Process: 18/2017-T

Date: September 20, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 18/2017-T addressed whether Article 269(e) of the Portuguese Insolvency Code (CIRE) exempts individual property sales from stamp tax when occurring within insolvency proceedings. The claimant acquired a residential property for €98,800 from an insolvent individual's estate and was assessed €920 in stamp tax. The taxpayer argued that Article 269(e) CIRE provides a broad exemption covering all asset sales within insolvency liquidation, including isolated immovable property transfers. The Tax Authority countered that the exemption applies exclusively to sales of entire businesses or establishments, not individual assets extracted from the insolvent estate. The arbitral tribunal analyzed the statutory language of Article 269(e), which exempts 'the transfer or assignment of the operation of company establishments, the incorporation of companies and the transfer of commercial establishments, the sale, exchange or assignment of elements of the company's assets.' The critical interpretative question centered on whether 'elements of the company's assets' encompasses individual properties sold separately, or whether the exemption requires the asset to be transferred as part of an ongoing business operation. The tribunal noted that the insolvent debtor was a natural person and found no evidence that the debtor operated any commercial establishment at the insolvency date. This factual finding proved determinative, as Article 269(e) specifically references 'company establishments' and 'company assets,' suggesting the exemption targets business restructuring scenarios rather than liquidation sales of personal assets from individual bankruptcies.

Full Decision

ARBITRAL DECISION

1. Report

A..., S.A., NIPC..., with registered address at ..., no...., parish of ..., ...-... Porto, hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Center (CAAD) a request for arbitral pronouncement with a view to annulling the Stamp Tax assessment, with the number..., by which a tax amount of €920.00 was established as payable.

The Claimant bases the illegality of the Stamp Tax assessment and consequent annulment of the tax act on a defect of error regarding the legal grounds, namely considering incorrect the interpretation of the legal provision by the Tax Authority of subparagraph e) of article 269 of the CIRE.

It thus considers, and summarizing the position procedurally assumed by the Claimant, that the exemption contained in the aforementioned regulation covers (also) immovable property transferred by sale or exchange, when not integrated in the sale, exchange or assignment of the company or establishment, the content of the Request for Arbitral Pronouncement of the now Claimant being reproduced here, concluding for the merits of the request for annulment of the tax act and consequent reversal of the amount of tax borne.

To the contrary, the Respondent Tax Authority understands that the tax event that underlies the present arbitral dispute is not covered by the Stamp Tax exemption provided for in subparagraph e) of article 269 of the CIRE, since, according to this, only the acts of sale, exchange or assignment of the company or its establishments, integrated within the scope of insolvency plans, payment plans, recovery plans or taking place within the context of the liquidation of the insolvent estate, benefit from such exemption.

For this reason, it concludes in the sense of the lack of merits of the request for annulment formulated by the Claimant.

The sole arbitrator was designated and appointed on 06.03.2017.

In accordance with the provisions of article 11, no. 1, subparagraph c) of the RJAT, the singular arbitral tribunal was constituted on 21.09.2017.

By order of 06.09.2017, the holding of an arbitral meeting was dispensed with and the pronouncement of a decision in these proceedings was scheduled.

2. Preliminary Matters

The singular arbitral tribunal is materially competent, in accordance with the provisions of articles 2, no. 1, subsection a) of the Legal Regime for Arbitration in Tax Matters (RJAT).

The parties enjoy legal personality and capacity and have standing in accordance with article 4 and no. 2 of article 10 of the RJAT, and article 1 of Administrative Order no. 112-A/2011, of 22 March.

The proceedings do not suffer from any nullity, there are no exceptions that prevent the examination of the merits of the case, the claim is timely filed, such that the conditions are met for the pronouncement of the present arbitral decision.

3. Facts

3.1. Proven Facts:

Having analyzed the documentary evidence produced and the positions of the parties, the following facts are considered proven and relevant to the decision of the case:

  1. The Claimant, on 21 June 2012, acquired, for the amount of €98,800.00, the independent fraction designated by the letter "I", intended for residential use, of the urban property in a regime of horizontal property ownership, located in ..., ..., parish of ..., Municipality of Figueira da Foz, described in the ... Land Registry of Figueira da Foz under the number ... and registered in the matrix of the said parish under article ..., within the scope of the insolvency proceedings of B..., which took place in the ... Civil Court of Coimbra, under no. .../11... TJCBR.

  2. The insolvent debtor is a natural person.

  3. Under cover of letter no...., of 04.12.2015 issued by the Tax Office of Leiria-..., and based on the aforementioned transfer, the Claimant was notified of the intention to issue a Stamp Tax assessment act in the amount of €920.00, under no. ... .

