Process: 812/2014-T

Date: July 3, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral decision addresses the application of Verba 28 of the General Stamp Tax Table (TGIS) to a vertical property regime building. The taxpayer challenged stamp tax assessments totaling €12,468.00 for 2013, arguing that a 15-storey building with independent units should not be taxed as a single luxury property under Verba 28. The central dispute concerns whether properties in vertical ownership (not constituted as horizontal property) with individual units valued below €1,000,000 should be assessed collectively or individually. The claimant contended that: (1) each independent unit has separate tax patrimonial values ranging from €79,300 to €187,240, none exceeding the €1,000,000 threshold; (2) the property includes mixed uses (residential, commercial, parking), not exclusively residential luxury use; (3) taxation should follow IMI rules with individual assessments per unit; and (4) aggregating values for vertical property while exempting horizontal property with identical characteristics violates constitutional principles of tax equality and legality (CRP Articles 101, 103, 104, 165 and LGT Articles 5, 7, 8). The case highlights critical distinctions in Portuguese tax law between vertical and horizontal property regimes and their impact on stamp tax liability for high-value properties, raising fundamental questions about proportionality, tax justice, and the scope of luxury property taxation introduced to combat tax evasion.

Full Decision

ARBITRAL DECISION

CASE NO. 812/2014-T

  1. REPORT

1.1. A…, taxpayer no. …, submitted on 15/12/2014 a request for arbitral pronouncement, in which he petitions for a declaration of illegality of the stamp tax assessment acts of the year 2013, in the total amount of € 12,468.00.

1.2. His Excellency the President of the Deontological Council of the Administrative Arbitration Centre (CAAD) appointed on 05/02/2015 Francisco Nicolau Domingos as arbitrator.

1.3. On 20/02/2015 the tribunal was constituted.

1.4. In compliance with the provision of art. 17, no. 1 of Decree-Law no. 10/2011, of 20 January (RJAT), the Respondent was notified on 27/02/2015 to, if it so wished, submit a reply and request the production of additional evidence.

1.5. On 09/04/2015 the Respondent submitted its reply and therein requested the waiver of the holding of the arbitral hearing referred to in art. 18 of the RJAT, as well as the production of arguments.

1.6. The tribunal, on 04/05/2015 ordered the notification of the Claimant to state whether it intended the holding of the hearing referred to in art. 18 of the RJAT.

1.7. The Claimant on 19/05/2015 submitted a request, in which it argues that it has no objection to the waiver of the holding of the aforementioned hearing.

1.8. The tribunal on 11/06/2015 decided to waive the holding of the hearing referred to in art. 18, no. 1 of the RJAT, granted a deadline to the parties to, if they so wished, submit final arguments and scheduled the date of 03/07/2015 for the pronouncement of the final decision, on the basis of the principle of the autonomy of the arbitral tribunal in the conduct of the proceedings and in the determination of the rules to be observed with a view to obtaining, within a reasonable timeframe, a pronouncement on the merits of the claims formulated, cf. art. 16, lit. c) of the RJAT.

  1. PRELIMINARY EXAMINATION

The joinder of the claims underlying the request for arbitral pronouncement is admissible, inasmuch as it concerns assessment acts of the same tax, that of stamp duty. The identity between the matter of fact is also verified and because the success of the claim depends on the interpretation of the same principles and rules of law, cf. art. 3, no. 1 of the RJAT.

The proceedings do not suffer from nullities, no questions have been raised that prevent the examination of the merits of the case, the arbitral tribunal is regularly constituted and is materially competent to hear and decide the claim, consequently verifying the conditions for the final decision to be pronounced.

  1. POSITIONS OF THE PARTIES

There are two positions in confrontation, that of the Claimant, set out in the request for arbitral pronouncement and that of the Respondent in its reply.

