Process: 748/2014-T

Date: May 28, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This arbitration decision addresses a critical dispute regarding the application of Stamp Tax under item 28.1 of the Portuguese General Stamp Tax Table (TGIS) to vertical property ownership. The claimant, A... S.A., challenged stamp tax assessments totaling €24,450.40 for 2012 and 2013 on an urban property consisting of 25 independent residential units under vertical ownership regime. The central legal question concerns whether item 28.1 TGIS applies based on individual Taxable Property Values (TPV) of each autonomous unit or the aggregate TPV of all units within the same property register entry. The Tax Authority assessed stamp tax by summing the TPVs of all 25 units (exceeding €1 million collectively), despite no individual unit reaching the €1 million threshold. The claimant argued this interpretation violated the legislative intent, contending that each independent unit should be assessed separately based on its individual TPV. Additionally, constitutional challenges were raised under Articles 13 (equality principle) and 104 (taxation capacity) of the Portuguese Constitution. The claimant asserted that aggregating TPVs of independent units creates discriminatory treatment and misapplies the tax capacity principle. The Tax Authority defended its position by arguing that independent use areas within the same property registration do not constitute separate urban properties under Article 2(4) of the Municipal Property Tax Code (CIMI), thus requiring TPV aggregation. The arbitration followed standard CAAD procedures with both parties waiving oral hearings. The tribunal confirmed its jurisdiction and procedural regularity. This case has significant implications for owners of vertical property developments, as it determines whether stamp tax liability depends on individual unit values or aggregate building values, potentially affecting thousands of similar properties nationwide.

Full Decision

ARBITRAL DECISION

Claimant: A…, S.A., (hereinafter "Claimant")

Respondent: TAX AND CUSTOMS AUTHORITY (hereinafter "TA" and "Respondent")

  1. Report

A…, S.A., legal entity number …, with registered office at Rua …, no. …, …, …-… Porto, hereinafter designated as Claimant, submitted to the Administrative Arbitration Center (CAAD) a request for constitution of an arbitral tribunal with a view to annulment of the tax acts for assessment of item 28.1 of the General Stamp Tax Table (TGIS) for the years 2012 and 2013, in the total amount of € 24,450.40, which break down as follows in the collection notices: 2014..., 2014 ..., 2014 ..., 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 … and 2014 …, 2014…, 2014 …, 2014…, 2014 …, 2014 …, 2014…, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 .., 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 … and 2014 …;

The Claimant bases the illegality of the tax act and consequent annulment of the tax acts on the following defects:

a) Incorrect interpretation by the TA of item 28.1 of the General Stamp Tax Table (TGIS), insofar as the subjection to Stamp Tax (ST) is determined by the Taxable Property Value (TPV) of each property and not by the sum of all areas of independent use of a property register entry;

b) Unconstitutional interpretation of item 28.1 of the TGIS due to violation of articles 13 and 104 of the Portuguese Republic's Constitution.

Also petitioning for the reimbursement of the stamp tax paid concerning the assessments for 2012 and 2013 now in question, as well as the payment of compensatory interest.

The Tax and Customs Authority, for its part, contended that there is no illegality whatsoever, since the areas of independent use relating to the same property register entry do not constitute urban property within the meaning of article 2, no. 4 of the CIMI, therefore being unable to refrain from summing the TPVs of all such areas or floors of independent use, concluding for the lack of merit of the annulment request formulated by the Claimant.

The sole arbitrator was appointed and designated on 17.12.2014.

In accordance with the provisions of article 11, no. 1, paragraph c) of the LRAT, the single arbitral tribunal was constituted on 15.01.2015.

Both the Claimant and the Respondent waived the holding of the first arbitral meeting as well as the formulation of pleadings.

  1. Preliminary Issues

The joinder of claims made in the present arbitral decision request, in which assessment acts of the same tax (Stamp Tax) are at issue, based on the same factual basis and applying the same rules of law, is fully justified in light of the principle of procedural economy enshrined in article 3 of the LRAT.

The arbitral tribunal is materially competent, pursuant to the provisions of articles 2, no. 1, paragraph a) of the Legal Regime of Arbitration in Tax Matters.

The parties enjoy legal personality and capacity and have standing pursuant to art. 4 and no. 2 of art. 10 of the Legal Regime of Arbitration in Tax Matters (LRAT), and art. 1 of Ordinance no. 112-A/2011, of 22 March.

The proceedings do not suffer from any nullity nor have the parties raised any exceptions that preclude the examination of the merits of the case, therefore the conditions for the rendering of the arbitral decision are met.

