Summary
Full Decision
ARBITRAL DECISION
The arbitrators Honourable Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. Maria Cristina Aragão Seia and Dr. António Nunes dos Reis (arbitrators), designated by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 03-06-2016, hereby agree as follows:
1. REPORT
A…, S.A., a legal entity and taxpayer number …, of the Tax Service of …(… with registered office in … - P.O. Box … … … (hereinafter "Claimant" or "A…"), came, in accordance with the terms and for the purposes of the provisions of articles 2, no. 1, paragraph a), and 10, no. 1, paragraph a) and no. 2 of the Legal Regime for Arbitration in Tax Matters, approved by Decree-Law no. 10/2011, of 20 January ("RJAT"), to present a request for an arbitral pronouncement in tax matters, with a view to declaring illegal the demonstration of the assessment of Value Added Tax ("VAT") no. 2013…, materialized in the compensation effected by reference to the period of December 2011, in the total amount of € 529,578.00.
The respondent is the TAX AUTHORITY AND CUSTOMS AUTHORITY.
The request for constitution of the arbitral tribunal was accepted by the President of the CAAD and automatically notified to the Tax Authority and Customs Authority on 04-04-2016.
In accordance with the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated as arbitrators of the collective arbitral tribunal the signatories, who communicated their acceptance of the assignment within the applicable period.
On 18-05-2016, the parties were duly notified of this designation, and did not manifest any intention to refuse the designation of the arbitrators, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.
Thus, in accordance with the provisions of paragraph c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 03-06-2016.
The Tax Authority and Customs Authority responded, arguing that the request should be dismissed.
By order of 06-07-2016, the holding of a hearing was dispensed with and it was determined that the proceedings would continue with written submissions.
The parties presented submissions.
The arbitral tribunal was regularly constituted, in accordance with the provisions of articles 2, no. 1, paragraph a), and 10, no. 1, of Decree-Law no. 10/2011, of 20 January, and is competent.
The parties are duly represented, have legal personality and capacity, are legitimate and are represented (articles 4 and 10, no. 2, of the same Decree-Law and article 1 of Order no. 112-A/2011, of 22 March).
The proceedings are not subject to nullities and no exceptions were invoked nor is there any obstacle to the consideration of the merits of the case.
2. FACTUAL MATTERS
2.1. Preliminary Question
The Claimant filed with its submissions document no. 4, which it referred to in the request for arbitral pronouncement and which was not attached to the proceedings.
The explanation put forward by the Claimant for this document not being attached to the proceedings is credible, given its considerable length and the presumption that some computer deficiency may have occurred, since the document is cited in the request for arbitral pronouncement.
For this reason, the filing of said document with the Claimant's submissions is admitted and, as the Tax Authority and Customs Authority pronounced upon it in its submissions, there is no obstacle to it being considered in the decision of the case.
2.2. Proven Facts
Based on the elements contained in the proceedings and documents filed with the request for arbitral pronouncement, the following facts are considered proven:
a) The Claimant's principal activity is the production and commercialization of fibres and polymers (polyester/PET);
b) In the periodic VAT return for the period 1206, the Claimant requested a refund in the amount of €288,208.16;
c) The Tax Authority and Customs Authority conducted a partial inspection of the Claimant's activities, concerning only value added tax (VAT), for the fiscal year 2011, under the Internal Service Order OI2013… of 18/04/2013, from the Finance Department of …;
d) In this inspection, a Tax Inspection Report was drawn up, which forms part of the administrative proceedings, the contents of which are hereby reproduced, in which the following is stated, among other things:
III - Description of facts and grounds for corrections that are merely arithmetic in relation to the taxable matter
III.1 In VAT matters
The company "A…, S.A.", VAT no. …, in the periodic VAT return for the period 1206, requested a refund in the amount of 288,208.16 €.
Upon analysis of the company's conduct in VAT terms, it was verified that until the month of March 2011, it was indebted in VAT to the State. From March through November 2011, the company was in a situation of both VAT credit and VAT debt.
Since December 2011, the company in question has been consistently in a situation of tax credit, and has repeatedly requested VAT refunds on a monthly basis.
This situation, as was possible to determine from those responsible for the management of this company, is due to a change in the commercial policy of procurement, since it began purchasing raw materials (PTA and MEG) on the external market, in addition to channelling a larger portion of its invoicing to the intra-community market, to the detriment of the national market.
In the periodic VAT return for the period 1112, the company "A…, S.A." proceeded with the regularization/recovery of VAT credits, in accordance with no. 7 of article 78 of the VAT Code, relating to the insolvency proceedings indicated below:
- Insolvency of the company "B…, Lda", case no. …/10. … ..., … Court of the Judicial Court of ..., relating to recognized credits in the amount of 1,462,174.35€;
- Insolvency of the company "C…, Lda", case no. …/10. … ..., .. Court of the Judicial Court of ..., relating to recognized credits in the amount of 217,254.19 €.
Now, the regularization of VAT by the creditor following the insolvency of the debtor (at the date of the facts) was provided for in paragraph b) of no. 7 of article 78 of the VAT Code, and the company exhibited in the course of the inspection action the complementary requirements so that it could regularize the VAT in accordance with the legal provisions referred to above:
- Certificate of final judgement of the insolvency sentence of the company "D…, Lda", VAT no. … and of the company "C…, Lda", VAT no. …;
- Copy of the letter claiming the credits from the Insolvency Administrator of the aforementioned companies;
- List of the relationship of credits, issued by the Court, which includes the credit of the company "A…, S.A.", VAT no. …, and the amount claimed;
- Copy of the registered letter with acknowledgment of receipt, sent to the companies in insolvency, communicating that the company "A…, S.A." would proceed with the annulment of VAT, for the purposes of correcting the deduction initially made by the client.
Upon analysis of the documentation supporting the recovery of VAT, in accordance with the legal provisions identified above, the existence was verified of credits of the company "A…, S.A." over the insolvent companies dating back to the fiscal years 2005, 2006, 2007 and 2008, these credits resulting in essence from economic operations of supply of raw materials (PET), advance payments and other economic operations arising from its business activity.
Upon verification of the various documents supporting the credits invoked by the company "A…, S.A.", it was found that on 31 December 2005, the aforementioned company would have issued Debit Note no. …, to the company "D…, Lda", VAT no. … (company now insolvent), relating to "Management Fees August to December 2005", in the amount of 2,521,800.00€ plus VAT of 529,578.00 € (Annex I).
In effect, in the documentation supporting the accounting entry, only the reference "Management Fees" (in Portuguese "honorários de gestão") and reference to a time period ("August to December") can be read.
