IMT and Stamp Tax Exemption on Property Acquired in Insolvency Proceedings – CAAD Case 521/2016-T

ARBITRAL DECISION

I – Report

1. On August 26, 2016, [A…], S.A., NIPC…, with registered office at …, No. …, Parish of …, …-… Porto, hereby, in accordance with articles 1 and 2, No. 1, letter a), and 10 of the Legal Framework for Tax Arbitration (RJAT), and article 99 of the Code of Tax Procedure (CPPT) applicable pursuant to article 10, No. 2, c) of the RJAT, presents a Request for Arbitral Pronouncement on the assessment act issued by the Finance Service of Amadora …, concerning Stamp Duty in the amount of € 912.00 (nine hundred and twelve euros), declaring null or annulling the tax assessment[1] and ordering the reimbursement of the amount wrongfully paid, plus compensatory interest. It enclosed, in addition to the legal power of attorney, seven documents.

2. In the Request for Arbitral Pronouncement, the Claimant opted not to appoint an arbitrator, and by decision of the President of the Deontological Council, in accordance with No. 1 of article 6 of the RJAT, the undersigned was appointed as sole arbitrator, who accepted the assignment within the legally stipulated timeframe.

3. The arbitral tribunal was constituted on November 18, 2016.

4. The Tax and Customs Authority (AT or Respondent) sent, on December 21, 2016, its Reply and the administrative file (PA).

5. The Tribunal dispensed with, by agreement of the Parties, the hearing provided for in article 18 of the RJAT, and granted a period of ten days for successive pleadings (presented on March 1 and March 17, 2017), and indicated as the deadline for pronouncing the final decision the end of the six-month period provided for in article 21 of the RJAT. When the Claimant was further asked to clarify certain parts of the Request, it did not respond, and therefore the decision is made based on the tribunal's interpretation thereof.

6. The Request for Pronouncement

The Claimant contends, in summary (our paraphrase):

• Notified on October 8, 2015 by the Finance Service of Amadora -…, to pay Stamp Duty in the amount of € 912.00 referring to the acquisition, on January 13, 2014, for € 114,000.00, of the autonomous fraction designated by the letter "E", intended for dwelling, of the urban property identified in the case file, within the scope of the insolvency proceedings of B… and C…, running in the Judicial Court of Leiria, the Claimant paid the said tax but filed, on March 11, 2016, an administrative appeal against the assessment act.

• Prior to the acquisition, the Claimant had presented before the competent Finance Service the declaration for assessment of IMT and Stamp Duty (IS), with certificates having been issued certifying that the transmission in question was exempt from IMT, pursuant to No. 2 of article 270 of the CIRE.

• The administrative appeal was dismissed on the grounds that "For the purposes of the IMT exemption provided for in No. 2 of art. 270 of the CIRE, only acts of sale, exchange or assignment of the company or of its establishments within the scope of insolvency, payment or recovery plans or carried out within the liquidation of the insolvent estate", and the question at issue is therefore the interpretation of the said No. 2 of article 270 of the CIRE: whether within the scope of the insolvency or payment plan carried out within the liquidation of the insolvent estate, the IMT exemption covers only the transmission of real property, the alienation of which occurs by virtue of selling, exchanging or assigning the company or establishment in which the real property (transmitted) is included, or, alternatively, whether that exemption covers (also) the real property transmitted by sale or exchange, when not included in the sale, exchange or assignment of the company or establishment.

• The second interpretation will be the correct one, all the more so because if the legislator's objective were to exempt from IMT only the transmissions of real property affected by the companies, it would have stated that only the transmission of real property when incorporated in the sale, exchange or assignment of the company or establishment enjoyed IMT exemption.

• The legislator, still within the scope of the CPEREF, reviewed the position of privileged creditors, leading to "the most significant privileges of the State and Local Authorities no longer being invocable in the bankruptcy proceedings and with the awareness that it was necessary to "set an example of participation in the common sacrifice.

• The incentives (in letter c) of No. 2 of its article 121 of the CPREF and No. 2 of article 270 of the CIRE) are compensation for the common sacrifice and social solidarity in the protection of the position of those who, due to the insolvency of their debtors, see the probability of receipt of their credits lost or severely reduced and their own solvency threatened.

• Thus, the State also lost privileges, both in the claiming of credits and as regards revenues, in particular with the exemption of IMT, maintained in the CIRE (No. 49 of the Preamble to Decree-Law No. 53/2004, of March 18). If the transmission of real property in the liquidation of the insolvent estate or in insolvency or payment plans were subject to IMT, No. 2 of article 270 of the CIRE would contradict No. 49 of said Preamble, and the AT's interpretation that it is more penalizing for the State to hinder the re-entry into the market of assets of insolvent estates, especially in view of their economic significance, of real property, and delay the satisfaction (possible) of creditors, which themselves, as a rule, have serious liquidity problems, would not be appropriate.

• On the other hand, interpreting No. 2 of article 270 of the CIRE in the sense that only the transmissions of real property included in the transmission of company or its establishment are exempt from IMT, is not an interpretation in accordance with the Constitution (cites judgment of the STA, of May 30, 2012).

• The assessment of IMT is based on a norm interpreted in an unconstitutional manner, with violation of No. 2 of art. 165 of the CRP, and is also voidable for that reason.

• Since no tax fact was constituted, the payment is illegal and not due, and the act under analysis is null and void due to lack of legal authority for the creation of taxes or special contributions not permitted by law (article 133/2/a) and d) of the CPA and articles 103/2 and 165/1/i) of the CRP).

• The challenged act – the assessment resulting from the purportedly improper application to the Claimant of the benefit of Stamp Duty exemption provided for in letter e) of article 269 of the CIRE (article 10 Request) - thus suffers from a manifest lack of factual and legal reasoning, or, at least, this is insufficient, obscure and incongruous, and therefore articles 268/3 of the CRP, articles 124 and 125 of the CPA and article 77 of the LGT were frontally violated. The assessment act under analysis is thus null and void, since the amount claimed has no legal or factual basis whatsoever (art. 77 of the LGT and art. 99/c of the CPPT; see art. 133 of the CPA).

