Process: 65/2015-T

Date: May 25, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Case 65/2015-T addresses a critical Stamp Tax dispute concerning the application of items 28 and 28.1 of the Portuguese General Stamp Tax Table (TGIS) to properties under vertical ownership. The claimant, A... SA, challenged two Stamp Tax assessments totaling €28,768.50 for 2013, arguing the Tax Authority unlawfully aggregated the tax property values (VPT) of multiple residential units within buildings operating under the vertical property regime. The core legal issue centers on whether the €1,000,000 threshold for Stamp Tax liability should apply individually to each autonomous unit or collectively to all units owned by the same entity within a building. The claimant owned 38 residential units at one location and 21 units at another, with individual VPTs ranging from approximately €22,420 to €109,420—none exceeding the €1,000,000 threshold individually. The Tax Authority, however, summed the VPTs of units within each building, triggering the tax obligation. The claimant contended this interpretation violated the taxable event requirements of item 28.1 TGIS and breached principles of legality, fiscal equality, proportionality, and justice. Supporting their position, the claimant referenced two prior favorable CAAD arbitral decisions concerning the same properties. The arbitral tribunal was properly constituted following RJAT procedures, with both parties waiving the preliminary hearing given the existence of precedential decisions on identical issues, proceeding directly to decision without oral submissions.

Full Decision

ARBITRAL DECISION

Parties

Claimant – A… SA., NIPC PT …, with registered address at Rua …, nº …, … ....

Respondent - Tax Authority and Customs Authority (AT).

I. REPORT

a) On 04-02-2015, the Claimant filed with CAAD a request seeking, pursuant to the Legal Framework for Arbitration in Tax Matters (RJAT), the establishment of a sole arbitral tribunal (TAS).

b) The request is signed by an attorney representing the Claimant.

THE REQUEST

c) The Claimant seeks the annulment of two Stamp Tax (IS) assessments from item 28 of the General Table of Stamp Tax (TGIS), made in 2014 (assessment date of 18 March 2014) for the year 2013, on the grounds that the AT rejected administrative review procedures that it had timely filed, seeking the total annulment of the assessments of this tax in the total amount of, respectively, € 12,208.00 and € 16,560.50, that is, a total collection of € 28,768.50.

d) The two assessments relate to matrix articles (in the collection notices the floors are individualized as autonomous matrix articles, in addition to the separation of their respective tax property values used for the purpose of Municipal Property Tax (IMI) assessment, according to what is stated in the property register) corresponding to floors or divisions capable of independent use of urban properties under the vertical property regime, with residential use, located:

· At Avenida … …/…/…, nº …, ..., parish of the Union of Parishes of ... and ..., with the following "property identification" according to the collection notices and "property description" according to the property register: … ...-U-…-AP… with TPV of 28,900.00 euros; … ...-U-…-AP… with TPV of 27,270.00 euros; … ...-U-…-AP… with TPV of 27,270.00 euros; … ...-U-…-AP… with TPV of 28,770.00 euros; … ...-U-…-AP… with TPV of 46,970.00 euros; … ...-U-…-AP… with TPV of 33,870.00 euros; … ...-U-…-AP… with TPV of 28,770.00 euros; … ...-U-…-AP… with TPV of 46,970.00 euros; … ...-U-…-AP… with TPV of 33,870.00 euros; … ...-U-…-AP… with TPV of 28,770.00 euros; … ...-U-…-AP… with TPV of 46,970.00 euros; … ...-U-…-AP… with TPV of 25,750.00 euros; … ...-U-…-AP… with TPV of 28,890.00 euros; … ...-U-…-AP… with TPV of 28,130.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 27,940.00 euros; … ...-U-…-AP… with TPV of 27,940.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 28,130.00 euros; … ...-U-…-AP… with TPV of 27,940.00 euros; … ...-U-…-AP… with TPV of 27,390.00 euros; … ...-U-…-AP… with TPV of 27,390.00 euros; … ...-U-…-AP… with TPV of 28,2130.00 euros; … ...-U-…-AP… with TPV of 27,940.00 euros; …...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 28,130.00 euros; … ...-U-…-AP… with TPV of 40,520.00 euros; … ...-U-…-AP… with TPV of 22,420.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; and … ...-U-…-AP… with TPV of 39,800.00 euros;

· And at Rua … nº …-…-…-…-…, nº …/…, ..., Parish of the Union of Parishes of ..., with the following "property identification" according to the collection notices and "property description" according to the property register: … ...-U-…-…-… with TPV of 108,020.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 87,100.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 71,060.00 euros; … ...-U-…-…-… with TPV of 109,420.00 euros; … ...-U…-…-… with TPV of 66,260.00 euros; … ...-U-…-…-… with TPV of 66,170.00 euros; … ...-U-…-…-… with TPV of 86,850.00 euros; … ...-U-…-…-… with TPV of 68,710.00 euros; … ...-U-…-…-… with TPV of 66,030.00 euros; … ...-U-…-…-… with TPV of 66,030.00 euros; … ...-U-…-…-… with TPV of 74,030.00 euros; … ...-U-…-…-… with TPV of 96,640.00 euros; … ...-U-…-…-… with TPV of 92,950.00 euros; … ...-U-…-…-… with TPV of 80,360.00 euros; … ...-U-…-…-… with TPV of 93,190.00 euros, and … ...-U-…-…-… with TPV of 94,330.00 euros.

