Process: 71/2018-T

Date: November 7, 2018

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 71/2018-T addresses the controversial application of Stamp Tax (Imposto do Selo) under Verba 28.1 of the General Stamp Tax Table (TGIS) to building land (terrenos para construção). The claimant, A... S.A., challenged a €21,636.65 Stamp Tax assessment for 2015 on urban land registered in Porto district, arguing the property did not qualify as 'land for construction whose authorized or provided construction be for housing' on the relevant tax event date (31/12/2015). The taxpayer contended that prior information approval (PIP) only occurred in February 2016, after the tax reference date, and included mixed-use development (residential, commercial, and services), not exclusively housing. The claimant invoked two grounds for annulment: (1) insufficient reasoning in the AT's dismissal decision of the gracious complaint, violating Article 77 of the General Tax Law, as the authority merely reproduced legal provisions without addressing substantive arguments; and (2) error in applying Verba 28.1 prerequisites, since no authorized or provided housing construction existed on 31/12/2015. The case highlights critical timing issues in Stamp Tax assessments on building land, particularly regarding when construction authorization or provision crystallizes for tax purposes. The arbitration tribunal was established in May 2018, with parties dispensing with oral hearings in favor of written submissions. This decision provides important guidance on evidentiary requirements for Verba 28.1 TGIS application, the duty of tax authorities to provide substantive reasoning when dismissing complaints, and procedural rights available to taxpayers through CAAD arbitration to challenge building land Stamp Tax assessments.

Full Decision

ARBITRAL DECISION

REPORT

On 26 February 2018, A..., S.A., Tax ID No. ..., hereinafter referred to as the Claimant, with registered office in Portugal, requested the establishment of an arbitral tribunal and submitted a request for arbitral pronouncement, pursuant to subparagraph a) of paragraph 1 of Article 2 and subparagraph a) of paragraph 1 of Article 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter referred to as AT) is the Respondent.

The Claimant is represented, in these proceedings, by her representative, Dr. B..., and the Respondent is represented by jurists Dr. C... and Dr. D....

By means of the request for establishment of the arbitral tribunal and request for arbitral pronouncement, the Claimant seeks, on the one hand, to have declared the illegality and respective annulment of the Stamp Duty tax assessment act No. 2015..., relating to the year 2015, in the amount of €21,636.65 (twenty-one thousand, six hundred and thirty-six euros and sixty-five cents) levied on the property registered under article ..., municipality of ... and ..., council of..., district of Porto, and on the other hand, the declaration of illegality and consequent annulment of the act of dismissal of the gracious complaint with No. ...2017....

Having verified the formal regularity of the request, pursuant to subparagraph a) of paragraph 2 of Article 6 of the RJAT, the undersigned was designated by the President of the Deontological Council of CAAD as arbitrator.

The Arbitrator accepted the designation made, and the arbitral tribunal was established on 7 May 2018, at the headquarters of CAAD, located at Avenida Duque de Loulé, No. 72-A, in Lisbon, as confirmed by the communication of the establishment of the arbitral tribunal which is attached to these proceedings.

After being duly notified, the Respondent submitted, on 29 May 2018, its response, presenting its defence by exception which the Tribunal decided to rule on only at the time of the final decision, and by objection.

By order of 6 July 2018, the Tribunal set 3 September 2018 as the date for the meeting provided for in Article 18 of the RJAT, as well as for the examination of the witnesses listed by the Claimant.

On 2 August 2018, in response to the order indicated above, the Claimant submitted a request in which it requested the dispensation of the meeting and the examination of the witnesses listed, nevertheless expressing its willingness to submit written arguments.

In response to this request, the Tribunal determined, through the order of 8 August 2018, on the one hand, to dispense with the said meeting and examination of witnesses, on the other, to grant a successive period of 10 days to the Claimant and to the Respondent, in that order, to submit their respective written arguments, with the Respondent's time period beginning with the notification of the Claimant's arguments, or with the expiry of the time period for that purpose, furthermore, and in compliance with the provisions of paragraph 2 of Article 18 of the RJAT, it designated 7 November 2018 as the date for delivery of the arbitral decision, and finally, it advised the Claimant to proceed with payment of the subsequent arbitral fee, pursuant to paragraph 3 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, and to communicate such payment to CAAD.

On 10 September 2018, the Claimant submitted its written arguments.

II. The Claimant supports its request, in summary, as follows:

The Claimant supports the request for annulment of the Stamp Duty assessment for the year 2015, in the amount of €21,636.65 (twenty-one thousand, six hundred and thirty-six euros and sixty-five cents) to which it was subject, as owner of the urban property—land for construction—registered in the urban property register under article ..., of the Union of parishes of ... and ..., council of..., district of Porto, as being illegal, for being vitiated by the following defects:

Lack of reasoning for the decision regarding the dismissal of the gracious complaint presented against the assessed levy, in that, according to the Claimant's express statement, "AT summarized the reasoning for the dismissal of the gracious complaint to a few brief paragraphs, reproducing what results from the law and saying that the approved PIP (only in 2016, note!) provides for housing, without however pronouncing itself on the arguments raised by the Author. (...) the AT does not refer even once to the main argument raised by the Author, namely, it says nothing about whether the land in question has any construction whose construction for housing is authorized or provided for; this is, moreover, the provision of the tax rule that AT applies, but to which it does not refer. It merely limited itself to AT, with due respect, to 'insist on the matter' that 'the assessment was made in accordance with the current elements in the matrix' and 'issued in observance of the aforementioned regulatory framework that in the context of Stamp Duty was applicable', without, however, objectively and factually assessing the arguments and facts brought to its knowledge(...)."

Continuing, the Claimant states that the reasoning used by AT "(...) does not satisfy the requirements of Article 77 of the General Tax Law, having limited itself to expounding a formalist reasoning, with faithful reproduction of various articles of CIMI and CIS." Furthermore, "In this case, the reasoning is insufficient since AT does not present any sufficient justification for having decided as it did and nor does it make any counterposition with the arguments presented by the Author.", whereby, "(...) the order dismissing the gracious complaint that confirmed the tax assessment is vitiated by the defect of lack of reasoning, which is invoked for the due and legal purposes.

The Claimant invokes the defect of error regarding the prerequisites for application of item 28.1 of TGIS, in that it understands that "it is the owner of an urban property, specifically land for construction, registered in the urban property register under article No. ..., located in the Union of parishes of ... and ..., council of ... (...) with a taxable property value of €2,163,664.75. By reference to the year 2015 (...) it was notified of the assessment relating to Stamp Duty, with a total levy of €21,636.65 to be paid in three instalments, by the application of item 28.1 of the General Table of the Stamp Duty Code, as the property in question and better identified above was allegedly treated as 'land for construction whose authorized or provided construction be for housing' and, in this way, if subsumed to the provision of item 28.1 after the amendment given to it by Law No. 83-C/2013, of 31 December."

