Process: 229/2016-T

Date: December 13, 2016

Tax Type: IMT

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 229/2016-T) addresses whether a property acquisition during insolvency proceedings qualifies for IMT (Municipal Tax on Onerous Transfer of Real Estate) exemption under Article 270 of the CIRE (Insolvency and Business Recovery Code). The Claimant acquired real estate from an insolvent company (B..., Lda.) by offsetting a recognized credit of €593,569.48 in the insolvency estate. The notary initially assessed IMT at zero, applying the CIRE exemption. However, the Tax Authority subsequently issued an additional IMT assessment of €17,413.00, triggering this arbitration. The Claimant argues the acquisition falls within Article 270(1)(c) CIRE as a transfer to creditors through asset satisfaction (dação em pagamento) and Article 270(2) CIRE as a transfer carried out within the liquidation of the insolvent estate. The Claimant also challenges the procedural legality of the assessment, claiming lack of notification and denial of the right to prior hearing. The Tax Authority raised jurisdictional exceptions regarding the tribunal's competence to annul tax enforcement proceedings. The arbitral tribunal addressed procedural issues including the timeliness of submissions and the applicable notification rules under Article 248 of the Code of Civil Procedure. The case illustrates the tension between literal and teleological interpretation of tax exemptions in insolvency contexts, raising fundamental questions about when property transfers in insolvency liquidation qualify for IMT relief and the proper scope of CAAD's jurisdiction over related enforcement matters.

Full Decision

ARBITRAL DECISION

I. Report

A..., resident at Rua ..., ..., ..., Cascais, taxpayer number ... (hereinafter, the "Claimant"), requested from the Administrative Arbitration Center (CAAD), on 17 April 2016, the constitution of an arbitral tribunal in tax matters, pursuant to the provisions of articles 2nd and 10th of Decree-Law No. 10/2011, of 20 January (Legal Regime of Tax Arbitration, hereinafter referred to as "LRTA"), in which the Tax and Customs Authority (AT) is the Respondent, with a view to the declaration of illegality and consequent annulment of the act of additional assessment of Municipal Tax on Onerous Transfer of Real Estate ("IMT"), in the amount of €17,413.00 (seventeen thousand four hundred and thirteen euros).

The Claimant chose not to appoint an arbitrator.

The request for constitution of an arbitral tribunal was accepted by the President of CAAD on 18 April 2016 and automatically notified to AT on the same date.

The Signatory was appointed by the President of the Deontological Council of CAAD as arbitrator of a single arbitral tribunal, pursuant to the provisions of article 6th of the LRTA, having communicated acceptance of the assignment, within the legal period, in accordance with article 4th of the Code of Ethics of CAAD.

The Parties were notified of the appointment of the Signatory, on 14 June 2016, pursuant to article 11th no. 1 subparagraphs a) and b) of the LRTA, and did not object to it.

The single arbitral tribunal was thus regularly constituted on 29 June 2016, in accordance with the provisions of subparagraph c) of no. 1 of article 11th of the LRTA.

The AT was notified of the arbitral order of 6 July 2016, to submit a response within 30 (thirty) days.

The AT submitted its response on 26 September 2016.

By arbitral order of 2 November 2016, the Arbitral Tribunal determined the notification of the Claimant to pronounce on the exceptions raised by the Respondent in its Response. It also determined the joining to the proceedings of the administrative file. Furthermore, it considered, under the provisions of article 16th, subparagraphs c) and e) of the LRTA, unnecessary the meeting of article 18th of the LRTA and the hearing of the witnesses indicated.

The Respondent submitted, on the same date, an administrative file, although not relating to the Claimant. It sent the correct administrative file again on 6 December 2016. The Claimant submitted, on 10 November, response to the exceptions raised. On 18 November, the Claimant submitted written submissions. The Respondent submitted its written submissions on 28 November.

The Claimant joined to the proceedings a request seeking the withdrawal of the submissions presented by the Respondent, considering them to be untimely. By arbitral order of 9 December, the Arbitral Tribunal considered that the rules provided for notifications made through electronic data transmission are contained in article 248th of the Code of Civil Procedure, applicable ex vi of article 29th, no. 1, subparagraph e) of the LRTA, in view of the manifest absence of rules governing the matter in the latter law. Article 248th of the CPC is applicable to the notification of acts performed within the scope of arbitral actions. Thus, the notification of the arbitral order of 2 November is presumed to have been made on day 7, the 1st working day after the 3rd day. The period began to run on 8 November, thus ending on 27. As this is not a working day, the period is transferred to 28 November, the date on which the Respondent submitted its respective submissions. It thus considered that the Claimant's request was not procedurally sound.

The Parties enjoy legal personality and capacity and are legitimate (articles 4th and 10th, no. 2 of the LRTA and article 1st of Order No. 112-A/2011, of 22 March).

