Process: 672/2014-T

Date: April 30, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 672/2014-T) addresses whether Stamp Tax under Verba 28.1 of the General Stamp Tax Table (TGIS) applies to construction land (terreno para construção). The taxpayer challenged a €16,412.40 stamp tax assessment for 2013, arguing that Verba 28.1, introduced by Law 55-A/2012, only taxes 'urban properties with residential use' valued at €1,000,000 or more, not building plots. The claimant contended that construction land, registered as a building plot in the urban property registry, is legally distinct from residential properties under Article 6 of the Real Estate Tax Code (CIMI). The taxpayer argued residential use applies only to constructed properties based on their actual utilization per CIMI Article 41, invoking principles of tax legality and typicality. The Tax Authority countered that CIMI Article 45(2) requires applying the general property valuation methodology to building plots, including the residential use coefficient from Article 41, making them subject to Verba 28. The procedural timeline shows the CAAD tribunal was constituted in November 2014, the Tax Authority submitted its response in January 2015, witness evidence was waived, and the tribunal scheduled final decision for April 2015. The case raises fundamental questions about property classification for stamp tax purposes, the scope of Verba 28.1, and whether taxing construction land as residential property violates constitutional tax principles. Taxpayers can challenge stamp tax assessments through CAAD arbitration by filing within 90 days, with the tribunal following structured procedures including written submissions, evidence gathering, and issuing binding decisions with potential refund rights.

Full Decision

CASE NO. 672/2014-T

ARBITRAL DECISION

  1. REPORT

1.1. A..., taxpayer no. …, submitted on 09/09/2014, a request for arbitral decision, in which he petitions the declaration of illegality of the stamp tax assessment act for the year 2013 and to which corresponds a collection of € 16,412.40.

1.2. The Honourable President of the Ethical Council of the Administrative Arbitration Centre (CAAD), appointed on 29/10/2014 as arbitrator, Francisco Nicolau Domingos.

1.3. On 13/11/2014 the arbitral tribunal was constituted.

1.4. Pursuant to the provision of art. 17, no. 1 of Decree-Law no. 10/2011, of 20 January (RJAT) the Tax Authority (AT), on 18/11/2014 was notified to, if it wished, submit a response and request the production of additional evidence.

1.5. On 05/01/2015 the AT submitted a response and separate request, in which it requested the waiver of the production of witness evidence and the holding of the meeting described in art. 18 of the RJAT.

1.6. The tribunal on 19/03/2015 invited the Claimant to come to the file to indicate the facts on which he intended to examine the witness listed in order to assess the relevance of such proceeding.

1.7. On 24/03/2015 the Claimant informed that he waived the production of witness evidence requested.

1.8. The tribunal on 24/03/2015 notified the Respondent to, if it wished, exercise the right of contradiction concerning the request formulated by the Claimant for reimbursement of the 1st instalment of the stamp tax assessment relating to the year 2013.

1.9. The tribunal, on 16/04/2015 decided to waive the holding of the meeting to which art. 18, no. 1 of the RJAT refers, on the basis of the principle of autonomy of the arbitral tribunal in the conduct of proceedings and in the determination of the rules to be observed in order to obtain, within a reasonable timeframe, a substantive decision on the claims formulated, see art. 16, letter c) of the RJAT, determined that the parties, if they wished, should submit written arguments and scheduled a date for the pronouncement of the final decision on 30/04/2015.

1.10. The Claimant on 20/04/2015 submitted arguments in which he reiterates all the matters of fact and law contained in the request for arbitral decision.

  1. PRELIMINARY MATTERS

The proceedings are not affected by nullities, no questions have been raised that would prevent the examination of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to hear and decide the request, and consequently, the conditions are met for the final decision to be rendered.

  1. POSITIONS OF THE PARTIES

There are two positions in confrontation, that of the Claimant, contained in the request for arbitral decision and that of the AT in its response.