The Claimant clarifies that "the property, although land, was not, on the date of the tax event (31/12/2015) land for construction whose authorized construction was for housing, nor land for construction whose provided construction was for housing." Indeed, "it made known to AT that, on 03/02/2016, by the Municipal Council of ... the request for prior information (PIP No. ...) had been approved, within which is provided not only the construction of an area intended for housing, but also intended for commerce and services (...) and it further made known that the effectiveness of that request for prior information was dependent on the exchange of areas of public domain with areas of private domain, an exchange that was formalized by public deed executed on 23/02/2017."

The Claimant thus considers that "the land at issue, on the date of the tax event, 31/12/2015 was not subsumed to item No. 28.1 (...)"

Further referring, the Claimant that "(...) in the year 2012, the legislator then added item No. 28.1 to TGIS, whose wording remained (...) until 2014: (...)". Indeed, the Claimant considers that "[i]n the initial version of that item 28.1 the problem centered on the interpretation of what to understand by housing affiliation as a formal characteristic and directly related to the affiliation coefficient of an urban property. However, the State Budget Law for 2014 (approved by Law No. 83-C/2013, of 31/12) altered the rule provided for in item 28.1 (...)." The legislator thus established that land for construction in respect of which construction for housing is authorized or provided is also subject to the customarily called luxury tax."

The Claimant adds that "the land at issue is not subsumed to this rule in that, during the year 2015, there was not authorized or provided any construction for housing, OR, the land did not enjoy effective building potential for housing. Nothing was provided! Although the Author was the holder of a building permit issued by the Municipal Council of ... for that property – the subdivision permit No. .../83, amended by Amendment No. .../09, of 04/06/2009 contained in the P.A. – the fact is that, on 31/12/2015, the Author still was not legally authorized to construct whatever on that land (which only occurred in February 2017).", pointing to the factual reasons for this situation.

Furthermore, adducing in that sequence that "(...) from the documentary elements brought into the proceedings it results unequivocally that there was no construction for housing authorized or provided. What was once provided had lost its content—in practice, never had it—and the Author was, in 2015, as she was for many years, without knowing what one day would be authorized. Whereby necessarily one must consider that the said land could not be regarded as land for construction, since there was not, at that date, any viable construction." Thus being, "[t]he prior qualification of the land as being 'for construction' had been emptied, rendered completely ineffective, by reasons of subsequent public interest that prevented the Author from giving it any use."

The Claimant further adds that "In the month of July 2015, the Municipal Council of ... dispensed the Author from providing a bank guarantee whose justification was precisely the 'construction of infrastructure' in the subdivision (...)." Now, "(...) if the Author was prevented from carrying out any construction or building precisely by the lack of definition as to the redesign of the project, then, she was dispensed from providing the bank guarantee. This demonstrates, clearly and unequivocally, that no construction was authorized or provided. Because if any construction for housing were authorized or provided, the Municipal Council of ... would not have dispensed the Author from providing the guarantee. Thus it is easily seen that the land for construction, which supposedly would be intended to build dwellings does not serve its announced purposes...For all that has been set forth, with the effective possibility of construction unknown and the concrete purpose that would be granted to the land unknown, it cannot be considered 'land for construction whose authorized or provided construction be for housing', under the terms and for the purposes of the provision in item No. 28.1 of TGIS, in the wording applicable to the year 2015."

Concluding to the effect that "(...) AT erred regarding the factual prerequisites which it judged to be verified and erred regarding the law by applying to the reality of the Author tax rules not applicable, violating Articles 2/4, 3/3/u), 5/u), 23/7, 44/5 of CIS and item 28.1 of TGIS."

Finally, the Claimant argues the defect of violation of the constitutional principle of tax equality and tax capacity, on the grounds that: "(...) that item 28.1, in the wording applicable to the situation at issue, merely introduced a distortion factor in the tax regime for real estate property that represents, not only a distortion in the internal coherence of the set of the fiscal system or even of Stamp Duty considered in isolation, but a distortion in the internal coherence itself of the tax rule contained in the said item. This is because, in bringing together in the same item the taxation of luxury homes and land for construction, on the assumption that both are subsumed generically to the category of real property of high taxable property value, it merely confuses manifestations of wealth with factors of production of that same wealth."

Continuing to the effect that "(...) the Constitutional Court Judgment No. 250/2017 of 24/05/2017 (...) judged unconstitutional the rule of item 28.1 of the General Table of Stamp Duty, approved by Law No. 55-A/2012, of 29 October, and amended by Law No. 83-C/2013, of 31 December, to the extent that it imposes annual taxation on the ownership of land for construction whose authorized or provided construction be for housing, whose taxable property value be equal to or greater than €1,000,000.00."

Further referring that "(...) if behind the tax imposed on the owner of a residential dwelling with a taxable property value greater than one million euros there may be a taxpayer with sufficient economic capacity to bear the respective tax burden, behind the tax imposed on the owner of land for construction there will normally be an entrepreneur, as a rule in the form of a commercial company engaged in real estate development, about whose economic capacity we know nothing. In fact, we cannot presume that such taxpayer has economic capacity proportional to the value of the land, which is merely instrumental in relation to their economic activity. We do not know what profit margin they will derive from its exercise, whether they are in legal and economic conditions to develop it, or whether they may not even have a negative net situation - it is precisely the case we are concerned with: the taxpayer is a real estate commercial company.".

Indeed, the Claimant considers that "(...) the amendment to the wording made by Law No. 83-C/2013 to item No. 28.1 of TGIS extended the normative provision to distinct realities, both on the physical and legal level, which therefore correspond to equally distinct tax facts. Because while residential buildings correspond to actual buildability, definitively incorporated in the legal sphere of its holder, land for construction corresponds to merely potential buildability, legally consolidated in the legal sphere of the property owner, but not yet materialized. And if land for construction is valued essentially by the content of its future urban development use, it is not possible to integrate them into the normative provision of a tax that aims to tax luxury homes, without considering, both the building typology and the legal structure of the buildings that will be constructed on them which may not be luxury homes, as here occurs."

Indeed, according to what the Claimant argues "Land for construction with a taxable property value exceeding one million euros, but intended for construction of a collective housing building that will consist of autonomous units of small or medium size, all of value much less than one million euros, is not comparable, nor expresses economic capacity equivalent to land for construction intended for construction of one or more luxury homes. And even less so does it compare to an already constructed luxury home, whatever its typology. Because item 28.1, furthermore, disregards the legal nature of the taxpayers, not distinguishing individual subjects from collective persons, nor the specific purpose pursued by the latter, it will apply indiscriminately, for example, to a luxury home in a tourism venture of ... and to land for construction of a collective housing building under cooperative scheme in the metropolitan suburbs of Lisbon or Porto - which is precisely the case we are concerned with: land in ..., in the suburbs of Porto."

"(...) in the case at issue (...) on the date of the tax event, the land did not even have authorization or provision for housing construction, to such an extent that the Author was taxed for a non-existent tax capacity."

