Process: 78/2015-T

Date: July 28, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

Process 78/2015-T addresses whether Stamp Tax under item 28.1 of the General Table of Stamp Tax (TGIS) applies to building plots (terrenos para construção). A property fund challenged Stamp Tax assessments for 2011 (€8,641.15) and 2012 (€17,282.30) on a Lisbon building plot valued at €1,728,230.00. The claimant argued that item 28.1, in its pre-2014 wording, applied only to 'properties with residential use' and could not encompass building plots, which lack actual residential use. The fund contended that building plots were only explicitly included from January 1, 2014, making prior assessments illegal due to improper retroactive application. The Tax Authority countered that building plots possess the legal nature of residential properties, citing Article 67(2) of the Stamp Tax Code which incorporates Municipal Property Tax Code definitions. The Authority argued that since use coefficients apply when determining property values for building plots, their residential designation cannot be ignored for Stamp Tax purposes. The case also involves a compensation claim for bank guarantee costs incurred to suspend enforcement proceedings. This arbitration illustrates critical issues regarding the temporal application of tax legislation, the interpretation of 'residential use' for Stamp Tax purposes, and taxpayers' rights to challenge high-value property assessments through CAAD arbitration.

Full Decision

ARBITRAL DECISION[1]

  1.  Report

A - General

1.1. Fund A…, with tax identification number …, with registered office in Lisbon, at …, n.º …, ….º, legally represented by company B…, S.A., corporate entity number …, with registered office at the same address (hereinafter referred to as "Claimant"), filed, on 09.02.2015, a request for constitution of an arbitral tribunal in tax matters, seeking the declaration of illegality of the acts of assessment of Stamp Tax No. 2011 …, relating to the year 2011, in the amount of € 8,641.15 (eight thousand six hundred and forty-one euros and fifteen cents) and No. 2012 …, relating to the year 2012, in the amount of € 17,282.30 (seventeen thousand two hundred and eighty-two euros and thirty cents), which was accepted, seeking, on the one hand, the annulment of the tax assessment acts of Stamp Tax for the years 2011 and 2012, relating to item 28.1 of the General Table of Stamp Tax (hereinafter "GTST"), relating to a property of which it is the owner, as will be seen further below, and on the other hand, compensation for the damages suffered by it due to the provision of an undue bank guarantee intended to suspend the tax enforcement proceedings instituted against it due to its failure to pay the assessed amounts.

1.2. Pursuant to the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council of the Administrative Arbitration Center (CAAD) appointed Nuno Pombo as arbitrator, and the Parties, after being duly notified, raised no objection to this appointment.

1.3. By ruling of 19.02.2015, the Tax and Customs Authority (hereinafter referred to as "Respondent") appointed Ms. Dr. C… to participate in the present arbitral proceedings, in the name and representation of the Respondent.

1.4. In accordance with the provisions of subparagraph c) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 17.04.2015.

1.5. On 21.04.2015, the highest-ranking official of the Respondent's service was notified to, if it so wished, within a period of 30 days, submit a reply and request the production of additional evidence.

1.6. On 26.05.2015, the Respondent submitted its reply.

B – Position of the Claimant

1.7. The Claimant is the owner of a building plot that was registered in the property register under article …, of the parish of …, municipality of Lisbon, with a property value of € 1,728,230.00 (one million seven hundred and twenty-eight thousand two hundred and thirty euros), to which corresponds the cadastral card that the Claimant attaches to its request as document No. 5, the contents of which are hereby reproduced (hereinafter referred to as "Property").

1.8. The Claimant was notified of the Stamp Tax assessments (hereinafter referred to as "ST") referred to in 1.1., the collection documents of which were attached to the request for arbitral ruling as documents Nos. 3 and 4, the contents of which are hereby reproduced, which were based on Article 1 of the Stamp Tax Code (hereinafter the "STC") and on item 28.1 of the GTST, added by Article 4 of Law No. 55-A/2012, of 29 October, and as regards the first of the assessments, also on sub-subparagraph i) of subparagraph f) of paragraph 1 of Article 6 of the same Law.

1.9. The Claimant did not proceed to pay the assessed amounts of which it became aware, and consequently, the appropriate tax enforcement proceedings were instituted against it.

