Process: 732/2014-T

Date: June 17, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitration Case 732/2014-T addressed whether Stamp Duty (Imposto do Selo) under item 28.1 of the General Stamp Tax Table (TGIS) applies to building land (terreno para construção). The claimant, A, S.A., contested a €9,436.42 stamp duty assessment for 2013 on a plot of land for construction with a tax-assessed value of €2,830,926.91. The Tax Authority argued that Article 6(1) of the Municipal Property Tax Code (CIMI) includes plots of land for construction within urban properties, thus subject to item 28.1 TGIS. The arbitral tribunal ruled in favor of the claimant, finding the assessment illegal. The tribunal's reasoning hinged on interpreting 'property with residential use' (prédios com afetação habitacional) under item 28.1 TGIS. The tribunal distinguished this term from 'residential properties' (prédios urbanos habitacionais) defined in Article 6(2) CIMI, which encompasses buildings licensed or designated for residential purposes. The tribunal determined that 'use' (afetação) requires actual, effective residential utilization, not mere licensing or designation. Since the property was undeveloped land for construction with no existing building, it could not have residential use as of the assessment date. The tribunal noted that Article 6 CIMI clearly distinguishes between urban residential properties and plots of land for construction. Critically, the tribunal referenced that the 2014 State Budget Law expressly amended item 28.1 TGIS to include plots of land for construction effective January 1, 2014, confirming such properties were not covered by the provision's wording through December 31, 2013. The tribunal annulled the stamp duty assessment for violating item 28.1 TGIS due to error regarding legal prerequisites, concluding that building land without actual residential use fell outside the tax provision's scope during the relevant period.

Full Decision

Case No. 732/2014-T

Claimant: A, S.A.

Defendant: Tax and Customs Authority

Stamp Duty ("Stamp Duty")

The Arbitrator Dr. Maria Antónia Torres, appointed by the Ethics Council of the Administrative Arbitration Centre ("CAAD") to form a Single Arbitral Tribunal, constituted on 26 December 2014, hereby decides as follows:

  1. REPORT

1.1 A, S.A., taxpayer no. …, hereinafter referred to as "Claimant", with registered office at …, requested the establishment of an arbitral tribunal, under Article 2, paragraph 1, subparagraph a), and Article 10, both of Decree-law No. 10/2011, of 20 January (hereinafter "RJAT"[1]).

1.2. The request for arbitral decision concerns the declaration of illegality, and consequent annulment, of the stamp duty tax assessment act No. 2014 ..., dated 17 March 2014, in the total amount of €9,436.42, relating to the year 2013, with payment due on 30 November 2014, issued by the Director-General of the Tax and Customs Authority (hereinafter the Defendant or AT), and contained in the assessment notice attached by the Claimant to its request for arbitral decision, which is hereby incorporated and reproduced for all legal purposes, which concerns a plot of land owned by the Claimant and currently registered in the urban property register under no. ... and located in the Parish of ....

1.3. To substantiate its request, the Claimant alleges that the property to which the Stamp Duty assessment refers is a plot of land for construction and, for that reason, cannot be considered as a property "with residential use" for the purposes of applying item 28.1 of the General Table of Stamp Duty.

1.4. The Tax and Customs Authority contends that the request for declaration of illegality, and consequent annulment, of the disputed assessment, should be ruled unfounded given that Article 6, paragraph 1 of the Municipal Property Tax Code (CIMI) includes in the category of urban properties plots of land for construction.

1.5. The parties also agreed to dispense with the meeting of the arbitral tribunal provided for in Article 18 of the RJAT.

  1. REVIEW OF JURISDICTION AND PROCEDURAL ISSUES

The Tribunal was duly constituted and is competent ratione materiae, in accordance with Article 2 of the RJAT.

The parties have legal personality and capacity, show themselves to be legitimate parties, and are duly represented (cf. Articles 4 and 10, paragraph 2 of the RJAT and Article 1 of Regulation No. 112-A/2011, of 22 March).

No procedural defects were identified.

  1. ISSUES FOR DECISION

The issue to be decided in the present case is whether the property that was subject to the stamp duty assessment referred to above, being a plot of land for construction, has or does not have residential use and, consequently, whether item 28.1 of the General Table of Stamp Duty (TGIS), as worded on the date to which the assessment relates, is or is not applicable to it.

