Process: 752/2014-T

Date: March 12, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 752/2014-T) involves a challenge to 20 Stamp Duty assessments under Item 28.1 of the General Table of Stamp Duty (TGIS) totaling €21,375.56. The claimant, a Portuguese company, owned a building in Lisbon with 20 independent units under a vertical property regime. The Tax Authority assessed Stamp Duty at 1% on each unit's patrimonial value (ranging from €53,788.03 to €112,958.07 per unit). The central legal dispute concerns whether Item 28.1 of TGIS applies to individual units in vertical property when none individually reaches the €1,000,000 threshold, or whether the Tax Authority can aggregate the values of all units. The claimant argued the assessments were illegal because the AT improperly summed the patrimonial values of all floors rather than treating each unit separately for taxation purposes. Since no individual unit had a taxable value equal to or exceeding €1,000,000, the claimant contended that Item 28.1 should not apply. The claimant further argued this interpretation violated constitutional equality principles, as identical properties under horizontal ownership would be treated differently. The challenge invoked grounds of erroneous qualification and quantification of taxable facts under Article 99(a) of CPPT, and also alleged lack of substantiation. The arbitral tribunal was duly constituted on January 28, 2015, with both parties waiving the hearing and pleadings. The excerpt provided covers only the procedural history and claimant's arguments, without revealing the tribunal's final decision or detailed legal reasoning on the merits.

Full Decision

THE PARTIES

Claimant – A…, Lda., NIPC PT…, with registered office at …, no. …, in Lisbon.

Respondent - Autoridade Tributária e Aduaneira (Tax and Customs Authority) (AT).

DECISION

REPORT

a) On 30-10-2014, the Claimant A…, Lda., NIPC PT…, with registered office at …, no. …, in Lisbon, filed a request with the CAAD requesting, pursuant to the Legal Regime of Arbitration in Tax Matters (RJAT), the establishment of a singular arbitral tribunal (TAS).

b) The request is signed by an attorney representing the Claimant.

THE REQUEST

c) The Claimant petitions for the annulment of 20 acts of assessment of Stamp Duty (IS) of item 28 of the General Table of Stamp Duty (TGIS), generating a total collection of 21,375.56 euros, dated 17.03.2014, with the 3rd instalment having a payment deadline of "November 2014" relating to the following property registration items [1] corresponding to floors or divisions capable of independent use of an urban property under the regime of vertical ownership:

Description of property by property registration items Rule of incidence Patrimonial Value Subject to Taxation (VPT) in € Ownership share Ad valorem rate applied Amount in dispute in €
… – 1st Right Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 1st Left Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 2nd Right Item 28.1 of TGIS 112,141.51 1/1 1% 1,121.42
… – 2nd Left Item 28.1 of TGIS 112,141.51 1/1 1% 1,121.42
… – 3rd Right Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 3rd Left Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 4th Right Item 28.1 of TGIS 112,141.51 1/1 1% 1,121.42
… – 4th Left Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 5th Right Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 5th Left Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 6th Right Item 28.1 of TGIS 112,141.51 1/1 1% 1,121.42
… – 6th Left Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 7th Right Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 7th Left Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 8th Right Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 8th Left Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 9th Right Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 9th Left Item 28.1 of TGIS 112,958.07 1/1 1% 1,129.58
… – 10th Right Item 28.1 of TGIS 53,788.03 1/1 1% 537.88
… – 10th Left Item 28.1 of TGIS 53,788.03 1/1 1% 537.88

Total……………………………………………………………………..…….……………..….. 21,375.56 euros

floors or divisions capable of independent use that form part of the following immovable property:

ü Urban property currently registered in the property register of the parish of …, Municipality of Lisbon, under item no. ….

d) It argues, in summary, that the assessment acts are illegal due to breach of the provision of item 28.1 of the TGIS insofar as the AT added the patrimonial values of the floors under vertical ownership and none of them individually has a VPT equal to or greater than 1,000,000.00 euros, arguing that it should be the VPT of each floor and not their sum that is relevant for taxation purposes.

e) And concludes: "we thus hold that this arbitrariness in the application of item 28 of stamp duty directly violates the principle of equality, enshrined in article 13 of the CRP", for the reason that "when a property, in all respects identical to that of the Claimant here, is treated in a substantially different manner merely because it has constituted horizontal ownership, two equal questions are being treated in an absolutely disparate manner, without any criterion of justice, equity, material truth or equality, creating a discrimination that is not in accordance with the Law or the Constitution".

f) And argues that "there is verified… the non-existence of the legal presupposition for the incidence of Stamp Duty provided for in Item 28 of the TGIS due to erroneous qualification and quantification of the tax facts, which constitutes grounds for challenging the tax act under item a) of article 99 of the CPPT".

g) It further invokes the lack of substantiation of the assessment acts.

h) It concludes by requesting the granting of the request for annulment of the tax acts identified in c), the condemnation of the AT to reimburse the amounts paid and also the interest accrued from the payments until full reimbursement.

