Process: 668/2015-T

Date: May 5, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitral decision 668/2015-T addressed the application of Stamp Tax under Verba 28.1 of the General Stamp Tax Table (TGIS) to a vertically-owned property in Lisbon. The claimant, representing an undivided estate, contested 17 Stamp Tax assessment acts from 2014 totaling €3,555.32, issued on March 20, 2015. The central dispute concerned whether the €1,000,000 taxable property value (TPV) threshold under Verba 28.1 should apply to each independent unit within a vertically-owned property or to the property as a whole. The claimant argued that the property comprised multiple floors and divisions susceptible to independent use across two blocks, but none of the individual units had a TPV equal to or exceeding €1,000,000 on December 31, 2014. Therefore, the essential prerequisite for the taxable event under Verba 28.1 was not satisfied. The claimant contended that vertical property ownership follows the same registration rules as horizontal property (condominiums), and if individual assessments are issued for each autonomous part, then each part must individually meet the €1 million threshold to trigger the tax. The Tax Authority's approach of considering the total property value was challenged as lacking legal basis and violating principles of legality, tax equality, and the prevalence of material truth. The claimant emphasized that the legislator intended Verba 28.1 to target high-value luxury residential properties, and applying it to individual units below the threshold contradicted this purpose. The case raised important questions about the autonomous challengeability of individual installment payments, the determination of case value when multiple assessments are contested together, and the proper interpretation of Verba 28.1 in the context of vertical property ownership structures.

Full Decision

ARBITRAL DECISION

I. REPORT

A..., in her capacity as head of the undivided estate opened by the death of B..., NIF..., with residence at Street..., no...., ..., in Lisbon (hereinafter, the "Claimant"), requested from the Administrative Arbitration Center (CAAD), on 30 October 2015, the constitution of an arbitral tribunal in tax matters, in accordance with the provisions of articles 2 and 10 of Decree-Law no. 10/2011 of 20 January (Legal Regime for Tax Arbitration, hereinafter designated as "LRTA"), in which the Tax and Customs Authority (TA) is the Respondent, with a view to the declaration of illegality and consequent annulment of the assessment acts for Stamp Duty ("SD") relating to the year 2014, to which correspond the documents no.:

i. 2015..., of 20.03.2015, in the amount of €203.03 (two hundred and three euros and three cents);

ii. 2015..., of 20.03.2015, in the amount of €219.46 (two hundred and nineteen euros and forty-six cents);

iii. 2015..., of 20.03.2015, in the amount of €217.30 (two hundred and seventeen euros and thirty cents);

iv. 2015..., of 20.03.2015, in the amount of €203.03 (two hundred and three euros and three cents);

v. 2015..., of 20.03.2015, in the amount of €201.00 (two hundred and one euros);

vi. 2015..., of 20.03.2015, in the amount of €217.30 (two hundred and seventeen euros and thirty cents);

vii. 2015..., of 20.03.2015, in the amount of €201.00 (two hundred and one euros);

viii. 2015..., of 20.03.2015, in the amount of €217.30 (two hundred and seventeen euros and thirty cents);

ix. 2015..., of 20.03.2015, in the amount of €201.00 (two hundred and one euros);

x. 2015..., of 20.03.2015, in the amount of €219.46 (two hundred and nineteen euros and forty-six cents);

xi. 2015..., of 20.03.2015, in the amount of €203.03 (two hundred and three euros and three cents);

xii. 2015..., of 20.03.2015, in the amount of €192.16 (one hundred and ninety-two euros and sixteen cents);

xiii. 2015..., of 20.03.2015, in the amount of €201.00 (two hundred and one euros);

xiv. 2015..., of 20.03.2015, in the amount of €203.03 (two hundred and three euros and three cents);

xv. 2015..., of 20.03.2015, in the amount of €219.46 (two hundred and nineteen euros and forty-six cents);

xvi. 2015..., of 20.03.2015, in the amount of €217.30 (two hundred and seventeen euros and thirty cents); and

xvii. 2015..., of 20.03.2015, in the amount of €219.46 (two hundred and nineteen euros and forty-six cents);

in the total amount of €3,555.32 (three thousand five hundred and fifty-five euros and thirty-two cents).

The Claimant chose not to appoint an arbitrator.

The request for constitution of an arbitral tribunal was accepted by the President of the CAAD on 2 November 2015 and automatically notified to the TA on the same date.

The Undersigned was appointed by the President of the Deontological Council of the CAAD as arbitrator of a sole arbitral tribunal, in accordance with the provisions of article 6 of the LRTA, having communicated acceptance of the appointment within the legal deadline, in accordance with the provisions of article 4 of the CAAD Deontological Code.

The Parties were notified of the appointment of the Undersigned on 24 January 2016, in accordance with article 11, no. 1, subparagraphs a) and b) of the LRTA, and did not object thereto.

The sole arbitral tribunal was thus regularly constituted on 9 February 2016, in accordance with the provisions of subparagraph c) of article 11, no. 1 of the LRTA.

The TA was notified of the arbitral order of 12 February 2016, to submit a response within 30 (thirty) days.

The TA submitted its Response on 14 March 2016.