  1. PROVEN FACTS

With relevance to the assessment and decision on the merits, the following facts are established as proven:

4.1 The Claimant is the owner of the urban property registered in the urban property register under no. ... and located in the Parish of ...;

4.2 The property is a plot of land for construction and has a tax-assessed value of €2,830,926.91 (as per the additional assessment), with no building existing on the land on the date in question;

4.3 The Claimant was notified of the Stamp Duty assessment issued under no. 2014 ..., relating to the year 2013, and dated 17 March 2013, relating to the property referred to above;

4.4 All as evidenced by documents attached to the arbitration request and in the reply submitted by the Defendant;

4.5 On 22 October 2014 the Claimant filed the request for establishment of the Arbitral Tribunal – cf. electronic submission in the CAAD system.

  1. UNPROVEN FACTS

There are no facts with relevance to the decision on the merits that have not been proven, the factual matrix being agreed upon by both parties.

  1. REASONING ON MATTERS OF FACT

The Tribunal's conviction was based on critical analysis of the documents indicated regarding each of the points of the factual matter, the dispute relating solely to questions of law.

  1. ON THE LAW

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

28 – Ownership, usufruct or right of superficies of urban properties whose tax-assessed value recorded in the register, under the terms of the Municipal Property Tax Code (CIMI), is equal to or exceeding €1,000,000 – on the tax-assessed value used for purposes of Municipal Property Tax (IMI):

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

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

c) The tax-assessed value to be used in the assessment of the tax corresponds to what 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 under the terms of the Municipal Property Tax Code: 0.5%;

ii) Properties with residential use not yet assessed under the terms of the Municipal Property Tax Code: 0.8%;

Item 28.1 TGIS and subitems i) and ii) of subparagraph f) of paragraph 1 of Article 6 of Law No. 55-A/2012, therefore contain a concept that is not used in any other tax legislation, which is that of "property with residential use".

The most closely approximating concept to the literal meaning of this expression used is that of "residential properties", which paragraph 2 of Article 6 of the CIMI defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a license, that have as their normal destination residential purposes.

However, the non-coincidence of the terms of the expression used in item 28.1 of the TGIS ("property with residential use") with that which is extracted from paragraph 2 of Article 6 of the CIMI ("residential properties"), points to the fact that it was not intended to use the same concept.

Furthermore, in the same article, a clear distinction is made between urban residential properties and plots of land for construction.

Following closely other decisions of the CAAD handed down on the same matter, we understand that the word "use" (afetação), in this context of the use of a property, must mean "the action of designating something for a particular use". Thus, "property with residential use" cannot be merely a property licensed for residential purposes or designated for that purpose (that is, it is not sufficient that it be a "residential property"), but must be a property that already has effective use for that purpose.

Thus, "it is to be concluded that the available interpretive elements, including the 'circumstances in which the law was enacted and the specific conditions of the time in which it is applied', clearly point to the fact that it was not intended to cover within the scope of application of item 28.1 situations of properties that are not yet in residential use, namely plots of land for construction held by companies".

Furthermore, with the State Budget Law for 2014, item 28.1 TGIS was expressly amended, so as to include, from 01.01.2014, plots of land for construction, which reinforces our conviction that such properties were not covered by the wording in force until 31.12.2013.

  1. DECISION

Now, the property of the Claimant is a plot of land for construction, and is not a property with current residential use, nor is there any building on the said land. Therefore, as of the date in question, there is no use for residential purposes.

For this reason, we understand that the Stamp Duty assessment whose declaration of illegality is requested is vitiated by a violation of item 28.1 TGIS, by error as to the legal prerequisites, which justifies the declaration of its illegality and consequent annulment (Article 135 of the Code of Administrative Procedure).

In view of the foregoing, the illegality and annulment of the Stamp Duty assessment act that is the subject of the present request is declared, with all legal consequences.

The value of the case is fixed at €9,436.42 in accordance with the provisions of Articles 3, paragraph 2 of the Regulation on Costs in Tax Arbitration Proceedings ("RCPAT"), 97-A, paragraph 1, subparagraph a) of the Tax Procedure Code and 306, paragraph 2 of the Code of Civil Procedure.

