Process: 21/2019-T

Date: September 11, 2019

Tax Type: IVA

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Case 21/2019-T) addresses the critical issue of burden of proof in VAT self-assessment disputes under Portuguese tax law. The taxpayer, a wholesale motor vehicle parts company, challenged VAT self-assessments for October-December 2015 totaling €129,779.17 following a tax inspection. The central legal question concerned who bears the burden of proving the facts in dispute when a taxpayer contests their own VAT self-assessment declarations. The arbitral tribunal clarified that unlike standard tax assessments where the Tax Authority bears the burden of proof, in self-assessment cases the taxpayer who submitted the original declarations bears this burden. This is because self-assessments (autoliquidação) are based on the taxpayer's own declarations, which are presumed true under Article 75/1 of the General Tax Law (Lei Geral Tributária). The tribunal emphasized that when taxpayers contest their own previously submitted VAT declarations, they are challenging the veracity of their own statements, thus they must prove the facts supporting their challenge. The case involved alleged improper treatment of supplies as exempt intra-Community transactions under Article 14(a) of the VAT Directive. The taxpayer had initially voluntarily regularized the situation by filing substitute declarations after receiving the draft inspection report, then subsequently filed an administrative appeal that was rejected before proceeding to CAAD arbitration. This decision establishes important precedent regarding evidentiary standards in VAT self-assessment disputes and procedural requirements for challenging such assessments through Portuguese tax arbitration.

Full Decision

Tax Arbitration Jurisprudence

Case No. 21/2019-T

Decision Date: 2019-09-11

VAT

Value of Claim: € 127,779.17

Subject Matter: VAT – Self-Assessment – Burden of Proof.

ARBITRAL DECISION (consult full version in PDF)

I – REPORT

  1. On 11 January 2019, A..., LDA., Tax ID No. ..., with registered office at..., lot..., ... ..., filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011 of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012 of 31 December (hereinafter, abbreviated as RJAT), seeking a declaration of illegality of the VAT self-assessment acts for the periods 201510, 201511 and 201512 and respective interest, in the total amount of € 129,779.17, as well as of the administrative appeal decision which was the subject of those acts.

  2. To substantiate its request, the Claimant alleges, in summary, that the tax acts in question suffer from errors in the factual and legal premises.

  3. On 14-01-2019, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority.

  4. The Claimant did not proceed to appoint an arbitrator, wherefore, pursuant to the provisions of Article 6, paragraph 2, subparagraph a) and Article 11, paragraph 1, subparagraph a) of the RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the assignment within the applicable deadline.

  5. On 04-03-2019, the parties were notified of these appointments and expressed no intention to challenge any of them.

  6. In accordance with the provisions of Article 11, paragraph 1, subparagraph c) of the RJAT, the Collective Arbitral Tribunal was constituted on 25-03-2019.

  7. On 06-05-2019, the Defendant, duly notified for this purpose, presented its defence by way of objection.

  8. Pursuant to Articles 16, subparagraphs c) and e), and Article 29, paragraph 2, both of the RJAT, the holding of the meeting referred to in Article 18 of the RJAT was dispensed with.

  9. Having been granted a deadline for submission of written pleadings, the parties refrained from doing so.

  10. It was indicated that the final decision would be notified by the end of the deadline provided for in Article 21, paragraph 1 of the RJAT.

  11. The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to Articles 2, paragraph 1, subparagraph a), 5 and 6, paragraph 2, subparagraph a), of the RJAT.

The parties have legal personality and legal capacity, are legitimated and are legally represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011 of 22 March.

The proceedings do not suffer from any nullities.

Thus, there is no obstacle to the consideration of the case.

All matters being duly considered, it behoves us to render:

II. DECISION

A. MATTER OF FACT

A.1. Facts Established as Proven

  1. The Claimant commenced its activity in 1966, with its principal activity being "Wholesale Trade in Parts and Accessories for Motor Vehicles," CAE 45310, being registered for VAT purposes under the normal monthly periodicity regime and for corporate income tax purposes under the general taxation regime for taxable profit.

