IMT Exemption Under Article 270(2) CIRE for Property Acquired in Insolvency Proceedings – CAAD 283/2016-T

ARBITRAL DECISION

The arbitrators Councillor José Baeta de Queiroz (arbitrator-president), Professor Doctor Nuno Cunha Rodrigues and Dr. João Taborda da Gama, appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, hereby agree as follows:

A…, S.A., and B…, S.A., with the Tax Identification Numbers … and …, respectively, both headquartered in Lisbon, have requested the constitution of an arbitral tribunal, invoking articles 10 of the Legal Regime for Tax Arbitration (RJAT) and 102 no. 1 paragraph a) of the Code of Tax Procedure and Process (CPPT), with a view to the annulment of the assessments of Municipal Tax on Onerous Property Transfers (IMT) with …, … (C…), … (D…), …, …, …, …, … (E…), … (F…), attributed to the first Claimant, and …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, attributed to the second Claimant.

As they did not appoint an arbitrator, the undersigned were appointed as such by the Deontological Council of the CAAD; after having accepted the appointment, and without the parties raising any objection, the arbitral tribunal was constituted on 4 August 2016.

Duly notified, the Director-General of Tax and Customs Administration responded, defending herself by way of exception and by impugnation.

The meeting referred to in article 18 of the RJAT having been dispensed with, both parties submitted written arguments, after which the tribunal declared that the decision would be delivered by 11 November 2016.

I. In response to the Claimant's request, the Tax Authority (AT) submitted its defence as follows:

A) BY WAY OF EXCEPTION:

All exceptions raised in the present proceedings were considered in other proceedings of identical nature, such as case no. 599/2015-T and case no. 693/2015-T, which we follow closely in the present decision as it was presided over by the same Arbitrator-Judge.

A.1.) On the insufficiency of the request for arbitral pronouncement due to contradiction between the prayer for relief and the cause of action

The Claimant acquired real property in an insolvency proceeding and requested exemption from Municipal Tax on Onerous Property Transfers (IMT) under the provisions of article 270, no. 2, of the Insolvency and Corporate Recovery Code (CIRE), upon submission of the Model 1 IMT Declarations at the origin of the disputed assessments.

Subsidiarily, the Claimant requested the application of the exemption provided for in article 7 of the Code of Municipal Tax on Onerous Property Transfers (CIMT), in accordance with article 10, no. 8, paragraph a) of the CIMT.

The AT understood that the first requested exemption was not applicable, but that the second was applicable, and therefore issued the disputed assessments, with a nil value, invoking as grounds the exemption provided for in article 7 of the CIMT, relating to the acquisition of property for resale.

The AT contends that there is an irreconcilable contradiction between the prayer for relief and the cause of action, because, in summary,

– the assessments now placed in issue, in addition to corresponding to what was requested (albeit subsidiarily) by the Claimant herself (cf. Doc. 2 attached to the petition), were issued in accordance with what the law establishes (cf. article 7 of the CIMT);

– the Claimant seeks the annulment of those assessments, on the grounds that they are vitiated by the defect of violation of law;

– the prayer for relief formulated by the Claimant relates to the annulment of (alleged) assessments for violation of article 270/2 of the CIRE;

– there is in the case at hand a lack of logical-normative correspondence between the concrete fact alleged by the Claimant and the judicial remedy requested for it.

Article 98, no. 1, paragraph a) of the CPPT, applicable to tax arbitral proceedings by virtue of the provisions of article 29, no. 1, paragraph c) of the Legal Regime for Arbitration in Tax Matters (RJAT), considers the insufficiency of the initial petition to be an incurable nullity.

In accordance with the provisions of article 186, no. 2 of the Code of Civil Procedure (CPC), applicable to tax arbitral proceedings by virtue of the provisions of article 29, no. 1, paragraph e) of the RJAT, one of the situations of insufficiency of the initial petition is that the prayer for relief is in contradiction with the cause of action.

The cause of action, in tax disputes concerning the annulment of assessment acts, is constituted by the defects or illegalities which the taxpayer ascribes to them, as appears from articles 99 and 124 of the CPPT.

In the case at hand, the Claimant seeks the annulment of the disputed assessments on grounds of violation of law, on the understanding that the exemption provided for in article 270, no. 2 of the CIRE should have been applied and not that provided for in article 7 of the CIMT.

Accordingly, there is no contradiction between the prayer for relief and the cause of action, since, if it is a situation in which the exemption provided for in article 270 of the CIRE should have been applied, the assessments will be vitiated by illegality in not having applied it, as the Claimant contended in the first instance,

And that illegality will be grounds for annulment, in accordance with the aforesaid articles 99 and 124 of the CPPT.

For this reason, no contradiction can be perceived between the cause of action (illegality of the assessments in not having applied the exemption provided for in article 270 of the CIRE) and the prayer for relief (annulment of the assessments on the grounds of that alleged illegality).

In this context of hypothetical contradiction between cause of action and prayer for relief, it is irrelevant that the Claimant has requested from the AT, subsidiarily, the application of the exemption in article 7 of the CIMT, which was applied, since the procedural obstacle which the granting of the subsidiary claim could raise would be at the level of lack of standing to sue, which is an unnamed procedural requirement.

However, there is no lack of standing to sue on the part of the Claimant, since the definitive IMT exemption not subordinated to the resolutive condition provided for in article 234, no. 2 of the CIRE is legally more advantageous for the Claimant than the conditional exemption provided for in article 7 of the CIMT.

Thus, the exception of insufficiency of the initial petition raised by the AT is without merit.