Insufficiency of elements which motivated that, in compliance with the inquiring principle, established in article 266 of the Constitution of the Portuguese Republic and article 58 of the General Tax Law, additional information be requested from the company.
Given the extent mentioned in this document, information was requested by email dated 19 November 2012, requesting the indication/characterization of the services rendered and their sustainability, no response being obtained from those responsible for the management of this company (Annex II).
In the course of the inspection action, we attempted to obtain accounting/extra-accounting information that would allow us to obtain irrefutable proof of the documentation supporting its recording and the typology of the service rendered as well as to verify that the services in question were actually rendered.
Notwithstanding the steps taken, it was not possible to collect, besides Debit Note no. … of 31 December 2005, any other external supporting elements/information that would allow us to assess the existence and identification, as well as the reasonableness of the price charged, in relation to the services possibly rendered.
Having analyzed the commercial relations between the company "A…, S.A." and the insolvent company "B…, Lda", only the existence of this debt for services was verified for the period August to December 2005. In relation to the remaining months, in the accounting of the aforementioned companies, there is no record/mention relating to the services mentioned in the above Debit Note.
On the other hand, it was not possible to ascertain any actual intervention by the company "A…, S.A." in the provision of services invoiced by the Debit Note referred to above.
In effect, in the documentation supporting the accounting entry of the said document, only the reference "Management Fees August to December 2005" can be read. Given the above-described content of the invoicing presented, the insufficiency of data that would allow assessment of the existence, nature/object of the services performed and paid is evident.
The documentation now presented by the company, which is restricted to Debit Note no. … of 31/12/2005, in the amount of 2,521,800.00 € plus VAT of 529,578.00 €, does not allow by itself to evaluate/identify and determine the relevance of the services rendered, as well as to evaluate the cost/quality relationship of the services rendered, and thus the effectiveness thereof may be questioned.
It is true that the company "A…, S.A.", through the Debit Note, proceeded with the assessment of VAT and proceeded with its delivery to the State coffers, relating to the period 1205. However, from the facts described, it was determined that the VAT assessment was improper, and the company acted correctly, since it improperly mentioned tax on an invoice, and therefore it should be delivered to the State coffers, in accordance with the legal provisions of no. 2 of article 27 of the VAT Code.
Having the company improperly assessed VAT on an active operation for which it could not prove its effectiveness, it thus does not have the right to its recovery in accordance with no. 7 of article 78 of the VAT Code, in the period 1112, and therefore we shall proceed with the resulting correction, in the amount of 529,578.00 €.
e) The Claimant was notified to exercise the right to a hearing on the draft Tax Inspection Report, but waived the exercise of that right:
f) Following the inspection referred to, the Tax Authority and Customs Authority issued VAT Assessment no. 2013…, relating to the period 201112, a copy of which is contained in document no. 1 filed with the request for arbitral pronouncement, the contents of which are hereby reproduced, in which the "excess to be carried forward used" of € 529,578.00 is indicated;
g) The Claimant filed an administrative appeal against the said assessment, in the terms contained in document no. 2 filed with the request for arbitral pronouncement, the contents of which are hereby reproduced;
h) The Claimant was notified to exercise the right to a hearing on the draft dismissal of the administrative appeal, based on information contained in the administrative proceedings, the contents of which are hereby reproduced, in which the following is referred to, among other things:
7 - In this way, according to the thesis of the appellant, the reasoning would be contradictory in that "... the correction effected could never be based on the violation of the provisions of paragraph b) of number 7 of article 78 of the VAT Code, since it is the Inspection Services themselves that state that the Appellant complied with the provisions of that rule;".
8 - It further argues that "the interpretation made by the Inspection Services of the provisions in number 2 of article 27 of the VAT Code, combined with the provisions of paragraph c) of number 1 of article 2 of the VAT Code, has no foundation whatsoever, and is even contrary to the case law of the Court of Justice of the European Union.".
9 - That is, in the perspective of the appellant, the reasoning would be contradictory in the sense that, during the operation of justification for the reason for restricting the recovery of the amount claimed, the inspection used simultaneously and indiscriminately legal provisions that are incompatible with the tax reality that was under analysis.
10 - Given that we are faced with two opposing interpretations, it is important to systematize the information in order to verify whether what is argued in the petition deserves to be upheld, or whether the content of the report is clear, express and objective in the part referenced by the appellant, legitimizing, specifically, how it legally acted.
11 - It transpires, without prejudice to any contrary opinion, that there is no contradiction whatsoever in the report prepared, since, as can be clearly extracted therefrom, there are two completely distinct legal realities in question, as will be attempted to be explained and clarified.
12 - Let us begin with the procedure carried out taking into account what was provided (at the time of the facts) in paragraph b) of no. 7 of article 78 of the VAT Code, making use of an excerpt from the report, which is of interest for the case under consideration:
In the periodic VAT return, relating to the period 1112, the company "A…, S.A." proceeded with the regularization/recovery of VAT credits, in accordance with no. 7 of article 78 of the VAT Code, relating to the insolvency proceedings indicated below:
Now the regularization of VAT by the creditor following the insolvency of the debtor (at the time of the facts) was provided for in paragraph b) of no. 7 of article 78 of the VAT Code, the company having exhibited in the course of the inspection action the complementary requirements so that it could regularize the VAT in accordance with the legal provisions referred to above:
Upon analysis of the documentation supporting the recovery of VAT, in accordance with the legal provisions identified above, the existence was verified of credits of the company "A… S.A." over the insolvent companies dating back to the fiscal years 2005, 2006, 2007 and 2008, these credits resulting in essence from economic operations of supply of raw materials (PET), advance payments and other economic operations arising from its business activity.
13 - Up to this point nothing anomalous was found in the inspection action that would lead to any correction for the purpose of preventing the recovery provided for in paragraph b) of no. 7 of article 78 of the VAT Code:
14 - However, the Supplementary Regime for the Procedure of Tax and Customs Inspection grants the inspection services the capacity to develop their competences most effectively at the level, namely, of consultation of documents, confirmation that taxpayers have their tax situation regularized and also whether the documents serving as support for accounting are issued in a legal manner.
15 - In this context, the factuality demonstrated in the course of the inspection procedure is that a document was detected which raised doubts as to compliance with legal requirements, as per the verifications and inquiries listed in the report, which are transcribed below, given their relevance for understanding the question raised:
Upon verification of the various documents supporting the credits invoked by the company "A…, S.A.", it was found that on 31 December 2005, the aforementioned company would have issued Debit Note no. …, to the company "D…, Lda", VAT no. … (company now insolvent), relating to "Management Fees August to December 2005", in the amount of 2,521,800.00€ plus VAT of 529,578.00 € (Annex I).