By arbitral order of 28 March 2016, the Arbitral Tribunal ordered notification to the Claimant to, within a period of 10 days, comment on the exceptions raised by the Respondent in its Response, pursuant to article 16, subparagraphs a), b) and c) of the LRTA and notification to the Respondent to attach a prior arbitral decision invoked as relevant to the file.

The Respondent submitted the aforementioned decision on 31 March 2016.

The Claimant did not comment.

By order of 15 April 2016, the Arbitral Tribunal considered, having analyzed the facts and elements brought by the Parties to the file, and pursuant to article 16, subparagraphs c) and e) of the LRTA, that the hearing of the witness indicated by the Claimant was dispensable, as well as the meeting provided for in article 18 of the LRTA. Furthermore, it set the deadline for rendering the arbitral decision until 13 May 2016.

The Parties enjoy legal personality and capacity and are legitimate (articles 4 and 10, no. 2 of the LRTA and article 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings are not affected by defects that would invalidate it.

II. CLAIM OF THE CLAIMANT

The Claimant presented a request for arbitral pronouncement with a view to the declaration of illegality and consequent annulment of the assessment acts for SD relating to the year 2014, identified above.

The Claimant bases its claim on the grounds hereinafter indicated:

i. The SD assessment acts refer to the urban property located in the parish of..., municipality of Lisbon, with the property registration article...;

ii. The identified urban property is in full ownership, and the assessments in question refer to each of the respective units susceptible to independent use;

iii. The taxable property value of the property that should serve as the basis for the assessment of the tax corresponding to item 28.1 of the GMDT, by reference to the CPIM, is the taxable property value in force on 31 December of the year to which it relates;

iv. On 31 December 2014, none of the units susceptible to independent use had a taxable property value equal to or exceeding €1,000,000.00;

v. Thus, one of the prerequisites of the taxable event capable of being subsumed under item 28.1 of the GMDT is not satisfied;

vi. The assessment in question thus suffers from nullity due to the absence of a legal prerequisite for its issuance;

vii. If not so understood, the assessment suffers from error, since the property is not constituted in horizontal property (condominium);

viii. In these circumstances, the assessment cannot fall upon each floor or division susceptible to independent use;

ix. The criterion used by the TA violates the principles of legality and tax equality, and of the prevalence of material truth over legal-formal reality;

x. The property in question is composed of two blocks, one with four floors and commercial establishments on the ground floor and another with five stories, comprising eight floors or divisions susceptible to independent use of which a large part is dedicated to housing;

xi. The legislator intended by this legislative innovation to tax urban properties with high-value (luxury) residential use;

xii. Considering that the registration in the property matrix in vertical property ownership follows the same registration rules as properties constituted in horizontal property, and their respective IMI, as well as the new SD, are liquidated individually in relation to each of the parts, there is no doubt that the legal criterion for defining the incidence of the new tax must be the same;

xiii. Accordingly, if the legal criterion requires the issuance of individual assessments for the autonomous parts of properties in vertical property ownership, in the same manner as it establishes for properties in horizontal property ownership, it has clearly established the criterion, which must be unique and unequivocal, for defining the incidence rule of the new tax;

xiv. Thus, tax would only be due if one of the parts, floors or divisions with independent use presented a TPV exceeding €1,000,000.00, which is not the case;

xv. The TA cannot therefore consider as the reference value for the incidence of SD the total value of the property;

xvi. The criterion used by the TA finds no legal support and is contrary to what is applicable in the context of IMI and, by reference, in the context of SD;

xvii. It is illegal and unconstitutional to consider as the reference value the one corresponding to the sum of the TPVs of each part, floor or division with independent use, because that would be a clear violation of the principle of equality and proportionality in tax matters;

xviii. If the property were in horizontal property ownership, none of its residential units would be subject to the incidence of the new tax;

xix. Furthermore, the rule of article 12, no. 3 of the CPIM is relevant for the purposes of registration in the property matrix of the autonomy which, within the same property, can be attributed to each of its parts, economically and functionally independent;

xx. However, this is not consistent with the TA's decision to tax the residential parts of a property in vertical property ownership based on the global TPV of the property;

xxi. The position of the TA is even contradictory, because for purposes of SD assessment it considers the property as a whole, but for purposes of enforcement of failure to pay that same SD it issued 27 assessments, one for each unit evaluated as an autonomous unit, ceasing thereby to have a whole;

xxii. Consequently, the discrimination perpetrated by the TA represents arbitrary and illegal discrimination;

xxiii. The TA cannot distinguish between two situations (horizontal and vertical property ownership) where the legislator itself understood not to do so;

xxiv. The assessments in question thus suffer from nullity or, if not so understood, should be annulled for breach of legal formalities, error regarding the factual prerequisites and lack of reasoning;

xxv. Should the tax not be paid within the deadline, the tax enforcement body may institute the competent collection proceedings and, in that case, the Claimant hereby indicates that it intends to request the issuance of a bank guarantee for its suspension;

xxvi. And the TA should be ordered to reimburse all amounts borne by the Claimant as a result of such request for suspension.

