Process: 724/2015-T

Date: June 7, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration case (Process 724/2015-T) addresses the legality of a Stamp Tax assessment under Verba 28.1 of the General Stamp Tax Table concerning a building plot valued for 2012. The Estate challenged a €26,425.00 assessment issued on March 21, 2013, first through an official review request filed November 26, 2014 (dismissed September 1, 2015), then via CAAD arbitration on December 2, 2015. The Tax Authority raised a preliminary exception of lapse of right of action (caducidade), arguing the arbitration request was untimely since it exceeded the statutory period under Article 10(1)(a) of the RJAT to directly challenge the 2013 assessment. The Authority distinguished between challenging the tax assessment itself versus the administrative decision dismissing the official review, noting the tribunal lacks jurisdiction over purely administrative acts. The Applicant contended: (1) the official review was timely under the 4-year period in Article 78 LGT for tax authority errors; (2) the 2012 taxable event occurred October 31, 2012 per Law 55-A/2012, but the assessment incorrectly used December 31, 2012 valuations; and (3) construction land does not constitute 'property with residential use' under Verba 28.1, which in 2012 taxed urban residential property valued ≥€1,000,000 at 1%. The case raises critical issues about procedural admissibility in tax arbitration, the interplay between official review procedures and arbitration time limits, and whether filing administrative remedies suspends or extends arbitration deadlines. The substantive dispute centers on whether building plots fall within Verba 28.1's scope and the correct reference date for property valuation when the taxable event precedes year-end.

Full Decision

ARBITRAL DECISION

I – Report

  1. On 2.12.2015, the Estate of A…, taxpayer no. …, represented by the head of household, B…, widow, taxpayer no. …, resident at Rua …, no. …, … left, Porto, filed a request with CAAD for the constitution of an arbitral tribunal, pursuant to art. 10º of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), in which the Tax and Customs Authority is the Respondent, with a view to the annulment of the Stamp Tax assessment issued on 21.03.2013, relating to the year 2012, in the amount of € 26,425.00, to which the following collection documents refer:

a) collection document no. 2013 …, relating to the 1st instalment, in the amount of € 8,808.34.

b) collection document no. 2013 …, relating to the 2nd instalment, in the amount of € 8,808.33. And,

c) collection document no. 2013 …, relating to the 3rd instalment, in the amount of € 8,808.33.

The Applicant, alleging to have paid the amounts in question, further petitions for their restitution, together with compensatory interest.

  1. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority.

Pursuant to the provisions of no. 1, art. 6º, of the RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, the undersigned was appointed arbitrator, who communicated to the Deontological Council and to the Centre for Administrative Arbitration the acceptance of the assignment within the regularly applicable period.

The Arbitral Tribunal was constituted on 11.02.2016.

  1. Given the absence of any situation provided for in art. 18º, no. 1, of the RJAT, which would make necessary the arbitral hearing provided therein, such hearing was dispensed with, on the grounds of the prohibition of performing useless acts.

The holding of statements was also dispensed with, pursuant to art. 18º, no. 2, of the RJAT, "a contrario".

  1. The grounds presented by the Applicant in support of its claim were, in summary, as follows:

a. The assessment that is the subject of this proceeding concerns a piece of land intended for urban construction of which the estate is the owner, which is registered in the urban property registry of the parish of ... under article no. … and relates to the year 2012 and to item 28.1 of the General Schedule of Stamp Tax attached to the Stamp Tax Code.

b. The collection documents were paid in full, as is official knowledge of the TA (cf. article 74º, no. 2 of the LGT) and is now demonstrated by the documents attached to the case file.

c. Not conforming to the Stamp Tax assessment referred to above, the Applicant, on 26.11.2014, filed the request for official review, which was based on error of Law and fact attributable to the TA.

d. This request for official review was dismissed by means of the despatch of 01.09.2015, from the Head of the …SF of Porto, which was based on the draft dismissal.

e. Fundamentally, the … SF of Porto considered that (i) the request for official review presented by the Applicant was untimely because the period for administrative recourse had expired (article 78º no. 1 of the LGT, first part); (ii) the TA would not have committed any error in issuing the Stamp Tax assessments in question; (iii) and that land intended for construction must be considered as urban property intended for residential construction.

f. Now, the despatch and the Stamp Tax assessment impugned here is illegal.

g. Contrary to what was decided, the request for official review was timely filed within the period of 4 years following the assessments, on the grounds of error attributable to the TA, wherefore, scrupulously, the legal period of 4 years stipulated in article 78º no. 1, 2nd part of the LGT was complied with.

On the other hand,

h. Pursuant to article 6º (Transitional Provisions) of Law no. 55-A/2012, of 29 October (entry into force on 30.10.2012, cf. article 7º no. 1 of that Law) "1 - In 2012, the following rules must be observed by reference to the assessment of stamp tax provided for in item no. 28 of the respective General Schedule: a) The taxable event occurs on 31 October 2012;

i. In this regard, and as decided by the Decision of TCAS, 2nd Section (CT), of 10.07.2014, Proc. 07648/14, "P (…) Thus, for purposes of taxation in relation to the year 2012, facts that occurred on a date after the occurrence of the taxable event (31/10/2012) cannot be taken into account, and it is certain that the valuation carried out in December of that year occurs downstream of the said taxable event, being in no way referable to the date thereof".

j. Moreover, and as mentioned above, on the date of the taxable event relevant for this purpose, 31.10.2012, the tax-assessed value of the land in question was substantially less than Euro 1,000,000.00.

k. So the Stamp Tax assessments whose illegality is here requested were improperly based on the tax-assessed value of the property on 31.12.2012.

l. Therefore, the Stamp Tax assessments in question must be annulled, on the grounds of error of Law attributable to the TA.

