Process: 722/2014-T

Date: April 22, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision from CAAD (Process 722/2014-T) addresses the controversial application of Stamp Tax under item 28.1 of the General Table of Stamp Tax (TGIS) to vertical property ownership structures. The claimant challenged six Stamp Tax assessments totaling €4,028.05 for the 2013 second installments on an urban property in Lisbon. The building, registered under vertical ownership with 5 floors containing 12 residential units and 3 commercial units, had a total taxable patrimonial value (TPV) of €1,244,948.15. However, no individual unit exceeded €1,000,000. The central legal question concerned whether the €1 million threshold in item 28.1 TGIS applies to the aggregate TPV of the entire building or to each independent unit separately. The claimant argued that since each autonomous unit fell below €1 million, no Stamp Tax should be levied, invoking the constitutional principle of equality and material truth. The claimant contended the tax criterion should mirror the IMI (Municipal Property Tax) methodology, which assesses each independent unit individually. Conversely, the Tax and Customs Authority maintained that for properties not constituted under horizontal property regime, the relevant TPV is the total value of the entire urban property, not individual units. This interpretation would subject the property to the 1% annual Stamp Tax despite individual units being below threshold. The arbitral tribunal cited multiple precedent cases (280/2013-T, 26/2014-T, 88/2014-T, among others) addressing this systematic issue. The case exemplifies the broader interpretative conflict regarding vertical ownership taxation under Law 55-A/2012, which introduced item 28 to the TGIS. The decision has significant implications for property owners with multiple autonomous units whose aggregate value exceeds €1 million but whose individual units do not.

Full Decision

ARBITRAL DECISION

Claimants/Requesters: A...

Respondent: Tax and Customs Authority (hereinafter ATA)

1. Report

On 17-10-2014, A..., taxpayer no. ..., resident at ... Street, Lisbon, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of an arbitral tribunal with a view to annulling the tax acts levying Stamp Tax no. 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., 2014 ..., in the total amount of 4,028.05 €, from item 28.1 of the General Table of Stamp Tax, relating to the second instalments for the year 2013 and to the urban property situated at ... Street, no. ..., in Lisbon, registered in the urban real estate registry of the parish ... under article ..., constituted in vertical ownership, with 5 storeys, and with 12 units with independent use intended for housing and 3 intended for commercial use.

The Claimant alleges that since none of the storeys with independent use has a taxable patrimonial value (TPV) exceeding one million euros (€1,000,000), Stamp Tax cannot be levied or collected, under penalty of violating the constitutional principle of equality and the prevalence of material truth.

The Tax and Customs Authority submitted a response on 03-02-2015, defending the maintenance of the tax acts reviewed, requesting dismissal of the claim, and alleging that the patrimonial value relevant for purposes of tax incidence is the total patrimonial value of the urban property and not the patrimonial value of each of the storeys or units that compose it, even if they are susceptible to independent use.

Suzana Fernandes da Costa was appointed as sole arbitrator on 05-12-2014. In accordance with the provisions of article 11, paragraph 1, subparagraph c) of the RJAT, the singular arbitral tribunal was constituted on 23-12-2014.

In its response, the ATA requested waiver of the holding of the meeting provided for in article 18 of the RJAT, as well as waiver of the production of further pleadings.

Notified of this waiver request, the Claimant made no statement.

On 16-03-2015 an order was issued waiving the holding of the meeting provided for in article 18 of the RJAT, since there were no exceptions to be considered, and further waiving the production of pleadings. The date of 23-04-2015 was also fixed for the issuance of the arbitral decision.

The parties have legal personality and capacity and are legitimate (articles 4 and 10, paragraphs 1 and 2 of the RJAT and article 1 of Order no. 112-A/2011 of 22 March).

The arbitral claim is timely, in accordance with article 10, paragraph 1, subparagraph a) of Decree-Law no. 10/2011 of 20 January and article 102, paragraph 1, subparagraph a) of the Tax Procedure and Process Code.

The case is not vitiated by nullities and no preliminary questions were raised.

