Process: 139/2016-T

Date: September 28, 2016

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 139/2016-T addressed whether a creditor acquiring real estate during insolvency liquidation proceedings could claim Stamp Tax exemption under Article 269(e) of the CIRE (Insolvency and Company Recovery Code). The claimant, A... S.A., challenged €9,635.22 in Stamp Tax assessments on multiple property acquisitions made as a creditor in various insolvency proceedings. The company argued that Article 269(e) CIRE exempts onerous acquisitions of real property (including sales, barters, and asset transfers) carried out within the liquidation of insolvent estates, not just acquisitions of complete companies. The claimant contended this exemption serves the legislative purpose of expediting insolvency proceedings and satisfying creditor interests. The Tax and Customs Authority countered that the exemption requires two cumulative conditions: (1) specific operation types listed in the law, and (2) acts must occur within formal insolvency, payment, or recovery plans OR during liquidation of the insolvent estate. Critically, the TCA argued the claimant failed to acquire the 'totality of real property of the insolvent company,' which it deemed necessary for exemption eligibility. The dispute centered on whether Article 269(e) CIRE covers isolated property acquisitions during asset liquidation or only comprehensive business transfers. This case illustrates the complexity of applying insolvency tax exemptions and the tension between broad interpretations favoring creditor recovery and restrictive readings limiting fiscal benefits to complete enterprise transfers.

Full Decision

ARBITRAL DECISION

REPORT

A - PARTIES

A..., S.A., with the NIF..., with headquarters at Rua..., n.º..., ...-... Lisbon, hereinafter designated as Claimant or taxpayer.

TAX AND CUSTOMS AUTHORITY, hereinafter designated as Respondent or TCA.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD, and the Arbitral Tribunal was duly constituted, on 23-05-2016, to hear and decide on the subject matter of the present proceeding, and was automatically notified to the Tax and Customs Authority on 23-05-2016, as appears in the respective minutes.

The Claimant did not proceed with the appointment of an arbitrator, therefore, pursuant to article 6.º, n.º 1 and article 11.º, n.º 1, letter b) of Decree-Law n.º 10/2011, of 20 January, as amended by article 228.º of Law n.º 66-B/2012, of 31 December, the Deontological Council appointed Paulo Ferreira Alves as Arbitrator, with the appointment being accepted in accordance with legally provided terms.

On 04-05-2016 the parties were duly notified of this appointment and did not manifest any intention to refuse the appointment of the arbitrators, in accordance with article 11.º, n.º 1, letters a) and b), of the RAT and Articles 6.º and 7.º of the Deontological Code.

In accordance with the provision of article 11.º, n.º 1, letter c), of Decree-Law n.º 10/2011, of 20 January, as amended by article 228.º of Law n.º 66-B/2012, of 31 December, the singular arbitral tribunal is duly constituted on 23-05-2016.

Both parties agree to the waiver of presentation of written pleadings and the waiver of the holding of the meeting provided for in article 18.º of the RAT.

The arbitral tribunal is duly constituted. It is materially competent, in accordance with articles 2.º, n.º 1, letter a), and 30.º, n.º 1, of Decree-Law n.º 10/2011, of 20 January.

The parties have legal personality and capacity, are legitimate and are duly represented (articles 4.º and 10.º, n.º 2, of the same regulation and article 1.º of Ordinance n.º 112-A/2011, of 22 March).

The proceeding does not suffer from defects that would invalidate it.

B - REQUEST

  1. The herein Claimant seeks the declaration of illegality of the tax assessment acts for Stamp Duty purposes: n.º... of 2015, n.º... of 2016, n.º... of 2016, n.º... of 2016, n.º... of 2016, n.º... of 2016, n.º... of 2016, which established a total tax to be paid of €9,635.22 (nine thousand six hundred and thirty-five euros and twenty-two cents).