The proceedings do not suffer from defects that invalidate them.

II. Claimant's Request

The Claimant presented a request for arbitral pronouncement in accordance with the reasoning briefly indicated below:

1. The Claimant was cited in a tax enforcement proceeding for forced collection of IMT assessment in the amount of €17,383.46.

2. The Claimant provided a guarantee within that proceeding to suspend the respective forced collection.

3. The underlying IMT assessment is illegal because it did not take into account the purchase carried out within an insolvency proceeding.

4. The assessment in question was never notified to the Claimant nor can the latter exercise its right to prior hearing.

5. On 7.2.2001 the Claimant promised to acquire autonomous unit C of the property described in the Land Registry of ... under no. ... and registered in the respective property register under article ... from the company B..., Lda.

6. That company breached the promise to sell agreement and the Claimant brought a declaratory action for condemnation, in which it claimed the resolution of the contract and payment of the deposit in double, namely €593,569.48.

7. The autonomous unit subject to the promise to sell agreement was also subject to seizure by the Claimant.

8. On 22.9.2008 B..., Lda. was declared insolvent, and the Claimant claimed its credit of €593,569.48, which was recognized and accepted by the Insolvency Administrator.

9. In the course of the liquidation proceeding of the company, the Claimant acquired the real estate that it had promised to buy, for compensation of the claimed credit.

10. The notary who executed the public deed of sale issued the respective IMT and Stamp Tax guides, assessed at zero, as it was an acquisition within the scope of insolvency.

11. All parties involved considered that the sale in question was exempt from IMT, which is why the Claimant was surprised to learn of this additional assessment.

12. In fact, contrary to the AT's understanding, the acquisition of the real estate was exempt from IMT by virtue of article 270th of the Insolvency and Business Recovery Code (CIRE).

13. Even if the AT may consider that the wording of the rule is not clear, it should always consider that in the interpretation of law one should not only attend to the literal or grammatical element.

14. It is true that even attending only to the literal element, the Claimant would always have the right to the exemption that it enjoyed.

15. The central question regarding the scope of application of article 270th of the CIRE is whether the exemption from IMT is applicable or not to isolated sales of assets of the insolvent. Now, given that it is the case of a transfer of assets to a creditor, carried out within the scope of the liquidation acts of the insolvent estate and payment plan, and not therefore an isolated sale and integrated in the liquidation acts, it cannot fail to benefit from said exemption.

16. As stated in article 270th no. 1 subparagraph c) of the CIRE, we are faced with a sale that results from the satisfaction by giving of assets of the company and the transfer of assets to creditors, whereby exempt from IMT.

17. Also no. 2 of article 270th CIRE exempts from IMT the acts of sale, exchange or transfer of the company or its establishments integrated within the scope of an insolvency or payment plan or carried out within the scope of the liquidation of the insolvent estate.

18. The transfer was carried out by the insolvent estate, within the scope of the liquidation acts.

19. Case law clearly corroborates such understanding.

20. It thus requests that the Arbitral Tribunal i) declare the nullity of the enforceable title for lack of notification of the Claimant for exercise of the right to prior hearing or of the assessment itself, ii) the annulment of the additional IMT assessment and respective interest, iii) the extinction of the forced collection of the tax.

III. Respondent's Response

The Respondent presented its Response, which it bases on the following terms:

By exception:

A. Lack of material jurisdiction of the Arbitral Tribunal to annul and declare extinction of the tax enforcement proceeding

1. It follows from the request and the cause of action deduced by the Claimant the extinction of the tax enforcement proceeding.

2. Considering the provisions of article 2nd no. 1 subparagraph a) of the LRTA, combined with Order No. 112-A/2011 of 22 March, the appreciation of the matter relating to the enforcement proceeding is not covered within the scope of the material jurisdiction of the Arbitral Tribunal.

3. The lack of jurisdiction of the arbitral tribunal constitutes a dilatory exception of ex officio knowledge that determines the dismissal of the action.

B. Absolute lack of material jurisdiction of the Arbitral Tribunal to recognize the right to the attribution of tax benefits provided for in the CIRE

4. From the provisions above mentioned also results that the appreciation of matters relating to the recognition of tax exemptions is not covered within the scope of the jurisdiction of the arbitral tribunal.

5. The Arbitral Tribunal has jurisdiction only to pronounce on the legality of the challenged assessment acts.

6. The lack of jurisdiction of the arbitral tribunal constitutes a dilatory exception of ex officio knowledge.

By impugnation:

7. The challenged assessment was notified to the Claimant by registered mail with return receipt to the address contained in the AT's records on 20.11.2016, and that notification was not collected by the Claimant at the postal service.

