Process: 640/2014-T

Date: February 21, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 640/2014-T addressed the application of Stamp Tax under item 28.1 of the Portuguese General Stamp Tax Table (TGIS) to vertical property. Two co-owners challenged Stamp Tax assessments totaling €3,520.96 for 2013, concerning a property in Lisbon with nine independent floors or units. Item 28.1 of the TGIS imposes annual Stamp Tax on properties with residential designation valued at €1,000,000 or more. The claimants raised two principal arguments: first, that the property, having been demolished nine years prior with only facades remaining in a state of ruin, could not be considered as having residential designation under Article 6 of the Municipal Property Tax Code (CIMI); second, that even if taxable, the relevant tax property value (VPT) should be calculated separately for each independent unit rather than aggregating the total property value. The Tax Authority maintained that the property as a whole exceeded the €1,000,000 threshold and was subject to taxation. The claimants emphasized that none of the individual floors or units exceeded this threshold when considered independently. They argued that Articles 67 of the Stamp Tax Code (CIS), 12(3), and 119 of the CIMI required individual unit assessment for properties in vertical ownership regimes. The claimants further contended that taxing a demolished, unlicensed property without current residential use for over 20 years violated constitutional principles of justice, equality, proportionality, and equity. After their administrative complaint was dismissed, the claimants initiated tax arbitration at CAAD under the Legal Framework for Tax Arbitration (RJAT), seeking annulment of the assessments and reimbursement with compensatory interest. The arbitral tribunal was constituted on October 30, 2014, with a single arbitrator, and both parties waived the oral hearing under Article 18 of the RJAT.

Full Decision

CAAD: TAX ARBITRATION

Case No. 640/2014-T

ARBITRAL DECISION

I. REPORT

  1. A…, taxpayer identification number … and B…, taxpayer identification number …, both residing at … Street, in Lisbon, requested the Administrative Arbitration Centre (CAAD), on 29 August 2014, the constitution of an arbitral tribunal in tax matters, pursuant to the provisions of Article 10, nos. 1 and 2 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration "RJAT"), in which the Tax and Customs Authority (AT) is the Respondent, with a view to the declaration of illegality and consequent annulment of the Stamp Tax (IS) assessment acts for the year 2013, relating to item 28.1 of the General Stamp Tax Table (TGIS), in the total amount of €3,520.96 (three thousand five hundred and twenty euros and ninety-six cents).

  2. The Claimants opted not to appoint an arbitrator.

  3. The request for constitution of an arbitral tribunal was accepted by the President of CAAD on 1 September 2014 and automatically notified to AT on the same date.

  4. The Signatory was appointed by the President of the Deontological Board of CAAD as arbitrator of a single arbitral tribunal, pursuant to the provisions of Article 6 of the RJAT.

  5. The Signatory communicated acceptance of the appointment to the President of the Deontological Board of CAAD within the legal timeframe, pursuant to the provisions of Article 4 of the CAAD Deontological Code.

  6. The Parties were notified of the Signatory's appointment on 15 October 2014, pursuant to Article 11, no. 1, paragraphs a) and b) of the RJAT, and raised no objection thereto.

  7. The single arbitral tribunal was thus properly constituted on 30 October 2014, in accordance with the provisions of paragraph c) of no. 1 of Article 11 of the RJAT.

  8. AT was notified, by arbitral order of 4 November 2014, to submit a response within 30 days.

  9. AT submitted its response on 5 December 2014, requesting therein a waiver of the hearing referred to in Article 18 of the RJAT.

  10. The Claimants, notified for this purpose, indicated no objection to such waiver.

  11. The Arbitral Tribunal is materially competent, pursuant to Article 2, no. 1, paragraph a) of the RJAT.

  12. The Parties possess legal personality and capacity and are legitimate (Articles 4 and 10, no. 2 of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March).

