Process: 833/2014-T

Date: April 22, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 833/2014-T) addresses a critical dispute regarding Stamp Tax (Imposto de Selo) under item 28.1 of the General Stamp Tax Table (TGIS) on vertical property ownership. Ten claimants, acting as heads of estates and individual owners, challenged Stamp Tax assessments totaling €14,248.80 for 2013 on urban property comprising multiple autonomous floors under a vertical ownership regime. The central legal issue concerns whether the €1,000,000 threshold in item 28.1 TGIS applies to each individual floor or division (autonomous unit) within vertical property, or whether the Tax Authority can aggregate the Tax Registry Values (VPT) of all separate units to determine taxability. The claimants argued that the assessments violated the legal incidence rule of item 28.1 TGIS, as none of the individual floors possessed a VPT equal to or exceeding €1,000,000 when considered separately. They contended that aggregating values from independent units distorts the tax statute's intent and creates unconstitutional discrimination. The claimants invoked Articles 13 and 104(3) of the Portuguese Constitution, arguing that the Tax Authority's interpretation breached equality principles by treating vertical property differently from other ownership structures. They supported their position by citing multiple CAAD precedents recognizing that stamp tax on high-value property should assess each autonomous unit individually under vertical ownership regimes. This case exemplifies recurring disputes in Portuguese tax arbitration concerning the proper application of wealth taxes to property under condominium regimes, highlighting tensions between tax collection objectives and constitutional guarantees of equal treatment under tax law.

Full Decision

ARBITRAL DECISION

THE PARTIES

Claimants: 1 - A, with tax domicile at Street ... no. ..., ..., TIN ..., in the capacity of head of the estate opened by the death of B with tax identification number ... and head of the estate of C with TIN ...;

2 - D, with tax domicile at Street ... ..., ..., TIN ..., in the capacity of head of the estate opened by the death of E with TIN ...;

3 - F, with tax domicile at Street ..., ..., ... and TIN ..., in the capacity of head of the estate opened by the death of G, with tax identification number ... whose estate has TIN ...;

4 - H, with tax domicile at Street ... .../..., ..., TIN ..., in the capacity of head of the estate opened by the death of I, TIN ...;

5 - J, with tax domicile at Street ... no. ... ... and TIN ..., in the capacity of head of the estate opened by the death of K, TIN ...;

6 - L, with tax domicile at Street ... no. ..., ... and TIN ..., in the capacity of head of the estate opened by the death of M, TIN ...;

7 - N, with domicile at ..., ..., ..., TIN ..., in the capacity of head of the estate opened by the death of O, TIN ...;

8 - P, with tax domicile at Street ..., ..., ..., TIN ... in the capacity of head of the estate opened by the death of Q, TIN ...;

9 - R, TIN ..., with domicile at Street ... no. ..., ..., ... Sepins;

10 - S, TIN ..., with domicile at Street ..., ..., ... Sepins.

Respondent: Tax and Customs Authority (AT).

DECISION

REPORT

a) On 22-12-2014 the Claimants filed with CAAD a request seeking, pursuant to the Legal Regime for Arbitration in Tax Matters (RJAT), the constitution of a singular arbitral tribunal (TAS).

b) The request is signed by counsel representing the Claimants.

THE REQUEST

c) The Claimants petition for the annulment of the assessments of Stamp Duty (IS) of item 28 of the General Schedule of Stamp Duty (TGIS), for the year 2013, generating a total collection of 14,248.80 euros, dated 18.03.2014, relating to the following property registry articles to which correspond floors or divisions capable of independent use of urban property under the regime of vertical ownership with articles ...-1A; ...-1B; ...- 2A; ...-2B; ...-3A and ...-3B; ...-4A and ...-4B; urban property located at ..., at Street ... nos. ... to ... and Street ... nos. ... to ..., currently registered in the respective property registry of the Joint Parishes of ..., ... and ....

d) They argue, in summary, that the assessment acts are illegal as they violate the rule of incidence of item 28.1 of the TGIS, insofar as the AT added the patrimonial values of the floors in vertical ownership and none of them alone has a TRV equal to or greater than 1,000,000.00 euros, contending that it should be the TRV of each floor and not their sum that is relevant for taxation purposes.

e) They further contend the unconstitutionality of the interpretation of the rule underlying the stamp duty assessments, by violation of the principle of equality (article 13 of the CRP) as well as the provisions of article 104, no. 3 of the CRP.

f) They invoke in support of their position several decisions adopted in CAAD in other identical cases.

g) They conclude by requesting the annulment of the tax acts referred to above, the condemnation of the AT to refund the amounts unduly paid and equally the accrued and accruing interest until full payment.

