IMT Exemption Under Article 270(2) CIRE for Individual Insolvency Property Sales – CAAD Case 25/2019-T

ARBITRAL DECISION

I. REPORT

1. On January 14, 2019, A..., Tax ID No. ..., resident at Rua ..., ..., ..., Coimbra, (hereinafter, Claimant), filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2, No. 1, paragraph a), and 10, Nos. 1, paragraph a), and 2, of Decree-Law No. 10/2011, of January 20, which approved the Legal Framework for Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012, of December 31 (hereinafter, abbreviated as RJAT), with a view to obtaining the pronouncement of this Tribunal regarding:

• Declaration of illegality and annulment of the IMT assessment No. ..., dated 02.01.2018, to which corresponds the payment order (DUC) No. ..., in the amount of € 39,000.00;

• Declaration of illegality and annulment of the decision rejecting the administrative appeal No. ...2018...; and

• Reimbursement of the amount of tax improperly paid, plus default interest at the legal rate, from the date of payment until the date of full reimbursement.

The Claimant filed 4 (four) documents and listed 3 (three) witnesses, having requested no other evidence.

The Respondent is the AT – Tax and Customs Authority (hereinafter, Respondent or AT).

1. As results from the request for arbitral pronouncement (hereinafter PPA), the Claimant bases the challenge of the disputed tax acts, summarily, on the following:

In the context of an insolvency proceeding of two individuals (husband and wife), a urban property was adjudicated to him, consisting of a single-family house, intended for residential purposes.

The respective adjudication deed, executed by the Insolvency Administrator, states that the transfer of such property "is covered by the provisions of Articles 269 and 270, both of CIRE, regarding the exemption from IMT and Stamp Tax"; for this reason, Stamp Tax and IMT were not assessed at that time.

The Claimant understands that the exemption created by Article 270, No. 2, of CIRE was intended to facilitate the realization of legal and financial operations, by eliminating the impact of fiscal charges inherent to such taxation, regardless of whether it is the property of a natural or legal person, a company asset or a personal asset.

Furthermore, the rationale of the norm imposes that it be interpreted to encompass the alienation of property in the context of insolvency of natural persons, whether or not engaged in business or holding companies.

Even if this were not the case, the Claimant says that, given the legislator's intent, as set forth in the preamble to CIRE, in the preamble to CPEREF and in the legislative authorization law, an extensive interpretation of Article 270, No. 2, of CIRE would always be required to include transfers to third parties within the scope of the norm.

This circumstance, according to the Claimant, represents a serious violation of the principle of equality, in its aspect of prohibition of arbitrariness, under Article 13 of the CRP [Portuguese Constitution] and Article 7, No. 3, of the LGT [General Tax Law].

The Claimant further argues that the norm of Article 270, No. 2, of CIRE, when interpreted as not encompassing the personal property of the insolvent, in the context of an insolvency proceeding, is unconstitutional due to violation (in addition to the principle of equality) of the principles of protection of legitimate expectations and legal certainty.

The Claimant further alleges that the insolvency of the natural person in question arose from the fact that the insolvent continued his business and professional activity on his own account, subject to a highly specialized regime within CIRE; thus, the activity developed by the insolvent, insofar as it had a business purpose, would always be integrated in the letter and spirit of Articles 5 and 6 of CIRE, whereby Articles 269 and 270, No. 2, of CIRE have full applicability to the transfer of the property in question.

Finally, since he paid the amount of tax assessed, the Claimant petitions for reimbursement thereof, plus default interest, in accordance with law.

1. The request for constitution of an arbitral tribunal was accepted and automatically notified to the AT on January 21, 2019.

2. The Claimant did not appoint an arbitrator, whereby, pursuant to Article 6, No. 1, and Article 11, No. 1, paragraph a) of RJAT, the President of the Deontological Council of CAAD designated the undersigned as arbitrator of the singular Arbitral Tribunal, who communicated acceptance of the appointment within the applicable period.

On March 6, 2019, both parties were duly notified of this appointment, and neither manifested any will to refuse the appointment of the arbitrator, in accordance with the combined provisions of Article 11, No. 1, paragraphs b) and c), of RJAT and Articles 6 and 7 of the Deontological Code of CAAD.

Thus, in conformity with the provision in paragraph c) of No. 1 of Article 11 of RJAT, the singular Arbitral Tribunal was constituted on March 26, 2019.

1. On May 6, 2019, the Respondent, duly notified for this purpose, filed its Reply in which it specifically contested the arguments raised by the Claimant and concluded for the rejection of the present action, with its consequent dismissal of all claims.

The Respondent requested no evidence, having merely attached to the proceedings its administrative file (hereinafter, PA).

1. The Respondent based its Reply, essentially, on the following arguments:

The IMT exemption provided for in Article 270, No. 2, of CIRE encompasses all acts integrated within insolvency plans, or payment plans, or liquidation of the insolvent mass, with the reservation that the insolvent is a company or establishment.

According to the AT, the settled case law understanding has been uniform to the effect that there must be immovable property that integrates the property of a company and not immovable property of natural persons, with the sole justification of being part of an insolvency proceeding.

The Respondent emphasizes, indeed, that if the legislator had intended to change the meaning of the law, it could have done so expressly in Article 234 of Law No. 66-B/2012, of December 31, which amended the said norm of CIRE, which it did not; this means, according to the AT, that the legislator did not intend to grant more exemptions than those included in the current wording of the norm in question.

On the other hand, the AT states that the fact that the insolvent husband was an architect is not sufficient to prove that the said property was dedicated to business activity, since the property is intended exclusively for permanent personal residence, and therefore did not belong to the insolvent mass of a company or its establishments, integrated within the scope of company recovery plans. In the case at hand, the AT argues that we are dealing with the acquisition of an immovable property, although in an insolvency proceeding, which does not belong to a company nor was intended for the exercise of any business activity, but was owned by a natural person for residential purposes; consequently, the legal requirements for the IMT exemption are not met given that its transfer was carried out in an insolvency proceeding of a natural person.

The AT thus argues that a different interpretation from the one it advocates, that is, to recognize IMT exemption in acquisitions from insolvent natural persons in the same manner as in company insolvency proceedings, has no legal and constitutional support.

Finally, the Respondent states that, since there is no error on the part of the services in applying the law to the facts in question, there is no basis for the payment of default interest.

1. By order of May 23, 2019, the parties were notified of the designation of the date for holding the meeting referred to in Article 18 of RJAT and for the questioning of the witnesses listed by the Claimant.

2. On July 2, 2019, the meeting referred to in Article 18 of RJAT took place – in which was dealt with what appears in the respective minutes, which are hereby deemed fully reproduced, the date of September 26, 2019 being set as the deadline for issuing the arbitral decision – which continued on September 3, 2019, with the production of witness testimony, witness B... being questioned.