A.2.) On the lack of subject matter of the request for arbitral pronouncement

The AT contends, in summary, that

– the Claimant is reacting against 68 IMT assessments which, in addition to corresponding to what was requested (albeit subsidiarily) by the Claimant herself, were issued in accordance with what the law establishes (cf. article 7 of the CIMT);

– it is legally only possible to annul what exists and what is contrary to law;

– there do not exist, either within or outside this arbitral proceeding, any 68 assessments relating to article 270, no. 2 of the CIRE, but only and solely 68 assessments lawfully issued under article 7 of the CIMT;

– it is legally impossible to annul 68 IMT Assessments issued under article 270, no. 2 of the CIRE, insofar as they quite simply do not exist; and 68 IMT Assessments issued under article 7 of the CIMT, insofar as they are entirely in conformity with tax law and requested at the finance service, albeit subsidiarily, by the Claimant;

– the competence of arbitral tribunals can never be directed, as the Claimant is now essentially seeking, towards the consideration of any future IMT assessments issued under article 270, no. 2 of the CIRE;

– the Claimant cannot here seek that the arbitral tribunal endorse the legality of assessments that contend with article 270, no. 2 of the CIRE, when such assessments were not only not identified in the request for arbitral pronouncement, but also – and more importantly – such assessments quite simply do not exist.

It is true that the assessments impugned are not those that have applied article 270, no. 2 of the CIRE, but rather assessments that applied article 7 of the CIMT.

However, what the Claimant contends is that the assessments should have applied the exemption in article 270, no. 2 of the CIRE and not that in article 7 of the CIMT, contending that these should be annulled.

The illegality of an assessment act is not necessarily embodied through the application of an illegal rule, and may arise from an omission, in not having applied a rule that should have been applied.

In fact, article 55 of the General Tax Law (LGT), in harmony with article 266 of the Constitution of the Portuguese Republic establishes that "the tax administration exercises its functions in pursuit of the public interest, in accordance with the principles of legality, equality, proportionality, justice, impartiality and celerity, in respect of the guarantees of taxpayers and other tax-obligated parties".

Implementing the "principle of legality", article 3, no. 1 of the Code of Administrative Procedure [subsidiarily applicable, by virtue of article 2, paragraph c) of the LGT] provides that "organs of Public Administration must act in obedience to law and to legal principles, within the limits of the powers conferred upon them and in accordance with their respective purposes".

In light of this positive formulation of the principle of legality, the implementation of the legislative aims regarding tax benefits is a mandatory purpose of the action of the Tax Administration, so that, if a situation exists in which two tax exemptions are potentially applicable, there will be illegality in refusing the application of either of them, since the powers that are granted to the Tax Administration to effect assessment acts are connected with the achievement of the aims envisaged legislatively in establishing them.

Thus, in the case at hand, having the Claimant requested, in the first instance, that the tax benefit provided for in article 270, no. 2 of the CIRE be granted, if a situation exists in which the requested exemption should be applied, there will be illegality in the assessment acts that did not apply it, regardless of whether another exemption, whose application was only subsidiarily requested, is also applicable.

Accordingly, a situation of lack of subject matter of the request for arbitral pronouncement does not exist, since the Claimant explicitly states that she seeks "the annulment of the Disputed Assessments, for violation of law, with all legal consequences".

Given that those assessments exist which did not apply the exemption requested in the first instance, they are the subject matter of the request for arbitral pronouncement, and therefore there is no situation of lack of subject matter thereof.

A.3.) On the impropriety of the means employed and the incompetence of the Arbitral Tribunal ratione materiae

The questions of the material incompetence of this Arbitral Tribunal and the impropriety of the means employed have common grounds and will therefore be considered together.

The AT contends that, seeking the Claimant that the Collective Arbitral Tribunal deliver a decision to the effect of recognising the IMT exemption provided for in article 270, no. 2 of the CIRE, it will be the special administrative action (within the competence of state courts) that constitutes the appropriate procedural means for the consideration of the matter – article 97, no. 2 of the Code of Tax Procedure and Process (CPPT) – and not the request for arbitral pronouncement, which it considers improper. Accordingly, the Collective Arbitral Tribunal, materially incompetent, should abstain from considering the request since the consideration of such matter goes beyond the competences that are reserved to it by law (cf. article 2, no. 1 of the RJAT).

The AT further raises the incompetence of the Collective Arbitral Tribunal to consider the recognition of a tax exemption related to the transfer of real property assets integrated in an insolvency proceeding, under article 270, no. 2 of the CIRE.

The AT further contends that only the judge holding the insolvency proceeding is in a position to verify the legal requirements demanded for the application of the exemption in article 270, no. 2 of the CIRE, in full harmony with the operation of the similar exemption provided for in article 8 of the CIMT and, consequently, with the verification of the legal requirements inherent in that rule, verification which is exclusively made by the judge holding the judicial proceeding (executive, bankruptcy or insolvency) by way of a judicial order or a sentence homologating a settlement. It will be, thereafter, one of these two documents that will serve as the basis for the recognition of the exemption in question, upon submission of the Model 1 Declaration, by the tax subject, at the competent finance service. The Collective Arbitral Tribunal not being the judicial body in which the insolvency proceeding took place, does not even have the minimum elements to assess the verification of the legal requirements demanded in article 270, no. 2 of the CIRE, being clearly outside its sphere, in the AT's understanding, the consideration of any questions relating to the recognition of a tax exemption related to the transfer of real property assets integrated in an insolvency proceeding.

Following closely the understanding of the CAAD in Cases nos. 123/2015-T; 599/2015-T and 693/2015-T, which dealt with questions of the same nature, we do not find the AT's position on these matters to be well-founded.

In fact, the request presented by the Claimant relates to the declaration of illegality of an assessment act for tax, in the case of IMT, for violation of the provisions of no. 2 of article 270 of the CIRE.

