Process: 746/2016-T

Date: September 29, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitration decision (Process 746/2016-T) addresses a critical question in Portuguese stamp duty law: whether Item 28.1 of the General Table of Stamp Duty (TGIS) applies individually to each independent division of a vertically-owned property or to the aggregate property value. The claimant challenged stamp duty assessments totaling €51,735.39 for years 2011-2015 on a Lisbon building with multiple floors having independent use for residential purposes. The total patrimonial value (VPT) was €1,830,063.81, but no individual floor exceeded €1,000,000. The taxpayer argued that Item 28.1 TGIS, which imposes 1% stamp duty on residential properties with VPT equal to or greater than €1,000,000, should apply to each division separately pursuant to Article 12(3) of the Municipal Property Tax Code (IMI Code), which allows separate registration and VPT attribution for divisions with independent use. The Tax Authority countered with two defenses: (1) statute of limitations, arguing the claim was filed beyond the 90-day period from the voluntary payment deadline, and (2) on the merits, that vertical/full ownership properties constitute a single taxable unit, unlike horizontal property where autonomous units are treated separately under Article 2(4) of the IMI Code. The Authority emphasized that the legal distinction between horizontal property (propriedade horizontal) and full ownership (propriedade plena/vertical) requires different tax treatment, with the latter being assessed on aggregate value. This case highlights the importance of property structure in determining stamp duty liability and has significant implications for owners of high-value buildings not constituted as horizontal property.

Full Decision

ARBITRAL DECISION

REPORT

The Undivided Succession Opened by the Death of A…, tax subject with NIF…, represented by B…, NIF …, resident in …, …–…, …-… Lisbon, in the capacity of head of household (hereinafter referred to as Claimant), comes, pursuant to the combined provisions of Articles 2, No. 1, subsection a) and 10, No. 1, subsection a) of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters ("RJAT"), to request the constitution of an Arbitral Tribunal, with the intervention of a single arbitrator, in which the Tax and Customs Authority ("TA") is Respondent, with a view to the declaration of illegality and consequent annulment of the Stamp Duty assessments ("SD") (Item 28.1 of the General Table of Stamp Duty ["GTSD"]) for the years 2011, 2012, 2013 and 2015, relating to divisions with independent use intended for housing, of the urban property located at …, … to …, parish …, in Lisbon, registered in the urban property register of the said parish under article…, and described in the Land Registry of Lisbon under No.…, in Lisbon, in the total amount of €51,735.39, as well as the restitution of the amounts paid.

The Claimant invokes, in summary, the following grounds:

The total patrimonial value ("PV") of the property is €1,830,063.81, corresponding to the sum of the PV of the various floors with independent use;

The TA assessed SD on the floors or divisions with independent use and residential purpose (basement, attic, 1st, 2nd, 3rd, 4th and 5th floors), whose taxable patrimonial values sum to the amount of €1,565,733.81;

Item 28.1 of the GTSD determines subjection to SD, at the rate of 1%, of ownership of urban properties intended for housing, with PV equal to or greater than €1,000,000.00. In applying the said item, attention should be paid to the PV attributed to each of the divisions with independent use, since in the final segment of Item 28 of the GTSD, it is expressly stated that attention is paid to the PV used for MPT purposes;

In the present case, as none of the divisions with independent use has a PV equal to or greater than €1,000,000.00, the assessed SD is not due;

Article 12, No. 3 of the Municipal Property Tax Code ("MPT"), applicable by virtue of Article 67, No. 2 of the Stamp Duty Code, determines that each floor or part with independent use of property not constituted as horizontal property is considered separately in the register, which also discriminates the respective PV;

Thus, the taxable matter for purposes of Item 28 of the GTSD is the PV of each division with independent use, used for MPT purposes.

The Claimant concludes by requesting that the annulment of the SD assessments that were notified to her be decreed, as well as the restitution of the amounts paid.

Notified in accordance with and for the purposes provided in Article 17 of the RJAT, the TA presented its response, defending itself by exception and challenge.

