VAT Exemption for Education-Related Services and Goods: CAAD Arbitration Case 132/2015-T

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 132/2015-T

Claimant: A... – ...

Respondent: Tax and Customs Authority

Subject Matter: VAT, exemption, goods and ancillary services, education.

I. REPORT

1. On 26 February 2015, the company A... – ..., SA, taxpayer No. ..., hereinafter identified as the Claimant, filed a request for arbitral pronouncement, in accordance with the provisions of Articles 2, No. 1, subparagraph a) and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter designated as LRAT), in conjunction with Article 102 of the Code of Tax Procedure and Process (CTPP), applicable ex vi Article 10, No. 1, subparagraph a), of Decree-Law No. 10/2011, of 20 January.

2. In the aforesaid request for arbitral pronouncement, the Claimant seeks to have the Arbitral Tribunal declare:

a) the illegality of the additional VAT assessment No. ..., in the amount of € 11,868.84, relating to the period 0903T, which amount was reformulated to € 3,181.65 following the partial granting of the administrative appeal against the same;

b) the illegality of the additional assessment No. ..., in the amount of € 12,969.50, relating to the period 0906T, which amount was reformulated to € 2,488.00 following the partial granting of the administrative appeal against the same;

c) the illegality of the additional assessment No. ..., in the amount of € 6,132.30, relating to the period 0909T, which amount was reformulated to € 1,700.80 following the partial granting of the administrative appeal against the same;

d) the illegality of the additional assessment No. ..., in the amount of € 19,038.30, relating to the period 0912T, which amount was reformulated to € 9,285.50 following the partial granting of the administrative appeal against the same;

e) the illegality of the additional assessment No. ..., in the amount of € 12,347.30, relating to the period 1003T, which amount was reformulated to € 2,836.60 following the partial granting of the administrative appeal against the same;

f) the illegality of the additional assessment No. ..., in the amount of € 9,798.10, relating to the period 1006T, which amount was reformulated to € 2,634.10 following the partial granting of the administrative appeal against the same;

g) the illegality of the additional assessment No. 1..., in the amount of € 13,137.11, relating to the period 1009T, which amount was reformulated to € 4,093.43 following the partial granting of the administrative appeal against the same;

h) the illegality of the additional assessment No. ..., in the amount of € 22,252.64, relating to the period 1012T, which amount was reformulated to € 11,260.19 following the partial granting of the administrative appeal against the same;

i) the illegality of the respective Compensatory Interest assessments;

j) the illegality of the partial grant decision of the administrative appeal No. ...;

k) the recognition of the right to compensation for improperly provided guarantee, the costs of which amounted to € 7,421.97 on the date of submission of the request.

1. The application for constitution of the arbitral tribunal was accepted on 27 February 2015, by the Esteemed President of the CAAD and subsequently notification was made to the Tax and Customs Authority (hereinafter identified as the Respondent Entity).

2. The Claimant did not proceed with the appointment of an arbitrator, so, under the provisions of Article 6, No. 1 of the LRAT, the undersigned was appointed by the President of the CAAD Deontological Council to constitute the present singular Arbitral Tribunal, the appointment having been accepted in accordance with legal provisions.

3. Following notification to that effect, the Claimant and the Respondent Entity submitted their arguments.

4. The Claimant sustains its request, in summary, on the understanding that all services provided by it are connected with the education activity, and therefore all of them benefit from VAT exemption under Article 9, No. 9 of the VAT Code, which covers the provision of services relating to education, as well as the supply of goods and provision of ancillary services effected by institutions integrated in the National Education System.

5. For the Claimant, the activities at issue in the inspection report unequivocally integrate the concept of extracurricular activities envisaged in the National Education System.

6. Furthermore, the Claimant understands that: regarding the supply and sale of material, the same are carried out exclusively to students and teachers; regarding health and psychology education services, these services are inseparably linked to the practice of education carried out by the Claimant; regarding the sale of clothing (uniforms), that the same is ancillary to the education activity to the extent that the use of uniforms integrates the philosophy of the education system adopted by the Claimant; regarding extended hours, that the same is necessarily ancillary to the education activity; and as for beach outings, that the same integrate its activity plan.

