CAAD 280/2018-T: VAT Discrepancies Between SAF-T Files and Tax Returns – Burden of Proof Under Article 74 LGT

ARBITRAL DECISION

The arbitrators Dr. Alexandra Coelho Martins (arbitrator president), Dr. Leonardo Marques dos Santos and Dr. José Nunes Barata (arbitrator members), appointed by the Deontological Council of the Centre for Administrative Arbitration ("CAAD") to form the present Arbitral Court, constituted on 13 August 2018, agree as follows:

Report

A..., S.A., legal entity number..., with headquarters at Rua..., n.º..., ...-... ..., hereinafter referred to as the "Claimant", filed a request for arbitral pronouncement, under the terms of articles 2, no. 1, letter a) and 3, no. 1 of the Legal Regime of Arbitration in Tax Matters ("RJAT"), approved by Decree-Law no. 10/2011, of 20 January, with a view to annulling the dismissal of Hierarchical Appeals filed against the dismissal of gracious complaints which had as their object Value Added Tax ("VAT") assessments no. 2015..., in the amount of €34,623.71, referring to the period 14/10, and no. 2015..., in the amount of €60,357.84, relating to the period 14/12, and of default interest no. 2015..., of €126.77, with the annulment request covering these tax acts. The Claimant further petitions the restitution of the amounts paid, increased by the corrected tax credit amounts and respective compensatory interest.

The respondent is the Tax and Customs Authority ("AT").

As grounds for its claim, the Claimant alleges the following defects, of a formal and substantive nature:

• Violation of the rules of burden of proof: according to the Claimant, the AT did not prove the requirements for the assessments, as required by article 74, no. 1 of the General Tax Law ("LGT"), nor carried out the necessary acts for discovering material truth, violating fundamental principles of tax procedure (articles 58 and 55 of the LGT). In case of uncertainty, the provision of article 100 of the Code of Tax Procedure and Process ("CPPT") would be applicable, equally leading to the annulment of the assessments;

• The divergences detected by the AT between the periodic declarations and the SAF-T (PT) files resulted from errors in the Claimant's computer system, which communicated internal documents as if they were invoices, and consequently generated duplicate billing values in those files. However, these errors had no reflection in the accounting, nor in the periodic declarations, whereby the VAT assessed in these and reflected in the accounting is correct, with no concealment of sales having occurred;

• The rectification of the SAF-T (PT) files carried out by the Claimant was slow, being completed in March 2018, at which time the Claimant requested the AT to submit the new rectified files, whose values coincide with those reported in the periodic declarations, with a slight difference of 1%, with VAT assessed in these being higher;

• With respect to the credit note procedures, there is no tax shortfall, whereby the reporting of active operations at the net value of credit notes constitutes merely a declarative irregularity;

• The procedure for VAT assessment based on the sales diary was carried out based on Circular Memorandum no. 102697, of 4 June 1991, whose revocation only occurred with Circular Memorandum no. 30196, of 5 December 2017. Thus, at the time, this procedure was not only permitted, but did not result in any failure or delay in the assessment of VAT due, but rather anticipated the assessment of this tax in relation to the invoice to be issued with the customer's check-out (the moment when the Claimant considers the service provision to be completed);

• The assessment acts suffer from lack of substantiation, as they do not mention the legal provisions supporting the tax corrections, under the terms of article 77 of the LGT.

The Claimant attached 21 (twenty-one) documents and requested witness testimony.

The request for constitution of the Arbitral Court was accepted by the President of CAAD and followed its normal proceedings, namely with the notification to the AT on 6 June 2018.

In accordance with articles 5, no. 3, letter a), 6, no. 2, letter a) and 11, no. 1, letter a), all of the RJAT, the Deontological Council of CAAD appointed as arbitrators of the Collective Arbitral Court the signatories, who communicated their acceptance of the assignment within the applicable timeframe.

On 24 July 2018, the parties were notified of this appointment, having not opposed it, under the combined terms of articles 11, no. 1, letters a) and b) and 8 of the RJAT, 6 and 7 of the Deontological Code of CAAD.

The Collective Arbitral Court was constituted on 13 August 2018, as communicated by the President of the Deontological Council of CAAD, under article 11, no. 1, letter c) of the RJAT.

On 1 October 2018, the Respondent filed its answer, arguing for the dismissal and consequent absolution of the claim, with the maintenance in the legal order of the impugned acts.

To this end, the Respondent emphasizes that, although the Claimant was invited to submit replacement periodic declarations and to provide the necessary clarifications to justify the divergences found, the former had difficulties in doing so, including in the context of the right to be heard, and the explanations given were not thorough nor unequivocal, whereby, considering the insufficiency of the evidentiary elements made available by the Claimant, the inspection procedures evolved and gave rise to the additional assessments based on the SAF-T files.

According to the Respondent, the logical corollary of the Claimant's justifications would necessarily imply the submission of new SAF-T files, with the correction of the values contained in the invoices communicated to the AT via the e-invoice portal, considering, however, that the replacement of files does not serve as proof of the Claimant's actual billing recorded in the accounting, which, in its view, remains unknown.

The Respondent further contends that the Tax Inspection Services carried out the necessary diligences for discovering material truth, in observance of article 58 of the LGT, with the AT not required to substitute the taxpayer in the performance of proof that, by law, falls to the taxpayer to carry out. It considers that facts should only be considered proven when determined with absolute certainty. It invokes articles 29, no. 1, letter g) and 44 of the VAT Code, which provides that taxpayers, in addition to the obligation to pay the tax, must have adequate accounting for the assessment and supervision of the tax.

The Respondent considers that VAT assessment based on the sales diary ceased to be provided for as of January 2013, with the generic revocation of previous administrative instructions carried out by no. 19 of Circular Memorandum no. 30136, of 19 November 2012.

As for the alleged lack of substantiation, it argues that the Claimant grasped the reasons underlying the assessments, which allowed it to impugn them, having resorted to the mechanism provided for in article 37 of the CPPT.

The Respondent requested the waiver of witness testimony, indicating, ad cautelem, one witness, and on 9 October 2018, attached the administrative procedure file ("PA").

Notified on 16 October 2018 to exercise the right to be heard regarding the waiver of witness testimony, the Claimant stated that the questioning of the witness it had listed was essential and additionally attached 21 documents.

By order of 16 November 2018, the Arbitral Court determined the holding of the meeting provided for in article 18 of the RJAT, with the questioning of witnesses.

On 5 December 2018, the said meeting was held, in which the Claimant's witness B... was heard, and the witness listed by the AT was dispensed with. The Arbitral Court denied the Respondent's request for removal of the rectified SAF-T files attached by the Claimant with the request for arbitral pronouncement ("ppa"), relating to the periods from June 2013 to September 2014. The Court requested additional information on the initiatives for re-submission of SAF-T files by the Claimant to the AT, which it presented on 10 December 2018.