• The quantification of the tax fact under analysis raises well-founded doubts, and therefore the challenged act should always be annulled, pursuant to articles 99/1/a) and 100 of the CPPT.

• The Tax Authority violated the legitimate expectations and guarantees previously established with the Claimant, and the principle of confidence and legal certainty inherent to the rule of law principle, in addition to having violated the principles of tax legality, prohibition of retroactivity of tax law and certainty and legal security provided for, among others, in articles 12 of the LGT, 12 of the CC and 103 No. 3 of the CRP.

• The AT misled the Claimant when it recognized the IS exemption to be assessed prior to the execution of the public deed, with a violation of the good faith principle (No. 2 of article 59 of the LGT and No. 2 of article 266 of the C.R.P), implying annulment by breach of legal formality, violation of the principles of collaboration and good faith as stated above (art. 59 of the LGT, and art. 99/d of the CPPT; see art. 7 of the CPA and No. 2 of article 266 of the C.R.P).

• The revocation of the exemption, being an act constitutive of rights, could only be carried out within one year after being granted (articles 136, 141, No. 1, of the CPA and 58 of the CPTA applicable pursuant to art. 2, letter c), of the LGT and art. 2, letter d), of the CPPT (Judgment of the STA of May 15, 2013).

• In view of the above, the Claimant has, by virtue of the assessment whose annulment is hereby requested, the right to reimbursement of the amount wrongfully paid, plus legal interest from the date of payment until its effective return.

1. The Reply

The Respondent replied, in summary (our paraphrase):

• The Claimant's interpretation that the acquisition of the property in question in the case file, carried out within the scope of the liquidation of a certain insolvent estate, is covered by the IS exemption provided for in letter e) of article 269 of the CIRE has no legal support whatsoever.

• It is proven in the present case that the insolvent debtors - B… and C… - from whom the Claimant acquired the property, are natural persons, with the first having filed a declaration of cessation of professional activity, category B, on May 22, 2008.

• The current wording of letter e) of article 269 of the CIRE provides that the following acts are exempt from stamp duty, when they would otherwise be subject to it, only acts of sale, exchange or assignment of the company or of its establishments, incorporated within the scope of insolvency, payment or recovery plans or carried out within the liquidation of the insolvent estate.

• This exemption thus covers all acts incorporated within the scope of insolvency or payment plans, or of liquidation of the insolvent estate, with the reservation that the insolvent is a company or establishment.

• With regard to the interpretation of the previous wording of No. 2 of article 270 of the CIRE, the case law interpretation is uniform in the sense that there must be real property that is part of the assets of a company and not real property of natural persons, with the only justification being that they are part of an insolvency proceeding (in the same sense, Judgment of the STA, of July 3, 2013, rendered in Case 765/13).

• If the legislator had intended to change the meaning of the law, it could have explicitly done so in article 234 of Law No. 66-B/2012, of December 31, which amended the said provision, but it did not, only adding the exemption relating to transmissions of the company or of its establishments, incorporated within the scope of company recovery plans.

• The fact that the Preamble of the CIRE provides that, as regards tax benefits, it maintains essentially those provided for in the CPEREF regarding the exemption of fees and tax benefits, has no interpretative relevance to article 270, No. 2, not to be confused "essentially" with "exclusively".

• In the said preamble (which moreover has no direct legislative force) the legislator did not mean that all tax benefits of the CPEREF were maintained by the CIRE, but rather that it maintained the majority of the tax benefits enshrined in the CPEREF, or if you will, its fundamental core.

• The Judgment of the STA cited by the Claimant in the Request has no application to the case of the present proceedings in which the insolvent is a natural person and not a company, regardless of whether it concerns the acquisition of real property or the totality of assets of the insolvent estate, this being the controversial issue in that judgment.

• If article 269, letter e), of the CIRE were unconstitutional, as the Claimant contends, the only logical consequence would be the illegality of the assessment by virtue of the inapplicability of a provision on tax benefits approved without any authorization granted by Parliament, but the purported unconstitutionality of the act would be completely superseded by the wording of article 269, letter e), of the CIRE as amended by article 234 of Law No. 66-B/2012, of December 31, which approved the State Budget for 2013.

• In summary, the challenged assessment is legal and in accordance with the Constitution, with no violation being shown of the multiple constitutional principles that the Claimant merely limited itself to invoking in the learned Arbitral Petition, without, however, having managed to demonstrate any unconstitutionality.

• In the case at hand, it is a matter of the acquisition of real property which, although in an insolvency proceeding, does not belong to a company nor was intended for the exercise of any business activity, being the property of a natural person and intended for dwelling, and therefore the legal prerequisites are not met to benefit from the IS exemption by reason of its transmission having been carried out in an insolvency proceeding of a natural person (in this sense cites Judgments of the STA of July 3, 2013, proc. No. 765/2013, and of September 25, 2013, proc. No. 866/13, and decisions in arbitral proceedings Nos. 200/2015-T, 649/2015-T, 558/2015-T, 136/2016-T and 106/2016-T).

• As for the invocation of the illegality of the revocation of the tax benefit, by violation of articles 140 and 141 of the CPA, since the legal prerequisites for the Claimant to benefit from the IS exemption are not met, in accordance with letter e) of article 269 of the CIRE, the tax authority could not fail to assess the tax due, provided that the statute of limitations period was respected, which, in the case of taxes with a single obligation, as is the case with Stamp Duty, is counted from the date on which the tax fact occurred (see article 45, Nos. 1 and 4, of the LGT).

• The present request for pronouncement should be judged as without merit, with the Respondent absolved of the claim, with all legal consequences.

1. Object of the Claim

The fundamental legal question at issue in the case is the legality of the Stamp Duty assessment carried out by the AT concerning the acquisition by the Claimant of real property within the scope of an insolvency proceeding of the owners of the same property, and it is a matter of determining whether the said acquisition is covered by the exemption provided for in letter e) of article 269 of the Code of Insolvency and Recovery of Enterprises (CIRE).

