Process: 764/2014-T

Date: May 29, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This arbitral decision addresses a jurisdictional challenge and substantive dispute concerning IMT (Property Transfer Tax) exemptions in insolvency proceedings. Company A acquired urban properties from an insolvent estate for €1,000,100 and was initially granted exemption under Article 7 CIMT (resale exemption), requiring resale within a specific timeframe. When the company failed to resell the properties within the deadline, it requested IMT assessment on 28 July 2014, outside the legal timeframe under Article 34(1) CIMT. Before the Tax Authority issued the disputed €65,006 assessment, the claimant requested conversion of the exemption to the insolvency exemption under Article 270(2) CIRE, citing favorable Supreme Administrative Court (STA) jurisprudence. The Tax Authority raised a preliminary objection arguing that CAAD arbitral tribunals lack material jurisdiction over exemption recognition matters, as Article 2(1)(a) RJAT limits jurisdiction to tax assessments, not exemption determinations. The AT cited Information .../2007 from DSIMT indicating that Article 270(2) CIRE exemption applies only when an entire company or independent establishment is sold as a universality, not individual assets. The claimant countered with STA decisions (949/11 and 765/13) supporting broader interpretation of the insolvency exemption. This case raises critical questions about the scope of arbitral jurisdiction when exemption denial leads to tax assessment, the applicability of CIRE exemptions to piecemeal asset sales from insolvent estates, and whether taxpayers can retroactively convert between different exemption regimes after failing to comply with conditions of the initially granted exemption.

Full Decision

ARBITRAL DECISION

I - REPORT

A..., SA, taxpayer no. ..., with registered office at Rua ..., no. ... – Room ..., in the municipality of ..., notified on 7-10-2014, by official letter no. ... from the Finance Service of Braga-1 of the assessment of IMT in the amount of €65,006.00, hereby requests arbitral pronouncement seeking the declaration of illegality of such assessment.

The claimant alleged, in summary and in essence:

a) Proceedings were conducted in the 2nd Civil Court of the Tribunal of the county of Guimarães with case no. .../... in which the insolvency of B..., Ldª, taxpayer no. ..., which had its registered office in the place of ..., of the parish of ..., of the municipality of Guimarães was declared – Doc. 1.

b) The insolvent estate comprised various urban properties, which were disposed of in the course of the liquidation of the insolvent estate.

c) All properties were acquired by the insolvent, for the sum of €1,000,100.00, as per deed of 14 June 2011, a copy of which is attached – Doc. 2

d) Before that transfer, the Claimant was granted exemption from stamp duty under item 1.1 of the Schedule, based on the provisions of Article 269 of the CIRE (doc. 3).

e) On the same date, since the Tax and Customs Authority (AT) did not recognize the claimant's exemption from IMT based on the provisions of no. 2 of Article 270 of the CIRE, the provisions of Article 7 of the CIMT were invoked, on the basis of which the exemption was granted to the claimant (Doc. 4).

f) Furthermore, although the claimant intended to resell such property, it was not possible to do so within the timeframe referred to in no. 5 of Article 7 of the CIMT.

g) The claimant, on 28 July 2014 and outside the timeframe referred to in no. 1 of Article 34 of the CIMT, requested the assessment of IMT on the ground that such property had not been resold.

h) Subsequently and before the disputed assessment was made, the claimant requested that such payment request be considered null and void and the conversion of the initially granted exemption to the provisions of no. 2 of Article 270 of the CIRE, based on the jurisprudence contained in the Decisions of the STA of 30 May 2012 and 3 July 2013, in case nos. 949/11 and 765/13, reported by Counsellors Isabel Marques da Silva and Fernanda Maçãs.

i) The AT made no pronouncement on such request, having made the assessment that is now being disputed.

j) According to information provided, the AT invokes, for the non-granting of the exemption, instructions transmitted by Information no. .../2007, of the DSIMT, pursuant to which there would be exemption from IMT only if the company had been sold in its entirety or an establishment thereof that would constitute an independent company.

