Process: 585/2016-T

Date: August 21, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

In Process 585/2016-T, the Portuguese Administrative Arbitration Centre (CAAD) examined whether stamp duty (Imposto de Selo) exemptions under Article 269(e) of the Insolvency and Company Recovery Code (CIRE) applied to real property acquisitions within insolvency proceedings. The claimant, A... LDA, challenged an official stamp duty assessment of €76,020.22 for 2013, arguing that the tax exemption provisions of CIRE Article 269(e) should apply to properties acquired through an insolvency plan. The company had acquired real properties originally transferred to C... S.A. as payment-in-kind (dação em pagamento) under an approved insolvency plan for B... Ltd. The Tax Authority defended the assessment, maintaining its interpretation of Article 269(e) was correct. A key procedural issue arose regarding the precise dates and manner of acquisition, as the administrative file contained contradictory information about whether the claimant directly acquired properties from the insolvency estate or through assignment of credits from C... S.A. The arbitral tribunal, constituted on 23 December 2016, requested certified documentation to clarify the transfer timeline, and the claimant provided a full certified copy of the Commercial Court sentence from 28 September 2012 approving the insolvency plan. The case raises important questions about the scope of tax exemptions in insolvency proceedings, particularly whether stamp duty relief extends to subsequent assignees of insolvency credits or only to direct transfers under court-approved plans. This decision has significant implications for tax treatment of corporate restructurings, insolvency transactions, and the interpretation of CIRE tax exemption provisions in complex multi-party scenarios involving credit assignments and property transfers.

Full Decision

ARBITRAL DECISION

I – REPORT

The Arbitrators Maria Fernanda dos Santos Maçãs (Presiding Arbitrator), Maria José Pires and Nuno Maldonado Sousa, appointed by the Ethics Council of the Administrative Arbitration Centre to form the present Arbitral Tribunal, hereby agree as follows:

On 28 September 2016, the company "A..., LDA.", holder of tax identification number..., with registered office at Street..., no...,...- ...Lisbon (hereinafter Claimant) filed a request for constitution of an arbitral tribunal, in accordance with and for the purposes of the provisions set out in Articles 2 and 10 of the Legal Framework for Arbitration in Tax Matters, approved by Decree-Law 10/2011 of 20 January (RJAT).

Through the request for constitution of the arbitral tribunal and for an arbitral award, the Claimant seeks the annulment of the official assessment of Stamp Duty (IS) for 2013, in the total amount of € 76,020.22 (seventy-six thousand and twenty euros and twenty-two cents), on the grounds of violation of the provisions of Article 269(e) of the Insolvency and Company Recovery Code (CIRE).

Indeed, not accepting the official assessment of Stamp Duty mentioned above, the Claimant requested the constitution of this arbitral tribunal, making the following claims:

a) Declaration of illegality and consequent annulment of the official assessment of Stamp Duty on the grounds of defect of violation of law by violation of the provisions of Article 269(e) of the CIRE;

b) Condemnation of the Tax Administration to refund the tax paid;

and

c) Condemnation of the Tax Administration to payment of compensatory interest, at the legal rate, until complete refund of the amount in question.

Three documents were attached to the petition.

Since the Claimant opted for non-appointment of an arbitrator, in accordance with the provisions of Article 6(2)(a) and Article 11(1)(b) of the RJAT, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the Ethics Council appointed as arbitrators of the collective arbitral tribunal Counselor Maria Fernanda dos Santos Maçãs, Dr. Maria José Pires and Dr. Nuno Maldonado Sousa, who communicated their acceptance of the appointment within the applicable deadline.

The parties were notified of this appointment, and no request for recusal of the appointment as arbitrator was made by any of the members of this tribunal.

Thus, in accordance with the provisions of Article 11(1)(c) and Article 11(8) of the RJAT, as amended by Article 228 of Law No. 66-B/2012 of 31 December, the collective arbitral tribunal was constituted on 23 December 2016.

On 3 February 2017, the Tax and Customs Authority (hereinafter "Respondent") filed a response in which it defended the maintenance of the official assessment of Stamp Duty on the grounds that its application embodied a correct interpretation of the provisions of Article 269(e) of the CIRE.

Given that in this case none of the purposes legally assigned to the meeting referred to in Article 18 of the RJAT were present, and taking into account the position taken by the parties in their pleadings, under the provisions of Article 16(c) and Article 19 of the RJAT, as well as the principles of procedural efficiency and prohibition of useless acts, the holding of this meeting was dispensed with, and the parties were notified that they could, if they wished, submit arguments. The Tribunal set 23 June as the deadline for the pronouncement of the arbitral decision, which was extended to 23 August 2017 by order of 18 June.