Moreover,

m. The aforementioned Law 55-A/2012, of 29/10, added item no. 28 to the General Schedule of Stamp Tax (GSTS) attached to the Stamp Tax Code, approved by Law 150/99, of 11/9, with the following wording (applicable, therefore, to 2012): "28 - Ownership, usufruct or right of superficies of urban property whose tax-assessed value contained in the registry, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than (euro) 1 000 000 - on the tax-assessed value used for the purpose of IMI: 28.1 – For property with residential use – 1%; 28.2 - For property, when the passive subjects who are not individuals are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by order of the Minister of Finance - 7.5%.".

n. Now, land intended for construction was not included in the law applicable to 2012, as it does not constitute "property with residential use", and with these grounds as well, the occurrence of error attributable to the services is verified.

  1. The ATA – Tax and Customs Administration, called upon to make a statement, contested the Applicant's claim, defending itself by impugnation, in summary, with the following grounds:

BY EXCEPTION

Lapse of right of action

a. The request for constitution of the Arbitral Tribunal is manifestly untimely.

b. In fact, as the date of assessment is 21.03.2013, the period for requesting constitution of the Arbitral Tribunal, provided for in art. 10º, no. 1, al. a), of Decree-Law no. 10/2011, of 20 January, had long since expired.

c. And, note that, the request formulated by the applicant is not even that for the revocation of the despatch dismissing the request for official review of the assessment, a request which, moreover, for whose appraisal this Arbitral Tribunal would be materially incompetent, as we are here faced with an administrative act in tax matters, but not with a tax act (art. 2º, no. 1, al. a) of the same instrument),

d. being limited to the applicant's request for "The annulment or declaration of nullity of the Stamp Tax assessments impugned here, with the consequent reimbursement of the taxes, interest and charges wrongfully paid; the recognition of the Applicant's right to compensatory interest, to be calculated in accordance with legal terms, for error of fact and Law of the TA in issuing the impugned assessments".

e. That is, the object of the proceeding and the object of the request consists solely and exclusively in the appraisal of the legality of the tax assessment, and the exercise of this right, by means of tax arbitration, had long since passed.

f. See, with the exact same presuppositions, what was decided by the Arbitral Tribunal, in the very recent arbitral decision of 02.11.2015, issued in Process no. 159/2015-T of CAAD, with the only difference, for the case irrelevant, that the applicant there based its request on the dismissal of a gracious recourse.

Impropriety of the procedural means

g. Having the Applicant been notified of the decision rendered on the request for official review filed and, as this is an act in tax matters, since the legality of the act that is the object of the request was not appraised, the proper (judicial) means of reaction to the act (express Decision of Archiving by preliminary dismissal of the request for official review) would always be the Special Administrative Action and not the present arbitral means.

h. The improper procedural means constitutes a dilatory exception, precluding knowledge of the merits of the case, in accordance with nos. 1 and 2 of article 576º and 577º of the Civil Procedure Code, which leads to absolution of the instance in accordance with the provisions of article 278º of the same instrument, wherefore this exception is raised for the due legal effects.

Non-verification of all the requirements and presuppositions of the request for official review of the assessment act

i. The request for official review, "in casu" could only have been filed on the grounds of no. 1 of art. 78º of the LGT within the period of four years following the assessment, or at any time, if the tax had not yet been paid, on the grounds of error attributable to the services.

j. Now, not only does the Applicant fail to prove that there was any error attributable to the Services but, undoubtedly, there was no error attributable to the TA in the assessment in question.

k. In light of the above, the Arbitral Tribunal cannot consider the present request timely, as the legal presuppositions required by art. 78º, no. 1, of the LGT are manifestly not met.

IMPUGNATION, by mere precaution

l. Now, urban properties that are land for construction and to which the designation of residential use has been attributed within the scope of their respective valuations, such designation being recorded in their respective registries, are subject to Stamp Tax.

m. The fact that, in the rule of incidence – item 28.1 of the GSTS – the property with residential use was positivated to the detriment of residential property, appeals to the coefficient of use, cf. article 41 of the CIMI, which applies, indistinctly, to all urban properties.

n. Proof and confirmation of this is the State Budget for 2014, Law no. 83-C/2013, of 31 December, see article 194º, under the heading - Amendment to the General Schedule of Stamp Tax, according to which item 28.1 of the General Schedule of Stamp Tax, attached to the Stamp Tax Code, approved by Law no. 150/99, of 11 September, now reads: «28.1 — For residential property or for land for construction whose building, authorized or planned, is for residence, in accordance with the provisions of the IMI Code — 1 %».

o. The right to compensatory interest provided for in no. 1 of article 43º of the LGT, derived from the judicial annulment of an assessment act, depends on having been demonstrated in the proceeding that this fact is affected by error in the presuppositions of fact or law attributable to the Tax Administration.

p. Since, at the time of the facts, the Tax Administration applied the law in the manner to which as an executive body it is constitutionally bound, one cannot speak of error of the services in accordance with the provisions of article 43º of the LGT.