Notified, the AT presented its response and raised the exception of lack of material jurisdiction of the Arbitral Tribunals constituted within the framework of CAAD and, without waiving this, contested the grounds of the request for arbitral pronouncement.

The AT alleged, in essence:

A – Exception of lack of material jurisdiction

a) Paragraph a) of no. 1 of Article 2 of the RJAT determines that the jurisdiction of arbitral tribunals comprises the appraisal of the declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account.

b) And Article 4 of the RJAT states that "The binding of the tax administration to the jurisdiction of the tribunals constituted under the terms of this law depends on a regulation of the Government members responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered."

c) That is, the appraisal of matters relating to the recognition of tax exemptions and benefits is not within the scope of the material jurisdiction of the Arbitral Tribunal.

d) It follows from the request and the cause of action submitted that the Claimant's claim consists in the recognition of the exemption provided for in Article 7 of the Municipal Tax Code on Onerous Transfers of Real Property (CIMT).

e) Thus, from the legal provisions above cited, in particular the provisions of Articles 2 of the RJAT, the arbitral tribunal is without material jurisdiction to appraise and decide the Claimant's request or to know of the matters relating to it.

f) In fact, the tax acts relating to the recognition of tax exemptions constitute distinguishable acts from the tax procedure, susceptible to reaction by taxpayers through appropriate means, and the tax assessment resulting therefrom cannot be challenged through judicial review or, in the case at hand, through a request for arbitral pronouncement, as is referred to, for example, in the jurisprudence set forth in the Decision of the STA no. 0188/09, of 09/09/2009.

g) In arbitral process no. 17/2012-T, of 14 May 2012, the following was considered:

"In fact, the lack of binding of the Tax and Customs Authority to the arbitral tribunal results in the immediate impossibility of the effectiveness as to third parties of a judgment which, if it had been rendered by this tribunal in the matters excluded, would produce no effects on the party that would have to execute it, thus constituting, therefore, lack of jurisdiction, which is delimited according to the subject-matter and therefore constitutes the material incompetence of this tribunal.

It is, therefore, unequivocal to us that the lack of jurisdiction of the tribunal to settle the dispute effectively constitutes the dilatory exception of incompetence and not any other, making, given the arbitral nature of the tribunal, an integrated reading of no. 1 of Article 2 of the RJAT, with no. 1 of its Article 4 and, also, with the aforementioned Article 2 of the Binding Regulation above transcribed." (Emphasis ours).

h) Also the decision rendered in Arbitral Process no. 310/2014-T, of 26 November 2014, concluded in favor of the exception of absolute lack of material jurisdiction of the Arbitral Tribunal.

There it was written:

"Now, as has been the constant jurisprudence of this Tribunal, the Respondent is not bound to the Jurisdiction of the CAAD regarding the matters petitioned by the Claimant (...)."

i) Considering thus that the AT is not bound to arbitral jurisdiction regarding acts of recognition of exemptions in tax matters, it must be concluded that the arbitral tribunal herein lacks jurisdiction to decide the present dispute, and consequently, the tribunal must abstain from knowing or pronouncing itself on any questions relating to the recognition of IMT exemption at issue herein.

B) Defense by contested claims

j) On 08.09.2014 the Finance Service of Braga notified the Claimant as follows in accordance with the excerpt copied and which is part of the administrative proceeding attached herein and reproduced herein in its entirety for all due and legal effects:

[Text of notification]

k) Attached to the notification was transmitted the following Calculation Memorandum:

[Calculation details]

l) The notification was sent to Rua …. no. … – … Room …, …-… … and was returned with the indication of "moved away."

m) On 19.09.2014 the second notification of the Claimant was made by registered mail with proof of receipt, the receipt of which was signed on 09.10.2014 as shown in the administrative proceeding.

n) The Claimant alleges, cf. in Article 8 of the administrative proceeding, that it requested that the IMT assessment request be considered null and void and the conversion of the initially granted exemption to the exemption referred to in no. 2 of Article 270 of the CIRE, a request to which the AT would not have pronounced itself.

o) However, such request does not appear in the administrative proceeding, nor does the claimant attach a copy or proof of delivery of the same or of the response that the AT may or may not have made, for which reason what is referred to in Articles 8 to 10 must be regarded as unestablished matter because unproven.

p) The Claimant benefited from the exemption provided for in Article 7 of the CIMT;

q) No defect or illegality can be imputed to the recognition of the exemption since it resulted directly from the application of the law.