III. RESPONSE OF THE RESPONDENT

The Respondent submitted its response alleging the following, briefly:

i. The Claimant presents its claim exclusively with reference to the second installment of the year 2014;

ii. By way of exception, the Respondent alleges that the Arbitral Tribunal is materially incompetent to assess the legality of an installment of an assessment act, which is not in itself any taxable act capable of being challenged, there being no doubt whatsoever, both by the value of the case and by all the documents attached to it, that the Claimant challenges exclusively the collection notes that constitute the 2nd installments of the tax relating to the property in question;

iii. The Respondent cites, to justify its understanding, an arbitral decision in which it is written:

"Another of the exceptions invoked by the TA is that of the incompetence of the arbitral tribunal to decide the dispute, on the ground that 'the Claimant does not challenge a taxable act, but rather challenges the payment of an installment of a taxable act contained in a collection note', that is, that 'the object of the proceedings is the annulment not of a taxable act, but of a collection note for the payment of the 2nd installment of a tax, a matter which is not, in any way, part of the set of rules that delimit the competence of tax arbitral tribunals, contained in article 2 of the LRTA'.

'The competence of tax arbitral tribunals operating at the CAAD is established by articles 2, no. 1, and 10, no. 1, of the LRTA.'

'Specifically, article 2, no. 1, subparagraph a) of the LRTA refers to such competence comprising the assessment of claims relating to the declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account, while subparagraph a) of no. 1 of its article 10 establishes the 90-day deadline for submission of the request to constitute the tribunal, 'counted from the facts provided for in nos. 1 and 2 of article 102 of the Code of Tax Procedure and Process, as regards acts capable of autonomous challenge and, as well as, notification of the decision or the end of the legal deadline for decision of the hierarchical appeal'.

'Determining the competence of the arbitral tribunal to decide on the claim that is the object of the present proceedings will necessarily require ascertaining whether the request for declaration of illegality and consequent annulment of one of the installments of a Stamp Duty assessment, made under item 28 of the GMDT, is equivalent to a request for annulment in whole or in part of the same assessment or, not equivalent, whether one of those installments may constitute an act capable of autonomous challenge.'

'As regards the first question, it can be affirmed that an installment is not equivalent to a tax assessment, since, in accordance with no. 7 of article 23 of the Stamp Duty Code, in the wording given to it by article 3 of Law no. 55-A/2012 of 29 October, '7 - In the case of tax due by the 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 and Customs Authority, applying, with the necessary adaptations, the rules contained in the CPIM' (emphasis ours).

'Now, the expression 'the tax is assessed annually' indicates that a single annual assessment is made, although the same may be divided, for payment purposes, into installments, and not as many assessments as there are installments in which the debt is to be satisfied – the division of an assessment into installments will therefore be nothing more than a mere technique of revenue collection.'

'On the other hand, the question of whether an installment can be regarded as an autonomously challengeable part of the assessment refers us to that of the divisibility of the taxable act of assessment and the consequent possibility of its partial annulment.'

'In this regard, case law has understood that the assessment is a divisible act, either by nature, as it concerns an obligation of a pecuniary nature, or by legal definition, since article 100 of the General Tax Law (GTL) admits 'full or partial acceptance of complaints or administrative or judicial proceedings appeals in favor of the taxpayer', a situation in which the tax administration is obliged 'to immediate and full restoration of the situation that would have existed had the illegality not been committed, including the payment of compensatory interest, under the terms and conditions provided for by law'.

'However, for there to be partial annulment of the taxable act, it is necessary that the illegality affects it only in part (see, in this sense, the Decision of the Plenary of the Tax Contentious Section of the SAC, issued on 10 April 2013, in appeal no. 0298/12, available at http://www.dgsi.pt, in whose summary it reads:

'Summary: I - The taxable act, as a divisible act, both by nature and by legal definition, is capable of partial annulment. II - The criterion for determining whether the act should be entirely or partially annulled is to determine whether the illegality affects the taxable act as a whole, in which case the act should be entirely annulled or only in part, in which case partial annulment is justified.' (Emphasis ours).'

'Thus, in cases where the taxable act is divisible, 'if partial annulment of a taxable act is requested, the tribunal cannot, in principle, annul it entirely' SOUSA, Jorge Lopes de, 'Code of Tax Procedure and Process – annotated and commented' Volume I, Áreas Publishing House, 2006, p. 875; if its entire annulment is requested and the act is only partially annullable, the request will be partially inadmissible.'

'On the question of the indivisibility of a Stamp Duty assessment referred to in item 28 of the GMDT, the CAAD has already ruled, in case no. 205/2013-T (available at https://caad.org.pt/tributario/decisoes/), as shown in the extract that follows:

'11. The Respondent further objects to the value of the case considering that the same is €8,940.94 and not €28,822.80, as indicated by the claimant.

The claimant submits that 'the disputed act in these proceedings is the assessment act with no.... of 22/02/2013, relating to the first installment of stamp duty, of the year 2012, in the amount of €8,940.94, attached by the claimant to the request for arbitral pronouncement as Doc. 1'.

'However, the value of the assessment no... of 22/02/2013, as stated in said document is, in reality, €26,822.00 and not €8,940.94.

Note that there is no assessment of €8,940.94. This value is only the first installment of an assessment that was immediately made and in the amount indicated by the Claimant. From the circumstance that the value of the assessment can be paid in various installments, it does not follow that there are three assessments. It is, differently, an assessment that can be paid in various installments (emphasis ours), and the taxpayer is not prevented from challenging it due to the fact that only the payment deadline for one of them has elapsed.

