Process: 661/2014-T

Date: April 17, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This CAAD arbitration case (661/2014-T) addresses a critical interpretation question regarding Stamp Duty under Item 28.1 of the General Stamp Duty Table (TGIS) for vertical property ownership. The claimant challenged €12,493.10 in Stamp Duty assessments for 2013, arguing the Tax Authority incorrectly applied the 1% tax rate by summing the Taxable Patrimonial Values (VPT) of 16 independent residential units within a single cadastral entry. The central legal issue concerns whether Item 28.1 TGIS, which taxes properties with VPT equal to or exceeding €1,000,000, applies to each independent unit separately or to the aggregate value of all units sharing one cadastral registration. The claimant's property consisted of 16 floors or independent-use divisions in a vertical property regime, with individual VPTs ranging from €41,780 to €160,220—none reaching the €1,000,000 threshold individually. The Tax Authority's interpretation summed all VPTs to exceed the threshold, triggering taxation. The claimant argued this contradicts the legal framework, citing that each independent unit constitutes a distinct urban property under CIMI (Municipal Property Tax Code). The arbitral tribunal accepted jurisdiction under RJAT articles 2(1)(a) and combined multiple collection acts under procedural economy principles. The case was decided under Law 55-A/2012 framework (before the 2014 amendments), with Article 67(2) of the Stamp Duty Code establishing CIMI's subsidiary application. This decision has significant implications for vertical property taxation and establishes important precedent for determining the taxable unit under Item 28.1 TGIS.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case no. 661/2014 – T

Subject Matter:

Claimant: A… – …, LDA (hereinafter "Claimant")

Respondent: TAX AND CUSTOMS AUTHORITY (hereinafter "TA" and "Respondent")

1. Statement of Facts

A… – …, LDA, legal entity no. …, with registered office at Rua …, no. … … Lisbon, hereinafter referred to as the Claimant, submitted to the Centre for Administrative Arbitration (CAAD) a request for constitution of an arbitral tribunal with a view to annulling the tax collection acts concerning item no. 28.1 of the General Stamp Duty Table (TGIS) relating to the year 2013, in the total amount of € 12,493.10, corresponding to 3 installments broken down in various collection notices, which in the case of the 1st installment bear the following numbers: 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 … and 2014 ….

The Claimant bases the illegality of the tax act on the following defects:

a) Erroneous interpretation by the TA of item 28.1 of the General Stamp Duty Table (TGIS), insofar as subjection to Stamp Duty (SD) is determined by the Taxable Patrimonial Value (TPV) of each individual property and not by the sum of all areas of independent use of a single cadastral entry;

Ultimately petitioning for the annulment of the tax act subject to this collection and the consequent restoration of tax legality.

The Tax and Customs Authority, for its part, argued in summary that there is no illegality whatsoever inasmuch as the areas of independent use relating to a single cadastral entry do not constitute an urban property within the meaning of no. 4 of article 2 of the Municipal Property Tax Code (CIMI), and therefore the TPVs of all such areas or independent-use divisions cannot but be summed, concluding that the Claimant's request for annulment is without merit.

The sole arbitrator was designated and appointed on 21.10.2014.

In accordance with the provisions of article 11, no. 1, subsection c) of the Legal Regime for Tax Arbitration (RJAT), the singular arbitral tribunal was constituted on 02.12.2014.

Both the Claimant and the Respondent waived the submission of briefs.

2. Sanitation of the Procedure

The cumulation of claims effected in this arbitral decision request, in which tax collection acts of a single tax (Stamp Duty) are at issue, based on the same factual basis and applying the same rules of law, is fully justified in light of the principle of procedural economy enshrined in article 3 of the RJAT.

The singular arbitral tribunal is materially competent, in accordance with the provisions of articles 2, no. 1, subsection a) of the Legal Regime for Tax Arbitration in Taxation Matters.

The parties have legal personality and capacity and have standing in accordance with article 4 and no. 2 of article 10 of the Legal Regime for Tax Arbitration in Taxation Matters (RJAT), and article 1 of Ministerial Order no. 112-A/2011, of 22 March.

