VAT Rate on Dental Implants Sold Separately – CAAD Ruling 188/2015-T on Lista I Verba 2.6 CIVA

DECISION OF THE ARBITRATION TRIBUNAL

THE ARBITRATOR

Professor Doctor Clotilde Celorico Palma, appointed by the Deontological Board of the Administrative Arbitration Centre to form the Arbitration Tribunal, constituted on 9 June 2015, decides as follows:

I. REPORT

1.  A..., S.A., NIPC ..., with registered office at Rua ..., No. ..., ...-... ..., hereinafter referred to as "Claimant", comes, pursuant to the provisions of articles 2, No. 1, paragraph a) and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter "LFATM"), to submit a request for constitution of an arbitration tribunal for a pronouncement on the illegality and consequent annulment of VAT assessments and on the payment of compensatory interest.
   

2.  The Respondent is the TAX AND CUSTOMS AUTHORITY.
   

3.  The request for constitution of the arbitration tribunal was accepted by the President of CAAD on 18-03-2015 and was automatically notified to the Tax and Customs Authority.
   

4.  Pursuant to the provisions of paragraph a) of No. 2 of article 6 and paragraph b) of No. 1 of article 11 of the LFATM, the Deontological Board appointed as arbitrator of the single arbitration tribunal the signatory of this decision, who communicated acceptance of the assignment within the applicable time limit.
   

5.  On 08-05-2015 the parties were duly notified of this appointment and did not manifest their intention to refuse the appointment of the arbitrator, in accordance with the combined provisions of article 11, No. 1, paragraphs a) and b) of the LFATM and articles 6 and 7 of the Deontological Code.
   

6.  In accordance with the provision of paragraph c) of No. 1 of article 11 of the LFATM, the arbitration tribunal was constituted on 09-06-2015.
   

7.  The arbitration tribunal accepted the cumulative nature of the requests formulated by the Claimant, having verified that the requirements for such cumulation were met.
   

8.  The Tax and Customs Authority submitted a response, having argued for the dismissal of the request for arbitration pronouncement.
   

9.  On 22-09-2015, the meeting provided for in article 18 of the LFATM was held, in which the representatives of the Claimant and Respondent stated their position on procedural conduct, on any exceptions that should be considered and decided before the Tribunal ruled on the request, on the need for corrections to be made in the procedural documents presented and on the need to schedule a new meeting for the holding of oral arguments, and the witness presented by the Claimant was examined.
   

1. The Arbitration Tribunal was regularly constituted.

2. The parties have legal personality and capacity and are legitimately represented (articles 4 and 10, No. 2 of the LFATM and article 1 of Ordinance No. 112-A/2011, of 22 March) and are properly represented.

3. The proceedings do not suffer from any nullities.

Preliminary Issue

The Tax and Customs Authority, faced with the request for arbitration pronouncement presented by A..., S.A, raised a preliminary issue in its response.

It alleges, in summary, that the Claimant did not present the gracious complaint on the grounds of disagreement with the terms of the inspection report but rather in accordance with article 131 of the Code of Tax Procedure and Process (CTPP).

It does not expressly indicate what procedural consequence should be drawn from the said preliminary issue. Not indicating, it is necessary to ascertain what, from a legal-procedural point of view, can be expected from the raising of a preliminary issue.

That is, it is necessary to determine what, also from this perspective, constitutes a preliminary issue.

If we look through the adjective civil law – the Code of Civil Procedure (CCP) – we do not find the expression preliminary issue or preliminary issues. We therefore do not obtain a response that allows us, directly and immediately, to derive from the CCP the technical-legal meaning of this expression.

In tax litigation (and also in administrative litigation), this is not the case. In fact, article 288 of the CTPP has as its heading, among other things, the knowledge of preliminary issues [by the judge of the superior court].

Since the heading is divided into two segments: "conclusion to the judge" and "knowledge of preliminary issues", and since No. 1 establishes that "Once distributed, the case file shall be submitted to the judge who may order that any procedural steps be taken or information be obtained from the court appealed from or from any authority", in obvious correspondence with this first segment of the heading, then No. 2, which provides that "The judge shall not rule on the appeal if he considers that it manifestly lacks the respective procedural requirements", has evident connection with the segment preliminary issues of the heading, which from this perspective assume the nature of dilatory exceptions.

In fact, these are nothing more than the absence of procedural requirements (see article 278, No. 1 of the CCP), because as Antunes Varela correctly states "[p]rocedural requirements are precisely the elements upon which depends the duty of the judge to pronounce a decision on the request formulated, granting or denying the relief sought. These are the minimum conditions considered indispensable to, from the outset, guarantee an adequate decision and a useful decision of the case.

If one of these requirements is not met, such as the legitimacy of the parties, the legal capacity of one or both of them, the judge must, in principle, refrain from examining the merit or demerit of the request, due to the lack of an essential requirement for this purpose"[1].

Therefore, in tax litigation the expression preliminary issues undoubtedly means the same as dilatory exceptions[2].

Now, although articles 123 and 124 of the CTPP, which regulate the requirements of the judgment, do not refer to dilatory exceptions, they cannot fail to be known at this procedural stage, as Jorge Lopes de Sousa observes[3].

And since dilatory exceptions imply that the judge must refrain "from ruling on the request and acquit the defendant of the instance" (see article 278, No. 1 of the CCP), then the raising of the preliminary issue raised by the respondent, which corresponds as we have seen to an unnamed dilatory exception, is aimed at leading the tribunal to refrain from ruling on the merits of the case.

However, this claim fails without appeal or review, as will be demonstrated.

Pursuant to article 131 of the CPT, the statutory provision that precisely has as its heading "Contestation in the case of self-assessment", contestation in these circumstances depends on the submission of a "gracious complaint addressed to the head of the regional peripheral body of the tax administration, within 2 years of submission of the declaration" (No. 1).

If the complaint is expressly dismissed or an implicit dismissal occurs (within four months counted from the date of submission of the gracious complaint (see article 57, No. 5 of the General Tax Law/GTL and 106 of the CTPP), the interested taxpayer may submit judicial contestation (within 3 months) or lodge a hierarchical appeal within 30 days.

However, the gracious complaint cannot be submitted on the grounds of mere issuance of an inspection report, because such act – as the Respondent itself emphasizes – does not have nor assume the nature of harming the taxpayer's legal sphere, being able to be viewed at most as a mere indication of such harmfulness, to be materialized through the assessment.