  13. The joinder of claims is admissible, as the requirements established in Article 3, no. 1 of the RJAT are met.

  14. The joinder of parties is admissible, as the requirements established in Article 3, no. 1 of the RJAT are met.

  15. The proceeding is not affected by flaws that would invalidate it.

II. THE CLAIMANTS' CLAIM

The Claimants presented a request for arbitral pronouncement seeking the declaration of illegality and consequent annulment of the Stamp Tax (IS) assessment acts for the year 2013, relating to item 28.1 of the TGIS, to which correspond the:

i. Document No. 2014…, in the amount of €220.06;
ii. Document No. 2014…, in the amount of €220.06;
iii. Document No. 2014…, in the amount of €220.06;
iv. Document No. 2014…, in the amount of €220.06;
v. Document No. 2014…, in the amount of €220.06;
vi. Document No. 2014…, in the amount of €220.06;
vii. Document No. 2014…, in the amount of €220.06;
viii. Document No. 2014…, in the amount of €220.06;
ix. Document No. 2014…, in the amount of €220.06;
x. Document No. 2014…, in the amount of €220.06;
xi. Document No. 2014…, in the amount of €220.06;
xii. Document No. 2014…, in the amount of €220.06;
xiii. Document No. 2014…, in the amount of €220.06;
xiv. Document No. 2014…, in the amount of €220.06;
xv. Document No. 2014…, in the amount of €220.06;
xvi. Document No. 2014…, in the amount of €220.06;

In the total amount of €3,520.96 (three thousand five hundred and twenty euros and ninety-six cents), all relating to the immovable property situated at … Avenue, turning towards the … Courtyard, municipality of Lisbon, registered in the urban real property register under article ….

For this purpose, and in summary, they present the following arguments:

  1. The urban property in question does not fall within the concept of properties with residential designation provided in item 28.1 of the TGIS.

  2. The interpretation by AT to the effect of considering, for purposes of applying IS, the tax property value (VPT) of the property as a whole, instead of the VPT of each floor or unit capable of independent use, violates the provisions of law.

  3. Each of the Claimants is the owner of 1/3 of the property in question, which is held in full ownership, and consists of 9 floors or units capable of independent use, designated for commercial and residential purposes.

  4. None of those floors or units capable of independent use has a VPT exceeding €1,000,000.00 (one million euros).

  5. The property register description does not correspond to the actual current state of the property, as it was demolished through contract work No. …, which resulted from a process of execution of coercive works with No. … of the Lisbon Municipal Council.

  6. The state of degradation of the property, of which only the facades remain, does not permit it to be used, in whole or in part, for the purposes indicated in the respective urban property record card, being in a state of ruin.

  7. The Claimants requested the competent bodies of the Lisbon Municipal Council to certify that the property is in ruins, which did not occur, and a hierarchical appeal of the decision rendered was filed.

  8. After being notified of the acts now challenged, the Claimants filed a complaint for reconsideration, alleging, essentially, that:

i. the property in question cannot be treated as a licensed construction or building, or that it has as its normal destination any of the purposes provided in paragraphs a) and b) of no. 1 of Article 6 of the Code of the Municipal Property Tax (CIMI), as there was never a license for the property nor does it have any licensed building or construction;

ii. the property cannot, either, be considered as land for construction, as legally defined for this purpose;

iii. AT cannot thus require IS based on item 28.1 of the TGIS from an owner of a property that has been demolished for 9 years, that never had a license for housing, that has not been used for housing for more than 20 years and does not even have a license or authorization for construction for it, without incurring manifest illegality;

iv. Any different interpretation would be unconstitutional, by violation of the principles of justice, equality, proportionality and equity, constitutionally enshrined.

  1. The draft decision of AT regarding the complaint for reconsideration filed determined its dismissal, and the Claimants exercised their right to prior hearing, AT maintaining the decision it had drafted.

