Process: 728/2014-T

Date: April 20, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 728/2014-T) addresses the application of Stamp Tax under item 28 of the General Stamp Tax Table (verba 28 TGIS) to residential properties with multiple independent units. The petitioner, a property owner, challenged Stamp Tax assessments on a building with apartments and separately usable units with a total taxable value (VPT) of €1,051,023.97. The core dispute centers on whether the €1,000,000 threshold for Stamp Tax applies to the property's global VPT or to each individual unit's VPT. The petitioner argued that since none of the individual storeys or units had a VPT reaching €1,000,000, the tax should not apply, and that vertical property ownership should receive the same tax treatment as horizontal joint ownership (condominium regime). The Tax Authority raised procedural objections including time bar issues and lack of jurisdiction, arguing the petitioner was challenging an installment payment rather than the assessment itself. Substantively, the Tax Authority contended that full ownership properties differ fundamentally from horizontal joint ownership, constituting a single legal entity for tax purposes. The case raises critical questions about the interpretation of verba 28 TGIS, the distinction between vertical and horizontal property division for Stamp Tax purposes, and whether the tax capacity indicator should focus on the entire property or its constituent parts when units are independently valued under Municipal Property Tax Code provisions.

Full Decision

ARBITRATION AWARD

I – REPORT

1 – A... SA, NIPC[1] ..., with registered office at Rua ..., in Lisbon, filed on 20/10/2014 a petition for constitution of an arbitration tribunal, pursuant to article 2(1)(a), article 3(1), and article 10(1)(a), all of the Legal Framework for Arbitration in Tax Matters[2], the Tax and Customs Authority[3] being the respondent, with a view to examination of the legality of the tax assessment acts for Stamp Tax[4], relating to the year 2013 (second instalment), with a payment deadline of 31/07/2014, relating to a building with apartments and separately usable units located at Rua ..., no. ..., Lisbon, registered in the urban property register of the parish of ... under no. 50, of which the petitioner is the owner.

2 – The petition for constitution of the arbitration tribunal was filed without exercising the option of arbitrator designation, having been accepted by the Honourable President of the Administrative Arbitration Centre[5] and automatically notified to the Tax Authority on 21/10/2014.

3 – Pursuant to article 6(1) of the Legal Framework for Arbitration in Tax Matters, by decision of the Honourable President of the Deontological Council, duly communicated to the parties within the legally applicable time limits, Arlindo José Francisco was appointed as arbitrator, who communicated to the Deontological Council and the Administrative Arbitration Centre his acceptance of the appointment within the regularly prescribed time limit.

4 – The tribunal was constituted on 24/12/2014 in accordance with the provisions contained in article 11(1)(c) of the Legal Framework for Arbitration in Tax Matters, as amended by article 228 of Law no. 66-B/2012 of 31 December.

5 – With its petition, the petitioner seeks a declaration of illegality of the tax assessment acts relating to item 28 of the General Stamp Tax Table[6] that were assessed on the taxable value[7] of the separately usable units allocated to residential use of the property in question of which it is the owner.

6 – For this purpose, it invokes, in summary, the following:

6.1 – The property in question has residential allocation, was registered in the property register prior to 1951, is composed of 4 storeys and units capable of independent use, with a global taxable value of € 1,051,023.97.

6.2 – Such value was determined separately, as provided in article 7(2)(b) of the Municipal Property Tax Code[8], and none of the storeys or separately usable units with residential allocation has a taxable value equal to or greater than €1,000,000.00.

6.3 – The contested Stamp Tax was assessed on the taxable value of each of the independent storeys or units with residential allocation according to the assessments contained in the documents attached to the case file, which, in its view, are vitiated by illegality insofar as none of the storeys or units individually considered have a taxable value equal to or greater than €1,000,000.00.

6.4 – A property under vertical or horizontal joint ownership cannot, by itself, be an indicator of tax capacity, with the law providing for equal tax treatment, and thus, if a property under horizontal joint ownership would only pay Stamp Tax for the units that have a taxable value equal to or greater than €1,000,000.00, the same should apply to properties under vertical joint ownership with storeys or separately usable units.

6.5 – It is therefore evident that the assessments are illegal as the legal requirement for the application of the Stamp Tax provided for in item 28 of the General Stamp Tax Table is not met.

7 – For its part, the Tax Authority, in summary, contends:

7.1 – That the petitioner is not correct in its contentions inasmuch as the petition is manifestly out of time in two respects, given that the tax assessment was made on 17/03/2014 and the voluntary payment period occurred in April 2014, as per article 120 of the Municipal Property Tax Code, applicable under article 3 of Law 55-A/2012 of 29 October.