7. The Respondent Entity understands that, being a matter relating to exemptions, it requires not only a general principle of strict interpretation, to the extent that exemptions constitute derogations from the general rule of subjection to tax, but also that the interpretation must be made in accordance with the objectives pursued by such exemptions and respecting the requirements of the principle of fiscal neutrality.

8. For the Respondent Entity, including the sale of school books within the scope of the exemption would create serious violations and distortions of competition with respect to other economic operators who carry out these same supply of goods. The same being stated regarding the sale of clothing, which it adds cannot be considered ancillary to the activity provided for in Article 9, No. 9 of the VAT Code.

9. Regarding the education, health and psychology services, the Respondent Entity understands that services relating to assistance provided to students with difficulties at the level of, namely, learning, are operations subject to VAT and not exempt therefrom. As for assistance to students in health, the taxpayer who provides them may benefit from the framework of the exemption provided for in Article 9, No. 1 of the VAT Code.

10. Finally, for the Respondent Entity, services related to extended hours and charges after 19 hours cannot be considered ancillary to the education activity, and therefore cannot benefit from the framework of the exemption provided for in Article 9, No. 9 of the VAT Code, all the more so because, in the Respondent Entity's view, to assess the framework of the exemption, it would always be necessary to make a judgment about the indispensability of the supply of goods and provision of services for the realization of exempt operations and about the fact that such activities provide the organism with the realization of operations carried out in direct competition with commercial enterprises subject to VAT, scrutiny which the operations do not meet.

II. PRELIMINARY ISSUES

The Tribunal is materially competent and is regularly constituted in accordance with Articles 2, No. 1, subparagraph a), 5 and 6, all of the LRAT.

The parties have legal personality and capacity, are legitimate and are represented, in accordance with Articles 4 and 10 of the LRAT and Article 1 of Order No. 112-A/2011, of 22 March.

No nullities are verified, so it is necessary to consider the merits of the request.

III. SUBJECT MATTER OF THE ARBITRAL PRONOUNCEMENT

The following matters are placed before the Tribunal, as described above:

i. Classification of a set of services provided and supply of goods effected by the Claimant within the exemption provided for in Article 9, No. 9 of the VAT Code, namely, the sales of clothing (uniforms); extended hours and charges after 19 hours and the SESP (Education, Health and Psychology Service);

ii. Right to compensation for improperly provided guarantee.

IV. FACTS

Proven Facts

1. The Claimant is classified for the principal exercise of the activity "Pre-Primary Education", CAE 85100, since 11 January 1999 and provides services in the scope of pre-primary and primary and secondary education in its own facilities (cf. pages 2 and 3/28 of the Inspection Report attached to the administrative file).

2. The Claimant was classified for VAT taxation purposes under the exemption regime of Article 9 and for taxation purposes under the general regime (cf. page 2/28 of the Inspection Report attached to the administrative file).

3. The Claimant holds Permit No. ..., issued by DREN – Regional Education Authority of ... (cf. page 2/28 of the Inspection Report attached to the administrative file).

4. The Claimant was subject to an external inspection procedure, under Service Order No. OI2012..., for the years 2009 and 2010, initially of partial scope relating to Corporate Income Tax and VAT and subsequently of general scope (cf. page 2/28 of the Inspection Report attached to the administrative file).

5. Within the scope of the aforesaid inspection action, the VAT classification of supply of goods and provision of services realized by the Claimant in the years 2009 and 2010 was analyzed.

6. According to the content of the Inspection Report, the sale of clothing (uniforms) carried out by the Claimant translates into "operations of sale of goods, namely uniforms/individual articles of clothing, with the logo adopted by the educational institution", the use of which is mandatory and the sale of which is made in the School itself (cf. page 7/28 of the Inspection Report attached to the administrative file).

7. According to the content of the Inspection Report, the Education, Health and Psychology Service provided by the Claimant "corresponds to personalized assistance with deficiencies detected at the level of learning, health and behavioral issues" (cf. page 7/28 of the Inspection Report attached to the administrative file).

8. According to information provided by the Claimant by email at pages 74 of the administrative file: "The School's educational support services integrate psychology services aimed at promoting and monitoring student development throughout their life cycle, the cost of which is included in the monthly fee. Any action or intervention of an extraordinary nature is framed within a specific process requested by parents and is subject to an additional amount added to the monthly fee".