  1. Facts

3.1. Proven Facts:

Having analyzed the documentary evidence produced and the positioning of the parties, the following facts are considered proven and material to the decision of the case:

  1. The Claimant is the owner for tax purposes of the urban property registered in the urban property register of the parish of …, under entry …, located at Rua …, municipality of Setúbal;

  2. The identified urban property is under a regime of full ownership/vertical division, with floors or divisions capable of independent use, as per the property record attached to the case file;

  3. With respect to the urban entry above identified and more specifically with respect to each of the floors or divisions capable of independent use, the Claimant was notified of the collection notices for Stamp Tax, relating to item 28.1 of the TGIS, which are now identified and which are the subject of the present arbitral decision:

a) Relating to the year 2012: 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …., 2014 …., 2014 …, 2014 …, 2014 …, 2014 …, 2014 …., 2014 …., 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 … and 2014 …;

b) Relating to the year 2013: 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …., 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 , 2014 …., 2014 …, 2014 …, 2014 …, 2014 …, 2014 …, 2014 … and 2014 …;

The entry … already identified is composed of 25 floors or divisions of independent use, with residential use, with the following TPVs:

  • Basement - € 23,210.00;

  • Ground Floor D - € 48,310.00;

  • Ground Floor E - € 47,110.00;

  • Ground Floor F - € 43,780.00

  • 1st Floor D - € 47,110.00;

  • 1st Floor E - € 48,880.00;

  • 1st Floor F - € 52,540.00;

  • 2nd Floor D - € 47,110.00;

  • 2nd Floor E - € 51,640.00;

  • 2nd Floor F - € 53,860.00;

  • 3rd Floor D - € 47,110.00;

  • 3rd Floor E - € 48,880.00;

  • 3rd Floor F – 53,860.00;

  • 4th Floor D - € 47,110.00;

  • 4th Floor E - € 51,640.00;

  • 4th Floor F – € 53,860.00;

  • 5th Floor D - € 47,110.00;

  • 5th Floor E - € 51,640.00;

  • 5th Floor F - € 53,860.00

  • 6th Floor D - € 47,110.00;

  • 6th Floor E - € 51,640.00;

  • 6th Floor F - € 53,860.00;

  • 7th Floor D - € 47,110.00;

  • 7th Floor E - € 51,640.00;

  • 7th Floor F - € 52,540.00

The taxable property value of the urban property entry … of the parish of …, municipality of Setúbal only reaches or exceeds the amount of € 1,000,000.00 when the TPVs relating to the floors or divisions capable of independent use and with residential use that comprise this same property register entry are summed;

No floor or division capable of independent use with residential use of entry … has a taxable property value equal to or greater than €1,000,000.00;

The collection notices indicated in 3 were notified to the Claimant;

The Claimant paid the totality of the amounts stated in the collection notices referred to in 3;

On 29.10.2014 the now Claimant submitted, via computer platform, the request for constitution of an arbitral tribunal;

The Claimant proceeded on 29.10.2014 to the payment of the initial court fee;

No other facts with relevance to the decision of the case were proven.

3.2. Grounds for the Proven Facts:

As to the facts proven, the arbitrator's conviction was based on the documentary evidence attached to the case file, as well as on the acceptance by the parties of the factual matters brought before this tribunal.

  1. Legal Matters:

4.1. Object and Scope of the Present Proceedings

The request for arbitral decision has as its object the declaration of illegality of the assessment acts of Stamp Tax, under the provisions of item 28.1 of the TGIS, relating to the years 2012 and 2013, embodied in the collection notices already identified above, in the total amount of € 24,450.40,00, as well as the examination of the alleged violation of the principle of equality, in the aspect of taxable capacity, contained in article 13 of the Portuguese Republic's Constitution.

Additionally, the Claimant petitions for the reimbursement of the tax paid as allegedly unduly paid and the payment of compensatory interest.

4.2. On the Alleged Illegality of the Assessment of Stamp Tax, Item 28.1 of the TGIS

In summary, the question at issue is whether the interpretation effected by the Tax and Customs Authority of using, as the legal criterion for subjection to Item 28.1 of the TGIS, the sum of the TPVs of all floors or divisions of independent use with residential use relating to the same property register entry is consonant with the applicable legal framework.

In this regard, it is important to consider that the tax act in question occurred during the validity of the wording conferred by Law no. 55-A/2012, of 29 October, and that the current wording given to it by article 194 of Law no. 83-C/2013, of 31 December (State Budget for 2014) is not applicable here, since it only entered into force on 1 January 2014.

