CAAD Case 118/2019-T: VAT Exemption Under Articles 9-10 CIVA and Single Operation Principle - Reformed Arbitral Decision

ARBITRAL TAX JURISPRUDENCE

Case No. 118/2019-T

Decision Date: 2021-02-03

Tax Type: VAT

Value of Claim: € 534,297.68

Subject Matter: VAT – Articles 1 to 4 and 9 and 10 of the VAT Code and Articles 9, 13 and 132 of the "VAT Directive" – Reform of the Arbitral Decision (attached to the decision).
*Replaces the Arbitral Decision of 24 October 2019.

BACKGROUND

A... filed an appeal with the Central Administrative Court South against the arbitral decision of 24 October 2019, pursuant to Articles 27 and 28 of the RJAT, invoking:

a. Nullity by omission of ruling:

(i) regarding the alleged violation of the principle of a single supply which had been alleged on a subsidiary basis in the arbitration request;

(ii) regarding the alleged violation of good faith, because the Court concluded, without explanation, that good faith is never a defect in tax assessment;

(iii) because the causal relationship was not assessed between the merits of good faith on the issue of taxes and on the issue of interest;

b. Nullity by contradiction between the grounds and the decision.

The Central Administrative Court South, by judgment of 30 September 2020, found nullity by omission of ruling as to the issue of violation of the principle of a single supply to be established, ruling the appeal unfounded as to the remaining grounds and ordered the issuance of a new arbitral decision with the removal of the irregularity recognized by the reviewing court.

In compliance with the judgment, the issuance of a new decision is now required, this time with the removal of the irregularity recognized by the reviewing court, which is done below, with a ruling as to the issue of violation of the principle of a single supply in section E of Part IV of the following new decision:

ARBITRAL DECISION

The arbitrators José Poças Falcão (arbitrator-chair), Dr. Catarina Belim and Dr. António Alberto Franco (arbitrator-members), appointed by the Deontological Council of the Administrative Arbitration Centre ("CAAD") to form this Arbitral Tribunal, constituted on 02 May 2019, hereby agree as follows:

I. REPORT

1. A..., hereinafter referred to as the "Applicant", corporate number and tax identification number ..., with registered address at Rua ..., No. ..., ..., Portugal, having been notified of the express rejection of the Gracious Objection filed against the tax assessment acts for additional Value Added Tax ("VAT") assessments, with Nos. ... (taxation period 01.13), ... (taxation period 02.13), ... (taxation period 03.13), ... (taxation period 04.13), ... (taxation period 05.13), 22161929 (taxation period 06.13), ... (taxation period 07.13), ... (taxation period 07.13), ... (taxation period 08.13), ... (taxation period 09.13), ... (taxation period 10.13), ... (taxation period 11.13), ... (taxation period 12.13), 2018 ... (taxation period 01.17), 2018 ... (taxation period 02.17), 2018 ... (taxation period 03.17), 2018 ... (taxation period 04.17), 2018 ... (taxation period 05.17) and respective compensatory interest assessments Nos. ... (07.13), 2018 ... (01.17), 2018 ... (02.17) and notified of the additional VAT assessment No. ... (taxation period 02.2018), filed on 21.02.2019 a request for the constitution of a Collective Arbitral Tribunal, pursuant to Articles 2, No. 1, paragraph a) and 10, No. 1, paragraph a) of the Legal Regime of Tax Arbitration ("RJAT"), approved by Decree-Law No. 10/2011, of 20 January, with the Tax and Customs Authority ("Tax Authority") being the Respondent.

2. The Applicant seeks, as the main claim, the annulment of the additional tax assessments and compensatory interest referred to above and the consequent restitution of the amounts paid (by way of compensation) plus the respective indemnity interest, pursuant to Article 43 of the General Tax Law as well as the termination of any guarantee provided and compensation for undue provision of guarantee.

3. As a subsidiary claim, the Applicant requests, in the event the main claims are rejected, the annulment of the compensatory interest assessments.

4. It invokes, on substantive grounds, that the assessments challenged are vitiated by error of fact and law: (i) in the first place, the Applicant is not subject, in terms of subjective and objective scope, to VAT, in relation to the income which are the subject of the assessments to the extent that it intervenes, in relation to these, as a public body in the exercise of powers of authority, (ii) in the second place because the income in question, even if subject to VAT, would always be exempt from it pursuant to Article 9, Nos. 19 and 21, of the VAT Code.

5. It further argues that the assessments challenged are illegal due to violation of the principles of good faith, justice, proportionality and neutrality of VAT given that the Applicant has always assessed VAT as a mixed taxable person, making a plausible and congruent interpretation of tax law and the Tax Authority only raised the issue of failure to assess tax, opening an inspection, when the Applicant requested a tax refund. For this reason, compensatory interest will not be due as they can only be claimed when the omission or delay in payment involves a judgment of censure or fault in relation to the taxpayer.

6. In accordance with Articles 5, No. 3, paragraph a) and 6, No. 2, paragraph a) of the RJAT, the Deontological Council of the Administrative Arbitration Centre appointed the signatories as arbitrators of the Collective Arbitral Tribunal, who communicated their acceptance of the appointment within the applicable time limit.

7. The Arbitral Tribunal was constituted at CAAD on 02.05.2019, as per communication from the President of the Deontological Council of CAAD.

8. Notified for such purpose on 11.05.2019, the Respondent filed a reply and defended itself by opposition.

9. The Respondent did not attach the administrative file.

10. Pursuant to paragraphs c) and e) of Article 16 and No. 2 of Article 29, both of the RJAT, the holding of the meeting referred to in Article 18 of the RJAT was waived, without objection from the Parties.

11. At the request of the Applicant, witness testimony given and recorded in CAAD case file No. 248/2018-T was utilized as evidence, which case referred to the challenge of additional VAT assessments issued to the Applicant on the same grounds as the assessments in this matter but with reference to the years 2014, 2015 and 2016, and in relation to which the Applicant opted to immediately resort to tax arbitration.

12. Given the opportunity for successive optional submissions, the parties chose not to submit further arguments.

II. PROCEDURAL MATTERS

1. The Tribunal is competent.

2. The request for arbitral ruling is timely, as it was filed within the time limit provided in Article 10, No. 1, paragraph a) of the RJAT, calculated from the facts provided in Article 102, No. 1, paragraph b) of the Code of Tax Procedure.

3. The proceedings are not affected by defects that would invalidate them in their entirety.

4. The parties have legal personality and capacity and are shown to be legitimately interested.

It is for the Tribunal to decide the merits.