2. Factual Matter

2.1. Proven Facts:

Having examined the documentary evidence produced and the position of the parties set forth in the procedural documents, the following facts are considered proven and material to the decision of the case:

  1. The Claimant A... is the owner of the urban property situated at ... Street, no. ..., in Lisbon, registered in the urban real estate registry of the parish ... under article ..., constituted in vertical ownership, with 5 storeys, and with 12 units with independent use intended for housing and 3 intended for commercial use, as per the real estate record attached to the arbitral claim as document 12.

  2. The total patrimonial value of the aforementioned property was, at the date of the levies in question, of one million, two hundred and forty-four thousand, nine hundred and forty-eight euros and fifteen cents (€1,244,948.15), as appears from the Stamp Tax levies attached by the Claimant as documents 1 to 11.

  3. The Claimant was notified of the following Stamp Tax levies, relating to the second instalments of stamp tax for the year 2013:

  • levy no. 2014 ... in the amount of € 444.98, relating to the 1st storey right of the aforementioned property, whose TPV is € 133,495.13;

  • levy no. 2014 ... in the amount of € 408.63, relating to the 1st storey left of the aforementioned property, whose TPV is € 122,591.00;

  • levy no. 2014 ... in the amount of € 442.25, relating to the 2nd storey right of the aforementioned property, whose TPV is € 132,675.50;

  • levy no. 2014 ... in the amount of € 405.90, relating to the 2nd storey left of the aforementioned property, whose TPV is € 121,771.38;

  • levy no. 2014 ... in the amount of € 442.25, relating to the 3rd storey right of the aforementioned property, whose TPV is € 132,675.50;

  • levy no. 2014 ... in the amount of € 405.90, relating to the 3rd storey left of the aforementioned property, whose TPV is € 121,771.38;

  • levy no. 2014 ... in the amount of € 442.25, relating to the 4th storey right of the aforementioned property, whose TPV is € 132,675.50;

  • levy no. 2014 ... in the amount of € 405.90, relating to the 4th storey left of the aforementioned property, whose TPV is € 121,771.38;

  • levy no. 2014 ... in the amount of € 238.17, relating to the 5th storey left of the aforementioned property, whose TPV is € 71,452.63;

  • levy no. 2014 ... in the amount of € 192.07, relating to the 5th storey P1 of the aforementioned property, whose TPV is € 57,622.75;

  • levy no. 2014 ... in the amount of € 199.75, relating to the 5th storey P2 of the aforementioned property, whose TPV is € 59,926.00.

  1. None of the storeys or units with independent use has a taxable patrimonial value exceeding one million euros.

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

2.2. Substantiation of Proven Factual Matter:

With regard to the proven facts, the arbitrator's conviction was based, on one hand, on the documents attached to the case by the Claimants, namely the levies and the real estate record, and on the other hand, on the positions taken by the parties.

3. Legal Matter:

3.1. Object and Scope of the Present Proceedings

The question to be decided in this case is whether item 28.1 of the General Table of Stamp Tax (GTST), in the case of properties not constituted in horizontal property regime, applies to the sum of the taxable patrimonial value attributed to the different parts or storeys (total TPV), or rather to the taxable patrimonial value of each part of the property with independent economic use.

On this question, among others, the decisions of the CAAD rendered in cases no. 280/2013-T, 26/2014-T, 88/2014-T, 206/2014-T, 290/2014-T, 428/2014-T, 451/2014-T, 457/2014-T, 458/2014-T and 567/2014-T have already pronounced themselves.

3.2. Question of the Taxable Patrimonial Value Relevant for Application of Item 28.1 of the GTST and the Alleged Violation of the Principle of Equality

According to the Tax and Customs Authority, in a property in vertical ownership (or not constituted under horizontal property regime) the criterion for determining the incidence of stamp tax is the global taxable patrimonial value of the storeys and units intended for housing.

For the Claimant, by contrast, the subjection to stamp tax contained in item no. 28.1 of the GTST should be measured not by the total value of the property but by the value attributed to each of the parts with independent use, according to the respective TPV, and should follow the same criterion as the determination of IMI.

