Process: 645/2018-T

Date: June 3, 2019

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 645/2018-T) addresses whether Stamp Tax under Item 28.1 of the General Stamp Tax Table (TGIS) applies to land classified as 'construction land' based solely on property matrix registration. The Claimant, a financial institution holding property acquired through dação em pagamento (payment in lieu), challenged Stamp Tax assessments for 2014-2015 totaling €29,513.10 on urban land registered as 'terreno para construção' (construction land) in Oeiras. The core legal dispute centers on interpreting Item 28.1 TGIS, which taxes 'land for construction whose construction, authorized or planned, is for residential purposes.' The Claimant argued that mere matrix registration as construction land is insufficient; actual administrative authorization, approved projects, and confirmed residential purpose are required. The property lacked building licenses or approved construction plans during the tax years. The Claimant also contended the property represented no enhanced tax capacity, being held for resale to recover defaulted loans rather than investment. Alternatively, constitutional challenges were raised regarding violations of tax equality and ability-to-pay principles under Article 104(3) of the Portuguese Constitution. The Tax Authority (AT) defended the assessments, arguing that residential use assigned during property evaluation and recorded in the matrix triggers taxation. AT relied on IMI Code definitions and Constitutional Court precedent (Summary Decision 214/2017) establishing that patrimony taxes apply based on ownership of patrimonial values regardless of asset function. AT also challenged the arbitral tribunal's jurisdiction over constitutional questions. This case clarifies the specific conditions—beyond simple matrix classification—required for Stamp Tax liability on construction land.

Full Decision

ARBITRAL DECISION

I. REPORT

On 19 December 2018, COMPANY A..., SA, with Tax Identification Number ... and with registered address at Rua ..., no. ..., ..., ...-... Lisbon (hereinafter referred to as the Claimant), submitted, under the combined provisions of articles 2, no. 1, paragraph a) and 10, nos. 1 and 2, of Decree-Law no. 10/2011, of 20 January, which approved the Legal Framework for Tax Arbitration (RJAT), a request for the constitution of an Arbitral Tribunal, with the Tax and Customs Authority (hereinafter AT or Respondent) as respondent, with a view to declaring unlawful the decision rejecting the request for ex officio review that had as its object the assessment acts for Stamp Tax (Item 28.1, of the General Stamp Tax Table - TGIS) relating to the years 2014 and 2015 and to the urban property (land for construction) registered in the property matrix of the Municipal Union of ... and ..., ... and ..., municipality of Oeiras, under the article ..., of which it is the owner, as well as the said assessments, in the global amount of € 29,513.10 (twenty-nine thousand, five hundred and thirteen euros and ten cents), whose annulment it requests.

The Claimant further requests the Respondent be condemned to the restitution of the amounts unduly paid, plus compensatory interest at the legal rate in force.

The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD and automatically notified to AT and, pursuant to the provisions of no. 1 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the single arbitral tribunal, a responsibility accepted within the applicable period, without objection from the Parties.

Summary of the Parties' Positions

a. Of the Claimant:

As grounds for the request for arbitral pronouncement, the Claimant alleges, in summary, the following:

The urban property to which the impugned assessments relate is registered in the property matrix as "land for construction"; however, the mere property registration of properties as "land for construction" does not, by itself, legitimize the application of item 28 of the TGIS.

Although Item 28.1 of the TGIS, in its latest version, provides for the taxation of "land for construction whose construction, authorized or planned, is for residential purposes", such taxation shall not take place in situations where the effective construction of the "land" has not been authorized or planned and where such construction is intended for "residential purposes", it being always necessary that there exist the entire administrative process associated with the construction and, finally, a valid building license or authorization, as well as an approved project and one that is intended for "residential purposes".

The fact that land for construction is located in the area covered by the Municipal Master Plan does not, by itself, grant its owner the right to build on it without the necessary administrative authorization, as is the case with the property to which the impugned assessments relate.

In the concrete case, there was neither in 2014 nor in 2015 any construction, authorized or planned, for residential purposes, to be carried out on the property in question, as required by item 28.1 of the TGIS, making the impugned assessments unlawful due to errors in the factual and legal assumptions, and they should be promptly annulled.

As resulted from the intervention of the State Secretary for Tax Affairs in the presentation and discussion of Bill no. 96/XII/2nd, which originated Law no. 55-A/2012, of 29/10, which, among other amendments to the Stamp Tax Code, added item 28 to the TGIS, through this provision the Government introduced a special taxation aimed at promoting "a more equitable tax system" in which taxpayers "are called upon to contribute according to their capacity to contribute".

