Process: 17/2017-T

Date: July 3, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD arbitration process 17/2017-T addressed whether Stamp Tax (Imposto do Selo) exemption under Article 269(e) of the Portuguese Insolvency Code (CIRE) applies to property acquisitions in individual insolvency proceedings. The claimant, A... SA, acquired real property for €140,000 in the insolvency proceedings of natural persons, initially receiving automatic IS and IMT exemptions based on CIRE provisions. Subsequently, the Tax Authority (AT) issued an assessment for outstanding Stamp Tax, arguing that the exemption regime under Articles 269(e) and 270(2) CIRE does not extend to insolvency proceedings of individuals (pessoas singulares), but only to corporate insolvencies. The claimant paid the tax under protest and filed a Gracious Complaint (Reclamação Graciosa), which was rejected on grounds that legal requirements for exemption were not satisfied in individual insolvency contexts. The company then initiated CAAD arbitration under RJAT (Decree-Law 10/2011), challenging both the gracious complaint rejection and the underlying IS assessment act. The core legal question concerns the scope of CIRE tax exemptions: whether the legislative intent encompasses all insolvency proceedings regardless of debtor type, or restricts benefits to commercial/corporate insolvencies. The arbitral tribunal was constituted as a sole arbitrator, with both parties waiving the oral hearing and proceeding through written submissions on this pure question of law, with decision anticipated by July 2017.

Full Decision

ARBITRAL DECISION

I – REPORT

A) The Parties and the Constitution of the Arbitral Tribunal

A…, SA, legal entity no. …, with registered office in …, no. …, parish of …, in Porto, hereinafter referred to as "Claimant", filed a request for constitution of an Arbitral Tribunal, pursuant to the provisions of subparagraph a) of no. 1 of article 2, no.1, subparagraph a), article 3, no.1, article 6, no.1 and article 10, no. 1, subparagraph a), of Decree-Law no. 10/2011, of 20 January, hereinafter referred to as "RJAT", for the purpose of challenging the decision rejecting the Gracious Complaint, concerning the assessment of Stamp Tax (IS), with no. …, in which the Tax and Customs Authority is the Respondent, hereinafter referred to as "TA". The Claimant seeks a declaration of illegality of the decision rejecting the Gracious Complaint, as well as of the underlying IS assessment act and its annulment with legal consequences.

The request for constitution of the arbitral tribunal was filed on 04-01-2017, was accepted by the President of CAAD on 06-01-2017 and, immediately thereafter, the Tax and Customs Authority was notified of its filing. Pursuant to the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned, on 06-03-2017, as arbitrator to compose the sole arbitral tribunal. The parties were immediately notified of this appointment and did not manifest any intent to refuse the appointment of the indicated arbitrator, pursuant to the combined provisions of article 11, no. 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics. Thus, in accordance with the provision of subparagraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the sole arbitral tribunal was constituted on 21-03-2017. On 23-03-2017, an arbitral order was issued, pursuant to the provisions of article 17 of the RJAT, and the TA was notified to file its defense within the legal period.

The Tax and Customs Authority responded on 27-04-2017 and attached to the record the respective administrative file (AF). In its response, which is hereby fully reproduced, the TA argues for the legality of the challenged acts and the lack of merit of the claim. It requests that the holding of the meeting provided for in article 18 of the RJAT be dispensed with as unnecessary, as well as the presentation of written submissions, given that the documentary evidence attached to the record is sufficient to render a decision, which concerns exclusively matters of law.

No exceptions were raised nor was testimonial evidence requested, with the issues to be decided by the tribunal being exclusively matters of law.

Accordingly, on 01-05-2017, an arbitral order was issued, inviting the Claimant to pronounce on the possibility of dispensing with the holding of the meeting provided for in article 18 of the RJAT, on the grounds invoked by the TA. The Claimant pronounced itself in favor of dispensing with the meeting while maintaining interest in written submissions.

On 15-05-2017, a new arbitral order was issued dispensing with the meeting and, accordingly, a period of 15 days, equal and successive for the parties to file their respective submissions, was set, with the foreseeable date for rendering the arbitral decision being fixed at 29 June 2017, which was extended by a further 10 days. The Claimant and Respondent filed their submissions, respectively, on 19-05-2017 and 25-05-2017, both reiterating the arguments already raised in previous procedural documents. The Claimant made payment of the subsequent arbitration fee.