9. According to the content of the Inspection Report, Extended Hours "aims to accommodate students for one or two hours beyond school hours, thus allowing parents to manage the time the student spends in the School's facilities according to their needs" and the Charge after 19 hours corresponds to a "penalty for the student's remaining in the School's facilities beyond 19 hours" (cf. pages 7 and 8/28 of the Inspection Report attached to the administrative file).

10. According to information provided by the Claimant by email at pages 74 of the administrative file: "Extensions are the term adopted by the School for periods extending beyond normal class hours in which recreational-pedagogical activities are developed in articulation with the existing projects in educational project and annual activity plan, subject to an additional amount added to the monthly fee".

11. According to the Annual Activity Plan for School Years 2008/2009 and 2009/2010 submitted by the Claimant by email and which appears at pages 76 et seq. of the administrative file, there is intervention by psychologists in the following activities:

• Growing-Up (Pre-primary):

i) Educational values/Priorities: Strengthen school-family connection through more systematic and formalized contacts;

ii) Objectives: Promote Reflection Spaces, guidance and partnership that help balance the individual development of the child;

iii) Participants: Psychologist, Parents and Legal Guardians, Nursery School Students.

• Pre-Primary:

i) Educational values/Priorities: Strengthen school-family connection through more systematic and formalized contacts;

ii) Objectives: Contribute to the mastery of a set of procedural capacities involving learning to think, to analyze critically: to relate to others, to invest in the development of projects, to question and to take initiative;

iii) Participants: Students in 5-year-old classrooms, Psychologist, Early Childhood Educators.

• DPS Pre-Primary:

iv) Educational values/Priorities: Promote Education for Citizenship, enhancing the development of transversal competencies;

v) Objectives: Promote in an integrated and integrating manner concepts and competence of social awareness and citizenship;

vi) Participants: Psychologist, Students aged 5, Early Childhood Educators, Educational Assistants.

1. Following the aforementioned inspection action, technical corrections were determined in VAT, on the grounds that part of the services provided by the Claimant "by their nature do not fit within the scope of the exemption granted by Article 9 of the VAT Code, as they are not considered ancillary and indispensable to the educational component but rather as other services provided to complement the teaching activity and derive from the organizational policy adopted by the company with a view to enhancing the services provided" (cf. page 6/28 of the Inspection Report attached to the administrative file).

2. The services provided by the Claimant that gave rise to the technical corrections in VAT were the following (cf. pages 7 and 8/28 of the Inspection Report attached to the administrative file):

i. Extended hours;

ii. Sales of clothing (uniforms);

iii. Extracurricular Activities;

iv. Study Hall;

v. SESP (Education, Health and Psychology Service);

vi. Beach;

vii. Charge after 19 hours.

1. The following amounts of shortfall tax were determined, detailed by tax period (cf. pages 8 and 9/28 of the Inspection Report attached to the administrative file):

Year 2009

Calculation of shortfall tax for 2009

Year 2010

Calculation of shortfall tax for 2010

1. In implementation of the corrections determined during the inspection action, the following acts were issued:

i. Additional assessment No. ..., in the amount of € 11,868.84, relating to period 0903T and, likewise, Compensatory Interest assessment No. ..., in the amount of € 1,700.00;

ii. Additional assessment No. ..., in the amount of € 12,969.50, relating to period 0906T, and, likewise, Compensatory Interest assessment No. ..., in the amount of € 1,724.06;

iii. Additional assessment No. ..., in the amount of € 6,132.30, relating to period 0909T, and, likewise, Compensatory Interest assessment No. ..., in the amount of € 754.02;

iv. Additional assessment No. ..., in the amount of € 19,038.30, relating to period 0912T, and, likewise, Compensatory Interest assessment No. ..., in the amount of € 2,151.07;

v. Additional assessment No. ..., in the amount of € 12,347.30, relating to period 1003T, and, likewise, Compensatory Interest assessment No. ..., in the amount of € 1,271.94;

vi. Additional assessment No. ..., in the amount of € 9,798.10, relating to period 1006T, and, likewise, Compensatory Interest assessment No. ..., in the amount of € 911.63;

vii. Additional assessment No. ..., in the amount of € 13,137.11, relating to period 1009T, and, likewise, Compensatory Interest assessment No. ..., in the amount of € 1,091.28;

viii. Additional assessment No. ..., in the amount of € 22,252.64, relating to period 1012T, and, likewise, Compensatory Interest assessment No. ..., in the amount of € 1,624.14;

1. The now Claimant filed an administrative appeal against the aforesaid additional VAT assessments and Compensatory Interest, to which was assigned No. ... (cf. administrative file).

