Summary
Full Decision
ARBITRAL DECISION
The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Clotilde Celorico Palma and A. Sérgio de Matos, appointed by the Deontological Council of the Administrative Arbitration Centre, agree to form an Arbitral Tribunal:
I – REPORT
On 7 March 2017, A…, NIPC…, with registered office in …, …, …-… …, filed a request for constitution of an arbitral tribunal, pursuant to Articles 2 and 10 of Decree-Law no. 10/2011 of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by Article 228 of Law no. 66-B/2012 of 31 December (hereinafter, briefly referred to as RJAT), seeking the declaration of illegality of the following acts of VAT assessment and compensatory interest, in the amount of € 705,503.80:
Additional VAT Assessments 2012:
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no. …);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…).
Additional VAT Assessments 2013:
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no. …);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…).
Assessments of compensatory interest 2012:
no. … (compensation no.…);
no. … (compensation no. …);
no. … (compensation no.…);
no.… (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no.… (compensation no.…):
Assessments of compensatory interest 2013:
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…):
no. … (compensation no.…);
no. … (compensation no.…):
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…);
no. … (compensation no.…).
To support its petition, the Claimant alleges, in summary:
Nullity of the inspection activity;
Nullity of the inspection report due to lack of substantiation;
Error of fact (insufficiency of alleged facts to legitimize the assessments) and of law (lack of merit of the Inspection Report conclusions regarding VAT);
Illegality of the assessment of compensatory interest.
On 08-03-2017, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority.
The Claimant did not appoint an arbitrator, and therefore, pursuant to Article 6, paragraph 2, item a) and Article 11, paragraph 1, item a) of the RJAT, the President of the Deontological Council of CAAD designated the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable period.
On 05-05-2017, the parties were notified of these appointments, neither manifesting any intention to refuse any of them.
In accordance with the provisions of Article 11, paragraph 1, item c) of the RJAT, the collective Arbitral Tribunal was constituted on 23-05-2017.
On 27-06-2017, the Defendant, duly notified for that purpose, presented its response, defending itself solely by way of denial.
On 06-09-2017, the hearing referred to in Article 18 of the RJAT took place, during which witnesses presented by the Claimant were examined.
Having been granted a period for submission of written arguments, the same were submitted by the parties, commenting on the evidence produced and reiterating and developing their respective legal positions.
A period of 30 days was set for the issuance of the final decision, following the submission of arguments by the Defendant, which period was extended by a further 15 days.
The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to Articles 2, paragraph 1, item a), 5 and 6, paragraph 1, of the RJAT.
The parties have legal standing and capacity, are legitimate and are legally represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Ordinance no. 112-A/2011 of 22 March.
The proceedings do not suffer from any nullities.
Thus, there is no obstacle to the consideration of the case.
Having considered everything, we must issue
II. DECISION
A. FACTUAL MATTERS
A.1. Facts Established as Proven
Between 12 February 2016 and 26 July 2016, the Claimant was subject to an external inspection procedure, carried out by the Tax Authority, initially with a partial scope regarding Value Added Tax (VAT).
On 23-05-2016, the scope of the external inspection procedure was altered, from partial VAT to general, in accordance with an order from the Division Chief, due to circumstances that required analysis under other taxes, namely Corporate Income Tax (IRC).
It was the accountant, Ms. B…, who signed the form altering the scope of the said Service orders.
The external inspection procedure thus covered, in general, the years 2012 and 2013 and resulted "from a proposal following inspection activities carried out in previous years (2010 and 2011 respectively), from which corrections in VAT and IRC resulted, as a consequence of procedures that proved to be infractions to the respective Codes and which are seen to be recurring practice in the following years, 2012 and 2013 respectively."
The inspection procedure period was extended, the Claimant being notified of such fact by official letter no. … of 21/07/2016, with the following content:
Once the inspection acts were completed, the Claimant was notified of the tax inspection project and duly exercised its right to be heard.
The Claimant, as evidence, called one witness who was heard.
The Tax Authority understood that it would maintain the projected corrections.
The Tax Inspection Report (RIT) contains, regarding the VAT corrections, that:
The Inspection Report thus determined, among other things, corrections regarding the provision of services and VAT assessed:
in the swimming pools (covered/indoor pools and outdoor pools);
in facilities for the practice of sports activities (athletics track and sports pavilions).
Following the RIT, the assessments that are the subject of the present arbitration action were issued.
With the expiration of the respective voluntary payment period, the corresponding tax enforcement proceedings were instituted.
In order to suspend the said enforcement proceedings, the Claimant provided a bank guarantee and surety in the amount of €909,152.20.
The Claimant is responsible for the management and operation of the municipal sports complex, which includes, in addition to the Multipurpose Pavilion, the Swimming Pools Complex of …, the …, the Swimming Pools of …, the Swimming Pools Complex of … (which began operating in September 2012), the Athletics Track …, and several sports pavilions.
With respect to this operation, the Tax Authority found that the Claimant did not assess VAT on services related to the practice of physical and sports activities and other public entertainment provided in the Swimming Pools Complexes of …, in the Swimming Pools Complexes …, in the …, in the Swimming Pools of…, on the Athletics Track and in the sports pavilions, on the grounds that it considered them to be operations exempt under the provisions of item 8) of Article 9 of the VAT Code (CIVA).
The RIT further states the following:
The Claimant was not notified of the proposal referred to in the preceding point.
From the information of the DSIVA, approved by order of 23-12-2009, the following appears, among other matters:
The Claimant was established by public deed of 22 January 1999, is a public interest cooperative (cooperative business), 89.26% owned by the Municipality of … .
The Claimant is a legal person under public law pursuant to the provisions of Article 1, paragraph 2 of Decree-Law no. 31/84 of 21 January.
The Claimant is a non-profit entity that pursues public goals, exercising functions of public interest and utility delegated by the Municipality of …, which since 1999 has delegated the management of its sports facilities to it with the purpose, defined by the Municipality, of promoting and encouraging sports practice in the municipality of …, privileging equal opportunities of access to non-competitive sports and developing projects of socio-sports animation and occupation of free time and leisure.