Now, article 2, no. 1 of the RJAT establishes, as regards the competence of the arbitral tribunals operating in the CAAD,

"1 - The competence of arbitral tribunals comprises the consideration of the following claims:

a) The declaration of illegality of assessment acts for taxes, self-assessments, withholding at source and payments on account;

b) The declaration of illegality of acts of determination of taxable matter when it does not give rise to the assessment of any tax, acts of determination of collectible matter and acts of determination of patrimonial values;"

This competence is limited by the binding of the AT which was defined, in accordance with article 4, no. 1 of the RJAT, by Regulation no. 112-A/2011, of 12 March, which establishes the following:

"Article 2

Subject matter of binding

The services and bodies referred to in the previous article bind themselves to the jurisdiction of arbitral tribunals operating in the CAAD which have for their subject matter the consideration of claims relating to taxes whose administration is entrusted to them referred to in no. 1 of article 2 of Decree-Law no. 10/2011, of 20 January, with the exception of the following:

a) Claims relating to the declaration of illegality of self-assessment acts, withholding at source and payments on account which have not been preceded by recourse to the administrative route in accordance with articles 131 to 133 of the Code of Tax Procedure and Process;

b) Claims relating to acts of determination of collectible matter and acts of determination of taxable matter, both by indirect methods, including the decision of the revision procedure;

c) Claims relating to customs duties on imports and other indirect taxes on goods subject to import duties; and

d) Claims relating to tariff classification, origin and customs value of goods and tariff quotas, or whose resolution depends on laboratory analysis or action to be taken by another Member State within the scope of administrative cooperation in customs matters."

Restricting the arbitral proceeding to assessment acts for taxes, (…) including administrative acts which involve the consideration of the legality of assessment acts, it is understood that the request put forward by the Claimant for the declaration of illegality of the IMT assessment act, based on the violation of article 270, no. 2 of the CIRE, is susceptible to consideration by the Arbitral Tribunal.

As Jorge Lopes de Sousa teaches (cf. Commentary on the Legal Regime for Tax Arbitration, in Guide to Tax Arbitration, Publisher Almedina, Coimbra, 2013, p. 105), as to the scope of the competence of tax arbitral tribunals, "the competence of these arbitral tribunals is restricted to activity connected with assessment acts for taxes, being outside its competence the consideration of the legality of administrative acts of total or partial rejection or revocation of exemptions or other tax benefits, when dependent on recognition by the Tax Administration, as well as other administrative acts relating to tax matters which do not involve consideration of the legality of the assessment act, to which reference is made in paragraph p) of no. 1 of article 97 of the CPPT, as well as acts of increase in the tax levy, seizure and adoption of precautionary measures by the Tax Administration, to which reference is made in the same article 97, no. 1, in its paragraph e) and articles 143 and 144 of the same Code.

In that sense, and following here the arbitral decision delivered in Case 599/2015-T, the competence of the CAAD tribunals, with the exception of what relates to customs matters, "is defined only having regard to the type of acts which are the subject matter of the impugnation, there being, in particular, no prohibition on the consideration of matters relating to tax exemptions or any other legal issues relating to the acts of the types referred to in article 2 of the RJAT. (…)

In the case at hand, an IMT assessment act is impugned, which falls under paragraph a) of no. 1 of article 2 of the RJAT, and the consideration of which is not excluded by any of the rules of the aforesaid Regulation.

Accordingly, in the arbitral proceeding any illegality may, as a rule, be imputed to assessment acts, as follows from article 99 of the CPPT, subsidiarily applicable.

(…) Being the assessment act injurious to the interests of the Claimant, in not applying a more favourable exemption, and being that the only act practiced by the AT in the sequence of the Model 1 IMT Declaration presented by the Claimant, its contentiousness must be assured on the grounds of any illegality, as follows from the principle of effective judicial protection, enshrined in articles 20, no. 1, and 268, no. 4 of the CRP.

On the other hand, the question of whether the assessment act is legal in not recognizing an exemption, relates to the legality of the assessment considered in tax courts in proceedings of judicial impugnation, as follows from paragraph a) of no. 1 of article 97 of the CPPT."

In fact, in the case sub judice, we are dealing with an exemption of automatic recognition, under article 10, no. 8, paragraph d) of the CIMT, so it is at the appropriate time itself to decide whether the assessment act should be practiced that the question of verification by the AT of the occurrence or non-occurrence of the conditions of the tax benefit is raised.

And it is the consideration of the legality of that assessment act that the Claimant seeks.

Also, the thesis defended by the AT that only the judicial body in which the insolvency proceeding took place would have competence to verify the legal requirements demanded in article 270, no. 2 of the CIRE, has no legal foundation.

Citing the same judgment:

"In truth, there is no special rule of insolvency law that attributes competence to the judicial courts to recognize tax exemptions and the general regime of tax benefits clearly contradicts that hypothesis.

In fact, the Tax Benefits Statute (EBF) applies to all tax benefits (its article 1). From article 5 of the EBF it follows that tax benefits, when automatic, are not the subject matter of any autonomous act of recognition, so it is at the appropriate time itself to decide whether an assessment act should be practiced that the question of verification by the Tax and Customs Authority of the occurrence or non-occurrence of the conditions of the tax benefit is raised.

In the specific case of the exemption provided for in article 270 of the CIRE, there is a tax benefit for which only the need for prior recognition by the Tax and Customs Authority is envisaged, in article 16, no. 2 of the CIRE, when applied within the scope of a business restructuring and revitalization proceeding, provided for in Decree-Law no. 178/2012, of 3 August. In other cases covered by article 270 of the CIRE, not expressly providing for the need for prior recognition (neither in the CIRE, nor in the EBF, nor in article 10 of the CIMT), there is an exemption of automatic recognition, with the duty to verify and declare it resting with the finance service where the declaration provided for in article 19, no. 1 of the CIMT is presented, as follows from the provision of paragraph d) of no. 8 of that article 10

On the other hand, being the right to tax benefits a matter of tax law, the possibility of its direct recognition by the Courts is reserved to Tax Courts, through the action for recognition of a right or legitimate interest in tax matters, under articles 212, no. 3 of the CRP, 144, no. 1, of the Law on the Organization of the Judicial System (Law no. 62/2013, of 26 August), 49, no. 1, paragraph c) of the ETAF, 101, paragraph b) of the LGT and 97, no. 1, paragraph h) and 145 of the CPPT, so there is no legal support for asserting the exclusive competence of the Judicial Courts to recognize the exemption in question."

