Process: 651/2014-T

Date: February 25, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (651/2014-T) addresses whether Stamp Tax under item 28.1 of the General Table of Stamp Tax (TGIS) applies to a property under construction for hotel use. The applicant company challenged a Stamp Tax levy of €26,822.80 for 2013 on a property registered in Lisbon with a tax asset value of €2,682,280. The property, consisting only of walls without floors or roof, has been under construction as a four-star hotel since 2012. The applicant argued the property should be classified as devoted to services (hotel) and thus exempt from item 28.1 TGIS, which applies to residential properties. The Tax Authority contended that because the property was classified as residential use in the IMI Form 1 filed in 2008 and no subsequent alteration was requested, it remained subject to Stamp Tax. The arbitral tribunal found as proven facts that: (1) the property resulted from consolidation of two parcels specifically intended for a hotel establishment; (2) prior tourism utility was granted in 2010; (3) construction commenced in 2012; (4) the property is not and never was suitable for residential use; and (5) it has only walls with no floors or roof. The tribunal's analysis focused on whether the land registry classification should prevail over the actual destination and physical condition of the property. The case raises important questions about the interpretation of item 28.1 TGIS, particularly whether a property's formal classification in tax records should override its demonstrated purpose and unsuitability for residential use. The applicant also requested compensatory interest from the payment date until refund if the assessment was annulled, arguing the levy violated constitutional principles of tax legality and article 4 of Law 55-A/2012.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case no. 651/2014 – T

Claimant/Applicant: A…, LDA

Respondent: Tax and Customs Authority (hereinafter ATA)

1. Report

On 01-09-2014, the company A…, LDA, legal entity no. …, with registered address at Rua …, no. …, …, …-… Porto, hereinafter referred to as the Applicant, filed a request with the Administrative Arbitration Center (CAAD) for the constitution of an arbitral tribunal with a view to annulling the levy of Stamp Tax no. 2014 …, of 17-03-2014, relating to the year 2013, and effected under item 28.1 of the General Table of Stamp Tax (GTST), such levy relating to the urban property registered in the land register of the parish …, municipality of Lisbon, under article …, described in the Property Register of Lisbon under no. … and …, and constituted in full ownership.

The Applicant alleges that the property in question has no floors, nor roof, that a four-star hotel has been under construction on it since 2012, and therefore should be classified as a property devoted to services and thus not subject to Stamp Tax under item 28.1 of the General Table of Stamp Tax (GTST).

The Applicant refers that the levies at issue are illegal because they result from an erroneous qualification of the facts and an incorrect interpretation of the law.

The Applicant also contends that the said levies are illegal for violation of constitutionally enshrined principles of legality of tax norms, and there is also an error concerning the legal presuppositions by violation of article 4 of Law no. 55-A/2012 which added item 28.1 to the GTST.

The Applicant further requests the condemnation of the ATA to refund the tax paid plus compensatory interest from the date of payment until the issuance of the credit note in favor of the Applicant, in accordance with article 43 of the General Tax Law.

The Tax and Customs Authority submitted its response on 03-12-2014, in which it refers that the property in question has residential use since in the IMI Form 1 presented in 2008 by the owner at that time, the use of the property was declared as residential, and was not subsequently requested to alter the use recorded in the assessment made. With respect to the request for compensatory interest, the ATA refers that, as the tax act is valid and lawful, no interest shall be due.

A single arbitrator was appointed on 17-10-2014, Suzana Fernandes da Costa. In accordance with the provisions of article 11 no. 1 paragraph c) of the RTAT, the single arbitral tribunal was constituted on 03-11-2014.

In its response, the ATA requested the waiver of holding the meeting provided for in article 18 of the RTAT, as well as the waiver of the production of written submissions.

Notified of this request for waiver, the Applicant stated on 05-01-2015 that it maintained interest in the production of written submissions and that it did not object to the waiver of the meeting provided for in article 18 of the RTAT.

On 07-01-2015 a ruling was issued waiving the holding of the meeting, fixing a period of 10 days for the parties to successively present their submissions, and 25-02-2015 was set for the pronouncement of the arbitral decision.

On 17-01-2015, the Applicant presented its submissions; the ATA did not present any submissions.

The Applicant sent to the proceedings on 25-01-2015 a license for tourism purposes dated 15-01-2015. On 29-01-2015 a ruling was issued not admitting the annexation to the record of the said document, since it is only valid for the future and does not influence the question to be decided.

The parties have legal personality and capacity and are legitimate (articles 4 and 10 no. 1 and 2 of the RTAT and article 1 of Ordinance no. 112-A/2011 of 22 March).

The proceedings are timely, do not suffer from any nullities and no preliminary issues were raised.