Pursuant to Article 2 of the Statutes of A…, Claimant, its main objects are:
"a) To promote sports activity, using the existing infrastructure and creating those necessary for the purpose it intends to develop,
b) To encourage the practice of sports in the community in general,
c) To provide technical knowledge to those involved in various modalities,
d) To encourage the spirit of fellowship and mutual aid,
e) To enable the community in general, and young people in particular, a healthier and more enriching alternative for the occupation of their free time.
f) To integrate marginalized children and groups of young people,
g) To enable young people outside the educational system, or outside any other training structure, equal opportunity of access to sports practice,
h) To promote professional training actions,
i) To promote and participate in Festivals and festivities, as well as leisure and free time initiatives,
j) To manage all available installations, adapting spaces for the provision of services in the catering area, through the creation of catering services, catering, bars selling beverages, purchase and sale of all food products, preparation and sale of all types of meals, whether for consumption in these establishments or for outside,
1) To ensure to the community and young people in particular, all necessary conditions for access to sports practice in safety, equipping the Sports City with a Medical Support Center for Sports, for monitoring and evaluating sports practice."
Pursuant to these attributions, the Claimant directs its field of action in two main areas:
The management of the municipal sports complex, which includes the Sports City (Multipurpose Pavilion, the Swimming Pools Complex, the … - outdoor recreational and entertainment pools and the Athletics Track …) the Swimming Pools of …, the Swimming Pools of …, and nine sports pavilions (the Municipal Pavilion of…, the Pavilion … (…), the Sports Pavilion of …, the Pavilion of …, the Municipal Pavilion … - … and the Gym-Sports Pavilions of Schools EB 2.3 of …, …, … and …);
The promotion and encouragement of sports practice in the Municipality of …, privileging equal opportunities of access to non-competitive sports, developing projects of socio-sports animation and occupation of free time and leisure.
The Claimant also administratively manages the C…, an innovative and pioneering service in the Country, aimed at all athletes, whether or not integrated in the federated and/or school system, which was recognized as an extension of the Sports Medicine Centers of IPDJ.
The Claimant assumed the implementation of development plans, among others, of modalities such as Athletics, Rugby, Skating, Volleyball (Rotating Volleyball), Korfball, Speedbadminton, Women's Futsal and Orienteering, the "Senior Activity" project (sports for the elderly) and Active Sundays (accompanied sports practice in the Urban Parks of the municipality).
The promotion and encouragement of athletics practice by primary school students began to be developed with school establishments in the municipality, and subsequently the Athletics Training Center of the Northern Zone was created.
As a form of promoting Orienteering activities, A… created the map of the City Park, cartographed and suitable for carrying out activities of this modality.
The Claimant, in the Sports City Park, contiguous to the Athletics Track …, promoted the holding of official competitions, training sessions and provision of conditions for the practice of various modalities and leisure activities (such as athletics, mountain biking, and walks).
The C… (C…) was recognized as equivalent to an extension of the Medicine Centers of the Portuguese Institute of Sports and Youth (IPDJ).
The C… constitutes a fundamental support for clubs and athletes, namely in terms of medical-sports examinations, advice for sports practice and medical assistance acts for athletes of … and neighboring municipalities.
In addition to the medical-sports examination (whose protocol is that established by the Portuguese Institute of Sports and Youth), the Sports Medicine Center provides services in terms of advice for sports practice, suggesting personalized sports paths based on the assessment of the user's physical condition, medical history, personal characteristics and possible limitations and personal motivation.
The Claimant encouraged, organized and impelled the holding of congresses, seminars, conferences, training sessions and studies related to sports and sports management.
The Claimant created and maintains the "…", an exhaustive database of the reality of sports in … .
In 2013 … was the European City of Sports.
The Claimant organized an International Seminar on "Granting and Management of Multipurpose Pavilions", congresses on "Event Management" and "Undertaking and Cooperating in a Global Market" and the Sports Medicine Conferences.
The Claimant organized actions for bone marrow collection, promotion of Road Safety Prevention (activity "City with Life – Building Safe and Responsible Behaviors"), "Solidarity Sundays" (classes in exchange for goods for social solidarity institutions), and walks "Different People, Equal Rights".
The Municipality of … enters into Collaboration Protocols with the Claimant through which the latter is provided with the financial means allocated by the municipal budget for the sports area (through the allocation of subsidies).
It is the Municipality of … that defines the table of fees to be applied by the Claimant for services provided, with the latter not being responsible for setting the price to be charged to users for such services.
The fees to be charged by the Claimant in the management of the municipal sports complex are discussed, approved and annually set by the Municipality in Municipal Assembly.
There is no other sports complex in the local geographic market, and in the municipality in general, that has physical conditions similar to those of the complex operated by the Claimant.
In 2013, the equipment and activities promoted by the Claimant were attended by the following numbers of users:
Swimming Pools Complex of …:
Users enrolled in classes: 3,500;
Users enrolled in free regime: 7,200
Total year access: 120,000 users
… Amusement Park - Outdoor Pools:
Access: 100,000 / year
Municipal Swimming Pools of…:
Users enrolled in classes: 1,200
Users enrolled in free regime: 1,100
Total year access: 35,000
- Athletics Track ..
Year access: 20,000 users (athletics, football, rugby)
9 Sports Pavilions of the Municipality
More than 11,000 hours of annual occupation exercising activity for more than 150,000 users
Field of the Leisure Park of …
About 500 hours of annual occupation exercising activity in this space for more than 10,000 young users per year
Multipurpose of …
156,000 entries in events
Sports Medicine Center of …
Service to 3,800 users
Sports Services Senior Activity: more than 2,000 users
Holidays and Workshop Activities for young people: more than 2,000
Mini League: about 600 young people
Community Games: 700 participants
Mini Olympics: about 600 participants.
The Claimant operates a swimming pools complex, consisting of three heated indoor pools (competition tank with 25 meters x 16 meters, with 8 lanes and depth of 1.80m to 2.00m, learning tank with 16 meters x 12 meters, with depth of 1.00m to 1.30m and paddling pool with 80 m2).
Now, the Claimant, in addition to normal aquatic sports activities (free swimming practice, swimming with teacher supervision, hydrotherapy, senior aquatics), allows the practice of competitive swimming, synchronized swimming and water polo.
With respect to Water Polo, the Claimant's Swimming Pools Complex is used by … for training in this modality, due to the fact that the pools operated by it do not have sufficient depth for this purpose.
The "firefighters' pools" mentioned in the RIT are operated by…) which is a public law entity.