And it is without losing sight of the legislative context of this innovation in the field of Stamp Tax taxation that the question relating to the assessment of the scope of the tax incidence rule contained in article 28.1 of the TGIS should also be examined.

Let us thus proceed, and first of all, to the legal framework of the Stamp Tax assessment in question:

Law no. 55-A/2012, of 29 October, added item 28.1 to the General Stamp Tax Table (TGIS), with the following wording:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable property value recorded in the register, pursuant to the Municipal Property Tax Code (CIMI), is equal to or greater than € 1,000,000 – on the taxable property value used for the purpose of IMI:

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

In turn, article 67, no. 2 of the Stamp Tax Code, added by the aforementioned Law, provides that "to matters not regulated in the present code relating to item 28 of the General Table, the CIMI applies subsidiarily."

The incidence rule refers to urban properties, whose base concept of property derives from the provision of article 2 of the CIMI, with the determination of TPV obeying the tenor of article 38 and following of the same code.

Being that, in accordance with that legal provision:

"1 - For the purposes of this Code, property is any parcel of land, including water, plantations, buildings and constructions of any nature incorporated in it or situated on it, with a character of permanence, provided that it forms part of the patrimony of a natural or legal person and, in normal circumstances, has economic value, as well as water, plantations, buildings or constructions, in the previous circumstances, endowed with economic autonomy in relation to the land where they are located, although situated on a parcel of land that constitutes an integral part of a different patrimony or does not have a patrimonial nature." (highlighted by us)

Being that article 6 of the CIMI clarifies that:

"1 - Urban properties are divided into:

a) Residential;

2 - Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, which have as their normal destination each of these purposes." (highlighted by us)

The legislator's concept regarding properties and the subsequent division into urban is, for tax purposes, undoubtedly a criterion based on economic value and functional autonomy in relation to purpose.

That is, we are dealing with a concept of material or substantive root and not with a concept of legal-formalistic character, as the Respondent TA seems to intend.

Now, in the case at hand, the Respondent TA does not even question whether the floors or divisions with independent use and with residential use relating to the property register entries do not exhibit those same characteristics (functional autonomy and economic value) highlighted by the legislator, nor could it do so since it is the TA itself that deemed the information correct and had it recorded in the respective property records of the property register entries to which the floors or divisions capable of independent use pertain.

Adding to this that, precisely because such floors or divisions exhibit such characteristics of autonomy, both in functional terms and in terms of economic value, one understands why the legislator provided for the assignment of taxable property values for each of those floors, areas or divisions capable of independent use.

Which contradicts the TA's thesis that, not being expressly stated in no. 4 of article 2 of the CIMI the floors or divisions capable of independent use, the legislator intended to exclude such a figure from the concept of property.

Thus, it being indisputable the residential use and likewise the functional autonomy and economic value, moreover fiscally translated in the TPV of those same independent areas or divisions, characteristics that are transposed to the respective property records of the property register entry under the designation of floors or divisions capable of independent use, we cannot fail to conclude that on the material and substantive level those same floors or divisions are encompassed by the notion of property contained in no. 1 of article 2 of the CIMI and of urban property contained in paragraph a) of no. 1 and no. 2 of article 6, both of the CIMI.

The introduction into the tax legal order of the present Item 28.1 of the TGIS had as a relevant and determining factor the incidence on urban properties with residential use, of high value, also usually designated as luxury dwellings, more precisely, of value equal to or greater than €1,000,000.00, on which Stamp Tax now falls due.

The legislator thus intended to introduce a principle of taxation on the wealth manifested in ownership, usufruct or right of superficies on any and all urban property with residential use, having the legislative criterion applied such stamp tax on urban properties with residential use, whose TPV is equal to or greater than €1,000,000.00.

This conclusion can be drawn from the analysis of the discussion of bill no. 96/XII in the Parliament of the Republic, available for consultation in the Parliamentary Record, Series I, no. 9/XII/2, of 11 October 2012.

The justification for the measure designated as "special tax on residential urban properties of higher value" is based on the invocation of the principles of social equity and fiscal justice, calling to contribute in a more intensive manner the holders of properties of high value intended for housing, with the new special tax falling on "houses of value equal to or greater than 1 million euros."

In this way, it seems clear that the legislator understood that houses exhibiting certain characteristics assessed quantitatively through the TPV should determine a special contribution to ensure the fair apportionment of the tax burden.