OF THE ARBITRAL TRIBUNAL

h) The request for constitution of the TAS was accepted by the President of CAAD and automatically notified to the AT on 23.12.2014.

i) By the Deontological Council of CAAD, the signatory of this decision was appointed as arbitrator, with the parties being notified thereof on 10.02.2015.

j) Therefore, the Singular Arbitral Tribunal (TAS) has been, since 25.02.2015, regularly constituted to examine and decide the subject matter of this dispute.

k) All these acts are documented in the communication of constitution of the Singular Arbitral Tribunal dated 25.02.2015 which is hereby reproduced.

l) On 25.02.2015 the AT was notified in accordance with and for the purposes of article 17-1 of the RJAT. It replied on 10.04.2015, which response, although untimely, was maintained in the proceedings by order of the TAS of 10.04.2015 pursuant to the provisions of article 19 of the RJAT.

m) Since questions that are entirely identical to those already raised in many other cases already decided in CAAD are raised in this case, the TAS by order of 08.04.2015, reiterated in the order of 10.04.2015, invited the parties to state their position on the dispensation of the hearing referred to in article 18 of the RJAT and equally on the non-conduct of pleadings, noting that in the absence of a statement it would be presumed that there is agreement regarding the non-conduct of these acts. Neither party raised the matter of the conduct of these acts.

n) Therefore, as both parties tacitly dispensed with the conduct of the parties' hearing of article 18 of the RJAT and the production of pleadings, these procedural acts were not conducted.

PROCEDURAL REQUIREMENTS

o) Standing, capacity and representation - The parties have personality and legal capacity, have standing and are represented.

In the case of this proceeding, the requirements of joinder of claimants and joinder of claims are met (article 104 of the TCPA and article 3-1 of the RJAT), insofar as the nature of the tax is the same, the grounds of fact and law are common, and the TAS is competent ratione materiae to settle the disputes viewed individually in light of each co-claimant.

Although I (Claimant identified above as no. 5) does not appear, either individually or as head of the estate opened by the death of K, TIN ..., in the property record in such capacity, this registration of part of the property belonging to the estate is made in the name of U TIN ..., one of the heirs of the estate, daughter of the Claimant and of the author of the estate, as may be inferred from the deed of heirship of 21.10.2005 executed at the Notarial Office of ..., attached to the proceeding. It is concluded, accordingly, regarding the material standing of the Claimant in this proceeding.

p) Right to be heard – The AT was notified as provided in section l). All orders issued in the proceeding and all documents attached were notified to the respective counterparty.

q) Dilatory exceptions - The proceeding does not suffer from nullities and the petition for arbitral pronouncement is timely as it was filed within the prescribed period in subparagraph a) of no. 1 of article 10 of the RJAT.

The AT in its response alleged the "deficiency of the petition for arbitral pronouncement" claiming that the Claimants did not fulfill the burden of attaching the contested acts, making it impossible to determine the value of the case.

In the order of the TAS of 10.04.2015 it was clarified that the contested collection notices were included in the digitalized proceedings in the SGP of CAAD in "request" and the AT was invited to state its position on their content, if it saw fit, which did not occur up to the date of issuance of this decision.

SUMMARY OF THE POSITION OF THE CLAIMANTS

Regarding the alleged illegality of the assessment acts for non-conformity with the rule of incidence of item 28.1 of the TGIS

r) They argue, in summary, that the assessment acts are illegal by violation of the rule of incidence of item 28.1 of the TGIS insofar as the AT added the patrimonial values of the floors in vertical ownership and none of them alone has a TRV equal to or greater than 1,000,000.00 euros, contending that it should be the TRV of each floor and not their sum that is relevant for taxation purposes.

s) They argue in support of their position several decisions adopted in CAAD in other identical cases.

t) They conclude by requesting the annulment of the tax acts referred to above, the condemnation of the AT to refund the amounts unduly paid and equally the accrued and accruing interest until full payment.

