Process: 225/2018-T

Date: March 4, 2019

Tax Type: IVA

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 225/2018-T) involved A... S.A. challenging VAT assessments totaling €185,425.03 for 2012 relating to intra-Community transactions with Spanish company B... SL. The taxpayer alleged three grounds for annulment: (i) procedural defect for violation of the right to a hearing under Article 60(1) LGT when the inspection report was notified to their representative; (ii) expiry of the assessment period (caducidade) under Article 45 LGT; and (iii) incorrect application of VAT exemption rules for intra-Community supplies under Article 14 RITI. The case centered on whether supplies to B... SL qualified for VAT exemption as intra-Community transactions, given that goods were delivered to Portuguese addresses (Vila Nova de Famalicão) for transformation before subsequent dispatch to other EU Member States. B... SL had its intra-Community operator registration cancelled by Spanish authorities for providing false domicile information. The tribunal examined whether notification of the inspection report to the taxpayer's legal representative satisfied procedural requirements, whether the assessment was made within statutory time limits considering when notification occurred, and whether the substantive conditions for VAT-exempt intra-Community supplies were met when goods underwent transformation in Portugal before being dispatched to final destinations in Germany and other Member States. The decision addresses fundamental questions about the validity of VAT assessments in triangular intra-Community transactions and procedural safeguards in tax inspections.

Full Decision

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Maria Alexandra Mesquita and Alexandre Andrade, appointed by the Deontological Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby decide as follows:

I – REPORT

  1. On 30 April 2018, A..., S.A., Tax ID..., with registered office at..., ..., ..., ...-... ..., filed a petition 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 Regime of 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 assessment acts No. 2017...(period of 01/2012), No. 2017 ... (period of 02/2012), No. 2017 ... (period of 03/2012), No. 2017 ... (period of 04/2012), No. 2017 ... (period of 05/2012), No. 2017 ... (period of 06/2012), 2017 ...(period of 07/2012), No. 2017 ... (period of 08/2012), No. 2017 ... (period of 09/2012), No. 2017 ... (period of 10/2012), No. 2017 ... (period of 11/2012), No. 2017 ... (period of 12/2012), relating to the period of 2012, as well as the respective liquidations of compensatory interest, in the total amount of €185,425.03.

  2. To support its petition, the Claimant alleges, in summary:

    i. Procedural defect, by violation of the principle of hearing of interested parties and adversarial proceedings, embodied in Article 60, No. 1 of the LGT, in No. 1 of Article 100 of the CPA, Articles 7 and 8 of the CPA and Article 267, No. 4 of the CRP.

    ii. Lapse of the right to assess the tax in question, pursuant to Article 45 of the LGT;

    iii. Violation of the rules of incidence, namely Article 14 of the RITI.

  3. On 02-05-2018, the petition for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).

  4. The Claimant did not proceed to appoint an arbitrator, whereupon, pursuant to paragraph a) of No. 2 of Article 6 and paragraph a) of No. 1 of Article 11 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 appointment within the applicable deadline.

  5. On 20-06-2018, the parties were notified of these appointments, and neither expressed an intention to refuse any of them.

  6. In accordance with the provision of paragraph c) of No. 1 of Article 11 of the RJAT, the collective Arbitral Tribunal was constituted on 10-07-2018.

  7. On 28-09-2018, the Respondent, duly notified for that purpose, filed its response defending itself solely by way of objection.

  8. On 30-11-2018, the hearing referred to in Article 18 of the RJAT took place, at which witnesses presented in person by the Claimant and the Respondent were examined.

  9. Having been granted a deadline for submission of written arguments, these were submitted by the parties, addressing the evidence produced and reiterating and developing their respective legal positions.

  10. The deadline referred to in Article 21, No. 1 of the RJAT was extended by two months, pursuant to No. 2 of that same article.

  11. It was indicated that the final decision would be notified by the end of the deadline set in Article 21, No. 1 of the RJAT, extended.