In addition to the erroneous interpretation of article 269 of the CIRE, various defects must be assessed that would taint the assessment act with illegality: lack of reasoning for the assessment, violation of the period provided for revocation of acts constitutive of rights, violation of various principles of the rule of law enshrined constitutionally (such as legality, confidence, security, certainty, good faith).

There must also be a pronouncement on the alleged violation of the prohibition on retroactivity (article 103, No. 3, of the CRP) and the irrevocability of the administrative act by lapse of one-year period (article 141, No. 1, of the CPA and article 58 of the CPTA).

1. Preliminary Examination

The single arbitral tribunal is materially competent, in accordance with the provisions of article 2, No. 1, letter a) of the Legal Framework for Tax Arbitration.

The parties have legal personality and capacity, have standing and are legally represented, in accordance with articles 4 and 10, No. 2, of the Legal Framework for Tax Arbitration (RJAT) and article 1 of Ordinance No. 112-A/2011, of March 22.

The proceedings do not suffer from any nullity nor were any exceptions raised.

The merits of the claim must be examined and decided.

II Reasoning

1. Established Facts

10.1. The Claimant entity acquired the autonomous fraction designated by the letter "E", intended for dwelling, of the urban property in the form of horizontal property located at … …, Parish of … and Municipality of Leiria, described in the … Land Registry Conservancy of Leiria under number … and registered in the matrix of the Union of Parishes of … and … under article … (Doc. No. 2 attached with the Request and PA, fls. 22 to 26).

10.2. The acquisition referred to in the previous number was made by public deed of January 13, 2014, within the scope of the insolvency proceedings of B… and C…, respectively, running in the 1st Civil Court of the Judicial Court of Leiria, under No. …/10… TBLRA and No. …/12… TBLRA, for the price of € 114,000.00 (one hundred and fourteen thousand euros), with the signatories being the insolvency administrator, in that capacity, and the attorneys-in-fact of the Claimant (Doc. No. 2 attached with the Request and PA, fls. 22 to 26).

10.3. The Claimant presented before the competent Finance Service the declaration (model 1) for assessment of the Municipal Tax on Onerous Transmissions of Real Property (IMT) and Stamp Duty (IS), and the document dated December 6, 2013 was issued, relating to the tax fact "31 - Acquisition of real property of the State, Autonomous Regions and Local Authorities; acquisition of real property by judicial or administrative sale or under legal systems of financial support for housing" and describing the property "Property: U-…-E Municipality: LEIRIA Parish: UNION OF PARISHES OF … (…). Purpose: Dwelling" and as regards Stamp Duty: "Benefits: 101 - Code of Insolvency and Recovery of Enterprises - Transmissions incorporated in Insolvency or Payment Plans or within the scope of liquidation of the insolvent estate (Art. 269 of the GIRE, approved by DL 53/04)" The assessments of IMT (…) and Stamp Duty (…) were zero euros (doc. No. 3 attached with the Request and PA, fls. 28 et seq.)[2].

10.4. The declaration referred to in the previous number had registration No. … containing the indication "reception date: 2013-12-06" and "responsibility: taxpayer" ("detail of model 1 assessment declaration", PA, fls. 19).

10.5. The Claimant was notified, by official letter of the Finance Service of Amadora…, "to, if it so wishes, exercise the right of hearing (….) within the period of 20 days (…) regarding the draft additional to registration No. …, of 6/12/2013 of IMT, in the amount of 1355.93€ and of stamp duty, in the amount of 912.00€ (…)", being warned that in the case of non-exercise of the right of hearing, the draft would be converted into final, initiating a period for payment within 30 days by means of payment slips to be requested and failure to pay would initiate the calculation of default interest with a certificate being extracted for compulsory collection, with a tax collection proceeding No. …2016… being instituted regarding collection of stamp duty (doc. No. 1 attached with the Request and PA, fls. 52 and 55, documents without registration date).

10.6. No right of hearing was exercised, and a corrective assessment followed in a declaration dated December 11, 2015 (document No. …), correcting the previous assessment (registration IMT No. …/2013) in which an exemption had been wrongfully attributed and calculating stamp duty payable in the amount of € 912.00, because "for the purposes of stamp duty exemption, provided for in letter e) of art. 269 of the CIRE, only acts of sale, exchange or assignment of elements of the assets of companies - understood as complex organizations could be considered covered by the legal provision" (PA, fls. 5 and 46).

10.7. The Claimant paid the said amount on January 15, 2016 but, on March 21, 2016, filed an administrative appeal against the corrective assessment act and collection of IMT and Stamp Duty at the Finance Service of Amadora -…, instituted with No. …2016… (PA, fls. 7 to 14, 56 et seq.).

10.8. The proposal for dismissal, issued on June 8, 2016 for prior hearing, was, in the absence of a response in the hearing, converted into final and made subject to a dismissal order on July 20, 2016 and notified by official letter of July 22, 2016 (PA, fls. 74 and 75).

10.9. The present Request for Arbitral Pronouncement was presented on August 26, 2017.

1. Reasoning for the Determination of Factual Matters

The facts were established as proven based on the documents submitted by the Parties, namely with the request for arbitral pronouncement and the administrative file.

1. Application of Law

12.1. The Factual Situation and Applicable Norms

The Claimant is a bank that acquired a fraction of real property, intended for dwelling, from natural persons, its debtors, in an insolvency proceeding. It argues that the incentives provided for in letter c) of No. 2 of article 121 of the CPREF and No. 2 of article 270 of the CIRE) are compensation for the common sacrifice and social solidarity in the protection of the position of those who, due to the insolvency of their debtors, see the probability of receipt of their credits lost or severely reduced and their own solvency threatened.