C - CAUSE OF ACTION

  1. To support its request for arbitral pronouncement, the Claimant alleged, seeking the declaration of illegality of the tax assessment acts for Stamp Duty purposes, already described in point 1 of this Award, in summary, the following:

i. The Claimant acquired real property, within the scope of an insolvency proceeding of various taxpayers, acting in the capacity of creditor thereof.

ii. Within the scope of these real property acquisition operations, the exemption from Stamp Duty provided for in article 269.º of the CIRE was automatically recognized for the Claimant, having therefore not assessed tax with respect to those acquisition operations.

iii. The Claimant alleges the verification of the principle of primacy of creditors' will in the CIRE, in such manner, and configuring the assets of insolvent debtors as the guarantee for satisfaction of existing credits, it would fall to creditors to decide on the effectiveness of that guarantee.

iv. Whereby, such effectiveness may be made viable either through full liquidation of the debtors' assets, or through the maintenance of activity and consequent restructuring of the insolvent company, being "by this way that, surely, the public interest in the preservation of the proper functioning of the market is best satisfied".

v. The Claimant argues that from letter e) of article 269.º of the CIRE, are also exempt from Stamp Duty onerous acquisitions of real property that are substantiated in any one of the following acts: 1. Sale; 2. Barter; 3. Transfer of company assets, provided that the act in question: a. be ab initio subject to Stamp Duty; and b. be carried out in insolvency plans, payment plans or recovery plans or carried out within the scope of the liquidation of the insolvent estate.

vi. Thus, the Stamp Duty exemption sub judice and granted, on the one hand, within the scope of operations of total or partial acquisition of the company subject to the insolvency proceeding, and, on the other, to mere acquisition acts of real property considered in isolation carried out in the liquidation phase of its assets.

vii. The Claimant maintains that the expressed intention of the legislator regarding the maintenance of existing regimes in the CPEREF regarding the exemption from fees and fiscal benefits, consequently imposes that the understanding be supported that are comprehended within the scope of the Stamp Duty exemption, provided for in letter e) of article 269.º of the CIRE, the operations of alienation of elements of the company's assets within the scope of the liquidation of its insolvent estate.

viii. It is evident that the real property operations under analysis in the present Request, carried out by the Claimant, are covered by the scope of application of letter e) of article 269.º of the CIRE and that, as such, legitimately benefited from the Stamp Duty exemption established therein, and the understanding of the TCA and the consequent tax assessments sub judice cannot proceed.

ix. The Claimant argues that any more restrictive interpretation of the norm under analysis would manifestly collide with the ratio legis thereof: to promote the expediting of the achievement of the insolvency process, so as to satisfy the interests of creditors.

x. The Claimant alleges that as to the concept of "individual merchant" the definition of "company" is a general and comprehensive concept, and necessarily applicable to natural persons acting in the capacity of individual merchants.

xi. Thus the Stamp Duty exemption, provided for in letter e) of article 269.º of the CIRE, appears equally applicable to situations of acquisition of real property carried out within the scope of the liquidation of the insolvent estate of natural persons, who act in the capacity of individual entrepreneurs.

xii. The Claimant concludes by alleging that in accordance with and on the grounds of the above stated, the tax assessment acts for Stamp Duty sub judice (in the total amount of €9,635.22, issued by the TCA with respect to the acquisitions under analysis, are deficient in legality, and should be annulled with all legal effects.

D - RESPONSE OF THE RESPONDENT

  1. The Respondent, duly notified for this purpose, timely presented its response in which, in abbreviated summary, alleged the following:

i. The TCA considered that the Claimant unduly benefited from the stamp duty exemption, in that the operations in question did not meet the necessary requirements for the application of letter e) of article 269.º of the CIRE, given that there was no verification of the acquisition of a "totality of the real property of the insolvent company".

ii. The fiscal exemption under consideration derives from the provision of article 269.º, letter e), in conjunction with article 16.º, n.º 2 (a contrario sensu), both of the CIRE.

iii. That is, the fiscal exemption provided for in the cited provisions is based on the verification of two cumulative prerequisites: 1st That what is in question is the carrying out of financing operations, the transfer or operation of company establishments, the constitution of companies and the transfer of commercial establishments, the sale [in casu], barter or transfer of elements of company assets, as well as the leasing of property; and 2nd That such acts, in casu, the sale, are provided for in insolvency plans, payment plans or recovery plans or are carried out within the scope of the liquidation of the insolvent estate.

iv. In these terms, in light of the facts alleged by the Claimant, it can only be concluded that the Singular Arbitral Tribunal does not even have the minimum elements to assess the verification of the legal prerequisites required in article 269.º, letter e) of the CIRE, elements that, as mentioned above, the Claimant does not even allege and, even less, prove.