In effect, in the documentation supporting the accounting entry, only the reference "Management Fees" (in Portuguese "honorários de gestão") and reference to a time period ("August to December") can be read. Insufficiency of elements which motivated that, in compliance with the inquiring principle, established in article 266 of the Constitution of the Portuguese Republic and article 58 of the General Tax Law, additional information be requested from the company.
Given the extent mentioned in this document, information was requested by email dated 19 November 2012, requesting the indication/characterization of the services rendered and their sustainability, no response being obtained from those responsible for the management of this company (Annex II). In the course of the inspection action, we attempted to obtain accounting/extra-accounting information that would allow us to obtain irrefutable proof of the documentation supporting its recording and the typology of the service rendered as well as to verify that the services in question were actually rendered. Notwithstanding the steps taken, it was not possible to collect, besides Debit Note no. … of 31 December 2005, any other external supporting elements/information that would allow us to assess the existence and identification, as well as the reasonableness of the price charged, in relation to the services possibly rendered.
Having analyzed the commercial relations between the company "A…, S.A." and the insolvent company "B…, Lda", only the existence of this debt for services was verified for the period August to December 2005. In relation to the remaining months, in the accounting of the aforementioned companies, there is no record/mention relating to the services mentioned in the above Debit Note.
On the other hand, it was not possible to ascertain any actual intervention by the company "A…, S.A." in the provision of services invoiced by the Debit Note referred to above.
In effect, in the documentation supporting the accounting entry of the said document, only the reference "Management Fees August to December 2005" can be read. Given the above-described content of the invoicing presented, the insufficiency of data that would allow assessment of the existence, nature/object of the services performed and paid is evident.
The documentation now required from the company, which is restricted to Debit Note no. … of 31/12/2005, in the amount of 2,521,800.00 € plus VAT of 529,578.00 €, does not allow by itself to evaluate/identify and determine the relevance of the services rendered, and thus the effectiveness thereof may be questioned.
16 - We thus have that, within its competences (the verification of possible irregularities in documents constitutes reason and object of intervention, indeed, it would not even be understandable that it were otherwise, under penalty of complete ineffectiveness of tax inspection) the Tax Inspection Services verified, as previously seen, an issue related to the lack of credibility of a document, with the reasoning being duly developed, upon which the appellant had even the opportunity to comment, not doing so, despite this being the causality of the invoked "contradiction".
17 - It is true that the appellant has the freedom to invoke any fact that it deems harmful to its tax situation, leading to the filing of an appeal, but not overlooking, however, that it is not enough to merely invoke, it is necessary to prove it, which in the case in discussion, manifestly does not happen, nor did it happen in the course of the inspection action.
18 - It should be added that in administrative appeal proceedings, the appellant does not have in its favour any presumption of veracity of the facts that may support the request formulated, since, in accordance with no. 1 of article 74 of the General Tax Law "The burden of proof of facts constituting the rights of the tax authority or taxpayers rests with whoever invokes them ...".
19 - On this subject:
"The existence of the rule on the burden of proof provided for in this article is not incompatible with the duty of the tax authority, in accordance with the inquiring principle and tax legality itself, to arrange ex officio the evidentiary proceedings necessary to ascertain the material truth. That is, the rules on the burden of proof in this article coexist with the inquiring principle, as referred to in annotation 1. It is a fact, however, that this principle does not require the tax authority to investigate, in cases where it is the taxpayer's burden to provide proof, claims devoid of the minimum evidentiary support. The indication of the proof produced or to be produced by the one bearing the burden is, in our view, a procedural prerequisite whose absence leads to the summary dismissal of the taxpayer's request." (Commentary to article 74 of the Annotated General Tax Law by António Lima Guerreiro).
20 - It should be noted that in the course of the inspection action the inquiring principle and the principle of participation, provided for in articles 58 and 60 of the General Tax Law, were used, the latter not being used (this right being optional, involving no consequences in the procedure for its non-exercise).
21 - With regard to such a specific matter as that under analysis here (generic and insufficient designation of services rendered) and as a matter of rigor, it is appropriate to specify what the irregularities detected consisted of, since they only assume relevance when they are capable of being reflected in the tax situation of the appellant.
22 - In order to seek to clarify why the inspection proceeded in that way and not otherwise, let us see the position endorsed by the Centre for Administrative Arbitration (CAAD) in the arbitral decision handed down in case 61/2013-T, on the subject "VAT - Right to deduction; the fulfillment of the requirements relating to the content of invoices", of which some excerpts are transcribed below:
Article 178, paragraph a) of the VAT Directive provides for the obligation of the taxable person to "... possess an invoice in accordance with articles 220 to 236, 238, 239 and 240". The concept of "invoice" should therefore be interpreted by reference to the combined provisions of articles 226 to 231 of the VAT Directive. Specifically, regarding the elements that must be included in invoices, article 226 of the VAT Directive has the following wording:
"Without prejudice to the specific provisions provided for in this directive, the only mentions that must necessarily appear, for VAT purposes, on invoices issued in application of the provisions of articles 220 and 221 are the following:
6) The quantity and nature of the goods delivered or the extent and nature of the services rendered;
It follows, therefore, from this provision, indeed, as endorsed in the context of Case C-368/09, of 15 July 2010, of the CJEU, that "it is not legitimate for Member States to associate the exercise of the right to deduct VAT with the fulfillment of requirements relating to the content of invoices that are not expressly provided for in the provisions of Directive 2006/112. This interpretation is equally corroborated by article 273 of this Directive, which provides that Member States may impose obligations that they deem necessary to ensure accurate VAT collection and to prevent fraud, but that this power cannot be used to impose invoice requirements in addition to those laid down, in particular, in article 226 of that directive". This means that, according to CJEU case law, although this provision allows Member States to adopt certain measures, these should not, however, go beyond what is necessary to achieve that aim and cannot therefore be used in such a way as to systematically call into question the right to deduct VAT, which is a fundamental principle of the common VAT system ...". It is valid and legal for this Court the principle that the taxpayer, acquirer of goods or services, can only effect the deduction of tax borne to the extent that it is mentioned in invoices issued by suppliers for the acquisition of goods and services, that is, that the invoice constitutes the document on the basis of which the taxable person proceeds to deduct VAT provided that they have been issued in legal form - no. 2 of article 19 of the VAT Code. In this case, the Respondent understood not to accept the aforesaid deductions by considering that the corresponding invoices, when referring only to "adjustment of prices to prices presented", "logistics", "transport", "handling", "packaging", "training in stock and handling management" or similar denominations, did not comply with the requirements of the former article 35, no. 5 of the VAT Code, since such expressions are vague and imprecise.