Regarding the alleged unconstitutionality of the rule contained in item 28.1 of the TGIS, in the implicit reading carried out by the AT

u) The Claimants consider that there is unconstitutionality in the interpretation of the rule of incidence underlying the stamp duty assessments, by violation of the principle of equality (article 13 of the CRP) as well as the provisions of article 104, no. 3 of the CRP.

SUMMARY OF THE POSITION OF THE TAX AUTHORITY

Regarding the alleged illegality of the assessment acts for non-conformity with the rule of incidence of item 28.1 of the TGIS.

v) The AT considers that "the patrimonial value relevant for purposes of the incidence of the tax is, ... the total patrimonial value of the urban property and not the patrimonial value of each of the parts that comprise it, even when capable of independent use".

w) This does not occur only – by virtue of article 84 of the CIMI – as to mixed properties and autonomous fractions of properties under horizontal ownership.

x) It further states "the fact that the IMI has been calculated on the basis of the patrimonial tributary value of each part of property with independent economic use does not equally affect the application of item 28, no. 1, of the General Schedule". It adds: "this is the result of the fact that the determining factor for the application of that item of the General Schedule is the total patrimonial value of the property and not separately that of each of its parcels."

y) It understands, in summary, that for purposes of IS what is relevant is the property in its entirety, as divisions capable of independent use are not considered as property, but only autonomous fractions are under horizontal ownership, as provided in article 2-4 of the CIMI.

z) It concludes: "any other interpretation would, in fact, violate the letter and spirit of item 28.1 of the General Schedule", contending for the legality of the assessments subject of the petition.

Regarding the alleged unconstitutionality of the rule contained in item 28.1 of the TGIS, in the implicit reading carried out by the AT

aa) The AT argues that the implicit reading of the law carried out in the assessment acts does not violate the principle of equality (nor of legality) because there is no discrimination between properties under horizontal ownership and properties under full ownership with floors or divisions capable of independent use.

bb) The different valuation and taxation of a property under full ownership compared to a property under horizontal ownership results from the different legal effects inherent in these two institutions.

cc) It contends that "it is unconstitutional, as offensive to the principle of tax legality, the interpretation of item 28.1 of the General Schedule, to the effect that the patrimonial value on which its incidence depends is to be determined globally and not floor by floor or division by division".

dd) Contending for the legality of the tax acts because they constitute a correct application of the law to the facts, both in terms of their consonance with ordinary law and in terms of their conformity with constitutional principles.

II - QUESTIONS WHICH THE TRIBUNAL MUST RESOLVE

Regarding the alleged "deficiency of the petition for arbitral pronouncement" raised by the AT in the Response, as provided in section q) of the Report of this decision, the same has lost relevance in light of the indication by the TAS that the assessment notices were included in the SGP of CAAD, upon which the right to be heard could have been exercised, which did not occur, whereby it is presumed that there is no interest in their examination, which in any event would be, in consonance with the factual description, to disregard their occurrence.

On the substance of the matter, in concrete, CAAD has already ruled in several decisions in which the central question is the same, namely, the scope of the rule of incidence of items 28 and 28-1 of the TGIS is discussed. These same Claimants and as to the same immovable property (IS assessment for 2012), have already successfully filed a request for pronouncement with CAAD.

The limit of interpretation is the letter, the text of the rule. The task of interconnection and valuation that escapes the literal domain then follows.

Assuming that every rule has a provision (and a disposition), the question that arises here is to determine, by delimiting, whether the rule of incidence, as it is drafted – in its provision - ownership of urban properties ... with residential purpose ... whose patrimonial tributary value contained in the registry, pursuant to the CIMI be equal to or greater than 1,000,000.00 euros – on the patrimonial tributary value used for the purpose of IMI, admits or not the understanding that as to properties "with residential purpose" in vertical ownership, with floors or divisions capable of independent use, held by an entity, the TRV on which the rate will be applied should be their sum or should the individual TRV of each floor or division capable of independent use be considered, in a manner similar to what occurs with properties under horizontal ownership and with the procedure for IMI assessment.

What is at issue here is the adoption of an adequate reading of the scope of the rule of incidence of items 28 and 28.1 of the TGIS, in light of what no. 7 of article 23 of the CIS refers to regarding the determination of taxable matter and subsequent tax assessment operation:

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

The AT, albeit implicitly, which may be inferred from articles 30 and 31 of the Response, appears to show that the legal support it used to proceed with the addition of the TRV of the floors of the urban property in question would have been article 23-7 of the CIS.