  4. The document relating to the Stamp Tax assessment in question came to be issued on 21.07.2016, with the identification no. ... .

  5. The Claimant proceeded to pay said tax on 22.07.2016.

  6. The Claimant filed (on 16 August 2016) an Administrative Appeal.

  7. By order issued on 23.11.2016, the Administrative Appeal came to be dismissed, with the Claimant being notified of such decision through letter no...., of 23.11.2016, issued by the Tax Office of Leiria- ... .

  8. On 04.01.2017, the Request for Arbitral Pronouncement and constitution of an arbitral tribunal was submitted by the Claimant, via electronic platform.

  9. The Claimant proceeded to pay the initial court fee.

No other facts with relevance to the decision of the case were proven.

3.2. Reasoning of the Proven Facts:

With regard to the proven facts, the arbitrator's conviction was based on the documentary evidence attached to the proceedings and the position taken by each of the parties.

3.3. Unproven Facts

The matter given as proven proves sufficient for the examination of the questions raised in these proceedings, which are reduced to matters of law, and in any case, it was not proven that the insolvent debtor better identified in point 1 of the "Proven Facts" was the holder, at the date of insolvency, of any establishment.

4. Law:

4.1. Object and scope of the present proceedings

The request for arbitral pronouncement has as its object the declaration of illegality of the Stamp Tax assessment act, in the amount of €920.00, notified to the Claimant, and has as its grounds the existence of an error regarding the legal grounds, by means of the invoked incorrect interpretation followed by the Tax Authority regarding subparagraph e) of article 269 of the CIRE.

In summary, the underlying issue rests on determining whether the acquisition made by the Claimant of an independent fraction within the scope of bankruptcy proceedings in which a natural person was declared insolvent is or is not covered by the scope of the Stamp Tax exemption to which said legal provision alludes.

4.2. Legal Framework

Let us first examine the legal framework, within the scope of the Insolvency and Company Recovery Code (CIRE), of the exemption at the level of which the disagreement between Claimant and Respondent emerges, namely the provision of article 269 of the CIRE (in the wording in force at the date of acquisition of the independent fraction in question).

Article 269
Benefit relating to stamp tax

The following acts are exempt from stamp tax, should it apply to them, provided they are provided for in insolvency or payment plans or carried out within the scope of the liquidation of the insolvent estate:

a) Modifications of maturity dates or interest rates on credits against the insolvency;

b) Capital increases, conversions of credits into capital and capital transfers;

c) The incorporation of a new company or companies;

d) The dation in performance of company assets and the transfer of assets to creditors;

e) The carrying out of financing operations, the transfer or assignment of the operation of company establishments, the incorporation of companies and the transfer of commercial establishments, the sale, exchange or assignment of elements of the company's assets, as well as the leasing of assets;

f) The issuance of bills or promissory notes.

(emphasis ours - Wording as amended by the following diploma: Decree-Law no. 53/2004, of 18 March)

Except for due respect for a different understanding, from reading the aforementioned provision, it results that the legislator only provided for the Stamp Tax exemption, within the scope of bankruptcy proceedings, when dealing with the concrete situations typified in subparagraph e) - the subparagraph that serves as the basis for the tax act being reviewed.

Now, within this framework of facts within which the acquirer can benefit from exemption, there is clearly no detection of any typification of exemption relating to the acquisition of immovable property within the insolvency of a natural person.

In truth, the legislator only came to contemplate within the scope of the said legal provision the right to exemption when dealing with (among others clearly not applicable in this case) the transfer of establishments in question and likewise the sale of elements of a company's assets.

In the case at hand and nothing was even alleged by the Claimant to the contrary, we are dealing with the acquisition from the insolvent estate of a natural person of immovable property with residential use.

Which is to say that the factuality that underlies the act of assessment in question does not fall under any of the exemption provisions contained in article 269 of the CIRE, nor specifically regarding the hypotheses contained in subparagraph e) of the said provision.

Article 11 of the General Tax Law establishes the essential rules for the interpretation of tax laws as follows:

Article 11
Interpretation

  1. In determining the meaning of tax provisions and in qualifying the facts to which they apply, the general rules and principles for interpretation and application of laws are observed.

  2. Whenever, in tax provisions, terms specific to other branches of law are employed, they must be interpreted in the same sense as that which they have there, unless otherwise directly follows from the law.

  3. If doubt persists regarding the meaning of the applicable provisions of incidence, the economic substance of the tax facts should be considered.

