Process: 632/2015-T

Date: May 16, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 632/2015-T addressed a critical interpretive question regarding the application of Stamp Tax (Imposto do Selo) under Item 28.1 of the General Table of Stamp Tax (TGIS) to urban properties held in total ownership comprising multiple independent residential units. The taxpayer owned a single property registration containing seven floors or divisions capable of independent use, each with residential purpose and individual Tax Property Values (VPT) ranging from €98,640 to €194,050. While no individual unit reached the €1,000,000 threshold triggering the 1% annual Stamp Tax, the Tax Authority aggregated all VPTs and assessed the tax accordingly through seven collection notices totaling €7,692.28 for 2014. The applicant challenged this methodology, arguing that Item 28.1 TGIS should apply separately to each independent unit based on its individual VPT, not the cumulative sum. The Tax Authority defended its position by asserting that independent use areas within a single property registration do not constitute separate urban properties under Article 2(4) of the Municipal Property Tax Code (CIMI), thereby requiring VPT summation. The arbitral tribunal analyzed the legislative framework, including Law 55-A/2012 which introduced Item 28.1 and Law 83-C/2013 (2014 State Budget) which amended it, alongside Article 67(2) of the Stamp Tax Code establishing CIMI's subsidiary application. The case raised fundamental questions about the conceptual distinction between property registrations, independent units, and urban properties for Stamp Tax purposes, with significant implications for property owners holding buildings with multiple autonomous residential divisions under unified ownership, particularly regarding whether fragmentation of ownership or independent registration would be necessary to avoid taxation when individual units fall below the threshold.

Full Decision

ARBITRAL DECISION

1. Report

A…., Tax ID No…, with residence at Rua…, no. …–… in Lisbon, hereinafter referred to as the Applicant, submitted to the Administrative Arbitration Center (CAAD) a request for constitution of an arbitral tribunal with a view to the annulment of the tax assessment acts of item no. 28.1 of the General Table of Stamp Tax (TGIS) for 2014, in the total amount of € 7,692.28 concerning the urban property registration of the parish of…, with no….

The Applicant bases the illegality of the tax act on the following defects:

Incorrect interpretation by the Tax Authority of item 28.1 of the General Table of Stamp Tax (TGIS), insofar as the subjection to Stamp Tax (IS) is determined by the Tax Property Value (VPT) of each of the properties and not by the sum of all areas of independent use of a single property registration;

Requesting, ultimately, the annulment of the tax assessment acts.

The Tax and Customs Authority, for its part, argued that there is no illegality whatsoever insofar as the areas of independent use relating to a single property registration do not constitute urban property within the meaning of no. 4 of article 2 of the CIMI, thus the VPTs of all such areas or floors of independent use cannot but be summed, concluding in favor of the dismissal of the annulment request filed by the Applicant.

The sole arbitrator was appointed on 07.12.2015.

In accordance with the provisions of article 11, no. 1, paragraph c) of the RJAT, the singular arbitral tribunal was constituted on 31.12.2015.

This arbitral tribunal, given the positioning of the Applicant and the Respondent, dispensed with both the holding of the first arbitral meeting and the formulation of submissions.

2. Case Management

The cumulation of claims made in the present request for arbitral pronouncement, in which assessment acts of the same tax (Stamp Tax) are at issue, based on the same factual basis and applying the same rules of law, is fully justified in light of the principle of procedural economy enshrined in article 3 of the RJAT.

The singular arbitral tribunal is materially competent, in accordance with the provisions of articles 2, no. 1, paragraph a) of the Legal Regime for Arbitration in Tax Matters.

The parties enjoy legal personality and capacity and have standing in accordance with article 4 and no. 2 of article 10 of the Legal Regime for Arbitration in Tax Matters (RJAT), and article 1 of Ordinance no. 112-A/2011, of 22 March.

The proceedings do not suffer from any nullity nor have the parties raised any exceptions that would prevent examination of the merits of the case, thus the conditions for rendering the arbitral decision are present.

3. Factual Matters

3.1. Proven Facts:

Having analyzed the documentary evidence produced and the positioning of the parties, the following facts are considered proven and of relevance to the decision of the case:

  1. The Applicant is the owner of the urban property registered in the urban property register of the Tax Office of Lisbon-… (…), Parish of …a, under registration number….

  2. The Applicant was notified of the tax assessment acts for Stamp Tax, Item 28.1 of the TGIS, for 2014, materialized by collection notices with nos. 2015…, 2015…, 2015…, 2015…, 2015…, 2015 … and 2015….

  3. The identified urban property is registered under full ownership, being composed of 7 floors or divisions capable of independent use.