B) PROCEDURAL REQUIREMENTS:

The arbitral tribunal was regularly constituted. The parties have legal personality and capacity, are legitimate and are represented (articles 4 and 10, no. 2, of the same legal instrument and article 1 of Ordinance no. 112-A/2011, of 22 March). The proceedings do not suffer from nullities that would prevent adjudication of the merits of the case.

It is necessary to examine and decide on the merits of the claim.

II. Factual Matter

A) Proven Facts

  1. On the basis of the elements contained in the record attached to the file, the following facts relevant to the examination of the merits of the case are considered proven:

a) The Claimant A… SA acquired on 4-10-2011 a mixed property, located on Rua …, …, Parish of … and Municipality of Leiria, described in the Property Registry of Leiria under number … and registered in the respective urban matrix under articles … (urban) and … (rural);

b) The acquisition of the aforementioned property by the Claimant occurred in the context of the insolvency proceedings of an individual, B… and C…, which were conducted in the … Civil Court of the Court of the Leiria District, under no. …/10… TBLRA;

c) The property in question was listed and seized for the insolvent estate, and the Claimant acquired it for the price of €140,000.00;

d) The Claimant filed the relevant acquisition declaration with the competent Tax Authority, prior to the adjudication of the properties, for the purpose of assessing Municipal Transfer Tax (IMT) and IS due, in which it stated that the acquisition occurred in the context of insolvency proceedings, exempt by virtue of the provisions of articles 270, no.2 and 269, subparagraph e) of the Insolvency and Business Recovery Code (CIRE);

e) By virtue of this type of acquisition, the exemptions from IMT and IS provided for in article 270 and 269 of the Insolvency and Business Recovery Code ("CIRE") were automatically recognized for the Claimant, and no tax was assessed for that operation;

f) The Claimant was notified on 30-11-2015, by Official Letter from the Tax Authority of Leiria …, with no. …, attached to the record as annex to the arbitration request as document no. 3, which determined payment of the outstanding Stamp Tax (IS);

g) In July 2016 the Claimant made payment of the assessed IS;

h) On 18-08-2016 the Claimant filed a Gracious Complaint (RG) against the assessed amount;

i) On 25-10-2016, in the context of the aforementioned Gracious Complaint proceedings, which were conducted under no. …2016…, the Claimant was notified to pronounce itself in the context of a prior hearing, in which it was communicated the intention to dismiss the application, on the ground that the requirements of the respective exemptions (IMT and IS) were not met, in the case of acquisition of assets occurring in the context of an insolvency proceeding of an individual;

j) On 23-11-2016 the Claimant was notified of the dismissal of the Gracious Complaint, on the ground mentioned in i), that is, that the legal requirements for application of the exemption were not met, as this concerned an acquisition occurring in the context of an insolvency proceeding of an individual.

k) On 04-01-2017 the Claimant filed the present request for constitution of an arbitral tribunal, in which it challenges the dismissal act and, consequently, the IS assessment concerning the property described above in a), which was the subject of examination in the Gracious Complaint proceedings, to which the dismissal order was addressed.

B) Unproven Facts

  1. There are no alleged facts to be considered as unproven that are relevant for the examination of the merits of the case to be mentioned.

C) Basis for the Determination of Factual Matter

  1. The proven facts are based on the documents filed with the record by the Claimant, not challenged by the Respondent and confirmed by the administrative file (AF) filed by the TA, whereby there are no disputed facts. There is no disagreement between the parties regarding the facts mentioned in the record, but only, exclusively, regarding the question of law underlying the assessed amount. It should be noted that the factual matter which the Tribunal must decide upon is not all that was alleged and proven, but only that considered relevant or of interest or relevance to the decision (See articles 591, 592, 596 and 607 of the Code of Civil Procedure and 123-2 of the Code of Tax Procedure, applicable by virtue of article 29 of the RJAT).

III - MATTERS OF LAW

  1. In summary, from the positions of the parties assumed in the record and from the summary of the factual matter set out above, the issue to be decided is whether the purchase of one or some immovable assets, in the context of a liquidation proceeding of the insolvent estate of an individual, is (or is not) exempt from Stamp Tax (IS), under the provisions of article 269, subparagraph e) of the CIRE.