III. MATTERS OF FACT

1. With relevance to the decision, it is important to note the following facts which the Tribunal considers to be established:

a. The Applicant is an association under private law, without profit-making purposes.

b. The Applicant has legal personality and administrative, technical and financial autonomy.

c. The Applicant, by delegation of B..., exercises competencies in the activity of ... professional.

d. The Applicant, in accordance with its bylaws, organizes and regulates professional sports competitions, supervises and monitors the associated parties in these competitions, defines the sports, financial and organizational conditions for access to competitions, as well as supervises their execution by the entities participating therein.

e. The Applicant integrates the clubs and sports companies that compete in professional ... competitions.

f. The Applicant may also integrate representatives of other sports agents.

g. The Applicant has as:

(i) ordinary members, sports companies that compete in professional ... competitions;

(ii) historical members, founding clubs of A... and those that have held the status of ordinary members regardless of whether they are competing in professional competitions;

(iii) honorary members, natural or legal persons to whom merit is recognized in the field of ... and those who have provided relevant services to A... or to ... sports.

h. The Applicant has its own deliberative bodies, executive bodies and fiscal and disciplinary control bodies.

i. It is the assignment of the Applicant the commercial exploitation of professional ... competitions (..., ... and ...) while representing the collective constituted by the sports companies participating therein, with the collection of advertising and sponsorship revenues, such as sponsorship of ... (season 2016/2017) as official sponsor of A....

j. The Applicant's revenues include the proceeds of admission fees and member quotas, the proceeds of fines, indemnities or percentages of these, costs, fees, deposits and guarantees, the revenues that accrue to it from matches in which the associated sports companies participate or that are organized by the Applicant.

k. Members have the obligation to contribute to the Applicant's expenses, paying quotas and other charges fixed.

l. Fixed-value quotas are applied, variable-value quotas to finance the general budget of the Applicant or intended for the Financial Balance Fund, and supplementary quotas, these required as a result of the registration of B teams in....

m. The Applicant's revenues also include:

(i) the amounts due for registration and transfer of national and foreign players and other sports agents (coaches, trainers, assistants, doctors, masseurs) and the respective amounts due for the issuance of identification cards and copies; and

(ii) the amounts due for stadium inspections.

n. The amounts due for registration and transfer of players and other sports agents and respective issuance of identification cards and copies, remunerate the organization of the administrative process for registration and transfer of players and other sports agents, with B... being responsible for the homologation of registration or transfer acts and final licensing.

o. In this regard:

(i) the value of the amounts due is determined by B... in each sports season;

(ii) the amounts received are divided between the Applicant and B.... The Applicant retains an amount equivalent to the general and common costs it has to bear with the organization and management of the processes, with the division in the years in question being 50%.

p. The amounts due for stadium inspections relate to control actions of the stadiums, in order to confirm and certify that they are suitable for holding ... matches, with security, comfort, broadcast and television requirements.

q. The positive balance of the accounting statement of professional competitions, resulting from the difference determined in each sports season between, on the one hand, net commercial exploitation revenues minus costs incurred for their obtaining, and on the other hand, the costs incurred in organizing these events, is, after deductions of amounts intended for the Financial Balance Fund, for the Applicant's budget and for the ... League Infrastructure Fund, allocated to the sports companies that participated therein in that same season, in accordance with the criteria defined by the General Assembly of the Applicant.

r. The negative balance determined in one sports season is deducted from positive balances, if any, of one or more subsequent sports seasons.

s. The surplus of the associative nature activity of A... will be allocated to the fulfillment of statutory purposes and attributions.

t. In the years 2013, 2017 and in the period 02.2018, the Applicant did not assess VAT on the amounts charged as associative quotas, registrations and transfers of players and sports agents and respective amounts due for the issuance of identification cards and copies, and also on stadium inspections.

u. The Applicant did not deduct the VAT borne in relation to these activities.

v. In the same years, the Applicant assessed VAT on the revenues – advertising and sponsorships – relating to the commercial exploitation of professional ... competitions, deducting the respective VAT incurred in relation to this activity.

w. As a result of tax inspection actions relating to the years 2013, 2017 and the period 02.2018, arithmetic corrections were made in respect of VAT in the amount of € 422,292.46, € 104,954.18 and € 7,051.03, respectively.

x. The majority of the corrections made relate to the amounts linked to registration and transfer of players and sports agents, 80% of the total 2013 assessments, 90% of the total 2017 assessments and 75% of the value of the 2018 assessment.

y. The Tax Authority, in the rejection of the Gracious Objection filed against the 2013 and 2017 assessments and in the Tax Inspection Report relating to the period 02.2018, considered that the income listed in items l. and m. above constitute onerous service provisions subject to and not exempt from VAT: (i) they are not covered by the exclusion from the subjective scope of the tax that appears in Article 2, No. 2, of the VAT Code to the extent that the Applicant does not have the status of a public body and exercises powers of authority directly and (ii) they are not covered by the exemption referred to in Article 9, No. 19, of the VAT Code to the extent that the Applicant is not a non-profit organization.

z. Likewise, the Tax Authority considered that the Applicant is not an autonomous group of persons exercising primarily an exempt activity nor does it limit itself to requiring from its members the exact reimbursement of the part that falls to them in common expenses, such that the exemption in Article 9, No. 21, of the VAT Code does not apply to the income in question.

aa. The Applicant invoked, in the Gracious Objection proceeding against the 2013 and 2017 assessments, a defect of form due to violation of No. 7 of Article 60 of the General Tax Law and the illegality of the corresponding compensatory interest (see the act of rejection of the Gracious Objection attached to the case file as document 1 of the PPA, point 3).

bb. The Applicant did not exercise the right to be heard regarding the draft correction of the inspection for the taxation period 02.2018 (see the Inspection Report attached to the case file as document 2 of the PPA, page 18, Section VIII).

cc. From the Dispatch of the Office of the Secretary of State for Tax Affairs No. 616/2008-XVII, issued to Association C..., on 25 June 2008, sent to it through Official Notice No. ..., the following is stated:

"Considering that No. 21 of Article 9 of the VAT Code (CIVA) establishes the exemption from tax on service provisions and related goods transfers effected, in the collective interest of its members, by non-profit organizations pursuing objectives of a sports nature, when the respective consideration is a quota set out in the bylaws;

Considering that it is not disputed that Association C... (C...) is constituted as a non-profit organization in accordance with Article 10 of CIVA;

Considering that pursuant to paragraphs a) and b) of Article 58 of the Bylaws of C... (EC...) the charging to clubs of quotas and fees for registration and transfer of players is provided for;

(…)

It should be understood that:

• The amounts charged to the clubs by C... in accordance with their respective Bylaws, relating to the organization of matches, the affiliation of clubs and their registration in competitions, the registration and transfer of players and the assignment of cards, fall within No. 21 of Article 9 of CIVA

(…)"

Reasoning of the Matters of Fact

1. With respect to the matters of fact, the Tribunal need not rule on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to distinguish between proven and unproven facts (see Article 123, No. 2, of the Code of Tax Procedure and Article 607, No. 3, of the Code of Civil Procedure, applicable by reference to Article 29, No. 1, paragraphs a) and e), of the RJAT).