v. In order to benefit from the exemption it is necessary for the Claimant to prove, namely that the said sale is integrated within the scope of an insolvency plan or payment plan or was carried out within the scope of the liquidation of the insolvent estate and that the sale relates to a company or establishment.

vi. Now the Claimant does not allege, and much less proves, on what basis the acquisitions of the real property were carried out, whether or not they are integrated within the scope of insolvency plans or payment plans or were carried out within the scope of the liquidation of the insolvent estate, therefore this prerequisite is not considered verified for lack of proof.

vii. Moreover, it derives from the provision of article 16.º, n.º 2 of the CIRE (cited above) that the fiscal benefits contained in articles 268.º to 270.º depend on prior recognition by the Tax and Customs Authority, when applied within the scope of Decree-Law n.º 178/2012, of 3 August (Decree-Law establishing the System of Business Recovery by Extrajudicial Means - SIREVE).

viii. In summary, in light of the scanty elements brought to the case file, it must be concluded that the Claimant made no proof of the facts constitutive of the right to the exemption it invokes, that is, that it met the prerequisites to benefit from the stamp duty exemption provided for in article 269.º, letter e) of the CIRE.

ix. The Claimant made no proof of the facts constitutive of the right to the exemption it invokes, that is, that it met the prerequisites to benefit from the stamp duty exemption provided for in article 269.º, letter e) of the CIRE.

x. Now, comparing the tenor of those two provisions two conclusions emerge: On the one hand, the IMT exemption resulting from payment in kind and transfer of property to creditors that was contained in article 121.º-b) of the CPEREF is now passed to article 270.º/1-c) of the CIRE. On the other hand, the same is not true with respect to the acts of sale, barter or transfer, as the legislator did not limit itself to a task of reordering [as it did with respect to article 270.º/1-c) of the CIRE], but rather to a substantive change.

xi. Indeed, the IMT exemption resulting from acts of sale, barter or transfer of the company ceased to refer to "elements of company assets" and to "long-term leases" [article 121.º/2-c) of the CPEREF], but only and solely to the "company" or "establishments thereof" [article 270.º/2) of the CIRE].

xii. In summary, the IMT exemption contained in article 270.º/2 of the CIRE covers acts of sale, barter or transfer integrated within the scope of insolvency plans, payment plans, recovery plans or carried out within the scope of the liquidation of the insolvent estate, however (now) with a qualification to what the (then) article 121.º/2-c) of the CPEREF provided: that the object of transmission be the company or establishment(s) thereof, and not solely elements of company assets.

xiii. The respondent concludes by alleging that in light of the argument adduced so far, the legality of the acts subject to the present arbitral request is evident, consequently lacking the claims formulated by the Claimant.

E - FACTUAL FOUNDATION

  1. Before proceeding to the assessment of these issues, it is necessary to present the factual matter relevant to its understanding and decision, which was done based on documentary evidence, and taking into account the facts alleged.

  2. As to the factual matter relevant, this tribunal considers the following facts established:

  3. The Claimant acquired the following real property, to which were issued the following supplementary Stamp Duty assessments:

a) Insolvency proceeding of natural person B..., NIF..., the real property acquired Article..., Parish of..., which corresponds to stamp duty assessment n.º..., dated 2015-12-16, and a tax to be assessed of €676.00.

b) Insolvency proceeding of natural person C..., NIF..., the real property acquired Article..., Parish of..., which corresponds to stamp duty assessment n.º..., dated 2016-01-12, and a tax to be assessed of €1,016.00.

c) Insolvency proceeding of natural person D..., NIF..., the real property acquired Article..., Parish of..., which corresponds to stamp duty assessment n.º..., dated 2016-01-28, and a tax to be assessed of €286.40.

d) Insolvency proceeding of natural person E..., NIF..., the real property acquired Article..., Parish of..., which corresponds to stamp duty assessment n.º..., dated 2016-01-28, and a tax to be assessed of €387.56.

e) Insolvency proceeding of natural person F..., NIF..., the real property acquired Article..., Parish of..., which corresponds to stamp duty assessment n.º..., dated 2016-01-28, and a tax to be assessed of €6,105.35.

f) Insolvency proceeding of natural person G..., NIF..., the real property acquired Article..., Parish of..., which corresponds to stamp duty assessment n.º..., dated 2016-01-28, and a tax to be assessed of €998.80.

g) Insolvency proceeding of natural person H..., NIF..., the real property acquired Article..., Parish of... (...), which corresponds to stamp duty assessment n.º..., dated 2016-02-29, and a tax to be assessed of €720.00.

