Process: 74/2015-T

Date: October 14, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses the application of Stamp Tax under item 28.1 of the General Table of Stamp Tax (TGIS) to properties classified as plots for construction. The claimant, a religious entity recognized under the Concordat between the Holy See and Portugal, contested a €57,898.20 stamp tax assessment on two land registration articles in Lisbon with tax patrimonial values totaling over €13 million. The central legal issue was whether item 28.1 of the TGIS, introduced by Law 55-A/2012 to tax high-value properties with residential allocation (valued at €1,000,000 or more), applies to undeveloped plots for construction or only to already-constructed residential buildings. The claimant raised both procedural and substantive challenges. Procedurally, the assessment allegedly lacked proper reasoning, failed to identify the assessing authority (violating Article 135 CPA), and denied prior hearing rights under Article 60 LGT. Substantively, the claimant argued the property was incorrectly classified as a plot for construction when it was actually accessory land to an existing urban building, with two land registration articles erroneously referring to the same property. The core legal argument relied on systematic interpretation: Article 6(2)-(3) of the Municipal Property Tax Code (CIMI) distinguishes plots for construction as a separate category from residential properties, suggesting item 28.1's scope excludes undeveloped land. Historical analysis of Law 55-A/2012's legislative process revealed the government's intent to tax luxury constructed residential properties to reduce the public deficit, not construction land. The phrase "with residential allocation" (com afetação habitacional) indicates properties already in residential use, not merely designated for future construction. The claimant cited CAAD precedent (Case 231/2013-T) supporting this narrow interpretation, emphasizing that taxation of plots would constitute an impermissible analogical or extensive interpretation of tax incidence norms contrary to legal certainty principles.

Full Decision

ARBITRAL DECISION

Case No. 74/2015 – T

Subject: Stamp Tax – item 28.1 of the General Table of Stamp Tax (2013) – plots for construction

Claimant: A…

Respondent: Tax and Customs Authority

I – Report

  1. On 9 February 2015, A…, …, legal entity No. …, invoking Articles 2 and 10 of Decree-Law No. 10/2011 of 20 January and Articles 99 and 102 of the Code of Tax and Customs Procedure, came to request the establishment of an arbitral tribunal and present a request for arbitral decision for review of the stamp tax (ST-item 28) assessment act in the total amount of €57,898.20 (fifty-seven thousand eight hundred and ninety-eight euros and twenty cents) relating to the property with land registration article … of the parish of …, Lisbon, contained in the 2014 assessment notice … and in the account settlement/compensation statement No. 2014 …, requesting its annulment due to the absence of the required legal conditions. In addition to the power of attorney and proof of payment of the initial fee, nine documents were attached.

  2. In the Request for Arbitral Decision, the Claimant opted not to appoint an arbitrator.

  3. Pursuant to Article 6(1) of the Legal Framework for Tax Arbitration (RJAT), by decision of the President of the Deontological Council, the undersigned was appointed as sole arbitrator, and accepted the position within the legally established timeframe.

  4. The arbitral tribunal was constituted on 17 April 2015.

  5. Notified pursuant to Article 17 of the RJAT, the Tax and Customs Authority (TA) presented its Response on 26 May 2015 and a motion wherein, taking into account the absence of any exceptions and the need for additional evidence production, it proposed the waiver of the hearing provided for in Article 18 of the RJAT.

  6. The Claimant adhered to the Respondent's position regarding waiver of the Article 18 RJAT hearing, and the tribunal, by order of 30 June, decided that said hearing would be waived, followed by written pleadings to be submitted successively by the Parties within ten days, with the arbitral decision to be issued by 15 October 2015. Despite an arbitral order of 29 September, the lack of certain documents referred to in the Request was not remedied.

7. The Request for Decision

In the Request for Arbitral Decision, the Claimant states, in summary (our responsibility):

  • The Claimant is, pursuant to Articles three and four of the Concordat between the Holy See and the Portuguese Republic, a religious legal person, morally and canonically erected, duly registered in Portugal, possessing the movable and immovable property necessary for the pursuit of its religious and charitable purposes.

  • The Claimant is the owner and possessor of a property as per land registration No. …/…, described in the land register of … (formerly …) with numbers … and …, with tax patrimonial value of €5,789,820.00 and €7,803,560.00.

  • The assessment act is vitiated by defects of lack of reasoning, obscurity, and absence of essential elements because: it is not reasoned in a manner enabling its clear, sufficient and coherent apprehension; the assessment notice does not indicate the authority that performed it, in violation of Article 135 of the Code of Administrative Procedure (CPA), and prior hearing rights were not granted, in violation of Article 60 of the General Tax Law (LGT).

  • The stamp tax assessment provided for in item 28 of the General Table of ST falls on a property incorrectly classified for tax purposes as a plot for construction, and is therefore illegal due to error concerning the legal requirements.

  • Two land registration articles – article … and … of the parish of … (former articles… and … of the … – correspond to the same property description, and the property corresponding to article … is neither now nor ever was a plot for construction with economic autonomy, but merely an accessory land of the urban property registered under article … of the same parish.

  • On 1 March 2001, a request was made to alter the land registration entry of the former article … of the parish of … (current …/…), identified as "….", indicating built-up area of 3,383.32 m² and uncovered area of 14,618.03 m² corresponding to the accessory land.

  • On 29 September 2005, verifying the existence of two land registration articles for the same property, a request was made that "the entry in the land register of article … of the parish of … be corrected regarding the constitution and built-up and uncovered areas of the property, in accordance with the documents existing in the 2nd Land Registry Office of Lisbon, that is, 3,383.32 m² of built-up area of the buildings and 14,618.03 m² of uncovered area of the accessory land which still includes the area of 2,000 m², alienated to the Youth Center, in process of regularization" and article … of the same parish be eliminated.

  • Despite the requests submitted, the registrations of articles … and … …, currently ... and … of ….remained.