  1. Notified of the response presented by the Respondent, the Applicant came to reply in writing to the exceptions raised, in summary, as follows:

a. The Respondent begins by excepting the "lapse of right of action" given that the Applicant would have requested "in fine" only the annulment or declaration of nullity of the assessments and requested the reimbursement of the tax together with compensatory interest,

b. and not the annulment or declaration of nullity of the despatch dismissing the request for official review of the assessment - for whose appraisal the Arbitral Tribunal would be materially incompetent, according to what the Respondent also alleges.

c. As the Applicant did not expressly formulate that request for annulment or declaration of nullity of the despatch dismissing the request for official review, the request for arbitral pronouncement would be untimely; if it had formulated it, the Arbitral Tribunal would be materially incompetent.

d. The practical effect of the Respondent's thesis would be that, one way or another, arbitral justice would always be denied to the taxpayer, in violation of its right of defence and effective judicial protection (articles 20º and 268º no. 4 of the CRP and 9º of the LGT, ex vi of article 29º no. 1 b) of the RJAT) but such understanding has no legal basis whatsoever.

e. As stated in article 7º of the CPTA (Promotion of Access to Justice), applicable by reference in article 29º no. 1 c) of the RJAT, "For the effectuation of the right of access to justice, procedural norms must be interpreted in the sense of promoting the issuance of pronouncements on the merits of the claims formulated."

f. Now, as it results from the provisions of article 2º no. 1 a) of the RJAT, it is the competence of Arbitral Tribunals to pronounce on the "declaration of illegality of tax assessment acts".

g. In turn, pursuant to article 10º no. 1 a) of the RJAT, the request for constitution of the arbitral tribunal is presented within the period of 90 days, "counted from the facts provided for in nos. 1 and 2 of article 102º of the Tax Procedure and Process Code (CPPT), as regards acts susceptible to autonomous impugnation".

h. Thus, contrary to the understanding of the Respondent, the Applicant did not have to expressly petition for the annulment of the express despatch dismissing the request for official review of the Stamp Tax assessments impugned in the present case – to "safeguard" the timeliness of the request for arbitral pronouncement.

i. As it is written in "Legal Framework for Tax Arbitration Annotated", 2016, Page 116) "Thus, the following are simultaneously arbitrable and impugnable: (…) Acts dismissing express gracious recourses, hierarchical appeals or requests for official review that themselves appraise the (i)legality of the assessment, self-assessment, withholding at source or payment on account act – under a teleological interpretation of al. a), of no. 1, of article 2º, of the RJAT and of al. a), of article 2º, of the Binding Order, and it is certain that the object of the arbitral proceeding is always the first-degree tax act whose (i)legality the passive subject intends to have appraised;"

j. the Applicant expressly requested that which it could and should request, since, contrary to the understanding of the Respondent, this is precisely the legal object of the request for arbitral pronouncement – the declaration of illegality of the assessment acts, with their consequent annulment or declaration of nullity.

k. And it formulated this request within the period of 90 days counted from the date of notification of the express despatch dismissing the request for official review of the assessments.

l. Therefore, contrary to the understanding of the Respondent, there is no "lapse of right of action".

On the other hand,

m. As results from its content, the despatch dismissing the request for official review and the respective draft dismissal on which it was based expressly pronounced on the legality of the Stamp Tax assessments.

n. that despatch advocating, among other assertions, that the TA would not have committed any error in issuing the Stamp Tax assessments in question and that land intended for construction must be considered as urban property intended for residential construction.

o. In fact, contrary to the understanding of the Respondent, it is manifest that the despatch dismissing the request for official review, in the concrete case of the present case, pronounced on the (i)legality of the Stamp Tax assessments impugned here.

p. If rightly understood, the Respondent further excepts the untimeliness of this request for arbitral pronouncement "because the requirements and presuppositions of the official review of the tax act are not verified (article 78º no. 1 of the LGT), whose dismissal motivated the present request".

q. Now, the request for official review, as results from it, was based on the provisions of article 78º no. 1 of the LGT, more specifically on error of Law and fact of the TA in issuing the impugned assessments.

r. In these terms, the exceptions raised by the Respondent should be judged groundless.

s. Subsidiarily, if perhaps such is not understood to be the case, the request formulated in fine of the request for arbitral pronouncement is expanded to also include the request for annulment of the despatch dismissing the request for official review of the assessments.

  1. It is necessary to resolve the following questions:

a. Exception of lapse of right of action.

b. Exception of impropriety of the procedural means.

c. Alleged prior question of the non-verification of all the requirements and presuppositions of the request for official review of the assessment act

d. Illegality of the impugned assessments, due to error in the legal presuppositions, attributable to the Tax Administration

e. In case of annulment of the assessment, the right to reimbursement of taxes paid and to compensatory interest.