But, regardless of whether this is so, the mere fact that an inspection procedure has not been concluded does not prevent the subject liable, by the mere effect of the self-assessment he has made, from raising contestation of that same self-assessment.

And if, as occurs in the case sub judice, the arguments invoked will, in part, discuss and refute considerations made in the inspection report, this can only mean a refutation ex ante or by anticipation of arguments which, in the understanding of the Claimant, may be invoked by the AT.

It is not, therefore, a matter of converting a request for arbitration pronouncement subsequent to a gracious complaint of a self-assessment act into a request for arbitration pronouncement with an object centered on the inspection procedure.

In this order of ideas, it is already clear that the Respondent misinterpreted what is intended to be achieved with the present request for arbitration pronouncement, confusing its object – which undoubtedly centers on the assessment in question – with the grounds on which it is based. Thus, no other course remains than to consider the said preliminary issue entirely without merit, which moreover would always lack merit for another reason, also already touched upon: the failure to know what the true and concrete procedural purpose that the Respondent envisioned with its raising was.

For, just as the Claimant/Applicant must conclude with a certain, intelligible and unequivocal request in the statement of claim, it not being sufficient for him to merely allege the cause of action, under penalty of ineptitude of the statement of claim (see article 186, No. 2, paragraph a) of the CCP), so too the Defendant/Respondent must allege the facts that constitute the exceptions it raises and conclude with the corresponding request.

There being no other obstacle to the examination of the merits of the case, it is necessary to pronounce

II. GROUNDS

A. Factual Matters

1.  Proven Facts
   

The following facts are considered proven:

a. The Claimant A..., S.A., is a limited company that is engaged in the provision of dental medicine and prosthetics services, which corresponds to CAE 86230;

b. The company is configured as a subject liable for Value Added Tax (VAT) purposes;

c. The Claimant charged VAT at the reduced rate of 6% on intra-Community acquisitions made from operator B... SL in the years 2010, 2011 and 2012, relating to various types of dental implants and abutments;

d. Under three service orders – SI2013 ..., SI2013 ..., SI2013 ... – the Claimant was subject to an internal inspection action, with various VAT corrections being made, due to the Tax Authority (TA) understanding that the Claimant should have charged VAT at the standard rate on the aforementioned intra-Community acquisitions, due to lack of classification of such goods in any of the items of the lists attached to the VAT Code;

e. The VAT corrections made by the TA gave rise to the following VAT assessments in the total amount of € 8,241.61 (eight thousand, two hundred and forty-one euros and sixty-one cents):

1. Additional VAT Assessment No. ..., relating to period 201011;

2. Additional VAT Assessment No. ..., relating to period 201012;

3. Additional VAT Assessment No. ..., relating to period 201102;

4. Additional VAT Assessment No. ..., relating to period 201103;

5. Additional VAT Assessment No. ..., relating to period 201104;

6. Additional VAT Assessment No. ..., relating to period 201105;

7. Additional VAT Assessment No. ..., relating to period 201106;

8. Additional VAT Assessment No. ..., relating to period 201108;

9. Additional VAT Assessment No. ..., relating to period 201109;

10. Additional VAT Assessment No. ..., relating to period 201110;

11. Additional VAT Assessment No. ..., relating to period 201111;

12. Additional VAT Assessment No. ..., relating to period 201112;

13. Additional VAT Assessment No. ..., relating to period 201201;

14. Additional VAT Assessment No. ..., relating to period 201202;

15. Additional VAT Assessment No. ..., relating to period 201203;

16. Additional VAT Assessment No. ..., relating to period 201204;

17. Additional VAT Assessment No. ..., relating to period 201207;

18. Additional VAT Assessment No. ..., relating to period 201208;

19. Additional VAT Assessment No. ..., relating to period 201209;

20. Additional VAT Assessment No. ..., relating to period 201210;

21. Additional VAT Assessment No. ..., relating to period 201211;

22. Additional VAT Assessment No. ..., relating to period 201212.

f. The Claimant proceeded to pay the VAT in question in the said tax assessments in the course of the said inspection action;

g. Implantology consists of the specialty of dental medicine intended for the fixed rehabilitation of edentulous spaces through dental implants;

h. Dental prosthetics aims to replace the dental apparatus and its main objective is the replacement of its functions, namely: mastication, verbalization and aesthetic function;

i. A tooth is composed of two parts, the root (internal part of the tooth) and the crown (the external part of the tooth);

j. In the absence of one or more teeth, these are replaceable by an osseointegrated dental implant and an artificial crown, the former being a substitute for the root, and the latter replacing the external and visible part of the tooth;

k. Dental prosthetics by dental implant is thus composed of three elements: implant, connection pieces/abutment and crown;

l. The implant is a titanium screw that serves to replace the root of a natural tooth and to support a fixing abutment and a dental crown, which replaces a natural tooth;

m. The crown needs to adjust to the characteristics of the patient's dentition, whereby it is specifically produced for each case;

n. The common surgical procedure for placing a dental prosthetic is a "staged surgery" procedure, as three stages are necessary to achieve the final objective;

o. The first stage consists of the surgical placement of the dental implant level with the bone, but within the gingiva;

p. At the end of the healing process, it is necessary to surgically expose the implant, through removal of the overlying gingiva;

q. Following placement of the dental implant, the surgeon confirms whether integration was successful and the process of union of the dental implant to the bone begins, called "osseointegration", in which the fixing abutment is fixed;

r. In a third stage, after the healing process that delimits the space to be occupied by the implant has ended and the same has been tested to confirm osseointegration, the restoration stage is carried out and, in this way, the dental crown is manufactured and placed on the osseointegrated dental implant;

s. The three basic pieces that make up the implant have no other use than to make implants;

t. A dental implant is thus an artificial tooth fixed in the gingiva or mandible in order to replace missing teeth and consists of a metallic root which, after being placed within the maxillary bone, eventually forms with it a unique structure, supporting an artificial crown or serving as a basis for a fixed bridge, restoring masticatory and phonetic capacity;

u. There are dozens of models of each of these three basic pieces that make up the implant on the market.

1. Unproven Facts

There are no facts relevant to the decision of the case that have not been proven.

1. Reasoning on Factual Matters

The facts considered proven above result from the application of two criteria to the judgment of factual matters: the first, the pertinence of each concrete fact to the decision, which it is the responsibility of the arbitration tribunal to determine, selecting from among all the facts alleged by the parties those which show suitability for that purpose and distinguishing proven from unproven matter (see article 123, No. 2 of the CTPP and article 607, No. 3 of the CCP, applicable by virtue of article 29, No. 1, paragraphs a) and e) of the LFATM). That is, the selection of factual matter relevant to the solution of the case is made through the condensation of the factual materiality alleged in the pleadings, taking into account the syllogism that must exist between the selected facts, the legal grounds and the operative part that will decide the case.

