Process: 749/2014-T

Date: June 11, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 749/2014-T) involves A..., S.A. challenging 59 stamp duty assessment acts issued under Item 28 of the General Stamp Duty Table (TGIS) for independent units within urban buildings located in Lisbon. The dispute centers on whether stamp duty under Item 28 applies to individual apartments and divisions with independent use that form part of buildings held in full ownership (propriedade vertical). The claimant contested assessments ranging from approximately €253 to €304 per unit across multiple floors and sections (right, left, front units, and ground floor) of properties registered under various matricular articles. Item 28 TGIS traditionally applies to vertical property arrangements where a building is divided into autonomous fractions with separate ownership rights. The central legal question appears to be whether the tax authority correctly applied this provision to units within buildings owned entirely by a single entity, rather than horizontally divided condominiums. The case was submitted to CAAD on October 29, 2014, seeking declaration of illegality of the tax assessments. The arbitration process through CAAD allows taxpayers to challenge tax acts through binding arbitration as an alternative to judicial courts. However, the provided excerpt contains only the initial report section listing the contested assessments, without disclosing the parties' arguments, legal reasoning, or the tribunal's final decision on whether the stamp duty assessments were lawful or should be annulled.

Full Decision

ARBITRAL DECISION

Claimant/Applicant: A…, S.A.

Respondent: Tax and Customs Authority (hereinafter AT)

1. Report

A…, S.A., NIF/NIPC …, with registered office at Rua …, no. …. …. … Lisbon, submitted, on 29-10-2014, to the Administrative Arbitration Center (CAAD), a petition for the constitution of an arbitral tribunal, with a view to declaring the illegality of tax acts assessing stamp duty on item no. 28 of the General Stamp Duty Schedule, relating to storeys and divisions with independent use of the urban property in full ownership located at Rua …, no. …, in the parish of ..., municipality of Lisbon, registered in the urban property matrix under the article … of the said parish, namely:

i. Assessment No. 2014 …, in the amount of €304.24, relating to the property described in matricular article U-…-1 Dto.;

ii. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-1 Esq.;

iii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-1 Fr.;

iv. Assessment No. 2014 …, in the amount of €304.24, relating to the property described in matricular article U-…-2 Dto.;

v. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-2 Esq.;

vi. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-2 Frt.;

vii. Assessment No. 2014 …, in the amount of €304.24, relating to the property described in matricular article U-…-3 Dto.;

viii. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-3 Esq.;

ix. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-3 Frt.;

x. Assessment No. 2014 …, in the amount of €304.24, relating to the property described in matricular article U-…-4 Dto.;

xi. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-4 Esq.;

xii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-4 Ft.;

xiii. Assessment No. 2014 …, in the amount of €304.24, relating to the property described in matricular article U-…-5 Dto.;

xiv. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-5 Esq.;

xv. Assessment No. 2014 …, in the amount of €265.58, relating to the property described in matricular article U-…-5 Ft.;

xvi. Assessment No. 2014 …, in the amount of €304.24, relating to the property described in matricular article U-…-6 Dto.;

xvii. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-6 Esq.;

xviii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-6 Ft.;

xix. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-7 Dto.;

xx. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-7 Esq.;

xxi. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-7 Fr.;

xxii. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-8 Dto.;

xxiii. Assessment No. 2014 …, in the amount of €253.40, relating to the property described in matricular article U-…-8 Esq.;

xxiv. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-8 Fr.;

xxv. Assessment No. 2014 …, in the amount of €298.66€, relating to the property described in matricular article U-…-Rc Dto.;

xxvi. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-Rc Esq.;

xxvii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-Rc Fr.;

xxviii. Assessment No. 2014 …, in the amount of €304.24€, relating to the property described in matricular article U-…-1 Dto.;

xxix. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-1 Esq.;

xxx. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-1 Fr.;

xxxi. Assessment No. 2014 …, in the amount of €304.48, relating to the property described in matricular article U-…-2 Dto.;

xxxii. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-2 Esq.;

xxxiii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-2 Ft.;

