Process: 747/2014-T

Date: March 9, 2015

Tax Type: IMI

Source: Original CAAD Decision

Summary

This arbitral decision from CAAD (Process 747/2014-T) addresses whether Stamp Tax under Verba 28 of the General Stamp Tax Table (TGIS) applies to construction land valued above €1,000,000. The applicant company owned construction land in Tavira with a tax equity value of €1,790,934.00 and was assessed Stamp Duty totaling €11,939.56 for 2013 under TGIS Item 28.1. The taxpayer challenged the assessment, arguing that Verba 28, introduced by Law 55/2012, applies exclusively to 'buildings with residential use designation' and not to undeveloped construction land. The applicant contended that construction land is legally distinct from residential buildings under Article 6 of the Municipal Property Tax Code (CIMI), and that residential use designation requires an actual constructed building per Article 41 CIMI. Since the property had no approved construction project or license, it could not be classified as a residential building. The Tax Authority (AT) responded that the assessment had already been annulled in a prior arbitral case (388/2014-T) decided favorably for the taxpayer on December 14, 2014, with full refund of €17,909.34 issued in February 2015. AT argued this proceeding lacked object since the same assessment was already definitively annulled, and the taxpayer should have joined the additional installment payments to the earlier case rather than filing a separate arbitral claim. The case highlights the crucial legal distinction between constructed residential buildings and construction land for Stamp Tax purposes, and demonstrates taxpayers' right to challenge assessments through CAAD arbitration under Decree-Law 10/2011.

Full Decision

ARBITRAL DECISION

I – REPORT

A – PARTIES

A…, LDA., with Tax Identification Number …, with registered office at Rua …, n.º …, …, … Queijas, hereinafter designated as Applicant or taxpayer.

TAX AND CUSTOMS AUTHORITY (which succeeded the Directorate-General for Taxes, by means of Decree-Law no. 118/2011, of 15 December) hereinafter designated as Respondent or AT.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was regularly constituted, on 31-10-2014, to hear and decide on the subject matter of the present proceeding, and was automatically notified to the Tax and Customs Authority on 03-11-2014, as appears in the respective minutes.

The Applicant did not proceed with the appointment of an arbitrator, whereby, under the provisions of no. 1 of Article 6 and of subparagraph b) of no. 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated Mr. Dr. Paulo Ferreira Alves, with the appointment having been accepted in accordance with the legal provisions.

On 17-12-2014 the parties were duly notified of this designation, having shown no intention to refuse the appointment of arbitrators, in accordance with Article 11 no. 1, subparagraphs a) and b), of the Rules of Procedure of the Arbitral Tribunal and Articles 6 and 7 of the Code of Deontology.

In accordance with the provisions of subparagraph c) of no. 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the sole arbitral tribunal is regularly constituted on 16-07-2014.

The arbitral tribunal is regularly constituted. It is materially competent, in accordance with Articles 2, no. 1, subparagraph a), and 30, no. 1, of Decree-Law no. 10/2011, of 20 January.

Both parties agree to dispense with the meeting provided for in Article 18 of the Rules of Procedure of the Arbitral Tribunal.

The parties have legal personality and capacity, are legitimate and are legally represented (Articles 4 and 10, no. 2, of the same instrument and Article 1 of Administrative Order no. 112-A/2011, of 22 March).

The proceeding is not affected by defects that would invalidate it.

B – CLAIM

The Applicant herein seeks a declaration of illegality of the tax act of additional assessment of Stamp Duty no. 2014 … and no. 2014 …, which fixed a total tax to be paid of 11,939.56 € (eleven thousand nine hundred and thirty-nine euros and fifty-six cents).

C – GROUNDS FOR THE CLAIM

To support its request for arbitral pronouncement, the Applicant alleged, with a view to obtaining a declaration of illegality of the tax act of additional assessment of Stamp Duty no. 2014 … and no. 2014 …, in summary, the following:

  1. It is the owner of a real property, specifically, of a plot of land for construction, registered in the urban property register under Article no. …, located in the Development … of the parish of … and Municipality of Tavira, with a tax equity value of € 1,790,934.00.

  2. It was notified of the assessment for voluntary payment in installments of stamp duty relating to the year 2013 and which includes as "TGIS Item" as the reason for application of the 1% rate to the tax equity value of the real property in the amount of 1,790,934.00€.

  3. Assessments which allegedly result from the application of the provisions of Law no. 55/2012, of 29 October.

  4. The Applicant states that the real property in question is a plot of land for construction and not a building with residential use designation.

  5. Further, it states that there is currently no building capacity defined for the said real property, there being no approved project or construction license for the same.

  6. The Applicant contends that the criterion of residential use designation applies only to constructed buildings, as it depends on the type of use in accordance with the provisions of Article 41 of the Municipal Property Tax Code (CIMI).

  7. Further, it alleges that land for construction is an urban property legally distinct from residential buildings, in accordance with Article no. 6 of the CIMI.

  8. The Applicant maintains that in the present case, the stamp duty assessments in question were made under the invocation of the "TGIS Item no. 28.1", whereas it is true that Law no. 55/2012, of 29 October, does not provide for the taxation of land for construction, but rather of "building with residential use designation", and this can only apply to constructed buildings.