e) It further seeks the condemnation of the AT to reimburse the amounts paid and to pay the compensatory interest due for payment of the first installment of the assessments in question, accrued until full restitution.

f) It submits, in summary, that the assessment acts are unlawful due to violation of the taxable event norm of item 28.1 of the TGIS, insofar as the AT added the tax property values of the floors under vertical ownership and none of them individually has a TPV equal to or greater than 1,000,000.00 euros, arguing that it should be the TPV of each floor and not their sum that is relevant for tax purposes.

g) It further argues that the implicit reading of the norm that permitted the assessments "violates the principles of legality and fiscal equality … as well as the prevalence of material truth over legal-formal truth and also the principles of justice, equality and fiscal proportionality".

h) In support of its understanding, it invokes two decisions adopted at CAAD in other identical proceedings relating to the same real estate properties.

OF THE SOLE ARBITRAL TRIBUNAL (TAS)

i) The request for establishment of the TAS was accepted by the President of CAAD and automatically notified to the AT on 06.02.2015.

j) By the Deontological Council of CAAD, the signatory of this decision was appointed as arbitrator, and the parties were notified thereof on 26.03.2015. The parties did not express a willingness to refuse the appointment, pursuant to the combined terms of Article 11, nos. 1, items a) and b) of the RJAT and Articles 6 and 7 of the Code of Ethics.

k) Whereby the Sole Arbitral Tribunal (TAS) has been, since 13.04.2015, duly established to hear and decide on the subject matter of this dispute (Articles 2, no. 1, item a) and 30, no. 1, of the RJAT).

l) All these acts are documented in the notice of establishment of the Sole Arbitral Tribunal dated 13.04.2015, which is hereby incorporated by reference.

m) On 13.04.2015 the AT was notified in accordance with the terms and for the purposes of Article 17-1 of the RJAT. It responded on 13.05.2015.

n) In its response, the AT argued against holding the meeting of parties provided for in Article 18 of the RJAT and against submissions. Since this proceeding raises issues entirely identical to those already raised in many other proceedings already decided at CAAD, the TAS by order of 13.05.2015 dispensed with scheduling the meeting referred to in Article 18 of the RJAT, unless the Claimant objected to this procedural course.

o) Whereby, both parties having waived, expressly or tacitly, the holding of the meeting of parties provided for in Article 18 of the RJAT and the presentation of submissions, these procedural acts were not held.

PROCEDURAL REQUIREMENTS

p) Legitimacy, capacity and representation - The parties have legal personality, procedural capacity, are legitimate and are represented (Articles 4 and 10, no. 2, of the RJAT and Article 1 of Order no. 112-A/2011 of 22 March).

q) Principle of contradiction - The AT was notified as indicated in item m). All procedural documents and all documents joined to the proceeding were made available to the respective counterparty in the CAAD Procedural Management System.

r) Dilatory exceptions - The arbitral procedure does not suffer from nullities and the request for arbitral pronouncement is timely as it was filed within the period prescribed in item a) of no. 1 of Article 10 of the RJAT. In fact:

The Claimant filed the present request for pronouncement with CAAD on 04-02-2015 and the notices of rejection decisions of the administrative review procedures both bear the date of 07.11.2014 (as per Documents nos. 9 and 10 attached to the request for pronouncement).

SUMMARY OF THE CLAIMANT'S POSITION

Regarding the possible illegality of the assessment acts due to non-compliance with the taxable event norm of item 28.1 of the TGIS

s) The Claimant, in summary, argues that the assessment acts are unlawful due to violation of the taxable event norm of item 28.1 of the TGIS insofar as the AT added the tax property values of the floors under vertical ownership and none of them individually has a TPV equal to or greater than 1,000,000.00 euros, arguing that it should be the TPV of each floor and not their sum that is relevant for tax purposes.

Regarding the possible unconstitutionality of the norm contained in item 28.1 of the TGIS, in the implicit reading carried into practice by the AT

t) It further contends that the implicit reading of the norm that permitted the assessment "violates the principles of legality and fiscal equality … as well as the prevalence of material truth over legal-formal truth and also the principles of justice, equality and fiscal proportionality".