This Tribunal was constituted on 20-1-2015, with the appointment of arbitrators by the Deontological Council of CAAD under the terms of Article 11 of the RJAT [Decree-Law no. 10/2011, of 20-1 – version introduced by Law no. 66-B/2012, of 31-12].

Preliminary determination

The material jurisdiction of this Tribunal

The respondent (AT) raises the exception of lack of material jurisdiction of the Tribunal, alleging, in summary, that "the appraisal of matters relating to the recognition of tax exemptions and benefits is not within the scope of the material jurisdiction of the Arbitral Tribunal" (art. 5 of the defense).

Responding to the exception [and only in that part is the response presented admitted], the claimant alleges that the tax act that is intended to be annulled is encompassed in paragraph a) of Article 2 of the RJAT and in paragraph a) of no. 1 of Article 97 of the CPPT, not being one of the acts provided for in cited no. 1 of Article 97 to which the ATA is not bound.

Deciding the exception

The subject of these proceedings is not a matter of recognition of an exemption, but rather the conversion of an automatic exemption.

The Claimant's claim is not, in truth, the recognition of an IMT exemption, contrary to what the AT asserts in its defense (arts. 6 and et seq.).

As the respondent appears to admit, the exemptions referred to in Article 7 of the CIMT are of automatic recognition (arts. 28, 32 and 33 of the Defense).

Therefore, what is questioned and the subject of the request is the assessment act resulting from the wrongful disregard, on the part of the AT, of an automatic exemption to which the Claimant considers itself entitled.

Therefore, and without other, unnecessary, considerations, the exception is without merit and this Tribunal is found to be materially competent to settle the dispute and is regularly constituted, under the terms of Articles 2 no. 1 paragraph a), 5 and 6 no. 1 of the RJAT.

The parties have standing and capacity to sue, are legitimate and are legally represented, under the terms of Articles 4 and 10 of the RJAT and Article 1 of Regulation no. 112-A/2011, of 22 March.

It is necessary to appraise and decide on the merits of the request.

II - GROUNDS FOR DECISION

SUBJECT-MATTER OF FACT

Proven facts

The Tribunal considers the following facts as proven:

a) Proceedings were conducted in the 2nd Civil Court of the Tribunal of the county of Guimarães with case no. …/… in which the insolvency of B..., Lda., taxpayer no. …, which had its registered office in the place of …, of the parish of …, of the municipality of Guimarães was declared, by judgment of 9-3-2004, which became final on 3-5-2004 (cf. judicial certificate in the administrative proceeding);

b) By public deed executed on 14-07-2011 between C…, in his capacity as judicial liquidator of the insolvent estate of B..., Lda., and D…, in his capacity as sole administrator and in representation of the claimant, A..., Lda., the latter acquired from the former, by purchase and for resale, the urban properties registered in their respective property records under the articles …, …, …, …, … and …, … and …, for the total price of 1,000,100.00 (Cf. document attached to the proceedings and not contested);

c) Before this transfer, the Claimant was granted exemption from stamp duty under item 1.1 of the Schedule, based on the provisions of Article 269 of the CIRE – "transfers integrated in insolvency or payment plans or carried out in the course of the liquidation of the Insolvent Estate (Cf. document of assessment attached to the proceedings);

d) The Claimant benefited from the exemption from IMT granted under the provisions of Article 7 of the CIMT.

e) On 28-07-2014 the Claimant, by virtue of not having resold the aforementioned properties within the period of 3 years, requested of the Head of the Finance Service of Braga 1 the assessment of IMT that appeared to be due for the properties registered in the property record under the articles …, …,…,…, …, …, … and ….

