Opinion of the Advocate General — ECLI:EU:C:2024:29
Date: 2024-01-11
Language of the case: Portuguese
Subject matter: Right of establishment;Approximation of laws
Procedure: Reference for a preliminary ruling;Reference for a preliminary ruling - inadmissible
Origin: Portugal

Summary C-20/23 – 1 
Case C-20/23 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
16 January 2023 
Referring court: 
Tribunal da Relação do Porto (Court of Appeal, Porto, Portugal) 
Date of the decision to refer: 
14 December 2022 
Appellant: 
SF 
Respondents: 
MV 
Instituto da Segurança Social, IP (Institute of Social Security, IP) 
Autoridade Tributária e Aduaneira (Tax and Customs 
Administration) 
Cofidis SA – Branch in Portugal 
  
Subject matter of the main proceedings 
The main dispute concerns the compatibility of national rules on the discharge of 
debt for insolvent natural persons – known as the ‘exoneração do passivo 
restante’ (discharge of unpaid liabilities) in national law – with Article 23(4) of 
Directive 2019/1023 (‘the Directive’). The referring court, before which the 
appeal was brought, must rule on whether the fact that those rules exclude tax and 
social security debts from the discharge of debt is in conformity with the 
Directive. The interpretation of the concept of being ‘justified’ within the meaning 
of Article 23(4) of the Directive and the scope of the concepts of ‘debts arising 
from or in connection with criminal penalties’ and ‘debts arising from tortious 
liability’ in that article are also at issue. 
EN 
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Questions referred for a preliminary ruling 
(1) Must Article 23(4) of the Directive [2019/1023] be interpreted as meaning 
that the exclusion of other debts (other than those listed in the respective letters of 
Article 23(4)) is permitted only if it is ‘duly justified’? 
(2) Must the possibility for Member States of excluding specific categories of 
debt from discharge of debt (where such exclusions are duly justified as provided 
for in Article 23(4) of Directive 2019/1023) be interpreted as allowing Member 
States to exclude tax debts (which are not listed in that article), thereby placing 
themselves in a privileged position? 
(3) If the answer to those questions is in the affirmative, what criteria must that 
justification satisfy, within the meaning of EU law, in order to comply with the 
general principles of EU law and the protection of fundamental rights, to which 
the European and national legislatures are subject [‘prohibition of discrimination 
on grounds of nationality’ (Article 18 TFEU), ‘freedom to conduct a business’ 
(Article 16 of the [Charter of Fundamental Rights of the European Union]) and 
the fundamental economic freedoms of the internal market]? 
(4) If the answer to the aforementioned question is in the negative, do the 
definitions (within the meaning of EU law and for the purposes of interpreting the 
directive in question) of ‘debts arising from or in connection with criminal 
penalties’ and ‘debts arising from “tortious liability”’ also include tax debts as 
provided for in the national legislative act transposing Directive 2019/1023 (Lei 
n.° 9/2022, de 11 de janeiro (Law No 9 of 11 January 2022))? 
Provisions of European Union law relied on 
Recitals 72 to 81 and Articles 20 to 23 of Directive (EU) 2019/1023 of the 
European Parliament and of the Council of 20 June 2019 on preventive 
restructuring frameworks, on discharge of debt and disqualifications, and on 
measures to increase the efficiency of procedures concerning restructuring, 
insolvency and discharge of debt, and amending Directive (EU) 2017/1132 
(Directive on restructuring and insolvency) (OJ 2019 L 172, p. 18) (‘the 
Directive’). 
Articles 16 and 52 of the Charter of Fundamental Rights of the European Union 
(‘the Charter’). 