  2. The Claimants consider that the property cannot, in any way, be considered as having residential designation.

  3. Additionally, the Claimants understand that when units of the same property with independent use are involved, the VPT relevant for purposes of determining the applicability or non-applicability of item 28 of the TGIS is that of each unit independently considered, by force of the provisions of Articles 67 of the CIS, 12, no. 3 and 119 of the CIMI.

  4. The IS (item 28.1 of the TGIS) cannot thus apply to the sum of the VPTs of the floors or units capable of independent use, allocated to housing, integrated in urban properties in horizontal property regime, but rather to the VPT of each floor or unit capable of independent use, only in the case where this value is equal to or greater than €1,000,000.00.

  5. Accordingly, the assessments are affected by the vice of violation of law, due to error regarding the legal presuppositions.

  6. If their claim proceeds, the Claimants request reimbursement of the amounts unduly paid, plus the legally due compensatory interest.

III. THE RESPONDENT'S ANSWER

The Respondent presented its Answer, alleging, in brief, the following:

  1. The Claimants erroneously seek to assimilate full ownership to horizontal property, so as to extract therefrom tax consequences to which they are not entitled.

  2. The CIMI is the normative framework of reference for this purpose, the concept of property provided for in Article 2 thereof assuming relevance, especially its no. 4, which states that each autonomous unit in the horizontal property regime is deemed to constitute a property.

  3. Thus, a property in full ownership with floors or units capable of independent use is, unequivocally, different from an immovable in horizontal property regime.

  4. By interpretation a contrario sensu, it is readily concluded that units of properties not in horizontal property regime do not constitute urban properties.

  5. There being thus no unequal treatment, as the Claimants contend.

  6. The Claimants not having opted to subject to the horizontal property regime the units capable of independent use, cannot, in light of the principle of tax legality, wish that the same enjoy legal status for which they do not meet the legal requirements.

  7. A change in legal nature would be required, namely the actual constitution of horizontal property, which, until it occurs, cannot determine consideration of the units capable of independent use as urban properties, pursuant to the terms and for the purposes set out in Article 2, no. 4 of the CIMI and, consequently, of item 28.1 itself of the TGIS of the CIS.

  8. Thus, the arguments of the Claimants regarding Article 12, no. 3 of the CIMI do not prevail, as it is not by mere matrix separation that units capable of independent use acquire, per se, the status of property.

  9. Article 12 of the CIMI establishes the concept of real property register, its no. 3 pertaining exclusively to the manner of recording matrix data.

  10. In the context of IMI, where a property in full ownership is involved, the VPT serving as the basis for its calculation is the VPT of the property - and it is in compliance with Article 119, no. 1 of the CIMI that the collection document is sent with breakdown of the parts capable of independent use, their respective VPT and amount attributable to each municipality.

  11. The attribution of an individual VPT does not remove the VPT of the respective property where the units or floors are located, and ends up contributing to or determining the very VPT of the urban property, which necessarily results from the sum of the VPTs of the various floors capable of independent use.

  12. Article 7, no. 2, paragraph b) of the CIMI itself states this: "each part is valued by application of the corresponding rules, being the value of the property the sum of the values of its parts".

  13. Thus, the thesis defended by the Claimants lacks legal support, for purposes of IS the property as a whole is relevant.

  14. Consequently, the vice of violation of law due to error in the qualification of facts and error in the application of Law should be dismissed as unfounded.

  15. As to the fact that the property description does not correspond to the actual current state of the property, as it is in a state of ruin, the Respondent alleges that the Claimants do not provide any evidence as to these alleged facts.

  16. With no definition in the CIS of what is meant by urban property and residential designation, it is necessary to resort to the CIMI, respectively, to Articles 2 and 6.

  17. For tax purposes, the immovable is an urban property with residential designation, in that capacity it was acquired and thus it remains and continues to be classified in property terms.

  18. Having a VPT exceeding €1,000,000.00 and, as such, falling within the provision of the norm of item 28.1 of the TGIS, a general and abstract norm, applicable uniformly to all cases in which the factual and legal presuppositions are met.