Thus being, "the Author invokes, therefore, that item 28.1 of the General Table of Stamp Duty when interpreted to mean that 'land for construction whose authorized or provided construction be for housing' should be taxed must be judged unconstitutional - and, to that extent, should be disapplied - for violation of the principle of tax equality enshrined in Articles 13 and 104, paragraph 3 of the Constitution of the Portuguese Republic, both because it does not respect the different tax capacity of the owners of the properties on which it falls, affecting indiscriminately taxpayers with and without the tax capacity necessary to bear the tax, and because the differentiations it introduces between those covered and excluded from its scope are not proportional, being inadequate to satisfy the purpose envisaged by the rule, which is to tax in an aggravated manner real estate assets of greater value in terms that satisfy 'the principle of social equity in austerity'."

Concluding its exposition by petitioning, regarding this defect, to the effect that: "(...) the tribunal should conclude that Articles 1, 2, 3, 4, 5, 7, 22, 23, 44, 46, 49 and 67 of the Stamp Duty Code, to the extent that they refer to item No. 28.1 of the general table are vitiated by unconstitutionality, and cannot, for that reason, be applied to the present case, and this request for arbitral pronouncement should be judged to be well-founded and, consequently, the assessment should be annulled."

III. In its Response, the Respondent, invoked, in summary, the following:

For its part, AT, in its response, defends itself, by exception and by objection:

By exception, the Respondent invokes, on the one hand, the material incompetence of the arbitral tribunal to review the request for a declaration of material unconstitutionality of item 28.1 of TGIS, on the grounds that "in paragraph 1 of Article 2 of the RJAT 'the matters on which the arbitral tribunal can rule are set out with precision', in accordance with the Preamble of Decree-Law No. 10/2011, of 20 January; and the precision of that definition is expressed through the exhaustive enumeration of the competence of this jurisdiction, namely:

· Claims relating to the declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payments on account, and

· Claims relating to the declaration of illegality of acts of determination of taxable matter when they do not give rise to the assessment of any tax, acts of determination of collectible matter and acts of fixing property values."

In this context, the Respondent argues that "[i]t is manifest that the competence of the arbitral judicial forum does not include the review of the constitutional conformity of legislative acts or their rules, ex vi Article 2, paragraph 1 of the RJAT; Whereby the Arbitral Tribunal is incompetent ratione materiae to review the request for declaration of material unconstitutionality 'of item 28 of the General Table of Stamp Duty, for violation of the principle of tax capacity, as an aspect of the principle of equality, provided for in Article 13 and 104 paragraph 3 of the CRP.' (cfr. Articles 106 to 122 of the arbitral request.)"

Petitioning finally, regarding this matter that "[a]bsolute incompetence ratione materiae constitutes a dilatory exception that prevents the continuation of the proceedings, leading to absolution of the instance regarding the respective request, in accordance with the provisions of Articles 576, paragraph 2, 577, subparagraph a) and 278, paragraph 1, subparagraph a) of the CPC, applicable ex vi Article 29, subparagraph e) of the RJAT."

By objection and as regards the alleged defect of lack of reasoning, the Respondent argues that: "[t]he lack of reasoning invoked by the Claimant is not understood, since in Gracious Complaint No. ...2017... AT addresses the matter, although the arguments adduced by the Claimant continue not to prevail." Now, "(...) the reasoning of tax acts aims to allow knowledge of the reasons that determined the body to act as it acted, so as to allow the taxpayer to consciously choose between accepting the legality of the act or impugning it." In this way, the Respondent understands that "the act is duly reasoned, since the Claimant was able to grasp the arguments of fact and law and, by not agreeing, deduced the present request for arbitral pronouncement."

Concluding to the effect of "[t]hat the gracious complaint is duly reasoned, both as to fact and law, not violating any legal or constitutional principle."

Regarding the alleged defect of Error regarding the prerequisites of the assessments, the Respondent understands that: "[w]hat is at issue here is the assessment that results from the direct application of the legal rule, and which translates into objective elements, without any subjective or discretionary assessment." In this way, "[c]onsulting the property register that forms the basis of the present assessment, it is verified that land for construction is assigned to housing. Now, urban properties that are land for construction and to which the housing affiliation has been attributed within the scope of their respective valuations, appearing such affiliation in their respective registers, are subject to Stamp Duty."

Indeed, the Respondent considers that "[t]he act of, in the rule of incidence – item 28.1 of TGIS – having made positive the property with housing affiliation in detriment of the residential property, makes an appeal to the affiliation coefficient, cf. Article 41 of CIMI, which applies, indistinctly, to all urban properties.", whereby, in this sequence, "[t]he Law No. 55-A/2012, of 29 October which altered Article 1 of the Stamp Duty Code, added to the General Table of this tax, item 28. The stamp duty thus began to apply also to ownership, usufruct or right of surface of urban properties whose taxable property value appearing in the respective register under the terms of CIMI be equal to or greater than €1,000,000.00. The stamp duty thus applies to all acts, contracts, documents, titles, papers and other facts or legal situations provided for in the general table, including gratuitous transfers of goods." Thus being, "[n]ot existing in the context of IS a definition of what is meant by 'urban property', 'land for construction' and 'housing affiliation' it is necessary to resort subsidiarily to CIMI to obtain a definition that allows assessment of possible subjection to IS, in accordance with the provision of Article 67, paragraph 2 of CIS in the wording given to it by Law No. 55-A/2012, of 29/10."

The Respondent further adds that "(...) the notion of 'urban property' finds place in the part relating to the valuation of real estate, since the purpose of the valuation of the real estate is to incorporate value into it, constituting a determining factor of distinction – coefficient – for purposes of valuation. The legislator chose to determine the application of the methodology of valuation of properties in general to the valuation of 'land for construction', as results from the expression 'value of authorized buildings' to which Article 45, paragraph 2 of CIMI refers and applying to it consequently the affiliation coefficient provided for in Article 41 of CIMI."

Further referring, regarding this matter, that "(...) in the valuation of land for construction the legislator wanted the methodology of valuation of urban properties in general to be applied, thus taking into account all coefficients, supra identified, in particular the affiliation coefficient provided for in Article 41 of CIMI, with the further result that such legal requirement results from paragraph 2 of Article 45 of CIMI, by referring to the value of buildings authorized or provided on the same land for construction. Whereby, for purposes of determining the taxable property value of land for construction the application of the affiliation coefficient in the context of valuation is clear."

