Process: 829/2014-T

Date: May 27, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 829/2014-T) addresses whether Stamp Tax under item 28.1 of the General Stamp Tax Rate Table (TGIS) applies to construction land (terrenos para construção) in Portugal. The claimant company challenged Stamp Tax assessments totaling €16,939.30 for 2013 on four urban properties classified as land for construction, with combined patrimonial tax values exceeding €5 million. The central legal question was whether construction land constitutes property with residential allocation under Verba 28.1 TGIS. The taxpayer argued that land for construction, by definition, lacks residential allocation since no residential building exists, making the assessments unlawful under Article 1 of the Stamp Tax Code and item 28.1 TGIS. The Tax Authority contended the properties had legal nature of residential allocation properties, justifying the tax assessments. After waiving oral hearings, the arbitral tribunal examined property records confirming all four properties were registered as land for construction. The legal framework requires item 28.1 TGIS to apply specifically to urban properties for residential purposes. Construction land, being undeveloped and intended for future building, typically cannot be classified as having current residential allocation. This distinction is crucial for Stamp Tax liability, as the tax basis under Verba 28 TGIS depends on actual residential use rather than potential future use. The claimant also sought compensatory interest (juros indemnizatórios) under Article 43 of the General Tax Law on amounts paid. This case demonstrates taxpayers' rights to challenge property tax assessments through CAAD arbitration when fundamental classification issues affect tax liability, particularly regarding the distinction between developed residential property and undeveloped construction land.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 829/2014 – T

Matter: Stamp Tax, item 28.1 of GSRT, land for construction

Claimants/Applicants: A… – …, S.A.

Respondent: Tax and Customs Authority (hereinafter A.T.A.)

1. Report

On 19-12-2014, the limited company A… – …, S.A., collective person no. …, with registered office at…, …..., hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of an arbitral tribunal for the purpose of annulling the tax acts of assessment of Stamp Tax of item no. 28 of the General Stamp Tax Rate Table (GSRT), relating to the year 2013 and relating to the following urban real properties (land for construction):

  • urban real property registered in the property register under article … of the union of parishes of ..., ... and ..., described in the Property Registration Office of ... under no. …, with the tax patrimonial value of 2.032.711,50 €;

  • urban real property registered in the property register under article … of the union of parishes of ..., ... and ..., described in the Property Registration Office of ... under no. …, with the tax patrimonial value of 1.016.355,75 €;

  • urban real property registered in the property register under article … of the union of parishes of ..., ... and ..., described in the Property Registration Office of ... under no. …, with the tax patrimonial value of 1.016.355,75 €;

  • urban real property registered in the property register under article … of the union of parishes of ..., ... and ..., described in the Property Registration Office of ... under no. …, with the tax patrimonial value of 1.016.355,75 €.

The Claimant requests the annulment of the Stamp Tax assessments corresponding to the first instalment of the tax for the year 2013, whose payment deadline ended on 30-04-2014.

The Claimant further requests the annulment of the consequent express act of rejection of the administrative appeal regarding the said Stamp Tax assessments.

The Claimant alleges that the real property to which the Stamp Tax assessment refers is land for construction, and therefore, does not have residential allocation, whereby the assessments in question are unlawful due to violation of article 1 of the Stamp Tax Code and item 28.1 of the General Stamp Tax Rate Table (GSRT).

The Claimant further requests the reimbursement of the amount of stamp tax paid, in the amount of 16.939,30 €, plus compensatory interest, in accordance with article 43 of the General Tax Law.

A single arbitrator was appointed on 10-02-2015, Suzana Fernandes da Costa.

In accordance with the provisions of article 11, no. 1, paragraph c) of RJAT, the singular arbitral tribunal was constituted on 26-02-2015.

The Tax and Customs Authority submitted its response on 10-04-2015 (within the legal deadline for doing so).

The A.T.A. contends that the request for declaration of unlawfulness and consequent annulment of the disputed assessments should be judged unfounded, since the assessments in question embody a correct interpretation of item 28.1 of the General Stamp Tax Rate Table, given that the said real property has the legal nature of a real property with residential allocation.

The A.T.A. further requested, on the same date, waiver of the holding of the meeting provided for in article 18 of the Tax Arbitration Rules.

Having been notified of this request from the A.T.A., the Claimant informed, on 05-05-2015, that it waived the holding of the meeting, and that it also did not object to waiver of the submission of arguments.