  1. All the real property mentioned above resulted from the liquidation of the insolvent estate of natural persons.

  2. The Claimant proceeded with the assessment of tax on the acts here challenged.

F - UNPROVEN FACTS

  1. Of the facts with interest for the decision of the case, contained in the challenge, all objects of concrete analysis, those not contained in the factuality described above were not proven.

G - QUESTIONS TO BE DECIDED

  1. In light of the positions of the parties taken in the arguments presented, the following constitute central questions to be resolved, which must therefore be assessed and decided:

a. That alleged by the Claimant:

(i) The declaration of illegality of the tax assessment acts for Stamp Duty purposes n.º: n.º... of 2015, n.º... of 2016, n.º... of 2016, n.º... of 2016, n.º... of 2016, n.º... of 2016, n.º... of 2016, in the amount of €9,635.22 (nine thousand six hundred and thirty-five euros and twenty-two cents).

(ii) Payment of compensatory interest.

H - LEGAL MATTERS

  1. Considering the positions of the parties assumed in the pleadings presented, the central issue to be decided by the present arbitral tribunal is to assess the legality of the stamp duty tax assessment acts, by violation of the fiscal benefit provided for in article 269.º letter e) in conjunction with article 16.º, n.º 2 of the CIRE, approved by Decree-Law n.º 53/2004, of 18/3 and amended by Law n.º 66-B/2012, of 31 December.

  3. The assessment of the said legality and in light of the factuality presented, the present tribunal will focus on two cumulative questions; first, it is necessary to assess the legality and scope of the exemption here in question with respect to the insolvency of natural persons within the scope of their business activity in personal name. Second, it is necessary to prove whether the said credits resulted from relationships established between the Claimant and natural persons within the scope of the exercise of a business activity in individual name.

  4. As to the interpretation of the fiscal benefit provided for in article 269.º letter e) in conjunction with article 16.º, n.º 2 of the CIRE, to encompass business activity in individual name.

  5. It follows from article 269.º letter e) of the CIRE (Benefit relating to stamp duty), the following:

"The following acts are exempt from stamp duty, when subject to it, provided they are provided for in insolvency plans, payment plans or recovery plans or carried out within the scope of the liquidation of the insolvent estate: (…)

e) The carrying out of financing operations, the transfer or operation of company establishments, the constitution of companies and the transfer of commercial establishments, the sale, barter or transfer of elements of company assets, as well as the leasing of property;"

  1. Pursuant to article 269.º letter e) of the CIRE, in order to benefit from the fiscal benefit in the context of Stamp Duty, it is necessary to fulfill the following cumulative requirements:

i. First that the act of sale of the real property be provided for in the insolvency plan or be carried out within the scope of the liquidation of the insolvent estate.

ii. Second that the sale result from company assets.

  1. As to the first requirement, the respondent alleges that the Claimant does not prove that the real property was acquired within the scope of an insolvency proceeding.

  2. There is no doubt that the acts of transfer of the real property to the Claimant resulted from a sale effected within the scope of an insolvency proceeding, within the scope of the respective insolvency plan and its liquidation.

  3. This fact is derived from the description made by the TCA in the tax assessment acts here challenged, which is cited "for purposes of the exemption from Stamp Duty, provided for in letter e) of article 269 of the CIRE, only acts of sale, barter or transfer of elements of company assets understood as complex organizations may be considered covered by the legal provision. In this manner, those acts are not covered by this legal provision where the insolvent is a natural person and does not exercise an industrial, commercial or agricultural activity.".

  4. Being that the lack of proof as to the verification of the existence and nature of the transfer of the real property is not grounds for the tax assessment.

  5. It is also described by the TCA, in the notification of office n.º... of 11-09-2015, notified to the Claimant, for the exercise of prior hearing, the following: "After analysis of the elements available in this Finance Service, it was verified that was acquired on 2013-10-03, within the scope of the insolvency proceeding of C..., the property identified above having benefited from the benefit of IMT and stamp duty which contradicts the requirements provided in art.º 269 and 270 of the Code of Insolvency and Recovery of Companies (CIRE)".