OF THE ARBITRAL TRIBUNAL

i) The request for establishment of the TAS was accepted by the President of the CAAD and automatically notified to the AT on 03.11.2014.

j) By the Ethics Council of the CAAD, the signatory of this decision was appointed as arbitrator, with the parties being notified thereof on 13.01.2015.

k) Whereby the Singular Arbitral Tribunal (TAS) has been, since 28.01.2015, duly constituted to hear and decide the subject matter of this dispute.

l) All these acts are documented in the communication of establishment of the Singular Arbitral Tribunal dated 28.01.2015 which is hereby reproduced.

m) On 28.01.2015, the AT was notified in accordance with and for the purposes of article 17-1 of the RJAT. It responded on 25.02.2014. It also on this date attached the Administrative File (PA).

n) Since the Claimant in the final part of the request for arbitral ruling listed two witnesses, the TAS, by order of 28.01.2015, decided on the unnecessary nature of their hearing unless the Respondent raised some exception and they were to be indicated for those facts.

o) In view of the fact that questions identical to those already raised in many other cases already decided in the CAAD are being raised in this case, the TAS in the order referred to in item m) invited the parties from the outset to pronounce themselves on the waiver of the meeting referred to in article 18 of the RJAT and as well as on the non-production of pleadings.

p) In its response, the AT proposed the non-holding of the parties' meeting and as well as of pleadings.

q) By order of 26.02.2015, the TAS waived the holding of the parties' meeting referred to above and as well as the setting of a deadline for pleadings by the parties, if the Claimant, within 10 days, did not object thereto.

r) Whereby, both parties having waived, expressly or tacitly, the holding of the parties' meeting of article 18 of the RJAT and the production of pleadings, these procedural acts did not take place.

PROCEDURAL REQUIREMENTS

s) Legitimacy, capacity and representation - the parties enjoy legal personality and capacity, are legitimate and are represented.

t) Contradictory principle - the AT was notified in accordance with item m). All orders produced in the proceedings, as well as the content of all documents attached were notified to the respective counterparty.

u) Dilatory exceptions - the proceedings do not suffer from nullities and the request for arbitral ruling is timely since it was presented within the prescribed period in item a) of no. 1 of article 10 of the RJAT. In effect,

Although the AT alleged that the Claimant did not prove the existence of the contested acts, by not having attached the assessment notes, the truth is that it had attached them opportunely and they are inserted in the CAAD's SGP system under "Request".

SUMMARY OF THE CLAIMANT'S POSITION

Regarding the possible illegality of the assessment acts due to non-conformity with the provision of item 28.1 of the TGIS

v) It argues, in summary, that the assessment acts are illegal due to breach of the provision of item 28.1 of the TGIS insofar as the AT added the patrimonial values of the floors under vertical ownership and none of them individually has a VPT equal to or greater than 1,000,000.00 euros, arguing that it should be the VPT of each floor and not their sum that is relevant for taxation purposes.

w) And concludes: "we thus hold that this arbitrariness in the application of item 28 of stamp duty directly violates the principle of equality, enshrined in article 13 of the CRP", for the reason that "when a property, in all respects identical to that of the Claimant here, is treated in a substantially different manner merely because it has constituted horizontal ownership, two equal questions are being treated in an absolutely disparate manner, without any criterion of justice, equity, material truth or equality, creating a discrimination that is not in accordance with the Law or the Constitution".

x) And argues that "there is verified… the non-existence of the legal presupposition for the incidence of Stamp Duty provided for in Item 28 of the TGIS due to erroneous qualification and quantification of the tax facts, which constitutes grounds for challenging the tax act under item a) of article 99 of the CPPT".

y) It further invokes the lack of substantiation of the assessment acts.

z) It concludes by requesting the granting of the request for annulment of the tax acts identified in c), the condemnation of the AT to reimburse the amounts paid and also the interest accrued from the payments until full reimbursement.