f) On 31-07-2014 the Claimant requested of the Head of the Finance Service of Braga 1 that such assessment request be considered null and void and the conversion of the initially granted exemption to the exemption referred to in no. 2 of Article 270 of the CIRE, having there invoked the jurisprudence contained in the Decisions of the STA of 30 May 2012 and 3 July 2013, in case nos. 949/11 and 765/13.

g) On 08-09-2014 the Finance Service of Braga notified the Claimant to proceed with the payment of IMT, in the amount of € 65,006.50, on the ground that the lapse of the exemption provided for in Article 7 of the CIMT had occurred (cf. document of assessment in the proceedings).

h) And attached to such notification was transmitted the calculation memorandum.

i) The claimant made payment of the amount of IMT assessed and compensatory interest (all totaling €65,106.24) on 3-11-2014 – Cf. document in the proceedings.

Unproven facts

There are no essential facts unproven relevant to the decision.

Grounds for the subject-matter of fact given as proven and unproven

With regard to the subject-matter of fact, the Tribunal does not, in the first place, have to pronounce itself on everything that was alleged by the parties, it being rather its duty to select the facts that matter for the decision and to distinguish the proven matter from the unproven [(cf. Article 123 no. 2 of the CPPT and Articles 607 of the CPC, applicable ex vi of Article 29, no. 1, paragraphs a) and e) of the RJAT)].

Thus, the facts pertinent to the judgment of the case are chosen and delineated according to their legal relevance, which is established in consideration of the various plausible solutions of the question(s) of law (cf. Article 596 of the CPC, applicable ex vi Article 29, no. 1, paragraph e) of the RJAT).

Furthermore, the Tribunal took into consideration, in forming its conviction, the critical analysis of the positions assumed by the parties, the documentary evidence mentioned and attached to the proceedings as well as the administrative proceeding attached by the AT.

Regarding in particular the proof of the request for conversion of the exemption, what the proceedings and documents show is that on 28-04-2015 the Claimant requested of the Tribunal the attachment of a copy of the request, dated 31-07-2014, for conversion of the "initially granted exemption to the exemption referred to in no. 2 of Article 270 of the CIRE", such attachment having been admitted and the document not contested.

There it is requested of the Head of the Finance Service of Braga-1 that it "deign to consider null and void the request of 28 of the current requesting the assessment on the basis of non-resale of the properties", sustaining that the interpretation of no. 2 of Article 270 of the CIRE made by the AT "is not in accordance" with the interpretation adopted by the STA in the decisions of 30-05-2012, case 949/11, and of 03-07-2013, case 765/13.

Hence it is concluded that before the disputed assessment was made, the claimant requested that "(…) such payment request be considered null and void and the conversion of the initially granted exemption to the provisions of no. 2 of Article 270 of the CIRE, based on the jurisprudence contained in the Decisions of the STA of 30 May 2012 and 3 July 2013, in case nos. 949/11 and 765/13, reported by Counsellors Isabel Marques da Silva and Fernanda Maçãs (…)".

II – GROUNDS FOR DECISION (Continued)

The Law

The question is whether the assessment is tainted with illegality due to violation of the provisions of Article 270 of the CIRE (Code of Insolvency and Company Recovery approved by Decree-Law no. 53/2004 and successive amendments).

There it provides:

"Article 270

Benefit regarding the municipal tax on onerous transfers of real property

1 – (...)

2 – Equally exempt from the municipal tax on onerous transfers of real property are the acts of sale, exchange or transfer of a company or of establishments thereof integrated within the scope of an insolvency or payment plan or carried out in the course of the liquidation of the Insolvent Estate (...)".

This rule succeeds Article 121-2/c) of the CPEREF and, just as was the case under that regime, also under the current one, the cited exemption is granted having regard to the acts themselves, with benefit both for the debtor company and for the creditors or acquirers of the alienated assets, the quality of the person or entity subject to payment of the tax being irrelevant (Cf. Luís Carvalho Fernandes and João Labareda, Code of Processes for Company Recovery and Insolvency Annotated, 3rd Edition, p. 329).