  6. It is verified in the remaining notifications attached to the case file, that the TCA at no time doubted the nature of the sale and its origin.

  7. In these terms the first requirement provided for in the first paragraph of article 269.º of the CIRE is fulfilled, in that the real property was all acquired within the scope of the insolvency proceeding.

  8. As to the second requirement, on which there was according to the positions of the parties and the respective assessments, the main reason for the non-attribution of the exemption.

  9. As it appears from the Stamp Duty assessments the TCA describes: "In this manner, those acts are not covered by this legal provision where the insolvent is a natural person and does not exercise an industrial, commercial or agricultural activity."

  10. The Claimant on its part maintains that the operations it carried out with natural persons acting in the capacity of individual merchants, and as such integrate the definition of "company", and are covered by that provided in article 269.º letter e) of the CIRE.

  11. In the case sub judice, the Claimant acquired as a creditor within the scope of various insolvency proceedings of natural persons, various real property already described, which in the understanding of the Claimant are exempt from payment of Stamp Duty.

  12. However the respondent, briefly that the operations in question did not meet the necessary prerequisites for the application of letter e) of article 269.º of the CIRE, given that there was no verification of the acquisition of a "totality of the real property of the insolvent company".

  13. Of important relevance to the present arbitral decision, administrative case law on an analogous topic, as to the interpretation of the prerequisites provided for in article 270.º of the CIRE, in facts in all respects similar, which understands that "exempt from IMT not only the sales of the company or establishments thereof, as universalities of property, but also the sales of elements of its assets, provided that integrated within the scope of an insolvency plan or payment plan or carried out within the scope of the liquidation of the insolvent estate"[1].

  14. It results from the Award of the Supreme Administrative Court, case 0765/13 of 07/03/2013:

"Against this interpretation, one reads at a given point in the appealed judgment, that such "restrictive interpretation is not supported by the legal provision above transcribed, as it provides for various hypotheses, the last of which relates to 'acts of sale ... carried out within the scope of the liquidation of the insolvent estate', without any distinction relating to whether the insolvent estate is of a legal person or a natural person, nor any reference to the existence of a 'company', as the tax administration defends. It was precisely in this sense that the Award of the STA 0949/11, of 30-05-2012, 2nd Section, published at www.dgsi.pt pronounced itself where it was understood that the acts to which n.º 2 of art.º 270.º of the CIRE refers cover, not only the transmissions of real property integrated into a universality of company or establishment of the insolvent estate, but also isolated transmissions of elements of its assets, provided that integrated within the scope of an insolvency plan or payment plan or carried out within the scope of the liquidation of the insolvent estate". (…)

In summary, whereas the Public Treasury defends a restrictive interpretation in the sense that n.º 2 of art. 270.º of the CIRE only covers onerous transmissions of property that integrate the universality of company or establishment sold, bartered or transferred within the scope of the insolvency plan, the judgment cited above concluded that the most appropriate to the sense and scope of the law authorizing legislative approval of the CIRE would be to admit a broader interpretation so as to include also the real property that integrate the patrimony of the insolvent company. In any event, for what interests us in the case at hand, the point is that it must be real property that integrates the patrimony of a company and not real property of natural persons, with the only justification of being part of an insolvency proceeding, as is defended in the appealed judgment."

  1. In the same sense and on the same topic, also pronounced itself the Award of the Supreme Administrative Court, case 1345/15 of 16/12/2015.

"[the] appealed judgment, at fls. [...] of the case file, found the challenge presented by the now respondent against the IMT assessment on real property acquisition in the asset liquidation phase in an insolvency proceeding, to be well-founded, annulling the challenged assessment act and ordering the Administration to restitute the unduly paid tax increased with compensatory interest, on the understanding that such acquisition is covered by the exemption norm contained in n.º 2 of article 270.º of the CIRE. It was grounded in the award of this STA of 30 May 2012, case n.º 0949/11, referring to it and proceeding with its respective transcription [...]. The Public Treasury disagrees with the decision, alleging that the prerequisites for fulfilling the requirements that determine obtaining the benefit of exemption were not fulfilled by the acquirer, in that it did not acquire the company or its establishment and that the provision in art. 270.º, n.º 2 of the CIRE, even by way of an extensive interpretation, does not contemplate the outright sale of elements of company assets.