  • The subdivision permits No. …/… and …/… which gave rise to the detachment of various parcels of the accessory land in question never classified that land (accessory land) as a plot for construction, docs. 8 and 9, with only the detached parcels being so classified.

  • The land with No. … cannot be registered as a plot for construction and even less so for residential purposes, being a property that serves only the property registered as …, and therefore the description in this latter land registration entry should be corrected and No. … should be extinguished, proceeding to a new valuation in accordance with Article 37 of the Municipal Property Tax Code (CIMI).

  • Item 28 of the TGIS as amended by Law No. 55-A/2012 of 29/10 incorporates properties with residential allocation without defining this concept, and therefore, taking into account the referral of Article 67(2) of the Stamp Tax Code (CIS), the solution should be sought in Article 6(2) of the CIMI.

  • Taking into account Articles 6(2) and (3) of the CIMI, it is concluded that for tax purposes, plots for construction constitute a distinct species of properties completely different from properties classified as residential or with residential allocation referred to in item 28.1 of the TGIS.

  • The TA cannot, by analogy or extensive interpretation, alter the material scope of tax incidence norms, and general rules of interpretation must be applied. Therefore, taking into account the historical element, it is concluded that the legislator's intention was to tax "constructed buildings" and not plots for construction.

  • Law No. 55-A/2012 introduced amendments to the Personal Income Tax Code, the Corporate Income Tax Code, the LGT, and the CIS, constituting a package of fiscal measures aimed at reducing the public deficit through increased revenue, to increase the taxation of capital income and capital gains, as well as taxation of property deemed luxury.

  • In the legislative proposal, the Government proposes the creation of a special rate for high-value residential urban properties, stating that special taxation would apply to properties worth equal to or greater than 1 million euros, making it unequivocal that the taxation of plots for construction was not in the spirit of the legislative proposal, and no evidence to the contrary resulting from the deputies who approved the law.

  • The formula "with residential allocation" used in item 28.1 manifestly encompasses properties that have already been given a destination for residential purposes, not including properties not yet applied to these purposes, although destined for them, namely through subdivision permits.

  • As stated in the decision of the Tax Arbitration Court (CAAD) (Case No. 231/2013-T): "the text of the law, by adopting the formula 'property with residential allocation', instead of 'urban properties with residential allocation', which appears in the aforesaid 'Statement of Reasons', strongly indicates that it is required that the residential allocation already be implemented, as only thus will the property have such allocation."

  • One cannot say that the legislator, with Law No. 83-C/2013 of 31 December, intended to clarify the logical element underlying the initial drafting of item 28.1 of the TGIS, because by not assigning it interpretative nature, it clearly intended to alter the scope of incidence of said item.

  • This interpretation has been consistently and uniformly followed by numerous decisions of the Superior Courts, namely the Tax Litigation Section of the Supreme Administrative Court (STA).

  • The taxation under item 28 violates the principle of equality because it taxes holders of immovable property of equal value held by different persons very differently, based on criteria that may conflict with the principle of contributory capacity, and is unconstitutional due to violation of the principles of equality and contributory capacity.

  • The Claimant had to constitute a voluntary mortgage to suspend the tax enforcement proceedings, bearing costs in the amount of €779.96, to which will be added the sum of €225.00 for its respective annulment, and therefore should be reimbursed this total amount of €1,004.96 plus compensatory interest for the period in which it incurred such costs, and also indemnificatory interest, pursuant to Article 43 of the LGT, relative to improper payments.

8. The Response

The Respondent responds, in summary (our responsibility):

  • With the legislative amendment introduced by Law No. 55-A/2012 of 29/10/2012, to Article 1 of the CIS, and the addition of item 28 to the TGIS, the ST now also applies to the ownership, usufruct or surface rights of urban properties whose tax patrimonial value contained in the matrix, in accordance with the Municipal Property Tax Code, is equal to or greater than €1,000,000.00.

  • In the absence of any definition in the ST, of the concepts of urban property, plot for construction and residential allocation, one must resort to the CIMI, mandatorily applied subsidiarily by Article 67(2) of the Stamp Tax Code.

  • One must take into account the concept of property in Article 2(1) of the CIMI, as well as the provisions of Article 6(1) of the CIMI, on the species of existing urban properties (including in this concept plots for construction).

  • The mere constitution of a potential construction right causes the value of the property in question to increase, therefore the notion of allocation of the urban property is based on the valuation of properties, and Article 45(2) of the CIMI must be applied, which requires taking into account the "value of authorized buildings", and therefore the allocation coefficient provided for in Article 41 of the CIMI is applicable.

  • Thus, if it is clear that for purposes of determining the tax patrimonial value of plots for construction one must take into account the allocation coefficient in property valuation, its consideration cannot be ignored for purposes of applying item 28 of the TGIS.

  • The legislator does not refer to properties intended for residential purposes but with residential allocation, and the meaning of this expression should be found not in Article 6(1)(a) of the CIMI but in Article 45 of the CIMI, which distinguishes the part of the land where the building to be constructed will be located and the area of free land; once the amount of the first part is determined, the determined value is reduced to a percentage between 15% and 45% as provided in Article 45(2) of said provision, because construction has not yet been effected.

  • The value of the land adjacent to the implantation area is determined in the same manner as the value of the free land area and the excess land area for purposes of any urban property.

  • It is possible, before the actual construction of the property, to determine and ascertain the allocation of the land for construction taking into account the urban development and construction regime, the Building and Urban Development Code (RJUE) and Municipal Master Plans.

  • The provision of item 28 of the TGIS does not constitute a violation of any constitutional command, applying equally to all cases in which the material and legal factual requirements are met, the different valuation and taxation of a property in full ownership as opposed to a property constituted in horizontal property being justified, as well as the different aptitude of properties (residential/services/commerce).

  • Taxation under stamp tax follows criteria of adequacy without violation of the principle of proportionality, applying to residential properties of value exceeding €1,000,000.00, and therefore the assessment under review is not vitiated by violation of law, whether of the Constitution or of the CIS, and consequently the Claimant's claim should be judged unfounded and the Respondent Entity should be absolved.