Summarising:

The Claimant submits, in particular, that:

a) "The taxpayer was notified of the assessment for voluntary payment in instalments of the stamp tax relating to the year 2013 and which lists as Item of the TGIS 28.1(...) as the basis for the application of the rate of 1% to the property value of the property in the amount of € 1,641,239.67...";

b) "The assessment in question allegedly arises from the application of the provisions of Law no. 55-A/2012, of 29 October.";

c) "... in the above-referenced table, stamp tax applies only to ownership, usufruct or right of surface of urban properties whose tax value shown in the registry, according to the Real Estate Tax Code (CIMI), is equal to or greater than (euro) 1,000,000 on the tax value used for IMI purposes: for property with residential use.";

d) "Now, as is shown in the urban property register relating to the land in question(...) it is a building plot and not a property with residential use as the law states.";

e) "...the taxpayer proceeded with the acquisition of the property in question, within the scope of his professional activity of purchase for resale of properties, having not undertaken any construction on it.";

f) "In this respect, the criterion of residential use only applies to constructed properties as it depends on the type of use thereof in accordance with the provisions of art. 41 of the CIMI.";

g) "It is further submitted that, having regard to the provisions of art. 6 of the CIMI, which clearly divides urban properties into four categories – distinguishing them! – the building plot is an urban property legally distinct from residential properties.";

h) "A fact which, moreover, results from the use correctly registered in the matrix as to the type of property as a building plot...";

i) "In these terms, the stamp tax assessment in question can only be understood as a mere error of the Tax Authority, being itself tainted with illegality as it is not even admissible according to the law.";

j) "Indeed, in the case in question, what we see is that the stamp tax assessment in question was carried out under the invocation of Item TGIS no. 28.1, when it is certain that the cited Law no. 55-A/2012, of 29 October does not provide for the taxation of building plots, but of property with residential use and, as demonstrated above, it must be considered only for constructed urban properties.";

k) "...in accordance with the principle of legality and typicality, the Tax Administration may only proceed with the assessment that is pertinent in the case of verification of each and every typical elements provided by law as generators of the State's right to the tax.";

l) "In Tax Law the typology is dominated not only by a principle of exhaustiveness but also by a principle of exclusivity.";

m) "Taxation thus results from the concrete verification of all tax prerequisites, as such provided for and described, abstractly, in the tax law.";

n) " Which does not occur in the case in question as shown in the urban property register(...) because it is a building plot...";

o) " The assessment act in this case constitutes the creation of a real tax or special contribution not permitted by law (art. 103/2 of the CRP and arts. 4/2 and 8 of the LGT.";

p) "The act under analysis is thus null and void for lack of authority and for having created taxes or special contributions not permitted by law (art. 133/2/a and d) of the CPA and arts. 103/2 and 165/1/i) of the CRP.";

q) "Indeed, the act in question does not indicate and there is no applicable legal provision that supports(...) the quantification of the amount determined and the assessment of the tax in question, nor were any justifying reasons provided.";

r) " The stamp tax assessment act thus suffers from a clear lack of factual and legal foundation, or, at least, this is insufficient, obscure and incongruous, whereby arts. 268/3 of the CRP, arts. 124 and 125 of the CPA and art. 77 of the LGT were directly violated.".

On the other hand, the AT argues that:

a) "Law no. 55-A/2012, of 29/10/2012 came to amend art. 1 of the CIS, and add to the TGIS item 28.";

b) "With this legislative amendment, the IS would now apply also to ownership, usufruct or right of surface of urban properties whose tax value shown in the registry, in accordance with the Real Estate Tax Code (CIMI) is equal to or greater than € 1,000,000.00.";

c) "The notion of use of urban property is grounded in the section relating to the valuation of properties, which is well understood because the valuation of the property (purpose) incorporates value to the property, constituting a determining factor of distinction (coefficient) for valuation purposes.";

d) "As results from the expression (...)value of the buildings authorized or foreseen, contained in art. 45, no. 2 of the CIMI, the legislator opted to determine the application of the methodology of evaluation of properties in general, to the evaluation of building plots, being consequently applicable to them the coefficient of use provided for in art. 41 of the CIMI.";