In the basis of its claim, the Claimant argues, in defense of its right to the IS exemption in the acquisition of the immovable assets identified above, that this benefit is identical to that resulting from the provisions of no. 2 of article 270 of the CIRE. It understands that these provisions exempt from tax any acquisition of immovable assets that form part of the insolvent's assets (which may include one or more immovable assets), whether it concerns an individual or a legal entity. Thus, from the Claimant's perspective, the requirements for the exemption from tax (whether IMT or IS) are met whenever it concerns onerous transfers of immovables, by sale, exchange or transfer of the business or of its establishments included in the context of insolvency plans, payment plans or recovery plans or carried out in the context of the liquidation of the insolvent estate, whether it concerns an insolvency of a business or an individual. Any other restrictive interpretation of these legal provisions results in illegality and unconstitutionality by violation of article 165 of the CRP. It also argues, regarding violation of constitutional norms, that the assessment act is null and void due to lack of authority and for having created taxes or special contributions not permitted by law (article 133/2/a) and d) of the CPA and articles 103/2 and 165/1/i9 of the CRP). It also invokes the defects of lack of reasoning and violation of the principles of trust and legal certainty inherent in the rule of law, as well as violation of the principle of fiscal legality, provided for in article 103, no.3 of the CRP. In the specific case, it also argues that the granting of the exemption constitutes an act creating rights which, as such, should be considered irrevocable by virtue of the provisions of articles 140 and 141 of the CPA, from which results illegality of the act due to failure to comply with an essential formality.

  1. For its part, the TA carried out the assessment of IMT challenged in the present proceedings, following a subsequent inspection procedure to confirm the requirements of the tax exemption provisions contained in articles 269 and 270, no. 2 of the CIRE. In the present case, it concluded that tax was due because the requirements of the exemption were not met, given that it found that the immovable asset in question (mixed property) had been acquired in the context of an insolvency proceeding of an individual. From the TA's perspective, this hypothesis does not fall within the provision of that legal norm.

This is, therefore, the legal question that truly gave rise to the controversy that led to the present arbitration request. In accordance with this understanding, the TA argued for the legality of the assessment act, in the terms set out in the response filed with the record, which is hereby reproduced.

In their respective submissions, the Claimant and Respondent reiterated the positions previously set out in their respective procedural documents.

Accordingly, for a better structuring of the present decision, it is necessary to examine the merits of the case, distinguishing the formal defects invoked by the Claimant from the question of substantive merit, which is strictly concerned with the interpretation and application of the provision contained in article 269, subparagraph e) of the CIRE.

Considering that the substantive question should be privileged over the formal question, but that some of the formal defects invoked could, if upheld, avoid the treatment of the remaining matters, in the present decision we shall first analyze the existence of any defects that would give rise to unconstitutionality and nullity of the act and, subsequently, the formal defect of lack of reasoning. If these defects are not upheld, we shall examine the substantive question, which consists in determining the correct interpretation of the applicable legal provision.

A) Regarding the formal defects:

  1. Article 124 of the Code of Tax Procedure, applicable by virtue of article 29, no. 1, subparagraph a), of the RJAT, provides as follows:

"1. In the decision, the tribunal shall first consider the defects that lead to a declaration of non-existence or nullity of the challenged act and, subsequently, the defects raised that lead to its annulment.

In the referred groups, the consideration of the defects is made in the following order:

a) In the first group, those defects whose substance, according to the prudent discretion of the judge, provides more stable or effective protection of the interests violated;

b) In the second group, the order indicated by the appellant, whenever the latter establishes a relationship of subsidiarity between them and no other defects are raised by the Public Prosecutor or, in other cases, the order fixed in the previous subparagraph."

This legal provision establishes a priority for the examination of the defects of the challenged act. Thus, defects whose substance, according to the prudent discretion of the judge, provides more stable or effective protection of the violated interests, should be examined first, which leads us to question the interpretation to be given to this criterion.

According to case law of the Supreme Administrative Court (STA), this principle would lead to giving priority to the examination of substantive defects of the act over formal defects, since the latter do not prevent renewal of the act, and this seems to be the understanding that privileges more effective protection of the violated interests. Citing expressly some case law of the STA, which summarizes the understanding of this higher tribunal, it results, among others, from the judgment delivered on 17.11.2010, the following: "(…) the case law of this Supreme Court has repeatedly explained, in the context of the interpretation of the normative content of the analogous rule set out in article 57 of the Administrative Litigation Procedure Law, that although more effective protection of the interests of the appellant would, in principle, impose priority examination of substantive or substantive defects in relation to formal defects, particularly the defect of lack of reasoning (given that the verification of this does not prevent renewal of the act with the same legal configuration, naturally purged of the defect that led to annulment)."