As set forth in the preamble of the diploma that approved the CIRE (Decree-Law 53/04, of 16-3), "there are maintained, in essence, the regimes existing in the CPEREF regarding the exemption of fees and tax benefits, as well as the indication of criminal violation" (Cf. 49 of the preamble of Decree-Law no. 53/2004, of 18 March, which approved the CIRE).

Under the diploma that approved the CPEREF (Decree-Law no. 123/93, of 23 April), "besides fairly favored treatment of the two processes covered by the diploma in the field of court costs, this decree-law also adopts a set of incentives of a fiscal nature, through which it seeks especially to avoid undue penalties or serious inconveniences for the legal, economic or financial operations in which the recovery process can unfold."

"To that end, certain charges of a fiscal or parafiscal character relating to the legal transactions susceptible to constituting the means of recovery approved by the creditors have been set aside, having particularly in mind stamp duty, municipal tax, municipal property transfer tax and the fees themselves owed for the acts".

It would clash with what is sought by the legislator – maintenance in essence of the regimes existing in the CPEREF regarding the exemption of fees and tax benefits (cited point 49 of the preamble of Decree-Law no. 53/2004) – the understanding that IMT exemptions would be excluded from sales of elements of the company's assets, even if integrated within the scope of the insolvency plan or payment plan or carried out in the course of the liquidation of the insolvent estate.

It was in this sense that the STA pronounced itself in Decision no. 0765/13, of 3 July: "No. 2 of Article 270 of the CIRE, whose wording is not clear as to the scope of the IMT exemption therein stated, may, at most, be interpreted as encompassing not only sales of the company or establishments thereof, as universalities of assets, but also sales of elements of its assets, provided they are integrated within an insolvency or payment plan or carried out in the course of the liquidation of the insolvent estate.

And the STA had previously pronounced itself in the same sense (Cf. Decision no. 0949/11, of 30-5-2012:

"I - No. 2 of Article 270 of the CIRE, whose wording is not clear as to the scope of the IMT exemption therein stated, should be interpreted in conformity with paragraph c) of no. 3 of Article 9 of Law no. 39/2003, of 22 August, since among two meanings of the law, both with support - at least minimal - in its letter, the interpreter must opt for that which makes it compatible with the constitutional text (interpretation in conformity with the Constitution), to the detriment of the interpretation that vitiates it of unconstitutionality.

II - As such, it should be understood that there are exempt from IMT not only sales of the company or establishments thereof, as universalities of assets, but also sales of elements of its assets, provided they are integrated within an insolvency or payment plan or carried out in the course of the liquidation of the insolvent estate.").

Subsumption:

On 31-07-2014 the Claimant requested of the Head of the Finance Service of Braga 1 that the IMT assessment request be considered null and void that appeared to be due for the properties registered in the property record under the articles …, …,…,…, .., …, … and … acquired from the Insolvent Estate by virtue of not having resold them within the period of 3 years and the conversion of the initially granted exemption to the exemption referred to in no. 2 of Article 270 of the CIRE, having there invoked the jurisprudence contained in the Decisions of the STA of 30 May 2012 and 3 July 2013, in case nos. 949/11 and 765/13.

Despite such request, the AT proceeded with the assessment previously requested and which is the subject of the subsequent request for annulment/conversion [On 08-09-2014 the Finance Service of Braga notified the Claimant to proceed with the payment of IMT, in the amount of € 65,006.50, on the ground that the lapse of the exemption provided for in Article 7 of the CIMT had occurred - Cf. g) and h), of the proven facts].

That is: the claimant initially requested the assessment of IMT resulting from the failure to resell properties acquired for resale within the period of 3 years (Cf. Article 7, CIMT).

However, before the assessment, it requested the annulment of such request and the conversion of the request to the granting of exemption in light of the provisions of Article 270-2 of the CIRE.

And, in truth, meeting the substantive and procedural conditions for the granting of such exemption (acquisition of properties within the course of an insolvency process and liquidation of assets and having requested the respective IMT exemption in light of the cited Article 270-2 of the CIRE), the IMT assessment at issue herein is tainted with illegality because it violates the provisions of the latter rule.