However, the appellant provides no reason that would shake our conviction that the appealed judgment has judged well by adopting the interpretation of article 270.º, n.º 2 of the CIRE that has been peacefully and repeatedly adopted by this STA since the Award mentioned in the appealed judgment – see beyond the judgments already cited in the opinion of the Excellency the Acting Solicitor-General to this STA above transcribed, the recent Awards of 11 November 2015, case n.º 0968/13 and of 18 November 2015, cases n.ºs 0575/15 and 1067/15 –, and it is not the fact that the TCA has a non-conforming interpretation of the provision to the case law of the STA – which will, moreover, have included in recent information 1/2014 of the DSIMT and submitted to the Bar Association of Notaries (see allegations of appeal at fls. 67, verso and 68 of the case file) -, reason to postpone the understanding that has been adopted and that is reaffirmed here, in that it constitutes that which better adjusts the legal text to the sense and extension of the legislative authorization under which the provision was emanated by the Government in matters reserved to the National Assembly and because this interpretation is the one that best serves the teleology of n.º 2 of article 270.º of the CIRE - «foster and support the rapid sale of property that integrates the insolvent estate for obvious reasons of interest to the creditors, but also of public interest in the resumption of normal functioning of the business world in which each insolvency proceeding presents itself as a disturbing element», giving fiscal incentives to whoever acquires the real property that integrates the insolvent estate and which will be sold in the liquidation phase – there being, to this light, no reason to distinguish situations in which the company is being sold globally with all its assets and liabilities, from situations in which one or more of the commercial establishments that comprised it are being sold, or in which real property that comprised its assets is being sold (see the Award of the STA of 18 November last, case n.º 01067/15). It is concluded, therefore, that there is nothing to censure in the appealed judgment which has judged well, and the appeal of the Public Treasury is destined to fail"

  1. In view of the foregoing, both awards decided as to the requirements of the IMT exemption, respectively, the "totality of the real property of the insolvent company" and as to the interpretation of "company", requirements that are equally provided for in article 269.º of the CIRE, regarding the Stamp Duty exemption, which should be applied in the present following situation:

  2. Additionally, within the scope of arbitral case law, it has been decided in the same sense as the STA, respectively in the arbitral awards n.º 764/2014-T of 29-05-2015 and n.º 123/2015-T of 01-09-2015, and arbitral decisions n.º 99/2015-T of 27-10-2015, n.º 95/2015-T.

  3. As per the Arbitral Award in case n.º 599/2015-T and 123/2015-T:

"Beyond this interpretation, permitted by the literal tenor of n.º 2 of article 270.º of the CIRE, being manifestly the one that is attuned with the teleology of the modality of exemption identified, which is to incentivize acquisitions of assets of the insolvent company, in the case at hand the sale was effected to a creditor of the insolvent company, whereby one is faced with a situation whose economic substance is essentially identical to the situations of payment in kind of property of the company or transfer of property to creditors, which are expressly provided for in letter c) of n.º 1 of the same article 270.º, as cases of IMT exemption.

For this reason, in cases where the sale is effected to creditors of the insolvent company, the economic substance, to which article 11.º, n.º 3, of the LGT mandates attention in the interpretation of tax incidence norms, would always require that it be understood that it concerns situations covered by the exemption, whereby, should the situation not fit within n.º 2 of article 270.º of the CIRE, it would always fall, by extensive interpretation, within n.º 1 of the same article."

  1. Using a broader interpretation so as to also include the real property that integrates the patrimony of the insolvent company, the real property acquired by the Claimant within the scope of the insolvency proceedings of natural persons who exercised a business activity in individual name, are covered by the exemption provided for in article 269.º letter e) of the CIRE.

  2. However, it is now incumbent on the present tribunal to focus on the second point of the present arbitral decision, respectively, whether the said debt contracted between the natural persons and the Claimant, from which would result the present operations within the scope of the insolvency proceeding, if the same resulted from the business activity in individual name of the insolvent person.

  3. It results from the factual matter established that the Claimant acquired real property within the scope of the liquidation of the insolvent estate of natural persons.

  4. However, and considering what has been written as to the extensive interpretation of the Fiscal Benefit here in question, it is incumbent to verify that the operations were carried out by natural persons within the scope of their business activity, that is, they resorted to financing from the Claimant exclusively for their business activity.