1.10. The Claimant, seeking to suspend the said tax enforcement proceedings, provided a guarantee for payment of the taxes demanded of it by the assessments referred to above, as is confirmed by the document attached to the request for arbitral ruling under No. 6, the contents of which are hereby reproduced, requesting compensation for the damages suffered by it with the issuance of an undue bank guarantee.

1.11. The Claimant alleges, in the first place, that item 28 of the GTST, in the wording in force until 31.12.2013, did not apply to building plots, as these could not be subsumed under the concept of "properties with residential use", which is why the assessments in question suffer from the defect of error regarding the factual presuppositions, being therefore illegal.

1.12. Building plots only began to be subsumed under item 28 of the GTST from 01.01.2014, and the assessments being challenged are illegal, as they predate that date, and retroactive effects or an interpretative nature cannot be attributed to the aforementioned normative change.

1.13. The Claimant further considers that even the licensing of the work cannot be an indicator of the designation of a building plot for residential use, insofar as licensing is not in itself a guarantee of the materialization of the construction that would result in effective residential use.

C – Position of the Respondent

1.14. The Respondent, in turn, maintains the understanding that the identified building plot has "the legal nature of a property with residential use", accordingly defending the maintenance of the tax assessment acts which are the object of the request for arbitral ruling.

1.15. The Respondent's understanding results from the fact that there is, in the context of Stamp Tax, no definition of the concepts of "urban property", "building plot" and "residential use", which requires recourse to the Municipal Property Tax Code (the "MPTC"), in compliance with the provisions of paragraph 2 of Article 67 of the STC, as amended by Law No. 55-A/2012, of 29 October, it being necessary to conclude that the notion of designation of an urban property "is found in the section relating to the assessment of properties" and if "for the purposes of determining the property value for tax purposes of building plots it is clear that the application of the use coefficient in the context of assessment" is applied, then "its consideration for the purposes of applying item 28 of the GTST cannot be ignored".

D – Conclusion of the Report and Case Management

1.16. By ruling of 20.06.2015, with the consent of the Parties, the arbitral tribunal dispensed with the hearing provided for in Article 18 of the Legal Regime of Tax Arbitration (LRTA), since they had already provided the tribunal with the factual elements necessary and sufficient for the issuance of the decision.

1.17. The arbitral tribunal is materially competent, pursuant to the provisions of Articles 2, paragraph 1, subparagraph a) of the LRTA.

1.18. The Parties have legal personality and capacity and have standing in accordance with Article 4 and paragraph 2 of Article 10 of the LRTA, and Article 1 of Ordinance No. 112-A/2011, of 22 March.

1.19. The joinder of claims made in the present request for arbitral ruling, in deference to the principle of procedural economy, is justified since the assessment acts being contested are based on the same factual basis and call for the application of the same rules of law, and the compensation claim submitted is equally acceptable in principle, since, without prejudice to what is further stated in section 3.1.4. below, Article 3 of the LRTA, by expressly admitting the possibility of "joinder of claims even if relating to different acts", accommodates, without hermeneutical abuse, the consideration of a claim that arises, in necessary terms, from the judgment that the arbitral tribunal renders on the validity of the assessments being challenged.

1.20. The proceedings do not suffer from any nullity and the Parties did not raise any exceptions that would prevent the consideration of the merits of the case, so the conditions are met for the issuance of the arbitral decision.

  1.  Statement of Facts

2.1. Proven Facts

2.1.1. The Claimant is the sole owner of the Property (doc. No. 5, attached to the request for arbitral ruling).

2.1.2. The Property was described as a building plot (doc. No. 5, attached to the request for arbitral ruling).

2.1.3. The Property was assigned a property value for tax purposes of € 1,728,230.00 (one million seven hundred and twenty-eight thousand two hundred and thirty euros) (docs. Nos. 3 to 5 attached to the request for arbitral ruling).

2.1.4. For the purposes of determining its property value for tax purposes, the Property was assigned residential use (consent of the Parties).

2.1.5. The Claimant was notified of the ST assessments referred to in the collection notes attached to the request for arbitral ruling under the designation of documents Nos. 3 and 4.

2.1.6. The Claimant did not proceed to pay the amount assessed ex officio by the Respondent (Article 56 of the request for arbitral ruling).