  12. The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to Articles 2, No. 1, paragraph a), 5 and 6, No. 2/a), of the RJAT.

The parties have legal personality and capacity, are parties with standing 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 are not affected by any nullities.

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

Having considered all of the foregoing, it is appropriate to render this decision:

II. DECISION

A. MATTERS OF FACT

A.1. Facts Established as Proven

  1. The Claimant's commercial activity consists of "Import, export and trade in representations and products for companies in the trade and services sector, provision of services and technical assistance. Transformation of all types of media, printing materials and digital communication. Manufacture of electronic components. Manufacture of electric lamps and other lighting equipment. Repair and maintenance of electrical equipment. Rental of machinery and equipment".

  2. In the year 2012, the majority of the Claimant's sales were carried out in national territory, but in terms of purchases, intra-Community acquisitions predominated.

  3. In terms of the Community market, sales were directed to various countries, namely: Spain, France, Belgium, the Netherlands, England, Ireland, Greece, Germany, Denmark and Estonia, with Spain being the principal destination.

  4. With regard to purchases, Intra-Community Acquisitions of Goods (AICBs) carried out came mainly from the Netherlands, Spain and Italy.

  5. The Claimant, as supplier to the Spanish company B... SL, declared that it carried out, in 2012, transfers with that company in the amount of €672,007.00:

  6. B..., SL is a commercial company based in Spain, and was registered in that country as an intra-Community operator with Tax ID ES-... .

  7. B... SL subsequently had its registration as an intra-Community operator cancelled by the Spanish Tax Agency after it found that "the declaration of the entity's registered office and tax domicile is not truthful, as the said address does not have a centralised registered office, nor does it effectively carry out business activities".

  8. On the invoices evidencing the transactions carried out between the Claimant and B..., SL, the notation "VAT-exempt under Article 14 of the RITI" was applied.

  9. The Claimant issued the following invoices in the name of B..., SL:

[table content omitted]

  1. The place of unloading mentioned on the invoices was, as a rule, ..., although on most of them a complete address at ...- ...- ... ...-... Vila Nova de Famalicão was identified.

  2. The said address corresponded, at that date, to the location of the registered office of C..., LD.ª, holder of Tax ID ... (currently named D..., SA, with registered office in ..., V.N. de Famalicão).

  3. The merchandise was transported to the said facilities of B..., SL, to be subject to transformation, and with a view to subsequent dispatch to another Member State.

  4. The transformation involved a different metal structure, the installation of proprietary software that was acquired from another company in Switzerland, the installation of a gutter that allowed fixing of printing colours and alterations to the print head.

  5. The machines sold by the Claimant to company B..., SL, with the designation "...", after being transferred to this company, were subject to said external equipment alterations, which resulted in the alteration of its weight and its trade name, but not of its mechanical components, nor of its serial number.

  6. Invoice 2012/1200036, in the amount of €75,500.00, evidences the transaction of a machine called ..., with serial number J..., which was subsequently sold by B..., SL to E... CMBH, an entity based in Germany, the machine being dispatched to the location of the registered office of said German company in..., Germany.

  7. The description of the merchandise in the invoice issued to E... CMBH is different from that contained in the Claimant's invoice, as follows:

[table content omitted]

  1. Invoice 2012/1200104 in the amount of €75,500.00 evidences the transaction of a machine called..., with serial number J... .

  2. The machine with serial number J... was dispatched on 01-03-2012, from Vila Nova de Famalicão to Germany, to the facilities of company F... GmbH, located in..., ... Ibbenburen.

  3. Invoice 2012/1200232, dated 12-03-2012, in the amount of €75,000.00, evidences the transaction of a machine called ..., with serial number J... .

  4. This equipment was dispatched on 18-04-2012, from Vila Nova de Famalicão to the facilities of company G..., AG, located in ... ..., Germany.

  5. Invoice 2012/120023, dated 09-05-2012, in the amount of €75,500.00, evidences the transaction of a machine called..., with serial number J... .