2. By Official Letter No. ..., of 11 February 2014, issued by the Tax Justice Division of the Finance Authority of ..., the Claimant was notified to comment at the prior hearing stage on the proposal for partial grant of the administrative appeal in accordance with the following tables (cf. Doc. 2, attached to the arbitral request):

Year 2009 – Values to be Granted

Year 2010 – Values to be Granted

1. According to the decision proposal notified, it appears that "we consider it appropriate to partially grant the request, reformulating the VAT assessments for the amounts of €3,181.64-0903T, €2,488.00-0906T, €1,700.80-0909T, €9,285.50-0912T, €2,836.60-1003T, €2,634.10-1006T, €4,093.43-1009T and €11,260.19-1012T, as well as the reformulation of compensatory interest" (cf. Doc. 2, attached to the arbitral request).

2. By Official Letter No. ..., of 5 November 2014, issued by the Finance Authority of ... -1, the Claimant was notified that by directive issued by the Esteemed Finance Authority Director of ... the administrative appeal was partially granted, in accordance with the terms proposed at the hearing (cf. Doc. 1, attached to the arbitral request).

3. With the exercise of the right to hearing in the administrative appeal procedure, receipts were submitted from which the reference to "Clinical Psychology" appears, as per pages 124 et seq. of the administrative file.

4. From the combination of the corrections proposed during inspection and the partial grant of the administrative appeal, the following results:

Year 2009

Calculation of shortfall tax for 2009

Year 2010

Calculation of shortfall tax for 2010

1. For coercive collection of the contested assessments, enforcement proceedings No. ... were instituted, as per pages 138 of the administrative file.

2. To suspend the enforcement proceedings, bank guarantee No. ..., issued by Bank ... was provided (cf. Doc. 3, attached to the arbitral request).

3. As of the date of submission of the arbitral request, the Claimant had already borne costs with the maintenance of the guarantee in the amount of € 7,422.00 (cf. Docs. 4 to 9, attached to the arbitral request).

The facts established, which are peacefully recognized and accepted by the parties, are based on documentary evidence produced.

Unproven Facts

Of the facts of interest for the decision of the case, contained in the request for arbitral pronouncement and the response, all objects of concrete analysis, those not included in the factuality described above were not proven.

V. LAW

1. The first matter under consideration in the present proceedings relates to the classification of a set of services provided and supply of goods effected by the Claimant within the exemption provided for in Article 9, No. 9 of the VAT Code, namely, the sales of clothing (uniforms), extended hours, the charge after 19 hours and the SESP (Education, Health and Psychology Service).

2. Operations are exempt from VAT, in accordance with the provisions of Article 9, No. 9 of the VAT Code, consisting of the provision of services relating to education, carried out by institutions integrated in the National Education System.

3. This exemption also covers the supply of goods and provision of ancillary services relating to education, such as the provision of accommodation and catering.

4. The said legal provision states that the following are exempt: "the provision of services relating to education, as well as the supply of goods and provision of ancillary services, such as the provision of accommodation and catering, carried out by institutions integrated in the National Education System or recognized as having similar purposes by the competent ministries".

5. This exemption is based on subparagraph i), No. 1, Article 132 of the VAT Directive, according to which States exempt operations related to "The education of children and young people, schooling or university education, vocational training or retraining, and also the provision of services and supply of goods closely related thereto, supplied by public bodies pursuing this objective and by other bodies which the Member State considers to pursue similar objectives" (cf. also subparagraph i), Article 13-A of the Sixth Directive).

6. According to Article 134 of the VAT Directive "The provision of services and supply of goods shall be excluded from the benefit of the exemption provided for in subparagraphs b), g), h), i), l), m) and n) of No. 1, in the following cases:

a) When they are not indispensable to the carrying out of exempt operations;

b) When they are designed, essentially, to obtain for the body supplementary revenues by carrying out operations effected in direct competition with commercial enterprises subject to VAT.

