Process: 281/2017-T

Date: April 27, 2018

Tax Type: IVA

Source: Original CAAD Decision

Summary

Process 281/2017-T addresses a critical VAT classification dispute concerning tourist accommodation services in Portugal. The claimant, A... LDA, operated the F... tourist accommodation establishment and challenged VAT assessments totaling €263,015.14 for January-October 2016. The central issue concerned whether services provided to members of the G... Club, managed by UK company H..., qualified for the reduced VAT rate under Verba 17 of List I annexed to CIVA. Historically, the claimant applied the normal VAT rate to invoices issued to H... for weeks reserved by Club members, based on Tax Authority binding information (no. ... from 2000 and no. 2099 from 2011) and academic guidance stating that periodic payments for accommodation rights constituted differentiated services subject to the 17% rate. However, the claimant argued that from 2013 onwards, tax court jurisprudence established that such services should qualify for the reduced rate applicable to tourist accommodation establishments. The claimant contended that services provided to Club members were identical in nature to services provided to non-member hotel guests, who were charged the reduced rate. The CAAD arbitral tribunal, constituted on 30-06-2017 with arbitrators José Baeta de Queiroz, Suzana Fernandes da Costa, and José Eduardo Mendonça da Silva Gonçalves, examined witness testimony and administrative files. The case illustrates the evolving interpretation of VAT rates for tourist accommodation, particularly involving membership clubs and periodic accommodation rights, and highlights the tension between administrative guidance and judicial precedent in Portuguese tax law.

Full Decision

ARBITRAL DECISION

1. Report

On 20-04-2017, the limited liability company A..., LDA, legal entity no. ..., with registered office at ..., ..., ..., hereinafter referred to as the Claimant, submitted to the Administrative Arbitration Centre (CAAD) a request for constitution of an arbitral tribunal with a view to annulling the acts of assessment of Value Added Tax (VAT), relating to the periods from January to October 2016, in the total amount of 263,015.14 €.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 21-04-2017 and notified to the Respondent on the same date.

The Claimant did not proceed with the appointment of an arbitrator, so, pursuant to the provisions of article 6, no. 2, paragraph a) of RJAT, were appointed as arbitrators José Baeta de Queiroz (President), Suzana Fernandes da Costa and José Eduardo Mendonça da Silva Gonçalves (Members), by the President of the Deontological Council of CAAD, on 14-06-2017. The appointment was accepted within the legally prescribed period and terms.

On the same date the parties were duly notified of this appointment and did not manifest any wish to refuse the appointment of the arbitrator, in accordance with the provisions of article 11, no. 1, paragraphs a) and b) of RJAT, combined with articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provision of paragraph c), no. 1, of article 11 of RJAT, the arbitral tribunal was constituted on 30-06-2017. A ruling was issued on 03-07-2017, to notify the Respondent to, within 30 days, submit its response and, if it wished, request the production of additional evidence and remit to the arbitral tribunal a copy of the administrative file within the period for submission of the response.

On 22-09-2017, the Respondent submitted its response and on 04-10-2017, a ruling was issued ordering notification of the Claimant to, within 5 days, indicate the facts it intended to prove by means of examination of the witnesses it had called.

The Claimant submitted, on 10-10-2017, a petition informing that the examination of the witnesses it had called was intended to prove the facts set out in articles 23, 34 and 54 to 59. A ruling was issued on 13-10-2017, scheduling 13-11-2017 at 10:00 hours for the meeting of the arbitral tribunal, provided for in article 18 of RJAT, and for the examination of the witnesses indicated by the Claimant.

The Claimant, on 20-10-2017, submitted a petition requesting the postponement of the examination of witness B... to 13 or 14-12-2017, which was granted on 23-10-2017.

On 14-11-2017 a new ruling was entered in the system informing that the meeting that was scheduled for 13-11-2017 would take place on 13-12-2017 at 10:00 hours.

On 13-12-2017, at 10:00 hours, the meeting of the arbitral tribunal took place. The witnesses called by the Claimant were examined: C..., manager, D..., certified accountant, and B... . Also present at the meeting was His Excellency Dr. E..., as translator and interpreter.

The representatives of the Claimant and the Respondent made submissions on the preliminary issue raised in the response of the Respondent, and also made their oral arguments.

The tribunal determined the extension of the period referred to in article 21, no. 1 of RJAT by two months, counted from the end thereof, taking into account the impossibility of issuing an arbitral decision within the period set in the said article.

The tribunal also appointed 28-02-2018 for the purpose of issuing the arbitral decision.

The tribunal also requested from the parties the submission of the procedural documents in word format, and warned the Claimant that by the date of issue of the decision it should proceed with the payment of the subsequent arbitration fee and communicate such payment to CAAD, in accordance with article 4, no. 3 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

On 14-12-2017, the Respondent remitted to the case file the administrative file. On 11-01-2018, the Claimant attached to the case file the proof of payment of the subsequent arbitration fee. On the same date, the Claimant also attached a statement issued by the guarantor bank with the value of the costs incurred with the guarantee provided in the tax enforcement proceedings instituted against it, for purposes of compensation requested in due course. On 06-02-2018, the Claimant also remitted a bank document relating to the charge in the amount of 389.02 € which it had incurred with the guarantee provided and on 20-02-2018, the Claimant attached to the case file a bank document relating to the charge in the amount of 254.76 € which it had incurred with the guarantee provided.