As to the defense by exception:

The TA begins by arguing the lapse of the right of action, inasmuch as:

Subsection a) of Article 10, No. 1 of the RJAT establishes that the request for constitution of an arbitral tribunal is presented within a period of 90 days, counted from the facts provided for in Nos. 1 and 2 of Article 102 of the Tax Procedure and Process Code ("TPPC"), as regards acts susceptible of autonomous challenge and, likewise, from the notification of the decision or from the end of the legal deadline for decision of the hierarchical appeal;

Article 102, No. 1, subsection a) of the TPPC refers that the challenge shall be presented within a period of three months, counted from the end of the period for voluntary payment of the tax installments legally notified to the taxpayer;

Pursuant to Article 120 of the MPT Code, applicable by virtue of Article 44, No. 5 of the Stamp Duty Code, when the amount of tax is greater than €500, it is paid in three installments, in the months of April, July and November, that being the deadline for payment of each of the installments of the SD assessment;

Taking into account that the request for arbitral pronouncement was submitted to the CAAD on 20-12-2016, the deadline for payment of the tax in question, contained in the various Collection Notes relating to the years 2011, 2012 and 2013 issued (and paid) in 2012, 2013 and 2014, respectively, as verified by analysis of the same (Docs. attached to P.I), implies that the period for requesting the constitution of the Arbitral Tribunal, provided for in Article 10, No. 1, subsection a) of the RJAT, for the assessments in question, ended long ago.

As to the defense on the merits:

Additionally, the TA further argues that the assessment acts subject to the request for arbitral pronouncement must be maintained, which it does with the following grounds:

"Subjection to stamp duty of Item 28.1 of the GTSD results from the combination of two facts: residential purpose and the patrimonial value of each urban property registered in the register being equal to or greater than €1,000,000.00";

If the building is constituted in full ownership with parts susceptible of independent use, it constitutes a single unit and its PV is determined by the sum of the parts with residential purpose;

Article 2, No. 4 of the MPT Code reserves autonomous units of properties constituted as horizontal property, which it exceptionally considers as properties, which does not happen with parts with independent use of properties in full ownership, in which the property as a whole is relevant;

However, this does not preclude separation in the register and the attribution of different PV for the floors or divisions with independent use (Article 12, No. 3 of the MPT Code), it being merely a way of recording registry data, since as regards the assessment of MPT the value that serves as the basis for calculation is the total patrimonial value;

Horizontal property and full ownership are distinct legal institutions, which deserve differentiated tax treatment; in the same way it is concluded that the present Claimant, for purposes of MPT and SD, is not the owner of autonomous units, but rather of a single property;

The TA thus considers that the challenged assessments embody a correct interpretation and application of law to the facts, in line with what was decided by the Arbitral Tribunal in Proc. No. 668/2015 – T, are duly reasoned and do not suffer from the defect of violation of law.

The TA concludes by requesting the dispensation of the meeting referred to in Article 18 of the RJAT, as well as of written submissions, given that the matter in dispute is exclusively one of law and is extensively set out in the procedural documents.

The request for constitution of the Arbitral Tribunal (to which the Claimant, certainly by error, refers in point 38 of its petition as "Tribunal Arbitrário") was filed with the CAAD on 20 December 2016, having been accepted by His Excellency the President of the CAAD and automatically notified to the TA on 29 December 2016.

The Claimant opted not to designate an arbitrator, wherefore, pursuant to Article 6, No. 1 of the RJAT, the undersigned was appointed arbitrator by His Excellency the President of the Deontological Council of the CAAD, which post he accepted within the legally prescribed period, without opposition from the Parties.

The Singular Arbitral Tribunal was duly constituted on 27 February 2017 and is materially competent to appreciate and decide the dispute subject to the present proceedings.

The Parties have legal personality and judicial capacity, are legitimate and are duly represented (Articles 4 and 10, No. 2 of the RJAT and Article 1 of Portaria No. 112-A/2011, of 22 March).

The proceedings do not suffer from nullities.

By order of 19 June 2016, following the response transmitted by the TA, the holding of the meeting referred to in Article 18 of the RJAT was dispensed with; however, it was determined that the proceedings continue with optional simultaneous written submissions for a period of 10 days.

The TA presented final submissions in which it reiterated the legal position taken in its response, urging the maintenance of the challenged acts and consequent dismissal of the claim. The Claimant likewise presented submissions in which it similarly reiterated the legal position set out in the initial request, requesting the annulment of the challenged SD assessments.