2.1.7. The Respondent, following the voluntary non-payment of the taxes demanded by the assessments now being challenged, instituted two tax enforcement proceedings against the Claimant: No. … 2014 … and No. … 2014 … (consent of the Parties).

2.1.8. The Claimant, with a view to suspending the tax enforcement proceedings referred to in 2.1.7., submitted a bank guarantee dated 29.04.2014 (doc. No. 6, attached to the request for arbitral ruling).

2.1.9. The issuance of the bank guarantee referred to in 2.1.8. has costs for the Claimant, the final quantification of which depends on the determination of the period during which it will remain in force (docs. Nos. 7 and 8, attached to the request for arbitral ruling).

2.2. Unproven Facts

There are no facts relevant to the consideration of the merits of the case that have been deemed unproven.

  1.  Legal Issues

3.1. Questions to be Decided

It follows from what has been stated above that the questions to be considered are, fundamentally, two:

a) Whether, as of the date to which the facts relate, a building plot is a property "with residential use" for the purposes of applying Article 1 of the STC and item 28.1 of the GTST, added by Article 4 of Law No. 55-A/2012, of 29 October; and

b) Whether, if the claim for a declaration of illegality and consequent annulment of the assessments being contested is upheld, the Claimant, within the scope of the present arbitral proceedings, may obtain a judgment condemning the Respondent to compensate it for the damages suffered by it due to the provision of an undue bank guarantee.

3.2. Item 28.1 of the GTST

Law No. 55-A/2012, of 29 October, among various amendments it made to the STC, added, by its Article 4, item 28 to the GTST, which reads as follows:

"28 - Ownership, usufruct or right of superficies of urban properties whose property value for tax purposes shown in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or greater than € 1,000,000 - on the property value for tax purposes used for the purpose of MPT:

28.1 - For a property with residential use - 1%;

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

With the heading "transitional provisions", Article 6 of Law No. 55-A/2012, of 29 October, and with relevance to what must be decided, established the following:

1 — In 2012, the following rules must be observed with reference to the assessment of stamp tax provided for in item No. 28 of the respective General Table:

a) The taxable event occurs on 31 October 2012;

b) The taxpayer is the one mentioned in paragraph 4 of Article 2 of the Stamp Tax Code on the date referred to in the preceding subparagraph;

c) The property value for tax purposes to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code with reference to the year 2011;

d) The assessment of the tax by the Tax and Customs Authority must be carried out by the end of November 2012;

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

f) The applicable rates are as follows:

i) Properties with residential use assessed in accordance with the MPT Code: 0.5%;

ii) Properties with residential use not yet assessed in accordance with the MPT Code: 0.8%;

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

As can be seen, item 28.1 refers to "properties with residential use". Now, not only does this concept not appear defined in any provision of the STC, but it is also not used in the MPTC, the statute to which Article 67, paragraph 2 of the STC expressly refers when matters not regulated in the STC are at issue relating to item 28.

3.3. The Meaning and Scope of the Concept of "Property with Residential Use"

The meaning and scope of the concept of "property with residential use" cannot be determined without considering the meaning of the word "use" itself. And this must be found in dictionaries, taking advantage of the careful study by lexicographers. Thus, "residential use" [afectação habitacional], according to the Dictionary of Contemporary Portuguese Language, of the Academy of Sciences of Lisbon, is the action of destining something for a specific use, and "to use" [afectar], consequently, is synonymous with destining for a specific use or function.

a) The rules of interpretation of tax norms

The issue to be considered does not dispense with, rather it requires, that one determine the meaning and scope of the concept of "property with residential use" to which item 28.1 of the GTST appeals. In the absence of a legal definition, whether in the STC or in any other statute, the interpreter-applicator of this provision has the duty to invoke the norms that govern the necessary hermeneutical exercise.

There is truly no special regime for the interpretation of tax norms. Paragraph 1 of Article 11 of the General Tax Law provides that, "in determining the meaning of tax norms and in qualifying the facts to which they apply", "the general rules and principles of interpretation and application of laws" must be observed.

The general principles of interpretation and application of laws are those established in Article 9 of the Civil Code:

ARTICLE 9

(Interpretation of law)

  1. Interpretation must not be restricted to the letter of the law, but must reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was drawn up and the specific conditions of the time in which it is applied.

