Process: 87/2015-T

Date: July 17, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Case 87/2015-T) addresses whether construction land (terrenos para construção) is subject to Stamp Tax under Verba 28 of the TGIS, as amended by Law 55-A/2012. The taxpayer owned construction land in Lisbon with a patrimonial tax value exceeding €1,000,000 and was assessed stamp duty totaling €28,702.87 for 2012-2013. The central legal question is whether construction land constitutes 'property with residential use' for stamp tax purposes. The taxpayer argued that construction land cannot be classified as having residential use since it lacks a residential occupation license and is undeveloped. Despite the residential coefficient being applied in calculating the land's patrimonial tax value under Article 41 CIMI, the taxpayer contended this administrative calculation method does not transform the land's legal nature into residential property. Significantly, the taxpayer highlighted that the legislator subsequently amended Verba 28.1 through Article 194 of Law 83-C/2013, explicitly including construction land in the stamp tax scope, demonstrating the original 2012 legislation did not cover such properties. The Tax Authority countered that 'residential use' is broader than 'residential destination,' arguing the application of residential coefficients in VPT determination confers residential use character. Before filing arbitration, the taxpayer exhausted administrative remedies by filing a reclamação graciosa and impugnação administrativa, both dismissed. The taxpayer paid the first installment and provided a bank guarantee costing €690.04 to suspend enforcement proceedings. The petition seeks annulment of the assessments, reimbursement of amounts paid, compensatory interest under Article 43 LGT, and compensation for the unwarranted guarantee. This case illustrates the interpretative challenges surrounding the 2012 stamp tax reforms and the importance of precise legislative drafting in tax law.

Full Decision

ARBITRATION DECISION

CAAD: Tax Arbitration

Case No. 87/2015-T

I – REPORT

1 A…, Tax Identification Number (NIPC) … with registered office at Largo … No. … – … … Lisbon, legally represented by B… – …, SA, with NIPC …, registered at the same location within the Lisbon tax service area – filed a petition for arbitration pursuant to the provisions of section (a) of paragraph 1 of Article 2, paragraph 1 of Article 3 and section (a) of paragraph 1 of Article 10, all of the Tax Arbitration Regulations (RJAT), with the Tax Authorities (AT) being respondent, seeking the annulment of the tax acts relating to the assessment of stamp duty on the ownership of a property registered in the urban records under article No. … of the parish of …, municipality of Lisbon, concerning a plot of land for construction, as per collection documents 2012… and 2013… in the total amount of € 28,702.87, acts against which it filed a petition for administrative reconsideration and an administrative appeal, both of which were dismissed, and, not accepting such taxation and decisions, filed the present petition.

2 The petition was filed without exercising the option to designate an arbitrator, having been accepted by the Honorable President of CAAD and automatically notified to the Tax Authorities on 11/02/2015.

3 Pursuant to the provisions of paragraph 2 of Article 6 of the Tax Arbitration Regulations, by decision of the Honorable President of the Deontological Council, duly communicated to the parties within the legally applicable time limits, Arlindo José Francisco was appointed as arbitrator on 02/04/2015, who communicated his acceptance of the assignment within the legally established timeframe.

4 The tribunal was constituted on 20/04/2015 in accordance with the provisions contained in section (c) of paragraph 1 of Article 11 of the Tax Arbitration Regulations, as amended by Article 228 of Law No. 66-B/2012, of 31 December.

5 With its petition, the petitioner seeks the annulment of the stamp duty assessment act in question, considering it manifestly illegal, with all legal consequences arising therefrom, namely the reimbursement of amounts unduly paid and compensatory interest in accordance with Article 43 of the General Tax Law (LGT) and also compensation for the provision of an unwarranted guarantee.

6 It supports its position, in summary, on the understanding that the assessments in question violate Article 1 of the Stamp Duty Code (CIS) and item 28.1 of the General Stamp Duty Table (TGIS), given that plots of land for construction may in no way be considered properties with residential use, not possessing nor being able to possess a license of use for residential purposes.

7 In its reply, the respondent considers that item 28 of the TGIS as amended by Law 55-A/2012 determines the taxation of plots of land for construction, as these have the legal nature of properties with residential use, considering that in determining their Patrimonial Tax Value (VPT) the residential use coefficient provided for in Article 41 of the Urban Property Tax Code (CIMI) is taken into account, citing Decision No. 04950/11 of 14/02/2012 of the Administrative Court of Appeal of the South (TCA do Sul).