xxxiv. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-3 Dto.;

xxxv. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-3 Esq.;

xxxvi. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-3 Ft.;

xxxvii. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-4 Dto.;

xxxviii. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-4 Esq.;

xxxix. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-4 Ft.;

xl. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-5 Dto.;

xli. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-5 Esq.;

xlii. Assessment No. 2014 …, in the amount of €265.56, relating to the property described in matricular article U-…-5 Ft.;

xlii. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-6 Dto.;

xliv. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-6 Esq.;

xlv. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-6 Ft.;

xlvi. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-7 Dto.;

xlvii. Assessment No. 2014 …, in the amount of €253.48, relating to the property described in matricular article U-…-7 Esq.;

xlviii. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-7 Fr.;

xlix. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-8 Dto.;

l. Assessment No. 2014 …, in the amount of €253.40, relating to the property described in matricular article U-…-8 Esq.;

li. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-8 Fr.;

lii. Assessment No. 2014 …, in the amount of €298.66, relating to the property described in matricular article U-…-Rc Dto.;

liii. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-Rc Esq.;

liv. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-Rc Fr.;

lv. Assessment No. 2014 …, in the amount of €304.24, relating to the property described in matricular article U-…-1 Dto.;

lvi. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-1 Esq.;

lvii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-1 Fr.;

lviii. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-2 Dto.;

lix. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-2 Esq.;

lx. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-2 Ft.;

lxi. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-3 Dto.;

lxii. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-3 Esq.;

lxiii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-3 Ft.;

lxiv. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-4 Dto.;

lxv. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-4 Esq.;

lxvi. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-4 Ft.;

lxvii. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-5 Dto.;

lxviii. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-5 Esq.;

lxix. Assessment No. 2014 …, in the amount of €265.56, relating to the property described in matricular article U-…-5 Frt.;

lxx. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-6 Dto.;

lxxi. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-6 Esq.;

lxxii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-6 Ft.;

lxxiii. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-7 Dto.;

lxxiv. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-7 Esq.;

lxxv. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-7 Ft.;

lxxvi. Assessment No. 2014 …, in the amount of €304.23, relating to the property described in matricular article U-…-8 Dto.;

lxxvii. Assessment No. 2014 …, in the amount of €253.40, relating to the property described in matricular article U-…-8 Esq.;

lxxviii. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-8 Ft.;

lxxix. Assessment No. 2014 …, in the amount of 298.66, relating to the property described in matricular article U-…-Rc Dto.;

lxxx. Assessment No. 2014 …, in the amount of €253.46, relating to the property described in matricular article U-…-Rc Esq.;

lxxxi. Assessment No. 2014 …, in the amount of €261.30, relating to the property described in matricular article U-…-Rc Frt.

All the aforementioned assessments are dated 17-03-2014.

The claimant petitions for the cancellation of the above-mentioned stamp duty assessment acts and the reimbursement of the amounts assessed, plus compensatory interest.

The claimant alleges, to this end, that the property to which the Stamp Duty assessments relate, whose legality is questioned, is a property in full ownership, composed of 29 divisions susceptible of independent use, none of which being intended for housing, and none of the divisions has a taxable patrimonial value (VPT) equal to or greater than €1,000,000, and that, in its view, the legal condition for the application of item 28.1 of the General Stamp Duty Schedule is not met.

A sole arbitrator was appointed on 17-12-2014, Ricardo Marques Candeias. In accordance with the provisions of art. 11, para. 1, c), RJAT, the sole arbitral tribunal was constituted on 05-01-2015.

Notified accordingly, the AT submitted a response on 16-12-2015. It argues that the patrimonial value relevant for the purposes of tax assessment is the total patrimonial value of the urban property and not the patrimonial value of each of the parts that compose it, even if they are susceptible of independent use, since the property is not constituted in the regime of horizontal ownership.

The AT further requested exemption from the presentation of an expert report (PA), and exemption from the holding of the meeting referred to in art. 18 of the RJAT and respective oral arguments.