By order of 25 May, the Tribunal issued an order with the following content:

"In its initial request, the Claimant alleges having acquired the set of real properties it identifies, within the scope of the insolvency of company B..., Ltd. ("B..."). In its response, the TA did not contest the acquisition. From the Administrative File it appears that C..., S.A. ("C...") acquired the credits of the goods from the insolvent B..., Ltd.

On the other hand, from the Administrative File it appears, among other things, that the Claimant requested the assessment of Stamp Duty, identifying the transaction subject to tax by reference to documents it attaches and from these it is clear that it concerns a transfer to C..., but such documents are accompanied by a reference to the insolvency proceedings no. .../09...TYLSB.

The Administrative File also contains documents according to which C... assigned to A... the credits it held over B..., including the guaranty rights over the real properties transacted in the operation referred to in the contested assessment.

On a date not revealed in these proceedings but which was subsequent to 10-01-2012 and prior to 28-09-2012, A... was deemed qualified to intervene in the insolvency proceedings of B..., as assignee of the credits of C... over B... (within the scope of insolvency proceedings no. .../09...TYLSB).

Given that the proceedings, including the Administrative File, contain somewhat contradictory or imprecise information that raises doubts for this tribunal regarding the dates and manner of acquisition of the real properties by the Claimant, in the name of the principle of inquiries and material truth (Article 411 of the Civil Procedure Code), the Claimant is invited to attach to the proceedings a certified copy of the document that evidences the transfer of the real properties identified in the contested assessment."

By request of 2 June 2017, the Claimant attached to the proceedings a full certified copy (the file contained only copies of the decision portion) of the sentence delivered by the Commercial Court of Lisbon on 28 September 2012, within the scope of proceedings no. .../09...TYLSB.

Notified to exercise the right of reply, the Respondent said nothing.

Both parties waived the submission of written arguments.

II. PROCEDURAL CLARIFICATION

There are no preliminary issues to resolve.

The arbitral tribunal was regularly constituted.

The proceedings are not affected by any nullities.

The parties enjoy juridical personality and capacity and are legitimate.

All things considered, it is necessary to decide.

III. FACTUAL MATTERS

III.1. ESTABLISHED FACTS

With regard to the factual matters, it is important, first of all, to point out that the tribunal does not have to pronounce on everything that has been alleged by the parties; rather, it has the duty to select the facts that are relevant to the decision and to distinguish the proven facts from those not proven. All in accordance with Article 123(2) of the Code of Tax Procedure and Process and Articles 607(2), (3) and (4) of the Civil Procedure Code, applicable by virtue of Article 29(1)(a) and (e) of the RJAT. Thus, the facts relevant to the judgment of the case are chosen and delimited according to their legal relevance, which is established with regard to the various plausible solutions to the legal question(s) (cf. Article 596 of the Civil Procedure Code applicable by virtue of Article 29(1)(e) of the RJAT).

Now, taking into account the positions taken by the parties, the documentary evidence and the Administrative File attached to the proceedings, the following facts are deemed proven as relevant to the decision:

  1. In insolvency proceedings no. .../09...TYLSB that took place before the ... Court of the Commercial Court of Lisbon and in which the company "B..., Ltd." was the insolvent, a plan was approved which provided for the transfer by way of payment to C..., S.A., of the credits claimed by it, through the real properties described at fol. 20 of the certified copy attached to the present proceedings by the Claimant, and which was approved by sentence that became final on 12.04.2011 – cf. fol. 1/60 and 20/60 of the certified copy issued by the Commercial Court of Lisbon on 28.09.2012, attached to the proceedings by the Claimant;

  2. According to the certified copy referred to in the preceding item, the Claimant "A..., S.A." intervened in that insolvency proceedings as a creditor of the insolvent – cf. fol. 1/60 of the certified copy issued by the Commercial Court of Lisbon on 28.09.2012, attached to the proceedings by the Claimant;

  3. From fol. 6 and 6 v. of the Administrative File it appears that the Claimant "A..., S.A." requested in the said insolvency proceedings its qualification in substitution of the claiming creditor C..., S.A., a qualification that was deemed proper by sentence of 10.01.2012 and which declared "it qualified to intervene in the proceedings in the capacity of assignee of the credits of C... S.A. over B..., S.A.", according to the annex no. .../09...TYLSB-G, a decision that became final on 22.02.2012, as shown in the certified copy attached by the Claimant;