In the present case, the selection of facts relevant to the judgment of the case was made through the choice of facts which, in function of the various plausible legal solutions, had relevance for the legal solution of the issues debated in the proceedings (see the former article 511, No. 1 of the CCP, corresponding to the current article 596, applicable by virtue of article 29, No. 1, paragraph e) of the LFATM).

The second criterion underlying the decision on factual matters rests on the tribunal's conviction. The tribunal's conviction emerges from the critical analysis of the evidence, the inferences drawn from instrumental facts and all elements that are decisive for that conviction. But, beyond that conviction, consideration must be given to facts that are admitted by agreement, proven by documents or by written confession, as required by article 607, No. 4 of the CCP, applicable by virtue of article 29, No. 1, paragraph e) of the LFATM).

The tribunal's conviction is based on the free assessment of evidence, which does not extend to facts for whose proof the law requires special formality, nor to those which can only be proven by documents or which are fully proven, either by documents or by agreement or confession of the parties (article 607, No. 5 of the CCP).

From the application of these criteria to the concrete case, it results that the tribunal's conviction as to the facts selected and considered proven rested on the documents in the case file and on the testimony of the examined witness, whose testimony showed impartiality, and it is certain that, with regard to the matter on which he was examined, he demonstrated direct knowledge of the facts or at least demonstrated his reason to know for the answers given.

Finally, it is important to say that the tribunal also took into account, in its answer to the factual matters, the maxims of evidence with deterministic-natural content which, together with the degree of acceptable probability[4], gave the tribunal, in its apprehension of the facts, the material truth as was established and which, there being no unproven facts, does not justify explaining the lack of proof of the same.

B. Legal Matters

It is of particular interest to decide on the main issue to be analyzed in the present proceedings, namely, to ascertain whether the "individualized" transfer of implants and abutments can be taxed at the reduced rate of 6% because it falls within the scope of item 2.6 of List I attached to the Value Added Tax Code.

This matter has already been the subject of some decisions in this Tribunal, relying essentially on the grounds invoked in Case No. 429/2014-T, of 24 November 2014, in which we were the relators on the legal matter concerning VAT classification, and therefore we will limit ourselves to reproducing the considerations then made and to subsuming the factual matter therein, in all respects similar to what was then dealt with.

It is thus important, for this purpose, to take into account the rules governing this tax in accordance with European Union Law, with its respective transposition at the internal level and with the administrative and judicial interpretation that has been conducted on the same, especially by the Court of Justice of the European Union (CJEU).

In fact, as has been peacefully understood by case law and is a corollary of the obligation of preliminary ruling provided for in article 267 of the Treaty on the Functioning of the European Union (which replaced article 234 of the Treaty of Rome, former article 177), the case law of the CJEU has a binding character for national courts, when it has as its object issues connected with European Union Law.

1. The Interpretation of Tax Norms

As is well known, article 11 of the GTL provides that in determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed. Now, No. 1 of article 9 of the Civil Code is clear when it determines that interpretation should not be confined only to the letter of the law (literal or grammatical element), but should reconstruct from the texts the legislative intention (ratio legis), taking into account the unity of the system (systematic element), the circumstances in which the law was elaborated (teleological element) and the specific conditions of the time in which it is applied (historical element).

The first hermeneutical factor to which the interpreter can resort to achieve the true meaning and scope of application of legal texts is, therefore, that which corresponds to the literal or grammatical element.

As to the systematic element, it determines the interpretation of the norm in an integrated manner considering the other provisions that form the normative complex in which the norm to be interpreted is integrated.

Regarding the teleological element, "This element consists of the reason for being of the law (ratio legis), the end pursued by the legislator in elaborating the norm. Knowledge of this end, especially when accompanied by knowledge of the circumstances (political, social, economic, moral, etc.) in which the norm was elaborated or of the political-economic-social situation that motivated the legislative 'decision' (occasio legis) constitutes a subsidy of the utmost importance in determining the meaning of the norm.

It suffices to remember that clarification of the ratio legis reveals to us the 'valuation' or weighing of the various interests that the norm regulates and, therefore, the relative weight of these interests, the choice between them expressed by the choice that the norm expresses" [5].

Finally, according to the historical element, it is necessary to ascertain the historical context of the elaboration of the norm.

The interpretation of the norm in question should, therefore, take these elements of interpretation into account.

1. The Principle of VAT Neutrality

As is well known, VAT is an indirect tax of Community origin, multiphase, which tends to affect the entire act of consumption (general tax on consumption), and its principal characteristic is its neutrality[6].

It is customary to distinguish the neutrality of transaction taxes regarding their effects on consumption and production. There will be neutrality regarding consumption when the tax does not influence the choices of various goods or services by consumers. A tax will be neutral from the production perspective if it does not induce producers to changes in the form of organization of their production process.

As Xavier de Basto notes, "Neutrality regarding consumption depends exclusively on the degree of objective coverage of the tax and the structure of the rates, and it is out of the question to outline a consumption tax that is completely neutral. Some exemptions must always be granted (.....) and there will probably be rate differentiations applicable to different transactions in goods and services".[7]

In general terms, according to the principle of neutrality, taxation should not interfere with economic decisions nor in price formation, implying the extension of the scope of application of this tax to all phases of production and distribution and to the services sector[8].

As Teresa Lemos points out, neutrality can be viewed from several aspects: neutrality in relation to production circuits – the tax burden does not depend on the greater or lesser integration of economic circuits, neutrality regarding the impact of the tax on different products and sectors, to the extent that the rate is uniform, neutrality regarding the choice of production factors – capital and labor, and neutrality regarding consumer preferences – equal taxation of different products[9].

The principle of neutrality is reflected in the VAT Directives, and is systematically invoked by the Commission to oppose national legislation deemed incompatible with European Union Law rules, as well as by tax administrations and by taxpayers of the various Member States, and has been applied countless times by the CJEU[10].

The application of the principle of neutrality should be taken into account in the essential phases of the life of this tax, such as the rules of objective and subjective incidence, location, exemptions and the exercise of the right to deduction. We can assert that this has been the principle most invoked by the Court to justify its rulings, often appearing allied with the principle of equal treatment, uniformity and the elimination of competition distortions.