However, it also results from this STA case law, reaffirmed in many other judgments, that this rule is not absolute, as it may happen that, for example, only the reasoning of the act can reveal substantive defects by clarifying the factual and legal framework upon which the challenged act was based. What amounts to saying that, when the defect of lack of reasoning is invoked, if it is actually verified, the Court may not be in a position to proceed with the examination of substantive defects, as it does not have all the available and essential elements to do so. The precedence of the formal defect can be justified when the inquiry regarding the specific reasoning of the act proves indispensable to the control of the substantive (material) defects of the act.

It is concluded, therefore, that more effective protection of the appellant's interests may pass through priority examination of formal defects, specifically the defect of lack of reasoning, whenever the discovery of the reasoning of the act can provide elements necessary to the judgment of verification of substantive defects, which occurs whenever there is an absolute lack of reasoning (of fact and/or of law), thereby implying the impossibility of knowledge of the facts upon which the act was based and/or its legal framework, preventing jurisdictional control of substantive defects. In other words, priority examination of the formal defect shall cease to be required whenever the alleged lack or insufficiency of reasoning proves, in the specific case (and the examination must, obviously, be case-by-case) irrelevant for the examination and possible merit of the substantive defect or defects that have been specifically raised. In the case under examination in the present proceedings, this appears to be precisely the case. On the other hand, the Claimant itself invoked the formal defects in a secondary position. However, it seems to us that there is some interest in first deciding the alleged formal defects that would give rise to nullity, which are invoked by the Claimant, notwithstanding what has been set out above.

  1. In the specific case of the present proceedings, it is concluded that none of the defects invoked by the Claimant is capable of generating nullity of the act. In fact, the alleged lack of authority and the unconstitutionality questions that are invoked rest on a theoretical argumentative construction that stems from the interpretative presupposition of the Claimant itself.

Now, the arbitral tribunal cannot follow this path. We are not facing the creation of any new tax, nor even the revocation of a tax benefit previously granted, by examination of a specific request, since the benefit in question is recognized by automatic effect resulting from the declaration made by the taxpayer itself. The reason it is justified that the TA proceeds with subsequent inspection, respecting the legally applicable periods on the expiry of the assessment. Thus, we are not facing the first situation, since the tax assessment rests solely on the interpretation that the TA makes of the provision in article 269, e) of the CIRE. This may or may not be the most appropriate, but it does not constitute the creation of a new tax, "with manifest lack of authority" in the terms invoked by the Claimant. Therefore, no unconstitutionality or nullity of the act resulting therefrom is apparent, nor violation of the principles of fiscal legality and trust inherent in the rule of law, to which the TA is bound, along with many others, including the duty to comply with applicable fiscal law. It did so in the case of the present proceedings, and what remains to be determined is whether it did so in compliance with the principles of interpretation and application of the legal norm provided for in article 269, subparagraph e) of the CIRE. This is strictly what is at issue, truly speaking, the legal question under examination in light of the object of the proceedings.

As regards the invoked defect of lack of reasoning, it is manifest that this does not exist, since the ground for the assessment, which is invoked in the Official Letter that precedes it, is clear and straightforward: the TA understands that one of the requirements of the automatic exemption provided for in article 269, subparagraph e) of the CIRE is not met, since it understands that such provision only applies in cases where it is a matter of assets that form part of the business assets, which is not the case when it is an insolvency proceeding of an individual. We may or may not agree with this reasoning, but it is sufficiently clear, objective and elucidating, and therefore sufficient to ground the act. Thus, if the challenged acts (dismissal of the Gracious Complaint and IS assessment) suffer any defect, it will necessarily be violation of law due to error in the requirements for application of the applicable legal provision. Indeed, from the entire content of the arbitration request it is concluded that the Claimant understood the arguments in this manner, and we are thus referred to examination of the substantive question, that is, leaving for last the question of revocability or irrevocability of the act, considering that this follows, by pure logic, from what shall be decided regarding the question that truly opposes the parties in this proceeding.

Let us thus examine the essential question at issue.

  1. The transfer in question was carried out in the context of an insolvency proceeding of an individual. Upon examination of the arbitration request, it is certain that a large part of the reasoning adduced by the Claimant concerns the exemption provided for in no. 2 of article 270 of the CIRE. It being certain that the tax in question in the present proceedings is the exemption from IS, it is evident that the terms underlying the establishment of each of these exemptions is the same.

With reference to the application of the IMT exemption regime provided for in article 270, no.2, accompanied by the exemption provided for in subparagraph e) of article 269 of the CIRE, two distinct questions have been raised, both already recurring in the case law of our administrative and tax courts, as well as arbitral ones, namely:

  • the question of whether the exemption operates solely and exclusively in the case of acquisition of the totality of the assets of the business or establishment, regarding which arbitral case law, as well as that of our superior courts, has been to the effect of recognizing the exemption in either of these situations;

  • the question of whether the exemption operates, indistinctly, whether it concerns insolvency of a business or an individual.