II. Sanation

  1. Exception of lapse of right of action.

The Respondent considers that the object of the proceeding and the object of the request consists solely and exclusively in the appraisal of the legality of the tax assessment, and that the exercise of this right, by means of tax arbitration, had long since passed.

For its part, the Applicant considers that it is precisely the assessment that is the legal object of the request for arbitral pronouncement – the declaration of illegality of the assessment acts, with their consequent annulment or declaration of nullity.

And it states that it formulated this request within the period of 90 days counted from the date of notification of the express despatch dismissing the request for official review of the assessments, wherefore, in its view, there is no lapse of right of action.

On this matter, Jorge Lopes de Sousa tells us that "the illegality of assessment acts can be declared judicially as a corollary of the illegality of a second-degree act, which confirms an assessment act, incorporating, with this confirmation, its illegality.

(…) in these cases, the immediate object of the impugning proceeding is, as a rule, the second-degree act that appraises the legality of the assessment act, an act that, if it confirms it, must be annulled, in order to obtain the declaration of illegality of the assessment act." (Commentary on the Legal Framework for Tax Arbitration, in GUIDE TO TAX ARBITRATION, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, 2013, Almedina, pages 121-122)

For its part, it writes in "Legal Framework for Tax Arbitration Annotated", 2016, Page 116):

"Thus, the following are simultaneously arbitrable and impugnable: (…)

Acts dismissing express gracious recourses, hierarchical appeals or requests for official review that themselves appraise the (i)legality of the assessment, self-assessment, withholding at source or payment on account act – under a teleological interpretation of al. a), of no. 1, of article 2º, of the RJAT and of al. a), of article 2º, of the Binding Order, it being certain that the object of the arbitral proceeding is always the first-degree tax act whose (i)legality the passive subject intends to have appraised;"

In the situation in question, the Applicant filed a request for official review of the tax assessment act. Following the dismissal of the request, within the period provided for in art. 10º, no. 1, al. a) of the RJAT, it filed the request for constitution of the arbitral tribunal, in which it alleged that dismissal.

Given this factuality, in light of art. 2º, no. 1, of the RJAT, of art. 7º of the Code of Procedure in Administrative Tribunals (ex vi of article 29º no. 1, al. c) of the RJAT) and of the constitutional principle of access to justice, the Respondent's thesis clearly lacks foundation.

Thus, there is no doubt that the request was filed timely, wherefore the exception in question is judged groundless.

  1. Exception of impropriety of the procedural means.

The Respondent further alleges that in the decision rendered on the request for official review the legality of the act that was the object of the request was not appraised, wherefore, the proper means of reaction to the act would always be the Special Administrative Action and not the present arbitral means.

However, the groundlessness of the exception in question is also manifest, since, as results from the despatch dismissing the request for official review and the respective draft dismissal on which it was based, the Respondent expressly pronounced on the legality of the assessment that is the object of the present proceeding, sustaining that despatch, designately, that the TA would not have committed any error in issuing the assessment in question and that land intended for construction must be considered as urban property intended for residential construction.

In such terms, the exception in question is judged groundless.

  1. Prior question: of the non-verification of all the requirements and presuppositions of the request for official review of the assessment act.

The Respondent contends that the request for official review, "in casu" could only have been filed on the grounds of no. 1 of art. 78º of the LGT within the period of four years following the assessment, or at any time if the tax had not yet been paid, on the grounds of error attributable to the services, and that no error attributable to the TA occurred in the assessment in question, wherefore the present request cannot be considered timely, as the legal presuppositions required by art. 78º, no. 1, of the LGT are not met.

The Applicant emphasizes that the request for official review, as results from it, was based on the provisions of article 78º no. 1 of the LGT, more specifically on error of Law and fact of the TA in issuing the impugned assessment.

As write Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa "Although art. 78º of the LGT, as regards the review of the tax act by initiative of the taxpayer, refers only to that which takes place within the «period of administrative recourse», in the no. (…) reference is made to «request of the taxpayer», for the accomplishment of the official review, which reveals that this, despite the impropriety of the designation as «official», can also have the taxpayer's initiative underlying it.

It is, thus, unequivocal that, notwithstanding the so-called review of the tax act by initiative of the taxpayer (within the period of administrative recourse), it is also admitted that, following its initiative, the «official review» (…) be made.

(…).

Thus, it is to be concluded that, the fact that the period for gracious recourse and judicial impugnation of the assessment act has passed, does not prevent the taxpayer from requesting the official review and contending against the dismissal of this act." (GENERAL TAX LAW, Annotated and Commented, writings meetings, 4th Edition, 2012, pages 705-706).

It is, therefore, also manifest, the groundlessness of this alleged "prior question", wherefore the same is judged groundless, without prejudice to the investigation of the existence of "error attributable to the services", a matter already pertaining to the merits of the case and which will be appraised below.

  1. The tribunal is materially competent and is regularly constituted in accordance with the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented.

The proceeding is not affected by vices that would invalidate it.