  5. The verification of the prerequisites, being a crucial point in this matter, is to decide on who bears the burden of proof as to the fulfillment of the requirement of article 269.º letter e) of the CIRE.

  6. As to the verification of the fulfillment of the prerequisites of fiscal benefits, whether they are automatic or dependent on recognition, the burden falls on the taxpayer (in accordance with article 7.º of the Fiscal Benefits Statute), that is, it is incumbent on the taxpayer in accordance with article 269.º of the CIRE, to prove that the operations were carried out with companies or natural persons within the scope of their business activity.

  7. Additionally, being necessary for the attribution of the present Fiscal Benefit of article 269.º, the prior recognition by the TCA in accordance with article 16.º n.º 2 of the CIRE, it becomes even more clear the necessity of verification of its prerequisites by the taxpayer.

  8. In both cases, whether it is the verification of an operation with a company or of a natural person who acted within the scope of their business activity, it falls to the Claimant to prove the fulfillment of that requirement.

  9. Having the Claimant maintained that the operations it carried out, were with natural persons acting in the capacity of individual merchants, and as such integrate the definition of "company", as such it falls to it to prove such invocation.

  10. In view of the foregoing, the burden of proof falls on the taxpayer, as it results from article 74.º of the LGT "1 - The burden of proof of the facts constitutive of the rights of the tax administration or of taxpayers falls on whoever invokes them.",

  11. Considering that natural persons, unlike companies, do not exercise exclusively business and commercial activity, it is reasonable to consider necessary additional elements to prove that a natural person acted exclusively within the business scope in these financing operations.

  12. The taxpayer has at its disposal all means of proof that it considers essential to prove the business activity within the scope of the operations carried out.

  13. However, its mere invocation is not sufficient.

  14. In light of the factual proof presented and the elements contained in the respective administrative proceeding, there is no document presented by the Claimant and Respondent that proves that the operations were exclusively for financing the business activity in individual name of the insolvent person.

  15. In light of the foregoing, and having not been proven that the operations carried out were exclusively within the scope of the business activity of the natural person, the present tribunal must decide in the sense that the said operations carried out by natural persons were not carried out exclusively within the business scope.

  16. Thus, in light of the foregoing as to the interpretation and scope of the exemption provided for in article 269.º letter e) of the CIRE, one of the fundamental requirements is thus not fulfilled.

  17. Therefore, the present tribunal concludes by the declaration of legality of the assessments sub judice, by not violating the provision of article 269.º letter e) of the CIRE, which justifies the declaration of their legality.

J - COMPENSATORY INTEREST

  1. The Claimant further petitions the payment of compensatory interest.

  2. In view of the foregoing, verified the legality of the assessments sub judice, there is no place for payment of interest.

  3. The Claimant's request is denied.

I - DECISION

Therefore, in view of all the foregoing, the present Arbitral Tribunal decides:

a. To judge unfounded the request for declaration of illegality of the tax assessment acts for Stamp Duty purposes, which established a total tax to be paid of €9,635.22 (nine thousand six hundred and thirty-five euros and twenty-two cents);

b. To judge unfounded the request for payment of compensatory interest.

The case value is set at €9,635.22 of the assessment value taking into account the economic value of the case assessed by the value of the tax assessments challenged, and in accordance the costs are set, in the respective amount of €918.00 (nine hundred and eighteen euros), chargeable to the Claimant in accordance with article 12.º, n.º 2 of the Tax Arbitration Regime, article 4.º of the RCPAT and Table I attached thereto. –, n.º 10 of art.º 35.º, and, n.º 1, 4 and 5 of art.º 43.º of the LGT, articles 5.º, n.º 1, al. a) of the RCPT, 97.º-A, n.º 1, al. a) of the CPPT and 559.º of the CPC).

Notify.

Lisbon, 28 September 2016

The Arbitrator

Dr. Paulo Ferreira Alves

[1] In the same sense, uniformly and repeatedly have been published the following Awards of the Supreme Administrative Court of 17 December 2014, rendered in case n.º 1085/13; 11 November 2015, rendered in case n.º 968/13; 18 November 2015, rendered in case n.º 575/15; 18 November 2015, rendered in case n.º 1076/15; 3 July 2013, rendered in case n.º 765/13; 25 September 2013, rendered in case n.º 866/13.