The taxpayer challenged the assessment act with no... of 22/02/2013, in the amount of €26,822.00, which had been notified to him and that is the correct value of the case.'

'Also, the arbitral case no. 120/2012-T, which proceeded at the CAAD (available at https://caad.org.pt/tributario/decisoes/) and from which the following fragments are extracted, had already ruled on the indivisibility of an IMI assessment, a matter of subsidiary application to Stamp Duty assessments of item 28 of the GMDT, by reference to no. 2 of article 67 of the Stamp Duty Code:

'In accordance with the provisions of article 113, no. 2 of the IMI Code, the assessment of this tax is made in the months of February and March of the year following that to which the tax relates. Under no. 1 of article 120 of the same diploma, the tax must be paid in two installments, in the months of April and September, provided that its amount exceeds Euros 250, payment in the case of such amount being equal to or less than that limit, being effected at once, during the month of April.' (…) 'As it thus results from the provisions of said articles, although the autonomously challengeable act is the IMI assessment act (emphasis ours), the deadline for contesting its legality should only be counted from the end of the payment deadline for the tax determined therein. This being to be paid, under the terms of the law, in more than one installment, only with the end of the last of those (assuming, of course, the non-occurrence of situations of early maturity) can thus begin the counting of the deadline referred to in article 102, no. 1, subparagraph a) of the CPPT, applicable, in the scope of arbitral proceedings, ex vi the provision of article 10, no. 1, subparagraph a) of Decree-Law no. 10/2011 of 20 January ('LRTA').' (…) 'Such conclusion results, moreover, clearly from the indivisible nature of the assessment act, as well as from the necessity – moreover, emphasized by the Respondent itself – of, with respect to the same IMI assessment - which, under the law should be paid in two installments - not being issued administrative or judicial decisions that are contradictory.' (emphasis ours) (…) 'Because – let us reiterate –, being none of the installments of payment of IMI autonomously challengeable – but only the assessment act to which they refer'. (emphasis ours).'

'The installments of payment of an IMI assessment or, in the situation under analysis, of a Stamp Duty assessment, under item 28 of the GMDT, are not autonomously challengeable, because they originate in a single annual obligation, in accordance with the teaching of Braz Teixeira: 'It is necessary not to confuse periodic installments, which, although being performed by successive acts at different times, originate in the same obligation and constitute the various portions of the same installment that was divided, with installments that must be performed periodically, not due to a division of the overall installment, but rather to the birth, also periodic, of new obligations, by the permanence of the factual prerequisites of taxation.' (TEIXEIRA, António Braz, 'Principles of Tax Law', Vol. I, 3rd Edition, Almedina, Coimbra, 1995, pp. 243 and 244).'

'Concluding that the installments of a tax assessment are not autonomously challengeable, as they constitute portions of an overall installment, originating in the same obligation, it is necessary to ascertain whether one of those installments can be considered as an 'act of autonomous challenge' referred to in article 10, no. 1, subparagraph a) of the LRTA, with reference to nos. 1 and 2 of article 102 of the CPPT.'

'In an annotation to article 102 of the CPPT, and with respect to subparagraph e) of its no. 1, which provides for the initial deadline for judicial challenge in the date of 'notification of the remaining acts that may be the subject of autonomous challenge under this Code', Jorge Lopes de Sousa writes: '(…) this rule applies not only to cases of autonomous challenge provided for in this Code [decisions of hierarchical appeal that involve the assessment of the legality of assessment acts (art. 76, no. 2), self-assessment acts (art. 131), withholding at source acts (art. 132) and fixed property value acts (art. 134), but also to other cases of challenge of direct assessment acts (article 86, no. 1 of the GTL)' (SOUSA, Jorge Lopes de, 'Code of Tax Procedure and Process – annotated and commented' Volume I, Áreas Publishing House, 2006, p. 734).'

'The fact that the declaration of illegality of the acts of fixing the taxable matter when it does not give rise to the assessment of any tax, acts of determination of taxable matter and fixing of property values, are part of the competence of arbitral tribunals, under article 2, no. 1, subparagraph b) of the LRTA, the request for constitution of the tribunal regarding them being submitted within 30 days from the date of the respective notification, under article 10, no. 1, subparagraph b) of the LRTA, leads to the necessary conclusion that acts of autonomous challenge referred to in article 10, no. 1, subparagraph a) of the LRTA are acts of assessment, self-assessment and payment on account, even though, with respect to these, a complaint or hierarchical appeal has been submitted, expressly or tacitly dismissed.'

'Having excluded the possibility of an installment constituting a taxable act of assessment, much less can it be attributed the nature of self-assessment or payment on account.'

'As each of the installments of the Stamp Duty assessments identified in the proceedings is not autonomously challengeable, for the reasons previously set out, we are dealing with a case of incompetence of the arbitral tribunal to assess and declare their illegality and consequent annulment.'

iv. The Respondent further argues the existence of original futility of the dispute, since the Respondent had already submitted, with reference to the same property registration article, the constitution of an Arbitral Tribunal, and the decision in that case, issued on 20 January 2016, upheld the preliminary exception of incompetence of the arbitral tribunal there invoked;

v. The object of the claim in that case corresponded to the first installment of stamp duty;

vi. It further alleges that the Claimant should be ordered to pay costs;

vii. And that the arbitral tribunal cannot assess the claim for compensation for undue guarantee, to the extent that it is a mere hypothesis not materialized;

viii. On these grounds, the exception of material incompetence of the arbitral tribunal should be upheld and the Respondent absolved of the instance and, if not so understood, the claim should be dismissed due to futility of the dispute.

