VAT Arbitration: Verba 2.6 List I – Revocation of Liquidation Act and Tax Reimbursement (CAAD 152/2016-T)

ARBITRAL DECISION

REPORT

1. On March 14, 2016, the company A…, Ltd, Tax Identification Number no. …, with registered office at Street…, …, ... …-… …, hereinafter referred to as the Claimant, with registered office in Portugal, requested the constitution of an arbitral tribunal and filed a request for arbitral decision, in accordance with section a) of paragraph 1 of Article 2 and section a) of paragraph 1 of Article 10 of Decree-Law no. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), in which the Tax and Customs Authority (hereinafter referred to as AT) is the Respondent.

2. The Claimant is represented, in these proceedings, by its legal representatives, Dr. B… and Dr. C…, and the Respondent is represented by legal counsels, Dr. D… and Dr. E….

3. The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD and notified to the Respondent on March 24, 2016.

4. By means of the request for constitution of the arbitral tribunal and request for arbitral decision, the Claimant intends to submit to the Tribunal's consideration the legality of the Value Added Tax ("VAT") assessment act no. 2015…, issued with reference to the fourth quarter of 2011, in the amount of €22,238.36 (twenty-two thousand, two hundred and thirty-eight euros and thirty-six cents), and the legality of the act dismissing the administrative review filed by the Claimant against that tax act, and it is equally requested that the Respondent be condemned to reimburse the amounts paid as tax and compensations, as well as the payment of compensatory interest.

5. Having verified the formal regularity of the request submitted, in accordance with the provisions of section a) of paragraph 2 of Article 6 of the RJAT, and since the Claimant did not proceed to appoint an arbitrator, the signatory was designated by the President of the Deontological Council of CAAD.

6. Having the signatory accepted the appointment made, the Arbitral Tribunal was constituted on May 25, 2016, at the registered office of CAAD, located at Avenida Duque de Loulé, no. 72-A, in Lisbon, as set out in the deed of constitution of the arbitral tribunal which was drafted and is attached to these proceedings.

7. The Respondent, after being duly notified, in accordance with the provisions of Article 17 of the Legal Framework for Arbitration in Tax Matters ("RJAT"), filed its reply on June 22, 2016, and also attached the administrative file on that same day.

8. Since no exceptions were raised, there being no need for production of additional evidence beyond that already documented in the proceedings, and no need being perceived for the parties to amend their respective procedural submissions, and the case containing all the necessary elements for the pronouncement of the decision, for reasons of procedural economy and expedition, the prohibition of useless acts, in view of the (tacit) position manifested by the parties, who were duly notified for this purpose, the Tribunal decided, through the order issued on September 14, 2016, to dispense with the holding of the meeting referred to in Article 18 of the RJAT, the examination of witnesses, as well as the presentation of arguments.

9. In that same order, the Tribunal fixed November 25, 2016 as the date for the pronouncement of the arbitral decision, and also warned the Claimant that it should proceed to pay the subsequent arbitration fee, in accordance with paragraph 3 of Article 4 of the Rules of Costs in Tax Arbitration Proceedings, and communicate such payment to CAAD.

10. It happened that on October 17, 2016, the Respondent filed a request for revocation of the contested assessment acts, and accordingly proposed the termination of the present proceedings, based on the supervening futility of the dispute.

11. However, the Claimant, in response to the request identified in paragraph 10, on October 26, 2016, filed a request to the effect that, despite accepting the Respondent's concession regarding the request for annulment of the contested assessments, the proceedings should continue as regards the question of the right to compensatory interest in the Claimant's favor.

