Process: 725/2015-T

Date: April 15, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 725/2015-T addressed whether Stamp Tax (Imposto do Selo) under Verba 28 of the General Table of Stamp Tax (TGIS) applies to properties in vertical ownership when individual units have Taxable Patrimonial Values (VPT) below €1,000,000 but their aggregate exceeds this threshold. The taxpayer owned a building in Lisbon comprising 3 shops, ground floor, and 5 floors, each capable of independent use but not constituted as horizontal property (condominium). Individual VPT values ranged from €54,900 to €78,910, but the total exceeded €1,000,000. The taxpayer argued that stamp tax should not apply since no individual unit reached the €1,000,000 threshold established in Verba 28 TGIS. The Tax Authority (AT) contended that vertical property differs fundamentally from horizontal property: when not constituted as a condominium, the building remains a single property unit for tax purposes, requiring aggregation of all VPT values. The tribunal examined whether the stamp tax assessment act was legally valid and clarified that payment instalments constitute merely a collection technique, not separate assessment acts. The single assessment act can be challenged after notification of any instalment, provided the challenge addresses the complete assessment. This case established important precedent distinguishing vertical from horizontal property ownership for Portuguese stamp tax purposes, confirming that properties not legally constituted as horizontal ownership must have their VPT calculated as a single aggregate value, regardless of having physically independent units capable of separate use.

Full Decision

I – REPORT

  1. A…, Legal Entity Number [CF]…, residing at Street … no …, …-… …, municipality of …, filed a request for arbitral decision, under the provisions of subsection a) of article 2(1), article 3(1) and subsection a) of article 10(1), all of the Legal Framework for Tax Arbitration [RJAT], requesting the Tax and Customs Authority [AT], with a view to assessing the legality of the tax assessment acts regarding stamp tax, for the year 2014, relating to the ownership of a property in vertical ownership, registered in the municipal register under the urban property no … of the parish of … in the area of … Tax Service of Lisbon, as per the collection documents, attached to the request, relating to the 3rd instalment.

  2. The request was filed without exercising the option to appoint an arbitrator, and was accepted by His Excellency the President of the Administrative Arbitration Centre [CAAD] and automatically notified to the Tax and Customs Authority on 03/12/2015.

  3. Under the terms and for the purposes of article 6(2) of the Legal Framework for Tax Arbitration [RJAT], by decision of His Excellency the President of the Ethics Council, duly communicated to the parties within the legally applicable periods, on 27/01/2016, the arbitrator Arlindo José Francisco was appointed, who communicated acceptance of the appointment within the legally stipulated period.

  4. The tribunal was constituted on 11/02/2016 in accordance with the provisions contained in subsection c) of article 11(1) of the Legal Framework for Tax Arbitration [RJAT], in the wording introduced by article 228 of Law no 66-B/2012, of 31 December.

  5. With its request, the claimant seeks the annulment of the stamp tax assessment act, for the year 2014 (third instalment) which fell upon the Taxable Patrimonial Value [VPT] of the property already identified.

  6. It supports its position, in summary, on the understanding that the Taxable Patrimonial Value [VPT] of each of the independent storeys is far lower than the value of € 1,000,000.00 that item 28 of the General Table of Stamp Tax [TGIS] stipulates for there to be subjection to Stamp Tax [IS], only their sum being superior to € 1,000,000.00.

  7. Concluding that such assessments suffer from illegality and therefore cannot be maintained in the legal order.

  8. In its reply, the defendant reiterates the understanding that, since the property is not constituted as horizontal property, although being a property with parts capable of independent use, for purposes of taxation in Stamp Tax [IS] its Taxable Patrimonial Value [VPT] is the sum of the Taxable Patrimonial Value [VPT] of each of the independent parts or divisions.

  9. Concluding that a property in horizontal ownership and a property in total ownership are distinct realities of fact and law, deserving differentiated tax treatment. The claimant is not the owner of autonomous units but of a single property, therefore understands that the tax assessment acts in question do not violate any legal provision, and should be maintained.

II - CASE MANAGEMENT

The tribunal was regularly constituted.

The parties have legal personality and capacity, are legitimate and are regularly represented in accordance with articles 4 and 10(2) of the Legal Framework for Tax Arbitration [RJAT] and article 1 of Order no 112-A/2011, of 22 March.

In its reply the Tax and Customs Authority requested waiver of the meeting provided for in article 18 of the Legal Framework for Tax Arbitration [RJAT], as well as the production of written arguments.

On 23/02/2016 the tribunal ordered notification to the claimant to make a statement, if it wished, regarding the said request.

On 26/02/2016, the claimant came before the tribunal to state that it agreed with the defendant's request.

Given the agreement of the parties regarding the waiver of the meeting referred to in article 18 of the Legal Framework for Tax Arbitration [RJAT], and the production of written arguments, and the process not suffering from any defects, it is necessary to decide.

