Process: 632/2017-T

Date: March 28, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 632/2017-T) addresses the application of Stamp Tax (Imposto do Selo) under item 28.1 of the General Stamp Tax Table (TGIS) to construction land (terreno para construção) with housing allocation. The claimant, A... S.A., challenged a €58,930.23 Stamp Tax assessment on property registered as 'building land' with a tax patrimonial value of €5,893,022.83. The core dispute centered on whether the 1% Stamp Tax rate applies when land is merely classified with a housing allocation coefficient in the property matrix, absent any approved construction project or building permit. The taxpayer argued the assessment violated legal and factual prerequisites, claiming illegality because no specific housing construction was foreseen or authorized. Additionally, constitutional challenges were raised regarding item 28.1's compliance with principles of tax capacity and equality if applied based solely on expectation of housing use. The arbitrator examined Law 83-C/2013 which amended item 28.1 to apply Stamp Tax to 'building land whose authorized or foreseen construction is for housing.' The decision required analyzing IMI Code provisions defining building land and determining when housing allocation triggers the tax obligation. This case establishes important precedent for construction land taxation, particularly regarding the distinction between matrix classification and actual construction authorization for Stamp Tax purposes under verba 28.1 TGIS.

Full Decision

ARBITRAL DECISION

The Arbitrator Nuno Cunha Rodrigues, designated by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the present Arbitral Court, constituted on 14.02.2018, decides as follows:

I. REPORT

A…, S.A., with registered office at …, no.…, …-… Sesimbra, with the collective person number …, requested the constitution of an arbitral tribunal in tax matters, in accordance with Articles 1, 2(1)(a) and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters), and Article 99 of the Code of Tax Procedure and Process (CPPT) applicable ex vi Article 10(2)(c) of the aforementioned decree, with a view to the declaration of illegality and annulment of the decision rejecting the formal complaint filed against the act of assessment and collection of Stamp Tax relating to the year 2015, in the total amount of €58,930.23 (fifty-eight thousand nine hundred and thirty euros and twenty-three cents) which fell on the property registered under Article …, of the parish of … (…), municipality of Sesimbra, registered in the respective matrix as "building land," with the tax patrimonial value of €5,893,022.83, in accordance with the provision in item 28.1 of the General Stamp Tax Table.

As the basis for the claim, the Claimant alleges, in summary, that the assessment of stamp tax was carried out under the erroneous invocation of "item no. 28.1 of the General Stamp Tax Table."

For its part, the Respondent – the Tax and Customs Authority (AT) – in response to the allegations, contested the Claimant's claim, presenting a defense by way of objection, arguing for the dismissal of the claim, that is, for the maintenance of the questioned assessment act.

The request for constitution of the arbitral tribunal, presented on 4 December 2017, was accepted by the President of CAAD and automatically notified to the Respondent AT on 5 December following.

In accordance with the provision in paragraph (a) of section 2 of Article 6 and paragraph (b) of section 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated as arbitrator of the single arbitral tribunal the signatory, who communicated acceptance of the appointment within the applicable deadline, and notified the parties of this designation on 23 January 2018.

Duly notified, the parties did not express the wish to challenge the designation of the arbitrator in accordance with the combined provisions of Article 11, section 1, paragraphs (a) and (b) of the Legal Framework for Tax Arbitration (RJAT) and Articles 6 and 7 of the Deontological Code.

Thus, in conformity with the provision in paragraph (c) of section 1 of Article 11 of the RJAT, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 14 February 2018.

Properly constituted, the arbitral tribunal is materially competent, in light of the provision in Articles 2, section 1, paragraph (a), of the RJAT.

The parties have legal personality and capacity and have standing (cf. Articles 4 and 10, section 2, of the RJAT, and Article 1 of Order no. 112-A/2011, of 22/03).

The Respondent presented its response on 15 March 2018.

Given the knowledge arising from the procedural documents forming part of this case, which is considered sufficient, the Tribunal decided to dispense with the meeting referred to in Article 18 of the RJAT as well as the production of witness evidence.