9. Object of the Request

The legal issues raised in the request for review of the legality of this Stamp Tax assessment are the following:

  • Imputation of illegality due to lack of reasoning, lack of identification of the author and lack of notification for prior hearing;

  • Classification of the property subject to the assessment in this case as a plot for construction;

  • Whether a plot for construction should be considered a "property with residential allocation" for purposes of applying item 28.1 of the General Table of Stamp Tax, as amended by Law No. 55-A/2012 of 29 October.

10. Sanitation

The arbitral tribunal is materially competent pursuant to the provisions of Article 2(1)(a) of the Legal Framework for Tax Arbitration.

The parties enjoy legal personality and capacity and have standing pursuant to Article 4 and Article 10(2) of the Legal Framework for Tax Arbitration (RJAT), and Article 1 of Ordinance No. 112-A/2011 of 22 March.

The case is not vitiated by any nullity nor have the parties raised any exceptions that would prevent review of the merits of the case, and therefore the conditions for the issuance of the arbitral decision are met.

II Justification

11. Established Facts

11.1. On 29 June 1970, the B… of the Patriarchate of Lisbon notified the Secretary of the Civil Government of Lisbon, pursuant to Articles three and four of the Concordat between the Holy See and the Portuguese Republic, of the existence as a religious legal person, morally and canonically erected, of "A…", with headquarters in the parish of …, municipality of Lisbon (cf. Certificate issued by the Civil Government of Lisbon, issued on …/…/2005, Document No. 2, attached with the Request).

11.2. By certificate issued by the Land Registry Office of Lisbon on 20/10/2014, the urban property College … (No. …/… of the parish of …) was described on 11/08/89 as a complex consisting of three buildings (with areas, respectively, of 1,102.21 m², 561.33 m² and 1,568.98 m²) and accessory land with an area of 17,726.18 m²; subsequent notes account for alterations, such as detachments and alteration of one of the buildings (Document No. 3 attached with the Request).

11.3. The certificate referred to in the previous item also contains records of acquisition of land on 10/04/1951 from the Lisbon City Council, by "A…."; subdivision authorizations (on 11/08/1989 and 21/05/1991), the latter of 8 plots of land for construction of residential properties (Document No. 3 attached with the Request).

11.4. Certificate issued in 1989 describes the detachment carried out that year from property …, of two plots of land intended for construction, with property .. becoming composed of two buildings and a chapel (areas of 1,102.21 m², 1,568.98 m² and 561.33 m²) and common accessory land of 17,726.18 m² (Document No. 8).

11.5. Registered in the urban land registers of the Tax Service of Lisbon 8, there are two urban properties in the ownership of "A….", legal entity No. …, as full owner, under articles … and … of the parish of … (which correspond, respectively, to articles … and … of the former parish of …) – (land record booklets, Documents Nos. 4 and 5).

11.6. On 1 March 2001, the Claimant delivered at the Tax Service 8 of Lisbon, a declaration model 129, communicating that, following a subdivision operation, 10 plots of land for construction had been detached from the "accessory land", and therefore the total built-up areas and accessory land areas had been altered, respectively to 3,383.32 m² and 14,618.03 m² (Document No. 7 attached with the Request).

11.7. On 29 September 2005, in a submission to the Chief of the Finance Division of the 8th Fiscal District of Lisbon, the Claimant recalled the 2001 delivery of model 129 and the noting of facts in the competent Land Registry Office, expressing surprise at the maintenance of two land registration articles … and … of parish …, and requesting action to "correct the entry in the land register of article … of parish …, regarding the constitution and built-up and uncovered areas of the property, in accordance with the documents existing in the 2nd Land Registry Office of Lisbon, that is: 3,383.32 m² of built-up area and 14,618.03 m² of uncovered area of the accessory land which still includes the area of 2,000 m² alienated to the Youth Support Center, in process of regularization" (Document No. 6 attached with the Request).

11.8. In the submission referred to in the previous item, taking into account the existence of two land registration articles for the same property, a request was made that "the entry in the land register of article … of parish … be corrected regarding the constitution and built-up and uncovered areas of the property, in accordance with the documents existing in the 2nd Land Registry Office of Lisbon, that is, 3,383.32 m² of built-up area of the buildings and 14,618.03 m² of uncovered area of the accessory land which still includes the area of 2,000 m², alienated to the Youth Center, in process of regularization" and article … of the same parish be eliminated.

11.9. In the respective land record booklet, the property currently corresponding to No. … of .. (former … of …, registered in the matrix on …), is described as a property composed of two buildings (one being a chapel at ground level), with reference to a new building and an enlarged property (previously registered as … which was eliminated), also referring to a "remaining area of 18,679.42 m²" which gave rise to article … …, with its Tax Patrimonial Value (VPT), determined in 2014, of €7,803,560.00 (Document No. 4, attached with the Request).

11.10. In the respective land record booklet, the property corresponding to No. … (former … …) is described as "plot for construction" with an area of 12,484.08 m²; registered in the matrix in 1992, with its VPT, determined in 2013, of €5,789,820.00 (Document No. 5, attached with the Request).

11.11. The Claimant was notified pursuant to Article 36 of the Code of Tax and Customs Procedure, applicable by virtue of Article 36 of the Stamp Tax Code, of the Stamp Tax assessment, item 28.1 of the TGIS, relating to 2013, in the amount of €57,898.20, derived from the application to property U-… of the parish of … of the rate of 1% on the VPT of €5,789,820.00 (Assessment Document No. 2014 …, Documents No. 1 and 1-a, attached with the Request and Article 96 of the Request).

11.12. The assessment document contains an electronic signature of the Director-General of Taxes, C…, and refers to the existence of electronic notifications, pursuant to Articles 39(9) and (10) of the Code of Tax and Customs Procedure (Assessment Document No. 2014 … – 1a - attached with the Request).

