Process: 96/2016-T

Date: September 20, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

This arbitral tax decision addresses whether Stamp Duty under Article 28 of the General Stamp Duty Table (TGIS) applies to a vertically-owned property where individual units fall below the €1,000,000 threshold but the aggregate value exceeds it. The taxpayer challenged stamp duty assessments for 2014 on a property consisting of 19 independent residential units with a total taxable patrimonial value (VPT) of €1,762,846.56, arguing that since no individual unit exceeded €1,000,000 (ranging from €15,955.09 to €161,789.29), the legal requirement for Verba 28 stamp duty was not met. The petitioner contended that the Municipal Property Tax Code (CIMI) rules should apply to matters not regulated in the Stamp Duty Code, and since IMI is calculated unit-by-unit, stamp duty should follow the same principle. The Tax Authority countered that stamp duty applies to the total VPT of the property, not per unit, arguing that vertical property ownership differs from full ownership under both civil and fiscal law. A procedural issue arose as the Tax Authority claimed supervening lack of object, asserting the 2014 assessments had already been annulled in Case 501/2015, noting that the taxpayer contests annual assessments, not individual installments which merely represent phased payment mechanisms. The tribunal was constituted on May 6, 2016, and both parties waived the hearing and oral arguments. The decision was scheduled for September 20, 2016, with the court first addressing whether the case retained its object before examining the substantive legality of aggregating VPT across independent units to trigger the high-value property stamp duty threshold.

Full Decision

ARBITRAL DECISION

I – REPORT

1 A…, unmarried, of age, TID[1]…, in his capacity as head of the estates opened by the death of B… and C…, resident at Avenue … no. … –…, …-… Lisbon, filed a request for arbitral pronouncement, pursuant to the provisions of subparagraph a) of no. 1 of article 2º, of no. 1 of article 3º and of subparagraph a) of no. 1 of article 10º, all of the LRATT[2], requesting the TCA[3], with a view to the assessment of the legality of the tax acts of stamp duty assessment, relating to the year 2014, incidental to the ownership of a real property in vertical ownership, registered in the property matrix under urban property no. … of the parish of …, area of the … Financial Service of Lisbon, as per the attached property record, relating to the 2nd and 3rd instalments, in the total amount of € 6,023.18.

2 Which was made without exercising the option to designate an arbitrator, having been accepted by His Excellency the President of the AAC[4] and automatically notified to the TCA on 22/02/2016.

3 Pursuant to the provisions of no. 2 of article 6º of the LRATT, by decision of His Excellency the President of the Ethics Council, duly communicated to the parties, within the legally applicable time limits, Arlindo José Francisco was appointed as arbitrator of the tribunal on 20/04/2016, who communicated his acceptance of the appointment within the legally stipulated time limit.

4 The tribunal was constituted on 06/05/2016 in accordance with the provisions contained in subparagraph c) of no. 1 of article 11º of the LRATT, as amended by article 228º of Law no. 66-B/2012, of 31 December.

5 With its request, the petitioner seeks the annulment of stamp duty relating to the 2nd and 3rd instalments and to the year 2014 concerning the property already identified whose aggregate TPV[5] exceeds € 1,000,000.00.

6 The petitioner supports its position, in summary, on the understanding that the TCA cannot take into account the total TPV of the property, since the legislator established a different rule under the MPTC[6], this being the code applicable to matters not regulated in the SDC[7], it being certain that item 28 of the GSDT[8] stipulates that SD[9] is charged on the TPV used for MPT[10] purposes.

7 Since the MPT is calculated unit by unit, the TCA cannot adopt a different understanding; in doing so, it violates the principles of legality and fiscal equality and the CPR[11], namely its article 103º.

8 Now, since none of the storeys or independent use units have a TPV equal to or exceeding € 1,000,000.00, the legal condition for the imposition of SD provided for in the aforementioned item 28 is not met, and therefore there is grounds for the annulment of the corresponding assessments.

9 It also states that the other stamp duty assessment acts of the year 2014, relating to the property in question (single instalment and 1st and 2nd instalments, with payment deadline in April and July 2015) are the subject of case 501/2015 which is pending before the AAC.

10 In its reply, the respondent corrects that the request is limited solely to the 3rd instalment of the year 2014, in the amount of € 6,023.18 and that, upon consultation of case 501/2015, the decision rendered therein annuls the assessments of the year 2014, as submitted by the TCA.

11 It considers that this case lacks an object since the petitioner had already submitted a challenge to the assessments of the year 2014, forgetting that it contests annual assessments and not instalments which are merely the means of phased payment of annual assessments.

12 It concludes that there is a supervening lack of object to the dispute which leads to its discharge from the instance, but, in the event that this is not so understood, it submitted a defence by way of challenge, wherein, in summary, it maintains that SD is charged on the total TPV of the property and not per storey or part capable of independent use, as the petitioner claims, since there is no equivalence between a property under a vertical property ownership regime and property under full ownership, being different civil-law regimes and fiscal law respects them.

