Process: 755/2016-T

Date: May 23, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitral Decision 755/2016-T addresses the legality of Stamp Tax (Imposto do Selo) assessments under Verba 28.1 of the General Stamp Tax Table (TGIS) when the underlying Taxable Property Value (Valor Patrimonial Tributário - VPT) is subsequently corrected. The claimant, A… SA, challenged Stamp Tax liquidations for 2012-2014 on an urban property in Lisbon, initially valued at €1,408,730.00. Verba 28 TGIS, introduced by Law 55-A/2012 and amended by Law 83-C/2013, imposes Stamp Tax on high-value property ownership. In December 2015, the claimant filed a complaint under Article 130 of the Municipal Property Tax Code (CIMI), alleging errors in the VPT calculation. The Tax Authority acknowledged the error, reducing the VPT to €426,850.00, well below the Verba 28 threshold. Consequently, the AT annulled the 2015 Stamp Tax but maintained assessments for prior years 2012-2014. The claimant argued that if the VPT was incorrectly determined ab initio, all Stamp Tax assessments based on that valuation should be annulled, as the correct VPT falls below the statutory threshold for taxation. The AT rejected an official revision request under Article 78 LGT as untimely. The central legal question is whether a VPT correction produces retroactive effects for Stamp Tax purposes, or whether corrections only apply prospectively from the year of complaint submission. This case examines the intersection of property valuation procedures under CIMI and Stamp Tax assessment rules, particularly the temporal scope of VPT corrections and their impact on tax obligations crystallized in previous years.

Full Decision

ARBITRAL DECISION

I – REPORT

1 A…, SA NIPC[1]…, with registered office in Lisbon at Rua … nº…, …-…, area of … Financial Services Office, filed a request for arbitral ruling, pursuant to the provisions of paragraph a) of section 1 of article 2, of section 1 of article 3, and paragraph a) of section 1 of article 10, all of the RJAT[2], with the Tax Authority[3] being the respondent, with a view to assessing the legality of the tax assessment acts for Stamp Duty[4], relating to the years 2012, 2013 and 2014, levied on the ownership of real property, an urban building, registered in the respective property register under article … in the parish of …, area of … financial services office of the municipality of Lisbon, in the total amount of € 43,846.71.

2 The request was made without exercising the option of appointing an arbitrator, and was accepted by the Honorable President of the CAAD[5] and automatically notified to the Tax Authority on 28/12/2016.

3 Pursuant to the provisions of section 2 of article 6 of the RJAT, by decision of the Honorable President of the Deontological Council, duly communicated to the parties within the legally applicable deadlines, on 03/02/2017, the arbitrator Arlindo José Francisco was appointed to the tribunal, who communicated acceptance of the appointment within the legally stipulated deadline.

4 The tribunal was constituted on 07/03/2017 in accordance with the provisions contained in paragraph c) of section 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012, of 31 December.

5 By its request, the claimant seeks the annulment of the Stamp Duty provided for in item 28.1 of the General Stamp Duty Table[6], relating to the years 2012, 2013 and 2014, concerning the property already identified as mentioned.

6 The claimant supports its position, in summary, on the fact that the assessments are illegal, since they were levied on a Taxable Property Value[7] that does not correspond to the legally due amount, which suffered from errors in its calculation, as indeed the Tax Authority came to agree and corrected its amount from € 1,408,730.00 to € 426,850.00.

7 Since the Taxable Property Value of the property correctly determined is only € 426,850.00, it would exclude the Stamp Duty taxation, since it is well below the provision of article 28 of the General Stamp Duty Table, which did not occur, since it was levied on the incorrect Taxable Property Value.

8 In its response, the Tax Authority also states in summary that the Stamp Duty assessments here challenged result from the direct application of the legal provision that levies Stamp Duty on the Taxable Property Value contained in the register for the purpose of Municipal Property Tax[8] and which had been accepted by the claimant, who did not request a second valuation, pursuant to article 76 of the Municipal Property Tax Code[9], nor objected to it pursuant to article 97, section 1, paragraph f) and article 134, both of the Tax Code of Procedure and Process[10].