In summary, the Claimant understands that:

a) "None of the (…) notifications contain, nor the grounds, nor the legal basis of the tax whose payment is sought by the Tax Authority, and the one that is stated is wrong…";

b) "The property, despite consisting of 15 storeys and divisions with independent use, is not constituted in horizontal property regime."

c) "Each of the independent storeys has a tax patrimonial value assigned to it, determined in accordance with the CIMI, comprised between € 79,300.00 and € 187,240.00."

d) "The tax due by the situations provided for in entry 28 must be assessed annually in relation to each urban property, by the central services of the Tax and Customs Authority and must be paid within the deadlines, terms and conditions defined in art. 120 of the CIMI and, if there is cause for tax assessment, the collection document is issued within the deadlines, terms and conditions defined in art. 119 of the CIMI…"

e) "…it is clear that the present law aimed, beyond combating tax fraud and evasion, the special and more onerous taxation of the ownership of luxury property, namely, of luxury urban properties with a value exceeding €1,000,000.00 with exclusively residential use."

f) "Outside such taxation, and therefore, remained properties with commercial and/or industrial use."

g) "If that was the case and that is how it was intended, how now does the Tax Authority intend to tax as a luxury property a property devoted simultaneously to residential and commercial use?..."

h) "On the other hand, it is verified that the taxation of this new stamp tax is completely ruled out, with regard to properties with the same values and characteristics, provided that they are constituted in horizontal property regime, which is, to say the least, the source of enormous inequality, disproportionality and tax injustice, when all the fractions belong to the same owner!"

i) "The law demands (…) that in all aspects of its application, be it in the determination, assessment, collection and respective deadlines, the applicable provisions are followed, with the necessary adaptations, with respect to IMI…"

j) "On the other hand, the registration in the matrix of properties in vertical property, consisting of units or divisions capable of independent use, follows the same rules as the registration of properties constituted in horizontal property regime, with the respective IMI, as well as the new stamp tax, being assessed individually in relation to each of the parts."

k) "Thus, how can one accept the interpretation and application by the Tax Authority, with regard to this new tax of entry 28 of the TGIS, of considering the value of the entire property and, notwithstanding, by force of the applicable provisions, having to issue collection notices and individualised assessments?"

l) "The answer can only be one: such a solution cannot be accepted, under penalty of violation of the principle of the prevalence of material truth over juridical-formal reality, a principle that for purposes of the static taxation of assets has been – and rightly – long consolidated; as indeed, and very rightly, was already questioned by His Excellency the Ombudsman to the Secretary of State for Tax Affairs, which it seems, to this day, has received no reply!!!"

m) "This procedure, of considering the value of the entire property in vertical property with units or divisions of independent use, is in total opposition to the spirit underlying the provision contained in entry 28 of the TGIS amended by the said law, which expressly requires that account be taken of the tax patrimonial value used for the purpose of IMI."

n) "Property in horizontal property regime or in full ownership, which results from the conjunction thereof made in articles 2 and 6 of the CIMI and from fiscal-legal practice, is each of the autonomous units, which are individually evaluated and pay IMI separately – Urban Property is, certainly, the fraction of a building in horizontal property regime or an autonomous unit of a building in full property regime."

o) "The property subject to the taxation which is now being challenged, not being constituted in horizontal property regime, is a property consisting of several autonomous and independent units, 12 devoted to residential use, 2 devoted to commerce and 1 to parking, and not a set of a large area devoted to the residential luxury use of the respective owner, in which the Tax Patrimonial Value of any of those units exceeds € 1,000,000.00."

p) "On the other hand, the existence of shops and parking in the property deprives it of the exclusively residential character which seems to underlie the wording of entry 28 of the TGIS, whereby, neither would the stamp tax be applicable to it through that avenue either…"

q) "Taxing the property in the present case in this manner is contrary to the most elementary rules and principles of justice, tax equity and tax legality, violating the most elementary principles of tax law and the Fundamental Law, today so commonly forgotten, the Constitution of the Portuguese Republic, designated and respectively articles 5, 7 and 8 of the LGT and articles 101, 103, 104 and 165 of the CRP, which is invoked here for all legal purposes."

r) "The stamp tax assessments hereinafter referred to should be annulled accordingly, the notifications for payment of the undue taxes being consequently annulled and rendered without effect, be it with regard to the 1st as to the 2nd and 3rd instalments already notified to the taxpayer, with condemnation of the Tax Authority to the payment of all costs resulting from this arbitral proceeding, all with the due, necessary and legal consequences."