Notified to pronounce itself on the proposed exemption from the presentation of an expert report, from the holding of the meeting referred to in art. 18 of the RJAT and exemption from oral arguments, the claimant said or requested nothing.

The arbitral tribunal understood, in view of the elements submitted to the case file, and there being no exceptions to resolve, that it was not necessary to attach an expert report, to hold the provided meeting, or to produce arguments. Consequently, on 04-06-2015, 11-06-2015 was set as the date for the pronouncement of the decision.

The parties have legal personality and capacity and are entitled to bring the action (arts. 4 and 10, para. 1 and 2, of the RJAT, and art. 1 of Ordinance No. 112-A/2011, of 22 March). The proceedings do not suffer from defects and no prior questions were raised that need to be considered.

2. Facts

Having analyzed the documentary evidence produced by the claimant, the following facts are considered proven and with bearing on the decision of the case:

a) The urban property located at Rua …, no. …, in the parish of ..., municipality of Lisbon, registered in the urban property matrix under article … of the said parish, is the property of the claimant;

b) The property is in the regime of full ownership;

c) It is composed of 29 divisions susceptible of independent use, not being in the regime of horizontal ownership;

d) The AT assessed on 17-03-2014 the Stamp Duty relating to the year 2013, relating to part of the storeys or divisions with independent use existing in the property identified above, in the amount corresponding to 1% of its taxable patrimonial value, as follows:

[The listing of assessments i through lxxxi as detailed above is repeated here]

e) The deadline for payment ended on 30-04-2014, for the first installment; on 30-07-2014 for the second installment and on 30-11-2014 for the third installment;

f) The total patrimonial value of the property is €2,208,540.00.

g) The Claimant was notified to proceed with the payment of the said assessment notes, in the total amount of €22,085.40.

h) The claimant proceeded to pay assessments No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, relating to the first installment on 30-07-2015; assessments No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, relating to the second installment on 30-06-2014 and assessments No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 … and No. 2014 …, relating to the third installment on 28-10-2014, all in the total amount of €22,085.40.

The arbitrator's conviction was based on the documentary evidence submitted to the case file, specifically points a), b), c) and f) result from the content of the property record submitted to the case file and points d), e), g) and h) result from the assessment notes submitted and payment notifications, in which the respective payment proof is affixed.

For the decision of the case, no other facts were proven with relevance.

3. Law

These are the facts that need to be considered. Let us examine them.

The claimant argues in its initial petition that "the subjection to Stamp Duty of properties with residential designation resulted from the addition by article 4 of Law No. 55-A/2012, of 29 October, to the TGIS of a new item 28.

(…).

As neither the Stamp Duty Code nor Law No. 55-A/2012, of 29 October, provides anything regarding what should be understood by 'urban property with residential designation', the meaning of that concept should be interpreted in accordance with article 67 of the CIS, which provides that 'for matters not regulated in this code concerning item 28 of the General Schedule, the CIMI shall apply subsidiarily'. The determination of the VPT shall follow the terms set forth in article 38 and subsequent articles of the said code.

Also, no. 6 of article 1 of the Stamp Duty Code (CIS) points in a similar direction by providing that the concept of property for purposes of Stamp Duty is that defined in the Code of the Municipal Tax on Real Estate (CIMI)."

The claimant defends its position by citing the concept of property set forth in art. 2 of the CIMI, which states that "Although not assuming the qualification of property, the parts susceptible of independent use in real estate in vertical ownership assume, however, an autonomy and tax relevance in the sphere of property tax that is conferred upon them, precisely by no. 3 of article 12 of the same CIMI".

The claimant continues, arguing that "Now, since the IMI is assessed individually in relation to each one of the parts, no reasons are discerned, in light of the referral resulting from the aforementioned article 67 of the CIS, for the legal criterion for defining the application of item 28 not to be the same."

Adding that "The argument invoked by the AT in support of the practice adopted in this matter, sustained in the merely formalistic assertion that the property is not constituted in the regime of horizontal ownership, finds no legal basis whatsoever."

The claimant continues its argumentation, stating that "(…) item no. 28.1 of the General Stamp Duty Schedule is intended to tax the ownership of so-called 'luxury dwellings'.

