Process: 743/2016-T

Date: April 21, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 743/2016-T addresses whether the Tax Authority (AT) can aggregate the patrimonial value of multiple independent housing units within a single property to trigger Stamp Tax under Verba 28.1 TGIS. Three co-owners challenged the second instalment of 2015 Stamp Tax (€5,281.44) on their Lisbon property containing nine independent storeys/divisions. The AT calculated tax by dividing the total value (€1,056,289.04) across eight residential units, multiplying by each owner's 1/3 quota, and applying the 1% rate, yielding €440.12 per unit per owner. The taxpayers argued that each storey/division should be valued autonomously under CIMI rules (applicable via Article 67 CIS), which would place individual units below the €1,000,000 threshold and exempt them from Verba 28 Stamp Tax. The AT raised multiple procedural defenses: (i) original futility of dispute citing a prior arbitral decision in Process 327/2016-T that annulled the first instalment for the same tax year and property; (ii) untimeliness of the arbitration request filed eight months after the April 2016 assessment; (iii) absolute incompetence, arguing taxpayers challenged a collection notice rather than a tax act under Article 2 RJAT; and (iv) passive illegitimacy due to third-party interests in the demolished property. The Court examined whether res judicata under Article 24(2) RJAT applies when a previous decision addressed the first instalment while this case concerns the second instalment of the same annual assessment. The decision clarifies critical issues for high-value property taxation: whether independent units must be assessed individually or can be aggregated to exceed statutory thresholds, the interplay between CIMI valuation rules and Stamp Tax calculation, and how co-ownership quotas affect Verba 28 application.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, taxpayer…, B…, taxpayer… and C…, taxpayer… submitted a request for constitution of a singular Arbitral Court, under the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), in which the Tax and Customs Authority (hereinafter AT) is the Respondent, with the objective of obtaining a declaration of illegality of the second instalment of the Stamp Tax (IS) assessment relating to 2015, in the amount of €5,281.44.

The Applicants base their request on the following arguments:

a) Each of the Applicants is the owner of 1/3 of the urban property located at Avenue …, No. … to No. …, facing …, in Lisbon, described in the … registry office of the Land Registry of Lisbon under no. … and registered in the respective property tax matrix under article …, of the parish …;

b) It appears in the property tax matrix of the said property that it is an urban property in full ownership, consisting of 9 storeys or divisions capable of independent use, intended for commerce and residential purposes, and the total patrimonial value of the property is €1,184,297.44;

c) For the purposes of IS assessment, the AT divided the value of €1,056,289.04 by eight (number of storeys/divisions, with exclusion of the Shop, intended for commerce) and multiplied by 1/3 (quota of each of the Applicants), value to which it applied the rate of 1%, resulting in an annual levy of €440.12 for each of the storeys/divisions with independent use.

d) That is, instead of considering each storey/division autonomously, which would exclude the application of Stamp Tax, the AT considered a total patrimonial value of the property, which it divided pro rata among the eight divisions with residential allocation.

e) This procedure violates the provisions of law, specifically the provisions of the Municipal Property Tax Code (CIMI), applicable ex vi article 67 of the CIS.

The request for constitution of the Arbitral Court was accepted by His Excellency the President of CAAD on 29.12.2016 and automatically notified to the AT.

In accordance with the provision in subparagraph c) of no. 1 of article 11 of the RJAT, the singular Arbitral Court was constituted on 01.03.2017.

The AT responded, defending its absolution from the claim, in view of the verification of the exception of original futility of the dispute, of double untimeliness of the request, of absolute incompetence, of passive illegitimacy, or if it is not understood that way, the lack of merit of the request, in view of the legality of the impugned tax acts, alleging, in summary, the following grounds:

a) On day 12-10-2016 an arbitral decision was rendered within the scope of process no. 327/2016-T, whose subject-matter was the same tax, the same property and the same year;

b) Whereby there ensues the original futility of the dispute, which is hereby requested, as well as payment of the respective costs being the responsibility of the Applicants, since they gave rise to the arbitral process;

c) The present request for arbitral pronouncement is manifestly untimely;

d) In the situation under consideration, the request for constitution of arbitral court presented by the Applicants was filed on 2016-12-15, with the assessment having been made on 2016-04-05, with the tax ascertained divided for payment in instalments, contained in the collection notices;