In the present case, what is at issue is the application of the provisions of article 269, letter e), of the Code of Insolvency and Recovery of Enterprises (CIRE) approved by Decree-Law No. 53/2004, of March 18, the segment of the provision relating to benefits "relating to stamp duty" regarding the sale of elements of the company's assets, provided that such are provided for in insolvency, payment or recovery plans or carried out within the liquidation of the insolvent estate.[3]

In the case of the present proceedings, the model 1 declaration made by the Claimant at the time of acquisition of the property also covered the application of the IMT exemption provided for "acts of sale, exchange or assignment of the company or of its establishments incorporated within the scope of insolvency or payment plan or carried out within the liquidation of the insolvent estate" provided for in No. 2 of article 270 of the CIRE.[4]

The provisions cited are inserted in Title XIII of the CIRE, concerning "Fee and tax benefits", with article 268 referring to benefits under IRS and CIT.[5] They correspond to articles 118 to 121 (Section VI of Title II) of the Code of Special Procedures for Recovery of Enterprises and Bankruptcy (CPEREF), approved by Decree-Law No. 132/93, of April 23.

The current letter e) of article 269 of the CIRE reproduces the content of letter f) of article 120 of the CPEREF, while No. 2 of art. 270 of the CIRE is not entirely coincident with the content of article 121 of the CPEREF, whose No. 2 provided that there were also exempt from municipal real estate transfer tax (sisa) the transmissions of real property, incorporated in any of the measures for recovery of the company, arising from "the legal independence of commercial or industrial establishments, the sale, exchange or assignment of elements of the company's assets, as well as long-term leases (…)" (letter c) of No. 2).

The provisions mentioned above have given rise to divergent interpretations, especially with regard to the application of the IMT exemption granted in No. 2 of art. 270 of the CIRE, giving rise to discussions as to whether from that provision one should conclude that "whether the sale, exchange or assignment, even when incorporated within an insolvency or payment plan or carried out within the scope of liquidation of the insolvent estate, in order to be exempt from IMT will necessarily have to have as their object the company or its establishment, or whether (…) the reference to the company or its establishments refers only to the assignment, being also understood within the scope of the IMT exemption the sales and exchanges of real property incorporated within an insolvency or payment plan or carried out within the scope of liquidation of the insolvent estate". (as stated in the question posed in the Judgment of the STA, of May 30, 2012, proc. No. 0949/11, underlining and highlighting ours).

But this is not the question at issue in the present case, in which the Request concerns the assessment of Stamp Duty and not IMT. It is therefore a matter not of the application of article 270, No. 2, of the CIRE but of letter e) of article 269 of the same Code, which provides for an exemption from stamp duty for "(…) carrying out financing operations, the assignment or transfer of the exploitation of establishments of the company, the formation of companies and the transfer of commercial establishments, the sale, exchange or assignment of elements of the company's assets, as well as the leasing of property" when they constitute acts provided for in insolvency or payment plans or carried out within the scope of liquidation of the insolvent estate".

12.2. Scope of Tax Benefits Granted by the CIRE

The Claimant argues that the law reveals the intention of the State to sacrifice its own rights (credit privileges, tax revenues) with a view to compensating the sacrifice of creditors who see their credits only partially satisfied. And this objective would justify the State forgoing the revenue from IMT and Stamp Duty in cases of acquisition of real property in insolvency proceedings.

It is considered here that analysis of the legislative evolution – from the Code of Special Procedures for Recovery of Enterprises and Bankruptcy (CPEREF), approved by Decree-Law No. 132/93, of April 23, to the Code of Insolvency and Recovery of Enterprises (CIRE) approved by Decree-Law No. 53/2004, of March 18 - is not necessary, only noting that the CIRE, although it has extended the application of recovery proceedings to debtors who are natural persons, remains, fundamentally, a Code directed at solving situations of non-compliance in business activities.

On the other hand, it is true that, while maintaining the concern with the recovery of enterprises, the CIRE placed the emphasis on the need to satisfy the claims of those who are engaged in business activities, highlighting that the public interest in making insolvent enterprises viable should be the subject of decision by the creditors themselves [6]. But the bulk of the regulation is clearly aimed at subjects of business activities [7], with the (innovative) rules relating to natural persons who are not merchants being identified [8].

This means that the difference in treatment in terms of tax incentives granted depending on whether or not the insolvents are engaged in business activities is justified. Although attributing greater emphasis to the will of the creditors in the insolvency of companies, what is at issue is the renewal of the business fabric, with creditors being assigned responsibility in assessing the economic viability of companies in difficulty.

When it comes to debtor natural persons – for example, borrowers of mortgage credit for the purchase of residential housing vis-à-vis lenders, banks – even if it is also relevant to satisfy the creditor's interest, it is justified that the law take into account the different economic capacity of the parties and the possibility of economic rehabilitation of debtors (supra, note 7), not extending tax exemptions to such cases.

This difference in treatment of situations is reflected in the exemptions granted in articles 269 and 270 of the CIRE.

In Arbitral Proceeding No. 649/2015-T, we considered, even within the scope of IMT, that regardless of the position taken on the divergences regarding the interpretation of No. 2 of article 270 of the CIRE (i.e., the doubts mentioned above regarding the application of the exemption to transmission of real property separately from the company), the application of the benefit provided for in this provision always concerns real property that is part of the assets of a company and not real property of natural persons with the only justification being that they are part of an insolvency proceeding (citing the Judgment of the STA of July 3, 2013, in proc. No. 0765/13)[9].

As for the exemption from Stamp Duty, letter e) of article 269 of the CIRE expressly covers acts of transmission of company real property, but makes it clear that there is no exemption when it is not real property belonging to a company or intended for the exercise of business activities.

As decided by the Judgment of the STA rendered on September 25, 2013, in proc. No. 866/13: "I - In accordance with the provisions of art. 269, letter e), of the CIRE, are exempt from IS the sales of "elements of the company's assets". II - Thus, said exemption does not cover the sale of urban real property intended for dwelling that belongs to a natural person, not being sufficient to benefit from that exemption the fact that it is acts of sale carried out within the scope of the liquidation of the insolvent estate, but it must be demonstrated that the property sold is part of the assets of a company."

