Process: 95/2015-T

Date: June 9, 2015

Tax Type: IMT

Source: Original CAAD Decision

Summary

This arbitration case (Process 95/2015-T) addresses jurisdictional questions regarding IMT (Municipal Tax on Onerous Property Transfers) exemptions in insolvency proceedings under Article 270(2) of the Portuguese Insolvency and Business Recovery Code (CIRE). Company A... LDA challenged an IMT assessment of €37,053.25 before CAAD, claiming entitlement to the insolvency-related exemption. The Tax and Customs Authority (TCA) contested the tribunal's jurisdiction, arguing that exemption recognition claims should proceed through special administrative courts rather than tax arbitration. The CAAD tribunal ruled it possesses material jurisdiction to examine the case, establishing a critical distinction: while pure requests for exemption recognition (such as denials of exemption applications) fall outside arbitral jurisdiction and belong in administrative courts under Article 97 of the CPPT, challenges to the legality of tax assessment acts—including IMT assessments allegedly violating CIRE Article 270(2)—constitute proper matters for tax arbitration under Article 2(1)(a) of the LRAT. The tribunal grounded its jurisdiction in Decree-Law 10/2011 and Ordinance 112-A/2011, which bind tax authorities to CAAD arbitration for claims declaring illegality of tax assessment acts. This decision clarifies that taxpayers may use tax arbitration to challenge IMT assessments based on alleged violations of insolvency-related exemptions, provided the claim targets the assessment act's legality rather than seeking initial recognition of exemption rights. The ruling establishes an important procedural pathway for companies in insolvency proceedings to contest IMT liability through the faster, alternative dispute resolution mechanism of tax arbitration.

Full Decision

ARBITRAL DECISION

I. REPORT

A..., LDA., Claimant, with registered office in ..., parish of ..., municipality of ..., entity number ..., came, pursuant to article 10, no. 2, of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to as LRAT), to request the constitution of a sole Arbitral Tribunal, in which the Tax and Customs Authority is summoned as defendant, hereinafter referred to as TCA or Defendant, with a view to obtaining the annulment of the assessment act for the Municipal Tax on Onerous Property Transfers (IMT) no. ..., in the amount of €37,053.25 (thirty-seven thousand and fifty-three euros and twenty-five cents), issued on 17.11.2014 by the Tax and Customs Authority Finance Office of ..., and the payment of compensatory interest to be calculated as of the date of actual reimbursement.

The request for constitution of the Arbitral Tribunal was accepted by the Honorable President of CAAD and automatically notified to the TCA on 16 February 2015.

In accordance with the provision of subparagraph c) of no. 1 of article 11 of the LRAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the sole Arbitral Tribunal was constituted on 28 April 2015.

The TCA replied, arguing that the petition should be judged groundless.

The parties have legal standing and capacity, are legitimately represented (article 4 and no. 2 of article 10 of the LRAT and article 1 of Ordinance no. 112/2011, of 22 March).

The meeting referred to in article 18 of the LRAT was dispensed with, given the nature of the subject matter contained in the case file.

II. PRELIMINARY QUESTIONS: ABSOLUTE LACK OF MATERIAL JURISDICTION

The TCA alleges in its response that the Claimant intends by its petition for arbitral pronouncement that the Tribunal issue a decision recognizing the right to IMT exemption, and for this purpose the appropriate procedural means is the special administrative action. Consequently, the TCA contends that the Tribunal should refrain from ruling on the petition.

Given that the merit of the exception invoked by the TCA, should it be established, would prevent consideration of the other issues raised, it is important to delimit the scope of jurisdiction of tax arbitral jurisdiction and ascertain whether the tribunal's jurisdiction encompasses, or does not encompass, the IMT assessment act sub judice.

In fact, according to the provisions of article 16 of the Code of Procedure and Tax Process ("CPPT"), article 13 of the Code of Procedure in Administrative Courts ("CPTA") and article 101 of the Civil Procedure Code ("CPC"), subsidiarily applicable by virtue of no. 1 of article 29 of the LRAT, the determination of the material jurisdiction of courts is of public order and its examination precedes that of any other matter.