e) Whereby it is concluded that the request presented by the Applicants is untimely;

f) In fact, the Applicants are not impugning a tax act, but rather impugning the payment of the 2nd instalment of the year 2015 of a tax act contained in a document which is a collection notice, that is, the object of the process is the annulment, not of a tax act (or of 1/3 of a tax act, which would not be legally possible), but rather of a collection notice for payment of the 2nd instalment of 2015 of the tax, as the Applicants state in the request and as results from the analysis of the documents they attach;

g) A matter which is not contained, in any way, in the set of norms which delimit the competence of tax arbitral courts, contained in article 2 of the RJAT, that is, the Arbitral Court is incompetent to appreciate the request formulated, which is that of the legality of a mere collection notice;

h) The Applicants still allege that despite the demolition of the aforesaid property with only the respective facades remaining, the CML certified only "… that the property in question was demolished with preservation/containment of facades", a decision which they impugned judicially;

i) Thus, the subject-matter of the present action affects personal and direct interests of entities which are not bound by this jurisdiction, nor represented in court, and such circumstance necessarily entails the impossibility of an arbitral court constituted under the aegis of CAAD to consider itself endowed with legitimacy to render an arbitral decision on the merits.

The meeting referred to in article 18 of the RJAT was dispensed with, in view of the content of the matter contained in the case file, with the parties being notified to present optional written submissions.

II. MATTERS OF FACT

Based on the elements contained in the case file and the administrative process attached to the case file, the following facts are considered proven:

A) On 15 December 2017, the Applicants presented a request for arbitral pronouncement of the IS assessment act relating to the year 2015, of item 28.1 of the TGIS, relating to the property, in full ownership, contained in the urban property tax matrix under article … of the parish of …;

B) The IS assessment act sub judice was annulled by arbitral decision of 12 October 2016, rendered in process no. 327/2016 which ran in this CAAD, which judged as meritorious the request for declaration of illegality of the tax assessment act in IS relating to the collection documents of the first IS instalment no.: 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016… and 2016…;

C) The Applicants seek to obtain a declaration of illegality of the second instalment of the IS assessment relating to 2015 in the amount of €5,434.24 relating to collection documents nos.: 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016… and 2016…, issued by the AT for payment, in November 2016.

D) The IS relating to the year 2015 was entirely paid by the Applicants.

There are no facts with relevance to the decision of the case which should be considered as not proven.

This Court formed its conviction on the consideration of the documents attached to the case file by the Parties.

III. MATTERS OF LAW

In the response presented, the AT invokes exceptions which, if verified, will lead to the absolution of the instance.

Thus, the AT alleges in its Response that "On day 12 October 2016, an arbitral decision was rendered within the scope of process no. 327/2016-T, whose subject-matter was the same tax, the same property and the same year."

To this effect, article 24, no. 2 of the RJAT provides the following:

"Without prejudice to the other effects provided for in the Tax Procedure and Process Code, the arbitral decision on the merits of the claim for which no appeal or challenge is available precludes the right to, on the same grounds, lodge a complaint, challenge, request a review or promote official review, or raise arbitral pronouncement on the acts subject to these requests or on the consequent assessment acts."

It results, thus, from the said norm that the operativeness of the exception of res judicata depends on the relationship subsisting between what has already been judged and what is submitted to decision with the new action, in the case, the new request for arbitral pronouncement.

Fundamentally, the objective limits of res judicata are defined by reference to the subject-matter of the process, which is delimited through the claim and the cause of action (See Judgment of the STA, rendered within the scope of process 419/11, of 7.12.2011).

Now, in the situation under analysis, the claim of the Applicants is directed to the removal from the legal order of an invalid legal act, in the case, the IS assessment act already identified, with the same grounds accepted by the Arbitral Court in the decision rendered within the scope of process no. 327/2016-T.

It is understood, therefore, that the present arbitral petition aims at the same effect as the arbitral petition presented within the scope of process no. 327/2016. In fact, through the decision rendered within the scope of that process, which determined the annulment of the IS assessment act relating to the year 2015 embodied in the collection documents issued up to that date, the annulment of the IS assessment act relating to the year 2015, in its entirety, is imposed, that is, in the total value of €10,562.89.