Thus, the CJEU has been concerned, namely, with the achievement of the objectives of the common system, in guaranteeing the neutrality of the tax burden of all economic activities, regardless of their objectives or results (which, as it points out, is achieved through the mechanism of deductions that frees the entrepreneur from the VAT burden he paid in his acquisitions)[11], in ensuring economic operators equal treatment, achieving a uniform definition of certain elements of the tax and guaranteeing legal certainty and facilitating actions aimed at its application[12].

From the outset, the CJEU sought to draw the appropriate consequences from the equal treatment of similar activities in VAT and from the absence of the impact of the extension of production and distribution chains on the amount of tax received by tax administrations.

It is in light of this basic principle that the tax should be interpreted and applied, so as to ensure a uniform system that guarantees sound competition in the European Union.

1. The Application of Reduced VAT Rates

3.1 The Rules of the VAT Directive

In accordance with the rules of Directive No. 2006/112/EC of 28 November, which we shall henceforth call VAT Directive or VAT D[13], taxable operations are subject to tax at the rates and conditions of the Member State in which they are located. The standard VAT rate is fixed, in accordance with the provisions of articles 96 and 97 of the VAT D, at a percentage of the taxable amount that may not be less than 15% until 31 December 2015[14].

In accordance with the provision of article 98 of the VAT D, Member States may apply one or two reduced rates at a percentage that may not be less than 5%. Reduced rates may only be applied to deliveries of goods and services in the categories listed in Annex III of the VAT Directive, e.g. Annex H of the Sixth Directive (as last amended by Directive 2009/47/EC).

The determination and definition of operations that may benefit from a reduced rate under these provisions of the VAT Directive are within the competence of the Member States.

It was with Directive 92/77/EEC of the Council of 19 October 1992[15] that Community harmonization of VAT rates was carried out, with a view to the functioning of the internal market, which came into operation on 1 January 2003. Until that date, each Member State had full autonomy to set the number of rates and their level.

As we have mentioned, Annex III of the VAT Directive contains the list of deliveries of goods and services to which the reduced rates provided for in article 98 can be applied, and contemplates, in its point 4, for the purposes that now concern us, the following realities: "Medical equipment, auxiliary material and other apparatus normally used to alleviate or treat deficiencies, for the exclusive personal use of disabled persons, including their repair, as well as car seats for children".

This wording is similar to that of the former Annex H of the Sixth Directive added by the aforementioned Directive 92/77/EEC (since repealed), which covered the following operations: "Medical equipment and other apparatus, normally used to alleviate or treat deficiencies, for the exclusive personal use of disabled persons, including their repair and car seats for children", the main difference being the subsequent expansion of its scope which came to contain "auxiliary material".

It follows from the foregoing that the possibility of applying a reduced tax rate is just that: a discretion that Member States may or may not exercise. However, if they do exercise such possibility they must do so in accordance with European Union Law rules. On the other hand, it is worth noting that the different goods and services to which Member States may apply reduced tax rates are limited to specific situations, resulting from a consensual position among themselves, in which it is recognized that they are goods or services whose social, educational, or cultural character leads them to consider as essential, as is the case, for the purposes that now concern us, regarding health.

It should be noted that in its recitals the VAT Directive states that "a VAT system achieves the greatest degree of simplicity and neutrality if the tax is levied in the most general manner possible" (recital 5) and that "it should, even though rates and exemptions are not completely harmonized, lead to competitive neutrality, in the sense that, in the territory of each Member State, goods and services of the same type are subject to the same tax burden, regardless of the extension of the production and distribution chain" (recital 7).

3.2 The Rules of the VAT Code

The VAT Code (VAT C) provides in No. 1 of its article 18 the following tax rates:

"a) For imports, deliveries of goods and services listed in List I attached to this statute, the rate of 6 %;

b) For imports, deliveries of goods and services listed in List II attached to this statute, the rate of 13 %;

c) For other imports, deliveries of goods and services, the rate of 23%."

Regarding the applicability of the rates, in accordance with the provision of article 18 of the VAT C, the standard VAT rate applies whenever the good or service in question does not fall within one of the two reduced rates provided in Lists I and II attached to the Code.

If there are groupings of several goods forming a distinct commercial product, one must take into account that, when they do not undergo changes in nature nor lose their individuality, the rate corresponding to them applies, or, if different rates apply, the highest (article 18, No. 4 of the VAT C).

In the situation under analysis, item 2.6 of List I is at issue, which represents the transposition at the level of internal law of the aforementioned point 4 of Annex III of the VAT D, pursuant to which the application of the reduced VAT rate is determined for the following goods: "2.6. Orthopedic devices, medical-surgical bands and medicinal socks, wheelchairs and similar vehicles, operated manually or by motor, for disabled persons, apparatus, artifacts and other prosthetic or compensation material intended to replace, in whole or in part, any member or organ of the human body or for the treatment of fractures and lenses for vision correction, as long as prescribed by medical prescription, in accordance with regulations to be issued by the Government within 30 days." (emphasis is ours).

As is well known, the general rate of the tax applies only if reduced rates do not apply. On the other hand, for the purposes of applying the tax rate it is important to ascertain whether we are dealing with a single operation or with principal and accessory operations.

In fact, when an operation comprises several deliveries of goods and/or services, the question arises of whether it should be considered as a single operation or as several distinct and independent services that should be assessed separately.

This question is of particular importance from the VAT perspective, namely for the purposes of applying the tax rate and the provisions relating to exemptions.

3.3 CJEU Case Law

Community case law on the application of reduced VAT rates is not very abundant. However, we can highlight some fundamental ideas that guide it, appearing to us sufficiently enlightening for this purpose.

In accordance with the understanding of the CJEU, the principle of tax neutrality also includes two other principles frequently invoked by the Commission: that of VAT uniformity and the elimination of competition distortions.

The CJEU has emphasized that the principle of tax neutrality implies that all economic activities must be treated in the same manner[16]. The same applies to economic operators who carry out the same operations[17].

Similar services, which are therefore in competition with each other, must not be treated differently from a VAT perspective[18].

As noted by Advocate General Juliane Kokott in her conclusions presented in the TNT Case[19], the principle of tax neutrality ‑ opposes treating commodities or similar services, which are therefore in competition with each other, differently from the perspective of value added tax (No. 43). In this context, it notes that "The principle of tax neutrality, which underlies the common system of tax and must be taken into account in interpreting exemption provisions, does not permit economic operators who carry out the same operations to be treated differently in respect of the collection of value added tax. (...) It includes the principle of eliminating competition distortions resulting from differential treatment from the value added tax perspective (...)" (No. 59).