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Provisions of national law relied on 
Registo Nacional de Pessoas Coletivas (Decreto-Lei n.º 129/98, de 13 de maio, 
última atualização pelo Decreto-Lei n.º 145/2019, de 23 de setembro) (National 
Register of Legal Persons (Decree-Law No 129 of 13 May 1998, as last amended 
by Decree-Law No 145 of 23 September 2019)) 
1 An ‘individual entrepreneur’ is defined as a natural person who operates a 
business in his or her own name and on his or her own behalf. The term ‘business’ 
has an objective meaning, that is to say, the organisation of production factors 
intended for the exercise of an economic activity. 
2 The legal effects arising from the operation of the business have a direct impact on 
the personal legal sphere of the entrepreneur and there is no separation of assets 
between his or her personal and business spheres. 
Código da Insolvência e da Recuperação de Empresas (Decreto-Lei n.º 53/2004, 
de 18 de março, última atualização pela Lei n.º 9/2022, de 11 de janeiro, e pelo 
Decreto-Lei n.º 57/2022, de 25 de agosto) (Insolvency and Business Recovery 
Code (Decree-Law No 53 of 18 March 2004, as last amended by Law No 9 of 
11 January 2022 and by Decree-Law No 57 of 25 August 2022)) 
3 Pursuant to Article 1 of the Código da Insolvência e da Recuperação de Empresas 
(Insolvency and Business Recovery Code; ‘the CIRE’), the purpose of insolvency 
proceedings is to liquidate the debtor’s assets and distribute the proceeds among 
the various creditors. 
4 Article 46(1) of the CIRE provides that the estate ‘shall cover all the debtor’s 
assets on the date of the insolvency declaration and all assets and rights acquired 
by the debtor in the course of the proceedings’. 
5 Under Article 47(1) and (2) of the CIRE, all claims of an economic nature against 
the insolvent person, or that are secured by assets forming part of the estate, prior 
to the date of the insolvency declaration, are regarded as insolvency debts. 
6 For the purposes of the main dispute, Articles 235 to 245 of the CIRE, which are 
contained in Chapter I, entitled ‘Discharge of unpaid liabilities’, of Title XII, 
entitled ‘Specific provisions on the insolvency of natural persons’, are of 
particular relevance. 
7 In accordance with Article 235 of the CIRE, in the version in force at the material 
time, if the debtor is a natural person, he or she may be discharged from any 
insolvency debts that have not been fully paid back during the insolvency 
proceedings or within five years of the end of those proceedings. 
8 In the version in force at the material time, Article 239 of the CIRE, entitled 
‘Transfer of disposable income’, provided as follows in paragraph 2: 
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‘The initial order shall provide that, within five years of the end of the insolvency 
proceedings, referred to in this chapter as the “transfer period”, the disposable 
income obtained by the debtor shall be deemed to be transferred to the entity, 
referred to in this chapter as the “trustee”, chosen by the court from among those 
registered in the official list of insolvency administrators […].’ 
9 Following the entry into force of Law No 9 of 11 January 2022, which transposed 
the Directive into national law, Article 239 of the CIRE now provides that the 
relevant period for transferring the disposable income is three years. 
10 Under Article 239(3) of the CIRE, certain income, such as income that provides a 
decent standard of living for the debtor and his or her household, is excluded from 
the disposable income for the purposes of the transfer. 
11 Article 241(1) of the CIRE, concerning the duties of the trustee, provides, in 
particular, that the trustee is to notify the insolvency creditors of the transfer of the 
debtor’s income and decide on the allocation of the sums received at the end of 
each year of the transfer period. 
12 Article 245 of the CIRE, entitled ‘Effects of the discharge’, provides: 
‘(1) The discharge of the debtor shall lead to the extinguishment of all insolvency 
debts that remain on the date on which it is granted, including debts that have not 
been claimed and verified […]. 
(2) However, the discharge does not include: 
[…] 
(d) Tax and social security debts.’ 
Lei Geral Tributária (Decreto-Lei n.º 398/98, de 17 de dezembro de 1998) 
(General Tax Law (Decree-Law No 398 of 17 December 1998); ‘the LGT’) 
13 Article 30(2) and (3) of the LGT establishes the principle of the unavailability of 
tax, in the sense that the tax liability cannot be waived and cannot be altered, 
unless otherwise provided by law. 