III – The relevant factual matter

  1. With relevance for the decision of the case, the following facts are considered proven:

  2. The Respondent carried out, on 21.02.2013, with the Applicant as the passive subject, the Stamp Tax assessment relating to the year 2012, in the amount of € 26,425.00, distributed among the following collection documents:

a) Collection document no. 2013 …, relating to the year 2012, 1st instalment, in the amount of Euro 8,808.34.

b) Collection document no. 2013 …, relating to the year 2012, 2nd instalment, in the amount of € 8,808.33.

c) Collection document no. 2013 …, relating to the year 2012, 3rd instalment, in the amount of Euro 8,808.33.

  1. The Applicant paid the amount of the three instalments in question.

  2. The assessment concerns a piece of land intended for urban construction of which the Applicant estate is the owner, which is registered in the urban property registry of the parish of ... under article no. ….

  3. The assessment in question relates to the year 2012 and to item 28.1 of the GSTS attached to the Stamp Tax Code.

  4. Not conforming to the assessment, the Applicant, on 26.11.2014, filed the request for official review thereof contained in the case file and which is given as fully reproduced for all legal purposes.

  5. The request for official review was dismissed by despatch of 01.09.2015, from the Head of the … SF of Porto, which was based on the draft dismissal, from which the following stands out:

[Content of the draft dismissal would be here]

With interest for the decision of the case there are no unproven facts.

  1. The Tribunal's conviction regarding the decision of the factual matter was based on the documents contained in the proceeding, and it is to be noted that there is total agreement between the parties regarding the factual matter, the disagreement being limited to the matter of law.

IV - The Applicable Law

  1. Item 28 of the General Schedule of Stamp Tax, in the wording at the date of the taxable event, established that the property of buildings with residential use with tax-assessed value equal to or greater than 1,000,000 euros was subject to stamp tax, in the following terms:

"28 – Ownership, usufruct or right of superficies of urban property whose tax-assessed value contained in the registry, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than 1 000 000 euros – on the tax-assessed value used for the purpose of IMI:[1]

28.1 – For property with residential use – 1%;

28.2 – For property, when the passive subjects who are not individuals are resident in a country, territory or region subject to a clearly more favourable tax regime, contained in the list approved by order of the Minister of Finance – 7.5%".

  1. It has been abundantly emphasized in various arbitral decisions[2] (designately in proceedings 42/2013-T, 48/2013-T, 49/2013-T, 51/2013-T, 53/2013-T, 144/2013-T and 202/2014-T) that the concept of "property with residential use" (which is not the subject of any specific definition in the Stamp Tax Code) is not used by the CIMI[3], nor in any other legislative instrument.

All these arbitral decisions, whose doctrine is approved, go, in essence, in the sense that such concept requires, for its fulfillment, at least the effective possibility of the existing property being used for residence and, in all of them, it was understood that land for construction, even if intended for the construction of residential buildings, do not come within the concept of "property with residential use", as results from the following passages, from the aforementioned proceedings:

Proceeding 42/2013-T:

"The expression "residential use" does not seem to be able to have any meaning other than "utilization" for residence, that is, urban property that has an effective utilization for residential purposes, either because it is licensed for that purpose or because it has that normal destination.

And we cannot confuse a "residential use" which implies an effective dedication of an urban property to that purpose, with the expectation, or potentiality, of an urban property being able to have a "residential use".

Proceeding 49/2013-T:

"The expression «with residential use» at a simple reading suggests an idea of real and present functionality. From the norm in question it is not possible to extract, by interpretation, that, as is affirmed in the respondent's reply, the legislator's choice of that expression is directed at integrating "other realities beyond those identified in article 6º, no. 1, al. a), of the CIMI." Such interpretation has no legal support, in light of the principles contained in articles 9º of the Civil Code and 11º of the General Tax Law.

In fact, if the legislator intended to encompass within the scope of incidence of the tax other realities than those resulting from the classification governed by article 6º of the CIMI, it would have said so expressly. But it does not, instead referring, in bulk, to the concepts and procedures provided for in the said Code"

Proceeding 51/2013-T:

"The point that matters to decide is this: is there a difference between the expression that the CIMI uses of «residential urban property» and the expression used by article 4º of Law no. 55-A/2012, in referring to «property with residential use»?

We believe there is not, since the same fundamental sense prevails, albeit using somewhat different words, of taxing the ownership of properties with the same destination, the effectiveness or the possibility of use being for purposes of human residence, with all the consequences that legislation in general and the CIMI in particular gives it."

Proceeding 53/2013-T:

"(…) it should be presumed that the use of a different expression aims at a distinct reality, wherefore, in good hermeneutics, «property with residential use», cannot be a property only licensed for residence or intended for that purpose (that is, it will not suffice that it be a «residential property»), but must be a property that already has effective dedication to that purpose."

Proceeding 144/2013-T:

"(..) we believe that it is necessary, in the interpretation of the provisions of item 28.1 of the GSTS, the understanding according to which the residential use of an urban property suggests that it be given that effective destination, or that it be directly possible to give that destination to it."

Proc. 202/2014-T

"The expression «with residential use» at a simple reading suggests an idea of real and present functionality. From the norm in question it is not possible to extract, by interpretation, that, as is affirmed in the Respondent's reply, the legislator's choice of that expression is directed at integrating "other realities beyond those identified in article 6º, no. 1, al. a), of the CIMI." Such interpretation has no legal support, in light of the principles contained in articles 9º of the Civil Code and 11º of the General Tax Law."