The CJEU has also clarified that the delimitation of goods and services which may benefit from reduced rates must be carried out on the basis of objective characteristics. Thus, in its Judgment of 23 October 2003, Case Commission v Germany[20], the CJEU reinforced the objective character of the situations in which reduced VAT rates may be applied, concluding that, where goods or services are similar and in competition with each other, they may not be treated discriminatorily.

That is, in accordance with CJEU case law, the establishment and maintenance of different VAT rates for similar goods or services are only admissible if they do not violate the principle of tax neutrality inherent in the common VAT system, in accordance with which Member States must transpose Community rules[21].

As the CJEU takes care to emphasize, it follows from Community rules that the determination and definition of operations that may benefit from a reduced rate are within the competence of the Member States. As the Commission has emphasized in its reports on reduced rates, one of the greatest problems in the application of rates is precisely the optional nature of such application and the absence of common definitions for the categories of goods and/or services covered[22].

However, in the exercise of this competence, Member States must respect the principle of tax neutrality. Now, as we have seen, this principle opposes, in particular, treating commodities or similar services, which are therefore in competition with each other, differently from a VAT perspective, so that the aforementioned products must be subject to a uniform rate[23].

Since the reduced rate is the exception, the fact that its application is limited to concrete and specific aspects is consistent with the principle that exemptions or derogations must be interpreted strictly, provided that the principle of tax neutrality is not violated[24].

In fact, the application of one or two reduced rates is a possibility recognized to Member States by way of derogation from the principle that the standard rate applies. Now, it results from established case law that provisions that have the character of a derogation from a principle must be the subject of strict interpretation, while still ensuring that the derogation does not become ineffective[25].

Member States may not, in particular, interpret the concepts used in Annex III of the Directive in a selective manner so that, without regard to objective criteria, different treatment is granted to identical situations. In fact, while it is true that the determination of operations subject to reduced VAT rates is within the competence of the Member States, with no abstract definitions to this end in Community legislation, it is necessary that the principle of neutrality be respected. Thus, a reduced-rate VAT taxation which, being selective, violates the fundamental characteristics of tax neutrality, objectivity and uniform tax rate would be contrary to European Union Law principles, not permitting the creation of subgroups within a taxable activity, with the intention of applying different tax rates to them, where there is no objective reason justifying such difference in treatment[26].

In particular, the principle of objectivity requires the application of one and the same rule to taxable operations of the same nature, with a presumption of similarity existing when the operations in question correspond to various variants of one and the same taxable operation included in one of the categories of Annex III of the VAT Directive.

It is also important to note in this context that the question of composite services versus independent services has been the subject of CJEU examination in some judgments[27].

In this regard, it follows from article 2 of the VAT Directive that each operation must normally be considered distinct and independent[28].

However, in certain circumstances, several formally distinct services, capable of being carried out separately and thus giving rise, in each case, to taxation or exemption, must be considered as a single operation when they are not independent.

This occurs, for example, when, at the end of an analysis, even if merely objective, it is found that one or more services constitute a principal service and that the other service(s) constitute one or more accessory services that share the tax treatment of the principal service.

In this context, it is settled CJEU case law that "…there is a single service in particular in the case where one or more elements must be considered the principal service, while conversely, one or more elements must be considered accessory services that share the same tax treatment as the principal service. A service must be considered accessory in relation to a principal service when it does not constitute for the clientele an end in itself, but a means of benefiting on the best terms from the provider's main service"[29].

It may also be considered that there is a single operation when two or more elements or acts supplied by the subject liable are so closely linked that they form, objectively, a single indissociable economic operation whose decomposition would be artificial[30].

Thus, the CJEU emphasizes that "…when an operation is constituted by a set of elements and acts, all circumstances in which the operation in question is developed must be taken into account, to determine, on the one hand, whether there are two or more distinct services or a single service, and, on the other, if, in this latter case, this single service must be qualified as a service"; and that "The same applies [that is, there is a single service] when two or more elements or acts supplied by the subject liable to the consumer…are so closely linked that they form, objectively, a single indissociable economic service whose decomposition would be artificial".

But the CJEU's position on the question of the fragmentation of the principal service into several elements does not end here, having continued, over the years, to be the subject of preliminary ruling requests, particularly in the context of the Part Service Case[31].

In fact, it was the CJEU's understanding in the aforementioned case that "51…it follows from article 2 of the Sixth Directive that each operation must normally be considered distinct and independent.

1. However, in certain circumstances, several formally distinct services, capable of being carried out separately and thus giving rise, in each case, to taxation or exemption, must be considered as a single operation when they are not independent.

2. This occurs, for example, when, at the end of an analysis, even if merely objective, it is found that one or more services constitute a principal service and that the other service(s) constitute one or more accessory services that share the tax treatment of the principal service (…)" [32].

Now, in light of the CJEU case law that has been stated and which, over the years, has been established, where there are principal and accessory services, economically indissociable, a single VAT regime should apply, corresponding to that of the principal service, namely for the purposes of applying tax rates.

This occurred in the Commission/France Case, in which the application of reduced VAT to electricity, specifically to electricity subscription, was analyzed[33].

For the Commission, if subscription was considered a supply, applying a reduced VAT rate to subscription for energy network services and a standard rate to any other energy supply would violate the principle of neutrality inherent in the Sixth Directive. In fact, in its understanding, even if it were a supply, the same rate should be applied to subscription and to any other electricity consumption, in accordance with the principle of neutrality.

According to the conclusions of Advocate General Siegbert Alber presented on 10 October 2002, subscription could only be considered an autonomous service if it were a service that had to be distinguished from the actual supply of natural gas and electricity.

The CJEU, regarding the charge raised as a subsidiary title regarding the violation of the principle of uniformity of the tax rate, invoked the following:

"88. The principle of tax neutrality would be violated if French tax legislation were such that equal services, which are in a relationship of competition, were treated differently in value added tax.

1. As has already been stated, subscription and the supply of natural gas and/or electricity constitute, for the vast majority of final consumers, an integrated service that encompasses the provision of services and the supply of goods (27), and not distinct services. It is only the price of the service that is divided into two parts, which are the subscription amount and the variable amount payable depending on the quantity of consumption.

(…)

1. Furthermore, this tax regime may infringe the principle of tax neutrality. In fact, equal services are applied different tax rates."