However, the real estate properties owned by the Claimant, acquired in their majority by way of performance in lieu of payment, do not represent an increased capacity to contribute, as they do not constitute investment assets, being intended solely to be resold to reimburse the debts of defaulting customers in the context of its credit activity.

Alternatively, the Claimant invokes the unconstitutionality of item 28.1 of the TGIS, when interpreted as being automatically applicable to land for construction, by violation of the principles of tax equality and capacity to contribute, enshrined in article 104, no. 3, of the Constitution of the Portuguese Republic, with respect to the taxation of patrimony.

b. Of the Respondent:

Notified pursuant to the terms and purposes set forth in article 17 of the RJAT, the AT submitted a response in which it came to defend the legality and maintenance of the assessment acts subject to the present request for arbitral pronouncement, both by exception and by impugnation.

By exception, the Respondent invokes the incompetence of the arbitral tribunal to decide on the request for declaration of the material unconstitutionality of item 28 of the TGIS, formulated by the Claimant on a subsidiary basis, given the express establishment of the competence of arbitral tribunals, expressed by the legislator in no. 1 of article 2 of the RJAT, which does not include the examination of the constitutional conformity of legislative acts or their norms.

And that, constituting absolute incompetence of the arbitral tribunal ratione materiae a dilatory exception that prevents the continuation of the proceedings, the Respondent should be absolved from the suit as to the respective request, in accordance with the provisions of articles 576, no. 2, 577, paragraph a) and 278, no. 1, paragraph a) of the CPC, applicable ex vi article 29, paragraph e) of the RJAT.

By impugnation, the Respondent submits the following grounds:

According to Summary Decision no. 214/2017 of the Constitutional Court, "the tax provided for in Item 28.1, as is typical of taxes on patrimony, delimits its scope of application by exclusive reference to the ownership of certain patrimonial values, 'regardless of the function performed by such assets (productive capital, application of funds or savings or durable consumption)'".

From consultation of the certificate of the content of the urban property dealt with in the records, as well as its respective property record card, it can be concluded that it was assigned a residential use in the context of its respective evaluation, with such use being recorded in its matrix and, for that reason, it is subject to Stamp Tax.

The fact that in the standard of incidence – item 28.1 of the TGIS – the property was posited with residential use rather than residential property appeals to the use coefficient (see article 41 of the IMI Code), which applies indiscriminately to all urban properties.

Not existing, under Stamp Tax, a definition of what is meant by "urban property", "land for construction" and "residential use", it is necessary to resort subsidiarily to the IMI Code to obtain a definition that allows assessment of possible subjection to Stamp Tax, in accordance with the provisions of article 67, no. 2 of the Stamp Tax Code as amended by Law no. 55-A/2012, of 29/10.

No. 1 of article 6 of the IMI Code integrates into the concept of urban property "land for construction", understood as "...land situated within or outside an urban agglomeration 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 thus been declared in the acquisition title, with the exception of land in which the competent entities prohibit any of those operations...".

In turn, the notion of "urban property" is found in the section relating to the evaluation of real estate, since the purpose of the evaluation of real estate is to incorporate value into it, constituting a determining distinction factor – coefficient – for evaluation purposes.

In the evaluation of land for construction, the legislator intended that the evaluation methodology of urban properties in general be applied, taking into account all coefficients, namely the use coefficient provided for in article 41 of the IMI Code, further resulting from such legal requirement from no. 2 of article 45 of the IMI Code, by referring to the value of buildings authorized or planned on the same land for construction.

Thus, it cannot be doubted that we are facing "land for construction", more specifically urban construction land plots, with the areas of building implantation and construction perfectly defined and identified in urban property record cards, with the residential use of the building being evident.

Firstly, because the legislator does not refer to "property intended for housing", having opted for the notion of "residential use", an expression that is different and broader, whose meaning is to be found in the need to integrate other realities beyond those identified in article 6, no. 1, paragraph a) of the IMI Code.

In the interpretation of law, beyond the grammatical element, one must also consider the logical element, which requires, in particular, that consideration be given to the end sought by the legislator in drafting the norm (teleological element), namely to ascertain its nature and its temporal scope of relevance, and to pay attention to the place the interpreted norm occupies therein (systematic element), with only from the combination of all these interpretive elements arising the true meaning of that norm.