3. The parties submitted written submissions, in which they reiterated the positions previously assumed in their respective pleadings.

II. PRELIMINARY MATTERS

1. The Arbitral Tribunal was regularly constituted and is competent ratione materiae, given the configuration of the subject matter of the proceedings (see Articles 2, No. 1, paragraph a) and 5 of RJAT).

The request for arbitral pronouncement is timely, as it was submitted within the period provided in Article 10, No. 1, paragraph a), of RJAT.

The parties enjoy legal personality and capacity, have legitimacy and are properly represented (see Articles 4 and 10, No. 2 of RJAT and Article 1 of Order No. 112-A/2011, of March 22).

The proceedings are free from vices of nullity, and no exceptions or preliminary issues were raised that would prevent consideration of the merits.

III. GROUNDS

III.1. FACTS

§1. ESTABLISHED FACTS

1. The following facts are considered established:

a) In the District Court of …, …, Central Branch, Commercial Section, Judge ..., an insolvency proceeding of a natural person (filing) of B..., Tax ID No. ..., and wife C..., Tax ID No. ..., was instituted on 23.11.2015 and proceeded under No. .../15...T…, in which an insolvency judgment was rendered, which became final on 04.01.2016. [cf. document No. 2 attached to the PPA]

b) The insolvent husband was a partner and manager of four commercial companies, all with registered offices in Coimbra, engaged in the activities of architecture, engineering, interior design and real estate development. [cf. testimony of witness B...]

c) The income of the insolvent husband came solely from the professional activity he carried out in the aforementioned commercial companies. [cf. testimony of witness B...]

d) The insolvency situation of the couple was essentially motivated by the total commercial and financial collapse of the mentioned commercial companies. [cf. testimony of witness B...]

e) In accordance with the cadastral information available on the AT's computer platform, the insolvent husband is registered for the activity of architect, classified for personal income tax purposes under the simplified taxation regime and for VAT purposes under the normal quarterly regime, and the insolvent wife does not carry out any economic activity. [cf. PA]

f) In the context of the aforementioned insolvency proceeding, the following immovable property was integrated into the respective insolvent mass: "single-family house with ground floor, first, second and third floors and land, located on Rua ..., ..., ..., described in the First Registry Office of Real Property of Coimbra under sheet ... of the parish of ..., registered on the cadastral ledger under article ... of said parish". [cf. document No. 3 attached to the PPA]

g) The said property is thus described in the respective urban cadastral ledger [cf. PA]:

[Details of property description omitted for brevity]

h) That property was designed by the insolvent husband, with a view to publicizing his architectural style, being used by the insolvents and their respective family members as their family home – that is, it was their habitual residence, the center of their family life and the privileged place of interaction with other family members and friends –, and it also had office space for work. [cf. testimony of witness B...]

i) The commercial companies referenced in established fact b) did not have headquarters or offices in the aforesaid property. [cf. testimony of witness B...]

j) On 15.12.2016, in the context of the aforementioned insolvency proceeding, the aforementioned property was adjudicated to the Claimant, for the price of € 650,000.00, and it was recorded in the respective Adjudication Deed that "[t]he transfer referred to in the present adjudication is covered by the provisions of Articles 269 and 270, both of CIRE, regarding the exemption from IMT and Stamp Tax". [cf. document No. 3 attached to the PPA]

k) Following the aforementioned adjudication, on 03.01.2018 the Claimant acquired by public deed of sale and purchase the said property. [cf. PA]

l) With a view to this same acquisition, on 02.01.2018 an IMT assessment No. ... was issued, in the amount of € 39,000.00, which the Claimant paid on that same date, through payment order No. ... . [cf. document No. 1 attached to the PPA and PA]

m) On 28.03.2018, the Claimant filed an administrative appeal against the said IMT assessment – filed under No. ...2018..., at the Tax Office of Coimbra-... and handled by the Tax Justice Division of the Finance Directorate of Coimbra – in accordance with and on the grounds set forth in the respective initial petition, which is hereby deemed fully reproduced. [cf. PA]

n) In the context of that administrative appeal procedure, the respective draft decision was prepared, which is hereby deemed fully reproduced, in which the rejection of the request was proposed with the reasoning set forth in Information No. .../2018, of 02.07.2018, from which we highlight the following segments [cf. PA]:

"III – Analysis of the Request

(…)

Applicable Law

No. 2 of Article 270 of CIRE establishes a tax exemption benefit from IMT regarding "[t]he acts of sale, exchange or transfer of the company or establishment thereof integrated within the scope of insolvency plans, payment plans or recovery or practiced within the liquidation of the insolvent mass".

In line with the understanding conveyed by Circular 4/2017, of February 10, the acts of sale, exchange or transfer, in isolation, of immovable property of the company or establishment thereof integrated within the scope of insolvency plans, are exempt from IMT.

Having analyzed the documents in the file, together with the information available on the computer platform, and taking into account applicable legislation, we are dealing with the acquisition of an immovable property which is a personal asset of the insolvents, that is, although it occurred in the context of an insolvency proceeding, it is not a company asset but rather a personal asset.

IV – Conclusion

Given the foregoing, given that the requirements referred to in No. 2 of Article 270 of CIRE are not met, it appears to us that the claimant's claim cannot be granted, and the request should be rejected."

o) The Claimant was notified, by letter dated 27.07.2018, sent via CTT [postal service], of that draft decision and, if he so wished, to exercise his right to a hearing, which the Claimant did not do. [cf. PA]

p) On 02.10.2018, the Chief of the Tax Justice Division, by delegation of the Finance Director of Coimbra, issued an order making the draft decision final and, with the reasoning referred to in established fact n), rejected the administrative appeal, and the Claimant was notified of that final decision by letter dated 08.10.2018, sent via CTT. [cf. document No. 4 attached to the PPA and PA]

q) On 14.01.2019, the Claimant filed the request for constitution of an arbitral tribunal that gave rise to the present proceedings. [cf. CAAD Case Management System]

§2. UNESTABLISHED FACTS

1. There are no facts of relevance to the appreciation and decision of the case that have not been established.

§3. REASONING ON MATTERS OF FACT

1. The facts pertinent to the judgment of the case were selected and delimited according to their legal relevance, in light of the plausible solutions of the legal issues, in accordance with the combined application of Articles 123, No. 2, of the CPPT [Code of Administrative Tax Procedure], 596, No. 1 and 607, No. 3, of the CPC [Code of Civil Procedure], applicable by virtue of Article 29, No. 1, paragraphs a) and e), of RJAT.

The Tribunal's conviction was based on the facts argued by the parties, whose correspondence to reality was not challenged, and on the body of evidence of a documentary nature (including the administrative file) and witness testimony brought to the proceedings, which was subject to critical analysis and appropriate consideration in light of common experience rules and according to standards of normality and reasonableness.