It was thus in this context that the CJEU decided in favor of the French Republic.

The same reasoning was adopted by the CJEU in its Judgment of 3 April 2008, Case Finanzamt Oschatz,[34], concluding that a connection line was not distinct from water distribution and should be applied the same reduced VAT rate as electricity. As was emphasized, "40. Although the Sixth Directive does not contain a definition of water distribution/supply, nor does it follow from its provisions that this concept should be subject to different interpretations depending on the annex in which it is mentioned. Being the individual connection line indispensable for placing water at the disposal of the public, as results from No. 34 of the present judgment, it must be considered that it is also covered by the concept of water supply mentioned in category 2 of Annex H of the Sixth Directive."

Also in the same sense, cite the CJEU Judgment of 10 March 2011, Cases C‑497/09, C‑499/09, C‑501/09 and C‑502/09, where the scope of the expression «foodstuffs» which appeared in its Annex H, category 1, of the Sixth Directive was at issue, again for the purposes of application of reduced VAT. As the Court began by emphasizing, it would be necessary to ascertain "…whether, from the VAT perspective, the various activities in question in each of the main proceedings must be treated as distinct operations taxable separately or as single complex operations composed of various elements" (No. 51).

It further emphasized that, "As results from CJEU case law, when an operation is constituted by a set of elements and acts, all circumstances in which the operation in question is developed must be taken into account, to determine, on the one hand, whether there are two or more distinct services or a single service and, on the other, whether, in this latter case, this single service must be qualified as a delivery of goods or as a service" (No. 52).

C. Position of the Claimant

Basically the Claimant bases its understanding on the following lines:

a) Dental prosthetics are composed of implant, connection pieces and crown, these three elements, distinct, that form the dental prosthetic;

b) These three elements, although separate, are nothing other than prosthetic material, in that they serve no other end or purpose than to fill the absence of one or more teeth;

c) The goods acquired by the Claimant, implants and connection pieces, are an integral part of the dental prosthetic, whether acquired separately or jointly. Whether separately or jointly, the Claimant is always acquiring the same goods, the same reality;

d) Being prosthetic material, the same reality cannot be treated differently; If such goods, acquired jointly, are subject to the reduced VAT rate, the same goods, even if acquired separately, cannot have differentiated treatment,

e) The interpretation that the Tax Administration wishes to make of item 2.6 of List I attached to the VAT C, according to which the reduced VAT rate applies only to "complete implant units", but not to the parts that constitute the complete dental implant, has no support in the legal text and, if followed, would introduce discriminatory tax treatment for implant prosthetics;

f) Not being susceptible to any other use than in dental medicine, they must be taxed at the reduced VAT rate, as they are classified under item 2.6 of the aforementioned List I.

D. Position of the Respondent

In its general lines the Tax and Customs Authority comes to defend the following:

a) The various components that make up dental implants when transacted separately must be classified as parts or accessories of an implant, and cannot be classified under item 2.6 of List I attached to the VAT C because they do not constitute, autonomously or unitarily, an artificial piece that replaces an organ of the body or part of it (the TA uses the expression "complete goods" for this purpose, in substitution for the concept previously used by it of "unique implant unit"), in the sense of assuming or actually replacing the function of the part of the body with deficiency or illness, and the standard rate of tax applies to them;

b) In fact, the parts and accessories of prosthetics such as the pieces in question, in addition to not being a prosthetic, are not capable, considered individually, of replacing a part of the body or its function, that is, they do not configure themselves as "complete goods" – i.e., those which, by themselves, are capable of replacing a part of the body or its function;

c) Only when the transaction concerns complete transplants, assembled as they are applied in the patient's mouth, will there be entitlement to the benefit of the reduced VAT rate under the provision of the aforementioned item;

d) In the matter of application of reduced VAT rates, as these are exceptional situations, the principle of strict interpretation applies;

e) From the perspective of neutrality we must compare the taxation of fixed prosthetics with the taxation of removable prosthetics and not the taxation of pieces and/or accessories of fixed prosthetics with this type of prosthetic, and in the case of removable prosthetics the pieces are taxed at the standard rate.

E. Application to the Concrete Case

Considering the factual matter given as proven and the legal matter that has been set out, it is important to ascertain the legitimacy of the Claimant's claim. That is, it is necessary to analyze whether the Portuguese legislator intended to restrict the application of the reduced rate, as the Tax Administration claims, only when transactions concern complete implants or whether the reduced rate can apply to transactions of the implant and abutment components that make up dental implants when transacted separately.

It is important to emphasize that the meaning and scope of the reduced rate applied in this domain should take into account the good rules of hermeneutics, taking into account not only the grammatical element, but also its context, reason for being and purposes pursued by item 2.6, and should result in a declaratory interpretation (and not restrictive, contrary to what the TA argues).

Now, from the outset, the letter of the provision appears to indicate that dental implants fall within the mentioned list, and we are dealing with prosthetic material intended to replace an organ of the human body, in this case, the dental apparatus.

In fact, nothing in the letter of the law leads us to restrict its application to situations of "complete goods" of implant, in the sense that the TA wishes to convey.

Furthermore, it results from the facts given as proven that such concept does not exist as such, there existing instead implants composed of the three pieces that comprise them – crown, implant and abutment, which, according to surgical technique, are introduced in stages in the patient's mouth, thus giving rise, as a whole, to an implant. In reality, these three pieces are inseparable and unusable except for the composition of an implant as a composite prosthetic.

Not existing such "complete goods" of implant, in the sense that the TA wishes to convey, the understanding of the Tax Administration ends up denying the benefit of the reduced rate to this type of prosthetics, thus calling into question, without an acceptable rational reason, the ratio legis that presided over the acceptance of this item in the terms in which it is written – the protection of public health. In fact, if such understanding were accepted, an arbitrary discriminatory treatment would be introduced between different dental prosthetics. On the one hand, prosthetics composed of a single piece would benefit from the reduced rate of 6%, on the other hand, "composite" prosthetics would be taxed at the standard rate. This fact is discriminatory, violating, from the outset, namely, the provisions of articles 5, No. 2 and 7, No. 3 of the GTL. In fact, in accordance with the provision in the first statutory provision, of heading "Purposes of Taxation", taxation respects the principles of generality, equality, legality and material justice. For its part, in accordance with the provision of article 7, No. 3, "Taxation does not discriminate against any profession or activity nor prejudices the practice of legitimate acts of a personal nature, without prejudice to exceptional increases or benefits determined by economic, social, environmental or other purposes".

