Process: 93/2017-T

Date: June 26, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 93/2017-T addresses the application of Stamp Tax (Imposto do Selo) under item 28.1 of the General Stamp Tax Table to a building in vertical property divided into 57 autonomous fractions in Lisbon, with a total patrimonial value of €9,848,728.27. The Tax Authority issued separate Stamp Tax assessments at the 1% rate for each autonomous fraction capable of independent use, totaling €80,707.27 for 2015. The central procedural issue concerned the timeliness of the arbitration request filed on 30-01-2017. The Applicant had previously filed case 429/2016-T before a singular arbitral tribunal, which was dismissed without addressing the merits due to lack of jurisdiction. The Tax Authority argued the new request was untimely, as it exceeded the 90-day period from the voluntary payment deadline of the first installment established in Articles 49(3) of the Stamp Tax Code and 129(2) CIMI. The Applicant countered that Article 24(3) of RJAT allows a new filing period when a prior arbitral decision concludes without addressing merits due to facts not attributable to the taxpayer. This case is significant for determining whether buildings in vertical property with autonomous fractions should be assessed for Stamp Tax purposes as a single property or as multiple independent taxable units, and for clarifying the procedural rules governing refiling after jurisdictional dismissals in tax arbitration.

Full Decision

ARBITRAL DECISION

The arbitrators Cons. Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. Maria Alexandra Mesquita and Dr. Adelaide Moura (arbitrators members), appointed by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 05-04-2017, agree as follows:

1. Report

A…, S.A., NIPC…, with headquarters at Av. …, …, …, …-…, Lisbon (hereinafter referred to as the "Applicant"), filed a request for the constitution of a collective arbitral tribunal, in accordance with the combined provisions of Articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the TAX AND CUSTOMS AUTHORITY is cited as respondent.

The request for the constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 06-02-2017.

Pursuant to the provisions of subsection a) of paragraph 2 of Article 6 and subsection b) of paragraph 1 of Article 11 of the RJAT, in the wording introduced by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories hereto, who communicated their acceptance of the appointment within the applicable time limit.

On 21-03-2017 the parties were duly notified of such appointment, and did not express any intention to refuse the designation of the arbitrators, in accordance with Article 11 paragraph 1 subsections a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provisions of subsection c) of paragraph 1 of Article 11 of the RJAT, in the wording introduced by Article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 05-04-2017.

The Tax and Customs Authority filed a response raising the exception of untimeliness and arguing that the request should be judged unfounded.

By order of 11-05-2017 a hearing was waived and it was decided that the case would proceed with written submissions.

The parties presented their written submissions.

The arbitral tribunal was duly constituted in accordance with the provisions of Articles 2, paragraph 1, subsection a), and 10, paragraph 1, of Decree-Law no. 10/2011, of 20 January, and is competent.

The parties are duly represented, have legal personality and capacity, are parties to the dispute and are represented (Articles 4 and 10, paragraph 2, of the same decree and Article 1 of Order no. 112-A/2011, of 22 March).

The case is not subject to any nullities.

2. Matters of Fact

2.1. Established Facts

Based on the evidence contained in the case file and in the administrative procedure attached to the record, the following facts are deemed established:

a) On 31 December 2015, the Applicant was the owner of the urban property registered under article … of the parish of …, municipality of Lisbon, corresponding to the former article … of the extinct parish of …, municipality of Loures, consisting of 57 apartments or units capable of independent use, with a total patrimonial value of € 9,848,728.27;

b) Of the aforementioned apartments or units capable of independent use, 36 are intended for residential purposes, with the remaining ones intended for commerce and services;

c) The sum of the Patrimonial Tax Values (VPT) attributed to the apartments or units capable of independent use and intended for residential purposes is € 8,070,722.95, this being the value indicated in each of the collection notes for the first instalment of the Stamp Tax assessments – item 28.1 – for the year 2015, as "Patrimonial Value of the property – total subject to tax";

