Process: 520/2016-T

Date: March 9, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

This CAAD arbitration addresses whether Stamp Tax exemptions for insolvency proceedings apply when the insolvent debtor is an individual rather than a company. A…, S.A. acquired residential property for €110,900 in an insolvency proceeding before the Évora Judicial Court. The Tax Authority initially recognized an exemption under Article 269(e) of the Portuguese Insolvency Code (CIRE), issuing a zero-value payment slip. However, in October 2015, the Authority reversed this position and issued an additional Stamp Tax assessment of €887.20.

The taxpayer challenged this assessment on multiple grounds. First, arguing that Article 269(e) CIRE exempts all property transfers within insolvency proceedings, regardless of whether the insolvent is a company or individual. Second, claiming violation of reasoning requirements under Article 77 LGT and Article 133 CPA. Third, alleging errors in determining the taxable base. Fourth, invoking principles of good faith and legitimate expectations under Article 59 LGT, since the Authority initially recognized the exemption. Finally, asserting that the right to revoke the tax benefit expired under Article 141(1) CAP, as more than one year had passed since initial recognition.

The Tax Authority defended its position by arguing that Article 269(e) CIRE only exempts acts when the insolvent is a company or establishment. Since the property belonged to an individual and was used for housing (not business purposes), the exemption does not apply. The Authority maintained it could assess the tax within the general statute of limitations period, as the legal prerequisites for the exemption were never met.

This case raises critical questions about the scope of insolvency tax exemptions, the limits on revoking initially-granted tax benefits, and the application of legitimate expectations principles when tax authorities reverse positions. The interpretation of Article 269(e) CIRE has significant implications for acquisitions in insolvency proceedings involving individual debtors.

Full Decision

ARBITRATION DECISION

I. REPORT

A…, S.A., NIPC…, with registered office at …, n.º…, in Porto, (hereinafter referred to simply as Claimant), filed, on 26-08-2016, a request for the constitution of a single arbitral tribunal, pursuant to Articles 2º and 10º of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to simply as LRATM), in conjunction with subparagraph a) of Article 99º of the Code of Tax Procedure and Process ("CTPP"), in which the Tax and Customs Authority is Defendant (hereinafter referred to simply as Defendant).

The Claimant requests the declaration of illegality of the additional assessment of Stamp Tax on item 1.1 of the General Table of Stamp Tax (hereinafter GTST), in the amount of € 887.20, and the consequent condemnation of the Defendant to the refund of the tax unduly paid, plus compensatory interest.

The request for the constitution of the arbitral tribunal was accepted by the Honorable President of CAAD on 26-08-2016 and notified to the Tax and Customs Authority on that same date.

Pursuant to the provision of subparagraph a) of Article 6º, no. 2 and subparagraph b) of Article 11º, no. 1 of the LRATM, the Deontological Council appointed the undersigned arbitrator to the single arbitral tribunal, who communicated acceptance of the assignment within the applicable period.

On 03-11-2016 the Parties were duly notified of this appointment, and did not manifest intention to challenge the arbitrator's appointment, in accordance with the combined provisions of Article 11º, no. 1, subparagraphs a) and b) of the LRATM and Articles 6º and 7º of the Deontological Code.

In accordance with the provision of subparagraph c) of Article 11º, no. 1 of the LRATM, the single arbitral tribunal was constituted on 18-11-2016.

Notified to respond, the Defendant presented the competent reply in which it concludes that the Claimant's claim is entirely devoid of merit.

By order of 06-01-2017, the meeting provided for in Article 18º of the LRATM was dispensed with, and the parties were granted a period to present successive written submissions.

II. OBJECT OF THE CLAIM

The Claimant seeks the declaration of illegality of the additional assessment of Stamp Tax ("ST") on item 1.1 of the GTST, in the amount of € 887.20, effected ex officio by the Defendant and notified to the Claimant on 08-10-2015, following the Claimant's acquisition of the real property situated on Rua …, n.º…, civil parish of …, municipality of …, registered in the urban property register of that civil parish under article …

The property in question was acquired in the context of the insolvency proceeding that took place before the 2nd Civil Court of the Judicial Court of Évora, under case no. .../11.0TBEVR, in which the previous owner was declared insolvent, and therefore, in the Claimant's view, the acquisition benefits from the exemption from Stamp Tax provided for in subparagraph e) of Article 269º of the Code on Insolvency and Business Recovery ("CIBR"). This was initially recognized by the Defendant which, upon submission of the declaration Form 1 of the Municipal Tax on Onerous Real Property Transfers ("MTORPT"), noted the said exemption, and the payment slip, dated 13-02-2014, was issued with zero, without any amount of tax due.

