Process: 665/2016-T

Date: March 1, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 665/2016-T) addresses the critical interpretation of Stamp Tax (Imposto do Selo) under Verba 28.1 TGIS for properties held under full ownership with multiple independent units. The applicant challenged ST assessments totaling €7,088.71 for 2012, arguing that tax liability should be determined by individual unit VPT, not aggregate property value. The property contained 21 autonomous units with total VPT of €1,417,738.12, exceeding the €1,000,000 threshold, but no individual unit reached this amount. The applicant relied on IMI Code provisions (Articles 7(2)(b) and 12(3)) establishing separate VPT assessments for economically independent units, and cited Supreme Administrative Court precedent (Case 047/15) holding that ST incidence depends on individual unit VPT for vertical ownership properties. The Tax Authority contended that full ownership differs from horizontal ownership and the threshold should apply to total property value. Based on consistent CAAD jurisprudence and Supreme Court guidance, the tribunal likely ruled for the applicant, establishing that when properties comprise economically independent units with separate matrix registrations, ST liability must be assessed unit-by-unit. This decision reinforces the principle that tax assessment methodologies must respect the economic and legal independence of separately registered property units, preventing inequitable taxation where owners possess multiple modest units within a single building structure. The ruling has significant implications for Portuguese real estate taxation, clarifying that the IMI Code's valuation framework applies equally to Stamp Tax determinations under Verba 28.1.

Full Decision

ARBITRATION DECISION

I. REPORT

A…, S.A., hereinafter Applicant, submitted a request for the constitution of a sole arbitration tribunal, in accordance with the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter designated only as RJAT), in which the Tax and Customs Authority (hereinafter TA) is respondent, with the objective of obtaining a declaration of illegality of the acts of assessment of Stamp Tax (ST) relating to the year 2012, in the total amount of €7,088.71.

The request for constitution of the arbitration tribunal was accepted by the Honourable President of CAAD on 19.08.2016 and automatically notified to the TA.

In accordance with the provisions of paragraph c) of article 11 of RJAT, the sole arbitration tribunal was constituted on 18.11.2016.

The TA responded, defending the non-merits of the claim.

The meeting referred to in article 18 of RJAT was dispensed with and the holding of closing arguments was dispensed with, given the nature of the matter contained in the case file.

The arbitration tribunal is properly constituted and materially competent, in accordance with paragraph a) of article 2(1) of RJAT.

The parties possess personality and legal capacity, are legitimate and are represented (article 4, and article 10(2) of RJAT and article 1 of Ordinance no. 112/2011, of 22 March).

There are no nullities, exceptions or preliminary questions that prevent immediate knowledge of the merits of the case.

II. FACTS

On the basis of the elements contained in the case file, the following facts are considered proven:

A) The Applicant is the owner and legitimate proprietor of the urban property registered in the urban property matrix under no. … of the parish of …, since extinguished, municipality and district of Lisbon;

B) The said property was constituted in full ownership, consisting of 6 storeys and 21 units or floors susceptible to independent use, with the Taxable Patrimonial Value (TPV) globally exceeding €1,000,000 (one million euros);

C) The units and independent divisions with housing use were subject to ST assessment, in the total amount of €7,088.71 (seven thousand eighty-eight euros and seventy-one cents);

D) The Applicant was notified of the act of ST assessment relating to the identified property, relating to the year 2012, as per documents no. 1 to 20 attached to the case file;

E) The TPV of the identified units and divisions was determined separately, in accordance with the provisions of article 7(2), paragraph b) of the Municipal Property Tax Code (IMI);

F) The Applicant filed a Request for Reconsideration of the identified ST assessment act, on which a ruling of dismissal dated 19.12.2014 was issued by the Head of the Finance Service of Lisbon …;

G) Not agreeing with such ruling, the Applicant appealed hierarchically, and such appeal was dismissed by ruling of 30.06.2016.

H) On 3.11.2016, the Applicant submitted a request for arbitration of the acts of ST assessment relating to the year 2012, in the total amount of €7,088.71.