FACTUAL MATTERS

Facts which are considered proven:

Both as of the date of the occurrence of the tax facts and as of the date of the request for constitution of the arbitral tribunal, the Claimant was the owner of the urban property located at …, … to …, parish …, registered in the urban property register of the said parish under article…, and described in the Land Registry of Lisbon under No.…, consisting of 8 floors or divisions susceptible of independent use, with total patrimonial value of €1,830,063.81, 7 of the said floors being intended for residential purposes;

The sum of the PV attributed to the floors or divisions susceptible of independent use and residential purpose is €1,565,733.81, that being the amount indicated in each of the collection notes as "Patrimonial Value of the property – total subject to tax";

The PV attributed to each floor or division susceptible of separate rental and residential purpose, as stated in the collection notes issued, varies between €159,561.13 and €240,410.20;

Were issued in the name of the Claimant, on 7 November 2012, for voluntary payment (single installment), the SD assessments for the year 2012/Article 6, No. 1 subsection a) of Law 55-A/2012, of 29 October, the installments of which are set out in the collection notes identified in the table below, based on the PV of each of the divisions susceptible of independent use and the rate of 0.5%:

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2012…|… …– U –…– C/V|€201,080.30|€1,005.40|
|2012…|… …– U –…– 1st|€235,120.20|€1,175.60|
|2012…|… …– U –…– 2nd|€235,120.20|€1,175.60|
|2012…|… …– U –…– 3rd|€235,120.20|€1,175.60|
|2012…|… …– U –…- 4th|€235,120.20|€1,175.60|
|2012…|… …– U –…– 5th|€233,670.00|€1,168.35|
|2012…|… …– U –…– ATT|€156,050.00|€780.25|

In the name of the Claimant were further issued, on 21 March 2013, for voluntary payment in three annual installments, the SD assessments for the year 2012, the installments of which are set out in the collection notes identified in the tables below, based on the PV of each of the divisions susceptible of independent use and the rate of 1%:

1st Installment due in April 2013

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2013…|… …– U –…– C/V|€201,080.30|€670.28|
|2013…|… …– U –… – 1st|€235,120.20|€783.74|
|2013…|… …– U –…– 2nd|€235,120.20|€783.74|
|2013…|… …– U –…– 3rd|€235,120.20|€783.74|
|2013…|… …– U –…- 4th|€235,120.20|€783.74|
|2013…|… …– U –…– 5th|€233,670.00|€778.90|
|2013…|… …– U –…– ATT|€156,050.00|€520.18|

2nd Installment due in July 2013

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2013…|… …– U –…– C/V|€201,080.30|€670.26|
|2013…|… …– U –…– 1st|€235,120.20|€783.73|
|2013…|… …– U –…– 2nd|€235,120.20|€783.73|
|2013…|… …– U –…– 3rd|€235,120.20|€783.73|
|2013…|… …– U –…- 4th|€235,120.20|€783.73|
|2013…|… …– U –…– 5th|€233,670.00|€778.90|
|2013…|… …– U –…– ATT|€156,050.00|€520.16|

3rd Installment due in November 2013

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2013…|… …– U –…– C/V|€201,080.30|€670.26|
|2013…|… …– U –…– 1st|€235,120.20|€783.73|
|2013…|… …– U –…– 2nd|€235,120.20|€783.73|
|2013…|… …– U –…– 3rd|€235,120.20|€783.73|
|2013…|… …– U –…- 4th|€235,120.20|€783.73|
|2013…|… …– U –…– 5th|€233,670.00|€778.90|
|2013…|… …– U –…– ATT|€156,050.00|€520.16|

In the name of the Claimant were also issued, on 17 March 2014, for voluntary payment in three annual installments, the SD assessments for the year 2013, the installments of which are set out in the collection notes identified in the tables below, based on the PV of each of the divisions susceptible of independent use and the rate of 1%:

1st Installment due in April 2014

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2014…|… …– U –…– C/V|€201,080.30|€670.28|
|2014…|… …– U –…– 1st|€235,120.20|€783.74|
|2014…|… …– U –…– 2nd|€235,120.20|€783.74|
|2014…|… …– U –…– 3rd|€235,120.20|€783.74|
|2014…|… …– U –…- 4th|€235,120.20|€783.74|
|2014…|… …– U –… – 5th|€233,670.00|€778.90|
|2014…|… …– U –…– ATT|€156,050.00|€520.18|