  19. Furthermore, well-founded reasons with constitutional basis, defended and explained by the Respondent, justified the creation of the norm in question.

  20. The arguments of the Claimants regarding the violation of the principles of justice, equality, proportionality and equity do not prevail either.

  21. There is no violation of the principle of equality, as there is no discrimination in the taxation of properties constituted in horizontal property regime and properties in full ownership with floors or units capable of independent use, or between properties with residential designation and properties with other designations.

  22. Full ownership and vertical property are differentiated legal institutions.

  23. The constitution of horizontal property implies a mere legal alteration of the property, but the legislature can, however, subject to a different tax legal framework properties in horizontal property regime and vertical regime, in particular, benefiting the legally more evolved institution of horizontal property without such discrimination needing to be considered necessarily arbitrary.

  24. The norms on property registration and, furthermore, the norms on the assessment of parts capable of independent use, do not permit the assertion that there should be an equation of the property in full ownership regime to the horizontal property regime, which would be illegal and unconstitutional.

  25. The constitution in horizontal property determines the division/partition of full ownership and the independence or autonomy of each of the units that comprise it, pursuant to no. 2 of Article 4 of the CIMI and Article 1414 and following of the Civil Code, such that a property in full ownership constitutes, for all purposes, a single legal-tax reality.

  26. The option for this mechanism of obtaining revenue through IS taxation is also legitimated, which obeys the principle of adequacy, aiming at maximum effectiveness as to the objective to be achieved.

  27. Additionally, everything that is being defended by the Respondent has already been the subject of binding information by AT, which it annexes.

  28. Thus, the tax acts in question did not violate any legal or constitutional principle, and should be maintained.

  29. As to the request for compensatory interest, there was no error attributable to the services which are bound by the principle of legality, which fulfilled it integrally, so the same cannot proceed, even in the case of considering the request for annulment of the acts in question well-founded.

IV. ISSUES FOR DECISION

Considering the facts and legal matters contained in the request for arbitral pronouncement presented by the Claimant and the Answer of the Respondent, the issues for decision by the Arbitral Tribunal are:

a. To determine whether the value on which item 28.1 of the TGIS, as worded in Law No. 55-A/2012, of 29 October, applies is (i) the sum of the VPT of each floor or unit capable of independent use, in the case of properties in full or vertical ownership regime (overall value), or (ii) the VPT of each floor or unit capable of independent use;

b. To determine whether the property in question has residential designation for purposes of applying item 28.1 of the TGIS, if its state of degradation and ruin is assumed (without prejudice to the provisions of point V below).

V. FACTUAL MATTERS

With relevance for the assessment of the claim, the following facts are considered proven, based on the documents attached to the file, not contested by the Respondent:

a. The Claimants are owners, each in the proportion of 1/3, of the urban property situated at … Avenue, turning towards the … Courtyard, municipality of Lisbon, registered in the urban real property register under article ….

b. The urban property in question comprises, according to its respective property registration, 8 floors or units capable of independent use, allocated to housing, and 1 floor or unit capable of independent use allocated to commercial use.

c. The sum of the VPTs of those floors or units capable of independent use allocated to housing was, on 31 December 2013, of €1,056,289.40 (one million fifty-six thousand two hundred and eighty-nine euros and forty cents).

d. None of those floors or units capable of independent use allocated to housing had, on 31 December 2013, a VPT exceeding €1,000,000.00.