The Athletics Track … was inaugurated on 2 March 2002, occupies a total area of 18,300 m2, is equipped with 8 lanes in synthetic surface and equipped for all athletics modalities, has 4 changing rooms with a total capacity of 300 users in simultaneous use, and a stand for 1,200 people.
Four of the nine sports pavilions referred to emerged from the institutional understanding between the Ministry of Education and the Municipal Council of … and are integrated in EB 2.3 Schools in the Municipality (…, …, … and …).
The pavilions of…, …, …, of heating of the Multipurpose …, and …, are multipurpose gym-sports pavilions, used by Schools of the Municipality and assigned to the exercise of various activities and modalities and open to general sports practice and to training and competition of clubs and sports associations of the region.
The following public agencies did not subject the following operations to VAT:
Pole of … of the University of Minho, in the sports services it provides;
Municipality of…, in the services provided in Municipal Swimming Pools;
The Firefighters of…, in the services provided in the Swimming Pools;
The Municipality of…, in the services provided in Municipal Swimming Pools;
The…, in the services provided in the Swimming Pools of the Municipal Stadium;
The Sports Club of…, in the services provided in the Swimming Pools;
The Municipality of…, in the services provided in Municipal Swimming Pools;
The Municipality of…, in the services provided in Municipal Swimming Pools;
The Municipality of …, in the services provided in Municipal Swimming Pools;
The … in the operation of the Municipal Swimming Pools of …;
The Municipality of…, in the services provided in Municipal Swimming Pools;
The Municipality of…, in the services provided in Municipal Swimming Pools;
The Municipality of…, in the services provided in Municipal Swimming Pools;
The IPDJ - Portuguese Institute of Sports and Youth in the operation of the Swimming Pools of the Jamor Stadium.
A.2. Facts Established as Not Proven
With relevance to the decision, there are no facts that should be considered as not proven.
A.3. Substantiation of Proven and Not Proven Factual Matters
With respect to factual matters, the Tribunal is not required to pronounce on everything alleged by the parties, rather it must exercise due diligence in selecting the facts that matter for the decision and differentiating proven from unproven matters (cf. Article 123, paragraph 2, of the CPPT and Article 607, paragraph 3 of the CPC, applicable pursuant to Article 29, paragraph 1, items a) and e), of the RJAT).
Thus, the facts relevant to the judgment of the case are selected and delineated according to their legal relevance, which is established in light of the various plausible solutions to the legal question(s) (cf. former Article 511, paragraph 1, of the CPC, corresponding to the current Article 596, applicable pursuant to Article 29, paragraph 1, item e), of the RJAT).
Thus, having regard to the positions assumed by the parties, in light of Article 110/7 of the CPPT, the documentary evidence and the PA added to the case file, the above-mentioned facts were considered proven, with relevance to the decision, taking into account that, as written in the Decision of the TCA-South of 26-06-2014, handed down in process 07148/13, "the probative value of the tax inspection report (...) may have probative force if the assertions contained therein are not impugned."
Allegations made by the parties and presented as facts, consisting of strictly conclusive statements, incapable of proof and whose truthfulness is to be assessed in relation to the concrete factual matter consolidated above, were neither considered proven nor not proven.
B. ON THE LAW
Article 124 of the CPPT provides:
"1 - In the judgment, the court shall primarily assess the defects that lead to the declaration of non-existence or nullity of the impugned act and, then, the defects argued that lead to its annulment.
2 - In the referred groups the assessment of the defects is made in the following order:
a) In the first group, that of defects whose substantiation determines, according to the prudent judgment of the judge, more stable or effective protection of the offended interests;
b) In the second group, that indicated by the party making the challenge, whenever it establishes a relationship of subsidiarity between them and no other defects are argued by the Public Prosecutor or, in the other cases, that fixed in the preceding item."
As written in the Decision of the STA of 18-05-2016, handed down in process 0100/16:
"Pursuant to Article 124, paragraph 2 of the CPPT, one must first know of the defects of violation of law stricto sensu (except in cases where the content of the act cannot be grasped), thus ensuring more effective protection of the taxpayer's rights."
Article 124 of the CPPT, applicable pursuant to Article 29, paragraph 1, item a), of the RJAT, thus provides that the court must primarily assess the defects that lead to the declaration of non-existence or nullity of the impugned act and, subsequently, the defects that lead to its annulment (paragraph 1). Concerning the defects that constitute non-existence or nullity, the judge must prioritarily know of the defects whose substantiation determines, according to his prudent judgment, more stable or effective protection of the offended interests. With respect to the defects that constitute annullability, the same criterion is established, which will only not apply if the party making the challenge has established a relationship of subsidiarity between the defects imputed to the act – which is permitted by Article 101 of the CPPT – for in that case priority is given to its will (provided that the Public Prosecutor has not argued other defects) (paragraph 2).
The rules emanating from this legal norm on the order of assessing defects are intended to protect the interest of the party making the challenge with maximum procedural economy, omitting pronouncement on defects invoked when the defect or defects already recognized prevent the renewal of the act with the same effect. Indeed, the establishment of this order of assessing the defects presupposes that, upon knowing of a defect that leads to the legal elimination of the impugned act, the court will cease to know of the remaining ones, for, if the judge were to know of all the defects imputed to the act, the order of assessment would be irrelevant.
The protection of the offended interests is more stable when the decision prevents the renewal of the act that offends the interests of the party making the challenge and will be more effective when it allows the interested party, in execution of judgment, to obtain better satisfaction of its interests, offended by the annulled act.
Thus, if it is, for example, a defect of violation of law, the annulment of the act will prevent the practice of a new tax act in which the same norm that was at issue in the preceding act is applied or inapplied, which will result in the impossibility of practicing a new act that imposes taxation on the party making the challenge.
As inferred from what has been said, it is having regard to the execution of the annulling judgment and the influence that the type of defect that substantiated the annulment has on it that justifies the establishment of an order of assessing the defects of the impugned act.
In this framework, returning to the present case, it is therefore necessary to begin with the assessment of the defect of violation of Articles 9/8 and 10/d) of the applicable VAT Code, for, if verified, it will definitely exclude the possibility of imposing a new tax act on the Claimant, thus achieving the more stable and effective protection of its interests.