2. Facts

2.1. Proven facts:

Upon analysis of the documentary evidence produced, the following facts are considered proven and relevant to the resolution of the case:

  1. The Applicant A…, LDA is the owner of the urban property registered in the urban land register of the parish of …, municipality of Lisbon, under article …, and described in the Property Register of Lisbon under no. … and …, constituted in full ownership, and with a tax asset value of two million, six hundred and eighty-two thousand, two hundred and eighty euros (2,682,280.00 €), according to the property certificate attached to the arbitration request as document 2.

  2. The Applicant was notified of the Stamp Tax levy no. 2014 …, of 17-03-2014, relating to the year 2013, in the amount of 26,822.80 €, effected under item 28.1 of the GTST, as per copy attached to the arbitration request as document 1.

  3. The Lisbon Municipal Council issued on 07-07-2009 the subdivision license no. …/2009, referring to municipal process no. …/URB/2005, in the name of B… – Real Estate Investment Fund Management Company, S.A., in its capacity as manager of the C… - Closed Real Estate Investment Fund, which concerned the urban properties registered in the land register under articles … and …, of the parish of …, municipality of Lisbon, which were consolidated in a single property registered in the land register under article … and which is the property to which the levy object of the present proceedings relates, the subdivision operation having been approved by the Lisbon Municipal Council on 03-12-2008, through resolution no. …/CM/2008.

  4. Also in accordance with the same resolution, the subdivision operation to which the license relates concerns the constitution of a single lot by consolidation of the properties previously registered under articles … and …, intended for a hotel establishment, with the property resulting from the subdivision being registered in the land register under article no. … of the parish of …, municipality of Lisbon.

  5. The authorization for building alteration work – alteration – architectural project, relating to the property resulting from the consolidation, was also approved by the Lisbon Municipal Council on 03-12-2008, through resolution no. …/CM/08.

  6. On 26-10-2010, prior tourism utility was granted to the Hotel to be built on the property, through the resolution of the State Secretary for Tourism.

  7. Through the alteration works license no. …/EO/2012, prepared on 22.05.2012, alteration works relating to the same property were approved by the Lisbon Municipal Council.

  8. The property resulting from the consolidation is not, nor ever was, suitable for residential use.

  9. The property has only walls, having no floors nor roof.

  10. Construction work on the property commenced in 2012.

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

2.2. Justification of the facts proven:

With respect to the proven facts, the arbitrator's conviction was based, on the one hand, on the documents attached to the record by the Applicant and not contested by the ATA, and on the other hand, on the positions taken by the ATA regarding the facts alleged by the Applicant.

The ATA did not contest the reality of the facts invoked by the Applicant, manifesting its disagreement not as to the facts alleged by the Applicant, but as to the application of law to the facts, by contending that the circumstance that the land register refers to the property as having residential use and not services use, leads to the taxation of the property under item 28.1 of the GTST.

2.3. Unproven facts:

The Applicant failed to prove that it made any payment of the Stamp Tax levy at issue in the present proceedings.

2.4. Justification of the facts not proven:

With respect to the unproven facts, the conviction was based on the analysis of the documents attached.

3. Law:

3.1. Object and scope of the present proceedings

The question to be decided in the present proceedings is whether item 28.1 of the General Table of Stamp Tax applies to a property whose land register shows residential use, but on which a hotel is being constructed.

Let us examine:

Law no. 55-A/2012 of 29 October added item 28 to the General Table of Stamp Tax (GTST), with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose tax asset value recorded in the land register, in accordance with the Real Estate Tax Code (RETC), is equal to or greater than €1,000,000 – on the tax asset value used for the purposes of RETC:

28.1 – For property with residential use – 1% (…);

In the transitional provisions contained in article 6 of said Law no. 55-A/2012, the following rules were established:

c) The tax asset value to be used in the levy of the tax corresponds to that resulting from the rules provided for in the Real Estate Tax Code by reference to the year 2011; (…)

f) The applicable rates are as follows:

i) Properties with residential use assessed in accordance with the Real Estate Tax Code: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the Real Estate Tax Code: 0.8%;"

Item 28.1 of the GTST and sub-items i) and ii) of paragraph f) of no. 1 of article 6 of Law no. 55-A/2012 contains a concept that is not used in any other tax legislation, which is that of "property with residential use."

In turn, article 67, no. 2 of the Stamp Tax Code, added by the said Law, provides that "matters not regulated in this Code relating to item 28 of the General Table shall apply subsidiarily the RETC."

The tax incidence norm refers to urban properties, the concept of which results from the provisions of article 2 of the RETC, with the determination of the tax asset value following the terms of article 38 and following of the same code.

Article 6 of the RETC indicates the different types of urban properties, and provides that "residential, commercial, industrial or service properties are buildings or structures licensed for such purposes or, in the absence of a license, that have each of these purposes as their normal destination." (see paragraph a) of no. 1 of article 6 RETC).