12. Unproven Facts

It was not proven that a voluntary mortgage was constituted on the urban property registered with land registration article … in order to suspend tax enforcement proceedings for collection of the tax subject to this case, nor was the number of the tax enforcement proceedings indicated (in Article 42 the Respondent admitted only facts proven by documents in the case).

13. Justification of Fact-Finding

The facts were established based on documents attached to the case and not contested by the TA, being indicated in relation to each item of factual matter.

Regarding the unproven facts, this resulted from the absence of elements, namely the non-attachment of documents mentioned in the Request.

It is considered that the factual matter established is sufficient for review of the legal issue.

14. Legal Analysis

Proceeding to analyze the legal issues that are the subject of this Request:

14.1. Illegality Due to Lack of Reasoning, Lack of Identification of the Author and Lack of Prior Hearing

14.1.1. Lack of Reasoning

As to the imputation to the assessment act of the defect of lack of reasoning, the Claimant argues that "nothing in the assessment justifies in what way the said 'plot for construction' would have (which it does not have) the residential allocation that is a necessary prerequisite for the incidence of item 28.1 of the TGIS."

However, the Claimant in its request clearly demonstrates understanding of the Respondent's reasoning on the application of item 28.1. – it is a question of understanding (agree or not) that a plot for construction may also be qualified as a "property with residential allocation", falling within the scope of incidence of item 28 of the TGIS. An interpretation that the Claimant contradicts in detail throughout approximately one hundred articles (39 to 138) of its Request for Decision.

In fact, the assessment notice sent to the Claimant indicates that it is an assessment of Stamp Tax, item 28.1 of the TGIS, relating to 2013, in the amount of €57,898.20, derived from the application to property U-… of the parish of … of the rate of 1% on the VPT of €5,789,820.00 (above, established facts, 11.11).

That is, this is an assessment carried out pursuant to Articles 46(5) [1] and 44(5) [2] of the Stamp Tax Code (as amended by Law No. 55-A/2012 of 29/10), which mandate the application of Articles 119 and 120 of the Municipal Property Tax Code.

It should be noted that Article 119 of the CIMI provides that the Tax Authority services send to each taxpayer, by the end of the month prior to payment, the competent assessment document, with details of the properties, their parts susceptible to independent use, the respective tax patrimonial value and the tax amount attributable to each municipality where the properties are located[3].

Comparing this with the legal requirements regarding the assessment document, we can conclude that the document in the case file meets, albeit very succinctly, the reasoning requirements imposed by Article 77(2) of the LGT, indicating the applicable legal provisions, the qualification and quantification of the tax fact and the determination of the taxable matter and the tax.

In addition, in the assessment document – which indicates as subject "statement of the Stamp Tax assessment (item 28)" – it adds "For more information you can consult your tax situation at the website http://portaldasfinancas.gov.pt using your access password"[4].

Pursuant to Article 23(7) of the Stamp Tax Code, "If the tax is due for the situations provided for in item 28 of the General Table, the tax is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI" and in accordance with Article 113(1) of the CIMI, "The tax is assessed annually, in relation to each municipality, by the central services of the General Directorate of Taxes, based on the tax patrimonial values of the properties and in relation to the taxpayers contained in the matrices on 31 December of the year to which it refers."

Therefore, in the case at hand, the assessment act does not suffer from insufficient reasoning.

In summary, it is concluded that the act is sufficiently reasoned for having been performed in accordance with the provisions invoked as applicable and because, in accordance with abundant administrative and tax jurisprudence well-established, it allows the cognitive and evaluative process of the decision to be known.

14.1.2. Failure to Indicate in the Assessment Notice the Authority That Performed It

The assessment document – containing all indispensable indications, as seen in the previous point – contains an electronic signature of the Director-General of Taxes, C… (above, established facts, 11.12.).

It does not appear that one can question that the highest-ranking official of the services responsible for the tax assessment has validly signed a document that embodies the assessment data.

In the same sense, the Rulings of the Court of Appeal, issued on 23 May 2006 (appeal 01156/06) and 5 June 2007 (appeal 01148/06)[5].

As in the first of the rulings referenced above, it is concluded in the present case that (…) as this is a "mass or series act, which does not prevent the singular character of the assessment under review, it concludes that the argument that it is unaware of the identity of the true author of the act does not proceed, which after all is perfectly identified"[6].

14.1.3. Failure to Grant the Right to Prior Hearing

The Claimant appears to argue that prior to the sending of the assessment contained in the assessment notice, sent in accordance with the rules provided for in the Stamp Tax Code and the Municipal Property Tax Code, it should have been heard to pronounce on the correctness thereof.

Article 60(1)(a) of the LGT provides that taxpayers' participation in the formation of decisions concerning them may be carried out, whenever the law does not prescribe otherwise, by any of the following means: a) right to hearing before assessment (…).

However, this cannot mean prior hearing of taxpayers before all assessment acts carried out by the Tax Authority, in compliance with the law, based on taxpayers' declarations or based on elements existing in its records that require it to carry out periodic taxation, as is precisely the case with Municipal Property Tax and Stamp Tax item 28.

That is, cases involving tax assessment procedures in which the administration acts with bound discretionary powers.[7]

These are situations in which, if the taxpayer does not agree, he should contest the correctness of the interpretation and application of the law[8].

In the case at hand, it is concluded, therefore, that there was no occasion for prior hearing, with no invoked illegality for failure to grant its exercise.

14.2. Land Registration Classification of the Land Subject to the Assessment at Issue

The Claimant intends, in summary, that its 2001 communication (of the detachment of 10 plots of land from the accessory land) and its 2005 objection to the classification as a plot for construction of the urban property under matrix … of the parish of … (then … of the parish of …) (above, established facts, 11.6 to 11.8.) are capable of vitiating the taxation under review here by having been based on incorrect qualification of the property subject to the tax.

The Claimant makes no reference to developments suffered by its claim. Apparently, despite the doubts expressed since 2001, the Claimant did not undertake subsequent action aimed at altering the qualification of the property in question.