There are no facts with relevance to the decision of the case that should be considered unproven.

This Tribunal has formed its conviction based on consideration of the documents submitted to the case file by the parties.

III. LAW

The main question that arises in the present case comes down to determining what is the TPV relevant for the purpose of application of item 28 and 28.1 of the General Table of Stamp Tax (GTST) relating to the urban residential property constituted under the regime of full ownership, which comprises units or divisions susceptible to independent use, duly identified in the case file.

In this regard, the Applicant alleges in its request for arbitration the following:

• The Applicant is the owner of the urban property identified in the case file, constituted under the regime of full ownership, with units or divisions susceptible to independent use;

• The IMI Code provides in its article 7(2), paragraph b) that: "Should the different parts be economically independent, each part is valued by application of the corresponding rules, the value of the property being the sum of the values of its parts."

• The IMI Code further provides in article 12(3) that: "Each unit or part of a property susceptible to independent use is considered separately in the matrix registration, which also specifies its respective taxable patrimonial value".

• Thus, in light of the IMI Code, each autonomous part of the property has its own TPV, which constitutes the taxable value for the purposes of this tax, and therefore that should be the taxable value for the purposes of Stamp Tax, namely, for the application of item 28.1 of the General Table of Stamp Tax;

• In this sense, the Supreme Administrative Court has already pronounced itself unequivocally in the Judgment delivered in Case no. 047/15, of 9.09.2015, according to which:

"I – With regard to properties in vertical ownership, for the purposes of incidence of Stamp Tax (Item 28.1 of GTST, as amended by Law no. 55-A/2012, of 29 October), the subjection is determined by the combination of two factors: housing use and the TPV recorded in the matrix equal to or exceeding €1,000,000.

II – Where a property is constituted under vertical ownership, the incidence of ST must be determined, not by the TPV resulting from the sum of the TPV of all units or floors susceptible to independent use (individually listed in the matrix entry), but by the TPV attributed to each of those units or divisions intended for housing."

• In fact, such an understanding also represents well-established case law in various other Judgments of this same CAAD Arbitration Tribunal, on the subject of "Stamp Tax – Item 28, vertical ownership", examples being those delivered in Cases no. 428/2014-T, no. 206/2014-T, no. 30/2014-T, no. 181/2013-T, no. 132/2013-T, no. 50/2013, no. 248/2013-T, no. 849/2014-T and no. 179/2015-T.

• Now, in the present case, none of the units or independent divisions of the urban property in question has a TPV equal to or exceeding €1,000,000, therefore any interpretation that admits and defends the incidence of Stamp Tax under item 28.1 of the General Table of Stamp Tax lacks any legal basis, and is thus manifestly illegal.

• In this way, it is necessary to proceed with the correction of the manifest error in the ST assessments in question and, consequently, to proceed with the annulment of all the ST assessment acts challenged by the Applicant, relating to the year 2012.

For its part, the TA alleges, in summary, the following:

• Subjection to ST of item 28.1 of the General Table attached to the ST Code results from the combination of two facts: housing use and the patrimonial value of the urban property registered in the matrix being equal to or exceeding €1,000,000.00.

• The property identified in the case file is registered in the matrix under the regime of full ownership, consisting of 6 storeys and 21 units or floors susceptible to independent use.

• The TPV was determined separately, in accordance with article 7(2), paragraph b) of the Municipal Property Tax Code (IMI), with the patrimonial value in its entirety in the amount of €1,417,738.12;

• The ST assessment in question was carried out by the TA, taking into account the nature of the urban property, namely its divisions assigned to housing, at the date of the taxable event, applying, with the necessary adaptations, the rules contained in the IMI Code.

• The IMI Code determines that under the horizontal ownership regime the units constitute properties. As the property is not subject to this regime, legally the units are parts susceptible to independent use, without common parts.

• The fact that the IMI was determined on the basis of the TPV of each part of a property with independent economic use does not equally affect the application of item 28.1 of the General Table;

• This is what follows from the determining fact for the application of this item of the General Table being the total patrimonial value of the property and not separately that of each of its portions.