  6. This equipment was dispatched on 25-06-2012, from Vila Nova de Famalicão to Great Britain.

  7. Invoice 2012/120041, dated 31-05-2012, in the amount of €75,500.00, evidences the transaction of a machine called..., with serial number J... .

  8. This equipment was dispatched on 14-06-2012, from Vila Nova de Famalicão to the facilities of company H..., located in ...-..., England.

  9. The merchandise described in invoices 2012/1200386 and 2012/1200390, dated 04-05-2012 and 07-05-2012, respectively, were dispatched from the Claimant's facilities to the address of B..., SL's customer, located in ..., Spain.

  10. The merchandise described in invoice 2012/1200934, dated 16-11-2012, was dispatched to the address of the final customer of B..., I..., Lta., located in..., England.

  11. The Claimant was subject to an external inspection action, authorised by service order No. OI2016... .

  12. The inspection action commenced on 16-12-2016, with the signing of the Service Order by the Certified Accountant of the Claimant, J... .

  13. The inspection procedure involved at least 2 visits by the AT to the Claimant's facilities, to analyse its accounting records, relating to the information and documentation supporting the invoices in question.

  14. The inspection actions were concluded on 23-05-2017 with the signing of the diligence report by the Certified Accountant of the Claimant.

  15. The Claimant was personally notified at its registered office, through employee K..., on 29-05-2017, of the Draft Inspection Report and, if it so wished, to exercise its right to be heard in accordance with Article 60 of the LGT and Article 60 of the RCPITA.

  16. The Claimant, by e-mail sent on 13-06-2017, through a representative with a power of attorney for that purpose, exercised its right to be heard, requesting that the AT carry out complementary diligences, namely, to examine witness J... .

  17. The AT did not proceed to examine the said witness.

  18. The Tax Inspection Report contains the following:

[content omitted]

  1. The Final Tax Inspection Report was notified, through an AT official on 14-06-2017, at the office of the Claimant's representatives, to L..., as per the following document:

[content omitted]

  1. The said notification was effected in execution of the following writ:

[content omitted]

  1. The power of attorney signed by the Claimant, dated 06-06-2017, attached to the tax inspection file, grants its representatives M..., N..., O..., P..., Q..., R..., S..., T..., U..., V..., W..., X... and Y... "simple legal authority to represent the principal".

  2. Following the said inspection procedure, the Claimant was notified of the VAT assessments No. 2017 ... (period of 01/2012), No. 2017 ... (period of 02/2012), No. 2017 ... (period of 03/2012), No. 2017 ... (period of 04/2012), No. 2017 ... (period of 05/2012), No. 2017 ... (period of 06/2012), 2017 ...(period of 07/2012), No. 2017 ... (period of 08/2012), No. 2017 ... (period of 09/2012), No. 2017 ... (period of 10/2012), No. 2017 ... (period of 11/2012), No. 2017 ... (period of 12/2012), relating to the period of 2012, and respective liquidations of compensatory interest, in the total amount of €185,425.03.

  3. On 31-08-2017, the Claimant proceeded to pay the said assessments.

A.2. Facts Established as Not Proven

With relevance to the decision, there are no facts that should be considered as not proven.

A.3. Grounds for the Matters of Fact Proven and Not Proven

With regard to matters of fact, the Tribunal does not have to pronounce itself on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to distinguish between proven and unproven matters (see Article 123, No. 2 of the CPPT and Article 607, No. 3 of the CPC, applicable by virtue of Article 29, No. 1, paragraphs a) and e), of the RJAT).

Thus, the facts relevant to the judgment of the case are chosen and delimited according to their legal relevance, which is established in view of the various plausible solutions to the legal question(s) (see previous Article 511, No. 1 of the CPC, corresponding to the current Article 596, applicable by virtue of Article 29, No. 1, paragraph e), of the RJAT).