  9. Thus, the stamp duty assessments in question, in the name of the principle of legality and typicality of taxes, could only have been made on the basis of the provisions contained in the general table of stamp duty and in accordance with the facts provided for by the legislator.

  10. In the Applicant's view, with these assessments, the verification of the conditions on which the tax in question depends was not proven, and it is manifest that no tax event occurred, whereby the payment demanded by AT is illegal and unenforceable.

  11. The acts in question are thus null and void due to lack of authority and for having created a tax not permitted by law.

  12. The stamp duty assessment acts thus suffer from manifest lack of factual and legal reasoning, this being insufficient, obscure and incongruous, whereby violations occurred of Articles 268 no. 3 of the Constitution, Articles 124 and 125 of the Code of Administrative Procedure and Article 77 of the General Tax Law.

D – THE RESPONDENT'S ANSWER

  1. The Respondent, duly notified for this purpose, timely submitted its answer in which, in abbreviated summary, it alleged the following:

  2. The present request for arbitral pronouncement has as its object the annulment of the Stamp Duty assessment – Item 28, relating to the year 2013, which fell upon the urban property registered in the property register of the parish of …, municipality of Tavira under no. ….

  3. The same request is supported by the notification issued for payment of the 2nd and 3rd installments of the aforementioned assessment, through payment documents no. 2014 … and 2014 …, which total the amount of € 11,939.56.

  4. However, in the sequence of the notification for payment of the 1st installment relating to the same assessment, the Applicant had already filed a request for arbitral pronouncement, seeking the annulment of the same assessment.

  5. Such request gave rise to arbitral case no. 388/2014-T, which on 14.12.2014 received a decision favorable to its claim, and annulled the said assessment.

  6. Consequently, the said arbitral decision was implemented and on 02.02.2015 a check was issued, in the total amount of € 17,909.34, paid on 18.02.2015, which evidences the annulment of the assessment and the full refund of the tax borne by the Applicant.

  7. Thus, the present proceeding lacks an object, since the assessment evidenced in the 3 installments notified to the taxpayer is already annulled.

  8. And, having the Applicant in the meantime proceeded with payment of the further 2nd and 3rd installments, it should have promoted the joining to the proceedings of case 388/2014-T of the payment documents notified in the meantime and the respective payments.

  9. What should never, in any way whatsoever, be done was to separate the request for annulment of the same assessment into more than one contentious proceeding.

  10. The AT should thus be absolved in the present proceedings, and the Applicant condemned to pay the procedural costs, since it improperly gave cause to the action.

E – FACTUAL FINDINGS

  1. Before proceeding to the assessment of these questions, it is necessary to present the factual matter relevant to the respective understanding and decision, which was effected on the basis of documentary evidence, and taking into account the facts alleged.

  2. In matters of fact relevant thereto, the present tribunal finds established the following facts:

  3. The Applicant is the owner of the urban property composed of "plot of land for construction", registered in the urban property register under Article no. …, located in the Development … of the parish of … and Municipality of Tavira, with a tax equity value of € 1,790,934.00.

  4. The Applicant was notified of the stamp duty assessment acts no. 2014 … relating to the 2nd installment, which fixed a tax to be paid on the aforementioned real property in the amount of 5,969.78€, with a payment deadline of July 2014, and of the stamp duty assessment act no. 2014 … relating to the 3rd installment in the amount of 5,969.78€, with a payment deadline in November 2014.

  5. Assessment acts no. 2014 … and no. 2014 … which fixed a total tax to be paid of 11,939.56€.

  6. A collection amount of 17,909.34€ of Stamp Duty on the said real property was determined.

  7. The Applicant timely proceeded with the payment of both aforementioned assessment acts.

  8. The assessment act relating to the first installment of Stamp Duty on the said real property, number 2014 … of 17-03-2014, has already been the subject of an arbitral decision as to its legality in which arbitral case no. 388/2014-T, which on 14.12.2014 decided "To judge meritorious the request for arbitral pronouncement as to the request for annulment of the Stamp Duty assessment no. 2014 …, with reference to the year 2013 challenged by the Applicant".

F – UNPROVEN FACTS

  1. Of the facts with interest for the decision of the case, contained in the challenge, all objects of concrete analysis, those not contained in the factual findings described above were not proven.

G – ISSUES TO BE DECIDED

  1. Given the positions of the parties assumed in the arguments presented, the central issue to be determined constitutes the following, which must be assessed and decided:

i. The alleged by the Respondent, of lis pendens or res judicata of the present request.

ii. The alleged by the Applicant, declaration of illegality of the tax act of additional assessment of Stamp Duty no. 2014 … and no. 2014 ….

H – THE EXCEPTION OF LIS PENDENS OR RES JUDICATA

  1. The Respondent invokes, in accordance with Articles 577 and 580 of the Code of Civil Procedure, a dilatory exception of lis pendens or res judicata, on the grounds that there is a repetition of a case already heard in another proceeding.

  2. With regard to this question raised by the Respondent, it invokes that arbitral case no. 388/2014-T, which on 14.12.2014 already decided on this question, in favor of the Applicant.