d) The VPT attributed to each apartment or unit capable of separate rental and intended for residential purposes ranges between € 146,121.50 and € 328,285.75;

e) In the name of the Applicant, Stamp Tax assessments for the year 2015 were issued on 5 April 2016, for voluntary payment in three annual instalments, whose first instalments appear in the collection notes identified in the table below, based on the VPT of each of the units capable of independent use and the rate of 1%:

f) The sum of the Stamp Tax assessments – item 28.1 – for the year 2015, relating to the property identified in the record, is € 80,707.27, with the amount of € 26,902.63 corresponding to the sum of the first instalments of said assessments, with voluntary payment deadline in April 2016;

g) The Applicant submitted a request for arbitral determination seeking the declaration of illegality and consequent annulment of the Stamp Tax assessments referred to, which was assigned number 429/2016-T, indicating as the value of the case the sum of the values of the 1st instalments;

h) In that case a decision was issued on 19-01-2017, a copy of which was attached with the request for arbitral determination, whose content is reproduced herein, in which the merits of the case were not addressed, as it was understood that the exception of lack of jurisdiction of the Singular Arbitral Tribunal to hear the Applicant's claim was applicable;

i) On 30-01-2017, the Applicant filed the request for arbitral determination that gave rise to the present case.

2.2. Unestablished Facts

2.3. Grounds for Establishing the Facts

The established facts are based on the documents submitted by the Applicant with the request for arbitral determination.

3. Matters of Law

3.1. Exception of Untimeliness

Article 10, paragraph 1, of the RJAT establishes the following, insofar as relevant:

1 - The request for the constitution of an arbitral tribunal is filed:

a) Within a period of 90 days, counted from the facts provided for in paragraphs 1 and 2 of Article 102 of the Code of Procedure and Tax Process, regarding acts capable of autonomous challenge and, likewise, from the notification of the decision or the expiry of the legal deadline for hierarchical appeal;

The Tax and Customs Authority argues, in summary, that the request for arbitral determination was filed untimely, as it was not filed within the 90-day period counted from the expiry of the voluntary payment deadline of the 1st instalment of the Stamp Tax provided for in item 28.1 of the General Table of Stamp Tax (TGIS).

The Applicant argues that the request for the constitution of the arbitral tribunal was filed within 30 days following the finality of the decision, as was issued in arbitral case no. 429/2016-T, and therefore should be considered timely filed, under the provisions of Articles 279, paragraph 2, of the CPC and 332, paragraph 1, and 327, paragraph 3, of the Civil Code (by virtue of Article 29 of the RJAT).

It is indisputable that the Applicant did not file the request for the constitution of the arbitral tribunal that gave rise to the present case within the 90-day period counted from the expiry of the voluntary payment deadline of the 1st instalments of the Stamp Tax assessments.

On the other hand, with the wording given by Decree-Law no. 41/2016, of 1 August, to Article 49, paragraph 3, of the Stamp Tax Code and to Article 129, paragraph 2, of the Code of Municipal Property Tax (CIMI), it was clarified that the period for challenging is counted from the expiry of the voluntary payment deadline of the 1st instalment.

The RJAT contains a special provision regarding the effects of an arbitral decision that concludes the case without addressing the merits of the claim and regarding the calculation of the deadline for submitting a new request for arbitral determination, which is paragraph 3 of Article 24.

Paragraph 3 of Article 24 establishes the following:

3 - When an arbitral decision concludes the case without addressing the merits of the claim due to a fact not attributable to the taxpayer, the periods for administrative complaint, challenge, revision, promotion of ex officio revision, revision of taxable matter, or for requesting new arbitral determination of the acts subject to the arbitral claim are counted from the notification of the arbitral decision.

This rule regulates only the effects of a decision that does not address the merits due to a fact not attributable to the taxpayer, establishing that in such cases the rights of administrative and contentious challenge are revived, with complete elimination of the time elapsed, which constitutes a privileged solution for the taxpayer, in view of the general regime provided for in the Code of Administrative Court Procedure, subsidiarily applicable to tax litigation by virtue of Article 2, subsection c), of the Code of Procedure and Tax Process.