Accordingly, taking into account the positions assumed by the parties, in light of Article 110/7 of the CPPT, the documentary and testimonial evidence, and the case file attached to the proceedings, the above-listed facts were considered proven, with relevance to the decision, bearing in mind that, as stated in the Court of Appeal decision of the TCA-South of 26-06-2014, rendered in case 07148/13, "the evidentiary value of the tax inspection report (...) may have probative force if the assertions contained therein are not challenged".

Allegations made by the parties and presented as facts, consisting of strictly conclusive statements that are incapable of proof and whose truthfulness must be assessed in relation to the concrete matters of fact consolidated above, were not given as proven or not proven.

B. LAW

As already explained, the Claimant raises the following questions in the proceedings:

i. Procedural defect, by violation of the principle of hearing of interested parties and adversarial proceedings, embodied in Article 60, No. 1 of the LGT, in No. 1 of Article 100 of the CPA, Articles 7 and 8 of the CPA and Article 267, No. 4 of the CRP.

ii. Lapse of the right to assess the tax in question, pursuant to Article 45 of the LGT;

iii. Violation of the rules of incidence, namely Article 14 of the RITI.

Article 124 of the CPPT provides that:

"1 - In the judgment, the court shall give priority consideration to defects that would lead to a declaration of non-existence or nullity of the impugned act and, then, to the defects alleged that would lead to its annulment.

2 - In the said groups, consideration of the defects is conducted in the following order:

a) In the first group, those defects whose merit would determine, according to the prudent discretion of the judge, more stable or effective protection of the injured interests;

b) In the second group, the order indicated by the party filing the objection, provided that this party establishes a relationship of subsidiarity among them and no other defects are raised by the Public Prosecutor or, in other cases, the order fixed in the preceding paragraph."

Accordingly, and given that the Claimant has not established any relationship of subsidiarity, consideration will be given to the defect relating to the lapse of the right to assess, as its merit would determine stable and effective protection of the interests of the Claimant.

With respect to the lapse of the right to assess, Article 45, No. 1 of the LGT provides that:

"The right to assess tributes lapses if the assessment is not validly notified to the taxpayer within a period of four years, when the law does not provide otherwise."

In compliance with this legislative provision, and as agreed by both the Claimant and the Respondent, it must be concluded that the lapse period in question, taking into account the nature of the tax at issue, expires on 01-01-2017.

Nevertheless, Article 46, No. 1 of the same statute provides:

"The lapse period is suspended with the notification to the taxpayer, in accordance with legal provisions, of the service order or dispatch at the commencement of external inspection action, ceasing, however, to have such effect, with the period commencing from its beginning, if the duration of the external inspection has exceeded the period of six months following notification."

The question that arises, therefore, is to determine whether, as the Respondent argues, the suspension ground set forth in the aforesaid normative provision operated, or whether, as the Claimant argues, this is not the case.

The crux of the matter, in this case, focuses on the disputed circumstance of whether the inspection action exceeded the period of six months following notification, in accordance with legal provisions, of the service order or dispatch at the commencement of external inspection action.

Indeed, it is not contested in the present arbitral proceedings that an external tax inspection procedure was carried out, nor that the service order or dispatch at the commencement of the external inspection action was regularly notified on 16-12-2016.

What is at issue is, therefore, to determine whether the external inspection action in question was, or was not, properly concluded by 16-06-2017.

To this end, Article 36, No. 2 of the RCPITA provides that "The inspection procedure is continuous and must be concluded within a maximum period of six months from the notification of its commencement."

And Article 62 of the Supplementary Regime of the Tax and Customs Inspection Procedure (RCPITA) applicable provides:

"1 - For conclusion of the verification and audit procedure a final report is prepared for the purposes of identification and systematisation of the facts detected and their legal and tax characterisation.

2 - The report referred to in the preceding number must be notified to the taxpayer by registered mail within the 10 days following the end of the deadline referred to in No. 4 of Article 60, the procedure being deemed concluded on the date of notification."