Let us examine this:

Law no. 55-A/2012, of 29 October, added item 28 to the General Table of Stamp Tax (GTST), with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value contained in the registry, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the taxable patrimonial value used for purposes of IMI:

28.1 – Per property with residential use – 1% (…);

In the transitional provisions contained in article 6 of that Law no. 55-A/2012, the following rules were established:

c) The taxable patrimonial value to be used in the levy of the tax corresponds to that which results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011; (…)

f) The applicable rates are as follows:

i) Properties with residential use assessed pursuant to the IMI Code: 0.5%;

ii) Properties with residential use not yet assessed pursuant to the IMI Code: 0.8%;"

Item 28.1 GTST and sub-items i) and ii) of subparagraph f) of paragraph 1 of article 6 of Law no. 55-A/2012 contain a concept that is not used in any other tax legislation which is that of "property with residential use".

For its part, article 67, paragraph 2 of the Stamp Tax Code, added by the aforementioned Law, provides that "to matters not regulated in the present code relating to item 28 of the General Table subsidiary application is made of the CIMI."

The rule of incidence refers to urban properties, the concept of which results from the provisions of article 2 of the CIMI, with the determination of TPV being subject to the terms provided for in article 38 and following of the same code.

For its part, article 6 of the CIMI indicates the different types of urban properties, and determines that "residential, commercial, industrial or service properties are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal purpose each of these uses." (see subparagraph a) of paragraph 1 of article 6 CIMI).

It must thus be concluded that for the legislator it is irrelevant whether the property is in vertical ownership or in horizontal property ownership, what matters only is the material truth underlying its existence as an urban property and its use.

Since the Stamp Tax Code refers to the CIMI, we must consider that the registration in the real estate registry of properties in vertical ownership, constituted by different parts, storeys or units with independent use, is subject to the same registration rules as properties constituted in horizontal property ownership.

It follows that the respective IMI, as well as Stamp Tax, are levied individually in relation to each of the parts. For this reason, the legal criterion for defining the incidence of the new tax must be the same.

Thus, as concluded in CAAD decision 50/2013-T, according to which "if the legal criterion imposes the issuance of individualized levies for the autonomous parts of properties in vertical ownership, in the same manner as it establishes for properties in horizontal ownership, it has clearly established the criterion, which must be unique and unequivocal, for defining the rule of incidence of item 28.1 of the GTST".

It follows from the law that stamp tax under item 28.1 of the GTST would only be levied if any of the parts, storeys or units with independent use presented a TPV exceeding one million euros (€1,000,000.00), which does not occur in the present case.

The criterion defended by the ATA, which takes into account the sum of the parts, with the argument that the property would not be constituted under horizontal property regime, finds no legal basis and is contrary to the criterion that results from the CIMI and which applies by way of cross-reference in the context of Stamp Tax.

Furthermore, the law itself expressly establishes, in the final part of item 28 of the GTST, that Stamp Tax to be levied on urban properties of value equal to or greater than one million euros (€1,000,000.00) – "on the taxable patrimonial value used for purposes of IMI."

In conclusion, the patrimonial value relevant for purposes of application of item 28.1 of the GTST is the TPV of the part, storey or unit with independent use.

The Claimant alleges that the application of item 28.1 of the GTST violates the principle of equality enshrined in articles 13 and 104, paragraph 3 of the Constitution of the Portuguese Republic.

In accordance with the interpretation upheld above, the taxation of parts with independent use of value less than one million euros is not covered by the rule of incidence; therefore, its taxation effectively violates the principle of equality, more specifically in its corollaries of tax capacity and fiscal proportionality.

With respect to the principle of equality, see CAAD decisions no. 50/2012-T and 218/2013-T, and decisions of the Constitutional Court no. 142/04 and 187/2013.