1. It is important to bear in mind that the terms used to designate the exemptions enshrined in Article 9 of the VAT Code are in principle subject to strict interpretation, given that they constitute derogations from the general principle, according to which VAT is charged on any provision of services carried out on an onerous basis by a taxable person (cf. Court of Justice Judgment of 11 January 2001, Commission/France, C-76/99 and Judgment of 20 June 2002 Commission/Germany, C-287/00, at http://curia.europa.eu).

2. However, contrary to "what normally occurs in the matter of interpretation of norms containing VAT exemptions on internal operations, in the judgment of 20 June 2002 (C-287/00, Commission/Germany, Coll. I -5811) the CJEU affirmed the unnecessary nature of a strict interpretation of the exemption currently set out in subparagraph i) of No. 1 of Article 132 of the VAT Directive, considering that this exemption is intended to ensure less expensive access to services related to education" (cf. LAIRES, Rui – Exemptions from VAT in Cultural, Educational, Recreational, Sports and Medical or Social Assistance Activities, IDEFF, No. 14, page 176).

3. In the aforesaid judgment of 20 June 2002 (Commission/Germany, C-287/00), when assessing the VAT treatment of research activities of public institutions of higher education carried out on an onerous basis, it is stated that the definition of the concept of provision of services "closely related" to university education "does not, however, require a particularly strict interpretation, to the extent that the exemption of the provision of services closely related to university education is intended to ensure that the benefit of this does not become inaccessible due to the increase in costs of such education if it itself, or the provision of services and supply of goods closely related to it, were subject to VAT" (cf. with respect to Article 13-A, No. 1, subparagraph b), of the Sixth Directive, judgment of 11 January 2001, Commission/France, C-76/99, Coll., p. I-249, No. 23).

4. The "purposive element has thus served the purpose of allowing the CJEU to set the meaning of VAT exemption norms, always respecting the limits imposed by their literal element" (VASQUES, Sérgio – VAT, Lisbon, 2015, page 330).

5. And, for the CJEU, the norm under consideration has the purpose of ensuring that the benefits of education do not become inaccessible due to increases in the costs of education itself or of the provision of services closely related to it.

6. This position is recognized by the Supreme Administrative Court, according to which "While it is true that European case law has affirmed, in the matter of VAT exemptions, a general principle of strict interpretation, as exemptions constitute derogations from the general rule of subjection to tax, in the specific domains of education, as in health, European case law has also affirmed that such interpretation must be made in accordance with the objectives pursued by such exemptions and respecting the requirements of the principle of fiscal neutrality." (cf. Decision of the Supreme Administrative Court, in Case No. 01209/14, of 25-03-2015, at www.dgsi.pt).

7. Clarifying that it is not reasonable to apply a restrictive interpretation of this exemption "since education, if destined for students, presupposes a set of human and material means directed to its pursuit and which, to that extent, appear indispensable to the proper pursuit of that activity, assumed by Europe as being of general interest" (cf. Decision of the Supreme Administrative Court, in Case No. 01209/14, of 25-03-2015, at www.dgsi.pt).

8. It must thus be understood that the notion of "supply of goods and provision of ancillary services with education" underlying Article 9, No. 9 of the VAT Code does not require a particularly strict interpretation to the extent that the exemption of education and operations closely related to education is intended to ensure that the benefit of this does not become inaccessible due to the increase in costs that would result if it itself, or operations closely related to it, were subject to VAT.

9. The exemption under analysis is composed of an objective element and another of a subjective nature.

10. Included in this exemption are the provision of education services and the supply of goods and provision of services ancillary to education, carried out by institutions integrated in the National Education System or recognized as having similar purposes.

11. The Claimant is integrated in the National Education System as confirmed by Permit No. ..., issued by DREN – Regional Education Authority of ....

12. It is therefore necessary to analyze whether the services provided by the Claimant and not recognized as exempt by the Tax Authority - sales of clothing (uniforms), extended hours, the charge after 19 hours, and the Education, Health and Psychology Service - can be considered as provision of education services or supply of goods and provision of ancillary services with education for the purposes of Article 9, No. 9 of the VAT Code.

13. Neither Article 9, No. 9 of the VAT Code, nor subparagraph i), No. 1, Article 132 of the VAT Directive offers the definition of the concept of provision of services "closely related" to education.

14. The provision of services and supply of goods can only be considered "closely related" to education when they are related to education and are effectively provided as ancillary provision of education, which constitutes the main provision (Judgment of the Court of Justice, of 14 June 2007, case 0434/05).