  3. And the Respondent also invokes that it has already refunded the assessed tax by means of check payment to the Applicant in the amount of the three installments of Stamp Duty, in the amount of 17,909.34€.

  4. It follows from the decision of arbitral case no. 388/2014-T, which decided on the assessment act relating to the first installment of Stamp Duty, number 2014 … of 17-03-2014 "In accordance with the foregoing, this Arbitral Tribunal agrees:

  5. To judge meritorious the request for arbitral pronouncement as to the request for annulment of the Stamp Duty assessment no. 2014 …, with reference to the year 2013 challenged by the Applicant;

  6. To condemn the Respondent to pay indemnificatory interest, on the amount of € 5,969.78, at the legal rate in force, counted from the date of payment (29 April 2014) until the date of processing of the respective credit note, which shall be included, in accordance with Articles 43 of the General Tax Law and 61 of the Code of Procedure and Tax Collection

  7. It follows from the request of such action by the Applicant "The Applicant requests that the Stamp Duty assessment no. 2014 …, of 17-03-2014, relating to the plot of land for construction registered in the urban property register under Article … of the parish of …, in the municipality of Tavira, with a value to be paid of € 5,969.78, be annulled or declared null.".

  8. The request for constitution of the arbitral tribunal in case 388/2014-T was presented on 22-05-2014, and the decision was issued on 14-12-2014.

  9. The request of the present arbitral tribunal was presented on 31-10-2014.

  10. The Respondent was notified on 22-01-2015 to submit its answer to the present request.

  11. It follows from Article 13, no. 1 of the Rules of Procedure of the Arbitral Tribunal, that the AT has 30 days from the date of the request for constitution of the arbitral tribunal to proceed with the revocation, rectification, reform or conversion of the tax act, a period that would end on 1 December 2014.

  12. From the request of the present arbitral tribunal, the Applicant seeks a declaration of illegality of the tax act of additional assessment of Stamp Duty no. 2014 … and no. 2014 ….

  13. The Applicant requested the annulment of the Stamp Duty assessment acts relating to its three installments, in two distinct arbitral proceedings.

  14. In light of the foregoing, the present tribunal must decide on the question of the dilatory exception.

  15. The current regime of stamp duty assessment on real property in accordance with Item 28.1 results in a single collection amount being calculated and three assessment acts being issued corresponding to three installments.

  16. The taxpayer requested the annulment of the tax assessment acts, in two distinct arbitral proceedings, as to the same real property and as to the same Stamp Duty and collection amount.

  17. The taxpayer did not repeat the request, and the decision of the arbitral tribunal in case 388/2014-T decided to annul the assessment act relating to the first installment.

  18. At the time the present action was filed, case 388/2014-T had not yet issued its decision.

  19. The decision of 388/2014-T only condemned the refund of the amount of €5,969.78, amounts that were improperly assessed at that date.

  20. The Applicant proceeded with the assessment of the 2nd and 3rd installment of Stamp Duty in the amount of 11,939.56€, before the date of the decision of case 388/2014-T.

  21. Assessment acts 2014 … and no. 2014 … were in no way assessed in case 388/2014-T or decided upon.

  22. The Applicant, in order to assert its right, and given the request made in case 388/2014-T, which only assessed the assessment act and not the act of determination of the collection amount, would always have to file a new legal or arbitral action to assert its defense as to assessment acts 2014 … and no. 2014 ….

  23. The fact that the AT proceeded with the refund of the amounts assessed by the Applicant in the assessment acts in question does not result from the condemnation of case 388/2014-T, nor does it have any influence on the decision of the present arbitral request, since it concerns the annulment of the assessment act.

  24. The question is, however, whether if the refund of the assessed amounts had occurred prior to the time of filing of the present action, the futility of the action would have been verified, due to the fault of the taxpayer.

  25. But given the time frame and the formulation of the request, the request for the dilatory exception of lis pendens or res judicata is not upheld, since case 388/2014-T assessed the assessment act no. 2014 …, and the present tribunal is assessing assessment acts nos. 2014 … and no. 2014 ….

I – LEGAL MATTERS

  1. Given the positions of the parties assumed in the pleadings submitted, the central question to be decided by this arbitral tribunal consists of determining whether the stamp duty assessment acts, in the amount of 11,939.56€., both relating to the urban property composed of "plot of land for construction", registered in the urban property register under Article no. …, located in the Development … of the parish of … and Municipality of Tavira, with a tax equity value of € 1,790,934.00, and of violation of law, due to the erroneous interpretation and application of Item 28.1 of the General Table of Stamp Duty and of Article 6, no. 1, subparagraph f), i) of the aforementioned Law no. 55-A/2012, of 29 October.

  2. The legal defects due to error regarding the conditions of the right to make the assessment, as to the question of the classification of plots of land for construction within the scope of incidence of Article 28 no. 1 of the General Table of Stamp Duty, introduced by the Regime of Law no. 55-A/2012, of 29 October.