Regarding the testimony given by witness B... – a participant, as an insolvent, in the insolvency proceeding referenced in these proceedings, and the only witness questioned, as the Claimant waived the others he had listed – it is important to begin by noting that he testified in a clear, objective and impartial manner about the facts to which he was questioned, with direct knowledge thereof, which was revealed and proven by the detailed manner in which he explained them, and therefore his testimony was entirely credible.

This witness's testimony was essentially concerned with the period preceding the filing for insolvency, having explained both his professional activity and the reasons underlying the insolvency situation – from which resulted established facts b), c) and d) – and the use that was made of the property in question in these proceedings – from which resulted established facts h) and i).

III.2. LAW

§1. THE ISSUE TO BE DECIDED

1. The substantive issue submitted to the consideration of this Tribunal consists, essentially, in determining whether the acquisition of the aforementioned property by the Claimant, in the context of the mentioned insolvency proceeding, is, or is not, covered by the IMT exemption established in Article 270, No. 2, of the Code on Insolvency and Business Recovery (CIRE).

The Tribunal is also called upon to pronounce itself on the requests for reimbursement of the amount of tax paid and payment of default interest.

§2. THE IMT EXEMPTION ESTABLISHED IN ARTICLE 270, NO. 2, OF CIRE

§2.1. EVOLUTION OF THE REGIME

1. In reaching its current contours, the regime of the IMT exemption in question underwent a legislative evolution, which we shall now account for.

In the preamble to Decree-Law No. 132/93, of April 23, which approved the Code on Special Procedures for Business Recovery and Bankruptcy (CPEREF) – a legal compendium that underwent several amendments, the most recent of which were introduced by Decree-Law No. 38/2003, of March 8 – the following was stated:

"10. In addition to quite favorable treatment of the two proceedings covered by this decree-law in the field of court costs, this decree-law also adopts a set of tax incentives, through which it seeks to particularly avoid unwarranted penalties or serious inconveniences to legal, economic or financial operations that may be undertaken in the recovery process.

For this purpose, some tax or paratax charges related to legal transactions that could constitute the means of recovery approved by creditors were removed, having in mind in particular stamp tax, municipal contribution, municipal tax on transfers of real property (sisa) and the fees owed for acts.

On the other hand, provision was made to prevent the insolvent company from improperly qualifying as gains the patrimonial benefits obtained in the recovery process and to ensure that the patrimonial sacrifices borne by creditors for the benefit of company recovery could be recorded as actual losses, within the same procedural context."

For purposes of this decision, it is important to note Article 121 of CPEREF, which established the following:

Article 121

Benefit relating to municipal transfer tax

1 - Transfers of immovable property, integrated in any of the business recovery procedures, are exempt from municipal tax on transfers of real property (sisa), if they are intended for:

a) The incorporation of the company, under Article 80, and the realization of its capital;

b) The realization of the increase in capital of the company under paragraph a) of No. 2 of Article 88 and Article 90, as well as No. 1 of Article 100.

2 - Transfers of immovable property are also exempt from municipal tax on transfers of real property, integrated in any of the business recovery procedures, which result from:

a) The transfer to third parties or the sale of shareholdings representing company capital, provided in paragraphs b) and c) of No. 2 of Article 88 and in Article 91, as well as in Nos. 1 and 2 of Article 100;

b) The payment-in-kind of company assets and the transfer of assets to creditors, provided in paragraphs d) and e) of No. 1 of Article 88 and in Article 93, as well as in No. 1 of Article 100;

c) The separation of commercial or industrial establishments, the sale, exchange or transfer of elements of the company assets, as well as long-term leases, respectively provided for in paragraphs e), f) and g) of No. 1 of Article 101.

Law No. 39/2003, of August 22, authorized the Government to legislate on the insolvency of natural and legal persons, having more specifically authorized the Government to approve CIRE, repealing CPEREF (Article 1, No. 1). Under CIRE the Government was authorized to legislate, in addition to other matters, on tax benefits within the insolvency process (Article 1, No. 3, paragraph h)); for this purpose, the following was provided in Article 9 of the same legal instrument, insofar as it is relevant here:

Article 9

Tax Benefits within the Insolvency Process

(…)

3 - The Government is finally authorized to exempt from municipal tax on transfers of real property the following transfers of immovable property, integrated in any insolvency plan or payment plan or carried out within the liquidation of the insolvent mass:

a) Those intended for the incorporation of new company or companies and the realization of their capital;

b) Those intended for the realization of the increase in capital of the insolvent debtor company;

c) Those resulting from the transfer to third parties or the sale of shareholdings representing company capital, payment-in-kind of company assets and transfer of assets to creditors, sale, exchange or transfer of the company, establishments or elements of its assets, as well as long-term leases.

In exercise of the aforementioned authorization, CIRE was approved and CPEREF was repealed, through Decree-Law No. 53/2004, of March 18, in whose preamble the following is, among other things, stated:

"49 - The regimes existing in CPEREF regarding the exemption from fees and tax benefits, as well as the indication of criminal infraction, are maintained in their essentials."

1. CIRE was subject to successive amendments, the most recent of which were introduced by Decree-Law No. 84/2019, of June 28, and in its original wording it established the following in its Article 270:

Article 270

Benefit relating to tax on onerous transfers of immovable property

1 - The following transfers of immovable property, integrated in any insolvency plan or payment plan, are exempt from tax on onerous transfers of immovable property:

a) Those intended for the incorporation of new company or companies and the realization of their capital;

b) Those intended for the realization of the increase in capital of the insolvent debtor company;

c) Those resulting from payment-in-kind of company assets and transfer of assets to creditors.

2 - The following are equally exempt from tax on onerous transfers of immovable property: acts of sale, exchange or transfer of the company or establishments thereof integrated within the scope of insolvency plans or payment plans or practiced within the liquidation of the insolvent mass.

At the time of the facts and currently, as a result of the amendment introduced by Law No. 66-B/2012, of December 31, the wording of this legal norm is as follows:

Article 270

Benefit relating to tax on onerous transfers of immovable property

1 - The following transfers of immovable property, integrated in any insolvency plan, payment plan or recovery plan, are exempt from tax on onerous transfers of immovable property:

a) Those intended for the incorporation of new company or companies and the realization of their capital;

b) Those intended for the realization of the increase in capital of the insolvent debtor company;

c) Those resulting from payment-in-kind of company assets and transfer of assets to creditors.

2 - The following are equally exempt from tax on onerous transfers of immovable property: acts of sale, exchange or transfer of the company or establishments thereof integrated within the scope of insolvency plans, payment plans or recovery plans or practiced within the liquidation of the insolvent mass.