8 That the legislator does not speak of properties intended for residential purposes, but of residential use, an expression far broader, with a view to encompassing other realities beyond those identified in Article 6, paragraph 1, section (a) of the Urban Property Tax Code.

9 From this perspective, it considers that the assessment in question should be upheld as it constitutes a correct interpretation and application of law to the facts, not being in violation of the Law, whether of the Constitution (CRP) or the Stamp Duty Code (CIS), and therefore the petitioner's claim should be judged unfounded and the respondent should be absolved from the petition.

II - PRELIMINARY EXAMINATION

The tribunal was regularly constituted and is competent ratione materiae in accordance with Article 2 of the Tax Arbitration Regulations.

The parties have legal personality and capacity, are legitimate and are regularly represented in accordance with Articles 4 and 10, paragraph 2 of the Tax Arbitration Regulations and Article 1 of Regulatory Decree No. 112-A/2011, of 22 March.

The parties agreed to waive the hearing referred to in Article 18 of the Tax Arbitration Regulations and the necessity of presenting written or oral arguments.

Considering the identical positions taken and, given that the proceedings do not suffer from any nullities nor have any questions been raised that would preclude the tribunal from ruling on the merits of the case, the tribunal considers that the conditions are met for issuing a decision.

III - REASONING

1 – The issues to be resolved that are material to these proceedings are as follows:

a) Whether plots of land for construction, to which the residential use coefficient was applied in determining its Patrimonial Tax Value and which had a value equal to or exceeding € 1,000,000.00, fall within the scope of stamp duty (IS) provided for in item 28 of the TGIS, as added by Law No. 55-A/2012, of 29 October.

b) If the answer is in the negative, whether the stamp duty assessment in question should be annulled as being illegal and, consequently, whether the amounts unduly paid should be refunded with compensatory interest as prescribed by Article 43 of the General Tax Law.

c) Whether compensation should be awarded for the provision of an unwarranted guarantee.

2 – Findings of Fact

The facts considered relevant and proven on the basis of the evidence in the file are as follows:

a) The petitioner was, in the years 2012 and 2013, the owner of a plot of land for construction registered in the urban records of the parish of …, municipality of Lisbon, under article no. ….

b) It was notified to make the stamp duty payments in question here (€ 11,931.57 as a single payment for 2012 and € 16,771.30, to be collected in 3 instalments, for 2013).

c) Against such assessments it filed a petition for administrative reconsideration and an administrative appeal which were dismissed.

d) The petitioner made payment of the 1st instalment in the amount of € 5,590.44 relating to 2013.

e) The petitioner, with a view to suspending the Executive Collection Process (PEF) for 2013, provided adequate guarantee, estimating that it has already spent € 690.04.

There are no factual matters that were not proven and that are material to the decision.

3 – Legal Analysis

3.1 - Regarding Stamp Duty:

a) The petitioner, in its petition for arbitration considers, in the first instance and in summary, the inapplicability of item 28 of the TGIS, as amended by Law 55-A/2012 of 29 October, to plots of land for construction.

b) It contends that plots of land for construction cannot be considered properties with residential use, relying on the applicable tax provision (item 28 of the TGIS), as amended by Law 55-A/2012, already mentioned.

c) The fact that the plot of land for construction in question has a Patrimonial Tax Value equal to or exceeding € 1,000,000.00, it lacks the essential requirement for taxation, which is residential use.

d) It refers to decisions previously issued by both the arbitral tribunal and the administrative courts to conclude, as in the respective learned decisions, that plots of land for construction cannot be considered urban properties with residential use.

e) It further points out that the legislator itself held this view, by establishing the taxation of plots of land for construction under stamp duty through Article 194 of Law 83-C/2013 of 31 December, amending item 28.1 of the TGIS as previously amended by Law 55-A/2012 of 29 October.

f) For its part, the respondent contends that plots of land for construction have the legal nature of properties with "residential use" since in determining its Patrimonial Tax Value the residential use coefficient provided for in Article 41 of the Urban Property Tax Code is taken into account, and cites in this regard Decision 04950/11 of 14/02/2012 of the Administrative Court of Appeal of the South which considers that the regime for assessing the patrimonial value of plots of land for construction is provided for in Article 45 of the Urban Property Tax Code, being the same as that of constructed buildings, although starting from the building to be constructed based on the project.

g) It considers that the expression "residential use" of item 28 of the TGIS refers to a classification that overlaps with the categories of urban properties provided for in paragraph 1 of Article 6 of the Urban Property Tax Code and that the legislator in using it intended to encompass other realities beyond those mentioned in the Urban Property Tax Code, concluding that the assessments in question should be upheld and the Tax Authorities be absolved from the petition.