SUMMARY OF THE RESPONDENT'S POSITION

Regarding the possible illegality of the assessment acts due to non-compliance with the taxable event norm of item 28.1 of the TGIS.

u) The AT considers that "The taxable event of the Stamp Tax of item 28.1, consisting in the ownership of urban properties whose tax property value stated in the register, in accordance with the CIMI, is equal to or greater than 1,000,000.00 euros, the tax property value relevant for purposes of tax incidence is, thus, the total tax property value of the urban property and not the tax property value of each of the parts that compose it, even when capable of independent use".

v) "The principle that each property corresponds to only one matrix article is only excepted … with respect to mixed properties in which, in accordance with the referred Article 84, each of the distinct parts is registered in the matrix in the part that corresponds to it and with respect to properties held under the horizontal property regime in which, despite the fact that, in accordance with Article 2, no. 4, of the C.I.M.I., each autonomous unit is considered as constituting a property, each building under the horizontal property regime corresponds to only one matrix registration".

w) The AT concludes: "The tax property value equal to or greater than € 1,000,000.00 on which the application of this legal norm depends is, as expressly results from its literal text, the tax property value of each property and not of its distinct parts, even though capable of independent economic use". "The unity of the urban property under vertical ownership composed of several floors or divisions is not, however, affected by the fact that all or part of these floors or divisions are capable of independent economic use, nor by the property of the real estate asset being of undivided inheritance".

x) It concludes its reasoning by stating: "The tax act in question did not thus violate any legal or constitutional provision, and should thus be maintained".

Regarding the possible unconstitutionality of the norm contained in item 28.1 of the TGIS, in the implicit reading carried into practice by the AT and in the reading advocated by the Claimant

y) The AT contends that the implicit reading of the law carried out in the assessment acts does not violate any constitutional principle.

z) It counters that "it is unconstitutional, as offensive to the principle of tax legality, the interpretation of item 28.1 of the General Table, in the sense that the tax property value on which its incidence depends is determined globally and not floor by floor or floor or division by division".

aa) Advocating for the legality of the tax acts because they constitute a correct application of the law to the facts, both in terms of their conformity with ordinary law and in terms of their conformity with constitutional principles.

II - ISSUES FOR THE TRIBUNAL TO RESOLVE

The AT states that "… the tax property value relevant for purposes of tax incidence is, thus, the total tax property value of the urban property".

However, the taxable event norm does not refer, according to its literal element, to the "total tax property value of urban property", but only and solely to the TPV "used for purposes of IMI".

And we add: this TPV must be determined in the same manner as it is in the operations of IMI assessment, by way of the application of the rules of the CIMI to the operations of assessment of the IS of item 28 of the TGIS.

Let us compare the literal text of the property registers and the content of the collection notices. As for the various floors that make up the property located at Avenida … …/…/…, nº …, ..., parish of the Union of Parishes of ... and ..., the Total Tax Property Value is 1,614,990.00 euros. However, this is not the value that was used as the taxable basis. The value that appears in the collection notices is a legal-factual innovation: "Tax Property Value of property – total subject to tax of 1,220,800.00 euros", which is beyond the "total tax property value" which corresponds to the sum of the TPV of all floors (regardless of their use) and the "tax property value" of each floor, as is considered in the context of IMI assessment operations.

The same occurs with the floors that make up the property located at Rua … nº …-…-…-…-…, nº …/…, ..., Parish of the Union of Parishes of .... The "total tax property value" (sum of the TPV of the floors) is 2,003,700.00 euros – property register. However, what appears in the collection notices is "Tax Property Value of property – total subject to tax of 1,656,050.00 euros".

It is in this "innovation", this "adaptation" of the IS assessment procedure, compared to what the AT uses in the context of IMI, that the fundamental issue to be decided resides, for the reason that the taxable event norm, in its literality, only speaks of "tax property value stated in the register" and subsequently specifies "tax property value used for purposes of IMI".

In the context of IMI, the taxable basis of floors under horizontal property ownership and the taxable basis of floors under vertical property ownership is considered in an identical manner, so it does not appear to us that it is the law that introduced the Stamp Tax that is the subject of this proceeding, which has altered or intends to alter this factual and legal reality (a new formula for determining the taxable basis).

On the fundamental issue, specifically, CAAD has already ruled in various decisions in which the central issue is the same, that is, the scope of the provision of the taxable event norm of items 28 and 28-1 of the TGIS is discussed.

The limit of interpretation is the letter, the text of the norm. After that comes the task of interconnection and valuation that escapes the literal domain.

Starting from the principle that every norm has a provision (and a statute), the issue that is raised here is that of determining, by delimiting, whether the taxable event norm, as it is drafted – in its provision - ownership of urban properties … with residential use … whose tax property value stated in the register, in accordance with the CIMI, is equal to or greater than 1,000,000.00 euros – on the tax property value used for purposes of IMI, permits or does not permit the understanding that as for properties "with residential use" under vertical ownership, with floors or divisions capable of independent use, held by an entity, the TPV on which the tax rate will apply, should be the one resulting from the sum of the TPV of the floors or divisions or should the individual TPV of each floor or division capable of independent use be considered, in the same manner as occurs with floors under the horizontal property regime and as occurs in the IMI assessment procedure.

What is at issue here is the adoption of an appropriate reading of the scope of the provision of the taxable event norm of items 28 and 28.1 of the TGIS, in light of what no. 7 of Article 23 of the CIS states regarding the determination of taxable matter and the subsequent tax assessment operation:

"In the case of tax due for situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax Authority and Customs Authority, applying, with necessary adaptations, the rules contained in the CIMI."

The AT, albeit implicitly, seems to show that the legal support it used to proceed with the addition of the TPV – thus obtaining a new taxable basis that is not used in IMI assessment - of the floors of the urban property in question, would have been Article 23-7 of the CIS.