e) "Contrary to what is argued by the Claimant, the AT considers that the concept of property with residential use, for the purposes of the provisions of item 28 of the TGIS, comprises both constructed properties and building plots...";

f) " Note that the legislator does not refer to properties intended for housing, having opted for the notion of residential use - a different and broader expression, whose meaning must be found in the need to integrate other realities beyond those identified in art. 6, no. 1 letter a) of the CIMI.";

g) "The mere establishment of a right of potential construction immediately increases the value of the property in question, hence the rule contained in art. 45 of the CIMI that orders the separation of the two parts of the land.";

h) "... long before the actual construction of the property, it is possible to determine and establish the use of the building plot.";

i) "Item 28 of the TGIS applies to ownership, usufruct or right of surface of urban properties with residential use, whose tax value shown in the registry, in accordance with the CIMI, is equal to or greater than € 1,000,000.00, that is, it applies to the value of the property.";

j) "It is a general and abstract rule, applicable without distinction to all cases in which the factual and legal prerequisites are met.";

k) "... the assessment in question constitutes a correct interpretation and application of law to the facts, not suffering from any defect of violation of law, whether of the CRP or of the CIS, and consequently, the claim made should be judged unfounded and the Respondent Entity should be absolved of the request...".

  1. FACTS

4.1. FACTS CONSIDERED PROVED

4.1.1. The Claimant is the owner of the property registered in the urban property registry of the parish of ..., municipality of Lisbon, under article no. ....

4.1.2. On 31 December 2013, the (urban) property was registered as classified as "building plot", with a tax value (VPT) of € 1,641,239.67.

4.1.3. There is no construction on the said property.

4.1.4. The deadline for voluntary payment of the 2013 Stamp Tax assessment, 1st instalment (document 2014...), in the amount of € 5,470.80, ended on 30 April 2014.

4.1.5. The deadline for voluntary payment of the 2013 Stamp Tax assessment, 2nd instalment (document 2014...), in the amount of € 5,470.80, ended on 31 July 2014.

4.1.6. The Claimant voluntarily paid the amount better described in 4.1.4. hereof, on 16/10/2014, plus interest and procedural costs, all in the amount of € 5,638.01.

4.2. FACTS NOT CONSIDERED PROVED

There are no facts relevant to the decision that have not been considered proved.

4.3. GROUNDS FOR THE FACTS CONSIDERED PROVED

The facts considered proved originate from the documents used for each of the alleged facts and whose authenticity was not called into question. Similarly, the facts not contested were also taken as established.

  1. THE LAW

5.1. ILLEGALITY OF THE STAMP TAX ASSESSMENT ACT FOR 2013

Preliminarily, the Claimant invokes a formal defect, that is, that the assessment is not substantiated, because, in his view, it is not possible to understand the reasons for the decision, especially as it contains no factual or legal motivation.

Case law holds as to the substantiation of the assessment act that: "An act shall be sufficiently substantiated when the administered, placed in the position of a normal recipient – the bonus pater familias of which art. 487, no. 2 of the Civil Code speaks – may come to know the factual and legal reasons that are at its origin, in order to allow him to choose, in an informed manner, between acceptance of the act or the activation of legal means of challenge, and so that, in the latter circumstance, the court may also exercise effective control of the legality of the act, assessing its legal correctness in light of its contextual substantiation"[1]. Or, in other words, the substantiation must incorporate elements of fact and law that allow the recipient of the act to understand the decision-making process of the AT.

In the present case, it is possible to discern in the assessment, the reference to the identification of the registered property, to its tax value, to the tax year, to the date of assessment, to the item of the TGIS and to the rate used to determine the amount of tax and, finally, to the amount of collection. For this reason, the tribunal considers that the act is sufficiently substantiated, as it contains the minimum references to the facts and law used by the AT for its implementation. Furthermore, the lack of substantiation imputed to it did not constitute any obstacle for the Claimant to request its annulment in an assertion in which he attributes to the assessment a list of defects. In sum, the act does not suffer from the defect of lack of substantiation that the Claimant attributes to it.