IV. QUESTIONS TO BE DECIDED

Considering the facts and matters of law contained in the request for arbitral pronouncement submitted by the Claimant and the response of the Respondent, the substantial question to be decided by the Arbitral Tribunal is whether the value upon which item 28.1 of the GMDT is incurred is (i) the sum of the TPV of each floor or division susceptible to independent use in the case of properties in full or vertical property ownership (global value), or (ii) the TPV of each floor or division susceptible to independent use.

Beyond what is stated above, the Respondent raises exceptions which, if so considered, determine the absolution of the instance and/or the dismissal of the claim. Thus, proceedings will first be made to the assessment, in accordance with the provisions of article 29, no. 1, subparagraphs a) and e) of the LRTA, 13 of the Code of Process in Administrative Courts (CPAC) and 608, no. 1, of the CPC:

  1. Of the original futility of the dispute, which if so considered, constitutes a peremptory exception that determines the extinction of the instance and the dismissal of the claim, under the provisions of articles 89, no. 3 of the CPAC, and 287, subparagraph e) and 576 of the CPC;

  2. Of the incompetence of the Arbitral Tribunal to assess the legality of an installment of an assessment act, which is not in itself a challengeable taxable act, and which, if so considered, constitutes a preliminary exception that determines the absolution of the instance, under article 89, no. 2 of the CPAC and 577 of the CPC.

V. MATTERS OF FACT

With relevance to the assessment of the Claimant's claim, the following facts are found to be proven, based on the documents attached to the file, and not disputed by the Respondent:

  1. The Claimant is the owner of the urban property located in the parish of..., municipality of Lisbon, with the property registration article...;

  2. The identified urban property is in full property ownership;

  3. None of the parts or divisions susceptible to independent use of the property has a taxable property value exceeding €1,000,000.00;

  4. The total taxable property value of the property is €1,114,850.00;

  5. The Claimant was notified of the assessment acts for the second installment of SD relating to the year 2014, to which correspond the documents no.:

i. 2015..., of 20.03.2015, in the amount of €203.03 (two hundred and three euros and three cents);

ii. 2015..., of 20.03.2015, in the amount of €219.46 (two hundred and nineteen euros and forty-six cents);

iii. 2015..., of 20.03.2015, in the amount of €217.30 (two hundred and seventeen euros and thirty cents);

iv. 2015..., of 20.03.2015, in the amount of €203.03 (two hundred and three euros and three cents);

v. 2015..., of 20.03.2015, in the amount of €201.00 (two hundred and one euros);

vi. 2015..., of 20.03.2015, in the amount of €217.30 (two hundred and seventeen euros and thirty cents);

vii. 2015..., of 20.03.2015, in the amount of €201.00 (two hundred and one euros);

viii. 2015..., of 20.03.2015, in the amount of €217.30 (two hundred and seventeen euros and thirty cents);

ix. 2015..., of 20.03.2015, in the amount of €201.00 (two hundred and one euros);

x. 2015..., of 20.03.2015, in the amount of €219.46 (two hundred and nineteen euros and forty-six cents);

xi. 2015..., of 20.03.2015, in the amount of €203.03 (two hundred and three euros and three cents);

xii. 2015..., of 20.03.2015, in the amount of €192.16 (one hundred and ninety-two euros and sixteen cents);

xiii. 2015..., of 20.03.2015, in the amount of €201.00 (two hundred and one euros);

xiv. 2015..., of 20.03.2015, in the amount of €203.03 (two hundred and three euros and three cents);

xv. 2015..., of 20.03.2015, in the amount of €219.46 (two hundred and nineteen euros and forty-six cents);

xvi. 2015..., of 20.03.2015, in the amount of €217.30 (two hundred and seventeen euros and thirty cents); and

xvii. 2015..., of 20.03.2015, in the amount of €219.46 (two hundred and nineteen euros and forty-six cents);

in the total amount of €3,555.32 (three thousand five hundred and fifty-five euros and thirty-two cents).

  1. The Claimant did not proceed with payment of the assessed tax.

  2. The tax was assessed taking as a reference, for the determination of incidence, the total taxable property value of the floors or divisions allocated to housing.

  3. Arbitral case 395/2015-T assessed the claim for annulment of assessments of the first installment of SD relating to floors or divisions susceptible to independent use also under assessment in the present proceedings, having decided that acts of collection of the tax in question are not autonomously challengeable and consequently absolved the TA of the instance.

The conviction regarding the facts found to be proven was based on the documentary evidence presented by the Parties, whose authenticity and correspondence to reality were not questioned.

There are no other facts of relevance to the proceedings that are not considered to be proven.

VI. MATTERS OF LAW

As results from the matters of fact, what are in question are SD assessments relating to the year 2014, concerning item 28.1 of the GMDT, which was applied to the total taxable property value of the floors or divisions allocated to housing owned by the Claimant.