As we have stated in other decisions, regarding the interpretation of tax rules there is a rule, although it may be considered residual, very proper, which is set forth in no. 3 of article 11 of the LGT: "if doubt persists about the meaning of the rules of incidence to be applied, regard shall be had to the economic substance of the tax facts". This is a criterion to be used in the course of hermeneutics of interpretation of rules.

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

But it appears to us that here too one may appeal to the analysis of the "economic substance of tax facts" to appropriately implement the "necessary adaptations of the rules contained in the CIMI", with a view to resolving the question that arises.

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

The possible non-conformity of the provision of the rule of incidence, against the constitutional text, (in the implicit reading carried out in the assessment of the tax here in question or in the reading advocated by the Claimants) will only arise if the interpreter reaches the conclusion that a determined and unequivocal reading of the law – correctly applied to a specific case - offends one or more constitutional principles with such intensity that the legislative option adopted could not have been, while still considering that the AT cannot, on the basis of possible unconstitutionalities of rules not declared by the courts, cease to apply the law, in the sense it deems most assertive.

The central question that the TAS must answer is the following:

Do items 28 and 28-1 of the TGIS, as rules of tax incidence, as they are drafted – in their provision - (ownership of urban properties ... with residential purpose ... whose patrimonial tributary value contained in the registry, pursuant to the CIMI be equal to or greater than 1,000,000.00 euros – on the patrimonial tributary value used for the purpose of IMI) admit or not the understanding that as to properties "with residential purpose" in vertical ownership, with floors or divisions capable of independent use, held by an entity, the TRV on which the rate will be applied should be their sum or should the individual TRV of each floor or division capable of independent use be considered, in a manner similar to what occurs with properties under horizontal ownership?

From the answer given to this question will result the merit or lack of merit of the petition, being that, if the answer is not in conformity with what was learnedly defended by the AT, it will not be necessary for the TAS to pronounce itself on the remaining grounds invoked in the request for pronouncement or in the response, with possible effect on the validity of the assessment acts now in question.

III. PROVEN AND UNPROVEN FACTS OF SUBSTANCE. GROUNDS

With relevance to the decision to be adopted, these are the facts that are considered proven, indicating the respective documents (proof by documents), as grounds:

Proven Facts

  1. The Claimants: 1 - A, in the capacity of head of the estate opened by the death of B with tax identification number ... and head of the estate of C with TIN ...; 2 - D, in the capacity of head of the estate opened by the death of E with TIN ...; 3 - F, in the capacity of head of the estate opened by the death of G, with tax identification number ... whose estate has TIN ...; 4 - H, in the capacity of head of the estate opened by the death of I, TIN ...; 5 - J, in the capacity of head of the estate opened by the death of K, TIN ... (tax registration which is made in the name of U TIN ..., one of the heirs of the estate, daughter of this Claimant and of the author of the estate); 6 -L, in the capacity of head of the estate opened by the death of M, TIN ...; 7 - N, in the capacity of head of the estate opened by the death of O, TIN ...; 8 - P, in the capacity of head of the estate opened by the death of Q, TIN ...; 9 - R, TIN ... and 10 - S, TIN ...; in their own name or in the capacities of heads of the estates indicated, are listed as holders of the right of full ownership (in the proportion of: 1st claimant – 330/2160; 2nd to 5th claimants – 396/2160 each; 6th to 7th claimants – 33/2160 each; 8th claimant – 30/2160 each; and 9th and 10th claimants – 15/2160 each, respectively) of the urban property located at ..., at Street ... nos. ... to ... and Street ... nos. ... to ..., registered in the registry under article ... - Joint Parishes of ..., ... and ..., composed of floors or divisions capable of independent use, under the regime of vertical ownership, separated according to the following articles: ...1A; ...-1B; ...- 2A; ...-2B; ...-3A, ...-3B, ...-4A and ...-4B – as per the property record attached by the Claimants with the designation of Document no. 60; deed of heirship of 21.10.2005, executed at the Notarial Office of ... (as to Claimant 5) and IS collection notices attached by the Claimants as documents nos. 2 to 59 with the request for pronouncement (as to the property registry separation of the floors).

