Process: 278/2015-T

Date: February 26, 2016

Tax Type: IVA

Source: Original CAAD Decision

Summary

CAAD arbitration process 278/2015-T addressed a dispute between A..., Lda and the Portuguese Tax Authority (AT) regarding an additional VAT assessment of €42,720.90 for period 11/09T. The core issue involved determining the correct taxable value under Article 16 of the Portuguese VAT Code (CIVA) for an assignment of contractual position transaction. The taxpayer contended that the taxable value should be €807,578.35 (the consideration actually received from E..., S.A.), resulting in VAT of €185,743.02. The Tax Authority argued the taxable value should be €993,321.37, with corresponding VAT of €228,463.92. The claimant challenged the assessment on multiple grounds: (1) violation of law due to error in factual premises, arguing Article 16(1) CIVA establishes that taxable value is the consideration obtained or to be obtained from the service recipient; (2) breach of private autonomy principles under Article 405 of the Civil Code, as both contracting parties agreed on the price of €807,578.35; (3) procedural irregularity, as the Tax Authority failed to demonstrate the declared price was simulated or unreal, despite the presumption of truthfulness afforded to taxpayer records under Article 75 of the General Tax Law (LGT). The taxpayer argued the agreed price represented a legitimate business decision that cannot be unilaterally reconfigured by tax authorities without proper justification. The case illustrates the application of RJAT arbitration procedures for challenging VAT assessments and raises fundamental questions about tax neutrality principles and the limits of tax authority discretion in recharacterizing contractually agreed consideration for VAT purposes.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. On 29 April 2015, A..., Lda, NIPC..., with registered office at..., ..., ...-... ..., hereinafter designated as the Claimant, requested the constitution of an Arbitral Tribunal and filed an arbitral award application in accordance with paragraph a) of point 1 of article 2 and paragraph a) of point 1 of article 10 of Decree-Law No. 10/2011 of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter designated only as RJAT), in which the Tax and Customs Authority (hereinafter designated as AT) is the Respondent.

  2. The Claimant is represented in the present proceedings by its representative, Dr. B..., and the Respondent is represented by legal counsels, Dr. C... and Dr. D....

  3. The request for constitution of the Arbitral Tribunal was accepted by the Honourable President of CAAD and notified to the Respondent on 04 May 2015.

  4. Through the request for constitution of the Arbitral Tribunal and the arbitral award application, the Claimant seeks the annulment of the additional assessment of Value Added Tax (VAT) relating to the taxation period 11/09T in the amount of €42,720.90 (forty-two thousand, seven hundred and twenty euros and ninety cents).

  5. Following verification of the formal regularity of the application submitted, in accordance with the provisions of paragraph a) of point 2 of article 6 of RJAT, and the Claimant not having proceeded to appoint an arbitrator, the signatory was appointed by the President of the Ethics Council of CAAD.

  6. The Arbitrator accepted the appointment made, with the Arbitral Tribunal being constituted on 07 July 2015 at the headquarters of CAAD, located at Avenida Duque de Loulé, No. 72-A, in Lisbon, in accordance with the minutes of constitution of the Arbitral Tribunal which were drawn up and are attached to the present proceedings.

  7. The Respondent submitted its reply on 28 September 2015.

  8. On 7 October 2015, the Tribunal, having regard to assessing the usefulness of witness evidence and party statements requested in the initial pleading, notified the Claimant to identify the facts subject to examination at the hearing, and on 14 October 2015 the Claimant complied with the Tribunal's order.

  9. On 29 October 2015, the Tribunal, through an order, designated 11 December 2015 for the holding of the meeting provided for in article 18 of RJAT and the hearing of witnesses, but in view of the request presented by the Claimant on 3 November of the same year, manifesting schedule unavailability, it was postponed to 16 December 2015, the date on which it actually took place.

  10. On that date, having addressed the matters referred to in article 18 of RJAT, the witnesses indicated by the Claimant were heard and party statements were given. Following the conclusion of evidence production, the Tribunal granted a period for the Claimant to attach additional documents to the proceedings, at the expiration of which the period for submission of written pleadings commenced. Also at this meeting, the Tribunal extended the deadline for the award by a further two months, in accordance with point 2 of article 21 of RJAT, warned the Claimant that it should proceed with payment of the subsequent arbitration fee, in accordance with point 3 of article 4 of the Regulation of Fees in Tax Arbitration Proceedings, and notify CAAD of such payment, and designated 15 February 2016 for the purposes of rendering the arbitral award. This date was extended to 6 March 2016 by order dated 15 February 2016.

  11. The Claimant, on 30 December 2015, submitted the request with attachment of the additional documents indicated and referred to in the meeting of article 18 of RJAT, and on 11 January 2016 submitted its pleadings.

  12. On 21 January 2016, the Respondent submitted its counter-pleadings.

II. The Claimant sustains its request, in summary, as follows:

The Claimant sustains the request for annulment of the additional assessment of Value Added Tax (VAT) relating to the taxation period 11/09T on the grounds that it is affected by illegality as follows:

a) The Claimant contends that the tax act now contested suffers from a defect of violation of law due to error in the factual premises, insofar as "what is at issue is a paid provision of services. (...)" Thus, the Claimant submits that, as results from point 1 of article 16 of CIVA "the taxable amount of services subject to tax is the value of the consideration obtained or to be obtained from the recipient," and therefore "contrary to the AT's understanding, the value of the consideration actually obtained by the Claimant as a result of the assignment of the contractual position to company "E..., S.A." amounted only to €807,578.35 and not to €993,321.37, with the VAT due – and already paid by the Claimant – amounting to €185,743.02 and not, as the AT contends, €228,463.92."

b) It sustains its position by referring that this was "the will of the parties as regards the remuneration established for the assignment of the contractual position celebrated between the Claimant and "E..., S.A."", whereby the same should prevail within the framework of private autonomy provided in point 1 of article 405 of the Civil Code.

c) Moreover it contests that "it is not understood, nor accepted, that, with the parties being in full agreement as to the agreed price and to the fact that it includes the VAT due – as is the case herein –, the AT departs from a price divergent from that which results from the will of the parties and taxes accordingly without, however, arguing or even demonstrating that the same does not appear real."