2. In this way, the facts relevant to the decision of the case are selected and determined according to their legal relevance, which is established in view of the various plausible solutions to the legal questions (see former Article 511, No. 1, of the Code of Civil Procedure, corresponding to current Article 596, applicable by reference to Article 29, No. 1, paragraph e), of the RJAT).

3. The Tribunal formed its conviction regarding the proven facts having regard to the positions adopted by the parties, in light of Article 110/7 of the Code of Tax Procedure, the documentary evidence and notorious facts, in particular the Applicant's Bylaws and Regulations and the bylaws of B..., and the witness testimony produced.

4. No findings were made as proven or unproven of allegations made by the parties and presented as facts, consisting of statements that are strictly conclusive or of law, not susceptible to proof, and whose veracity must be assessed in relation to the specific matter of fact established above.

IV. LAW AND MERITS

A. Delimitation of the Material Questions to be Decided

1. The Applicant understands that the non-assessment of VAT on the amounts listed in items l. and m. above of the Matters of Fact established is fully justified because:

(i) In the case of associative income, the Applicant is excluded from the subjective scope of VAT, pursuant to Article 2, No. 2, of the VAT Code and Article 13 of the VAT Directive, to the extent that the income in question relates to activities that the Applicant carries out in the capacity of a "public body" and in the exercise of "powers of authority";

(ii) The income in question is excluded from the objective scope of VAT because it does not constitute an economic activity subject to this tax pursuant to Articles 1 and 4 of the VAT Code and Article 9 of the VAT Directive;

(iii) Even if we were to consider the income in question as subject to VAT, the same would always be exempt from tax under the exemptions set out in Article 9, Nos. 19 and 21, of the VAT Code as we are dealing with provisions made in the collective interest of its members by non-profit organizations or provisions furnished to its members by autonomous groups of persons exercising an exempt activity, and

(iv) There has been a violation of the principle of "single supply" in the terms further developed below, in Section IV, point E.

1. The Applicant further indicates that: (i) should it be considered that the income in question is subject to and not exempt from VAT, the assessments are always vitiated by a defect of law due to violation of the principles of good faith and plausible interpretation, and compensatory interest will not be due under these principles (ii) there would be a right to deduct the VAT incurred in the acquisition of goods and services intended for the activity (associative), such that the corrections made by the Tax Authority are defective in illegality by not considering the difference between deductible VAT and assessed VAT.

Let us examine.

B. Exclusion of the Status of Taxable Person from Public Bodies Acting in the Exercise of Powers of Authority

1. The first issue to analyze concerns the rule of non-subjection to VAT of public bodies and its application to the Applicant and the income in question.

2. Pursuant to Article 13 of the VAT Directive, which guides our national VAT law: "States, regions, local authorities and other public bodies are not considered taxable persons in respect of activities or transactions which they carry out as public authorities, even where they collect duties, fees, contributions or remuneration in connection with those activities or transactions".

3. This rule was transposed into the VAT Code, Article 2, No. 2, with the following wording: "the State and other public bodies are not, however, taxable persons in respect of the tax when they carry out transactions in the exercise of their powers of authority, even if they receive fees or any other consideration, provided that their non-subjection does not give rise to distortions of competition".

4. In this regard, the Court of Justice of the European Union ("hereinafter CJEU") has ruled, on several occasions, on the concept of "public body" in the context of the interpretation of Article 13 of the VAT Directive, which is the one relevant to the present case.

5. It follows from the case law issued that the following are not considered "public bodies": (i) private law operators (Toll Road Cases), (ii) entities that are not integrated into the organization of public administration and (iii) entities that carry out independent economic activities, exercised within the framework of a liberal profession (Commission/Netherlands).

6. It is further clear that:

(i) it is not simply by virtue of the fact that an activity carried out by a private party consists of the performance of acts that constitute prerogatives of public authority that such activity is covered by the rule of non-subjection to VAT;

(ii) Article 13, analyzed in light of the objectives of the VAT Directive, highlights the need for the cumulative fulfillment of two conditions for the rule of non-subjection to apply: (a) the exercise of activities by a "public body" and (b) the exercise of activities carried out in the capacity of a public authority;

(iii) the only criterion that allows distinguishing between activities carried out by public bodies in the capacity of public law subjects or private law subjects is the legal regime applicable based on national law. Hence, public bodies act in the capacity of public authorities when they exercise competencies within the framework of the legal regime that is specific to them and, conversely, do not act in that capacity if they intervene as private economic operators.

1. From the application of the above to the present case, it follows that the Applicant will be excluded from the subjective scope of VAT pursuant to Article 2, No. 2, of the VAT Code only if it acts in the capacity of a "public body" under national rules.

2. Now, under the legal regime in force, ... as a sports activity, is grouped in a Federation, in this case, B....

3. This Federation is a non-profit legal person, constituted in the form of a private law association (see Article 1, No. 1, of the Bylaws of B...), to which the status of public utility is granted (see Article 19 of the Fundamental Law on Physical Activity and Sports, Law No. 5/2007 of 16 January hereinafter "Sports Fundamental Law", and Article 7 of the Legal Regime of Sports Federations of Public Utility, Decree-Law No. 248-B/2008, of 31 December, hereinafter "RJFD").

4. By obtaining the status of public utility, B... assumes the exclusive exercise of powers of a public, regulatory and disciplinary nature of the ... sports modality (see Article 19 of the Sports Fundamental Law).

5. In this context, B... must integrate a professional league, in the form of a non-profit association, with legal personality and administrative, technical and financial autonomy – in the present case, the Applicant (see Article 22, No. 1, of the Sports Fundamental Law).

6. This league, by delegation of B..., assumes the competencies relating to professional ... competitions, namely to organize and regulate professional competitions, to exercise, in relation to its members, control and supervisory functions and to define the sports, financial and organizational conditions for access to professional competitions of the Applicant (see Article 22, No. 2, of the Sports Fundamental Law).

7. This league does not have public interest recognized by administrative act.

8. The relationship between the Applicant and B... is regulated by a proper contract entered into between the two entities (see Article 23 of the Sports Fundamental Law and the Sports System and the contract existing between the Applicant and B...).

9. Although sometimes doubt could have arisen as to the nature of sports federations, it has always been the prevailing understanding that these entities, even if they were private law legal persons, to the extent that they possessed the status of public utility, benefited from prerogatives of authority in the exercise of a public service mission, in such a way that the unilateral acts they performed in that capacity assumed the nature of administrative acts, being subject to contentious challenge before the administrative courts (Opinion of the Attorney General's Office No. 14/1985, BMJ No. 359, p. 189; judgment of the Supreme Administrative Court (Full Court) of 30 April 1997, Cadernos de Justiça Administrativa (CJA) No. 4, p. 3; Vital Moreira, Administração Autónoma e Associações Públicas, Coimbra, 1997, p. 303).