8. On 11.12.2015 the notification was repeated, having again been left notice and not collected at the postal service.

9. Article 39th of the CPPT establishes that in case of non-collection of the mail the notification is presumed to have been made on the 3rd day following the day of registration.

10. Therefore, the assessment was duly notified.

11. The Claimant alleges that since the transfer of the real estate occurred in the course of the liquidation of the insolvent estate, constituting a transfer to a creditor, for which reason, both by virtue of the provisions of c) of no. 1 of article 270th of the CIRE, it is exempt from IMT.

12. However, it follows from the deed joined to the proceedings that by virtue of the acquisition the Claimant waives the claim of credits.

13. That is, the Claimant when it acquired the real estate no longer held the status of creditor of the insolvent, whereby the legal requirements provided for in c) of no. 1 of article 270th of the CIRE are not met in the case in question.

14. The Claimant also alleges that, as it constitutes an act of sale of an asset within the scope of the liquidation of the insolvent estate, the transfer of said real estate would always be covered by the exemption from payment of IMT provided for in no. 2 of article 270th of the CIRE.

15. Now, the Respondent is bound in its action, both to the principle of legality and to the internal guidelines issued by the AT, namely to the binding information in Process 2009... - IVE no. ..., with concordant order, of 24/03/2009, of the Deputy Director-General for Taxes of the Asset Area.

16. Which establishes that the application of the tax benefits of article 270th no. 2 of the C.I.R.E. depends on the immovable assets transferred being integrated into the universality of the company or establishment sold, exchanged or transferred within the scope of an insolvency or payment plan or of the liquidation of the insolvent company.

17. The Claimant did not acquire the company or the establishment nor did the said acquisition aim at the maintenance of business activity.

18. Attention must be paid to the literal meaning of the rule which provides that only acts of "sale", "exchange" or "transfer" of companies or their establishments are contemplated there.

19. The sale of assets of the company, in isolation, is thus not covered by the exemption provided for in no. 2 of article 270th of the CIRE, and is consequently subject to IMT under the general regime.

20. The legislator regarding the situation in question only intended to maintain the exemption in the case of transfer of the universality of assets associated with the exercise of the economic activity of the company.

21. The additional IMT assessment now challenged is based on a correct interpretation and application of the said exemption rule, and cannot benefit from any of the arguments, nor can any of the defects alleged by the Claimant to the challenged assessment be upheld.

22. Since there is no illegality of the assessment act nor legal basis supporting the Claimant's claim, the request for non-enforceability of the amounts due is consequently unfounded.

IV. Questions to be Decided

Considering the facts and the legal matters contained in the request for arbitral pronouncement presented by the Claimant and the response of the Respondent, the disputed question to be decided by the Arbitral Tribunal is whether the IMT assessment in dispute was or was not correctly issued considering the acquisition of the property in question from an insolvent entity, pursuant to the provisions of article 270th of the CIRE.

Before, however, such appreciation, and by force of the provisions of article 29th no. 1 subparagraphs a) and e) of the LRTA, 13th of the Code of Procedure in Administrative Courts (CPTA) and 608th no. 1 of the CPC, the Arbitral Tribunal will appreciate the exceptions raised by the AT:

1. To rule on the lack of material jurisdiction of the Arbitral Tribunal to annul and declare the extinction of the tax enforcement proceeding;

2. To rule on the absolute lack of material jurisdiction of the Arbitral Tribunal to recognize the right to the attribution of tax benefits provided for in the CIRE.

V. Factual Matter

With relevance to the appreciation of the Claimant's request, the following are the facts that are deemed proven, based on the documents joined to the proceedings:

1. The Claimant was cited in a tax enforcement proceeding for forced collection of IMT assessment in the amount of €17,383.46.

2. The Claimant provided a guarantee within that proceeding to suspend the respective forced collection.

3. On 7.2.2001 the Claimant promised to acquire autonomous unit C of the property described in the Land Registry of ... under no. ... and registered in the respective property register under article ... from the company B..., Lda.

4. That company breached the promise to sell agreement and the Claimant brought a declaratory action for condemnation, in which it claimed the resolution of the contract and payment of the deposit in double, namely €593,569.48.

5. The autonomous unit subject to the promise to sell agreement was also subject to seizure by the Claimant.

6. On 22.9.2008 B..., Lda. was declared insolvent, and the Claimant claimed its credit of €593,569.48, which was recognized and accepted by the Insolvency Administrator.

7. In the course of the liquidation proceeding of the company, the Claimant acquired, on 11 July 2012, the real estate that it had promised to buy, for compensation of the claimed credit.

8. The notary who executed the public deed of sale issued the respective IMT and Stamp Tax guides, assessed at zero, as it was an acquisition within the scope of insolvency.

9. The Respondent sent on 20.11.2015 notification to the Claimant, by registered mail with return receipt, to exercise its right to prior hearing regarding the additional IMT assessment, there being indicated that in the absence of the exercise of such right, this would determine the finality of the assessment.