  1. Also in the decision of the Supreme Administrative Court, of 09-04-2014, appeal no. 048/14[4] it was considered that:

"The concept of "urban property with residential use" was not defined by the legislator. Neither in Law no. 55-A/2012, which introduced it, nor in the IMI Code, to which no. 2 of article 67º of the Stamp Tax Code (also introduced by that Law) refers subsidiarily. And it is a concept that, probably owing to its imprecision – a fact all the more grave as it is in function of it that the scope of objective incidence of the new taxation is delineated -, had a short life, as it was abandoned upon the entry into force of the State Budget Law for 2014 (Law no. 83-C/2013, of 31 December), which gave new wording to that item no. 28 of the General Schedule, and which now delineates its scope of objective incidence through the use of concepts that are legally defined in article 6º of the IMI Code.

This amendment - to which the legislator did not attribute an interpretative character, nor does it seem to us that it did –, only makes unequivocal for the future that land for construction whose building, authorized or planned, is for residence are encompassed within the scope of item 28.1 of the General Schedule of Stamp Tax (provided that their respective tax-assessed value is of a value equal to or greater than 1 million euros), explaining nothing whatsoever, however, in relation to prior situations (assessments of 2012 and 2013), such as that which is the subject of the present case.

Now, as to these, it does not seem possible to adopt the interpretation of the appellant, since, contrary to what is alleged, it does not result unequivocally either from the letter or from the spirit of the law that the intention of the latter has been, ab initio, to encompass within its scope of objective incidence land for construction for which the construction of residential buildings has been authorized or planned, as now results unequivocally from item 28.1 of the General Schedule of Stamp Tax."
(…)

"It is concluded, therefore, with the respondent and in conformity with what was decided in the judgment under appeal, that, resulting from article 6º of the IMI Code a clear distinction between urban properties "residential" and "land for construction", these cannot be considered, (…) as "property with residential use" for the purposes of the provisions of item no. 28.1 of the General Schedule of Stamp Tax, in its original wording, which was given to it by Law no. 55-A/2012, of 29 October."

  1. This understanding continued to be adopted by the Supreme Administrative Court, uniformly, in the other proceedings in which it was called to pronounce. As can be read in the decision issued in proceeding 0707/14, of 10.09.2014[5]:

"The matter was already decided by this Section of Tax Litigation of the Supreme Administrative Court on 9 April 2014, in proceedings no.ºs 1870/13 (Not yet published in the official journal, available at
http://www.dgsi.pt/jsta.nsf/35fbbbf22e1bb1e680256f8e003ea931/f6fd29ac6d6ebaf380257cc30030891a?OpenDocument.) and 48/14 (Not yet published in the official journal, available at http://www.dgsi.pt/jsta.nsf/35fbbbf22e1bb1e680256f8e003ea931/0e28073928824e5080257cc3003a0cbd?OpenDocument.), and, since then, reiterated and uniformly in numerous decisions, so that it can be considered established case law to the effect that land for construction cannot be considered for purposes of the incidence of Stamp Tax provided for in Item 28.1 (in the wording of Law no. 55-A/2012, of 29 October) as urban property with residential use.

This is case law that is also adopted here, because we agree with it completely and in view of the provisions of no. 3 of art. 8º of the Civil Code (CC) (…).

  1. Thus, a point unequivocally common to all these decisions, which we follow, is the understanding that land for construction, even if intended for residential construction, is not property with residential use. In consequence, we consider that the application of item no. 28.1 of the General Schedule of Stamp Tax, in the wording amended by Law no. 55-A/2012, requires, at a minimum, the present nature of the dedication of the property to residence, it not being sufficient the mere potentiality of construction for residential purposes.

In truth, we understand that, regardless of the reasons that may have led Law no. 55-A/2012 to use the expression "property with residential use", instead of "residential property" contained in art. 6º, no. 1, al. a) of the CIMI, for the subsumption to item 28.1 of the Stamp Tax Code, one cannot but require, at a minimum, the real and present potentiality (relative to the taxable event) of the property in question being able to be used for residence.

Land for construction cannot, thus, be considered property with "residential use", as it consists of a reality not apt for human residence. To achieve that aptness, it is necessary for a reality external to it to occur - the construction of the building apt for residence- and it is with such an event that a land for construction ceases to exist and a new reality comes into being: the building. And it is this that can have residential use.

Thus, land for construction does not come within the concept of "property with residential use", and item 28.1 of the General Schedule of Stamp Tax is not applicable to it.

  1. In light of the above, as item 28.1 of the Stamp Tax Code is inapplicable to the Applicant's property, it cannot but be considered that error attributable to the services, provided for in art. 78º of the General Tax Law, has occurred.

Thus, the Applicant's annulment claim cannot but be well-founded, as the tax act is tainted with the vice of violation of law due to error in the legal presuppositions.

  1. The Applicant further petitioned for the Respondent to be ordered to reimburse the sums paid corresponding to the assessment that is the subject of the present proceeding, as well as the respective compensatory interest.