The Claimant sustains its request, in summary, as follows:

The Claimant sustains the request for annulment of the Value Added Tax ("VAT") assessment act no. 2015…, issued with reference to the fourth quarter of 2011, in the amount of €22,238.36 (twenty-two thousand, two hundred and thirty-eight euros and thirty-six cents), on the grounds that it is affected by illegality, due to error as to the legal requirements, inasmuch as:

a) The Claimant submits that "it is a company whose business purpose is the trade, importation, exportation and representation of products for application in the medical-dental, medical-orthopedic, surgical-dental, prosthetic-dental and laboratory areas, implants, instruments and precision tools, as well as training in the aforementioned areas. Within the scope of its stated business purpose, the Claimant proceeds, among other things, to the importation and commercialization of materials and components intended for dental implantology."

b) It further states that "the goods commercialized [by it] (…) are intended for the replacement of teeth, substituting, in whole or in part, the dental organ (the tooth), due to its loss, deterioration and irreparability, constituting goods of high social utility."

c) The Claimant alleges that it was the subject of a partial tax inspection, covering VAT for the (…) fourth quarter of 2011, which resulted in corrections of a purely arithmetic nature resulting from legal requirement, in the amount of €22,238.41, on the grounds that the Claimant "had assessed in its active operations VAT at the reduced rate (of 6%) when, in the AT's view, it should have assessed at the normal rate of (23%)."

d) In fact, the Claimant believes that the commercialization of dental implantology articles – osseointegrated implants, that is, "medical devices (used in dental medicine) which have as their main characteristic their direct fixation in the bone of the maxilla and/or mandible – by means of the technique of "osseointegration", which "(…) performs in a prosthesis the same function as the root in a natural tooth", have full classification, on the one hand, in section a) of paragraph 1 of Article 18 of the VAT Code and, on the other hand, in item 2.6 of List I attached to the VAT Code, which provides for taxation at the reduced rate (…), insofar as this item applies to the "orthopedic devices, surgical-medical belts and medicinal stockings, wheelchairs and similar vehicles, operated manually or by motor, for disabled persons, devices, articles and other prosthetic or compensatory material intended to replace, in whole or in part, any limb or organ of the human body or the treatment of fractures and lenses for correction of sight, as well as orthopedic footwear, provided prescribed by medical prescription (…)".

e) The Claimant states that the implants transacted by it "regardless of whether they are sold separately or jointly with the crown of the artificial tooth – which will often be motivated by technical reasons – aim at the replacement of part of an organ and that, together with the abutment (or connection element), become indispensable to the existence of the prosthesis itself".

f) Therefore, the Claimant believes that "in light of the literal element [of item 2.6 of List I of the VAT Code], one cannot deny the inclusion of dental implants within the scope of application of that provision: given its function (sole) and characteristics, there is no doubt that both the dental implants commercialized by the Claimant and their respective abutments or crown fixation elements fall within the legal concept of prosthetic material, in the sense that the prosthesis itself does not exist without the existence of those"

g) Concluding to the effect that "by correcting the tax assessed by the Claimant in the sale of implants, applying the normal rate of 23% instead of the reduced rate of 6% applied, by considering that item 2.6 of List I annexed to the VAT Code is not applicable, the tax act now in question incurs manifest illegality due to error as to the factual and legal requirements for application of that rule, and should therefore be immediately annulled." whereby, "as the AT, on its own initiative, proceeded to partially compensate the amounts additionally assessed as tax – thus depriving the Claimant of the amounts owed to it by the State – it is now incumbent upon it to rectify this situation, requiring the payment of the compensated amounts and, also, of the amounts paid in the execution proceedings initiated, accrued with compensatory interest calculated on this amount, from the date of compensation."