Supporting this understanding, we also consider, for the reasons indicated, that no material incompetence occurs.

Moreover, the STA has repeatedly considered the verification of the conditions of the exemption provided for in article 270, no. 2 of the CIRE, as can be seen from the judgments delivered in cases nos. 1350/2015, 1345/2015, 1085/2015 and 1067/2015, among many others, all of which are appeals brought in proceedings of judicial impugnation, which also contradicts the AT's position in defending the "special administrative action or other" as a procedural means of reaction to the non-attribution of the IMT exemption under article 270, no. 2 of the CIRE.

The exceptions of impropriety of the procedural means and material incompetence of the Arbitral Tribunal are thus without merit, as regards the main claim.

The Tribunal is materially competent and is duly constituted in accordance with the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented (articles 4 and 10, no. 2 of the RJAT and article 1 of Regulation no. 112-A/2011, of 22 March).

The proceeding is not vitiated by any nullities.

There are no other circumstances that prevent the consideration of the merits of the case.

II. Facts

1. Proven facts

Based on the elements contained in the proceeding and in the administrative proceeding attached to the file, the following facts are deemed to be proven:

The company C…, S.A. (hereinafter C…), holder of collective person identification number …, with headquarters at Street …, no. …, …, parish of …, municipality of Lisbon, was the owner of the fractions designated by the letters AW, CY, DN, DY, EJ, EU and FF of the real property registered in the urban land registry under article….º of the parish of … and of the fractions designated by the letters A, B, C, D, E, F, G, H, I, J, L, M, N, O, P, Q, R, S, T and U of the real property registered in the urban land registry under article….º of the Union of Parishes …, … and …;

The company D…, S.A. (hereinafter D…), holder of collective person identification number …, with headquarters at Street …, no. …, … floor, parish of …, municipality of Lisbon, was the owner of the fractions designated by the letters B, C, D, E, F, G, H, I and J of the real property registered in the urban land registry under article ….º of the parish of …;

The company E…, S.A. (hereinafter E…), holder of collective person identification number …, with headquarters at Street …, no. …, … floor, parish of …, municipality of Lisbon, was the owner of the fractions designated by the letters A, B, C, D, E, F, G, H, I, J, L, M, O, P, Q, R, U, V, X, Z, AE, AF, AL, AO, AP, AQ, AR, AS, BE, BF, BH, BI, BJ, BL, BN, BZ, CA, CB, CC, CD, CE, CF, CH, CI, CJ, CL, CM, CN, CO, CQ, CT, CU, CV, CX, CZ, DC, DD, DE, DF, DG, DH, DM, DN, DO, DP, DQ and DR of the real property registered in the urban land registry under article....º of the parish of …, of the urban real property registered in the urban land registry under article … of the parish of … and of the urban real property registered in the urban land registry under article ….º of the parish of …, municipality and district of Lisbon;

The company F…, S.A. (hereinafter F…), holder of collective person identification number …, with headquarters at Street …, no. …, … floor, parish of …, municipality of Lisbon, was the owner of the fraction designated by the letter A, of the real property registered in the urban land registry under article matricial ...º of the parish of …;