However, from this rule one cannot conclude, a contrario, that when the addressing of the merits is attributable to a fact of the taxpayer, there is no possibility whatsoever of renewal of the rights of challenge.

In fact, the general procedural legislation prevents the immediate loss of substantive rights by virtue of judicial decisions that refrain from addressing the merits (Article 279, paragraph 2, of the CPC), the same occurring with the legislation of administrative litigation (Article 87, paragraph 8, of the Code of Administrative Court Procedure [CPTA]), which is primarily applicable subsidiarily to tax proceedings, in accordance with subsection c) of Article 2 of the Code of Procedure and Tax Process and subsection c) of paragraph 1 of Article 29 of the RJAT.

In the case of the use of procedural means of challenge with short deadlines, such as the filing of a request for arbitral determination, the impossibility of renewal of its use would amount in practice to the loss of the right that was intended to be exercised, since, as a rule, there would be no time available counted from the initial expiry date of the period for challenge.

For this reason, in accordance with the constitutional principle of proportionality (Article 18, paragraph 2 of the Constitution of the Portuguese Republic), which assumes paramount importance when fundamental rights are at stake, such as the right of contentious challenge of injurious acts (Articles 20, paragraph 1, and 268, paragraph 4, of the Constitution of the Portuguese Republic), Article 24, paragraph 3, of the RJAT must be interpreted as not permitting a hypothetical a contrario interpretation, in the sense that non-addressing of the merits due to a fact attributable to the taxpayer would not allow the use of the normal means of renewal of the right of challenge that may be applicable, following a decision dismissing the action.

That is, the correct interpretation of Article 24, paragraph 3, is that when non-addressing of the merits is not attributable to the taxpayer, the latter shall have all administrative and contentious means of challenge indicated therein with the renewed initial deadline; when non-addressing of the merits is attributable to the taxpayer, the latter shall have the general means of renewal of contentious challenge with the special deadline provided for in the legislation subsidiarily applicable following decisions dismissing the action.

In the case at hand, the legislation subsidiarily applicable to proceedings to which the RJAT applies is Article 87, paragraph 8, of the CPTA, since the determination of the normative block to be applied is made "according to the nature of the matters not regulated", in accordance with paragraph 1 of Article 29 of the RJAT and, being confronted with the challenge of acts, the special subsidiary legislation for this type of proceedings should be applied, which is the CPTA (and not that provided for in the CPC, indicated by the Applicant).

In accordance with that Article 87, paragraph 8, of the CPTA, "the dismissal of the action without prior issuance of a pre-sanitation order, in cases where there could be correction of dilatory exceptions or irregularities, does not prevent the plaintiff from, within the period of 15 days, counted from notification of the decision, submitting a new petition, in compliance with the lacking requirements, which is deemed submitted on the date on which the first was submitted, for the purposes of timeliness of its submission".

Thus, in the face of a situation encompassed by this provision, the Applicant had the period of 15 days counted from the finality of the decision dismissing the action to file a new request for arbitral determination, which is deemed submitted on the date of the first.

In the case at hand, the arbitral decision was issued in case no. 429/2016-T on 19-01-2017 and the new request for arbitral determination was filed on 30-01-2017, therefore it is manifest that the Applicant is in a position to benefit from the regime provided for in that paragraph 8 of Article 87 of the CPTA.

For the foregoing reasons, the request for arbitral determination is deemed submitted on the date on which the one that gave rise to the case was submitted, which is 25-07-2016 (point 2.1 of the aforementioned arbitral decision), and therefore it was filed within the 90-day period following the expiry of the voluntary payment deadline of the 1st instalment of the challenged assessments, which occurred at the end of April 2016.

Therefore, the exception of untimeliness is unfounded.