There is nothing more logical than, due to the need to correct the budgetary deficit, without neglecting the fairness of the tax system, "...to promote the expansion of the tax base, requiring an increased effort from taxpayers with higher incomes...".

Furthermore, well-founded reasons also with constitutional support justified the creation of the contested norm, namely respect for the principles of proportionality and capacity to contribute, which remains entirely valid and lawful, concluding as to the legality of the impugned assessments, which do not suffer from any error, of fact or of law.

For which reason the request for recognition of the right to compensatory interest should also fail, as the respective legal prerequisites are not met.

*

By arbitral dispatch of 8 April 2019, the meeting referred to in article 18 of the RJAT was dispensed with, determining that the proceedings continue with successive written arguments, within the period of ten days, as a starting point in the Claimant, which was notified to pronounce itself on the matter of exception invoked by the Respondent within the same period. Further, 7 June 2019 was set as the date for pronouncement of the final decision, warning the Claimant of payment of the subsequent arbitral fee.

The Claimant did not pronounce itself on the matter of exception and neither of the Parties submitted arguments.

II. DISMISSAL OF DEFECTS

1. The single arbitral tribunal was regularly constituted on 28 February 2019, in accordance with the provisions of paragraph c) of no. 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.

2. The parties have legal personality and capacity, are legitimate and are legally represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Order no. 112-A/2011, of 22 March.

3. With regard to the examination of the exception of incompetence of the arbitral tribunal ratione materiae, with respect to the examination of the legality of the impugned assessments on the basis of unconstitutionality of the standard of incidence, request formulated by the Claimant on a subsidiary basis:

a. Under the heading "Examination of Unconstitutionality", article 204 of the Constitution of the Portuguese Republic provides that "In cases submitted for judgment, courts may not apply norms that infringe the Constitution or the principles enshrined therein".

b. The said norm imposes on courts the duty to examine the normative acts eventually applicable to a concrete case, which is translated into the "guarantee of a judicial decision in accordance with the constitution". There is thus established a system of diffuse control of the constitutionality of norms, of the competence of courts (of all courts – "including arbitral tribunals", which have in article 209, no. 2 of the CRP explicit constitutional support).

c. On the other hand, the Supreme Administrative Court "has uniformly decided that acts that apply unconstitutional norms (...) are subject to the general regime of invalidity", and are accordingly voidable.

d. The exception of incompetence of the Arbitral Tribunal, invoked by the Respondent, is accordingly deemed not verified.

4. The proceedings do not accordingly suffer from defects that would invalidate it.

5. The cumulation of claims, even if relating to different acts, is admissible, pursuant to the provisions of no. 1 of article 3 of the RJAT, inasmuch as the request for arbitral pronouncement formulated, as well as its merits, depends on the examination of the same factual circumstances and the interpretation and application of the same principles or rules of law, in the concrete case, item 28.1 of the General Table of Stamp Tax.

III. GROUNDS

III.1 MATTER OF FACT

1.1 Proven Facts:

The factual matter relevant to the understanding and decision of the case, after critical examination of the documentary evidence submitted by the Claimant with the request for arbitral pronouncement (hereinafter ppa), not contested by the Respondent, is established as follows:

a. The Claimant was, on 31/12/2014 and on 31/12/2015, the owner of the urban property registered in the property matrix of the Municipal Union of ... and ..., ... and ..., municipality of Oeiras, district of Lisbon, under article ..., there described as "land for construction" (Docs. 1 and 8, attached to ppa);

b. In the evaluation of the identified property, on 19/10/2005 (file no. ...), the use coefficient (Ca) 1.00 was used (Doc. 8, attached to ppa);

c. The patrimonial tax value of the property, determined in 2013, is € 1,475,654.90 (Doc. 8, attached to ppa);

d. In 2015, the Claimant was notified to proceed with payment of the Stamp Tax assessment (Item 28.1 of the TGIS) no. 2015..., referring to the year 2014, issued on 20/03/2015 for the global amount of € 14,756.55 and payable through collection notes no. 2015..., of € 4,918.85, no. 2015..., of € 4,918.85 and no. 2015..., of € 4,918.85, in the months of April, July and November 2015, respectively (Docs. 1 to 4, attached to ppa);