d) In this regard, it states that "the AT may, in certain situations, consider that the declared price does not correspond to that actually practiced, being therefore simulated. However, if that were the intention of the AT, the rule it would have to resort to would have to be other than that provided in article 16 of the VAT Code." And if that were the case, the AT would have, "given the presumption of truthfulness that benefits operations recorded in the books of taxpayers and their supporting documents in accordance with point 1 of article 75 of LGT, to fulfill the burden of proof of the facts that led it to understand that there is no correspondence between the price declared by the parties and accepted by them and that which would actually have been practiced."

e) It further alleges that "neither did the AT invoke any other rule than that provided in article 16 of the VAT Code to consider that the price of the assignment of the contractual position celebrated between the Claimant and "E..., S.A." is distinct from that which both affirm it to be, nor did it invoke – and much less demonstrated – that the price declared by the parties as to the assignment of the contractual position appears simulated – which it is not."

f) Concluding that "the fixing of the price of the assignment of the contractual position at €807,578.35 was a management option taken by the Claimant and "E..., S.A.", and cannot simply be disregarded or reconfigured by the AT based on the provisions of point 1 of article 16 of the VAT Code, because this rule does not permit discrediting a contractual element – the price – regarding which there is perfect agreement between the parties who celebrate the contract in question."

g) And it concludes to the effect that "the tax act under discussion results from an error in the factual premises, being therefore voidable, in accordance with the provisions of point 1 of article 163 of CPA, applicable by virtue of paragraph c) of article 2 of LGT."

h) On the other hand, the Claimant also contends that the disputed tax assessment act is vitiated by erroneous interpretation and application of law, insofar as "among general consumption taxes, value added taxes, such as VAT which is in force in the European Union, are distinguished from other tax models by their neutrality, with no cumulative or cascading effects. This neutrality stems precisely from the fact that tax is levied only on the value added at each stage of the production process, in such a way that it is effectively borne only by the final consumer."

i) Now the Claimant considers that "in the case in question, it is not disputed that through the contract for assignment of contractual position celebrated between the Claimant and "E..., S.A." the first intended to ensure a settlement of accounts as to its debt to "F... SGPS, S.A.", which was subsequently assumed and paid by company "G... SGPS, S.A.". It is equally not disputed that the value of the said debt is €993,321.37. What is disputed, it is emphasized, is that this should be considered the value of the consideration obtained by the Claimant for the purpose of determining the taxable amount for VAT purposes."

j) It continues by saying that "the value of €993,321.37 was not the value actually obtained by the Claimant in return for the contract for assignment of contractual position celebrated with "E..., S.A.". The value actually received by the Claimant under the said contract corresponds to the value of €993,321.37 minus the VAT delivered by the Claimant to the State coffers in the amount of €185,743.02."

k) Mentioning further that "it is precisely to this reality that attention must be paid when determining the taxable amount for VAT purposes in light of what is provided in point 1 of article 16 of CIVA: to the value which the service provider was actually able to extract from the performance of the contract celebrated for its benefit.", thus sustaining its position and argumentation in national doctrine and case law of the Court of Justice of the European Union (Judgment C-249/12 - Tulică and Plavoşin of 07.11.2013).

l) Concluding that the case law of the CJEU referred to "justifies the illegality of the tax assessment act in question herein, which should be annulled for suffering from a defect of violation of law by erroneous interpretation of law in accordance with the provisions of point 1 of article 163 of CPA applicable by virtue of paragraph c) of article 2 of LGT."

III. In its Reply, the Respondent invoked, in summary, the following:

a) For its part the AT presents its defense by way of objection invoking first and foremost that "the said contract for assignment of contractual position celebrated between the Claimant and E... SA did not contain any specification as to the price of the said assignment of contractual position." Indeed and in these circumstances "the tax inspection services understood that we were dealing with a provision of services subject to tax and not exempt from it, and accordingly it was necessary to determine what taxable amount should be taken into account for the purposes of assessment since the now Claimant had, quite simply, ignored the tax effects resulting from the celebration of the said assignment of contractual position."

b) It clarifies that "indeed in accordance with what is stated in the TIT (...) a taxable amount of €977,276.54 was reached which corresponds to the value of the real estate €1,127,372.26 which was stipulated in the initial financial leasing contract celebrated on 23.11.2010 minus the amount of €150,095.72 that is to say minus the residual value." Referring further that "It is precisely as a result of the confrontation with this situation that the now Claimant came to submit the periodic declaration of substitution for the period in question arguing to the tax inspection services that the reason the contract for assignment of contractual position did not mention any value associated with it was rooted in the fact that it had a loan in its liabilities in the form of capital contributions from its shareholder F... SGPS in the amount of €993,321.37 which was entirely assumed by E...."

c) It further states that "the now Claimant cites Judgments of the CJEU in articles 105 et seq. of its initial petition which with due respect are not applicable in the case in question. In fact in the cases to which they relate one is dealing with contracts for purchase and sale – transfers of goods – unlike what happens in the present proceedings in which one is dealing with the assignment of a contractual position classified as a provision of services."

d) It further alludes that "Indeed for besides not being a goods price if such were possible one would be reducing the amount of the debt of the now Claimant to its creditor all at the expense of the State."

e) It defends finally "There remain therefore no doubts that the value of €993,321.37 constitutes the economic consideration for the provision of services (assignment of contractual position) in question in the present proceedings." Adding further that "and if it is true that in the field of contractual freedom the will of the parties prevails in the celebration of contracts it is no less true that this freedom cannot be superimposed on rules of public order and interest – as is the case with tax rules."

f) And concludes finally to the effect that "In the case of the present proceedings as the Claimant itself refers the value of the debt of A... to F... SGPS assumed and paid by G... SGPS SA majority shareholder of E... SA amounted to €993,321.37 whereby no doubts remain that this is what represents the value of the consideration obtained by the Claimant upon the assignment of the contractual position."

IV. Case Management

The Tribunal is competent and is regularly constituted in accordance with paragraph a) of point 1 of article 2 and articles 5 and 6 all of RJAT.

The parties have legal personality and capacity, show themselves to be entitled, are regularly represented and the proceedings are not affected by any nullities.

V. Factual Matters

For the conviction of the Arbitral Tribunal regarding the facts proven the documents attached to the proceedings were relevant as well as the administrative proceedings and the witness evidence produced having been presented one witness and two party statements by the Claimant all analyzed and weighed in conjunction with the pleadings.

Party statement was also given.