The case is not subject to any nullity and no exceptions have been raised by the parties that would prevent consideration of the merits of the case, and therefore the conditions for pronouncing the arbitral decision are present.

3. Matter of Fact

3.1. Proven Facts:

Having analysed the documentary evidence produced and the parties' positions, the following facts are considered proven and material to the decision of the case:

  • The Claimant is the owner of the urban property registered in the urban property register of the Parish of Alvalade, under cadastral entry …;

  • The identified urban property was, at the end of 2013, in a regime of total/vertical property ownership, being composed of 16 floors or divisions capable of independent use;

  • The cadastral entry … already identified is composed of the 16 floors or independent-use divisions, with residential allocation, which have the following TPVs:

  • 1st DC - € 48,840.00;

  • 1st B - € 48,840.00;

  • 1st D - € 81,340.00;

  • 1st EA - € 81,340.00;

  • 2nd B - € 48,840.00;

  • 2nd D - € 81,340.00;

  • 2nd DC - € 48,840.00;

  • 2nd EA - € 81,340.00;

  • 3rd B – € 102,320.00;

  • 3rd D - € 160,220.00;

  • 3rd DC - € 102,320.00;

  • 3rd EA - € 160,220.00;

  • Ground Floor B - € 41,780.00;

  • Ground Floor D - € 41,780.00;

  • Ground Floor DC - € 41,780.00;

  • Ground Floor EA - € 78,170.00;

  • The taxable patrimonial value of the urban property aforementioned cadastral entry only reaches or exceeds the amount of € 1,000,000.00 when the TPVs relating to the floors or divisions capable of independent use and with residential allocation that compose that same cadastral entry are added;

  • No floor or division capable of independent use with residential allocation of the urban cadastral entry … has a taxable patrimonial value equal to or greater than € 1,000,000.00;

  • The Claimant was notified of the collection notices – 1st, 2nd, and 3rd installments – relating to the collection of Stamp Duty, item 28.1, which fell upon the cadastral entries identified in items 1 to 3 above;

  • The Claimant voluntarily paid and was subject to coercive collection of the entire amount of the collection at issue in these proceedings, in the total amount of € 12,493.10;

  • On 05.09.2014 the request for constitution and decision by arbitral tribunal was accepted;

  • The Claimant made payment on 26.03.2015 of the subsequent court fee;

No other facts material to the decision of the case were proven.

3.2. Reasoning for the Proven Matter of Fact:

With regard to the proven facts, the arbitrator's conviction was based on the documentary evidence attached to the case file, as well as on the parties' acceptance of the matter of fact brought before these proceedings.

4. Matter of Law:

4.1. Object and Scope of the Present Proceedings

The request for arbitral decision has as its object the declaration of illegality of the Stamp Duty collection acts of the year 2013, in the total amount of € 12,493.10, which are broken down in the collection documents of 1st, 2nd, and 3rd installments, pursuant to item 28.1 of the TGIS.

4.2. Of the Alleged Illegality of Stamp Duty Collections, Item 28.1 of the TGIS

In summary, the issue is to examine whether the interpretation made by the Tax and Customs Authority of using, as a legal criterion for the purposes of subjection to Item 28.1 of the TGIS, the sum of the TPVs of all floors or divisions of independent use with residential allocation relating to a single cadastral entry is consistent with the applicable legal framework.

In this regard, it is important to take into account that the tax act in question occurred during the validity of the wording given by Law no. 55-A/2012, of 29 October, and therefore the current wording given to it by article 194 of Law no. 83-C/2013, of 31 December (State Budget for 2014) is not applicable here, as it only came into force on 1 January 2014.

And it is without losing sight of the legislative context of this innovation in the area of Stamp Duty taxation that the question relating to the interpretation of the scope of the incidence norm contained in article 28.1 of the TGIS should also be examined.