Subsequently, in October 2015, the Defendant determined that the said exemption was not applicable and proceeded to assess the Stamp Tax in the amount of € 887.20.

The Claimant considers that the additional assessment made is illegal and should, as a consequence, be annulled, with the following grounds:

a) violation of the provision of subparagraph e) of Article 269º of the CIBR. In the Claimant's view, the exemption provided encompasses "both the transfer of real property effected in conjunction with the company or the establishment of which they are part, and the isolated transfer of real property, separately from the company or establishment of which they form part" (cf. Article 37º of the claim);

b) violation of the duty to provide reasoning provided for in Article 77º of the General Tax Law ("GTL") and Article 133º of the Code of Administrative Procedure ("CAP"), insofar as "the amount claimed has no legal or factual basis" (cf. Article 53º of the claim);

c) error in determining the taxable base, pursuant to Article 99º, no. 1, subparagraph a), and Article 100º of the CTPP, the Claimant alleging that "the quantification of the taxable fact under analysis raises well-founded doubts" (cf. Article 54º of the claim);

d) violation of the principles of good faith and protection of legitimate expectations, pursuant to Article 59º of the GTL, insofar as it is verified "clearly an error of law on the part of the Tax Authority, in that it induced the Claimant into error when it recognized the exemption from ST to be assessed prior to the execution of the public deed" (cf. Article 59º of the claim);

e) expiry of the right to revoke the tax benefit because the assessment now challenged was made more than one year after recognition of the exemption, in violation of the provision of Article 141º, no. 1, of the CAP and Article 58º of the Code of Procedure in Administrative Courts ("CPAC").

Accordingly, the Claimant concludes requesting the annulment of the act of ST assessment, with consequent refund of the tax unduly paid, plus compensatory interest.

+++

In reply, the Defendant contests the Claimant's claim, alleging that:

a) the tax exemption provided for in subparagraph e) of Article 269º of the CIBR is only applicable to "acts integrated within the scope of insolvency or payment plans, or of liquidation of the insolvent estate, with reservation that the insolvent is a company or establishment" (Article 10º of the reply). It happens that "In the case at hand, we are faced with the acquisition of a real property, albeit in an insolvency proceeding, but which does not belong to a company nor was intended for the exercise of any business activity, but was property of an individual with a destination for housing" (cf. Article 32º of the reply);

b) the assessment made is timely because "not occurring the legal prerequisites for the Claimant to be able to benefit from the exemption from ST, in accordance with subparagraph e) of Article 269º of the CIBR, the tax administration could not fail to assess the tax due, provided that the statute of limitations deadline is respected, which, in the case of taxes with a single obligation, such as Stamp Tax, is from the date on which the taxable event occurred (cf. Article 45º, nos. 1 and 4, of the GTL)" (cf. Article 41º of the reply).

Furthermore, the Defendant requests the correction of the economic value of the claim to € 887.20, corresponding to the value of the assessment contested, the value declared by the Claimant (€ 911.94) remaining to be justified.

It concludes, finally, that the claim is entirely devoid of merit.

III. PRELIMINARY ISSUES

The Arbitral Tribunal was regularly constituted and is competent.

The parties have legal personality and capacity and are legitimate (Articles 4º and 10º, no. 2, of the same statute and Article 1º of Regulation no. 112-A/2011, of 22 March).

The case does not suffer from nullities and there is no obstacle to the consideration of the merits of the case.