Frequently Asked Questions

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Is Stamp Tax (Imposto de Selo) exempt on property acquisitions made during insolvency proceedings under Portuguese law?
Stamp Tax exemptions on property acquisitions during insolvency proceedings are governed by Article 269(e) of the CIRE, which exempts certain onerous acquisitions of real property including sales, barters, and asset transfers. However, application is contentious. The exemption requires the transaction to be either included in formal insolvency, payment, or recovery plans, or carried out within the liquidation of the insolvent estate. Tax authorities have interpreted this narrowly, arguing that isolated property acquisitions by creditors do not qualify unless they involve acquisition of the totality of the insolvent company's real property. Creditors argue the exemption should apply broadly to all property sales during liquidation to facilitate the insolvency process and creditor satisfaction, consistent with the law's underlying purpose.
What does Article 269(2) of the CIRE establish regarding tax exemptions in insolvency?
Article 269(2) of the CIRE establishes tax exemptions for various acts performed within insolvency proceedings. Specifically, letter e) exempts from Stamp Tax certain onerous acquisitions of real property, including sales, barters, and transfers of company assets. These exemptions apply when such acts are: (1) included in insolvency plans, payment plans, or recovery plans approved by creditors, or (2) carried out within the scope of liquidation of the insolvent estate. The provision aims to reduce transaction costs and facilitate asset realization during insolvency, thereby maximizing creditor recovery. However, interpretation disputes arise regarding whether the exemption covers isolated property acquisitions or only transfers of complete business units or the totality of an insolvent company's real estate portfolio.
Can a creditor who acquires real estate in an insolvency process claim Stamp Tax exemption under the CIRE?
Whether a creditor acquiring real estate in an insolvency process can claim Stamp Tax exemption under CIRE is disputed. Creditors argue that Article 269(e) CIRE exempts property acquisitions made during the liquidation phase of insolvency estates, regardless of whether the creditor acquires isolated properties or complete business units. This interpretation aligns with the legislative intent to expedite insolvency proceedings and maximize creditor satisfaction by reducing transaction costs. However, the Tax and Customs Authority maintains that the exemption requires acquisition of the 'totality of real property of the insolvent company' and does not extend to piecemeal property purchases. The TCA interprets the exemption narrowly, requiring two cumulative conditions: the transaction must be one of the specified types AND must occur within formal plans or estate liquidation involving comprehensive asset transfers rather than isolated sales.
How does the CAAD arbitral tribunal handle disputes over Stamp Tax liquidation in insolvency-related property transfers?
The CAAD (Administrative Arbitration Centre) arbitral tribunal handles Stamp Tax disputes in insolvency-related property transfers through formal arbitration proceedings initiated by taxpayers challenging tax assessments. In Process 139/2016-T, the tribunal was constituted as a singular arbitral panel under Decree-Law 10/2011. The procedure involves submission of a request by the claimant, response by the Tax Authority, and adjudication based on written submissions (parties waived oral hearings in this case). The tribunal examines whether tax assessments comply with legal requirements, particularly whether transactions meet the criteria for exemptions under Article 269 CIRE. Disputes typically center on statutory interpretation: whether the exemption applies to isolated property acquisitions or only comprehensive business transfers, and whether the legislative purpose of facilitating insolvency proceedings supports broader or narrower application of tax benefits.
What was the outcome of CAAD Process 139/2016-T regarding the €9,635.22 Stamp Tax assessment?
The complete outcome of CAAD Process 139/2016-T regarding the €9,635.22 Stamp Tax assessment is not fully disclosed in the available excerpt, which ends during the presentation of the Tax Authority's arguments. The case involved seven separate Stamp Tax assessments issued in 2015-2016 for property acquisitions made by A... S.A. as a creditor in various insolvency proceedings. The claimant sought declaration of illegality and annulment of these assessments, arguing entitlement to Article 269(e) CIRE exemption. The Tax Authority contended the exemption was improperly applied because the claimant did not acquire the totality of the insolvent companies' real property. The tribunal's analysis would have focused on interpreting the scope of Article 269(e) exemptions and whether isolated property acquisitions during estate liquidation qualify, or whether the exemption is limited to comprehensive business or real estate portfolio transfers.