Thus, first of all, it is important to consider the provision of no. 1 of article 124 of Law no. 3-B/2010, of 28 April, according to which the Government was authorized to legislate in order to institute arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters, which should, according to its no. 2, "constitute an alternative procedural means to judicial impugnation proceedings and to action for recognition of a right or legitimate interest in tax matters.

In implementation of the aforementioned legislative authorization, Decree-Law no. 10/2011, of 20 January, instituted tax arbitration limited to certain matters, listed in its article 2, making the binding of the tax administration dependent on an ordinance of the Government members responsible for the areas of finance and justice - (see the reasoning of the arbitral award handed down in Case no. 76/2012 above mentioned).

The scope of tax arbitral jurisdiction was thus delimited, in the first place, by the provision of article 2 of the LRAT which sets forth, in its no. 1, the criteria for material distribution, encompassing the examination of claims aimed at declaring the illegality of tax assessment acts (subparagraph a)).

Through the Binding Ordinance (Ordinance no. 112-A/2011, of 20 April), the Government, by the State and Finance and Justice Ministers, bound the services of the General Tax Authority and the General Customs and Special Consumption Tax Authority to the jurisdiction of the arbitral tribunals operating at CAAD, and to these services now corresponds the Tax and Customs Authority, pursuant to Decree-Law no. 118/2011, of 15 December, which approves the organic structure of this Authority, resulting from the merger of various bodies.

In this Ordinance, additional conditions and limits of binding are established taking into account the specificity of the matters and the amount involved.

Article 2 of the Binding Ordinance provides:

Article 2
Object of Binding

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

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

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

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

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

The subject matter in dispute in the present case concerns, as appears from the petition presented by the Claimant, the declaration of illegality of the IMT assessment act sub judice, which could have been challenged judicially, in accordance with the provisions of articles 41 et seq. of the IMT Code (See, among others, the Judgments of the Supreme Administrative Court, handed down in the scope of case no. 949/11, of 30.05.2012 and in case no. 1085/15, of 17 December 2014, from which it appears that the acts in question were subject to judicial challenge).

In essence, the petition presented by the Claimant concerns the declaration of illegality of a tax assessment act, in the case of IMT, by violation of the provision of no. 2 of article 270 of the Insolvency and Business Recovery Code (hereinafter IBRC).

Having regard to the fact that the arbitral process is limited to tax assessment acts, (...) including administrative acts involving the examination of the legality of assessment acts, it is understood that the petition deduced by the Claimant concerning the declaration of illegality of the IMT assessment act based on the violation of article 270, no. 2 of the Insolvency and Business Recovery Code (IBRC), is susceptible to examination by the Tribunal.

In fact, as appears from various decisions already handed down by CAAD (See, for example, the award handed down in arbitral case no. 73/2012), only claims that fall outside the examination of administrative acts that do not involve the examination of the legality of the assessment act (administrative act on taxable matter) fall outside the scope of matters susceptible to examination in arbitral forum, which have their proper jurisdiction in the special administrative action, in accordance with subparagraph p) of no. 1 and with no. 2 of article 97 of the CPPT, as is the case of a denial act of a request for tax exemption, but not of a tax assessment act.

As teaches Jorge Lopes de Sousa, In Commentary on the Legal Regime of Tax Arbitration, in Guide to Tax Arbitration, Almedina Publishing House, 2013, pp. page 105, regarding the scope of the jurisdiction of tax arbitral tribunals, the jurisdiction of these arbitral tribunals is restricted to activity connected with tax assessment acts, falling outside their jurisdiction the examination of the legality of administrative acts of total or partial denial or revocation of exemptions or other tax benefits, when dependent on recognition by the Tax Administration, as well as other administrative acts relating to tax matters that do not involve examination of the legality of the assessment act, referred to in subparagraph p) of no. 1 of article 97 of the CPPT, as well as acts of assessment enhancement, seizure and adoption of precautionary measures by the Tax Administration, referred to in the same article 97, no. 1, in its subparagraph e) and articles 143 and 144 of the same Code.