As to the merits, the first question that should be examined by the tribunal consists in determining the scope of application of item no. 28.1 of the TGIS in its version at the date of the tax event. That is, it must be determined whether building plots fall within the scope of the tax rule, as the AT argues, or whether, on the contrary, they are excluded from it.

To accomplish this task, it is first necessary to find the rule whose parties disagree in its interpretation.

Thus, item 28 of the TGIS provides that the following are subject to taxation: "Ownership, usufruct or right of surface of urban properties whose tax value shown in the registry, in accordance with the Real Estate Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the tax value used for IMI purposes:

28.1 - For property with residential use – 1%..."[2].

In this way it is necessary to examine the concept of "(urban) property with residential use" to which the rule under interpretation refers. Now, as it is not possible to resolve the issue by reference to the CIS, it is by virtue of the provision of art. 67, no. 2 of the same law necessary to apply the rules of the Real Estate Tax Code (CIMI) as to the concept and types of urban properties.

Consequently, art. 4 of the CIMI provides on the concept of urban property: "...those that should not be classified as rural...". And art. 6, no. 1 continues: "Urban properties are divided into: a) Residential; b) Commercial, industrial or service properties; c) Building plots; d) Others". No. 2 provides that: "Residential, commercial, industrial or service properties are buildings or constructions licensed as such or, in the absence of a license, which have as their normal destination each of these purposes".

Thus, for the classification of a property in each of the enumerated categories, the nature of its use is relevant, that is, the purpose to which it is intended.

Now, the stamp tax item under analysis includes properties that are already subject to residential purposes, that is, those which have been given that destination[3]. But it is legitimate to formulate the following question: what about those properties (building plots) with such destination or those in which the intended purpose is unknown, do they come within "properties with residential use"?

The answer to the aforementioned question can only be in the negative. Indeed, the literal text of the item under analysis allows for the exclusion from the scope of application those building plots that have not implemented any type of use, inasmuch as they are not yet applied or intended for residential purposes. In other words, it is not possible to classify them as "properties with residential use", since they do not yet have any use or other purpose, other than construction of unknown type[4].

Yet, one may ask: do building plots that are not yet intended for residential purposes but already have a determined right, such as in the case of a subdivision license, fall within the scope of item 28.1 of the TGIS? We consider that they do not. In fact, art. 6, no. 2 of the CIMI, subsidiarily applicable, points to the need for an actual use.

In fact, the legislator did not use the expression "residential properties", but rather "properties with residential use", that is, the property must already have effective use for that purpose.

Now, this interpretation becomes clear with reference to a summary of the words of the Honourable Secretary of State for Tax Affairs, when presenting and discussing in the National Assembly the draft law[5], in that he argued that it: i) aimed to create a special tax on residential urban properties of higher value; ii) created special taxation on high-value properties intended for housing and iii) the tax would apply to houses with a value equal to or greater than 1 million euros. Or, in other words, the category to which the legislator refers with the expression "properties with residential use" are "houses".

The same interpretation is maintained, even if it is considered that in determining the VPT of urban properties, classified as building plots, account should be taken of the use which the authorized or foreseen building for these plots will have in order to determine the value of the implementation area. This does not mean that building plots should be classified as "properties with residential use", inasmuch as this designation refers in the scheme of the CIMI to properties and constructions that may be inhabited[6].

Reverting this interpretation to the present case, it must be said that the building plot which is the subject of these proceedings does not come within the category of "properties with residential use" and, as such, the 2013 stamp tax assessment must be declared illegal.

It might be thought that this interpretation was shaken by the entry into force of Law no. 83-C/2013, of 31 December (State Budget Law for 2014) in the section where it gave new wording to item 28.1 of the TGIS, in which it now refers to the categories described in art. 6 of the CIMI, that is, "residential property" and "building plot". However, we consider not, because, as counsellor ISABEL MARQUES DA SILVA maintains[7]: "... the legislator did not give interpretive character (...), it merely makes clear for the future that building plots whose authorized or foreseen construction, for housing purposes are covered within the scope of item 28.1 of the General Stamp Tax Table". That is, nothing is clarified in relation to acts carried out under the previous wording and another legislative choice is demonstrated with the reference to the types of urban property, i) residential and ii) building plots. Consequently, such legislative amendment does not in any way modify the decision set out in the preceding paragraph.