As a preliminary matter, it is important to note that this Court considers that the Tax Authority and Customs Authority cannot require requirements of invoices that do not respect the provisions of no. 5 of article 35 (current article 36) of the VAT Code and the provisions of article 226 of the VAT Directive. Thus, the required requirements should be limited to the elements provided for in the legislation in question, and the requirement of other elements should be limited to what is necessary to ensure the collection of value added tax and its inspection by the Tax Administration.
Having analyzed all the documentation contained in the case files, the Collective of Arbitrators of this Court assessed the conformity of the invoices in question with the requirements provided for in the former no. 5 of article 35 of the VAT Code and in the VAT Directive and, consequently, whether they could allow the Tax Authority to prevent fraud and ensure the correct collection of the tax.
Let us turn our attention, then, to the invoices titled "adjustment of prices to prices presented"...
In said invoices there is no identification of the "quantity and nature of the goods relating to which the 'adjustment of prices' was made", nor is any reference made to the "Distribution and Compensation Agreement", nor even to any attached list that would allow the Authority to control the ascertainment of the tax.
The claimant did not prove that the goods on which the "adjustments of prices" contained in the invoices referenced with the acronym "PT" were made related to goods/equipment previously acquired by the Claimant from ... as was mentioned in the Agreement that could support the issuance of the invoices in question;
The description of the "PT" invoices, although referring to "Adjustment of prices to prices presented", does not refer to the "Distribution and Compensation Agreement" nor to any annex that identifies the goods subject to said adjustment;
It is thus to be concluded that a reference in the invoices in question to "adjustment of prices", without them expressly stating that such adjustment relates to a set of goods which, by being extensive, may be contained in an attached list, manifestly does not satisfy the legal requirement, and therefore, since these are not invoices issued in compliance with the dictates of article 35 (currently article 36) they cannot give rise to deduction, as established in article 19, no. 2 of the VAT Code. Moreover, the presentation by the Claimant, after the fact, of a table justifying the invoiced values, in accordance with the Compensation and Distribution agreement, is not sufficient proof that the price adjustment in question related to goods previously acquired by the Claimant from ... in the period referred to in the Agreement, since it failed to attach, neither in the administrative phase nor before this Court, the invoices for the acquisition of the goods in question.
In this sense, the CJEU ruled, in the context of Case C-271/12, of 8 May 2013, the understanding that "The provisions of the Sixth Directive 77/388/EEC of the Council, of 17 May 1977, (...), should be interpreted to the effect that they do not preclude a national regulation such as that at issue in the main proceedings, by virtue of which the right to deduct value added tax may be refused to taxable persons who are recipients of services and who possess incomplete invoices, even though these have been completed by the presentation of documents intended to prove the reality, nature and amount of the operations invoiced after such a refusal decision has been adopted.".
In this context, the corrections made by the inspection services are thus justified and were based on the non-acceptance of the corresponding VAT deductions, relating to invoices referring to "Adjustment of prices to prices presented", for lack of legal support, that is, in breach of the provisions of the aforementioned article 35, no. 5 of the VAT Code, which currently corresponds to article 36, no. 5, since they do not allow identification of the terms or the goods on which the "adjustment of prices" was based, nor to effectively control the tax.
With regard to the deduction, by the Claimant, of the tax contained in invoices issued by ... to the claimant, identified with the acronym "LOG", during the months of October, November and December - a set of 16 invoices attached to the case files -, whose description mentioned only "logistics", "transport costs", "warehousing", "training, packaging and handling", the tribunal analyzed the conformity of its legal form with the requirements demanded by the VAT Code. The description of said invoices, although identifying the nature of the services rendered, does not allow determination, in concrete terms, whether the VAT framework applied - in this case, taxation at the standard rate - is appropriate.
In effect, although it is known from the description of the invoices in question that the nature of the services rendered relates to logistics, or transportation services, or handling and packaging services, or even training, the information necessary to identify the correct VAT framework for each of the services in question is not contained in such documents, namely, for example, whether the transport of goods relates to intra-community transport or whether it relates to transport in national territory or between the autonomous regions of Madeira and the Azores, or between any of these locations, or whether the handling and packaging services of goods relate to ancillary services of that type of transport, or even in what location the training was provided - in national territory or in another territory - questions that could determine a different VAT framework from that which was applied. Moreover, the defence prepared by the Claimant or the witness evidence presented by it does not contain any information that would even allow assessment of these specifications. Finally, there are well-founded indications by the Respondent, not contested by the Claimant, that the services titled by such documents were not actually rendered, since it was proven that ... did not possess, at the time, a business structure suitable for the purpose, namely in not having personnel in its employ and having insufficient volume of acquisitions from third parties which, from the outset, allowed the conclusion that that entity did not resort to the outsourcing of such services...".
23 - It is thus certain that the reasoning contained in the report regarding the insufficiency of data contained in the Debit Note, when referring only to "Management Fees August to December 2005", is rooted in the understanding adopted in the arbitral decision handed down.
24 - Finally, it is important to address the issue related to improper assessment of tax and the provisions of no. 2 of article 27 and paragraph c) of no. 1 of article 2, both of the VAT Code.
25 - Let us see what those legal provisions convey to us: Paragraph c) of no. 1 of article 2
"Natural persons or legal entities that improperly mention VAT on an invoice;"
No. 2 of article 27 "The persons referred to in paragraph c) of no. 1 of article 2, as well as those who practice a single taxable operation under the conditions referred to in paragraph a) of the same provision, must deliver to the legally authorized collection offices the corresponding tax ...".
26 - Now let us analyze what is contained in the inspection report:
It is true that the company "A…, S.A.", through the Debit Note, proceeded with the assessment of VAT and proceeded with its delivery to the State coffers, relating to the period 1205. However, from the facts described, it was determined that the VAT assessment was improper, and the company acted correctly, since it improperly mentioned tax on an invoice, and therefore it should be delivered to the State coffers, in accordance with the legal provisions of no. 2 of article 27 of the VAT Code. Having the company improperly assessed VAT on an active operation for which it could not prove its effectiveness, it thus does not have the right to its recovery in accordance with no. 7 of article 78 of the VAT Code, in the period 1112, and therefore we shall proceed with the resulting correction, in the amount of 529,578.00 €.