  4. Gaps resulting from tax provisions covered by the legislative reservation of the National Assembly are not susceptible to analogical integration.

The general principles of interpretation of laws, to which no. 1 of article 11 of the General Tax Law refers, are established in article 9 of the Civil Code, which provides as follows:

Article 9
Interpretation of law

  1. Interpretation should not be limited to the letter of the law, but should reconstruct from the texts the legislative intent, taking especially into account the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.

  2. However, the interpreter cannot take into account legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  3. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express its intent in adequate terms."

(emphasis ours)

Having as reference the principles arising from the aforementioned provisions, it is necessary to examine the application in concreto of the general rules of interpretation.

Thus, descending to the situation sub judicio, it results objectively evident that the law, in its letter, contains no reference in its content that would permit concluding for the acceptance of the tax fact within the scope of the provision granting such tax benefit.

That is, although the interpreter should not confine himself to the letter of the law in the interpretation of any provision (no. 1 of article 9 of the Civil Code), it is no less true that the interpreter is not permitted to resort, for interpretive purposes, to legislative intent that does not have a minimum of verbal correspondence with the literal wording of the provision.

Now, in the case at hand, there is no doubt regarding the non-existence of any element of literality apt to extract from article 269 of the CIRE a legislative intent that would permit concluding that a factual hypothesis such as exists in these proceedings is susceptible to Stamp Tax exemption.

In other words, it is not possible to extract from article 269 of the CIRE any interpretation that accommodates within its scope the acquisition of immovable property with residential use from the insolvent estate of a natural person, given that the legislator only provides for situations relating to the sale of elements of company assets.

Since it is not, and is not, possible to confuse the notion of "company" with that of "natural person," any interpretation according to the interpretive principles that emanate from what is expressed in article 11 of the Civil Code and article 9 of the General Tax Law regarding the legislative intent upon which article 269 of the CIRE is based does not permit the inclusion of the factuality underlying the assessment in question within the scope of the range of exemptions established in said legal provision.

On the other hand, regarding the alleged unconstitutionality, as invoked by the Claimant and which is based on the supposed violation of article 165 of the Constitution of the Portuguese Republic, it should be noted that the question has already been subject to subsequent analysis by the Supreme Administrative Court, which has been concluding, uniformly, that there is no unconstitutionality, a position which this Court endorses and supports.

See, for all, the decision rendered within the framework of proceedings no. 01521/15, of 29.03.2017, handed down by the Plenary Session of the Tax Section of the Supreme Administrative Court:

"Furthermore, as also stated in the aforementioned Decision 949/11, no. 3 of article 9 of the Legislative Authorization Law no. 39/2003, provided, with regard to exemptions from Sisa (now IMT), that: "The Government is finally authorized to exempt from municipal transfer tax the following transfers of immovable property, integrated into any insolvency or payment plan or carried out within the scope of the liquidation of the insolvent estate: c) (…) of the sale, exchange or assignment of the company, establishment or elements of its assets (…)".

Now the judgment did not consider unconstitutional the interpretation that the Tax Authority made of article 270, no. 2, of the CIRE, but rather considered, in accordance with the case law it cited, that between two meanings of the law, both with support – at least minimal – in their respective letter, the interpreter should opt for that which best compatibilizes with the constitutional text (interpretation in conformity with the Constitution).

"Furthermore, as also stated in the decision of 25-01-2017, in proceedings no. 01159/16, "from the possible non-use by the ordinary legislator of the legislative authorization law in its entirety, no unconstitutionality results, that is, nothing obliges the ordinary legislator to exhaust the content of the authorization, and may, without incurring normative invalidity, decide not to make full use of it and fall short of the legislative authorization, provided it remains within the meaning and content thereof (basing this allegation on the jurisprudence of the Constitutional Court, namely in decision no. 556/2003, handed down in proceedings no. 188/2003, of 12/11/2003 (…).

In the thesis we subscribe to (by reference to the decision handed down in proceedings no. 1345/15 cited above and contrary to what was initially decided in the decision handed down in proceedings no. 949/11), the unconstitutionality of the interpretation defended by the Public Treasury is not sustained, but only that between two meanings of the law, both with minimal support in their respective letter, the interpreter should opt for that which best adapts to the meaning and extent of the legislative authorization under which the provision was issued by the Government in a matter reserved to the National Assembly. Above all, when it is that which best serves the teleology (ratio legis) of the provision, as we understood it above, and when it also collects the support of the historical element, as well noted in the decision handed down in proceedings with the number 949/11.""