  1. Article 12 of the IMI Code establishes the concept of the property matrix, and its paragraph 3 concerns, exclusively, the manner of recording matrix data.

• The TPV relevant for the purpose of tax incidence is the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even when susceptible to independent use.

• As the properties are under the regime of full ownership, not possessing autonomous units, to which tax law attributes the qualification of property, because from the notion of property in article 2 of the IMI Code, only the autonomous units of property under the horizontal ownership regime are deemed to be properties – paragraph 4 of the cited article 2 of the IMI Code.

• From the foregoing, the challenged assessments must be maintained in the legal order as they constitute a correct application of law to the facts, with any vice of violation of law being ruled out on the grounds of error as to the legal presuppositions.

Let us consider what should be understood.

It follows from article 11 of the General Tax Code (GTC) that the interpretation of tax law must be carried out having regard to the general principles of interpretation.

The general principles of interpretation are established in article 9 of the Civil Code (CC), as follows:

"1. Interpretation must not be limited to the letter of the law, but must reconstruct from the texts the legislative intent, taking above all into account the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time at which it is applied.

  1. However, the interpreter cannot take into consideration legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and was able to express his intent in adequate terms."

Having regard to the rules of interpretation of the Law, it is important to note that Law no. 55-A/2012, of 29 October, added items 28 and 28.1 to the GTST, creating the ST rate on high patrimonial value urban properties.

The creation of this new taxable event occurred in the context of economic crisis and serious public finance crisis, with the purpose of increasing the State's tax revenues, through the taxation of those who demonstrate greater indicators of wealth.

The special ST rate on properties with a value exceeding €1,000,000.00, also known as the "luxury tax", aimed to ensure the distribution of sacrifices among all and not only among those who live on the income from their work.

In these circumstances, items 28 and 28.1 established the incidence of ST in the following terms:

"Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the taxable patrimonial value used for the purposes of IMI:

28.1. – For residential property or for building land where the authorized or planned construction is for housing, in accordance with the provisions of the IMI Code…… 1%."

It follows, therefore, from the letter of the law that the rate provided for in item 28.1 is applicable to the right of ownership over property with housing use, whose TPV used for the purposes of IMI is equal to or exceeding €1,000,000.00.

In accordance with article 1(6) of the ST Code, "For the purposes of this Code, the concept of property is that defined in the Municipal Property Tax Code (CIMI)."

For its part, the IMI Code determines in article 2, the following:

Concept of property

"1 - For the purposes of this Code, property means any portion of land, including waters, plantations, buildings and constructions of any nature incorporated therein or set thereon, with the character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the aforesaid circumstances, endowed with economic autonomy in relation to the land on which they are located, even though situated in a portion of land that constitutes an integral part of a diverse patrimony or does not have patrimonial character.

2 - Buildings or constructions, even though moveable by nature, are deemed to have the character of permanence when dedicated to non-transitory purposes.

3 - The character of permanence is presumed when buildings or constructions are set on the same site for a period exceeding one year.

4 - For the purposes of this tax, each autonomous unit, under the horizontal ownership regime, is deemed to constitute a property."

Having regard to the concept of property established by Law, it is clear that properties constituted under vertical ownership constitute properties, for the purposes of item 28.1 of the GTST.

Insofar as the property under analysis (hereinafter Property) constitutes a Property, as provided for in article 2 of the IMI Code, it is literally covered by items 28 and 28.1.

In fact, the law does not distinguish, at any time, between property under horizontal ownership and property under vertical ownership, with paragraph 4 of article 2 merely establishing that under the horizontal ownership regime each autonomous unit is deemed to be property.

From what is stated in paragraph 4 of article 2, it does not follow, contrary to what was argued by the Respondent in its response, that only the autonomous units of property under the horizontal ownership regime are deemed to be properties.

Nevertheless, the special ST rate set out in the item in question only applies if the Property constitutes a residential property, whose taxable patrimonial value recorded in the matrix, in accordance with the CIMI Code, is equal to or exceeding €1,000,000.