But we would be essentially facing an intolerable violation of the principle of neutrality that governs this tax at the level of European Union Law, treating equal goods differently without any acceptable rational reason, a fact that violates the rules governing this tax as well as all CJEU case law to which we have referred.

As is well known, in accordance with the provision of No. 2 of article 11 of the GTL, whenever, in tax norms, terms appropriate to other branches of law are used, they must be interpreted in the same sense as they have there, unless otherwise directly follows from the law. For its part, in No. 3 of the said statutory provision it is determined that, persisting doubt about the meaning of the norms of application to be applied, the economic substance of the taxable facts should be heeded. Now, what the Community legislator, the European Commission and CJEU case law determine is that, in the use of the concepts employed for the purposes of applying reduced rates, Member States should take into account the economic effects in question in a way as not to call into question the essential principle of tax neutrality.

That is, if we accept the understanding conveyed by the TA in the concrete case, we would have a difference in treatment for identical realities resulting not from the VAT Directive but from a deficient application of the same by the Tax Administration.

It is true that derogatory norms, such as is the case with the norm that enables Member States to apply reduced tax rates, should be applied restrictively, but we should not confuse this fact with selective application, a completely different reality that calls into question the most basic characteristics of the tax.

Now, it is important to emphasize again that, as was proven, the "pieces" in question – implant and abutment – cannot be used separately, being specially designed and manufactured for the production of a piece designated as an implant. In fact, contrary to what the TA alleges, there is no single piece implant in the factual sense that it wishes to give it, but only the implant constituted, as such, by implant, crown and abutment, inseparable pieces with this reality in view.

It is quite evident that the fact that such pieces are marketed separately, as in the cited case, cannot affect the classification and qualification for VAT purposes, with form taking precedence over substance.

In reality, what is at issue in the present proceedings and was proven subsumes under the legal provision of item 2.6 of List I attached to the VAT C, consisting of "…apparatus, artifacts and other prosthetic or compensation material intended to replace, in whole or in part, any member or organ of the human body".

And, let it be emphasized again, the ratio legis that leads the legislator to accept the application of the reduced VAT rate in such situations – the protection of health – is exactly the same that leads us to this interpretation.

It should be noted, lastly, that, from the case law cited, even if, as the TA claims, "complete goods" of implant supposedly existed, in the sense it wishes to convey, we would still have to recognize that the crown, the abutment and the implant would configure themselves as a single piece or, in the last instance, even if incorrectly not understood in this way, as accessory pieces, as the TA itself expressly recognizes, and as such, should be taxed at the reduced rate, following the treatment of the principal operation.

That is: whether by resorting only to the rules of European Union Law or by simple application of good hermeneutic rules, the result is the same – it can only be concluded that item 2.6 of List I attached to the VAT C includes both implants composed of a single piece and composite implants.

In fact, all interpretive elements of tax norms that can be invoked for this purpose, as well as the characteristics of VAT and the interpretation that the CJEU has been making of them, lead us to conclude that, in the present case, the reduced VAT rate provided for in item 2.6 of List I attached to the VAT C should be applied to the transfer of implants and abutments now under analysis, terms in which the Claimant is correct.

In light of the foregoing, it is concluded that the VAT assessments challenged suffer from error on the legal requirements, by erroneous interpretation of item 2.6 of List I attached to the VAT C.

This defect justifies the annulment of the assessments that are the subject of the present arbitration proceedings.

F. Payment of Compensatory Interest

The Claimant cumulates with the request for annulment of the tax act that is the subject of the present proceedings, the request for condemnation of the TA to payment of compensatory interest on the amount paid by it following the notification of the assessments now annulled.

It is a prerequisite for the award of compensatory interest that the error in which the TA labored be attributable to it (see the provision of article 43 of the GTL).

In the case of the proceedings, it is manifest that, following the illegality of the assessment acts, for the reasons indicated, there is entitlement to reimbursement of the tax paid by the Claimant, by virtue of the provision of the mentioned articles 24, No. 1, paragraph b) of the LFATM and 100 of the GTL, as this is essential to "restore the situation that would have existed if the tax act that is the subject of the arbitration decision had not been carried out".

It is also clear in the proceedings that the illegality of the tax assessment act contested is directly attributable to the Respondent which, on its own initiative, carried it out without legal support, suffering from an erroneous appreciation of the legally relevant facts and consequent application of the legal norms to the concrete case.

Thus, the Claimant is entitled to receipt of compensatory interest, in accordance with the provisions of articles 43, No. 1 of the GTL and 61 of the CTPP.

Compensatory interest is owed to the Claimant from the date on which it made payment of the tax in question in the proceedings, until the full reimbursement of the amount paid, at the legal rate.

III. Value of the Proceedings

In accordance with the provision of article 306, No. 2 of the CCP and 97-A, No. 1, paragraph a) of the CTPP and 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 8,241.61 (eight thousand, two hundred and forty-one euros and sixty-one cents).

IV. Operative Part

In light of the foregoing, in the arbitration proceedings brought by A..., S.A., against the TAX AND CUSTOMS AUTHORITY, the Arbitration Tribunal decides:

a) To declare the request for arbitration pronouncement well-founded;

b) To annul, on the grounds of violation of item 2.6 of List I attached to the VAT C, the VAT assessments indicated in point e. of the factual matter given as proven;

c) To condemn the Respondent to refund to the Claimant the value of the assessments paid by the latter in the amount of € 8,241.61 (eight thousand, two hundred and forty-one euros and sixty-one cents) plus compensatory interest accruing on that amount, calculated from the date of payment of the VAT resulting from such assessments until the date of its full restitution.

V. Costs

In accordance with the provisions of article 22, No. 4 of the LFATM, the amount of costs is fixed at € 918 (nine hundred and eighteen), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 5 November 2015

The Arbitrator

(Clotilde Celorico Palma)

[1] Manual of Civil Procedure, 2nd ed., Coimbra, Coimbra Ed., 1985, p. 104.

[2] Moreover, the exceptions that prevented knowledge of the merits of the case and led to dismissal of the instance always assumed within tax and administrative litigation the legal name of "preliminary issues", contrary to the denomination dilatory exceptions adopted in civil procedure. This is the case with article 176 of the Tax Procedure Code, regarding the absence of procedural requirements of the appeal to the [former] tax court of second instance and article 57, No. 4 of the APTA, applicable by virtue of the provision of article 54 of the LPTA.