In another manner, the Respondent argues that:

a) "The present claimant is the owner of a property under the full or vertical property regime. From the notion of property in article 2 of the CIMI, only the autonomous fractions of property under horizontal property regime are deemed to be properties – no. 4 of the cited article 2 of the CIMI…"

b) "Given that the property of which it is the owner is under the full property regime, it does not possess autonomous fractions, to which tax law attributes the qualification of property."

c) "Thus, the present claimant, for purposes of IMI and also of stamp tax, by force of the wording of the said entry, is not the owner of 15 autonomous fractions, but rather of a single property."

d) "Having accepted this fact, what the claimant seeks is for the TA to consider, for purposes of the assessment of the present tax, that there is an analogy between the regime of full property and that of horizontal property, given that there should not be discrimination in the tax-legal treatment of these two property regimes, as this would be illegal."

e) "…to claim that the interpreter and applicator of tax law apply, by analogy, to the full property regime, the horizontal property regime is what is abusive and illegal..."

f) "And the interpreter of tax law cannot equate these regimes, in accordance with the rule according to which the concepts of other branches of law have in tax law the meaning given to them in those branches of law, or in the words of article 11, no. 2 of the LGT…"

g) "On the other hand, also taking into account 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 are observed, as provided in article 11, no. 1 of the LGT which thus refers to the Civil Code, its article 10 on the application of analogy, determines that this will only be applicable in case of gaps in the law."

h) "Now tax law contains no such gap. The CIMI determines, to which the said entry refers, that in the horizontal property regime the fractions constitute properties. The property not being subject to this regime, juridically the fractions are parts capable of independent use, without there being common parts."

i) "We cannot, therefore, accept that it be considered, for purposes of entry 28.1 of the General Table attached to the CIS, that the parts capable of independent use have the same tax regime as the autonomous fractions of the horizontal property regime."

j) "Given that the property is subject to the full property regime, but being physically constituted by parts capable of independent use, tax law attributed relevance to this materiality, evaluating these parts individually, in accordance with art. 12 and consequently, in accordance with art. 12, no. 3, of the CIMI, each storey or part of a property capable of independent use is considered separately in the matricial registration, but in the same matrix, proceeding to the assessment of IMI taking into account the tax patrimonial value of each part."

k) "The storeys or independent divisions, evaluated in accordance with art. 12, no. 3 of the CIMI, are considered separately in the matricial registration, which equally discriminates the respective tax patrimonial value on which IMI is assessed."

l) "Such legal provision is therefore relevant, for purposes of registration in the property matrix, to the autonomy that, within the same property, may be attributed to each of its parts, economically and functionally independent."

m) "The unit of urban property in vertical property composed of several storeys or divisions is not, however, affected by the fact that all or some of those storeys or divisions are capable of independent economic use."

n) "Such property does not cease, by the fact of being only one, to be, thus, its distinct parts are not juridically equated to the autonomous fractions in horizontal property regime."

o) "The fact that IMI has been determined based on the tax patrimonial value of each part of property with independent economic use does not equally affect the application of entry 28, no. 1, of the General Table."

p) "It is what results from the fact that the determining factor for the application of that entry of the General Table is the total tax patrimonial value of the property and not separately that of each of its parcels."

q) The Respondent further argues that another interpretation would be unconstitutional as: "…it would violate (…) the wording and the spirit of entry 28.1 of the General Table and the principle of legality of the essential elements of the tax provided for in art. 103, no. 2, of the Constitution of the Portuguese Republic (CRP)."

r) "It is the function of the law – Law of the Assembly of the Republic and authorized Decree-Law – to establish the essential elements of tax incidence."

s) "A type of incidence according to which the tax patrimonial value of urban properties on which the application of entry 28.1 of the General Table depends is the tax patrimonial value of each storey or division capable of independent use and not the total tax patrimonial value of the urban property with residential use certainly has no expression whatsoever in the law."