Since the ST Code does not establish what is meant by "residential", by virtue of the provisions of article 67(2) of that Code, the rules provided for in the IMI Code are also applicable here, in particular those established in articles 6 and article 41 of that Code.

From the analysis of the said rules, it is also clear that the Property is covered by item 28.1, as an urban property with housing use.

It remains, therefore, to determine whether the TPV recorded in the Property's matrix, in accordance with the IMI Code, is equal to or exceeding €1,000,000.

Now, as follows from the letter of the Law, the TPV of the Property shall be that which is used for the purposes of IMI.

In this regard, it is determined in article 7(1) of the IMI Code, applicable by operation of article 23(7) of the ST Code, that "The taxable patrimonial value of properties is determined in accordance with this Code."

For its part, in articles 7(2) and (3) of the IMI Code, the rules for determining the TPV of properties with two or more classifications are established.

Since the rate provided for in items 28 and 28.1 of the GTST only applies to properties with housing use, the rules established in articles 7(2) and (3) of the IMI Code are not applicable to determining the relevant TPV for the purposes of the said item.

In fact, the TPV of properties with housing use, provided for in items 28 and 28.1, must be determined taking into account article 12(3) of the IMI Code, according to which:

"Each unit or part of a property susceptible to independent use is considered separately in the matrix registration, which also specifies its respective taxable patrimonial value."

Thus, having regard to the fact that the legislator attaches no relevance to whether the property is constituted under the vertical ownership regime, the TPV must be attributed to each unit or part of a property susceptible to independent use.

In fact, there is no rule in the IMI Code that would permit the conclusion that the TPV of a property under the vertical ownership regime should be obtained by summing the TPVs that were assigned separately to the parts that compose it (See, among others, the arbitration decisions delivered in Cases 50/2013-T, 131/2013-T, 177/2014-T, 396/2014-T).

Since the rules of incidence are subject to the principle of tax legality (See article 103 of the Constitution of the Portuguese Republic (CRP) and article 8 of the GTC), there appears to be no legal basis for the assessment of ST on the basis of the sum of the TPVs of each part of the Property.

In fact, the TA cannot carry out an assessment operation on the basis of a rule of incidence that does not expressly provide for the basis of tax incidence in the manner assessed, because the rules of incidence of taxes must be interpreted in their exact terms, without recourse to analogy, making prevalent the certainty and security in their application (See Judgment of the Central Administrative Court of the South, delivered in the course of proceedings 7648/14, of 10.07.2014).

It is thus understood that there is no legal basis that permits the TA to add the taxable patrimonial values of the units or parts of property susceptible to independent use, in order to reach the eligible taxation threshold of €1,000,000.00, provided for in item 28 of the GTST (See in this regard the most recent judgment of the Supreme Administrative Court of 15.02.2017 – Appeal no. 1425/14).

In light of the foregoing, as none of the units susceptible to independent use have a TPV exceeding €1,000,000.00, there is no place for the incidence of the rate provided for in item 28 of the GTST.

Consequently, the annulment of the act of ST assessment sub judice is warranted, and the recognition of the Applicant's right to compensation interest relating to the ST payments made, since the illegality of the assessment act is attributable to error on the part of the Respondent, in accordance with the provisions of article 43(1) of the GTC.

IV. DECISION

In these terms, this arbitration tribunal decides:

A) To find wholly well-founded the request for annulment of the act of ST assessment of 2012, relating to the urban property registered in the urban property matrix under no. … of the parish … of the parish of …, now extinct, municipality and district of Lisbon;

B) To order the Tax and Customs Administration to refund to the Applicant the amount of tax paid, plus compensation interest, in accordance with legal provisions;

C) To condemn the Respondent in costs of the present proceedings, as the unsuccessful party.

V. VALUE OF THE CASE

In accordance with the provisions of article 306(2) of the Civil Procedure Code, article 97-A(1) a) of the CTPC and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the claim is fixed at €7,088.71.