It is certain that in the initial acquisition of the properties from the insolvent estate, it remained exempt from the assessment and payment of IMT to the extent that the properties were intended for resale (Cf. Article 7 of the CIMT).

The properties not having been resold within the period of 3 years, the exemption lapsed, ipso facto, and, in a first request, the assessment of IMT was requested.

The claimant came, however, before the assessment was completed, to request the conversion of such assessment to a request for exemption based on the provisions of Article 270-2 of the CIRE.

The essential question will not be whether the lapse of the exemption occurred since it indeed occurred, automatically, by the non-resale of the properties within the period of 3 years.

But – the question is - would the automatic lapse of the exemption inevitably entail the assessment of IMT or, on the contrary, could the claimant invoke and request – as it did – the exemption from IMT based on the provisions of Article 270-2 of the CIRE?

The answer appears to be in the negative.

In truth, if at the date of purchase of the properties from the Insolvent Estate, the requirements for exemption provided for in Article 270-2 of the CIRE were met, nothing justifies the denial of the exemption and, consequently, the assessment under challenge.

On the other hand, it appears indisputable that the sale of the properties by the judicial liquidator of the Insolvent Estate took place in the course of the insolvency process and liquidation of assets subsequent to the judgment that declared such insolvency.

Which is sufficient to justify the exemption provided for in the cited Article 270-2 of the CIRE.

Therefore, the request for annulment of the assessment on grounds of illegality is upheld.

Compensatory interest

The Claimant requests the reimbursement of the tax improperly paid, in the amount of € 65,106.24 (including compensatory interest), plus compensatory interest.

The Claimant paid the assessed amounts, as referred to in paragraph i) of the subject-matter of fact established.

In accordance with the provisions of paragraph b) of Article 24 of the RJAT, the arbitral decision on the merits of the claim for which no appeal or challenge is available binds the tax administration from the expiration of the deadline provided for appeal or challenge, and the latter, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the expiration of the deadline provided for voluntary execution of decisions of tax courts, shall "reestablish the situation that would exist if the tax act subject of the arbitral decision had not been practiced, adopting the acts and operations necessary for that purpose", which is in harmony with what is provided in Article 100 of the LGT [applicable by force of the provisions of paragraph a) of no. 1 of Article 29 of the RJAT] which establishes that "the tax administration is obliged, in case of total or partial success of a complaint, judicial challenge (or request for arbitral pronouncement) or appeal in favor of the taxpayer, to the immediate and full restoration of the legality of the act or situation subject of the dispute, comprising payment of compensatory interest, if applicable, from the expiration of the deadline for execution of the decision".

Although Article 2, no. 1, paragraphs a) and b), of the RJAT uses the expression "declaration of illegality" to define the jurisdiction of the arbitral tribunals functioning in the CAAD, making no reference to condemnatory decisions, it should be understood that the powers attributed in judicial challenge proceedings to tax courts are encompassed in their jurisdiction, being this the interpretation that accords with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which it proclaims, as the first directive, that "the tax arbitral process must constitute an alternative procedural means to the judicial challenge process and to the action for the recognition of a right or legitimate interest in tax matters".

The judicial challenge process, although essentially a process of annulment of tax acts, admits the conviction of the Tax Administration in the payment of compensatory interest, as is apparent from Article 43, no. 1, of the LGT, in which it is established that "compensatory interest is owed when it is determined, in gracious complaint or judicial challenge, that there was error imputable to the services resulting in payment of the tax debt in an amount greater than legally owed" and from Article 61, no. 4 of the CPPT (in the wording given by Law no. 55-A/2010, of 31 December, which corresponds to no. 2 in the original wording), that «if the decision that recognized the right to compensatory interest is judicial, the payment period is counted from the beginning of the period of its voluntary execution».

Thus, no. 5 of Article 24 of the RJAT in stating that "payment of interest, regardless of its nature, is owed in accordance with the terms provided in the general tax law and in the Tax Procedure and Process Code" should be understood as permitting the recognition of the right to compensatory interest in the arbitral process.