It is to be noted that the witness evidence presented by the Claimant proved to be credible suitable and knowledgeable of the facts in question in the present proceedings reason for which it was duly considered and weighed.

a. Facts given as proven

With interest for the decision the following facts are given as proven:

A. The Claimant is a limited liability company that engages in the activity of producing electricity from hydraulic sources to which corresponds the CAE..., being framed in the general system of taxation for purposes of Corporate Income Tax (IRC) and in the general system of quarterly periodicity for the purposes of VAT taxation. (By agreement);

B. On 11.10.2010 the company F... – Company Managing Social Holdings SA was a shareholder of the Claimant holding a quota of nominal value of €6,000.00 having celebrated a financing contract with the Claimant in the amount of €979,904.28 in capital and €13,417.09 in interest for a total amount of €993,321.37. (cf. Doc. No. 6 attached with the arbitral award application);

C. On 23.11.2010 the Claimant celebrated with Bank H... S.A. a real estate financial leasing contract identified with No.... (cf. Doc. No. 4 attached with the arbitral award application and by agreement);

D. The said contract had as its object the following real properties:

(i) mixed property composed of four buildings located at Place of..., parish of..., municipality of..., registered in the urban real property register under the articles..., ..., ... and ... and in the rustic register under article...;

(ii) urban property intended as a water treatment station consisting of three divisions intended for machinery a storage room and a cylindrical tank located at Place of..., ..., parish of..., municipality of..., registered in the real property register under article... (cf. Doc. No. 4 attached with the arbitral award application and by agreement);

E. The value of the financing of the contract identified in C) amounted to €1,127,372.26 with payment divided into three installments of quarterly periodicity to take place within a period of nine months as follows:

i) 1st installment of €564,513.31 due on 23.11.2010;

ii) 2nd installment of €187,619.65 due on 25.02.2011;

iii) 3rd installment of €225,143.58 due on 25.05.2011;

iv) a residual value of €150,095.72 was fixed between the parties. (cf. Doc. No. 4 attached with the arbitral award application and by agreement);

F. On 24.08.2011 a contract for assignment of contractual position was celebrated between the Claimant in the capacity of lessee assignor and "E..., S.A." in the capacity of lessee assignee in which they declared "that no consideration is due for the assignment of the contractual position now agreed" – cf. Doc. No. 5 attached with the arbitral award application and by agreement).

G. Upon the celebration of the contract for assignment of contractual position amendments were also stipulated to the real estate financial leasing contract namely the establishment of a 4th installment in the value of €2,475.42 with due date 25.08.2011 and the extension of the contract to 25.11.2011 the due date of the obligation to pay the residual value (cf. Doc. No. 5 attached with the arbitral award application and by agreement);

H. On 20.10.2011 a contract for promise of assignment of quotas and assignment of credit was celebrated between "F... SGPS, S.A." and "I... SGPS, S.A." (now "G... SGPS, S.A." and majority shareholder of "E..., S.A.") by which the former assigned to the latter the credit it held against the Claimant for the price of €993,321.37 (cf. Doc. No. 6 attached with the arbitral award application);

I. The debt referred to in F) and G) was paid within a period of eight months through the issuance of four checks one issued on 20.11.2011 by "E..., S.A." in the amount of €13,417.09 (value equivalent to the interest item identified in B)) and three others issued on 20.12.2011, 23.03.2012 and 20.06.2012 in the amount of €326,634.76 each by "G... SGPS, S.A.") all to the order of "F... SGPS, S.A." – cf. Doc. No. 7 attached with the arbitral award application and Doc. No. 3 attached with the request presented by the Claimant on 30.12.2015);

J. In November 2013 the accounting of the Claimant was subject to an inspection action carried out by the Tax Inspection Division II of the Finance Department of..., covering the year 2011 and tax irregularities of a fiscal nature in respect of VAT were detected relating to the taxation period 2011/09T. (cf. Doc. No. 8 attached with the arbitral award application and at fls_ of the administrative proceedings attached to the proceedings);

K. On 15.11.2013 the Claimant submitted a periodic VAT declaration of substitution relating to the period of 2011/09T including therein in fields 3 and 4 of table 06 the taxable base of €807,578.35 and the VAT amount assessed of €185,743.02 – cf. Doc. No. 9 attached with the arbitral award application and by agreement);

L. On 10.12.2013 the Claimant issued an invoice to "E..., S.A." identified as No. 3/A with the description "Assignment of contractual position of the financial leasing contract No.... – Executed with H..." in accordance with which the price amounts to €807,578.35 and VAT to €185,743.02 totaling €993,321.37 – cf. Doc. No. 10 attached with the arbitral award application);

M. On 19.12.2013 the Claimant proceeded to pay the sum of €185,743.02 as title of VAT relating to the taxation period 2011/09T (cf. Doc. No. 11 attached with the arbitral award application and by agreement);

N. In March 2014 the Claimant was notified of the tax assessment act for additional VAT in the amount of €42,720.90 and respective compensatory interest in the amount of €3,839.03 relating to the taxation period of 2011/09T (cf. Doc. No. 1 attached with the arbitral award application);

O. The Claimant on 29.09.2014 filed a request for rectification to which was assigned the case number ...2014... against the additional VAT assessment contested in the present proceedings as well as against the compensatory interest assessed in the amount of €3,839.03 (cf. Doc. No. 3 attached with the arbitral award application and at fls 1 of the administrative proceedings attached to the proceedings);

P. The request for rectification identified in O) was subject to a draft decision according to which the Claimant's application would be partially granted in that procedure "maintaining the additional assessment for the period of 1109T in the amount of €42,720.90 and annulling the compensatory interest assessment for this same period in the amount of €3,839.03." (cf. at fls_ of the administrative proceedings attached to the proceedings);

Q. The request for rectification identified in O) was tacitly rejected due to the expiration of the 4-month period provided in article 57 of the Code of Tax Procedure and Process (CPPT) on 29.01.2015. (cf. Doc. No. 4 attached with the arbitral award application).

VI. Facts given as not proven

There are no facts given as not proven because all facts relevant to the appraisal of the application were given as proven.

VII. Legal Grounds

The following are the issues to be appraised and decided:

a) To know whether the tax assessment act for additional Value Added Tax (VAT) identified as No..., relating to the taxation period of 2011/09T in the amount of €42,720.90 (forty-two thousand, seven hundred and twenty euros and ninety cents) is illegal due to error in the factual premises and consequent erroneous interpretation and application of law;

b) Should the foregoing issue proceed to know whether the Claimant is entitled to compensatory interest in accordance with the provisions of article 43 of the General Tax Law (LGT);

Before there will still be the need to appraise the issue of the preliminary ruling raised by the parties.