IV. FACTUAL MATTERS

A. Proven Facts

The following facts are considered proven:

  1. By title of adjudication, dated 05-03-2014, drawn up by B…, in his capacity as Judicial Administrator, the Claimant acquired the real property intended for housing, situated on Rua …, n.º …, civil parish of …, municipality of …, registered in the urban property register of that civil parish under article …, for the price of € 110,900.00;

  2. Article… of the civil parish of …, municipality of …, gave rise to article … of the Union of civil parishes of … and …, of the same municipality;

  3. The adjudication was effected in the context of insolvency proceeding no. .../11.0TBEVR that took place before the 2nd Civil Court of the Judicial Court of Évora in which C…, owner of the property, was declared insolvent;

  4. On 13-02-2014, the Claimant proceeded to submit the declaration Form 1 of the MTORPT which was registered under number 2014/…;

  5. In the submitted declaration there appears in the field "Benefits" the indication "101 – Code on Insolvency and Business Recovery – Transfers integrated in Insolvency or Payment Plans or within the scope of liquidation of the insolvent estate (Article 269º of the CIBR, approved by DL 53/04), 100% of the taxable base";

  6. The declaration Form 1 of the MTORPT gave rise to the issuance of a document for collection, of the same date, with zero collection;

  7. On 06-10-2015, by Order no.…, the Defendant notified the Claimant to comment, in prior hearing, on the proposal for additional assessment of Stamp Tax in the amount of € 887.20 referring to registration no. …/2014 which came to be finalized;

  8. The Claimant proceeded to payment of the tax assessed on 15-01-2016, in the context of the tax enforcement proceeding no. …2016…, instituted by the Financial Services Office Porto…;

  9. On 22-03-2016, the Claimant filed an administrative appeal against the assessment made;

  10. On 22-07-2016, by Order no.…, received on 25-07-2016, the Claimant was notified of the order dismissing the administrative appeal, issued by the Head of the Financial Services Office.

B. Unproven Facts

No other facts with relevance to the arbitral decision were proven.

C. Basis of the Factual Matters

The factual matters given as proven are based on the documentary evidence cited and not contested.

V. MATTERS OF LAW

A. On the Illegality of Tax Acts

As mentioned above, the Claimant formulates its request for a declaration of illegality of the ST assessment, in the amount of € 887.20, alleging a series of defects which, if considered valid, will imply its annulment, with the other legal consequences.

Article 124º of the CTPP, applicable ex vi subparagraph a) of no. 1 of Article 29º of the LRATM, establishes the order in which the judgment must assess the defects invoked by the challenger, and from this order it follows that, "(…) once the existence of a defect capable of leading to the elimination of the act from the legal order with effective protection of the legal position of the challenger is recognized (in particular, that prevents the renewal of the act with the same meaning), the assessment of other defects attributed to the challenged act will be foreclosed, because, if it were necessary to always assess all defects attributed to the challenged act, the order of its assessment would be irrelevant"[1].

It has been the understanding of the Supreme Administrative Court – of which examples are the judgments of 07/12/2010, case no. 0569/10, of 22/03/06, case no. 0916/04, of 24/01/2007, case no. 0939/06, and of 06/07/2011, case no. 0355/11 – that defects involving violation of law (stricto sensu) should be assessed first, and only then possible defects of form, because this will ensure more effective protection of the rights of taxpayers.

Having these principles in mind, this Tribunal considers it appropriate to assess, in the first place, the legality of the assessment initially made by the Tax Authority in which the Claimant was recognized the exemption provided for in subparagraph e) of Article 269º of the CIBR which provided for the following:

"Are exempt from stamp tax, when subject to it, the following acts, provided that they are foreseen in insolvency plans, payment plans or recovery plans or carried out within the scope of liquidation of the insolvent estate:

(…)

e) realization of financing operations, the transfer or cession of the operation of company establishments, the constitution of companies and the transfer of commercial establishments, the sale, exchange or cession of elements of the company's assets, as well as the leasing of assets".

Throughout the request for arbitration, the Claimant defends the applicability of the said exemption to the case at hand, invoking, by analogy, the interpretation made of no. 2 of Article 270º of the CIBR (exemption from MTORPT) and recent decisions of the Supreme Administrative Court on the interpretation of that rule. Accordingly, the Claimant concludes that "the conditions are met for the Claimant to benefit from the exemption from ST provided for in subparagraph e) of Article 269º of the CIBR, given that this rule encompasses (unquestionably) both the transfer of real property effected in conjunction with the company or the establishment of which they are part and the isolated transfer of real property, separately from the company or establishment of which they form part" (cf. Article 37º of the claim).