II - CASE MANAGEMENT

The tribunal was regularly constituted, the parties have legal personality and capacity, show themselves to be legitimate and are regularly represented in accordance with articles 4º and 10º, no. 2 of the LRATT and article 1º of Regulation no. 112-A/2011, of 22 March.

Upon submission of the respondent's reply, as a preliminary issue, the question of supervening lack of object to the dispute was raised, with the consequent discharge from the instance, since the stamp duty assessment acts here challenged had already been the subject of assessment and decision no. Case 501/2015, which annulled the respective assessments.

It also raised the waiver of the hearing provided for in article 18º of the LRATT, as well as the production of written or oral submissions.

By order of 11/06/2016, the petitioner was invited to state its position on the waivers raised, which, in its petition of 24/06/2016, agreed to the respondent's proposals.

By order of 29/06/2016, given the convergence of the parties' positions, the conditions for rendering the decision were deemed to be met, with 20/09/2016 being set as the date thereof.

In this manner, the case not suffering from any nullities, the preliminary question of supervening lack of object to the dispute shall be assessed in the first place.

III - REASONING

1 – The issues to be resolved, of relevance to the case, are as follows:

a) To determine whether the stamp duty assessment acts here challenged were the subject of an annulling decision in Case 501/2015, thereby having a supervening lack of object to the present dispute.

b) If not, whether the aforementioned assessments should or should not be declared illegal.

2 – Factual Matter

The factual matter considered relevant and proven based on the evidence attached to the record is as follows:

a) The estates of B… and C… were, in the year 2014, owners of the property already identified, situated in the parish of … area of the … Financial Service of the municipality of Lisbon.

b) The aforementioned property consists of 19 storeys or independent use units intended for residential use.

c) The property in the year 2014 was not under the horizontal property ownership regime, with its aggregate TPV being € 1,762,846.56.

d) None of the storeys or independent units have a TPV equal to or exceeding € 1,000,000.00 (they vary between € 15,955.09 and € 161,789.29).

e) The economic value attributed by the petitioner to the case is € 6,023.18, which corresponds to the value of the 3rd instalment here challenged, the single instalment and 1st and 2nd instalments having been challenged in case 501/2015.

f) The TCA attaches the decision rendered in case 501/2015 and considers that it annuls the assessments of the year 2014 and that the petitioner forgets that it contests assessments which are annual and not instalments which are merely the means of phased payment of annual assessments.

g) The petitioner did not contest the respondent's position, instead agreeing to the waiver of the hearing provided for in article 18º of the LRATT as well as the production of submissions proposed by the TCA, as per its petition of 24/06/2016.

There is no factual matter stated as unproven that is relevant to the decision.

3 – Legal Matter

The TCA states in its reply that the petitioner forgets that it contests assessments, which are annual, and not instalments which are merely the means of phased payment of annual assessments and alleges the supervening lack of object to the present dispute since the assessments in question were the subject of annulment as a result of the decision rendered in case 501/2015 which in fact declared the request for arbitral pronouncement to be well-founded, with the consequent annulment, with all legal effects, of the stamp duty assessment acts.

As is evident from the request for arbitral pronouncement, the assessment of the legality of the stamp duty assessments relating to the year 2014 (third instalment) is sought.

From the tribunal's perspective, the possibility of payment in instalments is a collection technique for a particular assessment act which is unique and only it can constitute an actionable act susceptible to challenge. Any instalment considered independently is neither an assessment act nor part of such an act; it is merely a collection technique.

In the present case, the stamp duty assessment act provided for in item 28 of the GSDT is the sole act of final ascertainment of the tax to be paid; the possibility of that ascertained amount being paid in instalments does not mean that there are as many assessments as there are instalments.

This sole assessment act may be challenged, whether after notification for payment of the 1st, 2nd or 3rd instalment, provided that the request is directed to the sole assessment act.

On this issue there have already been decisions (Cases 736/2014, 725/2015, among others) which found the tribunal to be materially incompetent to assess it.

However, in the present case, the TCA considers that the stamp duty assessment acts in question were annulled in view of the decision rendered in case 501/2015 which causes the supervening lack of object to the dispute, a position to which the tribunal adheres, thereby prejudicing the examination of other issues.

IV DECISION

In view of the foregoing, the tribunal decides as follows:

a) To declare the supervening lack of object to the present dispute, with the consequent discharge of the respondent from the present instance and its extinction in accordance with the provisions of subparagraph e) of article 277º of the CCP[12], applicable by virtue of article 29º no. 1 subparagraph e) of the LRATT.

b) To set the value of the case at € 6,023.18 in accordance with the provisions contained in article 299º, no. 1, of the CCP, article 97º-A of the TPPC[13], and article 3º, no. 2, of the RCTAP[14].

c) To set the costs, pursuant to no. 4 of article 22º of the LRATT, in the amount of € 612.00 in accordance with the provisions of table I referred to in article 4º of the RCTAP, which shall be borne by the petitioner.