For the decision of the present proceedings, given the reasoning for the assessment and the dismissal of the Gracious Complaint that preceded the filing of the present arbitration request, the second question is exclusively relevant, since the ground for the assessment is precisely that the acquisition occurred in the context of a personal insolvency and the immovable asset acquired was intended for personal use by the insolvents and not for any business purpose. The factual reality ascertained in the present proceedings thus confirms this.

Given this, throughout the arbitration request, the Claimant alludes to various controversies regarding the interpretation of this exemption regime, always more focused on the provision of article 270 of the CIRE than on that provided for in article 269 of the CIRE, invokes different arguments in the sense of a broader interpretation of these provisions, but the fact is that, given the reasoning for the assessment act, the central question in debate is only one: can or cannot the exemption regime in question be applied to cases of insolvency of an individual, namely, when the assets acquired do not form part of the assets of a business?

  1. The TA argues in defense of its position that the exemption provided for in article 269, subparagraph e), expressly refers to the concept of business by the legislator, and therefore does not apply to acquisitions of immovable assets occurring in the context of an insolvency proceeding of an individual. On this point, it is important to note that it was proven in the record that the mixed property acquired by the Claimant was a mixed property registered in the respective urban matrix under articles … (urban) and … (rural). Now, it was not proven (nor was it even alleged) that the property was affected to any type of business activity developed by the insolvents. From the documents in the Administrative File, as well as from the documents filed by the Claimant with its arbitration request, no such factuality results, whereby it was intended for personal use by the insolvents. It was not alleged or demonstrated that the insolvents engaged in any activity of a business or commercial character that would oblige us to examine the concept of business in greater detail.

It is known, however, that the concept of business encompasses the type of business constituted in the form of a legal entity as well as, pursuant to the provisions of commercial law, cases in which such commercial and/or industrial activity is carried out by an individual and may fall within the concept of business provided for in article 230 of the Commercial Code.

In the case of the present proceedings, however, the proven facts leave no doubt as to the nature of the insolvency proceeding in question and the purpose of personal use given to the adjudicated property.

  1. Article 269 of the CIRE provides as follows:

Article 269

Benefit regarding Stamp Tax

The following acts are exempt from Stamp Tax, when subject thereto, provided that they are provided for in insolvency plans, payment plans or recovery plans or carried out in the context of the liquidation of the insolvent estate:

a) Modifications of maturity dates or interest rates on debts to the insolvency;
b) Capital increases, conversion of debts into capital and alienations of capital;
c) Formation of a new company or companies;
d) Performance of assets of the business and transfer of assets to creditors;
e) The performance of financing operations, transfer or transfer of the operation of business establishments, the formation of companies and the transfer of commercial establishments, the sale, exchange or transfer of elements of the business assets, as well as the leasing of assets; (underlined by us)

(…)

As expressly results from the letter of the law, the exemption presupposes that the transactions occur in the context of an insolvency proceeding and concern the immovable assets of the business or of its establishments (business).

On the question of whether the acquisition of immovable property for housing, in the context of an insolvency proceeding of an individual, can be encompassed within the scope of the exemption provided for in articles 270, no.2 and 269, subparagraph e) of the CIRE, our superior courts have already pronounced themselves, on several occasions. On this matter, see the case law of the STA set out, among others, in the Judgments of 03-07-2013, in the context of case no. 0765/13 and 25-09-2013, in case no. 68366.

Also within the scope of CAAD, this question has already been raised and was examined, among others, in arbitral cases nos. 95/2015-T, 649/2015-T, 136/2015-T, 518/2016-T and 558/2016-T. In all these decisions, the understanding was to the effect that the aforementioned exemption does not cover the sale of urban property intended for housing or personal use, which belongs to an individual, "it not being sufficient to benefit from that exemption the fact that the sale acts are carried out in the context of the liquidation of the insolvent estate, rather it must be demonstrated that the asset sold forms part of the assets of a business".

  1. Now, the additional assessment had as its motivation the finding, in the context of inspection, that the immovable assets in question formed part of the insolvent estate of an individual and not of a business. Also, the dismissal of the Gracious Complaint, which preceded the filing of the present arbitration request, had that ground, as results from document no. 7, attached as an annex to the arbitration request. The TA argues that only acquisitions of assets that, carried out in an insolvency proceeding, have as their object the sale of business assets, can benefit from the aforementioned exemption, that is, in the case of the present proceedings, the acquisition of the immovable property could only benefit from IS exemption if it formed part of the assets of an insolvent business. And, unless I am mistaken, the Respondent is correct in the understanding it draws from the legal norm to which it is strictly bound.