According to the land record booklets attached to the case (established facts, 11.9 and 11.10), the VPT of €7,803,560.00 of the property under matrix … … was determined in 2014 and the VPT of €5,789,820.00 of the property corresponding under No. … was determined in 2013.

The Claimant did not invoke failure to notify of the valuations in question, limiting itself to referring to the earlier requests (years 2001 and 2005) which appear to have gone unanswered, without, however, having pursued any contestation of the administration's silence (cf. Articles 20 to 23 of the Request).

It also does not state whether, upon learning of the valuations carried out in 2013 and 2014, it requested a second valuation or submitted any complaint regarding matrices (Article 130 of the CIMI) or the valuation (Articles 71 and 74 of the CIMI).

The Claimant argues that, although parcels of land have been detached from the accessory land, the respective subdivision permits No. …/… and …/… qualified as plots for construction only the lands detached from the land designated as accessory land of the property under No. 91, and not the accessory land itself (Article 24 of the Request).

For this reason, it intends that the description contained in the land registration entry corresponding to article No. … should be corrected and article … of the parish of … should be extinguished, proceeding to a new valuation in accordance with the provisions of Article 37 of the CIMI.

Now, if two land registration articles exist, in relation to which the Claimant believes one of them ceased to exist, with the land area to be included only in the other land registration article, it appears that it should have reacted against the valuations carried out in 2013 and 2014.

From the provisions of the Municipal Property Tax Code it follows that after notification of the first valuation, a second valuation will be requested within 30 days (Article 76) and that this gives rise to unitary challenge, on the basis of any illegality, including error of fact or law in fixing the tax patrimonial value (Article 77).

As follows from Article 134 of the Code of Tax and Customs Procedure and Article 86(1) of the LGT, valuation acts are separable acts, susceptible to autonomous and independent challenge, and it is not admissible to challenge in court the tax assessment carried out based on a tax patrimonial value determined in a valuation that was not timely contested.

If a tax assessment carried out based on a value resulting from a valuation act that, not having been autonomously challenged, became established in the legal order as a resolved or decided case, is challenged, such assessment is necessarily destined to fail[9].

That is, regardless of any other considerations (for example, regarding sufficiency of evidence or the tribunal's competence), this tribunal considers the Claimant's argument, based on the existence of inaccuracies in land register entries, property classification and valuation[10] incapable of leading to the invalidation of the assessment subject to review in this case.

14.3. Application of Item 28 of the General Table of Stamp Tax (TGIS) to Plots for Construction

Item 28 of the General Table of Stamp Tax annexed to the Stamp Tax Code (CIS) was added by Article 4 of Law No. 55-A/2012 of 29 October, with the following content:

"28 – Ownership, usufruct or surface rights of urban properties whose tax patrimonial value contained in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than €1,000,000 – on the tax patrimonial value for Municipal Property Tax purposes:

28.1 – For property with residential allocation – 1%;

28.2 – For property, when the taxpayers that are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by ordinance of the Minister of Finance – 7.5%."

Pursuant to the amendments to the Stamp Tax Code introduced by Article 3 of Law No. 55-A/2012 of 29/10, the stamp tax provided for in item 28 of the TGIS applies to a legal situation (Article 1(1) and Article 2(4) of the CIS), in which the respective taxpayers are those referred to in Article 8 of the CIMI (Article 2(4) of the CIS), and to whom the burden of the tax falls (Article 3(3)(u) of the CIS).

Item 28.1 encompasses "properties with residential allocation" but this concept is not defined in any provision of the CIS, nor is it used in the CIMI, the statute to which Article 67(2) of the CIS expressly refers when matters not regulated in the CIS are at issue concerning item 28.

This matter has been subject to review in a very large number of cases, both in arbitral tribunals[11] and in administrative and tax courts, with an appreciable quantity of decisions already issued at the highest level[12] (Tax Litigation Section of the Supreme Administrative Court), with great unanimity of positions.

We cannot but agree with the assessment that has been made in those multiple decisions, and will therefore cite some excerpts from them, largely repeating argument also already used in previous cases we have decided.

Recall that, in summary, the Claimant argues that item 28 of the TGIS, when referring to properties with residential allocation, encompasses "constructed buildings" – properties that have already been given the destination of residential purposes – and not "plots for construction" – which might someday, if it comes, be allocated to that specific purpose.

The TA, in contrast, considers that the meaning of the legislator not using the expression "properties intended for residential purposes," but "residential allocation," must be found not in Article 6(1)(a) of the CIMI but in Article 45 of the CIMI, in the interpretation of the expression "residential allocation," a notion that rests on the valuation of properties. Article 45(2) of the CIMI, which requires taking into account the "value of authorized buildings," refers to the allocation coefficient provided for in Article 41 of the CIMI, which would have to be taken into account for purposes of applying item 28 of the TGIS.

Analyzing precisely this type of argument, it was stated in the arbitral decision issued in Case 53/2013-T: "Regarding Article 45 of the CIMI, it has no relation whatsoever to the classification of properties, only indicating the factors to be weighed in the valuation of plots for construction. What is weighed there, in making reference to the 'building to be constructed,' is the consideration of the destination of the land, which, as we have seen, is something that, in the context of the CIMI, does not imply allocation and occurs before this."[13]