t) "It is, therefore, unconstitutional, as offensive of the principle of tax legality, the interpretation of entry 28.1 of the General Table, to the effect that the tax patrimonial value on which its incidence depends is determined globally and not storey by storey or division by division."

u) "In truth, horizontal property and vertical property are differentiated legal institutions."

v) "The constitution of horizontal property implies, it is a fact, a mere juridical alteration of the property, there being no new evaluation…"

w) "The legislator may, however, subject to a distinct tax-legal framework, and therefore discriminatory, properties under horizontal and vertical property regimes, in particular, benefiting the juridically more developed institution of horizontal property, without such discrimination being necessarily deemed arbitrary."

x) "Such discrimination may also be imposed by the need to impose coherence to the tax system."

y) "The fact that the present claimant legitimately disagrees with such discrimination does not imply the violation of any constitutional principle."

z) "The taxable event of the stamp tax of entry 28.1, consisting in the ownership of urban properties whose tax patrimonial value recorded in the matrix, in accordance with the CIMI, is equal to or exceeding € 1,000,000.00, the tax patrimonial value relevant for purposes of the incidence of the tax is, thus, the total tax patrimonial value of the urban property and not the tax patrimonial value of each of the parts that compose it, even when capable of independent use."

  1. MATTER OF FACT

4.1. FACTS DEEMED PROVED

4.1.1. The Claimant is the owner of the property to which corresponds the registration …, Urban, Union of Parishes of Coimbra – … (…), Coimbra.

4.1.2. Such property comprises 15 parts and storeys with independent use, registered in the urban property matrix of the Union of Parishes of Coimbra – … (…) as follows:

a) Annex, with a TPV of € 79,300.00, commerce;

b) Cellar, with a TPV of € 187,240.00, parking;

c) Ground floor, with a TPV of € 178,060.00, commerce;

d) 1st Right, with a TPV of € 105,770.00, residential;

e) 1st Left, with a TPV of € 102,030.00, residential;

f) 2nd Right, with a TPV of € 105,770.00, residential;

g) 2nd Left, with a TPV of € 102,030.00, residential;

h) 3rd Right, with a TPV of € 105,770.00, residential;

i) 3rd Left, with a TPV of € 102,030.00, residential;

j) 4th Right, with a TPV of € 105,770.00, residential;

l) 4th Left, with a TPV of € 102,030.00, residential;

m) 5th Right, with a TPV of € 105,770.00, residential;

n) 5th Left, with a TPV of € 102,030.00, residential;

o) 6th Right, with a TPV of € 105,770.00, residential;

q) 6th Left, with a TPV of € 102,030.00, residential.

4.1.3. The Claimant was notified of the stamp tax assessments relating to the year 2013, in relation to each of such matricial registrations, with residential use, in the total amount of € 12,468.00 and which break down as follows:

a) 1st Right, in the amount of € 1,057.70;

b) 1st Left, in the amount of € 1,020.30;

c) 2nd Right, in the amount of € 1,057.70;

d) 2nd Left, in the amount of € 1,020.30;

e) 3rd Right, in the amount of € 1,057.70;

f) 3rd Left, in the amount of € 1,020.30;

g) 4th Right, in the amount of € 1,057.70;

h) 4th Left, in the amount of € 1,020.30;

i) 5th Right, in the amount of € 1,057.70;

j) 5th Left, in the amount of € 1,020.30;

l) 6th Right, in the amount of € 1,057.70;

m) 6th Left, in the amount of € 1,020.30.

4.1.4. The property identified in 4.1.1. was not constituted under the horizontal property regime as at 31 December 2013.

4.2. FACTS NOT DEEMED PROVED

There are no facts relevant to the arbitral decision that have not been accepted as proved.

4.3. GROUNDS FOR THE MATTER OF FACT DEEMED PROVED

The matter of fact accepted as proved originates from the documents used for each of the alleged facts and whose authenticity was not questioned. Equally, the facts not contested were also accepted as established.