Let us see,

A. Of the request for preliminary ruling of the present proceedings to the CJEU.

  1. In the request for constitution of the present Arbitral Tribunal the Claimant suggests that "should it be understood that the non-conformity with European Union law herein exposed is not sufficiently clear or settled in the case law of the CJEU" that "the present Arbitral Tribunal make use of the mechanism of preliminary ruling provided for in article 267 of the CJEU (...)." Being that "for this purpose the Claimant suggests that the following preliminary questions be referred to the CJEU suspending the proceedings until its decision:

Is it possible under articles 1 point 2 and 73 of Council Directive 2006/112/EC of 28 November 2006 the content of which is reflected in point 1 of article 16 of CIVA to understand that in view of the absence of disagreement between the contracting parties as to the fixed price and such price having been effectively paid this fact be disregarded by the AT based on the general rules for calculating the taxable amount allowing VAT to be imposed on that price?

Is it possible under articles 1 point 2 and 73 of Council Directive 2006/112/EC of 28 November 2006 the content of which is reflected in point 1 of article 16 of CIVA to understand that with nothing being said in the contract regarding the incidence of VAT the same is added to the value actually paid by the acquirer to the service provider?"

Now let us see if the present Tribunal is obliged or instead dispensed from proceeding to the preliminary ruling of the present proceedings to the CJEU.

It is also referred that the same is also requested by the AT here Respondent in the course of submissions should the Tribunal have doubts on the question stated.

  1. In 2012 the CJEU issued recommendations addressed to national judicial bodies (2012/C 338/01) which not having binding character have as objective (among others) to guide the judicial bodies of the Member States as to the opportunity to proceed to a preliminary ruling as well as to provide practical guidance on the form and effects of such preliminary ruling.

  2. In fact from a careful reading of those recommendations we note that in its point 7 it is stated that "the role of the Court in the context of a preliminary ruling proceeding consists in interpreting the law of the Union or ruling on its validity and not in applying this law to the factual situation underlying the main proceeding. That role falls to the national judge and therefore it is not for the Court to rule on questions of fact raised in the context of the litigation in the main proceeding or on any divergence of opinion as to the interpretation or application of the rules of national law."

  3. Indeed point 12 of those Recommendations alludes to that: "a judicial body whose decisions are not subject to judicial appeal in internal law is obliged to submit that request to the Court except when there is already case law on the matter (and when the possibly new context does not raise any real doubt as to the possibility of applying that case law to the specific case) or when the correct way of interpreting the legal rule in question is unequivocal."

  4. It follows from these recommendations that the preliminary ruling to the CJEU should not take place when:

a) there is already case law on the matter (and when the possibly new context does not raise any real doubt as to the possibility of applying that case law to the specific case); or

b) when the correct way of interpreting the legal rule in question is unequivocal.

  1. In fact and in this sequence reaching point 13 of the recommendations contained therein we note that the CJEU advises that "a national judicial body may in particular when it considers itself sufficiently enlightened by the case law of the Court decide for itself on the correct interpretation of the law of the Union and its application to the factual situation of which it is aware".

  2. Finally reviewing point 18 of the same recommendations we note that that judicial body further encourages that "the national judicial body may present to the Court a request for preliminary ruling from the moment it considers that a decision on the interpretation or validity is necessary to make its decision."

  3. Now the questions formulated by the Claimant relate to the interpretation of articles 1 point 2 and 73 of Council Directive 2006/112/EC of 28 November 2006 the content of which is reflected in point 1 of article 16 of CIVA as regards its application to the specific case.

  4. With due respect the present Tribunal understands that it is clear and evident the meaning of the legal rule in question and its interpretation is unequivocal reason for which it understands that it will not be necessary to resort to the mechanism of the preliminary ruling proposed by the Claimant.

  5. Furthermore and as is mentioned by the Claimant in the course of final submissions "such preliminary ruling will only be dispensed if following the case law established in the Cilfit Judgment: (i) the question is not necessary nor relevant to the judgment of the main dispute; (ii) the Court of Justice has already pronounced itself firmly on the question to be referred or when there is already its consolidated case law on the same; or (iii) the Court has no reasonable doubts as to the solution to be given to the question because the meaning of the rule in question is clear and evident."

  6. Indeed the present Arbitral Tribunal understands that the interpretation of point 1 of article 16 of CIVA is evident and unequivocal regarding the fact that in transfers of goods and provisions of services the taxable amount corresponds to the consideration obtained or to be obtained by the acquirer the recipient or a third party.

  7. And as regards the understanding that the concept of consideration in accordance with what has been the orientation of the case law of the CJEU is in close connection with the character of the operations subject to tax embodying all benefits susceptible of pecuniary evaluation and subjective appreciation.

  8. Thus no doubt or uncertainty is seen in the application and interpretation of point 1 of article 16 of CIVA to the specific case since it is settled that between the parties a contract for assignment of contractual position was celebrated from which resulted a benefit or consideration that is in close connection with the character of the operation in question subject to tax.

  9. The true and only issue to be settled is by how much should this benefit and/or consideration be considered which given the facts given as proven and the application of what is provided in point 1 of article 16 of CIVA does not give rise to doubts for the present Tribunal,…

  10. …reason for which the present Tribunal considers it appropriate to reject the invoked request of the parties as to the preliminary ruling to the Court of Justice of the European Union namely as regards the questions formulated by the Claimant in its arbitral award application or any other related to it the same happening naturally with the request formulated by the Respondent.

B. Of the (il)legality of the disputed tax act.

  1. The issue to be decided regarding the (il)legality of the disputed tax act has as its basis as is settled the celebration on 23.11.2010 of a real estate financial leasing contract celebrated between the Claimant and Bank H..., S.A. relating to two real properties located in the municipality of ....

  2. The value of the financing stipulated between the parties was €1,127,372.26 divided into three installments of quarterly periodicity payable within a period of nine months in the following amounts:

a) 1st installment in the amount of €564,513.31 due on 2010.11.23;

b) 2nd installment in the amount of €187,619.65 due on 2011.02.25;

c) 3rd installment in the amount of €225,143.58 due on 2011.05.25.

With a residual value being fixed between the parties in the amount of €150,095.72.