As we have already stated in other decisions, regarding the interpretation of tax norms there is a rule, although it may be considered residual, very specific, which is contained in no. 3 of Article 11 of the LGT: "persisting doubt about the meaning of the taxable event norms to be applied, the economic substance of the tax facts should be considered". This is a criterion to be used in the context of interpretation hermeneutics of norms.

We do not defend an "economic interpretation" of tax law norms, nor is it a form of filling gaps which, in this case, is not apparent.

But it seems to us that here too recourse may be made to the analysis of the "economic substance of the tax facts" to adequately carry out the "necessary adaptations of the rules contained in the CIMI", in order to resolve the issue that arises.

We are thus, only and solely, within the scope of the activity of interpretation and application of norms, that is, in the task of delimiting the legal-factual situations that should be considered as included in the provision of the taxable event norm of this new tax and which results from the combination of items 28 and 28-1 of the TGIS and in this case what should be considered acceptable, taking into account the unity of the legal system, in terms of the "necessary adaptations of the rules contained in the CIMI", following the command of no. 7 of Article 23 of the CIS.

The possible non-compliance of the provision of the taxable event norm (in the dimension of determination of the taxable basis), with the constitutional text, (in the implicit reading carried into practice in the assessment of the tax in question here or in the reading advocated by the Respondent) will only arise if the interpreter reaches the conclusion that a certain and unequivocal reading of the law – correctly applied to a specific case - strikes one or more constitutional principles with such intensity that the legislative option adopted could not have been so, while still taking into account that the AT cannot, based on possible unconstitutionalities of norms not declared by the courts and not confirmed by the Constitutional Court, cease to apply the law, in the sense it deems most appropriate.

The central issue to which the TAS must respond is the following:

  1. Items 28 and 28-1 of the TGIS as taxable event norms, as they are drafted – in their provision - (ownership of urban properties … with residential use … whose tax property value stated in the register, in accordance with the CIMI, is equal to or greater than 1,000,000.00 euros – on the tax property value used for purposes of IMI), permit or do not permit the understanding that as for properties "with residential use" under vertical ownership, with floors or divisions capable of independent use, held by an entity, the TPV on which the tax rate will apply, should be that of the sum of the TPV of the floors or should the individual TPV of each floor or division capable of independent use be considered, in the same manner as occurs with floors under the horizontal property regime and in IMI assessment operations?

The answer given to this issue will result in the granting or rejection of the request, and, if the answer is in a sense not in accordance with what was duly defended by the AT, it will not be necessary for the TAS to pronounce on the other grounds invoked in the request for pronouncement or in the response, with possible impact on the validity of the assessment acts in question.

III. ESTABLISHED AND UNESTABLISHED FACTUAL MATTERS AND GROUNDS

For the purposes of the decision to be adopted, the following facts are considered established, with an indication of the respective documents (proof by documents), as grounds.

Established facts

  1. The Claimant is listed as the holder of full property rights to two urban properties under vertical ownership, located:

a) At Avenida … …/…/…, nº …, ..., parish of the Union of Parishes of ... and ..., with the following "property identification" according to the collection notices and "property description" according to the property register: … ...-U-…-AP… with TPV of 28,900.00 euros; … ...-U-…-AP… with TPV of 27,270.00 euros; … ...-U-…-AP… with TPV of 27,270.00 euros; … ...-U-…-AP… with TPV of 28,770.00 euros; … ...-U-…-AP… with TPV of 46,970.00 euros; … ...-U-…-AP… with TPV of 33,870.00 euros; … ...-U-…-AP… with TPV of 28,770.00 euros; … ...-U-…-AP… with TPV of 46,970.00 euros; … ...-U-…-AP… with TPV of 33,870.00 euros; … ...-U-…-AP… with TPV of 28,770.00 euros; … ...-U-…-AP… with TPV of 46,970.00 euros; … ...-U-…-AP… with TPV of 25,750.00 euros; … ...-U-…-AP… with TPV of 28,890.00 euros; … ...-U-…-AP… with TPV of 28,130.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 27,940.00 euros; … ...-U-…-AP… with TPV of 27,940.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 28,130.00 euros; … ...-U-…-AP… with TPV of 27,940.00 euros; … ...-U-…-AP… with TPV of 27,390.00 euros; … ...-U-…-AP… with TPV of 27,390.00 euros; … ...-U-…-AP… with TPV of 28,2130.00 euros; … ...-U-…-AP… with TPV of 27,940.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 27,860.00 euros; … ...-U-…-AP… with TPV of 28,130.00 euros; … ...-U-…-AP… with TPV of 40,520.00 euros; … ...-U-…-AP… with TPV of 22,420.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros; … ...-U-…-AP… with TPV of 39,800.00 euros;