Notify.

Lisbon, 20 September 2016

Text prepared by computer, pursuant to article 131º, no. 5 of the CCP, applicable by reference of article 29º, no. 1, subparagraph e) of the LRATT, with blank lines and revised by the tribunal.

The Arbitrator

Arlindo José Francisco

[1] Acronym for Tax Identification Number
[2] Acronym for Legal Regime for Arbitration in Tax Matters
[3] Acronym for Tax and Customs Authority
[4] Acronym for Administrative Arbitration Centre
[5] Acronym for Taxable Property Value
[6] Acronym for Municipal Property Tax Code
[7] Acronym for Stamp Duty Code
[8] Acronym for General Stamp Duty Table
[9] Acronym for Stamp Duty
[10] Acronym for Municipal Property Tax
[11] Acronym for Constitution of the Portuguese Republic
[12] Acronym for Civil Procedure Code
[13] Acronym for Tax Procedure and Process Code
[14] Acronym for Regulation on Costs in Tax Arbitration Proceedings

Frequently Asked Questions

Automatically Created

Does Stamp Tax under Verba 28 TGIS apply when individual units of a vertical property each have a VPT below €1,000,000?
According to the taxpayer's argument in this case, Stamp Tax under Verba 28 TGIS should not apply when individual units each have a VPT below €1,000,000, even if the aggregate exceeds this threshold. The petitioner contended that since the Municipal Property Tax Code (CIMI) applies to matters not regulated in the Stamp Duty Code and IMI is calculated unit-by-unit, each independent fraction should be assessed separately for stamp duty purposes. However, the Tax Authority maintained that vertical property ownership is distinct from full ownership and that stamp duty should be charged on the total VPT of the property, not per individual storey or independent unit, arguing that civil and fiscal law respect these different property regimes.
How is the taxable value (VPT) calculated for Stamp Tax purposes on properties in vertical ownership?
The calculation of taxable value (VPT) for Stamp Tax purposes on properties in vertical ownership is the central dispute in this case. The taxpayer argued that VPT should be determined unit-by-unit, following the methodology established in the Municipal Property Tax Code (CIMI), which is applicable to matters not specifically regulated in the Stamp Duty Code. Since Verba 28 of the TGIS stipulates that stamp duty is charged on the VPT used for Municipal Property Tax (IMI) purposes, and IMI is calculated per independent unit, the petitioner maintained that the €1,000,000 threshold should apply to each fraction separately. The Tax Authority disagreed, asserting that the total aggregate VPT of the entire property should be used, regardless of the vertical ownership structure or the individual values of component units.
Can the tax authority aggregate the VPT of all independent units in a building to trigger the Verba 28 threshold?
The Tax Authority's position in this case is that it can aggregate the VPT of all independent units in a building to trigger the Verba 28 threshold of €1,000,000. The respondent argued that stamp duty is charged on the total VPT of the property (€1,762,846.56 in this case) rather than on each individual storey or unit capable of independent use. The Tax Authority maintained that there is no equivalence between property under vertical ownership and property under full ownership, as these represent different civil law regimes that fiscal law must respect. The taxpayer contested this approach, arguing it violates principles of legality and fiscal equality enshrined in Article 103 of the Portuguese Constitution, since the law references VPT used for IMI purposes, which is calculated per unit.
What is the relationship between IMI valuation rules and Stamp Tax incidence under Portuguese tax law?
The relationship between IMI valuation rules and Stamp Tax incidence is a key legal question in this dispute. The petitioner argued that Article 28 of the TGIS establishes that stamp duty is charged on the taxable patrimonial value (VPT) used for Municipal Property Tax (IMI) purposes. Since the CIMI (Municipal Property Tax Code) applies to matters not regulated in the Stamp Duty Code, and IMI is calculated on a unit-by-unit basis for properties in vertical ownership, the same methodology should apply for stamp duty. The taxpayer contended that the Tax Authority cannot adopt a different understanding for stamp duty than what is established for IMI calculation. However, the Tax Authority maintained that vertical ownership creates a distinct fiscal treatment and that the total property value should be considered for stamp duty purposes, even if IMI is assessed per independent unit.
What legal principles of equality and legality apply to Stamp Tax liquidation on high-value real estate in Portugal?
The petitioner invoked the principles of legality and fiscal equality protected by Article 103 of the Portuguese Constitution (CPR) in challenging the stamp duty assessments. The taxpayer argued that by aggregating the VPT of all units rather than assessing each independently, the Tax Authority violated these constitutional principles. The principle of legality requires that taxes be imposed strictly according to law, and since Verba 28 refers to VPT used for IMI purposes (which is calculated per unit), the taxpayer contended that stamp duty must follow the same unit-by-unit approach. The principle of fiscal equality demands that taxpayers in similar situations be treated equally; the petitioner argued that treating vertical ownership differently from the IMI calculation methodology creates unequal treatment without legal justification. These principles form the constitutional framework governing tax liquidation on high-value real estate in Portugal.