  3. The modification of the regime as to the subjection to stamp duty of buildings with residential use designation through the addition of Item 28 of the General Table of Stamp Duty, effected by Article 4 of Law 55-A/2012, of 29/10, came to typify the following tax events, through the following wording:

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

28.1 – For building with residential use designation – 1 %;

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

  1. The provisions of Article 6 of Law no. 55-A/2012 contain the transitional provisions that established the rules relating to the assessment of the tax provided for in that Item:

"1 – In 2012, the following rules must be observed by reference to the assessment of stamp duty provided for in Item no. 28 of the respective General Table:

The tax event occurs on 31 October 2012;

The taxpayer of the tax is the one mentioned in no. 4 of Article 2 of the Stamp Duty Code on the date referred to in the previous subparagraph;

The tax equity value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011;

The assessment of the tax by the Tax and Customs Authority must be effected by the end of November 2012;

The tax must be paid, in a single installment, by the taxpayers by 20 December 2012;

The applicable rates are the following:

Buildings with residential use designation assessed in accordance with the Municipal Property Tax Code: 0.5 %;

ii) Buildings with residential use designation not yet assessed in accordance with the Municipal Property Tax Code: 0.8 %;

iii) Urban properties when the taxpayers that are not natural persons are resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance: 7.5 %.

2 – In 2013, the assessment of stamp duty provided for in Item no. 28 of the respective General Table must be based on the same tax equity value used for purposes of municipal property tax assessment to be made in that year.

3 – The failure to deliver, in whole or in part, within the time indicated, of the amounts assessed under stamp duty constitutes a tax infraction, punishable in accordance with the law."

On the interpretation of this instrument, Decision 53/2013-T has already ruled, which writes "The term used in Item 28.1 and in sub-items i) and ii) of subparagraph f) of no. 1 of Article 6 of Law no. 55-A/2012 is a concept that is not used in any other tax legislation in these precise terms, which is that of 'building with residential use designation'. Namely, in the CIMI, which in several norms of the Stamp Duty Code introduced by that Law is indicated as the instrument of subsidiary application with respect to the tax provided for in the aforementioned Item no. 28 [Articles 2, no. 4, 3, no. 3, subparagraph u), 5, subparagraph u), 23, no. 7, and 46 and 67 of the Stamp Duty Code], a concept defined in those terms is not used." On this matter, the decisions of the Arbitral Tribunal of CAAD have already ruled, nos. 42/2013-T, 48/2013-T, 49/2013-T, 189/2013-T, 207/2013-T, 247/2013, 284/2013-T, 288/2013-T, 308/2013-T, 12/2014-T, 31/2014-T, 56/2014-T; 92/2014-T; 151/2014-T; 202/2014-T, 210/2014-T; 276/2014-T; 310/2014-T.

  1. As to the concept of "properties", it is necessary for this purpose to resort to the concepts of "properties" used in the CIMI, in which the species of properties are enumerated in Articles 2 to 6, which is transcribed:

Article 2

Concept of Property

  1. For purposes of this Code, property is any parcel of land, including waters, plantings, buildings and constructions of any nature incorporated or situated thereon, with a character of permanence, provided it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantings, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are situated, although located on a parcel of land that constitutes an integral part of a different estate or has no asset nature.

  2. Buildings or constructions, even though movable by nature, are deemed to have a character of permanence when devoted to non-temporary purposes.

  3. The character of permanence is presumed when the buildings or constructions are situated in the same location for a period exceeding one year.

  4. For purposes of this tax, each autonomous unit, under the horizontal ownership regime, is deemed to constitute a property.

Article 3

Rural Properties

1 – Rural properties are land situated outside an urban settlement that should not be classified as land for construction, in accordance with no. 3 of Article 6, provided that:

They are devoted or, in the absence of concrete devotion, have as their normal purpose a use generating agricultural income, such as those considered for purposes of the personal income tax (IRS);

Not having the devotion indicated in the previous subparagraph, they are not constructed or have only buildings or constructions of an accessory character, without economic autonomy and of reduced value.

2 – Rural properties are also land situated within an urban settlement, provided that, by force of a legally approved provision, they cannot have a use generating any income or can only have a use generating agricultural income and are actually being devoted to this purpose.

3 – The following are also rural properties:

Buildings and constructions directly devoted to the generation of agricultural income, when situated on the land referred to in the above paragraphs;

Waters and plantings in the situations referred to in no. 1 of Article 2.

4 – For purposes of this Code, urban settlements are considered, in addition to those situated within legally established perimeters, clusters with a minimum of 10 units served by public use roadways, with their perimeter delimited by points at a distance of 50 m from the axis of the roadways, in the transversal direction, and 20 m from the last building, in the direction of the roadways.

Article 4

Urban Properties

Urban properties are all those that should not be classified as rural, without prejudice to the provisions of the following article.

Article 5

Mixed Properties

1 – Whenever a property has rural and urban parts it is classified, in its entirety, in accordance with the principal part.

2 – If neither of the parts can be classified as principal, the property is deemed mixed.

Article 6

Species of Urban Properties

1 – Urban properties are divided into:

Residential;

Commercial, industrial or for services;

Land for construction;

Others.

2 – Residential, commercial, industrial or for services are buildings or constructions licensed for such purposes or, in the absence of a license, which have as their normal purpose each of these ends.