In the same sense, the STA pronounced itself in the aforementioned judgment of 3 July 2013, delivered in case no. 0765/13, in which the issue was to determine whether the exemption from Municipal Transfer Tax on Onerous Transfer of Immovable Property (IMT) provided for in article 270, no. 2 of the Insolvency and Business Recovery Code (CIRE) applies in the acquisition, in the phase of liquidation of assets in an insolvency proceeding, of an immovable asset that forms part of the assets of the insolvent business. And, to answer the question, the Court considered that: "at issue in the present proceedings is the interpretation of no. 2 of article 270 of the CIRE, and it must be decided whether the provision should be interpreted in the sense that both sale and exchange and transfer, even though included within the scope of an insolvency plan or payment plan or carried out in the context of the liquidation of the insolvent estate, in order to be exempt from IMT must necessarily have as their object the business or establishment thereof, or whether, as decided, the reference to the business or establishments thereof refers only to transfer, being also included within the scope of IMT exemption the sales and exchanges of immovable assets included within the scope of an insolvency plan or payment plan or carried out in the context of the liquidation of the insolvent estate.

As is known, between two meanings of the law, both with support – at least minimum – in its letter, the interpreter must opt for the one that makes it compatible with the constitutional text (interpretation in conformity with the Constitution), to the detriment of the interpretation that entails unconstitutionality. (…)" In summary, whereas the Public Treasury defends a restrictive interpretation in the sense that no. 2 of article 270 of the CIRE only covers onerous transfers of assets that form part of the totality of the business or establishment sold, exchanged or transferred in the context of the insolvency plan, the aforementioned judgment concluded that the most appropriate to the meaning and scope of the law of legislative authorization for approval of the CIRE would be to admit a broader interpretation so as to also include immovable assets that form part of the assets of the insolvent business. In any case, for what is of interest to us in the case of the present proceedings, the point is that it must be immovable assets that form part of the assets of a business and not immovable assets of individuals, with the sole justification of being part of an insolvency proceeding".

In our view, the considerations set out in the STA judgment cited are entirely transferable to the situation of the present proceedings. In fact, the interpretation advocated by the Claimant has the least support in the literal tenor of the provision. Indeed, subparagraph e) of the aforementioned article 269 of the CIRE expressly states that the exemption presupposes that the assets transacted or adjudicated form part of the "assets of the business". The reference to this concept from accounting and financial law well reflects the legislator's intent. Moreover, all the arguments invoked by the Claimant for discussion about the provision in question have as their reference another question that has been discussed in this context and which is whether the exemption should or should not operate in the acquisitions of individual assets of the business or only in the transfer of the totality of the assets of the business. However, that is not the question at issue in the present proceedings.

In both reference provisions, whether in article 269, subparagraph e), or in no.2 of article 270, both of the CIRE, there is expressly a reference to assets of the business assets, which presupposes the existence of a business activity of the insolvent to which such assets are associated. Therefore, transactions or adjudications relating to personal assets of the insolvent, an individual, are excluded.

Now, in the case of the present proceedings, it is a matter of determining whether the sale of an immovable asset, in the context of an insolvency proceeding of an individual, is exempt from IS, knowing that such immovable property, belonging to that individual, was not affected to the exercise of any business activity. The answer cannot but be negative, since this hypothesis cannot be subsumed under the provision of the norm of article 269, subparagraph e) of the CIRE, which refers exclusively to the sale of "elements of the business assets".

  1. The Claimant further argues that the restrictive interpretation of the provision carried out by the TA constitutes an unconstitutionality, by violation of the provision in no.2 of article 165 of the CRP (see article 33 of the arbitration request). Now, once again it is not correct, and, from the outset, the arguments it invokes do not relate to the interpretative question here at issue. From the outset, the STA Judgment which the claimant invokes, delivered on 30 May 2012, relates to the restrictive interpretation that has been carried out by the TA, in considering that the exemption of no. 2 of article 270 of the CIRE only applies in cases of transfer of the totality of the assets of the business. But that question is not the same as the one we now face. It is not a matter of determining whether the exemption should only be recognized in the case of transfer of the totality of the assets of the business or individually, but rather whether it can encompass the transfer of immovable property not affected to any business activity in the context of an insolvency proceeding of an individual. The answer to this question is, obviously, negative in light of the letter of the law and everything that serves as the rational basis for the regime instituted by the legal provision.