This could even be a legitimate conclusion if, in fact, and in the words of the Claimant, it were a case of "the isolated transfer of real property, separately from the company or establishment of which they form part", which is not the case. Indeed, from the proven facts it results that the previous owner of the property, declared insolvent in the identified proceeding, is an individual. At no time was it alleged or proven by the Claimant that, despite being an individual, the insolvent was the owner of a company or of an establishment of which such property formed part.

In accordance with the wording of the law – and the Claimant's own interpretation in the passage above transcribed – the exemption provided for in subparagraph e) of Article 269º of the CIBR is only applicable to the transfer of real property that forms part of a company's assets, and is therefore not invocable if the insolvent is an individual, without any business or professional activity.

This understanding has already been endorsed by the Supreme Administrative Court in the judgment of 29-09-2013, delivered in case no. 0866/13 (available at www.dgsi.pt), in which it was concluded that "I. In accordance with the provision of Article 269º, subparagraph e), of the CIBR, sales of «elements of the company's assets» are exempt from ST. II. Therefore, the said exemption does not cover the sale of urban real property intended for housing that belongs to an individual, it being insufficient to benefit from that exemption the fact that the sale acts are carried out within the scope of liquidation of the insolvent estate, but it must be demonstrated that the property sold forms part of a company's assets."

In this regard, agreement is reached with the Defendant when it alleges that "In the case at hand, we are faced with the acquisition of a real property, albeit in an insolvency proceeding, but which does not belong to a company nor was intended for the exercise of any business activity, but was property of an individual with a destination for housing. Therefore, the legal prerequisites are not met to benefit from the exemption from ST by reason of its transfer having been carried out in an insolvency proceeding of an individual" (cf. Articles 32º and 33º of the reply).

Given the foregoing, and contrary to what is alleged by the Claimant, the operation identified in the case does not benefit from the exemption from ST provided for in subparagraph e) of Article 269º of the CIBR, contrary to what was initially decided by the Defendant and which justified the issuance of a document for collection without tax due.

Concluding that the initial assessment is illegal, for violation of subparagraph e) of Article 269º of the CIBR, it is necessary to analyze whether the Defendant could act as it did and simply assess additionally the tax that should have been paid ab initio.

Pursuant to Article 5º of the TBR (Statute of Tax Benefits), tax benefits can be automatic or dependent on recognition, the former resulting directly and immediately from the law, while the latter presuppose one or more subsequent acts of recognition.

In the case at hand, the exemption invoked by the Claimant – subparagraph e) of Article 269º of the CIBR – would, in principle, be qualifiable as an automatic tax benefit since there is no provision, in the CIBR or in the Code of Stamp Tax, for an independent formal procedure for recognition.

However, notwithstanding such automatic character, we note that the recognition of the said exemption is dependent on a request presented by the interested party and subject to a procedure, albeit not independent from the assessment procedure.

Indeed, by virtue of the normative references contained in no. 4 of Article 23º and no. 4 of Article 44º of the Code of Stamp Tax, to the assessment of the tax due on item 1.1 of the GTST are applied, with the necessary adaptations, the rules contained in the Code of MTORPT, including the rules relating to the recognition of exemptions.

On this matter specifically, Article 10º, no. 1 of the Code of MTORPT provides that "Exemptions are recognized at the request of the interested parties, to be presented before the act or contract that gave rise to the transfer to the competent services for the decision, but always before the assessment that would be to be effected" (emphasis ours). In the context of MTORPT – and, consequently, in the context of ST on item 1.1 of the GTST – the principle of request applies, placing it upon the taxpayer to request from the Tax Authority the recognition of any exemption of which it wishes to benefit, including automatic exemptions.

Hence, as regards the division of competence for such recognition, no. 8 of Article 10º of the Code of MTORPT determines that, in the case of automatic exemptions, their recognition – albeit automatic – is the responsibility of the financial services office where the tax return provided for in Article 19º of the Code of MTORPT is presented, being this the body that should proceed to its "verification and declaration". That is, upon submission of the tax return and subsequent assessment, the Tax Authority should assess, based on the elements provided by the interested party, whether or not the latter may enjoy the tax benefit invoked (in this case, the exemption provided for in Article 269º of the CIBR). Whenever it concludes that the taxpayer is entitled to the exemption invoked and issues a document for collection without tax due, the Tax Authority is recognizing to the taxpayer the corresponding tax benefit, integrating in the assessment act the tax advantage legally provided for. This is evident in the assessment attached to the case file (document no. 3) in which express reference is made to the benefit of Article 269º of the CIBR because it is an acquisition integrated in an insolvency plan. If, on the other hand, the Tax Authority considers that the legal requirements for application of the tax benefit invoked are not met, it refuses its recognition and assesses the tax due under the general rules.