SUMMARY OF THE POSITION OF THE TAX AND CUSTOMS AUTHORITY

Regarding the possible illegality of the assessment acts due to non-conformity with the provision of item 28.1 of the TGIS.

aa) The AT justifies its choice of adding the VPT of the floors or parts of urban property in order to determine whether the minimum taxation threshold of 1,000,000.00 euros is reached, for each urban property under vertical ownership, based on the fact that it appears "… in the property record that the property is under the regime of complete ownership, composed of various parts capable of independent use", and

bb) argues that "this being the property registration information, in accordance with article 23, no. 7 of the CIS, the stamp duty assessments reported to the year 2012 would have been carried out by the tax administration having regard to the nature of the urban property, at the date of the tax event, applying, with the necessary adaptations, the rules contained in the CIMI".

cc) Since "the property being under the regime of complete ownership, not having autonomous fractions, to which the tax law attributes the qualification of property, because from the notion of property of article 2 of the CIMI, only the autonomous fractions of property under the regime of horizontal ownership are deemed to be properties – no. 4 of the aforementioned article 2 of the CIMI".

dd) That is, it holds that the legal support that permits the adoption of the manner in which it determined the tax base for the duty is in article 23-7 of the CIS, to conclude that there does not occur in the case in question "the vice of breach of law as to the legal presuppositions".

ee) It also states that there is no breach of the principles of tax equality and contributive capacity, since: "horizontal ownership and vertical ownership are differentiated legal institutions", "the constitution of horizontal ownership involves, it is a fact, a mere legal alteration of the property, with no valuation…, but the legislator may, nevertheless, subject to a distinct tax legal framework, and thus discriminatorily, properties under the regime of horizontal and vertical ownership, in particular, benefiting the more legally evolved institution of horizontal ownership, without that discrimination necessarily being considered arbitrary", "this discrimination may also be imposed by the need to impose coherence to the tax system".

ff) It further expresses: "… also the different valuation and taxation of an immovable property under complete ownership as against an immovable property constituted in horizontal ownership derives from the different legal effects inherent to these two institutions".

gg) It adds: "it is also important to note that taxation for purposes of IS complies with the criterion of appropriateness, to the extent that it aims at the taxation of wealth embodied in the ownership of immovable property of high value, arising in a context of economic crisis that cannot at all be ignored".

hh) As to the alleged lack of substantiation, it concludes that, in the specific case, the tax act is "duly substantiated, both in fact and in law, all the more so because the Claimant's arguments in this present request for arbitral ruling reveal that it had no difficulty whatsoever in understanding the reasons which led to the enactment of the act, unquestionably the application of the law to its specific situation that fell within the scope of the tax".

ii) It concludes by requesting the rejection of the request and the adoption of a dismissory decision.

II - ISSUES WHICH THE TRIBUNAL MUST RESOLVE

On this specific matter, the CAAD has already pronounced itself in several decisions in which the fundamental issue is the same, namely, the scope of the provision of item 28 and 28-1 of the TGIS is discussed.

The limit of interpretation is the letter, the text of the rule. What remains is the "task of linking and valuation that escapes the literal domain".

Starting from the principle that every rule has a provision (and an enactment), the issue that arises here is to determine, by delimiting, whether the provision of the rule of incidence, as it is worded – in its provision - (ownership of urban properties ... with residential use ... whose patrimonial value shown in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than 1,000,000.00 euros – on the patrimonial value used for purposes of IMI), allows or not the understanding that as to properties "with residential use" under vertical ownership, with floors or divisions capable of independent use, held by an entity, the VPT on which the rate will be applied should be their sum or should the individual VPT of each floor or division capable of independent use be considered, similarly to what happens with properties under the regime of horizontal ownership and with the IMI assessment procedure.

Fundamentally, what is at issue is the adoption of an adequate reading of the scope of the provision of the rule of incidence of items 28 and 28.1 of the TGIS, in light of what no. 7 of article 23 of the CIS says about the determination of the taxable matter and subsequent operation of assessment of the duty:

"Where the duty is due under the situations provided for in item no. 28 of the General Table, the duty is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI."