  2. The Claimant was subject to a tax inspection procedure, based on the service order No. OI2017..., covering the year 2015, carried out by the Tax Inspection Services (SIT) of the Tax Authority Office of ..., in the course of which the Inspection Services included in the draft Report, among other matters, the following:

  3. The Claimant now voluntarily regularized the corrections proposed in the draft Report, by filing substitute declarations for the periods in question.

  4. The Claimant timely filed an administrative appeal which was registered under No. ...2018..., against the VAT self-assessments relating to periods 2015-10, 2015-11 and 2015-12, in the amount of €129,779.17.

  5. Administrative appeal which was subject to a rejection decision by the Director of Finances of ... dated 2019-01-09, notified by post to the Claimant on 2019-01-11, to the person of its representative.

  6. The supplies referred to in the draft Report were recorded in the Claimant's accounting as if they were intra-Community supplies of goods, subject to VAT, but exempt under Article 14, subparagraph a) of the VAT Directive.

A.2. Facts Established as Not Proven

There are no facts that should be considered as not proven that are material to the decision.

A.3. Justification of the Factual Matter Proven and Not Proven

With regard to the matter of fact, the Tribunal need not pronounce on all that was alleged by the parties; rather, it is incumbent upon it to select the facts that are important for the decision and to distinguish the proven matter from the not proven (cf. Article 123, paragraph 2, of the CPPT and Article 607, paragraph 3 of the CPC, applicable by virtue of Article 29, paragraph 1, subparagraphs a) and e), of the RJAT).

Thus, the facts pertinent to the adjudication of the case are chosen and defined according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (cf. former Article 511, paragraph 1, of the CPC, corresponding to the current Article 596, applicable by virtue of Article 29, paragraph 1, subparagraph e), of the RJAT).

Thus, taking into account the positions assumed by the parties, in light of Article 110/7 of the CPPT, the documentary evidence joined to the file, the facts listed above were considered proven as material to the decision.

Allegations made by the parties and presented as facts, consisting of strictly conclusive statements, incapable of proof and whose veracity must be assessed in relation to the concrete factual matter consolidated above, were neither given as proven nor as not proven.

B. ON THE LAW

At issue in the present tax arbitration proceedings is the assessment of the legality of the VAT self-assessments by the Claimant relating to periods 2015-10, 2015-11 and 2015-12.

Before proceeding with the analysis of the question to be decided, it is necessary to make some clarifications regarding the burden of proof in the present action.

Indeed, and as appears from the initial request, the Claimant seems to assume that such burden rests on the Tax Authority, stating, among other things, that "since the Tax Authority seeks the assessment of VAT, it falls upon it the burden of proof of the facts constitutive of the right it invokes," and that "The Tax Authority proves nothing regarding the non-existence of the legal prerequisites, reason why it must be burdened thereby."

Nevertheless, since self-assessments, and not assessments by the Tax Authority, are at issue, this will not be the case.

Indeed, self-assessments are based on the declaration and subsequent self-assessment of tax by the taxpayer itself, wherefore the basis for such assessments is the taxpayer's own declaration, such that in such cases it falls upon the Tax Authority only to ensure that the tax assessment is in conformity with the taxpayer's declaration which, pursuant to Article 75/1 of the General Tax Law, are presumed to be true.

Thus, as was held in the Supreme Court of Administrative Justice decision of 27-06-2012, rendered in case 0982/11, "In the process of judicial challenge, the burden of proof of the facts constitutive of the rights of the tax administration or of taxpayers rests upon whoever invokes them."

And, as is clarified in the same decision, "in the case of the present proceedings the situation is different: since a self-assessment is at issue, it is the taxpayer who comes to contest its own declaration, impugning its veracity and even its authenticity, (...) Thus, it fell upon the appellant to demonstrate the fact alleged by it."

Also in the present proceedings, the Claimant presents itself as contesting its own self-assessments, arguing that such assessments suffer from errors in the legal and factual premises, seeking to benefit from the regime of Article 14, subparagraph a) of the VAT Directive applicable at the level of the exemption provided therein.