The amount of costs is fixed at €918 to be borne by the Tax and Customs Authority, in accordance with Articles 12, paragraph 2 of the RJAT and 4, paragraph 4 of the RCPAT.

Notify accordingly.

Lisbon, 17 June 2015

Text prepared by computer, under the terms of Article 131, paragraph 5 of the Code of Civil Procedure (CPC), applicable by reference of Article 29, paragraph 1, subparagraph e) of the RJAT, with blank verses.

This Arbitral Award is drafted in accordance with the old spelling rules.

The Arbitrator,

Maria Antónia Torres

[1] Acronym for Legal Regime of Tax Arbitration.

Frequently Asked Questions

Automatically Created

Is building land (terreno para construção) subject to Stamp Tax under Verba 28.1 of the TGIS in Portugal?
Building land (terreno para construção) was not subject to Stamp Tax under Verba 28.1 of the TGIS for tax year 2013 and prior years. CAAD Case 732/2014-T clarified that until December 31, 2013, item 28.1 only applied to properties with actual residential use, which undeveloped plots of land for construction could not have. However, the 2014 State Budget Law expressly amended item 28.1 TGIS effective January 1, 2014, to explicitly include plots of land for construction within the scope of the stamp duty on urban properties valued at €1 million or more, thereby making such land taxable from 2014 forward.
What does 'housing allocation' (afetação habitacional) mean for Stamp Tax purposes on urban properties?
For Stamp Tax purposes under item 28.1 TGIS, 'housing allocation' (afetação habitacional) means actual, effective residential use of the property, not merely licensing or designation for residential purposes. The CAAD tribunal in Case 732/2014-T interpreted 'afetação' as 'the action of designating something for a particular use' that has been effectuated. This distinguishes it from the CIMI concept of 'residential properties' which only requires licensing or normal destination for residential purposes. A property must be actively utilized for housing to have 'afetação habitacional,' meaning undeveloped land or vacant buildings cannot meet this requirement regardless of their intended future use.
How does CAAD arbitration process 732/2014-T address Stamp Tax on vertical property?
CAAD arbitration process 732/2014-T addressed Stamp Tax on vertical property by ruling that a plot of land for construction, representing ownership rights in urban property, was not subject to item 28.1 TGIS prior to 2014. The tribunal examined whether ownership (propriedade) of urban land designated for construction constituted 'property with residential use' under the stamp duty provision. The decision clarified that vertical property ownership (propriedade vertical) - ownership of land and potential future buildings - does not trigger stamp duty under item 28.1 unless there is actual residential use. The tribunal distinguished between legal ownership rights and functional residential use, holding that mere ownership of development-ready land, even with high assessed value, falls outside the pre-2014 tax base.
Can the Portuguese Tax Authority (AT) apply Verba 28 of the General Stamp Tax Table to land designated for construction?
The Portuguese Tax Authority (AT) cannot apply Verba 28 of the General Stamp Tax Table to land designated for construction for tax years prior to 2014. CAAD Case 732/2014-T established that the wording of item 28.1 TGIS in effect until December 31, 2013, requiring 'property with residential use,' excluded plots of land for construction because such land without existing buildings cannot have actual residential use. The tribunal found the AT's assessment violated item 28.1 by error regarding legal prerequisites. However, following the 2014 State Budget Law amendment, the AT can properly apply Verba 28 to building land from January 1, 2014, onward, as the provision was expressly modified to include terrenos para construção.
What is the legal distinction between urban buildings and building land under Article 6 of the Portuguese Municipal Property Tax Code (CIMI)?
Article 6 of the Portuguese Municipal Property Tax Code (CIMI) legally distinguishes urban buildings from building land through separate classifications. Article 6(2) CIMI defines 'residential properties' (prédios urbanos habitacionais) as buildings or constructions licensed for residential purposes or, absent licensing, having normal residential destination. In contrast, Article 6(1) CIMI includes 'plots of land for construction' (terrenos para construção) as a distinct category of urban property. CAAD Case 732/2014-T emphasized this clear distinction, noting that while both fall under urban properties, they represent fundamentally different property types - one being developed with structures capable of actual use, the other being undeveloped land with only potential for future construction.