In the same sense, we also cite the arbitral decision rendered in proceeding No. 13/2016-T where it was concluded that "letter e) of article 269 of the CIRE grants IS exemption to the sales of elements of the assets of companies, and the sales of property of natural persons, non-entrepreneurs or holders of companies, cannot be understood to be included here, since such is not provided for in the provision under analysis. (…) The provision under analysis clearly and expressly provides that the IS exemption applies to the "sale, exchange or assignment of elements of the company's assets" and does not provide that the IS exemption applies to the sale, exchange or assignment of elements held by natural persons. Consequently, Ubi lex non distinguit nec nos distinguere debemus. Whence, the IS exemption provided for in letter e) of article 269 of the CIRE only applies to real property that is part of the assets of a company and not to real property of natural persons."

It follows from the above that in the case of the present proceedings, in which the acquisition by a bank, in an insolvency proceeding of private individuals, of real property intended for their own dwelling and which was not devoted to business activities, is at issue, the situation cannot be subsumed within the provision of letter e) of article 269 of the CIRE, which refers exclusively to the sale of "elements of the company's assets".

Thus, it is concluded that Stamp Duty was owed, in accordance with article 1, No. 1, of the Stamp Duty Code and item 1.1 of the General Table of Stamp Duty, with no illegality being found in the assessment, under appraisal in this proceeding, which considered the exemption provided for in letter e) of article 269 of the CIRE to be inapplicable.

12.3. Defects Attributed to the Assessment Act – Violation of Principles of the Rule of Law Enshrined Constitutionally, Lack of Reasoning for the Assessment and Illegality of Revocation of the Act

The Claimant's attribution of unconstitutionality by violation of No. 2 of art. 165 of the CRP (citing the Judgment rendered by the STA on May 30, 2012, proc. 949/11) presents itself as quite detached from the case sub judice, since it would only make sense if the present assessment derived from the denial of application of the IMT exemption provided for in article 270, No. 2 of the CIRE to transmissions of real property separately from the insolvent company, restricting the application of this provision to the onerous transmission of property that forms part of the totality of company or establishment sold, exchanged or assigned within the scope of the insolvency or payment plan or the liquidation of the insolvent estate[10].

But in the present case, as already developed above, it is verified that:

• What is at issue is the assessment not of IMT but of Stamp Duty (article 269 of the CIRE does not raise the doubts dealt with in the Judgment of the STA cited);

• The insolvency proceeding does not concern a company or holders of a company but rather natural persons;

• The real property acquired is not from any company but the dwelling of the insolvent debtors, with the acquirer being the lending entity of the respective mortgage loan.

Wherefore it is considered that the arguments used are completely unfounded, invoking as they do a situation so different as that to which the cited Judgment refers.

And there is also no violation of principles of the rule of law enshrined in the CRP, namely those of confidence, certainty, security, legality, good faith, non-retroactivity.

As regards the reasoning for the assessment, it is verified that this was carried out in accordance with legal procedures, presenting itself as sufficient and perfectly understandable, as well as duly communicated to the Claimant, both in the corrective assessment procedure of the initial one based on the taxpayer's declaration, and in the administrative appeal procedure, with the Claimant having felt no need to intervene in these through the exercise of the right to prior hearing (established facts 10.5 and 10.8).

As for the invocation of violation of the principle of retroactivity, the Claimant does not explain exactly what it would consist of, and it is certain that the provisions subject to interpretation and application by the AT (item 1.1 of the General Table of Stamp Duty, attached to the Stamp Duty Code and letter i) of article 269 of the CIRE) were those in force at the time of the facts (transmission on January 13, 2014).

However, the Claimant seems to relate retroactivity to the issue of revocability of the exemption. The Claimant understands that, having initially been granted Stamp Duty exemption, we would be faced with an act constitutive of rights, susceptible to revocation only within one year (articles 136, 141, No. 1, of the CPA and 58 of the CPTA, applicable pursuant to art. 2, letter c), of the LGT and art. 2, letter d), of the CPPT), which, not having occurred, would taint the later assessment (revoking the initial assessment) with nullity or voidability.

But this interpretation of the Claimant also does not meet with the acceptance of this tribunal.

In support of its thesis, the Claimant cites Judgments of the STA of May 15, 2013 and November 23, 2011.

In the first of the Judgments (STA, proc. 0566/12), what was at issue was the revocation of a tax exemption previously recognized, regarding the IRS for the year 2005, in light of art. 37, No. 3, of the Statute of Tax Benefits, (in the wording introduced by Dec. Law No. 198/01, of July 3), which provided that "The Minister of Finance may, at the request of the interested entities, grant exemption from IRS regarding income earned by persons seconded abroad in the service thereof, under contracts concluded with foreign entities, provided that the advantages of such contracts for the national interest are demonstrated." (underlining ours).

And in the second Judgment (proc. 0590/11), the STA examined a situation in which the tax authority had granted exemption from local property tax by order of October 7, 2003, for the period from 2002 to 2011, under article 42-1 of the EBF. That is, it is a matter of exemption from local property tax, provided for in the EBF (successively articles 52, 42 and 46), in which the recognition of the exemption, within the competence of the head of finances for the situation of the property, was also dependent on the submission of a duly documented request.

In a very different way, in the case of the present proceedings, the application of the tax benefits contained in articles 268 to 270 of the CIRE is only dependent on prior recognition by the Tax and Customs Authority within the framework of SIREVE (see No. 2 of article 16 of the CIRE)[11].

Thus, letter e) of article 269 of the CIRE, subject of the present proceeding, provides for an automatic tax benefit, according to the classification contained in article 5 of the Statute of Tax Benefits (EBF)[12].

In the case of automatic verification "the benefits are not granted by the tax authority, but established directly by law, with the right to the corresponding benefit being born, from the simple historical verification of the respective requirements", and it is necessary, to that extent, to prepare the Services with a view to desirable control of such automatic tax benefits, giving actual execution to the final part of No. 4 of art. 2 of the EBF [13]. The need to control legality and quantification of tax expenditure imply a set of formal and instrumental obligations of the taxpayer[14]. The controls must, however, be compatible with the (desired) increasing simplification of procedures.