h) Having summarized the positions of the petitioner and the respondent, we will proceed to analyze the taxable event rule for stamp duty on urban properties with residential use.

i) Item 28 of the TGIS, as added by Law No. 55-A/2012, subjects to stamp duty urban properties with residential use whose Patrimonial Tax Value, determined in accordance with the Urban Property Tax Code, is equal to or exceeding € 1,000,000.00.

j) The Stamp Duty Code refers to the Urban Property Tax Code the regulation of the concept of property and of matters not regulated as to item 28 of the TGIS (see paragraph 6 of Article 1 and paragraph 2 of Article 67, both of the Stamp Duty Code).

k) If we examine Article 6 of the Urban Property Tax Code, it establishes that urban properties are divided into residential, commercial, industrial or service properties, plots of land for construction, and others.

l) From its paragraph 2 it follows that urban residential properties "are buildings or structures licensed for such purpose or, in the absence of a license, that are intended for such purpose" and its paragraph 3 tells us that plots of land for construction "are those situated within or outside an urban area for which a license or authorization for a subdivision or construction operation has been granted, and also those that have been declared as such in the property title…".

m) From these concepts we can already conclude the existence of autonomy between urban properties "residential" and urban properties "plots of land for construction".

n) The legislator, in establishing the taxation of urban properties "with residential use," did not specify the concept, so we must, by force of the reference, turn to the Urban Property Tax Code and this, as already seen, autonomizes them with respect to plots of land for construction.

o) The expression "residential use" is by no means evident in plots of land for construction, nor can it, as the respondent contends, be understood as an expression encompassing other realities.

p) We agree with the position taken in case 49/2013, which is quoted as follows: "The expression 'with residential use' conveys, upon simple reading, an idea of real and present functionality. From the applicable rule it is not possible to extract, by interpretation, that, as stated in the respondent's reply, the legislator's choice of that expression was intended to encompass 'other realities beyond those identified in Article 6, paragraph 1, section (a), of the Urban Property Tax Code.' Such interpretation has no legal support in the light of the principles contained in Articles 9 of the Civil Code and 11 of the General Tax Law. Indeed, if the legislator intended to include within the tax scope realities other than those resulting from the classification governed by Article 6 of the Urban Property Tax Code, it would have said so expressly. But it does not do so, instead referring, in toto, to the concepts and procedures provided for in the said Code. On the other hand, the respondent's position that the concept of 'residential use' follows from the rule of Article 45 of the Urban Property Tax Code cannot be accepted either. This article refers to the rules applicable in determining the patrimonial value of plots of land for construction, establishing that this is what results from the value of the area of the building plot to be constructed plus the land adjacent to the plot. In fixing the value of that area, a percentage varying between 15% and 45% of the value of the authorized or planned buildings is taken into account. According to the respondent, in fixing the value of the buildings authorized or planned on the land to be evaluated, the coefficients applicable in determining the taxable patrimonial value are used, namely the use coefficient provided for in Article 1 of that Code. Concluding from this that the consideration of such a coefficient, dependent on the type of use planned for the property to be built on the land, will be determinative for the purposes of applying Item 28 of the TGIS. This conclusion is based on the assumption that the expression 'properties with residential use' refers to a classification that overlaps with the categories provided for in paragraph 1 of Article 6 of the Urban Property Tax Code. It is not possible, however, to follow such conclusion. […]. In these terms, as Article 6 of the Urban Property Tax Code makes a clear distinction between urban properties 'residential' and 'plots of land for construction,' the latter cannot be considered, for the purposes of stamp duty, as 'properties with residential use.'"

q) The legislator, in intending to tax plots of land for construction under stamp duty, revised item 28 of the TGIS through Law No. 83-C/2013, of 31 December, and introduced them there, which proves that in the formulation of Law No. 55-A/2012, plots of land for construction were excluded from stamp duty taxation under item 28 of the TGIS and now, through Law No. 83-C/2013, they became subject to taxation, which is why it appears clear to us that the legislator considered that the expression "residential use" did not include plots of land for construction.

r) Nor should it be argued that the fact that Article 45 of the Urban Property Tax Code provides for the application of a residential use coefficient in determining the Patrimonial Tax Value of plots of land for construction is, in itself, a sufficient condition to permit their inclusion in the taxable event rule of item 28 as added by Law No. 55-A/2012, nor does it change their nature as plots of land for construction, given that what is at issue here is only ascertaining the Patrimonial Tax Value which will be influenced by the type of buildings to be carried out (which, it should be said, are not always realized).