Thus, it is concluded that the exception raised by the TCA regarding the absolute lack of material jurisdiction of this arbitral tribunal is groundless.

Based on the foregoing, it is considered that the Arbitral Tribunal is properly constituted and is materially competent, in accordance with subparagraph a) of no. 1 of article 2 of the LRAT.

III. STATEMENT OF FACTS

Based on the elements in the case file and in the administrative proceedings attached to the case file, the following facts are considered proven:

A) In Case no. …/09…..TBEPS, which was conducted in the 1st Court of the Judicial Court of ..., the insolvency of the company "B..., S.A", entity number ..., was declared;

B) Within the scope of such proceedings and with a view to the liquidation of the insolvent estate, various real properties were placed for sale, among which those acquired by the Claimant, better described and identified in Doc. 1 and 3, which are enumerated below:

  1. Property: U-..., ... - ..., ... Lot 43;
  2. Property: U-..., ... - ..., ... Lot 43;
  3. Property: U-..., ... - ..., ... Lot 47;
  4. Property: U-..., ... - ..., ... Lot 49;
  5. Property: U-..., ... - ..., ... Lot 50;
  6. Property: U-..., ... - ..., ... Lot 52;
  7. Property: U-..., ... - ..., ... Lot 65;
  8. Property: U-..., ... - ..., ... Lot 68;
  9. Property: U-..., ... - ..., ... Lot 44;
  10. Property: U-..., ... - ..., ... Lot 45;
  11. Property: U-..., ... - ..., ... Lot 48;
  12. Property: U-..., ... - ..., ... Lot 51;
  13. Property: U-..., ... - ..., ... Lot 62;
  14. Property: U-..., ... - ..., ... Lot 63;
  15. Property: U-..., ... - ..., ... Lot 66;
  16. Property: U-..., ... - ..., ... Lot 67;
  17. Property: U-...-..., ... - ..., ... Apt. ..., Lot 78, 1st floor;
  18. Property: U-..., ... - ..., ... Lot 80;

C) The Claimant submitted a proposal to purchase such properties, and that proposal was the winning bid;

D) In consequence, the insolvency administrator drew up the respective acts of adjudication;

E) Armed with such acts and with a view to the conclusion of the respective deed of sale and purchase (Doc. 3), the Claimant requested from the Finance Office of ... the issuance of the legally required IMT assessment, expecting its issuance at "zero", given the exemption provided for in no. 2 of article 270 of the IBRC.

F) Nevertheless, and despite the interpellation of the Claimant before the Finance Office of ..., the assessment act was actually issued considering that the amount of €37,053.25 was due, to be paid by 18.11.2014;

G) The Claimant paid the IMT assessed on 17.11.2014.

H) The Claimant acquired the properties already identified within the scope of the insolvency proceedings of the company "B..., S.A", entity number ...;

There are no facts of relevance for the examination of the merits of the case that have not been proven.

This Tribunal formed its conviction on the basis of the documents attached to the case file by the Parties.

IV. STATEMENT OF LAW

The principal issue raised in the present case comes down to determining whether the purchase of real property within the scope of the liquidation proceedings of the insolvent company is (or is not) exempt from IMT, in accordance with the provisions of article 270, no. 2 of the IBRC.

To this end, the Claimant alleges in its petition for constitution of the Arbitral Tribunal the following:

A) Article 270, no. 2 of the IBRC provides that "Also exempt from municipal tax on onerous property transfers are the acts of sale, exchange or transfer of the company or of establishments thereof integrated within the scope of insolvency, payment or recovery plans or carried out within the scope of liquidation of the insolvent estate";

B) The transfer in question is, without a shadow of doubt, a transfer effected through sale, carried out within the scope of liquidation of the insolvent estate, and therefore in failing to apply the exemption provided for in article 270, no. 2 of the IBRC, the TCA acted in manifest illegality;

C) To this end, already on 30.05.2012 the Supreme Administrative Court understood, within the scope of case no. 0949/11, that there should be understood as exempt from IMT not only the sales of the company or establishments thereof, as a universality of assets, 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 liquidation of the insolvent estate;