The assessment of the tax on onerous transmission of real property (Stamp Duty and IMT) is initiated by the interested parties, who are required to submit, at any finance service, a properly completed declaration[15].

Following the amendments introduced in the State Budget for 2009 [16], article 23 of the Stamp Duty Code came to provide in its No. 4: "In the case of tax owed by the acts or contracts provided for in item 1.1 of the general table, the rules contained in the CIMT apply to the assessment of the tax, with the necessary adaptations", and therefore the rules of assessment and exemption provided for in the Code of Municipal Tax on Onerous Transmissions of Real Property (CIMT) are considered applicable.

With the OE for 2009, article 19, No. 1, of the IMT Code came to provide for the submission of the declaration also by electronic means, and in No. 3, then added, the obligation of submission of a declaration was extended to situations of exemption. And article 10 of the same Code distinguishes in a more developed manner cases of exemptions of prior recognition and automatic recognition, including in its No. 8, "exemptions contained in legislation external to this code", as automatic recognition exemptions, with it falling to them to verify and declare in the finance service where the declaration provided for in No. 1 of article 19 is presented.

And article 43 of the IMT Code came to provide, in consonance with the provisions of No. 8 of article 10, that where there is an exemption, the entities referred to in No. 1 must note the exemption and require the supporting document which they file[17].

But these amendments were not intended, in our view, to create a moment of assessment by the services at the request of taxpayers, configuring an act of granting of a tax benefit, an administrative act, of a tax nature, constitutive of rights.

In a Report on "Simplification of the Tax System" prepared by the Working Group created for this purpose by order of April 20, 2005, of the Minister of State and Finance, it was proposed, with regard to the CIMT, that further progress be made in the simplifications introduced by the new Code, namely as regards the procedures for assessment in the onerous transmission of real property. The receipt, in the assessment relating to purchase and sale contracts, of the possibility of the declarative act being carried out in front office, dispensing the taxpayer from filling out the respective declaration, was particularly praised, with that same declaration being an output of the system itself. [18]

Going further, the Group recommended evolution in the direction of original IMT assessments resulting from the payment being carried out in the notarial offices themselves, avoiding the taxpayers' displacement to two institutions, one to assess the tax and another to execute the public deed. And given that all elements contained in the Model 1 Declaration of IMT are contained in the DUC, the Working Group also proposed that consideration be given to the possibility of dispensing with the submission of Model 1 of the IMT, as an output of the system itself and an element to be delivered to the entity that intervenes in the act or contract[19].

These suggestions, made at a time when the original wording of the CIMT was in force, were not, at least entirely, reflected in amendments introduced subsequently and, now, automatic recognition exemptions are also the subject of a declaration, delivered at the finance service or by electronic means.

The explanation for such an amendment could be found reflected, at least partially, in the Report of the Working Group for the Study of Fiscal Policy (Competitiveness, efficiency and justice of the Tax System), prepared in 2009. This Report, in the analysis of tax benefits under IMI and IMT, observes that "regarding the quantification of tax expenditure associated with the tax benefits granted under IMT, no data are currently available. In fact, in this tax there is a very broad set of benefits that operate automatically, having their non-enforcement been verified, until December 31, 2008, by the entities that intervened in the carrying out of the instrument through which the legal transmission was carried out, that is, the public deed. From January 2009 onwards, all transactions of real property, even if they benefit from exemption, are subject to the delivery of model 1 declaration of IMT before their legal transmission, which now takes place by public deed or authenticated private document. In this way, in the future, it will be possible to quantify that tax expenditure associated with IMT exemption benefits, by type of exemption, thus accommodating one of the recommendations that in recent years had been presented by the Court of Accounts"[20].

According to this passage, the new procedure – delivery of the declaration at the Finance Service – will have objectives of quantitative control [21]. And it can be added, also possibly of easier access to information by the Tax Authority.

But everything points to the fact that such an amendment was not intended to eliminate the existing differences between automatic benefits and benefits dependent on recognition, making their respective effects identical and standardizing procedures.

That is, the "automatic" tax benefits (art. 10, No. 8 of the CIMT) and the benefits "dependent on recognition" are (remain) structurally different, and the expression "recognition of exemption" before the deed of purchase and sale should be understood "cum grano salis". In different numbers of article 10 of the CIMT, whose heading is "recognition of exemptions", different treatment is identified of various types of exemptions: those of prior recognition by order of the member of the Government responsible for the financial area based on information and opinion of the Tax and Customs Authority (No. 6); of prior recognition, by order of the director-general of taxes based on information from the competent services (No. 7) and those of automatic recognition (No. 8), with it falling to them to verify and declare in the finance service where the declaration provided for in No. 1 of article 19 of the same Code is presented.

It can be verified by comparison of successive wordings that, possibly for reasons of deburearucratization, the number of situations included in automatic recognition has been increasing. But, even so, it can be said that No. 8 of article 10 of the CIMT classifies as automatic recognition benefits situations in which the benefit is connected to objective elements, in some cases only confirmable later (case of acquisition of property for certain purposes), departing from the principle that the declaration of the taxpayer is a sufficient basis for the requirement of the exemption to be deemed met.

The CIMT includes in the list of automatic recognition exemptions the case of "automatic recognition exemptions contained in legislation external to this code" (letter d) of No. 8 of art. 10), which is precisely, as seen above, the case of article 269 of the CIRE.

Taking into account the set of provisions cited, it results that, when the Claimant presented the declaration at the Finance Service, the latter merely limited itself to entering the respective data into the computer system, issuing, from such data, two documents, relating to IMT and Stamp Duty, indicating zero euros as the total IMT amount. Despite the intervention of the Finance Service, we are faced with a procedure not very different from the one corresponding to the filling out of declarations of CIT or VAT which end with self-assessment carried out by taxpayers[22]. The elements declared by the taxpayers serve for the immediate input by the officer with a view to obtaining from the system the DUC, a means of payment, on the assumption that the declared elements are verified and there is no autonomous intervention of the Tax Authority on the data. Data which immediately remain in the possession of the administration, making faster auditing possible [23] for control of the verification of the requirements – of fact and of law – of the declared benefits.