§2.2. INTERPRETATION AND DELIMITATION OF THE SCOPE OF APPLICATION OF THE EXEMPTION

1. The interpretation and delimitation of the scope of application of this IMT exemption have been the subject of case law disputes, essentially around two central issues to which we shall now turn.

2. A first issue concerns whether this exemption applies only to the transfer of the insolvent company itself or one of its establishments, or whether it also applies to the isolated transfer of real property assets of that company.

On this matter, the STA [Supreme Administrative Court], following a consolidated case law line, issued a judgment standardizing jurisprudence No. 3/2017, of March 29, 2017, in case No. 1521/15, to the following effect: "the IMT exemption provided for in No. 2 of Article 270 of CIRE applies, not only to sales or exchanges of companies or establishments as a whole assets, but also to sales and exchanges of immovable property, as elements of their assets, provided they are framed within an insolvency plan or payment plan, or practiced within the liquidation of the insolvent mass."

As is noted in this judgment, this issue had already been "exhaustively and repeatedly addressed by the Supreme Administrative Court in numerous judgments, as can be seen from reading, among others, the judgments of the Tax Litigation Section delivered in the following cases: No. 01508/12, of 05-11-2014, No. 01085/13, of 17-12-2014, No. 0575/15, of 18-11-2015, No. 0968/13, of 11-11-2015, No. 01345/15, of 16-12-2015, No. 01067/15, of 18-11-2015, No. 01350/15, of 20-01-2016, No. 0788/14, of 16-03-2016, No. 0788/14, of 25-01-2017, 01159/16, of 01-02-2017, case No. 0724/16, of 15-02-2017, in No. 0793/16, all to the effect that the IMT exemption provided for in No. 2 of Article 270 of CIRE applies not only to sales or exchanges of companies or establishments as a whole, but also to sales and exchanges of immovable property, as elements of the assets of an insolvent company, provided they are framed within an insolvency plan or payment plan, or practiced within the liquidation of the insolvent mass.

This led the Tax Administration, in a laudable and important inaugural initiative to comply with the provision in No. 4 of Article 68-A of the General Tax Law, to publish on 10/02/2017 Circular No. 4/2017, through which it revised its previous interpretation regarding this IMT exemption, adopting a new interpretation that reflects the repeated and uniform jurisprudence of the Supreme Administrative Court.

Indeed, the following is the text of Circular No. 4/2017, issued in response to the Order of the Secretary of State for Tax Affairs No. 14/2017-XXI, of 26/01/2017:

"1 - By Order No. 14/2017-XXI, of January 26, by the Secretary of State for Tax Affairs, based on recent jurisprudence of the Supreme Administrative Court (STA), as well as on the provision in No. 4 of Article 68-A of the general tax law (LGT), which provides that the tax administration must review its positions in light of the jurisprudence of the higher courts, the Tax and Customs Authority (AT) was ordered to proceed with the revision of the interpretation of No. 2 of Article 270 of CIRE, expressed in point III of the annex to Circular No. 10/2015, as regards the IMT exemption in the acquisition of immovable property.

2 - Thus, the first two paragraphs of point III of the "GUIDE FOR COMPLIANCE WITH TAX OBLIGATIONS OF LEGAL ENTITIES IN INSOLVENCY SITUATION", annexed to Circular No. 10/2015, of September 9, are replaced by the following understanding:

"The application of the tax benefits provided for in No. 2 of Article 270 of CIRE does not depend on whether the thing sold, exchanged or transferred encompasses the whole of the insolvent company or one of its establishments.

Thus, the acts of sale, exchange or transfer, in isolation, of immovable property of the company or establishments thereof are exempt from IMT, provided they are integrated within the scope of insolvency plans, payment plans or recovery plans or practiced within the liquidation of the insolvent mass.""

As is also noted in this judgment, the legal reasoning that sustains the position which, repeatedly and uniformly, had been supported by the STA is as follows (reproduction of the STA judgment of 16/03/2016, delivered in case No. 0788/14):

"The judgment of the TAF [Administrative Court of Appeal] of Aveiro, before the question posed to it which concerned the interpretation of No. 2 of Article 270 of CIRE, as regards the scope of the exemption established therein, concluded, supporting the jurisprudence of this Supreme Administrative Court — Judgment of 30.05.2012, in case No. 0949/11 (in www.dgsi.pt) – that "contrary to the restrictive interpretation of No. 2 of Article 270 of CIRE defended by the Tax Administration, to the effect that the tax benefit of this norm only encompasses the onerous transfer of assets that integrate the whole of the company or establishment sold, exchanged or transferred within the scope of the insolvency plan, it is concluded, as in the above-cited judgment, that the most adequate to the meaning and reach of the law authorizing the approval of CIRE assets that integrate the property of the insolvent company".

In the continuation of this argumentative discourse, it concluded that "sales of elements of the company assets should be understood to be exempt from IMT, provided they are integrated within an insolvency plan or payment plan or practiced within the liquidation of the insolvent mass, and not only sales of the company or establishment thereof, as a whole of assets".

Not conforming to this, the Public Exchequer argues that CIRE did not maintain, despite the legislative authorization law thus permitting, the IMT exemption for the transfer of elements of the assets of a bankrupt company, as provided in CPEREF (articles 120 and 121), but restricts this exemption to the transfer of the company or establishment thereof (articles 269 and 270 of CIRE).

[...]

7 - Appreciating and deciding:

This Supreme Administrative Court has already ruled on several occasions on the interpretation of this legal provision and in the sense advocated by the appealed decision.

Thus it is already settled jurisprudence of this section that, as the wording of No. 2 of Article 270 of CIRE is not clear, it should be understood that there are exempt from IMT "not only the sales of the company or its establishments, as a whole of assets, but also the sales of elements of its assets, provided they are integrated within an insolvency plan or payment plan or practiced within the liquidation of the insolvent mass" (cf., inter alia, in addition to the already cited Judgment 949/11, the Judgments of 03-07-2013, case 0765/13, of 17.12.2014, case 01085/13, of 11.11.2015, case 968/13, of 18.11.2015, cases 01067/15 and 0575/15, respectively, of 16 December 2015, case 1345/15, and of 20 January 2016, case 1350/15, all in www.dgsi.pt).

We concur with this jurisprudence whose legal reasoning has full applicability also in the present case and, notwithstanding the Respondent's argumentative effort, we see no reasons to alter it.

Indeed, the question raised is, above all, a matter of interpretation of tax law, and one must appeal to the legislative purpose (ratio legis) and always bear in mind that the capture of the meaning of a norm cannot be done in isolation.

Now, as was demonstrated in the above-referenced judgment 1085/13, account must be taken of the purpose that the legislator intended to achieve with the granting of such exemption, – "to promote and support the rapid sale of assets that integrate the insolvent mass for obvious reasons of interest to creditors, but also of public interest in restoring the normal functioning of the business world in which each insolvency proceeding appears as a disruptive element", providing tax incentives to those who acquire immovable assets that integrate the insolvent mass and which will be sold in the liquidation phase.