Also arbitral decisions Nos. 158/2013-T and 288/2013-T rejected the TA's thesis regarding the application of the general property valuation methodology to plots for construction, which would make the allocation coefficient provided for in Article 41 of the CIMI applicable to such properties, as follows: "It is true that the CIMI determines the application, to the valuation of plots for construction, of the valuation methodology applicable to constructed buildings, incorporating for this purpose in the land value the estimated value of the building to be constructed; and that this value is determined, in turn, by the type of allocation provided for the properties to be built. Put in simpler terms, the law (CIMI) says that to determine the tax patrimonial value of plots for construction, one incorporates into this a portion of the estimated value of the buildings to be constructed; and to estimate the value of the buildings to be constructed, one takes into account the allocation provided for them. Contrary to what the TA argues, it follows precisely from the letter of these provisions the inapplicability of the concept of 'allocation' to plots for construction. The allocation that is taken into account, for purposes of valuation, even of plots for construction, is always and only the allocation of the buildings to be constructed. The allocation provided for the buildings to be constructed influences the tax patrimonial value of plots for construction, but nothing more. From the norm regarding the determination of the value of properties, which states that in the value of plots for construction is incorporated the estimated value of the buildings to be erected, which, in turn, is influenced by the future allocation of those buildings, one cannot extract that the allocation in question is an allocation of the plots themselves, and for two reasons: First, because this interpretation would be contrary to the very literal meaning of the provisions that require taking into account, in the valuation of plots for construction, the allocation of the properties to be built; And second, because the manner in which the law requires a particular patrimonial reality to be valued cannot be determinative of the nature or legal qualification of that same reality, having in view, above all, the principle of typicality of tax incidence norms. The fact that the law requires the same valuation methodology to be applied to one patrimonial reality that is applied to another different reality does not cause the first reality to share the nature of the second. Thus, if it is true that the value of the authorized or planned buildings influences the actual value of construction land, and this value must therefore be reflected in the tax patrimonial value of those lands, it does not follow that a plot becomes to have residential allocation by having the construction, in it, of residential properties planned, and this distinction is drawn clearly from the very valuation norms of the CIMI."

The TA's argument has also been rejected by the Supreme Administrative Court, reproducing, by all accounts, an excerpt from a decision (Ruling of 14-05-2014, in Case 0317/14) which also refers to other decisions: "Nothing unequivocal follows from the letter of the law, indeed, as it itself, by using a concept that it did not define and that was also not found defined in the statute to which it referred by way of subsidiary remedies, was unnecessarily subject to misunderstandings, in a matter – of tax incidence – in which certainty and legal security should also be primary concerns of the legislator. And from its 'spirit,' apprehensible in the statement of reasons of the legislative proposal that is the origin of Law No. 55-A/2012 (Legislative Proposal No. 96/XII – 2nd, Record of Parliamentary Debates, Series A, No. 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing more follows except the concern to raise new tax revenue, from sources of wealth 'spared' in the past by the Tax Authority's reach compared to earnings from work, in particular capital income, securities capital gains and property ownership, reasons which bring no relevant contribution to the clarification of the concept of 'urban properties with residential allocation', as they take it for granted without concern to clarify it. Such clarification did, however, arise – as reported in the Arbitral Decision issued on 12 December 2013, in Case No. 144/2013-T, available in the CAAD database – when the legislative proposal was presented and discussed in the Parliament, in the words of the State Secretary for Tax Affairs, who is said to have explicitly stated, as found in the Record of Parliamentary Debates (DAR I Series No. 9/XII – 2, of 11 October, p. 32) that: 'The Government proposes the creation of a special rate on high-value residential urban properties. This is the first time in Portugal that special taxation on high-value properties intended for residential use is created. This rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to properties worth equal to or greater than 1 million euros' (emphasis ours), from which it appears that the reality to be taxed with a view is, after all, and despite the terminological imprecision of the law, 'urban residential properties', in current language 'houses', and not other realities. The fact that it may be considered that in determining the tax patrimonial value of urban properties classified as plots for construction one must take into account the allocation that the authorized or planned construction will have for determining the respective value of the implantation area (cf. Articles 45(1) and (2) of the CIMI) does not determine that plots for construction may be classified as 'properties with residential allocation,' as 'residential allocation' always appears in the Municipal Property Tax Code referred to 'buildings' or 'constructions', existing, authorized or planned, as only these can be inhabited, which is not the case with plots for construction, which do not have, in themselves, conditions for this, not being susceptible to use for residential purposes unless and when the construction authorized and planned for them is erected on them (but in that case they would no longer be 'plots for construction' but another species of urban properties – 'residential', 'commercial, industrial or service' or 'other' – Article 6 of the CIMI). It would be strange, indeed, that the determination of the scope of the objective incidence norm of item 28 of the General Table of Stamp Tax would be found, in the end, in the norms determining the tax patrimonial value in the Municipal Property Tax Code, and that the legislator's terminological imprecision in the drafting of that rule would, after all, be elucidated and finally clarified by way of an indirect and equivocal referral to the allocation coefficient established by the legislator in relation to constructed properties (Article 41 of the Municipal Property Tax Code). Thus, given that a plot for construction – whatever the type and purpose of the building that will be or may be erected on it – does not satisfy, by itself, any condition for being licensed as such or for its destination to be defined as normal for residential use, and referring the Stamp Tax incidence norm to urban properties with 'residential allocation', without any specific concept being established for the purpose, cannot one extract from it that the same contains a future potentiality, inherent in a distinct property that may someday be built on the land. It is concluded therefore, in conformity with the decision in the judgment under appeal that, as Article 6 of the Municipal Property Tax Code results in a clear distinction between urban properties 'residential' and 'plots for construction', these cannot be considered as 'properties with residential allocation' for purposes of the provision in item 28.1 of the General Table of Stamp Tax, in its original wording, as conferred by Law No. 55-A/2012 of 29 October."

This tribunal subscribes to the analyses contained in the excerpts reproduced.

And it is also considered that this interpretation is confirmed by the amendment, by the State Budget Law for 2014 (Law No. 83-C/2013 of 31 December), of the wording of item 28.1, which now reads: "For residential property or for plot for construction whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the Municipal Property Tax Code."

Indeed, this change in wording means it was intended to alter the text to encompass what was not previously included in it.

And if previously someone had intended to encompass the reality defended by the TA, such goal not only found no expression in the letter of the law but was contradicted by the historical element, through the account of parliamentary proceedings.

The SEAF statements transcribed above are proof of this: the legislator, in introducing this legislative innovation, considered to be the determinant expression of contributory capacity, urban properties with residential allocation, of high value (luxury), more rigorously, of value equal to or greater than €1,000,000.00, on which a special stamp tax rate now applies, intending to introduce a principle of taxation on wealth exhibited in the ownership, usufruct or surface rights of luxury urban properties with residential allocation.