The fact that no. 8 of Article 10º of the Code of MTORPT refers to "automatic recognition" does not mean that there is no assessment and decision by the competent body as to the applicability of the benefit invoked. Indeed, it is this Tribunal's understanding that there is an effective act of "recognition", prior to the tax assessment, which is formally evidenced in the tax assessment act itself. It is this prior "verification and declaration" of the exemption, the responsibility of the financial services office where the Form 1 return of MTORPT is submitted, that justifies the taxpayer's reliance on the Tax Authority's decision and carrying out its economic and financial choices with confidence.

This procedure results from the amendments introduced by Law no. 64-A/2008, of 31 December (General State Budget for 2009), which aimed to adapt the regime of exemptions in the context of MTORPT to the recognition procedure enshrined in Article 10º of the Code of MTORPT, moving away from the normative practice dating back to the previous enforcement of Sisa Tax, having regard to the provision of the then Article 15º of the Code of Sisa and Related Taxes, in conjunction with no. 20 of Article 11º of the relevant statute and which was still incorporated in the original version of the Code of MTORPT[2]. After these amendments, the legal provision of the tax procedure for recognition of automatic exemptions from MTORPT and ST on item 1.1 of the GTST came into force, which passes through the "verification" of the prerequisites for application of the tax benefit and its "declaration" evidenced through the issuance of an assessment act without tax value to be paid, all as provided for in subparagraph d) of no. 8 of Article 10º and nos. 3 of Article 19º of the Code of MTORPT.

Thus, it will be necessary to assess the powers and legitimacy of the Tax Authority to revoke such act of recognition of the tax benefit invoked by the Claimant.

It must first be noted that, in the tax context, the principle of free revocability of tax acts applies, as provided for in no. 1 of Article 79º of the GTL which establishes that "The decision act may revoke in whole or in part, reform, ratify or convert a previous act within the periods of its revision".

This principle of revocability of tax acts is also admitted regarding acts that recognize tax benefits, in the terms and conditions provided for in no. 4 of Article 14º of the TBR. From this rule it results that "The administrative act that grants a tax benefit is not revocable, nor may the respective grant agreement be rescinded, nor may the rights acquired be diminished, by unilateral act of the tax administration, except if there is non-compliance attributable to the beneficiary of the obligations imposed, or if the benefit was unduly granted, in which case that act may be revoked".

In legal terms, there are thus two situations in which the revocation of an act of recognition of a tax benefit is admitted: (i) non-compliance with the obligations imposed by law or by the act recognizing the benefit and which constituted the premise of its legal and functional motivation; (ii) the undue granting of the benefit due to error in the premises on which the act was based.

Having regard to what has been decided above regarding the non-applicability of the exemption provided for in subparagraph e) of Article 269º of the CIBR to the case at hand, there is no doubt as to the legitimacy of the Defendant to revoke the unduly granted tax benefit.

However, tax law does not regulate the procedure and periods within which such revocation may occur, so the rules of the Code of Administrative Procedure ("CAP") will be applicable here, subsidiarily.

This is defended by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa[3], when they state that "In the absence of special rules on the requirements for revocation, ratification, reform, conversion and rectification of the administrative act, those provided for in the CAP should be applied, subsidiarily applicable, in accordance with subparagraph b) of Article 2º of the GTL". In the specific case of revocation, these authors[4] understand that "Revocation is an act that terminates or eliminates the effects of a previous act based on its inconvenience or invalidity. Its regime is provided for in Articles 138º to 146º of the CAP (…)".

This understanding has already been endorsed by decisions of the Supreme Administrative Court, of which examples are the judgment of 15/05/2013, delivered in case no. 0566/12, and the judgment of 27/03/2012, delivered in case no. 590/11, both available at www.dgsi.pt.

In the most recent of the aforementioned judgments, the Supreme Administrative Court concluded that "(…) neither this legal instrument [General Tax Law] nor the CTPP contains any rule on the period for the said revocation, so such period can only be that provided for in the rules of the CAP – a statute constituting complementary and subsidiary legislation to tax law [Articles 2º, subparagraph c), of the GTL and 2º, subparagraph d), of the CTPP] – and which must be applied in tax law in accordance with the nature of the case with no provision, more precisely the rules which directly regulate the revocation of administrative acts in Articles 136º et seq".