For all these reasons, if the Claimant's property was registered as a building plot at the date of the tax event relating to the year 2013[8], the tax rule in question cannot be applicable to the present case, on pain of illegality. For this reason, the 2013 stamp tax assessment must be annulled, with all the legal consequences.

5.1.2. INDEMNITY INTEREST

Art. 43, no. 1 of the LGT provides that: "Indemnity interest is due, when it is determined, in administrative reclamation or judicial challenge, that there has been an error attributable to the services as a result of which the tax debt was paid in an amount greater than legally due". In other words, there are three requirements for entitlement to the aforementioned interest: i) The existence of an error in a tax assessment act attributable to the services; ii) Determination of such error in administrative reclamation or judicial challenge proceedings and iii) Payment of a tax debt in an amount greater than legally due.

In this way, it is immediately possible to pose a question: is it admissible to determine the payment of indemnity interest in tax arbitration proceedings? The answer to the question is in the affirmative. Indeed, art. 24, no. 5 of the RJAT provides that: "Payment of interest, regardless of its nature, is due in accordance with the terms provided for in the General Tax Law and the Code of Tax Procedure and Process".

Understanding the issue, the illegality of the assessment is attributable to the AT due to the lack of normative support at the time of its implementation. Consequently, the request for indemnity interest is well-founded, calculated at the determined rate, in accordance with the provisions of art. 43, no. 4 of the LGT, between the date when the undue payment was made and until full reimbursement.

  1. DECISION

Accordingly, and with the substantiation described above, the request is judged to be well-founded, with the consequent annulment of the act which is the subject of this arbitral decision. The AT is further condemned to pay the Claimant indemnity interest, at the legal rate, from the date of payment of the 1st instalment until full reimbursement.

  1. VALUE OF THE CASE

The value of the case is fixed at € 16,412.40, pursuant to art. 97-A of the CPPT, applicable by virtue of the provisions of art. 29, no. 1, letters a) and b) of the RJAT and art. 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs to be borne by the AT, in the amount of € 1,224, see art. 22, no. 4 of the RJAT and Table I attached to the Regulation on Costs in Tax Arbitration Proceedings.

Notify.

Lisbon, 30 April 2015

The Arbitrator,

Francisco Nicolau Domingos

		[1] Decision of the Supreme Administrative Court of 23/04/2014, delivered in case no. 01690/13 and with reporting judge counsellor ASCENSÃO LOPES.


	
		[2] In the version in force at the date of the tax events.


	
		[3] See in this sense, in particular, the decision of the Supreme Administrative Court, delivered in appeal 048/14, of 09/04/2014, with reporting judge counsellor ISABEL MARQUES DA SILVA; the decision of the Supreme Administrative Court, delivered in appeal 046/14, of 14/05/2014, with reporting judge counsellor ASCENSÃO LOPES; and the arbitral decision delivered in case 53/2013-T, of 02/10/2013, in which counsellor JORGE LOPES DE SOUSA served as president-arbitrator.


	
		[4] See decision delivered in case 53/2013-T, of 02/10/2013, in which counsellor JORGE LOPES DE SOUSA served as president-arbitrator.


	
		[5] Parliamentary Records of the National Assembly, I Series, no. 9/XII – 2, of 11 October, p. 32.


	
		[6] Decision of the Supreme Administrative Court, delivered in appeal 048/14, of 09/04/2014, with reporting judge counsellor ISABEL MARQUES DA SILVA.


	
		[7] In the context of the decision 048/14, of 09/04/2014, as reported by her.