  4. On 20.02.2013, tax certificates were issued concerning the Municipal Tax on Onerous Transfers of Real Property and Stamp Duty relating to the real properties identified by the Claimant in item 7 of the request for constitution of the arbitral tribunal, without any tax assessment, mentioning as the acquirer of these real properties the Claimant and as the transferor C..., S.A., appearing in each of these certificates and in "observations" the mention "Proceedings no. .../09...TYLSB, of the Commercial Court of Lisbon (Qualification for assignment of credits)" – cf. fol. 20 to 25 of the A.F.;

  5. By means of Official Letter no. ..., of 26 June 2016, the Claimant was notified by the Finance Office of ... to request payment certificates for Municipal Tax on Real Property Transfers and Stamp Duty, the latter in the amount of 76,020.22 € – as per doc. 2 attached by the Claimant and fol. 130 of the A.F.;

  6. According to the "Information" attached to that notification, "The SP A..., Ltd., NIPC..., acquired from C..., SA, through the Commercial Court of Lisbon – ...Court (...) the property/properties identified below with exemption from Municipal Tax on Real Property Transfers and Stamp Duty in accordance with nos. 1 and 2 of Article 270 and subsection (e) of Article 269 respectively, both of the Insolvency and Company Recovery Code (...). Now, in the present case, it is found that the acquisition made by SP does not fall within the above cited, by virtue of the goods acquired not forming part of insolvency plans or within the scope of the liquidation of the insolvent estate of the previous holder (C..., SA), as this acquired the credits of the goods from the insolvent B..., Ltd. Thus, there is ground for an additional assessment of Municipal Tax on Real Property Transfers (...) and Stamp Duty (...)" – cf. doc. 2 attached by the Claimant and fol. 130 of the A.F.;

  7. The Claimant proceeded to payment of Stamp Duty in the amount of 76,020.22 € on 29 June 2016 – as shown in document no. 3 attached with the request for arbitral award.

III.2. UNPROVEN FACTS

As stated, with regard to the factual matters taken as established, the tribunal does not have to pronounce on everything that has been alleged by the parties; rather, it has the duty to select the facts that are relevant to the decision and to distinguish the proven facts from those not proven, as stated in Article 123(2) of the Code of Tax Procedure and Process applicable by virtue of Article 29(1)(a) and (e) of the RJAT. Thus, the facts relevant to the judgment of the case were, as stated above, chosen and delimited according to their legal relevance, there being no other alleged factual matters that are relevant to the proper composition of the procedural dispute.

IV. LEGAL MATTERS

In the Information that served as the basis for the order converting the provisional assessment into the final assessment, one can read, in relation to the scope of application of the exemption from Stamp Duty, in accordance with the provisions of Articles 270(1) and (2) and Article 269(e) of the Insolvency and Company Recovery Code (CIRE), among other things, that:

"1. For purposes of Stamp Duty, the exemption includes the sale, exchange or assignment of elements of the company's assets (fixed or current) provided that they are integrated in insolvency or payment plans or within the scope of the liquidation of the insolvent estate.

  1. For purposes of Municipal Tax on Real Property Transfers, real properties transferred in acts of sale, exchange or assignment of the company or of a business establishment, forming part of an insolvency or payment plan or carried out within the scope of the liquidation of the insolvent estate, provided that the real properties transferred are integrated in the whole of the company (that is, in case of transfer of its entirety) or, at least, integrated in the global and complete transfer of one of its business establishments.

  2. That the insolvent be a legal person (...)"

Now in the present case, it is found that the acquisition made by SP does not fall within the above cited, by virtue of the goods acquired not forming part of insolvency plans or within the scope of the liquidation of the insolvent estate of the previous holder (C..., SA), as this acquired the credits of the goods from the insolvent B..., Ltd. (...).

Against this reasoning the Claimant objects, arguing that it acquired the goods in question "within the scope of the insolvency proceedings of the legal person subsequently described – proceedings no. .../09...TYLSB, which took place before the ...Court of the Commercial Court of Lisbon-, acting in the capacity of its creditor, (...)".

The Respondent does not question the acquisition of the goods in question by the Claimant, but only whether they were acquired within the scope of insolvency proceedings and whether, in the context in which the acquisition took place, the requirements for exemption from Stamp Duty under subsection (e) of Article 269 of the CIRE are met.