We conclude, as in CAAD decision no. 218/2013-T, "the levy of Stamp Tax now under consideration manifestly violates the principle of fiscal equality provided for in article 13 of the CRP, because: i) it is based on a rule that treats taxpayers who are in identical situations in very different ways, the measure of the difference not being assessed by their real tax capacity; ii) it is based on an arbitrary legal solution devoid of any rational foundation."

In the case at hand, the property in question is in vertical ownership and contains several storeys and units with independent use intended for housing, as proven above. Given that none of the storeys intended for housing has a patrimonial value equal to or greater than one million euros (€1,000,000.00), as results from the documents attached to the case, it is concluded that the legal premise for the incidence of Stamp Tax provided for in Item 28 of the GTST is not met.

Looking now at the ratio legis of the provision in question in item 28.1 GTST and quoting CAAD decision no. 50/2013-T "the legislator, in introducing this legislative innovation, considered as the determining element of tax capacity urban properties, with residential use, of high value (luxury), more precisely, of value equal to or greater than one million euros (€1,000,000.00), on which a special rate of stamp tax began to be levied, intending to introduce a principle of taxation on wealth externalized in the ownership, usufruct or right of superficies of luxury urban properties with residential use. For this reason, the criterion was the application of the new rate to urban properties with residential use, whose TPV is equal to or greater than one million euros (€1,000,000.00). Clearly the legislator understood that this value, when imputed to a dwelling (house, autonomous unit or storey with independent use) translates a tax capacity above the average and, as such, susceptible to determining a special contribution to ensure just distribution of the fiscal burden." But when applied to a part or unit that does not exceed the aforementioned value of one million euros, the rule of incidence will not be met.

The principle of fiscal equality determines that what is equal must be treated fiscally equally and what is different must be treated differently. Now, differential treatment of units or parts of a property is not justified solely by the fact that the same is already in horizontal property ownership, provided that the units or parts have independent use.

As stated in CAAD decision in case no. 218/2013-T, "The principle of fiscal equality is based on the general principle of equality provided for in article 13 of the CRP, from which results the principle of tax capacity which, by constitutional imperative, is the premise and criterion of taxation."

As Casalta Nabais notes, the principle of fiscal equality has inherent above all "the idea of generality or universality, whereby all citizens are bound to comply with the duty to pay taxes, and of uniformity, requiring that such duty be measured by a single criterion — the criterion of tax capacity. This thus implies equal tax for those with equal tax capacity (horizontal equality) and different tax (in qualitative or quantitative terms) for those with different tax capacity in proportion to this difference (vertical equality) (Casalta Nabais, Tax Law, 5th edition, Coimbra, 2009, p. 151-152)."

In CAAD decision in case no. 50/2013-T it can be read that "the tax legislator cannot treat equal situations differently. Now, if the property were under horizontal property regime, none of its residential units would be subject to the incidence of the new tax."

Thus, and in line with the jurisprudence of the Constitutional Court and the CAAD, we conclude that there is a violation of the principle of fiscal equality and tax capacity.

4. Decision

In light of the above, it is determined to judge totally admissible the claim filed by the Claimant in the present tax arbitration proceedings, as to the illegality of the Stamp Tax levies relating to the second instalments for the year 2013, no. 2014 ... in the amount of € 442.25, no. 2014 ... in the amount of € 405.90, no. 2014 ... in the amount of € 442.25, no. 2014 ... in the amount of € 405.90, no. 2014 ... in the amount of € 442.25, no. 2014 ... in the amount of € 405.90, no. 2014 ... in the amount of € 238.17, no. 2014 ... in the amount of € 192.07 and no. 2014 ... in the amount of € 199.75.

5. Value of the Case:

In accordance with article 306, paragraph 2 of the CPC and article 97-A, paragraph 1, subparagraph a) of the CPPT and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is set at € 4,028.05.

6. Costs:

In accordance with article 22, paragraph 4 of the RJAT, and Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at € 612.00, owed by the Tax and Customs Authority.

Notify.

Lisbon, 22 April 2015.