10. That notification was returned as not collected by the Respondent at the postal service.

11. The Respondent sent on 11.12.2015 second notification to the Claimant, by registered mail with return receipt, to exercise its right to prior hearing regarding the additional IMT assessment, there being indicated that in the absence of the exercise of such right, this would determine the finality of the assessment.

12. That notification was returned as not collected by the Respondent at the postal service.

The conviction regarding the facts deemed as proven was founded on the documentary evidence joined and not contested by the Parties.

There are, with relevance to the proceedings, no other facts that are not considered proven.

VI. Legal Matter

It appears necessary, by force of the provisions of article 29th no. 1 subparagraphs a) and e) of the LRTA, 13th of the Code of Procedure in Administrative Courts (CPTA) and 608th no. 1 of the CPC, to appreciate the exceptions raised by the Respondent.

A. Lack of material jurisdiction of the Arbitral Tribunal to annul and declare extinction of the tax enforcement proceeding

The Respondent is correct when it states that the arbitral tribunal does not have jurisdiction within the scope of a tax enforcement proceeding.

This is as it follows from subparagraph a) of no. 1 of article 2nd of the LRTA, 4th of the LRTA and Order No. 112-A/2011, of 22 March.

The exception of lack of jurisdiction constitutes a dilatory exception that determines the dismissal of the action pursuant to article 576th and subparagraph a) of article 577th of the Code of Civil Procedure (CPC) applicable ex vi article 29th, no. 1, subparagraph e) of the LRTA.

It thus remains to be understood whether the proceeding should end in its entirety, regarding all requests, or only in the part for which the Arbitral Tribunal lacks jurisdiction. To solve such question, the provision of the Decision of the Supreme Court of Justice, of 8 May 2013, handed down within the scope of proceeding no. 5737/09.6TVLSB.L1-S1, is followed, which is cited, for ease of exposition:

"Thus, the inadmissibility of joinder resulting from the lack of jurisdiction of the court as to the subject matter for some of the cumulated claims may constitute:

- either a dilatory exception, determining the dismissal of the action as to all of them (due to lack of jurisdiction as to the subject matter for some of them), since the proceeding as it was presented (plurality of parties, cumulation of causes of action and claims) cannot proceed;

- or a mere inefficacy of the claim(s) as to which the court lacks jurisdiction.

Common to any of these possible solutions is that the joinder as it was configured by the Plaintiff cannot proceed.

It remains to inquire which of the pointed out solutions should be adopted.

We will begin by stating from the start that the first does not present itself in accordance with the principles that govern the admissibility and curing of joinder.

In fact, a joinder is, fundamentally, an accumulation in a single proceeding of actions which, although connected to each other, could be brought separately before the same judge, provided that any of the connected causes does not fall within the material jurisdiction of another judge, different.

It is founded on a reason of convenience and procedural economy resulting from the basic normative principle that, as a rule, all causes that, if brought separately, are capable of being joined (for example, through consolidation of proceedings) may be brought together.

The limitation resulting from the imperativeness of jurisdictional competence as to the subject matter is founded on reasons of public interest and order that prevail over the procedural conveniences resulting from the connection of causes justifying the joinder.

It will thus be easily understood that one of the requirements of the accumulation of actions in a single proceeding is the competence of the court as to the subject matter for all such actions.

Apart from procedural economy, one of the advantages associated with joinder is the prevention of contradictory or divergent decisions between the various actions (if brought separately).

Although the proceeding (with all the accumulated actions) is heard and decided jointly and decided in a single decision, it must be taken into account that the claims retain their distinction and autonomy with respect to each other. Being the proceeding single and the procedural acts the same, the autonomy of the actions (claims) will imply, among others, that the concurrence of both the procedural assumptions and the substantive requirements of each action must be examined separately and that the actions retain their autonomy for the purpose of acts of procedural disposition (confession, withdrawal, settlement) (see Andrés de la Oliva Santos – Ignacio Diez-Picazo Gimenez, Derecho Procesal Civil, El proceso de declaracion, p. 170).

Being the procedural assumptions verified regarding each of the actions, the accumulation, in the same proceeding, of actions or claims for which the court has material competence with others for which it does not, should have as a consequence that the proceeding will continue exclusively for the trial of the actions as to which the court is competent, ceasing only and solely the actions as to which the court lacks jurisdiction.

This was the solution advocated by Prof. Alberto dos Reis; according to him:

"…the fact that claims are cumulated in infringement of the requirements relating to the form of proceeding and the competence of the court results in one or some of the claims becoming without effect. Which or which ones?