On 06-05-2015, an order was issued waiving the meeting provided for in article 18 of RJAT and waiving the submission of arguments, taking into account the absence of exceptions to be assessed, the position of the parties, and the legal grounds of the procedural documents.

It was also decided in the same order to set 28-05-2015 as the date for the pronouncement of the arbitral decision.

The parties have legal standing and capacity and are legitimate (articles 4 and 10, nos. 1 and 2 of RJAT and article 1 of Regulation no. 112-A/2011 of 22 March).

The present request for arbitral pronouncement was timely submitted, in accordance with article 10, no. 1, paragraph a) of Decree-Law no. 10/2011 of 20 January.

The proceedings do not suffer from nullities and no preliminary issues were raised.

2. Factual Matters

2.1. Proven Facts:

Having analysed the documentary evidence produced, the following facts are deemed proven and material for the decision of the case:

  1. The Claimant is the owner of the urban real property registered in the property register under article … of the union of parishes of ..., ... and ..., described in the Property Registration Office of ... under no. …, which has a tax patrimonial value of 2.032.711,50€, as per the property record annexed to the arbitral request as document 2;

  2. The Claimant is the owner of the urban real property registered in the property register under article … of the union of parishes of ..., ... and ..., described in the Property Registration Office of ... under no. …, which has a tax patrimonial value of 1.016.355,75€, as per the property record annexed to the arbitral request as document 3;

  3. The Claimant is the owner of the urban real property registered in the property register under article … of the union of parishes of ..., ... and ..., described in the Property Registration Office of ... under no. …, which has a tax patrimonial value of 1.016.355,75€, as per the property record annexed to the arbitral request as document 4;

  4. The Claimant is the owner of the urban real property registered in the property register under article … of the union of parishes of ..., ... and ..., described in the Property Registration Office of ... under no. …, which has a tax patrimonial value of 1.016.355,75€, as per the property record annexed to the arbitral request as document 5;

  5. The four real properties identified above are land for construction, as per the property records annexed to the arbitral request;

  6. The Claimant was notified of the Stamp Tax assessment no. 2014 …, relating to the urban article …, notification which also incorporated a document of collection of the first instalment of the tax, in the amount of 6.775,72 €, to be paid by 30-04-2014, as per document 6 annexed to the arbitral request.

  7. The Claimant was notified of the Stamp Tax assessment no. 2014 …, relating to the urban article …, notification which also incorporated a document of collection of the first instalment of the tax, in the amount of 3.387,86 €, to be paid by 30-04-2014, as per document 7 annexed to the arbitral request.

  8. The Claimant was notified of the Stamp Tax assessment no. 2014 …, relating to the urban article …, notification which also incorporated a document of collection of the first instalment of the tax, in the amount of 3.387,86 €, to be paid by 30-04-2014, as per document 8 annexed to the arbitral request.

  9. The Claimant was notified of the Stamp Tax assessment no. 2014 …, relating to the urban article …, notification which also incorporated a document of collection of the first instalment of the tax, in the amount of 3.387,86 €, to be paid by 30-04-2014, as per document 9 annexed to the arbitral request.

  10. The Claimant submitted an administrative appeal of all the Stamp Tax assessments in question in the present proceedings.

  11. The administrative appeal of the Stamp Tax assessments was expressly rejected, and the Claimant was notified of its rejection by registered letter with proof of receipt on 03-12-2014, as per copy of the decision annexed to the arbitral request as document 1.

  12. The Claimant proceeded to pay the stamp tax contained in the assessments referred to above.

No other facts relevant to the decision of the case were proven.

2.2. Reasoning of the Proven Factual Matters:

As regards the proven facts, the arbitrator's conviction was based on the documentary evidence annexed to the proceedings and on the facts admitted by agreement.

3. Legal Matters:

3.1. Object and Scope of the Present Proceedings

The question to be decided in the present proceedings is whether the real properties that were subject to stamp tax assessments, being land for construction, have residential allocation and whether item 28.1 of the General Stamp Tax Rate Table (GSRT) applies to them.

On this same matter, among others, the CAAD decisions handed down in cases number 53/2013-T, 49/2013-T, 42/2013-T, 180/2013-T, 75/2013-T, 215/2013-T, 240/2013-T, 284/2013-T, 288/2013-T, 310/2013-T, 12/2014-T, 151/2014-T, 202/2014-T, 210/2014-T, 276/2014-T, 514/2014-T, 516/2014-T, 523/2014-T and 599/2014-T have already pronounced themselves.