For this reason, the criterion was for application of the new rate to urban properties with residential allocation, whose VPT is equal to or greater than €1,000,000.00". (...)[14] "The justification for the measure designated as 'special rate on high-value residential urban properties' rests on the invocation of the principles of social equity and tax justice, calling on holders of high-value properties intended for residential use to contribute more intensively, applying the new special rate to 'houses worth equal to or greater than 1 million euros. Clearly the legislator understood that this value, when attributed to a residence (house, independent fraction or apartment with independent use), reflects a contributory capacity above average and, as such, susceptible to determining special contribution to ensure fair distribution of the tax burden."

Now if the legislator clearly showed the intention to tax luxury houses allocated to residential use, it is not possible to extract from the letter of the law, as drafted in 2012, the interpretation that taxation encompasses plots for construction of buildings, even if allocated to residential use.

Citing again the Ruling of the STA issued in appeal No. 317/14: "residential allocation always appears in the Municipal Property Tax Code referred to 'buildings' or 'constructions', existing, authorized or planned, as only these can be inhabited, which is not the case with plots for construction, which do not have, in themselves, conditions for this, not being susceptible to use for residential purposes unless and when the construction authorized and planned for them is erected on them (but in that case they would no longer be 'plots for construction' but another species of urban properties – 'residential', 'commercial, industrial or service' or 'other' – Article 6 of the CIMI)."

Therefore, the wording given to item 28.1 with the 2014 Budget Law is clearly innovative, with the question of its application to previous years not arising.

Which, it is repeated, the legislator did not even attempt.

14.3. Conclusion

Given that the Claimant's property is classified as a plot for construction, it does not constitute a property with current residential allocation, and therefore the Stamp Tax provided for in item 28.1 of the TGIS does not apply to that property, in the wording in force at the time of the facts.

For this reason, the assessment whose declaration of illegality is requested is vitiated by violation of said item 28.1, by error concerning the legal requirements, which justifies the declaration of its illegality and annulment (Article 135 of the Code of Administrative Procedure).

15. Costs Relating to Guarantee and Compensatory Interest and Indemnificatory Interest on Guarantee Costs

The Claimant seeks reimbursement of the costs of providing guarantee to suspend tax enforcement proceedings, consisting of a voluntary mortgage, as well as compensatory interest for the period in which it incurred such costs, and also indemnificatory interest on the guarantee cost, pursuant to Article 24(5) of the RJAT and Article 43 of the LGT, as these are improper payments.

It follows from Articles 53(1) to (3) of the LGT (with heading "guarantee in case of improper payment") that in the event that, in a gracious claim or challenge, it is verified that there was error attributable to the services in the tax assessment, the debtor who offered a bank guarantee or equivalent to suspend enforcement will be indemnified wholly or partly for the losses resulting from its provision in proportion to the amount won in the judicial challenge that has as its object the guaranteed debt, having as maximum limit the amount resulting from the application to the guaranteed amount of the rate of indemnificatory interest provided for in the LGT.

On this matter, Article 171 of the Code of Tax and Customs Procedure provides: "Indemnification in the case of bank guarantee or equivalent improperly provided shall be requested in the case in which the legality of the enforceable debt is disputed."

In the case at hand, it was concluded that the interpretation by the services of the Respondent was not correct in taxing the situation pursuant to item 28.1 of the TGIS, and it is also undisputed that arbitral tribunals are competent to apply Article 53 of the LGT[15].

However, the guarantee that the Claimant claims to have provided to suspend tax enforcement is not covered by said Article 53 of the LGT.

According to doctrine uniformly accepted, a voluntary mortgage does not have the characteristics required in said legal provision.

"Equivalent to bank guarantee, for purposes of this article, shall be all forms of guarantee that entail for the interested party bearing an expense whose amount increases as a function of the period of time during which it is maintained. Of the guarantee means expressly provided for in Article 199 of the Code of Tax and Customs Procedure, it would be the case of guarantee insurance (…)."[16]

In the case of another type of guarantee provision, any claim for indemnification must be made through an autonomous action, of tort liability[17].

Furthermore, as indemnification for guarantee costs is not due, no other interest is due either[18].

In addition, pursuant to Article 43 of the LGT, the right to indemnificatory interest covers only the liability of the Tax Authority originating from improper payment of taxes attributable to it[19].

16. Decision

Pursuant to and with the grounds set out above, the arbitral tribunal decides to judge the request for arbitral decision well-founded as to the declaration of illegality, with the consequent annulment, of the Stamp Tax assessment act relating to the year 2013 (assessment notice 2014 …) in the amount of €57,898.20.

17. Value of the Case

In accordance with the provisions of Article 315(2) of the Code of Civil Procedure, Article 97-A(1)(a) of the Code of Tax and Customs Procedure and also Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €57,898.20 (fifty-seven thousand eight hundred and ninety-eight euros and twenty cents).

19. Costs

For purposes of the provisions of Article 12(2) and Article 22(4) of the RJAT and Article 4(4) of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €2,142.00 (two thousand one hundred and forty-two euros), in accordance with Table I annexed to said Regulation, to be borne entirely by the Respondent.

Lisbon, 14 October 2015.