In these terms, and taking into account the provisions of Article 74/1 of the General Tax Law, it is the Claimant that bears the burden of proof of the prerequisites of the rule from which it seeks to benefit, noting once more that what is at issue in the situation sub iudice is not the assessment of the legality of any correction made by the Tax Authority, but the assessment of the legality of self-assessments made by the Claimant.

That being said, and as the Claimant itself assumes, "in order to affirm the existence of an intra-Community supply exempt from tax in light of the cited provisions of the VAT Directive, it is indispensable that the goods be dispatched or transported – by the seller, by the buyer or on their behalf – from national territory to another Member State, destined for the buyer."

Now, with respect to these circumstances, no fact was alleged, nor consequently proven.

The Claimant wishes, as emerges from the initial request, that this absence of proof be valued against the Defendant, imputing upon it the burden of the corresponding proof.

Nevertheless, as has been seen, it is the Claimant upon whom such burden rests, and it is against the Claimant that the absence of proof must be resolved, pursuant to Article 414 of the Code of Civil Procedure.

Thus, there being no proof whatsoever in the file that the goods were dispatched or transported – by the seller, by the buyer or on their behalf – from national territory to another Member State, destined for the buyer, the Claimant's claim cannot be accepted.

The conclusion set forth above is not hindered by what was decided in the decisions rendered by the Court of Justice of the European Union in cases C-21/16, inasmuch as, by the Claimant not demonstrating that goods were dispatched or transported – by the seller, by the buyer or on their behalf – from national territory to another Member State, destined for the buyer, there is no identity of fact with what was decided therein.

Neither are the considerations raised by the Claimant with respect to what the Tax Authority stated in the draft inspection report worthy of acceptance.

Indeed, that draft report does not form part of the justification of any tax act detrimental to the Claimant.

It was merely a draft report which never came to be definitively concluded, inasmuch as the Claimant chose to file substitute declarations, thereby triggering the closure of the inspection procedure directed against it, such that the Tax Authority did not ultimately determine any corrective adjustments.

Wherefore, as previously explained, the Tax Authority has no burden of proof other than that the tax assessments are in conformity with what was declared by the Claimant, which in this case is not even disputed.

Thus, and in light of all that has been set forth, there can be no doubt that the Claimant's claim cannot be accepted, and therefore the arbitral request must be fully dismissed.

C. DECISION

For these reasons, this Arbitral Tribunal decides to render the arbitral request filed wholly unmeritorious and, in consequence:

a) Absolve the Defendant of the claim;

b) Condemn the Claimant to pay the costs of the proceedings, in the amount fixed below.

D. Value of the Proceedings

The value of the proceedings is fixed at € 129,779.17, pursuant to Article 97-A, paragraph 1, subparagraph a), of the Code of Procedure and Tax Procedure, applicable by virtue of subparagraphs a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 3 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The amount of the arbitration fee is fixed at € 3,060.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Claimant, since the claim was wholly unmeritorious, pursuant to Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 5, of the cited Regulation.

Notify accordingly.

Lisbon, 11 September 2019

The Presiding Arbitrator

(José Pedro Carvalho)

The Arbitrator Member

(António Alberto Franco)

The Arbitrator Member

(Arlindo José Francisco)