Let us see.

In accordance with the provisions of al. b) of article 24º of the RJAT, the arbitral decision on the merits of the claim for which no recourse or impugnation is available binds the tax administration from the end of the period provided for recourse or impugnation, and the latter must, in the exact terms of the procedural nature of the arbitral decision in favor of the passive subject and until the end of the period provided for the voluntary execution of decisions of tax judicial tribunals, "re-establish the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for this purpose", which is in harmony with the provision of article 100º of the LGT [applicable by virtue of the provisions of al. a) of no. 1 of article 29º of the RJAT] which establishes that "the Tax Administration is obliged, in case of total or partial success of a recourse, judicial impugnation or appeal in favor of the passive subject, to the immediate and full restoration of the legality of the act or situation that is the object of the dispute, comprising the payment of compensatory interest, if applicable, from the end of the period of execution of the decision".

Although article 2º, no. 1, al. a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals operating in CAAD, making no reference to condemnatory decisions, it should be understood that their competencies include the powers that in a process of judicial impugnation are attributed to tax tribunals, and this is the interpretation that is in tune with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which it proclaims, as the first guideline, that "the tax arbitration process should constitute an alternative procedural means to the process of judicial impugnation and to the action for the recognition of a right or legitimate interest in tax matters".[6]

The process of judicial impugnation, although it is essentially a process of annulment of tax acts, admits the condemnation of the Tax Administration to the payment of compensatory interest, as is drawn from article 43º, no. 1, of the LGT, in which it is established that "compensatory interest is due when it is determined, in gracious recourse or judicial impugnation, that there was error attributable to the services from which results payment of the tax debt in an amount greater than legally due" and from article 61º, no. 4 of the CPPT (in the wording given by Law no. 55-A/2010, of 31 December, which corresponds to no. 2 in the original wording), which states that "if the decision that recognized the right to compensatory interest is judicial, the period of payment is counted from the beginning of the period of its voluntary execution".

Thus, no. 5 of article 24º of the RJAT when it says that "payment of interest, regardless of its nature, is due in the terms provided for in the general tax law and in the Tax Procedure and Process Code" should be understood as permitting the recognition of the right to compensatory interest in the arbitral proceeding.

In the case in question, it is manifest that, as a consequence of the illegality of the assessment acts, there is grounds for reimbursement of the tax, by virtue of the aforementioned articles 24º, no. 1, al. b), of the RJAT and 100º of the LGT, as this is essential to "re-establish the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed".

As regards compensatory interest, this claim must still be appraised in light of article 43º of the General Tax Law.

It provides in no. 1 of that article that "Compensatory interest is due when it is determined, in gracious recourse or judicial impugnation, that there was error attributable to the services from which results payment of the tax debt in an amount greater than legally due".

As has already been mentioned, in the case, the occurrence of "error attributable to the services" is verified. Moreover, the understanding of Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa is approved, who sustain that "The error attributable to the services that performed the assessment is demonstrated when they proceed to gracious recourse or judicial impugnation of that same assessment and the error is not attributable to the taxpayer" (GENERAL TAX LAW, Annotated and Commented, writings meetings, 4th Edition, 2012, page 342).

In the case "sub judice", as the error that gave rise to the assessments, now annulled, is not attributable to the Applicant but, exclusively, to the Respondent, the request for the condemnation of the Respondent as to compensatory interest cannot but be well-founded.

Thus, the Tax and Customs Authority must give effect to the present decision, in accordance with article 24º, no. 1, of the RJAT, reimbursing the amounts paid by the Applicant relating to the annulled assessments, with compensatory interest, at the legal rate.

Compensatory interest is due from the date of payment until the processing of the credit note, in which they are included (article 61º, no. 5, of the CPPT).

V - Decision

Thus, the arbitral tribunal decides, judging the request for arbitral pronouncement well-founded:

a) Declare the non-applicability of item 28.1 of the General Schedule of Stamp Tax to the property in question, of which the Applicant is the owner registered in the urban property registry.

b) Declare the illegality and consequent annulment of the tax act sub judice.

c) Condemn the Respondent to reimburse the claimant the amounts paid with compensatory interest at the legal rate, counted from the date of payment until the processing of the credit note.

Value of the action: 26,557.55 (twenty-six thousand, five hundred and fifty-seven euros and fifty-five cents) in accordance with the provisions of article 306º, no. 2, of the Civil Procedure Code and 97º-A, no. 1, al. a), of the Tax Procedure and Process Code and 3º, no. 2, of the Regulation of Costs in Arbitration Proceedings.

Costs payable by the Respondent, in the amount of € 1,530.00 (one thousand five hundred and thirty euros), in accordance with no. 4 of article 22º of the RJAT.

Let it be notified.

Lisbon, CAAD, 7.06.2016

The Arbitrator

Marcolino Pisão Pedreiro

[1] This rule was amended with the entry into force of the State Budget Law for 2014, Law no. 83-C/2013, of 31 December, expanding expressly the tax base, to include land for construction.