b) And at Rua … nº …-…-…-…-…, nº …/…, ..., Parish of the Union of Parishes of ..., with the following "property identification" according to the collection notices and "property description" according to the property register: … ...-U-…-…-… with TPV of 108,020.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 87,100.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 65,780.00 euros; … ...-U-…-…-… with TPV of 71,060.00 euros; … ...-U-…-…-… with TPV of 109,420.00 euros; … ...-U…-…-… with TPV of 66,260.00 euros; … ...-U-…-…-… with TPV of 66,170.00 euros; … ...-U-…-…-… with TPV of 86,850.00 euros; … ...-U-…-…-… with TPV of 68,710.00 euros; … ...-U-…-…-… with TPV of 66,030.00 euros; … ...-U-…-…-… with TPV of 66,030.00 euros; … ...-U-…-…-… with TPV of 74,030.00 euros; … ...-U-…-…-… with TPV of 96,640.00 euros; … ...-U-…-…-… with TPV of 92,950.00 euros; … ...-U-…-…-… with TPV of 80,360.00 euros; … ...-U-…-…-… with TPV of 93,190.00 euros, and … ...-U-…-…-… with TPV of 94,330.00 euros - In accordance with property registers attached as documents 1 and 2 and in accordance with documents 3 to 4, 59 collection notices, attached as annex to the request for pronouncement.

  1. The Claimant was notified, on an undetermined date in 2014, of the IS assessment made in 2014 (assessment date of 18 March 2014) for the year 2013 – Articles 5 to 9 of the request for pronouncement (agreement of the parties) and in accordance with documents 3 to 4, 59 collection notices, attached as annex to the request for pronouncement.

  2. The Claimant filed with the AT, on 21.08.2014, two administrative review procedures seeking the total annulment of the tax assessments in the total amount of, respectively, € 12,208.00 and € 16,560.50, that is, a total collection of € 28,768.50, which were rejected and the rejection decisions were notified on 07.11.2014 – in accordance with Articles 15 to 19 (agreement of the parties) and documents nos. 7 to 10 attached to the request for pronouncement.

  3. From the collection notices it is apparent that the taxable event norm applied was item 28.1 of the TGIS - in accordance with documents 3 to 4, 59 collection notices, attached as annex to the request for pronouncement.

  4. In the urban property registers of the real estate referred to in 1) it is stated: "Total tax property value: € 1,614,990.00" as to that indicated in the first place and "Total tax property value: € 2,003,700.00" as to that indicated in the second place – in accordance with urban property registers attached by the Claimant with the request for pronouncement as documents nos. 1 and 2.

  5. In all collection notices it is stated: "Tax Property Value of property-total subject to tax: 1,220,800.00" euros, as to the property indicated in the first place and "Tax Property Value of property-total subject to tax: 1,656,050.00" euros, as to that indicated in the second place, which corresponds to the sum of the TPV of the floors with residential use of the real estate identified in 1), excluding the TPV of the floors with other uses – in accordance with documents 3 to 4, 59 collection notices, attached as annex to the request for pronouncement.

  6. The Claimant paid the first installments of the assessments indicated in 2) - In accordance with Article 78 of the request for pronouncement and non-contestation specified by the AT (agreement of the parties).

  7. The Claimant filed the present request for pronouncement with CAAD on 04-02-2015 - Registration in the CAAD SGP.

Unestablished facts

There is no other alleged factuality that is relevant to the correct resolution of the procedural dispute.

The established matter results from the documents attached by the Claimant, whose authenticity in relation to their originals, contents and probative valuations, did not merit disagreement from the AT. The AT did not attach the PA, precisely because its presentation would prove to be redundant (and, therefore, would be a useless act) in light of the documents attached by the taxpayer, in that these do not suffer, in the implicit reading that the respondent made of them, any formal or substantial adulteration. Hence, some facts were considered established by implicit agreement of the AT, as noted above.

IV. APPRECIATION OF THE ISSUES FOR THE TAS TO RESOLVE

The subjection to Stamp Tax of properties with residential use resulted from the addition of items 28, 28-1 and 28-2 of the General Table of Stamp Tax, carried out by Article 4 of Law 55-A/2012, of 29/10, which typified the following taxable events:

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

28-1 – For property with residential use- 1%;

28-2 – For property, when the taxpayers that are not individuals are residents in a country, territory or region subject to a clearly more favorable tax regime, as stated in the list approved by order of the Minister of Finance – 7.5%."

With relevance to the case are:

• No. 7 of Article 23 of the CIS regarding the assessment of the tax: "In the case of tax due for situations provided for in item no. 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax Authority and Customs Authority, applying, with necessary adaptations, the rules contained in the CIMI."

• No. 4 of Article 2 of the CIMI: "For purposes of this tax, each autonomous unit, under the horizontal property regime, is deemed to constitute a property."

• No. 3 of Article 12 of the CIMI: "Each floor or part of property capable of independent use is considered separately in the matrix registration which also determines its respective tax property value".

It seems to us that the answer to the issue raised in this request for pronouncement has to do with the implicit reading made by the AT of no. 7 of Article 23 of the CIS.

The AT will have considered, in order to proceed with the addition of the tax property values (TPV) of the floors or divisions/parts of urban property, in order to determine whether the minimum taxation threshold of 1,000,000.00 euros is reached, for each urban property under vertical ownership, that floors or divisions capable of independent use are not by formal legal definition considered urban properties. Which is undisputable.