In this case, the classification of the property as residential is recorded in the land register based on the IMI Form 1 that was filed on 23-10-2008.

It is apparent from the proven facts that the property in question resulting from the consolidation is not, nor ever was, suitable for residential use, and has been, since 2008, the subject of administrative acts aimed at the construction of a hotel.

It was proven that the Lisbon Municipal Council issued on 07-07-2009 the subdivision license no. …/2009, referring to municipal process no. …/URB/2005, in the name of B… – Real Estate Investment Fund Management Company, S.A., in its capacity as manager of the C… - Closed Real Estate Investment Fund, which concerned the urban properties registered in the land register under articles … and …, of the parish of …, municipality of Lisbon, which were consolidated in a single property registered in the land register under article … and which is the property to which the levy object of the present proceedings relates, the subdivision operation having been approved by the Lisbon Municipal Council on 03-12-2008, through resolution no. …/CM/2008. This subdivision operation to which the license relates concerns the constitution of a single lot by consolidation of the properties previously registered under articles … and …, intended for a hotel establishment, with the property resulting from the subdivision being registered in the land register under article no. … of the parish of …, municipality of Lisbon. And the authorization for building alteration work – alteration - architectural project, relating to the property resulting from the consolidation, was also approved by the Lisbon Municipal Council on 03-12-2008, through resolution no. …/CM/08.

The Applicant thus succeeded in demonstrating that the property in question, despite the presumption of the land register, did not have residential use in fact.

The CAAD has had the opportunity to rule on a similar case, relating to the same property, in case no. 205/2013-T.

As stated in the said CAAD decision: "It does not seem proper to understand that the land registers have full evidentiary force, when the RETC itself provides, for the purposes of this tax, the possibility for the taxpayer to claim at any time any inaccuracy in the land register entries, in accordance with article 130, no. 3 of this Code, providing likewise, in the same line, that no. 5 of this article that 'the head of the competent Finance Service may, at any time, promote the correction of any inaccuracy in the land register entries, except those that entail alteration of the tax asset value resulting from direct assessment with the grounds provided for in paragraph a) of no. 3 (…)'."

In the case at hand, the Applicant was not limited to raising reasonable doubts about the residential use of the property, but proved the contrary. The Applicant was not prevented from demonstrating, as it did, that despite being recorded in the land register that the property in question has residential use, this was not the reality on the date of the taxable event. On the date of the taxable event, the property in question did not have residential use.

For the reasons stated, one is not dealing with a property with residential use, and therefore Stamp Tax provided for in item 28.1 of the GTST does not apply to that property.

For this reason, the levy whose declaration of illegality is requested suffers from the vice of violation of that item no. 28.1 GTST, due to error concerning legal presuppositions, which justifies the declaration of its illegality and annulment (article 135 of the Administrative Procedure Code).

4. On the request to condemn the ATA to payment of the tax unduly paid

The Applicant did not prove that it made payment of the Stamp Tax levy at issue in the present proceedings.

Therefore, as no payment has been proven, the Applicant's request cannot be upheld.

5. On compensatory interest

The Applicant requested the condemnation of the ATA to refund the tax unduly paid, plus compensatory interest in accordance with article 43 of the General Tax Law.

However, as no payment has been proven, the request to condemn the ATA to pay compensatory interest to the Applicant is dismissed.

6. Decision

In light of the above, it is determined:

  • to declare the non-application of item 28 of the GTST to the property in question;

  • to declare the illegality and consequent annulment of the Stamp Tax levy no. 2014 …, for the year 2013, in the amount of 26,822.80 €;

  • to dismiss the request to condemn the ATA to refund the tax and to pay compensatory interest, as formulated by the Applicant in accordance with article 43 of the GTL, absolving the Respondent of these requests.

7. Value of the case:

In accordance with the provisions of article 306, no. 2 of the Code of Civil Procedure and article 97-A, no. 1, paragraph a) of the Code of Tax Procedure and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is set at 26,822.80 €.

8. Costs:

In accordance with article 22, no. 4 of the RTAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at 1,530.00 €, to be borne by the Tax and Customs Authority.

Notify.

Lisbon, 25 February 2015.

Document prepared by computer, in accordance with article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by reference of article 29, no. 1, paragraph e) of the Tax Arbitration Regulations, reviewed by me.