The company G…, S.A. (hereinafter G…), holder of collective person identification number …, with headquarters at Street …, no. …, … floor, parish of …, municipality of Lisbon, was the owner of the fractions designated by the letters A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, V, W, X, Y, Z, AA, AB, AC, AD, AE, AF, AG, AH, AI, AJ, AN, AO, AQ, AS, AT, AU, AW, AX, AY, AZ, BB, BC, BD, BE, BF, BG, BH, BI, BJ, BK , BL, BM, BN, BO, BP, BQ, BR, BS, BT, BU, BV, BW, BX, BY, BZ, CA, CB, CC, CD, CE, CF, CG, CH, CI, CJ, CK, CL, CM, CN, CO, DC, DD, DG, DH, DI, DJ, DK, DL, DM, DN, DO, DP, DQ, DR, DS, DT, DU, DV, DW, DX, DY, DZ, EA, EB, EC, ED, EE, EF, EG, EH, EI, EJ, EK, EL, EM, EN, EO, EP, EQ, ER, ES, ET, EU, EV, EW, EX, EY, EZ, FA, FB, FC, FD, FE, FF, FG, FH, FI, FJ, FK, FL, FM, FN, FO, FP, FQ, FR, FS, FT, FU, FV, FW, FX, FY, FZ, GA, GB, GC, GD, GE, GF, GG, GH, GI, GJ, GK, GL, GM, GN, GO, GP, GQ, GR, GS, GT, GU, GV, GW, GX, GY, GZ, HA, HB, HC, HD, HE, HF, HG, HH, HI, HJ, HK, HL, HM, HN, HO, HP, HQ, 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SA, SB, SC, SD, SE, SF, SG, SH, SI, SJ, SK, SM, SN, SO, SW, SX, SY, SZ, TA, TT, TU, TV, TW, TX, TY, TZ, UA, UB, UC, UD, UE, UF, UG, UH, UI, UJ, UK, UL, UM, UN, UO, UP, UQ, UR, US, UT, UU, UV, UW, UX, UY, UZ, VA, VB, VC, VD, VE, VF, VG, VH, VI, VJ, VK, VL, VM, VN, VO, VP, VQ, VR, VS, VT, VU, VV, VW, VX, VY, VZ, WA, WB, WC, WD, WE, WF, WG, WH, WI, WJ, WK, WL, WM, WN, WO, WP, WQ, WR, WS, WT, WU, WV, WW, WX, WY, WZ, XA, XB, XC, XD, XE, XF, XG, XH, XI, XJ, XK, XL, XM, XN, XO, XP, XQ, XR, XS, XT, XU, XW, XX, XY, XZ, YA, YB, YC, YD, YE, YF, YG, YH, YI, YJ, YK, YM, YN, YP, ZA, ZC, ZD, ZE, ZF, ZG, ZH, ZI, ZJ, ZK, ZL, ZM, ZN, ZO, ZP, ZQ, ZR, ZS, ZT, ZU, ZV, ZW, ZX, ZY, ZZ, AAA, AAB, AAC, AAD, AAE, AAF, AAG, AAH, AAI, AAJ, AAK, AAL, AAM, AAN, AAO, AAP, AAQ, AAR, AAS, AAT, AAU, AAV, AAW, AAX, AAY, AAZ, ABA, ABB, ABC, ABD, ABE, ABF, ABG, ABH, ABI, ABJ, ABK, ABL, ABM, ABN, ABV, ABW, ABX, ACQ, ACW, ACX, AFJ, AGF, AGG, AGH, AGI, AGJ, AGK, AGL, AGM, AGN, AGO, AGP, AGQ, AGR, AGS, AGT, AGU, AGV, AGW, AGX, AGY, AGZ, AHA, AHB, AHC, AHD, AHE, AHF, AHG, AHH, AHI, AHJ, AHK, AHL, AHM, AHN, AHO, AHP, AHQ, AHR, AHS, AHT, AHU, AHV, AHW, AHX, AHY, AHZ, AIA, AIB, AIC, AID, AIE, AIF, AIG, AIH, AII, AIJ, AIK, AIL, AIM, AIN, AIO, AIP, AIQ, AIR, AIS, AIT, AIU, AIV, AIW, AIX, AIY, AIZ, AJA, AJB, AJC, AJD, AJE, AJF, AJG, AJH, AJI, AJJ, AJK, AJL, AJM, AJN, AJO, AJP, AJQ, AJR, AJS, AJT, AJU, AJV, AJW, AJX, AJY, AJZ, AKA, AKB, AKC, AKD, AKE, AKF, AKG, AKH, AKI, AKJ, AKK, AKL, AKM, AKN, AKO, AKP, AKQ, AKR, AKS, AKT, AKU, AKV, AKW, AKX, AKY, AKZ, ALA, ALB, ALC, ALD, ALE, ALF, ALG, ALH, ALI, ALJ, ALK, ALL, ALM, ALN, ALO, ALP, ALQ, ALR, ALS, ALT, ALU, ALV, ALW, ALX, ALY, ALZ, AMA, AMB, AMC, AMD, AME, AMF, AMG, AMH, AMI, AMJ, AMK, AML, AMM, AMN, AMO, AMP, AMQ, AMR, AMS, AMT, AMU, AMV, AMW, AMX, AMY, AMZ, ANA, ANB, ANC, AND, ANE, ANF, ANG, ANH, ANI, ANJ, ANK, ANL, ANM, ANN, ANO, ANP, ANQ, ANR, ANS, ANT, ANU, ANV, ANW, ANX, ANY, ANZ, AOA, AOB, AOC, AOD, AOE, AOF, AOG, AOH, AOI, AOJ, AOK, AOL, AOM, AON, AOO, AOP AOQ, AOR, AOS, AOT, AOU, AOV, AOW, AOX, AOY, AOZ, APA, APB, APC, APD, APE, APF, APG, APH, API, APJ, APK, APL, APM, APN, APO, APP, APQ, APR, APS, APT, APU, APV, APW, APX, APY, APZ, AQA, AQB, AQC, AQD, AQE, AQF, AQG, AQH, AQI, AQJ, AQK, AQL, AQR, AQS, AQT, AQU, AQV, AQW, AQX, AQY, AQZ, ARA, ARB, ARC, ARD, ARE, ARF, ARG, ARH, ARI, ARJ, ARM, ARO, ARP, ARQ, ARR, ARS, ART, ARU, ASB, ASF, ASG, ASH, ASI, ASJ, ASK, ASL, ASM, ASN, ASO, ASP, ASQ, ASR, ASS, AST, ASU, ASV, ASW, ASX, ASY, ASZ, ATA, ATB, ATC, ATD, ATE, ATF, ATG, ATH, ATI, ATJ, ATK, ATL, ATM, ATN, ATO, ATP, ATQ, ATR, ATS, ATT, ATU, ATV, ATW, ATX, ATY, ATZ, AUA, AUB, AUD, AUE, AUF, AUG, AUH, AUI, AUJ, AUK, AUL, AUM, AUN, AUO, AUP, AUQ, AUR, AUS, AUT, AUU, AUV, AUW, AUX, AUY, AUZ, AVA, AVB, AVC, AVD, AVE, AVF, AVG, AVH, AVI, AVJ, AVK, AVL, AVM, AVN, AVO, AVP, AVQ, AVR, AVS, AVT, AVU, AVV, AVW, AVX, AVY, AVZ, AWA, AWB, AWC, AWD, AWE, AWF, AWG, AWH, AWI, AWJ, AWK, AWL, AWM, AWN, AWO, AWP, AWQ, AWR, AWS, AWT, AWU, AWV, AWW, AWX, AWY, AWZ, AXA, AXB, AXC, AXD, AXE, AXF, AXG, AXH, AXI, AXJ, AXK, AXL, AXM, AXN, AXO, AXP, AXQ, AXR, AXS, AXT, AXU, AXV, AXW, AXX, AXY, AXZ, AYA, AYB, AYC, AYD, AYE, AYF, AYG, AYH, AYI, AYJ, AYK, AYL, AYM, AYN, AYO, AYP, AYQ, AYR, AYS, AYT, AYU, AYV, AYW, AYX, AYY, AYZ, AZA, AZB, AZC, AZD, AZE, AZF, AZG, AZH, AZI, AZJ, AZK, AZL, AZM, AZN, AZO, AZP, AZQ, AZR, AZS, AZT, AZU, AZV, AZW, AZX, AZY, AZZ, BAA, BAB, BAC, BAD, BAE, BAF, BAG and BAH of the real property registered in the urban land registry under article ….º, …;

