing any matters relating to the assimilation of the Claimant to an IPSS and its respective consequences. The alleged incompetence of the Arbitral Tribunal arises, according to the Defendant, from the provision in paragraph a) of no. 1 of article 2 of the RJAT, which permits the conclusion that "matters relating to the recognition of tax exemptions are not covered within the scope of material competence of the Arbitral Tribunal".

Having in view the decision on this exception argued by the Defendant, the Tribunal understands that the object of the proceedings is not a question of recognition of an exemption, but rather a question of an objective exemption, provided for by law, to which the Claimant considers itself entitled, and which was disregarded by the Defendant, resulting therefrom the practice of the acts of Stamp Duty assessment now challenged.

Accordingly, the exception does not proceed and this Tribunal is judged to be materially competent to settle the dispute.

Let us then proceed. Entities considered as assimilated are religious institutions that, beyond religious purposes, pursue other purposes which fall within the Statute of Private Social Solidarity Institutions.

In accordance with article 3 of the 1940 Concordat, recognition by the Portuguese State of the legal personality of canonically erected entities results from simple written communication to the competent authority.

With the 2004 Concordat, it is established that the Portuguese State recognizes the legal personality of all canonically erected entities that have been constituted and reported to the competent entity before its entry into force, with the obligation to be registered in a proper State registry not applying to them.

Now, the Claimant is a canonically erected entity and its existence was communicated on 29 June 1970 by the Vicar General of the Patriarchate of Lisbon, pursuant to articles 3 and 4 of the Concordat celebrated between the Portuguese Republic and the Holy See, as evidenced by the certificate attached to the petition (document no. 2). This communication occurred at a moment prior to the entry into force of the 2004 Concordat, for which reason the obligation to register does not apply to it. Additionally, the Claimant pursues, beyond religious purposes, activities which fall within the Statute of Private Social Solidarity Institutions, namely in the matter of social assistance and education.

Thus, one can only conclude by the assimilation of the Claimant to Private Social Solidarity Institutions, for which reason article 6, paragraph d) of the Stamp Duty Code applies to it, thus afflicting the tax acts sub judice, relating to the years 2014 and 2015, with illegality.

Having concluded thus by this tribunal, the assessment of the remaining defects adduced by the parties becomes moot, as procedurally pointless.

6. DECISION:

In these terms and with the substantiation set out above, this arbitral tribunal decides:

1. To judge as having merit the request for declaration of illegality of the tax acts of assessment of Stamp Duty for the years 2014 and 2015, on the grounds of error as to the legal prerequisites.

2. To judge as lacking merit the request for declaration of illegality of the tax act of assessment of Stamp Duty for the year 2012 due to lapse of the right of action.

3. To judge as partially having merit the request for compensatory interest petitioned by the Claimant, insofar as the Stamp Duty paid relating to the years 2014 and 2015 is concerned.

* * *

The value of the case is set at €49,299.60 (forty-nine thousand two hundred and ninety-nine euros and sixty cents), in accordance with the provision in articles 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), 97-A, no. 1, paragraph a) of the Tax Procedure and Process Code and 306 of the Code of Civil Procedure.

The amount of costs is fixed at Euros 2,142 (two thousand one hundred and forty-two euros) pursuant to article 22, no. 4 of the RJAT and Table I attached to the RCPAT, distributed proportionally by the Claimant (33.33%) and the Defendant (66.66%), in accordance with the provision in articles 12, no. 2 of the RJAT and 4, no. 4 of the RCPAT.

Notify accordingly.

Lisbon, 30 June 2017

The Arbitrator

(Maria Antónia Torres)

Text prepared by computer, pursuant to article 131, no. 5 of the Code of Civil Procedure, applicable by reference to article 29, no. 1, paragraph e) of the RJAT.

The drafting of the present arbitral decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] Acronym for Legal Regime of Tax Arbitration.

Frequently Asked Questions

Automatically Created

Are building plots (terrenos para construção) subject to Stamp Tax (Imposto do Selo) under clause 28.1 of the General Stamp Tax Table?
Yes, according to the Tax Authority's position upheld in this case, land for construction (terrenos para construção) is subject to Stamp Tax under item 28.1 of the General Stamp Tax Table when the taxable asset value exceeds €1,000,000. The Tax Authority argued that item 28.1 applies equally to land for construction, and the claimant itself recognized that the property qualified as such. The tribunal proceeded to analyze whether exemptions applied rather than excluding land for construction from the scope of item 28.1.
Can an entity canonically established and equivalent to an IPSS claim Stamp Tax exemption under Article 6(d) of the Código do Imposto do Selo?
The case specifically addresses whether a canonically erected legal entity, whose existence was communicated by the Vicar General of the Patriarchate of Lisbon pursuant to Articles 3 and 4 of the Concordat between Portugal and the Holy See, qualifies as equivalent to an IPSS and can therefore claim Stamp Tax exemption under Article 6(d) of the Stamp Tax Code. The claimant presented evidence of its canonical erection in 1970. The tribunal's analysis focused on the substantive requirements of Article 6(d), though the complete reasoning is not fully disclosed in the excerpt provided.
What are the grounds for challenging Stamp Tax assessments on high-value real estate before CAAD arbitral tribunals?
Taxpayers can challenge Stamp Tax assessments before CAAD arbitral tribunals under Article 2(1)(a) and Article 10 of Decree-Law 10/2011 (RJAT). Grounds include: (1) illegality of assessment acts; (2) incorrect application of exemption provisions; (3) formal defects such as lack of substantiation; (4) violation of procedural rights including prior hearing; (5) incorrect taxable asset valuation. The challenge must be filed within 90 days from the deadline for voluntary payment of the tax installment (Article 10 RJAT and Article 102(1)(a) CPPT). Challenges to multiple assessment years must respect individual deadlines for each year.
Is prior hearing (audição prévia) required before issuing Stamp Tax assessments on immovable property?
The claimant alleged violation of the right to prior hearing (audição prévia) before issuance of Stamp Tax assessments on immovable property. However, the Tax Authority contested this claim. Portuguese administrative procedure generally requires prior hearing before decisions adversely affecting rights or legally protected interests (Article 121 of the Administrative Procedure Code). For tax assessments, prior hearing requirements depend on the specific circumstances and whether the assessment involves discretionary elements or factual determinations requiring taxpayer input. The tribunal would need to determine whether Stamp Tax assessments under item 28.1, which apply automatically based on taxable asset values, trigger mandatory prior hearing obligations.
Can a taxpayer request reimbursement and compensatory interest (juros indemnizatórios) after annulment of unlawful Stamp Tax assessments?
Yes, under Portuguese tax law, when unlawful tax assessments are annulled, taxpayers are entitled to reimbursement of sums unduly paid plus compensatory interest (juros indemnizatórios). Article 43 of the Tax Benefits Statute (Estatuto dos Benefícios Fiscais) and Article 100 of the Tax Procedure Code (CPPT) regulate restitution of taxes. Compensatory interest compensates taxpayers for the State's unlawful retention of funds and accrues automatically from the date of undue payment until restitution. The claimant in this case explicitly requested condemnation of the Tax Authority to restitution of sums unduly paid and recognition of the right to compensatory interest on all amounts paid, which is standard relief sought in successful tax arbitration proceedings.