  4. All floors or divisions capable of independent use have residential use and the following VPTs:

  • CV D: € 104,190.00;
  • CV E: € 98,640.00;
  • Ground Floor: € 182,430.00;
  • 1st: € 190,240.00;
  • 2nd: € 192,140.00;
  • 3rd: € 192,140.00;
  • 4th: € 194,050.00;

No floor or division capable of independent use with residential use of the urban registration… has a tax property value equal to or exceeding €1,000,000.00;

On 18.12.2015, the present Applicant filed, via electronic platform, the request for constitution of an arbitral tribunal;

The Applicant paid the subsequent court fee.

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

3.2. Justification of the Proven Factual Matters:

With regard to the proven facts, the arbitrator's conviction was based on the documentary evidence attached to the case file, as well as on the positioning of the parties regarding the factual matters brought before these proceedings.

4. Matters of Law:

4.1. Object and Scope of the Present Proceedings

The request for arbitral pronouncement has as its object the declaration of illegality of the tax assessment acts for Stamp Tax for 2014 concerning the floors or divisions capable of independent use relating to the urban property registration… of the parish of….

4.2. Regarding the Alleged Illegality of Stamp Tax Assessments, Item 28.1 of the TGIS

In summary, the issue is to determine whether the interpretation carried out by the Tax and Customs Authority to use, as the legal criterion for purposes of subjection to Item 28.1 of the TGIS, the sum of the VPTs of all floors or divisions of independent use with residential use relating to a single property registration is or is not consistent with the applicable legal framework.

In this regard, it is important to take into account the legislative succession concerning Item 28.1 of the TGIS.

Item 28.1 of the TGIS was added to the General Table of Stamp Tax through Law no. 55-A/2012, of 29 October.

Subsequently, the legislator amended the original normative wording given by the aforementioned law, by means of article 194 of Law no. 83-C/2013, of 31 December (State Budget for 2014), which is here applicable to the tax assessment acts, since it entered into force on 1 January 2014, the year to which the taxes now subject to arbitral review pertain.

Let us examine, therefore, and first of all, the legal framework of the Stamp Tax assessments in question:

Item 28.1 of the TGIS provides, in the wording given by the aforementioned legislative instrument, the following:

28 – Ownership, usufruct or right of superficies of urban properties whose tax property value contained in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax property value used for purposes of IMI:

28.1 – For each residential property or for land for construction whose construction, authorized or anticipated, is for residential use, in accordance with the provisions of the IMI Code – 1%"

In turn, article 67, no. 2 of the Stamp Tax Code, added by Law no. 55-A/2012, of 29 October, provides that "to matters not regulated in the present code concerning item 28 of the General Table, the CIMI shall apply subsidiarily."

The norm of application refers to urban properties, the basic concept of property being rooted in the provisions of article 2 of the CIMI, with the determination of the VPT following the tenor of the provisions of article 38 and following of the same code.

In that the provision stated provides:

"1 - For purposes of this Code, property is any fraction of land, encompassing waters, plantations, buildings and constructions of any nature incorporated therein or resting thereon, 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 aforementioned circumstances, endowed with economic autonomy in relation to the land where they are situated, although located in a fraction of land that constitutes an integral part of a diverse patrimony or does not have a patrimonial nature." (emphasis added)

Clarifying, in turn, article 6 of the CIMI, that:

"1 - Urban properties are divided into:

a) Residential;

2 - Residential, commercial, industrial or service properties are buildings or constructions licensed for such purpose or, in the absence of a license, which have as their normal destination each of these purposes." (emphasis added)

The legislator's concept regarding properties and the subsequent division into urban properties is, for tax purposes, undoubtedly a criterion based on economic value and functional autonomy due to purpose.

That is, one is confronted with a concept of material or substantive root and not with a concept of legal-formal framework, as the Respondent Tax Authority appears to intend.

Now, in the case at hand, the Respondent Tax Authority does not even question whether the floors or divisions with independent use and residential use relating to the property registration do not possess these same characteristics (functional autonomy and economic value) highlighted by the legislator, nor could it do so since it is the Tax Authority itself that confirmed as correct and caused to be registered this same information in the respective property record of the property registration to which the floors or divisions capable of independent use pertain.

Adding to this, precisely because such floors or divisions possess such characteristics of autonomy, both in functional terms and in terms of economic value, it is understandable that the legislator has provided for the attribution of tax property values for each of those floors, areas or divisions capable of independent use.

Which contradicts the Tax Authority's thesis that according to which, since they are not expressly contained in no. 4 of article 2 of the CIMI, the legislator had intended to exclude such figure from the concept of property.

Thus, the Respondent not even questioning that one is dealing with residential property and not equally questioning the functional autonomy and economic value of these same independent areas, moreover fiscally reflected in their respective VPTs and whose characteristics are transposed to the respective property records of the property registration under the designation of floors or divisions capable of independent use, we cannot but conclude that on the material and substantive plane these same floors or divisions are encompassed by the notion of property contained in no. 1 of article 2 of the CIMI and of urban property contained in a) of no. 1 and no. 2 of article 6, both of the CIMI.