The AT expressed clearly in article 25 of its response that the addition of the VPT of the floors of the urban property in question was carried out having as legal support the reading made of this rule (article 23-7 of the CIS).

As we have already stated in other decisions, regarding the interpretation of tax rules there is a rule, although it may be considered residual, very specific that is contained in no. 3 of article 11 of the LGT: "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". This is a criterion to be used in the context of interpretation hermeneutics of the rules.

We do not advocate an "economic interpretation" of tax law rules.

But it seems to us that appeal may also be made here to the analysis of the "economic substance of the tax facts" to appropriately implement the "necessary adaptations of the rules contained in the CIMI", with a view to resolving the issue that arises.

We are thus, only and solely, within the scope of the activity of interpretation and application of the rules, that is, in the task of delimiting the legal-factual situations that should be understood as encompassed in the provision of the rule of incidence of this new tax and which results from the combination of items 28 and 28-1 of the TGIS and in this case what should be accepted at the level of the "necessary adaptations of the rules contained in the CIMI", following the command of no. 7 of article 23 of the CIS.

It seems to us that the fundamental issue to which the TAS should respond is the following:

Do items 28 and 28-1 of the TGIS as rules of tax incidence, as they are worded – in their provision - (ownership of urban properties ... with residential use ... whose patrimonial value shown in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than 1,000,000.00 euros – on the patrimonial value used for purposes of IMI), allow or not the understanding that as to properties "with residential use" under vertical ownership, with floors or divisions capable of independent use, held by an entity, the VPT on which the rate will be applied should be their sum or should the individual VPT of each floor or division capable of independent use be considered, similarly to what happens with properties under the regime of horizontal ownership?

The answer given to this question will determine the granting or rejection of the request, and if the answer is not in accordance with what was so learnedly argued by the AT, it will not be necessary for the TAS to pronounce itself on the remaining grounds invoked by the Claimant in the request for arbitral ruling, with possible impact on the validity of the assessment acts in question.

III. FACTUAL MATTERS PROVEN AND NOT PROVEN. SUBSTANTIATION

With relevance to the decision that will be adopted, these are the facts that are considered proven, with the respective documents being indicated (proof by documents) as substantiation:

Proven Facts

  1. The Claimant is registered as holder of the right of full ownership of the urban property under the regime of vertical ownership, with floors or divisions capable of independent use, more specifically on the floors intended for residential purposes that make it up, (which in this case are all of them), namely: urban property currently registered in the property register of the parish of..., under the following property registration items: article ...-1st Right; article ...-1st Left; article ...-2nd Right; article ...-2nd Left; article ...-3rd Right; article ...-3rd Left; article ...-4th Right; article ...-4th Left; article ...-5th Right; article ...-5th Left; article ...-6th Right; article ...-6th Left; article ...-7th Right; article ...-7th Left; article ...-8th Right; article ...-8th Left; article ...-9th Right; article ...-9th Left; article ...-10th Right; article ...-10th Left – As per urban property record and 60 assessment notes for IS item 28.1 of the TGIS, documents attached by the Claimant at the time of filing the request for arbitral ruling and inserted in the CAAD's SGP system.

  2. The Claimant was notified, on a date not determined, of the assessments of Stamp Duty of item 28.1 of the TGIS, expressed in item c) of the Report, generating a total collection of 21,375.56 euros, with the following payment deadline being noted on the assessment notes for the 3rd instalment: "November 2014" – As per assessment notes for IS item 28.1 of the TGIS attached by the Claimant at the time of filing the request for arbitral ruling and inserted in the CAAD's SGP system.

  3. The duty which was paid by the Claimant (1st, 2nd and 3rd instalments) – As per page 34 of the PA and documents attached by the Claimant on 12.03.2015 inserted in the CAAD's SGP system.

  4. The floors or divisions capable of independent use subject to taxation, with residential use, have VPT comprised between 53,788.03 euros (articles ...-10th Right and ...-10th Left) and 112,958.07 euros (articles ...-1st Right, ...-1st Left, ...-3rd Right, ...-3rd Left...-4th Left ...-5th Right, ...-5th Left, ...-6th Left, ...-7th Right, ...-7th Left, ...-8th Right, ...-8th Left, ...-9th Right and ...-9th Left) – As per urban property record and 60 assessment notes for IS item 28.1 of the TGIS, documents attached by the Claimant at the time of filing the request for arbitral ruling and inserted in the CAAD's SGP system.

