Individual Insolvencies and Stamp Duty Exemption

Legal Brief by João Mota da Costa

Supreme Court of Justice Harmonising Decision – 22 January 2025 – The stamp duty exemption provided for in Article 269(e) of the Portuguese Insolvency and Corporate Recovery Code (CIRE) only applies to insolvency proceedings involving natural persons if the immovable assets in question are directly linked to the business activity of the insolvent individual.

In the context of an arbitration case before the Administrative Arbitration Centre (CAAD), an arbitral decision was issued regarding the scope of the stamp duty exemption provided for in Article 269(e) of the CIRE. The arbitrators held that the exemption encompassed all assets owned by the debtor, regardless of whether they were allocated to the commercial activity of the insolvent individuals. This concerned natural persons operating as sole proprietors engaged in commercial activity on their own account.

The Portuguese Tax and Customs Authority (AT) filed a request for harmonisation of case law with the Supreme Court of Justice (STJ), challenging the CAAD decision, as it directly contradicted a previous ruling of the same Court dated 25 September 2013. That earlier decision had unequivocally held that the exemption only covered the sale of assets belonging to the business, excluding the sale of residential properties owned by individuals, and that it was insufficient, for the purposes of exemption, that the sale occurred in the context of liquidation of the insolvency estate. Instead, it was necessary to prove that the property sold formed part of the company’s assets.

According to the AT, two cumulative conditions must be met for the exemption to apply to natural persons:
a) the individual must be engaged in a commercial activity; and
b) the property sold in the insolvency proceedings must be allocated to said commercial activity.

Article 269 of the CIRE provides as follows:

“The following acts, when subject to stamp duty, shall be exempt therefrom, provided they are foreseen in insolvency, payment, or recovery plans, or are carried out within the scope of liquidation of the insolvency estate:

a) Amendments to the maturity dates or interest rates of claims against the insolvency estate;
b) Capital increases, conversions of claims into equity, and transfers of equity;
c) The incorporation of new companies;
d) Payment in kind with business assets and assignment of assets to creditors;
e) Financing operations, transfer or assignment of the operation of business establishments, incorporation of companies and transfer of commercial establishments, sale, exchange or assignment of company assets, as well as leasing of assets;
f) Issuance of bills of exchange or promissory notes;
g) Creation or extension of guarantees.”

Regarding paragraph (e) of Article 269, the STJ had already taken the view that the stamp duty exemption only applies to acts foreseen in insolvency, payment, or recovery plans, or carried out during the liquidation of the insolvency estate (as per the body of the article), and that such acts must concern the sale of assets forming part of the business’s estate. The wording of the law and its exhaustive nature leave no room for alternative interpretation.

As such, the exemption provided for in Article 269(e) of the CIRE can only be applied in insolvency proceedings involving natural persons where the acts to be performed—whether under insolvency, payment, or recovery plans or during liquidation—relate to immovable property that was used for the individual’s business activity.

This was precisely the conclusion reached in the Harmonising Judgment of the Supreme Court of Justice dated 22 January 2025, which ruled that:

“The stamp duty exemption provided for in Article 269(e) of the CIRE only applies to the sale of immovable property in insolvency proceedings involving natural persons where such property is directly linked to the business activity of the insolvent person and forms part of the company’s assets.”