15. It follows, in turn, from the case law of the Court of Justice that a provision must be considered ancillary in relation to a main provision when it does not constitute for the clientele an end in itself, but a means to benefit, in better conditions, from the service provider's main service.

16. On the other hand, it has been stated that operations connected with the main activity can only benefit from the exemption if they are indispensable to the carrying out of those exempt operations.

17. In order to be "qualified as indispensable, ancillary operations must be of such a nature and characteristics that, without resorting to such operations, it would not be possible to ensure that the main service from which the client benefits had equivalent worth, that is to say, for example, offered the same quality". (cf. LAIRES, Rui - The Notion of "Operations Closely Related" – Magazine of Portuguese Auditors, No. 132, MAR. 2011, pages 56 and 57).

18. Finally, the provision of services and supply of goods do not benefit from the exemption if they are designed, essentially, to obtain for the body supplementary revenues by carrying out operations effected in direct competition with commercial enterprises subject to VAT.

19. This exclusion is understood as a specific expression of the principle of fiscal neutrality, which opposes, in particular, that provision of services similar, which are therefore in competition with each other, be treated differently from the point of view of VAT.

20. Having made the classification of the exemption under analysis, it is necessary to verify whether the operations underlying the corrections promoted by the tax authority integrate the provision of Article 9, No. 9 of the VAT Code.

21. The sale of clothing (uniforms) translates into "operations of sale of goods, namely uniforms/individual articles of clothing, with the logo adopted by the educational institution", the use of which is mandatory and the sale of which is made in the School itself (cf. page 7/28 of the Inspection Report attached to the administrative file).

22. For the Claimant, the sale of uniforms should benefit from VAT exemption as it is an ancillary operation to the extent that the use of uniforms integrates the philosophy of the education system adopted by it.

23. The Claimant does not clarify, however, in what manner the use of uniforms integrates its education philosophy.

24. As already stated, an operation connected with the main activity can only benefit from the exemption if it does not constitute for the clientele an end in itself, but a means to benefit in better conditions from the service provider's main service and is indispensable to the carrying out of the exempt operation, in such a way that without resorting to that operation it would not be possible to derive identical benefit from the main provision.

25. Although it is admitted that the use of uniforms does not constitute an end in itself, it is not apparent that the use of uniforms is indispensable to education, or that it guarantees that it is provided with greater quality.

26. The reasons that led the Claimant to require the use of uniforms are not known. It is admitted that the use of uniforms by students may contribute to a greater sense of belonging to a specific school community, but it does not appear evident that it is not possible to ensure education of equivalent worth without resorting to the use of uniforms. Indeed, many institutions offer excellent quality education without requiring the use of uniforms, which appears to us to reveal the lack of indispensability.

27. The use of uniforms is therefore not essential to the carrying out of the main provision. Thus, the non-recognition of the exemption does not call into question the purpose of the norm to ensure that the benefits of education do not become inaccessible due to increases in costs of education itself or of the provision of services closely related to it.

28. For this reason, it is concluded that the sale of school uniforms is an operation that does not fit within the exemption provided for in Article 9, No. 9 of the VAT Code.

29. In light of the foregoing, the request for annulment of the contested acts is found to be unfounded as regards the corrections underlying the sale of uniforms operations.

30. Underlying the acts whose legality is challenged is also the Education, Health and Psychology Service.

31. This Service according to the brochure distributed by the School "aims to "improve the quality of life of our students and families through the centralization of specialized resources in the educational space. Specifically it corresponds to personalized assistance with deficiencies detected at the level of learning, health and behavioral issues" (cf. page 7/28 of the Inspection Report attached to the administrative file).

32. According to information provided by email at page 74 of the administrative file: "The School's educational support services integrate psychology services aimed at promoting and monitoring student development throughout their life cycle, the cost of which is included in the monthly fee. Any action or intervention of an extraordinary nature is framed within a specific process requested by parents and is subject to an additional amount added to the monthly fee".

33. From the elements in the file it is not clear whether the Service in question is carried out exclusively by a psychologist, or has the intervention of a psychologist, it being certain that the Claimant resorts to psychologists in different activities and situations.