Pursuant to what is consensually recognized by the parties, at issue in the present arbitration action is the application of Article 9/8 of the applicable VAT Code, which determines the exemption of that tax with respect to "services provided by non-profit organizations that operate establishments or facilities intended for the practice of artistic, sports, recreational and physical education activities to persons engaged in those activities," in conjunction with the provisions of item d) of Article 10 of the same Code, from which it follows that "For purposes of exemption, only organizations without profit motive are considered as non-profit organizations that simultaneously: (...) Do not enter into direct competition with taxable persons."
These norms correspond to item m) of Article 132 of the VAT Directive, corresponding to the former item m), paragraph 1, of Part A of Article 13 of the Sixth Directive, which obliges Member States to exempt "Certain services closely related to the practice of sport or physical education, provided by non-profit organizations to persons engaged in sport or physical education;" and in Article 133 thereof, corresponding to the former item a), paragraph 2, of Part A of Article 13 of the Sixth Directive, first to fourth indents, which provides that "Member States may make the grant of any of the exemptions provided for in items b), g), h), i), l), m) and n) of paragraph 1 of Article 132 conditional, on a case-by-case basis, for non-public law organizations on the observance of one or more of the following conditions: (...) d) The exemptions cannot be such as to cause distortions of competition to the detriment of taxable commercial enterprises."
The first conclusion that is drawn, on the matter at hand, from the analysis of the relevant norms, is that the rule of EU law concerning the conditions for recognition of exemption for non-profit organizations of private law is not a mandate, but rather a permission to Member States. In other words, the common VAT regime allows Member States to exempt services closely related to the practice of sport or physical education, provided by non-profit organizations of private law to persons engaged in sport or physical education, and may make the grant of such exemption conditional, on a case-by-case basis, on the observance of one or more of the stated conditions (never reporting to the selection of all, which was the option adopted by the Portuguese legislator). This is therefore a discretionary power, as noted by Rui Laires.
This means, from the outset, that the exemption of the said organizations, even if they are not of public law, regarding those services, even if the conditions of Article 133 of the Directive are not met, is not contrary to the rules and principles of European Union law concerning VAT.
In fact, by granting Member States the possibility of making exemption conditional on the conditions provided therein, Article 133 of the Directive results in the possibility for Member States not to do so, applying directly to non-profit organizations, even if they are not of public law, the exemption of item m) of Article 132, regarding the services mentioned therein. That is: even, in what matters for the case, the exemption may be susceptible to causing distortions of competition to the detriment of taxable commercial enterprises, it will not be contrary to the common VAT regime to apply the same to non-profit organizations that are not of public law, regarding services closely related to the practice of sport or physical education to persons engaged in sport or physical education, as occurs with respect to its application to non-profit organizations of public law, regarding which Member States must apply the exemption, even if the same is susceptible to causing distortions of competition to the detriment of taxable commercial enterprises.
Thus, and given that the case does not concern a situation in which it is discussed whether Portugal exceeded the limits established in Article 133 of the Directive, it is within the framework of national law that the scope and extent of the conditions established in Article 10 of the VAT Code, in particular, and as far as the case is concerned, of item d) of that norm, should be ascertained.
Indeed, given that it is not in question, as noted, that the scope of the provisions of Article 133 of the Directive was exceeded, it is necessary to determine whether the national regime simply transposed those provisions, remaining within the maximum scope of the non-exemption discretion established in such a norm, or whether, on the contrary, it remained below, establishing a more restrictive regime, that is, not using, in its full scope, that same discretion.
Now, upon examination of the said Article 10 of the applicable VAT Code, and in particular its item d), it is found that the same excluded the scope of the exemption at issue when there is "direct competition with taxable persons," and not, as stated in the text of the Directive, when there is susceptibility to "cause distortions of competition to the detriment of taxable commercial enterprises."
It is concluded, therefore, that the condition for exclusion of the exemption established, in this case, in Article 9/8 of the VAT Code, is more restrictive than that permitted by the Directive, not being satisfied with mere susceptibility to cause distortions in competition, but requiring the verification of direct competition with taxable persons. In the concrete case, as emphasized by Rui Laires, an interpretation of the condition provided for in item d) of Article 10 of the VAT Code is required "...in the sense that it aims to prevent the exemption of non-profit organizations in all cases in which they enter into direct competition - making available in the market the same types of goods or services marketed by enterprises subject to taxation and at lower prices - but only when the possible exemption from which they benefited could generate competition distortions with commercial enterprises."
As the author acknowledges, it proves difficult for tax authorities to evaluate the occurrence or non-occurrence of competition distortions, given that such evaluation presupposes an in-depth knowledge of each of the sectors of activity involved, including their respective market conditions.
The Court of Justice of the European Union has analyzed the issue of competition distortions primarily at the level of the negative delimitation of the scope of public entities adopted among us in Article 2/2 of the VAT Code, whose matrix is found in Article 13/1 of the VAT Directive. As the CJEU emphasizes, given that compliance with the neutrality principle is at issue, the rule of taxation contained in this provision should not be interpreted too restrictively, and one of the issues that have been analyzed herein is whether competition distortions should be assessed in relation to the activity as a whole or on a case-by-case basis in relation to local markets.
Regarding exemptions, this requirement has rarely been analyzed, notable for this purpose being the Decision of 20 November 2003, handed down in Case C-8/01, known as the Taksatorrigen Case. In this context, although what is reported concerns the provisions of item f) of Article 132 of the VAT Directive (relating to autonomous groupings of persons), the CJEU emphasized that it is the exemption itself that should not cause distortions of competition, and it is necessary that the risk of competition distortions be real and not merely hypothetical. As Rui Laires notes, this should likewise be the understanding adopted with respect to the provision now at issue.
Having made these considerations and for purposes of the case under analysis, it should be noted that the assessment of the existence or non-existence of competition can be made at various levels.
Thus, it could be considered that the recreational offering of sports services competes with other services such as cinemas and entertainment, to the extent that they are directed at the occupation of free time, but it is believed that one cannot, manifestly, speak of effective competition, in the terms that concern us.
Within the recreational offering of sports services, it can be said that services related, for example, to athletics, football, tennis, swimming, and golf, compete with each other, as an offering of sports services, but neither there can one speak of effective competition, in the terms that concern us.
And even within the offering of services related to the same sports modality, there may be no direct competition. Thus, for example, a Football school in which training is given by Cristiano Ronaldo, or a Tennis school in which training is given by João Sousa, will not compete directly, in principle, with a school of the same modality, with training provided by a curious local person.