e. The Claimants were notified of the Stamp Tax assessment acts, relating to item 28.1 of the TGIS, for the year 2013, to which correspond the:

i. Document No. 2014…, in the amount of €220.06;
ii. Document No. 2014…, in the amount of €220.06;
iii. Document No. 2014…, in the amount of €220.06;
iv. Document No. 2014…, in the amount of €220.06;
v. Document No. 2014…, in the amount of €220.06;
vi. Document No. 2014…, in the amount of €220.06;
vii. Document No. 2014…, in the amount of €220.06;
viii. Document No. 2014…, in the amount of €220.06;
ix. Document No. 2014…, in the amount of €220.06;
x. Document No. 2014…, in the amount of €220.06;
xi. Document No. 2014…, in the amount of €220.06;
xii. Document No. 2014…, in the amount of €220.06;
xiii. Document No. 2014…, in the amount of €220.06;
xiv. Document No. 2014…, in the amount of €220.06;
xv. Document No. 2014…, in the amount of €220.06;
xvi. Document No. 2014…, in the amount of €220.06;

In the total amount of €3,520.96 (three thousand five hundred and twenty euros and ninety-six cents).

f. The Claimants proceeded to payment of that amount.

g. The Claimants filed a complaint for reconsideration regarding the acts in question, which was dismissed by official letter from AT of 21 July 2014.

The conviction regarding the facts considered proven was based on the documentary evidence attached, whose authenticity and correspondence to reality were not questioned by the Respondent.

As to the facts referring to the state of degradation, ruin or partial demolition of the property in question, the following are contained in the file:

a. A fax from the Lisbon Municipal Council, Municipal Department for Conservation and Urban Rehabilitation, Department for Conservation of Private Buildings, dated 27.06.2006, with the subject "Cost of coercive works" referring to the location … Avenue, stating that the demolition works of the private property situated at that location, carried out through Contract No. …, are completed, and it is necessary to arrange for their collection from the owner, pursuant to Article …, no. 3 of the RAU, signed by the Head of the Inspection Division;

b. A document from the Municipal Department for Conservation and Urban Rehabilitation, Department for Conservation of Private Buildings, addressed to the Director of the Department, proposing extinction of the procedure, with an order of extinction thereof signed by the Department Director herself, on 12.09.2006;

c. A document of filing of a hierarchical appeal addressed to the President of the Lisbon Municipal Council, referring to Case No. …, signed by the Representative of the Claimants, undated, with no mention of having been received by the addressee or any evidence of having been sent or transmitted.

The documents above referred to, submitted by the Claimants to seek to demonstrate the current state of demolition and ruin of the property, date from 2006, on the one hand, and the apparently more recent one does not contain sufficient or adequate elements to demonstrate the alleged, in particular regarding the state of the property on 31 December 2013, the date on which the tax fact in question occurred.

The Respondent alleges that the facts alleged have not been proven. The Arbitral Tribunal agrees with such assertion, thus determining that the facts alleged by the Claimants regarding the current state of the property in question are not considered proven, due to absence of adequate evidence presented in their regard.

In these terms, and for the proper purposes, the Arbitral Tribunal cannot but consider that the urban property in question corresponds to the property register description contained in the respective property record card attached to the file, due to manifest absence of proof to the contrary.

VI. LEGAL MATTERS

In view of what is set out in point V above, the examination of the issue for decision indicated in b) of point IV is prejudiced. The sole issue for examination by the Arbitral Tribunal is thus that indicated in a) of point IV.

As results from the factual matters, the issue concerns the assessment of IS for the year 2013, relating to item 28.1 of the TGIS, which was applied on the tax property value of the property in full/vertical ownership regime, situated … Avenue, in Lisbon.

AT considered, for purposes of applying that item 28.1 of the TGIS, the sum of the VPT of each of the respective floors or units capable of independent use, that sum determining a VPT exceeding €1,000,000.00. The Claimants consider that AT should not have considered that sum, to the extent that the treatment to be given to a property in full ownership regime cannot be different from that given to a property in horizontal property regime – if, in the latter case, the VPT to be considered is that of each autonomous unit, in the case of full ownership it should also be considered the VPT of each floor or unit capable of independent use. And, in the concrete case, each floor or unit capable of independent use allocated to housing has a VPT of less than €1,000,000.00.

It is thus important to understand whether AT acted with error regarding the legal presuppositions for applying, to the case, item 28.1 of the TGIS.