The resolution of the question to be decided in the present proceedings is, therefore, possible at the subconstitutional level. From the text of the law (article 269, subparagraph e) of the CIRE) it is possible to extract, without difficulty, a meaning compatible with the imposition resulting from the law of legislative authorization and the objectives of the law expressed in its preamble. It falls, moreover, to the applier of law, in case of doubt, to find the interpretation compatible with the text and the constitutional impositions.

We must not lose sight of the purpose that the legislator intends to achieve with the granting of such exemption, which consists in promoting and encouraging the rapid sale of assets forming part of the insolvent estate of the business, for more rapid and effective satisfaction of the interest of creditors, of the market and of the general public interest, not forgetting the satisfaction of the State's own debts (tax debts and Social Security, predominantly). It is these reasons that led the legislator to grant the fiscal benefit of exemption from payment of IMT in the acquisition of these assets or of the totality of the assets of the business or of the establishments of the insolvent business. It is evident that, from the legislator's point of view, identical reasons do not exist regarding the adjudication of immovable assets not affected to any business activity in the context of a personal insolvency proceeding.

  1. Thus, the interpretation of the legal text set out in subparagraph e) of article 269 of the CIRE can be reached, in a clear and straightforward manner, taking into account the letter of the law and its "ratio legis" (the reason for the law).

As decided by the STA Judgment delivered on 25-09-2013, in case no. 866/13, which concerns, precisely, the exemption from Stamp Tax and the underlying question is the same as the one we examine in the present proceedings:

"I - In accordance with the provision of article 269, subparagraph e) of the CIRE, the sales of "elements of the assets of the business" are exempt from IS. II - Accordingly, the aforementioned exemption does not cover the sale of urban property intended for housing belonging to an individual, it not being sufficient to benefit from that exemption the fact that the sale acts are carried out in the context of the liquidation of the insolvent estate, rather it must be demonstrated that the asset sold forms part of the assets of a business."

In the same sense, arbitral case law has pronounced itself. Thus it was decided in case no. 13/2016-T, where it was concluded that subparagraph e) of article 269 of the CIRE grants IS exemption to the sales of elements of the assets of businesses, and it cannot be understood here to include the sales of assets of individuals, non-entrepreneurs or holders of businesses, since such is not provided for in the provision under analysis. And, more recently, in arbitral decisions nos. 649/2015 T, 95/2015 T or 106/2016 T, where it was decided, in the same sense, on a question identical to the present proceedings.

Therefore, from all that has been set out, it should be said that the arguments made by the Claimant regarding the alleged nullity of the tax act for "not having a minimum correspondence in law" or the alleged creation of a true tax or contribution not permitted by law also do not merit acceptance. But we have already pronounced ourselves on this matter above (see point 11 of the present arbitral decision).

  1. Finally, the arguments made regarding violation of the provision in articles 140 and 141 of the CPA do not merit acceptance either, seeking that the granting of the aforementioned exemption, as an act creating rights, could no longer be revoked.

As we know, the tax procedure obeys specific principles and rules, among which is relevant the fact that many taxes are effected in a first moment by declaration of the taxpayer itself and only subsequently do the inspection services inspect (as is their functional duty) the truthfulness of the facts and their verification in accordance with the terms and requirements legally established. The same applies to tax exemptions recognized automatically by declaration of the interested party itself, as occurs in the case of the present proceedings. In other words, it falls to the TA to ascertain whether the facts declared and which served as the basis for the prior non-assessment of IMT or IS were verified in accordance with the terms and scope provided for by law. This is what occurred in the present case. For this purpose, the TA is bound by the periods and rules provided for in the tax procedure, particularly by observance of the statute of limitations for assessment of the tax, which was observed, in light of the provision in article 39, no.1 of the Tax Code.

Thus, being so, no nullity of the act or annulability due to violation of any procedural principle in light of the rules applicable to tax procedure is apparent, and the provision of articles 140 and 141 of the CPA does not apply to the case.

  1. Accordingly, given all that has been set out, it results that the challenged assessment does not suffer any formal defect nor defect of violation of law due to error in the requirements of law, embodied in violation of article 269, subparagraph e) of the CIRE or any other defect generating illegality that would impose its annulment.