In summary, it is concluded that the arguments of the claimant do not prevail in the sense that there is a violation of the provisions of article 141 of the CPA, by occurrence of revocation of an act of granting of a tax benefit, since being a benefit of an automatic nature its effectiveness is not dependent on an administrative act of recognition, susceptible to revocation in accordance with the terms and period provided for in the said legal provision[24].

And, since no act of granting exemption occurred, there was no act constitutive of rights, nor does the later assessment by the Respondent, when it verifies the lack of requirements for enjoyment of the exemption, mean any violation of legality or other constitutional principles referred to, including that of good faith.

Thus, the present Request is judged as without merit, confirming that the assessment act does not suffer from illegality, as it has not violated article 269, letter e), of the Code of Insolvency and Recovery of Enterprises (CIRE) nor any other legal or constitutional provisions.

Nor does the decision dismissing the administrative appeal filed prior to the current challenge suffer from illegality.

And, as the arbitral request is without merit, so is the request for reimbursement of the amount paid, as well as compensatory interest.

III. DECISION

1. In view of the foregoing, the present Arbitral Tribunal decides:

a) To judge the present request for declaration of illegality of the Stamp Duty assessment in the amount of € 939.57 (nine hundred and thirty-nine euros and fifty-seven cents) as without merit, maintaining the said assessment act as well as the decision dismissing the administrative appeal filed against that act.

b) To order the Claimant to pay the costs of the present proceeding.

1. Value of the Proceeding and Costs

The value of the proceeding is fixed at € 939.57 (nine hundred and thirty-nine euros and fifty-seven cents) in accordance with article 97-A, No. 1, of the CPPT, applicable by virtue of article 29, No. 1, a) of the RJAT and article 3, No. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

The amount of costs is fixed at € 306.00 (three hundred and six euros) charged to the Claimant and calculated in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, all in accordance with articles 12, No. 2, and 22, No. 4, of the RJAT and article 4 of the RCPAT.

Lisbon, May 18, 2017.

The Arbitrator

Maria Manuela Roseiro

[1] In the final Request the Claimant refers to IMT but, by the whole of the Request for Arbitral Pronouncement, and despite referring several times to its position regarding also IMT, it is concluded, even from the amount of the assessment subject of the Request, that this was a lapse, and that the present proceeding concerns the appraisal of the legality of the assessment of Stamp Duty.

[2] As for IMT it appears: "Benefits: 60 - Code of Insolvency and Recovery of Enterprises - Transmissions incorporated within the scope of liquidation of the insolvent estate (Art. 270, No. 2 of DL 53/04)".

[3] Article 269, under the heading "Benefit relating to stamp duty", provides that "The following acts are exempt from stamp duty, when they would otherwise be subject to it, provided that such are provided for in insolvency or payment plans or carried out within the scope of liquidation of the insolvent estate: a) The modifications of maturity dates or interest rates of credits on the insolvency; b) The increases of capital, the conversions of credits into capital and the alienations of capital; c) The formation of a new company or companies; d) The performance of company property and the assignment of property to creditors; e) The carrying out of financing operations, the assignment or transfer of the operation of establishments of the company, the formation of companies and the transfer of commercial establishments, the sale, exchange or assignment of elements of the company's assets, as well as the leasing of property; f) The issuance of bills of exchange or promissory notes". (underlining ours).

[4] Article 270, relating to "Benefit relating to municipal tax on onerous transmissions of real property", provides: "1 - The following transmissions of real property, incorporated in any insolvency or payment plan, are exempt from municipal tax on onerous transmissions of real property: a) Those intended for the formation of a new company or companies and the accomplishment of its capital; b) Those intended for the realization of the increase of capital of the debtor company; c) Those arising from the performance of company property and the assignment of property to creditors. 2 - Similarly exempt from municipal tax on onerous transmissions of real property are acts of sale, exchange or assignment of the company or of its establishments incorporated within the scope of insolvency or payment plan or recovery carried out within the scope of liquidation of the insolvent estate" (underlining ours, wording given by article 234 of Law No. 66-B/2012, of December 31 - OE for 2013, which introduced the segment in italics).

[5] Article 268, relating to "Benefits relating to taxes on the income of natural and legal persons", provides: "1 - The capital gains realized as a result of performance of the debtor's property and the assignment of property to creditors are exempt from taxes on the income of natural and legal persons, not concurring for the determination of the taxable income of the debtor. 2 - Nor do the positive patrimonial variations resulting from the changes to its debts provided for in an insolvency plan or a payment plan enter into the formation of the debtor's taxable income. 3 - The amount of credits that is subject to reduction, under an insolvency plan or a payment plan, is considered as a cost or loss of the respective fiscal year, for purposes of ascertaining the taxable profit of taxpayers subject to tax on the income of natural and legal persons".

[6] In the preamble it states in particular: "Economic and business life is a life of interdependence, so that non-compliance by certain agents necessarily has repercussions on the economic and financial situation of the others. It is therefore urgent to equip them with suitable means to cope with the insolvency of their debtors, as the impossibility of punctually fulfilling matured obligations. Since the common guarantee of credits is the debtor's assets, it is the creditors who must decide on the best way to enforce that guarantee, and it is through that means that, certainly, the public interest in preserving the proper functioning of the market is best satisfied. When the insolvent estate comprises a company that did not generate the income necessary to meet its obligations, the best satisfaction of creditors may depend on both the closure of the company and its continuation in operation. But it is always on the creditors' assessment that the decision to recover the company must depend, in the last analysis, and on what terms, namely regarding its maintenance in ownership by the insolvent debtor or by another. And, to reiterate, that assessment will always be the best way of realizing the public interest in market regulation, keeping viable companies in operation and purging therefrom those that are not (even if, in the latter case, the inviability may result only from the fact that the creditors do not see interest in the continuation)". (cf. No. 3 of the preamble). (No. 6 of the preamble to DL 53/2004).