On the other hand, still at the level of densifying the concept of competition relevant for the purposes at hand, it is necessary to keep in mind the regime of item c) of Article 10 of the VAT Code, which, following item c) of Article 133 of the VAT Directive, expressly admits the existence of similar activities, as well as the practice of prices (provided they are approved by public authorities) that exceed those practiced by commercial enterprises practicing the same, without this resulting in relevant competition.
Indeed, if Article 10 of the VAT Code requires that the conditions established in its various items be cumulatively fulfilled, it follows necessarily that the cumulative fulfillment of items c) and d) is possible, that is, that a non-profit entity can practice prices approved by a public authority, that are not "lower than those required for similar operations by enterprises subject to tax," without "direct competition with taxable persons" occurring.
Thus, as written in the Decision of the STA of 09-10-2002, handed down in process 02S1905, in a different but directly transposable situation, "For the confrontation of a concrete situation with the duty of non-competition to be carried out with adequacy and legitimacy, it is therefore necessary to take into account, more than the identity or similarity of the goods or services produced by the enterprises considered, and much more than the fact that they belong to the same "branch," "type" or "sector" of economic activity this elementary requirement of the hypothesis of competition: the factual possibility of diversion of clientele."
And as Jorge Patrício Paúl refers:
"The act of competition is one that is suitable to attribute, in terms of clientele, advantageous positions in the market.
Competition is not susceptible of being defined in the abstract and can only be appreciated in concreto, because what matters to know is whether the activity of one economic agent reaches or does not reach the activity of another, through the dispute of the same clientele. (...)
The concept of competition is therefore a relative concept, which cannot be aprioristically defined but can only be appreciated on a case-by-case basis, taking into account the concrete conduct of the various economic agents and the reality of current economic life."
Given, in what is deemed relevant, the essential notes of the legal regime under discussion, it is now necessary to proceed to verify the correctness, or lack thereof, in its application to the concrete case.
As follows from the reading of the RIT, to whose substantiation the Tribunal must adhere, given that, as written in the Decision of the STA of 23-09-2015, handed down in process 0134/11, "It is exclusively in light of the substantiation provided by the Tax Authority when making the additional VAT assessment that the legality of that tax act should be assessed," it is found that the same is based on the understanding that "a global approach to each sector of activity seems to be what best ensures the neutrality of the tax," to the detriment of "individualized assessment," concluding that "the occurrence of competition distortions (...) should be evaluated with respect to the activity in question, as such (...) considered in the context of the sector in which it is inserted and in the context of the entire National Territory" and that "the verification of competition distortions should be appreciated in relation to the activity exercised, and not specifically in relation to a particular market (...) and much less as a function of the installations," and therefore the Claimant "finds itself in a situation of direct competition with other entities (...) that possess installations that allow the exercise of several of the sports and recreational practices and provide the same type of services."
As to factual matters, the RIT is based on the fact that:
"in the installations that the subject operates, the services provided are: in covered/indoor pools, activities such as free swimming, adult swimming, baby swimming, children's swimming, hydrotherapy, aqua aerobics, hydro-cycling are available to users; in gyms and dance and fitness academies, the activities available to users have strength training and maintenance, pilates, senior gym, cycling, zumba, etc. at their disposal; in sports pavilions, gym-sports pavilions and track, pavilions are open to general sports practice; in outdoor pools, leisure and entertainment activities are available to the user";
there exist as "competing entities in the activities developed in the covered pool, a hotel located in the city (Health-Club Hotel of…), (...) another in the parish of … (…Hotel) (...) gyms (... two with indoor pool, ...Hotel), (...) the firefighters' pool (operated by…) (...) a legal person located in the parish of … (…) (...) [with] gym and indoor pools activity in the year 2012, until then only operated outdoor pools, the "…"";
regarding the "services related to the practice of physical activity in the gym, dance school and rhythmic expression," considered "the existence of a situation of direct competition with the practice of modalities available in the various private gyms located not only throughout the country, but in the parishes of the municipality and in the city of…";
as for the "provision of services (...) relating to the rental of facilities for the practice of sports activities, (...) pavilions and track," that the Claimant "is in a situation of direct competition with other taxable persons, namely with entities subject to VAT that possess sports installations (covered pavilions, "indoor" pavilions, and or football fields and other venues) (...) that enable the practice of sports in general, establishments that exist, in the national territory and also in the local market, that allow the practice of the same sports modalities";
regarding "services provided in outdoor pools (… and Swimming Pools of…)," there will exist "in the country, district, municipality and even city, spaces with outdoor pools intended for amusement and leisure, examples being local the Pool of "…", or pools of the "…"";
"competition also occurs at the level of the considered local market as well as in the municipality, but is also present in peripheral municipalities such as Braga, Fafe or Vila Nova de Famalicão, for example, because there are in these municipalities covered pools, pavilions, gyms outdoor pools, etc., for general sports practice and leisure, which can be used by citizens of the municipality of …, because the distance, or the prices practiced could justify the move to peripheral municipalities";
it is also noted that the prices practiced by the Claimant "are similar to those practiced by competitors (...) and as for the prices practiced by gyms it should be noted that it is common for them to practice promotions, which lower the base price," noting "that the prices in question are (...) practiced in the year 2016, however (...) it is found that they have not changed since the year 2012.";
"in the year 2011 there was the opening of a new space, …, with venues for sports practice, such as covered pool and indoor and outdoor spaces, open to the general public (not exclusively for guests), (...) the same happening in 2012, because the … (...) opened a covered venue that includes pools and gym."
Having regard to what was referred to previously, it is evident from the outset that the light in which the legal regime invoked by the Tax Authority is to be applied to the facts ascertained to substantiate the corrections applied, and now contested by the Claimant, is different from that which illuminated that authority.
Indeed, it must be verified whether, in fact, the facts ascertained are susceptible to allowing the conclusion that direct competition of the activities exercised by the Claimant and taxed by the Tax Authority exists with taxable persons or not.
As follows from national law, properly interpreted, without any contradiction with the Common VAT Regime, the competition necessary to not exempt the provision of services in question, realized by non-profit organizations that are not of public law (as is the case of the Claimant), is not a mere generic and abstract competition (potential, susceptible), but direct, effective, concrete and actual competition. This was the (legitimate, in light of European Union law) option of the national legislator.