  1. THE LAW

In the first place, the Claimant imputes to the assessments in question a formal defect, that is, the lack of substantiation of such acts. In other words, it argues that the assessments are not substantiated, as, in its judgment, it is not possible to understand the reasons for the decision, especially because they do not contain any factual or legal motivation.

Jurisprudence states with regard to the substantiation of the assessment act that: "The act will be sufficiently substantiated when the taxpayer, placed in the position of a normal recipient – the bonus pater familiae referred to in art. 487, no. 2 of the Civil Code – may understand the factual and legal reasons that are at its origin, so as to allow him to opt, in an informed manner, between the acceptance of the act or the activation of the legal means of challenge, and in such a way that, in this latter circumstance, the court may also exercise effective control of the legality of the act, assessing its legal correctness in light of its contextual substantiation."[1]. Or, put differently, the substantiation must incorporate elements of fact and law that allow the recipient of the act to understand the decision-making process of the TA.

In the case sub judice, it is possible to discern in the assessments the reference to the identification of the registered storeys, their tax patrimonial value, the year of the tax, the date of assessment, the entry of the TGIS and the rate used to determine the amount of tax and, finally, the amount of the collection. For this reason, the tribunal understands that the acts are sufficiently substantiated, given that they contain the minimum references to the matter of fact and law used by the Respondent for their execution. Moreover, the alleged lack of substantiation of such acts did not constitute any obstacle to the Claimant requesting their annulment in a pleading in which it imputes to the assessments a series of defects. In sum, the acts do not suffer from the defect of lack of substantiation that the Claimant attributes to them.

With regard to the merits, there are two questions that the tribunal must decide: to ascertain whether the subjection to the incidence norm of entry 28 of the TGIS should be concretized by the TPV corresponding to each of the parts, storeys or divisions capable of independent use, or, if on the contrary, by the sum of the TPV of each of such parts. And, secondly, to determine whether the interpretation which concludes that there is Stamp Tax incidence only when the TPV of each of the divisions capable of independent use exceeds € 1,000,000.00, violates the principle of legality of the essential elements of the tax, provided for in art. 103, no. 2 of the CRP.

To accomplish such a task, it is necessary, from the outset, to seek the norm whose parts are in dispute as to its interpretation.

Thus, art. 1, no. 1 of the Stamp Tax Code (CIS) and entry 28 of the General Table of Stamp Tax (TGIS), provide that the following are subject to taxation: "Ownership, usufruct or right of surface of urban properties whose tax patrimonial value recorded in the matrix, in accordance with the Municipal Property Tax Code (CIMI), is equal to or exceeding € 1,000,000.00 – on the tax patrimonial value used for the purpose of IMI:

28.1 - For property with residential use - 1%..."[2].

In this way, it is necessary to examine the concept of "property with residential use" to which the norm under interpretation refers and that of "tax patrimonial value used for the purpose of IMI". Now, as it is not possible to resolve the question using the CIS, it is by force of the provision of art. 67, no. 2 of the CIS necessary to apply the norms of the Municipal Property Tax Code (CIMI).

Consequently, art. 2 of the CIMI provides on the concept of property:

"1 - For purposes of the present Code, property is every fraction of territory, including waters, plantations, buildings and constructions of any kind incorporated therein or established thereon, with a character of permanence, provided that it forms part of the assets of a natural or legal person and, in normal circumstances, has economic value, as well as waters, plantations, buildings or constructions, in the circumstances aforesaid, endowed with economic autonomy in relation to the land where they are located, although situated in a fraction of territory that constitutes an integral part of other assets or has no patrimonial nature.

2 - Buildings or constructions, even if moveable in nature, are deemed to have a character of permanence when devoted to non-transitory purposes.

3 - The character of permanence is presumed when the buildings or constructions are established in the same location for a period exceeding one year.

4 - For purposes of this tax, each autonomous fraction, in the horizontal property regime, is deemed to constitute a property."