But no less evident, it translates a line of legislative choice that intended to specifically burden urban properties with residential use of the high segment, premium or also commonly called luxury properties.

Note that, regardless of the more or less subjective conceptions about the concept of luxury dwellings, high segment or expressions of equivalent meaning, it is certain that the taxable property value is, since the 2003 reform of taxation on patrimony, measured based on objective elements, such as area, location, comfort level, among others.

Which is to say that, regardless of the ideological considerations that may be made on such a political choice, the legislator had a concrete and defined objective: to subject to Stamp Tax taxation urban properties with residential use of higher value, which in practice resulted in the fixing of a measurable threshold through TPV: value equal to or greater than € 1,000,000.00.

Adding to this that the legislator ensured through various coefficients (reductive and augmentative) the objectivity in the determination of that same TPV.

Now, none of the floors or divisions capable of independent use at issue here and on which the assessments falling due the present request for arbitral decision fell, reach, individually, the value of € 1,000,000.00, being that each of those floors or independent divisions represents in the tax system a property per se, reason for which the TA incurred in error on the grounds by making subject to item 28.1 of the TGIS by disregarding that each of those same areas or divisions represents, pursuant to the Municipal Property Tax Code and consequently in the field of Stamp Tax, an urban property, reason for which those areas or divisions relating to the same property register entry could not be the subject of summing for calculation of the TPV of that property register entry.

What the same means to say that, having regard to the ratio legis just enunciated, the floors or divisions capable of independent use do not meet the requirement relating to taxation in the field of the tax incidence rule provided in item 28.1 of the TGIS, reason for which, also in view of what has been stated, it cannot fail to be concluded for the legal non-conformity of the TA's interpretation of subjecting to Item 28.1 of the TGIS the floors or divisions capable of independent use, since the same do not reach individually the minimum quantitative criterion for such subjection.

Thus, with respect to the collection notices issued and notified to the Claimant and the respective assessments underlying them, it cannot fail to impose a judgment of censure and, consequently, to determine the annulment of the tax acts that are the subject of these proceedings.

4.3. Prejudiced Questions: Unconstitutionality due to Violation of the Principle of Equality – Article 13 of the Portuguese Republic's Constitution

As the single arbitral tribunal accepted the understanding of the non-applicability of item 28.1 of the TGIS to the case at hand, the examination of the remaining defects alleged and which may afflict the contested assessments is prejudiced as procedurally moot.

Thus, the examination of the question of unconstitutionality of the rule introduced in the TGIS (item 28/28.1) by Law no. 55-A/2012, of 28 October, due to violation of the principle of equality enshrined in article 13 of the Constitution is prejudiced.

4.4. On the Reimbursement to the Claimant of the Stamp Tax Paid, Together with the Payment of Compensatory Interest:

In view of everything expounded and concluded above in section 4.2, judgment of illegality that fell on the tax acts subject to the present arbitral decision, it is important to look at the request also formulated by the Claimant for the payment of compensatory interest.

Pursuant to no. 1 of art. 43 of the LGT, "Compensatory interest is due when it is determined, in administrative objection or judicial contestation, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due."

Article 2 of that article of the LGT also provides that "Error attributable to the services is also deemed to exist in cases where, although the assessment is made on the basis of the taxpayer's declaration, the taxpayer followed in its completion the generic orientations of the tax administration, duly published."

Now, in the concrete case, the legitimacy of the aforementioned request for payment of compensatory interest in favor of the Claimant is unequivocally established, since the assessments in question are shown to be afflicted with illegality, being, therefore, in addition to the reversal of the amount paid as Stamp Tax, compensatory interest is equally due from the day following the unduly paid until the date of issuance of the respective credit note, in accordance with what is established in art. 43 of the LGT and art. 61 of the CPPT.

It is, therefore, the Claimant a creditor of the Respondent TA of the amount corresponding to the unduly paid Stamp Tax, in the amount of € 24,450.40, plus the respective compensatory interest accrued and to accrue, to be calculated until the issuance of the respective credit note.

  1. DECISION:

In these terms and with the grounds that are hereby set out, this arbitral tribunal decides:

  1. To decide favorably on the request for declaration of illegality of the tax assessment acts for Stamp Tax, to which correspond the collection notices identified in 3 and relating to the property identified by the urban property register entry stated in 1, due to defect of violation of law as to the rule contained in item 28.1 of the TGIS, due to error regarding the legal grounds and consequent reimbursement by the Respondent of the amounts paid by the Claimant relating to the tax acts which by the present decision are annulled;

  2. To decide favorably on the request for payment of compensatory interest by the Respondent to the Claimant from the date of unduly paid until the date of issuance of the credit note, in accordance with what is established in article 43 of the LGT and in article 61 of the Code of Tax Procedure and Process;

Value of the case: € 24,450.40 – articles 97-A, of the CPPT, 12, of the LRAT (DL 10/2011), 3-2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs pursuant to Table I, of the RCPTA, calculated in function of the above-stated value of the claim, to be borne by the Respondent - articles 4-1, of the RCPTA and 6-2/a) and 22-4, of the LRAT.