At issue, as has also been seen, are the following activities:
exercised in covered/indoor pools: free swimming, adult swimming, baby swimming, children's swimming, hydrotherapy, aqua aerobics, hydro-cycling;
provision of services relating to gyms and dance and fitness academies: strength training and maintenance, pilates, senior gym, cycling, zumba, etc.;
provision of services relating to the rental of facilities for the practice of sports activities (sports pavilions, gym-sports pavilions and athletics track): general sports practice;
exercised in outdoor pools: leisure and entertainment activities.
Regarding the activities referred to, the Tax Authority, in light of its understanding that a global approach to each sector of activity is what best ensures the neutrality of the tax, and that the occurrence of competition distortions should be evaluated in relation to the activity in question, as such considered in the context of the sector in which it is inserted and in the context of the entire National Territory and that the verification of competition distortions should be appreciated in relation to the activity exercised, and not specifically in relation to a particular market and much less as a function of the installations used, concluded that the requirement established in item d) of Article 10 of the VAT Code was not met.
However, given the criterion that is deemed to result from the proper understanding of the applicable norms, analyzed above, it is considered necessary to ascertain whether the factuality gathered by the Tax Authority allows for the conclusion of direct competition of the activities in question with taxable persons in the manner stated.
As has already been seen, it is deemed that, in order to conclude that such a situation of direct competition of the Claimant's activities with taxable persons exists, concrete demonstration of the dispute for clientele by the latter is necessary.
And inevitably in such demonstration, contrary to what the Tax Authority understood, the installations in which the services are provided have an influence, in addition to the specific characteristics of these, such as quality or personalization, price, and the characteristics of the clientele itself obtained.
It will not suffice, therefore, contrary to what was deemed in the act that is the subject of the present arbitration action, a sector identity, which is easily understood by resorting to an example in the catering sector, where a social canteen or a fast food restaurant does not compete with a luxury restaurant, or in clothing, where the clothing section of a large supermarket does not compete with the clothing of an established fashion house.
In this framework, it is not possible to conclude that the demonstration of the existence of direct competition between the services provided by the Claimant, selected for correction by the Tax Authority, and services provided by taxable persons, has been made in the case file.
Thus, as regards the activities exercised in covered/indoor pools (free swimming, adult swimming, baby swimming, children's swimming, hydrotherapy, aqua aerobics, hydro-cycling), it will not be the mere existence of entities with offering of activities developed in the covered pool, such as hotels or gyms, that will denote the existence of effective competition, given that nothing was ascertained regarding the characteristics of the pools, their frequency and, in particular, the type of clientele to which each of those entities directs its services, in order to be able to conclude that the activities in question exercised by the Claimant have an effective impact on the clientele, albeit potential, of those entities, noting that, from a point of view of normality, the pools offered by those entities are of small size, and the entities in question are, normally, dedicated to the offering of differentiated and/or specific services, aimed at selected clientele and cultivating more or less refined environments, while, as ascertained, the Claimant is dedicated to the offering of "popular" services, accessible to all, in accordance with its statutory mission.
As regards the firefighters' pool, it is recognized as being operated by …, notably a non-profit legal person, and therefore, naturally, it cannot have relevance for assessing the existence of competition, under the prism that concerns us.
Regarding the reference to a legal person located in the parish of … (…) with gym and indoor pools activity in 2012, nothing is specifically ascertained regarding the characteristics of the services offered there, and regarding the scopes (including geographic) of the clientele targeted, and therefore neither here is it possible to conclude that effective competition exists, and the very commercial reference to "…" denotes a target clientele distinct from that of the Claimant.
As regards the provision of services relating to gyms and dance and fitness academies (strength training and maintenance, pilates, senior gym, cycling, zumba), it was understood in the RIT that there was a situation of direct competition with the practice of modalities available in the various private gyms located not only throughout the country, but in the parishes of the municipality and in the city of … .
Also here it is considered that it is not possible to validate, given the factual elements on which the corrections made are based, that one is in the presence of effective occurrence, in the terms presupposed by the norm applied to substantiate the corrections contested by the Claimant.
Indeed, notwithstanding that one could conceive that, in light of the understanding embodied in the RIT concerning the interpretation of item d) of the applicable Article 10 of the VAT Code, the elements collected in this matter could, even, support a judgment of susceptibility to cause competition distortions, the fact is that this was not the criterion adopted by the national legislator, as has been seen, but a more restrictive one, which presupposes the verification of effective competition.
Now, in order for such a judgment to be possible, elements were necessary that would allow one to state that the targeted clientele was the same, and that the distribution of such clientele was actually or potentially affected by the Claimant's activity, ascertaining, for example, the quantity and quality of machines existing in the Claimant's installations and those of its alleged competitors, their concrete location, the type of installations in question, the concrete services offered by one and the other, the conditions for joining (being, obviously, not relevant, for being generic, considerations such as "it is common for them to practice promotions, which lower the base price"), as well as the occupancy rates thereof, given that entities that are at the limit of their capacity to serve clientele, do not naturally suffer effective competition from third parties.
Regarding the provision of services relating to the rental of facilities for the practice of sports activities (sports pavilions, gym-sports pavilions and athletics track), it was considered that competition occurred with entities subject to VAT that possess sports installations (covered pavilions, "indoor" pavilions, or football fields) that enable general sports practice, which would exist, in the national territory and also in the local market, and that allow the practice of the same sports modalities, citing for this purpose two establishments intended for indoor football practice located in the municipality (… and …).
In this matter, and given the criteria previously set out, only regarding these two latter situations (indoor football pavilions) can one in some way consider remotely realized indications of facts susceptible of substantiating the Tax Authority's understanding, in the matter at hand, embodied in the RIT, as in the remainder we are only before a generic invocation of the existence of covered pavilions, "indoor" pavilions, or football fields, which, being notorious that they exist throughout the country, is far from being the case that they are in a situation of operation by VAT taxable persons in a position of competition with the Claimant.
However, even as regards the "indoor" football venues located in the municipality, what is lacking is the ascertainment of their concrete characteristics and conditions of the services offered, and without more, as is the case, it is not possible to bring to competition any of the Claimant's services indicated by the Tax Authority, noting, for example, that, as a rule, those venues have a synthetic grass surface, unlike multipurpose pavilions, which requires the use of special footwear distinct from that used in these, which, not being known whether that is the case – by not being ascertained – indicates from the outset a specific market, and that, the football practiced in those referred venues is between teams with a number of players less than that practiced in outdoor football fields (so-called "eleven-a-side"), which also indicates the non-occurrence of direct competition.