9 Only on 29 December 2015 did the claimant lodge a complaint pursuant to article 130 of the Municipal Property Tax Code, whose corrections only produce effects for the respective year of presentation, not producing effects for assessments of previous years.

II - PROCEDURAL HEARING

The tribunal was regularly constituted, the parties have legal personality and capacity, prove themselves to be entitled, and are regularly represented in accordance with articles 4 and 10, section 2 of the RJAT and article 1 of Ordinance No. 112-A/2011, of 22 March.

In the Tax Authority's response, it raised the dispensation of the hearing provided for in article 18 of the RJAT, and on 20/04/2017, the tribunal issued the following order: "Notify the claimant to pronounce itself, if it so wishes, within 10 days, regarding the respondent's proposal to dispense with the hearing provided for in article 18 of the RJAT.

Also notify the parties to pronounce themselves, if they so wish, within the same period, on the lack of necessity for the production of oral or written pleadings, since their positions are perfectly defined".

On 03/05/2017, the claimant agreed to the proposed conditions as stated in its request attached to the case file, and the tribunal, by order of 03/05/2017, considered the conditions met to render a decision.

In this way, the proceedings not suffering from any nullities, it remains to decide.

III - GROUNDS

1 – The issue to be resolved, with interest for the case file, is to assess the following:

a) Whether the Stamp Duty assessments here challenged suffer from illegality by having been levied on an incorrectly determined Taxable Property Value, with a lack of subject matter for application of item 28.1 of the General Stamp Duty Table.

b) If the request is granted, whether or not there will be grounds for the payment of compensatory interest by the Tax Authority.

2 - Findings of Fact

a) The claimant is the owner of the urban building located at Rua … nº … of the city of Lisbon, registered in the property register under article … of the parish of ….

b) As a result of the conservation and improvement intervention on the property carried out in 2008, the respective Municipal Property Tax Form I was submitted on 26/09/2008, in which it is stated that the building was then 88 years old.

c) As a consequence, the property was valued, and a Taxable Property Value of € 1,408,730.00 was assigned, determined in accordance with article 38 of the Municipal Property Tax Code, contributing to its determination, among others, the age coefficient of 1.

d) From the results of the valuation, no complaint or objection was made, nor was a second valuation requested, in accordance with the legally provided terms.

e) In December 2015, the claimant filed a complaint regarding the property register, pursuant to article 130 of the Municipal Property Tax Code, without specifying any of the paragraphs of section 3 of said provision, but which, from its content, suggests that the Taxable Property Value was at issue.

f) The Tax Authority considered the complaint well-founded, as per the respective Administrative Process[11] attached, and as a consequence, the Taxable Property Value of the property in question was reduced to € 426,850.00.

g) The Stamp Duty provided for in item 28 of the General Stamp Duty Table, introduced therein by Law 55-A/2012 of 29 October and amended by Law 83-C/2013 of 31 December, was levied on the Taxable Property Value of € 1,408,730.00, in force at the time of the assessments here in question.

h) As a result of the finding that the complaint regarding the property register was well-founded, the Tax Authority annulled the Stamp Duty assessed for the year 2015, since the Taxable Property Value determined is well below the provision contained in item 28 of the General Stamp Duty Table, maintaining the assessments for the years 2012, 2013 and 2014.

i) Against this action, the claimant filed with the Tax Authority a request for official revision, pursuant to section 1 of article 78 of the General Tax Law[12], of the Stamp Duty assessments for the years 2012, 2013 and 2014, on the grounds that, given the merit of the complaint regarding the property register for errors ab initio in the determination of the Taxable Property Value of € 1,408,730.00, there would be no grounds for the taxation here challenged, since the Taxable Property Value was reduced to € 426,850.00, lower, as already stated, than the provision contained in item 28 of the General Stamp Duty Table.

j) However, the Tax Authority did not consider the request for official revision, as it considered it out of time.

k) The Stamp Duty assessments for the years 2012, 2013 and 2014 were paid on time.

The factual matters here given as proven result from documents and proceedings attached to the case file that were not impugned by the parties and which the tribunal considers relevant to the assessment of the merits of the case.