III - LEGAL BASIS

1 - The issues to be resolved, with interest for this case, are as follows:

a) To determine whether the stamp tax assessment acts for the year 2014 suffer from illegality or not.

b) In the event the tribunal considers them illegal, it shall declare the obligation to refund the amounts unduly paid.

c) And if their illegality is confirmed, with the consequent refund, whether or not there should be an award of compensatory interest.

2 - Factual Matters

The factual matters considered relevant and proved based on the evidence attached to the case are as follows:

a) The claimant is the owner of the property already identified, located at Street … of the parish of …, in Lisbon.

b) In 2014 the property was not constituted as horizontal property, being composed of 3 shops, ground floor and 5 storeys, all capable of independent use.

c) None of the divisions with Taxable Patrimonial Value [VPT] determined individually, none of them equals or exceeds € 1,000,000.00 (they vary between € 54,900.00 and € 78,910.00).

d) The request is directed exclusively to the value of the 3rd instalment, the economic value assigned to the proceedings by the claimant being € 3,373.95, precisely the value of the said instalment.

There is no factual matter given as unproven that is relevant to the decision.

3 - Legal Matters

The declaration of illegality of the tax assessment acts falls within the scope of subsection a) of article 2(1) of the Legal Framework for Tax Arbitration [RJAT].

As is understood from the request for arbitral decision, the intention is to assess the legality of the stamp tax assessments, for the year 2014 (third instalment), in the value of € 3,373.95.

From the tribunal's perspective, the possibility of payment in instalments is a collection technique for a given assessment act which is unique and only it can constitute an injurious act susceptible to challenge. Any instalment considered autonomously is not an assessment act, nor is it a part of that act, it is merely a collection technique whose assessment is not contemplated in the aforementioned article 2 of the Legal Framework for Tax Arbitration [RJAT].

The stamp tax assessment act provided for in item 28 of the General Table of Stamp Tax [TGIS] is the single act of total determination of the tax to be paid, the possibility of the value determined being paid in instalments does not mean that as many assessments occur as there are instalments. These, as has been said, are a mere collection technique.

This single assessment act may be challenged, whether after notification for payment of the 1st, 2nd or 3rd instalment, provided that the request is directed to the single assessment act.

We follow the position advocated in the context of Administrative Arbitration Centre [CAAD] case 736/2014, which, with due respect, is transcribed:

"… In order to provide a response to the issue at hand, it is pertinent to bear in mind the concept of tax assessment (article 97(1), subsection a) of the Code of Tax Procedure and Process [CPPT]) or tax assessment acts (article 2(1), subsection a) of the Legal Framework for Tax Arbitration [RJAT]). In the teaching of José Casalta Nabais "assessment in the broad sense, that is to say, as the set of all operations intended to determine the amount of tax, comprises: 1) Subjective assessment intended to determine or identify the taxpayer or subject of the fiscal legal relationship, 2) Objective assessment through which the taxable or liable matter of the tax is determined and, likewise, the rate to be applied in case of plurality of rates is determined. 3) Assessment strictly speaking expressed in the determination of the collection through the application of the rate to the taxable or liable matter, and 4) the (eventual) deductions to the collection. As follows from the notion of assessment given to us by the distinguished professor, for each tax fact there will be, in principle, a single assessment, through which the collection to be paid will be determined. This is, moreover, what follows from article 23(7) of the Stamp Tax Code when it provides that "in the case of Stamp Tax due under the situations provided for in item no 28 of the General Table, the tax is assessed annually (…)" applying, with the necessary adaptations, the rules contained in the Municipal Property Tax Code [CIMI]". For its part, article 113(2) of the Municipal Property Tax Code [CIMI], applicable by referral of that provision of the Stamp Tax Code, provides that "assessment (…) is carried out in the months of February and March of the following year". From the fact that, by force of law, it may be paid in several instalments, it does not follow that several assessments have occurred. The assessment is only one and only constitutes an injurious act, susceptible to being challenged, which can only, evidently, be the object of a single challenge. Naturally, when the law provides for the payment of the value of the assessment in several instalments, staggered over time, the annulment of the tax act will have consequences for all of them, causing the payment obligation to cease or imposing the obligation to refund and interest at the expense of the Tax and Customs Authority [ATA], in case of payment by the subject of the tax obligation. What the law does not provide for, neither in tax arbitration proceedings, nor in judicial challenge proceedings, is the annulment claim regarding payment of instalments per se, since such effect will only arise from the annulment of the tax assessment act, which as we have seen, consists in the quantification of the total amount to be paid and which is only and solely a single tax act"

In agreement with the tribunal with this perspective, verifying that the request is directed exclusively to the Stamp Tax paid under the 3rd instalment and that the economic value assigned to the proceedings is precisely the value of that same instalment (€ 3,373.95), it must be concluded that the object of the request is not directed to the assessment act of the tax, but to the collection technique thereof, in this case, the 3rd instalment, and it is certain that the law does not provide for the challenge per se of instalments.