  2. The Claimants were notified, on an undetermined date, of the assessments of Stamp Duty, for the year 2013, of item 28.1 of the TGIS, dated 18.03.2014, generating a total collection of 14,248.80 euros – As per IS collection notices attached by the Claimants as documents nos. 2 to 59 with the request for pronouncement.

  3. The floors or divisions capable of independent use subject to taxation, with residential purpose, have TRV comprised between 146,111.13 euros (article ... 1B) and 202,696.38 euros (articles ... 2B, ... 3B and ... 4B) – As per the urban property record and IS assessment notices of item 28.1 of the TGIS attached by the Claimants with the request for pronouncement.

  4. In the urban property record of the immovable property referred to in 1) appears: "Total patrimonial value: € 2,079,793.29" – As per the property record attached by the Claimants.

  5. In the assessment notices appears: "Patrimonial Value of the property-total subject to tax: 1,511,336.66" euros, which corresponds to the sum of the TRV of the floors with residential purpose of the immovable property identified in 1) – As per IS assessment notices of item 28.1 of the TGIS attached by the Claimants with the request for pronouncement.

  6. This tax being assessed on the basis of item 28.1 of the TGIS – As per IS assessment notices of item 28.1 of the TGIS attached by the Claimants.

  7. The Claimants paid the amounts that were assessed to them, totaling 14,248.80 euros - As per stamps affixed to the IS assessment notices of item 28.1 of the TGIS attached by the Claimants, article 14 of the request for pronouncement and non-specific contest by the AT of the alleged.

Unproven Facts

There is no other factuality alleged that is relevant for the correct composition of the dispute.

The established facts result from the documents attached by the Claimants, whose contents and probative valuations did not merit disagreement from the AT.

IV. EXAMINATION OF THE QUESTIONS WHICH THE TAS MUST RESOLVE

Do items 28 and 28-1 of the TGIS, as rules of tax incidence, as they are drafted – in their provision - (ownership of urban properties ... with residential purpose ... whose patrimonial tributary value contained in the registry, pursuant to the CIMI be equal to or greater than 1,000,000.00 euros – on the patrimonial tributary value used for the purpose of IMI) admit or not the understanding that as to properties "with residential purpose" in vertical ownership, with floors or divisions capable of independent use, held by an entity, the TRV on which the rate will be applied should be their sum or should the individual TRV of each floor or division capable of independent use be considered, in a manner similar to what occurs with properties under horizontal ownership?

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

"28 – Ownership, usufruct or right of surface of urban properties whose patrimonial tributary value contained in the registry, pursuant to the Code of the Municipal Property Tax (CIMI), be equal to or greater than € 1,000,000 – on the patrimonial tributary value used for the purpose of IMI:

28-1 – Per property with residential purpose - 1%;

28-2 – Per property, when the passive subjects that are not natural persons are residents in a country, territory or region subject to a clearly more favorable tax regime, contained in the list approved by regulation of the Minister of Finance – 7.5%."

With relevance to the case the following are cited:

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

· No. 4 of article 2 of the CIMI: "For the purposes of this tax, each autonomous fraction, under horizontal ownership, is considered as constituting a property."

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

It appears to us that the answer to the question posed in this request for pronouncement has to do with the implicit reading made by the AT of no. 7 of article 23 of the CIS.

The AT would have considered, in order to proceed with the sum of the patrimonial tributary values (TRV) of the floors or divisions/parts of urban property, in order to determine whether the minimum taxation threshold of 1,000,000.00 euros is reached, per each urban property in vertical ownership, that the floors or divisions capable of independent use are not by formal legal definition considered urban properties. What is configured to be indisputable.

And it would have considered that this addition of TRV is required because the law states that one must proceed with "the necessary adaptations" of the "rules of the CIMI" (no. 7 of article 23 of the CIS).

Although items 28 and 28.1 speak of "urban properties" and "per property" and no. 7 of article 23 of the CIS states that "the tax is assessed annually, in relation to each urban property", what appears to us to be relevant here, at the level of determination of the eligible taxable matter and tax assessment, is that the "necessary adaptations of the rules of the CIMI" be applied as stated in the aforementioned no. 7 of article 23 of the CIS. But, obviously, "adaptations" insofar as they are necessary.

What happened – as to urban properties with residential purpose, in vertical ownership, with floors or divisions capable of independent use – was that the AT, the "adaptation" it made, in the IS assessment operations, was to add the TRV of each floor or independent division assigned to residential purposes (excluding the TRV of floors or divisions designated for other purposes), creating a new legal reality, which is a patrimonial value of urban properties in vertical ownership, with residential purpose.