(…)

The legislator understood that this value, when attributed to a dwelling (house, autonomous unit or storey with independent use) denotes a contributive capacity above the average, capable, as such, of translating into a special contribution to ensure fair distribution of the fiscal burden."

Concluding, in this context, by arguing that "Following these considerations, it must be concluded that the existence of a property in vertical or horizontal ownership cannot be, by itself, an indicator of contributive capacity."

It further states that "(…) In addition to clearly violating the law and its spirit, the understanding endorsed by the Tax Authority in favor of the persistence of the assessment of the tax for item 28 of the TGIS clearly violates the principle of substance over form in matters of taxation of assets that underlies the rule set forth in the aforementioned article 12, no. 3 of the CIMI, and is capable of leading to situations of unsustainable discrimination of materially identical situations, in clear violation of the constitutional principles of equality and proportionality."

It concludes, stating that "(…) the practice adopted by the AT of assessing the stamp duty of item 28 of the TGIS in relation to properties in vertical ownership, composed of parts susceptible of independent use, based on the total value of the VPT of the properties, completely lacks legal basis and is capable of leading to a situation of violation of the constitutional principles of equality and proportionality."

The claimant ends by advocating the illegality of the assessments and petitioning for the reimbursement of the amounts paid plus compensatory interest.

For its part, the AT comes to counter the position of the claimant, basing its claim on the fact that the claimant's property is in the regime of full ownership and the concentration in each property of independent dwellings is not capable of triggering the application of stamp duty on each one of them.

In the understanding of the AT, "the patrimonial value relevant for purposes of the application of the tax is thus the patrimonial value of each one of the parts that compose it, even when susceptible of independent use".

According to the AT, "The principle that each property corresponds to only one matricular article is only exceptioned thus in relation to mixed properties in which, according to the aforementioned art. 84, each one of the distinct parts is registered in the matrix in the part that corresponds to it and in relation to properties constituted in the regime of horizontal ownership in which, despite the fact that, under article 2, no. 4, of the CIMI, each autonomous unit is considered as constituting a property, each building in the regime of horizontal ownership corresponds to only one matricular registration.

The urban property was not constituted in the regime of horizontal ownership on the date of the tax event for stamp duty – 31 December 2012 – in which case each one of the autonomous units would be considered as urban property, including for purposes of subjection to the stamp duty of item 28.1 of the General Schedule, but in the regime of vertical ownership."

The AT concludes that "any other interpretation would violate, indeed, the letter and spirit of item 28.1 of the General Schedule and the principle of legality of the essential elements of taxation provided for in article 103, no. 2 of the Constitution of the Portuguese Republic (CRP)."

The AT further argues for the unconstitutionality of the interpretation made by the Claimant of item 28.1 of the TGIS, to the extent that the VPT on which its application depends should be calculated for each storey and not globally, violating the principle of tax legality.

Having given a brief description of the argumentative framework put forth by the parties, let us examine the matter.

The question to be decided concerns whether the rule for the application of item 28.1 of the General Schedule of Stamp Duty (TGIS) is applicable to properties that are not constituted in the regime of horizontal ownership. In fact, in such cases, the question is raised whether the said item should apply to the sum of the VPT attributed to the different storeys, that is, to the total VPT of the property, or rather to the VPT of each storey with independent economic use of the property.

This question has already been the subject of several rulings from the CAAD, notably those handed down in proceedings 132/2013-T, 14/2014-T, 30/2014-T and 88/2014-T, which we shall follow closely.

Item 28 of the General Stamp Duty Schedule (TGIS) was added by Law No. 55-A/2012, of 29 October. It establishes the following:

"28 – Ownership, usufruct or right of superficies of urban properties whose taxable patrimonial value as registered in the matrix, in accordance with the Code of the Municipal Tax on Real Estate (CIMI), is equal to or greater than €1,000,000 – on the taxable patrimonial value used for IMI purposes:

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

With the addition of no. 2 of article 67 of the Stamp Duty Code (CIS), also effected by the said Law, it was established that for "matters not regulated in this code concerning item 28 of the General Schedule, the CIMI shall apply subsidiarily."