Text prepared by computer, in accordance with article 138, paragraph 5 of the Code of Civil Procedure (CPC), applicable by cross-reference of article 29, paragraph 1, subparagraph e) of the Tax Arbitration Regime, reviewed by me.

The sole arbitrator,

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Is Stamp Tax under Verba 28.1 TGIS applied to each independent unit or the total value of a vertical property building?
Under the Tax Authority's interpretation, Stamp Tax under Verba 28.1 TGIS is applied to the total aggregated value of the entire vertical property building, not to each independent unit separately. In this case, although each individual unit had a TPV below €1,000,000, the Tax Authority levied Stamp Tax because the total TPV of the building (€1,244,948.15) exceeded the threshold. This contrasts with the claimant's position that the tax should apply only if individual autonomous units exceed €1 million, following the same criteria used for IMI assessment. The arbitral tribunal examined whether the legal interpretation should focus on the property as a whole or on each economically independent unit.
Can a vertical property with individual units below €1,000,000 VPT be subject to Stamp Tax under Verba 28.1?
Yes, according to the Tax Authority's position upheld in this case, a vertical property building can be subject to Stamp Tax under Verba 28.1 even when all individual units have TPV below €1,000,000. The decisive criterion is whether the total aggregate taxable patrimonial value of the entire property exceeds the €1 million threshold. In Process 722/2014-T, the building contained 15 independent units, none exceeding €1 million individually (ranging from approximately €57,622 to €133,495), yet Stamp Tax was levied because the combined TPV reached €1,244,948.15. This interpretation treats vertical ownership properties differently from horizontal property regimes, where each autonomous fraction is typically assessed separately for tax purposes.
Does taxing vertical property as a whole under Verba 28.1 violate the constitutional principle of equality?
The claimant argued that applying Stamp Tax to the aggregate value of vertical property while assessing horizontal property fractions individually violates the constitutional principle of equality (Article 13 of the Portuguese Constitution). The argument centers on discriminatory treatment between two ownership structures with economically equivalent realities—both containing autonomous units with independent use. The claimant contended that units in vertical ownership with similar characteristics and values to horizontal property fractions should receive identical tax treatment. Additionally, the claimant invoked the principle of material truth, asserting that the economic substance (independent units below threshold) should prevail over legal form (unified property registration). However, the Tax Authority defended its interpretation based on the literal wording of item 28.1 TGIS, which refers to 'urban properties' without distinguishing internal organization.
What is the CAAD arbitration procedure for challenging Stamp Tax liquidation on high-value properties?
The CAAD arbitration procedure for challenging Stamp Tax liquidation involves several steps: (1) The taxpayer submits a request for arbitration within the legal deadline (90 days from notification of the tax assessment); (2) An arbitrator is appointed, and the arbitral tribunal is formally constituted; (3) The Tax Authority submits its response defending the assessments; (4) Either party may request waiver of the oral hearing under Article 18 RJAT if no exceptions require discussion; (5) The tribunal may waive additional pleadings if the matter is sufficiently documented; (6) The tribunal issues a decision within the statutory timeframe. In Process 722/2014-T, the request was filed on October 17, 2014, the tribunal constituted on December 23, 2014, and the decision date was set for April 23, 2015, following waiver of the oral hearing and additional pleadings.
How does the tax authority determine the relevant patrimonial value for Imposto de Selo on buildings with multiple independent divisions?
For vertical ownership buildings with multiple independent divisions, the Tax Authority determines the relevant patrimonial value for Imposto de Selo by aggregating the taxable patrimonial values (TPV) of all units with independent use registered for the property. This total aggregate value is then compared against the €1,000,000 threshold in item 28.1 TGIS. The Authority does not assess each autonomous unit separately for Stamp Tax purposes, unlike the methodology used for IMI (Municipal Property Tax), which evaluates each independent unit individually. In this case, the Authority summed the TPVs of 12 residential units and 3 commercial units across 5 floors to reach €1,244,948.15, thereby triggering the 1% annual Stamp Tax. This approach contrasts with horizontal property regimes, where each registered fraction typically constitutes a separate 'property' for tax purposes.