Naturally that or those with respect to which the form of proceeding employed is improper or the court is incompetent as to the subject matter or hierarchy. If it is the incompetence or the error in form that causes the claim to fall, in order for the effect to be in correlation with the cause, it must necessarily be admitted that the claim put outside the field is precisely that which does not fit the form of proceeding adopted or of which the court cannot know due to lack of jurisdiction as to the subject matter or hierarchy" (See Commentary to the CPC, vol. III, p. 168).

In the same sense, Prof. Castro Mendes, confronted with the problem of the illegality of the joinder resulting from procedural incompatibilities (lack of court jurisdiction and error in form of proceeding) wrote:

"If (the illegality of the joinder) results from procedural incompatibility, by violation of article 31st no. 1 (...) what occurs is – as to one or both claims – a defect of lack of jurisdiction or of error in the form of proceeding. Thus, here the consequence will be the dismissal of the action as to that or those of the claims as to which the court is incompetent or the form of proceeding inadequate" (see Civil Procedural Law, vol. II, p. 274-275).

Equally Prof. Lebre de Freitas:

"The separation of causes also takes place when only as to some claims the court is incompetent or the form of proceeding is inadequate, maintaining in the court of the action the appreciation of the remaining ones" (see Code of Civil Procedure, vol 1st, 1999, p. 67).

This solution is the one that is in accordance with the conception of joinder as accumulation in the same proceeding of actions that could be brought separately; in this hypothesis – separate bringing of actions – the proceeding that would end would be that in which a claim was formulated for whose appreciation the court lacked jurisdiction as to the subject matter; now, no reasons are discerned to abandon this rule in the hypothesis of joinder.

Just as in that case, the proceeding instituted separately would become without effect (the same is to say, the Defendant would be dismissed from the action...), in this hypothesis, it is the claim that becomes without effect – the Defendant being dismissed from the respective action as to it.

The normative principle that underlies this solution is, moreover, the same that arises in the normative hypotheses expressly provided for in articles 31st no. 4 and 31st-A no. 1 CPC.

That is to say: the obstacles to joinder to which article 31st CPC alludes are impediments to the inclusion in the proceeding of the causes to which they refer; they prevent only that certain causes be accumulated in the same proceeding, but not that others, as to which there are no obstacles, be so; therefore, the dismissal of the action should affect, not the entire proceeding (that is, all the actions or accumulated causes), but only those as to which the said obstacles are verified."

By the foregoing, the dismissal of the action as to the Respondent regarding the request for extinction of the tax enforcement proceeding is deemed fair, due to lack of jurisdiction of the Arbitral Tribunal, proceeding with the file as to the request for appreciation of the legality of the IMT assessment act in question.

B. Absolute lack of material jurisdiction of the Arbitral Tribunal to recognize the right to the attribution of tax benefits provided for in the CIRE

Article 2nd no. 1 of the LRTA provides that the jurisdiction of arbitral tribunals comprises the appreciation of the following claims:

a. The declaration of illegality of acts of assessment of taxes, of self-assessment, of withholding at source and of payment on account; and

b. the declaration of illegality of acts of determination of taxable matter when it does not give rise to the assessment of any tax, of acts of determination of taxable income and of acts of determination of property values.

Now, no doubts are raised, in the case in question, that what is being discussed is the act of assessment of IMT. That is, an act of assessment of taxes.

There is, in fact, no administrative act of recognition or revocation of exemptions or other tax benefits that is being contested – acts that are outside the jurisdiction of arbitral tribunals. An act of recognition of tax benefits will not be appreciated.

The crux of the question to be decided is different – it is to know whether the IMT assessment notified to the Claimant is or is not legal, in light of the legal provision contained in article 270th of the CIRE.

Thus, it is reiterated, an act of recognition or revocation of tax benefits will not be appreciated. Rather, it will be appreciated, in the wake of so many other cases already decided in arbitral tribunal, an act of assessment of tax that presupposes the interpretation of rules relating to tax benefits.

This Arbitral Tribunal therefore understands that it has jurisdiction to appreciate the arbitral request, the exception of lack of jurisdiction raised by the Respondent not being fair.

C. Disputed Question

As stated, the disputed question to be decided by the Arbitral Tribunal is whether the IMT assessment in dispute was or was not correctly issued considering the acquisition of the property in question from an insolvent entity, pursuant to the provisions of article 270th of the CIRE.

Article 270th of the CIRE provided, in the wording in force at the date of the facts (namely, July 2012, date of execution of the deed of sale), that is, in the wording prior to Law No. 66-B/2012, of 31 December:

"1. The following transfers of immovable assets are exempt from municipal tax on onerous transfers of real estate, integrated into any insolvency or payment plan:

a. Those intended for the constitution of a new company or companies and for the performance of its capital;

b. Those intended for the achievement of the increase of capital of the debtor company;

c. Those resulting from satisfaction by giving of assets of the company and transfer of assets to creditors.