In the exercise of the right to be heard, the AT stated that the submission of new SAF-T files, which eliminated the difference in values initially detected by the AT, was achieved through the mass annulment of invoices and that the Claimant does not demonstrate why the invoices were annulled and what these annulments consisted of, making it essential to carry out additional instructional diligences, namely expert evidence.

In turn, the Claimant attached documentary proof of the iterations via electronic means between the taxpayer and the AT with reference to the submission of the rectified SAF-T files and reiterated that the AT founded solely the VAT assessments on the information contained in these SAF-T files and never bothered to analyze the accounting and invoices issued within the scope of the inspection procedure, accounting that was always correct, given that, as it stated, the error occurred only in those files. It adds that the AT validated the replacement of the new SAF-T files and accepted their submission, contrary to what the Respondent claims, whereby there are no grounds for conducting an expert assessment of the SAF-T files.

The Arbitral Court notified the parties for successive written submissions, fixing a deadline of 10 days, and denied expert evidence by reasoned order.

Both parties submitted submissions and maintained the positions previously assumed. The Claimant added to its initial arguments the violation of the principles of proportionality and effective judicial protection and "lack of non-taxation by indirect methods". On the other hand, the Respondent additionally invokes that the late submission of the corrected SAF-T files implies, in any event, that it was the Claimant that gave rise to the action, whereby it bears responsibility for costs.

By order of 7 February 2019, the deadline for rendering the decision was extended, under article 21, no. 2 of the RJAT, given the extension of the instructional phase, having been subject to additional extension on 11 April 2019.

Clarification of Procedural Issues

The Tribunal was regularly constituted and is competent ratione materiae, given the configuration of the subject matter of the process (cf. articles 2, no. 1, letter a) and 5 of the RJAT).

The request for arbitral pronouncement is timely, as it was filed within the deadline provided for in article 10, no. 1, letter a) of the RJAT.

The parties have legal personality and capacity, have standing and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

Grounds for Decision

Matter of Fact

With relevance to the decision, it is important to consider the following facts deemed proven:

• A..., S.A., is a company governed by Portuguese law with activity since 1988 and is an integral part of Group C..., carrying out, as its main activity, Hotel and Restaurant operations, under CAE 55111. In 2014, it operated and managed more than 20 hotels in Portugal, namely under the brands D..., E... and F...– cf. information in the PA.

• The Claimant is framed within the normal regime of monthly periodicity for VAT purposes and is permanently in a tax credit situation, regularly requesting VAT refunds – cf. information in the PA.

• In the various hotels of the Claimant, accommodation services, provision of beverages and meals, rental of spaces and catering, vehicle parking and laundry services, among others, are provided – cf. copies of invoices attached by the Claimant in a separate request.

• Customers frequently choose to aggregate the consumption made during their stay, making payment once at the end, when they check out of the hotel establishment in question – cf. copies of invoices attached by the Claimant in a separate request and witness testimony.

• In such cases, the Claimant's procedure at the time of the facts followed what was provided for in Circular Memorandum no. 102697, of 4 June 1991, according to which, in cases where consumption was made on various days and the invoice was only issued and corresponding payment made at the end of the stay, operations could be considered and the respective VAT assessed on a daily basis, that is, with the effectuation of consumption (based on the sales diary) and not with reference to the invoice date, which represented an anticipation of the assessment of this tax compared to what would result from consideration of the invoice date. This method was used by various entities operating in the hotel sector in Portugal – cf. witness testimony.

• Still with respect to consumption made over various days but invoiced once at the end of the stay, specifically those relating to beverages and meals ("food and beverage"), the Claimant, at the time of consumption, issued an internal document in the certified invoicing system it had, called VR. Later, when the customer paid and checked out, an invoice for all consumption was issued and delivered, processed by the other certified invoicing system used by the front-office of the Claimant (FOLS system) – cf. document 20 attached with the ppa, invoices attached by the Claimant in a separate request and witness testimony.

• The internal documents issued when beverage and meal consumption was made were not made available to customers, to whom only the final front-office invoice generated in the FOLS system was provided – cf. witness testimony.

• With respect to the specific situation of breakfasts included in the value of accommodation and which were not, for that reason, subject to separate invoicing, their consumption also gave rise to an internal document – cf. witness testimony.

• Until September 2014, both invoices issued by the front-office system (in FOLS) and the internal documents of the VR were communicated through the invoicing SAF-T to the AT, with both types of documents being considered, in that context, as issued invoices – cf. witness testimony.

• However, the supplies and values contained in the internal documents of the VR (which represented internal transfers) were replicated in the final front-office invoices issued to customers in the FOLS system, whereby they represented, in that measure, a duplication relative to the same services provided and values, taxable base and VAT charged – cf. document 20 attached with the ppa and witness testimony.

• In the Claimant's accounting and, consequently, in the VAT periodic declarations, this duplication was not recorded, whereby only the operations reported in the final front-office invoices and the respective values of taxable base and VAT were correctly considered – cf. witness testimony.

• On 23 December 2014, the Claimant was notified by the VAT Collection Services Department of the AT for purposes of exercising Prior Hearing within 15 days (article 60 of the LGT), that in the periods of July and August 2014 there were divergences, specifically that "the VAT value assessed in the invoices is higher than the VAT value declared in the Periodic Declaration of the period" – cf. documents 4 and 5 attached with the ppa and in the PA.

• In February 2015, the Claimant was notified of:

  • The VAT assessment demonstration no. 2015..., dated 4 February 2015, which resulted in the VAT amount to be paid of €34,623.71, relating to the period of October 2014, with payment deadline set for 6 April 2015 – cf. document 1 attached with the ppa and in the PA;

  • The VAT assessment demonstration no. 2015..., dated 10 February 2015, which resulted in the VAT amount to be paid of €60,357.84, relating to the period of December 2014, with payment deadline set for 23 April 2015 – cf. document 2 attached with the ppa and in the PA; and

  • The default interest demonstration no. 2015..., dated 10 February 2015, which resulted in the interest amount to be paid of €126.77, relating to the period of December 2014, with payment deadline set for 23 April 2015 – cf. document 3 attached with the ppa and in the PA.

• The above-mentioned assessment relating to the period of October 2014 (of €34,623.72) was the repercussion of the VAT correction, in the amount of €111,438.25, which the AT considered to be owing for the periods of July and August 2014, which resulted in the VAT assessment demonstrations no. 2015..., no. 2015..., respectively, and in the recalculation by the AT of the following periodic declarations. Specifically, payable tax was generated in relation to the month of October, in the said amount of €34,623.72, reflected in the additional assessment no. 2015..., derived from the VAT differential corrected by the AT, not absorbed by the VAT credit of €76,814.74 reported by the Claimant in the October declaration – cf. documents 1 (Oct), 6 (Jul) and 7 (Aug) attached with the ppa and in the PA.