Let us therefore examine, before anything else, the legal framework of the Stamp Duty collection in question:

Law no. 55-A/2012, of 29 October, added item 28.1 to the General Stamp Duty Table (TGIS), with the following wording:

"28 – Ownership, usufruct or surface rights of urban properties whose taxable patrimonial value registered in the property register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000 – on the taxable patrimonial value used for Municipal Property Tax (IMI) purposes:

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

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

The incidence norm refers to urban properties, the basic concept of which is based on the provisions of article 2 of the CIMI, with the determination of TPV following the provisions of article 38 et seq. of the same code.

Being that, in accordance with that legal provision:

"1 - For the purposes of this Code, property is any portion of territory, including waters, plantations, buildings and constructions of any nature incorporated or based thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, under the aforementioned circumstances, endowed with economic autonomy in relation to the land on which they are located, although situated in a portion of territory that constitutes an integral part of an asset or does not have a property nature." (emphasis added)

Article 6 of the CIMI clarifies that:

"1 - Urban properties are divided into:

a) Residential;

2 - Residential, commercial, industrial or service properties are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal destination each of these purposes." (emphasis added)

The legislator's concept regarding properties and the subsequent division into urban properties is, for tax purposes, undoubtedly a criterion based on economic value and functional autonomy due to purpose.

That is, we are dealing with a concept of material or substantive nature and not a concept of legal-formalistic delineation, as the Respondent TA seems to intend.

Now, in the case at hand, the Respondent TA does not even question whether the floors or divisions with independent use and with residential allocation relating to the cadastral entries do not possess these same characteristics (functional autonomy and economic value) highlighted by the legislator, nor could it do so since it is the TA itself that deemed this information correct and caused it to be registered in the respective property records of the cadastral entries to which the floors or divisions capable of independent use relate.

Furthermore, precisely because such floors or divisions possess such characteristics of autonomy, both in functional terms and in terms of economic value, it is understandable that the legislator provided for the attribution of taxable patrimonial values for each of these floors, areas or divisions capable of independent use.

This contradicts the TA's thesis that, since floors or divisions capable of independent use are not expressly mentioned in no. 4 of article 2 of the CIMI, the legislator intended to exclude such an entity from the concept of property.

Therefore, given that the residential allocation and likewise the functional autonomy and economic value are undeniable, and moreover fiscally reflected in the TPV of those same independent areas or divisions, characteristics that are transposed to the respective property records of the cadastral entry under the designation of floors or divisions capable of independent use, we cannot but conclude that on a material and substantive level these same floors or divisions are covered by the notion of property contained in no. 1 of article 2 of the CIMI and urban property contained in subsection a) of no. 1 and no. 2 of article 6, both of the CIMI.

The introduction of item 28.1 of the TGIS into the tax legal order had as a relevant and determining factor the incidence on urban properties with residential allocation and high value, also commonly referred to as luxury homes, more precisely, of value equal to or exceeding € 1,000,000.00, upon which Stamp Duty began to apply.

The legislator thus intended to introduce a principle of taxation on wealth externalized in the ownership, usufruct or surface rights over any and all urban property with residential allocation, with the legislative criterion applying such stamp duty to urban properties with residential allocation whose TPV is equal to or exceeding € 1,000,000.00.

This conclusion can be drawn from the analysis of the discussion of Bill no. 96/XII in the Parliament of the Republic, available for consultation in the Official Journal of the Parliament of the Republic, 1st series, no. 9/XII/2, of 11 October 2012.

The justification for the measure designated as "special tax on urban residential properties of higher value" is based on the invocation of the principles of social equity and tax justice, calling on those holding high-value property properties intended for housing to contribute more intensely, applying the new special tax to "houses of value equal to or exceeding 1 million euros."

In this way, it appears clear that the legislator understood that homes possessing certain characteristics assessed quantitatively through TPV should determine a special contribution to ensure fair distribution of the tax burden.

But it is no less evident that it reflects a line of legislative choice intended to specifically burden urban properties with residential allocation of the high-value segment, premium or also commonly called luxury homes.

Note that, regardless of more or less subjective conceptions about the concept of luxury homes, high-value segment or expressions of equivalent meaning, it is certain that the taxable patrimonial value has been, since the 2003 property tax reform, measured on the basis of objective elements, such as area, location, comfort level, among others.