2nd Installment due in July 2014

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2014…|… …– U –…– C/V|€201,080.30|€670.26|
|2014…|… …– U –…– 1st|€235,120.20|€783.73|
|2014…|… …– U –…– 2nd|€235,120.20|€783.73|
|2014…|… …– U –…– 3rd|€235,120.20|€783.73|
|2014…|… …– U –…- 4th|€235,120.20|€783.73|
|2014…|… …– U –…– 5th|€233,670.00|€778.90|
|2014…|… …– U –…– ATT|€156,050.00|€520.16|

3rd Installment due in November 2014

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2014…|… …– U –…– C/V|€201,080.30|€670.26|
|2014 …|… …– U –…– 1st|€235,120.20|€783.73|
|2014…|… …– U –…– 2nd|€235,120.20|€783.73|
|2014…|… …– U –…– 3rd|€235,120.20|€783.73|
|2014…|… …– U –…- 4th|€235,120.20|€783.73|
|2014…|… …– U –…– 5th|€233,670.00|€778.90|
|2014…|… …– U –…– ATT|€156,050.00|€520.16|

In the name of the Claimant were issued, on 5 April 2016, for voluntary payment in three annual installments, the SD assessments for the year 2015, the installments of which are set out in the collection notes identified in the tables below, based on the PV of each of the divisions susceptible of independent use and the rate of 1%:

1st Installment due in April 2016

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2016…|… …– U…– 1st|€235,120.20|€801.38|
|2016…|… …– U –…– 2nd|€235,120.20|€801.38|
|2016…|… …– U –…– 3rd|€235,120.20|€801.38|
|2016…|… …– U –…- 4th|€235,120.20|€801.38|
|2016…|… …– U –…– 5th|€233,670.00|€796.44|
|2016…|… …– U –…– ATT|€156,050.00|€531.87|

2nd Installment due in July 2016

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2016…|… …– U –…– 1st|€201,080.30|€774.56|
|2016…|… …– U –…– 2nd|€235,120.20|€774.56|
|2016…|… …– U –…– 3rd|€235,120.20|€774.56|
|2016…|… …– U –…- 4th|€235,120.20|€774.56|
|2016…|… …– U –…– 5th|€235,120.20|€781.23|
|2016…|… …– U –…– ATT|€233,670.00|€506.26|

3rd Installment due in November 2016

|Document ID|Property ID|PV|Assessment|
|---|---|---|---|
|2016…|… …– U –…– 1st|€201,080.30|€774.56|
|2016…|… …– U –… – 2nd|€235,120.20|€774.56|
|2016…|… …– U –…– 3rd|€235,120.20|€774.56|
|2016…|… …– U –… - 4th|€235,120.20|€774.56|
|2016…|… …– U –…– 5th|€235,120.20|€781.23|
|2016…|… …– U –…– ATT|€233,670.00|€506.26|

Justification of the factual matter proven:

The Tribunal's conviction as to the factual matter given as proven resulted from the analysis of the documentary evidence attached to the request for arbitral pronouncement (copies of the collection notes for each of the installments into which the challenged assessments were subdivided), not contested by the Respondent.

Facts not proven

There are no facts relevant to the decision in the case which should be considered as not proven.

MATTERS OF LAW – JUSTIFICATION

As to the Exception – Timeliness of the Arbitral Request

The Respondent alleges that the request for constitution of an arbitral tribunal is presented within a period of 90 days, counted from the facts provided for in Article 102, Nos. 1 and 2 of the TPPC, as regards acts susceptible of autonomous challenge and, likewise, from the notification of the decision or from the end of the legal deadline for decision of the hierarchical appeal.

The Respondent further considers that the initial starting point of the period should be determined on the basis of Article 102, No. 1, subsection a) of the TPPC, which establishes that the counting of the period begins with the end of the period for voluntary payment of the tax installments legally notified to the taxpayer, that this period should, in the concrete case, begin with the deadline for payment of each of the installments of the Stamp Duty assessment, which is why they argue for the lapse of the assessments for the years 2011, 2012 and 2013.