Regarding the activities exercised in outdoor pools (leisure and entertainment activities), the Tax Authority considered that there would exist "in the country, district, municipality and even city, spaces with outdoor pools intended for amusement and leisure, with local examples being the Pool of "…", or pools of the "…"".
The considerations expended above regarding activities exercised in covered/indoor pools shall apply here, mutatis mutandis.
Indeed, from the elements gathered by the Tax Authority and contained in the RIT it is not possible to conclude that the concrete activities exercised by the Claimant in outdoor pools are in direct competition, in the sense previously densified, with the activities exercised in the Pool of "…", or pools of the "Club …".
As regards the consideration that "competition (...) is also present in peripheral municipalities such as Braga, Fafe or Vila Nova de Famalicão, for example, because there are in these municipalities covered pools, pavilions, gyms outdoor pools, etc., for general sports practice and leisure, which can be used by citizens of the municipality of…, because the distance, or the prices practiced could justify the move to peripheral municipalities," this cannot have acceptance, given the understanding of the concept of effective competition, as densified above.
Indeed, as has been seen, the effectiveness of competition implies a direct affectation of the clientele of VAT taxable persons, which cannot be concluded from the data gathered in the RIT, from the outset, as regards the consideration now at hand, not being ascertained what entities exercise what activities in the indicated peripheral municipalities, and in what conditions they do so, nor in what measure, and why, one could justify the move to those, and it is also certain that from point 50 of the proven facts, it even results that (at least) some of those entities would apply, just as the Claimant, the VAT exemption.
Given the foregoing, here, as in arbitration process no. 274/2016-T, which dealt with identical subject matter relating to the same taxpayer, it is concluded that:
"In order to conclude that there is competition distortion it would be necessary to know the concrete services provided and prices practiced by the entities that the Tax Authority and Customs considers competitors, because they may be distinct services with distinct prices, intended for different types of public."
And, as in arbitration process no. 209/2015-T, which also dealt with identical subject matter relating to the same taxpayer, it is concluded that:
"In the case sub iudice this competition distortion is not revealed inasmuch as it is not demonstrated, on the one hand, the concrete existence of entities with offering of services comparable to those provided by the Claimant and, on the other, what prices are practiced by the entities (and identification thereof) that allegedly make available the equipment suitable and identical to that of the Claimant and what the concrete conditions of use and characteristics of the firefighters' pools in the parish of … and the concrete equipment with characteristics or similarities when compared with the athletics track and other equipment operated by the Claimant (venues or covered pavilions and football fields)."
The conclusions drawn are not opposed by the circumstances, pointed out in the RIT, of "as a function of the characteristic of the user" sometimes assessing VAT (when legal entities are at issue), and that "in the year 2012 an email was received (...) where is attached a complaint presented to the Association of Gym and Fitness Academy Companies of Portugal (AGAP) related to the fact that the taxpayer is in direct competition with the other entities as regards the practice of all modalities of a private gym."
Indeed, as regards the first, nothing in it denotes the correctness, or lack thereof, of the option practiced by the Claimant, in particular the correctness in assessing VAT to legal entities, and that, regardless thereof, the Claimant will always be obliged to remit to the State the VAT, even if incorrectly charged (cf. Article 2/1/c) of the VAT Code).
As regards the second of the pointed circumstances, the simple filing of a complaint says nothing about the grounds and admissibility thereof, and it is necessary for such purpose to ascertain that which, precisely, is lacking in the RIT, that is, the concrete circumstances in which the Claimant and its alleged competitors exercise their respective activities, in terms of being able to detect the dispute, albeit potential, of a common clientele.
Neither will the information of the DSIVA, approved by order of 23-12-2009, oppose what was concluded, given that the same, as follows from its own content, contained in the proven facts, and contrary to what the Tax Authority understood, does not gather the notes proper to bindingness, explicitly mentioning the same that it presents "a conditional and non-binding response."
Finally, as regards the dissenting opinion written in the above-cited arbitration process no. 274/2016-T, the grounds thereof are not subscribed to, for the reasons previously seen, to the extent that the same is based, essentially, on the understandings that:
"Article 10 of the VAT Code is based on the principle of VAT neutrality. What is aimed at is preventing exemptions granted to non-profit entities by virtue of that characteristic from having the effect of preventing or distorting competition"; and
"the determination that the Court of Justice of the European Union makes of the terms used in European directives, as is the case of the VAT Directive," must be imposed on the interpretation of national norms – so that, from the point of view of Article 10 of the VAT Code, for competition with taxable persons to exist, it is not necessary for that competition to be current and effective."
Now, as has already been seen above, the norm of Article 132/m) of the VAT Directive, matrix of Article 9 of the VAT Code, expressly admits exemption for non-profit organizations and taxable persons, from the outset because the provision of Article 133 of the same is discretionary for Member States, from which it follows that, if these opt not to exercise such discretion, the exemption of Article 132/m) will be maintained and will be in accordance with European Union law.
On the other hand, and as also has been seen and is now pointed out, the provision of Article 133 of the same is discretionary for Member States, and therefore, from the outset, the imposition of the CJEU's considerations will only be required from the point of view of setting the maximum scope of the exercise of that discretion (since Member States may always remain below the use of such discretion, or not use it fully), on the one hand, and, on the other, national law is clear in requiring the existence of "direct competition" to exclude the exemption, and therefore the understanding that "it is not necessary for that competition to be current and effective" will be, beyond else, contrary to law.
Thus, and for all the foregoing, it is considered that the corrections made by the Tax Authority at issue in the present arbitration action suffer from error in the factual assumptions, and consequent error in law, and should as such be annulled and accordingly the arbitral petition proceeds.
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The Claimant further formulates a request for compensation for unjustified guarantee.
This matter has been the subject of several decisions within the scope of arbitration jurisdiction, as can be seen, among others, in arbitration process no. 1/2013T, as hereby transcribed:
"In accordance with the provisions of item b) of Article 24 of the RJAT, the arbitral decision on the merits of the claim for which no appeal or challenge lies binds the tax authority from the end of the period provided for appeal or challenge, such authority being required, in the exact terms of the acceptance of the arbitral decision in favor of the taxpayer and until the end of the period provided for voluntary execution of the decisions of the tax courts, «to restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been carried out, adopting the necessary acts and operations for that purpose».