The Respondent continues referring, regarding the present case that "[i]n the property register of the property, the type of property is 'land for construction'. We cannot doubt that we are dealing with 'land for construction', more specifically, before a plot of land for urban construction, with areas of building implantation and construction perfectly defined and identified in the urban property register, as moreover supra described." Now, "[f]iscally the real estate are land for construction, in that capacity they were acquired and so are they predially classified and, therefore, they are undoubtedly, plots of land for construction, more exactly urban properties with housing vocation. From the certificate issued by the Municipal Council of ..., attached by the Claimant to the arbitral request, as document 7, it appears that:"(...) This plot has been subject to successive adjustments, in order to make the proposed construction compatible with the intervention projected by E..., SA, for the construction of the metro overpass, preventing the realization of the current provisions for the same. In accordance with Amendment No. ... of 2009 to the subdivision permit, for plot 1 construction of a residential building with 106 units is provided. (...)" OR, it is clear the housing affiliation of the property to which the assessment now impugned refers."

In light of this, the Respondent argues that "[t]he Claimant cannot be unaware that the property register is absolutely clear in defining for the land for construction in question, the respective area of building implantation and construction, thus perfectly defined and identified (...) It is thus clear the housing affiliation of the property."

Adding regarding this aspect that "(...) the legislator does not refer to 'property intended for housing', having opted for the notion 'housing affiliation', a different and broader expression, whose meaning will be found in the need to integrate other realities beyond those identified in Article 6, paragraph 1, subparagraph a) of CIMI. However, the tax law considers as an integrating element for purposes of valuation of land for construction the value of the area of implantation, which varies between 15% and 45% of the value of buildings authorized or provided based on the plan of urbanization and construction."

Further referring that "[o]ne cannot ignore that the permit for the conduct of urban development operations must contain, among other elements, the number of plots and the indication of the area of location, purpose, area of implantation, area of construction, number of floors of number of units of each of the plots, with specification of the units intended for housing at controlled cost, when provided, under the terms of subparagraph a) of Article 77 of RJUE. (...) Moreover, for the property here identified, a subdivision permit No. .../83 was attributed, issued by the Municipal Council of ..., a permit that had Amendment No. .../09, which the Claimant is not unaware of. Long before the actual construction of the property, it is possible to ascertain and determine the affiliation of the land for construction. As is the case under review. From Amendment No. 928/09 to the subdivision permit No. 306/83, (...)."

The Respondent further argues that "(...) such was not the intention of the legislator, if we take into account that in applying the law to concrete cases it is important to determine the exact meaning and scope of the rule, so that the rule contained in it is revealed, an indispensable condition for it to be able to be applied, except to consider in respect of the principle of 'social equity in austerity' that in the concept 'urban properties' are integrated 'land for construction' with housing affiliation. "

Regarding the interpretation of the rule in question, the Respondent understands that: "Prima facie, in a very narrow interpretation to the letter of the law, one could draw from the text the meaning that the Claimant wishes to give it, but as our jurisprudence has declared, that is not the best interpretation of the law, and in the hermeneutical task, the literal element, constituting the starting point and limit for extracting the meaning of the rule, is not the decisive element, nor even the most important, a role that is reserved for the 'unity of the system', under the terms of paragraph 2 of Article 9 of the CC. (...) Proof of this is the State Budget for 2014, Law No. 83-C/2013, of 31 December, see Article 194, under the heading - Amendment to the General Table of Stamp Duty, according to which item 28.1 of the General Table of Stamp Duty, annexed to the Stamp Duty Code, approved by Law No. 150/99, of 11 September, now reads as follows: '28.1 — For residential property or for land for construction whose authorized or provided construction be for housing, under the terms provided in the Stamp Duty Code — 1 %'. That is, the legislator merely defined, without room for doubt, the logical element underlying the statement of reasons that served as the basis for the Bill No. 96/XII and which, by appearances, has been difficult to grasp."

Regarding the unconstitutionality alleged by the Claimant, the Respondent argues that "[t]he rule of item 28 of TGIS is a general and abstract rule, applicable indistinctly to all cases in which the factual and legal prerequisites are verified. It also follows that well-founded reasons also with constitutional basis, justified the creation of the contested rule, namely the respect for the principles of proportionality and tax capacity. Taxation in the context of IS obeys the criterion of adequacy, to the exact extent that it aims at the taxation of wealth embodied in the ownership of real estate of high value, arising in a context of economic crisis that cannot be ignored at all. In fact, the measure implemented seeks to achieve maximum effectiveness with regard to the objective to be achieved, with the minimum harm to other interests considered relevant.", whereby, "[[t]hus, the option for this mechanism of obtaining revenue is legitimized, which would only be censurable, in the face of the principle of proportionality, if it resulted manifestly indefensible."

Concluding to the effect that "(...) we have, necessarily [to] conclude that the tax acts in question did not violate any legal principle, and should, therefore be maintained."

IV. Clarification of the Record

The Tribunal is competent and is regularly constituted, pursuant to subparagraph a) of paragraph 1 of Article 2 and Articles 5 and 6, all of the RJAT.

The parties have legal personality and capacity, show themselves to be legally interested parties, are regularly represented and the proceedings do not suffer from nullities.

V. Factual Matter

With relevance for the decision, the following facts are deemed proven:

  1. The Claimant is the owner of the urban property registered in the urban property register under article ... of the Union of parishes of ... and ..., council of... – cfr. Doc. No. 5 attached with the request for establishment of the arbitral tribunal-;

  2. The property in question is described in the register as "land for construction" – cfr. Doc. No. 5 attached with the request for establishment of the arbitral tribunal - ;

  3. The property, in 2015, had the taxable property value of €2,163,664.75 (two million, one hundred and sixty-three thousand, six hundred and sixty-four euros and seventy-five cents) – cfr. Doc. No. 5 attached with the request for establishment of the arbitral tribunal - ;

  4. On 03.02.2016, the Claimant made known to the Tax and Customs Authority that, on that same day, the Municipal Council of ... had approved the request for prior information (PIP No. ...). – cfr. Doc. No. 10 attached with the request for establishment of the arbitral tribunal - ;

  5. By reference to the year 2015, the Claimant was notified of the assessment relating to Stamp Duty, with a total levy of €21,636.65, to be paid in three instalments (assessment No. 2015..., assessment No. 2016... and assessment No. 2016..., respectively) under the provision of item 28.1 of the General Table of Stamp Duty, levied on the property identified in A. supra. – cfr. Docs. Nos. 1, 2 and 3 attached with the request for establishment of the arbitral tribunal -;

  6. On 24.08.2016, the Claimant filed a gracious complaint against the act of assessment of Stamp Duty relating to the year 2015, here impugned, to which was assigned No. ...2017... .