VI. COSTS

In accordance with the provisions of articles 12(2) and 22(4), both of RJAT, and article 4(4) of the Regulation of Costs of Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €612, in accordance with Table I of the aforementioned Regulation, to be borne by the Respondent.

Let notification be made.

Lisbon, 1 March 2017

The Arbitrator

Magda Feliciano

(The text of this decision was prepared by computer, in accordance with article 131(5) of the Civil Procedure Code, applicable by remission from article 29(1), paragraph e) of Decree-Law no. 10/2011, of 20 January (RJAT), and its wording is governed by the orthography prior to the 1990 Orthographic Agreement).

Frequently Asked Questions

Automatically Created

Does Stamp Tax under Verba 28.1 TGIS apply to individual units in a building held under total ownership when only the global VPT exceeds €1,000,000?
No. According to established CAAD jurisprudence and the Supreme Administrative Court (Case 047/15), Stamp Tax under Verba 28.1 must be assessed based on individual unit VPT, not aggregate property value. When a property consists of economically independent units with separate matrix registrations under IMI Code Article 7(2)(b), each unit is evaluated independently. If no individual unit reaches the €1,000,000 threshold, Stamp Tax does not apply, even if the total property value exceeds this amount. This interpretation applies regardless of whether the property is held under full ownership or vertical ownership, as the key factor is the economic independence of each unit.
How is the taxable value determined for Stamp Tax purposes on properties composed of multiple independent units?
For properties with multiple independent units, the taxable value for Stamp Tax is determined by the individual VPT (Valor Patrimonial Tributável) of each autonomous unit, not the sum of all units. Under IMI Code Article 7(2)(b), economically independent parts are valued separately, with each receiving its own matrix registration and VPT per Article 12(3). This separate valuation framework carries over to Stamp Tax assessment under Verba 28.1 TGIS. The €1,000,000 threshold must be met by an individual unit's VPT for that unit to be subject to Stamp Tax. This methodology prevents inequitable taxation of property owners who possess multiple modest units within a single building structure.
What is the procedure for challenging Stamp Tax assessments on real estate through CAAD tax arbitration?
To challenge Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa), taxpayers must first exhaust administrative remedies. The applicant must file a Request for Reconsideration (Pedido de Revisão), and if dismissed, proceed with a hierarchical appeal (recurso hierárquico). Only after these administrative procedures are completed can the taxpayer submit an arbitration request to CAAD under RJAT (Decree-Law 10/2011) within statutory deadlines. The request must specify contested acts, amounts, and legal grounds. CAAD accepts the request, notifies the Tax Authority, and constitutes an arbitration tribunal. The process includes written submissions and potential oral hearings, providing an efficient alternative to judicial litigation for resolving tax disputes.
Can the tax authority levy Imposto do Selo on residential units whose individual VPT is below the €1,000,000 threshold?
No. Verba 28.1 of the TGIS establishes two cumulative requirements for Stamp Tax incidence: (1) housing use and (2) VPT equal to or exceeding €1,000,000. When individual residential units have separate VPT assessments below this threshold, they cannot be subject to Stamp Tax, even if they form part of a larger property whose aggregate value exceeds €1,000,000. The Tax Authority's attempt to apply the threshold to total property value contradicts established case law. The Supreme Administrative Court and consistent CAAD rulings confirm that assessment must occur at the individual unit level when units are economically independent and separately registered in the matrix, preventing arbitrary taxation based on aggregate valuations.
What role does Article 7(2)(b) of the IMI Code play in determining Stamp Tax liability under Verba 28.1 of the TGIS?
Article 7(2)(b) of the IMI Code plays a decisive role by establishing that economically independent parts of a property are valued separately, with the total property value being the sum of individual parts. This valuation methodology creates the legal framework for determining which units are subject to Stamp Tax. When Article 7(2)(b) requires separate valuation for independent units, this separation must be respected for ST purposes under Verba 28.1. Combined with IMI Code Article 12(3), which mandates separate matrix registration for each autonomous unit with its own VPT, this framework prevents the Tax Authority from artificially aggregating values to trigger Stamp Tax liability on units that individually fall below the €1,000,000 threshold.