Now, the concept of property under IMI is, as we know, endowed with greater breadth in relation to that set out in 204, no. 2 of the Civil Code (CC) and encompasses three elements, more specifically, one of a physical nature, the second of a legal character and the last of an economic nature, J. SILVÉRIO MATEUS/L. CORVELO DE FREITAS, The taxes on real estate property. Stamp Tax, Engisco, 2005, pp. 101 to 103 and JOSÉ MARTINS ALFARO, Municipal Property Tax Code – Commented and Annotated, Áreas Editora, 2004, pp. 118 to 123. The first requires a reference to a fraction of territory, encompassing, in particular, buildings and constructions incorporated therein with a character of permanence. The element of a legal character requires that the thing, moveable or immoveable, belongs to the assets of a natural or legal person. Thirdly, the element of an economic nature requires that the thing has an economic value.

With regard to the concept of urban property, art. 6 of the CIMI describes its various categories, being fundamental for the subsumption in each of them, the nature of the use, that is, the purpose to which it is devoted. And nothing in the economy of art. 6, no. 1, lit. a) of the CIMI prevents the classification of the parts of a property in vertical property regime, with divisions or storeys capable of independent use, with a residential use, as "property with residential use". What is relevant is, it is repeated, its use. And a different conclusion is not possible to arrive at through the interpretation of art. 2, no. 4 of the CIMI which elevates each autonomous fraction in horizontal property to the category of property. In truth, neither in this latter provision can any basis be discerned for discriminating between properties in horizontal property regime and properties in vertical property regime, with storeys or divisions capable of independent use, as regards their subsumption as urban and residential properties, in accordance with the entire economy of entry 28 of the TGIS. In other words, if the legislator did not treat differently properties in vertical property regime in relation to those constituted in horizontal property regime, the interpreter should not do so[3].

Quite the contrary, the matricial registration and the determination of the TPV clearly demonstrate the similarity of legislative treatment. In effect, the parts endowed with economic independence must, each of them, be the object of separate matricial registration and, consequently, the respective TPV should equally appear autonomously, cf. art. 2, no. 4, art. 7, no. 2, lit. b) and art. 12, no. 3 all of the CIMI. This has a bearing with regard to assessment, in that there will be one for each part, division or storey that is the object of separate use.

Reverting such interpretation to the present case, there are 12 storeys/divisions of the property with independent residential use which, on the date of the taxable event, 31 December 2013, was not yet constituted in horizontal property regime and, consequently, from the outset, no doubts exist that the same should be classified as "property with residential use" of an urban nature.

It is also important to clarify the other textual segment of the CIS entry under interpretation, that is, the "tax patrimonial value for the purpose of IMI".

In this respect, as already described above, the CIMI provides for the autonomization of the parts of urban property capable of independent use with regard to the matricial registration and the specification of the respective TPV. Such observation is equally valid with regard to the consequent assessment, as provided for in art. 113, no. 1 and art. 119, no. 1, both of the latter cited statute. In effect, if the tax is assessed "…on the basis of the tax patrimonial values of the properties (our emphasis) and in relation to the taxpayers that appear in the matrices (our emphasis)…" and the collection document must contain the "…discrimination of the properties, their parts capable of independent use, respective tax patrimonial value and the collection…", this means that, not only the TPV for purposes of applying entry 28.1 of the TGIS to be considered is that which is the object of separate matricial registration, but also nothing prevents the qualification as "property with residential use" of parts, storeys or divisions with independent use.

Now, if none of the Claimant's storeys with residential use exceeded the TPV of € 1,000,000.00, the incidence norm in question cannot be applicable to the case sub judice, under penalty of illegality. And it is not by reason of the fact that, as the Claimant argues, the use is not residential in all storeys with independent use, that any one of them would be excluded from the incidence of the Stamp Tax entry under interpretation. It is repeated, what is relevant, for determining the scope of such norm, on which the parts disagree in its interpretation: i) That the storey capable of independent use has a TPV exceeding € 1,000,000.00 and ii) That the said storey has a residential use.