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

The objective pursued by the teleology of the norm will equally be achieved when the acquisition concerns elements of the company's assets, and it is not necessary that the object be the company or establishments thereof integrated within an insolvency plan.

For this very reason, the Respondent's argumentation does not stand when it invokes the example of the Stamp Tax exemption referred to in Article 269, paragraph e) of CIRE.

There is no valid reason to proceed with a more restrictive interpretation as regards the IMT exemption provided for in Article 270, No. 2 of CIRE.

It is also added that, as was also stated in the above-cited Judgment 949/11, No. 3 of Article 9 of the legislative authorization law No. 39/2003 provided, as regards exemptions from Sisa (now IMT) that: "The Government is finally authorized to exempt from municipal tax on transfers of real property the following transfers of immovable property, integrated in any insolvency plan or payment plan or carried out within the liquidation of the insolvent mass: c) [...] sale, exchange or transfer of the company, establishment or elements of its assets [...]".

Now the judgment did not consider unconstitutional the interpretation that the AT made of Article 270, No. 2, of CIRE, but rather considered, in accordance with the jurisprudence it cited, that between two meanings of the law, both with support – at least minimal – in its respective text, should the interpreter opt for the one that best is compatible with the constitutional text (interpretation in conformity with the Constitution).

It is further added that, as explained in the judgment of 25-01-2017, in case No. 01159/16, "from the possible non-utilization by the ordinary legislator of the legislative authorization law in its fullness no unconstitutionality results, that is, nothing obliges the ordinary legislator to exhaust the content of the authorization, being able, without incurring invalidity of the norm, to decide not to make full use of the same and to fall short of the legislative authorization, provided it is within the meaning and content thereof (basing this allegation on the jurisprudence of the Constitutional Court, namely in Judgment No. 556/2003, issued in case No. 188/2003, of 12/11/2003 [...].

In the thesis that we subscribe (by reference to the judgment issued in case No. 1345/15 cited above and contrary to what was initially decided in the judgment issued in case No. 949/11), the unconstitutionality of the interpretation defended by the Public Exchequer does not stand, but only that between two meanings of the law, both with minimal support in its respective text, should the interpreter opt for the one that best fits the meaning and extent of the legislative authorization under which the norm was issued by the Government in a matter reserved to the Parliament. Especially when this is the one that best serves the teleology (ratio legis) of the norm, as we have understood it above and when it also has the support of the historical element, as is well noted in the judgment delivered in the case with No. 949/11."

In this conformity, it is our understanding that the IMT exemption established in Article 270, No. 2, of CIRE encompasses not only acts of sale, exchange or transfer of companies or establishments thereof, as a whole of assets, but also acts of sale, exchange or transfer of immovable property of their assets, provided they are integrated within the scope of an insolvency plan, payment plan or recovery plan or practiced within the liquidation of the insolvent mass.

Within the scope of arbitral tribunals constituted under the auspices of CAAD, this was the understanding followed, among others, in the arbitral decisions rendered in cases Nos. 81/2016-T, 368/2016-T, 512/2016-T, 15/2017-T and 20/2018-T.

Finally, in this respect, it is important to note that, although the issue in question does not directly affect the decision of the case sub judice, it seems pertinent to us – and, therefore, we have decided to address it – in the perspective of full understanding of the scope of application of the IMT exemption established in Article 270, No. 2, of CIRE.

1. The other issue that has arisen around the interpretation and delimitation of the scope of application of this IMT exemption concerns whether it operates indiscriminately, whether it concerns immovable property that integrates the property of an insolvent company, or immovable property integrated into the insolvent mass of natural persons. In other words, it is important to ascertain whether the legislator's intent was to exempt from taxation in the form of IMT only the acts of sale, exchange or transfer of immovable property integrating the insolvent mass of companies, or also the acts of sale, exchange or transfer of immovable property integrating the insolvent mass of natural persons.

The STA ruled on this issue in the judgment delivered on 03/07/2013, in case No. 0765/13, summarized as follows:

"I - No. 2 of Article 270 of CIRE, whose wording is not clear as regards the scope of the IMT exemption established therein, could, at most, be interpreted as encompassing not only the sales of the company or its establishments, as a whole of assets, but also the sales of elements of its assets, provided they are integrated within an insolvency plan or payment plan or practiced within the liquidation of the insolvent mass.

II - Thus, the said exemption does not encompass the sale of urban real property intended for housing, which belongs to a natural person, it not being sufficient to benefit from that exemption the fact that these are acts of sale practiced within the liquidation of the insolvent mass, regardless of whether the same belongs to a natural or legal person (business entity)."

The STA supported an equal understanding in the judgment dated 25/09/2013, delivered in case No. 0866/13, regarding the Stamp Tax exemption established in Article 269, paragraph e), of CIRE, summarized as follows:

"I – In accordance with Article 269, paragraph e), of CIRE, sales of "elements of the company assets" are exempt from Stamp Tax.

II – Thus, the said exemption does not encompass the sale of urban real property intended for housing which belongs to a natural person, it not being sufficient to benefit from that exemption the fact that these are acts of sale practiced within the liquidation of the insolvent mass, but rather it must be demonstrated that the asset sold integrates the assets of a company."

This same understanding has been repeatedly adopted by the arbitral tribunals constituted under the auspices of CAAD, as evidenced, among others, by the arbitral decisions rendered in cases Nos. 649/2015-T, 368/2016-T, 512/2016-T, 517/2016-T, 518/2016-T, 519/2016-T, 12/2017-T, 13/2017-T, 15/2017-T, 16/2017-T, 23/2017-T and 27/2017-T.

We advance, from the outset, that we do not see any reason to diverge from this understanding which, for this reason, we adopt, for the reasons we shall now set forth.

In the cases in which the Supreme Administrative Court was called upon to rule on the application of the IMT exemption established in Article 270, No. 2, of CIRE, it was always a matter of the sale of immovable property integrated into the property of a commercial company, in the context of an insolvency proceeding, as is evidenced by the above-cited judgments. As is well known, although companies can be legally held through various legal forms, regarding commercial companies there is no question that they are always companies; for this reason, in those cases examined by the STA, what was at issue was immovable property integrated into the property of companies. Indeed, upon examination of the above-cited judgments, we find that the STA makes clear that these are immovable property that are elements of the assets of companies.

We do not dispute that companies can be held by individual traders in their own name and that, therefore, the individual entrepreneur has a company and possesses assets that are dedicated to that company; such assets constitute the property of the individual entrepreneur's company, in contrast to his personal property.