  5. In the urban property record of the immovable property referred to in 1) it appears: "Total patrimonial value: € 2,137,555.08" – As per urban property record attached by the Claimant at the time of filing the request for arbitral ruling and inserted in the CAAD's SGP system.

  6. In the 60 assessment notes - 1st, 2nd and 3rd instalments - it states: "Patrimonial Value of the property-total subject to duty: 2,137,555.08" euros, which corresponds to the sum of the VPT of the floors with residential use of the immovable property identified in 1) – As per 60 assessment notes for IS item 28.1 of the TGIS, documents attached by the Claimant at the time of filing the request for arbitral ruling and inserted in the CAAD's SGP system.

  7. Duty which was assessed on the basis of item 28.1 of the TGIS, as to the year 2013 – As per 60 assessment notes for IS item 28.1 of the TGIS, documents attached by the Claimant at the time of filing the request for arbitral ruling and inserted in the CAAD's SGP system.

Unproven Facts

There is no other factuality alleged that is relevant to the proper resolution of the procedural dispute.

The undisputed factual matters result from the documents attached by the Claimant and the Respondent, whose contents and evidentiary valuations did not merit disagreement by the parties after their availability for the exercise of the contradictory principle.

IV. APPRECIATION OF THE ISSUES WHICH THE TAS MUST RESOLVE

Do items 28 and 28-1 of the TGIS as rules of tax incidence, as they are worded – in their provision - (ownership of urban properties ... with residential use ... whose patrimonial value shown in the register, in accordance with the Municipal Property Tax Code (CIMI), is equal to or greater than 1,000,000.00 euros – on the patrimonial value used for purposes of IMI), allow or not the understanding that as to properties "with residential use" under vertical ownership, with floors or divisions capable of independent use, held by an entity, the VPT on which the rate will be applied should be their sum or should the individual VPT of each floor or division capable of independent use be considered, similarly to what happens with properties under the regime of horizontal ownership?

The subjection to stamp duty of properties with residential use resulted from the addition of items 28, 28-1 and 28-2 of the General Table of Stamp Duty, carried out by article 4 of Law 55-A/2012, of 29/10, which typified the following tax facts:

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

28-1 – For property with residential use - 1%;

28-2 – For property, when the taxpayers who are not individuals are resident in a country, territory or region subject to a clearly more favourable tax regime, listed in the official gazette approved by the Minister of Finance – 7.5%."

With relevance to the case, we note:

· No. 7 of article 23 of the CIS as to the assessment of the duty: "Where the duty is due under the situations provided for in item no. 28 of the General Table, the duty is assessed annually, in relation to each urban property, by the central services of the Tax and Customs Authority, applying, with the necessary adaptations, the rules contained in the CIMI."

· No. 4 of article 2 of the CIMI: "For purposes of this duty, each autonomous fraction, under the regime of horizontal ownership, is deemed to constitute a property."

· No. 3 of article 12 of the CIMI: "Each floor or part of property capable of independent use is considered separately in the property registration which also determines its respective patrimonial value".

It seems to us that the answer to the issue raised in this request for arbitral ruling is related to the reading made by the AT of no. 7 of article 23 of the CIS.

The AT would have considered, to proceed to the addition of the patrimonial values subject to taxation (VPT) of the floors or divisions/parts of urban property, in order to determine whether the minimum taxation threshold of 1,000,000.00 euros is reached, for each urban property under vertical ownership, that the floors or divisions capable of independent use are not by formal legal definition considered urban properties. Which is indisputable.

This is what results from the AT's response (article 25).

And it would have considered that this addition of VPT is required because the law states that "necessary adaptations" of the "CIMI rules" should be carried out (no. 7 of article 23 of the CIS).

In fact, although items 28 and 28.1 speak of "urban properties" and "for each property" and no. 7 of article 23 of the CIS refers to "the duty is assessed annually, in relation to each urban property", what seems to us relevant here, at the level of the determination of eligible taxable matter and assessment of the duty, is that "... with the necessary adaptations, the rules contained in the CIMI" be applied as stated in the referred no. 7 of article 23 of the CIS. But, obviously, "adaptations" provided that necessary to ensure the "unity of the legal system", in this case the legal-tax system.