• The assessment relating to the period of December (of €60,357.84), derives from the recalculation of the previous periodic declarations and of the December declaration itself – cf. documents 1 to 7 attached with the ppa and in the PA.

• In the values corrected by the AT in the periods under analysis, there is a difference of €545.56 between the corrections made by the AT in the VAT periodic declarations and the notifications of divergences to the Claimant, for which there is no justification – cf. documents 1 to 7 attached with the ppa and in the PA.

• The AT, prior to the correction of the assessed VAT value and the issuance of the additional VAT assessments relating to the second half of 2014, here impugned, did not analyze the invoices issued by the Claimant in that period, nor its accounting, referring a posteriori that "given the specificity and size of the entity, in which we highlight the number of SAF-T files submitted monthly, which exceeds 50, as well as the number of documents issued monthly which average around 80 thousand documents monthly, the analysis would be of high complexity requiring specific instruments and deep knowledge in the area of IT audit." – cf. AT information from 2016 in the PA.

• On 16 March 2015, the Claimant requested the substantiation of fact and law of the VAT assessment demonstration relating to the period of October 2014, under article 37 of the CPPT – cf. document 13 attached with the ppa and in the PA.

• In response to the Claimant's request, the following grounds were communicated:

"[…]

Regarding this matter, the following is reported:

• For 1407 and 1408, the Taxpayer was notified to exercise the right to prior hearing regarding the project for additional VAT assessment to be issued.

This notification contains the substantiation on which its issuance is based, of which its form of calculation is part.

• In the periods mentioned above, the amount resulting from the difference between the values mentioned in the prior hearing notification was automatically inserted in field 41 of DC 108;

Since the credit determined in those periods supported the corrections made, there was no place for the issuance of an additional assessment, with a reduction, by the same amount, of the value of the ER available for the following tax periods.

Thus, in 1408, there was a cumulative reduction of ER in the amount of €111,438.25, which was reflected in the following periods.

• So, in 1410, only the value of €184,233.14 was considered in field 61, resulting in field 94 the value of €1,165,376.29 (compared to €1,276,814.74 determined by the Taxpayer), value that was fully considered for refund purposes, although the requested amount had already been paid.

The value of €76,814.74 that the Taxpayer had considered as ER for 1411, ceased to be available and, for the difference still outstanding for €111,438.25, an additional assessment of €34,623.71 was issued.

The notification of this additional assessment was made through two documents, which are attached, namely:

• VAT Assessment Demonstration, which is substantiated through the provision of the values of the DP that were accepted, for purposes of comparison with those the Taxpayer considered in completing the same DP, in which one can verify, in particular, the value of fields 61, 94 and 95, as well as the value to be refunded;

• Account Reconciliation Demonstration, which explains the difference between the value of the RB paid and the value of available credit, thus justifying the value of the additional assessment.

• Similarly to what already happens for DC of type 105, it is expected, shortly, the implementation of automatic issuance of notifications to be sent to the Taxpayer, when there is a cut-off of ER in light of DC 108 processing.

For this case, the IT area was requested to proceed with issuing the notifications relating to 1407 and 1408, pending its dispatch to SECIN. […]" – cf. document 13 attached with the ppa and in the PA.

• An identical request was submitted for the VAT assessment demonstration relating to the period of December 2014, regarding which the Claimant received the same substantiation – cf. documents in the PA.

• On 23 April 2015, the Claimant proceeded to pay the amounts of the VAT assessment demonstrations (€34,623.71, €60,357.84 and €126.77) despite not agreeing with them – cf. documents in the PA.

• The Claimant filed Gracious Complaints for each of the periods in question – cf. documents 9 and 10 attached with the ppa and in the PA.

• In December 2015, the Claimant was notified of the projects for dismissal of the Gracious Complaints which became final, by order dated 30 December of that year – cf. documents 11 and 12 attached with the ppa and in the PA.

• As grounds for the dismissal of the Gracious Complaints, the AT states the following:

"[…]

From the appreciation of the petition

• From consultation of the computer system, it is verified that divergences were detected between the value communicated through the "E-invoice" system and the value communicated in the VAT Periodic Declaration (DP), relating to the periods 201407 and 201408.

• In the periods in question, the AT corrected the VAT value in favor of the State, having determined a smaller credit value to report for the following periods. This credit reduction led to the correction, in period 201410, of the value entered in field 61 – "Excess to report from the previous period", originating the additional assessment now complained of.

• Thus, what is important to analyze here are the divergences verified in periods 201407 and 201408, regarding which the claimant presents generic justifications about how to account for and determine VAT due, without objectively concretizing and justifying the divergent values.

• Considering that taxpayers have the burden of proving the facts that may serve to support the concretization of the rights they wish to assert, for the AT to be able to decide, it falls to the claimant to present documents capable of convincing of the veracity of the facts.

• Thus, article 74, no. 1 of the LGT provides, under which "the burden of proof of the facts constitutive of the rights of taxpayers rests on whoever invokes them".

• It also follows from no. 1 of article 342 of the Civil Code (CC) that "it falls to the one who invokes a right to prove the constitutive facts of the right alleged".

• Now, the burden consists in the necessity to observe a certain conduct, not for satisfaction of the interest of another, but as a prerequisite for obtaining an advantage for oneself, which translates, for the party to whom it falls, in the task of providing proof of the fact in question, incurring the disadvantageous consequences of the contrary fact being taken as established, when it does not succeed in providing that proof.

• In the case at hand, the claimant refers in the pi that "…registers, as better detailed in the Attached Hearing Rights remitting oneself to their analysis, various situations that, as a result of its activity and without harming the State (given the VAT assessment in an amount prior to invoicing) inevitably generate divergences due to non-coincidence in certain service provisions between the moment of assessment and the moment of invoicing."

• On this matter, appreciating the Hearing Rights attached to the pi (Docs. 6 and 7), it is verified that there are, indeed, presented some examples of facts that occur and that make the claimant deliver VAT to the State in a certain month, although the invoice will only be issued the following month.

• However, it does not attach any accounting elements that would allow corroboration of the alleged facts and that would allow validation that the value of the divergence relative to each of the periods corresponds to VAT that was actually already delivered to the State in the previous period(s).

• Furthermore, the claimant states in its respective Hearing Rights that "…protests to attach additional information intended to support its understanding" without the same having been attached to the pi.

• Given the lack of proof of what is alleged, it must be concluded that there is an insufficiency of means of proof, since these, by themselves, do not allow validating that the tax owing in periods 201407 and 201408 was already delivered to the State in previous periods and, for that reason, the additional VAT assessment now relating to period 201410 is not now due.