The Supreme Administrative Court has also already pronounced itself on this matter, in particular in the decisions in cases no. 048/14 of 09-04-2014, 0467/14 of 02-07-2014, no. 0676/14 of 09-07-2014, no. 0395/14 of 28-05-2014, no. 01871/13 of 14-05-2014 and no. 055/14 of 14-05-2014, no. 0425/14 of 28-05-2014, no. 0396/14 of 28-05-2014, no. 0274/14 of 14-05-2014 and no. 046/14 of 14-05-2014. By way of example, the decision handed down in case no. 0676/14 of 09-07-2014 states that: "Since the legislator has not defined the concept of "real properties (urban) with residential allocation", and a clear distinction between "residential urban real properties" and "land for construction" results from article 6 of the Municipal Property Tax Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Rate Table – these cannot be considered, for the purposes of the incidence of Stamp Tax (Item no. 28.1 of GSRT, as amended by Law no. 55-A/2012, of 29 October) as urban real properties with residential allocation."

3.2. Question of the Classification of Land for Construction within the Scope of Application of Item 28.1 of GSRT

3.2.1. Regime of Law no. 55-A/2012, of 29 October

Law no. 55-A/2012, of 29 October, added item 28 to the General Stamp Tax Rate Table (GSRT), with the following wording:

28 – Property, usufruct or surface right of urban real properties whose tax patrimonial value recorded in the register, in accordance with the Municipal Property Tax Code (MPTC), is equal to or higher than € 1.000.000 – on the tax patrimonial value used for the purpose of MPT:

28.1 – For real property with residential allocation – 1 % (…);

In the transitional provisions contained in article 6 of that Law no. 55-A/2012, the following rules were established:

c) The tax patrimonial value to be used in the assessment of the tax corresponds to what results from the rules provided for in the Municipal Property Tax Code by reference to the year 2011; (…)

f) The applicable rates are as follows:

i) Real properties with residential allocation assessed in accordance with the Municipal Property Tax Code: 0.5 %;

ii) Real properties with residential allocation not yet assessed in accordance with the Municipal Property Tax Code: 0.8 %;

Item 28.1 GSRT and sub-paragraphs i) and ii) of paragraph f) of no. 1 of article 6 of Law no. 55-A/2012, contains a concept that is not used in any other tax legislation which is that of "real property with residential allocation".

Let us see:

3.2.2. Concept of Real Properties Used in MPTC

In the MPTC, the classes of real properties are enumerated in its articles 3 to 6. There is no concept of "real property with residential allocation" in any of these articles.

The closest notion to the literal sense of this expression used is that of "residential real properties", which no. 2 of article 6 of the MPTC defines as encompassing "buildings or constructions" licensed for residential purposes or, in the absence of a licence, which have as their normal purpose residential purposes.

However, the non-coincidence of the terms of the expression used in item no. 28.1 of GSRT with that which is drawn from no. 2 of article 6 of the MPTC, points to the fact that the same concept was not intended to be used.

Nor is this concept found, with this terminology, in any other legislation.

3.2.3. Concept of "Real Property with Residential Allocation"

Item 28.1 of GSRT referred in 2013 to "real property with residential allocation".

The word "allocation", in this context of use of a real property, has the meaning of "action of designating something for a particular use".

As stated in the CAAD decision handed down in case no. 53/2013-T, in which the arbitrators were Judge Counsellor Jorge Lopes de Sousa, Dr. Conceição Pinto Rosa and Dr. Alberto Amorim Pereira:

"it is to be concluded that the interpretive elements available, including the 'circumstances in which the law was drafted and the specific conditions of the time in which it is applied', clearly point to the fact that it was not intended to encompass within the scope of application of item no. 28.1 situations of real properties that are not yet allocated to residential use, in particular land for construction held by companies".

Those classified as land for construction, and taking into account the provisions of article 6, no. 3 of the Municipal Property Tax Code, are those in which the owner has acquired the right to build thereon or to carry out subdivision operations, as well as those which have been acquired expressly for that purpose. In this sense, see JOSÉ MARIA FERNANDES PIRES in Lectures on Property Taxes and Stamp Tax, Almedina, 2010, page 97.

Note that in the classification as land for construction, the allocation which future constructions may have is irrelevant, in particular residential, commercial, industrial or for services.