However, this does not mean that it is legitimate to conclude that the IMT exemption in question applies to alienations of immovable property integrating the insolvent mass of natural persons, with the sole justification that they are part of an insolvency proceeding.

The approval of CPEREF introduced a profound change in the bankruptcy proceeding, with its epicenter ceasing to be the defense of the creditor's right to guarantee its credit and becoming a means of business recovery. This new paradigm was evidenced by the amendments to CPEREF introduced by Decree-Law No. 315/98, of October 20, which recognized, in addition to bankruptcy and insolvency, "a tertium genus, a new basis of the proceeding, that is, an economic situation of difficulty evidenced by considerable economic or financial difficulties that hinder the normal functioning of the company or the pursuit of its social purpose."

For its part, CIRE, although it extended the application of recovery proceedings to debtor natural persons, fundamentally maintains its character as a legal compendium directed at resolving situations of default in business activity. Moreover, although the concern for business recovery is maintained, the emphasis is placed on the need to satisfy the credits of those engaged in business activity, emphasizing that the public interest in enabling insolvent companies must be subject to decision by the creditors themselves.

It should be added that the bulk of the regulation is unquestionably directed at subjects engaged in business activity, with innovative norms being identified concerning natural persons who are not traders.

On the other hand, as is well stated in the discourse supporting the arbitral decision rendered in case No. 517/2016-T, the (correct) hermeneutic exegesis of Article 270, No. 2, of CIRE leads us in the following sense:

"Beginning with the literal element, it is found that the cited provision contains no reference to assets integrating the insolvent mass of natural persons, with the law only referring to acts of sale, exchange or transfer of the company or establishments thereof.

As is quite clear, a natural person who does not engage in any industrial, commercial or agricultural activity cannot be considered either a company or the holder of an establishment integrated in a company.

Therefore, starting from the principle – which is taken as certain – that the legislator knew how to express himself in adequate terms, it cannot be argued, on the basis of analysis of the text of the law, that the IMT exemption is applicable to the alienation of immovable property integrating the insolvent mass of natural persons.

With regard to the rational element, it must not be forgotten that CIRE, as stated in the decision rendered in arbitral case No. 649/2015-T, "although it extended the application of recovery proceedings to natural persons, remains fundamentally as a Code directed at the solution of situations of default in business activity".

The entire legal regime provided for in CIRE was designed around the recovery and maintenance of business activity of companies, as economic agents whose financial soundness and maintenance in the economic life it is important to ensure, and there are no provisions of significance in this code directed at the recovery of natural persons.

As regards the systematic element, it is important to emphasize that, in addition to the exemption provided for in Article 270, No. 2, CIRE establishes other benefits applicable to onerous transfers of immovable property carried out in the context of the insolvency proceeding, such as the Stamp Tax exemption provided for in Article 269, d) and e) and the IMT exemption referred to in Article 270, No. 1.

Any of these provisions only provides, as regards acts of sale, the exemption of the respective tax for acts of sale of elements of the company's assets and not for all and any sales, in particular for the sale of immovable property integrating the insolvent mass of natural persons.

Just as with the Stamp Tax exemption, the IMT exemption will not be applicable when acts of sale of immovable property are at issue that do not constitute an integral part of the company or its establishments.

If there were any doubt about the most correct interpretation of Article 270, No. 2, of CIRE, this would be dispelled by analysis of the historical element.

Indeed, it is important to note that the Code on Special Procedures for Business Recovery and Bankruptcy, a diploma that preceded CIRE and which favored the recourse to business recovery procedures rather than bankruptcy, provided in its Article 121 the SISA exemption for transfers of immovable property integrated in any of the business recovery procedures that result from "the separation of commercial or industrial establishments, the sale, exchange or transfer of elements of the company assets".

This provision did not provide for the SISA exemption for the transfer of immovable property integrated in the insolvent mass of natural persons, regarding which it would never be possible to have an IMT exemption under this provision, as such transfers would not fit within any business recovery procedure.

For its part, Law No. 39/2003, of August 22, which authorized the Government to approve CIRE, repealing the Code on Special Procedures for Business Recovery and Bankruptcy, as regards tax benefits, authorized the Government to exempt from SISA transfers of immovable property integrated in any insolvency plan or payment plan or carried out within the liquidation of the insolvent mass, which result from the "sale, exchange or transfer of the company, establishments or elements of its assets" – see Article 9, No. 3, c).

Once again, and although CIRE henceforth had a title exclusively dedicated to the insolvency of natural persons, the SISA or IMT exemption was not provided for the transfer of immovable property integrated in the insolvent mass of natural persons.

There is no doubt, then, that the legislator's intent was to exempt from taxation in the form of IMT the acts of sale of immovable property integrating the insolvent mass of companies and not all and any acts of sale of immovable property, in particular the sale of immovable property integrating the insolvent mass of natural persons (…).

On this issue (…), already diverse jurisprudence, including arbitral jurisprudence, has ruled to the effect that the identified provision "does not encompass the sale of urban real property intended for housing, which belongs to a natural person, it not being sufficient to benefit from that exemption the fact that these are acts of sale practiced within the liquidation of the insolvent mass, regardless of whether the same belongs to a natural or legal person (business entity)", not seeing this tribunal any reasons to turn back from the line established in this jurisprudence, which we support.

Likewise, and although within the scope of the Stamp Tax exemption provided for in Article 269 of CIRE but entirely applicable to the exemption provided for in Article 270, No. 2 of the same code, also diverse jurisprudence, with the very same grounds, has ruled to the effect that this exemption does not apply to acts relating to assets integrating the insolvent mass of natural persons.

This is, in our view, the best interpretation of the command of Article 270, No. 2, of CIRE, not seeing in such interpretation, (…), any unconstitutionality or any violation of principles of law."

1. The Claimant argues that the norm of Article 270, No. 2, of CIRE, interpreted in the exact terms stated above, that is, in the sense of not "encompassing alienations of property in the context of insolvency of natural persons, whether or not engaged in business or holding companies" or, put another way, in the sense of not being applicable "regardless of whether it is the property of a natural or legal person, a company asset or a personal asset", is unconstitutional for violation of the principles of equality, namely in its aspect of prohibition of arbitrariness, protection of legitimate expectations and legal certainty. The Claimant does not specify how each of the invoked constitutional principles is violated, limiting himself to their simple and conclusive statement; however, we will not fail to pronounce ourselves on this matter.