  7. The Claimant was notified of the draft decision to the effect of dismissal of the gracious complaint identified in E supra, having presented its right of hearing on 03.11.2017. – cfr. Docs. Nos. 8 and 9 attached with the request for establishment of the arbitral tribunal -;

  8. On 30.11.2017, the Claimant was notified, through Office No. 2014..., of the decision of final dismissal of the gracious complaint presented and identified in E supra. – cfr. Doc. No. 4 attached to the request for establishment of the arbitral tribunal - ;

  9. The Claimant proceeded to payment of the stamp duty assessments above identified. – cfr. Docs. Nos. 1, 2 and 3 attached with the request for establishment of the arbitral tribunal-;

  10. It appears in the proceedings and forming an integral part of the attached administrative proceedings, a certificate issued on 03.02.2016 by the Municipal Council of ..., with the following wording:

"F..., Head of the Urban Management Division, of the Department of Urban Planning and Planning, pursuant to the competencies subdelegated to him by the Department Director and appearing in order No. 42/2015, certifies, narratively and in accordance with the order noted on the request of A..., S.A., with headquarters..., ...-... ..., registered in this Council under the number ... that, regarding plot No. 1 of the subdivision permit No. .../83, described in the Land Register Office of ... under No. ... of the ..., separated from No. ... and registered in the register under article No. ... of the respective municipality, the following information was provided:

"This plot has been subject to successive adjustments, in order to make the proposed construction compatible with the intervention projected by E..., S.A, for the construction of the metro overpass, preventing the realization of the current provisions for the same.

In accordance with Amendment No. ... of 2009 to the subdivision permit, for plot 1 construction of a residential building with 106 units is provided.

However, this solution has not yet been implemented, as it does not fit the latest proposal for the metro line, regarding the alignment of construction and installation elevations.

Given this situation, the applicant submitted a request for prior information – Application... - in order to be informed of the feasibility of changing the subdivision. The proposed amendment aims to make it compatible with the study by E..., SA and the provision of a commercial area in the building, which is no longer exclusively intended for housing.

This proposal has not yet received a decision by CNN, despite, after several meetings and contacts with E..., SA, conclusively defining the location and installation elevations of the construction.

After obtaining favorable information, it will be necessary to request the amendment to the subdivision permit, which defines the new urban planning parameters for the plot".

  1. On 26.08.2018, the Claimant filed, with CAAD, a request for arbitral pronouncement which gave rise to the present proceedings.

VI. Facts Deemed Not Proven

There are no facts deemed not proven, because all facts relevant to the review of the request were deemed proven.

VII. Motivation of the Factual Matter Deemed Proven

For the conviction of the Arbitral Tribunal, regarding the proven facts, the documents attached to the proceedings were relevant, as well as the administrative proceedings, all analyzed and weighed in conjunction with the pleadings, from which results agreement regarding the factuality presented by the parties, pursuant to paragraph 7 of Article 110 of the CPPT.

It should be noted that, regarding factual matter, the Tribunal does not have to rule on everything alleged by the parties, the duty being incumbent upon it to select the facts that matter to the decision, to discriminate between proven and not proven matter [(cfr. Article 123, paragraph 2 of the CPPT and paragraph 3 of Article 607 of the Code of Civil Procedure, applicable ex vi Article 29, paragraphs 1, subparagraphs a) and d) of the RJAT)].

Thus, the facts relevant to the judgment of the case are selected in function of their legal relevance which is established in function of the various solutions of the legal question(s) to be discerned. (cfr. Article 596 of the CPC, applicable ex vi Article 29, paragraph 1, subparagraph e) of the RJAT).

VIII. Preliminary Question

  1. The Respondent, in its response, defends itself by invoking the exception of "material incompetence of the Arbitral Tribunal to review the request for declaration of material unconstitutionality of item 28 of TGIS", given that the Claimant, in its request for arbitral pronouncement (Articles 106 to 121) invoked the "violation of the constitutional principle of tax equality and tax capacity", and concluded in Article 120 of its request that "(...) item 28.1 General Table of Stamp Duty when interpreted in the sense that 'land for construction whose authorized or provided construction be for housing' should be taxed must be judged unconstitutional - and, to that extent, should be disapplied – for violation of the principle of tax equality (...)"

  2. For its part, the Respondent alleges that the material competence of the Arbitral Tribunal, as defined in paragraph 1 of Article 2 of the RJAT does not include the declaration of unconstitutionality of item 28 of the General Table of Stamp Duty, here under review.

  3. Indeed, and using the written arguments, and regarding the matter of the exception, the Claimant came to clarify that "it does not intend for this Tribunal to declare any unconstitutionality on its own by substituting itself for the Constitutional Court for that purpose"; "what is intended is that Article 204 of the CRP be complied with, namely, that the Tribunal refuse to apply rules that are unconstitutional".

Now,

  1. Indeed, a more detailed review of the competence of the Arbitral Tribunal to review the request for declaration of material unconstitutionality of item 28 of TGIS would be prejudiced by the order of knowledge of the defects that this Arbitral Tribunal understands to proceed with in light of the provision of Article 124 of the Code of Tax Procedure and Process (CPPT) ex vi Article 29, paragraph 1, subparagraph a) of the RJAT.

  2. However, it may be said that the present Tribunal does not agree with the position adopted by the Respondent, the exception of material incompetence of the Arbitral Tribunal not being well-founded in the manner in which it is raised by AT.

  3. Indeed, having regard to the parity with the present case, we refer to the decided in the context of proceedings No. 385/2015-T delivered on 30.11.2015, and No. 451/2017-T delivered on 14.02.2018, within the scope of CAAD to which we adhere in full:

"In the view of this tribunal, there has been some misunderstanding by the Respondent as to the request made by the Claimant. Indeed, what the Claimant seeks is the declaration of illegality of the contested assessment act, based on the unconstitutionality of the rule that sustains it. And this conclusion regarding the object of the present proceedings results evident from the request made finally by the Claimant: 'Whereby the act of stamp duty assessment relating to the year 2014 on the real estate identified in Article 2 of this petition should be annulled, with all legal consequences.

Contrary to what the Respondent appears to have understood from the request and arguments of the Claimant, it is not intended that this tribunal substitute for the Constitutional Court and declare item 28.1 of TGIS unconstitutional; rather, it is intended that this tribunal, within the scope of the powers legally recognized to it, judge the rule to be unconstitutional, thus refusing its application to the concrete case. Since the rule cannot be applied concretely, the tax act that results from the execution of the same will, consequently, be illegal and, as such, annullable.

What is at issue in the present proceedings is, therefore, the legality of the assessment act, and in order to be able to decide, this tribunal will have to, necessarily and by constitutional requirement (Article 204 of the CRP), assess the constitutional conformity of the rules that legally sustain it."

  1. Whereby the exception argued by the Respondent is not well-founded.

IX. Grounds of Law

  • Of the Disputed Legal Questions –
  1. In the present case, three legal questions are disputed:

  1. To know whether for purposes of application of item 28.1 of TGIS, the property identified in the proceedings, as land for construction is covered and subject to its incidence;

  2. To know whether the provision of item No. 28 of TGIS is unconstitutional for violation of the principle of equality, provided for in Article 13 of the CRP, as well as the principle of contributive equality in the context of taxation of property, provided for in Article 104, paragraph 3, of the CRP, in the interpretation that AT makes of it;

  3. To know whether the Claimant, if either or both of the preceding questions proceed, is entitled to indemnity interest.