By virtue of this referral, as the rule for the application of item 28.1 TGIS refers to urban properties, the concept of urban property shall be that resulting from the CIMI.

The CIMI establishes in art. 2, para. 1, the concept of property. It defines it as "any fraction of territory, encompassing water, plantations, buildings and constructions of any nature incorporated or based therein, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, under normal circumstances, has economic value, as well as water, plantations, buildings or constructions, in the circumstances mentioned above, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of assets of a different nature or does not have a patrimonial nature."

Article 4 of the CIMI provides that urban properties are "all those that should not be classified as rural, without prejudice to the provisions of the following article."

In turn, article 6, ibidem, proceeds to classify the various types of urban properties, distinguishing them, in para. 1 of the said article, into four subcategories: "a) Residential; b) Commercial, industrial or for services; c) Land for construction; d) Others".

In para. 2 of the same article we find the criterion used for this distinction, considering that "Residential, commercial, industrial or for services are buildings or constructions licensed for such purpose or, in the absence of a license, that have as their normal destination each of these purposes".

Now, we note that nothing in the legal provisions of the said statute results in any classification of urban properties that distinguishes them between properties in horizontal ownership versus properties in vertical ownership.

If the legislator qualifies them as the same juridical-fiscal reality, there would lack legal support for the application of different tax regimes by virtue of the juridical-civil nature that an urban property with residential designation possesses.

It is true that art. 2, para. 4, of the CIMI determines that, "for purposes of this tax, each autonomous unit, in the regime of horizontal ownership, is considered as constituting a property". However, it is also true that the same does not establish any differentiation between the autonomous units of properties in horizontal ownership and the parts of the property with independent use, regardless of the classification as residential urban properties.

From this it follows that the legislator intended only, as it did, to differentiate urban properties by considering their normal destination, that is, by considering the purpose to which each of them is bound. In this manner, it thus prevents, from the fiscal point of view, a distinction that civil law provides for, between properties in horizontal ownership and properties in vertical ownership, not permitting, however, that this legal characterization be relevant for what interests us, which is the scope of application of the tax, both for IMI purposes and for item 28.1 of the TGIS, resulting from the aforementioned referral.

Being so, we conclude that it is irrelevant, for taxation purposes, whether the property is in vertical or horizontal ownership. What is relevant instead is the material truth underlying its existence as an urban property and its use for residential purposes.

Indeed, considering the legislator's intention in creating item 28 of the TGIS and the application that the AT has been giving it, the criterion adopted by the latter for properties in vertical ownership is not adequate to the principles of legality, equality and fiscal proportionality, enshrined constitutionally in our legal system.

The principle of fiscal equality should be understood in its material sense. Therefore, the emphasis of this principle will always rest on the contributive capacity of each taxpayer. The same is to say that we shall have equal taxation for those with equal contributive capacity, and different taxation for those with different contributive capacity. It is certain that the difference in taxation will be proportional to the different contributive capacity.

This principle is imposed upon us by the articulation of art. 13 of the Constitution of the Portuguese Republic (CRP) with arts. 103 and 104 of the same document.

Now, the tax established by item 28 of the TGIS is intended to harmonize the distribution of the fiscal burden of taxpayers, by imposing this tax on the holders of properties of high value intended for housing that exceed €1,000,000.00, for each storey with independent use.

Indeed, as the principle of fiscal equality determines that what is equal should be treated fiscally equally and what is different should be treated differently, the differentiated treatment, for taxation purposes, of the storeys of a property cannot be justified merely by the fact that the same is already in horizontal ownership, as long as those storeys have independent use.

And by referring the CIS to the CIMI, we consider that the registration in the real estate matrix of properties in vertical ownership, composed of different storeys with independent use, should follow the same registration rules as properties constituted in horizontal ownership.

Note, specifically, the provision in para. 3 of article 12 of the CIMI, according to which "each storey or part of a property susceptible of independent use is considered separately in the matricular registration, which also discriminates the respective taxable patrimonial value."