For the assessment of the issue in question it is important, first of all, to analyze Article 4 of Law No. 55-A/2012, of 29 October, which added to the TGIS, annexed to the CIS, item no. 28, with the following wording:

"28 — Ownership, usufruct or right of surface of urban properties whose tax property value recorded in the register, pursuant to the Code of the Municipal Property Tax (CIMI), is equal to or exceeding €1,000,000 — on the tax property value used for purposes of IMI:

28.1 — For property with residential designation — 1%;

28.2 — For property, when the taxpayers who are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by order of the Minister of Finance — 7.5%."

As stated, the Claimants sustain that this normative provision does not cover urban properties in full ownership considered as a whole, when composed of parts capable of independent use.

It is necessary to interpret, for this purpose, the concept of "property" contained in that item 28.1 of the TGIS. To understand its content, the concepts of property contained in the CIMI (Articles 2 to 6) should be examined – under the provisions of Article 67, no. 2 of the CIS, according to which, to matters not regulated in the CIS relating to item no. 28 of the TGIS, the provisions of the CIMI apply subsidiarily.

And such interpretation should always be carried out pursuant to the provisions of Article 11 of the General Tax Law (LGT) and Article 9 of the Civil Code, to which it refers.

Article 2 of the CIMI defines the concept of property, and establishes, specifically, in its no. 4, that for purposes of this tax, each autonomous unit in the horizontal property regime is deemed to constitute a property. This article makes no reference to properties in full ownership or to parts of properties (floors or units capable of independent use).

From a literal interpretation of Article 2 of the CIMI, there will be no doubt that parts of properties that are not in horizontal property regime do not integrate, for purposes of IMI, the concept of property.

As to the determination of the tax property value of each property, Article 7 of the CIMI governs. According to no. 1 thereof, the tax property value of properties is determined pursuant to this Code. Thus, and according to no. 2, paragraph b) of that Article 7, the tax property value of urban properties with parts classifiable under more than one of the classifications attributed to urban properties pursuant to Article 6, no. 1 of the CIMI (namely, residential, commercial, industrial or service, land for construction and others) is determined as follows: "where the different parts are economically independent, each part is valued by application of the corresponding rules, being the value of the property the sum of the values of its parts".

Consequently, also in the determination of the tax property value of properties, there appears to be no specific reference that determines that economically independent parts are considered as constituting, per se, properties. On the contrary, the literal interpretation of the norm permits the conclusion in the opposite sense: the value of the property is the sum of the values of its parts.

It is reiterated then: the CIMI does not equate, for determination of tax property value, parts of properties capable of independent use to properties. On the contrary, it clearly separates the concepts of "property" and "part of property". Now, returning to Article 2 of the CIMI, "parts of property" are not deemed to be properties (precisely the opposite of what is specifically referred to regarding autonomous units, which are indeed equated to properties).

In the concrete case, the urban property is composed of parts (independent) for residential purposes and parts (independent) for commercial purposes. Accordingly, the value of the property is, in accordance with the rules indicated, the sum of the values of its parts.

There is thus no equality of treatment in the CIMI between properties in horizontal property regime and properties in full ownership with parts classifiable under more than one of the classifications attributed to urban properties. As for the former, their respective autonomous units are, unequivocally, properties for purposes of IMI; as for the latter, their independent parts do not fall within that concept. The parts compose, as a whole, the property.

Consequently, if parts of properties, for purposes of IMI, are not properties, then they will not be for purposes of IS either. Thus, the tax fact is the ownership of the property as a whole, as results from the concept contained in Article 2 of the CIMI.

The arguments of the Claimants regarding Articles 12, no. 3 and 119 of the CIMI, relating, respectively, to the concept of real property register and to the assessment of the tax, do not prevail either, in the understanding of the Arbitral Tribunal.

As the Respondent well states, it is not by mere matrix separation determined by Article 12, no. 3 that floors or units capable of independent use acquire the quality of property that is not conferred on them by Article 2 of the same CIMI.