In the case at hand, it is manifest that, as a consequence of the illegality of the assessment act, there is place for reimbursement of the tax, by force of the aforementioned Articles 24, no. 1, paragraph b), of the RJAT and 100 of the LGT, since this is essential to "reestablish the situation that would exist if the tax act subject of the arbitral decision had not been practiced".

With regard to compensatory interest, it is also clear that the illegality of the act is imputable to the Tax and Customs Authority, which, on its own initiative, practiced it without legal support.

There is a defect of violation of substantive law, consisting of error in the legal presuppositions, imputable to the Tax Administration.

Consequently, the Claimant is entitled to compensatory interest, under the terms of Article 43, no. 1, of the LGT and Article 61 of the CPPT, calculated on the amount improperly paid (€65,106.24).

Thus, the Tax and Customs Authority shall execute this decision, under the terms of Article 24, no. 1, of the RJAT, determining the amount to be refunded to the Claimants and calculating the respective compensatory interest, at the legal rate for civil debts, under the terms of Articles 35, no. 10, and 43, nos. 1 and 5, of the LGT, 61 of the CPPT, 559 of the Civil Code and Regulation no. 291/2003, of 8 April (or diploma or diplomas that succeed it).

Compensatory interest is owed from the date of payment (3-11-2014), until the processing of the credit note, in which they are included (Article 61, no. 5, of the CPPT).

Value of the case

In accordance with the provisions of Article 306, no. 2, of the CPC and 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 65,106.24.

Costs

Under the terms of Article 22, no. 4, of the RJAT, the amount of costs is fixed at € 2,448.00, under the terms of Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, with payment thereof to be borne by the respondent, the Tax and Customs Authority.

III – DECISION

In accordance with the foregoing, the members of this Arbitral Tribunal agree to:

– judge the request for declaration of illegality of the IMT assessment of 3-11-2014 and compensatory interest to be fully upheld;

– annul such assessment;

– judge the request for reimbursement of the amount paid corresponding to the aforementioned assessment (€ 65,106.24) to be upheld and condemn the Tax and Customs Authority to refund it;

– judge the request for payment of compensatory interest to be upheld and condemn the Tax and Customs Authority to pay it to the Claimant, calculated on the amount to be refunded (€65,106.24), from the date of payment (3-11-2014), until the processing of the credit note, in which they must be included (Article 61, no. 5, of the CPPT), at the legal rates in effect until payment, under the terms of Article 559 of the Civil Code and Regulation no. 291/2003, of 8 April (or diploma or diplomas that succeed it).

– condemn the Tax and Customs Authority in the costs of the present proceedings.

Lisbon, 29-05-2015

The Tribunal

José Poças Falcão
(President)

Maria do Rosário Anjos
(Member)

Paulo Jorge Nogueira da Costa
(Member)