Having the Claimant attributed various defects to the contested tax act, in addressing these the order of Article 124 of the Code of Tax Procedure and Process must be observed, applicable by virtue of Article 29(1)(a) of the Legal Framework for Tax Arbitration[1].

The establishment of any of the defects invoked by the Claimant will lead to the annulment of the tax acts. Thus, the defect of violation of law due to error regarding the legal premises on which the assessment depends will be analyzed first, insofar as it is the one that will lead to "the most stable or effective protection of the offended interests" and its possible establishment will prevent the renewal of the act, which does not occur with the annulment resulting from other defects.

Accordingly, the tribunal will first assess the defect of violation of law.

IV.1. Regarding the alleged defect of violation of law

The first question to be decided is whether the Claimant acquired or did not acquire the goods in question within the scope of an insolvency process, in order to be able to enjoy the right to exemption from Stamp Duty in accordance with Article 269(e) of the CIRE.

Let us then consider the provision in question which has the following content:

Article 269 of the CIRE - The following acts are exempt from stamp duty, where applicable, provided they are provided for in insolvency, payment or recovery plans or carried out within the scope of the liquidation of the insolvent estate:

a) Modifications of the maturity dates or interest rates of credits against the insolvency;

b) Increases in capital, conversions of credits into capital and disposals of capital;

c) The establishment of a new company or companies;

d) Transfer in settlement of company assets and assignment of assets to creditors;

e) The carrying out of financing operations, the transfer or assignment of the operation of company business establishments, the establishment of companies and the transfer of commercial establishments, the sale, exchange or assignment of elements of the company's assets, as well as the lease of goods;

f) The issue of bills or promissory notes.

(As amended by Law No. 66-B/2012 of 31 December - entering into force on 1 January 2013)

As stated in the reasoning of the contested Stamp Duty assessment (cf. A.F. fol. 2 and doc. 2 attached to the request for arbitral award), the Finance Office bases its refusal of the exemption, in this case, from Stamp Duty, on the consideration that the Claimant acquired the said real properties from C..., which, in turn, acquired them from B..., through that entity's insolvency proceedings, in the capacity of a secured creditor.

This reasoning, however, is not correct, as will now be demonstrated:

To C..., in the capacity of claiming creditor in the insolvency proceedings in question, the real properties in question were assigned by way of payment in settlement, as stated in the insolvency plan judicially approved.

It so happens that the credits of C... against the insolvent B... were assigned to the Claimant[2] which, by that fact, requested its qualification in the insolvency proceedings, in substitution of the creditor C..., as results from the sentence delivered in Proc. .../09...TYLSB-G, which is the annex relating to the qualification of the Claimant in the insolvency proceedings of B....

Under Article 577(1) of the Civil Code, "The creditor may assign to a third party a part or the whole of the credit, without the consent of the debtor, provided that the assignment is not forbidden by law or agreement of the parties and the credit is not, by the nature of the obligation itself, tied to the person of the creditor."

And Article 578(2) of the Civil Code provides that "The assignment of secured credits, when not made in a will and the security interest relates to real property, must be evidenced by public deed or authenticated private document."

In turn, Article 583(1) of the Civil Code provides that "(...) the assignment of credit entails the transmission to the assignee of the guaranties and other accessories of the right assigned, which are not inseparable from the person of the assignor."

And at the level of procedural law, the qualification of the acquirer or assignee is provided for in Article 356 of the Civil Procedure Code.

Thus, in the present case, the qualification of the Claimant, in the insolvency proceedings identified above, in substitution of C..., S.A., to whom the real properties identified in the insolvency plan approved and judicially confirmed had been assigned by way of payment in settlement, reflects the acquisition of these real properties within the scope of the liquidation of the insolvent company's assets in substitution of the claiming creditor, as expressly stated in the sentence that decreed the qualification of the Claimant in that insolvency proceeding.

Therefore, it was within the scope of the insolvency proceeding that the Claimant acquired the real properties in question, which are part of company B...'s assets, in substitution of C....

Indeed, in this respect, no argument to the contrary is presented by the TA in its response, which is based essentially on the understanding that the impediment to the application to this case of the exemption provided for in Article 269(e) of the CIRE results from the fact that only "some goods in the process of liquidation of the insolvent estate" were transferred to the Claimant, i.e., not all the real properties of which the insolvent was the owner were sold, as stated in paragraphs 9, 10, 44 and 45 of the TA's response.