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

  3. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his intent in adequate terms.

It should be noted, however, that the interpretation of norms, including tax norms, is not exhausted in a lexical exercise. It does not involve only, or even primarily, the dissection of vocabulary. What is at issue, therefore, is not knowing exactly what "property with residential use" means, but rather determining the meaning and scope of this concept within the context of item 28.1 of the GTST. That is to say, to emphasize, there will only be procedural utility to the hermeneutical effort, within the scope of this specific request for arbitral ruling, if it is directed at discerning whether the legislator, with the wording chosen for item 28.1 of the GTST, intended to include therein urban properties qualified as building plots.

b) "Residential use" – residential properties and properties with residential use

The Respondent contends that the use of the property is a coefficient that contributes to its assessment, which we believe to be indisputable. However, the question now at issue is whether item 28 of the GTST, in the wording we must consider, encompasses both built properties and building plots.

Article 6, paragraph 1 of the STC, with taxonomic concern, distinguishes "residential properties" from "building plots". The former shall be, pursuant to paragraph 2 of the same article, buildings or constructions licensed for such purpose or, in the absence of such license, those which have such purpose as their normal destination. Building plots, on the other hand, are clarified in paragraph 3 of the provision to which we have been referring, are those for which a license or authorization has been granted, a prior notification has been admitted or favorable prior information for a subdivision or construction operation has been issued, and also those which have been so declared in the acquisition title, with some exceptions.

It is thus clear that a building plot is not, according to this classification, a residential property. The question now is whether "property with residential use", a concept used by item 28.1 of the GTST, corresponds, despite the literal diversity, to "residential property", a notion employed in the classification just visited.

Use, by what we have learned from lexicographers, invokes the destination given to a certain asset. "Residential", in turn, is relative to residence, this being, in turn, and according to the Dictionary we have been using, a place or house in which one lives or dwells. Now, residential use cannot suggest any other meaning than the action of giving to a certain asset – in this case the Property, which is, recall, a building plot – the destination of a house or place where one lives.

It is known that the MPTC makes, in various provisions, use of the expression "use". It does so, for example:

· In Article 3, when referring, regarding rural properties, to use generating agricultural income;

· In Article 9, when it imposes on taxpayers the duty to report to the tax authorities that a building plot has come to form part of the inventory of a company whose business is the construction of buildings for sale or that a property has come to form part of the inventory of a company whose business is the sale thereof;

· In Article 27, when it relates certain buildings and constructions to the production of agricultural income.

In all the situations presented, as can be seen, the use is not referred to in potential terms, of calling or of expectation. It is precisely the contrary. It suggests an effective or direct destination, to use a phrase that the legislator appeals to in Article 27.

However, the MPTC also makes abundant use of the expression "use" when it sets forth the rules that must apply to determining the property value for tax purposes of urban properties (articles 38 and following of the MPTC). It is important, then, to see whether we can extract from the rules of property value determination any useful element that would allow us to determine the meaning and scope of the concept of "property with residential use".

c) The Relevance of the Rules for Determining Property Value for Tax Purposes

The Respondent maintains that the "notion of use of the urban property is found in the section relating to the assessment of properties" and, moreover, that "for the purposes of determining the property value for tax purposes of building plots it is clear that the application of the use coefficient in the context of assessment applies, so its consideration for the purposes of applying item 28 of the GTST cannot be ignored".

It is true that in determining the property value for tax purposes of building plots, attention has been given, not without difficulties, to the "use" of what may be built on it.

However, as the Respondent rightly points out, "the mere establishment of a right of potential construction immediately increases the value of the property in question", based, precisely, on what may be constructed on it. Therefore, as the Respondent very well explains, Article 45 of the MPTC "requires separating the two parts of the land": on the one hand, we must consider "the part of the land where [more correctly, where it may come to be] the building to be constructed is to be erected, and on the other the area of free land. Once the amount of the first part is determined, the value determined is reduced to a percentage between 15% and 45% (…), by virtue of the construction not yet being effectuated". It is clear that the application of that percentage allows precisely for consideration of the circumstance that there is not yet construction, but it does not authorize the legislator to ignore that the economic, or market, value of a building plot is related to its constructive capacity.