Frequently Asked Questions

Automatically Created

What is VAT self-assessment (autoliquidação de IVA) and how does it apply under Portuguese tax law?
VAT self-assessment (autoliquidação de IVA) under Portuguese tax law is a system where taxpayers themselves declare and calculate the VAT due rather than receiving an assessment from the Tax Authority. The taxpayer submits periodic declarations (typically monthly) reporting their VAT transactions and computing the tax payable or refundable. These self-assessed declarations form the legal basis for the tax liability. Under Article 75/1 of the General Tax Law (Lei Geral Tributária), taxpayer declarations are presumed to be true and accurate. Self-assessment applies to most VAT taxpayers in Portugal operating under the normal regime, who must file declarations for each tax period reporting output VAT on sales, input VAT on purchases, and the net amount due or refundable. The Tax Authority maintains the right to inspect and verify these declarations, and taxpayers can voluntarily correct errors by filing substitute declarations.
Who bears the burden of proof in disputes involving VAT self-assessment in Portugal?
In disputes involving VAT self-assessment, Portuguese law places the burden of proof on the taxpayer who challenges their own previously submitted declarations. This represents a significant departure from standard tax assessment disputes where the Tax Authority bears the burden of proving facts constitutive of the tax obligation. As clarified in this CAAD decision citing Supreme Administrative Court precedent (case 0982/11 from 27-06-2012), when a taxpayer contests their own self-assessment declaration, they are essentially challenging the veracity or authenticity of their own statements. Since Article 75/1 of the General Tax Law establishes a legal presumption that taxpayer declarations are true, the burden falls on the taxpayer to rebut this presumption by proving the facts that support their challenge. This burden of proof allocation reflects the fundamental principle that whoever invokes rights must prove the constitutive facts, and in self-assessment cases, it is the taxpayer seeking to overturn their own declaration.
How can taxpayers challenge VAT self-assessment acts through CAAD tax arbitration?
Taxpayers can challenge VAT self-assessment acts through CAAD (Centro de Arbitragem Administrativa) by filing a request for constitution of an arbitral tribunal under the Legal Framework for Arbitration in Tax Matters (RJAT - Regime Jurídico da Arbitragem em Matéria Tributária), approved by Decree-Law 10/2011 of 20 January. The process begins with submitting an arbitration request pursuant to Articles 2 and 10 of RJAT, which must identify the contested self-assessment acts and state the grounds for illegality. Taxpayers may contest either the original self-assessment or subsequent administrative decisions (such as rejection of administrative appeals). The request can be submitted even after filing an administrative complaint (reclamação graciosa), as occurred in this case where the taxpayer first pursued administrative appeal before proceeding to arbitration. CAAD arbitration provides an alternative to judicial courts for resolving tax disputes, offering a specialized, typically faster resolution process. The arbitral tribunal has jurisdiction over VAT disputes under Article 2(1)(a) of RJAT, and decisions are binding and enforceable.
What is the procedure for filing a request for arbitral tribunal constitution at CAAD for VAT disputes?
The procedure for filing a request for arbitral tribunal constitution at CAAD for VAT disputes follows specific steps under RJAT. First, the taxpayer submits a written request identifying the contested tax acts (in this case, VAT self-assessments for specific periods), the amounts involved, and the legal and factual grounds challenging the acts' legality. Upon receipt, CAAD registers and automatically notifies the Tax Authority. The taxpayer may appoint an arbitrator or, if they decline (as occurred here), the President of CAAD's Deontological Council appoints the arbitrator(s) under Article 6(2)(a) and Article 11(1)(a) of RJAT. For collective tribunals, three arbitrators are appointed. Parties receive notification of appointments and may challenge arbitrators for cause. The tribunal is formally constituted once all appointments are finalized (here, on 25-03-2019). The Tax Authority then files its defense. The tribunal may dispense with oral hearings under Articles 16 and 29(2) of RJAT. Parties may submit written pleadings. The final decision must be issued within the deadline specified in Article 21(1) of RJAT.
Can a prior administrative complaint (reclamação graciosa) decision on VAT self-assessment be reviewed by a CAAD arbitral tribunal?
Yes, CAAD arbitral tribunals can review prior administrative complaint (reclamação graciosa) decisions on VAT self-assessment, as demonstrated in this case. The taxpayer filed an administrative appeal registered under process number ...2018... against the VAT self-assessments for periods 2015-10, 2015-11, and 2015-12. This administrative appeal was rejected by decision of the Director of Finances dated 2019-01-09 and notified to the taxpayer on 2019-01-11. Subsequently, the taxpayer filed the CAAD arbitration request on 2019-01-11 seeking a declaration of illegality of both the underlying VAT self-assessment acts and the administrative appeal decision itself. This demonstrates that CAAD arbitration jurisdiction extends to reviewing administrative decisions that ruled on the legality of self-assessments. The prior administrative procedure does not preclude subsequent arbitration; rather, taxpayers may pursue administrative remedies before or instead of arbitration, and CAAD can exercise full review powers over both the original tax acts and intervening administrative decisions, providing comprehensive dispute resolution.