10. The Sports Fundamental Law points in this direction when it identifies, in its Article 18, that "disputes arising from acts and omissions of the bodies of sports federations and professional leagues, in the context of the exercise of public powers, are subject to the rules of administrative contentious proceedings".

11. It follows from all that has been set out here that B... acquired public powers of regulation and discipline of ... sports activity, powers that were delegated to it by the State.

12. In turn, B... itself delegated, to the Applicant, part of these public powers as regards professional ... competitions.

13. Notwithstanding the conclusion reached above, the delegation of powers verified merely means that there has been a process of transfer of responsibilities for the execution of a public function and not that a given entity becomes, by that means, qualified as a public body.

14. In this regard, this Tribunal fully agrees with the decision and grounds of the Collective Arbitral Tribunal in case 248/2018-T, which are reproduced below for ease of reference:

"9. In light of this entire legal framework, it is important to recognize that sports federations are, in their genesis, private associations (freely constituted by sports agents, clubs and groups of clubs) and only through a request for the attribution of the status of public utility for sports purposes do they acquire the competency to exercise public powers of regulation and discipline of sports activity. These public powers correspond to powers delegated by the State, that is, to powers that were originally within the attributions of the State in sports matters.

The delegation of public powers in a private entity merely means that this entity, through a process of transfer of responsibilities, becomes an instance of execution of a public function, and in the exercise of which it is required to comply with administrative law and public oversight procedures. We are not dealing with the execution of a task that has moved to the private sector, but that remains a public task and continues to be the ultimate responsibility of the State.

(…)

In relation to professional competitions, the law allows for the delegation of competencies to professional leagues, which corresponds to a form of sub-delegation of competencies. That is, the State delegates public functions to federations but the exercise of some of those functions may be delegated to A... [Applicant].

As it results from Article 22 of the Fundamental Law, and is reaffirmed in Article 27 of the Legal Regime of Sports Federations, A... constitutes an autonomous body of B [B...] for professional sports and which has legal personality and administrative autonomy. This means that the acts they perform in the exercise of delegated powers are not attributable to B... but to A... itself as a differentiated body. It must be concluded that professional leagues participate in the exercise of the public function of regulation of sports, exercising, in that context, public powers of authority (in this sense, Pedro Gonçalves, op. cit., p. 867).

In that context, it cannot be overlooked that the intervention of A... in the procedures for registration and transfer of players and in inspections of sports facilities, with constitutive effects, albeit subject to homologation by B..., represent the exercise of powers of authority. This is because, by effect of the specific legal regime applicable to it, A... intervenes, not as a private law subject, but in the exercise of powers sub-delegated of regulation of professional competitions that originally belonged to the State.

The point is that A..., as has been indicated, is a private law association, constituted for the defense of the "common interests of its members", to which it is assigned not only the exercise of regulatory functions but also "to negotiate, manage and supervise, in the interest and on behalf of its members, the exploitation of professional competitions" and "to manage the revenues" derived from them (Articles 1, 7, paragraph b), and 8, No. 1, paragraphs q) and r), of the Bylaws). For the pursuit of common interests, A... is assigned, in particular, to "establish commercial companies with a view to the commercial exploitation of its activity and activities related to it" or to "define the rules and general guidelines for the promotion, enhancement and profitability of professional competitions" (Article 8, No. 2, paragraphs e) and f), of the Bylaws).

As a mere private entity, A... does not meet the first of the requirements on which the application of the rule of non-subjection to VAT depends, to the extent that it cannot be considered as a public authority for the purposes provided in Articles 13 of the VAT Directive and 2, No. 2, of the VAT Code, and, as has been stated, according to the very understanding of the Court of Justice, the said rule of exclusion from VAT implies that cumulatively the conditions of exercise of authority prerogatives are met and that that activity is carried out in the capacity of a public authority."

1. The same conclusion is reached if we apply the teachings of the CJEU judgment Saudaçor cited by the Applicant, reinforced by the teachings of the Nagyszebas Telepulesszolgaltatasi judgment.

2. From this case law, one of the touchstones for considering an entity as a "public body" is the demonstration that an entity is sufficiently integrated into the organization of public administration, which can be evidenced in particular when:

(i) the capital of that entity is 100% held by public law entities;

(ii) the clients of that entity are public law entities;

(iii) service provisions furnished to third private parties are residual;

(iv) the management and administration of that entity are determined by public law entities; and,

(v) there is an organic connection between the entity and public law entities, in particular by the entity being created by a legislative act approved by the national legislator.

1. Now, in the present case, as follows from the facts established here and the applicable national legal regime, the features of the Applicant point in the direction that it is not sufficiently integrated into public administration to be considered a public body:

(i) The Applicant is a private law entity, constituted in the great majority by sports companies and sports clubs that compete in professional competitions and that assume the character of private entities (see Articles 26 and 27 of the Sports Fundamental Law);

(ii) The Law is clear when it establishes that the Applicant maintains administrative, technical and financial autonomy, nor does it confer upon it the status of public utility but rather delimited functions of execution of powers of authority within professional ... sports by means of sub-delegation of such powers by the entity that possesses the status of public utility, B... (see Article 19, No. 1 and Article 22, Nos. 1 and 2 of the Sports Fundamental Law);

(iii) The Applicant has its own deliberative bodies, executive bodies and fiscal and disciplinary control bodies (Article 18 of the Bylaws).

(iv) The Applicant has autonomy in the commercial exploitation of professional ... competitions (see Article 48, No. 2, paragraph b) of the Bylaws).

(v) The Applicant has autonomy to associate with natural and legal persons with a view to the provision of services or the commercialization of rights and products related to ... (see Article 8, No. 2, paragraph k) of the Bylaws).

(vi) The Applicant has its own revenues that do not depend on public law entities (see Article 63 of the Bylaws).

1. Therefore, this Tribunal also fully agrees with the decision and grounds of the Collective Arbitral Tribunal in case 248/2018-T, which are reproduced below for ease of reference:

"10. (…)

As is evident, the State does not exercise any powers of direction or superintendence in relation to A..., does not finance it nor does it participate in its revenues or in its social assets, and does not interfere in its constitution or operation, since A... is freely constituted by its members in accordance with the legal regime applicable to private law associations.

The State exercises only powers of supervision in relation to the exercise of public powers by B..., by means of inquiries, inspections and investigations, and may suspend or cancel the status of public utility that grants to that entity the competency to exercise regulatory or disciplinary powers (Articles 20 and 21 of the Fundamental Law on Physical Activity and Sports). And, in that sense, it exercises a mere power of supervision translated into the verification of compliance with laws and regulations by the proper bodies of B....

And, on the other hand, although A... is legally empowered to exercise, by delegation of B..., the competencies relating to professional competitions, such delegation does not even operate through State intervention, being rather granted by contract to be entered into between the parties (Article 23 of the Fundamental Law on Physical Activity and Sports).