The introduction into the tax legal order of the present Item 28.1 of the TGIS had as its relevant and determining factor the subjection of urban residential properties of high value, also usually referred to as luxury dwellings, more precisely, of value equal to or exceeding €1,000,000.00, on which Stamp Tax began to apply.

The legislator thus intended to introduce a principle of taxation on wealth manifested in ownership, usufruct or right of superficies over any and all urban residential property, the legislative criterion having applied such stamp tax to urban properties with residential use, whose VPT is equal to or exceeding €1,000,000.00.

Such conclusion may be drawn from the analysis of the discussion of bill no. 96/XII in the National Assembly, available for consultation in the Parliamentary Assembly Record, I series, no. 9/XII/2, of 11 October 2012.

The justification for the measure referred to as "special tax on the most valuable urban residential properties" is based on the invocation of the principles of social equity and fiscal justice, calling upon the holders of high-value properties intended for residential use to contribute more intensely, applying the new special tax to "houses valued at equal to or exceeding 1 million euros."

In this way, it appears clear that the legislator understood that properties possessing certain characteristics assessed quantitatively through the VPT should determine a special contribution to ensure just distribution of the tax burden.

But no less evident, it reflects a line of legislative choice that intended to specifically burden high-end urban residential properties, luxury properties or also commonly called such.

It should be noted that, regardless of more or less subjective conceptions about the concept of luxury homes, high-end segment or expressions of equivalent meaning, it is certain that tax property value has been, since the 2003 reform of property taxation, measured based on objective elements, such as area, location, comfort level, among others.

Which means to say that and regardless of the ideological considerations that may be made about such political choice, the legislator had a concrete and defined objective: to subject to Stamp Tax taxation urban residential properties of the highest value, which in practice resulted in the setting of a measurable threshold through the VPT: value equal to or exceeding € 1,000,000.00.

Adding to this, the legislator ensured through various coefficients (both decreasing and increasing) objectivity in the calculation of that same VPT.

Now, none of the floors or divisions capable of independent use here in question and on which the assessments subject to the present request for arbitral pronouncement fell, individually reach the value of € 1,000,000.00, with each of those floors or independent divisions representing in the tax system a property in and of itself, reason for which the Tax Authority erred in the assumptions by making subject to item 28.1 of the TGIS and disregarding that each of those same areas or divisions represent, in accordance with the IMI Code and consequently in the Stamp Tax regime, an urban property.

Reason for which these areas or divisions relating to a single property registration could not be subject to summation for calculation of the VPT of that property registration.

Which means the same as to say that having regard to the ratio legis come to state, the floors or divisions capable of independent use do not meet the requirement relating to taxation within the scope of the norm of application provided for in item 28.1 of the TGIS, reason for which, also in light of what has been stated, the conclusion cannot but be reached that there is legal non-conformity of the Tax Authority's interpretation in subjecting to Item 28.1 of the TGIS the floors or divisions capable of independent use, since the same do not individually meet the minimum quantitative criterion for such subjection.

5. DECISION:

In these terms and with the justification set forth above, this arbitral tribunal decides:

  1. To find the request for declaration of illegality of the tax assessment acts in the Stamp Tax regime for 2014, concerning the urban property registration… of the parish of…, procedent, for the defect of violation of law as to the norm contained in item 28.1 of the TGIS, annulling the tax assessment acts in question.

Value of the case: € 7,692.28 – articles 97-A of the CPPT, 12 of the RJAT (Decree-Law 10/2011), 3-2 of the Regulation on Costs in Arbitration Proceedings in Tax Matters (RCPAT).

Costs in accordance with Table I of the RCPTA, calculated based on the aforementioned value of the claim, to be borne by the Respondent - articles 4-1 of the RCPTA and 6-2/a) and 22-4 of the RJAT.

Let this arbitral decision be notified to the parties and, in due course, the proceedings shall be filed away.

Lisbon, 16 May 2016.