To state what precedes does not mean, however, that the legislator felt the need to impose automatic and necessary taxation, in the context of Municipal Property Tax, on all building plots. It is enough to read what is provided in subparagraph d) of the already mentioned Article 9 of the MPTC:

ARTICLE 9

(Beginning of taxation)

  1.  The tax is due from:

(…)

d) The 4th year following, inclusive, that in which a building plot came to form part of the inventory of a company whose business is the construction of buildings for sale;

(…)

That is, even if the legislator finds it reasonable, as it seems to be, to determine the property value for tax purposes of a building plot taking into account its constructive capacity and, let us concede for the sake of argument, the nature or calling of what may be built on it, it is nevertheless symptomatic that it has opted, at the same time, to suspend such taxation in cases where such building plots form part of the inventory of a company whose business is the construction of buildings for sale. In cases where, one could also say, these urban properties form part of a productive process that tends to continue and to produce, downstream, fruits which are also taxable.

If the primary meaning of "use", as we have stated, suggests an effective, direct destination given to a specific asset, we do not see how this understanding can be undermined by the finding that the legislator, in the context of the assessment of building plots, authorizes (to admit that it does authorize) the use of the use coefficient, with a view to what may come to be built on it. In reality, it does not seem reasonable to admit in this scenario the recourse to rules for determining the taxable matter to broaden the scope of the rules of incidence.

d) Position Adopted

Given the foregoing, the arbitral tribunal holds that it is necessary, in interpreting the provisions of item 28.1 of the GTST with the wording applicable to the case before us, the understanding that the residential use of an urban property suggests that it be given that effective destination, or that it be capable of being directly given that destination. Since, as it seems to us, a building plot is not included in that item, in terms of objective scope. It thus seems to us that a building plot, by its very nature, cannot be associated with residential use as suggested by item 28.1 of the GTST.

It cannot be said that this judgment collides with the possibility of seeing applied to a construction plot the use coefficient referred to in Section II of Chapter VI of the STC. In truth, one thing is the rules that the legislator imposes to determine the property value for tax purposes of building plots, it being not unusual that attention be given to their constructive capacity and the nature and calling of what may be built on them, another, quite different, is to claim that these rules are invoked to define the field of scope of the rules of incidence.

In fact, the interpretation adopted here is in harmony with what appears to have been the intention of the Government, the author of the proposal that resulted in this imprecise legislative intervention.

When presenting and discussing, in Parliament, bill No. 96/XII (2nd), the Secretary of State for Tax Affairs explicitly stated[2]:

"The Government proposes the creation of a special tax on high-value urban residential properties. It is the first time in Portugal that a special tax has been created on high-value properties intended for residential purposes. This tax will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to houses valued at equal to or greater than 1 million euros."

Now, the Secretary of State for Tax Affairs presents this bill referring to the expressions "urban residential properties", which are those contained in subparagraph a) of paragraph 1 of Article 6 of the STC, and "houses", and it is clear that, in both cases, building plots, referred to in subparagraph c) of the cited provision, are not, without further ado, encompassed by these concepts.

Thus, notwithstanding the unfortunate nature of the legislative technique and without prejudice to the wording currently in force, it is abundantly clear that item 28.1 of the GTST, as of the date of the facts, cannot be interpreted as encompassing building plots, for the reasons set out above. Rather, it seems that the meaning and scope of the concept of "properties with residential use" is equivalent to that of "residential properties" mentioned in subparagraph a) of paragraph 1 of Article 6 of the STC.

3.4. Compensation for Provision of Undue Guarantee

The Claimant also submits a claim for compensation for the provision of an undue guarantee.

Claims of this nature are not novel at CAAD, with several decisions supporting their cognizability by arbitral tribunals[3]. As has already been briefly stated, this arbitral tribunal also understands itself to be competent to know of that claim.

Subparagraph b) of paragraph 1 of the LRTA provides that "the arbitral decision on the merits of a claim which is not subject to appeal or challenge binds the tax administration from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the period provided for voluntary execution of judgments of tax courts, restore the situation that would exist if the tax act which is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for this purpose".