This operation of the tax iter (incidence – determination of taxable matter – assessment – payment) appears to us to contend with the literal element of the rule of incidence, item 28 of the TGIS, which states that this tax is applied to "the patrimonial tributary value used for the purpose of IMI".

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

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

The above conclusion will not be affected by the fact that in the property records of this type of property the "total patrimonial value" is indicated which corresponds to the sum of the TRV of all floors, regardless of their purpose. What is relevant for this taxation will not be the "total patrimonial value" but solely the "patrimonial tributary value" of urban properties with residential purpose, in this case of floors separately autonomized fiscally in terms of eligible TRV.

Especially because, in the majority of cases of properties in vertical ownership, as occurs in this case, the "residential purpose" is characteristic of one or several floors separately and not of the property as a whole. There are two other floors that make up the property and do not have residential purpose.

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

Conclusion that will be reached taking into account the principle of tax legality, both in the dimension of no. 1 of article 8 of the LGT (if we consider that a rule of incidence is at issue), and in the dimension of subparagraph a) of no. 2 of article 8 of the LGT (if we consider that a rule regulating the determination of the taxable base on which a rate is applied, that is to say, the tax assessment, is at issue).

There occurs, it is perceived, non-conformity with the literal element of the final part of the rule of incidence (item 28 of the TGIS) which states that the tax is applied to "the patrimonial tributary value used for the purpose of IMI" and therefore, should not be applied to the sum of patrimonial tributary values of properties, parts of properties or floors, nor is legal support seen in the operation of addition of patrimonial tributary values of floors or parts of property capable of independent use, with residential purpose, in order to reach the eligible taxation threshold of 1,000,000.00 euros or more.

That is to say, the creation of a new TRV for purposes of taxation in IS as to item 28 of the TGIS, as results from the affixing in all collection notices of "patrimonial value of property – total subject to tax" – section 5 of the established factual matter, is not configured in conformity with the law.

Which is to say that when no. 7 of article 23 refers to "...the tax is assessed annually, in relation to each urban property", this expression "each urban property" will intend to encompass both properties under horizontal ownership and the floors or parts of urban properties of properties in vertical ownership, insofar as they are assigned to residential purposes, but always starting from a single taxable base for all legal purposes: the patrimonial tributary value used for the purpose of IMI (final part of item 28 of the TGIS).

The question does not require, in our view, to be raised at the level of violation of the CRP, sufficing, in compliance with what is stated in no. 7 of article 23 of the CIS, that a reading be carried out, "with the necessary adaptations of the rules of the CIMI" which would be to consider that the expression "each urban property" encompasses not only autonomous fractions under horizontal ownership (which are urban properties ope legis) but also "floors or parts of property capable of independent use" (no. 3 of article 12 of the CIMI).

If, for example, as to floors that make up the autonomous fractions of urban residential properties, under horizontal ownership, (although they are by definition and "ope legis" urban properties) the TRV are not added to determine the threshold of TRV eligible for subjection to IS, per passive subject, of 1,000,000.00 euros (operation of determination of taxable matter), why should the same occur as to the "parts of property or floors" of properties in vertical ownership?

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

It appears to us that it is the rule of incidence contained in items 28 and 28-1 of the TGIS, in its literality, namely its final part, combined with no. 7 of article 23 of the CIS, that permits concluding, with the "necessary adaptations of the rules of the CIMI" that the AT should not have added the TRV of the floors or parts of the property above identified to find a new TRV relating to those that are assigned to residential purposes, separated from the TRV of those assigned to other purposes.

The Claimants allege, fundamentally, the non-conformity of the tax acts with the law, alleging the illegality contained in subparagraph a) of article 99 of the TCPA: "erroneous qualification ... of tax facts".

In fact, with the grounds expressed above, the IS assessments contested carried out in the manner in which they were, are not in harmony with the rule of incidence of items 28 and 28-1 of the TGIS, thereby occurring the illegality provided for in subparagraph a) of article 99 of the TCPA.

As the first ground of the petition formulated by the Claimants in the request for pronouncement (section d) of the Report) proceeds, there is no need to examine the other grounds (sections e) and cc) of the Report), by uselessness, since their examination is rendered moot.