2. The following are equally exempt from municipal tax on onerous transfers of real estate the acts of sale, exchange or transfer of the company or of establishments thereof integrated within the scope of an insolvency or payment plan or carried out within the scope of the liquidation of the insolvent estate."

It is therefore important to proceed with the interpretation of the indicated provision, which should always be carried out in accordance with the provisions of articles 11th of the General Tax Law (LGT) and 9th of the Civil Code, to which that refers, which will be done.

The question in issue has already been the subject of pronouncement by various superior courts, and today its interpretation is relatively settled in doctrine and case law.

According to the Claimant, the acquisition of the real estate would be exempt from IMT by virtue of article 270th of the CIRE. First, because the exemption from IMT would always be applicable to isolated sales of assets of the insolvent entity, pursuant to no. 2 of article 270th. Second, and even if this were not the case, this case would always be a transfer of assets to a creditor, carried out within the scope of the liquidation acts of the insolvent estate and payment plan, and not therefore necessarily an isolated sale. The transfer was carried out by the insolvent estate, within the scope of the liquidation acts, under no. 1 of the same provision.

According to the Respondent, the Claimant when it acquired the real estate no longer held the status of creditor of the insolvent, whereby the legal requirements provided for in c) of no. 1 of article 270th of the CIRE are not met in the case in question. Further, the application of the tax benefits of article 270th no. 2 of the C.I.R.E. depends on the immovable assets transferred being integrated into the universality of the company or establishment sold, exchanged or transferred within the scope of an insolvency or payment plan or of the liquidation of the insolvent company. Not having the Claimant acquired the company or establishment, nor the said acquisition aimed at the maintenance of business activity, then the benefit cannot be applied. Attention must be paid to the literal meaning of the rule which provides that only acts of "sale", "exchange" or "transfer" of companies or their establishments are contemplated there. The sale of assets of the company, in isolation, is thus not covered by the exemption provided for in no. 2 of article 270th of the CIRE, and is consequently subject to IMT under the general regime.

It is fitting to appreciate, by recourse to, as one agrees entirely with what was decided by the Central Administrative Court of the South, on 19 November 2015, within the scope of proceeding 08063/14, which is cited:

"the interpretation of the rule contained in identified article 270th of the C.I.R.E., approved by decree-law 53/2004, of 18/3 (wording prior to Law 66-B/2012, of 31/12) must be made.

There will therefore be a need to decide whether the rule should be interpreted in the sense that both the sale, the exchange, and the transfer, even if integrated within the scope of an insolvency or payment plan or carried out in the space of the liquidation of the insolvent estate, in order for them to be exempt from I.M.T. must necessarily have as their object the company or establishment thereof, as the appellant argues, or whether, on the contrary, they are comprehended within the scope of the exemption from I.M.T. in question, also and in addition, the sales of immovable assets integrated into the assets of the company, provided that they are carried out within the scope of an insolvency or payment plan or carried out in the context of the liquidation of the insolvent estate.

Recall that the legislator set forth in no. 49 of the preamble of the C.I.R.E., with respect to tax benefits, the following: 'the regimes existing in the CPEREF are essentially maintained regarding the exemption from fees and tax benefits', and it is true that subparagraph c) of no. 2 of article 121 of the CPEREF exempted from municipal stamp tax transfers of immovable assets integrated into any of the business recovery measures that result, namely, from the sale, exchange or transfer of elements of the assets of the company.

On the other hand, the meaning and extent of the legislative authorization granted to the Government, under which the CIRE was approved, fixed in articles 2 and following of Law 39/2003, of 22/8, regarding the exemptions from municipal stamp tax (now IMT), provided in no. 3 of article 9 of that legislative authorization law that: 'The Government is finally authorized to exempt from municipal stamp tax the following transfers of immovable assets, 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 transfer of the company, establishment or elements of its assets (...)'.

It must therefore be concluded that the historical elements of interpretation of the rule under exegesis go in the direction of the exemption from I.M.T. enshrined in article 270th, no. 2 of the C.I.R.E., in the wording prior to Law 66-B/2012, of 31/12, encompassing also the sales of elements of the assets of the insolvent company, provided that they are integrated within the scope of an insolvency or payment plan or carried out in the space of the liquidation of the insolvent estate (see decision of the Supreme Administrative Court-2nd Section, 30/5/2012, proceeding 949/11; decision of the Supreme Administrative Court-2nd Section, 3/7/2013, proceeding 765/13; decision of the Supreme Administrative Court-2nd Section, 17/12/2014, proceeding 1085/13; Luís A. Carvalho Fernandes and João Labareda, Insolvency and Business Recovery Code annotated, Quid Juris, 2006, II volume, p. 257 et seq.)."