The Arbitrator

Maria Manuela Roseiro

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto de Selo) under Verba 28.1 of the TGIS on construction land in Portugal?
Item 28.1 of the General Table of Stamp Tax (TGIS), introduced by Law No. 55-A/2012 of October 29, 2012, imposes an annual stamp tax on high-value properties with a tax patrimonial value (VPT) equal to or greater than €1,000,000. The tax rate is 1% for properties valued between €1,000,000 and €2,000,000, and 1.5% for properties exceeding €2,000,000. The central legal controversy concerns whether "properties with residential allocation" (imóveis com afetação habitacional) includes plots for construction (terrenos para construção) or only already-constructed residential buildings. The predominant interpretation, supported by systematic analysis of Article 6(2)-(3) of the Municipal Property Tax Code (CIMI), treats plots for construction as a distinct category from residential properties, suggesting they should not fall under item 28.1's scope. Historical legislative analysis indicates the law's purpose was to tax luxury residential properties already in use, not undeveloped construction land. This distinction is crucial because extending the tax to construction land would constitute an analogical interpretation of tax incidence norms, which is prohibited under Portuguese tax law principles requiring strict interpretation of provisions defining tax obligations.
Can religious entities be exempt from Stamp Tax on real estate under the Concordata between Portugal and the Holy See?
The Concordat between the Holy See and the Portuguese Republic, particularly Articles 3 and 4, recognizes religious legal persons canonically erected and registered in Portugal, granting them capacity to possess movable and immovable property necessary for pursuing their religious and charitable purposes. While the Concordat provides certain tax benefits to religious institutions, specific exemption from Stamp Tax under item 28.1 depends on the nature and use of the property. Properties used directly for religious worship, charitable activities, or closely related canonical purposes may qualify for exemptions under Portuguese tax law implementing the Concordat. However, properties held for investment or commercial purposes, even by religious entities, may not automatically qualify for exemption. In this case, the Claimant invoked its status as a religious legal person under the Concordat, though the primary legal argument focused on the incorrect classification of the property as a plot for construction rather than accessory land to a religious building. The exemption analysis requires examining both Concordat provisions and specific Portuguese tax exemption rules (including Article 44 of the Stamp Tax Code and exemptions in the Municipal Property Tax Code) applicable to religious institutions' real estate holdings, considering whether the property serves essential religious functions or constitutes taxable patrimony.
How is the patrimonial tax value (VPT) determined for construction land subject to Verba 28 of the TGIS?
The patrimonial tax value (Valor Patrimonial Tributário - VPT) for construction land is determined according to the Municipal Property Tax Code (CIMI), specifically Article 37 which governs valuation of plots for construction (terrenos para construção). The VPT calculation considers multiple factors: (1) the land's location and applicable zone coefficient reflecting market conditions; (2) total area of the plot; (3) construction potential determined by buildable area according to urban planning regulations, subdivision permits (alvarás de loteamento), and applicable building indices; (4) infrastructure availability (roads, utilities, services); and (5) market values in comparable zones. For plots designated for construction, the valuation formula multiplies the construction area permitted by planning regulations by the zone's construction value coefficient. In this case, the properties had VPTs of €5,789,820.00 and €7,803,560.00, exceeding the €1,000,000 threshold triggering stamp tax liability. However, the Claimant contested the underlying classification, arguing the land registration should be corrected because the property was accessory land (terreno anexo) to an existing urban building, not an autonomous plot for construction. If reclassified as accessory land, Article 37 CIMI would not apply; instead, the land would be valued as part of the principal urban property under Article 38 CIMI, potentially eliminating stamp tax liability under item 28.1.
What are the grounds for annulling a Stamp Tax assessment before the CAAD arbitration tribunal?
Under Portuguese tax law and the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011), a Stamp Tax assessment can be annulled on multiple grounds. Procedural grounds include: (1) insufficient reasoning (falta de fundamentação) - the assessment must provide clear, sufficient, and coherent explanation enabling the taxpayer to understand the tax calculation and challenge it effectively; (2) absence of essential elements - failure to indicate the competent authority that performed the assessment violates Article 135 of the Administrative Procedure Code (CPA) and constitutes a formal defect; (3) violation of prior hearing rights (audiência prévia) - Article 60 of the General Tax Law (LGT) requires the Tax Authority to grant taxpayers opportunity to comment before finalizing assessments in certain circumstances. Substantive grounds include: (1) error concerning legal requirements (erro sobre os pressupostos de direito ou de facto) - incorrect application of law to facts, such as misclassifying property as a plot for construction when it is accessory land; (2) incorrect interpretation or application of tax incidence norms - arguing that item 28.1 TGIS does not apply to plots for construction based on systematic, historical, and teleological interpretation; (3) erroneous factual determinations - such as double registration of the same property under two land articles creating duplicative taxation; (4) violation of legal certainty and prohibition of analogy in tax law - extending tax incidence beyond the clear statutory scope. The burden of proof for factual elements supporting taxation rests on the Tax Authority under Article 74 LGT.
What procedural steps are involved in filing an arbitration request under Decree-Law 10/2011 (RJAT) against the Portuguese Tax Authority?
The procedural steps under the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011) are: (1) Filing the Request: The taxpayer submits a request for arbitral decision to the Tax Arbitration Center (CAAD) invoking Articles 2 and 10 of Decree-Law 10/2011 and the applicable procedural provisions (Articles 99 and 102 of the Tax and Customs Procedure Code). The request must identify the contested tax act, state the grounds for annulment with supporting legal arguments, specify the requested relief, and attach supporting documents, power of attorney, and proof of payment of the initial fee. (2) Arbitrator Selection: The claimant may appoint an arbitrator or decline to do so; in the latter case, the President of the Deontological Council appoints a sole arbitrator pursuant to Article 6(1) RJAT. (3) Tribunal Constitution: The arbitral tribunal is formally constituted once the arbitrator(s) accept the appointment within the legal timeframe. (4) Tax Authority Response: Under Article 17 RJAT, the Tax Authority is notified and must present its Response, typically within 30 days, addressing the claims and raising any procedural exceptions or defenses. (5) Hearing Determination: Parties may jointly waive the oral hearing provided in Article 18 RJAT; otherwise, the tribunal schedules a hearing for evidence and argument. (6) Written Pleadings: If the hearing is waived, the tribunal may order successive written pleadings (alegações) allowing parties to develop their legal arguments. (7) Arbitral Decision: The arbitrator issues the final arbitral decision within the statutory deadline (generally 6 months from tribunal constitution, extendable to 9 months), which has the same force as a judicial court decision and is subject to limited appeal to the Central Administrative Court on points of law.