D) Following the aforementioned case law, the Supreme Administrative Court Judgment, in Case no. 0765/13, of 03.07.2013, also came to reinforce the interpretation of article 270, no. 2 of the IBRC of the Supreme Administrative Court Judgment in Case no. 0949/11;

E) Such Judgment summarily states that "Article 270, no. 2 of the IBRC, whose wording is not clear as to the scope of the IMT exemption provided therein, may, at most, be interpreted as encompassing not only the sales of the company or establishments thereof, as a universality of assets, 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 liquidation of the insolvent estate";

F) Despite being aware of such understandings, the truth is that the TCA, whose action is guided in accordance with article 3 of the APA by the principle of legality, effected the assessment in question in disregard of such principle, making its own interpretation of the law prevail over the understanding advocated by the courts, which are the guarantors of legality;

G) And if it is true that judicial decisions have a markedly individual and concrete character, it is equally true that in compliance with the constitutional text the TCA, as part of the structure of public administration, is, by virtue of no. 2 of article 266 of the Constitution of the Portuguese Republic, bound to respect the principle of equality and, with particular relevance, that of good faith;

H) In compliance with the principle of equality, bringing to the fore here the situation addressed in the Supreme Administrative Court Judgment in Case no. 949/11, administrative action should, without room for interpretation, apply equal solutions to equal situations;

I) Thus, the assessment whose annulment is now requested suffers from illegality as to its material and legal presuppositions, expressly violating the provision of no. 2 of article 270 of the IBRC;

J) The requested annulment will always provide grounds, in accordance with article 43 of the General Tax Law, for the right of the Claimant to the payment of compensatory interest, which is hereby claimed for the amount to be calculated at the time of the actual reimbursement of the amount unduly collected by virtue of the illegal IMT assessment.

For its part, the TCA alleges, in summary, the following:

A) The Claimant makes an erroneous interpretation and application of the legal rules subsumable to the case sub judice notoriously incorrect;

B) Prior to the emergence of the IBRC, the fiscal benefit in question in bankruptcy matters was contained in article 121 of the CPRF, approved by Decree-Law no. 132/93, of 23 April;

C) No. 2 of the same article of the CPRF conferred exemption on the transfer of real property integrated in any of the company recovery measures, arising from: "c) The legal autonomization of commercial or industrial establishments, the sale, exchange or transfer of elements of the company's assets, as well as long-term leases, provided for, respectively, in subparagraphs e), f) and g) of no. 1 of article 101";

D) With the Reform of Patrimony Taxation occurring in 2003, that exemption of the CPRF came to be reported to the IMT;

E) Law no. 66-B/2012, of 31 December, introduced, among others, a slight amendment to article 270/2-c) of the IBRC, which came to provide that:

"Also exempt from municipal tax on onerous property transfers are the acts of sale, exchange or transfer of the company or of establishments thereof integrated within the scope of insolvency, payment or recovery plans or carried out within the scope of liquidation of the insolvent estate";

F) In the case sub judice, the comparison between the letter of article 121 of the CPRF and the provision of article 270/2 of the IBRC assumes relevance, from which two rules can be extracted: on the one hand, the IMT exemption resulting from performance and transfer of assets to creditors contained in article 121-b) of the CPRF passed as such to article 270/1-c) of the IBRC; on the other hand, the same did not occur with respect to acts of sale, exchange or transfer, since the legislator did not merely perform a reorganization task, but rather a substantive change;

G) In fact, the IMT exemption resulting from acts of sale, exchange or transfer of the company ceased to make reference to "elements of the company's assets" and to "long-term leases", but only and exclusively to the "company" or "establishments thereof" only;

H) In summary, the IMT exemption contained in article 270/2 of the IBRC encompasses acts of sale, exchange or transfer integrated within the scope of insolvency, payment or recovery plans or carried out within the scope of liquidation of the insolvent estate, however (now) with a reservation with respect to what (then) article 121/2-c) of the CPRF provided: that the object of the transfer be the company or establishment(s) thereof, and not merely elements of the company's assets.