In accordance with the said normative provision, it has been understood by the case law of the superior tax courts that the inspection procedure is deemed concluded only with notification of the final inspection report.

To this effect, what may be considered as settled jurisprudence, is referenced, for example, in the Supreme Court of Administration (STA) decision of 30-11-2010, rendered in case 0669/10, which states that "the mere conclusion of the practice of external inspection acts does not constitute the end of the respective inspection, understood in its procedural dimension, which, in accordance with the said No. 2 of Article 62 of the RCPIT, is concluded only with notification of the final report to the taxpayer" and that, consequently, "the suspensive effect of the external inspection is maintained beyond the conclusion of the external inspection acts, ceasing only with the end of the inspection procedure materialised in the notification of the final report to the taxpayer, on the assumption that such has occurred within the maximum period of six months following notification to the taxpayer of the service order or dispatch at the commencement of the external inspection action" .

Thus, there should be no doubt that, for the suspension of the lapse period set forth in Article 46, No. 1 of the LGT to operate, the final report of the external inspection action must be (regularly) notified to the taxpayer within the maximum period of 6 months (subject to any extensions) following notification to the taxpayer of the service order or dispatch at the commencement of the external inspection action.

Now, it is precisely this question of the moment at which notification of the final report of the inspection action in question in the present arbitral proceedings should be deemed to have occurred, which must be resolved.

As appears from the facts established as proven, the said notification was effected in execution of a writ that determines the notification of the "law firm – Z..., Soc. Ad. RL., NIPC...", in the capacity of representative of the Claimant, with the notification certificate being signed, under the heading "Representative", by L..., "in the capacity of employee of the representative", and dated 14-06-2017.

It is therefore necessary, in view of this factual situation and the applicable norms, to determine whether the Claimant should be deemed to have been properly notified of the Inspection Report that concluded the inspection procedure, and, if the answer is in the affirmative, on what date.

Article 40 of the CPPT provides that:

"1 - Notifications to interested parties who have appointed a representative shall be made to such person and at their office.(...)

3 - Notifications shall be made by registered mail or registered mail with notice of delivery, addressed to the domicile or office of the recipients, or may be made personally by the competent official when found in the building of the service or court."

There being no doubt that, since the Claimant had appointed representative(s), the notification, in compliance with the aforesaid provision, should be made to such person(s), as defined in that same provision.

It is therefore necessary to determine whether this was the case.

In view of the facts established as proven, it must be concluded that this was not the case.

Indeed, the said rule, a special rule as against the general regime of notifications, provides that notification to representatives shall be made to such person(s) (and not to third parties), and:

a) by registered mail or registered mail with notice of delivery, addressed to the domicile or office of the recipients;

b) personally by the competent official when found in the building of the service or court.

Now, in this case, the notification in question was not made by registered mail or registered mail with notice of delivery, nor in the building of any service or court.

Moreover, the said notification was not even made to the person of any one of the representatives appointed by the Claimant, even outside the building of any service or court.

To this regard, it should be noted that the notification in question presents deficiencies at various levels, which ultimately compromise it irredeemably.

Thus, in the first place, the writ that determined it is addressed to the "law firm – Z..., Soc. Ad. RL., NIPC...", an entity that appears as the recipient of the notification certificate, when, as appears from the power of attorney attached by the Claimant to the inspection procedure, this appointed as representatives the individual attorneys listed therein, and not the law firm that they might, perhaps, be part of.

Furthermore, no legal rule makes the notification received by representatives effective on the person of representatives when personal notification is made to one of their employees (and in this case, it is not even ascertained whether the person signing as an employee is an employee of any of the representatives, individually, or of the law firm recipient of the notification), which, moreover, makes sense, since we would be, if such possibility were admitted, in the presence of a representation of representation (that is: the representative represented the taxpayer, and the employee of the representative would represent the representative...).

Given that the rule of Article 40 of the CPPT, cited above, is a special rule governing notifications to representatives, in light of the specificity of their profession, and as such excludes other general rules, it could further be said that the notification at issue does not conform even with those general rules.