Indeed, under Article 10 of the RJAT, the period for submitting the request for constitution of an arbitral tribunal must indeed be presented within the peremptory period of 90 days, under penalty of lapse of the right.

In accordance with the wording of Article 49 of the Stamp Duty Code in force until 1 August 2016, to the guarantees of taxpayers of Stamp Duty ("SD") applied, "according to the nature of the matters, the General Tax Law and the Tax Procedure and Process Code (TPPC)."

Thus, the initial starting point of the 90-day period is, under Article 102, No. 1, subsection a) of the TPPC, the "end of the period for voluntary payment of the tax installments legally notified to the taxpayer".

Thus, as the deadline for payment of the assessments for 2011, 2012 and 2013 ended during the years 2012, 2013 and 2014, respectively, it is concluded that the 90-day period established by law for requesting the constitution of an arbitral tribunal was long since exceeded at the time when the request for constitution of the present arbitral tribunal was submitted.

It is important to emphasize, in this context, that no gracious complaint was filed with respect to the assessment acts under consideration.

Thus, in summary, this tribunal cannot take cognizance of the merits of the question as regards the assessments for the years 2011, 2012 and 2013, because the Claimant's right of action lapsed by not having been exercised within the legally prescribed period.

As to the Merits of the Stamp Duty assessments/Item 28.1 of the GTSD, challenged

From a substantive point of view, the main question raised by the Claimant is whether the subjection to SD, under Item No. 28 of the GTSD, of an urban property not constituted as horizontal property is determined by the PV that corresponds to each of the parts of the property with residential purpose, or is determined by the overall PV of the property, which would correspond to the sum of the PV of all floors or divisions with independent use and residential purpose that compose it, according to the interpretation given by the TA to the rule of incidence.

It is necessary to appreciate and decide.

Item 28 of the GTSD, added by Law No. 55-A/2012, of 29 October, and amended by Law No. 83-C/2013, of 31 December, established, in its wording in force in 2015, the subjection to SD of the following situations:

"28 - Ownership, usufruct or surface right of urban properties whose patrimonial tax value shown in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than (euro) 1,000,000 - on the patrimonial value used for MPT purposes:

28.1 - For a residential property or for building land whose construction, authorized or planned, is for housing, in accordance with the provisions of the MPT Code - 1%

28.2 - For a property, when the taxpayers who are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, listed in the list approved by ministerial order of the Finance Minister - 7.5%."

As to the thema decidendum, this Arbitration Center has already pronounced itself in various proceedings.

Without prejudice to additional arguments being put forward regarding the legal question under analysis, we choose to follow the argumentative approach applied in Proceeding No. 10/2016-T because, in agreement with the argument presented in the said Proceeding, for reasons of coherence and legal stability, it does not seem to us necessary, nor desirable, to proceed with any changes to the analysis carried out, being, moreover, of the same taxpayer and the same property (pertaining to 2014).

"Thus, they constitute cumulative requirements for the application of the rule of incidence contained in Item 28.1 of the GTSD that the property to be taxed is an urban property intended for housing (or, from 2014 onwards, building land whose construction, authorized or planned, is for housing) whose patrimonial tax value, for MPT purposes, is equal to or greater than €1,000,000.00.

The concept of urban residential property is not defined in the Stamp Duty Code but rather in the provisions of the MPT Code, to whose subsidiary application it referred, in full, No. 2 of Article 67 of the Stamp Duty Code in the wording as of the date of the facts, added by the same Law No. 55-A/2012, of 29 October, in stating that "2 - To matters not regulated in this Code concerning Item No. 28 of the General Table, the provisions of the MPTC shall apply, subsidiarily."

Indeed, Article 6 of the MPT Code, inserted in Chapter I, under the heading "Incidence", classifies urban properties as being: a) Residential; b) Commercial, industrial or for services; c) Building land; d) Other, delimiting Nos. 2, 3 and 4 of the same article, what should be understood by each of those designations.

Thus, residential are those urban properties that, under No. 2 of Article 6 of the MPT Code, are buildings or constructions licensed for housing or which, in the absence of a license, have housing as their normal destination (housing purposes).

However, the law does not exclude that there may be urban properties with more than one purpose (namely residential purpose and commercial, industrial or services purpose) as frequently happens in the case of urban properties not constituted under the regime of horizontal property, as is the case with the property of which the Claimant is the owner, which comprises eight floors or divisions susceptible of independent use, one of them intended for services and the remaining seven, intended for housing.