III. In its Reply the Respondent invoked, in summary, the following:

a) The Respondent believes, with regard to the alleged error as to the factual requirements, that "in accordance with item 2.6 of List I annexed to the VAT Code, only the sale of prostheses, including dental prostheses, which are intended for the purpose provided for therein, are subject to the reduced rate (…), and not the sale of pieces or materials for connection or fixation of those prostheses, whose sale should be taxed at the normal rate of the tax."

b) In fact, the Respondent considers, following the understanding conveyed by the VAT Design Division of the VAT Services Directorate, that "prosthetic materials are only taxed at the reduced rate if they are intended for the purpose defined in the item, that is, for the replacement of a defective or ill part of the body or its function.", which "also implies that goods consisting of pieces, parts and accessories of those prostheses are not covered by item 2.6, given that, in addition to not being prostheses, they are not capable of fulfilling, individually considered, the function of replacing a part of the body or its function.".

c) It argues, thus, that "item 2.6 only covers the transmission of the article that, in itself, constitutes an artificial piece that replaces an organ of the human body or part thereof, that is, autonomously or unitarily.", and that "in the dental implant prosthesis, the normal rate of tax applies to the transmission of connection or fixation pieces, given that those, do not themselves, objectively, fulfill the function described in item 2.6 of List I annexed to the VAT Code."

d) To support its position, the Respondent relies on Community jurisprudence, namely by making reference to the Judgments of January 18, 2001, case Commission v Spain, C–83/99, and to the Judgment of January 17, 2013, also in the case Commission v Spain, C–360/11, as regards the application of reduced rates, referring to the fact that "the scope of application of reduced VAT rates is, in particular, to reduce the burden borne by the final consumer in the acquisition of certain essential goods. Given that this type of good is used essentially by professionals and entities in the health sector, who benefit from the exemption from the tax in the services they provide, the burden of these expenses hardly falls on the final consumer."

e) Accordingly, the Respondent considers that "the Tribunal's conclusion is, moreover, in line with the provisions of paragraph 4 of Article 11 of the General Tax Law (LGT) which prohibits analogical interpretation for lacunae resulting from tax rules covered by the parliamentary law reserve of the Assembly of the Republic. In fact, by virtue of the provisions of paragraph 2 of Article 103 and section i) of paragraph 1 of Article 165, both of the Constitution of the Portuguese Republic, exemptions and other benefits or fiscal incentives, which undoubtedly include cases of application of reduced rates in VAT, constitute matters covered by the parliamentary law reserve, being, to that extent, subject to the prohibition of analogy.", to reinforce its position that "item 2.6 of List I, annexed to the VAT Code, applies to goods taxed at the reduced rate, namely the "(…) devices, articles and other prosthetic or compensatory material intended to replace, in whole or in part, any limb or organ of the human body".

f) Resorting to the rules of hermeneutics, it further alleges that "it is established in Article 11, paragraph 1 of the LGT that in determining the meaning of tax rules and in qualifying the facts to which they apply the general rules and principles of interpretation and application of laws are observed.", also making reference to the provisions of Article 9 of the Civil Code, to affirm that "To interpret a law is to fix its meaning and the scope with which it should apply, that is, to determine its decisive meanings and scope.", further stating that "given the literal element of the interpretation of the rule, that the legislator refers to prosthetic material and not material for prosthetics (for application in a prosthesis), which indicates excluding the pieces for connection or fixation of prostheses, such as those transacted by the taxpayer."

g) It continues, stating that, "(…) it is important to distinguish the concept of implant from the concept of prosthetic material. [Thus] By "prosthetic material" should be understood that which is intended or is apt for the replacement of a limb or organ of the human body, in whole or in part. Dental prostheses aim to replace the dental apparatus, in whole or in part. This replacement occurs not only physically but also in the replacement of its functions: chewing, verbalization, aesthetic function. In the implant prosthesis, (…) the implant is the manner of fixation of the prosthesis. The prosthesis, constructed or elaborated by a specialized technician, with reference to the patient for whom it is intended, consists of the piece designated as the crown (artificial tooth in porcelain), which is not supplied by the taxpayer. In reality, the implant (the manner of fixation of the prosthesis) does not benefit from the same tax treatment as the prosthesis, as happens, moreover, with the components used in the elaboration of other prostheses."