14 Article 49 of the LGT lays down more favourable rules governing the limitation 
period for tax debts, as the grounds for interruption and suspension of that period 
are broader than those provided for under civil rules. 
Succinct presentation of the facts and procedure in the main proceedings 
15 SF was an individual entrepreneur and operated a timber business. 
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16 When he was declared insolvent, by judgment of 18 June 2018, SF was in prison, 
serving a prison sentence. 
17 In the insolvency proceedings, debts totalling EUR 53 396.22 were claimed 
against him, including (i) a debt of EUR 1 123.71 from the Instituto da Segurança 
Social (Social Security Institute), corresponding to unpaid contributions in 
November and December 2015, plus interest, and (ii) a debt of EUR 11 189.71 
from the Fazenda Nacional (National Treasury), corresponding to unpaid taxes 
from September 2015, relating to VAT, the imposto sobre o rendimento das 
pessoas singulares (Personal Income Tax; ‘IRS’), the imposto único de circulação 
automóvel (Single Road Tax; ‘IUC’), costs and fines. 
18 On the date of the insolvency declaration, SF’s assets consisted in two motor 
vehicles. 
19 On 23 January 2019, the application for the discharge of unpaid liabilities 
submitted by the insolvent entrepreneur was provisionally granted. According to 
that decision, within five years of the end of the insolvency proceedings, all 
disposable income obtained by the debtor would be deemed to have been 
transferred to the insolvency administrator appointed as trustee. 
20 On 29 July 2022, the trustee submitted a final report stating that the debtor should 
be granted a discharge of unpaid liabilities, in so far as (i) during the transfer 
period, the debtor had no surplus income and (ii) in view of his situation and the 
fact that he had obtained employment, he had demonstrated that he wished to turn 
his life around. 
21 On 3 October 2022, the judgment under appeal was delivered, by which it was 
decided to grant SF the discharge of unpaid liabilities, with all outstanding 
insolvency debts declared to have been extinguished. 
22 However, the discharge of unpaid liabilities did not include the discharge of debts 
provided for in Article 245(2)(d) of the CIRE, more specifically tax and social 
security debts. 
23 The insolvent entrepreneur brought an appeal on the ground that the final order for 
the discharge of liabilities should include those debts. The Public Prosecutor’s 
Office, representing the applicant for the insolvency declaration, argued that the 
appeal should be dismissed. 
The essential arguments of the parties in the main proceedings 
24 According to the appellant, by excluding tax and social security debts from the 
discharge of debt, Article 245(2)(d) of the CIRE infringes Articles 20(1), 21(2) 
and 23(2) and (4) of the Directive. 
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25 In the text transposing the Directive into national law, Law No 9/2022, the 
national legislature made no mention of the full discharge of debt, yet that 
discharge was provided for in the Directive. 
26 Under the Directive, Member States must ensure that insolvent entrepreneurs have 
access to at least one procedure that can lead to a full discharge of debt, and may 
exclude specific categories of debt from discharge of debt, or restrict access to 
discharge of debt or lay down a longer discharge period where such exclusions, 
restrictions or longer periods are duly justified. 
27 The Directive is clear on the idea of full discharge, by allowing only duly justified 
restrictions that do not compromise the idea of a fresh start, which is fundamental 
to the mechanism for the discharge of unpaid liabilities. 
28 In the law transposing the Directive into national law, the Portuguese legislature 
laid down a different rule for its debts, keeping in force the legal rule according to 
which tax and social security debts are not covered by the discharge of unpaid 
liabilities, without providing any justification in that regard. 
29 According to the appellant, in order for Article 245(2)(d) of the CIRE to remain in 
force, the Portuguese legislature should have duly justified its choice in the 
legislation transposing the Directive, which it did not do. Thus, because it does not 
comply with EU law, the CIRE rule should be declared to be inapplicable. 