3.2. Question of the Merits of the Request for Arbitral Determination

Item 28.1 of the TGIS, on which the challenged assessments were based, has the following wording in the year 2015, which is at issue:

28 - Ownership, usufruct or surface right of urban properties whose patrimonial tax value shown in the register, in accordance with the Code of Municipal Property Tax (CIMI), is equal to or greater than (euros) 1,000,000 - on the patrimonial tax value used for purposes of the Municipal Property Tax:

28.1 - For residential property or for building land whose construction, authorized or planned, is for residential purposes, in accordance with the provisions of the Code of Municipal Property Tax - 1%;

As results from the established facts, underlying the challenged assessments is an urban property in vertical ownership, which encompasses various autonomous units intended for residential purposes, in addition to others.

All units intended for residential purposes have a patrimonial tax value of less than € 1,000,000.00.

In this type of situation, item 28.1 of the TGIS does not apply, as has been repeatedly and unanimously held by the Supreme Administrative Court.

Among various decisions, reference may be made in this sense to the decision of the Plenary of the Supreme Administrative Court of 29-03-2017, case no. 0593/16, issued unanimously, which states, among other things, the following:

In Article 67, paragraph 2 of the Stamp Tax Code, it is established that "to matters not regulated in this code relating to item 28 of the General Table, the Code of Municipal Property Tax applies subsidiarily". Thus it seems legitimate to affirm that the legislative options in this regard must be drawn from the Code of Municipal Property Tax. This means that the tax legislator does not intend for the concepts in question to be densified by recourse to other branches of law, namely the Civil Code where a long tradition precisely defines what are properties, rural and urban properties, as it defines full ownership and horizontal ownership, defining a detailed regime for each. The legislator made, clearly and expressly in the Code of Municipal Property Tax, a choice of concepts which, although often having the same names as those in the Civil Code, differ from it as to their content so as to encompass more realities capable of taxation. The concept of property for purposes of Municipal Property Tax, Article 2, is so broad that it greatly exceeds, and even derogates from, the nature of the thing on which real rights are exercised, approximating instead the economic potential of the assets to generate wealth that, it is intended to tax, than the real nature of the right that taxpayers may have over the thing. Thus, any solution for the present situation that must emerge from the concepts of the Civil Code regarding what are properties and regarding the regulation of the right of ownership proves to be inadequate. That for the Civil Code horizontal ownership does not confuse with the ownership of an immovable in which its parts have distinct uses and are capable of independent economic use is an evident fact, but it adds nothing to the solution we seek.

As stated in the foundational decision, it is the legislator in that Article 67, paragraph 2 of the Stamp Tax Code who points the way that the judge must follow in terms of clarifying the objective incidence of Stamp Tax – item 28 – without which he may depart, precisely because of the legal typicity constraints to which these taxes are constitutionally subject. To argue that the purpose of the registers is different, that the difference rests on the number of property notebooks issued serves only to note that in mere bureaucratic treatment details slight differences are perceived between the units of properties constituted in horizontal ownership and the parts of a property not constituted in horizontal ownership but which integrates parts capable of independent use and with economic value. That they are different things no one doubts, but here the question is whether the legislator intended to give them different treatment for purposes of taxation.

As expressed in the foundational decision, for the reasons mentioned therein that we hereby reaffirm, we can only conclude, using the rules of interpretation contained in Article 9 of the Civil Code, which are indeed applicable subsidiarily by virtue of the provisions of Article 2 of the Code of Procedure and Tax Process, that the solution to be applied, in this case to taxation under Stamp Tax, can only be the one that the legislator defined for purposes of taxation under Municipal Property Tax, because this was the clear and express choice of the legislator.

The grounds of the foundational decision to which reference is made in this judgment are the following:

"(…) it is necessary to bring together the conclusions that allow, without room for doubt, to decide on the matter under discussion (that is, whether, for purposes of the application of Item no. 28 of the TGIS, in cases in which a property with various autonomous units, capable of independent use, is not constituted in horizontal ownership, the relevant VPT is determined by the sum of the individual VPTs, or alternatively, is individually considered).