In the legislative authorization on which the Government based itself to approve the RJAT, granted by Article 124 of Law no. 3-B/2010 of 28 April, the primary guideline of the institution of arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters is proclaimed, namely that «the tax arbitration process must constitute an alternative procedural means to the judicial impugnation process and the action for the recognition of a right or legitimate interest in tax matters».
Although Article 2, paragraph 1, items a) and b), of the RJAT uses the expression «declaration of illegality» to define the competence of the arbitral tribunals operating in the CAAD and does not make reference to constitutive (annulling) and condemnatory decisions, it should be understood, in harmony with the referred legislative authorization, that the powers that in judicial impugnation proceedings are attributed to tax courts are included within its competence regarding the acts whose assessment of legality falls within its competence.
Although the judicial impugnation process is essentially a process of mere annulment (Articles 99 and 124 of the CPPT), a condemnation of the tax authority in the payment of indemnificatory interest and compensation for unjustified guarantee can be delivered in it.
In fact, although there is no express provision in that sense, it has been peacefully understood in the tax courts, since the entry into force of the codes of the fiscal reform of 1958-1965, that the request for condemnation in the payment of indemnificatory interest can be cumulated with the request for annulment or declaration of nullity or non-existence of the act, because these codes refer to the right to indemnificatory interest arising when, in gracious complaint or judicial process, the tax authority is convinced that there was an error of fact attributable to the services. This regime was subsequently generalized in the Code of Tax Procedure, which established in paragraph 1 of its Article 24 that «there will be a right to indemnificatory interest in favor of the taxpayer when, in gracious complaint or judicial process, it is determined that there was an error attributable to the services», followed, in the LGT, in whose Article 43, paragraph 1, it is established that «indemnificatory interest is due when it is determined, in gracious complaint or judicial impugnation, that there was an error attributable to the services from which payment of the tax debt results in an amount greater than that legally due» and, finally, in the CPPT in which it was established, in paragraph 2 of Article 61 (to which corresponds paragraph 4 in the wording given by Law no. 55-A/2010 of 31 December), that «if the decision recognizing the right to indemnificatory interest is judicial, the period for payment is counted from the beginning of the period for voluntary execution thereof».
Regarding the request for condemnation in the payment of compensation for the provision of unjustified guarantee, Article 171 of the CPPT establishes that «the compensation in case of banking or equivalent guarantee unjustifiedly provided shall be requested in the process in which the legality of the enforceable debt is controversial» and that «the compensation must be requested in the complaint, impugnation or appeal or in case its ground is subsequent within the period of 30 days after its occurrence».
Thus, it is unequivocal that the judicial impugnation process covers the possibility of condemnation in the payment of unjustified guarantee and even is, in principle, the adequate procedural means to formulate such a request, which is justified by obvious reasons of procedural economy, since the right to compensation for unjustified guarantee depends on what is decided about the legality or illegality of the tax assessment act.
The request for constitution of the arbitral tribunal has as a corollary that it becomes in the arbitration process that will be discussed the «legality of the enforceable debt», and therefore, as results from the express tenor of that paragraph 1 of the referred Article 171 of the CPPT, it is also in the arbitration process that the request for compensation for unjustified guarantee should be assessed.
Moreover, the cumulation of requests relating to the same tax act is implicitly presumed in Article 3 of the RJAT, when speaking of «cumulation of requests even relating to different acts», which makes it clear that the cumulation of requests is also possible regarding the same tax act and the requests for compensation for indemnificatory interest and condemnation for unjustified guarantee are susceptible to being covered by that formula, and therefore an interpretation in this sense has, at least, the minimum of verbal correspondence required by paragraph 2 of Article 9 of the Civil Code.
The regime of the right to compensation for unjustified guarantee is contained in Article 52 of the LGT, which establishes the following:
Article 53
Guarantee in case of unjustified provision
1. The debtor who, in order to suspend execution, offers banking or equivalent guarantee shall be compensated totally or partially for the damages resulting from its provision, in case the debtor has maintained it for a period exceeding three years in proportion to the ruling in administrative appeal, impugnation or opposition to execution that have as their object the debt guaranteed.
2. The period referred to in the preceding number does not apply when it is verified, in gracious complaint or judicial impugnation, that there was an error attributable to the services in the tax assessment.
3. The compensation referred to in number 1 has as its maximum limit the amount resulting from the application to the guaranteed amount of the rate of indemnificatory interest provided for in the present law and can be requested in the very process of complaint or judicial impugnation, or autonomously.
4. The compensation for unjustified guarantee provision shall be paid by offset against the revenue from the tax of the year in which payment is made."
In the case at hand, it is manifest that the error of the assessment acts in the parts now declared illegal, embodied in assessments carried out without support in a factual basis presupposed by the tax, is attributable to the Tax Authority and Customs, as the tax inspection and assessment were initiated by it and the Claimant in no way contributed to such error being committed.
For this reason, the Claimant has the right to compensation for the guarantee provided, regarding the amount of tax now annulled.
However, the costs incurred by the Claimant to provide the banking guarantee were neither alleged nor proven, and therefore it is not viable to fix here the compensation to which the Claimant is entitled, which may only be effected in execution of this decision.
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C. DECISION
Accordingly, this Arbitral Tribunal decides to find the arbitral petition filed as acceptable and in consequence:
Annul the assessment acts that are the subject of the present arbitration action, identified above;
Condemn the Defendant in the payment of compensation for unjustified guarantee, in the terms that may be fixed, if necessary, in execution of judgment;
Condemn the Defendant in the costs of the process, in the amount of € 10,404.00.
D. Value of the Process
The value of the process is set at € 705,503.80, pursuant to Article 97-A, paragraph 1, a), of the Code of Tax Procedure and Process, applicable by force of items a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.
E. Costs
The arbitration fee is set at € 10,404.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Defendant, given that the claim was entirely successful, pursuant to Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4, of the cited Regulation.
Notify.
Lisbon 6 November 2017
The Presiding Arbitrator
(José Pedro Carvalho)
The Arbitrator Member
(Clotilde Celorico Palma)
The Arbitrator Member
(A. Sérgio de Matos)
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