Supreme Administrative Court

Judgement of 3 July 2013

Case No. 01148/11

The court ruled on the conditions of the right to deduct input VAT paid on the construction of residences (passive transactions), in connection with rehousing operations.

The court held that the right to deduct the input VAT charged for the acquisition of goods or services presupposes that the expenses with the acquisition are component parts of the price of the transactions subject to output tax that have a right to deduction, and that, therefore, there is a necessary link between the VAT paid and the performance of taxable transactions.

In this connection, the court ruled that input VAT charged on the constructions of residences (taxable transactions), in connection with rehousing operations may be deducted from output tax paid in the economic transactions resulting from the pursuit of the economic activity of the taxable person.

Supreme Administrative Court

Judgment of 3 July 2013

Case No. 0765/13

The subject matter of this judgment is the scope of application of the exemption from Imposto Municipal sobre as Transmissões Onerosas de Imóveis ("IMT") (Property Transfer Tax) applicable to the real estate transfers included in insolvency plans or payments provided for in article 270(2) of the Código da Insolvência e da Recuperação de Empresas («CIRE») (Code of Insolvency and Recovery of Companies).

In this context, the court stated that article 270(2) of the CIRE, should be interpreted as meaning that the exemption provided for therein should include transfers in return for payment of assets that are part of all the assets of the company or establishment sold, exchanged or assigned under the insolvency plan as well as the real estate assets included in the assets of the insolvent company, excluding of such exemption the real estate transfers which have no relation with the company or business, even though they are part of insolvency proceedings.