Therefore, the assessment of the legitimacy and timeliness of the Defendant's action should be analyzed in light of Articles 165º et seq. of the CAP, in force at the date of the revocation of the act in which the Claimant's right was verified and declared to enjoy the exemption provided for in subparagraph e) of Article 269º of the CIBR.

Specifically, Article 168º, no. 2 of the CAP provides that "Except in the cases provided for in the following numbers, acts constitutive of rights may only be subject to administrative annulment within the period of one year, counted from the date of their respective issuance". This one-year period shall be extended to five years if any of the situations listed in no. 4 of the same article occur.

For this purpose, recourse must be had to the legal definition of "act constitutive of right" which is given to us in no. 3 of Article 167º of the CAP from which it follows that "For the purposes of the provisions of this section, acts constitutive of rights are administrative acts that attribute or recognize legal situations of advantage or eliminate or limit duties, burdens, charges or subjections, except when precariousness results from the law or the nature of the act".

In view of this legal definition, this Tribunal understands that the act of initial assessment in which the Defendant recognized, after verification, the tax benefit invoked by the Claimant – assigning to it a legal situation of advantage reflected in the exemption from the payment of a certain amount as ST – is, for this purpose, an act constitutive of rights, the revocation of which is subject to the period of no. 2 of Article 168º of the CAP.

Given that none of the situations in no. 4 of Article 168º of the CAP occurred, the Defendant would have the period of one year, counted from its making, to revoke the act of initial assessment in which it recognized to the Claimant the benefit provided for in subparagraph e) of Article 269º of the CIBR.

Considering that the initial act is dated 13-02-2014, its revocation could only have taken place until 13-02-2015. Given that the assessment now challenged was made after this date (October 2015), it remains to conclude that the Defendant's action was untimely and that it thus acted beyond the legal period.

For all of this, this Tribunal considers the Claimant's claim to be well-founded, concluding that the act of assessment of ST on item 1.1 of the GTST, in the amount of € 887.20, was carried out beyond the period legally permitted, in violation of the provision of no. 4 of Article 14º of the TBR combined with no. 2 of Article 168º of the CAP, applicable by reference from Articles 2º, subparagraph c), of the GTL and 2º, subparagraph d), of the CTPP, which justifies its annulment. Consequently, the decision dismissing the administrative appeal filed must also be annulled as it is a subsequent act.

Concluding that the assessment should be annulled on this ground, the assessment of the other defects that the Claimant attributed to the act becomes unnecessary and is therefore foreclosed.

B. On the Right to Compensatory Interest

Pursuant to no. 1 of Article 43º of the GTL "Compensatory interest is due when it is determined, in an administrative appeal or judicial challenge, that there was an error attributable to the services resulting in payment of the tax debt in an amount higher than that legally due".

As Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa[5] state, "The error attributable to the services that carried out the assessment is demonstrated when they proceed to an administrative appeal or challenge of that same assessment and the error is not attributable to the taxpayer (for example, there will be annulment due to error attributable to the taxpayer when the assessment is based on mistaken factual premises, but the error is based on a wrong indication in the return that the taxpayer submitted)".

Now, in the specific case, the Claimant's request for payment of compensatory interest is justified since the tax assessment challenged is illegal and should therefore be annulled. Thus, the Claimant shall be entitled to the payment of compensatory interest, at the legal rate in force, counted from the date of payment until the date of processing of the respective credit note, in which they are included – cf. Article 43º of the GTL and no. 4 of Article 61º of the CTPP.

VI. DECISION

In accordance with the foregoing, this Arbitral Tribunal decides to uphold the claim and, in consequence, declares illegal the assessment of Stamp Tax on item 1.1 of the GTST, in the amount of € 887.20, as well as the decision dismissing the administrative appeal filed, ordering the annulment of both and condemning the Defendant to the refund of the tax unduly paid plus compensatory interest, from the date of payment until the date of processing of the respective credit note.