The Respondent further argues that it would be unconstitutional, by violation of the principle of legality of the essential elements of the tax, the interpretation of entry 28.1 of the TGIS different from that which concludes that the TPV relevant for such incidence norm must be the total tax patrimonial value of the property and not that of each of its independent parts. If such were the case, the express reference to "tax patrimonial value used for the purpose of IMI" would not be understood. And that, no doubts exist, is the object of autonomization in relation to each of the parts capable of independent use. Equally, we would also not find argument for the issuance of autonomous assessment notices. It is further added that, given the express referral of art. 67, no. 2 of the CIS to the CIMI, with regard to matters not regulated, the parts, storeys or divisions with autonomy are classifiable within the properties classified as urban and residential, cf. art. 2, 3 and 6, all of the CIMI. In this manner, it is understood that the said interpretation does not suffer from unconstitutionality.

Finally, the Claimant requests in its petition the "payment of costs and all expenses arising from the proceedings".

Now costs, in arbitral proceedings, are denominated as expressly and specifically described by art. 2, no. 1 of the Regulation of Costs in Tax Arbitration Proceedings, as arbitration fee and incorporate the expenses arising from the conduct of the arbitral proceedings and the fees of the arbitrators. In other words, they do not encompass the reimbursement of any other expenses resulting from the dispute or the fees of legal representatives. In truth, art. 2, no. 2 of the latter cited provision provides that: "Any expenses arising from the appointment of experts, translators, interpreters and other expenses related to the production of evidence shall be borne directly by the parties."

For this reason, the request for condemnation to expenses must fail, which, moreover, were not even alleged in the request for arbitral pronouncement. But even if they had been, this tribunal would not have normative competence to condemn the Respondent to the reimbursement of such expenses. Along these lines, jurisprudence holds: "By deciding to condemn the Tax Administration to the payment of other expenses arising from the dispute, as well as to the fees of legal representatives, the arbitral tribunal exceeded the competence – which is, moreover, restrictive – that is legally conferred upon it, whereby the arbitral decision pronounced, in this respect, suffers from the defect of undue pronouncement…", cf. ruling of the Central Administrative Court South of 12/06/2014, pronounced in the context of appeal no. 6224/12 and in which the rapporteur was His Excellency Judge PEDRO MARCHÃO MARQUES.

  1. DECISION

In these terms and with the substantiation above, the tribunal decides to adjudge the arbitral petition partially well-founded, with the consequent annulment of the assessment acts which are the object of the case. Moreover, the Claimant's claim for condemnation of the Respondent to the payment of expenses is rejected.

  1. VALUE OF THE CASE

The value of the case is fixed at € 12,468.00 (corresponding to the sum of the assessments which are the object of the pronouncement) in accordance with art. 97-A of the CPPT, applicable by force of the provision of art. 29, no. 1, lit. a) and b) of the RJAT and of art. 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

  1. COSTS

Costs borne by the Respondent, in the amount of € 918.00, cf. art. 22, no. 4 of the RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, insofar as the claim for annulment of the Stamp Tax assessments above identified succeeded in full.

Let notification be made.

Lisbon, 3 July 2015

The Arbitrator,

Francisco Nicolau Domingos

[1] Ruling of the Supreme Administrative Court of 23/04/2014, pronounced in the context of case no. 01690/13 and in which the rapporteur was Advisor ASCENSÃO LOPES.

[2] As worded on the date of the taxable event.

[3] See in this sense the arbitral decision pronounced in case no. 50/2013 – T, of 29/10/2013, in which the functions of arbitrator were performed by Dr. MARIA DO ROSÁRIO ANJOS.