Frequently Asked Questions

Automatically Created

Is the CAAD arbitral tribunal competent to rule on IMT exemption recognition under Portuguese tax law?
The CAAD arbitral tribunal's competence to rule on IMT exemption recognition is contested in this case. The Tax Authority argues that under Article 2(1)(a) RJAT, arbitral tribunals have jurisdiction only over tax assessments, withholdings, and payments on account—not over acts recognizing tax exemptions and benefits. The AT maintains that exemption recognition constitutes a separate administrative act outside the assessment procedure, citing precedents from arbitral processes 17/2012-T and 310/2014-T. However, there is a legal distinction between directly seeking exemption recognition versus challenging an assessment that resulted from exemption denial. When a taxpayer disputes an IMT assessment issued because an exemption was denied, the challenge may fall within CAAD jurisdiction as it concerns the legality of the assessment itself, not merely exemption recognition. The resolution depends on whether the tribunal views the dispute as fundamentally about the assessment's validity or the underlying exemption entitlement.
Can IMT exemption under Article 270(2) of CIRE apply to the sale of individual assets from an insolvent estate?
The application of Article 270(2) CIRE IMT exemption to individual asset sales from an insolvent estate is disputed. The Tax Authority's position, based on Information .../2007 from DSIMT, restricts the exemption to acquisitions of entire companies or independent establishments that constitute autonomous operational units—essentially requiring transfer of a going concern or universality of assets. Under this interpretation, piecemeal sales of individual properties from an insolvent estate would not qualify for the CIRE insolvency exemption. However, the claimant cites Supreme Administrative Court jurisprudence, specifically decisions dated 30 May 2012 (case 949/11, Counsellor Isabel Marques da Silva) and 3 July 2013 (case 765/13, Counsellor Fernanda Maçãs), which apparently support a broader interpretation allowing the exemption for asset sales within insolvency liquidation proceedings even when sold individually rather than as an integrated business unit. This represents a fundamental disagreement between administrative practice and judicial interpretation of the scope of insolvency-related IMT exemptions.
What happens if a property acquired with IMT resale exemption under Article 7 CIMT is not resold within the legal deadline?
When property acquired with IMT exemption under Article 7 CIMT (resale exemption) is not resold within the legal deadline specified in Article 7(5) CIMT, the exemption becomes invalid and IMT becomes due. The taxpayer must request IMT assessment within the timeframe established in Article 34(1) CIMT. In this case, the claimant failed to resell the properties within the required period and requested assessment on 28 July 2014, which was outside the Article 34(1) deadline. The failure to comply with both the resale obligation and the assessment request deadline creates a compound procedural issue. Once the resale condition is breached, the originally granted exemption is lost, and the Tax Authority will assess IMT on the original acquisition value. The taxpayer becomes liable for the full IMT amount that would have been due at the time of acquisition, plus potential late payment interest calculated from when the tax should have been paid had no exemption been granted.
Can a taxpayer convert an IMT resale exemption into an insolvency exemption under CIRE after the resale period expires?
The ability to convert an IMT resale exemption under Article 7 CIMT into an insolvency exemption under Article 270(2) CIRE after the resale period expires is legally contentious. In this case, after failing to resell within the Article 7 timeframe and requesting assessment outside the Article 34(1) deadline, the claimant requested that the Tax Authority consider the original assessment request null and convert the exemption basis from Article 7 CIMT to Article 270(2) CIRE. The claimant argued that it should have qualified for the insolvency exemption from the outset based on favorable STA jurisprudence. However, the Tax Authority did not respond to this conversion request and proceeded with the IMT assessment. The legal question is whether exemption grounds can be retroactively modified after the taxpayer has already benefited from one exemption regime, failed to meet its conditions, and allowed procedural deadlines to expire. Generally, tax exemptions must be claimed at the appropriate time, and changing the legal basis after non-compliance with an initially granted exemption's conditions may be considered procedurally improper, though the substantive question of which exemption correctly applies remains.
How does Portuguese case law from the STA influence IMT exemption claims in insolvency proceedings?
Portuguese Supreme Administrative Court (STA) case law significantly influences IMT exemption claims in insolvency proceedings by providing judicial interpretation that may diverge from Tax Authority administrative practice. The claimant specifically invoked two STA decisions—the ruling of 30 May 2012 in case 949/11 (rapporteur Counsellor Isabel Marques da Silva) and the decision of 3 July 2013 in case 765/13 (rapporteur Counsellor Fernanda Maçãs)—as supporting the application of Article 270(2) CIRE exemption to sales of individual assets from insolvent estates, not merely transfers of entire companies or autonomous establishments. This jurisprudence challenges the restrictive interpretation contained in Tax Authority Information .../2007 from DSIMT. The STA's interpretation appears to favor a functional approach recognizing that asset liquidation in insolvency proceedings serves the same policy objectives as enterprise transfers, warranting exemption treatment. However, the Tax Authority's administrative guidance continues to apply the narrower interpretation. This creates uncertainty for taxpayers who must choose between following administrative instructions or relying on judicial precedent, with the risk that initial exemption denials lead to assessments that must be challenged through litigation to obtain the benefit of the more favorable judicial interpretation.