Process value: In accordance with the provision of Article 306º, no. 2, of the Civil Procedure Code and 97º-A, no. 1, subparagraph a), of the CTPP and 3º, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the process value is fixed at € 887.20 corresponding to the total value of the Stamp Tax assessed and whose annulment is hereby ordered.

Costs: Pursuant to no. 4 of Article 22º of the LRATM, the amount of costs is fixed at € 306.00 in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Defendant.

Let this arbitration decision be registered and notified to the parties.

Lisbon, 09-03-2017

The Sole Arbitrator

(Maria Forte Vaz)

[1] Cf. Jorge Lopes de Sousa, Guide to Tax Arbitration, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, Almedina, 2013, pages 202 and 203.

[2] This was disclosed by the Tax Authority through Circular no. 5/2011, of 11 March, available at www.portaldasfinancas.gov.pt.

[3] Cf. General Tax Law Annotated and Commented, 4th Edition, 2012, Encontro de Escrita Publisher, page 724, note 1.

[4] Cf. cited work, page 725, note 2.

[5] Cf. cited work, page 342, note 2.

Frequently Asked Questions

Automatically Created

Is Stamp Tax (Imposto do Selo) due on property acquisitions made within insolvency proceedings in Portugal?
Stamp Tax is generally due on property acquisitions in insolvency proceedings unless a specific exemption applies. Article 269(e) of the Portuguese Insolvency Code (CIRE) provides a potential exemption, but its scope is contested. The Tax Authority maintains the exemption only applies when the insolvent debtor is a company or establishment conducting business activities, not when an individual's residential property is sold. Property acquirers in insolvency proceedings should carefully verify exemption eligibility with legal counsel before relying on it, as initial administrative recognition may be subsequently reversed.
What tax exemption does Article 269(e) of the Portuguese Insolvency Code (CIRE) provide for Stamp Tax?
Article 269(e) of CIRE exempts from Stamp Tax acts integrated within insolvency or payment plans, or liquidation of insolvent estates. The central interpretive dispute concerns whether this exemption applies universally to all insolvency-related transfers or only when the insolvent debtor is a company or establishment. Taxpayers argue the exemption encompasses both company asset transfers and isolated property transfers. The Tax Authority contends it requires the insolvent to be a company or establishment engaged in business activities, excluding residential property of individuals not connected to commercial operations.
Can the Tax Authority issue an additional Stamp Tax assessment after initially recognizing an insolvency exemption?
Yes, the Tax Authority can issue additional Stamp Tax assessments after initially recognizing an exemption, subject to legal limitations. In this case, the Authority reversed its initial exemption recognition after approximately 18 months. Taxpayers can challenge this on two grounds: (1) violation of good faith and legitimate expectations principles under Article 59 LGT when the Authority induces reliance on its initial position, and (2) expiry of the revocation right under Article 141(1) CAP imposing a one-year limit on revoking administrative acts. The Authority argues it can assess within the general statute of limitations if the exemption prerequisites were never legally satisfied.
How does CAAD arbitration work for challenging Stamp Tax assessments related to insolvency in Portugal?
CAAD (Administrative Arbitration Center) arbitration for Stamp Tax challenges follows the Legal Regime of Arbitration in Tax Matters (RJAT). The process involves: filing a request for arbitral tribunal constitution under Articles 2 and 10 RJAT; acceptance by CAAD President; notification to Tax Authority; appointment of arbitrator by the Deontological Council; notification to parties with opportunity to challenge the appointment; tribunal constitution; Tax Authority's reply; optional hearing or written submissions under Article 18 RJAT; and final decision. The tribunal has jurisdiction over Stamp Tax legality challenges per Article 99(a) CPPT. This provides an alternative to judicial courts for tax dispute resolution.
What are the conditions for claiming compensatory interest (juros indemnizatórios) on unduly paid Stamp Tax?
Compensatory interest (juros indemnizatórios) on unduly paid Stamp Tax requires: (1) illegal tax assessment subsequently annulled by tribunal or court; (2) actual payment of the tax amount by the taxpayer; and (3) delay in refunding attributable to the Tax Authority's wrongful collection. The interest compensates taxpayers for loss of use of funds wrongly collected by the State. It accrues from the payment date until actual refund. In this case, the claimant requested compensatory interest on €887.20 if the additional assessment were annulled, arguing the Tax Authority's reversal of its initial exemption recognition constituted an error inducing illegitimate tax collection and financial harm.