Let us see,

  1. Law No. 55-A/2012, of 19 October (which we shall hereinafter refer to as Law No. 55-A/2012 or simply Law), made the amendment, among others, of various articles of the Stamp Duty Code, more specifically 12 of its articles.

  2. We shall not rule on all of them, but only on those that may be relevant to the review of the matter here at issue.

  3. Now, the fundamental amendment, which conditions all others, is contained in Article 4 of Law No. 55–A/2012, which added to the General Table of Stamp Duty (TGIS), annexed to the Stamp Duty Code (CIS), a new item, No. 28, with the following wording:

"28. Ownership, usufruct or right of surface of urban properties whose taxable property value appearing in the register, under the terms of the Property Tax Code (CIMI), be equal to or greater than (euro) 1 000 000 - on the taxable property value used for purposes of Property Tax:

28.1 For residential property --------------------------------------------------------- 1%

28.2 For property, when the taxpayers who are not individuals are residents in a country, territory or region subject to a clearly more favorable tax regime, appearing in the list approved by order of the Finance Minister ----------------------------------------------- 7.5%"

  1. Indeed, the underlying rationale of this legislative innovation, is set out in the Statement of Reasons of the Bill No. 96/XII/2nd, according to which:

"The pursuit of the public interest, in light of the Country's economic and financial situation, requires an effort of consolidation that will require, in addition to permanent activism in reducing public expenditure, the introduction of fiscal measures inserted in a broader set of measures to combat budget deficit.

These measures are fundamental to reinforce the principle of social equity in austerity, guaranteeing an effective distribution of the sacrifices necessary to comply with the adjustment program. The Government is strongly committed to ensuring that the distribution of these sacrifices will be made by all and not only by those who live on the income from their work. In accordance with that objective, this act expands the taxation of capital income and property, equitably covering a broad set of sectors of Portuguese society.

In these terms, the taxation of capital income and securities gains will be aggravated, with the respective rates increasing from 25% to 26.5% in the context of IRS. The tax rates applicable to income obtained from, or transferred to, tax havens are also aggravated to 35%.

On the other hand, a tax rate is created in the context of Stamp Duty affecting urban properties with housing affiliation whose taxable property value be equal to or greater than one million euros.

Finally, this act introduces a measure to reinforce the fight against tax fraud and evasion, through the strengthening of the regime applicable to manifestations of fortune of taxpayers (IRS) and to transfers to and from tax havens. First, the operationalization of the assessment of IRS is strengthened based on manifestations of fortune, reducing the differential from 50% to 30% between manifestations of fortune and income declared in the context of IRS. On the other hand, transfers to and from tax havens effected between taxpayer accounts, not declared in accordance with law, become a manifestation of fortune and, in that measure, subject to taxation in the context of IRS by indirect methods".

  1. Indeed, this wording of item 28.1 of TGIS saw its constitutionality affirmed by the Constitutional Court, namely in Judgment No. 590/2015, of 11 November 2015, delivered in proceedings No. 542/14, from which it appears that:

"(...) there is not found in the rule of incidence at issue an arbitrary fiscal measure, because it is not devoid of rational foundation. As was seen, the legislative amendment had the purpose of expanding the taxation of property, making it fall more intensely on ownership which, by its value considerably greater than that of the generality of urban properties with housing affiliation, reveals greater indicators of wealth and, as such, is susceptible to founding the imposition of increased contribution for the cleaning of public accounts to its holders, in pursuit of the said 'principle of social equity in austerity'" and that "the taxable property value on which the incidence of the tax depends is affected only by urban properties with housing vocation of greatest economic significance, showing levels of wealth corresponding to the highest standards of Portuguese society".

  1. However, it should be noted that the interpretation and application of item 28.1 of TGIS was the subject of various disputes that opposed AT and taxpayers, owners of land for construction – which is of interest to us here -, disputes which received the attention of the Supreme Administrative Court, which determined unanimously that:

"Since the legislator has not defined the concept of 'urban properties with housing affiliation', and resulting from Article 6 of the Property Tax Code (subsidiarily applicable to Stamp Duty provided for in the new item No. 28 of the General Table) a clear distinction between 'urban residential properties' and 'land for construction', these latter cannot be considered, for purposes of the incidence of Stamp Duty (Item 28.1 of TGIS, in the wording of Law No. 55-A/2012, of 29 October), as urban properties with housing affiliation." (See, by way of example, the Judgment of the Supreme Administrative Court delivered in proceedings No. 048/14, of 09.04.2014).

  1. Interpretation and conclusion which was also adopted by the arbitral tribunal operating in the Administrative Arbitration Center (CAAD), that is, "on 'land for construction' cannot Stamp Duty incide to which item No. 28.1 refers. of TGIS in the wording provided by Law No. 55-A/2012." (See, by way of example and among many others, the decision of CAAD delivered in proceedings No. 757/2014-T of 17.04.2015.)

  2. Now, faced with this consecutive and unanimous outcome of national jurisprudence – the declaration of illegality of the assessments of Stamp Duty affecting land for construction, under item 28 of TGIS – the legislator, seeking to bring the incidence of this item closer to the interpretation of the Tax and Customs Authority, understood to amend its wording, thus broadening the incidence of the tax to the ownership of rights of property, usufruct or right of surface of land for construction "whose authorized or provided construction be for housing".

  3. In this way, it came thus to provide, item 28.1 of TGIS, with the amendments introduced by Law No. 83-C/2013, of 31 December (State Budget 2014) – wording which is of interest to us – the following:

"28.1 – For residential property or for land for construction whose authorized or provided construction be for housing, under the terms provided in the Property Tax Code-1%".

  1. Now, from the outset it should be mentioned that the amendment introduced by Law No. 83-C/2013 of 31 December (State Budget 2014) allows the conclusion that the taxable event of stamp duty, relating to item 28.1 of the table, is constituted by three prerequisites:

a. the ownership of a real right over the property in question,

b. taxable property value equal to or greater than one million euros,

c. that the "authorized or provided construction be for housing".

  1. Only by way of curiosity, it may also be stated that paragraph 2 of Article 210 of Law No. 42/2016, of 28 December (State Budget Law for 2017) came to repeal item 28 of TGIS.

In the Concrete Case,

  1. The parties in the exposition they make in their pleadings do not disagree as to the qualification of the property in question as "land for construction".

  2. They do disagree, however, as to the legitimacy and legality of the assessment of stamp duty on the land for construction in question, under item 28.1 of TGIS while "land for construction whose authorized or provided construction be for housing, under the terms provided in the Property Tax Code."

  3. Being relevant, in this sense, to clarify the scope of the factual matter that the property is qualified as "land for housing".