e. In 2016, the Claimant was notified to proceed with payment of the Stamp Tax assessment (Item 28.1 of the TGIS) no. 2016..., issued on 05/04/2016 for the global amount of € 14,756.55, payable through collection notes no. 2016..., of € 4,918.85, no. 2016..., of € 4,918.85 and no. 2016..., of € 4,918.85, in the months of April, July and November 2016, respectively (Docs. 1 and 5 to 7, attached to ppa);

f. The assessments identified in the preceding points were effected under item 28.1 of the TGIS and resulted from the application of the rate of 1% to the patrimonial tax value of € 1,475,654.90 (Docs. 1 to 7, attached to ppa);

g. The Claimant proceeded to payment of the Stamp Tax assessment for the year 2014 on 15/10/2015, in the context of tax enforcement proceedings (PEF) nos. ...2015... and ...2015... (1st and 2nd installments) and on 28/01/2016, in PEF ...2015... (3rd Installment), having paid the assessment for 2015 on 21/06/2016, in PEF ...016... (1st installment), on 08/09/2016, in PEF ...2016... (2nd installment) and, voluntarily, on 3/11/2016, the 3rd installment (Doc. 9, attached to ppa);

h. On 30/01/2017, the Claimant submitted a request for ex officio review of the assessments now impugned (procedure no. ...2017...), the decision rejecting which was notified to it on 04/10/2018, through a letter from the Finance Directorate of Lisbon under the CTT registration no. RH ... PT (Doc. 1, attached to ppa);

i. It appears from the information forming the basis of the decision rejecting the request for ex officio review of the assessments under analysis, among other things, the following:

"(...)

(ii) the property met the requirements for objective incidence, because:

. it was land for construction intended for residential purposes (as recorded in the matrix on the said date) and thus fell within item 28.1 of the General Table of Stamp Tax, in the wording given to it by Law 83-C/2013, of 31/12;

. the patrimonial tax value on 31/12/2014 and on 31/12/2015 was 1,475,654.90€, that is, it was greater than 1,000,000.00€;

. the property was located in Portuguese territory (article 4, no. 6 of the Stamp Tax Code).

(...)".

1.2. Unproven Facts

It was not proven that in either 2014 or 2015 the property identified in the records had any approved project for construction or that construction for residential purposes was planned on it.

There are no other facts with relevance to the arbitral decision that have not been established as proven.

1.3. Grounds for the Proven and Unproven Factual Matter

Regarding the factual matter, the Tribunal does not have to pronounce itself on everything alleged by the parties; rather, it is its duty to select the facts that matter for the decision and to distinguish proven from unproven matter.

Thus, the facts pertinent to the judgment of the case are chosen and delimited according to their legal relevance, which is established in view of the various plausible solutions of the question(s) of Law (see former article 511, no. 1 of the CPC, corresponding to the current article 596, applicable ex vi article 29, no. 1, paragraph e) of the RJAT).

Thus, taking into account the documents indicated in each of the paragraphs of the evidence above, the facts set forth above are considered proven.

As to the unproven fact, it is based on the omission of any documentary support proving that the impugned Stamp Tax assessments were imposed on property with an approved project for the construction of buildings intended for residential purposes.

III.2 OF LAW

1. Questions to be Decided:

The Claimant impugns the Stamp Tax assessments relating to the years 2014 and 2015 and the identified land for construction, on the grounds of error as to the factual and legal prerequisites and, alternatively, due to unconstitutionality of the standard of incidence contained in item 28.1 of the TGIS, in the wording given to it by Law no. 83-C/2013, of 31 December, by violation of the constitutional principles of capacity to contribute and tax equality.

The following are therefore the questions to be decided in the present case:

a. Whether the property to which the impugned assessments relate is "land for construction whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the IMI Code", falling within the provision of the standard of incidence under analysis;

b. If in the affirmative, to examine the constitutional conformity of item 28.1 of the TGIS, in the wording of Law no. 83-C/2013, of 31 December, in the interpretation that the taxable fact to which it refers translates into a mere expectation that the construction to be erected is for residential purposes, by violation of the constitutional principles of equality and capacity to contribute, and;

c. Whether, in case of procedence of the request, the prerequisites for condemning the Respondent to the payment of the requested compensatory interest are met.