As it must be concluded, A... cannot be considered as a public body in the sense of an entity that is integrated into the organization of Public Administration, even according to the criteria defined in the said Saudaçor judgment."

1. Considering all the grounds set out above, this Tribunal understands that the Applicant is not, in relation to the associative income in question, excluded from the subjective scope of VAT pursuant to Article 2, No. 2, of the VAT Code and inherent Article 13 of the VAT Directive, because it does not qualify as a "public body".

C. Exclusion of the Income in Question from the Objective Scope of VAT by Not Constituting an Economic Activity

1. The Applicant argues that the income indicated in items l. and m. above of the Matters of Fact established is always excluded from the objective scope of VAT because it does not constitute an economic activity subject to this tax pursuant to Articles 1 and 4 of the VAT Code and Article 9 of the VAT Directive.

2. Now, pursuant to Article 9 of the VAT Directive, economic activity is defined as: "any activity of production, commercialization or provision of services, including extractive activities, agricultural activities and the activities of liberal professions or equivalent professions".

3. Pursuant to Article 1, No. 4, of the VAT Code, which deals with the objective scope of the tax, the following are subject to VAT: service provisions being as such considered "(…) transactions carried out with consideration which do not constitute supplies, intra-community acquisitions or importations of goods".

4. In this regard, it is settled case law of the CJEU that the possibility of qualifying a service provision as "a transaction with consideration" merely presupposes the existence of a direct link between that provision and a consideration actually received by the taxable person. That direct link is demonstrated when there exists between the provider and the beneficiary a legal relationship within which reciprocal performances are exchanged, with the remuneration received by the provider constituting the effective countervalue of the service provided to the beneficiary.

5. As for the concept of "economic activity" contained in Article 9 of the VAT Directive, the CJEU has consistently considered that an activity is covered by this concept if it is carried out with the aim of obtaining income with a permanent character.

6. Applying the above to the present case, this Tribunal concludes that we are dealing with income that is the consideration for reciprocal service provisions, based on the relationship existing between the Applicant and its members or the recipients of the respective service provisions:

(i) In the case of quotas, we are dealing with remuneration paid by the respective recipients in return for belonging to the association with the rights and duties inherent to their position as members, as defined in the Bylaws; these revenues are a reality of a permanent, continuous and periodic character, for as long as the status of member lasts, and the performances given in exchange directly benefit the sports companies, clubs and other members, being thus sought by these.

(ii) In the case of registration and transfer values of players and sports agents and amounts due for the issuance of identification cards and copies, as per the established facts, we are dealing with the remuneration of the procedure aimed at the recognition that a given person is suitable for professional ... sports; These revenues have a permanent and continuous character, every sports season, and the performances given in exchange directly benefit the players and sports agents or the entities representing them, being thus sought by these.

(iii) In the case of values for inspection of stadiums, it is aimed, as per the established facts, to remunerate the procedure of supervision of the stadiums and verification of their suitability for holding sports events, acts which also assume a permanent and continuous character within the scope of the Applicant's attributions and which benefit the sports companies and clubs involved, being thus sought by these.

1. There is thus a synallagmatic relationship objective between the amounts paid and the service provisions received in exchange that causes the provisions in question to fall within the residual definition of service provisions contained in Article 4, No. 1, of the VAT Code.

2. Their provision in a successive manner and with a permanent character to obtain revenues by the Applicant – we are not dealing with occasional, sporadic manifestations or carried out at the discretion of each – denotes the economic character of the activities in question.

3. In this regard, it is important to note that the designation given to the provisions as "quotas", "fees" or "licenses" is irrelevant. Even if fees or licenses are commonly charged in contexts of exercise of powers of authority – what matters is the analysis of their material substance as considerations resulting from an economic activity, when it is concluded, as in the present case, that such realities are not excluded from VAT under the rules of subjective scope.

4. Therefore, this Tribunal considers that the income indicated in items l. and m. above of the Matters of Fact are not excluded from the objective scope of VAT because they reflect service provisions resulting from the exercise of an economic activity pursuant to Articles 1 and 4 of the VAT Code and Article 9 of the VAT Directive.

D. Exemption under Article 9, Nos. 19 and 21, of the VAT Code

1. The Applicant argues that even if the income in question is considered to be subject to VAT (subjective and objective scope), the same would always be exempt from VAT under Article 9, Nos. 19 and 21, of the VAT Code. Let us examine.

2. Pursuant to Article 9, No. 19, of the VAT Code: "the following are exempt from tax: service provisions and the supplies of goods connected with them carried out in the collective interest of its members by non-profit organizations, provided that such organizations pursue objectives of a political, trade union, religious, humanitarian, philanthropic, recreational, sports, cultural, civic or representation of economic interests nature and the only consideration is a quota fixed in accordance with the bylaws".

3. This rule must be read in conjunction with Article 10 of the VAT Code, which determines the characteristics of "non-profit organizations", fixing that they are thus understood as those which simultaneously meet the following conditions:

"a) Under no circumstances shall they distribute profits and their managing bodies shall not have, by themselves or through an intermediary, any direct or indirect interest in the results of the business;

b) They shall keep accounts that cover all their activities and place them at the disposal of tax authorities, in particular for the verification of the aforementioned;

c) They shall charge prices authorized by public authorities or, for transactions not susceptible to authorization, prices lower than those required for similar transactions by commercial enterprises subject to the tax;

d) They shall not compete directly with taxable persons."

1. The two rules above have their origin in Articles 132 and 133 of the VAT Directive, relating to exemptions for the benefit of certain activities of general economic interest and as such should be read and interpreted in harmony with these.

2. In this regard, Article 132 provides, in paragraph l) of its No. 1, that Member States exempt "service provisions, and also supplies of goods closely related to them, provided to their respective members in the collective interest by non-profit organizations pursuing objectives of a political, trade union, religious, patriotic, philosophical, philanthropic or civic nature, by means of a contribution fixed in the bylaws, provided that such exemption is not likely to cause distortions of competition".

3. And Article 133 of the VAT Directive provides that Member States, as far as "organizations that are not public bodies" are concerned, may make the granting of the exemption conditional on the observance of various conditions, among them the one contained in the respective paragraph a): "The organizations in question must not have as their objective the systematic pursuit of profit, and any profit earned must under no circumstances be distributed, but instead must be applied to the maintenance or improvement of the services provided".

4. Here we arrive, it is important to note that one cannot confuse the civil classification of the Applicant as a non-profit association, with the autonomous classification for the purposes of VAT of the Applicant as a "non-profit organization".

5. Indeed, the concept "non-profit organization" is an autonomous concept of the VAT system and, as such, should be interpreted in a harmonized manner within the systematic framework of this tax.