  1. Now as equally follows settled on 24.08.2011 a contract for assignment of contractual position was celebrated between the Claimant in the capacity of lessee assignor and "E..., S.A." in the capacity of lessee assignee. Having on the same date and in the same private document also been stipulated amendments to the real estate financial leasing contract namely as regards the term thereof which was extended to 25.11.2011 the due date of the obligation to pay the residual value. Being moreover agreed in the same document the payment of a fourth installment in the value of €2,475.42 with due date 25.08.2011.

  2. In fact and reviewing the contract for assignment of contractual position (Doc. No. 5 attached with the arbitral award application) we note indeed in its seventh clause that "The second and third parties declare that no consideration is due for the assignment of the contractual position now agreed".

Let it be said from now that notwithstanding the foregoing the Claimant and Respondent later admitted by agreement the onerous character of the provision of services in question (See note 3 of the Claimant's pleadings).

Now,

  1. In accordance with the provisions of paragraph a) of point 1 of article 1 of the VAT Code (CIVA) according to which: "a) The transfers of goods and provisions of services effected in the national territory on an onerous basis by a taxpayer acting as such" are subject to VAT.

  2. The concept of transfer of goods for the purpose of VAT is provided for in point 1 of article 3 of CIVA which provides to the effect that: "A transfer of goods is generally considered to be the onerous transfer of tangible goods in a manner corresponding to the exercise of the right of ownership."

  3. As clarified by Clotilde Celorico Palma[1] from this definition it is possible to extract that:

a) As a general rule only transfers effected on an onerous basis are subject to VAT;

b) A transfer of goods for the purposes of VAT implies the existence of a tangible good movable or immovable. That is transfers of intangible goods are outside this concept which will be taxable for VAT purposes as provisions of services (...);

c) It is a concept of economic nature. It is not however necessary that the transferor be the owner of the transferred good."

  1. In fact considering that in the present case we are dealing with an assignment of the contractual position of the lessee in the real estate financial leasing contract for the purpose of VAT in which rights and obligations are assigned we will have to frame this operation as being a provision of services under point 1 of article 4 of CIVA since although transcending the concept of provision of services its qualification should be based on the residual character thereof insofar as it does not fit within the definition of "operations effected on an onerous basis that do not constitute transfers intra-community acquisitions or imports of goods."

  2. Stated this and after qualifying the operation in question well knowing that the same is located in the national territory it is necessary to determine whether it is subject to VAT or not whereby we will have to resort to the provisions of article 9 of CIVA in order to determine whether it benefited from any exemption.

  3. In fact reviewing this article 9 we note that the operation here in question does not fit within any of the exemptions provided therein whereby we will necessarily have to conclude that it is an operation subject to VAT and not exempt from it.

  4. Indeed the path traced up to here is settled for both parties since they do not dispute the nature of the operation in question.

  5. The onerous nature thereof must be left behind despite the content of point 15 of the AT's Reply as the Claimant rightly points out[2].

  6. The true divergence reflects itself however in the determination of the taxable amount of the onerous provision of services here in question for the purposes of VAT.

  7. In this direction we have on one hand the position of the Claimant which contends that the taxable base for the purposes of VAT resulting from the execution of the contract for assignment of contractual position celebrated between itself and company "E..., S.A." is €807,578.35 by understanding and considering that this is the value of the consideration actually obtained by the Claimant as a result of that assignment.

  8. Alleging as support for its position that this was "the will of the parties as regards the remuneration established for the assignment of the contractual position celebrated between the Claimant and E..., S.A."," regarding which moreover the "parties are in full agreement as to the agreed price and to the fact that it includes the VAT due".

  9. Moreover the Claimant refers in this regard that "the fixing of the price of the assignment of the contractual position at €807,578.35 was a management option taken by the Claimant and E..., S.A." and cannot be simply disregarded or reconfigured by the AT based on the provisions of point 1 of article 16 of the VAT Code because this rule does not permit discrediting a contractual element – the price – regarding which there is perfect agreement between the parties who celebrate the contract in question."

  10. In opposition to these arguments the Respondent invokes that "the said contract for assignment of contractual position celebrated between the Claimant and E... SA did not contain any specification as to the price of the said assignment of contractual position" whereby there was a need on the part of the AT Services to determine what taxable amount should be taken into account for the purposes of assessment "since the now Claimant had quite simply ignored the tax effects resulting from the celebration of the said assignment of contractual position."

  11. It should be noted in passing that the determination of the contract price as referred to by the Claimant by agreement is "effected" afterwards following the inspection action since at the time of the celebration of the contract for assignment of contractual position which conditioned the determination of the value of the consideration quite simply there was no price because the contractual clauses expressly referred to its non-onerous character.

  12. Thus concludes the AT "a taxable amount of €977,276.54 was reached which corresponds to the value of the real estate €1,127,372.26 which was stipulated in the initial financial leasing contract celebrated on 23.11.2010 minus the amount of €150,095.72 that is to say minus the residual value."

Let us see who is right.

  1. First and as results from the exposition of the Claimant it is true that private autonomy provided for in article 405 of the Civil Code according to which "the parties have the faculty of within the limits of the law i) freely fix the content of contracts; ii) celebrate contracts different from those provided for in that code; or iii) include therein the clauses they deem fit."

  2. Being reasonable to affirm as the Claimant does that "from this it follows as a rule that the will of the parties is sovereign".

  3. Now it happens that the contract for assignment of contractual position in question regarding which it is intended to determine the value of the benefit or consideration resulting from the same for the Claimant expressly states in its seventh clause as regards this matter that "the second and third parties declare that no consideration is due for the assignment of contractual position now agreed".

  4. This means that in the contract celebrated its content was freely fixed in which is stated that no consideration is due for the assignment of contractual position agreed which has interest and relevance for civil purposes.

  5. However in the tax field it is somewhat different since as it is an operation such as the assignment of contractual position qualified for the purposes of VAT as a provision of services gratuitous or onerous from the same there always results the responsibility for payment of the tax given the economic benefit that results from it (it is not forgotten that the onerous nature of the operation came to be recognized by the parties).

  6. In fact and as regards the argument of private autonomy the Respondent refers and rightly so that "if it is true that in the field of contractual freedom the will of the parties prevails in the celebration of contracts it is no less true that this freedom cannot be superimposed on a rule of public order and interest – as is the case with tax rules."

  7. Another argument that the Claimant raises in its exposition to substantiate and support its thesis as to the taxable base in the amount of €807,578.35 and consequently as to the illegality of the disputed tax act is the existence of a similarity between the case sub judice and that which was discussed in the Judgment of the CJEU rendered in case No. C-249/1 Case Tulică and Plavoşin.