3 – Legal Grounds

3.1 – On the legality of the Stamp Duty assessments

The Stamp Duty assessments here challenged result from the application of the provisions contained in article 1 of the Stamp Duty Code[13] and item 28.1 of the General Stamp Duty Table as amended by Law 55-A/2012 of 29 October. Thus, in the present case, the urban building in question had a Taxable Property Value equal to or exceeding € 1,000,000.00 and therefore covered by the provision of said provisions and consequent Stamp Duty taxation.

The Taxable Property Value in question had been determined on the basis of the rules provided for in the Municipal Property Tax Code, which was not subject to any complaint or objection, nor was a second valuation requested, in accordance with the legally provided terms, at the time of its determination.

Realizing that the Taxable Property Value determined and which served as the basis for the assessments suffered from errors in its determination, the claimant filed a complaint, pursuant to article 130 of the Municipal Property Tax Code, in December 2015, which was accepted by the Tax Authority, which corrected the Taxable Property Value then recorded in the property register, fixing it at € 426,850.00, and immediately annulled the Stamp Duty assessment for the year 2015, since the Taxable Property Value then corrected was well below the amount provided for in item 28 of the General Stamp Duty Table and therefore not subject to taxation, proceeding with the correction of the 2015 assessment in accordance with the provisions of section 8 of article 130 of the Municipal Property Tax Code.

In view of the new Taxable Property Value and given that the Tax Authority limited itself to annulling only the Stamp Duty for the year 2015, the claimant filed on 17 August 2016 a request for official revision, pursuant to section 1 of article 78 of the General Tax Law, of the assessments of item 28.1 of the General Stamp Duty Table for the years 2012, 2013 and 2014, on the grounds that they were tainted by illegality since they were levied on a Taxable Property Value erroneously determined ab initio, which indeed the Tax Authority understood, by reducing it from € 1,408,730.00 to € 426,850.00, after the complaint regarding the property register, and also because the error in determining the initial Taxable Property Value was attributable to the services, given that in the valuation the age of the building declared by the claimant had been disregarded without any justification for such procedure.

The claimant saw its request for official revision denied by the head of the … Financial Services Office[14] of Lisbon, as per notification of 22 September 2016, which considered that the assessments were based on the Taxable Property Value determined in accordance with the valuation carried out, which was not challenged, with the assessments resulting from the application of Law 55-A/2012 of 29 October, therefore there being no error attributable to the services, and the request for revision presented outside the deadline provided for in the second part of section 1 of article 78 of the General Tax Law.

The Tax Authority argues that section 8 of article 130 of the Municipal Property Tax Code provides that complaints regarding the property register only produce effects for the year in which they are presented, not producing effects for previous years.

From the factual matters proven, it results that the claimant in the Municipal Property Tax Form I statement presented as a result of the works carried out in 2008, the age of the building (88 years then) is stated, and that the age coefficient used in the valuation was 1, well above the amount provided for in the table contained in section 1 of article 44 of the Municipal Property Tax Code (0.4). From this finding, the tribunal understands that the valuation carried out by the Tax Authority, by not taking into account the age of the building declared nor justifying the assignment of coefficient 1, arrived at an incorrect Taxable Property Value, as indeed the Tax Authority itself concluded by accepting the complaint presented in December 2015, reducing the initial Taxable Property Value from € 1,408,730.00 to € 426,850.00, and that this error can only be attributed to the Tax Authority's valuation services and must necessarily fall within the scope of the second part of section 1 of article 78 of the General Tax Law.

In these circumstances, the Tax Authority should have proceeded with the official revision of the assessments, given that the error in determining the Taxable Property Value is attributable to it and cannot shield itself behind the out-of-time nature of the request nor the impossibility of complaints regarding the property register producing effects for years prior to their presentation, and also because the taxpayer did not use the means available to it to challenge either the determination of the Taxable Property Value or the assessments at issue.

But what is at issue here is the illegality of the Stamp Duty assessments that were levied on a Taxable Property Value erroneously determined by an error attributable to the Tax Authority's services, as already stated, and which article 78 of the General Tax Law accommodates the possibility of such revision. And it should not be said that the taxpayer did not present its request within the administrative complaint deadline, as stipulated in the first part of section 1 of the aforementioned article 78 of the General Tax Law.