Real property registers are records containing, in particular, the characterization of properties (Article 12, no. 1 CIMI). That description is an integral part, in the case of properties in full ownership, of floors or parts of property capable of independent use, which the law determines (no. 3 of the same article) be separately considered in the same property registration.

As for properties in horizontal property regime, the law goes further: Article 92 of the CIMI establishes that each building in horizontal property regime also corresponds to only one registration, but each of the autonomous units that compose it is detailed and individually described by the letter corresponding to it.

And even if it were considered that, as to the question of property registration, the treatment between properties in full ownership regime and properties in horizontal property regime is substantially similar, such would not, it is considered, overcome the fact that parts of properties are not specifically provided for in Article 2 of the CIMI, unlike what occurs with autonomous units.

Additionally, for each "property" registered in the register a property record card is delivered to the respective owner (Article 93, no. 1 of the CIMI). Now, there does not exist, for each floor or unit capable of independent use of a property in full ownership, an autonomous property record card, for the clear reason of not falling under the concept of property defined for purposes of this tax.

As to the assessment of IMI (Article 119), the collection document necessarily contains the breakdown of the properties and their parts capable of independent use. This is because, under the provisions of Article 7, no. 2, paragraph b) of the CIMI, each part capable of independent use has its tax property value calculated separately, as indicated previously.

In view of the foregoing, the Arbitral Tribunal understands, without regard to the propriety or accuracy of the wording of the norm, that the interpretation considering that floors or parts of properties capable of independent use of properties in full ownership are, for purposes of IMI, equated to autonomous units, does not have sufficient legal support and is too far removed from the letter of the law.

Note that the Claimants formulate no argument regarding the possible unconstitutionality of this understanding – despite the Respondent justifying its constitutionality in the Answer presented – so such is not assessed. The only constitutional judgment of the Claimants relates to whether AT could consider that a demolished or ruined property is a property with residential designation: now, not having considered proven the state of demolition or current ruin of the immovable, there is no basis for assessment of such judgment.

Consequently, the request for annulment of the assessments in dispute founded on error regarding the legal presuppositions, presented by the Claimants, does not proceed.

The Claimants' claim not proceeding, consequently, their request for reimbursement of the tax paid plus compensatory interest will not proceed.

VII. DECISION

In these terms, and based on the grounds set forth, the Arbitral Tribunal decides to dismiss the request for arbitral pronouncement, the challenged assessments being maintained.

Value of the case: €3,520.96 (three thousand five hundred and twenty euros and ninety-six cents).

Costs: Under the provisions of Article 22, no. 4 of the RJAT, and pursuant to Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, the value of costs is fixed at €612.00 (six hundred and twelve euros), to be borne by the Claimants.

Lisbon, 21 February 2015

The Arbitrator

Ana Pedrosa Augusto

[1] There being no doubt that the property in question is, for the proper purposes, an urban property.