  8. Understanding for that purpose the Claimant that: "the CJEU in a similar case considered that "when the price of a good has been determined by the parties without mention of VAT and the supplier of that good is the debtor of the VAT due on the taxed transaction and if the supplier has no possibility of recovering from the acquirer the VAT claimed by the tax administration it should be considered that the agreed price already includes VAT". That is to say the CJEU understood that it should be considered that the agreed price already includes VAT if the following requirements are met:

a) The price has been determined by the parties without mention of VAT;

b) The supplier of the good is the debtor of the VAT; and

c) The supplier has no possibility of recovering the VAT from the acquirer."

  1. The Claimant thus considers that the requirements contained therein are fulfilled in the case in question since on the one hand as regards the determination of price it invokes that "the parties agreed on a global value being their intention in this way to settle all existing liabilities with no mention of VAT whatsoever." for another as regards the possibility of recovering the VAT from the acquirer it refers that "it is important to emphasize that E... is a VAT taxpayer exempt under article 9 of the VAT Code reason for which the VAT borne by it is not deductible (similar to what happens with final consumers)" whereby "it would not have any "possibility of recovering from E... the VAT additionally assessed not only because the legal period for that purpose has already elapsed but also because E... is a taxpayer who performs exempt VAT operations without right to deduction."

  2. The Respondent disagrees however that the aforesaid Judgment of the CJEU can be applied to the case in question invoking for that purpose that "the factual circumstances between the said Judgment and the case in question are different first of all because:

a) the Judgment relates to a transfer of goods and not to a provision of services contract;

b) in the case the parties were natural persons (who were ex officio classified by the Tax Administration as taxpayers) and not legal persons who are normally VAT taxpayers as to the activities they practice;

c) in the contracts celebrated a price was expressly fixed which did not happen in the specific case."

  1. In fact these small details are liable to determine whether the said Judgment applies to the case sub judice or not.

Let us see,

  1. As regards the requirement of price determination let us agree that in the aforesaid CJEU ruling the matter concerns: a transfer of goods regarding which a price was expressly fixed which included VAT even though such inclusion was not mentioned in it...

  2. And that in the case in question we are dealing with a provision of services – contract for assignment of contractual position – which contains no specification as to the price of the said assignment of contractual position nor as to the VAT that would result from it. Thus expressly providing in the contract in its seventh clause that "no consideration is due for the assignment of contractual position now agreed" (See Doc. No. 5 attached with the arbitral award application)

  3. As regards the requirement of "possibility of recovery of VAT by the Claimant" given that the assignee E... is a taxpayer exempt under article 9 as regards transfers of goods and provisions of services it performs (active operations) and does not therefore have to assess and pay VAT to the State this does not necessarily imply that it is discharged from paying the tax especially when it is a final consumer of taxable operations carried out by non-exempt taxpayers (passive operations).

  4. Indeed in a final analysis recovery of the VAT by the Claimant could have taken place if the doctrine of unjust enrichment had been invoked or through the provisions of article 78 of CIVA thus recovering the amount of additionally assessed VAT. It is not by the mere fact that a first period for that purpose has been exceeded that such recovery becomes unfeasible.

  5. In view of the foregoing the present Tribunal understands that the CJEU Judgment aforesaid cannot be applied to the specific case as the respective requirements are not met namely:

a) because the CJEU Judgment concerns a transfer of goods and not a provision of services contract as happens in the case in question;

b) in the case of the Judgment the parties were natural persons (who were ex officio classified by the Tax Administration as taxpayers) and not legal persons who are normally VAT taxpayers as to the activities they practice;

c) in the Judgment the contracts celebrated had a price expressly fixed which did not happen in the specific case in which it was expressly declared that "no consideration is due for the assignment of the contractual position" whereby it is manifest that no price was determined with or without VAT included[3].

d) As regards in the case in question the "possibility of the claimant being able to recover from ... the VAT additionally assessed notwithstanding this being a taxpayer that performs exempt VAT operations without right to deduction the truth is that recovery of the VAT could be made either through the deduction of non-deductible VAT for purposes of IRC as an expense of its activity reducing its revenues and consequently its taxable profit" or through the doctrine of unjust enrichment or further through the provisions of article 78 of CIVA.

Of the application of article 16, point 1 of CIVA

  1. Article 16 of CIVA provides in its point 1 that: "Without prejudice to the provisions of point 2 and 10 the taxable amount of transfers of goods and provisions of services subject to tax is the value of the consideration obtained or to be obtained from the acquirer the recipient or a third party."

  2. According to Marta Machado de Almeida[4] this rule establishes the general rule according to which "in transfers of goods and provisions of services the taxable amount corresponds to the consideration obtained or to be obtained from the acquirer the recipient or third parties."

  3. Moreover explaining this Author[5] that: "Thus regardless of the entity that carries out the payment VAT – as a tax very much linked to the economic activity that it is – will be levied on the actual and real consideration of the transaction carried out. It is intended by this means and in line with the case law of the CJEU that the notion of consideration has a meaning as broad as possible namely so as to guarantee respect for neutrality."

  4. As regards the concept of consideration that concerns us in the present case it further mentions that Author[6] that "in accordance with what has been the orientation of the case law this concept is in close connection with the character of the operations subject to tax. For this purpose and in accordance with the general rule previously enunciated all benefits susceptible of pecuniary evaluation and subjective appreciation should be considered as consideration. In this context it should be noted that although there are rules that determine the equating of certain gratuitous operations to taxed operations the onerous character is an integral part of the tax incidence prerequisites of this tax."

  5. It continues by saying that "In fact for there to be taxation for VAT purposes there must be a consideration that assumes itself as the remuneration of a service that has been rendered being certain that such consideration essential for the subjection to this tax should be integrated into a legal relationship from which reciprocal performances will result. The existence of said reciprocal performances also corresponds to the need to pursue an economic activity being certain that this is not satisfied by the existence of any transaction involving "movement of values" also implying for this purpose of determining the consideration that the parties involved have awareness or have agreed what each expects from the other."

  6. Still on this matter teaches Clotilde Celorico Palma[7] "in accordance with the understanding of the CJEU the consideration should be real and effective susceptible of pecuniary evaluation and subjective appreciation and should include all benefits in a direct manner regardless of whether they have a monetary nature or consist of a transfer of goods or a provision of services."