In this sense, it should be noted, first, that the present subject matter is, from the outset by virtue of Article 67, paragraph 2 of the Stamp Tax Code, subject to the rules of the Code of Municipal Property Tax, "to matters not regulated in this code relating to item 28 of the General Table, the Code of Municipal Property Tax applies subsidiarily".

As such, and as has been mentioned so many times, in the understanding of this court, the mechanism for determining the relevant VPT for purposes of the aforementioned item is the one that is established in the Code of Municipal Property Tax.

Now, Article 12, paragraph 3 of the Code of Municipal Property Tax establishes that "each apartment or part of a property capable of independent use is registered separately in the land register, which also indicates its respective patrimonial tax value".

The legislator thus downplaying, in accordance with the terms previously mentioned, any prior constitution of horizontal or vertical ownership.

Indeed, for the legislator, what is relevant is the material truth underlying its existence as an urban property and its use.

It should be noted that the Tax Authority itself seems to agree with the criterion set forth, which is why the assessments that it itself issues are very clear in their essential elements, from which it follows that the value of incidence is that corresponding to the VPT of each of the apartments and the assessments are individualized.

Therefore, if the legal criterion imposes the issuance of individualized assessments for the autonomous parts of properties in horizontal ownership, in the same manner as it establishes for properties in horizontal ownership, it clearly established the criterion, which must be unique and unequivocal, for the definition of the rule of incidence of the new tax.

Thus, there would only be incidence of Stamp Tax (within item no. 28 of the TGIS) if any of the parts, apartments or units with independent use presented a VPT greater than € 1,000,000.00.

The Tax Authority cannot consider as the reference value for the incidence of the new tax the total value of the property, when the legislator itself established a different rule under the Municipal Property Tax (and, as previously mentioned, this is the applicable code to matters not regulated as regards item no. 28 of the TGIS).

In conclusion, the current legal regime does not impose the obligation to constitute horizontal ownership, therefore the conduct of the Tax Authority translates into arbitrary and illegal discrimination.

In fact, the Tax Authority cannot distinguish where the legislator itself understood not to do so, under penalty of violating the coherence of the tax system, as well as the principle of tax legality provided for in Article 103 of the Constitution of the Portuguese Republic, and also the principles of tax justice, equality and proportionality.

In the case at hand, the property or properties in question were, on the date relevant to the facts, constituted in full ownership and had […] units with independent use, as results from the documents […].

Given that none of these units has a patrimonial value equal to or greater than € 1,000,000.00, as results from the documents attached to the record, it is concluded that the legal presupposition for incidence is not met".

In line with this jurisprudence, the challenged assessments are illegal, due to a defect consisting of violation of law, since properties in the regime of full or vertical ownership that integrate units intended for residential purposes capable of independent use that do not have, any of them, a patrimonial tax value greater than € 1,000,000.00, do not fall within the scope of application of item 28.1 of the TGIS.

This defect justifies the annulment of the assessments, in accordance with Article 163, paragraph 1, of the Code of Administrative Procedure, subsidiarily applicable by virtue of the provisions of Article 29, paragraph 1, subsection e), of the RJAT.

4. Decision

For these reasons, this Arbitral Tribunal agrees to:

a) Judge the exception of untimeliness unfounded;

b) Judge the request for arbitral determination well-founded;

c) Declare illegal and annul the Stamp Tax assessments for the year 2015 with the numbers:

2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, 2016…, and 2016….

5. Value of the Case

In accordance with the provisions of Article 306, paragraph 2, of the CPC and Article 97-A, paragraph 1, subsection a), of the Code of Procedure and Tax Process and Article 3, paragraph 2, of the Regulations of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 80,707.27.