In light of the foregoing, with respect to the position of the Parties and the arguments presented, to determine whether the IMT assessment act sub judice is or is not illegal it will be necessary to verify:

Whether the rule provided for in article 270, no. 2 of the IBRC exempts from IMT the real property acquired within the scope of the liquidation proceedings of the insolvent company, independently of whether the transferred assets are integrated into the universality of the company or establishment sold, exchanged or transferred within the scope of an insolvency or payment plan or from the liquidation of the insolvent company.

Let us see what should be understood.

Article 270 of the IBRC, approved by Decree-Law no. 53/2004, provides as follows:

1 - The following transfers of real property are exempt from municipal tax on onerous property transfers, integrated in any insolvency, payment or recovery plan:

a) Those intended for the constitution of a new company or companies and the realization of its capital;

b) Those intended for the realization of the increase of capital of the debtor company;

c) Those arising from performance of company assets and transfer of assets to creditors;

2 - Also exempt from municipal tax on onerous property transfers are the acts of sale, exchange or transfer of the company or of establishments thereof integrated within the scope of insolvency, payment or recovery plans or carried out within the scope of liquidation of the insolvent estate.

On this matter and in a question identical to that in the present case, the Supreme Administrative Court has already pronounced itself in several judgments, from which stands out for its clarity the Judgment no. 0949/11, of 30 May 2012, which we proceed to reproduce:

In light of the letter of the law, either one or the other of the interpretations are defensible, appearing, however, grammatically more correct that sustained by the tax administration, since the verbs "sell", "exchange" and "transfer" are all transitive verbs, hence in the phrase the reference to the "company or establishments thereof" would appear as the direct object of all three.

This interpretation, however, clashes – as well observed in the contested decision – with what the legislator set forth in no. 49 of the preamble of the IBRC with respect to fiscal benefits, where it states that: "the existing regimes in the CPRF regarding the exemption of fees and fiscal benefits are maintained, in their essence", and it is certain that subparagraph c) of no. 2 of article 121 of the CPRF exempted from municipal transfer tax the transfers of real property integrated in any of the company recovery measures arising, in particular, from the sale, exchange or transfer of elements of the company's assets. And it also clashes – as well observed by the Public Prosecutor's Office in first instance (cfr. the opinion at pages 66 to 68 of the case file) – with the meaning and scope of the legislative authorization granted to the Government under which the IBRC was approved, fixed in articles 2 and following of Law no. 39/2003, of 22 August, since, with regard to exemptions from municipal transfer tax (now IMT), article 9, no. 3 of that legislative authorization law provided that: "The Government is finally authorized to exempt from municipal transfer tax the following transfers of real property, integrated in any insolvency or payment plan or carried out within the scope of liquidation of the insolvent estate: c) (...) the sale, exchange or transfer of the company, establishment or elements of its assets (...)".

One may, it is true, argue that, in the perspective of the legislator of the IBRC, the differences as to the scope of the IMT exemption with respect to that which existed in the CPRF for the transfer tax did not appear as essential, hence it has made no particular reference to them. It is that, particularly in tax matters, the preambles of statutes do not always accurately reflect their content, nor is it uncommon for them to include mentions that the provisions of the law contradict (cfr. with regard to transfer tax/IMT the Judgment of this Supreme Court of 3 November 2010, appeal no. 499/10).

And one may also argue that in the implementation of the legislative authorization for approval of the IBRC, in the matter that concerns us, the Executive decided to be more parsimonious than the Assembly of the Republic as to the granting of IMT exemption, deciding to exclude that exemption in cases of sale, exchange or transfer of elements of its assets, granting it only in cases of sale, exchange or transfer of the company or its establishment. If so, however, it would not have respected the meaning and scope of the legislative authorization that was granted to it, having legislated in a matter reserved to the Assembly of the Republic (cfr. no. 2 of article 103 and subparagraph i) of no. 1 of article 165 of the Constitution) in disregard of the parliamentary credential granted to it.

As is well known, between two meanings of a law, both with support – at least minimal – in its letter, the interpreter must opt for that which is compatible with the constitutional text (interpretation in conformity with the Constitution), to the detriment of the interpretation which would vitiate it of unconstitutionality.