3 – Land for construction is considered to be land situated within or outside an urban settlement, for which a license or authorization has been granted, admitting prior notice or issued favorable prior information of a subdivision or construction operation, and also those which have been declared as such in the title of acquisition, with the exception of land where the competent entities prohibit any of those operations, namely those located in green zones, protected areas or that, in accordance with municipal land use planning, are devoted to public spaces, infrastructure or equipment. (As amended by Law no. 64-A/08, of 31-12)

4 – The provision of subparagraph d) of no. 1 includes land situated within an urban settlement that is not land for construction nor is it covered by the provisions of no. 2 of Article 3, as well as buildings and constructions licensed or, in the absence of a license, which have as their normal purpose purposes other than those referred to in no. 2, as well as those of the exception in no. 3.

  1. On the interpretation of tax norms, for the case sub judice, Article 11 of the General Tax Law tells us, which establishes the essential rules for the interpretation of tax laws, which it does in the following terms:

Article 11

Interpretation

In determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

Whenever tax norms employ terms peculiar to other branches of law, the same should be interpreted in the same sense as they have there, unless otherwise directly follows from the law.

If doubt persists as to the meaning of the rules of incidence to be applied, regard should be had to the economic substance of the tax facts.

Gaps resulting from tax norms covered by the reservation of law of the National Assembly are not susceptible to analogical integration.

  1. To this provision, it is also necessary to resort to the general principles of interpretation of laws, to which no. 1 of Article 11 of the General Tax Law refers, are established in Article 9 of the Civil Code, which establishes the following:

Article 9

Interpretation of Law

The interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intent, having particularly in mind the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

However, the interpreter cannot consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

In fixing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its intent in adequate terms.

  1. Given the legal reasoning already exposed, and taking into account the articles transcribed and enumerated, the following interpretative hypotheses arise regarding the concept of "building with residential use designation", as to the Concept of "building with residential use designation" as referring to residential buildings, and as to the Concept of "building with residential use designation" as a concept distinct from "residential buildings".

  2. Articles 2 to 6 of the CIMI transcribed above are not used by the legislator in the classification of properties the concept of "building with residential use designation". Similarly, this concept is not found, with this terminology, in any other instrument.

  3. The lack of exact terminological correspondence of the concept of "building with residential use designation" with any other used in other instruments may give rise to several interpretative hypotheses.

  4. The text of the law, being the starting point for the interpretation of the expression "buildings with residential use designation", and it is on the basis of it that the "legislative intent" must be reconstructed, as required by no. 1 of Article 9 of the Civil Code, applicable by virtue of the provisions of Article 11, no. 1, of the General Tax Law, already transcribed.

  5. On the interpretation of the concept of "building with residential use designation", it is important to cite Decision 53/2013-T which has already ruled on this matter. A decision that equally sustains two interpretative hypotheses regarding the concept of "building with residential use designation", respectively in the same sense as the present decision, as to the concept of "building with residential use designation" as referring to residential buildings, and as to the Concept of "building with residential use designation" as a concept distinct from "residential buildings"

  6. Decision 53/2013-T writes, regarding the concept of "building with residential use designation" as referring to residential buildings:

"The concept closest to the literal sense of this expression used is manifestly that of 'residential buildings', defined in no. 2 of Article 6 of the CIMI as encompassing 'buildings or constructions' licensed for residential purposes or, in the absence of a license, which have as their normal purpose residential ends.

If it is to be understood that the expression 'building with residential use designation' coincides with that of 'residential buildings', it is manifest that the assessments will be defective due to error regarding the factual and legal conditions, since all properties as to which Stamp Duty was assessed under Item no. 28.1 are land for construction, without any building or construction, required to meet that concept of 'residential buildings'.

For this reason, if the interpretation is adopted that 'building with residential use designation' means 'residential building', the stamp duty assessments in question will be illegal, because there is no building or construction in any of the properties.

However, the non-coincidence of the terms of the expression used in Item no. 28.1 of the General Table of Stamp Duty with that which is extracted from no. 2 of Article 6 of the CIMI suggests that it was not intended to use the same concept."

  1. Regarding the interpretation of the second hypothesis: Concept of "building with residential use designation" as a concept distinct from "residential buildings", Decision 53/2013-T is cited again, in which it writes:

"The word 'designation' [or 'devotion'], in this context of use of a property, has the meaning of 'the action of destining something to a certain use'. ( [1] )

'When, as a rule, norms (legislative formulas) have more than one meaning, then the positive function of the text is expressed in giving stronger support to or more strongly suggesting one of the possible meanings. It is that, among the possible meanings, some will correspond to the more natural and direct meaning of the expressions used, whereas others will only fit within the verbal framework of the norm in a forced, contrafeit manner. Now, in the absence of other elements that induce the choice of the less immediate sense of the text, the interpreter should opt in principle for that meaning which best and most immediately corresponds to the natural meaning of the verbal expressions used, and namely to its technical-legal meaning, on the assumption (not always accurate) that the legislator knew how to express its intent correctly'. ( [2] )

The relevance of the text of the law is especially emphasized in the matter of interpretation of rules of incidence of Stamp Duty, which are reduced to a mixture, under a common denomination, of an incongruous set of taxes of completely distinct natures (on income, on expenditure, on assets, on acts, etc.), which leaves little room for the application of the primary interpretative criterion, which is the unity of the legal system, which requires its overall coherence.