Let this arbitral decision be notified to the parties and, in due course, the case file shall be archived.

Lisbon, 28 May 2015.

The Sole Arbitrator

(Luís Ricardo Farinha Sequeira)

Text prepared by computer, pursuant to article 138, no. 5 of the Civil Procedure Code (CPC), applicable by referral from article 29, no. 1, paragraph e) of the Tax Arbitration Regime, with blank lines and revised by me.

Frequently Asked Questions

Automatically Created

How is the Taxable Patrimonial Value (VPT) calculated for Stamp Tax purposes on vertical property buildings in Portugal?
For Stamp Tax purposes on vertical property buildings in Portugal, the Taxable Patrimonial Value (VPT) is calculated individually for each autonomous unit (floor or division capable of independent use) based on property assessment rules under the Municipal Property Tax Code (CIMI). However, the controversy in this case concerns whether item 28.1 of the TGIS requires summing all individual VPTs within the same property register entry or applying the tax threshold separately to each independent unit. Each autonomous unit receives its own VPT assessment, but the Tax Authority's interpretation aggregates these values when determining stamp tax liability under item 28.1.
Does Stamp Tax clause 28.1 of the TGIS apply to each independent unit or to the total value of the property article?
The central legal dispute in this case is whether Stamp Tax clause 28.1 of the TGIS applies to each independent unit separately or to the aggregated total value of all units within the same property register entry. The taxpayer contends that item 28.1 should apply individually to each autonomous unit based on its respective VPT, meaning only units with individual values exceeding €1 million would be taxed. The Tax Authority argues that all VPTs of independent use areas within the same property registration must be summed, and if the aggregate exceeds the threshold, stamp tax applies to each unit. This interpretation significantly impacts vertical property owners.
Is it constitutional to aggregate VPT values of independent units under clause 28.1 of the Portuguese Stamp Tax Table?
The constitutional challenge raised questions whether aggregating VPT values of independent units under clause 28.1 violates Articles 13 and 104 of the Portuguese Constitution. The taxpayer argued that summing VPTs of autonomous units creates unequal treatment compared to owners of single properties with equivalent values and violates the taxation capacity principle. The aggregation method potentially subjects owners of multiple lower-value units to taxation while exempting single high-value properties, creating horizontal inequity. The constitutional analysis requires examining whether independent units under vertical ownership constitute separate properties for tax purposes and whether differential treatment lacks reasonable justification under equality and ability-to-pay principles.
What is the CAAD arbitration procedure for challenging Stamp Tax liquidation acts in Portugal?
The CAAD (Administrative Arbitration Center) procedure for challenging Stamp Tax liquidation acts involves: (1) submitting an arbitration request via electronic platform within the legal deadline; (2) paying the initial court fee; (3) appointment of sole arbitrator or arbitral panel; (4) formal constitution of the arbitral tribunal; (5) opportunity for both parties to present written arguments and evidence; (6) optional first arbitral meeting and oral hearings (which parties may waive); (7) analysis of preliminary issues including jurisdiction, standing, and procedural regularity; (8) establishment of proven facts based on documentary evidence and party positions; (9) legal analysis and decision; and (10) issuance of binding arbitral decision. The process typically concludes within six months.
Are taxpayers entitled to compensatory interest when Stamp Tax assessments under clause 28.1 TGIS are annulled?
Yes, taxpayers are entitled to compensatory interest when Stamp Tax assessments under clause 28.1 TGIS are annulled. When tax is deemed illegally assessed and subsequently annulled by arbitral decision, amounts paid are considered unduly collected, triggering the Tax Authority's obligation to refund the principal plus compensatory interest. Compensatory interest compensates taxpayers for the unavailability of funds wrongfully retained by the state, calculated from payment date until reimbursement at legally established rates. This right derives from general tax procedure principles protecting taxpayers against illegitimate tax collection, ensuring full restitution when administrative acts are declared illegal. The claimant specifically requested such interest alongside principal reimbursement in this arbitration.