No written submissions were made as they were considered unnecessary.

By clerical error, the Tribunal indicated, as the deadline for rendering the decision, 7 May 2017 when, in fact, it intended to refer to 7 May 2018.

The case is not vitiated by any nullities and no other issues were raised which would prevent consideration of the merits of the case, with all conditions being met for a final decision to be rendered.

II. FACTUAL MATTERS

With relevance to the consideration of the issues raised, the following factual elements are highlighted, which are considered entirely proven in light of the documents forming part of this case, namely those attached by the Claimant with the request for arbitral decision and by the Respondent in the administrative case:

  • The Claimant was the owner, on 31 December 2015, of the property with Article …, located in the parish of … (…), municipality of Sesimbra, registered in the respective matrix as "building land," with the tax patrimonial value of €5,893,022.83;

  • The Claimant was notified of the assessment for voluntary payment in instalments of stamp tax relating to the year 2015 and which lists as "Item of the General Stamp Tax Table" "28.1" as the basis for the application of the 1% rate to the tax patrimonial value of the property in the amount of €5,883,022.83.

  • The property sub judice was registered in the respective matrix as "building land" and was considered, in the matrix, as the allocation coefficient, the housing factor.

III. ON THE MERITS OF THE CLAIM

The Claimant contests the assessments of Stamp Tax under analysis on the following grounds:

  • Illegality due to error in factual and legal presuppositions;

  • Unconstitutionality of item 28.1 of the General Stamp Tax Table, as worded by Law no. 83-C/2013, of 31 December, if interpreted in the sense that the relevant taxable event is based on an expectation of allocation for housing, by violation of the constitutional principles of contributive capacity and tax equality.

Prima facie, the issue to be determined in the case sub judice is whether the building land in question is subject to the 1% rate of stamp tax provided for in item 28.1 of the General Stamp Tax Table, applicable if the "building land" is intended for construction, foreseen or authorized, for housing.

The Claimant alleges, in summary, that the assessment of stamp tax contested in these proceedings suffers from the defect of violation of law, because the property in question does not have a housing allocation since there is no foreseen building capacity nor is there any approved project or licensing permit for the property in question.

Given the factual matters set forth above, it is first necessary to analyze the presuppositions for the incidence of stamp tax on "building land," using the tax rules relevant to the definition of the respective legal concepts.

Let us examine:

Following the approval of Law no. 55-A/2012, of 29/10, Item 28 was added to the General Stamp Tax Table, which came to subject to this tax urban properties whose tax patrimonial value recorded in the matrix, in accordance with the Code of Municipal Property Tax (hereinafter only IMI Code), was equal to or greater than €1,000,000.

Later, Article 194 of Law no. 83-C/2013, of 31/12, amended the wording of section 1 of Item 28 of the General Stamp Tax Table, so that the taxation in question now applies, at the rate of 1%, "Per residential property or per building land whose authorized or foreseen construction is for housing, in accordance with the provisions of the IMI Code."

Item 28.1 of the General Stamp Tax Table resulting from the provision of Law no. 83-C/2013, of 31 December, is applicable ratione temporis to the situation sub judice.

For IMI purposes and, in this case, for stamp tax, building land is an urban property, since it meets the requirements constituting the concept of property – physical reality, patrimonial nature and economic value – and, whatever allocation or use it may currently have, in the case of expectant land, is expressly excluded from the concept of rustic property.