h) It further adds that "(…) dental prostheses in general, regardless of the method of application, have, in their final destination, the same tax treatment, that is, the exemption provided for in Article 9 of the VAT Code. We must not forget that the prosthesis, in itself, can be the subject of commercialization in stages prior to being placed at the patient's disposal, in which case it is taxed at the reduced rate."

i) Furthermore, it mentions that "item 2.6 applies, therefore, to the devices and prostheses in themselves, the final product, in the case in question, to the artificial tooth (prosthesis). It means that it does not apply to the goods transacted by the taxpayer.", since these "(…) are not prosthetic material. Indeed, according to the opinion of the Dental Surgeons Association, referred to above, such goods serve as support for the dental prosthesis."

j) It continues stating that "notwithstanding that they have no other application than in dental medicine, they are merely accessory or instrumental pieces, which contribute to the final result of oral rehabilitation. It should be noted again that the very Dental Surgeons Association considers the crown a prosthesis, since it is this that replaces the tooth, in its mastication, verbalization and aesthetic functions."

k) It makes reference to the "principle of neutrality deriving [from] the Treaty of Rome and is set forth in the VAT Directive (2006/112/EC), being systematically invoked by the Commission to oppose national legislations deemed incompatible with Community rules, as well as by the tax administrations and taxpayers of the various Member States, and has been repeatedly applied by the Court of Justice of the European Union.", further stating that "if we are talking about the neutrality of the taxation of different types of prosthesis we must compare the transmission of the removable prosthesis with that of the fixed prosthesis. And not with the fixed prosthesis plus fixation and connection pieces.", by which it believes that "It would be manifestly debatable the possible comparison between the two types of prosthesis, whether by their economic value, or by the way to meet the needs for which they are intended, it not being irrelevant, from the point of view of the consumer, to opt for one or the other. From this perspective, the principle of neutrality can be in crisis if different rates are imposed on the materials necessary for the elaboration of each of the different types of prosthesis."

l) Concluding to the effect that "given all the arguments above, it is inevitable to conclude that the Claimant has no reason in its pretensions.", stressing, however, without conceding, as a precaution, that "the requirements upon which the Claimant's right to compensatory interest depends are not met", arguing, finally and consequently, for the dismissal of the request for arbitral decision.

IV. Of the order revoking the tax act by the Director General of the Authority

1. The Respondent, on October 17, 2016, presented the request alleging the supervening futility of the dispute, given the (recent) revocation of the assessment acts challenged in the ongoing proceedings.

2. That revocation, which was effected, in conformity with recent administrative guidelines, in accordance with the Order of 14.10.2016 of the Director-General of the Tax and Customs Authority "recently [was] prepared (by the VAT Services) the Memorandum no. …, favorably endorsed, by the Sub-Director-General for the area of Tax Management of VAT, on the 9th of the current month. This memorandum is anchored in the understanding endorsed by the CEF, in an Opinion dated 14.07.2016, which, for the matter in question here, proposes, in conclusion 1) "the change in the interpretation of item 2.6 of List I, to the effect of considering that the reduced VAT rate of 6% is applicable to dental prostheses as well as to their respective components."

This Opinion received the endorsement of the Director-General, of July 26, 2016.

The aforementioned Memorandum corroborates the direction of the Opinion and alters the interpretation, in force until the date, on the matter, now considering that the components of dental prostheses – implant, abutment and crown – benefit from the application of the reduced rate of 6%, since they fall within the normative provision of item 2.6 of List I to the VAT Code."

1. Concluding, accordingly proposing "the revocation of the assessment act which constitutes the object of the request for arbitral decision – which is pending before the Arbitral Tribunal under no. 152/2016 T CAAD – (…)."

I. Preliminary Examination

The Tribunal is competent and regularly constituted, in accordance with section a) of paragraph 1 of Article 2 and Articles 5 and 6, all of the RJAT.