For its part, the Supreme Administrative Court decision of 09-07-2014, case no. 0676/14, in which the Counsellor Dulce Neto is the rapporteur, states that "residential allocation always appears in the Municipal Property Tax Code referred to as 'buildings' or 'constructions', existing, authorized or envisaged, since only these can be inhabited, which is not the case with land for construction, which does not have, in itself, conditions for such, not being capable of being used for residential purposes except if and when authorized and envisaged construction is built thereon (but in that case they will no longer be 'land for construction' but another class of urban real properties – 'residential', 'commercial, industrial or for services' or 'other' – article 6 of the MPTC)."

In the same way, in the Supreme Administrative Court decision of 14-05-2014, case no. 046/14, in which Ascenção Lopes is the Rapporteur, it is stated that "since the legislator has not defined the concept of 'real properties (urban) with residential allocation', and a clear distinction between 'residential urban real properties' and 'land for construction' results from article 6 of the Municipal Property Tax Code – subsidiarily applicable to the Stamp Tax provided for in the new item no. 28 of the General Rate Table – these cannot be considered, for the purposes of the incidence of Stamp Tax (Item 28.1 of GSRT, as amended by Law no. 55-A/2012, of 29 October), as urban real properties with residential allocation."

We can thus conclude that "land for construction" cannot be considered as "real property with residential allocation" for the purposes of application of item 28.1 of the General Stamp Tax Rate Table.

Prohibition of Analogy and Extensive Interpretation

One could, on the other hand, raise the question of the possibility of applying analogy to the item provided for in item 28.1 of GSRT. Now, on this matter, no. 4 of article 11 of the General Tax Law provides that:

"4. Lacunae resulting from tax rules covered under the reserve of law of the Parliament are not susceptible of analogical integration"

As regards the matters covered by the reserve of law, attention should be paid to article 103, no. 2 of the Constitution and article 8 of the GTL. According to these rules, the principle of fiscal legality encompasses incidence, the rate, tax benefits and taxpayer guarantees. This is also referred to in the work "The Principle of Fiscal Legality" by Ana Paula Dourado, Almedina, 2007, page 106.

Since item 28.1 GSRT is an incidence rule, covered by the principle of fiscal legality, its analogical application to situations not expressly provided therein is prohibited.

In the same way, nor should an extensive interpretation of the said item be admitted which would allow the inclusion in the expression contained in the law of land for construction. On interpretation, article 11, nos. 1 to 3 of the GTL and article 9 of the Civil Code apply. We understand that an extensive interpretation of the said item is not possible which would include therein land for construction, since it would always have to have a minimum correspondence in the letter of the law, which does not occur.

With regard to the historical element, the fact that item 28.1 GSRT was subsequently expressly amended, with the Budget Law for 2014, so as to include, as from 01.01.2014, land for construction, also allows the conclusion to be drawn that such real properties were not taxed in the wording in force until 31.12.2013.

Application of the Regime to the Claimant's Situation

The Claimant's real properties are land for construction held by a company. For what has been stated, these are not real properties with residential allocation, whereby Stamp Tax provided for in item 28.1 of GSRT does not apply to these real properties.

For this reason, the assessments whose declaration of unlawfulness is requested suffer from the defect of violation of that item no. 28.1 GSRT, due to error regarding the legal premises, which justifies the declaration of their unlawfulness and annulment (article 135 of the Administrative Procedure Code).

4. On Compensatory Interest

The Claimant requested that the A.T.A. be ordered to refund the unduly paid tax, plus compensatory interest in accordance with article 43 of the General Tax Law.

Article 43, no. 1 of the GTL provides that "compensatory interest is due when it is determined, in administrative appeal or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due".

In the case in question, the error that affects the assessments is attributable to the Tax and Customs Authority which carried out the assessment acts on its own initiative, whereby the Claimant is entitled to compensatory interest from the date of payment of each amount until reimbursement, at the legal default rate, in accordance with articles 43, nos. 1 and 4, and 35, no. 10, of the GTL, article 559 of the Civil Code and Regulation no. 291/2003, of 8 April.

As results from the said article 43, no. 1 of the GTL, the right to compensatory interest depends on payment of a tax debt in an unduly higher amount.

Given that the Stamp Tax assessments for the year 2013, no. 2014 … in the amount of 6.775,72 €, no. 2014 … in the amount of 3.387,86€, no. 2014 … in the amount of 3.387,86 € and no. 2014 … in the amount of 3.387,86€, are unlawful, compensatory interest is owed from the date of payment until complete reimbursement by the AT, in accordance with articles 43 of the GTL and 61, no. 2 of the Tax Procedure Code.