  7. Now in the case in question notwithstanding the Claimant referring that the value of the consideration in question is €807,578.35 as this is the value agreed between the parties in the contract for assignment of contractual position celebrated,

  8. …The truth is that reviewing that same contract namely its 7th clause we note that it states that "the second and the third parties declare that no consideration is due for the assignment of contractual position now agreed.".

  9. Thus being at a first instance assuming this to be the real will of the parties (expressed in the contract) it would be inferred from there that we would be ab initio dealing with a gratuitous provision of services subject to VAT not already under the residual rule of point 1 of article 4 of CIVA but of paragraph b) of point 2 of the same rule and of the same enactment. Thus consequently the quantification of the taxable base should be determined around paragraph c) of point 2 of article 16 of the same enactment having as reference "the normal value of the service" defined in point 4 of that same article.

  10. Now it happens that the Claimant following the tax inspection to which it was subject on 15.11.2013 submitted a declaration of substitution relating to the taxation period 2011/09 T declaring as income earned for the purposes of the 23% VAT rate the amount of €807,578.35 to which corresponded a value of tax to be paid of €185,743.02

  11. …and issued on 10.12.2013 Invoice No. 3/A [FM] with the description "assignment of contractual position of the financial leasing contract No.... – executed with H..." in the global amount of €993,321.37 in which the VAT at the rate of 23% is included. Resulting from this invoice that the taxable base considered by the Claimant is €807,578.35 and the value of VAT is €185,743.02 reason for which it is possible to set aside the thesis of a gratuitous provision of services and consider that the assignment of contractual position here in question is indeed an onerous provision of services.

  12. A qualification that moreover is not nor has it ever been in question in the present proceedings as stated.

  13. Now from the factual matter brought to the discussion we note that according to what the Claimant refers in its initial petition at the time of the celebration of the financial leasing contract it had a debt to company "F... SGPS, S.A." (B) factual matter given as proven) relating to a loan in the amount of €993,321.37. Which "was granted to the Claimant so that it would settle the installments agreed under the real estate financial leasing contract identified."

  14. Thus being and taking into consideration that on 20.10.2010 company F... assigned its credits against the Claimant to company G... SGPS SA (paragraph H) of the factual matter given as settled) and that this assumed payment of the debt relating to the loan in the amount of €993,321.37 price that was paid by company E..., S.A. for the assignment of the contractual position – as the Claimant explains in the request presented on 30.12.2015 it is manifest that we are dealing with an onerous provision of services…

  15. …which in addition to the evidence produced at the hearing with the examination of witness J... who when questioned about the price for which the assignment was contracted referred that "the price would have been the value of the real estate about a million euros" the party statement of K... who mentioned that "would have been about nine hundred thousand euros and that would be the value of the debt of A... to F..." and finally the party statement of L... according to whom what was intended with such assignment was a "debt assumption" whereby "the value of the assignment would have been the value of the debt to F...".

  16. Nothing leads to believe that the assignment of the contractual position in question was agreed upon in the amount of €807,578.35 as referred to by the Claimant. But we shall see further whether this will be the case.

  17. It is important to always keep in mind the following aspects:

i). The settlement of accounts cannot be a means of avoiding the taxation inherent and associated with the various intercalary payments;

ii). If the profit was only €807,576.35 instead of €993,321.37 because VAT was accounted for in another account then the accounts are not settled and a debt remains between the parties equal to the VAT since it had to be delivered to the State coffers;

iii). The question of VAT was raised only later. No one thought of it at the time of the celebration of the contract for assignment of contractual position.

  1. Really what separates the parties now is the method of determining the price of the assignment of contractual position in the real estate financial leasing contract.

  2. But that was not what separated them initially.

  3. When the AT began its inspection action nothing of what the Claimant now attributes to the will and autonomy of the parties namely as to the rigor in determining the value of the consideration had even been minimally raised by the Claimant and its counterparties.

  4. Purely and simply because the contract had not been attributed any onerous character nor had there been any need to establish any financial accounting tax or any other flows.

  5. The non-onerous nature the absence of price the absence of consideration all would allow resolution.

  6. Only the intervention of the AT led to everything changing.

  7. Now with due respect it is not by the fact that the Claimant comes later to deliver a declaration of substituted VAT to that first delivered or comes to issue an invoice considering a certain value for the operation effected that the same value can be revealed as the benefit/consideration to be taken into account. What matters for tax purposes is precisely what benefit was derived from that operation.

  8. In fact from gratuitous the contract became onerous came to have a price there to be consideration invoice VAT periodic declaration settlement of accounts accounting movements etc., etc.

  9. And it is not curious that by taking from the "capital contributions" debt (which they are not) which with the assignment it was intended to see settled the base value for calculation of the consideration – the only one that seems admissible to us – and which had the primary objective the need for settlement of accounts between companies the Claimant should have presented to the AT a first argument (there were no flows it only mattered to pay the debt) and should not have argued to lower necessarily the taxable base but everything should have acquired new contours from the moment the contract for assignment of contractual position passed from gratuitous to onerous by intervention and imposition of the AT.

  10. And if the maximum motivation was to settle the capital contributions debt (which they were not) despite what is stated in the accounting statement explained by the Claimant (See request of 30.12.2015) the Tribunal did not form the conviction that these costs had effectively been settled.

  11. If the Claimant is to receive €993,321.37 from E... (assignment of contractual position) and has to pay the debt to E... because it was a creditor of that value as "capital contributions" in one of its investee companies it is entitled to receive for itself that same value.

  12. And not any other value of which a part would have to be delivered to the State.

  13. The accounts cannot thus be settled.

  14. E... was entitled to receive €993,321.37 and not merely €807,578.35 which corresponds to a construction effected later by the Claimant for merely fiscal reasons resulting from the issues raised in the inspection by the AT.

  15. If none of this had existed if the Claimant had returned from the value of its credit only the amount of €807,578.35 it would have remained in debt on that account the amount of €125,743.02 (curiously the value of the VAT that the AT understands should have been assessed).

  16. And having received for itself all that – €807,578.35 the Claimant comes to Court to defend and intends to demonstrate including accounting-wise that the accounts are settled.