Referring to urban properties, section 1 of Article 6 of the IMI Code distinguishes various types, dividing them into residential, commercial, industrial or service properties, building land and others, according to the following criteria:

  • "residential, commercial, industrial or service" – buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal destination each of these purposes (cf. Article 6, section 2 of the IMI Code);

  • "building land," land situated within or outside an urban settlement, for which a license or authorization has been granted, prior notification admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the acquisition deed, excepting land where the competent entities prohibit any of those operations, namely those located in green zones, protected areas or which, in accordance with municipal land use planning, are allocated to spaces, infrastructure or public equipment (cf. Article 6, section 3 of the IMI Code, as amended by Law no. 64-A/2008, of 31/12);

  • "Others," are considered as such land situated within an urban settlement which are neither building land nor are classified as rustic property, in accordance with the respective legal concept, as well as buildings and constructions licensed, or in the absence of a license, which have as their normal destination other purposes than those referred to above (cf. Article 6, section 4 of the IMI Code).

The present wording of Item no. 28.1 of the General Table, having now come to include "building land," maintained the conditionality relating to the inclusion that authorized or foreseen construction be for housing.

In practice, the scope of incidence continues to be restricted, in the case of "building land," to authorized or foreseen construction that is for housing, in accordance with the provisions of the IMI Code.

In this measure, subjection to Item no. 28.1 of the General Table depends on the cumulative fulfillment of the following requirements (in addition to ownership of the property):

  • the tax patrimonial value recorded in the matrix, in accordance with the IMI Code, being equal to or greater than €1,000,000.00;

  • being a building land; and

  • the authorized and foreseen construction for the building land being for housing, in accordance with the IMI Code.

Therefore, it is necessary to verify in this case the fulfillment of these requirements.

As to the first requirement, the property sub judice has a tax patrimonial value greater than €1,000,000.00, so this requirement is satisfied.

As to the second requirement, there is no doubt about the qualification of the property as "building land," nor about its inclusion in the definition contained in section 3 of Article 6 of the IMI Code, so this requirement is also satisfied.

Finally, it is necessary to analyze whether the third requirement is also satisfied: whether the authorized and foreseen construction is for housing, in accordance with the provisions of the IMI Code.

The essential issue that arises is whether or not there exists a provision or expectation of "construction for housing" with respect to the building land under analysis and whether the application of stamp tax as performed by the AT can be accepted.

This third requirement consists of authorized or foreseen construction being intended for housing.

The inclusion of building land in item 28.1 of the General Stamp Tax Table presupposes that there exists a provision or expectation of construction for housing which is realized through the fulfillment of legal and administrative requirements necessary for said construction.

In this regard, ANTÓNIO SANTOS ROCHA and EDUARDO JOSÉ MARTINS BRÁS note (in Taxation of Assets. IMI-IMT and Stamp Tax (Annotated and Commented), Almedina, 2015, pp. 44):

"With respect to building land, whether or not located within an urban settlement, as defined in Article 3(4) of this act (IMI Code), must be considered as such those lands for which:

  • a license for a subdivision operation has been granted,

  • a license for construction has been granted,

  • authorization for a subdivision operation has been granted,

  • authorization for construction has been granted,

  • favorable prior notification of a subdivision or construction operation has been admitted,

  • favorable prior information of a subdivision or construction operation has been issued, as well as

  • those that have been declared as such in the acquisition deed, it being necessary to bear in mind that, also for this purpose, only the acquisition deed with the form prescribed by civil law should be relevant, that is, the public deed or the authenticated private document referred to in Article 875 of the Civil Code."

The legal and administrative requirements set forth above constitute necessary requirements for the inclusion of building land in item 28.1 of the General Stamp Tax Table.

Although the property sub judice is registered in the matrix as being "building land," this does not justify the automatic application of item 28.1 of the General Stamp Tax Table, since, as it seems obviously clear, the mere registry registration does not by itself constitute a demonstration that a property has foreseen construction for housing.

Neither does it justify the automatic application of item 28.1 of the General Stamp Tax Table the attribution by the AT of a housing allocation in the context of its evaluations, with such allocation appearing, without more, in the respective matrices. The legislator did not attribute to the use of that coefficient any relevance in the qualification of the property, but only in its evaluation.

Therefore, the understanding of the Respondent cannot be accepted in the sense that the concept of "housing allocation" derives from the norm of Article 45 of the IMI Code.