The single arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Is a property under construction for a hotel subject to Stamp Tax under Verba 28.1 of the TGIS?
Não, um imóvel em construção destinado exclusivamente a hotel não está sujeito ao Imposto de Selo previsto na Verba 28.1 da TGIS. No processo 651/2014-T, o tribunal arbitral considerou provado que o imóvel não era nem nunca foi adequado para uso habitacional, destinando-se a estabelecimento hoteleiro conforme licenças de loteamento e obras. Quando o imóvel consiste apenas em paredes, sem pisos nem telhado, e possui utilidade turística prévia concedida para hotel, deve ser classificado como imóvel afeto a serviços e não como propriedade residencial. A Verba 28.1 da TGIS aplica-se à propriedade total de imóveis para habitação, não a imóveis em construção para fins exclusivamente comerciais ou turísticos. A qualificação jurídica do imóvel deve atender à sua real destinação e condições físicas, não apenas ao registo matricial.
Can a property classified as housing in the IMI registration be reclassified as services for Stamp Tax purposes?
Sim, a classificação de um imóvel no registo do IMI pode ser contestada para efeitos de Imposto de Selo. No caso 651/2014-T, a AT argumentou que o imóvel estava registado como habitacional no Modelo 1 do IMI apresentado em 2008 e que não foi solicitada alteração. Porém, o tribunal arbitral deu relevância aos factos provados que demonstravam que o imóvel resultou de operação de loteamento destinada a estabelecimento hoteleiro, possuía utilidade turística prévia concedida em 2010, e nunca foi adequado para uso habitacional. A mera classificação administrativa no IMI não vincula automaticamente a aplicação da Verba 28.1 da TGIS quando a realidade factual e a destinação efetiva do imóvel demonstram tratar-se de propriedade afeta a serviços. A qualificação tributária deve prevalecer sobre a classificação cadastral quando há elementos probatórios que comprovem a verdadeira natureza do imóvel.
What are the grounds for annulling a Stamp Tax assessment on properties held in total ownership (propriedade total)?
Os fundamentos para anular uma liquidação de Imposto de Selo sobre propriedade total incluem: (1) qualificação errónea dos factos - quando a AT classifica incorretamente o imóvel como habitacional quando se destina a serviços; (2) interpretação incorreta da lei - aplicação indevida da Verba 28.1 da TGIS a imóveis não residenciais; (3) violação do princípio da legalidade tributária consagrado constitucionalmente; (4) erro sobre os pressupostos de direito por violação do artigo 4.º da Lei n.º 55-A/2012 que aditou a Verba 28.1 à TGIS; (5) prova de que o imóvel nunca foi adequado para uso habitacional; (6) existência de licenças e autorizações que comprovem destinação não residencial (loteamento para hotel, utilidade turística prévia); e (7) estado físico do imóvel incompatível com uso habitacional (apenas paredes, sem pisos ou telhado). A conjugação destes elementos demonstra a ilegalidade da liquidação.
How does CAAD arbitration handle disputes over the application of Verba 28.1 of the Tabela Geral do Imposto de Selo?
O CAAD analisa as disputas sobre a Verba 28.1 da TGIS através de rigorosa apreciação dos factos provados e da qualificação jurídica do imóvel. No processo 651/2014-T, o tribunal arbitral: (1) constitui-se após nomeação de árbitro único; (2) admite a possibilidade de dispensa da reunião prevista no artigo 18.º do RTAT; (3) fixa prazos para alegações escritas quando as partes o solicitam; (4) analisa exaustivamente a prova documental (certidões prediais, licenças de loteamento e obras, resoluções camarárias, concessão de utilidade turística prévia); (5) valoriza as posições das partes quanto aos factos e à aplicação do direito; (6) determina factos provados, factos não provados e fundamenta ambas as conclusões; (7) interpreta a Verba 28.1 da TGIS à luz da real destinação do imóvel e não apenas do registo matricial; e (8) aprecia pedidos acessórios como juros indemnizatórios. A arbitragem tributária privilegia a verdade material sobre a classificação formal.
Are compensatory interest (juros indemnizatórios) due when a Stamp Tax assessment under Verba 28.1 TGIS is annulled?
Sim, são devidos juros indemnizatórios quando uma liquidação de Imposto de Selo ao abrigo da Verba 28.1 da TGIS é anulada. No processo 651/2014-T, a requerente solicitou expressamente a condenação da AT a restituir o imposto pago acrescido de juros indemnizatórios desde a data do pagamento até à emissão da nota de crédito a seu favor, nos termos do artigo 43.º da LGT. A AT argumentou que, sendo o ato tributário válido e legal, não seriam devidos juros. Porém, a procedência da anulação da liquidação implica o reconhecimento de que o pagamento foi indevido, gerando direito a juros indemnizatórios. O artigo 43.º da LGT estabelece que são devidos juros indemnizatórios em caso de erro imputável aos serviços quando haja pagamento de dívida tributária superior à legalmente devida. A taxa e período de contagem dos juros indemnizatórios seguem as regras do Código do IMI e da LGT aplicáveis.