2. On the Merits of the Impugned Assessments

The addition of item 28 to the TGIS by Law no. 55-A/2012, of 29 October, introduced a special taxation on patrimony, by which "Property, usufruct or right of surface of urban properties whose patrimonial tax value contained in the matrix, pursuant to the Code of the Municipal Tax on Real Estate (IMI Code), is equal to or greater than (euro) 1,000,000 - on the patrimonial tax value used for IMI purposes" became subject to Stamp Tax, with properties "with residential use" taxed at the rate of 1% (28.1).

Not containing the Stamp Tax Code a definition of "properties with residential use", the referral contained in no. 2 of its article 67, added by the same Law, to the IMI Code, led jurisprudence to understand that such would be properties intended for housing, that is, "buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal purpose each of these uses."

By way of example, cite the Decision handed down by the Supreme Administrative Court (STA) on 23/04/2014, in case no. 0270/14, 2nd Section, according to whose summary "Not having the legislator defined the concept of '(urban) properties with residential use', and it resulting from article 6 of the IMI Code - subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Table - a clear distinction between 'residential urban properties' and 'land for construction', the latter cannot be considered, for purposes of the incidence of Stamp Tax (Item 28.1 of the TGIS, as amended by Law no. 55-A/2012, of 29 October), as urban properties with residential use."

The new wording given to item 28.1 of the TGIS by article 194 of Law no. 83-C/2013, of 31 December, which approved the State Budget for 2014, made it unequivocal that, going forward, that standard of incidence would comprise, in addition to residential urban properties (intended for housing), "land for construction whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the IMI Code".

The question now centers on what should be understood by "land for construction whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the IMI Code", taking into account the classification of properties contained in article 6 of this Code, under the heading "Types of Urban Properties":

"Article 6 - Types of Urban Properties

1 - Urban properties are divided into:

a) Residential;

b) Commercial, industrial or for services;

c) Land for construction;

d) Other.

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

3 - Land for construction is considered as land situated within or outside an urban agglomeration 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 thus been declared in the acquisition title, with the exception of land in which the competent entities prohibit any of those operations, namely those located in green areas, protected areas or which, in accordance with municipal territorial planning plans, are allocated to public spaces, infrastructure or equipment.

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

The Respondent holds that, in order for land for construction to come within the normative provision of item 28.1 of the TGIS, it will be sufficient that it be recorded and described in the property matrix as land for construction with the location and use coefficients relating to housing, assigned at the time of its evaluation, provided that such evaluation resulted in a patrimonial tax value equal to or greater than € 1,000,000.00.

The Claimant does not contest the patrimonial tax value attributed to the property, but only its actual destination, cumulative requirements of the incidence of the Stamp Tax of item 28.1 of the TGIS.

In fact, not all land for construction whose patrimonial tax value falls within the limit defined by item 28.1 of the TGIS is intended to be built for housing purposes and, even those that are registered in the property matrix under that classification may cease to meet the conditions for such, as is well clarified by António Santos Rocha and Eduardo José Martins Brás, in annotation to no. 3 of article 6 of the IMI Code, when they write that "Real estate already described in the property matrix as land for construction, with respect to which there is lapse of the subdivision, license or authorization of construction and in which no construction operation has even been initiated, should, by way of said institute of lapse, recover its previous nature (...)"

And, even regarding land for construction registered in the property matrix on the basis of declarations presented by taxpayers, the aforementioned Authors consider that, such declarations not having constitutive effect, there is "the necessity of the existence of identification of the document authorizing construction or subdivision."

In fact, "When item 28 refers to construction for housing authorized or planned, it does not refer only to the description of the property in the matrix since authorization to construct a dwelling does not have to be taken to the matrix. When registering a property in the matrix, its owner may indicate that he intends to construct housing on it, but the authorization to do so, or to construct something different depends not on tax rules, but on urban planning rules."

From the foregoing, it is clear that only land for construction with respect to which there is, as of the date the taxable fact arises, an actual potential for building will fall within the provision of the norm of item 28.1 of the TGIS.

In the situation under analysis, the Claimant invokes, as grounds for the error as to the factual and legal prerequisites on which the impugned assessments are based, that the property in question had no, in the years to which the tax relates, any "construction, authorized or planned" for "residential purposes", as required by item 28.1 of the TGIS.

Not having the AT presented to the arbitral tribunal any proof of the existence of such authorization or properly approved construction project by the competent Municipal Council, it is inevitable to conclude that it cannot be considered proven that the land in question has "construction, authorized or planned, for residential purposes", in accordance with the IMI Code.