The TA considered, for purposes of applying that item 28.1 of the GMDT, the sum of the TPV of each of the respective floors or divisions susceptible to independent use, a sum that determines a TPV exceeding €1,000,000.00.

The Claimant considers that the TA should not have considered that sum, to the extent that the treatment to be given to a property in the regime of full property ownership cannot be different from that given to a property in the regime of horizontal property ownership – if, in the latter case, the TPV to be considered is that of each autonomous unit, in the case of full property ownership the TPV of each floor or division susceptible to independent use should also be considered. And, in the specific case, each floor or division susceptible to independent use allocated to housing has a TPV lower than €1,000,000.00.

Before entering, however, into the assessment of the merits of the case, it is necessary to address the exceptions raised by the Respondent.

A. OF THE ORIGINAL FUTILITY OF THE DISPUTE

The Respondent alleges, as indicated, that a prior arbitral case had already assessed the assessment acts of the first installment of SD relating to the property upon which the assessments that are the object of the present claim fall. In that case, the Respondent was absolved of the instance. Consequently, the present case is futile, as it concerns essentially the same object.

With all due respect, there is disagreement with what was alleged by the Respondent. First, it would be necessary to discuss whether the object of the claim is entirely the same, to the extent that the assessments then assessed are not entirely coincident as to the divisions susceptible to independent use covered. It is considered, however, that such a discussion is not even justified in light of the provisions of article 279, no. 1 of the CPC, applicable ex vi article 29 of the LRTA and 1 of the CPAC: "The absolution of the instance does not prevent the filing of another action concerning the same object." In this regard, and even if it were considered that the object is the same, which is not straightforward, it would always be irrelevant in light of the effects that the law attributes to absolution of the instance.

Thus, the exception invoked of original futility of the dispute is not considered to be well-founded.

B. OF THE INCOMPETENCE OF THE ARBITRAL TRIBUNAL TO HEAR THE CLAIM

The Respondent alleges that the Claimant does not challenge a taxable act, but rather challenges the payment of an installment of a taxable act contained in a collection note, that is, that the object of the proceedings is the annulment not of a taxable act, but of a collection note for the payment of the 2nd installment of a tax, a matter which is not, in any way, part of the set of rules that delimit the competence of tax arbitral tribunals, contained in article 2 of the LRTA.

The tax in question is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CPIM (article 23, no. 7 of the SD Code). By virtue of that reference, its assessment can be divided into installments, depending on its value, in accordance with the provisions of article 120, no. 1 of the CPIM.

Notwithstanding that it results from the file that the Claimant intends the annulment of the indicated assessments, it also results from its claim and the arguments adduced that, in fact, the Claimant intends the annulment of the tax assessment act, and it is irrelevant whether it does so through the challenge of one or another installment of the same.

In fact, what must be the object of challenge is the tax assessment act and not the collection to which the same gives rise, because, closely following the arbitral decisions cited by the Respondent, "the installments of a tax assessment are not autonomously challengeable, as they constitute portions of an overall installment originating in the same obligation". And those installments are not autonomously challengeable, as the Respondent rightly states. Their relevance shall be assessed for purposes of determining the deadline for filing the challenge of the act, which, under article 102, no. 1, subparagraph a) of the CPPT, applicable ex vi the provisions of article 10, no. 1, subparagraph a) of the LRTA, only runs from the end of the payment deadline for the tax contained in the last installment charged.

In light of the foregoing, and considering what is stated, the question – this Arbitral Tribunal understands – will not be so much about defining whether the act challenged in the present proceedings is an installment of the assessed tax or the assessment act itself. For this Arbitral Tribunal, and in light of the justification set out above, the challenge should always fall upon the assessment of the tax, in its entirety. The central question will rather relate to the value of the action.

The Claimant indicates as the value of the action the amount of €3,555.32, corresponding to the sum of the assessments attached to the claim. However, for it to be possible to assess the claim to challenge the assessment act, the value of the action will not be this, but rather the one corresponding to the total value of the collection, that is, €10,666.10.

Under article 97A, subparagraph a) of the CPPT, the value to be considered for purposes of costs or others provided for by law, for actions proceeding in tax courts, when the assessment is being challenged, is that of the amount whose annulment is intended. Thus, if only the assessment act (and not an installment thereof) can be challenged, then the value of the action must necessarily be that of the total collection value stated above.

For this purpose, civil procedural law – applicable ex vi article 29 of the LRTA and 31, no. 4 of the CPAC – provides, regarding the power of the parties as to the indication of the value of the action, that in the pleading in which it presents its defense, the respondent can challenge the value of the action indicated in the initial petition, provided that it offers another in its place, and that in subsequent pleadings the parties can agree on any value (305, no. 1 of the CPC). The failure of the respondent to object means that it accepts the value attributed by the claimant.

Already regarding the fixing of the value of the action, article 306 of the CPC stipulates, in its no. 1, that it is the duty of the judge to fix the value of the action, without prejudice to the duty of indication that rests on the parties. This value of the action is fixed in the sanating order, and if there is no sanating order, it is fixed in the judgment. That is, the judge is always to fix the value of the action, scrutinizing the value indicated by the parties.