Thus, the third requirement contained in the tax incidence norm is not satisfied, since the "building land" sub judice does not have construction, authorized or foreseen, allocated to housing.

Consequently, it can be stated that in this concrete case we are faced with a situation not foreseen, nor typified in the General Stamp Tax Table, having as reference both the literal element and the ratio legis of the norm of incidence of stamp tax.

The understanding endorsed by the Tribunal is, in fact, part of abundant case law of CAAD (see, for example, the decisions rendered in cases nos. 522/2015-T, 578/2015-T; 658/2016-T; 213/2017-T and 305/2017-T which we follow in the present decision).

In light of the above, and without need for further consideration, it is imperative to conclude that the urban property in question – building land – is not subject to Stamp Tax provided for in the tax incidence norm contained in Item 28.1 of the General Stamp Tax Table.

In these terms, it cannot but be concluded that the assessment of stamp tax which is the object of the present request for arbitral decision is illegal, and it is also concluded that, at its origin, there is error attributable to the Tax Authority.

As the Claimant's understanding is well-founded regarding the aforementioned issue, consideration of the other allegations of the Claimant is foreclosed, in accordance with Article 124 of the Code of Tax Procedure and Process (CPPT), ex vi Article 29, section 1, paragraph (c), of the RJAT, namely the alleged unconstitutionality.

COMPENSATORY INTEREST AND REIMBURSEMENT OF AMOUNT PAID

In light of the provision in section 5 of Article 24 of the RJAT – in the part that states "payment of interest is due, regardless of its nature, in accordance with the terms provided in the general tax law and in the Code of Tax Procedure and Process," it has been understood that this norm allows recognition of the right to compensatory interest in arbitral proceedings.

Thus justified, by the foregoing, is the analysis of the request for payment of compensatory interest to the present Claimant.

Compensatory interest is due when it is determined, in a formal complaint or judicial contestation, that there has been error attributable to the administration services from which results payment of the tax debt in an amount greater than that legally due (cf. Article 43, section 1, of the General Tax Law).

It is, therefore, a necessary condition for the award of said interest the demonstration of the existence of error attributable to the administration services. To that end, see, for example, the following decisions: "The right to compensatory interest provided for in section 1 of Article 43 of the General Tax Law […] depends on it being demonstrated in the case that this act is affected by error regarding factual or legal presuppositions attributable to the AT." (Decision of the Supreme Administrative Court of 30 May 2012, case 410/12); "The right to compensatory interest provided for in section 1 of Article 43 of the General Tax Law presupposes that the case determines that in the assessment 'there was error attributable to the services,' understood as the 'error regarding factual or legal presuppositions attributable to the Tax Administration'" (Decision of the Supreme Administrative Court of 10 April 2013, case 1215/12).

Having occurred, as results from the present arbitral decision, error attributable to the administration services – which leads to the annulment of the tax acts in question and to the consequent refund of the amounts paid by the Claimant, in accordance with Article 173, section 1, of the Code of Tax Procedure and Process, ex vi Article 29, section 1, paragraph (c), of the RJAT – it is concluded, without need for further consideration, that the request for payment of compensatory interest to the Claimant is well-founded.

IV. DECISION

In these terms, and with the grounds set forth, the Tribunal decides:

a) To judge the request for arbitral decision well-founded;

b) To declare the illegality of the act of assessment of Stamp Tax for the year 2015, to which correspond the collection notes relating to collection documents nos. 2016…; 2016… and 2016…, with the global value of €58,930.23;

c) To annul the assessment of Stamp Tax referred to above;

d) To judge well-founded the request in the part relating to the recognition of the right to compensatory interest in favor of the Claimant, by virtue of the tax unduly paid, in accordance with the law, to be made concrete in the execution of judgment proceedings;

V. VALUE OF THE CASE

It is fixed at €58,930.23 (fifty-eight thousand nine hundred and thirty euros and twenty-three cents), in accordance with Article 97-A, section 1, paragraph (a) of the CPPT, applicable by reference to Article 29, section 1, paragraphs (a) and (b), of the RJAT and Article 3, section 2, of the Regulations on Costs in Tax Arbitration Proceedings.