7.2 – Pursuant to article 10(1)(a) of the Legal Framework for Arbitration in Tax Matters and article 102(1)(a) of the Code of Tax Procedure and Process, the time limit for filing the petition for constitution of the arbitration tribunal is 90 days from the expiry of the voluntary payment period for the tax, which in this case would have expired on 29/07/2014 and was only filed on 20/10/2014.

7.3 – Moreover, it will be out of time insofar as the petitioner failed to prove payment of the first instalment, whose payment period ended on 30/04/2014, which implies the maturity of the remaining instalments under article 120(4) of the Municipal Property Tax Code already cited, therefore the legality of the instalment in question also had its payment period until 30/04/2014, and therefore the present petition would also be out of time on this basis.

7.4 – Even if this were not to be the case, from the Tax Authority's perspective, there would be a lack of jurisdiction of the tribunal, insofar as the petitioner is not challenging a tax assessment act, but rather the payment of an instalment (second) of a tax assessment act, a matter that falls entirely outside the jurisdiction of tax arbitration tribunals, and as the petitioner did not challenge the tax assessment when it was duly notified to pay the first instalment, it cannot later, when it receives the second collection notice, challenge the assessment which has become final.

7.5 – The Tax Authority further argues that a property in full ownership and a property in horizontal joint ownership have different valuation and taxation, from which different legal effects flow; whereas in horizontal joint ownership there is a division of the total property and autonomy of each unit, in a property in full ownership there is a single legal entity;

7.6 – Each part capable of independent use is not autonomous, as registered, having a description of the property as a whole;

7.7 – Concludes that the tax assessment acts challenged here are legal, should be upheld, and the Tax Authority should be absolved of the petition.

II – PRELIMINARY ASSESSMENT

The tribunal was duly constituted and has jurisdiction ratione materiae, in accordance with article 2 of the Legal Framework for Arbitration in Tax Matters.

The parties have legal personality and capacity, are proper parties and are duly represented in accordance with articles 4 and 10(2) of the Legal Framework for Arbitration in Tax Matters and article 1 of Ordinance no. 112-A/2011 of 22 March.

In its response, the Tax Authority raised exceptions of "double" time bar and lack of jurisdiction of the tribunal.

A hearing referred to in article 18 of the Legal Framework for Arbitration in Tax Matters was scheduled for 11 March 2015; the petitioner exercised its right to be heard regarding the excepted matters, which led the tribunal on 03/03/2015 to issue the following order:

"From the analysis of the case file, the tribunal considers it unnecessary to hold the hearing referred to in article 18 of the Legal Framework for Arbitration in Tax Matters, as well as to receive written or oral arguments on the disputed matter. In this manner, if the parties do not object or make any statement regarding this view by the 10th of this month, the scheduled hearing shall not take place and the tribunal shall issue its decision by 20 April next. Notification to be given."

The parties having been notified on the same date made no statement, whereupon the tribunal considered the conditions for issuing the final decision to be met.

As exceptions were raised by the respondent which may preclude consideration of the merits, they must be decided first:

1 – On the "double" time bar of the petition

The respondent argues, firstly, that the tax assessment act was made on 17 March 2014 and the first voluntary payment period occurred in April 2014, as provided in article 120 of the Municipal Property Tax Code, applicable under article 3 of Law 55-A/2012 of 29 October, to conclude that in accordance with the provisions contained in article 10(1)(a) of Decree-Law 10/2011 of 20 January which approved the Legal Framework for Arbitration in Tax Matters and article 102(1)(a) of the Code of Tax Procedure and Process, the time limit for filing the petition for constitution of the arbitration tribunal is 90 days from the expiry of the voluntary payment period and, in its view, this period expired on 29/07/2014.

The respondent further argues that, in accordance with article 120(4) of the Municipal Property Tax Code, applicable here as already stated, the petitioner's failure to prove payment of the first instalment, whose payment period ended on 30/04/2014, is equivalent to the maturity of the remaining instalments.

Thus the legality of the collection notice now being discussed saw its voluntary payment period also expire on 30/04/2014, from which it draws the conclusion of the "double" time bar of the petition.