[3] Manual of Tax Procedure and Process Annotated, Volume II, 6th ed., Lisbon, Áreas Ed., 2011, pp. 316 et seq.

[4] On the aforementioned contents and evidentiary maxims, probabilistic judgments and judicial presumptions, see Karl Larenz, Methodology of Legal Science, 2nd edition, pp. 367 et seq. and Pires de Lima - Antunes Varela, Civil Code Annotated, 4th ed., Vol. I, p. 312.

[5] As taught to us by J. Baptista Machado, Introduction to Law and Legitimizing Discourse, Coimbra, 1983, pp. 182 and 183.

[6] See, Xavier de Basto, Taxation of Consumption and its International Coordination, CCTF No. 164, Lisbon 1991, p. 39 to 73 and Clotilde Celorico Palma, Introduction to Value Added Tax, IDEFF Notebooks No. 1, Almedina, 6th edition, September 2014, pp. 19 to 34.

[7] Xavier de Basto, ibidem, pp. 29 and 30.

[8] According to Xavier de Basto, ibidem, p. 29, in a generic formulation, neutrality is understood to be the characteristic of a tax that is analyzed as not altering the relative prices of the alternatives on which the choices of economic agents fall, thus not originating "distortions" of their behavior. In another equally technical formulation, it will be said that a neutral tax will be one which, causing, as any tax cannot help but cause, income effects, is free from substitution effects.

[9] See. Maria Teresa Graça de Lemos, "Some Observations on the Eventual Introduction of a Value Added Tax System in Portugal", CTF No. 156, December 1971, p. 10.

[10] As is noted in Francis Lefebre (author Francisco Xavier Sanchéz Galhardo) - Memento Expert, VAT: Community Case Law, Directive 2006/112/EC, Updated as of 31 December 2007, Francis Lefebre Editions, 2008, p. 68, "It is customary to refer to the principle of neutrality as fundamental in the functioning of VAT, so that the mechanism of the tax is supposed to avoid any discriminatory situation or distortion in the functioning of enterprises."

Regarding the application of this principle by the CJEU, see also Michel Guichard, "The Spirit of Community VAT Laws: From the Principle of Neutrality", Review of Tax Law No. 36, 2001, pp. 1205-1212.

[11] See, in particular, Judgments of 14 February 1985, Case Rompelman, Case 268/83, Rec., p. 655, No. 19, 22 June 1993, Case Sofitam, Case C-333/91, Colect., p. I-3513, No. 10, and 6 April 1995, Case BPL Group, Case C-4/94, Colect., p. I-983, No. 26.

[12] In this sense, see Ramírez Gómez, in Case Law of the Court of Justice of the European Communities in VAT Matters, Aranzadi Publishing House, Pamplona, 1997, pp. 232 et seq.

[13] Published in OJ No. L 347 of 11 December 2006. Essentially, this Directive came to reformulate the text of the Sixth Directive (it is a substantially formal reformulation, given that its text is excessively dense, given the successive amendments introduced to it since its approval). With the reformulation it came to have 414 articles (it had 53).

[14] On the rules for application of reduced VAT rates see Clotilde Celorico Palma, "The Proposed State Budget for 2012 and VAT Rates", Review of Public Finance and Tax Law, Year IV, No. 3, November/2011.

[15] Published in OJ No. L 316 of 31 October 1992.

[16] Judgment of 20 June 1996, Case Wellcome Trust, Case C‑155/94, Colect., p. I‑3013, No. 38.

[17] Judgment of 7 September 1999, Case Gregg, Case C-216/97, Colect., p. I-4947, No. 20.

[18] See, in particular, Judgments of 12 June 1979, Case Nederlandse Spoorwegen, Case 126/78, Rec., p. 2041, 11 October 2001, Case Adam, Case C‑267/99, Colect., p. I‑7467, No. 36, 23 October 2003, Case Commission v Germany, Case C‑109/02, Colect., p. I‑12691, No. 20, and 26 May 2005, Case Kingscrest Associates and Montecello, Case C‑498/03, Colect., p. I-4427, No. 41.

[19] Judgment of 23 April 2009, Case C-357/07, Colect., p. I-5189.

[20] Case C-109/02, already cited.

[21] See, in this sense, the Judgment of 7 September 1999, Case Gregg, already cited, No. 19.

[22] Report of 13 November 1997 [COM (97) 559 final] and Report of 22 October 2001 (COM (2001) 599).

[23] See, in this sense, Judgment of 3 May 2001, Case Commission v France, Case C-481/98, Colect., p. I-3369, No. 22, and Judgment of 11 October 2001, Case Adam, already cited, Nos. 35 and 36.

[24] See the Judgment of 18 January 2001, Case Commission v Spain, Case C-83/99, Colect. p. I-00445.

[25] See, in particular, Judgments of 30 September 2010, Case EMI Group, Case C‑581/08, Colect., p. 8607, No. 20, and 28 October 2010, Case Axa UK, Case C‑175/09, Colect., p. 10701, No. 25.

[26] Citing the conclusions of the Judgment of 23 October 2003, Case Commission v Germany, Case C-109/02, Colect., p. I-12691.

[27] See, in particular, Judgments of 25 February 1999, Case CPP, Case C‑349/96, Colect., p. I‑973, No. 27, and 27 October 2005, Case Levob Insurance and OV Bank, Case C‑41/04, Colect., p. I‑9433, No. 18.

[28] See Judgments, already mentioned, Case CPP, No. 29, and Case Levob Insurance and OV Bank, No. 20.

[29] Case CPP, already cited, No. 30.

[30] Case Levob Insurance and OV Bank, already mentioned, No. 22.

[31] Judgment of 21 February 2008, Case Part Service, Case C-425/06, Colect., p. I-897.

[32] Ibidem.

[33] Judgment of 8 May 2003, Case Commission v France, Case C-384/01, Colect., p. I-4395.

The French Republic amended its VAT legislation applicable to the supply of electricity and natural gas, having applied to subscription, that is, the fixed amount to be paid for connection to supply networks for a specified period of time and which also includes other fixed expenses, the reduced rate of tax and to the variable amount payable depending on the quantity of consumption, maintained the applicability of the standard rate.

The Commission charged France, within the scope of an infringement action, on the one hand, of not having properly and/or fully transmitted to it the information relating to the amendment that it is incumbent upon it to provide by virtue of the Sixth VAT Directive. On the other hand, it considered that the application of different value added tax rates to the two services of the set of the operation was incompatible with the provisions of the directive.

[34] Case C‑442/05, Colect., p. 1817.