The parties have legal standing and capacity, show themselves to be legitimately interested, are regularly represented and the proceedings do not suffer from any nullities.

II. Matters of Fact

For the conviction of the Arbitral Tribunal, with respect to the proven facts, the positions exposed by the parties, the documents and the administrative file attached to the proceedings were relevant.

a. Facts found to be proven

With interest for the consideration of the question of supervening futility of the dispute, the following facts are found to be proven:

A. The Claimant was notified of the VAT assessment act no. 2015…, issued with reference to the fourth quarter of 2011, from which results an amount to be paid of €22,238.36 (twenty-two thousand, two hundred and thirty-eight euros and thirty-six cents) (cf. Doc. no. 2 attached with the initial petition and administrative file).

B. On May 25, 2015, the Claimant here, dissatisfied with that assessment act, filed an Administrative Review against it. (cf. Doc. no. 3 attached with the initial petition and administrative file).

C. The administrative review referred to in B. was dismissed, by means of the Letter no. …, of December 17, 2015. (cf. Doc. no. 1 attached with the initial petition and administrative file).

D. On March 14, 2016, the Claimant filed the request for constitution of the Arbitral Tribunal which gave rise to the present proceedings.

E. On October 17, 2016, the Respondent proceeded to revoke the assessment act challenged in these proceedings, by order of the Legal Advice and Litigation Services Directorate of the AT. (cf. Request and order attached to the proceedings, by the Respondent, on 17.10.2016).

F. On October 26, 2016, the Claimant, notified of the revocation of the assessment act challenged, manifested its intention to continue the proceedings regarding the consideration of the right to compensatory interest petitioned.

G. The Claimant proceeded to pay the tax in question, as well as the respective compensations, in the amount of €22,238.36 – (cf. Doc. no. 2 and 25 attached with the initial petition).

III. Facts found to be not proven

There are no facts found to be not proven, because all facts relevant for the consideration of the request were found to be proven.

IV – Of the Law

Question of supervening futility of the dispute – revocation of the assessment act

1. The Respondent, as already mentioned above, comes to propose the termination of the present proceedings, based on supervening futility of the dispute, given "the revocation of the assessment acts challenged in the proceedings in progress."

2. The Claimant, notified of the revocation of the assessment act challenged in these proceedings, manifested its intention to proceed with the consideration of the right to compensatory interest in the Claimant's favor, for overpayment of the tax obligation. Referring, in this respect, that "the mere revocation of the assessments by the Respondent AT cannot by itself determine the supervening futility of the dispute, and the arbitral proceedings, accepting the Respondent's concession regarding the request for annulment of the contested assessments, should proceed to the consideration of the question of the error attributable to the services in the overpayment of the assessments on the right to compensatory interest in the Claimant's favor."

Well, let us see,

1. Supervening futility of the dispute is, in accordance with the provisions of section e) of Article 277 of the Code of Civil Procedure, applicable by virtue of Article 29 of the RJAT, a cause for termination of the instance, which occurs when, "by a fact occurring during the pendency of the instance, the solution of the dispute ceases to be of interest, because the result that the party aimed to obtain has been achieved by another means." - cf. Judgment of the Supreme Administrative Court, issued in case no. 0875/14, of 30.07.2014, which briefly explains that:

"I – The supervening futility of the dispute (which constitutes a cause for termination of the instance - section e) of art. 277 of the CPC) is verified when, by a fact occurring during the pendency of the instance, the solution of the dispute ceases to be of interest, because the result that the party aimed to obtain has been achieved by another means."

1. Further adds, on this matter, the Judgment of the Central Administrative Court of the South, issued in case no. 07433/14, of 10.04.2014, that:

"1. Among the causes for termination of the instance of the declaratory proceedings, which are applicable to the enforcement proceedings supplementarily, as provided by art. 551, no. 1, of the C.P. Civil, in the amended version of Law 41/2013, of 26/6, we will find the impossibility or supervening futility of the dispute (cf. art. 277, section e), of the C.P. Civil).