Thus, the grounds for action stated by the Claimant lack foundation and, consequently, the merits of the claim are rendered unfeasible and likewise the requested reversal of the Stamp Tax borne is prejudiced.

From the foregoing, the Stamp Tax assessment now under examination merits no censure.

5. DECISION:

In these terms and with the reasoning set forth above, this arbitral tribunal decides:

  1. To judge totally without merit the request for declaration of illegality of the Stamp Tax assessment act, for non-occurrence of any of the defects pointed out by the Claimant.

  2. To condemn the Claimant to the payment of costs in accordance with Table I of the RCPTA, calculated as a function of the value of the matter - articles 4-1 of the RCPTA and 6, no. 2, subsection a) and 22, no. 4 of the RJAT.

Value of the matter: €920.00 – articles 97-A of the CPPT, 12 of the RJAT (Decree-Law 10/2011), 3-2 of the Regulation on Costs in Tax Arbitration Proceedings (RCPAT).

Let this arbitral decision be notified to the parties and, in due course, let the proceedings be filed away.

Lisbon, 20 September 2017.

The Arbitrator

(Luís Ricardo Farinha Sequeira)

Text prepared by computer, in accordance with article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by reference to article 29, no. 1, subsection e) of the Tax Arbitration Regime, with blank lines and revised by me.

Frequently Asked Questions

Automatically Created

What is the stamp tax (Imposto do Selo) exemption under Article 269(e) of the Portuguese Insolvency Code (CIRE)?
Article 269(e) of the Portuguese Insolvency Code (CIRE) provides a stamp tax exemption for certain transactions within insolvency proceedings, including financing operations, transfers of business establishments, company incorporations, sales or assignments of company assets, and asset leasing. The exemption applies only when these acts are provided for in insolvency or payment plans, or carried out within the liquidation of the insolvent estate. The provision specifically targets business-related transactions during insolvency restructuring or liquidation processes.
Does the CIRE Article 269(e) exemption apply to individual property sales from an insolvent estate, or only to sales of the entire business?
CAAD Process 18/2017-T examined whether Article 269(e) CIRE exemption extends to individual property sales from an insolvent estate. The Tax Authority maintained that the exemption applies exclusively to sales of entire businesses or establishments integrated within insolvency plans, not isolated asset sales. The arbitral tribunal analyzed the statutory language referencing 'company establishments' and 'company assets,' noting that the insolvent debtor was a natural person without any proven commercial establishment. This interpretative approach suggests the exemption does not cover individual property sales when extracted separately from the insolvent estate, but rather applies to integrated business transfers.
How can taxpayers challenge a stamp tax assessment through CAAD tax arbitration in Portugal?
Taxpayers can challenge stamp tax assessments through the Administrative Arbitration Center (CAAD) by submitting a request for arbitral pronouncement within the statutory deadline. In Process 18/2017-T, the claimant first filed an administrative appeal on August 16, 2016, which was dismissed on November 23, 2016. The arbitration request was then submitted electronically on January 4, 2017, after paying the initial court fee. The arbitral tribunal was constituted on September 21, 2017. Taxpayers must demonstrate legal grounds for challenging the assessment, such as error regarding legal interpretation, as was argued regarding Article 269(e) CIRE in this case.
What are the legal requirements for stamp tax exemption on real estate transfers within insolvency proceedings?
Legal requirements for stamp tax exemption on real estate transfers within insolvency proceedings under Article 269(e) CIRE include: (1) the transaction must occur within the framework of approved insolvency plans, payment plans, or liquidation of the insolvent estate; (2) the transfer must involve business-related operations such as assignment of company establishments, incorporation of companies, or transfer of commercial establishments; and (3) based on CAAD interpretation, the exemption appears to require that assets be transferred as part of integrated business operations rather than as isolated individual properties. The exemption does not automatically apply to all real estate sales merely because they occur within insolvency proceedings.
What was the outcome of CAAD Process 18/2017-T regarding the scope of stamp tax exemption in insolvency?
While the complete decision text is not provided, CAAD Process 18/2017-T appears to have ruled against the taxpayer's claim for stamp tax exemption. The arbitral tribunal's reasoning focused on the specific statutory language of Article 269(e) CIRE, which references 'company establishments' and 'company assets.' The tribunal determined that the exemption scope is limited to situations explicitly typified in the provision, and found no clear exemption for isolated immovable property acquisitions. Since the insolvent debtor was a natural person without proven commercial establishments, the sale of an individual residential property did not qualify for the Article 269(e) exemption, upholding the €920 stamp tax assessment.