• Finally, regarding the alleged lack of substantiation, article 77, no. 2 of the LGT determines that the substantiation of tax acts may be done summarily, and must always contain the applicable legal provisions, the characterization and quantification of the tax facts and the operations for determining the taxable matter and the tax.

• As the STA has understood, the legal and constitutional requirement of substantiation aims, mainly, to allow those interested to know the reasons that led the Tax Authority to act, in order to enable them a conscious choice between accepting the legality of the act and its contentious reaction.

• This objective was achieved by the Tax Authority, as from reading the Hearing Rights presented by the claimant it follows that it grasped in a clear and objective manner what the reason underlying the detected divergences was.

• On the other hand, following notification of the additional assessment in question, the claimant availed itself of the prerogative provided for in article 37 of the CPPT and requested the allegedly missing substantiation, verifying once more, through the pi, that it understood the reasons that led to the determination of the tax owing.

• Regarding the request for compensatory interest, articles 43, nos. 1 and 2 of the LGT state that there will only be a place for its payment when the tax administration is convinced, in gracious complaint proceedings, hierarchical appeal or judicial impugnation, that there was error attributable to the services, resulting in payment of the tax debt in an amount higher than legally due.

• In the case at hand, as the present opinion does not propose granting the request, there is no right to compensatory interest.

Conclusion

From the foregoing, it is concluded that the claimant, despite being burdened with the burden of proof of the veracity of the alleged facts, did not equip itself with sufficient means of proof that would allow putting into question the correction made by the AT, whereby the VAT assessment now complained of is to be maintained, with the dismissal of the petition being proposed, due to lack of evidentiary support. […]" – cf. documents 11 and 12 attached with the ppa supplemented with information in the PA.

• On 12 February 2016, the Claimant filed Hierarchical Appeals against the decisions dismissing the Gracious Complaints. The Hierarchical Appeals came to be dismissed by order of 6 March 2018, received on 7 March 2018 – cf. documents 13 to 16 attached with the ppa and in the PA.

• The AT substantiates the dismissal of the Hierarchical Appeals in the following terms:

"[…]

1. The issued assessment was based on the divergence between the VAT amounts assessed contained in the SAF-T file and the VAT assessed mentioned in the periodic declarations relating to the periods 2014-07 and 2014-08, which subsequently, after the re-assessments made, was reflected in the correction of the values of field 61 of the periodic declaration of 2014-10 [and 2014-12].

2. The difference detected by the AT services (Tax and Customs Authority) resulted from the finding that the VAT value assessed in the invoices and communicated by the SAF-T files was higher than the VAT value declared in the periodic declarations, consisting in the issuance of the additional assessment, under the terms of article 87 of the VAT Code (CIVA), in the amount of €34,623.71 [and €60,357.84, for the period 2014-12].

3. It should be noted that the VAT assessed entered in the periodic declaration considered in the comparison with the VAT assessed in the invoices communicated is given by the following formula;

Field (C)92-C11-C17-C41-[(C97+C98+C99+C100+C101+C102)*(Standard VAT Rate/100)]

1. Thus, we emphasize that the amounts communicated by the SAF-T file, when compared with the amounts revealed in the VAT periodic declarations identified below, do indeed show the existence of a divergence, as we can verify

[…]

1. Thus, in accordance with information no. 1379, of 2017-04-19, from this Services Department noted with concordant order from the VAT Services Director, which is given here as fully reproduced, the collaboration of the Tax Inspection Services (SIT) was requested in order to determine the VAT actually due in the periods 2014-07 and 2014-08, which ultimately influenced the additional assessment of October 2014 [and December 2014].

2. In response to what was requested, the Finance Department of Porto, in its information of 2017-12-18, ruled on the question sub judice, as follows (excerpts):

"8. (…) given that there were pending refund situations, the divergences were considered concluded, relating to periods 2013.06 through 2014.09 (excepting the two periods to which the Hierarchical Appeal relates), and an external inspection procedure was opened, titled by DI... .

1. From the inspection action it was immediately noted that "given the specificity and size of the entity, the analysis would be of high complexity requiring specific instruments and deep knowledge in the area of IT audit."

2. With respect to the allegation, on the part of the company, of invoice duplication and "after several diligences and attempts to analyze to test such duplications, although it was verified that there indeed existed duplication of records, it was not possible to demonstrably prove the alleged duplication due to the taxpayer not having made available/demonstrated necessary elements to assess them."

3. Being thus certain that the divergences do not result, by themselves, from the alleged application of the memorandum ... of the SIVA of 04-06-1991, but would result in some cases from actual invoice record duplication, it was, however, not possible to make a conclusive analysis, due to difficulties of varied nature, namely due to limitations resulting from the size and specificity of the taxpayer, the lack of technical means and access to relevant information, on the part of IT, and the difficulty/slowness in providing elements on the part of the taxpayer.

4. As a consequence thereof, the external inspection action was closed on 19-12-2016, with two internal service orders being opened, credited with numbers OI2016... and OI2016... and issued on 30-12-2016, for the years 2013 and 2014.

5. From the conclusions of the Draft Report it is extracted that from the "appreciation of the content of the prior hearing rights for purposes of justifying the divergences stemming from the treatment of data sent for e-invoice, the report prepared under DI..., the INFORMATION of the complaint against the additional assessment that emerged from the divergence verified for periods 201407 and 201408, in all respects identical in matters of fact and law, to those now under appreciation identified in the previous item and all other elements in the process and in the AT database" and considering "the unequivocal insufficiency of evidentiary elements made available by the taxpayer to allow validation of the amounts entered in the DP's presented", the substantiation was presented that served as the basis for the correction proposals that follow:

[…]

1. Such corrections were maintained in the Final Report, dated 04-10-2017, after analysis of the grounds invoked in the exercise of the right to be heard, considering that:

i) "the elements adduced by the taxpayer in the exercise of the right to be heard, in which it basically limited itself to repeating theoretical justifications already considered in the preparation of the correction project, moving almost entirely away from the practical part concretizing justifications invoked – duplication of tax in invoices contained in the SAFT and that the outdated use of the rules contained in the OC ..., did not harm the State, neither in the values determined nor in temporal terms, which necessarily would have to be presented unequivocally, clearly and objectively;

ii) the required justifications would objectively as a logical corollary of the work developed result in the submission of new SAF-T files, which had not yet occurred.

it appears to us that, with the exercise of the right to be heard, in substance, A... added nothing materially relevant and new to the fundamental question, the justification of the divergences, whereby it appears that the corrections in VAT should be maintained initially proposed."

1. Now, if we pay attention to what is established in no. 1 of article 74 of the LGT, "The burden of proof of the facts constitutive of the rights of the tax administration or of taxpayers rests on whoever invokes them."