5. Decision

In light of the above, it is determined:

a) to judge as well-founded the request made by the Claimant in the present tax arbitral proceedings, as to the unlawfulness of the Stamp Tax assessments for the year 2013, no. 2014 … in the amount of 6.775,72 €, no. 2014 … in the amount of 3.387,86€, no. 2014 … in the amount of 3.387,86 € and no. 2014 … in the amount of 3.387,86€.

b) to judge as well-founded the request to order the Tax and Customs Authority to refund to the Claimant the amount paid of 16.939,30 €, plus compensatory interest in accordance with the legal terms, from the date such payment was made until the date of complete reimbursement thereof.

6. Value of the Case:

In accordance with the provisions of article 315, no. 2, of the Civil Procedure Code and 97-A, no. 1, paragraph a) of the Tax Procedure Code and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at 16.939,30 €.

7. Costs:

In accordance with article 22, no. 4, of RJAT, and Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at 1.224,00 € owed by the Tax and Customs Authority.

Notify.

Lisbon, 27 May 2015.

Text drawn up by computer, in accordance with article 138, no. 5 of the Civil Procedure Code (CPC), applicable by reference to article 29, no. 1, paragraph e) of the Tax Arbitration Rules, reviewed by me.

The Single Arbitrator

Suzana Fernandes da Costa

Frequently Asked Questions

Automatically Created

Is Stamp Tax under Verba 28.1 of the TGIS applicable to construction land (terrenos para construção) in Portugal?
No, Stamp Tax under Verba 28.1 of the TGIS is not applicable to construction land (terrenos para construção) in Portugal. Item 28.1 of the General Stamp Tax Rate Table specifically applies to urban properties for residential purposes. Construction land, being undeveloped and lacking actual residential buildings, does not have residential allocation and therefore falls outside the scope of this tax provision. The legal classification as 'land for construction' in property records confirms the absence of residential use, making such assessments unlawful under Article 1 of the Stamp Tax Code.
Can a taxpayer challenge Stamp Tax assessments on urban properties through CAAD tax arbitration?
Yes, taxpayers can challenge Stamp Tax assessments on urban properties through CAAD (Centro de Arbitragem Administrativa) tax arbitration. The arbitration procedure allows taxpayers to contest the legality of tax assessments, including those related to Stamp Tax under item 28 of the TGIS. The process involves filing an arbitration request within the legal deadline after exhausting administrative appeals. CAAD provides an alternative dispute resolution mechanism that is faster than traditional court litigation for resolving tax disputes involving property taxation.
What is the legal basis for contesting Imposto de Selo on land without residential designation?
The legal basis for contesting Imposto de Selo (Stamp Tax) on land without residential designation is Article 1 of the Stamp Tax Code combined with item 28.1 of the TGIS (General Stamp Tax Rate Table). Item 28.1 specifically requires properties to have residential allocation for the tax to apply. Taxpayers can argue that construction land, by its legal nature and classification in property records, lacks residential allocation since no residential building exists. The tax incidence depends on actual residential use, not potential future use, making assessments on undeveloped construction land a violation of the legal requirements for Stamp Tax applicability under this specific provision.
How does the patrimonial tax value (valor patrimonial tributário) affect Stamp Tax liability under Verba 28 TGIS?
The patrimonial tax value (valor patrimonial tributário/VPT) serves as the tax base for calculating Stamp Tax liability under Verba 28 TGIS when the tax applies. The annual Stamp Tax rate is applied to the VPT of qualifying properties. However, the VPT alone does not determine whether the tax is due—the property must first meet the legal requirement of having residential allocation. Even properties with high patrimonial values, if classified as construction land without residential use, should not be subject to item 28.1 taxation. The VPT becomes relevant only after confirming the property qualifies as residential under the applicable legal framework.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) when Stamp Tax liquidations on construction land are annulled?
Yes, taxpayers are entitled to compensatory interest (juros indemnizatórios) when Stamp Tax liquidations on construction land are annulled, pursuant to Article 43 of the General Tax Law (Lei Geral Tributária). When tax assessments are declared unlawful and annulled by arbitral decision, amounts paid must be reimbursed with compensatory interest calculated from the payment date until actual reimbursement. This right compensates taxpayers for the financial loss caused by paying unlawful taxes. The interest is automatic upon annulment of the tax assessment and does not require separate proof of damages, reflecting the principle that the State must compensate taxpayers for illegal tax collection.