[7] "The subjection to the insolvency proceeding of natural and legal persons, both holders of companies and unrelated to any business activity, is not done without the provision of differentiated regimes and institutes for each category of entities, which allow the best normative treatment of their respective insolvency situations. As mentioned above with regard to the insolvency plan, this will tend to be used by larger companies. In the treatment given to natural persons, the regimes of exoneration of the remaining debt and the payment plan stand out" (cf. No. 44 of the preamble to DL 53/2004).

[8] "The Code combines in an innovative way the fundamental principle of compensation of creditors with the assignment to insolvent debtor natural persons of the possibility of freeing themselves from some of their debts, and thus allowing them to achieve their economic rehabilitation. The principle of fresh start for natural persons in good faith incurred in a situation of insolvency, so widespread in the United States, and recently incorporated in German insolvency legislation, is now also received among us, through the regime of "exoneration of the remaining debt". The general principle in this matter is that exemption of the remaining credits on insolvency not entirely paid in the insolvency proceeding or in the five years following the closure thereof can be granted to the debtor natural person" (cf. point 45 of the preamble to DL 53/2004).

[9] "(…) the said exemption does not cover the sale of urban real property intended for dwelling, which belongs to a natural person, not being sufficient to benefit from that exemption the fact that these are acts of sale carried out within the scope of the liquidation of the insolvent estate, regardless of whether it belongs to a natural person or legal entity (business entity)."

[10] In the Judgment of the STA referred to by the Claimant, the invocation of article 165 of the CRP is due to having considered that "although it is doubtful that the ordinary legislator of the CIRE intended to grant the IMT exemption provided for in No. 2 of its article 270 the same scope that the previous SISA exemption provided for in letter c) of No. 2 of article 121 of the CPEREF had", it was necessary to respect the meaning and extent of the authorization under which the CIRE was approved, fixed in articles 2 and following of Law No. 39/2003, of August 22, whose No. 3 of article 9 provided: "Finally, the Government is authorized to exempt from municipal real estate transfer tax (sisa) the following transmissions of real property, incorporated in any insolvency or payment plan or carried out within the scope of liquidation of the insolvent estate: c) (…) the sale, exchange or assignment of the company, establishment or elements of its assets (…)". (underlining ours).

[11] Wording given by article 234 of Law No. 66-B/2012, of December 31. The SIREVE (System for Recovery of Enterprises by Extrajudicial Means), an extrajudicial procedure created by Decree-Law No. 178/2012, of August 3.

[12] "Tax benefits are automatic or dependent on recognition; the former result directly and immediately from the law, the latter presuppose one or more subsequent acts of recognition".

[13] Nuno Sá Gomes, General Theory of Tax Benefits, CTF No. 359, p. 137.

[14] Exemplifying types of obligations - declarative, assessment and collection, calculation of the tax owed, delivery within the prescribed period in law - Report of the Working Group on Reassessment of Tax Benefits, 2005, No. 198 Cadernos CTF.

[15] Article 23 of the Stamp Duty Code initially provided: "The assessment of the tax is the responsibility of the taxpayers referred to in No. 1 of article 2." And article 19, No. 1, of the CIMT, in its original wording provided: "The assessment of IMT is at the initiative of the interested parties, for which purpose they must submit an official model declaration, duly completed".

[16] Articles 82 and 97 of Law No. 64-A/2008, of December 31.

[17] The same Law No. 64-A/2008, of December 31, 2009, added a number to article 49 of the CIMT, providing that "The notaries who execute public deeds and persons who, in any other form, intervene in authenticated private documents, or any other title, when such form is permitted as an alternative to the public deed, are jointly and severally liable with the taxpayer for the payment of the tax, provided that they have collaborated in the failure of assessment or collection of the tax or, at the date of such intervention, receipt or use, have not required the document certifying payment or exemption, if applicable".

[18] And it was commented: "it is important that this practice be generalized to all other tax facts, which could represent in terms of simplification for taxpayers who need to fill out the declaration and the errors it could avoid in the respective declarations". (Report cited, Cadernos CTF No. 201, p. 282).

[19] Proposals made in the said Report, ibidem, pp. 282 and 283.

[20] Report of the Working Group for the Study of Fiscal Policy, Cadernos CTF, No. 209, p. 522.

[21] No. 4 of article 2 of the EBF provides (since the original wording) that for the purposes of controlling the tax expenditure inherent to the tax benefits granted, the interested parties can be required to declare the exempt income earned, except in the case of generic and automatic tax benefits, cases in which the tax services can obtain the elements necessary for calculating the total tax that would be owed (underlining ours).

[22] Note that the application of article 65 of the CPPT, relating to the procedure for Recognition of tax benefits, only concerns benefits dependent on recognition (article 5 of the EBF) and not automatic benefits.

[23] "All persons, natural or legal, of public or private law, to whom tax benefits are granted, automatic or dependent on recognition, are subject to inspection by the Directorate-General of Taxes and other competent entities, for control of the verification of the requirements of the respective tax benefits and of compliance with the obligations imposed on the holders of the right to the benefits" (article 7 of the EBF). See also article 24 of the Stamp Duty Code "In the competent finance service, a file is organized in relation to each taxpayer in which the declarations and other elements that relate to the same are incorporated".

[24] In this same sense, see arbitral decision in proceeding No. 522/2016-T: "It is thus concluded that, if the tax benefit provided for in letter e) of article 269 of the CIRE were applicable to the situation of the present proceedings, it would always have the nature of an automatic tax benefit, not requiring any prior act of recognition by the AT. Reason by which the revocation of an administrative act cannot be invoked, as grounds for impugning the additional assessment of Stamp Duty, which the AT did not carry out (and which would be the recognition of the tax benefit provided for in letter e) of article 269 of the CIRE), as this is an automatic tax benefit, and it should rather be concluded that, in the exercise of the power-duty to control the requirements of the tax benefits, even if automatic (article 7, No. 1, of the EBF), the AT could always proceed to the assessment of the tax owed, within the statute of limitations period (article 45 of the LGT), as it came to do".