34. Indeed, according to the information provided by it in the tax inspection and appeal procedures that preceded the present proceedings, the Claimant resorts to psychologists for certain activities (e.g. "Growing-Up" and DPS Pre-Primary), and resorts to psychologists when the circumstances of the specific case require, and it is unknown to which intervention or interventions the receipts at pages 123 et seq. of the administrative file refer.

35. The said receipts are submitted at the time of exercising the right to prior hearing within the administrative appeal procedure with the following information: "The same applies to the services designated by SEPS. It is noted from the outset that the appellant does not provide psychology services to its students. Such activity is legally reserved for professionals qualified to practice the profession. The appellant, in the comprehensive education service it provides to its students, resorts to specialized psychology services. It should be said, in any case, that the appellant resorts exclusively to clinical psychology services (see receipts attached)".

36. Clinical psychology services are exempt under Article 9, No. 1 of the VAT Code. However, from the elements in the file, as already mentioned, it appears that the Claimant resorts to psychologists for other activities than clinical psychology understood as the provision of services consisting of the preparation of diagnoses or application of treatments, and no element results from the present proceedings that allows concluding that the Education, Health and Psychology Service under analysis involves clinical psychology.

37. It is therefore necessary to assess whether the Education, Health and Psychology Service can be considered as provision of services "closely related" to education, within the terms and for the purposes of Article 9, No. 9 of the VAT Code.

38. As already stated, in order for a provision to be considered ancillary in relation to a main provision, it should not constitute for the clientele an end in itself, but a means to benefit, in better conditions, from the service provider's main service.

39. To make this assessment, it is necessary to know the concrete characteristics of the provision of services in question.

40. However, regarding the concrete characteristics of the Education, Health and Psychology Service, it only results from the file the information that "it corresponds to personalized assistance with deficiencies detected at the level of learning, health and behavioral issues" (cf. page 7/28 of the Inspection Report attached to the administrative file).

41. From the various pieces of information provided over time by the Claimant and in the present proceedings, it is not possible to understand which professionals participate in this service, the concrete situations in which the service is provided are not identified, nor in what concrete acts it is concretized.

42. Article 74 of the General Tax Law provides that "The burden of proof of the facts constituting the rights of the tax authority or taxpayers falls on whoever invokes them."

43. This transposes to the tax procedure the rule of No. 1, Article 342 of the Civil Code, according to which "He who invokes a right is responsible for proving the constitutive facts of the right claimed."

44. Being at issue in the case at hand a right of the taxpayer to a tax exemption, the burden of proof of the prerequisites of the right which it seeks to exercise will fall upon it.

45. It is the responsibility of whoever seeks and has grounds to exercise their right to non-taxation, to the exemption from the normal incidence of VAT, to bear the responsibility of proving, validly and relevantly, that the activity it develops fits within the prerequisites of the exemption.

46. Thus, the burden of proof of the fulfillment of these prerequisites fell on the Claimant, which in the case at hand implied, at a minimum, a clarification regarding the concrete nature of the activity, by whom it was carried out and in what situations it was carried out, a burden that cannot be considered fulfilled with a mere description of the activity with vague and generic terms.

47. As no minimum elements result from the file that would allow concluding that we are faced with a provision of ancillary services with education, it is necessary to conclude by the maintenance of the corrections determined by the Tax Authority, with the Claimant's request being unfounded as to this matter.

48. The acts whose legality is challenged also underlie two other provisions of services, namely, extended hours and the penalty for the possibility of remaining after 19 hours.

49. Extended Hours "aim to accommodate students for one or two hours beyond school hours, thus allowing parents to manage the time the student spends in the School's facilities according to their needs" and the Charge after 19 hours corresponds to a "penalty for the student's remaining in the School's facilities beyond 19 hours" (cf. pages 7 and 8/28 of the Inspection Report attached to the administrative file).

50. According to information provided by email at page 74 of the administrative file: "Extensions are the term adopted by the School for periods extending beyond normal class hours in which recreational-pedagogical activities are developed in articulation with the existing projects in the educational project and annual activity plan, subject to an additional amount added to the monthly fee".

51. From the information provided at the time of exercising the right to prior hearing within the administrative appeal procedure, it is further clarified that extended hours also cover support in the completion of homework, as per page 122 of the administrative file.

52. Extended hours allow one to benefit from the main provision in better conditions, allowing through the activities developed there for the main provision of education to be carried out with greater quality.