2. Furthermore, facts should also only be considered proven when determined with absolute certainty, which is why the failure to provide proof or its insufficient provision cannot but influence the merits of the claim.

3. Thus, it was important that A... had presented elements suitable to support the characterization of the monthly divergences and their respective accounting records.

4. Which should, unequivocally, prove the difference between the VAT determined in sales/service provisions and that contained in the invoices communicated to the AT.

5. Which did not happen, despite the intervention of the SIT being requested, in the scope of this hierarchical appeal procedure, whereby we are of the opinion that the appealing party is not right.

6. In the hierarchical appeal, no new elements were presented to the process, capable of altering the decision already made in gracious complaint proceedings, which was notified to it on 2016-01-14.

7. Accordingly, taking into account the instructions on the right to be heard conveyed through no. 3 of Circular no. 13, of 1999-07-08, from the Tax Justice Services Department, and that A... was already called to exercise its right to be heard on the situation in question, in previous phases of the process (no. 3 of article 60 of the LGT), we are of the opinion that it is to be dispensed with new hearing.

8. In light of the foregoing, it is proposed to dismiss the present hierarchical appeal. […]" – documents 15 and 16 attached with the ppa and in the PA.

• Given the divergences detected between the billing communicated via SAF-T files and the operations reported in the periodic VAT declarations, the Claimant proceeded to rectify the files produced relating to 2013 and 2014, in the latter case through September, a task it completed in March 2018, with the outsourced support of a software house and an international audit and consulting company – cf. document 15 attached with the ppa and witness testimony.

• The said rectification consisted of identifying all duplicated invoices, i.e., those corresponding to mere internal transfers originated in the VR system for the customer accounts current and that were, by programming error, generating their communication to the SAF-T file as invoices and duplicating the respective value. These invoices subsequently came to be in the status "annulled" (A) and, subsequently, new SAF-T files were generated, whose billing values ceased to present divergences relative to those contained in the accounting and periodic declarations for the months/periods in question, which remained unchanged – cf. documents attached by the Claimant with the exchanges of information and clarifications in the "E-counter Service" and witness testimony.

• On 12 March 2018, the Claimant requested the AT, via electronic means, through the "E-counter Service", the replacement of the SAF-T files for the periods between June 2013 and September 2014, as for this replacement it was essential that the previously submitted files be removed, which could only be carried out by the AT – cf. documents attached by the Claimant relating to the "E-counter Service" and witness testimony.

• After several contacts with the AT via the E-counter Service and the provision of explanations by the Claimant, the AT informed, by that means, on 23 March 2018, that "in the matter presented, there is a duplication in the elements contained in the issuance of the documents themselves and not in their communication. […] The solution may involve the proper rectification of the issued invoices and subsequently proceed with their communication." – cf. documents attached by the Claimant relating to the E-counter Service.

• On 19 April 2018, once again via the E-counter Service, the AT informs: "In accordance with our telephone contact and given your last clarification provided, we reiterate the need to submit the new files relating to the improperly issued documents, in a new status – annulled status (AT). Please proceed with the submission of files relating to the periods that are in the reported circumstances." – cf. documents attached by the Claimant relating to the E-counter Service.

• In that sequence, the Claimant submitted, on 16 May 2018, a corrected SAF-T file for the AT to evaluate its integration, having after several contacts, the AT responded on 13 July 2018, via the E-counter Service, to the effect that it would not technically be possible to accept the "information contained in the files relating to the year 2013". As for the year 2014, similarly to what had been requested for the year 2013, the AT requested "the submission of a file relating to the first period (JAN 2014) in order to evaluate the proper integration and in that way subsequently allow the submission of the remaining files. In due course, indication will be given on the possibility of submitting the remaining 2014 files." – cf. documents attached by the Claimant relating to the E-counter Service.

• The Claimant submitted, on 25 July 2018, two SAF-T files relating to January 2014, one relating to the FOLS system and another to the VR system, both of which were successfully integrated, and requested, on 6 August 2018, authorization from the AT for the submission of the remaining SAF-T billing files for the remaining periods of 2014 – cf. documents attached by the Claimant relating to the E-counter Service.

• On 9 August 2018, the AT confirmed the submission of files relating to January 2014 and authorized the presentation of the remaining ones, in the following manner: "We confirm the submission of the said files (identifier ... with 841 integrated documents and 1082 duplicate documents and identifier ... with 896 integrated documents and 1831 duplicate documents). The integrated documents correspond to their new status as annulled allowing thus their successful inclusion. The duplicate documents were not newly integrated as they had been previously communicated. In that sense, please thus submit the remaining documents in this new status relative to the remaining periods relating to the year 2014." – cf. documents attached by the Claimant relating to the E-counter Service.

• In disagreement with the VAT corrections relating to the periods of July and August 2014 and respective repercussions generating the additional VAT and default interest assessments relating to October and December 2014 identified above, the Claimant filed with CAAD, on 5 June 2018, the request for constitution of the Collective Arbitral Court that gave rise to the present process.

Motivation

The pertinent facts for the judgment of the case were chosen and delimited based on their legal relevance, in light of the plausible solutions of the legal questions, under the combined application of articles 123, no. 2 of the CPPT, 596, no. 1 and 607, no. 3 of the Code of Civil Procedure ("CPC"), applicable by referral from article 29, no. 1, letters a) and e) of the RJAT.

Allegations made by the parties and presented as facts were not taken as proven or not proven if they consisted of strictly conclusive statements, not susceptible to proof, and whose validity is to be assessed in relation to the concrete consolidated matter of fact.

With respect to the facts proven, the conviction of the arbitrators was based, essentially, on critical analysis of the documentary evidence attached to the file and, whenever applicable, on the testimony of the witness questioned, B..., an employee of the tax consulting company subcontracted by the Claimant to provide assistance in the rectification and validation of the SAF-T invoicing files.

The testimony given by the witness was objective, consistent and demonstrated detailed knowledge of the facts reported, namely with respect to the problems identified in the operation of the Claimant's invoicing systems and the occurrence of duplication, by computer program error, of issuance of invoices relating to the supply of meals and beverages charged to the customer account in the certified VR system (which were only charged at the end via the FOLS system) in 2013 and 2014 (through September).

The witness participated in the process of analyzing the SAF-T files from July 2013 to August 2014 and in resolving problems with them, to eliminate duplication situations and file re-submission, in coordination with the software house (IT aspect), having performed the respective validation tests supported by a significant sample, determined in accordance with audit procedures. It noted having been an extensive and time-consuming task given the volume of information involved which, for the years 2013 and 2014, corresponded to 800 .xml files.

Facts Not Proven

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

On the Law

2.1. Delimitation of Questions to be Decided

The corrections to VAT assessed based on the SAF-T invoicing files communicated by the Claimant are in question, with reference to the months of July and August 2014, which presented, at the time, divergences relative to the values of operations and VAT assessed contained in the VAT periodic declarations relating to the same months.