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the Portuguese Stamp Tax General Table (TGIS) and how does it apply to property?
Verba 28.1 of the Portuguese Stamp Tax General Table (TGIS) imposes an annual Stamp Tax on properties with residential designation (destinação habitacional) whose tax property value (valor patrimonial tributário - VPT) equals or exceeds €1,000,000. The tax applies to properties that are licensed constructions or buildings with residential purposes under Article 6 of the Municipal Property Tax Code (CIMI), or land for construction. The provision targets high-value residential real estate, requiring annual payment by property owners. The key elements for application are: (1) the property must have residential designation according to its urban property classification; (2) the VPT must meet or exceed the €1,000,000 threshold; and (3) the property must be capable of use for housing purposes, whether actually occupied or not.
Can vertical property (propriedade vertical) be subject to Stamp Tax under Verba 28 of the TGIS?
Yes, vertical property (propriedade vertical) can be subject to Stamp Tax under Verba 28 of the TGIS, but a critical interpretative issue exists regarding the calculation method. In vertical property regimes, where a single building contains multiple independent units or floors owned by different parties or held in undivided co-ownership, the question arises whether the €1,000,000 threshold applies to: (a) the aggregate VPT of the entire property, or (b) the VPT of each independent unit separately. Taxpayers argue that Articles 67 of the Stamp Tax Code (CIS), 12(3), and 119 of the Municipal Property Tax Code (CIMI) require individual assessment of each autonomous unit capable of independent use. Under this interpretation, only units individually valued at €1,000,000 or more would trigger the tax. The Tax Authority has historically aggregated the total property value, potentially subjecting properties to taxation even when no single unit exceeds the threshold. This divergence creates significant controversy in cases involving buildings with multiple residential units in vertical ownership.
How do taxpayers challenge Stamp Tax assessments through CAAD tax arbitration in Portugal?
Taxpayers challenge Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa) by filing a request for constitution of an arbitral tribunal under the Legal Framework for Tax Arbitration (Regime Jurídico da Arbitragem Tributária - RJAT), specifically Article 10(1) and (2). The process requires: (1) Prior exhaustion of administrative remedies (typically filing a complaint for reconsideration with the Tax Authority); (2) Filing the arbitration request within the statutory deadline after the administrative decision; (3) Naming the Tax and Customs Authority (AT) as respondent; (4) Paying the required arbitration fee; (5) Optionally appointing an arbitrator or allowing CAAD to appoint one from its list. The CAAD President accepts the request and notifies AT, which must respond within 30 days. The arbitral tribunal is constituted under Article 11 of the RJAT, typically within 15 days of the arbitrator's acceptance. Parties may waive the oral hearing under Article 18. The arbitrator issues a binding decision that can declare assessments illegal and order reimbursement with compensatory interest. This alternative dispute resolution mechanism offers a faster, more specialized forum than judicial courts for tax disputes.
What was the outcome of CAAD Process 640/2014-T regarding Stamp Tax on vertical property?
The provided excerpt of CAAD Process 640/2014-T does not include the final arbitral decision or outcome. The document presents the procedural history and the claimants' arguments but cuts off after beginning Section III (The Respondent's Answer) without providing the Tax Authority's response, the tribunal's legal analysis, or the final ruling. Based on the procedural information available, the arbitral tribunal was properly constituted on October 30, 2014, with the signatory arbitrator appointed by CAAD's Deontological Board. Both parties waived the oral hearing. The claimants sought annulment of €3,520.96 in Stamp Tax assessments for 2013, arguing the demolished property lacked residential designation and that individual unit values should apply rather than aggregate property value. To determine the actual outcome—whether the tribunal ruled in favor of the claimants by annulling the assessments or upheld the Tax Authority's position—the complete arbitral decision would need to be consulted.
What are the legal requirements for filing a joint tax arbitration claim (coligação de autores) under the RJAT?
The legal requirements for filing a joint tax arbitration claim (coligação de autores) under the RJAT are established in Article 3(1), which permits joinder of parties when multiple claimants share common legal interests in the same matter. Specifically, joinder is admissible when: (1) The parties contest related or connected tax acts arising from the same legal or factual circumstances; (2) The legal questions and factual grounds are substantially similar or identical; (3) The claims seek compatible relief (such as annulment of related assessments); (4) There is procedural economy in deciding the matters together. In CAAD Process 640/2014-T, the tribunal explicitly found that both the joinder of claims (cumulação de pedidos) and joinder of parties (coligação de autores) were admissible under Article 3(1) of the RJAT. The two claimants, who were co-owners of the same property each holding 1/3 ownership, contested 16 separate but related Stamp Tax assessment documents all concerning the same immovable property for the same tax year (2013) under the same legal provision (item 28.1 of the TGIS). This demonstrated the requisite commonality of legal and factual grounds, making joint arbitration procedurally appropriate and efficient rather than requiring separate proceedings.