The recognized lack of coherence of Stamp Duty is particularly exuberant in the case of this Item no. 28.1, hastily included outside the General State Budget, by a fiscal legislator without perceivable global fiscal orientation, which is successively implementing norms of fiscal aggravation as a measure of the reverses of budgetary execution, of the impositions of international institutional creditors (represented by the 'troika') and of the oversight of the Constitutional Court.

In fact, although in the 'Explanatory Memorandum' of the Bill no. 96/XII/2nd ( [3] ), on which Law no. 55-A/2012 was based, reference is made to the praiseworthy concern of the Government to 'strengthen the principle of social equity in austerity, ensuring an effective distribution of the necessary sacrifices to comply with the adjustment program' and to its commitment 'to ensure that the distribution of these sacrifices will be made by all and not just by those who live from the income of their work', it is manifest, on the one hand, that those reasons of equity, certainly existing, did not begin to apply in the middle of 2012, already existing at the beginning of the year, when the General State Budget entered into force, and, on the other hand, that the scope of Item no. 28.1, in taxing additionally properties with residential use designation and not also properties that do not have it, lets it be seen that the concerns of social equity and the proclaimed intention of distribution of sacrifices by all, affects much more some than truly all.

In this context, in the absence of interpretative elements that are reliable and allow for the detection of legislative coherence in the solution adopted in that Item no. 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretative purposes in the face of no. 3 of Article 9 of the Civil Code), the tenor of the legal text must be the primary element of interpretation, in accordance with the presumption, imposed by the same no. 3 of Article 9, that the legislator knew how to express its intent in adequate terms.

In view of those meanings of the words 'designation' [or 'devotion'] and 'devote', which are 'to assign a purpose' or 'to apply', the formula used in that Item no. 28.1 of the General Table of Stamp Duty manifestly encompasses properties that are already applied to residential purposes, whereby it is important to inquire whether it will also encompass properties that, although not yet applied to residential purposes, are destined for these and those whose purpose is unknown.

In view of the literal tenor of Item no. 28.1, it is to be excluded from the scope of incidence of the Stamp Duty provided therein the land for construction of some Applicants that have not yet had any type of use defined, since they are not yet applied nor destined to residential purposes. That is, land for construction that does not have a defined use cannot be considered properties with residential use designation, since they do not yet have any designation nor any other purpose than the construction of unknown type. An interpretation in the sense that Item no. 28.1 refers to properties whose purpose is unknown has no minimum of verbal correspondence in the letter of that norm, whereby a hypothetical legislative intent of that kind cannot be considered by the interpreter of the law, in the face of the prohibition contained in no. 2 of Article 9 of the Civil Code.

But this is not enough to clarify the situation of those land for construction which, although not yet applied to residential purposes, already have a determined purpose, namely, in the subdivision license, which is the case of the properties referred to in subparagraphs z) to dd) of the matter of fact established.

For this reason, it is necessary to clarify when a property can be understood to be devoted to a residential purpose, namely whether it is when that purpose is fixed for it in a licensing act or similar, or only when the actual assignment of that purpose is concretized.

From the outset, the comparison of Item no. 28.1 of the General Table of Stamp Duty with no. 2 of Article 6 of the CIMI, which defines the concept of residential buildings, manifestly points to the necessity of an actual devotion.

In fact, a building or construction licensed for residence or, even without a license, but which has residence as its normal purpose, is, in view of no. 2 of that Article 6, a residential building.

For this reason, on the assumption that the legislator of Law no. 55-A/2012 knew how to express its intent in adequate terms (as required by Article 9, no. 3, of the Civil Code that is presumed), if it intended to refer to those properties already licensed for residence or which have residence as their normal purpose, it would certainly have used the concept of 'residential buildings', which would express perfectly and clearly its intent, in view of the definition given by that no. 2 of Article 6 of the CIMI.

Consequently, it must be presumed that the use of a different expression has in mind a distinct reality, whereby, in good hermeneutics, 'property with residential use designation', cannot be a property merely licensed for residence or destined for that purpose (that is, it will not be enough that it be a 'residential building'), having to be a property that already has actual devotion to that purpose.

That this is the sense of the expression 'designation' [or 'devotion'], in the same context of classification of properties as the CIMI does, is confirmed by Article 3 in which, with respect to rural properties, reference is made to those which 'are devoted or, in the absence of concrete devotion, have as their normal purpose a use generating agricultural income', which shows that the devotion is concrete, actual. In fact, as can be seen by the final part of this text, a property may have as a purpose a certain use and be or not be devoted to it, which shows that the devotion is, at the level of the connection of a property to a certain use, something more intense than mere purpose and which may or may not occur, downstream of this and not upstream. ( [4] )

Furthermore, the text of the law by adopting the formula 'property with residential use designation' [or 'property with residential devotion'], instead of 'urban properties of residential use designation', which appears in the aforementioned 'Explanatory Memorandum', points strongly in the direction that it is required that the residential designation already be concretized, since only then will the property have that designation.

With regard to Article 45 of the CIMI, it has no relationship with the classification of properties, merely indicating the factors to be considered in the evaluation of land for construction. What is considered there, in making reference to the 'building to be constructed' is the consideration of the purpose of the land, which, as has been seen, is something that, in the context of the CIMI, does not imply devotion and occurs before this.