However, insofar as it is indeed the acquisition of real properties forming part of the insolvent "B..., Ltd."'s assets, even if through qualification as assignee of the claimed credits, the exemption from Stamp Duty enshrined in Article 269(e) of the CIRE applies fully, since these real properties were acquired within the scope of the liquidation of this company's assets.

The understanding of the TA underlying the issuance of the contested Stamp Duty assessment therefore lacks merit, since the Claimant did not acquire the real properties in question from C..., but rather from the insolvent "B..., Ltd.", through substitution of that claiming creditor's position within the scope of the insolvency plan approved in that proceeding.

Finally, the TA is also not correct when in its response it argues that there is a violation of Article 270(2) of the CIRE, a provision that establishes an exemption from Municipal Tax on Real Property Transfers in cases where "acts of sale, exchange or assignment of the company or of a business establishment" occur, provided that such acts are carried out within the scope of an insolvency plan or the liquidation of the insolvent estate.

Against this interpretation the Respondent objects, defending that the provision quoted above is solely and exclusively applicable to onerous transfers of real properties integrated in the whole of the company or integrated in the global and complete transfer of one of its business establishments.

The issue underlying here thus arises from an interpretative doubt related to the text of Article 270(2), which although provided for Municipal Tax on Real Property Transfers must also be invoked here. Specifically, the underlying question is whether the reference to "acts of sale" should be understood as referring to any "act of sale", provided it is inserted within the scope of an insolvency plan, recovery or the liquidation of the insolvent estate, or whether, on the contrary, it should refer only to the "sale of the company" or to the "sale of the business establishments" integrated in it.

As the Claimant points out, the question has been widely discussed in judicial forums, and the Supreme Administrative Court has pronounced itself on it several times, namely in the Decision of 30.05.2012, proceedings no. 0949/11, in the Decision of 17.12.2014, proceedings no. 01085/13 and in the Decision of 18.11.2015, proceedings no. 01067/15 (all available at http://www.dgsi.pt/), where it was decided that "are exempt from Municipal Tax on Real Property Transfers not only the sales of the company or business establishments thereof, as universalities of goods, but also the sales of elements of its assets, provided they are integrated within the scope of an insolvency or payment plan or carried out within the scope of the liquidation of the insolvent estate".

And the Supreme Administrative Court further decided, in the identified proceeding:

"The goods that form the insolvent estate are the goods from the patrimony of the declared insolvent company and no others belonging to another natural or legal person. By definition, the goods that are sold in insolvency proceedings are goods of the insolvent or which, at least, were so considered. There is no sale of goods other than those that formed part of the insolvent's patrimony.

The legislator, to ensure this is the case, even provides for a reclamation procedure for the restitution and separation of goods intended to separate from the estate goods of third parties wrongfully seized, or those of which the insolvent is not the full and exclusive owner, or which are foreign to the estate or incapable of seizure for the estate – Article 141 of the Insolvency and Company Recovery Code. Furthermore, in the liquidation chapter of the Insolvency and Company Recovery Code there are clear and precise indications of the goods that can be sold in that liquidation and those that should be temporarily or permanently excluded from sale, with only the insolvent's rights over goods of which it is co-owner being liquidated in the insolvency proceedings – Article 159 – and the sale of goods of disputed ownership not proceeding until the final judgment defining the ownership of the property right with respect to such goods becomes final – Article 160.

The insolvency proceeding is – Article 1 of the Insolvency and Company Recovery Code – a universal execution proceeding whose purpose is the satisfaction of creditors in the manner provided for in an insolvency plan designed to promote the recovery of the company included in the insolvent estate, or, when such is not possible, to liquidate the patrimony of the insolvent debtor with the subsequent distribution of the product obtained to the creditors. The insolvent estate comprises all the debtor's patrimony as of the date of declaration of insolvency, as well as the goods and rights acquired by it during the proceedings and also those whose non-attachment is not absolute and are voluntarily presented by the debtor – Article 46 of the Insolvency and Company Recovery Code - whereby it cannot be conceived that there are goods forming part of the insolvent estate of a declared insolvent company that can be classified in a category of goods with no relationship whatsoever to that company or business establishment."

Being an interpretative question, let us examine, in a first analysis, what results solely from the letter of the law.