To fix as the reference value for the application of the new tax the global VPT of the property in question, as the AT claims, finds no basis whatsoever in the applicable legislation mentioned above.

Indeed, the very respondent issued the assessment notes that form part of the case file, each of them relating to each one of the fractions with independent use and residential designation. It is even stated in each of them a particular reference to the VPT of each fraction, for purposes of applying item 28.1 of the TGIS. From this it follows that the tax was assessed individually in relation to each one of the parts with independent use and not considering the sum of the VPT of the storeys of the property in full ownership.

In view of all the foregoing, the legal criterion to be used for determining the application of the tax established in item 28.1 of the TGIS must be identical to that established for IMI purposes.

As can be read in the Arbitral Decision handed down in proceeding 132/2013-T, "there is no indication, in the works relating to the discussion of bill no. 96/XII in the Parliament, of the invocation of a different interpretative basis than that presented here. In fact, this measure was justified, called a 'special tax on residential urban properties of the highest value', by the need to comply with the principles of social equity and fiscal justice, charging more significantly the holders of properties of high value intended for housing, and, in that measure, by applying the new 'special tax' to 'houses worth equal to or greater than 1 million euros'."

The said decision continues by affirming that "if this logic seems to make sense when applied to 'housing' - whether it be a 'house', 'autonomous unit' or 'part of property with independent use' / 'autonomous unit' - because it is assumed that there is a contributive capacity above the average and, in that measure, it is justified the need for an additional contributive effort, it would make little sense to then disregard the calculations 'unit by unit' when it is only through the sum of the VPTs of the same (because held by the same individual) that the million euros threshold would be exceeded."

Since the AT would only be right and, consequently, would have the right to assess the tax in question, if any of the storeys with independent use had a VPT exceeding €1,000,000.00, which is not the case.

It may be inferred from what has been said thus far that the AT's position is contrary to the Law and the Constitution, violating the principles of legality and fiscal equality.

The property in question is in full ownership and contains 29 divisions with independent use. As shown to be proven, none of them has a VPT equal to or greater than €1,000,000.00. Thus, we observe the non-fulfillment of the legal condition for the application of Stamp Duty provided for in item 28 of the TGIS.

As a consequence of the foregoing, we conclude that the stamp duty assessments challenged by the Claimant are illegal. Therefore, the taxable matter that serves as the basis for the rule for the application of item 28.1 of the TGIS should be the VPT determined in accordance with the CIMI, for each one of the storeys of the property that are susceptible of independent use.

It has been established as proven that the aforementioned claimant paid on 30-07-2014, 30-06-2014 and 28-10-2014, respectively the first, second and third installments relating to the tax resulting from the assessments in question, and has petitioned for recognition of the right to compensatory interest.

Articles 24, para. 1, b), RJAT, and 100, LGT, provide that, once the tax has been paid and subsequently, the assessment supporting that tax being annulled, the taxpayer has the right to reimbursement of the amounts unduly paid.

Article 43, LGT, provides that "compensatory interest is due when it is determined, in gracious challenge or judicial appeal, that there was error attributable to the tax authorities that resulted in payment of the tax debt in an amount greater than legally due."

As to the existence, in the present case, of error attributable to the tax authorities, this error is considered verified, according to uniform case law from the Supreme Administrative Court (see, in this sense, the Judgments of the SAC of 22-05-2002, Proc. No. 457/02; of 31.10.2001, Proc. No. 26167; of 2.12.2009, Proc. No. 0892/09) whenever they proceed to gracious challenge or appeal of the assessment (in the same sense, the decision in arbitral proceeding 218/2013-T).

Consequently, the claimant has the right to compensatory interest, in accordance with arts. 43, para. 1, LGT, and 61, para. 2, 5, CPPT.

Being so, the AT must reimburse the amount of €22,085.40 plus interest at the legal rate of 4%, from the dates of the said payments (30-07-2014, 30-06-2014 and 28-10-2014) until full reimbursement of the amounts by the AT.