It is to this reality of mixed use that subsection b) of No. 2 of Article 7 of the MPT Code refers, in providing that

"2 - The patrimonial tax value of urban properties with parts that can be classified under more than one of the classifications in No. 1 of the previous article is determined:

a) (...);

b) If the different parts are economically independent, each part is assessed by applying the corresponding rules, with the value of the property being the sum of the values of its parts."

Thus, if, in accordance with subsection b) of No. 2 of Article 7 of the MPT Code, the property not constituted as horizontal property comprises floors or divisions susceptible of independent use with more than one of the classifications referred to in No. 1 of Article 6 of the same Code, its value (patrimonial tax value) will be equivalent to the sum of the values of the parts assessed by applying the corresponding rules, taking into account, in particular, the use coefficient provided for in Article 41 of the cited Code.

However, if the overall value (patrimonial tax value) of the urban property in full ownership is relevant, for example, for the purposes of assessment of Municipal Tax on Onerous Real Estate Transactions (see Article 12 of the Real Estate Transfer Tax Code) or of Stamp Duty on gratuitous transfers (see Article 13 of the Stamp Duty Code), because it is not possible to transfer separately each of the parts with independent use, it is not the same as regards MPT and Stamp Duty of Item 28.1 of the GTSD.

Indeed, beyond No. 2 of Article 7 of the MPT Code, other provisions of the same Code refer to urban properties in full or vertical ownership, of which the following stand out: Article 12, No. 3 ("3 - Each floor or part of a property susceptible of independent use is considered separately in the registry record, which also discriminates the respective patrimonial tax value") and Article 119, No. 1 ("1 - The services of the General Directorate of Taxes shall send to each taxpayer, by the end of the month preceding the month of payment, the corresponding collection document, with discrimination of the properties, their parts susceptible of independent use, respective patrimonial tax value and the tax liability imputable to each municipality of the location of the properties").

From the combination of the provisions previously referred to, the conclusion is drawn that in the case of properties not constituted as horizontal property, the patrimonial tax value relevant for MPT purposes and, consequently, for the purposes of the incidence of Stamp Duty, Item 28 of the GTSD, is the patrimonial tax value attributed to each floor or division susceptible of independent use and not its overall patrimonial tax value.

On the other hand, in the case of a property with mixed use, composed of divisions or floors intended for housing and, at least one of them, intended for services, it cannot be classified as a residential property or one whose destination is, exclusively, housing, it not appearing that the floors or divisions with residential purpose that compose it can be segregated from the whole to, taken together, constitute the notion of residential property provided for in the rule of incidence of Item 28.1 of the GTSD.

Indeed, applying the rule of Item 28.1 of the GTSD, the expression "residential property", it does not seem legitimate that the TA should seek to include in it the floors or divisions with independent use of urban properties not constituted as horizontal property which, as the TA itself acknowledges, are not properties and cannot, therefore, be included in the scope of the norm.

As it does not appear that this is the legislative intention, it cannot be accepted that the TA formulates a rule of incidence ex novo different from the one created by the legislator, seeking to tax parts of properties, even if economically and functionally independent and, as such, separately registered in the register, for the law is clear in subjecting to stamp duty of Item 28.1 of the GTSD urban residential properties whose PV, for MPT purposes, is greater than €1,000,000.00.

For the reasons above, there being a defect of violation of law due to error in the application of law resulting from the erroneous interpretation of the provisions of Item No. 28.1 of the GTSD and Articles 6, No. 1, subsection a) and No. 2, 7, No. 2, subsection b), 12, No. 3 and 119, No. 1 of the MPT Code, applicable by virtue of Article 67, No. 2 of the Stamp Duty Code, the challenged assessments cannot be maintained in the legal system.