Thus, in the first place, Article 62, No. 2 of the RCPITA, already cited, provides that the inspection report must be notified to the taxpayer by registered mail, and this should, in principle, be considered a rule, also a special one, as against the general rules of notification set forth in Articles 37 et seq. of the same statute.

But, even if this is not understood to be the case, the fact is that Article 39 of the RCPITA, relating to notifications to natural persons, states that "In case of notification to the person of an employee or collaborator, registered mail with notice of receipt must be sent to the tax domicile of the taxpayer or tax-obliged person, giving notice of the content of the notification, the day, time and person to whom it was made", which is not proven.

And Article 40 of the same statute, relating to notifications to legal entities, states that "Notification of a legal entity, or tax-equivalent entity, to the person of an employee or collaborator, shall be made by delivery of the duplicate and the indication that this should be delivered to a representative of the legal entity." which also is not demonstrated to have occurred.

Hence, from whatever point of view one considers it, one cannot conclude otherwise than that the notification carried out in the case at hand does not conform to any of the potentially admissible forms, leaving no doubt that the Claimant, or its representatives, cannot be considered to have been notified of the tax inspection report, which concluded the inspection procedure, on 14-06-2017, by means of the notification to which point 36 of the facts established as proven refers.

The Respondent alleges, in point 99 of its response, that "in the manner in which such is ensured by the official of the CTT through registered mail with notice of receipt."

However, even if such thesis were accepted, the same conclusion would have to be reached.

Indeed, as stated in the decisions of the STA of 20-01-2016 and 24-02-2016, rendered respectively in cases 01680/15 and 0142/16:

"III - Notifications to appointed representatives, pursuant to No. 3 of Article 40 of the Code of Tax Procedure and Process shall be made by registered mail or registered mail with notice of delivery, addressed to the domicile or office of the recipients, or personally by the competent official when found in the building of the service or court.

IV - When notification to the representative is made by registered mail with notice of receipt, the date of signature on the notice assumes no legal relevance, provided that it is prior to the date resulting from the presumption of notification established in Article 254, No. 3 of the former Code of Civil Procedure.

V - The presumption established in No. 3 can only be rebuttable by the notified representative, if not notified or notified later than the date resulting from the presumption."

That is: even if it were considered that the notification procedure followed in the proceedings was equivalent to the use of registered mail with notice of receipt, it would always, in application of the doctrine of the said decisions, have to be concluded that such did not prevent the representative from being considered notified only on the third day following the day of registration, or on the first business day following that, when it is not.

In this way, even if the thesis of the Respondent were accepted, the notification could not be considered as effected on a date prior to 19-06-2017, as, moreover, the Respondent itself points out.

Indeed, given that the notification made to the person of Ana Paula dos Santos de Pina Cabral was carried out on 14-06-2017, a Wednesday, the third day following would be 17-06-2017, a Saturday, so the first business day following was 19-06-2017, a Monday.

Thus, even in the scenario outlined by the Respondent in its response, of equating the notification carried out with notification by registered mail with notice of receipt, in light of the STA case law cited above, the notification could never be considered as producing effects on a date prior to the said 19-06-2017.

Now, as appears from the facts established as proven, the inspection action commenced on 16-12-2016, whereby it should have been concluded, in accordance with the said Article 62, No. 1 of the RCPITA, by notification, in accordance with legal provisions, of the final inspection report, by 16-06-2017.

It not being demonstrated that this was the case, it must be concluded that the suspensive effect of the lapse period of the right to assess the taxes at issue, resulting from the notification, in accordance with legal provisions, of the service order or dispatch at the commencement of the external inspection action, ceased on 16-06-2017, pursuant to Article 46, No. 1 of the LGT, whereby "the lapse period, which was suspended, ceases to have such effect, with the period commencing from its beginning, that is, everything proceeds as if the inspection had not been carried out, with the lapse period running continuously and without any suspension" .