  4. In this sense, the present tribunal understands, by its manifest interest, as to this matter, to cite an excerpt from the arbitral decision delivered in proceedings No. 150/2017-T, of 27.10.2017, under the terms of which it is clarified that:

"It is not the simple registration as 'land for construction' that necessarily leads to the inevitable application of item 28.1 of TGIS, since it does not constitute, on its own, conclusive demonstration that a particular property has construction for housing provided.

See in this regard JOSÉ MANUEL FERNANDES PIRES, (Lessons on Taxes on Property and Stamp Duty, Coimbra, Almedina, 3rd ed., 2015, pages 110 to 112); 'The right to build is not inherent in the right of ownership, but only arises ex novo in the patrimony of the owner when an administrative act of the competent public entity recognizes and authorizes the owner to build or subdivide. [...] only when this right is constituted in the legal sphere of the owner is that the Property Tax Code establishes that we are before land for construction.'

Thus, it seems clear that for the verification of the normative provision it is not enough the mere registration in the register of a property as land for construction assigned to housing, since the delineation of the objective incidence now under review does not renounce the demonstration of an effective building potential, necessarily revealed by the existence of documentary supports that authorize it. The same is to say that the incidence of the tax, for purposes of the provision of item 28.1 of TGIS is only materialized, and even then not in definitive or complete terms, with the verification of an 'effective affiliation', to use the apt expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507)."

"Now, without the demonstration of this effective building potential, item 28.1 of TGIS does not appear to be applicable. However, for purposes of application of item 28.1 of TGIS it is not sufficient this effective building potential. It is necessary to prove that the building, authorized or provided, is for housing. The same is to say that it cannot be for a purpose other than housing, since, as seems to us, construction for commerce or industry will not give rise to the application of the rule to which we have been referring".

  1. Thus, and in the case under review, we must refer that the fact of being before a land for construction, with housing affiliation, by itself, does not imply its immediate subjection to item 28.1 of TGIS.

  2. Indeed, and armed with the information provided by the Municipal Council of ... – in accordance with Doc. No. 7 attached with the request for establishment of the arbitral tribunal – we consider it equitable to conclude that, notwithstanding, the subdivision permit No. .../83, altered by Amendment No. .../09, of 04/06/2009, in 2015, no construction for housing was authorized or provided, with reference to 31/12/2015.

  3. Indeed, as results from the certificate issued by the Municipal Council of ..., on 03 February 2016, - Doc. No. 7 attached with the request for establishment of the arbitral tribunal - the plot in question "has been subject to successive adjustments, in order to make the proposed construction compatible with the intervention projected by E..., SA", the same certificate refers that "the proposed amendment aims to make it compatible with the study by E..., SA and the provision of a commercial area in the building, which is no longer exclusively intended for housing".

  4. In this sequence, we are of the view that the affiliation of the property to a purpose other than housing, removes, without room for doubt, the subjection to item 28.1 of TGIS, whereby, and avoiding unnecessary disconsiderations, the present tribunal understands to follow, in the factual context of the present proceedings, the position of the Claimant when it alleges that "(...) there having been, until 31/12/2015, no definitive position on the project and on the destination of the construction areas that could come to be built by the Author, the same was prevented from beginning any construction or submitting any work project. Thus, not knowing if it could build, nor what it could build, the Author was denied the normal disposal of the property, being further denied any building. Hence that no other conclusion is possible except that regarding the land no construction for housing was authorized or provided."

  5. In this way, the understanding of AT to the effect that the land for construction identified in the proceedings - on which no construction for housing was authorized or provided, and for which the existing licensing has undergone amendments in which it "aims to make it compatible with the study by E..., SA and the provision of a commercial area in the building, which is no longer exclusively intended for housing", - legitimates the incidence of stamp duty, under item 28 of TGIS, is manifestly illegal.

  6. As regards the alleged defect of lack of reasoning and the defect of unconstitutionality for violation of the principle of tax equality and tax capacity, knowledge of such questions is prejudiced by the declaration of illegality of the assessments of Stamp Duty at issue, by substantive defect that prevents their re-edition or renewal.

As referred to in the Commentary on the Code of Procedure in Administrative Courts, Almedina, 2005, by Mário Aroso de Almeida and Carlos Cadilha, in annotation to Article 95 of that act, page 483 (applicable by reference from Article 2, subparagraph c) of the CPPT and Article 29, paragraph 1, subparagraphs a) and c) of the RJAT) "If the tribunal judged the principal request to be well-founded, the jurisdictional power is foreclosed as to a subsidiary request or formulated in the alternative; and, in the same terms, if the pronouncement adopted regarding a question consumes or leaves prejudiced other aspects of the case which correlate with it."

In these terms, faced with the interpretation set forth, knowledge and review of the remaining defects attributed to the impugned assessment act is prejudiced.

X - Indemnity Interest

  1. The Claimant also petitions that the right to indemnity interest be recognized.

  2. Paragraph 1 of Article 43 of the General Tax Law and Article 61 of the Code of Tax Procedure and Process provide that indemnity interest is due when it is determined in a gracious complaint or judicial impugnation, that there was error attributable to the services from which results payment of tax debt in an amount greater than legally due.

  3. Error attributable to the administration is considered when the error is not attributable to the taxpayer and is based on erroneous factual premises which are not the responsibility of the taxpayer.

  4. Now, resulting from the impugned tax acts the obligation to pay tax in an amount greater than what would be due, indemnity interest is due under the terms legally provided, the legislator presuming, in these cases, in which the annulment of the assessment is verified, that prejudice occurred in the sphere of the taxpayer by virtue of having been deprived of the patrimonial amount that had to be delivered to the State by virtue of an illegal assessment. Consequently, the taxpayer is entitled to this indemnification, independently of any allegation or proof of the prejudice suffered.

  5. In the present case, it will be unquestionable that, in the sequence of the establishment of the illegality of the assessment acts, there will be a place for reimbursement of the tax by force of the provision of paragraph 1 of Article 43 of the General Tax Law, and Article 100 of the General Tax Law passing, necessarily through there, the restoration of the "situation that would exist if the tax act object of the arbitral decision had not been carried out".

  6. Similarly, it is understood that it will be beyond doubt that the illegality of the act is attributable to the Tax Authority, which autonomously carried it out illegally.

  7. Regarding the concept of "error", it has been understood that only in cases of annulments based on defects relating to the tax legal relationship will there be payment of indemnity interest, such right not being recognized in the case of annulments by procedural or formal defects.

  8. Thus being, being before a defect of violation of substantive law, which is embodied in error regarding the legal prerequisites, attributable to the Tax Authority, the Claimant has the right to indemnity interest, in accordance with Articles 43, paragraph 1 of the General Tax Law, and 61 of the CPPT, counted from the payment of the tax until the full reimbursement of the said amount.

DECISION

In accordance with the foregoing, the decision is:

  1. To judge the request formulated by the Claimant to be well-founded, in consequence annul the Stamp Duty assessment levied, with the consequent declaration of illegality and annulment of the act of dismissal of the gracious complaint, with the respective restitution of the tax paid;

  2. To condemn the Respondent to the payment of indemnity interest from the payment of the tax until the date of issuance of the credit note, under the terms of Article 43 of the General Tax Law and Article 61 of the CPPT.