Although in the decision it was not expressly indicated that the collection document corresponding to the second instalment of the IS assessment act, subject-matter of the present request for arbitral pronouncement, would be covered by the declaration of illegality, the truth is that the tax assessment act considered was only one, with the AT being condemned to annul the entire IS assessment act in question and to return the total value of the assessment act, including the value which is now subject to a new request for arbitral pronouncement.

In fact, in accordance with article 23, no. 7 of the IS Code, "Where the tax is due for the situations provided for in item no. 28 of the General Table, the tax is assessed annually, (…), applying, with the necessary adaptations, the rules contained in the CIMT."

From this it follows that, as the tax is assessed annually, there is only one annual assessment act, although such act may be divided into several instalments for the purpose of revenue collection (See Judgment of the CAAD, rendered in process no. 726/2014).

Although assessment acts, such as the IS assessment act underlying the present process, may be divisible either by nature, as it respects a pecuniary obligation, or by definition (See Judgments of the STA rendered within the scope of process no. 298/12, of 10.04.2013, no. 5874, of 9.07.1997, no. 24101, of 22.09.1999, no. 287/05, of 27.09.2005 and no. 583/10, of 12.01.2011, among others), the partial annulment of the IS assessment act sub judice could only occur if the illegality of the act were only partial.

Now, to this effect it has already been decided in various judgments that "The criterion for determining whether the act should be wholly or partially annulled passes through determining whether the illegality affects the tax act in its entirety, in which case the act should be entirely annulled or only in part, in which case partial annulment is justified." – See, among others, the Judgment of the STA, rendered within the scope of process no. 298/12, of 10 April.

In the case under analysis, the illegality of the IS assessment relating to the year 2015 is indubitable, this act being indivisible, in so far as the illegality of the tax assessment act of IS affects it in its entirety.

As has already been clarified in various decisions of the CAAD (See decision rendered within the scope of process no. 205/2013 and 726/2014), "From the circumstance that the value of the assessment may be paid in several instalments, it does not follow that there are three assessments. It is, differently, one assessment that may be paid in several instalments, with the passive subject not being prevented from challenging the same due to the fact that only the payment period of one of them has elapsed."

In consequence, as the IS assessment act, subject-matter of the present request for arbitral pronouncement, has been annulled by the decision of the CAAD rendered within the scope of process no. 327/2016-T and there being no other matter to discuss in the process, the exception of res judicata must necessarily be judged as meritorious, thus avoiding that disputes be renewed indefinitely between the same persons, on the same grounds and on the same subject-matter, which put into question trust and social peace and potentiate the possibility of contradictory decisions with disrepute to justice.

IV. DECISION

In these terms, this Arbitral Court decides to declare the exception of res judicata as meritorious and, in consequence, absolve the Tax and Customs Authority from the instance.

V. VALUE OF THE CASE

In accordance with the provision in article 306, no. 2 of the Civil Procedure Code, 97-A, no. 1 a) of the CPPT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Processes, the value of the claim is corrected to €10,562.90.

VI. COSTS

In accordance with the provisions of articles 12, no. 2 and 22, no. 4, both of the RJAT, and article 4, no. 4 of the Regulation of Costs of Tax Arbitration Processes, the value of the arbitration fee is fixed at €918.00, in accordance with Table I of the aforesaid Regulation, to be borne by the Applicants.

Notify.

Lisbon, 21 April 2017

The Arbitrator,

Magda Feliciano

(The text of the present decision was drawn up by computer, in accordance with article 131, no. 5, of the Civil Procedure Code, applicable by reference of article 29, no. 1, subparagraph e) of Decree-Law no. 10/2011, of 20 January (RJAT) being governed in its drafting by the orthography prior to the Orthographic Agreement of 1990.)