Various defects are raised in this context, of which it is necessary to have knowledge, except insofar as knowledge of others makes them prejudicial:

• Non-existence of taxable operations and lack of proof, by the AT, of the requirements for VAT incidence, with violation of the rules of distribution of burden of proof;

• Requirement for diabolic proof in violation of the principles of proportionality and effective judicial protection;

• Deficit of instruction of the administrative procedure, by omission of necessary diligences and violation of the principle of discovery of material truth;

• Lack of non-taxation by indirect methods;

• Lack of substantiation; and

• Subsequent healing of declarative divergences.

2.2. Non-existence of Taxable Operations and Distribution of Burden of Proof

The sole ground of the tax acts and, likewise, of the second-level acts that fell upon them, all here impugned, resides in the finding, by the AT, of divergences between, on the one hand, the value of operations and VAT assessed in the VAT periodic declarations, relative to the periods of July and August 2014, and, on the other hand, the value contained in the SAF-T files issued and communicated by the Claimant for the same periods.

In this context, the value presented in the VAT periodic declarations being lower than that contained in the SAF-T files, the AT proceeded with the additional assessment for the difference, considering that the taxpayer failed to provide proof of the justification it invoked for the said divergences, which also had repercussions, through the reduction of the Claimant's tax credit, in subsequent periods, in casu, in October and December 2014.

This justification concerns three types of situations, the most significant being the duplication of billing for beverages and meals consumed at the Claimant's hotel establishments, which occurred when their internal transfer between the two computer systems used by the Claimant, in cases where guests or customers chose to pay consumption only at the end of the stay ("transfers"), and that of breakfasts included in the value of accommodation, in which a "pre-invoice" was issued, for stock management purposes. In these situations, the Claimant demonstrated in the present arbitral proceedings that the documents processed by the VR system, which should not be invoices as they did not represent any charge, were communicated through the invoicing SAF-T to the AT as issued invoices, not being delivered to customers, to whom an invoice was issued at the end of the stay including the said consumption, issued by the FOLS (front-office) system and not by the VR system. The invoice issued by the FOLS system was also reported in the SAF-T.

The other two situations that originated differences, although less significant, relate to the consideration, at the time of the facts, in VAT periodic declarations, of the value of operations net of credit notes, and to the determination of VAT assessed at the moment of consumption and not invoicing, that is, based on the sales diary, under the administrative understanding contained in Circular Memorandum no. 102697, of the VAT Services, of 4 June 1991, which came to be expressly and specifically revoked by Circular Memorandum no. 30196, of 5 December 2017. The first configures a declarative error capable of generating discrepancies between the VAT assessed fields and the values of issued and communicated billing, however, deprived of any impact on the value of VAT due, as the tax relating to credit notes is deductible, and the second represents an anticipation of the assessment of this tax compared to what would result from consideration of the invoice date.

First and foremost, it is important to note that the SAF-T invoicing file does not constitute an ancillary obligation for VAT determination, nor a taxable fact or requirement for taxation of this tax. Taxable, for VAT purposes, are the operations enumerated exhaustively in article 1, no. 1 of the Code of this tax, specifically, transfers of goods, provision of services, imports of goods and intra-Community operations defined and regulated in the Regime of VAT in Intra-Community Transactions, with VAT also due that is incorrectly mentioned in an invoice, in accordance with article 2, no. 1, letter c) of the same Code.

Thus, the SAF-T file and the information contained therein are not convocable as a basis or requirement for VAT incidence. It is recalled that this is a normalized file, created by Ordinance no. 321-A/2007, of 26 March, aimed at standardizing the financial and tax information of taxpayers subject to Corporate Income Tax ("IRC"), in accordance with a pre-defined data structure, encompassing invoicing and accounting systems, aimed at facilitating analysis of this information by tax inspection services.

With Decree-Law no. 198/2012, of 24 August, the legislator came to establish the obligation to communicate invoices issued by taxpayers, by electronic data transmission, through submission of the SAF-T invoicing file, framed by the mentioned diploma under "measures to control invoice issuance", which came into force on 1 January 2013, under the terms of its articles 3 and 11.

The creation of this additional declarative obligation had the explicit purpose of expediting tax audit procedures and "strengthening the fight against informality and tax evasion and to assist taxpayers in avoiding non-compliance with their tax obligations", as results from the preamble of Decree-Law no. 198/2012, cited above.

Thus, the declarative basis for tax assessment was not altered or replaced, continuing to be the VAT periodic declarations, as prescribed in articles 29, no. 1, letter c) and 41 of the VAT Code, in observance of what Directive 2006/112/EC of 28 November 2006 ("VAT Directive") provides, which determines, in article 250, no. 1, that "taxpayers must submit a VAT declaration containing all the information necessary for determining the amount of tax due and the amount of deductions to be made, including, insofar as necessary for determining the taxable amount, the overall amount of operations relating to that tax and those deductions, as well as the amount of exempt operations."

As the Claimant notes, the SAT-T file is a tool that does not constitute the support for tax assessment, but an ancillary means in supervising its collection, that is, in identifying situations of non-compliance, whereby the mere occurrence of divergences does not constitute grounds for a tax assessment, nor does it relieve the AT of the burden of proving the requirements of its action or, stated differently, of VAT incidence.

In effect, as a corollary of the principle of administrative legality and in accordance with the burden of proof allocation rules contained in article 74, no. 1 of the LGT, in concretization of the general principle enshrined in article 342, no. 1 of the Civil Code, it is the AT that must demonstrate the verification of the legal requirements legitimizing its action. The burden falling on the taxpayer, in that case, being the proof of the veracity of the operations in question.

In this sense, Vieira de Andrade states: "in principle, it should be the responsibility of the Administration to prove the verification of the legal (binding) requirements of its action, particularly if aggressive (positive and unfavorable); in return, it will fall to the administered to present sufficient proof of the illegality of the act, when these requirements are shown to be met" – "Administrative Justice (Lessons)", 2nd edition, p. 269. Similarly, Lima Guerreiro, in annotation to article 74 of the LGT, states that the AT "is obliged, because it is then she who invokes the facts, to prove the existence and quantification of the tax facts not declared" – "Annotated General Tax Law", Rei dos Livros Publishing, 2001, p.329.

Moreover, the taxpayers' tax declarations, including accounting and respective supporting elements, benefit from the presumption of truthfulness and good faith, having, in the concrete situation, VAT been assessed and paid in accordance with the VAT periodic declarations, in line with the accounting.