By judgment of 5 June 2015, delivered in case no. …/15…T…, by the Court of … - Central Instance - 1st Commercial Division - Judge 5, the said C… was declared insolvent (document no. 5 attached with the request for arbitral pronouncement);

By judgment of 11 June 2015, delivered in case no. …/15….T…, by the Court of … - Central Instance - 1st Commercial Division - Judge 5, the said D… was declared insolvent (document no. 6 attached with the request for arbitral pronouncement);

By judgment of 1 June 2015, delivered in case no. …/15….T…, by the Court of … - Central Instance - 1st Commercial Division - Judge 4, the said E… was declared insolvent (document no. 7 attached with the request for arbitral pronouncement);

By judgment of 18 May 2015, delivered in case no. …/15….T…, by the Court of … - Central Instance - 1st Commercial Division - Judge 1, the said F… was declared insolvent (document no. 8 attached with the request for arbitral pronouncement);

By judgment of 18 December 2014, delivered in case no. …/14….T…, by the Court of … – Central Instance of Lisbon - 1st Commercial Division – Judge 2, the said G… was declared insolvent (document no. 31 attached with the request for arbitral pronouncement);

As a creditor and beneficiary of mortgages over the real property, the First Claimant claimed its credits against C… in the amount € 12,420,610.91, against D… in the amount of €30,422,326.30, against E… in the amount of €34,715,483.57 and against F… in the amount of €30,325,424.11, in all cases plus accrued interest, within the scope of the insolvency proceedings identified above (documents no. 9, 10, 11 and 12 attached with the request for arbitral pronouncement);

As a creditor of G… and beneficiary of mortgages over the real property, the Second Claimant claimed its credits in the amount of € 40,869,008.26 within the scope of the insolvency proceedings identified above (document no. 32 attached with the request for arbitral pronouncement);

The claims of the Claimants were fully recognised by the Insolvency Administrator and classified as secured (by mortgage over the Real Property) (documents no. 13 and 33 attached with the request for arbitral pronouncement);

Within the scope of the insolvency proceeding of C…, the Court dispensed with the holding of the Creditors' Assembly proceeding directly to the liquidation of the insolvent assets (document no. 5 attached with the request for arbitral pronouncement);

In the insolvency proceeding of D…, E…, F… and G… it was decided in the creditors' assembly to proceed with the liquidation of the insolvent assets (documents no. 14, 15, 16 and 34 attached with the request for arbitral pronouncement);

Within the scope of the liquidations, the sales of the real property indicated in paragraphs a), b), c), d) and e) were announced (document no. 17 attached with the request for arbitral pronouncement);

The First Claimant, as a creditor of the insolvent companies C…, D…, E… and F…, submitted the following acquisition proposals for the Real Property:

Two acquisition proposals for the Real Property held by C…, in the amounts of € 9,800,000 (nine million eight hundred thousand euros) and of € 2,333,700 (two million, three hundred and thirty-three thousand euros and seven hundred euros) (document no. 18 attached with the request for arbitral pronouncement);

One acquisition proposal for the Real Property held by D…, in the amount of € 5,370,000 (five million three hundred and seventy thousand euros) (document no. 19 attached with the request for arbitral pronouncement);

Three acquisition proposals for the Real Property held by E…, in the amounts of € 3,970,000 (three million nine hundred and seventy thousand euros), of € 3,480,000 (three million four hundred and eighty thousand euros) and of € 3,370,000 (three million three hundred and seventy thousand euros) (document no. 20 attached with the request for arbitral pronouncement);

One acquisition proposal for the fraction held by F…, in the amount of € 1,180,000 (one million one hundred and eighty thousand euros) (document no. 21 attached with the request for arbitral pronouncement).

The Second Claimant submitted, as a creditor of company G…, a proposal for acquisition of the Real Property, in the total amount of € 26,000,000.00 through performance in satisfaction of debt (document no. 35 attached with the request for arbitral pronouncement);

All proposals were intended for the partial satisfaction of the mortgage credits referred to above;

Following the said proposals, the Real Property was awarded to the Claimants (documents nos. 21 to 24, and 26 to 29 and 37 attached with the request for arbitral pronouncement);

For the purpose of executing the deeds of acquisition of the Real Property, the Claimants submitted the "Model 1 IMT Declaration" which consists of documents nos. 2 and 3 attached with the request for arbitral pronouncement, which states that:

"(...) the Claimants requested, as their main claim, the application of the IS exemption provided for in article 269, paragraph e) and the IMT exemption provided for in article 270, no. 2, both of the CIRE which are, moreover, exemptions of automatic character in that they do not depend on any act - prior, autonomous and separate - of recognition by the AT or any other public entity for that purpose - cf. Doc. 3 attached.

Having, for that purpose, described and documented all the facts enumerated and detailed above in points 1.2. and 1.3 which would justify the application of the said exemptions – cf. Doc. 3 attached.

Having requested, only subsidiarily and with caution, the application of the IMT exemption provided for in article 7 of the CIMT, given that the Claimants acquired the real property for resale and met the requirements for the application of such exemption subject, in particular, to the condition of resale of the property acquired within 3 years."