30 The appellant further submits that neither the deletion of Article 245(2) of the 
CIRE nor the amendment of letter (d) thereof would entail any infringement of the 
principle of equality and legality of taxation. 
Succinct presentation of the reasoning in the request for a preliminary ruling 
31 Until the adoption of the CIRE, in the event of an improvement in the debtor’s 
financial situation, creditors could enforce their claims within the general 
limitation period of 20 years, which made it unfeasible in practice for the debtor to 
be financially rehabilitated. 
32 The ‘discharge of unpaid liabilities’, enshrined in Article 235 of the CIRE since 
2004, was introduced to allow the insolvent debtor to be released from unpaid 
debts during the transfer period. 
33 However, the referring court has doubts as to the compatibility of 
Article 245(2)(d) of the CIRE with Article 23(4) of the Directive, in so far as that 
provision of national law excludes ‘tax and social security debts’ from the 
discharge. 
34 It points out, in particular, that the aim of the Directive is to contribute to the 
proper functioning of the internal market by removing obstacles to the exercise of 
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economic freedoms that might result from differences with the national rules and 
procedures in this area. 
35 In this context, the referring court states that it is important to determine whether 
the exclusion of such debts from the discharge of unpaid liabilities is consistent 
with the general principles of EU law and with the Charter, and whether that 
exclusion constitutes an obstacle to the attainment of the objectives of the 
Directive and the Treaties. 
36 Indeed, it would appear from Article 23(4) of the Directive that Member States 
may exclude specific categories of debt from the discharge of debt. However, that 
article states that such a possibility exists only ‘… where such exclusions, 
restrictions or longer periods are duly justified […]’. 
37 The article cites examples of debts that may be excluded from the discharge, but 
the referring court has doubts as to whether other exclusions are permitted, 
provided that they are duly justified. 
38 It also points out that Law No 9/2022 did not provide any justification for 
excluding tax and social security debts and that no such justification was provided 
for in the relevant draft law either. 
39 According to the referring court, not all tax debts are ‘criminal’ or ‘tortious’ 
within the meaning of EU law, and reasons of a fiscal nature and of budgetary 
balance may not justify a proportionate restriction of fundamental rights, in 
accordance with Article 52 of the Charter and the case-law of the Court of Justice 
on economic freedoms. 
40 The exclusion of tax and social security debts was based on the public interest 
inherent to the recovery of taxes. However, the discharge of unpaid liabilities also 
has an underlying public interest, namely the rehabilitation of the insolvent person 
as an economic operator and as a dynamic agent capable of generating wealth in 
society. 
41 In addition, tax and social security debts created or accrued during the 12 months 
preceding the start of insolvency proceedings, as well as debts incurred during the 
course of the proceedings, have a privileged status, which enables the 
administration to have its debts settled as a priority over the debts owed to other 
creditors. That fact alone constitutes a departure from the principle of equality of 
creditors. 
42 Tax and social security debts thus enjoy a dual benefit: on the one hand, they are 
debts with a general or special priority in respect of movable or immovable 
property, as the case may be, and, on the other hand, they are excluded from the 
discharge of debts. Finally, tax debts also benefit from more favourable rules on 
limitation periods, since the grounds for the interruption or suspension of the 
limitation period are broader than those provided for by the civil rules governing 
other debts. 
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43 The referring court also points out that the different language versions of 
Article 23(4) of the Directive do not fully correspond to one another and that it 
does not recognise the meaning of certain legal concepts in the different versions 
of that article which it cites in its request for a preliminary ruling. In particular, it 
cites the Spanish, French, Italian and German-language versions of the 
introductory part of Article 23(4) of the Directive. 
44 Consequently, the referring court considers, in the present case, that the reference 
for a preliminary ruling is mandatory and that the case does not fall within any of 
the exemptions established in Cilfit (C-283/81).