	
		[8] That is, 31 December 2013, the date on which the VPT of the property was € 1,641,239.67.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28 of TGIS applicable to construction land (terreno para construção)?
The applicability of Stamp Tax under Verba 28 TGIS to construction land is disputed. The taxpayer argues that Verba 28.1 explicitly requires 'property with residential use' and that this classification applies only to constructed properties based on their actual utilization under CIMI Article 41. Since building plots (terrenos para construção) are legally distinct from residential properties under CIMI Article 6 and have no constructed use, they should not fall within Verba 28.1's scope. The Tax Authority contends that CIMI Article 45(2) requires applying the residential use coefficient to building plots for valuation purposes, bringing them within the tax base. The resolution depends on whether 'residential use' is determined by actual use (requiring construction) or by valuation methodology coefficients applied to potential future use.
How can a taxpayer challenge a Stamp Tax assessment through CAAD tax arbitration proceedings?
Taxpayers challenge Stamp Tax assessments through CAAD by filing an arbitration request within 90 days of notification or becoming aware of the contested act. The process involves: (1) submitting a detailed petition identifying the illegal act and legal grounds; (2) appointment of an arbitrator by the CAAD President; (3) tribunal constitution; (4) notification to the Tax Authority to submit a response within statutory deadlines; (5) evidence production phase where parties may request witness testimony or documentary evidence; (6) optional hearing under RJAT Article 18, which tribunals may waive based on case circumstances; (7) submission of written arguments; and (8) issuance of a binding arbitral decision. In this case, the tribunal waived the oral hearing, relying on written submissions, and scheduled the final decision for approximately six months after the initial request.
What are the legal grounds for contesting the classification of property under Verba 28.1 of the Tabela Geral do Imposto do Selo?
Legal grounds for contesting property classification under Verba 28.1 include: (1) violation of tax legality and typicality principles (Articles 103(2) CRP, 4(2) and 8 LGT), arguing the assessment creates taxation not permitted by law since construction land lacks the 'residential use' requirement; (2) incorrect legal interpretation of CIMI provisions, distinguishing building plots as a separate category under Article 6 from residential properties; (3) argument that residential use under Article 41 applies only to constructed properties based on actual utilization, not vacant land; (4) nullity for lack of legal authority and creation of unauthorized taxes (Article 133(2)(a)(d) CPA); and (5) insufficient legal and factual grounds in the assessment notice (Articles 268(3) CRP, 124-125 CPA, 77 LGT). The challenge relies on demonstrating the property registry correctly classifies the property as a building plot, not residential use.
What procedural steps does a CAAD arbitral tribunal follow when deciding Stamp Tax disputes on real estate?
CAAD arbitral tribunals follow these procedural steps in Stamp Tax real estate disputes: (1) receipt and registration of the arbitration request; (2) appointment of arbitrator(s) by the CAAD President; (3) formal constitution of the tribunal with notification to parties; (4) notification to the Tax Authority under RJAT Article 17(1) to respond and request additional evidence within statutory deadlines; (5) examination of preliminary matters including jurisdiction, standing, and procedural regularity; (6) evidence phase where tribunals may invite clarification, accept witness testimony, or request documents; (7) decision on whether to hold an Article 18 RJAT hearing, exercising procedural autonomy under Article 16(c); (8) setting deadlines for written arguments; (9) legal and factual analysis applying tax law principles; and (10) issuing the final arbitral decision within the scheduled timeframe, addressing both substantive legality and any refund requests.
Can a taxpayer obtain a refund of Stamp Tax installments already paid if the CAAD rules the assessment unlawful?
Yes, taxpayers can obtain refunds of Stamp Tax installments already paid if the CAAD rules the assessment unlawful. The claimant in this case specifically requested reimbursement of the first installment of the 2013 stamp tax assessment, and the tribunal notified the Tax Authority to exercise its right of contradiction regarding this refund request. When an arbitral decision declares a tax assessment illegal, the unlawfully collected amounts must be refunded under general tax law principles of unjust enrichment and taxpayer rights (LGT provisions). The refund includes the principal amount unlawfully paid, and taxpayers may also be entitled to compensatory interest from the payment date until reimbursement. CAAD decisions are binding on the Tax Authority, which must execute the refund after the decision becomes final, typically within the deadlines established by tax procedure law unless the Tax Authority appeals to judicial courts on limited grounds.