IV. DECISION

Therefore, this Arbitral Tribunal decides as follows:

A) To judge the arbitration request entirely without merit, with the challenged assessment in the amount of €1,120.00 being maintained;

B) To condemn the Claimant to pay the costs of the present proceedings.

VALUE OF THE CASE

The value of the case is fixed at €1,120.00 pursuant to article 97-A, no. 1, a), of the Code of Tax Procedure, applicable by virtue of subparagraphs a) and b) of no. 1 of article 29 of the RJAT and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

COSTS

The arbitration fee is fixed at €306.00 pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the unsuccessful party, pursuant to articles 12, no. 2, and 22, no. 4, both of the RJAT, and article 4, no. 4, of the aforementioned Regulation.

Let it be notified.

Lisbon, 3 July 2017

The sole arbitral tribunal,

(Maria do Rosário Anjos)

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) exempt under Article 269(e) of the Portuguese Insolvency Code (CIRE) for individual insolvency proceedings?
The interpretation of Article 269(e) CIRE regarding Stamp Tax exemption for individual insolvency proceedings is disputed. While the Tax Authority contends this exemption applies only to corporate insolvencies, taxpayers argue the provision's wording does not distinguish between natural and legal persons. CAAD case 17/2017-T specifically addresses this interpretive question, with the claimant asserting that acquisitions in any insolvency proceeding under CIRE should benefit from IS exemption, regardless of whether the insolvent debtor is an individual or company.
What was the outcome of CAAD arbitration process 17/2017-T regarding Stamp Tax exemption in insolvency?
Process 17/2017-T was initiated on January 4, 2017, following rejection of a Gracious Complaint concerning Stamp Tax assessed on property acquired in individual insolvency proceedings. The arbitral tribunal was constituted on March 21, 2017, with both parties waiving the oral hearing and proceeding exclusively through written submissions. The Tax Authority defended the assessment's legality, arguing Article 269(e) CIRE exemption does not apply to individual insolvencies. The proceedings addressed purely legal questions regarding CIRE exemption scope, with decision scheduled for July 2017. The case exemplifies taxpayer recourse when IS exemptions in insolvency contexts are challenged by tax authorities.
How does the CAAD arbitral tribunal handle disputes over Stamp Tax liquidation acts issued by the Portuguese Tax Authority (AT)?
CAAD arbitral tribunals exercise jurisdiction over Stamp Tax disputes under RJAT (Decree-Law 10/2011), following exhaustion of administrative remedies like Gracious Complaints. The process begins with a request for tribunal constitution, followed by appointment of arbitrator(s) by the Deontological Council, Tax Authority defense filing with administrative file submission, and optional hearing under Article 18 RJAT. In process 17/2017-T, parties dispensed with oral proceedings, proceeding through written submissions on legal issues. Tribunals examine both procedural legality (standing, capacity, representation) and substantive merits, issuing binding arbitral decisions that can declare tax acts illegal and order their annulment with appropriate legal consequences.
What is the legal basis for challenging a Stamp Tax assessment through a gracious complaint (Reclamação Graciosa) and subsequent arbitration?
Challenging Stamp Tax assessments follows a two-tier process: first, filing a Gracious Complaint (Reclamação Graciosa) directly with the Tax Authority under general tax procedure rules, seeking administrative review of the assessment's legality. If rejected, taxpayers may initiate CAAD arbitration under Article 2(1)(a) and Article 10(1)(a) RJAT, which grants jurisdiction over challenges to gracious complaint rejections. In process 17/2017-T, the claimant exercised this sequential recourse after AT rejected its complaint on November 23, 2016, filing arbitration on January 4, 2017. This pathway provides judicial review while avoiding ordinary court litigation, with RJAT establishing specific procedural frameworks, timelines, and arbitrator appointment mechanisms for tax dispute resolution.
Does the tax exemption regime under CIRE Article 269(e) apply to natural persons (pessoas singulares) declared insolvent in Portugal?
The applicability of CIRE Article 269(e) tax exemption to natural persons' insolvency is the central controversy in process 17/2017-T. The Tax Authority's position is that this exemption regime, along with Article 270(2) regarding IMT, does not extend to insolvencies of individuals (pessoas singulares), but exclusively to commercial or corporate insolvencies. Conversely, taxpayers argue that CIRE provisions do not textually restrict exemptions based on debtor classification, and legislative policy favoring insolvency estate maximization supports broad application regardless of whether the insolvent is natural or legal person. This interpretive divide directly impacts acquisition costs in insolvency sales and estate recovery rates, making the arbitral tribunal's statutory construction precedentially significant for Portuguese insolvency and tax practice.