Which means to say that and regardless of the ideological considerations that may be made about such a political choice, the legislator had a concrete and defined objective: to subject to Stamp Duty taxation urban properties with residential allocation of higher value, which in practice resulted in the establishment of a threshold measurable through TPV: value equal to or exceeding € 1,000,000.00.

Furthermore, the legislator ensured through various coefficients (reductive and increased) objectivity in the calculation of that same TPV.

Now, none of the floors or divisions capable of independent use at issue here and upon which the collections subject to this arbitral decision request fell, reach, individually, the value of € 1,000,000.00, and each of these floors or independent divisions represents in the tax system a property in itself, which is why the TA erred in the presuppositions by making them subject to item 28.1 of the TGIS by disregarding that each of these same areas or divisions represents, under the terms of the Municipal Property Tax Code and consequently in the context of Stamp Duty, an urban property, which is why these areas or divisions relating to a single cadastral entry could not be the object of summation for the calculation of the TPV of that cadastral entry.

Which means to say that, having regard to the ratio legis just stated, the floors or divisions capable of independent use do not meet the requirement relating to taxation within the scope of the incidence norm provided for in item 28.1 of the TGIS, which is why, also in light of the above, we must conclude that the TA's interpretation of subjecting Item 28.1 of the TGIS to floors or divisions capable of independent use is not legally conforming, since they do not individually reach the minimum quantitative criterion for such subjection.

Thus, with respect to the Stamp Duty collection notice relating to the year 2013 and which is broken down in 3 installments via collection notices, a judgment of censure cannot but be imposed.

5. DECISION:

In these terms and with the reasoning set out above, this arbitral tribunal decides as follows:

  • To find in favor of the petition for declaration of illegality of the tax collection acts in the area of Stamp Duty, year 2013, to which correspond the collection notices broken down in 3 installments, for the defect of violation of law as regards the norm contained in item 28.1 of the TGIS, for error in the legal presuppositions and, in consequence, to annul the tax collection acts relating to Stamp Duty, of the year 2013 now at issue, with restitution by the Respondent of the amounts paid on this account by the Claimant;

Value of the case: € 12,493.10 – articles 97-A of the Code of Civil Procedure in Tax Matters (CPPT), 12 of the RJAT (DL 10/2011), 3-2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs in accordance with Table I of the RCPTA, calculated on the basis of the aforementioned value of the claim, to be borne by the Respondent - articles 4-1 of the RCPTA and 6-2/a) and 22-4 of the RJAT.

Let this arbitral decision be notified to the parties and, in due course, the case shall be filed.

Lisbon, 17 April 2015.

The sole arbitrator

(Luís Ricardo Farinha Sequeira)

Text prepared by computer, in accordance with article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by referral of article 29, no. 1, subsection e) of the Legal Regime for Tax Arbitration, with blank lines and reviewed by me.