6. In this regard, the case law of the CJEU gives us a precise and clear notion of the ratio legis of the exemption rules in question and the main principles with which the concept of "non-profit organization" should be interpreted:

(i) the benefit of the exemption should be reserved for organizations that do not have a commercial purpose and the Community legislator intended to make a distinction between the activities of commercial enterprises and those of organizations that do not have as their objective the generation of profits for their members;

(ii) the objective of the exemption is to grant more favorable treatment, in VAT matters, to certain organizations whose activities are oriented towards purposes other than commercial purposes;

(iii) to determine whether such an organization meets the conditions imposed by the exemption, regard should be had to the totality of its activities;

(iv) it is not the results, in the sense of surpluses obtained at the end of an accounting period, that prevent an organization from being qualified as "non-profit", but rather profits, in the sense of "pecuniary advantages in favor of members";

(v) an organization can be qualified as "non-profit" even if it systematically seeks to generate surpluses provided that it applies them to the execution of its own service provisions.

1. It thus being clear from the case law referred to above that the exemption rule of Article 9, No. 19, of the VAT Code is not intended to apply to organizations that carry out commercial activities with the objective of granting pecuniary advantages in favor of members, but rather to organizations that, unlike a commercial enterprise, do not have as their objective the generation of profits for their members.

2. From the application of the criteria described above to the present case, this Tribunal concludes that the Applicant does not manage to pass the test of the conditions that must be met to benefit from VAT exemption pursuant to Article 9, No. 19, of the VAT CODE.

3. Indeed, it is established that the Applicant's primary purpose and exclusive competency is the organization of professional ... competitions in Portugal and, within this purpose, it is its assignment the commercial exploitation of professional ... competitions.

4. In this context, it is for the Applicant to manage, negotiate and supervise the activity of commercial exploitation of professional ... competitions in the best interest and on behalf of its members.

5. Even though it acts on behalf of its members, the Applicant is in fact acting in its own name (note that ... assumes itself as a sponsor of A...) and in fulfillment of its own associative attributions, in the systematic pursuit of profit derived from that activity, through the obtaining of sponsorships and advertising revenues.

6. It is very clear from the established facts that this profit is a pecuniary advantage in favor of its members, with only a small part remaining for the Applicant's budget, see Article 8, No. 4, of the Bylaws.

7. In these terms, the Applicant's activity, viewed globally and in the computation of activities, does not cease to have as its objective the systematic pursuit of profit in favor of its members, nor can one speak, in a broad sense, of an "absence" of distribution of profits by its members when the positive balance resulting from the activity of commercial exploitation of professional ... competitions, i.e., the profit from one of its attributions, is distributed by these.

8. As the ratio legis and conditions of the exemption in question are frustrated, this Tribunal understands that the Applicant cannot be qualified as a "non-profit organization" for the purposes of the exemption provided in Article 9, No. 19, of the VAT Code and in accordance with the understanding of the CJEU case law.

9. And it should be said, in this regard, that it follows from the wording of the rules in question that the exemption to be granted – which is not to be applied on the basis of the condition of "non-profit organization" – would only benefit the services covered by associative quotas and never the autonomous services such as those for registration and transfer of players and sports agents which were the subject of the majority of the corrections made.

10. Likewise, this Tribunal considers that the exemption provided in No. 21 of Article 9 of the VAT Code does not apply to the present case, based on the same grounds invoked by the Collective Arbitral Tribunal in the decision of case 248/2018-T, which are reproduced below for ease of reference:

"In correspondence with Article 132, No. 1, paragraph f), of the VAT Directive, Article 9 of the VAT Code provides, in its No. 21, that the following are exempt from tax: service provisions furnished to its members by autonomous groups of persons exercising an exempt activity, provided that such services are directly necessary to the exercise of the activity and the groups limit themselves to requiring from their members the exact reimbursement of the part that falls to them in common expenses, provided, however, that this exemption is not likely to cause distortions of competition.

The application of this exemption depends, among other things, on the members constituting the autonomous grouping carrying out an activity itself exempt from tax, from which it follows that the application of the exemption would depend, not on the regime of the service provisions carried out by A..., but on the regime of the service provisions that may be carried out autonomously by the sports companies as its members.

The additional tax assessment that is the subject of this arbitration proceeding refers, however, to the service provisions carried out by A..., such that only the exemption that could cover that activity would need to be considered, with no other activity that may be attributed to the associated clubs being in question."

E. Violation of the Principle of a Single Supply

1. The Applicant, in Articles 316 to 336 of the request for arbitral ruling, alleges, in summary, that the service of transfer and registration of sports agents and venues has a peculiar characteristic that makes it exempt from VAT: it is provided by two entities, A... and B..., in total cooperation, with A... being responsible for the organization of processes and obtaining relevant information and B... being responsible for the homologation of the decision (in the request for arbitral ruling it is referred to in Article 318 that the entity doing the homologation is A...; however, it follows from the systematic presentation of Articles 316 and 336 and from the competency and legal powers of each of the entities involved that such reference is a typographical error, and should read B... instead of A... in the second part of Article 318).

2. Given that the activity of B... is exempt from tax and that of A... is subject to and not exempt from tax, and it being impossible to divide the provisions in question, the VAT regime must be applied to the main provision made by B..., which performs the administrative act of homologation, with the work of A... being operational, internal and preparatory of dossiers and merely accessory.

3. It also alleges that this understanding was already followed by the CJEU, in a similar situation, in Cases C-497/09 and C-499/09, in which it was understood that the sale of popcorn, in the eyes of an average cinema customer, merely completes the cinema session, such that it is not a question of an autonomous food service provision.

4. The matter here under examination was already the subject of consideration by the collective arbitral tribunal constituted in case file No. 248/2018-T, which reformed its arbitral decision as a result of nullity by omission of ruling as to the violation of the principle of a single supply which had been alleged.

5. This Tribunal agrees with the conclusions and grounds of the superseded decision, issued therein, dated 5 June 2020, which accepts and reproduces below for ease of reference:

"Moving on to analyze the issue, it is important to begin by saying that the arbitral decision did not take a position on the subjective scope of VAT in relation to B..., having only carried out, preliminarily, the legal framework that made it possible to conclude that sports federations are, in their genesis, private associations (freely constituted by sports agents, clubs and groups of clubs) and only through a request for the attribution of the status of public utility for sports purposes do they acquire the competency to exercise public powers of regulation and discipline of sports activity.

Nor is it overlooked, on the other hand, as was set out in the arbitral decision, that the European legislator used a strict concept of public body for VAT purposes, which the CJEU case law also came to corroborate, by stating that "an activity exercised by a private party is not exempt from VAT simply because that activity consists of the performance of acts that constitute prerogatives of public authority (judgment Commission v. Portugal, Case No. C-462/05, of 17 July 2008).

Although starting from the idea that there is a different VAT regime for B... and A... – which may be justified at the point where B... has essentially regulatory and disciplinary powers that do not fit into a typical economic activity – it does not seem to be understood that the transfer and registration of sports agents and venues corresponds to a single supply that is subject to the same VAT regime.