Beginning with the principle of equality, Sérgio Vasques states (Manual of Tax Law, 2nd Edition, Coimbra, Almedina, 2008, pp. 289 and 290) that "equality represents the most important principle of our Constitutional Tax Law", and that "the principle of tax equality can be summarized in the formula according to which one should 'treat equally what is equal and treat differently what is different'", this being a formula that breaks down into two essential elements: (a) the equality or difference of the realities to be treated and; (b) the equality or difference of the treatment accorded them. The second element, that of equality of treatment, has merely descriptive content and is easier to implement, and it can be said that there is equality of treatment when two situations are subject to the same legal provision. The first element, that of equality of situations, already has normative content and proves always difficult to implement, because the relationship of equality between two situations requires a comparative judgment and the choice of a relevant distinctive criterion for this purpose. (…)

All this makes clear that the central problem to the principle of tax equality lies in the choice and justification of the distinctive criterion or tertium comparationis that should serve as the basis for the comparison of the persons or situations to be treated by law."

However, as Jorge Reis Novais emphasizes (Structural Principles of the Rule of Law, Coimbra, Almedina, 2019, p. 77), "the equality clause does not guarantee to each individual (…) the same treatment or benefit that is granted to others, but only guarantees him that in the process of formation of political will and in the granting of benefits or imposition of sacrifices by the State he should be treated with the equal consideration and respect that are owed to all others. That is, the principle of equality does not guarantee him the same treatment, that is not the ultimate normative meaning of the constitutional command, but rather ensures him to be treated as equal and, in that sense, with justice".

In this perspective, "equality is identified with a principle of prohibition of arbitrariness" (Jorge Reis Novais, op. cit., pp. 79 and 80); according to "the doctrine of the prohibition of arbitrariness, it is legitimate for the tax legislator to choose the distinctive criteria he deems most convenient in the treatment of taxpayers, only being forbidden the use of the criterion manifestly irrational, that is, for which no evident objective foundation is found. Viewed in this way, the principle of tax equality is conceived as a mere negative limit to the freedom of the legislator to shape the law, forbidding him the distinctive criterion that radically denies justice without, for that reason, imposing upon him any just criterion" (Sérgio Vasques, op. cit., p. 291).

In this same sense has the Constitutional Court repeatedly ruled, stating that the principle of equality, as a limit on legislative discretion, does not require equal treatment of all situations, but rather implies that those who find themselves in equal situations be treated equally and those who find themselves in unequal situations be treated unequally, in proportion to the difference, so as not to create discriminations that are arbitrary and unreasonable, because lacking sufficient material foundation; an example of this is, among others, judgment No. 695/2014, of 15.10.2014, in which it is stated that "the principle of tax equality can be concretized through diverse aspects: a first, is in the generality of the tax law, in its application to all without exception; a second, in the uniformity of the tax law, in treating equally those taxpayers who find themselves in equal situations and differently those who find themselves in different situations, in proportion to the difference, to be assessed by taxpaying capacity; a last, is in the prohibition of arbitrariness, in preventing the introduction of discriminations among taxpayers that are devoid of rational foundation".

Thus, the principle of equality does not prohibit the establishment of distinctions, but rather arbitrary distinctions, lacking objective and rational justification, and to inquire "into the existence of a particularism sufficiently distinct to justify an inequality of legal regime, and to decide on the circumstances and factors to be considered relevant in that inquiry, is a task that primarily falls to the legislator, who has the primacy in implementing constitutional principles and the corresponding freedom of conformation. For this reason, the principle of equality presents itself fundamentally to legal operators, in terms of control of constitutionality, as a negative principle (…) – as a prohibition of arbitrariness" (judgment No. 711/2006, of 29.12.2006, of the Constitutional Court).

Returning to the case at hand and given that there is ample legislative freedom of conformation in the case of tax benefits (see, in this sense, judgment No. 1057/96, of 16.10.1996, of the Constitutional Court), we hold that the norm of Article 270, No. 2, of CIRE, interpreted in the sense stated above, is legitimated by the purpose the legislator intended to achieve with the granting of such exemption, which was embodied in "promoting and supporting the rapid sale of assets that integrate the insolvent mass for obvious reasons of interest to creditors, but also of public interest in restoring the normal functioning of the business world in which each insolvency proceeding appears as a disruptive element" (see STA judgment of 17.12.2014, rendered in case No. 01085/13); for this reason, there is no reason to understand that the legislator, in excluding from the scope of application of the IMT exemption in question the alienations of immovable property integrating the insolvent mass of natural persons, in the terms stated above, is treating unequally two situations that are essentially equal, thus violating the principle of equality, namely in the aspect of prohibition of arbitrariness.

Regarding the principles of protection of legitimate expectations and legal certainty, Jorge Reis Novais (op. cit., p. 149) begins by explaining that "the protection of the confidence of private individuals encompasses all State action, including the legitimate action of the legislator in the general and abstract pursuit of the public interest" and, "considering now the affinities with the principle of legal certainty, not only the violation of expectations constitutes a direct affront to certainty, but also, when the protection of confidence appeals to the continuity and stability of the legal regimes in force, the principle equally evokes the purpose of legal certainty proper to the Rule of Law.

Thus, even if the Constitution does not contain express references to legal certainty and protection of confidence, these are essential principles of the material Constitution of the Rule of Law, as indispensable factors for structuring social life in legal peace and, from the perspective of private individuals, such principles are a condition of the predictability of State action as a prerequisite of individual autonomy in the shaping of one's own life plans."

The same constitutionalist further states that this "protection of the confidence of private individuals regarding the continuity of the guarantees and limits that the legal order establishes, as well as the practice of acts in conformity with the precedents established by State activity in the past is (…) the subjective side of the broader guarantee of legal certainty inherent in the Rule of Law.

In its objective dimension, the principle of legal certainty applies to all areas of State action, breaking down into requirements especially directed to the Administration (note the relevance of the so-called res judicata doctrine), to the judiciary (the stability assured to final judgments or the importance of decisions standardizing jurisprudence), but also to the democratic legislator" (op. cit., p. 150).

In this vein, as Sérgio Vasques emphasizes (op. cit., p. 340), "if this principle of legal certainty, rooted in Article 2 of the Constitution of the Republic, is directed to all areas of legislative intervention and administrative practice, it is evident that in the tax field it assumes redoubled importance, not least because taxes represent a coercive ablation of property. (…) The predictability and constancy of the law, which will always be advisable in any area of the legal order, become of paramount importance when we are dealing with taxes, contributions and duties."

In this context, it is important to add that the "typical framework for intervention of the principle of protection of legitimate expectations is characterized by the confluence of the following two factors which, however, (…), can assume in the concrete case presence, modalities and intensity substantially differentiated.

There is, first, the necessary existence of a basis that has generated the confidence of private individuals, that is, a given, a fact or an act of the responsibility of or under the control of public authorities with objective potential to generate in the interested private individual a firm expectation that in the future certain legal consequences will occur. This confidence usually translates into an expectation as to the simple continuation in force of the legal framework that imparts stability to an already constituted or to be constituted legal position, but may also relate to the future practice of an act or the subsistence of an omission by public authorities from which advantages flow to the private individual.