s) Decision 04950/11 of 14/02/2012 of the Administrative Court of Appeal of the South cited by the Tax Authorities, which considers that the regime for assessing the patrimonial value of plots of land for construction is provided for in Article 45 of the Urban Property Tax Code, being the same as that of constructed buildings, although starting from the building to be constructed based on the project, is merely a statement that is limited to the determination of the Patrimonial Tax Value and nothing more.

t) Now, as already seen, Article 6 of the Urban Property Tax Code establishes an unmistakable distinction between residential properties and plots of land for construction, which prevents the latter from being subject to stamp duty in the manner sought by the respondent.

u) Several arbitration decisions have already been issued in this sense, namely, cases 42, 48, 49 and 75, all from 2013, and by the Supreme Administrative Court (STA).

v) The taxation put in issue here only occurred due to error attributable to the Tax Authorities' services, since item 28 of the TGIS, as amended by Law 55-A/2012, did not permit the taxation of plots of land for construction under stamp duty, and therefore should be annulled with all legal consequences arising therefrom.

3.2 – Regarding the Reimbursement of Amounts Unduly Paid, Together with Compensatory Interest

a) Once the illegality of the debt is declared and the annulment of the assessment becomes final, the Tax Authorities are obliged to restore the situation that would exist if the annulled act had not been performed, in accordance with the provisions of Article 100 of the General Tax Law.

b) This is the position taken by Diogo Leite Campos/Benjamim Silva Rodrigues/Jorge Lopes de Sousa in annotation to the aforementioned Article 100 of the General Tax Law, 2nd edition.

c) In this manner, given the illegality of the stamp duty assessment acts attributable to the Tax Authorities, having been performed without adequate legal support, and given the proven payment, the petitioner has the right to payment of compensatory interest in the precise terms of paragraph 1 of Article 43 of the General Tax Law and Article 61 of the Tax Procedural Code (CPPT).

3.3 - Regarding Compensation for the Provision of an Unwarranted Guarantee

The petitioner also seeks to be compensated for the expenses incurred in providing a bank guarantee for the purpose of suspending the Executive Collection Process (PEF) for 2013, initiated due to non-payment of the stamp duty assessed pursuant to Article 6 of Law 55-A/2012. In view of the provisions contained in Article 53 of the General Tax Law and Article 171 of the Tax Procedural Code, we must consider this to be the proper procedural means for formalizing the request.

Considering that the stamp duty assessment acts put in issue here are illegal, it is evident that their enforcement can only be attributed to the Tax Authorities, and the petitioner has the right to be compensated for such expenses.

Although the petitioner presents an estimate of the costs already incurred, the amount of compensation should correspond to the costs actually incurred, from the date it became necessary to provide the guarantee until the date it is canceled, with the maximum limit provided for in paragraph 3 of Article 53 of the General Tax Law.

Since the tribunal cannot, owing to practical impossibility, quantify the costs of the guarantee provided, nor its maximum limit, its value shall be determined in the enforcement of this decision, in accordance with paragraph 2 of Article 609 of the Code of Civil Procedure (CPC), applicable by force of section (e) of paragraph 1 of Article 29 of the Tax Arbitration Regulations.

IV – DECISION

On the basis of the foregoing, the tribunal decides as follows:

a) To declare that plots of land for construction are excluded from stamp duty taxation provided for in item 28.1 of the TGIS, as amended by Law 55-A/2012 of 29 October.

b) Consequently to declare the petition for arbitration as well-founded, owing to error attributable to the Tax Authorities' services, and to annul the stamp duty assessment acts for the years 2012 and 2013 in the total amount of € 28,702.87, with all legal consequences arising therefrom, as they are manifestly in violation of the aforementioned taxable event rule.

c) To declare the obligation of the Tax Authorities to reimburse the stamp duty proven to have been paid in the 1st instalment of 2013 in the amount of € 5,590.44 plus compensatory interest, calculated at the legal rate, from the date of payment to the date of reimbursement.

d) To declare the obligation to pay the costs of the guarantee provided, to be determined in the enforcement of this decision.

e) To fix the case value at € 29,392.91 in accordance with the provisions of Article 299, paragraph 1, of the Code of Civil Procedure, Article 97-A of the Tax Procedural Code, and Article 3, paragraph 2, of the Rules of Procedure for Tax Arbitration (RCPAT).

f) To fix the costs, under paragraph 4 of Article 22 of the Tax Arbitration Regulations, in the amount of € 1,530.00 in accordance with the provisions of Table I referred to in Article 4 of the Rules of Procedure for Tax Arbitration, to be borne by the respondent.