The correctness of this interpretation in the sense that only properties that are actually devoted to residence are inserted within the scope of incidence of Item no. 28.1 of the General Table of Stamp Duty is also confirmed by the ratio legis perceptible from the restriction of the field of application of the norm to properties with residential use designation, in the context of the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', which Article 9, no. 1, of the Civil Code also establishes as interpretative elements. ( [5] ).

From the outset, the limitation of Stamp Duty taxation to 'properties with residential use designation' allows it to be perceived that it was not intended to encompass within the scope of incidence of the tax properties devoted to services, industry or commerce, that is, properties devoted to economic activity, which is understood in a context in which, as is well known, the economy is in a recessionary spiral, publicly proclaimed at the highest level, with unemployment rates reaching historically maximum levels, with an avalanche of business closures resulting from economic unsustainability.

With this situation in mind and it being well known and public that the revitalization of economic activity and the increase in exports are the doorways out of the crisis, it is understood that legislative measures were not taken that would hinder economic activity, namely the aggravation of the tax burden that hinders it and affects competitiveness in international terms.

For this reason, it is to be concluded that the interpretative elements available, including the 'circumstances in which the law was elaborated and the specific conditions of the time in which it is applied', point clearly in the direction of not having intended to encompass within the scope of incidence of Item no. 28.1 situations of properties that are not yet devoted to residence, namely land for construction held by companies. ( [6] )"

  1. It follows from the foregoing that the application of the regime to the situation of the Applicant, with respect to the urban property corresponding to a "plot of land for construction", which is not verified in the present case, before a property with current residential use designation, whereby Stamp Duty provided for in Item 28.1 of the General Table of Stamp Duty does not apply to those properties.

  2. In this manner, the assessment sub judice, as to which a declaration of illegality is sought, is defective due to violation of that Item no. 28.1, due to error regarding the legal conditions, which justifies the declaration of its illegality and annulment (Article 135 of the Code of Administrative Procedure).

J – OF INDEMNIFICATORY INTEREST

  1. The Applicant further petitions for the payment of indemnificatory interest.

  2. Given the foregoing, the Stamp Duty assessment, to the extent covered by the annulment, which will be decreed, result from errors of fact and of law attributable exclusively to the fiscal administration, to the extent that the Applicant complied with its duty to declare and were committed by it and could not the same fail to know different understandings.

  3. In fact, being demonstrated that the Applicant paid the disputed tax in an amount higher than that which is due, by virtue of the provisions of Articles 61 of the Code of Procedure and Tax Collection and 43 of the General Tax Law, the Applicant has the right to the indemnificatory interest owed, such interest to be counted from the date of payment of the unduly paid (annulled) tax until the date of issuance of the respective credit note, with the period for that payment being counted from the beginning of the period for the spontaneous execution of the present decision (Article 61, nos. 2 to 5, of the Code of Procedure and Tax Collection), all at the rate ascertained in accordance with the provisions of no. 4 of Article 43 of the General Tax Law.

  4. The Applicant's request is granted.

L – DECISION

Therefore, in light of all of the foregoing, the present Arbitral Tribunal decides as follows:

I. To judge meritorious the request for declaration of illegality of the tax acts of assessment under Stamp Duty, no. 2014 … and no. 2014 …, due to violation of law as to the norm contained in Item 28 no. 1, due to error regarding the legal conditions, which justifies the declaration of its illegality and annulment.

II. To condemn the Respondent to refund to the Applicant the amount improperly assessed and paid, plus the payment of indemnificatory interest already accrued relating to the period between 29 July 2014 to be calculated on the amount of 5,969.78€, and from 17 November 2014 to be calculated on the amount of 5,969.78€, all in accordance with nos. 2 to 5 of Article 61 of the Code of Procedure and Tax Collection and at the rate ascertained in accordance with the provisions of no. 4 of Article 43 of the General Tax Law until full reimbursement.

III. The value of the proceeding is fixed at € 11,939.56 taking into account the economic value of the proceeding assessed by the value of the stamp duty assessments challenged, and in accordance the costs are fixed, in the respective amount of 918.00€ (nine hundred and eighteen euros), to be borne by the Respondent in accordance with Article 12, no. 2 of the Regime of Tax Arbitration, Article 4 of the Procedural Rules of the Tax Arbitration Court and Table I attached thereto. – no. 10 of Article 35, and nos. 1, 4 and 5 of Article 43 of the General Tax Law, Articles 5, no. 1, subparagraph a) of the Procedural Rules of Tax Collection, 97-A, no. 1, subparagraph a) of the Code of Procedure and Tax Collection and 559 of the Code of Civil Procedure).

Notify.

Lisbon, 09 March 2015.

The Arbitrator

Paulo Renato Ferreira Alves

[1] Dictionary of Contemporary Portuguese Language of the Academy of Sciences of Lisbon, Volume I, page 102.

[2] BAPTISTA MACHADO, Introduction to Law and Legitimating Discourse, page 182.

[3] Bill no. 99/XII/2nd is available at http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=37245 .