It is not ignored that the legislative authorization granted to the Government by Article 124 of Law No. 3-B/2010, of 28 April, on the basis of which the LRTA was approved, determines that the tax arbitral proceeding constitutes an alternative procedural means to the judicial challenge proceeding and to the action for recognition of a right or legitimate interest in tax matters. Although subparagraphs a) and b) of paragraph 1 of Article 2 of the LRTA base the competence of arbitral tribunals on "declarations of illegality", it seems reasonable the understanding that their competences include the powers that in judicial challenge proceedings are attributed to tax courts, it being certain that in judicial challenge proceedings, beyond the annulment of tax acts, claims for compensation may be considered, whether they relate to compensatory interest or to the provision of undue guarantees.

With effect, the principle of cognizability of compensation claims, in administrative recourse or in judicial proceedings, is justified whenever the damage which is sought to be compensated results from a fact attributable to the tax and customs administration. Manifestations of this principle can be found in paragraph 1 of Article 43 of the General Tax Law (GTL) and in paragraph 4 of Article 61 of the Code of Tax Procedure and Process (CTPP).

Specifically regarding compensation in case of an undue guarantee, Article 171 of the CTPP refers, it being clear from this provision that the claim for compensation may be known in the proceeding in which the legality of the debt being enforced is contested, which is necessary for reasons of procedural economy, since the right to compensation for a guarantee unduly provided depends on what is decided regarding the legality or illegality of the assessment act. Thus, it must be concluded that the arbitral proceeding must also be deemed appropriate for considering the claim for compensation for a guarantee unduly provided.

The regime for the right to compensation for a guarantee unduly provided is contained, as the Claimant rightly notes, in Article 53 of the GTL, which establishes the following:

Article 53

Guarantee in Case of Undue Provision

  1. The debtor who, to suspend enforcement, provides a bank guarantee or equivalent shall be compensated in whole or in part for the damages resulting from its provision, if he has kept it for a period exceeding three years in proportion of the success in administrative appeal, judicial challenge or opposition to enforcement that have as their object the guaranteed debt.

  2. The period referred to in the preceding paragraph does not apply when it is verified, in administrative recourse or judicial challenge, that there was error attributable to the services in the assessment of the tax.

  3. The compensation referred to in paragraph 1 has as its maximum limit the amount resulting from the application to the guaranteed value of the rate of compensatory interest provided for in this law and may be requested in the administrative recourse or judicial challenge proceeding itself, or autonomously.

(…)

In the case now before us, as has been stated, the assessment acts being contested are illegal, since the norms on which they are based do not prove applicable to the factuality of the case, error which cannot fail to be attributable to the Respondent since the said assessments are of its exclusive initiative and responsibility.

Consequently, the arbitral tribunal understands that the Claimant has the right to be compensated for the damages suffered by it with the issuance of the guarantee unduly provided, being equivalent to the costs which it had to bear with that issuance, costs whose determination depends on knowledge of the period during which the said guarantee is to remain in force, it being certain that until 31.01.2015, those costs amounted to € 1,499.22 (one thousand four hundred and ninety-nine euros and twenty-two cents).

It will always be necessary to determine whether the costs borne by the Claimant with the issuance of the bank guarantee unduly provided exceed the limit set in paragraph 3 of Article 53 of the GTL, based on the application to the guaranteed value (in its respective proportion) of the rate of compensatory interest. Since the guarantee still remains valid, it is not possible to determine the effective costs nor, consequently, to carry out the necessary arithmetic operation, so it will have to be carried out at a later time.

Thus, the amount of compensation to which the Claimant is entitled will have to be determined in execution of this decision, in accordance with the provisions of Article 609 of the Code of Civil Procedure, applicable by virtue of subparagraph e) of paragraph 1 of Article 29 of the LRTA.

  1.  Decision

Based on the foregoing grounds and provisions, the arbitral tribunal decides:

a) To uphold the request for arbitral ruling with the consequent annulment of the assessments being challenged, with all legal consequences;

b) To uphold the claim for compensation for guarantee unduly provided, condemning the Respondent to pay the Claimant the compensation which shall be determined in execution of the present decision.

  1.  Value of the Case

In accordance with the provisions of paragraph 2 of Article 306 of the Code of Civil Procedure, Article 97-A of the CTPP and also paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at € 27,422.67 (twenty-seven thousand four hundred and twenty-two euros and sixty-seven cents).