Additionally, it should always be said that in the same sense decided the judgments of the Supreme Administrative Court No. 47/2015, of 9.9.2015, No. 498/16, of 29.6.2016 and, more recently, the understanding was confirmed by the Full Court of the Tax Disputes Section in judgment No. 593/16, of 29.3.2017, within the scope of an extraordinary appeal for uniformization of case law. In all these cases it was decided that the relevant PV is not the sum of the PV of the various parts: "in the case of a property constituted in vertical ownership, the incidence of SD should be determined not by the PV resulting from the sum of the PV of all divisions or floors susceptible of independent use (individualized in the registry article) but by the PV attributed to each of those floors or divisions intended for housing", is read in the summary of the judgment of the Supreme Administrative Court No. 47/2015, of 9.9.2015, conclusion that is explicitly founded on case law of the CAAD, in particular in proceeding No. 724/2014-T of 9 April 2015. Indeed, in the said judgment, one can read in conclusion that "in the first place that the present theme is, from the outset by virtue of Article 67, No. 2 of the Stamp Duty Code, subject to the provisions of the MPT Code, "to matters not regulated in this code concerning Item 28 of the General Table, the MPTC shall apply subsidiarily". As such, and as has been mentioned so many times in the understanding of the present tribunal, the mechanism for determining the relevant PV for purposes of the said item is the one provided for in the MPT Code.

Now, Article 12, No. 3 of the MPT Code establishes that "each floor or part of a property susceptible of independent use is considered separately in the registry record, which also discriminates the respective patrimonial tax value".

With the legislator depreciating, in the terms previously mentioned, any prior constitution of horizontal or vertical property.

Indeed, for the legislator, what is relevant is the material truth underlying its existence as an urban property and its use.

It should be noted that the TA itself seems to agree with the criterion set out, which is why the assessments that it itself issues are very clear in their essential elements, from which it follows that the amount of incidence is the amount corresponding to the PV of each of the floors and the assessments are individualized.

Therefore, if the legal criterion requires the issuance of individualized assessments for the autonomous parts of properties in vertical ownership in the same manner as it establishes for properties in horizontal property, it clearly established the criterion, which must be unique and unambiguous, for the definition of the rule of incidence of the new tax.

Thus, there would be place for the incidence of SD (within Item No. 28 of the GTSD) if any of the parts, floors or divisions with independent use had a PV greater than €1,000,000.00.

The TA cannot consider as the reference value for the incidence of the new tax the total value of the property when the legislator itself established a different rule for MPT purposes (and, as previously mentioned, this is the code applicable to matters not regulated regarding Item No. 28 of the GTSD).

In conclusion, the current legal regime does not impose the obligation to constitute horizontal property, which is why the TA's action amounts to arbitrary and illegal discrimination.

Indeed, the TA cannot distinguish where the legislator itself chose not to, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in Article 103 of the Constitution of the Portuguese Republic, and also the principles of justice, equality and tax proportionality.

In the case at hand, the property/properties in question were, at the relevant date of the facts, constituted in full ownership and had [...] parts with independent use, as results from the documents [...].

Given that none of these parts has patrimonial value equal to or greater than €1,000,000.00, as results from the documents attached to the case file, it is concluded that the legal prerequisite for incidence is not met".

These are the reasons set out in previous decisions of the CAAD, confirmed by consistent case law of the Supreme Administrative Court, that lead us to grant the claim of the claimant which was timely brought to this tribunal.

DECISION

Based on the factual and legal grounds set out above and, in accordance with Article 2 of the RJAT, it is decided:

To judge inadmissible, for want of timeliness, the request for arbitral pronouncement as regards the Stamp Duty assessments for the years 2011, 2012 and 2013, maintaining the challenged assessments;

To declare the illegality of the Stamp Duty assessment for the year 2015; and

To condemn the TA to refund the amounts unduly paid by the Claimant as Stamp Duty for 2015.

VALUE OF THE CASE:

In accordance with the provisions of Article 306, Nos. 1 and 2 of the Code of Civil Procedure, 97-A, No. 1 subsection a) of the TPPC and 3, No. 2 of the Regulations on Costs in Tax Arbitration Proceedings, the value of the case is fixed at €51,735.39 (fifty-one thousand, seven hundred and thirty-five euros and thirty-nine cents), equivalent to the total amount of the challenged assessments.

COSTS:

Calculated in accordance with Article 4 of the Regulations on Costs in Tax Arbitration Proceedings and Table I attached to it, in the amount of €2,142.00 (two thousand one hundred and forty-two euros), to be paid by the Parties in proportion to their respective loss, fixed above, since the request was partially granted, in accordance with Articles 12, No. 2, and 22, No. 4, both of the RJAT and Article 4, No. 4 of the cited Regulations.