Frequently Asked Questions

Automatically Created

What is Verba 28 of the Tabela Geral do Imposto do Selo (TGIS) and how does it apply to high-value properties?
Verba 28 of the TGIS (General Stamp Tax Table) imposes an annual stamp tax on high-value urban properties with tax patrimonial values exceeding €1,000,000 used for residential purposes. Introduced to combat tax fraud and evasion while specially taxing luxury property ownership, this provision requires annual assessment by the Tax and Customs Authority's central services based on the tax patrimonial value used for IMI (Municipal Property Tax) purposes. The tax is assessed and collected following the deadlines, terms and conditions defined in Articles 119 and 120 of the CIMI (Municipal Property Tax Code). The provision primarily targets exclusively residential luxury properties, with the €1,000,000 threshold serving as the trigger for this special taxation regime on property ownership.
How does the distinction between vertical property and horizontal property affect Stamp Tax liability in Portugal?
The distinction between vertical property (propriedade vertical) and horizontal property (propriedade horizontal) is crucial for Stamp Tax liability under Verba 28 of the TGIS. In horizontal property regime, each autonomous fraction is individually registered in the property matrix, evaluated separately, and pays IMI individually - thus each fraction is treated as an independent urban property for tax purposes. For vertical property consisting of units capable of independent use but not formally constituted as horizontal property, the Tax Authority's position has been to aggregate the entire building's value for Verba 28 assessment, even when individual units have separate tax patrimonial values. This creates potential inequality where identical properties owned by the same person face different tax treatment based solely on their legal constitution. The claimant argues that vertical properties with independent units should follow the same registration and assessment rules as horizontal property, with stamp tax assessed individually per unit rather than collectively, particularly when no individual unit exceeds the €1,000,000 threshold.
Can Stamp Tax assessments be challenged through CAAD arbitration proceedings under the RJAT?
Yes, Stamp Tax (Imposto do Selo) assessments can be challenged through CAAD (Centro de Arbitragem Administrativa) arbitration proceedings under the RJAT (Legal Regime for Tax Arbitration - Decree-Law 10/2011 of 20 January). The RJAT establishes the framework for arbitral tax dispute resolution, including procedural rules for claim submission, tribunal constitution, reply submission, evidence production, and final decision pronouncement. In this case, the arbitral tribunal was properly constituted with jurisdiction to hear stamp tax disputes, the proceedings allowed both parties to present arguments and evidence, and the parties could waive the arbitral hearing by mutual agreement. Tax arbitration provides an alternative to judicial courts for resolving tax disputes, offering a specialized forum for technical tax matters with arbitrators experienced in tax law. The CAAD's competence extends to declaring the illegality of tax assessment acts, including stamp tax liquidations, based on substantive and procedural grounds.
What are the legal grounds for declaring Stamp Tax liquidation acts illegal in Portuguese tax law?
Legal grounds for declaring Stamp Tax liquidation acts illegal in Portuguese tax law include: (1) violation of constitutional principles enshrined in Articles 101 (tax system justice), 103 (tax legality and equality), 104 (progressive taxation), and 165 (parliamentary tax law reservation) of the Portuguese Constitution; (2) breach of General Tax Law (LGT) principles in Articles 5 (tax legality), 7 (tax equity and equality), and 8 (prevalence of material substance over legal form); (3) incorrect legal basis or erroneous application of tax provisions; (4) lack of proper grounds in assessment notifications; (5) violation of CIMI provisions regarding property valuation and assessment procedures; (6) disproportionality and discrimination in tax treatment of comparable situations; (7) misapplication of the tax patrimonial value determination criteria; and (8) procedural irregularities in assessment, collection, or notification. Taxpayers can invoke both substantive illegality (wrong interpretation or application of tax rules) and formal illegality (procedural defects) to challenge stamp tax assessments.
Does a building with independent units that is not constituted as horizontal property fall under the Stamp Tax surcharge of Verba 28?
Whether a building with independent units not constituted as horizontal property falls under Verba 28's Stamp Tax surcharge depends on the interpretation of 'urban property' for tax purposes. The taxpayer's position argues that vertical properties with autonomous units capable of independent use should be treated identically to horizontal property fractions - each unit assessed individually based on its separate tax patrimonial value used for IMI purposes. Since none of the individual units exceed €1,000,000 (ranging from €79,300 to €187,240), the surcharge should not apply. Furthermore, the property's mixed use (residential, commercial, parking) contradicts the 'exclusively residential' luxury character underlying Verba 28's legislative intent. The Tax Authority's contrary position aggregates the entire building's value for assessment purposes. The resolution hinges on whether the principle of material substance over legal form and CIMI provisions regarding property registration and valuation require individual unit assessment regardless of formal horizontal property constitution, particularly given that IMI itself is assessed per independent unit even in vertical property situations.