  1.  Costs

For the purposes of the provisions of paragraph 2 of Article 12 and paragraph 4 of Article 22 of the LRTA and paragraph 4 of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at € 1,530.00 (one thousand five hundred and thirty euros), in accordance with Table I attached to the said Regulation, to be borne entirely by the Respondent.

Lisbon, 28 July 2015

The Arbitrator

(Nuno Pombo)

[1] Text prepared by computer, in accordance with paragraph 5 of Article 131 of the Code of Civil Procedure, applicable by reference to subparagraph e) of paragraph 1 of Decree-Law No. 10/2011, of 20 January.

[2] See DAR I Series No. 9/XII -2, of 11 October, page 32.

[3] See, by way of example, the decisions issued in the context of cases numbered 233/2013-T, 112/2013-T and 36/2013-T.

Frequently Asked Questions

Automatically Created

Does Stamp Tax (Imposto do Selo) under Verba 28.1 of the TGIS apply to building land (terrenos para construção)?
The application of Stamp Tax under Verba 28.1 of the TGIS to building land was contested in this case. The claimant argued that before 2014, item 28.1 applied only to 'properties with residential use' and building plots could not be included in this concept since they lacked actual residential occupation. The Tax Authority maintained that building plots have the legal nature of residential properties, particularly when use coefficients for residential purposes are applied in property valuation under the Municipal Property Tax Code. The dispute centers on whether the concept of 'residential use' encompasses potential future use (building plots with residential licensing) or requires actual current use.
Can a taxpayer challenge Stamp Tax assessments on high-value properties through CAAD arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on high-value properties through CAAD (Centro de Arbitragem Administrativa) arbitration. This case demonstrates that property funds and other taxpayers have standing to contest Stamp Tax liquidations through the arbitral tribunal system. The CAAD accepted jurisdiction under Article 2(1)(a) of the Legal Regime of Tax Arbitration (LRTA). Taxpayers can request annulment of tax assessments and may join compensation claims for damages suffered, such as bank guarantee costs incurred to suspend enforcement proceedings pending the arbitration outcome.
What are the grounds for annulling Stamp Tax liquidations on building plots under Portuguese tax law?
The grounds for annulling Stamp Tax liquidations on building plots under Portuguese tax law include: (1) error regarding factual presuppositions - arguing the property does not qualify as having 'residential use' under item 28.1 of GTIS; (2) improper retroactive application of legislation - claiming that building plots were only explicitly included in the tax base from January 1, 2014, making prior assessments illegal; (3) incorrect legal classification - contending that construction licensing alone does not guarantee materialization of residential use; and (4) misapplication of legal definitions - challenging the Tax Authority's reliance on Municipal Property Tax Code concepts without explicit authorization in the Stamp Tax Code's original wording.
Is a property fund entitled to reimbursement for bank guarantee costs when contesting Stamp Tax assessments?
The property fund in this case requested compensation for damages suffered due to providing an undue bank guarantee to suspend tax enforcement proceedings. Article 3 of the LRTA permits joinder of claims, including compensation claims arising from the main challenge to tax assessments. While the tribunal acknowledged this compensation claim was acceptable in principle, the actual entitlement depends on: (1) successful annulment of the underlying Stamp Tax assessments proving they were illegally imposed; (2) demonstration that the bank guarantee costs constitute recoverable damages; and (3) establishing a direct causal link between the illegal tax assessments and the financial harm suffered. The final determination of this compensation claim would be addressed in the tribunal's decision.
How is the taxable value (valor patrimonial tributário) determined for building land under Verba 28.1 of the TGIS?
The taxable value (valor patrimonial tributário) for building land under Verba 28.1 of the TGIS is determined by reference to the property value established for Municipal Property Tax purposes. In this case, the building plot had a registered property value of €1,728,230.00. According to Article 67(2) of the Stamp Tax Code (as amended by Law 55-A/2012), concepts not defined in the STC should resort to the Municipal Property Tax Code (MPTC). The Tax Authority argued that when determining property values for building plots, use coefficients are applied during the assessment process under the MPTC, and these coefficients reflect the designated use (residential, commercial, etc.). Therefore, the taxable value incorporates assumptions about the plot's intended use, which the Tax Authority contended should inform the application of item 28.1 for Stamp Tax purposes.