[4] Other norms of the CIMI make it clear that the term 'designation' [or 'devotion'] is used to reference situations already existing and not merely future, even if foreseeable, as 'purpose' is. This is the case of Article 9 of the CIMI, which, after establishing that 'the tax is due from' 'the 4th year following, inclusive, that in which land for construction came to appear in the inventory of a company whose business is the construction of buildings for sale' or 'the 3rd year following, inclusive, that in which a property came to appear in the inventory of a company whose business is its sale' [subparagraphs d) and e) of no. 1], determines that 'for purposes of the provisions of subparagraphs d) and e) of no. 1, taxpayers must notify the tax office in the area where the properties are located, within 60 days counted from the occurrence of the fact determining its application, of the designation [or 'devotion'] of the properties to those purposes'. The 'designation [or 'devotion'] of the properties to those purposes', in the context of this Article 9, is reduced to the concrete attribution to the properties of the purpose 'for sale', materialized by their inventory, not being sufficient that they have been constructed or acquired with a view to their sale.

[5] This approach does not take into account the special cases provided for in Item no. 28.2, of ownership of properties by legal persons resident in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by order of the Minister of Finance to which, as in other norms, strong tax penalty is assigned, because these are situations normally associated with tax evasion.

[6] Outside the special cases provided for in Item no. 28.2.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto de Selo) under Verba 28 of the TGIS applicable to construction land (terrenos para construção)?
No, Stamp Tax under Verba 28 of the TGIS is not applicable to construction land (terrenos para construção). According to the legal interpretation in this case, Verba 28, introduced by Law 55/2012 of October 29, applies exclusively to 'buildings with residential use designation' (prédios com afetação habitacional). Construction land is legally distinct from residential buildings under Article 6 of the Municipal Property Tax Code (CIMI). The residential use designation criterion under Article 41 CIMI requires an actual constructed building, not merely land designated for future construction. Therefore, undeveloped land, even with construction potential and high value, should not be subject to this stamp tax.
Can a taxpayer challenge additional Stamp Tax assessments on high-value properties through CAAD arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on high-value properties through CAAD (Centro de Arbitragem Administrativa) arbitration. This case demonstrates that CAAD has material competence to hear stamp tax disputes under Article 2, no. 1, subparagraph a) of Decree-Law 10/2011 of January 20. The arbitral tribunal is constituted following submission of the request, with the President of CAAD accepting it and arbitrators being appointed either by the parties or by the Deontological Council. In this specific case, the taxpayer successfully challenged assessments totaling €11,939.56 related to additional Stamp Tax installments on a property valued at €1,790,934.00, having previously obtained a favorable decision in case 388/2014-T that resulted in full annulment and refund.
How is the taxable value (valor patrimonial tributário) determined for construction land under Portuguese tax law?
The taxable value (valor patrimonial tributário or VPT) for construction land is determined according to the Municipal Property Tax Code (CIMI - Código do Imposto Municipal sobre Imóveis). For urban land for construction, the valuation follows Article 45 of CIMI, which establishes specific criteria including location, area, building capacity, and infrastructure access. The VPT is inscribed in the urban property register (matriz predial urbana) maintained by the Tax Authority. In this case, the construction land in Tavira had a registered VPT of €1,790,934.00. This value serves as the tax base for applicable property taxes and, controversially in this case, was used by AT to calculate Stamp Tax under Verba 28, though the taxpayer successfully argued this application was illegal for unconstructed land.
What is the procedure for filing an arbitral claim against the Portuguese Tax Authority (AT) at CAAD?
The procedure for filing an arbitral claim against the Portuguese Tax Authority at CAAD involves several steps: (1) Submit a formal request for arbitration (pedido de constituição do tribunal arbitral) to CAAD; (2) The President of CAAD reviews and accepts the request; (3) The arbitral tribunal is constituted, with parties having the right to appoint arbitrators under Article 6 and Article 11(1)(b) of Decree-Law 10/2011, or the Deontological Council appoints if parties do not; (4) The Tax Authority is automatically notified; (5) Parties are notified of arbitrator appointments and have the right to refuse under Article 11(1) and Articles 6-7 of the Code of Deontology; (6) AT submits its response; (7) Parties may dispense with the preliminary meeting per Article 18 of the Arbitral Tribunal Rules. The tribunal verifies its competence, parties' legitimacy, and legal representation before proceeding to merits.
Does a property valued above €1,000,000 automatically trigger Stamp Tax liability under Verba 28 of the General Stamp Tax Table?
No, a property valued above €1,000,000 does not automatically trigger Stamp Tax liability under Verba 28 of the General Stamp Tax Table. While Law 55/2012 established a 1% annual Stamp Tax rate for properties valued between €1,000,000 and €2,000,000, this tax applies specifically to 'buildings with residential use designation' (prédios urbanos com afetação habitacional). The mere fact that a property's taxable value exceeds €1 million is insufficient to create tax liability; the property must be a constructed residential building, not construction land or non-residential property. This distinction was critical in this case where the taxpayer's construction land valued at €1,790,934.00 was incorrectly assessed Stamp Tax. The assessment was annulled because construction land, regardless of value, does not meet the legal requirements of Verba 28, which requires an actual building with residential use designation.