27 - On this matter, the Judgment of the Supreme Administrative Court, in case 0555/12 of 26-09-2012, established the following understanding:
Article 2, no 1, paragraph c), of the VAT Code provides that the following are taxable persons "natural persons or legal entities that, in an invoice or equivalent document, improperly mention VAT".
In this way, the simple mention of VAT in such documents, even if perhaps inappropriate, by reason of there being no basis therefor, gives rise to a tax obligation.
As was established in the Judgment of this Supreme Court of 24-4/2002, case no. 26636, this result derives both from the rigid and formalistic nature of VAT and the fact that the taxable person receiving the invoice has the right of deduction thereof.
In the words of XAVIER DE BASTO (See "Tax Harmonization in the EEC", Science and Tax Technique, no. 362, p. 44.), each invoice with mention of tax constitutes "a check on the treasury, as it grants to the recipient who is a taxable person the right to deduct the VAT contained therein. For this reason (...) the simple mention of VAT on an invoice (even if perhaps inappropriate, by reason of there being no basis therefor in that case, for any reason) gives rise to a payment obligation, regardless of the quality of the issuer, that is, whether or not he is a taxable person. It will become, by the mere fact of the mention, a "debtor of tax". Only in this way can it be achieved that the right to deduction, which the invoice grants to the recipient who is a taxable person, always corresponds to a payment obligation. Thus the regular operation of the system of fractional payments is assured".
In sum, having been established in the appealed Judgment that there was improper mention of VAT, and therefore factuality sufficient to support the official assessment, there can be no doubt that a consequent obligation arises to deliver the corresponding tax to the State, by application of article 2, no.1, paragraph c), of the VAT Code.
28 - Finally, it appears that there is no contradiction whatever between the reasoning of the Inspection Services and the assumptions on which it was based, since the correction resulted from comprehensive analysis of the tax situation of the appellant, both within the scope of the requirements listed in article 78 of the VAT Code and in the verification of the supporting documents, which if they had all been issued in a manner that raised no doubt whatsoever, the provisions of paragraph c) of no. 1 of article 2 and no. 2 of article 57, both of the VAT Code, would not even be a reason for its use, and therefore, until proven otherwise, the Tax Inspection Services acted properly in the procedure carried out.
29 - In these terms and for what has been explained, the pretension manifested by the appellant, lacking in concrete elements and sustainable legal basis to overturn the procedures of the Tax Inspection Services, is in my opinion such that the present appeal may be dismissed in its entirety.
i) The Claimant exercised the right to a hearing regarding the draft decision on the administrative appeal;
j) Following the exercise of the right to a hearing, the Tax Authority and Customs Authority prepared information, the contents of which are hereby reproduced, in which the following is referred to, among other things:
1 - The company A…, S.A., VAT no. …, with registered office in … … - P.O. Box …, in …, was notified by registered letter on 2015-11-18 of the draft decision prepared in these administrative appeal proceedings, so that, in writing and within fifteen days, if it wished, it would come to the proceeding to exercise its right to a hearing on the draft decision of dismissal of the appeal.
2 - Following this fact, a submission was received in this Service on 2015-12-04, incorporated at pages 49 to 52 of the case file, subscribed by the appellant, in which it comes to exercise the right to a hearing legally granted in accordance with article 60 of the General Tax Law, pronouncing on the draft decision that had been communicated to it.
3 - It is therefore important, before the final decision is handed down, to analyze it in order to assess the existence of new elements put forward by the appellant, thus complying with what is established in no. 7 of article 60 of that legal provision.
4 - In this context, although the right that is conferred upon it and the legitimacy of the invoked matter, it is nevertheless found that they bring nothing new in the sense of reversing the position taken in the draft on the matter in discussion, since the petitioner merely limits its disagreement to the presentation of understandings and opinions that have the nature of merely interpretative of the legal norms duly analyzed in the case file, reason for which both the reasoning and the conclusions of the draft decision of dismissal remain fully valid, and consequently converting it into final.
k) The administrative appeal was dismissed by order of 15-12-2015, issued by the Director of Finance of …, in which the following is stated:
I agree,
with the content of the information provided, as well as with the opinion rendered thereon, and therefore, with the same terms and grounds, I determine the dismissal of the present administrative appeal proceedings, insofar as the inspection report demonstrates that the document subject of the correction, here in question, does not have the elements legally required for the purposes provided for in article 78 of the VAT Code, that is, the Tax Authority does not question the condition of insolvency of the customer of the claimant, but rather the legal form of the document that supported the regularization/recovery of the tax in favour of the taxpayer. Fact which the claimant did not overturn, neither in the course of the inspection procedure, nor in this process. The obligation to deliver VAT, in accordance with the discipline of article 27, no. 2, of the same Code, is not, naturally, at issue, as the claimant itself indicates in paragraph c), of point 9, of the petition that it filed, on 4 December 2015, to exercise the right to be heard.
l) The Claimant assessed the VAT referred to in Debit Note no. … which it issued to the company D…, Lda and proceeded with its delivery to the State coffers, relating to the period 1205 (article 32 of the Response);
m) The said debit note relates to management services rendered by the Claimant to D…, Lda;
n) In 2005 the draft of the demerger-merger contained in document no. 4 filed with the Claimant's submissions was drawn up, the contents of which are hereby reproduced;
o) On 23-05-2005, the Board of Directors of the Claimant approved a draft demerger-merger by the separation of part of the assets of E… S.A., without dissolution thereof, and merger of the separated assets by incorporation in D…, Lda. (partial demerger - merger by incorporation) (document no. 5 filed with the request for arbitral pronouncement, the contents of which are hereby reproduced);
p) On 01-08-2005 the deed was executed, a copy of which is contained in document no. 6 filed with the request for arbitral pronouncement, the contents of which are hereby reproduced, relating to the demerger-merger between E…, S.A. and D…, Lda;
q) On 31-12-2015, the Claimant issued debit note no. …/2005, which is contained in document no. 7 filed with the request for arbitral pronouncement, the contents of which are hereby reproduced;
r) The credit referred to in debit note no. …/2005, was recognized in the insolvency proceedings of D…, Lda, which took place in the Judicial Court of ... under no. …/10. … ...;
s) The credit referred to was claimed and recognized in the insolvency proceedings of D…, Lda", VAT no. … and of the company "C…, Lda which took place in the Judicial Court of ...;
t) On 17-03-2016, the Claimant filed the request for constitution of the arbitral tribunal that gave rise to the present proceedings.
2.3. Unproven Facts
It was not proven what the specific management services underlying the issuance of debit note no. …, issued by the Claimant to the company D…, Lda, were.
2.4. Rationale for the Establishment of the Factual Matters
The proven facts are based on the documents filed by the Claimant with the request for arbitral pronouncement and with its submissions and those contained in the administrative proceedings.