The AT recognised only the application of the IS exemption - issuing in consequence the assessment the copy of which consists of documents no. 1 and 4 attached with the request for arbitral pronouncement, in which it determined a total amount of € 0;

With respect to IMT, the AT only accepted applying the exemption relating to the purchase for resale provided for in article 7 of the IMT Code and requested, subsidiarily by the Claimants, only in this context thus making the assessments identified below, in the amount of €0.00, (document no. 1 attached with the request for arbitral pronouncement):

In the case of acquisitions from C…: assessments no. … and …;

In the case of acquisitions from D…: assessments no. …;

In the case of acquisitions from E…: assessments no. …, …, …, …, …;

In the case of acquisitions from F…, assessments no. …; and

In the case of acquisitions from G…: assessments no. …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, … …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, ….

III. Unproven facts

With relevance to the decision of the case, there are no unproven facts.

IV. Reasoning on the facts

The facts were deemed proven on the basis of the documents submitted by the parties and contained in the administrative proceeding, as well as from the positions of the parties, it being noted that no actual disagreement emerges from the positions assumed by Claimants and Respondent regarding the facts, the dispute being confined to matters of law.

The facts were deemed proven on the basis of the documents submitted by the parties and contained in the administrative proceeding, as well as from the positions of the parties, it being noted that no actual disagreement emerges from the positions assumed by Claimant and Respondent regarding the facts, the dispute being confined to matters of law.

V. Legal Issues

1. Question to be answered

It is necessary, in the present proceedings, to consider the legality of the assessment act that did not apply the exemption provided for in article 270 of the CIRE to the acquisition of real property by the Claimant in an insolvency proceeding, which requires investigating whether the said exemption operates only with respect to sales, exchanges or transfer of companies or establishments as universalities of assets, as the Respondent contends, or whether it also operates with respect to sales, exchanges or transfer of real property as elements of its assets, provided they are framed within the scope of an insolvency plan or payment plan, or practised within the scope of the liquidation of the insolvent assets, as the Claimant sustains.

As was mentioned in the opening part of the present decision, questions of precisely identical nature to those in the present proceedings have been previously considered in other cases, such as case no. 599/2015-T and case no. 693/2015-T, which we follow closely in the present decision as it was presided over by the same Arbitrator-Judge.

The legal reasoning adduced in case no. 693/2015-T is accordingly followed.

1. On the IMT exemption relating to acquisitions of real property in insolvency proceedings

On this matter and in a question identical to that in the present proceedings, pronouncements have previously been made, in a peaceful, reiterated and uniform manner, both by the CAAD (cf. Decision of 1 September 2015, delivered in case no. 123/2015-T; decision of 10 February 2016, delivered in case no. 599/2015-T; decision of 9 June 2015, delivered in case no. 95/2015-T; decision of 27 October 2015, delivered in case no. 99/2015-T, all of the CAAD), and by the Supreme Administrative Court, in several decisions (cf., inter alia, the following decisions of the STA: decision of 30 May 2012, delivered in case no. 949/11; decision of 17 December 2014, delivered in case no. 1085/13; decision of 11 November 2015, delivered in case no. 968/13; decision of 18 November 2015, delivered in case no. 575/15; decision of 16 December 2015, delivered in case no. 1345/15; decision of 20 January 2016, delivered in case no. 1350/15).

Highlighted, for its clarity, is the Decision of the STA of 16 December 2015, delivered in case no. 1345/15, which we transcribe:

"The Public Finance Exchequer disagrees with what was decided, arguing that the requirements for fulfilling the conditions for obtaining the benefit of exemption were not met by the acquirer, since it did not acquire the company or its establishment and that the provision of article 270, no. 2 of the CIRE, even by way of an extensive interpretation, does not contemplate the simple sale of elements of the company's assets.

However, the appellant does not provide any reason that would shake our conviction that the sentence appealed from correctly judged in adopting the interpretation of article 270, no. 2 of the CIRE which has been peacefully and repeatedly adopted by this STA since the Decision mentioned in the sentence appealed from – cf. in addition to the decisions already cited in the opinion of the Excellency the Deputy Attorney General attached to this STA transcribed above, the recent Decisions of 11 November 2015, case no. 0968/13 and of 18 November 2015, cases nos. 0575/15 and 1067/15 –, and the fact that the AT has adopted an interpretation of the rule that differs from the jurisprudence of the STA – which may, moreover, have even set forth in recent information …/2014 of the DSIMT and provided to the Bar Association of Notaries (cf. arguments of appeal at pages 67, verso and 68 of the records) -, is no reason for postponing the understanding that has been adopted and which is hereby reaffirmed, since it constitutes what best adjusts the legal text to the meaning and extension of the legislative authorization under which the rule was issued by the Government in a matter reserved to the National Assembly and because this interpretation is what best serves the teleology of no. 2 of article 270 of the CIRE - "to promote and support the swift sale of assets comprising the insolvent assets for obvious reasons of creditor interests, but also of public interest in resuming the normal functioning of the business world in which each insolvency proceeding presents itself as a disruptive element", providing fiscal incentives to those who acquire the real property that comprise the insolvent assets and which will be sold in the liquidation phase – there being no reason, in this light, to distinguish situations in which the company is being sold globally with all its assets and liabilities, from situations in which one or more of the commercial establishments that comprised it are being sold, or in which real property that comprised its assets are being sold (cf. the Decision of the STA of 18 November last, case no. 01067/15)".