It is for that fundamental reason that it is understood that the contested decision does not merit censure, since although it is doubtful that the ordinary legislator of the IBRC intended to confer on the IMT exemption provided for in no. 2 of its article 270 the same scope as had the previous transfer tax exemption provided for in subparagraph c) of no. 2 of article 121 of the CPRF, the option to restrict its meaning was not permitted to him, since in matters of fiscal benefits he legislates in a domain reserved to the Assembly of the Republic, and must respect the limits fixed for him, particularly those concerning the meaning and scope of the authorization (cfr. no. 2 of article 165 of the Constitution of the Portuguese Republic).

Thus, just as was advocated in the aforementioned Judgment, this Tribunal understands that the acts referred to in no. 2 of article 270 of the IBRC encompass, not only the transfers of real property integrated into a universality of the company or establishment of the insolvent estate, but also the isolated transfers of elements of its assets, provided they are integrated within the scope of the insolvency or payment plan or carried out within the scope of liquidation of the insolvent estate.

In casu, the Claimant acquired several real properties from the bankrupt estate of the company "B..., S.A." – a fact that the Defendant does not dispute.

Therefore, and in light of the interpretation advocated in the Supreme Administrative Court Judgment above identified, which we endorse, it is necessary to conclude that the Claimant is right when it argues the illegality of the IMT assessment act relating to the acquisition of those real properties.

Thus, it is necessary to judge the arbitral petition presented against the IMT assessment relating to the acquisition of real property in insolvency proceedings as well-founded, annulling the IMT assessment act sub judice, it being considered that such acquisition is encompassed by the exemption rule contained in no. 2 of article 270 of the IBRC.

The Claimant also petitions for the condemnation of the TCA to pay compensatory interest, in accordance with the provisions of article 43 of the General Tax Law.

Now, article 46 of the IMT Code establishes the following:

  1. When the assessment is annulled, whether by the administration or by decision of the competent entity or court, with final judgment, the respective reimbursement is effected.

  2. There is no place for annulment whenever the amount of tax to be annulled is less than €10.

  3. Compensatory interest is due, in accordance with article 43 of the General Tax Law which are assessed and paid in accordance with the Code of Procedure and Tax Process.

As results from the interpretation given to article 270, no. 2 of the IBRC, IMT was not due, and therefore such tax was unduly collected.

In consequence, the Claimant has the right to compensatory interest, in accordance with the legal provisions above stated.

In sum: the IMT assessment act underlying the present arbitral petition is illegal and should be annulled.

V. DECISION

Therefore, this Arbitral Tribunal decides:

A) To judge the petition for arbitral pronouncement well-founded, and in consequence declare illegal and annul the IMT assessment act, in the total amount of €37,053.25.

B) To judge the petition for payment of compensatory interest as well-founded, condemning in particular the Defendant to the payment of compensatory interest counted from the date of undue payment until the date of processing of the respective credit note, as provided for in no. 1 of article 43 of the General Tax Law in conjunction with the provision of no. 5 of article 61 of the Code of Procedure and Tax Process.

C) To condemn the Defendant in the costs of the present proceedings, as the losing party.

VI. VALUE OF THE PROCEEDING

In accordance with the provisions of article 306, no. 2 of the Civil Procedure Code, article 97-A of the CPPT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the claim is set at €37,053.25.

VII. COSTS

In accordance with the provisions of articles 12, no. 2 and 22, no. 4, both of the LRAT, and article 4, no. 4 of the Regulation of Costs of Tax Arbitration Proceedings, the amount of the arbitration fee is set at €1,836.00, in accordance with Table I of the aforementioned Regulation, to be borne by the Defendant, given the full merit of the petition.

Let notice be given.

Lisbon, 9 June 2015

The Arbitrator

Magda Feliciano

(The text of the present decision was prepared by computer, in accordance with article 131, no. 5, of the Civil Procedure Code, applicable by reference from article 29, no. 1, subparagraph e) of Decree-Law no. 10/2011, of 20 January (LRAT), and its drafting is governed by the orthography prior to the Orthographic Agreement of 1990.)