6. Costs

In accordance with Article 22, paragraph 4, of the RJAT, the amount of costs is fixed at € 2,754.00, in accordance with Table I annexed to the Regulations of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 26-06-2017

The Arbitrators

(Jorge Manuel Lopes de Sousa)

(Maria Alexandra Mesquita)

(Adelaide Moura)

Frequently Asked Questions

Automatically Created

What is the Stamp Tax (Imposto do Selo) applicable to buildings in vertical property divided into autonomous fractions in Portugal?
Stamp Tax on buildings in vertical property divided into autonomous fractions in Portugal is governed by item 28.1 of the General Stamp Tax Table (TGIS), which applies a 1% annual rate on the patrimonial tax value (VPT) of properties exceeding €1,000,000. In Process 93/2017-T, the Tax Authority issued separate assessments for each of the 57 autonomous fractions, treating them as independent taxable units rather than as a single building. The residential units had a combined patrimonial value of €8,070,722.95, with individual VPT values ranging from €146,121.50 to €328,285.75 per fraction.
How does CAAD Process 93/2017-T address the tax treatment of vertical property buildings with autonomous fractions?
CAAD Process 93/2017-T primarily addresses the procedural timeliness of challenging Stamp Tax assessments on vertical property buildings after a prior arbitration case was dismissed for lack of jurisdiction. The case involves whether the Tax Authority correctly issued separate Stamp Tax assessments for each autonomous fraction or whether the property should be treated as a single unit. After the singular arbitral tribunal dismissed case 429/2016-T without addressing the merits due to jurisdictional issues, the Applicant refiled before a collective tribunal, arguing that Article 24(3) of RJAT allows a new filing period when dismissal is not attributable to the taxpayer. The decision clarifies the intersection between substantive tax treatment of vertical property and procedural rules for refiling after jurisdictional dismissals.
Can a building in vertical property be assessed for Stamp Tax as a single unit or must each autonomous fraction be taxed separately?
Based on Process 93/2017-T, the Tax Authority's practice is to assess each autonomous fraction separately for Stamp Tax purposes under item 28.1 of TGIS, rather than treating the entire building in vertical property as a single taxable unit. In this case, the Authority issued 36 separate assessments for residential fractions within the same property (former article of the parish), each subject to the 1% rate on its individual patrimonial value. This approach contrasts with treating the building as one property, which would potentially affect both the applicability of the tax and jurisdictional thresholds for arbitration.
What was the outcome of the CAAD arbitral decision regarding Stamp Tax on vertical property buildings?
The full outcome of Process 93/2017-T regarding the substantive Stamp Tax issue is not provided in the excerpt, which focuses on the procedural exception of untimeliness raised by the Tax Authority. The arbitral tribunal was constituted as a collective tribunal on 05-04-2017 and was examining whether the request filed on 30-01-2017 was timely under Article 24(3) of RJAT, which addresses refiling after a prior case concluded without addressing merits. The decision was considering whether the 90-day deadline from the voluntary payment deadline applies strictly, or whether the Applicant could benefit from an extended period following the 19-01-2017 decision in case 429/2016-T that dismissed the claim for lack of jurisdiction of the singular tribunal.
What is the legal deadline for filing a CAAD arbitration request to challenge Stamp Tax assessments on real estate?
The legal deadline for filing a CAAD arbitration request to challenge Stamp Tax assessments on real estate is 90 days, counted from the expiry of the voluntary payment deadline of the first installment, as established in Article 10(1)(a) of RJAT and clarified by Decree-Law 41/2016 in Articles 49(3) of the Stamp Tax Code and 129(2) CIMI. However, Article 24(3) of RJAT provides an exception: when an arbitral decision concludes without addressing the merits due to facts not attributable to the taxpayer (such as jurisdictional issues), new filing periods may apply. In Process 93/2017-T, the Applicant argued for a 30-day period from the finality of the dismissal in case 429/2016-T, invoking Articles 279(2) CPC and 332(1) and 327(3) of the Civil Code by virtue of Article 29 RJAT.