In fact, it has been the case law of the Supreme Administrative Court to consider that the taxpayer, in case of error attributable to the services, as is the case, can within a period of 4 years request the revision of the tax act. By way of example, the following is transcribed in the relevant part, an extract from the judgment of the Supreme Administrative Court of 29 May 2013 – No. 140/13: "The case law of this Supreme Administrative Court has held that the taxpayer can request the revision of the tax act, also within the period of four years, on the grounds of error attributable to the services. It is in this sense that the judgment of the Supreme Administrative Court of 29 May 2013, rendered in Proc. No. 140/13, in which the current reporter acted as 1st Adjunct Judge, is pronounced, in which the following can be read: "(…) Thus, as is the case with respect to any tax act, regardless of whether one can use the normal means of defense (administrative complaint, hierarchical appeal and judicial challenge), the taxpayer can also request the revision of the tax act within the administrative complaint deadline on the grounds of any illegality; and can furthermore request the tax administration, within four years after the assessment, to revoke the act on the grounds of error attributable to the services." And further, "Thus, it is to be concluded that the fact that the administrative complaint deadline and the judicial challenge period of the assessment act have elapsed did not prevent the challenger from requesting official revision."

Now, as the 4-year period has not elapsed, neither for the 2012 assessment, much less for those of the following years, and there being error attributable to the services, the Tax Authority could only revise the assessments as requested and not deny the request as it did.

Given this conclusion, the tribunal considers it unnecessary to assess the consequences of the alleged lack of prior hearing invoked by the claimant.

3.2 – On the request for compensatory interest

Given the illegality of the assessments by having been levied on a Taxable Property Value erroneously determined, by an error attributable to the services, by not taking into account the elements declared by the taxpayer nor justifying the procedure, and with a view to the provisions of article 46 of the Municipal Property Transfer Tax Code[15], section 3, applicable by reference to article 49, section 2 of the Stamp Duty Code, compensatory interest is owed, provided for in article 43 of the General Tax Law, thus leaving the Tax Authority obliged to reconstruct the situation that would have existed if the annulled act had not been carried out, as per article 100 of the General Tax Law.

Proven the payment of the Stamp Duty in question by the claimant, the claimant has the right to payment of compensatory interest in the precise terms of the cited article 43, section 1 of the General Tax Law and article 61 of the Tax Code of Procedure and Process.

IV – DECISION

Given the foregoing, the tribunal decides as follows:

a) To declare the request for arbitration well-founded given the verified illegality of the Stamp Duty assessments for the years 2012, 2013 and 2014, in the total amount of € 43,846.71 (€ 14,615.57 for each year), with the consequent annulment and reimbursement of the amount unduly paid.

b) To declare that the reimbursement of the amount unduly paid should be accompanied by compensatory interest, calculated at the legal rate, from the date on which the payment occurred to the date on which the reimbursement occurs.

c) To set the value of the case at € 43,846.71 in accordance with the provisions contained in article 299, section 1, of the Code of Civil Procedure[16], article 97-A of the Tax Code of Procedure and Process, and article 3, section 2, of the Rules of Costs in Tax Arbitration Proceedings[17].

d) To set the costs, pursuant to section 4 of article 22 of the RJAT, in the amount of € 2,142.00 in accordance with the provisions of Table I referred to in article 4 of the Rules of Costs in Tax Arbitration Proceedings, which are borne by the respondent.

Notify.

Lisbon, 23 May 2017

Document prepared on computer, in accordance with article 131, section 5 of the Code of Civil Procedure, applicable by reference from article 29, section 1, paragraph e) of the RJAT, with blank lines and reviewed by the tribunal.