Thus, and having regard to all of the foregoing, it must be necessarily concluded to the lapse of the right to assess the taxes to which the assessments subject to the present arbitral action refer, noting further that the "rationale" of the lapse institute rests on objective reasons of legal certainty, without regard to the negligence or inertia of the holder of the right and attending solely to the need to define the legal situation with brevity, it functions as a guarantee and limit of reappraisal of the abstract obligation resulting from the practice of the tax act, as opposed to the substantive tax situation of which that (tax act) is or was a reflection." whereby "as a guarantee, the lapse of the right to assess must be subject to precise temporal limits" .

At the level of case law, it has been admitted that the lapse of the right to assess may be raised in the context of judicial impugnation, considering that "Similar to what occurs with abstract illegality and duplicative collection, the failure to notify the assessment within the lapse period also constitutes a defect that can be raised both in opposition to tax enforcement and in judicial impugnation." since "once the lapse period of the assessment has elapsed without valid notification having occurred, such act, although practiced within the period, does not cease, by force of Article 45 of the LGT, to be tainted with illegality." ; reference may also be made, by way of example, to the STA decision of 19-12-2007, rendered in case No. 0617/07, where the question was addressed in that same context. In the same sense, reference may be made to the decisions of 12-10-2005, case No. 0633/05, 28-03-2007, case No. 0965/06, and 19-12-2007, case No. 0617/07.

Not having, therefore, the tax in question in the proceedings been assessed within the applicable lapse period, and the respective notification to the tax debtor effected within the same period, the assessment should be annulled, as unlawful, whereby the arbitral petition proceeds, leaving the consideration of the remaining questions raised by the Claimant prejudiced.

As to the claim for indemnity interest (juros indemnizatórios) filed by the Claimant, Article 43, No. 1 of the LGT establishes that indemnity interest is due when it is determined that there has been an error attributable to the services which results in payment of the tax debt in an amount greater than legally due.

In this case, the error affecting the annulled assessments is attributable to the Tax and Customs Authority, which practiced the assessment acts subject to the present arbitral action, beyond the period that the law legally granted it to exercise such right.

The Claimant therefore has the right to be reimbursed of the amount it paid (pursuant to the provisions of Articles 100 of the LGT and 24, No. 1 of the RJAT) by force of the annulled acts and, further, to be indemnified for the improper payment through the payment of indemnity interest, by the Respondent, from the date of the improper payment, until its reimbursement, at the legal subsidiary rate, pursuant to Articles 43, Nos. 1 and 4, and 35, No. 10, of the LGT, Article 559 of the Civil Code and Ordinance No. 291/2003, of 8 April.

C. DECISION

The Tribunal Arbitral hereby decides to render complete judgment in favour of the arbitral petition filed and, in consequence:

a) Annul the VAT assessment acts No. 2017 ... (period of 01/2012), No. 2017 ... (period of 02/2012), No. 2017... (period of 03/2012), No. 2017 ... (period of 04/2012), No. 2017 ... (period of 05/2012), No. 2017 ... (period of 06/2012), 2017 ... (period of 07/2012), No. 2017 ... (period of 08/2012), No. 2017 ... (period of 09/2012), No. 2017 ... (period of 10/2012), No. 2017 ...(period of 11/2012), No. 2017 ... (period of 12/2012), relating to the period of 2012, as well as the respective liquidations of compensatory interest;

b) Condemn the AT to pay indemnity interest, on the terms fixed above;

c) Condemn the Respondent to pay the costs of the proceedings, fixed below.

D. Value of the Proceedings

The value of the proceedings is fixed at €185,425.03, pursuant to Article 97-A, No. 1, a), of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of No. 1 of Article 29 of the RJAT and No. 3 of Article 3 of the Regulations for Costs in Tax Arbitration Proceedings.