As it follows from the cited decision, with whose reasoning one agrees, the exemption from IMT contained in article 270th no. 2 of the CIRE encompasses the isolated sales of elements of the assets of the insolvent, as was the case.

The Supreme Administrative Court understands the same in its decision of 18 November 2015, handed down within the scope of proceeding 01067/15:

"Let us therefore see what the applicable legal regime is.

Under no. 1 of article 270th of the CIRE are exempt from municipal tax on onerous transfers of real estate the following transfers of immovable assets, integrated into any insolvency, payment or business recovery plan:

a) Those intended for the constitution of a new company or companies and for the performance of its capital;

b) Those intended for the achievement of the increase of capital of the debtor company;

c) Those resulting from satisfaction by giving of assets of the company and transfer of assets to creditors.

In turn, no. 2 of the same article provides that 'the following are equally exempt from municipal tax on onerous transfers of real estate the acts of sale, exchange or transfer of the company or of establishments thereof integrated within the scope of insolvency, payment or business recovery plans or carried out within the scope of the liquidation of the insolvent estate'.

The wording of this number 2 is not clear, rather ambiguous, giving rise to divergent interpretive positions, namely such as that which is raised in the present proceedings, namely to know whether only the acts of sale, exchange or transfer that have as their object the company or establishments thereof benefit from exemption from IMT, or, as was decided in first instance, also can be considered comprehended by the exemption the sales of elements of the assets of companies, provided that they are integrated within the scope of an insolvency or payment plan or carried out within the scope of the liquidation of the insolvent estate.

This Supreme Administrative Court has already pronounced itself several times on the question of the interpretation of this normative and in the direction advocated by the decision in appeal.

As was stated in Decision 949/11 of 30.05.2012, 'no. 2 of article 270th of the CIRE, whose wording is not clear regarding the scope of the exemption from IMT there enshrined, should be interpreted in conformity with subparagraph c) of no. 3 of article 9th of Law no. 39/2003, of 22 August, because between two meanings of the law, both with at least minimal support - in its literal meaning, should the interpreter opt for that which makes it compatible with the constitutional text (interpretation in accordance with the Constitution), to the detriment of the interpretation that vitiates it of unconstitutionality. (...)As such, should be understood to be exempt from IMT not only the sales of the company or establishments thereof, as universalities of assets, but also the sales of elements of its assets, provided that they are integrated within the scope of an insolvency or payment plan or carried out within the scope of the liquidation of the insolvent estate.

Also in the decisions of this Section of 17 December 2014, proceedings 1085/13 and 11 November 2015, proceeding 968/13 Still not published in the www.dgsi.pt. database, handed down in cases similar to those of the present proceedings, it was underlined that the acquisition of a real estate property, allegedly even the only asset that integrated the insolvent estate, in the sale carried out in the insolvency proceeding in the phase of liquidation of the insolvent estate, cannot therefore fail to be exempt from IMT, under the provisions of no. 2 of article 270th of the Insolvency and Business Recovery Code.

We agree with this case law whose legal reasoning has full application also in the case at hand.

In fact the question raised is, above all, a question of interpretation of fiscal law, and one must resort to the ratio legis and always keep in mind that the apprehension of the meaning of a rule cannot be done in an isolated manner.

Now, as was evidenced in the aforementioned decision 1085/13, one must take into account the purpose that the legislator intends to achieve with the grant of such exemption, - 'to foster and support the quick sale of the assets that make up the insolvent estate for obvious reasons of interest to 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 disruptive element', by giving tax incentives to those who acquire the immovable assets that make up the insolvent estate and that will be sold in the liquidation phase.

There being no need to differentiate, for such purpose, the situations in which the company is being sold globally with all its assets and liabilities, and the situations in which one or more of the commercial establishments that comprised it are being sold, or in which immovable assets that comprised its assets are being sold.

The objective that presides over the teleology of the rule will be equally pursued when the acquisition has as its object elements of the assets of the company, not taking it necessary that the object be the company or establishments thereof integrated within the scope of an insolvency plan.

Therefore, the argument of the appellant is also not procedurally sound when it invokes the example of the exemption from Stamp Tax referred to in article 269th subparagraph e) of the CIRE.

There is no valid reason to proceed with a more restrictive interpretation regarding the exemption from IMT provided for in article 270th, no. 2 of the CIRE.

Furthermore, as was also stated in the above-cited Decision 949/11, no. 3 of article 9th of the legislative authorization law no. 39/2003, provided, regarding the exemptions from Stamp Tax (now IMT) that: 'The Government is finally authorized to exempt from municipal stamp tax the following transfers of immovable assets, 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 transfer of the company, establishment or elements of its assets (...)'.