What happened - as to urban properties with residential use, under vertical ownership, with floors or divisions capable of independent use - is that the AT made the "adaptation" in the operations of assessment of the IS by adding the VPT of each floor or autonomous division intended for residential purposes (excluding the VPT of the floors or divisions intended for other purposes), creating a new legal reality, which is a patrimonial value of urban properties under vertical ownership, with residential use.

This operation of the tax process (incidence – determination of taxable matter – assessment – payment) seems to us to contend with the literal element of the rule of incidence, item 28 of the TGIS, which states that this duty is levied on "the patrimonial value used for purposes of IMI".

That is, the AT, in the operation of determination of taxable matter and subsequent assessment of the IS of items 28 and 28.1 of the TGIS (operation of application of a rate to the taxable matter), as to urban properties with residential use, under vertical ownership, with floors or divisions capable of independent use, should not consider any other patrimonial value subject to taxation (on which the ad valorem rate of the duty is applied) than that which results exclusively from no. 3 of article 12 of the CIMI. Whether for the IMI or for this IS.

And for the reason that urban properties under vertical ownership, as a whole, do not have VPT. The law determines in these cases that the VPT be attributed to each floor or part of the property separately.

The conclusion above will not be belied by the fact that in the property records of this type of property the "total patrimonial value" is indicated which corresponds to the sum of the VPT of all floors, regardless of their use. What is relevant for this taxation will not be the "total patrimonial value" but only the "patrimonial value subject to taxation" of urban properties with residential use, in this case of the floors separately allocated fiscally in terms of eligible VPT.

All the more so because, in the majority of cases of properties under vertical ownership, "residential use" is characteristic of one or several floors separately and not of the property as a whole.

Creating a new legal reality, with a view to finding a new form of determining taxable matter that is not used for purposes of IMI (a tax base for the floors or parts of property capable of independent use, with residential use) does not seem to have legal support in the "necessary adaptations" referred to in no. 7 of article 23 of the CIS.

A conclusion which will be reached having regard to the principle of tax legality, whether in the dimension of no. 1 of article 8 of the LGT (if we consider that a rule of incidence is at issue), whether in the dimension of item a) of no. 2 of article 8 of the LGT (if we consider that a rule regulating the determination of the tax base on which a rate is applied is at issue, that is, the assessment of the duty).

There is also, it impacts, non-conformity with the literal element of the final part of the rule of incidence (item 28 of the TGIS) which states that the duty is levied on "the patrimonial value used for purposes of IMI" and therefore, should not be levied on the sum of patrimonial values subject to taxation of properties, parts of properties or floors, and no legal support is seen in the operation of adding patrimonial values subject to taxation of the floors or parts of property capable of independent use, with residential use, in order to reach the eligible taxation threshold of 1,000,000.00 euros or more.

That is, it is not in conformity with the law, the creation of a new VPT for purposes of taxation in IS as to item 28 of the TGIS, as results from the notation in all collection notes of "patrimonial value of property – total subject to duty" – item 6 of the undisputed factual matter.

What this means is that when no. 7 of article 23 refers to "...the duty is assessed annually, in relation to each urban property", this expression "each urban property" is intended to encompass urban properties under horizontal ownership and the floors or parts of urban properties under vertical ownership, provided that they are intended for residential purposes, but always starting from a single tax base for all legal purposes: the patrimonial value used for purposes of IMI (final part of item 28 of the TGIS).

It should be added that the issue does not require, in our view, to be raised at the level of breach of the Constitution (its guiding principles of the Rule of Law), it sufficing, in compliance with what is stated in no. 7 of article 23 of the CIS, that an interpretation "with the necessary adaptations of the CIMI rules" be carried out which will be to consider that the expression "each urban property" encompasses not only the floors under horizontal ownership (which are urban properties ope legis) as well as "the floors or parts of property capable of independent use" (no. 3 of article 12 of the CIMI).

If, for example, for the floors which compose the autonomous fractions of residential urban properties, under horizontal ownership, (although they are by definition and "ope legis" urban properties) the VPT are not added to determine the threshold of eligible VPT for subjection to IS, by taxpayer, of 1,000,000.00 euros (operation of determination of taxable matter), why should this occur as to the "parts of property or floors" of properties under vertical ownership?