Therefore, it must be concluded that the assessed assessments suffer from the defect of violation of law, due to errors in the factual and legal prerequisites, and cannot be maintained in the legal order.

3. Questions of Knowledge Prejudiced

In the judgment, the judge must pronounce himself on all questions that he should examine, refraining from pronouncing himself on questions he should not know about (final segment of no. 1 of article 125 of the CPPT), and the questions over which the court's powers of cognition fall are, in accordance with no. 2 of article 608 of the CPC, applicable subsidiarily to the tax arbitral process, by referral of article 29, no. 1, paragraph e) of the RJAT, "the questions that the parties have submitted to his examination, except for those whose decision is prejudiced by the solution given to others (...)".

In light of the solution given to the question relating to the concept of "land for construction whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the IMI Code", the knowledge of the remaining questions raised by the Parties becomes prejudiced, in particular that of the invoked unconstitutionality of the standard of incidence contained in Item 28.1 of the TGIS, as it is not susceptible to the interpretation that, in this case, was made by the AT.

4. On the Request for Compensatory Interest

The tax arbitral process was devised as an alternative means to the process of judicial impugnation (see the legislative authorization granted to the Government by article 124, no. 2 (first part) of Law no. 3-B/2010, of 28 April, which approved the State Budget for 2010, and it should be understood that the competence of arbitral tribunals functioning under the auspices of CAAD comprises the same powers that, in the process of judicial impugnation, are attributed to tax tribunals, such as the power to examine the right to compensatory interest.

Paragraph b) of no. 1 of article 24 of the RJAT establishes that the arbitral decision on the merits of the pretension from which no appeal or impugnation is available binds the tax administration from the end of the period provided for appeal or impugnation, and this, in the precise terms of the procedence of the arbitral decision in favor of the taxpayer and until the end of the period provided for the spontaneous execution of the sentences of the tax judicial tribunals, must "restore the situation that would exist if the tax act subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose".

Equally, article 100 of the LGT, applicable to the tax arbitral process by force of the provisions of paragraph a) of no. 1 of article 29 of the RJAT, establishes that "The tax administration is obliged, in case of total or partial procedence of complaints or administrative appeals, or of judicial proceedings in favor of the taxpayer, to the immediate and full restoration of the situation that would exist if the illegality had not been committed, including the payment of compensatory interest, in accordance with the terms and conditions provided by law."

The regime for compensatory interest is set out in article 43 of the General Tax Law (LGT), in accordance with no. 1 of which, "Compensatory interest is due when it is determined, in gracious complaint or judicial impugnation, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than what is legally due."

Although in the situation under analysis the impugned assessments suffer from the defect of violation of law due to error by the Tax Administration regarding the factual and legal prerequisites on which their issuance was based, the Claimant did not submit a gracious complaint or judicial impugnation, but rather a request for ex officio review, on 30/01/2017, that is, within the period of four years after the date of the assessments, made on 20/03/2015 and on 05/04/2016, respectively.

In these cases, the right to compensatory interest does not have the same scope as that arising from the provisions of no. 1 of article 43 of the LGT, suffering the restriction referred to in paragraph c) of no. 3 of the cited article, since, "When the review of the tax act by initiative of the taxpayer takes place more than one year after his request, unless the delay is not attributable to the tax administration."

Thus, the request for ex officio review of the assessments now impugned having been formulated before the Tax Administration on 30/01/2017, the Claimant may only be recognized the right to compensatory interest from the end of one year after that date, since "The legislator considers that the period of one year is the reasonable period for the Administration to decide the request for review and execute the respective decision, when favorable to the taxpayer, deviating from full compensation for damages from the moment they arose in the taxpayer's patrimonial sphere."

IV. DECISION:

On the basis of the factual and legal grounds set forth above and, pursuant to article 2 of the RJAT, it is decided, judging the present request for arbitral pronouncement well-founded:

a. To declare unlawful the Stamp Tax assessments (item 28.1 of the TGIS) no. 2015..., relating to the year 2014, in the amount of € 14,756.55 and no. 2016..., relating to the year 2015, in the amount of € 14,756.55, as well as the decision rejecting the request for ex officio review that had them as its object;

b. To condemn the Respondent to the restitution of the amounts unduly paid by the Claimant;

c. To condemn the Respondent to the payment of compensatory interest on the amounts of € 14,756.55 and € 14,756.55, to be calculated in accordance with article 43, no. 3, paragraph c) of the LGT.