  17. Manifestly contradictory.

  18. One thing – the settlement of accounts – is incompatible with the other – the non-receipt of the sum of €933,321.37.

  19. And it does not avail to say that the Claimant received that sum because it did not receive it for itself.

  20. It received it to deliver it to the State. The capital contributions debt is not paid.

  21. And that is incontrovertible.

  22. In view of the foregoing as the Claimant itself refers the value of the debt of A... to F... SGPS assumed and paid by G... SGPS SA majority shareholder of E... SA amounted to €993,321.37 whereby no doubts remain that this is what represents the value of the consideration obtained by the Claimant upon the assignment of the contractual position reason for which the disputed assessment act relating to VAT for the period of 2011/09T in the amount of €42,720.90 should be maintained in the legal order as lawful not suffering from any defect.

C. Compensatory Interest.

  1. The assessment not suffering from defects leading to its annulment the request for payment of compensatory interest falls away.

DECISION

Based on the factual and legal grounds exposed it is decided thus for the dismissal of the application and the VAT assessment act for the taxation period 2011/09T in the amount of €42,720.90 (forty-two thousand, seven hundred and twenty euros and ninety cents) should be maintained in the legal order as manifestly lawful.

Process Value

The value of the process is fixed at €42,720.90 (forty-two thousand, seven hundred and twenty euros and ninety cents) in accordance with art. 97-A, point 1, a), of CPPT applicable by virtue of paragraphs a) and b) of point 1 of art. 29 of RJAT and of point 2 of art. 3 of the Regulation of Fees in Tax Arbitration Proceedings.

Costs

Costs charged to the Claimant in accordance with art. 12, point 2 of RJAT, of art. 4 of RCPAT, and of Table I attached to the latter which are fixed in the amount of €2,142.00.

Notify.

Lisbon, 26 February 2016

The Arbitrator

(Jorge Carita)

Frequently Asked Questions

Automatically Created

What is the taxable value (valor tributável) for VAT purposes under Article 16 of the Portuguese VAT Code (CIVA)?
Under Article 16 of the Portuguese VAT Code (CIVA), the taxable value for VAT purposes is the consideration obtained or to be obtained by the service provider from the recipient. In the context of paid services, this means the actual remuneration agreed between parties. Article 16(1) CIVA establishes that for taxable services, the taxable amount corresponds to the value of the consideration, which includes everything that constitutes the counterpart for the service provided. This principle respects the actual economic value exchanged in the transaction and reflects the parties' contractual agreement, consistent with private autonomy under Article 405 of the Civil Code. The taxable value should reflect the real consideration received, not a hypothetical or administratively reconstructed value, unless the Tax Authority demonstrates the declared value is simulated or does not correspond to reality.
Can a taxpayer request arbitration at CAAD to challenge an additional VAT assessment by the Portuguese Tax Authority?
Yes, taxpayers can request arbitration at CAAD (Centro de Arbitragem Administrativa) to challenge additional VAT assessments issued by the Portuguese Tax Authority. This right is established under the RJAT (Regime Jurídico da Arbitragem em Matéria Tributária), enacted by Decree-Law No. 10/2011 of 20 January. According to Article 2(1)(a) and Article 10(1)(a) of RJAT, taxpayers may submit arbitration requests to contest tax assessment acts, including VAT liquidations. The process involves filing a request for constitution of an arbitral tribunal, which is then accepted by the President of CAAD, followed by notification to the Tax Authority. An arbitrator is appointed, either by the taxpayer or by the President of CAAD's Ethics Council, and the tribunal is formally constituted. This alternative dispute resolution mechanism provides taxpayers with an efficient, specialized forum for resolving tax disputes outside traditional administrative and judicial channels.
What was the outcome of CAAD arbitration process 278/2015-T regarding the €42,720.90 additional IVA assessment?
The provided excerpt does not include the final decision of the arbitral tribunal in process 278/2015-T. The text presents the procedural history and the claimant's arguments challenging the €42,720.90 additional VAT assessment for period 11/09T, but concludes before presenting the tribunal's reasoning and ruling. The claimant sought annulment of the assessment, arguing that the correct taxable value was €807,578.35 (with VAT of €185,743.02) rather than the Tax Authority's determination of €993,321.37 (with VAT of €228,463.92). The claimant alleged violation of law due to error in factual premises and misinterpretation of Article 16 CIVA. The case involved hearings on December 16, 2015, with witness testimony and party statements, and the decision deadline was extended to March 6, 2016. To determine the actual outcome, one would need to consult the complete arbitral decision document.
How does the RJAT (Regime Jurídico da Arbitragem Tributária) procedure work for disputing VAT liquidation acts in Portugal?
The RJAT (Legal Regime of Tax Arbitration) procedure for disputing VAT liquidation acts follows these steps: (1) The taxpayer files a request for constitution of an arbitral tribunal along with the arbitration claim, specifying the contested act; (2) The CAAD President accepts the request and notifies the Tax Authority; (3) An arbitrator is appointed by the taxpayer or, if not appointed, by the CAAD Ethics Council President; (4) The tribunal is formally constituted at CAAD headquarters; (5) The Tax Authority submits its reply; (6) The tribunal may order clarification of evidence and schedule hearings per Article 18 RJAT; (7) A hearing is held where witnesses are examined, party statements taken, and procedural matters addressed; (8) Parties submit written pleadings and counter-pleadings; (9) The tribunal issues its decision within the legal deadline, which may be extended pursuant to Article 21(2) RJAT. Throughout the process, taxpayers must pay arbitration fees according to the applicable regulation. This streamlined procedure provides faster resolution than traditional court litigation for tax disputes.
What legal grounds can be used to annul an additional VAT (IVA) assessment related to taxable value determination in Portugal?
Legal grounds for annulling an additional VAT assessment related to taxable value determination in Portugal include: (1) Violation of law due to error in factual premises (Article 163(1) of the Administrative Procedure Code - CPA, applicable via Article 2(c) of the General Tax Law - LGT), where the Tax Authority incorrectly determines the facts underlying the taxable value; (2) Erroneous interpretation and application of Article 16 CIVA, particularly regarding what constitutes 'consideration obtained or to be obtained'; (3) Violation of the presumption of truthfulness of taxpayer records under Article 75 LGT, where the Tax Authority disregards documented transactions without proving simulation or unreality; (4) Breach of private autonomy principles (Article 405 Civil Code), where authorities reconfigure contractually agreed prices without legal basis; (5) Violation of VAT neutrality principles, fundamental to the European VAT system; (6) Procedural defects in the assessment process; (7) Insufficient justification for departing from declared values when parties are in agreement. The burden of proof lies with the Tax Authority to demonstrate that declared values do not correspond to reality when challenging taxpayer documentation.