Now, the expression that appears in Article 270(2) of the CIRE "of the company or business establishments thereof" appears only after the reference in the same provision to "acts of...assignment". As a consequence, from a purely literal analysis, it can easily be argued that the expression "of the company or business establishments thereof" appears as a direct complement not only of acts of assignment, but also of acts of sale and exchange, thus determining that only acts of sale of the company or of business establishments thereof would be covered by the exemption.

However, as the Supreme Administrative Court states in the aforementioned Decision of 30.05.2012, Proc. 0949/11:

"(...) although the wording of the provision is ambiguous, lending itself to the interpretation that both the "sale" and the "exchange," together with the "assignment," relate to the company or to business establishments thereof, such interpretation should be rejected lest one conclude that if it were so, there would be an inexplicable tautology, since the "assignment" of the company (or of the business establishment) is nothing more than its "sale," it being deemed that the only plausible interpretation of the said provision is the one that understands it as relating the exemption to acts of sale and exchange of the real properties themselves, including acts covered by the assignment of the company or of a business establishment thereof."

Indeed, making use of the historical and teleological element of interpretation of the provision, the interpretation given to the provision by the Supreme Administrative Court appears to be the interpretation that best aligns with the purpose intended by the legislator, as it is the one through which the provision in question externalizes its most beneficial, salutary and advantageous meaning for the interests it is intended to protect. (in this sense, MANUEL DE ANDRADE, Essay on the Theory of Interpretation of Laws, Arménio Amado, editors, Coimbra, 1978).

Indeed:

As referred to in the Decision of the Supreme Administrative Court of 17-12-2014, Proc. 01085/13, which is cited hereafter in the relevant part:

"Taking into account the purpose that the legislator intends to achieve with the granting of such exemption - to promote and support the quick sale of goods that make up the insolvent estate for obvious reasons of creditors' interest, but also of the public interest in resuming the normal functioning of the business world in which each insolvency proceeding presents itself as a disruptive element, giving «a bonus» to whoever acquires the real properties that make up the insolvent estate – buy these goods at a cheaper price because they do not have to pay the Municipal Tax on Real Property Transfers that would be due in the acquisition of a similar real property outside the insolvency proceeding – and that will be sold in the liquidation phase, the ambiguous text of Article 270(2) can be the subject of a clearer and unambiguous reading without resorting to any extensive interpretation. It suffices that we ask ourselves whether, to achieve the purpose defined before, it makes any difference whether the company is being sold as a whole with all its assets and liabilities, whether one or more of the commercial establishments that comprised it are being sold, whether goods that were part of its patrimony but were not used in its commercial operations are being sold – for example a real property received in payment of a debt of which the insolvent company was the creditor – so that one is faced with a sale that is carried out within the scope of the liquidation of the insolvent estate? And, if in the same situations it is not sales but exchanges or assignments – it being that this word must have been used in an improper sense inasmuch as when associated with the business world it usually refers to the assignment of operations, assignment of the commercial establishment, similar to lease and not to disposal, and in the Insolvency and Company Recovery Code it is shown to be used also regarding the acquisition of goods by creditors -?. We believe the answer can only be negative."

Indeed, the ratio legis of the provision appears to be the incentive for the acquisition of real properties belonging to companies in insolvency, so as to accelerate the liquidation of assets. This allows creditors to satisfy their credits in a timely manner and to resolve the uncertain situation of the insolvent company, the resolution of which is in the interest of all involved, but also benefits public order and peace, while encouraging economic activity, which is why tax benefits are granted for the transfer of real properties from its assets.

To such an extent that, and in accordance with what appears to us to be the purpose of the regime, the Supreme Administrative Court also, in its Decision of 18.11.2015, delivered in the scope of proceedings no. 01067/15, discerns that "(...) the objective that presides over the teleology of the norm will equally be pursued when the acquisition has as its object elements of the company's assets, it not becoming necessary that the object be the company or business establishments thereof integrated in the insolvency plan".

An identical interpretation appears to result from the meaning and extent of the legislative authorization granted to the Government, contained in Law No. 39/2003 of 22 August, which corroborates this understanding, under which the CIRE was approved. Indeed, its Article 9(3) provides that "Finally, the Government is authorized to exempt from municipal property transfer tax the following transfers of real properties, integrated in any insolvency or payment plan or carried out within the scope of the liquidation of the insolvent estate: (...) c) (...) of the sale, exchange or assignment of the company, business establishment or elements of its assets (...)".