[2] Which can be consulted on the website "https://caad.org.pt/tributario/decisoes/"

[3] Article 67º, no. 2, of the Stamp Tax Code provides that "To matters not regulated in the present Code concerning item no. 28 of the General Schedule shall be applied, subsidiarily, the provisions of the CIMI." In turn, the CIMI uses the concept of residential urban property, being considered as such the buildings/constructions licensed for that purpose or those which have as their normal destination each of these purposes, in accordance with article 6º, no. 1, al. a) and no. 2. This same article clearly differentiates the concept of land for construction, in its no. 1, al. c) and in no. 3.

[4] Available at http://www.dgsi.pt/.

[5] Also available at http://www.dgsi.pt/.

[6] On this matter see Jorge Lopes de Sousa, Commentary on the Legal Framework for Tax Arbitration, in GUIDE TO TAX ARBITRATION, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, 2013, Almedina, pages 110-116).

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto de Selo) under Verba 28.1 of the General Stamp Tax Table for building land in Portugal?
Verba 28.1 of the General Stamp Tax Table, introduced by Law 55-A/2012 for 2012, imposes a 1% annual tax on ownership, usufruct, or surface rights of urban property with residential use whose tax-assessed value (patrimonial value) equals or exceeds €1,000,000. For 2012, the taxable event occurred on October 31, 2012. The central controversy in this case is whether building land (lote de terreno para construção) qualifies as 'property with residential use.' The taxpayer argued that construction land does not constitute residential use property under the 2012 legislation, as the statutory language specifically referred to 'property with residential use' rather than land designated for future construction, meaning such plots should be exempt from this Stamp Tax levy.
Can a taxpayer challenge a Stamp Tax assessment on construction land through tax arbitration at CAAD?
Yes, taxpayers can challenge Stamp Tax assessments through tax arbitration at CAAD (Centro de Arbitragem Administrativa), but strict procedural time limits apply. Under Article 10(1)(a) of the RJAT (Legal Framework for Tax Arbitration), taxpayers must file arbitration requests within the same deadlines applicable to judicial appeals. However, this case illustrates a critical procedural issue: if a taxpayer first pursues an official review (revisão oficiosa) and that request is denied, the question arises whether the arbitration challenge targets the original tax assessment or the dismissal decision. The Tax Authority argued that CAAD lacks jurisdiction over purely administrative acts (the dismissal decision) and can only review tax acts. Therefore, taxpayers must carefully identify the proper object of their arbitration request and ensure compliance with applicable deadlines from the original assessment date.
What are the time limits (caducidade) for filing a legal action against a Stamp Tax liquidation in Portugal?
The time limits for challenging Stamp Tax liquidations in Portugal depend on the procedural route chosen. For direct judicial or arbitral challenges, the deadline generally runs from notification of the assessment (the specific period must comply with tax procedure law). However, Article 78(1) of the LGT (Lei Geral Tributária) provides two distinct periods for official review requests: (1) in the first part, a shorter period when the taxpayer seeks review; (2) in the second part, a 4-year period when the review is based on errors attributable to the Tax Authority. In this case, the assessment was issued March 21, 2013, and the arbitration request filed December 2, 2015. The Tax Authority invoked caducidade (lapse of right of action), arguing the direct challenge deadline had expired. This raises the question of whether pursuing official review suspends, interrupts, or extends arbitration deadlines—a critical issue for taxpayers strategizing their procedural approach.
Is a request for official review (revisão oficiosa) a valid procedural step before arbitration in Stamp Tax disputes?
A request for official review (revisão oficiosa) is a valid administrative remedy under Article 78 LGT, allowing taxpayers to request the Tax Authority to review its own acts, particularly when based on errors attributable to the administration (4-year deadline). However, this case demonstrates that filing an official review may not preserve or extend the right to subsequently pursue tax arbitration. The Tax Authority argued that the arbitration request was untimely because it challenged the 2013 assessment filed in 2015, well beyond the direct challenge period, regardless of the intervening official review. The critical procedural question is whether the official review suspends or interrupts arbitration deadlines, or whether these run independently. Taxpayers must understand that pursuing official review carries the risk that if dismissed, the original deadlines for arbitration or judicial appeal may have already expired, potentially foreclosing substantive review of the tax assessment.
How does the CAAD assess procedural admissibility (impropriedade do meio processual) in Stamp Tax cases on building plots?
CAAD assesses procedural admissibility (impropriedade do meio processual) by examining whether: (1) the arbitration request is timely filed within statutory deadlines; (2) the tribunal has material jurisdiction over the subject matter; and (3) the object of the request constitutes a reviewable 'tax act' versus a purely 'administrative act.' In this case, the Tax Authority argued impropriedade on multiple grounds: the arbitration was filed outside the time limit to challenge the 2013 assessment, and if the request targeted the dismissal of the official review, CAAD would lack jurisdiction since Article 2(1)(a) RJAT limits arbitration to tax acts, not administrative decisions in tax matters. The Applicant's petition requested annulment of the Stamp Tax assessments themselves, not the dismissal decision, which the Authority argued demonstrated the request directly challenged a time-barred assessment. This illustrates how CAAD rigorously examines whether the procedural vehicle (arbitration) is appropriate, timely, and jurisdictionally proper before reaching substantive tax issues regarding building land classification or valuation dates.