The Sole Arbitrator

(Luís Ricardo Farinha Sequeira)

Frequently Asked Questions

Automatically Created

How is Stamp Tax (Imposto do Selo) under Verba 28.1 TGIS applied to urban properties held in total ownership with multiple independent units?
Stamp Tax under Item 28.1 TGIS applies to urban properties with VPT equal to or exceeding €1,000,000 at a rate of 1%. For properties held in total ownership with multiple independent units, the critical interpretive issue is whether each independent unit constitutes a separate 'urban property' for tax purposes or whether all units within a single property registration must be treated as one taxable unit. The Tax Authority's position has been to aggregate the VPTs of all independent use areas within a single property registration, applying the tax if the total exceeds the threshold. This interpretation relies on Article 2(4) of CIMI, which defines property broadly, and the argument that independent use divisions do not constitute separate urban properties unless they achieve autonomous property status. Property owners facing this interpretation may contest it through administrative or arbitral proceedings, arguing that each independent unit meeting CIMI's criteria for separate property classification should be assessed individually.
Must the taxable patrimonial value (VPT) be assessed per individual independent unit or as the aggregate sum of all units within the same property article?
The central dispute in Process 632/2015-T concerned whether VPT assessment occurs per individual independent unit or as an aggregate sum. The Tax Authority applied the aggregate method, summing the VPTs of all seven independent residential divisions (totaling over €1,000,000) within the single property registration to determine Stamp Tax liability. The taxpayer argued for individual assessment, contending that each floor or division capable of independent use should be evaluated separately against the €1,000,000 threshold. Under the aggregate approach, even when no individual unit reaches the threshold, the combined value triggers taxation. Under the individual approach, taxation would only apply to units individually exceeding €1,000,000. Article 67(2) of the Stamp Tax Code directs subsidiary application of CIMI, making the definition of 'urban property' under Article 2 CIMI determinative. The outcome depends on whether independent use divisions with separate VPTs constitute distinct properties or merely components of a unified property registration for Stamp Tax purposes.
What is the legal distinction between independent units and urban properties under Article 2(4) of CIMI for Stamp Tax purposes?
Article 2(4) of CIMI defines 'property' (prédio) broadly as any fraction of land with incorporated buildings having permanence character, forming part of a person's patrimony with economic value, or buildings with economic autonomy from the underlying land. Independent units are divisions capable of autonomous use within a larger property structure, often with separate VPTs for IMI purposes. The legal distinction for Stamp Tax purposes turns on whether independent units within a single property registration constitute separate 'urban properties' under Item 28.1 TGIS. The Tax Authority's interpretation is that independent use areas within one property registration do not achieve the status of separate urban properties under Article 2(4) CIMI, requiring VPT aggregation. Taxpayers may argue that divisions meeting autonomy criteria—separate access, independent utilities, distinct residential use—should qualify as separate properties. Article 6 CIMI classifies urban properties by use (residential, commercial, industrial, services), but the threshold question is whether subdivision within a property registration creates multiple properties or one composite property for Stamp Tax application.
How can a taxpayer challenge Stamp Tax (Imposto do Selo) assessments through CAAD tax arbitration under the RJAT framework?
Taxpayers can challenge Stamp Tax assessments through the Administrative Arbitration Center (CAAD) under the Legal Regime for Arbitration in Tax Matters (RJAT). The process involves submitting a request for constitution of an arbitral tribunal within the statutory deadline, paying the required fee, and presenting legal arguments for annulment. In Process 632/2015-T, the applicant filed the arbitration request on December 18, 2015, via electronic platform, paid the court fee, and the sole arbitrator was appointed on December 7, 2015, with the tribunal constituted on December 31, 2015. The RJAT framework provides material competence for arbitral tribunals to review tax assessment acts under Article 2(1)(a). Parties must have legal personality, capacity, and standing per Article 4 and Article 10(2) of RJAT. The tribunal examines both procedural regularity and substantive legality, including whether the Tax Authority correctly interpreted and applied relevant law. Taxpayers should present documentary evidence (property registration, VPT valuations, collection notices), legal arguments regarding statutory interpretation, and requests for specific relief (annulment, reimbursement). CAAD arbitration offers an alternative to hierarchical administrative review and judicial courts.
What was the outcome of CAAD Process 632/2015-T regarding the annulment of Verba 28.1 TGIS tax assessments on properties in total ownership?
While the complete decision is not provided in the excerpt, Process 632/2015-T examined whether Stamp Tax assessments totaling €7,692.28 for 2014 on seven independent residential units within a single property registration should be annulled. The applicant sought annulment based on alleged incorrect interpretation of Item 28.1 TGIS, arguing the Tax Authority improperly summed VPTs of independent units rather than assessing each separately. The Tax Authority defended the assessments, arguing independent use areas within one registration do not constitute separate urban properties under Article 2(4) CIMI, necessitating VPT summation. The tribunal found no procedural defects, confirmed material competence under RJAT, and established the proven facts including the seven independent residential divisions with individual VPTs ranging from €98,640 to €194,050 (none individually exceeding €1,000,000). The legal analysis centered on interpreting Item 28.1 TGIS as amended by Law 83-C/2013 and the subsidiary application of CIMI pursuant to Article 67(2) of the Stamp Tax Code. The decision's outcome would establish important precedent regarding whether property owners can avoid Stamp Tax by maintaining unified ownership of buildings with multiple independent units falling individually below the €1,000,000 threshold.