As a consequence of the above, the petition for annulment of the tax acts submitted by the Claimants to the Arbitral Tribunal proceeds, since the IS assessments carried out by the AT are not in conformity with the law, in the reading advocated above.

In fact, it results from the proven facts (section 3) of part III of this decision) that none of the floors or parts of property has, per se, a TRV that is equal to or greater than the taxation threshold indicated in item 28 of the TGIS (TRV equal to 1,000,000.00 euros).

Petition for Interest

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

Although subparagraphs a) and b) of no. 1 of article 2 of the RJAT use the expression "declaration of illegality" to define the competence of the arbitral tribunals functioning in CAAD and do not make reference to constitutive (annulling) and condemnatory decisions, it should be understood, in harmony with the aforementioned legislative authorization, that their competences encompass the powers that in contestation proceedings are attributed to tax tribunals in relation to acts whose examination of legality falls within their competences.

Whereby a condemnation of the tax administration in the payment of damages-interest may be issued here.

Article 43 of the LGT "merely establishes an expedite and, so to speak, automatic means of indemnifying the injured party. Independently of any allegation and proof of damages suffered, he has the right to indemnification established therein, translated into damages-interest in cases included in the provision (...)" Decision of the Supreme Administrative Court of 2-11-2006, case 604/06, available at www.dgsi.pt"

In the case at hand, it is proven that the Claimants paid the total value of the assessments that were notified to them, whereby they have the right to damages-interest counted from the date of payment, total or partial, of the assessments of the tax now annulled until the date of issuance of the respective credit notes, with the period for that payment being counted from the beginning of the period for voluntary compliance with this decision (article 61, nos. 2 to 5, of the TCPA), at the rate determined in accordance with the provisions of no. 4 of article 43 of the LGT.

V. DECISION

Based on and with the grounds set forth above, it is decided:

  1. The petition of the Claimants is upheld, annulling the Stamp Duty assessments for the year 2013, referred to in section c) of the Report (documents indicated in the respective footnote), generating a total collection of Stamp Duty of item 28.1 of the TGIS, of 14,248.80 euros, with reference to the urban property located at ..., at Street ... nos. ... to ... and Street ... nos. ... to ..., registered in the registry under article ... - Joint Parishes of ..., ... and ..., which is composed of floors or divisions capable of independent use, under the regime of vertical ownership, separated according to the residential-use articles ...-1A; ...-1B; ...- 2A; ...-2B; ...-3A, ...-3B, ...-4A and ...-4B, due to non-conformity with the rules contained in items 28 and 28.1 of the TGIS and in no. 7 of article 23 of the CIS.

  2. The petition for condemnation of the AT in the payment of damages-interest to the Claimants is upheld, counted from the date of payment of the Stamp Duty tax installments, in whole or in part, until the date of issuance of the respective credit note, with the period for that payment being counted from the beginning of the period for voluntary compliance with this decision (article 61, nos. 2 to 5, of the TCPA), at the rate determined in accordance with the provisions of no. 4 of article 43 of the LGT.

It is noted that the right of the Claimants to obtain the refund of all amounts paid to the AT is a legal consequence of the annulment of the IS assessment acts.

Value of the case: in accordance with the provisions of article 3, no. 2, of the Regulations on Costs in Tax Arbitration Proceedings (and subparagraph a) of no. 1 of article 97A of the TCPA), the case value is set at 14,248.80 euros.

Costs: in accordance with the provisions of article 22, no. 4, of the RJAT, the amount of costs is set at € 918.00, according to Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, to be borne by the respondent.

Notify.

Lisbon, 22 April 2015

Singular Arbitral Tribunal,

Augusto Vieira

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

The drafting of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

[1] In the assessment notices the floors are separated as autonomous property registry articles, in addition to the separation of their respective patrimonial tributary values used for purposes of IMI assessment in accordance with what appears in the property registry. These notices have the following document identification, according to the request for pronouncement, per claimant:

T - documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…;

D – documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…;

F - documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…;

H – documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…;

J – documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…;

L – documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…;

N – documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…:

P – documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…;

R – documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014…;

S – documents nos. 2014…, 2014…, 2014…, 2014…, 2014…, 2014…, 2014….