Lisbon, 29 September 2017.

The Arbitrator,

João Taborda da Gama

Frequently Asked Questions

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Does Stamp Tax (Verba 28.1 TGIS) apply to individual independent units in a vertical property when each unit's VPT is below €1,000,000?
The central dispute in this case is whether Stamp Duty under Item 28.1 TGIS applies to each independent division separately or to the aggregate property value. The taxpayer argued that since no individual floor exceeded €1,000,000 in patrimonial value, no stamp duty was due, relying on Article 12(3) of the IMI Code which provides for separate registration of divisions with independent use. The Tax Authority maintained that vertical/full ownership properties constitute a single taxable unit, unlike horizontal property, and therefore the aggregate residential value (€1,565,733.81) determines stamp duty liability. The Authority's position is that separate registration for IMI purposes is merely administrative and does not create separate properties for stamp duty purposes when the building is not legally constituted as horizontal property.
How is the taxable base determined for Stamp Tax purposes on buildings not constituted as horizontal property?
For buildings not constituted as horizontal property (propriedade horizontal), the Tax Authority's position is that the taxable base equals the sum of all patrimonial values of divisions with residential purpose within the single property unit. The Authority distinguishes between horizontal property, where Article 2(4) of the IMI Code treats autonomous units as separate properties, and vertical/full ownership, where the building remains a single property despite Article 12(3) of the IMI Code allowing separate registration and VPT attribution for administrative purposes. According to the Tax Authority, while divisions may have separate VPT for IMI registration, the stamp duty assessment considers the total VPT of all residential components because the property legally remains undivided. This interpretation significantly affects high-value buildings structured as full ownership rather than horizontal property.
Can the Tax Authority aggregate the VPT of all independent units to exceed the €1,000,000 threshold for Imposto do Selo?
According to the Tax Authority's interpretation in this case, yes, the VPT of all independent residential units in a vertical/full ownership property should be aggregated to determine whether the €1,000,000 threshold is met. The Authority argues that the legal distinction between horizontal property (where autonomous units are separate properties under Article 2(4) of the IMI Code) and full ownership (where the building is a single property) justifies this aggregation. The taxpayer contested this interpretation, arguing that Article 67(2) of the Stamp Duty Code incorporates Article 12(3) of the IMI Code, which requires separate consideration of divisions with independent use. This dispute reflects a fundamental question about whether administrative separation for IMI purposes (separate registration and VPT attribution) extends to stamp duty liability or whether the underlying property structure controls.
What role does Article 12(3) of the IMI Code play in determining Stamp Tax liability under Verba 28.1 TGIS?
Article 12(3) of the IMI Code is central to the taxpayer's argument. This provision states that each floor or part with independent use of property not constituted as horizontal property is considered separately in the register, with separate patrimonial value attribution. The claimant argued that Article 67(2) of the Stamp Duty Code, which makes IMI Code provisions applicable to stamp duty for determining patrimonial value, incorporates this separate treatment for stamp duty purposes under Item 28.1 TGIS. Therefore, each division should be assessed independently for the €1,000,000 threshold. The Tax Authority countered that Article 12(3) merely establishes an administrative registration method and does not transform a single property into multiple properties for tax purposes, distinguishing it from the substantive separate property status granted to horizontal property units under Article 2(4) of the IMI Code.
What remedies are available to taxpayers who have paid Stamp Tax on incorrectly aggregated property valuations?
Taxpayers who believe they have incorrectly paid stamp duty based on aggregated property valuations can request arbitration under the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011), as the claimant did in this case. The arbitration request must be filed within 90 days from the events specified in Article 102(1) and (2) of the Tax Procedure and Process Code, which for autonomous challengeable acts means 90 days from the end of the voluntary payment period. For stamp duty on high-value residential property, when the amount exceeds €500, it is paid in three installments (April, July, November) per Article 120 of the IMI Code. The request should seek annulment of the assessments and restitution of amounts paid. However, strict compliance with time limits is essential, as the Tax Authority raised statute of limitations as a defense for the 2011-2013 assessments in this case, arguing the December 2016 filing was beyond the deadline for taxes paid in 2012-2014.