Returning to the case at hand, the Arbitral Tribunal admits, under article 16, subparagraphs c), e) and f) of the LRTA, the challenge of the taxable act in its entirety, by understanding that only that is possible (as stated, an installment of the assessed tax alone is not challengeable) and that this results from what is the argument adduced by the Claimant with its claim. However, and by virtue of the provisions of article 306 of the CPC, the value of the action is fixed, for all purposes, at €10,666.10 (ten thousand six hundred and sixty-six euros and ten cents).

The exception invoked by the Respondent is thus groundless, at least partially.

C. ON THE MERITS OF THE CASE

It is now necessary to ascertain whether the TA acted in error regarding the factual or legal prerequisites for application to the case of item 28.1 of the GMDT.

For the assessment of the question in issue it is first necessary to analyze items no. 28 and 28.1 of the GMDT:

"28. Ownership, usufruct or right of superficies of urban properties whose taxable property value contained in the matrix, under the Code of the Municipal Property Tax (CPIM), is equal to or exceeding (euro) 1,000,000 - on the taxable property value used for purposes of IMI:

28.1 Per property with housing allocation or per land for construction whose authorized and expected construction is for housing, under the provisions of the IMI Code – 1%"

The Claimant argues that urban properties in full property ownership, when considered as a whole and composed of parts susceptible to independent use, do not fall within this normative provision.

It is necessary to interpret, for this purpose, the concept of "property" contained in that item 28.1 of the GMDT. To understand its content, the concepts of property contained in the CPIM (articles 2 to 6) should be consulted – under the provisions of article 67, no. 2 of the SD Code, according to which, to matters not regulated in the SD Code concerning item no. 28 of the GMDT, the provisions of the CPIM apply subsidiarily.

And such interpretation should always be made in accordance with the provisions of articles 11 of the General Tax Law (GTL) and 9 of the Civil Code, to which that refers, and this will be done.

Article 2 of the CPIM defines the concept of property and establishes, specifically, in its no. 4, that for purposes of this tax, each autonomous fraction, under the regime of horizontal property ownership, is regarded as constituting a property. This article makes no reference to properties in full property ownership or to parts of properties (floors or divisions susceptible to independent use).

From a literal interpretation of article 2 of the CPIM, no doubt will remain that parts of properties not in horizontal property ownership are not integrated, for purposes of IMI, into the concept of property.

As regards the determination of the taxable property value of each property, article 7 of the CPIM applies. According to no. 1 thereof, the taxable property value of properties is determined under the terms of this Code. Thus, and according to no. 2, subparagraph b) of that article 7, the taxable property value of urban properties with parts that can be classified under more than one of the classifications assigned to urban properties under article 6, no. 1 of the CPIM (namely, residential, commercial, industrial or service, land for construction and others) is determined as follows: "where the different parts are economically independent, each part is assessed by application of the corresponding rules, the value of the property being the sum of the values of its parts".

Consequently, also in the determination of the taxable property value of properties, there appears to be no reference that specifically determines that parts that are economically independent are considered as constituting, per se, properties. On the contrary, the literal interpretation of the rule allows the conclusion to the opposite effect: the value of the property is the sum of the values of its parts.

It is reiterated then: the CPIM does not equate, for determination of taxable property value, parts of properties susceptible to independent use with properties. On the contrary, it clearly separates the concepts of "property" and "part of property". Now, returning to article 2 of the CPIM, "parts of property" are not regarded as properties (precisely the opposite of what is specifically referred to regarding autonomous fractions, which are indeed equated with properties).

In the specific case, the urban property is composed of parts (independent) residential and parts (independent) commercial. Therefore, the value of the property is, in accordance with the rules indicated, the sum of the values of its parts.

There is not, therefore, equality of treatment in the CPIM between properties in horizontal property ownership and properties in full property ownership with parts that can be classified under more than one of the classifications assigned to urban properties. As regards the former, their respective autonomous fractions are, unequivocally, properties for purposes of IMI, as regards the latter, their independent parts do not come under that concept. The parts compose, as a whole, the property.

Consequently, if parts of properties, for purposes of IMI, are not properties, then they will not be for purposes of SD either. Thus, the taxable event is the ownership of the property as a whole, as follows from the concept contained in article 2 of the CPIM.

Neither do the arguments around articles 12, no. 3 and 119 of the CPIM, concerning, respectively, the concept of property matrix and the assessment of the tax, apply, in the understanding of this Arbitral Tribunal.

In fact, it is not through mere autonomization in the property matrix determined by article 12, no. 3 that floors or divisions susceptible to independent use acquire the quality of property that is not conferred upon them by article 2 of the same CPIM.

Property matrices are records in which are contained, in particular, the characterization of properties (article 12, no. 1 CPIM). Of that description is an integral part, in the case of properties in full property ownership, the floors or parts of property susceptible to independent use, which the law determines (no. 3 of the same article) be separately considered in the same property matrix entry.

As regards properties under the regime of horizontal property ownership, the law goes further: article 92 of the CPIM establishes that to each building under the regime of horizontal property ownership there corresponds also only one entry, but each of the autonomous fractions that compose it is detailed and individually identified by the letter that corresponds to it.

And even if it were considered that, as to the question of property matrix entry, the treatment between properties under the regime of full property ownership and properties under the regime of horizontal property ownership is substantially similar, it is considered that such would not overcome the fact that parts of properties are not specifically contained in article 2 of the CPIM, unlike what occurs with autonomous fractions.