VI. COSTS

Under Article 22, section 4, of the RJAT, and in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €2,142 (two thousand one hundred and forty-two euros), entirely at the charge of the Respondent AT.

Let notification be made.

Lisbon, 28 March 2018

The Arbitrator

Nuno Cunha Rodrigues

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under clause 28.1 of TGIS applicable to construction land classified with housing allocation?
Yes, Stamp Tax under clause 28.1 of TGIS applies to construction land (terreno para construção) when the authorized or foreseen construction is for housing purposes, at a 1% rate on properties with tax patrimonial value equal to or exceeding €1,000,000. However, the application depends on whether housing construction is actually 'authorized or foreseen' under IMI Code provisions, not merely based on a housing allocation coefficient in the property matrix. Law 83-C/2013 amended item 28.1 to specifically target building land where housing construction is contemplated, requiring more than simple administrative classification.
Can a taxpayer challenge a Stamp Tax assessment on construction land through CAAD tax arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on construction land through CAAD (Centro de Arbitragem Administrativa) tax arbitration. The process requires filing a request for constitution of an arbitral tribunal under Decree-Law 10/2011 (RJAT - Legal Framework for Arbitration in Tax Matters) and Article 99 of CPPT. The claim must be filed after exhausting administrative remedies (reclamação graciosa) and within applicable deadlines. CAAD arbitration provides material competence for disputes involving Stamp Tax assessments under item 28.1 TGIS, as demonstrated in this decision where the arbitral tribunal was properly constituted to review the €58,930.23 assessment.
What is the legal basis for contesting Stamp Tax applied under verba 28.1 of the Tabela Geral de Imposto de Selo?
The legal basis for contesting Stamp Tax under verba 28.1 TGIS includes: (1) violation of law due to incorrect application of legal prerequisites - arguing the property doesn't meet the 'authorized or foreseen construction for housing' requirement; (2) error in factual presuppositions - challenging whether actual construction capacity exists or permits have been granted; (3) constitutional grounds - alleging violation of principles of tax capacity (capacidade contributiva) and tax equality if applied based solely on expectation rather than concrete housing allocation. Taxpayers can argue that matrix classification alone, without approved projects or building licenses, is insufficient to trigger the 1% Stamp Tax rate under item 28.1.
How is the taxable patrimonial value (valor patrimonial tributário) determined for construction land subject to Stamp Tax?
The taxable patrimonial value (valor patrimonial tributário - VPT) for construction land subject to Stamp Tax is determined according to the IMI Code (Código do IMI) provisions and recorded in the property matrix (matriz predial). For building land classified for housing under item 28.1 TGIS, the 1% Stamp Tax rate applies to the VPT when it equals or exceeds €1,000,000. The VPT is established through property valuation procedures under IMI regulations, considering factors like location, area, and urban classification. In this case, the property's VPT of €5,893,022.83 was registered in the matrix as 'building land' with a housing allocation coefficient, which became the basis for the contested assessment.
What procedural steps are required to file a tax arbitration claim at CAAD against an Imposto do Selo assessment?
To file a tax arbitration claim at CAAD against an Imposto do Selo assessment, taxpayers must: (1) first file a formal complaint (reclamação graciosa) with the Tax Authority challenging the assessment; (2) await rejection of the complaint or expiry of the decision period; (3) submit a request for constitution of an arbitral tribunal to CAAD under Articles 1, 2(1)(a) and 10 of Decree-Law 10/2011 (RJAT) within applicable deadlines; (4) pay required fees per Order 112-A/2011; (5) specify the contested act, legal grounds, and requested relief; (6) attach supporting documentation including the rejected complaint decision and assessment notices. The CAAD President accepts the request, notifies the Tax Authority, and the Deontological Council designates an arbitrator to constitute the tribunal.