As has been stated by the CJEU, for VAT purposes, each transaction should, in principle, be considered distinct and independent. The situations in which distinct transactions can be reduced to a single transaction may result from a relationship of subordination between the various constituent elements, which makes it possible to consider that some or some of those elements should be regarded as the main provision and others as merely accessory provision that is only intended to complete or benefit the enjoyment of the main provision, or from a relationship of interdependence when the various provisions are so interlinked that they objectively appear to the consumer as a single economic transaction (as to these aspects, SÉRGIO VASQUES, O Imposto sobre o Valor Acrescentado, Coimbra, 2015, pp. 217-218).

The CJEU judgment in the CinemaxX case (judgment of 10 March 2011, Case No. C-497/2009) – cited by the Applicant – is elucidating as to the requirement of these conditions. In a case involving the preparation and distribution of popcorn in cinema halls, which were carried out continuously and not in response to customer requests, the Court of Justice understood that that activity is not independent of its sale, and cannot be characterized as a food service or table service, but as a sale that for the average customer completes the cinema session (recital 72). In that and in other situations analyzed in the same judgment, involving the sale in vehicles or food establishments of sausages, french fries and other ready-to-eat foods (Cases No. C-497/09 and C-501/09), the Court understood that the preponderant element of the transactions at issue, taken as a whole, is constituted by the delivery of ready-made or food ready for immediate consumption, since its preparation, summary and standardized, is intrinsically linked to it and that the provision of rudimentary facilities allowing a limited number of customers to consume on the spot has a purely accessory and minor character (recital 74).

None of these situations are transposable to the present case.

As it results from Article 22 of the Fundamental Law, and is reaffirmed in Article 27 of the Legal Regime of Sports Federations, A... constitutes an autonomous body of B... for professional sports and which has legal personality and administrative autonomy. On the other hand, professional leagues exercise, by delegation of their respective federations, the competencies relating to professional competitions, namely in terms of the organization and regulation of professional competitions, exercise of control and supervisory functions in relation to its members, and definition of the sports, financial and organizational conditions for access to professional competitions. The relationship between the sports B... and its respective league is regulated by a contract to be entered into between those entities, pursuant to law (Articles 22, No. 2, and 23, No. 1, of the Fundamental Law).

The contract entered into between B... and A... provides for the attribution to this entity, among others, of competencies in the context of the processes of registration and transfer of players of clubs that integrate professional competitions (clause [5 and] 6). Specific attributions in the context of access to sports venues and registration of ... contracts by sports companies are also provided for in the Bylaws of A… (Article 8, No. 1, paragraphs c) and g)).

The simple circumstance that A... participates in the exercise of the public function of regulation of sports, by delegation of powers, means that it practices its own acts which are not attributable to B... but to that same entity as a differentiated body.

In this entire context, the service provisions resulting from the registration and transfer of players or other sports agents, as well as those arising from inspections for the purposes of licensing of sports facilities, corresponding to specific acts of an authoritative nature directly practiced by A..., cannot be regarded as merely accessory provisions, devoid of autonomy and that become attributable for tax treatment purposes to B....

True it is that B... proceeds with the homologation of the processes of transfer and registration of players (clause [5 and] 6 of the contract), but this is a mere formal act of confirmation that does not disqualify the preparatory and deliberative activity of A... nor raises the intervention of B... to the level of the main element of the activity.

The arbitration request thus shows itself to be unfounded as to this ground."

1. But, moreover, it is important to recall that in the Card Protection Plan Judgment (25 February 1999, "Case CPP", Proc. C 349/96, Coll., p. I 973), the precursor regarding what should be considered a single supply for VAT purposes, the CJEU defined as one of the guiding criteria of what should be considered a single supply that "A provision should be considered accessory in relation to a main provision when it does not constitute for the clientele an end in itself, but a means of benefiting in the best conditions from the service main provider".

2. Now it was established in the matters of fact that the amounts for registration and transfer of players in question remunerate:

(i) the organization of the administrative process for registration and transfer of players and other sports agents carried out, which is the responsibility of A...; and,

(ii) the homologation of the registration or transfer acts and final licensing, which is the responsibility of B....

1. It was established that the amounts for registration and transfer of national and foreign players are revenues of A....

2. It was further established that, in total, the amounts received are divided between A... (which receives them and divides) and B....

3. Thus examining the case files, it results from the established matters of fact that we are dealing with an agent, which is A..., that appears before the clubs as the entity to which these must submit the entire administrative process for registration of players in professional competitions, with the organization of these processes being a proper attribution of this entity. A... is, before the clubs, the provider – and collector – of the services in question.

4. It further results from the case files that, differently from what the Applicant invokes, its work is not "internal and preparatory of dossiers (Article 324 of the PPA)". A... presents itself and acts in its own name before the clubs with a very visible and external activity, with services that are not merely a means of benefiting from the best conditions of another main service, i.e., they are not an accessory operation of the act of homologation by B....

5. And this conclusion does not fall – as the Applicant invokes – because of the fact that a single price is charged. As follows from the CJEU case law in the Case CPP already referred to here (paragraph 31 of the judgment), the fact of a single price being charged does not automatically determine that we are dealing with a single and indivisible provision, especially when, as in the present case, the circumstances point to the existence (public and notorious) of distinct provisions – one in the aspect of organization of the administrative process (subject to VAT in general terms under the other grounds of this decision) and another in the aspect of the act of homologation.

6. Finally, the argument invoked by the Applicant cannot be admitted that the service is indivisible and exempt or not subject to VAT to the extent that A... and B... have shared competencies of Public Authority and are integrated one in the other, with powers ope legis. In this regard, for all the grounds woven in point B of this arbitral decision, for which reference is made, this Tribunal understands that the Applicant is not excluded from the subjective scope of VAT pursuant to Article 2, No. 2, of the VAT Code and inherent Article 13 of the VAT Directive, being necessary to dismiss that it has "shared competencies of Public Authority". Therefore, the arguments invoked by the Applicant do not proceed here either.

7. The arbitration request thus shows itself to be equally unfounded as to the issue of violation of the principle of a single supply.

F. Deduction of VAT in the Corrections Made by the Tax Authority

1. The Applicant further maintains that, if the service provisions realized are to be considered subject to and not exempt from tax, it would be necessary to incorporate into the additional VAT assessments the deduction of tax relating to the activity in question, so that the arithmetic corrections would correspond to the difference between the VAT payable and the VAT deductible.

2. In this regard, the Applicant invokes that, in the right to be heard, it indicated the values to be deducted, but that the Tax Authority did not take this argument into account in violation of Article 60, No. 7, of the General Tax Law and in violation of the principle of legality contained in Article 55 of the General Tax Law.

3. The said Article 60 of the General Tax Law, under the heading "Principle of Participation", provides, in No. 1, paragraphs a) and e), the right to be heard by taxpayers before the assessment and the conclusion of the tax inspection report, and in No. 7, prescribes that "The new facts raised in the hearing of the taxpayers are necessarily taken into account in the reasoning of the decision".