53. Furthermore, these activities facilitate access to education in that, for professional and family organization reasons, the extended school hours are today a determining factor in the choice of educational institution, and broaden the range of institutions to which legal guardians can resort.

54. If the provision of accommodation by educational institutions is considered by the norm itself as an activity ancillary to education, by greater reason the possibility of students remaining in school for the period necessary for their legal guardians to reconcile school hours with the management of family life, usually determined by the professional obligations of the latter, should also be considered to be covered by the provision of the norm.

55. On the other hand, extended hours ensure the occupation of students with recreational-pedagogical activities that integrate the education project developed.

56. These two factors, either individually or together, lead to the conclusion that this activity facilitates access to the main provision and allows its execution with greater quality.

57. The argument of the Respondent Entity does not hold, in turn, that this activity, benefiting from VAT exemption, constitutes a violation of the principle of fiscal neutrality, as it is not demonstrated that it is designed, essentially, to obtain for the body supplementary revenues by carrying out operations effected in direct competition with commercial enterprises subject to VAT.

58. For the reasons set forth, it is concluded that extended hours is an operation that fits within the exemption provided for in Article 9, No. 9 of the VAT Code.

59. Consequently, the request for arbitral pronouncement is found to be well-founded as regards the corrections related to Extended Hours.

60. As for the penalty for remaining after 19 hours, to the extent that it is characterized by the Claimant itself as a penalty, and as such, as a mere mechanism to discourage students from remaining in school beyond a certain hour, it does not aim to guarantee either extended hours or the occupation through recreational-pedagogical activities but solely to discourage the use of the institution at a certain time, an objective that in no way is related to the conduct of the main activity of education with better quality or that allows such provision to be benefited in better conditions.

61. Thus, the penalty under analysis is not an operation that fits within the exemption provided for in Article 9, No. 9 of the VAT Code, the request for arbitral pronouncement being consequently found to be unfounded as regards the corrections related to the Penalty for Remaining after 19 hours.

62. The second matter that must be considered relates to the assessment of the request for compensation for improperly provided guarantee.

63. Having been proven in the file that the Claimant provided bank guarantee No. ..., issued by Bank ..., for the suspension of enforcement proceedings No. ..., instituted for coercive collection of the contested acts, the right to compensation for improperly provided guarantee is recognized, in the proportion of the amount annulled, to be determined based on the costs actually borne with its provision until the date of its removal, in accordance with the provisions of Article 53 of the General Tax Law and Article 171 of the Code of Tax Procedure and Process, as a result of the annulled corrections being due to error attributable to the Services.

VI. DECISION

In light of the foregoing, it is determined:

i) The unfoundedness of the Claimant's request regarding the corrections related to the Sale of Uniforms, the Education, Health and Psychology Service, and the Penalty for Remaining after 19 hours, maintaining the contested acts as regards these corrections;

ii) The well-foundedness of the Claimant's request as regards the corrections related to Extended Hours, with the consequent (partial) annulment of the contested acts as regards these corrections;

iii) The annulment of the administrative appeal decision No. ... in the part in which it maintained the annulled corrections;

iv) Recognition of the right to compensation for improperly provided guarantee in the proportion of the annulment of the contested acts.

The value of the case is set at € 37,480.27 (thirty-seven thousand four hundred and eighty euros and twenty-seven cents), in accordance with Article 97-A of the Code of Tax Procedure and Process, applicable pursuant to subparagraphs a) and b), No. 1, Article 29 of the LRAT, and No. 2, Article 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs, in the amount of € 1,836.00 (one thousand eight hundred and thirty-six euros), in accordance with Table I of the RCPAT, to be borne by the Claimant in the proportion of 4/5 and by the Respondent Entity in the proportion of 1/5, given that the present request was found to be partially well-founded, and in compliance with the provisions of No. 2, Article 12, and No. 4, Article 22, both of the LRAT, and with the provisions of No. 4, Article 4 of the said Regulation.

Notify accordingly.

Lisbon, 26 November 2015

[Text prepared by computer, in accordance with Article 131, No. 5 of the Code of Civil Procedure (CCP), applicable by reference to Article 29, No. 1, subparagraph e) of the LRAT, with blank verses and revised by the signatory].

The Arbitrator

(Ana Moutinho Nascimento)