Second, this confidence must have been frustrated by the commissive or omissive action of public authorities, unexpected and running counter to the expectations previously generated and which causes a sensible sacrifice or prejudice in the sphere of the private individual." (Jorge Reis Novais, op. cit., p. 152).

The Constitutional Court has ruled multiple times on the constitutional principles in question, an example of which is judgment No. 862/2013, of 07.01.2014, in which the following was stated:

"The protection of legitimate expectations is a norm of a principled nature that flows from one of the material elements justifying and immanent in the Rule of Law: legal certainty deducible from Article 2 of the CRP [Portuguese Constitution]. While associated and mediated by legal certainty, the principle of protection of legitimate expectations concerns the subjective dimension of certainty – that of protection of the confidence of private individuals in the stability, continuity, permanence and regularity of the situations and legal relationships in force.

Sustained in the principle of the "democratic rule of law", its content has been constructed by jurisprudence, in assessments and weighings that take into account the circumstances of the concrete case. When applied to the legislative power, the Constitutional Court has densified the principle through a formula which, since the already-cited Judgment No. 287/90, has been applied in successive jurisprudence.

Among abundant jurisprudence, the said formula is made explicit in Judgment No. 128/2009, in the following terms:

"In accordance with this jurisprudence on the principle of legal certainty in the material aspect of confidence, for the latter to be protected it is necessary to meet two essential requirements:

a) the affecting of expectations, in an unfavorable sense, will be inadmissible, when it constitutes a change of the legal order with which, reasonably, the addressees of its norms cannot reckon; and also

b) when it is not dictated by the necessity to safeguard rights or interests constitutionally protected that should be considered prevalent (one should resort here to the principle of proportionality, explicitly enshrined as regards rights, freedoms and guarantees, in No. 2 of Article 18 of the Constitution).

The two criteria stated (and which are also expressed in other jurisprudence of the Court) are, in fact, reducible to four different requirements or "tests". For there to be constitutional legal protection of "confidence" it is necessary, first, that the State (especially the legislator) has undertaken behavior capable of generating in private individuals "expectations" of continuity; then, such expectations must be legitimate, justified and based on good reasons; thirdly, private individuals must have made life plans taking into account the prospect of continuity of the "behavior" of the State; finally, it is still necessary that there be no reasons of public interest that justify, in a balancing, the non-continuity of the behavior that generated the situation of expectation.

This principle thus postulates an idea of protection of the confidence of citizens and the community in the stability of the legal order and the constancy of State action. However, the confidence here is not just any confidence: if it does not meet the four requirements that were outlined above, the Constitution does not afford it protection".

The methodology to be followed in applying this criterion always implies a balancing of conflicting interests: on the one hand, the expectations of private individuals in the continuity of the legislative framework in force; on the other, the reasons of public interest that justify the non-continuity of legislative solutions. Private individuals have an interest in the stability of the legal order and of constituted legal situations, in order to organize their life plans and to avoid as far as possible the frustration of their founded expectations; but counterposed to this interest is the public interest in the transformation of the legal order and its adaptation to new ideas of social ordering. If the two groups of interests and values are recognized in the Constitution in conditions of equality, the necessary exercise of confrontation and balancing must be imposed on them to conclude, on the basis of the variable weight of each, which one should prevail.

The method of the judgment of evaluation and balancing of the interests related to the protection of legitimate expectations is the same as that which follows when one judges the proportionality or substantive adequacy of a measure restricting rights. Even if one concludes for the urgency of the public interest in the change and adaptation of the legislative framework in force, it is still necessary to assess, in the light of material and axiological parameters, whether the measure of sacrifice is "inadmissible, arbitrary and excessively burdensome" (see Judgment No. 287/90)."

In this framework, reverting to the case at hand and given what has been said both as to the evolution of the legal regime leading to the current legal solution established in Article 270, No. 2, of CIRE – whose wording on the date of the facts and currently in force results from the amendment introduced by Law No. 66-B/2012, of December 31, that is, much earlier than the institution of the insolvency proceeding referenced in these proceedings [23.11.2015 (see established fact a)] – and as to the (correct) hermeneutic exegesis of this same legal norm, we do not see that this, when interpreted in the sense stated above, suffers from unconstitutionality due to violation of the principles of protection of legitimate expectations and legal certainty.

§3. THE CONCRETE CASE: SUBSUMPTION TO ARTICLE 270, NO. 2, OF CIRE

1. In the case sub judice the issue is whether the sale of an immovable property, which does not belong to a company nor was intended for the exercise of any business activity, but which was owned by a natural person and intended for residential purposes, with no report of its dedication to any business activity – see established facts b), c), g), h) and i) –, can benefit from the IMT exemption established in Article 270, No. 2, of CIRE, by reason of having been carried out in an insolvency proceeding.

The answer, given what has been stated above, can only be negative, as the acquisition of the mentioned property by the Claimant, despite having been carried out in the context of an insolvency proceeding, is not manifestly subsumable to the provision of Article 270, No. 2, of CIRE.

1. Therefore, the disputed tax acts – IMT assessment No. ..., dated 02.01.2018, to which corresponds payment order No. ..., in the amount of € 39,000.00 and decision rejecting the administrative appeal No. ...2018... – do not suffer from the pointed vices invalidating them, and should therefore be fully upheld.

§4. REIMBURSEMENT OF AMOUNT OF TAX PAID, PLUS DEFAULT INTEREST

1. Since the disputed IMT assessment is to be upheld, for the reasons set forth above, the requests for reimbursement of the amount of tax paid and payment of default interest on that same amount must necessarily fail, as they lack any foundation either of fact or of law.

1. Finally, it is important to note that the issues of relevance submitted to the consideration of this Arbitral Tribunal have been addressed and considered, those whose decision was prejudiced by the solution given to others have not been.

IV. DECISION

In light of the foregoing, this Arbitral Tribunal decides:

a) To find the request for arbitral pronouncement entirely without merit and, consequently, to dismiss the Tax and Customs Authority from all claims;

b) To condemn the Claimant to payment of the costs of the present proceedings.

VALUE OF THE PROCEEDINGS

In accordance with Articles 306, No. 2, of the CPC [Code of Civil Procedure] ex vi Article 29, No. 1, paragraph e), of RJAT, 97-A, No. 1, paragraph a), of the CPPT [Code of Administrative Tax Procedure] ex vi Article 29, No. 1, paragraph a), of RJAT and 3, No. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is set at € 39,000.00 (thirty-nine thousand euros).

COSTS

In accordance with Articles 12, No. 2, and 22, No. 4, of RJAT and Article 4, No. 4, and Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at € 1,836.00 (one thousand eight hundred and thirty-six euros), to be borne by the Claimant.

Notify.

Lisbon, September 19, 2019.

The Arbitrator,

(Ricardo Rodrigues Pereira)