Frequently Asked Questions

Automatically Created

How is Verba 28.1 of the TGIS applied to vertical property (propriedade vertical) for Stamp Tax purposes?
Verba 28.1 of the TGIS applies a 1% Stamp Duty rate to ownership, usufruct, or surface rights of urban properties with residential allocation when the Taxable Patrimonial Value (VPT) equals or exceeds €1,000,000. The central controversy in vertical property (propriedade vertical) cases involves whether the tax applies to each independent unit separately or to the sum of all units within a single cadastral entry. The legal framework established by Law 55-A/2012 did not explicitly address vertical property scenarios, creating interpretative ambiguity. Article 67(2) of the Stamp Duty Code mandates subsidiary application of CIMI (Municipal Property Tax Code), which under Article 2(4) defines urban property parameters. The Tax Authority's interpretation aggregated all independent-use areas within one cadastral entry, while taxpayers argued each autonomous unit with separate VPT should be assessed individually for threshold purposes.
Should the Valor Patrimonial Tributário (VPT) be calculated per individual unit or as the sum of all independent areas in a single property article?
The dispute centers on whether VPT calculation for Item 28.1 TGIS purposes should consider individual autonomous units or the sum of all independent areas within a single property article (artigo matricial). The Tax Authority's position maintains that areas of independent use relating to one cadastral entry do not constitute separate urban properties under CIMI Article 2(4), therefore requiring summation of all VPTs. The claimant's counter-argument asserts that vertical property regime creates legally independent units, each with distinct VPT, and taxation should apply only when an individual unit's VPT reaches the €1,000,000 threshold. This interpretation aligns with the concept that each floor or division capable of independent use constitutes a separate taxable reality. The legal framework in effect during 2013 (before Law 83-C/2013 amendments effective January 1, 2014) did not provide explicit guidance, requiring arbitral interpretation of the incidence norm's scope.
What is the CAAD arbitration procedure for challenging Imposto de Selo (Stamp Tax) liquidation acts in Portugal?
The CAAD (Centro de Arbitragem Administrativa) arbitration procedure for challenging Stamp Tax (Imposto de Selo) liquidation acts follows the Legal Regime for Tax Arbitration (RJAT). Taxpayers submit arbitration requests to CAAD pursuant to Article 2(1)(a) RJAT, which grants material competence for tax disputes. The process involves: (1) filing the arbitration request identifying the challenged acts and legal grounds; (2) designation and appointment of arbitrators (singular tribunal designated October 21, 2014, constituted December 2, 2014 in this case); (3) opportunity for both parties to submit briefs (waived here); (4) procedural sanitation phase examining competence, legal personality, capacity, and standing under Articles 4 and 10 RJAT; (5) fact-finding based on documentary evidence and party positions; and (6) arbitral decision on legality. Parties must have legal standing under RJAT Article 10(2) and Ministerial Order 112-A/2011. The tribunal examines substantive illegality claims and may annul unlawful tax acts, ordering restoration of tax legality.
Can multiple Stamp Tax liquidation acts be combined in a single CAAD arbitration request under the principle of procedural economy?
Yes, multiple Stamp Tax liquidation acts can be combined in a single CAAD arbitration request under the principle of procedural economy enshrined in Article 3 RJAT. The cumulation is justified when: (1) all acts concern the same tax (Imposto de Selo); (2) they share the same factual basis; and (3) the same legal rules apply. In this case, the tribunal explicitly validated combining three installments comprising 16 separate collection notices (2014…series) totaling €12,493.10, all relating to Item 28.1 TGIS for the 2013 tax year. This procedural economy principle promotes efficiency by avoiding multiple parallel proceedings addressing identical legal and factual questions. The tribunal confirmed no nullity existed and no exceptions prevented merit consideration of the combined claims. Each collection notice related to the same cadastral entry's independent units under the same vertical property regime, applying identical Item 28.1 TGIS provisions, thereby satisfying cumulation requirements without prejudicing either party's procedural rights or defense capabilities.
What legal arguments support annulling Stamp Tax assessments on properties with multiple independent units under Verba 28.1 TGIS?
Legal arguments supporting annulment of Stamp Tax assessments on properties with multiple independent units under Verba 28.1 TGIS include: (1) Literal interpretation: Item 28.1 references 'urban properties' (singular), suggesting individual assessment rather than aggregation; (2) CIMI subsidiary application: Article 2(4) CIMI defines urban property parameters, and vertical property units with separate VPTs constitute distinct properties; (3) Legislative intent: The €1,000,000 threshold targets high-value luxury properties, not aggregated middle-value units; (4) Constitutional proportionality: Taxing aggregated units that individually fall below the threshold violates the principle that tax incidence should reflect actual economic capacity; (5) Vertical property autonomy: Each independent-use division functions as a separate legal and economic reality with distinct VPT, ownership potential, and market value; (6) Principle of legality: Tax incidence requires clear legal basis—ambiguity should favor taxpayers; (7) Horizontal equity: Similar treatment should apply to identical VPT values regardless of cadastral registration structure. These arguments emphasize that cadastral entry organization is an administrative formality that should not alter substantive tax treatment of economically independent units.