In both cases the same contributive capacity of the taxpayers is manifested (their level of wealth at the level of immovable property). It is the same "economic substance" analysed from various angles. In both situations the same "ability-to-pay" is manifested.

It seems to us that it is the rule of incidence contained in items 28 and 28-1 of the TGIS, in its literalness, especially its final part, combined with no. 7 of article 23 of the CIS, that permits to conclude, with the "necessary adaptations of the CIMI rules", that the AT should not add the VPT of the floors or parts of the property identified above to find a new VPT.

Request for Interest

In the legislative authorization on which the Government based itself to approve the RJAT, granted by article 124 of Law no. 3-B/2010, it is stated that "the tax arbitration process should constitute an alternative procedural means to the process of judicial challenge and the action for the recognition of a right or legitimate interest in tax matters".

Although items a) and b) of no. 1 of article 2 of the RJAT use the expression "declaration of illegality" to define the competence of the arbitral tribunals that function in the CAAD and do not make reference to constitutive (annulment) and condemnatory decisions, it should be understood, in harmony with the aforementioned legislative authorization, that the powers included in their competences are those which in the process of judicial challenge are attributed to the tax courts in relation to the acts whose appreciation of legality is within their competences.

Whereby condemnation of the tax administration may be issued here in the payment of indemnificatory interest.

Article 43 of the LGT "does nothing more than establish a swift and, so to speak, automatic means of indemnifying the injured party. Regardless of any allegation and proof of the damages suffered, he has the right to the indemnification established therein, translated into indemnificatory interest in the cases included in the provision (…)" Judgment of the STA of 2-11-2006, case 604/06, available at www.dgsi.pt"

In the case in question, it has been proven that the Claimant paid the total amount of the assessments that were notified to it (in three instalments, as per item 3 of Part III of this decision), and therefore has the right to indemnificatory interest counted from the date of payment, total or partial, of the assessments of the duty now annulled until the date of issuance of the respective credit notes, counting the period for this payment from the commencement of the period for voluntary execution of this decision (article 61, nos. 2 to 5, of the CPPT), at the rate determined in accordance with what is provided in no. 4 of article 43 of the LGT.

The Claimant argues, essentially, the non-conformity of the tax acts with tax law, alleging the illegality stated in item a) of article 99 of the CPPT: "erroneous qualification ... of tax facts".

In fact, with the grounds expressed above, the IS assessments challenged carried out in the manner in which they were, are not in harmony with the rule of incidence of items 28 and 28-1 of the TGIS, occurring, therefore, the non-conformity with the law provided for in item a) of article 99 of the CPPT.

With the first ground of the request formulated by the Claimant proceeding, it is not necessary to proceed to the appreciation of other grounds, by manifest futility.

As a consequence of the above, the request for annulment of the tax acts brought by the Claimant before the Arbitral Tribunal proceeds, since the IS assessments carried out by the AT are not in conformity with the law, in the reading above advocated.

In fact, it results from the proven facts (item 4 of Part III of this decision) that none of the floors or parts of property has, in itself, a VPT that is equal to or greater than the taxation threshold indicated in item 28 of the TGIS (VPT equal to 1,000,000.00 euros).

V. DECISION

In the terms and with the grounds expressed above, the request of the Claimant is deemed to be granted, annulling the Stamp Duty assessments indicated in item c) of the Report (which are hereby reproduced), generating a total collection of 21,375.56 euros, relating to the urban property under vertical ownership, with floors or divisions capable of independent use, more specifically on the floors intended for residential purposes that make it up, namely:

· urban property currently registered in the property register of the parish of ..., Municipality of Lisbon, under the following items: article ...-1st Right; article ...-1st Left; article ...-2nd Right; article ...-2nd Left; article ...-3rd Right; article ...-3rd Left; article ...-4th Right; article ...-4th Left; article ...-5th Right; article ...-5th Left; article ...-6th Right; article ...-6th Left; article ...-7th Right; article ...-7th Left; article ...-8th Right; article ...-8th Left; article ...-9th Right; article ...-9th Left; article ...-10th Right; article ...-10th Left, due to non-conformity with the rules contained in items 28 and 28.1 of the TGIS and in no. 7 of article 23 of the CIS, with this decision entailing the obligation of the Respondent to promote the reimbursement of what has been paid to it.