Clearly, this presumption does not occur when "omissions, errors, inaccuracies or founded indications that they do not reflect" knowledge of the actual taxable matter of the taxpayer are revealed – cf. article 75, nos. 1 and 2 of the LGT. However, SAF-T file divergences cannot be valued, by themselves and unaccompanied by any other elements, as a founded indication that the Claimant's accounting and tax declarations do not reflect reality. Divergences in e-invoice are not synonymous with tax obligation non-compliance by taxpayers, being able to derive from various sources, namely computer problems, as alleged by the Claimant and appears to have notoriously been the case.

It is also important to contextualize that the extraction of information from companies' computer systems, in accordance with the SAF-T data structure, required computer developments, sometimes time-consuming and expensive, whereby in the first years of effectiveness of this obligation, of inevitable adaptation by taxpayers, frequent situations of divergences could not be liminar and reasonably interpreted as non-compliance with performance obligations.

In this context, it was the AT's responsibility to gather indications that the operations contained in the Claimant's accounting and reported in its VAT declarations did not correspond to reality, namely, and as is usual, through analysis of the Claimant's accounting, the invoices issued and the tracing of associated financial flows and possibly through some information cross-referencing. The divergences identified by the SAF-T do not, as mentioned above, dispense with proof of the requirements for tax incidence or, at least with founded indications "consistent, serious and revealing of a high probability" that the declared operations do not correspond, by deficit, to reality[2].

The possibility of administrative disregard of elements declared by taxpayers, namely regarding the verification of commercial transactions and their respective taxable bases, derives from a prior judgment regarding the congruence and sufficiency of the declared elements.

According to the case law of the Supreme Administrative Court ("STA"), the AT must prove factuality "capable of shaking the presumption of truthfulness of operations contained in the taxpayer's records and their supporting documents, only then does the burden of proof shift to the taxpayer" – see, for example, the Decision handed down in case no. 01424/05.2BEVIS 0292/18, of 27 February 2019.

The AT starts from the unsupported assumption that the operational activity of the Claimant is equivalent to the billing communicated in the SAF-T file and not to that reflected in its accounting or in the VAT periodic declarations. As grounds for the contested VAT corrections, the AT limited itself to invoking divergences found in SAF-T files, having not identified any other dissonance, and gave precedence to the information contained in these files over that of the VAT periodic declarations, when it is these latter that are the basis for determination and declaration of the tax due, in accordance with the VAT Code and the VAT Directive, as mentioned above.

In these terms, the AT did not satisfy the burden of proof incumbent upon it to identify and prove founded indications of operations on which VAT not declared by the Claimant would be incurred, nor did it even initiate an inspection action (external), prior to the issuance of the assessment acts, for analysis of the elements thereof.

No divergences other than those submitted by the Claimant itself via SAF-T were identified, whereby the AT did not succeed in undermining the presumption from which the Claimant's VAT declarations benefit (and, it is stressed, also its accounting), whose VAT determination cannot be replaced by the SAF-T file, due to lack of legal support.

Given the foregoing, the Claimant is right, and the impugned VAT assessments and the acts confirming them must be annulled due to violation of law, by error in the requirements.

2.3. Deficit of Instruction of the Procedure – Omission of Necessary Diligences – Principle of Material Truth

The Claimant invokes that it was subject to two inspection actions for the fiscal years 2013 and 2014 affecting only VAT, of an internal nature, and that the AT, by not subsequently initiating an external inspection procedure "annihilated and self-sabotaged illegally any possibility of officially accessing and investigating the elements and supporting documents of the Claimant's activity". It concludes that the AT violated the principle of the inquisitorial, as it did not carry out, as it should have, the diligences necessary for discovering material truth, also violating the principle of impartiality which requires consideration of all relevant interests (cf. articles 55 and 58 of the LGT and 9 of the Administrative Procedure Code ("CPA")).

First and foremost, it is important to emphasize that the inspection actions to which the Claimant refers are all posterior to the date of the contested VAT corrections, whose assessments are dated 4 and 10 February 2015, and were undertaken in the context of second-level proceedings (gracious complaint followed by hierarchical appeal). Thus, the irregularity or invalidity of such proceedings is not capable of affecting the assessment acts that precede them, but only the second-level decisions, dismissing the gracious complaints or hierarchical appeals filed against those acts.

It is reiterated what was stated above, that the AT not only failed to prove any founded indications capable of shaking the presumption of truthfulness of the Claimant's VAT declarations, but did not even undertake concrete inspection diligences in its sphere that would have allowed it to access those elements. It inferred, without legal support, that the SAF-T divergences corresponded to operations capable of VAT assessment, issuing the consequent additional assessments.

It is further to be stated that the AT, in the VAT inspections which it tardily (in the second half of 2015 and in 2016) carried out on the Claimant relative to years 2013 and 2014, after issuance of the assessment acts, claims to lack resources to carry out the supervision, as, given the specificity and size of the Claimant, the analysis would be of high complexity requiring specific instruments and knowledge in the area of IT audit, and concludes that consequently, the Claimant has the burden of proof, as if the lack of AT resources could have a cause-and-effect relationship relative to the allocation of that burden of proof.

On the one hand, the AT accuses the Claimant of not having presented the due justifications in a timely manner, nor having promptly replaced the SAF-T files, the logical corollary of such justifications. However, it itself recognizes the specificity and size of the Claimant and uses that argument to consider impossible (due to lack of resources) the carrying out of an inspection procedure, dismissing, without further ado, the traditional means of supervising the records of taxpayers, which are not dependent on IT audits.

Indeed, in the context of appreciating the gracious complaints, the AT, despite recognizing "there indeed existed duplication of records", as alleged by the Claimant, concludes that "it was not possible to demonstrably prove the alleged duplication" which was due, in its words, to: "difficulties of varied nature, namely due to limitations resulting from the size and specificity of the taxpayer, lack of technical means and access to relevant information, on the part of IT, and difficulty/slowness in providing elements on the part of the taxpayer."

In this framework, it appears that the AT's conduct is inconsistent with the principle of the inquisitorial, in that it has not undertaken "the diligences necessary to satisfy the public interest and to discover material truth", which constitutes a defect of violation of law from which the tax acts in question and the acts confirming these suffer, under articles 55 and 58 of the LGT, whereby they must also for this reason be annulled.

This defect is found as to the tax acts, which were not preceded by any inspection diligences with the taxpayer, and also as to the second-level proceedings, in the terms set out above.

2.4. Lack of Substantiation

The Claimant further invokes that the tax acts suffer from lack of substantiation, for not indicating the facts and law reasons underlying them, namely the provisions of the VAT Code on which they are based, violating what is provided in article 77 of the LGT, 152, no. 1, letter a) of the CPA and 268, no. 3 of the Constitution of the Portuguese Republic ("CRP"). It contends that the duty of substantiation entails the obligation to make known to the taxpayer the cognitive and evaluative itinerary for the AT to have decided in the manner it decided, which, in its view, was not verified in the concrete case.