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto de Selo) under Verba 28.1 TGIS applicable to individual units in vertical property or to the total aggregated value?
Stamp Tax under Verba 28.1 TGIS applies to individual autonomous units in vertical property ownership, not to aggregated values. The €1,000,000 threshold must be met by each separate floor or division capable of independent use. When a building operates under a vertical property regime (propriedade vertical), each autonomous fraction with its own property registry article constitutes an independent taxable unit. The Tax Authority cannot combine the Tax Registry Values (VPT) of multiple distinct units to artificially reach the threshold. This interpretation aligns with CAAD jurisprudence recognizing that each autonomous unit in vertical ownership must be assessed individually for Stamp Tax purposes, respecting the legal independence of each property fraction under Portuguese property law.
Can the Tax Authority sum the VPT of separate units in a vertical property building to meet the €1,000,000 threshold?
No, the Tax Authority cannot lawfully sum the VPT of separate units in a vertical property building to meet the €1,000,000 threshold under item 28.1 TGIS. Each autonomous floor or division registered with its own property registry article must independently satisfy the €1,000,000 requirement. The aggregation approach contradicts the legal structure of vertical property ownership, where each unit possesses separate legal identity, independent registry inscription, and distinct ownership rights. CAAD arbitration tribunals have consistently held that such aggregation violates the incidence rule of Verba 28.1, which targets individual high-value properties. The Tax Authority's aggregation methodology has been rejected in multiple precedents as an impermissible extension of the tax statute beyond its legislative scope, treating legally separate properties as a single taxable unit without statutory authorization.
What constitutional principles apply to Stamp Tax on high-value vertical property under Articles 13 and 104(3) of the Portuguese Constitution?
Articles 13 and 104(3) of the Portuguese Constitution establish equality and legality principles applicable to Stamp Tax on high-value vertical property. Article 13 enshrines the fundamental right to equal treatment, prohibiting arbitrary tax discrimination. When the Tax Authority aggregates VPT values in vertical property to reach the €1,000,000 threshold while assessing horizontal property or single-owner buildings on individual unit values, it creates unconstitutional inequality between taxpayers in economically equivalent situations. Article 104(3) mandates that no tax may be collected without prior statutory authorization, requiring strict interpretation of tax incidence rules. The aggregation interpretation extends Verba 28.1 TGIS beyond its literal scope, effectively creating a tax obligation not expressly provided by law. Constitutional review examines whether the Tax Authority's methodology respects these principles by ensuring uniform treatment across property ownership structures and adherence to statutory tax definitions.
How does CAAD arbitration address disputes over Stamp Tax liquidation on vertical property prédios urbanos?
CAAD arbitration addresses Stamp Tax disputes on vertical property through expedited proceedings that examine the legal interpretation of Verba 28.1 TGIS and its application to autonomous units. Tribunals analyze whether contested assessments comply with the statutory incidence rule requiring each property to have VPT ≥ €1,000,000. CAAD decisions have established consistent jurisprudence rejecting aggregation methodologies and requiring individual unit assessment. The arbitration process allows taxpayers to challenge liquidations by invoking both legality arguments (statutory interpretation of TGIS provisions) and constitutionality claims (violations of equality and legality principles). CAAD has developed substantial precedent recognizing that vertical property regime creates legally independent units that must be taxed separately. Arbitrators examine property registry documentation, deed structures, and the legal characterization of each autonomous fraction to determine proper tax treatment, providing faster resolution than administrative courts while establishing interpretative guidance for recurring issues.
What is the difference between horizontal and vertical property for Stamp Tax purposes under Verba 28 of the TGIS?
The difference between horizontal and vertical property for Stamp Tax purposes under Verba 28 TGIS lies in ownership structure and unit independence. Vertical property (propriedade vertical) involves floors or horizontal divisions of a building, where each level constitutes an autonomous unit with separate registry, independent of other floors. Horizontal property (propriedade horizontal) typically involves side-by-side divisions within the same level. For Stamp Tax, both regimes create legally independent autonomous fractions, each requiring individual assessment against the €1,000,000 threshold. The critical distinction is not horizontal versus vertical orientation, but whether units possess autonomous legal status with separate registry articles. Verba 28 applies uniformly to both: each autonomous unit must independently meet the threshold. The Tax Authority cannot aggregate values across units regardless of their spatial arrangement. Both property types grant each fraction independent ownership rights, separate conveyance capability, and distinct tax identity, requiring parallel tax treatment under constitutional equality principles.