This was, moreover, the understanding of the Supreme Administrative Court, advocated in the Decision of 30.05.2012, Proc. 0949/11, which states that:

"Article 270(2) of the CIRE, whose wording is not clear as to the scope of the Municipal Tax on Real Property Transfers exemption stated therein, must be interpreted in accordance with Article 9(3)(c) of Law No. 39/2003 of 22 August, because among two meanings of the law, both with support – at least minimal – in its respective letter, the interpreter must opt for the one that makes it compatible with the constitutional text (interpretation in conformity with the Constitution), to the detriment of the interpretation that would render it unconstitutional."

Appealing again to the historical element, it is also worth noting that the legislator, in point 49 of the preamble of the CIRE, further stated that the existing regimes in the Code of Special Procedures for Company Recovery and Bankruptcy (CPEREF) were maintained, in essence, as to the exemption of fees and tax benefits.

Now, Article 121(2)(c) of the CPEREF exempted from municipal property transfer tax "the transfers of real properties integrated in any of the company recovery measures that result, namely, from the sale, exchange or assignment of elements of the company's assets" (emphasis ours).

In this way, and based on the preamble of the CIRE itself, the provision currently contained in Article 270(2) of the CIRE should also follow the same interpretative line as its predecessor.

The understanding of this tribunal is thus completely consistent with the recurring jurisprudence of the Supreme Administrative Court, and is also that which has been upheld by the more recent tax arbitration jurisprudence, namely that resulting from proceedings nos. 95/2015-T, 99/2015-T and 123/2015-T (whose decisions are available at http://www.caad.org.pt/).

Reproducing what was stated in the Arbitral Decision, delivered in proceedings no. 81/2016-T, "Thus, without need for further consideration, in a situation where there is settled and established jurisprudence, the understanding is upheld here that acts of sale of real properties carried out within the scope of insolvency or payment plans or recovery or carried out within the scope of the liquidation of the insolvent estate are not subject to Municipal Tax on Real Property Transfers, even if they are "mere" elements of the company's assets and not real properties integrated in the whole of the company or in the global and complete transfer of one of its business establishments."

Based on the above, it is concluded that the tax act of official assessment of Stamp Duty for the year 2013 is illegal, fundamentally due to the defect of violation of law, due to error regarding the legal premises on which the assessment depends, embodied in the violation of Article 269(e) of the CIRE, which justifies its annulment under the terms of Article 135 of the Code of Administrative Procedure, applicable under the terms of Article 29(1)(d) of the RJAT and Article 2(c) of the Tax General Law.

The request for arbitral award thus proceeds, with the consequent annulment of the official assessment that is the subject of the impugnation.

IV.2. Regarding the claim for compensatory interest

The Claimant combines with the request for annulment of the tax act which is the subject of the present proceedings, the request for condemnation of the TA to payment of compensatory interest for the undue payment of the tax act under analysis.

It is a prerequisite for the attribution of compensatory interest that the error in which the TA labored is imputable to it[3].

In the present case, it is manifest that, as a consequence of the illegality of the assessment act, for the reasons pointed out previously, the prerequisites for the right to compensatory interest are satisfied.

Although the judicial impugnation process is essentially a mere annulment process – as provided in Articles 99 and 124 of the Code of Tax Procedure and Process – a condemnation of the tax administration to payment of compensatory interest can be rendered therein.

On the other hand, there is ground for refund of the tax paid by the Claimant, by force of the provisions of Articles 24(1)(b) of the RJAT and 100 of the Tax General Law, as this is essential to "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed".

That was also the understanding of the arbitral tribunal constituted in the scope of proceedings no. 48/2013-T, where there were also claims for refund and condemnation to payment of compensatory interest. That tribunal concluded that: "The request for constitution of an arbitral tribunal has as a corollary that it will be in the arbitral process that the legality of the enforceable debt will be discussed, so that, as results from the express wording of Article 117(1) of the Code of Tax Procedure and Process, the arbitral process is also the appropriate one to assess the claim for compensation for undue guarantee."

Applying the doctrine of that award, it is considered that the Claimant is entitled to compensatory interest on the amount unduly paid, under the terms of Article 43(1) and (3)(c) of the Tax General Law and Article 61 of the Code of Tax Procedure and Process.

Compensatory interest is due and calculated based on the amount unduly paid, until its complete return to the Claimant, at the legal rate, under the terms of Articles 43(1) and (4) and Article 35(10) of the Tax General Law, Article 61 of the Code of Tax Procedure and Process and Article 559 of the Civil Code and Ordinance No. 291/2003 of 8 April (without prejudice to any subsequent changes to the legal rate).