In this context, it is important to note that the duty of substantiation performs the primary function of allowing the recipient of the act to be apprised of the reasons underlying the administrative decision, allowing control of its validity, through analysis of its requirements, and access to contentious guarantee.

According to STA case law, for substantiation of an administrative or tax act to be considered sufficient, it is not always necessary to indicate the applicable legal provisions, "being sufficient the reference to relevant principles, to the legal regime or to a well-determined legal framework, and the act should be considered substantiated when it fits into a perfectly cognizable legal-regulatory framework by a normal recipient placed in the position in which its actual recipient finds itself" – Decision handed down in case no. 1051/09, of 17 November 2010.

Without prejudice to recognizing that the substantiation of the tax acts in question is overly succinct and without adequate reference to the legal provisions for incidence, namely of the VAT Code, such deficiencies do not appear to be of such a nature as to prevent or compromise the apprehension of the facts and law reasons that motivated the AT's action, including its requirements (even if erroneous), and the Claimant understood perfectly its meaning and scope. Indeed, in the notification for exercise of the right to prior hearing it is clear that what is at issue is the divergence between the VAT value assessed in invoices communicated via SAF-T by the Claimant (higher) and the VAT value reported in the Periodic Declaration of the period and that the AT understood this divergence to be capable of supporting the corresponding tax assessment.

The alleged lack of substantiation defect raised by the Claimant does not thus proceed.

A different question is whether the Claimant disagrees with the substantiation because it does not consider the taxation requirements depicted therein to be met and that "has already to do with the merits of the decision and with the legality 'stricto sensu' of the act itself" (cf. STA Decision, case no. 1690/13, of 23 April 2014). In this case, it is not a matter of assessing the formal defect of lack of substantiation, but the substantive validity of the tax act, by error in the requirements, which was assessed above in the direction advocated by the Claimant.

2.5. Subsequent Submission of Rectified SAF-T Files

Following the work undertaken to correct the errors that were at the origin of the billing duplications reported in the SAF-T file, and which involved various outsourced entities for that purpose, the Claimant identified the duplicate invoices communicated in the periods of July and August 2014, proceeded with their annulment, extracted new rectified files and requested the AT's authorization for their re-submission, purged of the initial errors, that is, reflecting actual billing for the periods in question, corresponding to that contained in the Periodic Declarations, which remained unchanged.

The process of replacement of the SAF-T files with the AT was initiated by the Claimant in March 2018, having been accomplished in August of the same year, after several communications between the AT and the Claimant. The AT's participation in the replacement of files proved to be essential, because, unlike other declarative obligations, the replacement of SAF-T files is complex and cannot be carried out by mere taxpayer initiative, as clarified by the information contained in the finance portal transcribed below in part, as it depends on the removal of the initial files that only the AT can effect (http://info.portaldasfinancas.gov.pt/pt/faturas/Pages/faqs-00262.aspx):

"01-2829 Is it possible to proceed with replacement of files (SAFT-PT)?

There is no automatic way to carry out SAF-T replacement. The procedure involves requesting cancellation of a file already delivered and subsequent submission of a new file. The form and content of the request are detailed in the second part of this FAQ.

Simple submission of a file for the same period does not result in the replacement of the file already submitted for that period.

Need for file replacement

Before making a request to cancel a file, already submitted, to proceed with delivery of a new file, you should verify whether the solution to the problem involves indeed the replacement of the file. Some situations that may occur are described which are not resolved with the replacement of the file (consultation of the FAQ is also suggested: "How are SAF-T files processed"):

[…]

Invoices cancelled after SAF-T delivery

It is possible to communicate invoices which, after communication (submission of the SAF-T or communication via WebService), moved to the cancelled status (A).

For this purpose, you should communicate the same invoices with the new status.

If the invoices are exactly equal to those already existing in the AT, differing only in status, this will be changed accordingly.

Note that the file may contain the remaining invoices, which will be considered "duplicate" (see faq "How are SAF-T files processed") and as such are not newly integrated.

[…]

So, when is file replacement justified?

Replacement is justified when the elements contained in e-invoice differ from the document originally issued. Normally, this divergence is due to errors in SAF-T file construction.

Submitted files should always reflect the information of issued documents (especially in the fields that are collected in e-invoice).

How is replacement processed?

At this date, the solution to the question raised involves requesting from the AT, through a request made in the new electronic service "e-counter", authentication with the access password and selecting the option e-counter > E-counter Service > Register New Question, filling in the fields as follows: […]".

On 9 August 2018, the AT confirmed the submission of files sent as "pilot" relating to January 2014 and authorized the presentation of the remaining ones, which was accomplished by the Claimant.

In these terms, the declarative divergences disappeared, the billing communicated in the SAF-T files being equivalent to that reflected in the VAT periodic declarations of July and August 2014, resulting in the elimination of the sole reason that motivated the VAT assessments by the AT. Thus, even if the violations of law appreciated above did not proceed (and they do), the assessments should be annulled due to subsequent performance of the ancillary obligation (rectified).

2.6. On Compensatory Interest

When what is at issue is the erroneous interpretation and application by the Respondent of tax incidence norms, it has been peacefully understood that Tax Arbitral Courts[3] have the competence to hand down condemnatory pronouncements in modes identical to those admitted in judicial impugnation proceedings, thus including those deriving from the recognition of the right to compensatory interest, under the terms of articles 24, no. 1, letter b) and no. 5 of the RJAT and 43 and 100 of the LGT.

The right to compensatory interest depends on a set of constitutive requirements. Above all, it is essential that the Claimant have previously proceeded to payment of the tax and interest relative to which it claims restitution.

In the situation at hand, the Claimant proved full payment of the assessment acts. Moreover, it was demonstrated that the tax acts suffer from errors of fact and law that are attributable to the AT, which could not have proceeded with the VAT assessment based on mere comparison of SAF-T files with the VAT periodic declarations.

Thus, the request for the AT's condemnation to pay compensatory interest proceeds, calculated on the amount of €171,796.28, counted under the terms of articles 43 of the LGT and 61 of the CPPT.

In Summary

Given the foregoing, the tax acts assessing VAT and default interest to which the Claimant was subject, relating to the periods of October and December 2014, due to divergences between the SAF-T and the VAT periodic declarations found with reference to the months of July and August 2014, are voidable due to violation of law by error in the requirements, in accordance with the provision of article 135 of the Administrative Procedure Code ("CPA"), with correspondence in article 163, no. 1 of the new CPA, applicable by referral from article 29, no. 1, letter d) of the RJAT.

Also invalid are the decisions dismissing the Gracious Complaints and the Hierarchical Appeals that fell upon these acts and which confirmed them.

Finally, it is important to note that the relevant questions submitted for consideration by this Court were known and appreciated, whereas those whose decision was prejudiced by the solution given to others were not, namely those relating