Notify.

Lisbon, 17 July 2015

Document prepared by computer in accordance with Article 131, paragraph 5 of the Code of Civil Procedure, as applicable by reference in Article 29, paragraph 1, section (e) of the Tax Arbitration Regulations, with blank spaces and reviewed by the tribunal.

The Arbitrator

Arlindo José Francisco

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) under Verba 28 of the TGIS applicable to construction land (terrenos para construção) in Portugal?
Based on the original wording of Verba 28 TGIS as amended by Law 55-A/2012, construction land should not be subject to Stamp Tax. The provision taxed 'property with residential use' (prédios de afetação habitacional), and construction land lacks residential use since it has no buildings, occupancy licenses, or actual residential purpose. The legislator confirmed this interpretation by subsequently amending Verba 28.1 through Law 83-C/2013 to explicitly include construction land, demonstrating the original law did not cover terrenos para construção. However, the Tax Authority initially took the position that construction land qualified based on the application of residential coefficients in patrimonial value calculations.
Can construction land be classified as property with housing allocation (afetação habitacional) for Stamp Tax purposes?
No, construction land cannot be properly classified as property with housing allocation (afetação habitacional) for Stamp Tax purposes under the original Law 55-A/2012. Construction land is undeveloped and lacks the essential characteristics of residential use: it has no buildings, no residential occupation license, and serves no current housing function. While the Tax Authority argued that applying the residential coefficient in calculating patrimonial tax value (VPT) under Article 41 CIMI confers residential character, this administrative calculation method does not transform the land's legal nature. The concept of 'housing allocation' requires actual or potential residential occupation, which bare land for construction cannot provide until development occurs.
What is the difference between 'housing destination' and 'housing allocation' under Portuguese Stamp Tax law?
'Housing destination' (destino habitacional) refers to the intended future purpose of a property—what it is designed or planned to become. 'Housing allocation' (afetação habitacional) refers to the current use or functional assignment of a property for residential purposes. Under Portuguese Stamp Tax law, Verba 28 TGIS uses 'afetação habitacional' (allocation), not merely 'destination.' This distinction is critical: construction land may have a future residential destination in urban planning terms, but it lacks current residential allocation since it remains undeveloped. The Tax Authority attempted to conflate these concepts by arguing 'residential use' is broader than 'residential purpose,' but the legislative amendment in Law 83-C/2013 clarified that construction land required explicit inclusion in the tax base, confirming the original provision covered only properties with actual residential allocation.
What procedural steps must a taxpayer follow before filing an arbitration request with CAAD against a Stamp Tax assessment?
Before filing an arbitration request with CAAD against a Stamp Tax assessment, a taxpayer must exhaust mandatory administrative remedies. First, the taxpayer must file a reclamação graciosa (administrative reconsideration request) with the Tax Authority within the statutory deadline (typically 120 days from notification of the assessment). If the reclamação is dismissed or denied, the taxpayer may file an impugnação judicial (judicial challenge) or proceed to arbitration. Alternatively, after the reclamação decision, the taxpayer can choose arbitration under RJAT Article 2(1)(a) and Article 10(1)(a). In this case, the taxpayer filed both a reclamação graciosa and an impugnação administrativa, both of which were dismissed, before filing the CAAD arbitration petition. The taxpayer also made partial payment (first installment of €5,590.44) and provided a bank guarantee to suspend enforcement proceedings, demonstrating compliance with procedural requirements to preserve rights during the challenge.
Can a taxpayer claim compensatory interest and indemnity for undue guarantees when challenging Stamp Tax liquidations at CAAD?
Yes, a taxpayer can claim both compensatory interest and indemnity for undue guarantees when successfully challenging Stamp Tax liquidations at CAAD. Under Article 43 of the General Tax Law (LGT), taxpayers are entitled to compensatory interest (juros compensatórios) on amounts unduly paid when tax assessments are annulled. This interest compensates for the State's use of funds that were not legally due. Additionally, when a taxpayer provides a bank guarantee or other security to suspend enforcement proceedings (PEF) pending resolution of the challenge, and the underlying assessment is later annulled, the taxpayer may claim compensation for costs incurred in providing that guarantee. In this case, the taxpayer estimated guarantee costs of €690.04 and explicitly requested compensation in the arbitration petition. These remedies ensure taxpayers are made whole when illegally assessed taxes are successfully challenged, covering both the time value of money paid and ancillary costs of defending against unlawful collection efforts.