VALUE OF THE CASE: In accordance with the provisions of article 306, nos. 1 and 2 of the CPC, 97-A, no. 1, paragraph a) of the CPPT and 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned the value of € 29,513.10 (twenty-nine thousand, five hundred and thirteen euros and ten cents).

COSTS: Calculated in accordance with article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, in the amount of € 1,530.00 (one thousand five hundred and thirty euros), at the expense of the Tax and Customs Authority.

Let it be notified.

Lisbon, 3 June 2019.

The Arbitrator,

Mariana Vargas

Document prepared by computer, in accordance with no. 5 of article 131 of the CPC, applicable by referral of paragraph e) of no. 1 of article 29 of DL 10/2011, of 20 January.

The drafting of this decision is governed by the 1990 Spelling Agreement.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Verba 28.1 TGIS) applicable to land classified as 'construction land' solely based on its property matrix registration?
No, Stamp Tax under Verba 28.1 TGIS is not automatically applicable based solely on property matrix registration as 'construction land.' The Claimant successfully argued that mere classification as 'terreno para construção' in property records is insufficient. Item 28.1 requires that construction be 'authorized or planned' for residential purposes, necessitating actual administrative procedures, valid building licenses or authorizations, and approved residential projects. Without these concrete elements demonstrating imminent residential construction, the tax cannot be legitimately assessed, even if the land carries the construction land designation in official registries.
What conditions must be met for construction land to be subject to Stamp Tax under Verba 28.1 of the General Stamp Tax Table?
For construction land to be subject to Stamp Tax under Verba 28.1 TGIS, several cumulative conditions must be satisfied: (1) the land must be classified as 'terreno para construção' (construction land); (2) there must be construction that is either authorized or planned; (3) this construction must be specifically intended for residential purposes; and (4) there must exist a complete administrative process including valid building licenses or authorizations and approved architectural projects. The mere potential for construction or zoning designation is insufficient—concrete administrative acts demonstrating imminent residential development are required. Additionally, the property's patrimonial tax value must meet applicable thresholds established in the TGIS provisions.
Does a property's inclusion in a Municipal Master Plan (PDM) automatically trigger Stamp Tax liability under Verba 28?
No, a property's inclusion in a Municipal Master Plan (PDM - Plano Director Municipal) does not automatically trigger Stamp Tax liability under Verba 28 TGIS. As the Claimant correctly argued, location within an area designated for construction in the PDM does not grant automatic building rights or constitute 'authorized or planned construction.' Landowners must still obtain necessary administrative authorizations, building permits, and project approvals. The PDM establishes zoning and land use possibilities but does not replace the requirement for specific construction licenses. Therefore, PDM designation alone, without concrete administrative acts authorizing residential construction, is insufficient to establish Stamp Tax liability under Item 28.1.
Can taxpayers challenge Stamp Tax assessments on construction land through CAAD arbitration and request a refund with compensatory interest?
Yes, taxpayers can challenge Stamp Tax assessments on construction land through CAAD (Centro de Arbitragem Administrativa) arbitration proceedings. The Claimant in this case successfully invoked CAAD jurisdiction under Decree-Law 10/2011 (RJAT - Legal Framework for Tax Arbitration) to contest assessments totaling €29,513.10. Taxpayers may request not only annulment of unlawful assessments but also restitution of amounts unduly paid plus compensatory interest at the legal rate (juros indemnizatórios). However, CAAD's jurisdiction has limitations: arbitral tribunals lack competence to declare the material unconstitutionality of legislative acts, as the Tax Authority correctly noted regarding Article 2(1) RJAT. Constitutional challenges must be addressed through ordinary courts with subsequent referral to the Constitutional Court.
What is the minimum patrimonial tax value threshold for construction land to fall under Verba 28.1 of the TGIS?
While the decision text does not explicitly state the minimum patrimonial tax value threshold, Verba 28.1 TGIS historically applied to urban properties and construction land with a patrimonial tax value (valor patrimonial tributário - VPT) exceeding €1,000,000. This threshold was established by Law 55-A/2012 when Item 28 was introduced to the TGIS as a special patrimony tax targeting high-value real estate. The tax rate is 1% annually on the portion of VPT exceeding this threshold. However, as this case demonstrates, meeting the value threshold alone is insufficient—the construction land must also satisfy the substantive requirements of having authorized or planned residential construction with proper administrative approvals and licenses to fall within the scope of Verba 28.1 taxation.