The petitioner, for its part, contends that it does not accept the Tax Authority's argument, given that the petition for constitution of the arbitration tribunal was filed on 20/10/2014, concerning the assessments being challenged, whose voluntary payment period was 31/07/2014, and therefore the time limits provided for in article 10(1)(a) of the Legal Framework for Arbitration in Tax Matters and article 102(1)(a) of the Code of Tax Procedure and Process were observed, and that as to the second time bar argument, the first instalment was paid by offsetting by the Tax Authority itself, and that proof of payment in no case conditions the filing of the challenge.

It is necessary to decide:

Having regard to the provisions contained in article 10(1)(a) of the Legal Framework for Arbitration in Tax Matters and article 102(1)(a) of the Code of Tax Procedure and Process, the petition for arbitration must be filed within 90 days from the expiry of the voluntary payment period for the tax instalments legally notified to the taxpayer. Voluntary payment is that which occurs within the period established and regulated in tax law, as per articles 84 and 85 of the Code of Tax Procedure and Process.

Article 120(4) of the Municipal Property Tax Code provides that failure to pay an instalment within the established period leads to the immediate maturity of the remaining instalments.

The documents attached by the petitioner, documents 4 to 8 attached to the petition, demonstrate that the payments via multibanco occurred on 15/10/2014 and within the scope of an Enforcement Process. On the other hand, in the petition of 17/02/2015, the petitioner attaches a document which, in its view, proves payment of the first instalment through offsetting by the Tax Authority itself.

From the analysis of the said document, it is verified that the offsetting occurred on 28/08/2014, through seizure of an income tax credit, which occurred in the Enforcement Process initiated by the Tax Authority for payment of the Stamp Tax in question.

We can thus already conclude from the case file that the first instalment of the Stamp Tax in question was not paid within the voluntary period legally granted (30 April 2014). The payments occurred beyond this period and already as coercive payments.

From the facts set out, it appears that the first instalment of the Stamp Tax in question was not paid within the voluntary payment period which ran until 30 April 2014, and thus in accordance with the provisions contained in article 120(4) of the Municipal Property Tax Code, as already seen to be applicable to the present case, the failure to pay caused the premature maturity of the remaining instalments. In other words, the remaining instalments had their voluntary payment period advanced to 30 April 2014, given the failure to pay the first instalment on time.

Taking into account that article 10 of the Legal Framework for Arbitration in Tax Matters provides that the petition for constitution of the tribunal is filed within 90 days from the expiry of the voluntary payment period, as prescribed by article 102(1)(a) of the Code of Tax Procedure and Process, and that the petition was filed on 20/10/2014, we must conclude, from the combination of these provisions with article 120(4) of the Municipal Property Tax Code applicable here, that the petition is manifestly out of time.

And it cannot be said that the petition concerns assessments whose voluntary payment period ended on 31/07/2014; it would only be so if payment of the first instalment had occurred by 30 April 2014, which did not occur.

The tribunal therefore finds the exception of time bar of the petition for constitution of the arbitration tribunal to be well-founded.

2 – On the lack of jurisdiction of the arbitration tribunal

Given that the time bar of the petition has been established, which by itself determines the absolution of the instance, the tribunal is dispensed from considering this exception of lack of jurisdiction.

III – OPERATIVE PART

a) In view of the foregoing, the tribunal finds the exception of time bar of the petition for arbitration to be well-founded, and is thus prevented from examining the merits.

b) Accordingly, the respondent is absolved of the instance.

c) Value of the case: € 3,503.39, having regard to the provisions contained in article 299(1) of the Code of Civil Procedure[9], 97-A of the Code of Tax Procedure and Process[10], and article 3(2) of the Rules on Costs in Tax Arbitration Proceedings[11].

d) Costs to be borne by the petitioner, under article 22(4) of the Legal Framework for Arbitration in Tax Matters, the amount being fixed at € 612.00 in accordance with Table I of the Rules on Costs in Tax Arbitration Proceedings.

Notification to be given.

Lisbon, 20 April 2015

Document prepared by computer, in accordance with article 131(5) of the Code of Civil Procedure, applicable under article 29(1)(e) of the Legal Framework for Arbitration in Tax Matters, with blank spaces and reviewed by me.

The drafting of this decision is governed by the orthography prior to the orthographic agreement.