Frequently Asked Questions

Automatically Created

How is Stamp Tax (Imposto do Selo) calculated on properties with multiple independent units under Verba 28?
Under Verba 28.1 TGIS, Stamp Tax at 1% applies annually to residential properties with patrimonial value exceeding €1,000,000. When a property contains multiple independent units, the central dispute in Process 743/2016-T was whether AT can aggregate their values or must assess each unit separately. Taxpayers argued that CIMI rules (applicable via Article 67 CIS) require autonomous valuation of each storey/division capable of independent use. If valued individually, units below €1M would be exempt. The AT's approach divided the total property value across residential units, then applied each co-owner's quota (1/3), resulting in taxable fractions. This methodological dispute determines whether properties with multiple independent units can avoid Stamp Tax by remaining below threshold values when disaggregated.
Can the Tax Authority aggregate the patrimonial value of individual housing units to exceed the €1,000,000 threshold for Stamp Tax?
The AT cannot legitimately aggregate patrimonial values of genuinely independent housing units to artificially exceed the €1,000,000 Verba 28 threshold. Article 67 CIS incorporates CIMI valuation principles, which recognize autonomous property units with separate registrations and independent use capacity. In Process 743/2016-T, the property had nine storeys/divisions capable of independent use registered in the property tax matrix. When units qualify as independent under CIMI—having separate entrances, utilities, and functional autonomy—each should be valued separately for Stamp Tax purposes. Aggregation violates the legal framework's requirement that each autonomous fraction be assessed individually. The prior decision in Process 327/2016-T that annulled the first instalment suggests CAAD accepted that independent units cannot be artificially combined to trigger taxation of properties that would otherwise be exempt.
What is the role of CIMI rules in determining property valuation for Stamp Tax purposes via Article 67 CIS?
Article 67 CIS establishes that Stamp Tax calculation uses the "patrimonial value for IMI purposes" as defined in the CIMI (Municipal Property Tax Code). CIMI contains detailed rules for property valuation and classification, including criteria for identifying independent units (frações autónomas). When CIMI recognizes separate storeys/divisions as capable of independent use—each with distinct characteristics, access, and utility connections—they receive individual property tax assessments. Article 67 CIS imports these valuation principles into Stamp Tax administration. In Process 743/2016-T, taxpayers invoked CIMI rules to argue that AT violated legal standards by aggregating values of eight independent residential divisions rather than treating each autonomously. This cross-reference ensures consistency between municipal property taxation and stamp duty, preventing arbitrary aggregation that contradicts the structural property classification established under CIMI legislation.
Does co-ownership affect the application of Verba 28 Stamp Tax on high-value residential properties in Portugal?
Co-ownership significantly affects Verba 28 application because Stamp Tax liability is personal to each owner based on their ownership quota. In Process 743/2016-T, three co-owners each held 1/3 of the property. The AT calculated tax by taking the residential value (€1,056,289.04), dividing by eight units, multiplying by each owner's 1/3 quota, and applying 1% to reach €440.12 per unit per owner. However, co-ownership does not authorize aggregating independent units to exceed the €1M threshold. Each co-owner's fractional interest in autonomous units should be assessed separately. If an independent unit is valued at €800,000, a 1/3 co-owner's share (€266,667) falls well below the threshold. The decisive question is whether the tax base is (i) each owner's quota of the total property or (ii) each owner's quota of each independent unit—the latter interpretation respects both co-ownership realities and CIMI's recognition of autonomous fractions.
What procedural defenses can taxpayers raise in CAAD arbitration against Stamp Tax assessments, including lis pendens and time limits?
Taxpayers can raise several procedural defenses in CAAD arbitration against Stamp Tax assessments. Process 743/2016-T illustrates key challenges: (1) Res judicata/lis pendens—AT argued Process 327/2016-T already decided the same tax, property, and year, invoking Article 24(2) RJAT which precludes re-litigation on the same grounds. However, different instalments of annual tax may constitute distinct acts. (2) Time limits—AT claimed double untimeliness since the request was filed eight months after the April 2016 assessment, exceeding statutory deadlines. Taxpayers must file within prescribed periods from notification. (3) Jurisdictional competence—AT argued CAAD lacks competence to review collection notices (mere payment demands) versus substantive tax assessment acts under Article 2 RJAT. (4) Passive illegitimacy—when third parties (like Lisbon Municipality regarding demolition certification) have direct interests not represented in arbitration. (5) Prior payment—full payment may affect available remedies. These defenses can result in absolution from the instance without merits consideration, emphasizing the importance of proper procedure in tax arbitration.