Therefore, we consider that the act subject to arbitral decision goes beyond the jurisdiction of the arbitral tribunal, given that the claimant does not challenge a tax act, but the payment of the 3rd instalment, a matter that is not at all contained in the provision of article 2 of the Legal Framework for Tax Arbitration [RJAT] which delimits the jurisdiction of arbitral tribunals, which makes it impossible to continue the proceedings in accordance with the provisions of subsection c) of article 89(1) of the Code of Administrative Court Procedure [CPTA], applicable by virtue of article 29(1), subsection c) of the Legal Framework for Tax Arbitration [RJAT].

IV - DECISION

In view of the foregoing, the tribunal decides as follows:

a) Declare the defendant absolved of the claim.

b) Fix the value of the proceedings at € 3,373.95 in accordance with the provisions contained in article 299(1) of the Code of Civil Procedure [CPC], article 97-A of the Code of Tax Procedure and Process [CPPT], and article 3(2) of the Regulation on Costs in Tax Arbitration Proceedings [RCPAT].

c) Fix the costs, under article 22(4) of the Legal Framework for Tax Arbitration [RJAT], at the amount of € 612.00 in accordance with the provisions in Table I referred to in article 4 of the Regulation on Costs in Tax Arbitration Proceedings [RCPAT], which shall be borne by the claimant.

Notify.

Lisbon, 15 April 2016

Document prepared by computer, under the terms of article 131(5) of the Code of Civil Procedure [CPC], applicable by referral of article 29(1), subsection e) of the Legal Framework for Tax Arbitration [RJAT], with blank verses and reviewed by the tribunal.

The arbitrator

Arlindo José Francisco

[1] Acronym for Legal Entity Identification Number

[2] Acronym for Legal Framework for Tax Arbitration

[3] Acronym for Tax and Customs Authority

[4] Acronym for Administrative Arbitration Centre

[5] Acronym for Taxable Patrimonial Value

[6] Acronym for General Table of Stamp Tax

[7] Acronym for Stamp Tax

[8] Acronym for Code of Administrative Court Procedure

[9] Acronym for Code of Civil Procedure

[10] Acronym for Code of Tax Procedure and Process

[11] Acronym for Regulation on Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) due under Verba 28 TGIS when individual units of a vertical property each have a VPT below €1,000,000?
Yes, Stamp Tax is due under Verba 28 TGIS when a property in vertical ownership has an aggregate VPT exceeding €1,000,000, even if individual units each fall below this threshold. The Portuguese Tax Authority maintains that vertical property not constituted as horizontal property (condominium) constitutes a single property unit for taxation purposes. Therefore, the VPT is calculated by summing the values of all independent parts or divisions. If this aggregate exceeds €1,000,000, stamp tax applies to the entire property, regardless of individual unit values.
How does the Portuguese tax authority calculate the VPT for properties in vertical ownership versus horizontal ownership for Stamp Tax purposes?
For vertical ownership (property not constituted as horizontal property/condominium), the Portuguese Tax Authority calculates VPT by aggregating the Taxable Patrimonial Values of all independent parts, divisions, or floors, treating the building as a single property unit. For horizontal ownership (condominium), each autonomous fraction is treated as a separate property with its own VPT. This fundamental distinction means vertical properties have their component values summed for stamp tax threshold purposes, while horizontal property units are assessed independently based on each fraction's individual VPT.
Can a taxpayer challenge Stamp Tax assessments on vertical property through CAAD arbitration under RJAT?
Yes, taxpayers can challenge Stamp Tax assessments on vertical property through CAAD (Centro de Arbitragem Administrativa) arbitration under the Legal Framework for Tax Arbitration (RJAT). Process 725/2015-T demonstrates this jurisdiction under article 2(1)(a) of RJAT, which covers assessment of legality of tax assessment acts. The tribunal confirmed that the single stamp tax assessment act can be challenged after notification of any payment instalment (first, second, or third), provided the request addresses the complete assessment act rather than individual instalments, which are merely collection techniques.
What is the legal distinction between vertical property and horizontal property for Imposto do Selo taxation in Portugal?
The legal distinction lies in property constitution and ownership structure. Vertical property refers to buildings with physically independent units (floors, shops, etc.) that are NOT legally constituted as horizontal property (condominium regime). The owner holds a single property title encompassing all parts. Horizontal property involves legal constitution under the condominium regime, creating autonomous fractions with separate registrations and independent ownership rights. For Imposto do Selo under Verba 28 TGIS, this distinction is critical: vertical property has aggregated VPT calculated as a single unit, while horizontal property fractions are taxed independently based on individual VPT values.
What was the outcome of CAAD Process 725/2015-T regarding Stamp Tax on a property with aggregated VPT exceeding €1,000,000?
While the complete decision text is not fully provided in the excerpt, the tribunal in Process 725/2015-T analyzed whether stamp tax assessments for 2014 on a vertical property with aggregated VPT exceeding €1,000,000 were legal. The case examined the taxpayer's challenge to the third instalment of stamp tax, clarifying that instalments are collection techniques rather than separate assessments. The tribunal distinguished between vertical and horizontal property ownership, following the Tax Authority's position that properties not constituted as condominiums must have VPT calculated by aggregating all component values, thereby subjecting the property to stamp tax when the total exceeds €1,000,000, even though individual units fall below this threshold.