Additionally, for each "property" entered in the matrix, a property record book is delivered to the respective owner (article 93, no. 1 of the CPIM). Now, there does not exist, for each floor or division susceptible to independent use of a property in full property ownership, an autonomous property record book, for the clear reason that it does not fall under the concept of property as defined for purposes of this tax.

As regards the assessment of IMI (article 119), the collection document must necessarily contain the breakdown of properties and their parts susceptible to independent use. This is because, under the provisions of article 7, no. 2, subparagraph b) of the CPIM, each part susceptible to independent use has the taxable property value calculated separately, as indicated previously.

Consequently, the Claimant's request for declaration of nullity of the assessments in question is not well-founded on the basis of lack of a legal prerequisite for the taxable event: as has been demonstrated, the taxable event exists (the ownership of an urban property with taxable property value exceeding €1,000,000.00).

Nor is the Claimant's request for annulment of the assessments in question well-founded on the basis of error in the prerequisites, whether factual or legal, because the prerequisites for the assessment and collection of the tax are clearly satisfied in the case in question.

In light of what has been decided, there is no basis for annulment of interest and charges arising from the unaided assessments, it being certain that the tribunal could never decide on the ordering of the Respondent even had the Claimant's request been well-founded, to reimburse amounts indicated as a mere hypothesis not materialized.

VII. DECISION

On these grounds, and based on the reasoning set out above, the Arbitral Tribunal decides:

a. To dismiss the exception of original futility of the dispute;

b. To dismiss the exception of incompetence of the arbitral tribunal to decide the case;

c. To fix the value of the action at €10,666.10 (ten thousand six hundred and sixty-six euros and ten cents);

d. To dismiss the request for arbitral pronouncement, the assessments under challenge being maintained.

Value of the case: €10,666.10 (ten thousand six hundred and sixty-six euros and ten cents)

Costs: Under the provisions of article 22, no. 4 of the LRTA, and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the value of costs is fixed at €918.00 (nine hundred and eighteen euros), at the charge of the Claimant.

Lisbon, 5 May 2016

The Arbitrator

Ana Pedrosa Augusto

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS on high-value properties in Portugal?
The Stamp Tax under Verba 28.1 of the TGIS (General Stamp Tax Table) is a tax introduced to target high-value residential properties in Portugal. It applies to urban properties for residential use with a taxable property value (valor patrimonial tributário) equal to or exceeding €1,000,000 as of December 31 of the relevant year. The tax represents a legislative innovation aimed specifically at luxury real estate holdings, with the assessment based on the taxable property value registered in the property matrix (CPIM) on the reference date.
Can individual Stamp Tax installment payments be autonomously challenged before the CAAD arbitral tribunal?
Yes, individual Stamp Tax installment payments can be autonomously challenged before the CAAD arbitral tribunal. In Process 668/2015-T, the claimant successfully brought 17 separate assessment acts (prestações) before the tribunal as individual contestable administrative acts. Each assessment document, though part of the same annual tax obligation, constituted a distinct liquidation act subject to independent challenge under the Legal Regime for Tax Arbitration (LRTA), demonstrating that taxpayers are not required to contest the entire annual obligation as a single unit but may challenge individual installments.
How is the value of the case determined when multiple Stamp Tax assessments are contested together?
When multiple Stamp Tax assessments are contested together in a single arbitral proceeding, the value of the case (valor da causa) is determined by the cumulative total of all contested assessment acts. In Process 668/2015-T, the claimant challenged 17 individual assessment documents issued on March 20, 2015, with amounts ranging from €192.16 to €219.46. The case value was fixed at €3,555.32, representing the sum of all 17 contested assessments, establishing that aggregated assessments relating to the same property and tax year should be valued cumulatively for jurisdictional and procedural purposes.
Does vertical property ownership (propriedade vertical) affect the application of Verba 28.1 Stamp Tax on real estate?
Yes, vertical property ownership (propriedade vertical) significantly affects the application of Verba 28.1 Stamp Tax. The claimant in Process 668/2015-T argued that properties in vertical ownership follow the same registration and taxation rules as horizontal property (condominiums), with individual assessments issued for each autonomous part. The key contention was that if the property is not constituted as horizontal property but individual units are taxed separately, each autonomous unit must independently meet the €1,000,000 threshold. The Tax Authority's approach of aggregating values across all units in a vertically-owned property was challenged as lacking legal support and creating unequal treatment compared to horizontal property structures where each unit is assessed individually against the threshold.
What was the outcome of CAAD arbitral decision 668/2015-T regarding the annulment of Stamp Tax assessments for 2014?
The provided excerpt of CAAD arbitral decision 668/2015-T does not include the final ruling or outcome. The document presents the procedural history, the claimant's arguments challenging the legality of 17 Stamp Tax assessment acts totaling €3,555.32 for 2014, and the grounds for annulment based on vertical property ownership interpretation. The claimant argued that none of the individual units exceeded the €1,000,000 threshold required under Verba 28.1, and therefore the assessments were illegal. However, the arbitral tribunal's reasoning, legal analysis, and final decision on whether to annul the contested assessments are not included in the excerpt provided.