Now, although the literal argument could also point to a different solution, 'an interpretation in accordance with the CRP imposes that one considers that the exemption in question also applies to the sales and exchanges of elements of the assets of companies framed within the scope of an insolvency or payment plan, or carried out within the scope of the liquidation of the insolvent estate, since it is for that solution that the legislative authorization law that authorized the Government to legislate on this matter points, whereby a different interpretation would be unconstitutional, since in that case, the Government would have legislated in disrespect for the "meaning and extent" of the legislative authorization.'.

Hence it is concluded, reiterating such case law, that the exemption from IMT provided for in no. 2 of article 270th of the CIRE applies, not only to sales or exchanges of companies or establishments as universalities of assets, but also sales and exchanges of immovable assets (as elements of its assets), provided that they are framed within the scope of an insolvency or payment plan, or carried out within the scope of the liquidation of the insolvent estate."

In light of the above reasoning, which is cited and with which it is entirely agreed, the Arbitral Tribunal considers that the exemption from IMT contained in article 270th no. 2 of the CIRE, in the wording in force at the date of the facts, encompasses the isolated sales of elements of the assets of the insolvent.

In these terms, and without need for more, it is illegal the IMT assessment in question, as issued in violation of the provisions of article 270th no. 2 of the CIRE.

VII. Decision

Based on the grounds exposed, the Arbitral Tribunal decides to deem the arbitral request fair in the part requesting the annulment of the additional IMT assessment, in the amount of €17,413.00 (seventeen thousand four hundred and thirteen euros), and respective interest, annulling the challenged assessment.

Value of the proceeding: €17,413.00 (seventeen thousand four hundred and thirteen euros)

Costs: Pursuant to the provisions of article 22nd no. 4 of the LRTA, and under the terms of Table I attached to the Regulations of Costs in Tax Arbitration Proceedings, the value of the costs is fixed at €1,224.00 (one thousand two hundred and twenty-four euros), to be borne by the Respondent.

Lisbon, 13 December 2016

The Arbitrator

Ana Pedrosa Augusto

Frequently Asked Questions

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Is property transferred during insolvency proceedings exempt from IMT under Article 270 of CIRE?
Article 270 of CIRE provides IMT exemption for property transfers during insolvency proceedings, including sales to creditors through asset satisfaction (dação em pagamento) and transfers made within the liquidation of the insolvent estate. The exemption applies when the transfer is integrated within insolvency liquidation acts or payment plans, not to isolated sales outside the insolvency framework. The key distinction is whether the transfer forms part of the structured liquidation process managed by the insolvency administrator.
What are the legal requirements for claiming an IMT exemption on real estate acquisitions in insolvency cases?
To claim IMT exemption under CIRE Article 270, the acquisition must occur within a declared insolvency proceeding, be part of the liquidation of the insolvent estate or payment plan, and involve either (a) transfer to creditors for credit satisfaction, (b) sale/exchange of the company or its establishments, or (c) transfers integrated in insolvency or payment plan acts. The notary executing the deed must assess IMT at zero based on these conditions. Documentation proving the insolvency declaration, credit recognition, and integration within liquidation acts is essential.
Can the Tax Authority issue an additional IMT assessment when a CIRE Article 270 exemption was initially applied?
Yes, the Tax Authority can issue additional IMT assessments even when an initial exemption was applied, if it later determines the exemption was improperly claimed. Such assessments are subject to challenge through administrative complaint or CAAD arbitration. The taxpayer must be notified of the assessment and given the right to prior hearing. In this case, the Claimant challenged both the substantive grounds (arguing the exemption was correctly applied under CIRE Article 270) and procedural defects (claiming lack of proper notification).
What is the CAAD arbitration procedure for challenging an IMT tax assessment in Portugal?
The CAAD arbitration procedure for IMT disputes begins with filing a request for constitution of an arbitral tribunal within the statutory deadline. The President of CAAD appoints an arbitrator if parties don't agree on selection. The Tax Authority submits a response within 30 days. The tribunal may order joinder of the administrative file and determine whether hearings are necessary. Both parties submit written arguments. The tribunal evaluates jurisdictional questions, procedural exceptions, and substantive merits before issuing a final decision. Notifications follow CPC rules applicable to arbitral proceedings per Article 29(1)(e) LRTA.
How does the arbitral tribunal evaluate exceptions raised by the Tax Authority in IMT exemption disputes?
Arbitral tribunals first address preliminary exceptions raised by the Tax Authority, such as lack of material jurisdiction, before examining substantive issues. The tribunal must determine whether CAAD has competence over the specific relief requested, including questions about jurisdiction over tax enforcement proceedings versus assessment acts. The tribunal applies Article 29(1)(e) LRTA incorporating procedural rules from the Code of Civil Procedure. Exceptions must be decided through reasoned arbitral orders, with parties given opportunity to respond. Only after resolving jurisdictional and procedural issues does the tribunal proceed to evaluate the merits of the exemption claim.