E. Costs

The arbitration fee is fixed at €3,672.00, pursuant to Table I of the Regulations for Costs in Tax Arbitration Proceedings, to be paid by the Respondent, since the arbitral petition was completely upheld, pursuant to Articles 12, No. 2, and 22, No. 4, both of the RJAT, and Article 4, No. 5, of the said Regulations.

Let notification be made.

Lisbon, 4 March 2019

The Presiding Arbitrator

(José Pedro Carvalho)

The Arbitrator Member

(Maria Alexandra Mesquita)

The Arbitrator Member

(Alexandre Andrade)

Frequently Asked Questions

Automatically Created

What is the statute of limitations (caducidade) for VAT liquidation under Article 45 of the LGT?
Under Article 45 of the LGT (General Tax Law), the Tax Authority's right to assess VAT generally expires (caducidade) four years from the end of the year in which the tax should have been declared or paid. For VAT periods in 2012, assessment rights would normally expire by December 31, 2016, unless interrupted by specific acts such as notification of inspection proceedings. The critical issue in this case was whether notification of the inspection report to the taxpayer's legal representative validly interrupted the limitation period. The notification date and recipient determine whether assessments issued in 2017 were time-barred.
How does notification of an inspection report to a taxpayer's representative affect VAT assessment validity?
Notification of an inspection report to a taxpayer's mandatário (legal representative) is valid under Portuguese tax law, provided the representative has proper authorization. Article 60(1) LGT requires Tax Authorities to grant taxpayers the right to a hearing (audiência prévia) before issuing assessments. When an inspection report is notified to a legal representative rather than directly to the taxpayer, this can raise questions about whether the taxpayer's procedural rights were adequately protected. The validity depends on whether the representative had authority to receive such notifications and whether the taxpayer was effectively able to exercise their right to respond before the assessment was finalized.
Can a VAT assessment be annulled due to violation of the right to a hearing (audiência prévia) under Article 60 of the LGT?
Yes, a VAT assessment can be annulled for violation of the right to a hearing under Article 60(1) LGT, which embodies constitutional principles from Article 267(4) CRP and Articles 100 CPA (Administrative Procedure Code). The audiência prévia is a fundamental procedural guarantee requiring the Tax Authority to allow taxpayers to comment on proposed adverse decisions before finalization. Violations occur when: (i) no hearing opportunity is provided; (ii) the notification is defective (e.g., sent to wrong person without proper representation); or (iii) insufficient time is granted for response. Even if substantive grounds exist for assessment, procedural violations can render the act illegal and subject to annulment by arbitral tribunals.
What are the rules for intra-community VAT transactions under Article 14 of RITI?
Article 14 RITI (Regime do IVA nas Transações Intracomunitárias) exempts intra-Community supplies of goods from VAT when: (i) goods are dispatched or transported from Portuguese territory to another Member State; (ii) the acquirer is a taxable person identified for VAT purposes in another Member State; (iii) the acquirer has communicated their VAT identification number to the supplier; and (iv) the supplier maintains proof of dispatch/transport to another Member State. The exemption requires actual physical movement of goods out of Portugal. This case examined whether supplies qualified when goods were delivered to Portuguese addresses for transformation before subsequent dispatch to other EU countries, and when the purported acquirer's intra-Community registration was later cancelled for providing false information.
What is the CAAD arbitral procedure for challenging multiple VAT liquidation acts and compensatory interest?
CAAD (Centro de Arbitragem Administrativa) arbitral procedure under RJAT (Regime Jurídico da Arbitragem em Matéria Tributária) allows taxpayers to challenge multiple related VAT liquidation acts in a single proceeding. The petition must identify each contested assessment act and total amount (here €185,425.03 for twelve 2012 monthly periods plus compensatory interest). After acceptance, the Tax Authority is notified and must file a response (contestação). If parties don't appoint arbitrators, the CAAD Deontological Council appoints them. The tribunal follows procedural steps including written submissions, hearing with witness testimony, final arguments, and decision within statutory deadlines (extendable under Article 21 RJAT). The procedure provides an alternative to judicial courts for resolving VAT disputes efficiently.