In accordance with the provisions of arts. 12, para. 2, and 22, para. 4, both of the RJAT, and art. 4, para. 3, of Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the costs of the present proceedings shall be borne by the respondent.

4. Decision

In view of the foregoing, it is decided to uphold in full the claim filed by the claimant in the present tax arbitration proceeding, regarding the illegality of Stamp Duty assessments No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 …, No. 2014 … and No. 2014 …, the same being declared null, with the necessary legal consequences.

Furthermore, the respondent is condemned to return to the claimant the total of €22,085.40, as capital, which the latter unduly paid, plus interest at the legal rate of 4%, from 30-07-2014, 30-06-2014 and 28-10-2014 respectively, relating to the first, second and third installments, until full reimbursement of the amount in question.

The respondent is further condemned to payment of costs in the terms mentioned above and below.

Value of the Action:

In accordance with the provisions of arts. 306, para. 2, CPC, and 97-A, para. 1, a), CPPT, and 3, para. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the action is fixed at €22,085.40.

Costs:

In accordance with article 22, para. 4, of the RJAT, and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €1,224.00 owing by the Tax and Customs Authority.

Notify.

Lisbon, 11 June 2015.

Text prepared by computer, in accordance with art. 131, para. 5, CPC, applicable by referral from art. 29, para. 1, e), RJAT, with blank lines and reviewed by myself.

The sole arbitrator

Ricardo Marques Candeias

Frequently Asked Questions

Automatically Created

What is Stamp Duty under Clause 28 of the General Stamp Duty Table (TGIS) in Portugal?
Stamp Duty under Item 28 of the General Stamp Duty Table (TGIS) in Portugal is a tax traditionally applied to vertical property (propriedade vertical), which refers to the legal regime where a building is divided into autonomous fractions or units that can be independently owned. This tax applies to the constitution of such property arrangements and is calculated based on the taxable value of each independent unit or fraction created within the building structure.
How does vertical property (propriedade vertical) affect Stamp Duty liability on urban buildings?
Vertical property (propriedade vertical) creates stamp duty liability under Item 28 TGIS when urban buildings are legally divided into autonomous fractions with independent use. Each fraction or unit that gains independent legal status may trigger stamp duty obligations. The key factor is whether the building arrangement constitutes true vertical property with separate ownership rights for different units, as opposed to a single property in full ownership by one entity, which is the core dispute in cases like Process 749/2014-T.
Can independent units within a single building be individually assessed for Stamp Duty under Portuguese tax law?
Under Portuguese tax law, independent units within a single building can be individually assessed for stamp duty under Item 28 TGIS when they constitute autonomous fractions in a vertical property regime. However, controversy exists when a building remains in full ownership (propriedade total) by a single owner despite having divisions with independent use. The tax authority's position that individual units warrant separate assessments is often challenged when no formal horizontal property division exists, as such units may not meet the legal definition triggering Item 28 taxation.
What is the CAAD arbitration process for challenging Stamp Duty liquidation acts in Portugal?
The CAAD (Centro de Arbitragem Administrativa) arbitration process for challenging stamp duty liquidation acts in Portugal requires submitting a formal petition identifying the contested tax acts and legal grounds. In Process 749/2014-T, the claimant filed on October 29, 2014, listing all 59 challenged assessments with their respective amounts and property identifications. CAAD provides binding arbitration as an alternative to traditional judicial review, offering specialized tax dispute resolution with qualified arbitrators who issue decisions on the legality of tax authority acts.
How did the CAAD decide on Stamp Duty assessments for buildings in total ownership with independent divisions?
The complete decision on the CAAD's ruling regarding stamp duty assessments for buildings in total ownership with independent divisions is not included in the provided excerpt, which contains only the initial report section. The case involves the fundamental question of whether Item 28 TGIS stamp duty properly applies to independent units within buildings held in full ownership by a single entity (A..., S.A.), rather than formally constituted vertical property with separate fraction ownership. The tribunal's analysis and final determination on this legal issue would appear in the decision section not included in this excerpt.