As to the claim and recognition of the credit in the insolvency proceedings, the Tax Inspection Report states that certificates were filed by the Claimant, but they were not attached to the present proceedings and from the administrative proceedings filed by the Tax Authority and Customs Authority only the administrative appeal proceedings are contained and not the tax inspection proceedings.
Moreover, a document was attached in which it is communicated to the Insolvency Administrator that the VAT relating to the credit in question would be deducted (document no. 8 filed with the request for arbitral pronouncement, the contents of which are hereby reproduced).
In any case, since the Tax Authority and Customs Authority does not question this recognition of the credit in the insolvency proceedings, this fact is taken as established.
As to the provision of management services rendered by the Claimant to D…, Lda, it was proven that they occurred, if only because the debit note was issued and no explanation is put forth for its issuance without services being rendered.
Moreover, the fact that the credit referred to was recognized by judgment handed down in insolvency proceedings, specifically designed for that purpose and with the possibility of control by the Court, by the Insolvency Administrator, by the Public Prosecutor's Office and by the generality of creditors of the insolvent company, corroborates the conviction that management services were rendered in the value indicated in that debit note.
To this is added that, as the Claimant refers, the period to which the management services referred to in the debit note relate is consistent with the period of implementation of the demerger-merger process which is compatible with the provision of services by one company to another. In this context, the fact that there were no other services of this kind in periods prior to August 2005 or after December 2005 gives an indication of the connection between these services and the implementation of the said process of reorganization of the companies.
On the other hand, the fact that there was a business reorganization constitutes an acceptable explanation, in terms of reasonableness, in light of common experience, for the lack of presentation of documentary proof capable of densifying the specification of services rendered about 10 years before.
At the very least, faced with these facts which point towards the rendering of the management services referred to and in the absence of any evidentiary element pointing in the opposite direction, one must remain in doubt on this point, which amounts procedurally to positive proof of the rendering of these services, in light of the rule of no. 1 of article 100 of the Code of Tax Procedure, applicable to tax arbitral proceedings by virtue of the provision of article 29, no. 1, paragraph c), of the RJAT.
3. LEGAL MATTERS
3.1. Rationale for the Challenged Act
The Claimant, in the periodic VAT return for the period 1112, proceeded with the regularization/recovery of VAT credits, in accordance with no. 7 of article 78 of the VAT Code, relating to the insolvency proceedings.
Upon analyzing the documents presented by the Claimant supporting the credits invoked by the Claimant, the Tax Authority and Customs Authority found that on 31-12-2005, it issued Debit Note no. …, to the company "D…, Lda", VAT no. … (company now insolvent), relating to "Management Fees August to December 2005", in the amount of 2,521,800.00€ plus VAT of 529,578.00 €.
The Tax Authority and Customs Authority understood that the existing references in the documentation supporting the accounting entry, in which only "Management Fees" (in Portuguese "honorários de gestão") and the reference to a time period ("August to December") can be read, is insufficient, and therefore requested from the Claimant additional information on the indication/characterization of the services rendered and their sustainability, obtaining no response, and in the inspection was unable to obtain further information on this matter.
The Tax Authority and Customs Authority concluded in the Tax Inspection Report the following:
«It is true that the company "A…, S.A.", through the Debit Note, proceeded with the assessment of VAT and proceeded with its delivery to the State coffers, relating to the period 1205. However, from the facts described, it was determined that the VAT assessment was improper, and the company acted correctly, since it improperly mentioned tax on an invoice, and therefore it should be delivered to the State coffers, in accordance with the legal provisions of no. 2 of article 27 of the VAT Code.
Having the company improperly assessed VAT on an active operation for which it could not prove its effectiveness, it thus does not have the right to its recovery in accordance with no. 7 of article 78 of the VAT Code, in the period 1112, and therefore we shall proceed with the resulting correction, in the amount of 529,578.00 €.»
In the information which formed the basis for the decision on the administrative appeal, the Tax Authority and Customs Authority made an extensive transcription of the arbitral decision handed down in case no. 617/2013, in which the following is referred to, among other things:
– article 178, paragraph a) of the VAT Directive provides for the obligation of the taxable person to "... possess an invoice in accordance with articles 220 to 236, 238, 239 and 240;
– that the only mentions that must necessarily appear, for VAT purposes, on invoices issued in application of articles 220 and 221 are the ... quantity and nature of the goods delivered or the extent and nature of the services rendered;
– as endorsed in the context of Case C-368/09, of 15 July 2010, of the CJEU, that "it is not legitimate for Member States to associate the exercise of the right to deduct VAT with the fulfillment of requirements relating to the content of invoices that are not expressly provided for in the provisions of Directive 2006/112. This interpretation is equally corroborated by article 273 of this Directive, which provides that Member States may impose obligations that they deem necessary to ensure accurate VAT collection and to prevent fraud, but that this power cannot be used to impose invoice requirements in addition to those laid down, in particular, in article 226 of that directive;
– the CJEU ruled, in the context of Case C-271/12, of 8 May 2013, the understanding that "The provisions of the Sixth Directive 77/388/EEC of the Council, of 17 May 1977, (...), should be interpreted to the effect that they do not preclude a national regulation such as that at issue in the main proceedings, by virtue of which the right to deduct value added tax may be refused to taxable persons who are recipients of services and who possess incomplete invoices, even though these have been completed by the presentation of documents intended to prove the reality, nature and amount of the operations invoiced after such a refusal decision has been adopted.";
– the description of said invoices, although identifying the nature of the services rendered, does not allow determination, in concrete terms, whether the VAT framework applied - in this case, taxation at the standard rate - is appropriate.
Following this citation, it is stated in the information which formed the basis for the decision on the administrative appeal that
– «the reasoning contained in the report regarding the insufficiency of data contained in the Debit Note, when referring only to "Management Fees August to December 2005", is rooted in the understanding adopted in the arbitral decision handed down»;
– «it is true that the company "A…, S.A.", through the Debit Note, proceeded with the assessment of VAT and proceeded with its delivery to the State coffers, relating to the period 1205. However, from the facts described, it was determined that the VAT assessment was improper, and the company acted correctly, since it improperly mentioned tax on an invoice, and therefore it should be delivered to the State coffers, in accordance with the legal provisions of no. 2 of article 27 of the VAT Code. Having the company improperly assessed VAT on an active operation for which it could not prove its effectiveness, it thus does not have the right to its recovery in accordance with no. 7 of article 78 of the VAT Code, in the period 1112, and therefore we shall proceed with the resulting correction, in the amount of 529,578.00»;
«... there is no contradiction whatever between the reasoning of the Inspection Services and the assumptions on which it was based, since the correction resulted from comprehensive analysis of the tax situation of the appellant, both within the scope of the requirements listed in article 78 of the VAT Code and in the verification of the supporting documents, which if they had all been issued in a manner that raised no doubt whatsoever, the provisions of paragraph c) of no. 1 of article 2 and no. 2 of article 57, both of the VAT Code, would not even be a reason for its use, and therefore, until proven otherwise, the Tax Inspection Services acted properly in the procedure carried out».