The sole arbitrator,

Arlindo José Francisco

[1] Acronym for Collective Entity Identification Number

[2] Acronym for Legal Framework for Arbitration in Tax Matters

[3] Acronym for Tax and Customs Authority

[4] Acronym for Stamp Tax

[5] Acronym for Administrative Arbitration Centre

[6] Acronym for General Stamp Tax Table

[7] Acronym for Taxable Value

[8] Acronym for Municipal Property Tax Code

[9] Acronym for Code of Civil Procedure

[10] Acronym for Code of Tax Procedure and Process

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

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under verba 28 TGIS due when individual property divisions each have a VPT below €1,000,000?
Under Portuguese tax law, the application of Stamp Tax under verba 28 TGIS to properties with independent divisions valued below €1,000,000 individually depends on whether the property is treated as a single entity or separate units. The Tax Authority's position distinguishes between full ownership and horizontal joint ownership (condominium), arguing that a property in full ownership constitutes a single legal entity for tax purposes, even if it contains separately usable units. Therefore, if the global taxable value exceeds €1,000,000, Stamp Tax may be due on the entire property, regardless of individual unit values. However, property owners have challenged this interpretation, arguing for equal treatment with horizontal property regimes where tax applies only to autonomous units meeting the threshold.
How is the taxable value determined for properties with independent divisions under vertical ownership for Stamp Tax purposes?
For Stamp Tax purposes under verba 28 TGIS, the taxable value determination for properties with independent divisions under vertical ownership follows the valuation established by the Municipal Property Tax Code (CIMI). According to Article 7(2)(b) of CIMI, properties with multiple storeys or separately usable units can have their taxable values determined separately for each division. However, the Tax Authority maintains that for Stamp Tax purposes, properties under full ownership with vertical divisions should be assessed based on the total property value as a single legal entity, rather than treating each division as an autonomous unit. This contrasts with horizontal property ownership (condominium regime), where each fraction is independently registered and taxed. The critical distinction lies in whether the divisions are legally autonomous entities or merely physical divisions of a unified property.
Does Portuguese tax law treat vertical and horizontal property ownership equally for Imposto do Selo verba 28 TGIS?
Portuguese tax law does not automatically treat vertical and horizontal property ownership equally for Imposto do Selo verba 28 TGIS purposes. The Tax Authority maintains a distinction between these ownership structures: horizontal joint ownership (propriedade horizontal) involves legally autonomous fractions with independent registration, while vertical ownership with separately usable units constitutes a single property entity despite physical divisions. In horizontal ownership, each fraction is treated independently for tax purposes, meaning Stamp Tax under verba 28 only applies to individual units with VPT ≥ €1,000,000. However, for properties under full ownership with vertical divisions, the Tax Authority argues the global property value determines tax liability. Property owners have contested this interpretation, arguing it creates unequal treatment and that tax capacity should be measured identically regardless of ownership structure, particularly when units are independently valued under CIMI provisions.
What is the CAAD arbitral procedure for challenging Stamp Tax liquidation on high-value residential properties?
The CAAD (Centro de Arbitragem Administrativa) arbitral procedure for challenging Stamp Tax liquidation on high-value residential properties follows the Legal Framework for Arbitration in Tax Matters (RJAT). Property owners must file a petition for constitution of an arbitration tribunal within 90 days from the expiry of the voluntary payment period, as established in Article 10(1)(a) RJAT and Article 102(1)(a) of the Code of Tax Procedure. For Stamp Tax assessed under verba 28 TGIS on residential properties, the payment deadline typically follows the Municipal Property Tax collection schedule under Article 120 CIMI. Critical procedural aspects include: demonstrating payment or guarantee of the contested amount, proper notification timing, and challenging the actual assessment act rather than installment payments. The Tax Authority may raise procedural defenses including time bar arguments and jurisdictional challenges, particularly when petitioners contest later installments without challenging the initial assessment notification.
Can a property owner contest Imposto do Selo when the global VPT exceeds €1,000,000 but no single unit reaches that threshold?
Property owners can contest Imposto do Selo when the global VPT exceeds €1,000,000 but no single unit reaches that threshold, as demonstrated in CAAD Process 728/2014-T. The legal basis for such challenges rests on arguing that verba 28 TGIS should apply only to individual units meeting the €1,000,000 threshold, not the aggregate property value. Property owners typically invoke Article 7(2)(b) CIMI, which provides for separate valuation of independently usable units, arguing this separate valuation should extend to Stamp Tax application. The challenge requires filing an arbitration petition with CAAD within statutory deadlines, demonstrating that treating separately valued units as a single entity for tax purposes creates inequality compared to horizontal property regimes and that the tax capacity indicator should focus on individual unit values rather than aggregate property value. However, success depends on overcoming the Tax Authority's position that full ownership properties constitute single legal entities regardless of internal divisions.