The Decision of the STA of 30 May 2012, delivered in case no. 949/11, adds that the AT's interpretation "clashes, however - as correctly observed in the sentence appealed from –, with what the legislator set forth in no. 49 of the preamble of the CIRE regarding tax benefits, where it is stated that: "essentially maintained are the arrangements existing in the CPEREF as to the exemption from stamp duties and tax benefits", and it is true that paragraph c) of no. 2 of article 121 of the CPEREF exempted from the municipal property transfer tax the transfers of real property integrated in any of the business recovery measures that flow, in particular, from the sale, exchange or transfer of elements of the assets of the company. And it clashes, also – as correctly observed by the Public Prosecution in first instance (cf. the opinion at pages 66 to 68 of the records) -, with the meaning and extension of the legislative authorization granted to the Government under which the CIRE was approved, set forth in articles 2 and following of Law no. 39/2003, of 22 August, for in what concerns the exemptions from property transfer tax (now IMT), article 9, no. 3 of that authorization law provided that: "Finally, the Government is authorized to exempt from the municipal property transfer tax the following transfers of real property, integrated in any insolvency plan or payment plan or carried out within the scope of the liquidation of the insolvent assets: c) (…) the sale, exchange or transfer of the company, establishment or elements of its assets (…)".

It is true that it could be argued that, from the perspective of the legislator of the CIRE, the differences as to the scope of the IMT exemption in relation to the one that existed in the CPEREF for the stamp duty were not seen as essential, hence why no particular reference was made to them. For it is, in particular in tax matters, not always the case that the preambles of statutes accurately reflect their content, it being not without precedent that they include mentions that the statutory text contradicts (cf. with respect to stamp duty/IMT the Decision of this Supreme Court of 3 November 2010, case no. 499/10).

And it could also be argued that in the implementation of the legislative authorization for approval of the CIRE, in the matter at issue, the Executive decided to be more parsimonious than the National Assembly in granting the IMT exemption, deciding to exclude that exemption in cases of sale, exchange or transfer of elements of its assets, granting it only in cases of sale, exchange or transfer of the company or its establishment. If thus it was, however, it would not have respected the meaning and extension of the legislative authorization that was granted to it, having legislated on a matter reserved to the National Assembly (cf. no. 2 of article 103 and paragraph i) of no. 1 of article 165 of the Constitution) in disregard of the parliamentary credential that was conferred upon it.

As is known, between two meanings of the law, both with support - at least minimal - in the respective letter, the interpreter must opt for the one that makes it compatible with the constitutional text (interpretation in conformity with the Constitution), to the detriment of the interpretation that the constitutional defect vitiates.

It is fundamentally for this reason that it is understood that the sentence appealed from does not merit censure, since although it is doubtful that the ordinary legislator of the CIRE intended to confer upon the IMT exemption provided for in no. 2 of its article 270 the same scope that the former stamp duty exemption provided in paragraph c) of no. 2 of article 121 of the CPEREF had, the option to limit its meaning was not permitted to it, since in the matter of tax benefits it legislates in a domain reserved to the National Assembly, and it must respect the limits that the latter sets for it, in particular those relating to the meaning and extension of the authorization (cf. no. 2 of article 165 of the Constitution of the Republic)."

In light of the interpretation defended in the STA Decisions identified above, which we support, it is necessary to conclude that the Claimant is correct in asserting the illegality of the IMT assessment act relating to the acquisition of those real properties.

This Tribunal thus understands that the IMT exemption provided for in no. 2 of article 270 of the CIRE applies not only to sales or exchanges of companies or establishments as a universality of assets, but also to sales and exchanges of real property (as elements of its assets), provided that they are framed within the scope of an insolvency plan or payment plan, or practised within the scope of the liquidation of the insolvent assets.

It remains, then, to judge the arbitral claim presented against the IMT assessment relating to the acquisition of real property in an insolvency proceeding to be well-founded, annulling the IMT assessment act in dispute, holding that such acquisition is covered by the exemption rule contained in no. 2 of article 270 of the CIRE.

VI. Operative part

On these grounds, this collective of arbitrators agrees to:

a) Judge unfounded the exceptions of incompetence of the Arbitral Tribunal ratione materiae and impropriety of the procedural means;

b) Judge unfounded the exception of insufficiency of the arbitral claim due to contradiction between the prayer for relief and the cause of action;

c) Judge unfounded the exception of lack of subject matter of the arbitral claim;

d) Judge well-founded the claim for arbitral pronouncement which is the subject matter of this action and, in consequence, annul, on the grounds of violation of article 270, no. 2 of the CIRE, all the disputed assessments:

                            i.            In the case of acquisitions from C…: assessments no. … and …;

                          ii.            In the case of acquisitions from D…: assessments no. …;

                        iii.            In the case of acquisitions from E…: assessments no. …, …, …, …, …;

                        iv.            In the case of acquisitions from F…, assessments no. …; and

                          v.            In the case of acquisitions from G…: assessments no. …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, ….

The value of the case is fixed at € 3,607,740.50 (three million six hundred and seven thousand seven hundred and forty euros and fifty cents), in accordance with the provisions of articles 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings ("RCPAT"), 97-A, no. 1, paragraph a) of the CPPT, and 306, no. 2 of the Code of Civil Procedure.

The amount of costs is fixed at € 45,900.00 (forty-five thousand nine hundred euros) to be borne by the Tax and Customs Authority, in accordance with the provisions of articles 12, no. 2 of the RJAT and 4, no. 4 of the RCPAT.

Notify.

Lisbon, 8 November 2016

The Arbitrator President

(José Baeta de Queiroz)

The Arbitrator Member

(Nuno Cunha Rodrigues)

The Arbitrator Member

(João Taborda da Gama)

(Text produced by computer, in accordance with article 138, no. 5 of the Code of Civil Procedure (CPC), applicable by referral from article 29, no. 1, paragraph e) of the Regime of Tax Arbitration, with blank spaces and reviewed by us. The wording of the present decision is governed by the former spelling.)