The arbitrator,

Arlindo José Francisco

[1] Acronym for Tax Identification Number for Legal Entity
[2] Acronym for Legal Framework for Tax Arbitration
[3] Acronym for Tax and Customs Authority
[4] Acronym for Stamp Duty
[5] Acronym for Administrative Arbitration Centre
[6] Acronym for General Stamp Duty Table
[7] Acronym for Taxable Property Value
[8] Acronym for Municipal Property Tax
[9] Acronym for Municipal Property Tax Code
[10] Acronym for Tax Code of Procedure and Process
[11] Acronym for Administrative Process
[12] Acronym for General Tax Law
[13] Acronym for Stamp Duty Code
[14] Acronym for Financial Services Office
[15] Acronym for Municipal Property Transfer Tax Code
[16] Acronym for Code of Civil Procedure
[17] Acronym for Rules of Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) and when does it apply to property?
Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) was introduced by Law 55-A/2012 of 29 October and amended by Law 83-C/2013 of 31 December. It levies Stamp Tax on the ownership of high-value real property. Specifically, Verba 28.1 applies to urban buildings with a Taxable Property Value (Valor Patrimonial Tributário - VPT) exceeding €1,000,000. The tax is charged annually based on the VPT registered for Municipal Property Tax (IMI) purposes. Properties valued below this threshold are exempt from this particular Stamp Tax charge.
Can Stamp Tax (IS) liquidations be annulled if the Valor Patrimonial Tributário (VPT) was incorrectly calculated?
Yes, Stamp Tax (Imposto do Selo) liquidations can potentially be annulled if the Valor Patrimonial Tributário (VPT) was incorrectly calculated, particularly when the error results in taxation below the applicable threshold under Verba 28.1 TGIS. However, the key issue is whether the VPT correction has retroactive effect. In this case, the claimant argued that since the VPT was incorrectly determined ab initio (from the beginning), the Stamp Tax assessments based on the erroneous VPT should be annulled. The Tax Authority's position was that corrections only affect the year of complaint submission forward, not previous years. The legitimacy of annulment depends on demonstrating that the tax lacked proper legal basis due to fundamental errors in the taxable base.
What happens when the VPT of a property is corrected to below the €1,000,000 threshold under Verba 28.1 TGIS?
When the Valor Patrimonial Tributário (VPT) of a property is corrected to below the €1,000,000 threshold under Verba 28.1 TGIS, the property becomes exempt from Stamp Tax on property ownership. In this case, when the VPT was reduced from €1,408,730.00 to €426,850.00, the Tax Authority annulled the Stamp Tax for 2015 (the year following the complaint). However, the critical legal question is whether this correction produces retroactive effects for prior years (2012-2014). The Tax Authority maintained that corrections under Article 130 CIMI only produce effects from the year of complaint presentation forward, not retrospectively. The claimant contested this interpretation, arguing that if the error existed ab initio, all assessments based on the incorrect VPT should be annulled.
What is the legal deadline and procedure to challenge a property's VPT under Article 130 of the CIMI?
Article 130 of the Municipal Property Tax Code (CIMI) establishes the procedure for challenging property valuations through a complaint regarding the property register (reclamação da matriz). Taxpayers can file complaints when they identify errors in the property valuation or other registry data. The complaint must be submitted to the Tax Authority, which will review the valuation and make necessary corrections if warranted. In this case, the claimant filed the complaint in December 2015, and the Tax Authority acknowledged the error, correcting the VPT from €1,408,730.00 to €426,850.00. The Tax Authority's position is that corrections produce effects only from the year of complaint submission forward, pursuant to Article 130 CIMI. The claimant did not initially request a second valuation under Article 76 CIMI or object under Article 97(1)(f) and Article 134 of the Tax Procedure Code (CPPT) when the original valuation was determined.
Does a corrected VPT by the tax authority (AT) retroactively affect prior years' Stamp Tax liquidations?
According to the Tax Authority's interpretation in this case, a corrected VPT does not retroactively affect prior years' Stamp Tax liquidations. The AT maintains that corrections made pursuant to complaints under Article 130 CIMI only produce effects from the year of complaint submission forward, not for previous years. Therefore, when the VPT was corrected in response to the December 2015 complaint, the Tax Authority annulled only the 2015 Stamp Tax assessment, maintaining the liquidations for 2012, 2013, and 2014. The claimant challenged this position, arguing that since the VPT was incorrectly determined ab initio (due to calculation errors from the beginning), the correction should apply retroactively to all years affected by the erroneous valuation. The claimant's request for official revision under Article 78 of the General Tax Law (LGT) was rejected as untimely. This case presents the fundamental question of whether VPT corrections have prospective or retroactive temporal scope for Stamp Tax purposes.