In the decision on the administrative appeal, issued by the Director of Finance of …, the following is stated:
I agree,
with the content of the information provided, as well as with the opinion rendered thereon, and therefore, with the same terms and grounds, I determine the dismissal of the present administrative appeal proceedings, insofar as the inspection report demonstrates that the document subject of the correction, here in question, does not have the elements legally required for the purposes provided for in article 78 of the VAT Code, that is, the Tax Authority does not question the condition of insolvency of the customer of the claimant, but rather the legal form of the document that supported the regularization/recovery of the tax in favour of the taxpayer. Fact which the claimant did not overturn, neither in the course of the inspection procedure, nor in this process. The obligation to deliver VAT, in accordance with the discipline of article 27, no. 2, of the same Code, is not, naturally, at issue, as the claimant itself indicates in paragraph c), of point 9, of the petition that it filed, on 4 December 2015, to exercise the right to be heard. (emphasis ours).
The arbitral tribunals that function in the CAAD decide according to the constituted law (article 2, no. 2, of the RJAT), their activity being limited to the declaration of illegality of acts of the types referred to in article 2, no. 1, of the same Decree-Law.
We are thus in the sphere of mere legality dispute, in which the legality or illegality of the challenged act must be assessed as it occurred, with the reasoning used therein, other possible reasoning that could serve as support for other acts with total or partially coincident decisory content with the act performed being irrelevant. Other reasoning invoked after the end of the tax procedure in which the act whose declaration of illegality is requested was performed is thus irrelevant in principle, including that put forth in the arbitral proceedings.
However, in cases of administrative challenge (namely administrative appeal and hierarchical review of assessment acts), if the respective decision maintains the challenged act with different reasoning, it should be understood that revocation by substitution of that act occurs (which will be ratification if the initial reasoning was illegal), and a new act continues to subsist in the legal order which, despite maintaining the same decisory content, will have the new reasoning. Naturally, if the act that decides the administrative challenge alters the decisory content of the challenged act, namely by partially revoking it, this will also be revocation by substitution, with only the initial act remaining in the legal order in the part not revoked, with the reasoning that results from the act that adjudicates the administrative challenge.
In the case at hand, it results from the reasoning of the assessment, with greater clarity from the decision on the administrative appeal, which defines the final position of the Tax Authority in relation to the Claimant, that the ground for the correction made is that the debit note referred to does not have «the elements legally required for the purposes provided for in article 78 of the VAT Code», with the Tax Authority and Customs Authority questioning only «the legal form of the document that supported the regularization/recovery of the tax in favour of the taxpayer».
Thus, it is in light of this reasoning that the legality of the challenged act must be assessed.
3.2. Issue of Error of Law in the Reasoning of the Challenged Act
The Claimant imputes to the challenged act, in the first place, a defect due to error of law, stating in its submissions, in summary:
– neither the legal framework conferred by the Tax Authority on the correction in question appears to be correct, nor the reasoning presented is consistent with the same;
– the regularization of tax under the said no. 7 of article 78 of the VAT Code requires compliance with certain documentary and temporal requirements, and is not dependent on additional requirements and criteria that may be invoked by the Tax Authority to support corrections that have no legal basis;
– as to the compliance with these criteria, it is the Tax Authority itself that attests to it, categorically stating that there is no impediment to the respective tax regularization, and therefore the same appears to be valid;
– moreover, no. 7 of article 78 of the VAT Code does not address alleged scenarios of improper VAT assessment, as the Tax Authority intends in this process, being limited only to the regularization of tax relating to credits considered uncollectible in insolvency proceedings (and equivalent), which (regularization) raises, justifiably, an increased concern regarding documentary proof (which is not justified in true scenarios of improper VAT assessment) in order to avoid losses to the State.
– the Tax Authority thus errs in law, by attempting to make use of a special VAT regime — regularization of uncollectible credits -- to address a factual situation — improper VAT assessment — which it manifestly does not encompass.
The VAT regularization effected by the Claimant was based on paragraph b) of no. 7 of article 78 of the VAT Code, which, in the wording resulting from the republication operated by Decree-Law no. 102/2008, of 20 June, in force in December 2012, the period in which the regularization was made, establishes the following:
7 - Taxable persons may further deduct tax relating to credits considered uncollectible:
(...)
b) In insolvency proceedings when the same is decreed.
(...)
As the Claimant correctly refers, no obstacle results from this rule to regularization derived from the verification or non-verification of the operations with respect to which the VAT that the taxable person intends to regularize was assessed.
In truth, the hypothesis of this rule is fulfilled when the taxable person is the holder of a credit which is considered uncollectible with respect to which VAT was assessed.
However, as is concluded from the decision on the administrative appeal and the information to which it refers, the obstacle that the Tax Authority and Customs Authority understood to exist to the exercise of the right to deduction results from the lack of elements of the debit note in question and not from the fulfillment of the hypothesis of paragraph b) of no. 7 of article 78.
And in this decision, through the reference to article 178 of Directive no. 2006/112/EC which is contained in the transcription of the said arbitral decision, the legal support for what was decided is found, in the wake of CJEU case law which is cited in the sense that «the right to deduct value added tax may be refused to taxable persons who are recipients of services and who possess incomplete invoices, even though these have been completed by the presentation of documents intended to prove the reality, nature and amount of the operations invoiced after such a refusal decision has been adopted».
Thus, the challenged act, with the reasoning given to it in the decision on the administrative appeal, does not suffer from the defect that the Claimant imputes to it of error in legal framework, as the provisions of article 78, no. 7, of the VAT Code are not the ground for what was decided, as evidenced by the express content of the decision on the administrative appeal.
3.3. Issue of Proof of the Existence of Services Rendered by the Claimant Relating to the Debit Note
As results from the factual matters established, it was not proven that the services referred to in the debit note were not rendered, rather there is a set of facts that points toward their having been actually performed, and therefore, at the very least, one is faced with a situation of founded doubt which should be valued procedurally in favour of the Claimant, by virtue of the provision of article 100, no. 1, of the Code of Tax Procedure applicable to tax arbitral proceedings by virtue of the provision of article 29, no. 1, paragraph c), of the RJAT.