1. This cause for termination of the instance contains two requirements that need to be verified for its application. They are, the futility of the dispute, and that this futility results from a fact subsequent to the beginning of the instance, in order to be said to be supervening, which gives rise to the same termination of the instance without consideration of the merits of the case.

2. Also in this sense follows the doctrine and jurisprudence, by referring that the impossibility or supervening futility of the dispute occurs when, by a fact occurring during the pendency of the instance, the plaintiff's claim cannot be sustained, because of the disappearance of the subjects or the object of the proceedings or, on the other hand, because it finds satisfaction outside the scheme of the claimed origin. In both cases, the cause ceases to be of interest - beyond by impossibility of achieving the intended result; here, because it has already been achieved by other means.

3. The supervening futility of the dispute is only verified when this futility is a juridical futility. The utility of the dispute correlates, therefore, with the possibility of obtaining useful effects from it, by which its termination should only be declared when it is concluded that its continuation could not bring any advantageous consequences to the author/appellant."

4. Now, in the case sub judice, we have as the contested act - the VAT assessment act concerning 2011/4th quarter - which, during the pendency of the present proceedings, was revoked by the Director General of the Tax and Customs Authority, and therefore, is the understanding of the Respondent that the instance should be terminated based on the supervening futility of the dispute.

Let us see if it is correct,

1. The revocation of an act presupposes the non-conformity between the standard of action established previously by the author of the act and the standard that emerges from subsequent changes in facts or rights. It constitutes a secondary act (act upon act) that causes the disintegration of the previous administrative act, determining its disappearance from the legal order and extinguishing its effects.

2. The revocation of the act can be total or partial, being that, in the first case, there is complete and total elimination of the previous tax act, and in the second case, there is only partial elimination of the act.

3. As correctly notes Clotilde Celorico Palma in the decision of CAAD issued in case no. 360/2014 T:

"(…) although revocation has disintegrating or destructive effects, in whole or in part, on the previous act, even in case of total revocation the applicant may have an interest in the declaration of illegality of the revoked act as support for a possible claim for damages caused to it until the effects of the revoking act are produced.

(…)

Even in the case in which the revocation of the tax act is the result of a subsequent administrative act in tax matters, since the effectiveness of this in relation to the taxpayer depends on the revoking act being notified to it, the applicant, if unaware of the act's performance by not having been made aware of it, can submit it to the Arbitral Tribunal with a view to the declaration of its illegality. In this case, even if the Tribunal comes to recognize that the act cannot be annulled, because it has meanwhile disappeared from the legal order, it cannot fail to recognize that the activity of the Tribunal is entirely attributable to the AT.

The same applies, in fact, if the revocation occurs after the request for constitution of the Tribunal, in accordance with Article 13 of the RJAT."

1. In fact, taking into account that, in the present proceedings, the Respondent did not rule on, in the act revoking the assessment in question, the request for payment of compensatory interest and that, notified of the AT's request in which (simply) communicated that revocation, the Claimant came to petition that the request for payment of compensatory interest be considered, for only thus would "the pretensions formulated by the claimant in these proceedings" be safeguarded, it is necessary the continuation of the present proceedings, namely for consideration of the eventual right to compensatory interest, as well as the right to reimbursement of the paid tax and respective compensations, which will be done next.

Right to compensatory interest

1. Despite the revocation of the assessment act in question in these proceedings, the truth is that the Claimant manifests its interest in the continuation of the proceedings, so that the present Tribunal may consider the right to compensatory interest petitioned, on the grounds of error attributable to the services.

2. Paragraph 1 of Article 43 of the LGT and Article 61 of the Code of Procedure and Tax Process (CPPT) provide that compensatory interest is due when it is determined in administrative review or judicial challenge, that there was error attributable to the services resulting in the payment of a tax debt in an amount greater than legally due.