V. DECISION

In these terms, it is decided in this Arbitral Tribunal:

a) To judge the request for arbitral award to be well-founded;

b) To declare the illegality of the tax act of official assessment of Stamp Duty and, consequently, to annul the Stamp Duty assessment for the year 2013;

c) To condemn the Tax and Customs Authority to payment of compensatory interest to the Claimant, in the terms mentioned.

VI. VALUE OF THE CASE

The value of the case is set at € 76,020.22, pursuant to Article 97-A(1)(a) of the Code of Tax Procedure and Process, applicable by force of Articles 29(1)(a) and (b) of the Legal Framework for Tax Arbitration and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings.

VII. COSTS

The amount of the arbitration fee is set at € 2,448.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Respondent, since the request was entirely well-founded, pursuant to Articles 12(2) and 22(4), both of the Legal Framework for Tax Arbitration, and Article 4(4) of the said Regulation.

Let it be notified.

Lisbon, 21 August 2017.

The Presiding Arbitrator

(Fernanda Maçãs)

The Arbitrator

(Maria José Pires)

The Arbitrator

(Nuno Maldonado Sousa)

Document prepared by computer, pursuant to Article 138(5) of the Civil Procedure Code (CPC), applicable by cross-reference to Article 29(1)(e) of the Legal Framework for Tax Arbitration.

The wording of this decision follows the old spelling.

[1] Jorge Lopes de Sousa, Commentary on the Legal Framework for Tax Arbitration, in Guide to Tax Arbitration, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, 2013, Almedina, p. 202.

[2] As stated in the public deed of assignment of credits attached to the A.F.

[3] Cf. Article 43 of the Tax General Law.

Frequently Asked Questions

Automatically Created

Is stamp tax (Imposto de Selo) exempt for companies under insolvency proceedings in Portugal?
Article 269(e) of the Portuguese Insolvency Code (CIRE) provides for stamp duty exemptions in insolvency proceedings. In Process 585/2016-T, the claimant invoked this provision to challenge a €76,020.22 stamp duty assessment on real properties acquired through an insolvency plan. The exemption's applicability depends on whether the acquisition qualifies under the statutory requirements, including whether it occurred directly under a court-approved insolvency plan or through subsequent credit assignments.
What does Article 269(e) of the Portuguese Insolvency Code (CIRE) provide regarding tax exemptions?
Article 269(e) of CIRE establishes tax exemptions for transactions occurring within the framework of insolvency proceedings. While the arbitral decision excerpt does not quote the article's exact text, the case demonstrates it relates to relief from stamp duty on property transfers effectuated through court-approved insolvency plans. The Tax Authority and the claimant disputed the correct interpretation of this provision, particularly regarding its application to transfers involving payment-in-kind (dação em pagamento) and subsequent credit assignments.
Can the Tax Authority issue an official stamp tax assessment during an insolvency process?
The Tax Authority can issue official stamp duty assessments even when transactions occur within insolvency proceedings. In Process 585/2016-T, the Tax Authority issued an official assessment of €76,020.22 for 2013, which the taxpayer challenged as violating CIRE Article 269(e) exemption provisions. The legality of such assessments depends on whether the specific transaction qualifies for the insolvency exemption, which requires examining the nature of the transfer, its approval under the insolvency plan, and whether the taxpayer meets the statutory requirements for relief.
How did CAAD rule on the legality of the stamp tax assessment in process 585/2016-T?
The complete ruling in Process 585/2016-T is not provided in the available excerpt, which concludes during the factual findings section. The arbitral tribunal, composed of three arbitrators and constituted on 23 December 2016, examined whether the stamp duty assessment violated Article 269(e) of CIRE. The tribunal requested additional documentation to clarify the acquisition timeline and circumstances, indicating careful scrutiny of whether the exemption applied to the claimant's specific situation involving credit assignment and property transfers through an approved insolvency plan.
Are companies in insolvency entitled to a refund and compensatory interest on unlawfully collected stamp tax?
Under Portuguese law, when tax assessments are annulled as illegal, taxpayers are generally entitled to refund of amounts paid plus compensatory interest at the legal rate until complete reimbursement. In Process 585/2016-T, the claimant specifically requested condemnation of the Tax Authority to refund the stamp duty paid and payment of compensatory interest. However, whether such relief was granted depends on the tribunal's final decision regarding the applicability of the CIRE Article 269(e) exemption, which is not included in the available excerpt of the arbitral decision.