As to this matter, the positions assumed by the Tax Authority and Customs Authority throughout the inspection and administrative appeal procedures are not congruent, as in the order of dismissal of the administrative appeal it refers that it questions «the legal form of the document that supported the regularization/recovery of the tax in favour of the taxpayer» and in the inspection procedure steps were taken with a view to determining what services were rendered underlying the reference made in the debit note, which can only be justified if the invoked formal irregularity was not an obstacle to regularization.
In any case, in harmony with the provisions of article 226 of Directive no. 2006/112/EC (invoked in the opinion to which the decision of dismissal of the appeal refers through transcription of the arbitral decision handed down in case no. 61/2013-T), absent a special rule, «the only mentions that must necessarily appear, for VAT purposes, on invoices» are those indicated, and, as to the identification of services rendered, only requires, in point 6), the indication of their «extent and nature».
In the case at hand, the quantity and denomination of services rendered is contained in the debit note, albeit in a succinct manner, as a generic denomination of the type of services is referred to as being «management» (its «nature») and the period during which they were rendered «from August to December 2005» (the «extent» of the services) is indicated, and therefore it cannot be concluded that the debit note does not indicate the extent and nature of the services. ([1])
By the foregoing, it is concluded that the challenged assessment suffers from a defect of violation of law, by erroneous application of article 226 of Directive no. 2006/112/EC, in understanding that it should refuse the regularization effected by the Claimant.
4. INDEMNIFICATORY INTEREST
The Claimant paid the assessed amount and requests indemnificatory interest.
In accordance with the provision of paragraph b) of article 24 of the RJAT, the arbitral decision on the merits of the claim which is not subject to appeal or challenge binds the Tax Authority from the end of the period provided for appeal or challenge, and this must, in the exact terms of the favorable outcome of the arbitral decision for the taxpayer and until the end of the period provided for the execution of judicial sentences in tax courts, «restore the situation that would have existed if the tax act subject of the arbitral decision had not been performed, adopting the acts and operations necessary for the purpose», which is in keeping with the provisions of article 100 of the General Tax Law [applicable by virtue of the provision of paragraph a) of no. 1 of article 29 of the RJAT] which establishes that «the tax authority is obliged, in case of total or partial success of administrative appeal, judicial challenge or appeal in favor of the taxpayer, to the immediate and full restoration of the legality of the act or situation subject of the dispute, including the payment of indemnificatory interest, if applicable, from the end of the period of execution of the decision».
Although article 2, no. 1, paragraphs a) and b), of the RJAT uses the expression «declaration of illegality» to define the competence of the arbitral tribunals functioning in the CAAD, making no reference to condemnatory decisions, it should be understood that this encompasses the powers that in judicial challenge proceedings are attributed to tax courts, and this is the interpretation that is in keeping with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which it proclaims, as the first directive, that «the tax arbitral process must constitute an alternative procedural means to judicial challenge proceedings and to the action for the recognition of a right or legitimate interest in tax matters».
The judicial challenge proceedings, despite being essentially a process of annulment of tax acts, admits the condemnation of the Tax Authority to the payment of indemnificatory interest, as can be inferred from article 43, no. 1, of the General Tax Law, in which it is established that «indemnificatory interest is owed when it is determined, in administrative appeal or judicial challenge, that there was error imputable to the services as a result of which payment of the tax debt in an amount superior to the legally owed was made» and article 61, no. 4 of the Code of Tax Procedure (in the wording given by Law no. 55-A/2010, of 31 December, which corresponds to no. 2 in the original wording), which states that «if the decision recognizing the right to indemnificatory interest is judicial, the period for payment is counted from the beginning of the period of its voluntary execution».
Thus, no. 5 of article 24 of the RJAT, by stating that «payment of interest, regardless of its nature, is owed in accordance with the terms provided for in the general tax law and in the Code of Tax Procedure», should be understood as allowing the recognition of the right to indemnificatory interest in the arbitral process.
In the case at hand, it is manifest that, following the illegality of the assessment act, indemnificatory interest is owed, as the assessment is imputable to the Tax Authority, which, on its own initiative, performed it without legal support.
Consequently, the Claimant has the right to indemnificatory interest, in accordance with articles 24, no. 5, of the RJAT, 43, no. 1, of the General Tax Law and 61 of the Code of Tax Procedure, to be determined by the Tax Authority and Customs Authority in execution of this judgment.
5. DECISION
For these reasons, the arbitrators of this Arbitral Tribunal hereby agree to:
a) Find the request for arbitral pronouncement to be well-founded;
b) Annul the VAT assessment no. 2013…, relating to the period 201112 and the respective demonstration of settlement adjustment;
c) Condemn the Tax Authority and Customs Authority to pay to the Claimant indemnificatory interest, in accordance with articles 24, no. 5, of the RJAT, 43, no. 1, of the General Tax Law and 61 of the Code of Tax Procedure.
6. VALUE OF THE CASE
In accordance with the provision of article 306, no. 2, of the Code of Civil Procedure and article 97-A, no. 1, paragraph a), of the Code of Tax Procedure and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned a value of € 529,578.00.
7. COSTS
In accordance with article 22, no. 4, of the RJAT, the amount of costs is fixed at € 8,262.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, charged to the Claimant.
Lisbon, 10-10-2016
The Arbitrators
(Jorge Manuel Lopes de Sousa)
(Maria Cristina Aragão Seia)
(António Nunes dos Reis)
[1] Article 36, no. 5, of the VAT Code, which indicates, in its paragraph b), the formalities of invoices (and, before Decree-Law no. 197/2012, of 24 August, also of "equivalent documents"), is not invoked in the Tax Inspection Report nor in the decision on the administrative appeal and opinion to which it refers, and therefore cannot be considered the ground for the challenged act.
In any case, it can be added, as an obiter dictum, that in that paragraph b) only the following is referred to, among the elements that invoices and equivalent documents must contain, «the quantity and usual denomination of the goods transferred or the services rendered, with specification of the elements necessary to determine the applicable rate; packaging not actually transacted must be the subject of separate indication and with express mention that its return was agreed».
In the case at hand, the quantity and denomination of services rendered is contained in the debit note, albeit in a succinct manner, as a generic denomination of the type of services is referred to as being «management» and the period during which they were rendered «from August to December 2005» is indicated and, on the other hand, since it is a matter of services fully taxed at the standard rate, the «specification of the elements necessary to determine the applicable rate» was unnecessary.
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