Frequently Asked Questions

Automatically Created

What is the IMT tax exemption provided under Article 270(2) of the Portuguese Insolvency Code (CIRE)?
Article 270(2) of the Portuguese Insolvency and Business Recovery Code (CIRE) provides an exemption from IMT (Municipal Tax on Onerous Property Transfers) for property acquisitions occurring within insolvency proceedings. This exemption aims to facilitate the restructuring and recovery of insolvent businesses by reducing the tax burden on property transfers that form part of the insolvency process. When property is transferred as part of an approved insolvency plan or during the liquidation phase, the acquiring party may be entitled to relief from IMT, which would otherwise represent a significant transaction cost that could impede business recovery efforts.
Can a company challenge an IMT tax assessment through CAAD tax arbitration proceedings?
Yes, companies can challenge IMT tax assessments through CAAD (Administrative Center for Alternative Dispute Resolution) tax arbitration proceedings, as confirmed in this decision. The CAAD tribunal has jurisdiction under Article 2(1)(a) of the LRAT (Legal Regime of Arbitration in Tax Matters) to examine claims declaring the illegality of tax assessment acts, including IMT assessments. The company must be challenging the legality of an existing assessment act rather than merely requesting initial recognition of an exemption right. Tax arbitration is available as an alternative to judicial impugnation proceedings in regular courts, provided the claim falls within the material scope defined by Decree-Law 10/2011 and the Tax Authority is bound by Ordinance 112-A/2011.
Does the CAAD arbitral tribunal have jurisdiction to rule on IMT exemption recognition claims?
The CAAD arbitral tribunal has jurisdiction to rule on claims challenging the legality of IMT assessment acts based on alleged violations of exemption provisions, including Article 270(2) of CIRE. However, there is a crucial distinction: the tribunal can examine whether an IMT assessment was illegally imposed in violation of an exemption, but cannot hear pure recognition claims seeking initial acknowledgment of exemption rights (such as appeals from denials of exemption applications). Those recognition actions must proceed through special administrative courts under Article 97 of the CPPT. The tribunal's jurisdiction extends to administrative acts involving examination of the legality of assessment acts, but not to administrative acts that merely determine taxable matter without an assessment having been issued.
What are the procedural requirements for requesting IMT exemption on property transfers in insolvency proceedings in Portugal?
To request IMT exemption on property transfers in insolvency proceedings in Portugal, taxpayers should invoke Article 270(2) of CIRE at the time of the property transfer. The exemption claim should be presented to the competent Tax Authority Finance Office when the taxable event occurs or when filing the IMT declaration. If the Tax Authority issues an IMT assessment despite the claimed exemption, the taxpayer can challenge the assessment through either judicial impugnation proceedings (under Articles 41 et seq. of the IMT Code) or through tax arbitration at CAAD. The procedural route depends on whether the taxpayer is contesting an actual assessment (arbitration available) or appealing a denial of an exemption request without an assessment (requiring special administrative action). Companies should maintain proper documentation of the insolvency proceedings to support their exemption claims.
How does the Portuguese Tax Authority (AT) assess IMT liability on property acquisitions related to insolvency processes?
The Portuguese Tax Authority (AT) assesses IMT liability on property acquisitions related to insolvency processes by first determining whether the transaction falls within the scope of Article 270(2) of CIRE, which provides exemption for certain insolvency-related transfers. If the AT concludes that the exemption does not apply or was improperly claimed, it issues an IMT assessment act for the standard IMT due on the property transfer. The assessment is calculated based on the property's value and applicable IMT rates, without regard to the claimed exemption. The taxpayer then bears the burden of challenging this assessment through administrative or judicial means. As demonstrated in this case, where the AT issued an assessment of €37,053.25 despite the company's invocation of the CIRE exemption, taxpayers may contest such assessments by arguing that the AT incorrectly applied the law and failed to recognize the applicable insolvency exemption. The AT's position may be that the specific circumstances did not meet the exemption requirements or that proper procedural steps were not followed.