3. Thus, when the taxpayer's assets have been affected as a result of an error by the Tax Administration, and such error has been declared, which occurs, implicitly, whenever a decision annulling the assessment act is handed down, the right to compensatory interest arises.

4. The keystone of this rule is the error of the services, whose recognition has as automatic effect the right to compensatory interest, due from the date on which the tax was overpaid to the date on which the credit note in favor of the taxpayer should be issued (in this sense, see, in particular, the Judgment of the Supreme Administrative Court, of November 2, 2005, Case no. 562/05).

5. Moreover, error attributable to the administration is considered to exist when the error is not attributable to the taxpayer and is based on erroneous factual assumptions that are not the responsibility of the taxpayer.

6. Now, resulting from the tax acts in question the obligation to pay a tax higher than what would be due, compensatory interest is owed in accordance with the legally provided terms, the legislator presuming, in these cases, in which there is annulment of the assessment, that a prejudice occurred in the taxpayer's sphere due to having been deprived of the patrimonial amount that it had to deliver to the State due to an illegal assessment. Consequently, the taxpayer has the right to such indemnification, independently of any allegation or proof of the damage suffered.

7. In the present case, taking into account the revocation of the tax assessment act in question, the AT now considering, contrary to what it had previously argued and whose understanding gave rise to the present arbitral proceedings, that the components of dental prostheses – implant, abutment and crown – benefit from the application of the reduced rate of 6%, since they fall within the normative provision of item 2.6 of List I annexed to the VAT Code.", it is unquestionable that there will be entitlement to reimbursement of the tax by virtue of the provisions of paragraph 1 of Article 43 of the LGT, and Article 100 of the LGT, necessarily passing through the restoration of the "situation that would exist if the tax act that is the subject of the arbitral decision had not been performed".

8. Similarly, it is understood that it will be free of doubt that the illegality of the act is attributable to the Tax Authority, which autonomously performed it illegally, which cannot fail to be interlinked with its subsequent revocation.

9. Thus, being in the presence of a substantive law violation, which is embodied in error as to the legal requirements, attributable to the Tax Authority, the Claimant has the right to compensatory interest, in accordance with Articles 43, paragraph 1 of the LGT, and 61 of the CPPT, counted from the payment of the tax until the complete reimbursement of that amount.

V. Decision

In accordance with the above, it is decided to condemn the Respondent to reimburse the amount paid by the Claimant as tax in question, plus the respective compensations, as well as the payment of compensatory interest counted from the payment of the tax until the complete reimbursement of that amount.

VI. Value of the Case

The value of the case is fixed at €22,238.36 (twenty-two thousand, two hundred and thirty-eight euros and thirty-six cents) in accordance with Article 97-A, paragraph 1, a), of the CPPT, applicable by virtue of sections a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Rules of Costs in Tax Arbitration Proceedings.

VII. Costs

In accordance with the provisions of paragraph 3 of Article 536 of the Code of Civil Procedure, applicable by virtue of section e) of Article 29 of the RJAT, "the responsibility for costs remains with the plaintiff or applicant, unless such impossibility or futility is attributable to the defendant or respondent, in which case it is the latter who is responsible for all costs".

Now, taking into account that the Respondent proceeded to revoke the VAT assessment act after the constitution of the Arbitral Tribunal, the continuation of the proceedings can only be attributable to the Respondent.

Whereby, the costs must, therefore, be entirely attributable to the Respondent, in light of the principle in force in the Portuguese legal order that the party that gave rise to it bears the costs of the proceedings (Article 447-D, paragraph 1, of the Code of Civil Procedure).

Thus, in accordance with the provisions of Articles 12, paragraph 2 and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 3 of the Rules of Costs of Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €1,224.00, in accordance with Table I of the aforementioned Rules, at the charge of the Respondent.

Let notification be made.

Lisbon, November 15, 2016

The Arbitrator

(Jorge Carita)