Tax Matters | Contracts for the Use of Shops in Shopping Centres – are they subject to Stamp Duty?

Paulo Cordeiro de Sousa*

The Supreme Court (“TUI” – Tribunal de Última Instância) issued a decision on 16 October 2019 that resulted in a number of contracts for the use of shops in a certain shopping centre in Macau being subject to the payment of Stamp Duty (“SD”). The tax administration had assessed SD on several contracts and required the company that manages the shopping centre to pay the SD. Rental contracts are subject to the payment of SD, but on a number of occasions the TUI and the Court of Second Instance (“TSI” – Tribunal de Segunda Instância) had ruled that Contracts for the Use of Shops in Shopping Centres (“CUSSC”) are different from normal rental contracts, and therefore should not be deemed taxable under the SD Regulations – which expressly covers only tax rental contracts. So, why has the TUI issued a decision on 16 October 2019 that seems to contradict previous settled case law of the high courts (TUI and TSI)? But there is no contradiction.
The TUI’s decision of 16 October 2019 does not rule that the CUSSC are subject to SD. It is a ruling taken for unification of jurisprudence – in fact, its aim is to create a precedent that, from now on, is mandatory for all courts in Macau. The law allows the TUI to issue these kinds of decisions in cases where there are two contradictory decisions taken by the TUI or one taken by the TUI and another by the TSI.
The situation was as following: The tax administration has considered that several CUSSC, relating to a certain shopping centre, should be subject to the payment of SD. Knowing that the settled case law of the Macanese high courts is that such contracts are not subject to SD, the management company has challenged the tax administration’s position in the Administrative Court. The latter considered that, prior to filing the lawsuit in court, the management company should have filed an administrative appeal, under the terms of article 2 of Law 12/2003, and thus ruled the lawsuit as inadmissible.
The management company appealed to the TSI, arguing that Law 12/2003 was not applicable to the SD – as has been previously ruled by the TSI in other occasions. The TSI ruled in favour of the management company. The tax administration appealed to the TUI. The TUI had previously ruled, through a decision taken in 23 July 2014, that although Law 12/2003 is labelled “Amending the Professional Tax Regulations and the Complementary Income Regulations” (i.e. the Personal Income Tax – “PIT” – and the Corporate Income Tax – “CIT”), its article 2 applies to all taxes in general, meaning that it also applies to the SD. As mentioned, article 2 of Law 12/2003 sets forth that, save for some exceptions, taxpayers may only challenge a tax assessment in court after having previously filed an administrative appeal. The TSI had previously ruled on the contrary, arguing that Law 12/2003 applied only to PIT and CIT. Now, it has been ultimately decided by the TUI that article 2 of Law 12/2003 applies to all taxes, SD included.
In my opinion, it is strange to determine that a law labelled as amending two specific taxes should also apply to all taxes. If the lawmakers had this intention, they would have stated so. The decision of the TUI may open many doubts regarding the application of certain provisions of other laws to situations to which they have not been approved by the lawmakers.
So, the fact is that the court’s unanimous position is that the CUSSC are not subject to SD, but the tax administration’s position is that they are. If the taxpayers wish to challenge the tax administration’s position, they must first file an administrative appeal, and only afterwards a lawsuit in court, otherwise they may lose the opportunity to do so. It does not seem to make much sense.