Value of the Proceedings

The value of the proceedings is set at €21,636.65 (twenty-one thousand, six hundred and thirty-six euros and sixty-five cents), under the terms of Article 97-A, paragraph 1, a), of the CPPT, applicable by force of subparagraphs a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

Costs

Costs to be borne by the Respondent, in accordance with Article 22, paragraph 2 of the RJAT, Article 4 of the RCPAT, and Table I annexed to the latter, which are set at the amount of €1,224.00.

Let notification be made.

Lisbon, 7 November 2018

The Arbitrator

(Jorge Carita)

Frequently Asked Questions

Automatically Created

What is Verba 28.1 of the General Stamp Tax Table (TGIS) and how does it apply to building land (terrenos para construção)?
Verba 28.1 of the General Stamp Tax Table (TGIS) imposes annual Stamp Tax on building land (terrenos para construção) whose authorized or provided construction is for housing purposes. Following amendments by Law No. 83-C/2013 of 31 December, this provision targets urban land plots destined for residential development. The tax applies at 1% of the property's taxable patrimonial value (valor patrimonial tributário) and is assessed annually. Critical to application is determining whether, on the tax event date (typically 31 December of the reference year), the land has authorized construction for housing (construcción autorizada) or provided construction for housing (construcción prevista). This requires examination of municipal approvals, prior information requests (PIP), urban planning designations, and actual construction permits. Mixed-use developments incorporating commercial, services, and residential components may fall outside Verba 28.1's scope if housing is not the primary or exclusive purpose. The provision's interpretation has generated significant litigation, particularly regarding the temporal element—when authorization or provision crystallizes for tax purposes—and whether preliminary planning approvals suffice or final construction licenses are required.
Can Stamp Tax (Imposto do Selo) be levied on building land under Verba 28.1 TGIS?
Yes, Stamp Tax can be levied on building land under Verba 28.1 TGIS, but only when specific statutory prerequisites are satisfied. The land must qualify as 'terreno para construção' (building land) in the urban property register (matriz predial urbana), and crucially, the authorized or provided construction must be specifically for housing (habitação). The Tax and Customs Authority (AT) bases assessments on property registry data and municipal urban planning classifications. However, taxpayers can challenge such assessments when: (1) no construction authorization existed on the tax event date; (2) approved construction includes non-residential uses that preclude exclusive housing classification; (3) only preliminary planning approvals exist without definitive construction authorization; or (4) effectiveness of approvals remains subject to suspensive conditions (like public-private land exchanges). The mere classification as 'terreno para construção' in property records is insufficient; AT must demonstrate that construction specifically for housing was authorized or provided on 31 December of the reference year. Taxpayers bear the burden of proving the assessment's illegality by presenting municipal documentation, approved project plans, and chronological evidence showing authorization timing relative to the tax event date.
What was the outcome of CAAD arbitration process 71/2018-T regarding Stamp Tax on building land?
While the excerpt provided does not contain the tribunal's final decision, CAAD arbitration process 71/2018-T examined whether Stamp Tax under Verba 28.1 TGIS was correctly assessed on building land in Porto district for 2015. The claimant challenged the €21,636.65 assessment on two grounds: procedural (insufficient reasoning in AT's dismissal of the gracious complaint, violating Article 77 of the General Tax Law) and substantive (error in applying Verba 28.1 prerequisites because no housing construction was authorized or provided on 31/12/2015). The taxpayer presented evidence that prior information approval (PIP) only occurred in February 2016, after the relevant tax year, and contemplated mixed-use development including commercial and services components, not exclusively housing. Additionally, the PIP's effectiveness was subject to a suspensive condition—public-private land exchange—formalized only in February 2017. The arbitral tribunal, constituted in May 2018 with a decision deadline of 7 November 2018, proceeded via written submissions without oral hearings. This case illustrates common challenges in Verba 28.1 assessments: temporal misalignment between tax event dates and authorization dates, AT's reliance on outdated property registry data, and inadequate administrative reasoning when dismissing taxpayer complaints.
How can taxpayers challenge Stamp Tax assessments on building land through CAAD arbitration in Portugal?
Taxpayers can challenge Stamp Tax assessments on building land through CAAD (Centro de Arbitragem Administrativa) arbitration by following established procedures under the Legal Regime for Arbitration in Tax Matters (RJAT - Decree-Law No. 10/2011 of 20 January). First, file a gracious complaint (reclamação graciosa) with AT within the statutory deadline challenging the Stamp Tax liquidation. After AT's decision dismissing the complaint, taxpayers may request establishment of an arbitral tribunal pursuant to Article 2(1)(a) and Article 10(1)(a) of RJAT. The arbitration request must identify the contested acts (both the original tax assessment and the dismissal decision), state grounds for illegality (procedural defects like insufficient reasoning under Article 77 of the General Tax Law, or substantive errors in applying Verba 28.1 prerequisites), and provide supporting documentation (property registry excerpts, municipal planning approvals, PIP documentation, construction permits, chronological evidence of authorization dates). Taxpayers must pay initial and subsequent arbitral fees per the Regulation of Costs in Tax Arbitration Proceedings. Legal representation is advisable given technical complexity. The arbitral tribunal, comprising tax law experts, examines whether AT correctly determined that authorized or provided construction was for housing on the relevant tax event date, assesses procedural regularity, and may annul illegal assessments with potential tax refund.
What is the legal basis for annulling Stamp Tax liquidation on terrenos para construção under Portuguese tax law?
The legal basis for annulling Stamp Tax liquidation on terrenos para construção under Portuguese tax law includes both procedural and substantive grounds. Procedurally, Article 77 of the General Tax Law (Lei Geral Tributária) requires tax decisions, including gracious complaint dismissals, to contain sufficient reasoning explaining the factual and legal basis for the determination. Formalistic reproduction of statutory provisions without addressing taxpayer arguments constitutes defective reasoning justifying annulment. Substantively, annulment derives from misapplication of Verba 28.1 TGIS prerequisites. The provision requires: (1) land classified as 'terreno para construção' in property registry; (2) authorized construction for housing OR provided construction for housing; and (3) existence of such authorization or provision on the tax event date (31 December of reference year). AT bears the burden of demonstrating these cumulative requirements. Grounds for annulment include: absence of construction authorization on the relevant date; authorization for mixed-use or non-residential development; authorization subject to unfulfilled suspensive conditions; reliance on outdated property registry data without verifying actual municipal approvals; or assessment based on post-tax-event authorizations. The principle of legality (princípio da legalidade) requires strict adherence to statutory prerequisites. Taxpayers may invoke violation of legal certainty and property rights when AT assesses tax without proper factual basis, justifying annulment through administrative complaint, judicial review, or CAAD arbitration.