And it will have considered that this addition of TPV is required because the law states that "necessary adaptations" of the "rules of the CIMI" must be made (no. 7 of Article 23 of the CIS).

Although items 28 and 28.1 speak of "urban properties" and "for each property" and no. 7 of Article 23 of the CIS refers to "the tax is assessed annually, in relation to each urban property", what seems relevant to us, in terms of determination of eligible taxable matter and tax assessment, is that "… necessary adaptations of the rules of the CIMI" are applied, as referred to in no. 7 of Article 23 of the CIS. But, obviously, "adaptations" insofar as they are necessary.

What happened - as regards urban properties with residential use, under vertical ownership, with floors or divisions capable of independent use - was that the AT, in the "adaptation" it made in the IS assessment operations, was to add the TPV of each floor or independent division allocated to residential purposes (excluding the TPV of floors or divisions intended for other purposes), creating a new legal reality, which is a tax property value of urban properties under vertical ownership, with residential use.

This operation of the tax iter (incidence – determination of taxable matter – assessment – payment) seems to us to contend with the literal element of the taxable event norm, item 28 of the TGIS, which states that this tax applies to "the tax property value used for purposes of IMI".

It is that the AT, in the operation of determination of taxable matter and subsequent IS assessment of item 28 and 28.1 of the TGIS (operation of application of a rate to taxable matter), as regards urban properties with residential use, under vertical ownership, with floors or divisions capable of independent use, should not consider any tax property value (on which the ad valorem rate of the tax applies) other than that which results exclusively from no. 3 of Article 12 of the CIMI. Both for IMI and for this IS.

And for the reason that urban properties under vertical ownership, as a whole, do not have TPV. The law determines in these cases that the TPV be attributed to each floor or part of the property separately.

The above conclusion will not be affected by the fact that in the property registers of this type of property the "total tax property value" is indicated which corresponds to the sum of the TPV of all floors, regardless of their use. What is relevant for this taxation will not be the "total tax property value" but only the "tax property value" of urban properties with residential use, in this case of floors separately classified for tax purposes in terms of TPV eligible by the taxable event norm.

All the more so, in most cases of properties under vertical ownership the "residential use" is a characteristic of one or several floors separately and not of the property as a whole. In the case there are 4 floors, in each property, that do not have residential use. And the notion of "use" that is relevant here is the concrete one and not that which will result from the municipal permit (license of use).

Creating a new legal reality, in order to find a new form of determination of taxable matter that is not used in the context of IMI (a taxable basis for floors or parts of property capable of independent use, with residential use) does not appear to have legal support in the "necessary adaptations" referred to in no. 7 of Article 23 of the CIS.

A conclusion reached by taking into account the principle of tax legality, both in the dimension of no. 1 of Article 8 of the LGT (if we consider that there is a taxable event norm in question), and in the dimension of item a) of no. 2 of Article 8 of the LGT (if we consider that there is a norm governing the determination of the taxable basis on which a rate applies, that is, the assessment of the tax).

There is, it is perceived, non-compliance with the literal element of the final part of the taxable event norm (item 28 of the TGIS) which states that the tax applies to "the tax property value used for purposes of IMI" and therefore, should not apply to the sum of tax property values of properties, parts of properties or floors, no legal support being apparent in the operation of adding the tax property values of the floors or parts of property capable of independent use, with residential use, in order to reach the eligible taxation threshold of 1,000,000.00 euros or more.

That is, it is not in accordance with law, the creation of a new TPV for purposes of taxation in IS regarding item 28 of the TGIS, as results from the indication in all collection notices of "tax property value of property – total subject to tax" – item 5 of the established factual matter.

What means that when no. 7 of Article 23 refers to "…the tax is assessed annually, in relation to each urban property", this expression "each urban property" intends to encompass urban properties under horizontal ownership with residential use (or in other words, floors under horizontal ownership with residential use) and floors or parts of urban properties of properties under vertical ownership, provided they are allocated to residential purposes, but always starting from a single taxable basis for all legal purposes: the tax property value used for purposes of IMI (final part of item 28 of the TGIS).

The issue does not require, in our understanding, to be raised at the level of violation of the CRP, being sufficient, in compliance with what is stated in no. 7 of Article 23 of the CIS, that a reading be carried out, "with necessary adaptations of the rules of the CIMI" which will be to consider that the expression "each urban property" encompasses not only floors under horizontal ownership with residential use (which are urban properties ope legis) as well as "floors or parts of property capable of independent use" with residential use, under full or vertical ownership (no. 3 of Article 12 of the CIMI).

If, for example, for the floors that make up the autonomous units of urban properties with residential use, under the horizontal property regime, (even though they are by definition and "ope legis" urban properties) the TPV is not added to determine the threshold of TPV eligible for subjection to IS, per taxpayer, of 1,000,000.00 euros (operation of determination of taxable matter), why should this occur regarding the "parts of property or floors" with residential use of properties under vertical or full ownership?

In both cases the same contributory capacity of the taxpayers is manifested (their level of wealth in terms of real estate). It is the same "economic substance" analyzed from different perspectives. In both situations the same "ability-to-pay" is manifested.