· It is further deemed that the request for condemnation of the AT to the payment of indemnificatory interest to the Claimant is granted, counted from the date of payment of the IS tax instalments, in whole or in part, until the date of issuance of the respective credit note, counting the period for this payment from the commencement of the period for voluntary execution of this decision (article 61, nos. 2 to 5, of the CPPT), at the rate determined in accordance with what is provided in no. 4 of article 43 of the LGT.

Value of the case: in accordance with what is provided in article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (and item a) of no. 1 of article 97A of the CPPT), the value of the case is fixed at 21,375.56 euros.

Costs: in accordance with what is provided in article 22, no. 4, of the RJAT, the amount of costs is fixed at € 1,224.00 €, according to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the respondent.

Let notification be made.

Lisbon, 12 March 2015

Singular Arbitral Tribunal,

Augusto Vieira

Document drawn up by computer in accordance with the provisions of article 131, no. 5, of the CPC, applicable by reference to article 29 of the RJAT.

The drafting of this decision is governed by the orthography prior to the Spelling Agreement of 1990.

[1] In the assessment notes, 1st, 2nd and 3rd instalments, the floors are identified as autonomous property registration items, in addition to the identification of their respective patrimonial values subject to taxation used for purposes of IMI.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto de Selo) under Verba 28.1 of TGIS apply to individual units in vertical property buildings?
Under Item 28.1 of TGIS, Stamp Tax applies to ownership of urban properties or fractions with a taxable patrimonial value (VPT) equal to or exceeding €1,000,000. The legal dispute in vertical property regimes centers on whether each independent unit should be assessed individually or whether the Tax Authority can aggregate all units' values. In this case, the claimant argued that since no individual floor exceeded the €1,000,000 threshold, Item 28.1 should not apply, and the AT's approach of summing values was legally incorrect.
How is the taxable value (VPT) calculated for each independent unit in a vertical property regime for Stamp Tax purposes?
For Stamp Tax purposes under Verba 28.1, the taxable value (VPT) calculation for vertical property units is contentious. Each independent unit in a vertical ownership regime has its own registered patrimonial value based on tax assessments. The claimant's position was that each unit should be evaluated separately for the €1,000,000 threshold, not aggregated. The case illustrates the importance of property registration structure, as each floor was registered with individual VPT values ranging from approximately €53,788 to €112,958, all below the statutory threshold when considered individually.
Can property owners challenge multiple Stamp Tax assessments on vertical property units through CAAD tax arbitration?
Yes, property owners can challenge Stamp Tax assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration under the Legal Regime of Arbitration in Tax Matters (RJAT). This case demonstrates the procedure: the claimant filed for establishment of a singular arbitral tribunal within the legal deadline, challenging 20 simultaneous assessments. Grounds for challenge include erroneous qualification and quantification of taxable facts (Article 99(a) CPPT), lack of substantiation, and constitutional violations. The arbitration process allows waiver of hearings and pleadings by mutual consent, expediting resolution.
What is the difference between horizontal property and vertical property for Stamp Tax (Verba 28.1 TGIS) purposes?
The distinction between horizontal and vertical property is critical for Stamp Tax under Verba 28.1. In horizontal property (condominium), each unit is independently owned with its own property registration and separate VPT assessment. In vertical property, floors or divisions capable of independent use may be owned separately but structured differently under Civil Code provisions. The claimant argued this created discriminatory treatment: identical properties structured as horizontal ownership would have each unit assessed separately for the €1,000,000 threshold, while the AT's interpretation of vertical property allowed aggregation of values, resulting in unequal tax treatment violating Article 13 of the Portuguese Constitution.
What are the legal grounds for annulling Stamp Tax assessments on properties with a taxable value exceeding €1,000,000 under Verba 28.1?
Legal grounds for annulling Stamp Tax assessments under Verba 28.1 include: (1) erroneous qualification of taxable facts - incorrect determination that Item 28.1 applies when the property or unit doesn't meet statutory requirements; (2) erroneous quantification - improper calculation of the taxable patrimonial value, such as aggregating individual units rather than assessing them separately; (3) lack of substantiation - insufficient reasoning in the assessment notice; (4) violation of constitutional principles, particularly equality under Article 13 CRP when similar properties are treated differently; and (5) misapplication of the law regarding what constitutes the relevant property unit for threshold purposes. These grounds fall under Article 99 of the Tax Procedure Code (CPPT).