4. Now it results from the documents attached to the case files that the Applicant did not exercise the right to be heard regarding the draft correction of the inspection relating to the taxation period 02.2018 (see the Inspection Report attached as document 2 of the PPA, p. 18, Section VIII), such that its claim falls in this part as regards the violation of the right of participation invoked.

5. As for the years 2013 and 2017, it results from the case files that in the act of express rejection of the Gracious Objection the Tax Authority became aware of the invocation of the defect of form due to violation of No. 7 of Article 60 of the General Tax Law and illegality of the compensatory interest, without having ruled expressly on this issue in its decision but maintaining its position as to the VAT assessments made. The documents attached to the case files do not allow for other data or information on this matter to be inferred.

6. In this regard, Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa state (General Tax Law, Annotated and Commented, 4th Edition, Encontro da Escrita Publishing, Lisbon 2012, p. 513), in annotation to the cited legal provision: "... if the holder of the right to be heard, in the exercise of this right, raises new facts, they should be considered in the reasoning of the decision.

The presentation of these new facts, if they are facts relating to the subject matter of fact, may justify the carrying out of new procedures that should be carried out, officially or at the request of those interested, if they are to be considered as convenient for the ascertainment of the factual matter upon which the decision must be based (...).

The obligation to take into account these new facts, in the reasoning of the decision, translates into them being mentioned and assessed.

The failure to assess the factual or legal new facts invoked by those interested will constitute a defect of form, due to deficiency of reasoning, capable of leading to the annulment of the decision of the proceeding."

1. Moreover, in this regard, the case law of the superior administrative courts, as to the right to prior hearing in whose systematic framework the rule of No. 7 of Article 60 of the General Tax Law under discussion is included, has been in the sense of providing that the formality of the right to be heard in question (essential) is only downgraded to non-essential, and is therefore not invalidating of the decision, in cases where the prior hearing would not have the minimal probability of influencing the decision taken, which requires the benefit of the act – utile per inutile non viciatur (see the Judgment of 14/5/2003, appeal No. 317/03 of the Supreme Administrative Court, among others).

2. In the present case, it does not result from the law that the Tax Authority must consider, in acts of additional VAT assessment, the values of deductible VAT of the taxable person.

3. On the contrary, it results from Articles 19 to 27, 41 and Article 98 of the VAT Code that the exercise of the right to deduct VAT is carried out by taxable persons in their periodic declarations, and at their option – in this sense Article 19, No. 1, of the VAT Code states that "for the determination of the tax due, taxable persons deduct, in accordance with the following articles, from the tax charged on the taxable transactions they have carried out (…) the tax due or paid for the acquisition of goods and services from other taxable persons".

4. Such exercise may and should be carried out by the taxable person within the time limits set out in Articles 78 and 98 of the VAT Code (the general deduction period being 4 years after the birth of the right to deduction).

5. For its part, it follows from Articles 28 and 87 of the VAT Code that the Tax Authority does not have the duty to consider tax deductions in the additional VAT assessments made by it – in this sense Article 87, No. 1, of the VAT Code provides that "(…) the Revenue Directorate proceeds to rectify the declarations of taxable persons when it reasonably considers that they include a lower tax or a deduction higher than that due, assessing additionally the difference".

6. Applying the above to the case in reference, it follows that the new facts brought by the Applicant to the proceedings, i.e., the VAT deduction values for the years 2013 and 2017, are not determining for the factual matter that is the subject of the Tax Authority's tax act under discussion, which is to know whether the income listed in items l. to m. of the Matters of Fact established are or are not subject to VAT and, concluding in a reasoned manner that there has been payment of lower tax than that due, proceeding, pursuant to Article 87 of the VAT CODE, to the additional assessment of the difference.

7. Therefore, in the view of this Tribunal, it is necessary to benefit from the acts of additional assessment in question and not to consider that the alleged invocation of lack of reasoning regarding the new facts brought by the Applicant – which would not benefit the case – is capable of leading to the annulment of the proceeding – utile per inutile non viciatur.

G. Violation of the Principles of Good Faith, Justice, Proportionality and Neutrality of VAT and the Payment of Compensatory Interest

1. The Applicant considers that the acts challenged violate the principles of good faith, justice and proportionality and neutrality of VAT, arguing that:

(i) It has always self-assessed VAT as a mixed taxable person, without assessment of VAT on one part of its activity – the part understood as associative, without being questioned by the Tax Authority which received its periodic declarations every month;

(ii) The Tax Authority only raised the issues now challenged as a result of a VAT refund request made by the Applicant, the subject of tax inspections;

(iii) It has always acted on the basis of a plausible reading of the applicable law and further on the basis of Dispatch No. 616/2008-XVII issued to Association C... [C...], which clearly provided for the application of VAT exemption to the amounts charged to clubs relating to the organization of matches, affiliation of clubs and their registration in competitions, registration of players and assignment of cards by application of Article 9, No. 21, of the VAT CODE (corresponding to the current Article 9, No. 19 of the VAT CODE);

(iv) Such that the Tax Authority cannot retroactively invoke the interpretation of the Tax Inspection, in violation of Article 68-A, No. 2, of the General Tax Law, it now being impossible or unfeasible to globally correct the entire situation or deduct VAT from its inputs from the beginning, thus violating the right to deduction and neutrality of VAT.

1. As regards the invocation of the violation of the principle of good faith, justice, proportionality and neutrality of VAT this Tribunal accepts, in its entirety, the decision and grounds of the Collective Arbitral Tribunal in case 248/2018-T, which are reproduced below for ease of reference:

"In the case, the inspection procedures were initiated as a result of VAT refund requests by the fact that it was found that the Applicant had not assessed VAT on some of its active transactions.

The inspection procedure may be intended to confirm the elements declared by taxable persons or to inquire into tax facts not declared, and may be translated into a procedure of verification and checking of compliance with tax obligations (Articles 2 and 12 of the Supplementary Regime of the Tax and Customs Inspection Procedure).

On the other hand, the initiation of the procedure may be of official initiative, in accordance with opportunity criteria that it is for the Tax Administration to define.

It is not seen, therefore, in what terms the opening of an inspection procedure following a request for a tax refund and to verify the legality of the taxpayer's tax situation can injure the said principles of administrative action.

Nor is it easy to understand in what manner the tax assessment act of additional tax assessment intended to ensure payment of tax not assessed can affect the principle of neutrality, when this principle, in VAT matters, constitutes the translation of the principle of equal treatment and is intended to ensure that taxable goods bear the same tax burden regardless of the extent of the production and distribution circuit."

1. It further adds that the Dispatch of the Tax Administration invoked by the Applicant was issued to a third entity distinct from the Applicant, with its own presuppositions and framing, and is therefore not binding on the Tax Authority in the situation of the Applicant which, if it had intended to obtain binding