It seems to us that it is the taxable event norm contained in items 28 and 28-1 of the TGIS, in its literality, notably its final part, combined with no. 7 of Article 23 of the CIS, which allows concluding, with the "necessary adaptations of the rules of the CIMI", that the AT should not add the TPV of the floors or parts of property identified above to find a new TPV relating to those that are allocated to residential purposes, separated from the TPV of those that are allocated to other purposes.

It will thus suffice, a mere declarative interpretation of the law, in light of its literal element, not being necessary to resort even to its extensive interpretation (reasoning of parity of reason between the two types in which floor ownership is materialized).

The Claimant contends, fundamentally, the non-compliance of the tax acts with tax law, alleging the illegality contained in item a) of Article 99 of the CPPT: "erroneous qualification …of tax facts".

In fact, with the grounds expressed above, the IS assessments contested, carried out as they were, are not in harmony with the taxable event norm of items 28 and 28-1 of the TGIS combined with the norm of no. 7 of Article 23 of the CIS, thus occurring the illegality provided for in item a) of Article 99 of the CPPT.

The first ground of the request filed by the Claimant in the request for pronouncement proceeding (item f) of the Report) is well-founded, making it unnecessary to assess the other grounds (items g) and z) of the Report), for futility, as their assessment is prejudiced.

As a consequence of the above stated, the request for annulment of the tax acts submitted by the Claimant to the Arbitral Tribunal is granted, since the IS assessments carried out by the AT are not in compliance with the law, in the reading proposed above.

In fact, it results from the established facts (item 1) of Part III of this decision) that none of the floors or parts of property has, in itself, a TPV that is equal to or greater than the taxation threshold indicated in item 28 of the TGIS (TPV equal to 1,000,000.00 euros).

Request for interest

In the legislative authorization on which the Government based itself to approve the RJAT, granted by Article 124 of Law no. 3-B/2010, it is stated that "the tax arbitration proceeding must constitute an alternative procedural means to judicial appeal proceedings and to actions for recognition of a right or legitimate interest in tax matters".

Although items a) and b) of no. 1 of Article 2 of the RJAT use the expression "declaration of illegality" to define the jurisdiction of the arbitral tribunals operating in CAAD and do not make reference to constitutive (annulling) and condemnatory decisions, it should be understood, in harmony with the referred legislative authorization, that the jurisdictional powers assigned to tax tribunals in appeal proceedings in relation to acts whose appraisal of legality falls within their jurisdiction are included in their jurisdiction.

Whereby a condemnation of the tax administration in the payment of compensatory interest may be handed down here.

Article 43 of the LGT "merely establishes an expeditious and, so to speak, automatic means of compensating the aggrieved party. Independently of any allegation and proof of damages suffered, he has the right to the compensation provided therein, reflected in compensatory interest in cases included in the provision (…)" [Decision of the Administrative Supreme Court (STA) of 2-11-2006, case 604/06, available at www.dgsi.pt]

In the case in question, it is proven that the Claimant paid the amounts stated in the collection notices that were notified to it as the first installment, and therefore is entitled to compensatory interest accrued from the date of payment, in whole or in part, of the assessments of the tax now annulled until the date of issuance of the respective credit notes, with the payment period being counted from the beginning of the period for spontaneous execution of the present decision (Article 61, nos. 2 to 5, of the CPPT), at the rate determined in accordance with the provisions of no. 4 of Article 43 of the LGT.

V. RULING

On the basis and for the reasons set out above, it is ruled:

  1. Granting the request for arbitral pronouncement regarding the request for declaration of illegality of the Stamp Tax assessments of item 28 of the TGIS, made in 2014 (assessment dates of 18 March 2014) for the year 2013, in the total amount of, respectively, € 12,208.00 and € 16,560.50, that is, a total collection of € 28,768.50, with reference to the two urban properties under vertical ownership identified in d) of the Report and in 1) of the established matter, for non-compliance with the norms contained in items 28 and 28.1 of the TGIS and in no. 7 of Article 23 of the CIS;

  2. Granting the request for condemnation of the AT to reimburse the amounts paid (first installment) and to pay compensatory interest to the Claimant, accrued from the date of payment of the IS installments, in whole or in part, until the date of issuance of the respective credit notes, with the payment period being counted from the beginning of the period for spontaneous execution of the present decision (Article 61, nos. 2 to 5, of the CPPT), at the rate determined in accordance with the provisions of no. 4 of Article 43 of the LGT.

Value of the case: in accordance with the provisions of Article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (and item a) of no. 1 of Article 97-A of the CPPT), the value of the case is set at € 28,768.50.

Costs: in accordance with the provisions of Article 22, no. 4, of the RJAT, the amount of costs is set at € 1,530.00, according to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the respondent.

Notify.

Lisbon, 25 May 2015

Augusto Vieira

Sole Arbitral Tribunal (TAS)

Text prepared by computer in accordance with the provisions of Article 131, no. 5, of the CPC, applicable by reference to Article 29 of the RJAT.

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

Frequently Asked Questions

Automatically Created

What is Stamp Tax (Imposto do Selo) under Clauses 28 and 28.1 of the Portuguese General Stamp Tax Table (TGIS)?
Stamp Tax under items 28 and 28.1 of the Portuguese General Stamp Tax Table (TGIS) is an annual tax levied on high-value residential property ownership. Item 28.1 specifically applies to urban properties or autonomous fractions (independent units) intended for residential use with a tax property value (valor patrimonial tributário - VPT) equal to or exceeding €1,000,000. The tax is assessed annually based on the property's VPT as determined for Municipal Property Tax (IMI) purposes. The key threshold of €1,000,000 VPT triggers the tax obligation, making this a targeted levy on luxury or high-value residential real estate. The central interpretative question in Case 65/2015-T was whether this threshold applies to each individual unit separately or to aggregated values when multiple units are owned within the same building under vertical property regime.
How does vertical property ownership affect Stamp Tax liability on residential units in Portugal?
Vertical property ownership (propriedade vertical or horizontal property regime) significantly impacts Stamp Tax liability determination on residential units in Portugal. Under this regime, a building is divided into autonomous fractions (floors or units) that can be independently owned, each with separate matrix registration and individual tax property values for IMI purposes. The critical dispute in Case 65/2015-T concerned whether autonomous units should be assessed individually or collectively for Stamp Tax purposes. The claimant argued that each autonomous fraction constitutes an independent property for tax purposes, and the €1,000,000 threshold should apply to each unit's VPT separately. The Tax Authority, conversely, aggregated the VPTs of all units within each building owned by the same taxpayer, thereby triggering Stamp Tax liability even though no individual unit exceeded the threshold. This interpretative conflict directly affects property investors owning multiple units in vertical property buildings.
Can individual units in a vertical property building be taxed separately for Stamp Tax purposes based on their VPT?
Yes, individual units in a vertical property building should be taxed separately for Stamp Tax purposes based on their individual VPT, according to the claimant's argument in Case 65/2015-T. The claimant contended that each autonomous fraction (floor or division capable of independent use) constitutes a distinct property with its own matrix article registration and separate VPT for Municipal Property Tax assessment. Since item 28.1 of the TGIS refers to the tax property value of 'urban properties or autonomous fractions' intended for residential use, the tax threshold should apply individually to each unit's VPT rather than to an aggregated sum. The claimant owned 59 residential units across two buildings, with individual VPTs ranging from €22,420 to €109,420—none individually reaching the €1,000,000 threshold. The claimant argued that aggregating these values violated the legal framework of the taxable event and contravened principles of legality, fiscal equality, and proportionality, citing two prior favorable CAAD decisions on the same properties supporting individual assessment of autonomous fractions.
What is the CAAD arbitral procedure for challenging Stamp Tax assessments by the Portuguese Tax Authority?
The CAAD (Centro de Arbitragem Administrativa) arbitral procedure for challenging Stamp Tax assessments by the Portuguese Tax Authority follows the Legal Framework for Arbitration in Tax Matters (Regime Jurídico da Arbitragem em Matéria Tributária - RJAT). Taxpayers must first exhaust administrative review procedures (reclamação graciosa) with the Tax Authority. Upon rejection, they can file a request with CAAD within the statutory deadline (generally 90 days from notification of rejection). In Case 65/2015-T, the claimant filed on February 4, 2015, after the Tax Authority rejected administrative reviews of two Stamp Tax assessments totaling €28,768.50. The CAAD President accepts the request and notifies the Tax Authority, which then has 30 days to respond. An arbitrator is appointed by CAAD's Deontological Council, and parties may object within specified timeframes. Once constituted, the sole arbitral tribunal (TAS) manages proceedings, which may include a preliminary hearing (Article 18 RJAT), evidence gathering, and submissions. In this case, both parties waived the preliminary hearing given existing precedent on identical issues, proceeding directly to decision. CAAD arbitration provides a faster, specialized alternative to judicial courts for tax disputes.
What was the outcome of CAAD Case 65/2015-T regarding the annulment of Stamp Tax assessments on vertical property?
While the complete decision is not provided in the excerpt, the procedural context and claimant's arguments in CAAD Case 65/2015-T strongly indicate a favorable outcome for the taxpayer seeking annulment of the Stamp Tax assessments. The claimant specifically invoked 'two decisions adopted at CAAD in other identical proceedings relating to the same real estate properties,' suggesting established precedent supporting individual assessment of autonomous fractions rather than aggregated values. The arbitral tribunal dispensed with the preliminary hearing precisely because 'this proceeding raises issues entirely identical to those already raised in many other proceedings already decided at CAAD,' indicating consistent jurisprudence on this matter. The legal argument that item 28.1 TGIS references 'urban properties or autonomous fractions' (plural alternatives) supports treating each registered unit as an independent taxable entity with its own VPT threshold. The claimant sought annulment of the €28,768.50 in assessments plus reimbursement with compensatory interest. The outcome likely established that vertical property units must be assessed individually for Stamp Tax purposes, with the €1,000,000 threshold applying separately to each autonomous fraction's VPT rather than to aggregated building values.