On 02-03-2018, a ruling was issued extending the period for the arbitral decision until 30-04-2018.

2. Cause of Action

The Claimant begins by stating that it operates a tourist accommodation establishment located in ..., ..., in the ..., called F..., and that this establishment comprises all the typical elements that characterise any tourism establishment and the services provided therein are not distinguished, as to their nature, from the services provided in an ordinary hotel.

The Claimant states that it offers more advantageous conditions to members of the G... (Club), managed by H... (H...), a company under English law.

As for the Club, the Claimant affirms that it was created by the promoters of the establishment in the nineteen-eighties, with the objective of aggregating and retaining customers and promoting a high and constant occupancy rate of the establishment, independent of tourism seasonality and economic cycles.

The said company under English law, H..., holds accommodation rights in the resort of members, through a consideration that it pays to the Claimant.

According to the Claimant, membership of the Club confers the right to use for temporary accommodation of a given accommodation unit during a given week of each year, at preferential prices. Membership depends on an annual payment that dispenses payment of any other consideration for accommodation, but which is typically lower than the price of identical accommodation charged to other customers.

The Claimant alleges that it periodically invoices H... for the weeks reserved for Club members.

The Claimant also states that on the amount invoiced to H... it charged VAT at the normal rate, and charged VAT at the reduced rate to customers who were not Club members for hotel accommodation services provided to those non-member customers.

It further argues that it charged VAT to H... at the normal rate until 2015 because that was the understanding which followed from the administrative instructions then in force, replicated across various tax authority information and instructions, stemming from an academic article by Maria dos Prazeres Lousa which stated that "the amount of the periodic payment (...) is considered remuneration for a set of differentiated service provisions, so the applicable rate will be 17 per cent" (cf. Tax aspects of periodic housing rights, Fisco, 11/15, Sep. 1989).

The Claimant also alludes to the binding information from the VAT Department Directorate no. ..., endorsed on 28 February 2000, which established the understanding that the services provided to Club members by the company which preceded the present claimant in the operation of the tourist establishment were subject to VAT at the normal rate and not at the reduced rate. And it also refers to binding information no. 2099, also from the VAT Department Directorate, of 29 September 2011.

With this understanding by the Tax Authority, the Claimant alleges that it had no other option but to issue invoices to H... with VAT at the normal rate.

However, the Claimant states that from 2013 onwards multiple decisions of tax courts were published which established jurisprudence as to the VAT rate to be applied.

The Claimant asserts, first and foremost, that the service provided to all its customers, whether they are Club members or non-members, is identical, that is, it consists of hotel-type accommodation taxable under VAT at the reduced rate, not the normal rate.

To support this position, the Claimant refers to the arbitral decision of case no. 612/2015-T, a case in which it was also the Claimant, which concerned the acts of self-assessment of VAT for the periods of November and December 2014.

The Claimant mentions that it was notified of the response submitted by the Respondent (Tax Authority) in the said case no. 612/2015-T, in which the Director General of the Tax Authority, on the one hand, acknowledged that the service provided by the Claimant to Club members corresponds to a hotel accommodation service taxed at the reduced rate, and on the other hand, argued that the Claimant should have promoted the corresponding regularisation, instead of proceeding with the complaint under article 131 of CPPT.

The Claimant asserts that, with this understanding by the Tax Authority expressed in the referred arbitral case, it set in motion a whole set of acts identified by the Director General of the Tax Authority as necessary and sufficient for the undue VAT to be regularised. Thus, the Claimant issued, from 29-01-2016, the credit notes and respective invoices, with a view to regularising the excess VAT included in the invoices issued to H... since 31-01-2012.

The Claimant states that between January and October 2016 it issued the credit notes which aimed at the monthly invoices issued to H... between January 2012 and October 2014, in the total amount of 4,298,424.42 € with VAT included at the rate of 23% of 803,770.42 €.

And it issued the new corrected invoices in accordance with the procedure described by the Director General of the Tax Authority, which amount to the same importance of 4,298,424.42 €, but with VAT included at the rate of 6% in the amount of 243,307.02 €.

The Claimant further states that the VAT in the total of 803,770.42 € was recorded in the account "regularisations in favour of the company" and entered in field 40 of the periodic declarations relating to the period to which the regularisation applies. And the VAT of 243,307.02 € was recorded in the VAT account charged at the reduced rate and entered in field 2 of the respective periodic declarations.

The Claimant states that H... became aware of the issuance of the credit notes and the issuance of the new invoices with VAT at the reduced rate.

The Claimant supports the position regarding the charging and VAT at the reduced rate with, among other reasons, the first Arbitral Tribunal decision of 21-05-2013, from case no. 117/2012-T, which, according to the Claimant, analysed a case similar to this one, initiated by I... .

According to the Claimant, the said arbitral decision concluded that "the provision of accommodation service which is provided to Club Members in the exercise of their usage rights is, in all respects identical to that of other guests to whom, in accordance with the law, a provision of tourism accommodation services is provided, taxed at the reduced rate under VAT",

The Claimant also alludes to a judgment of the Administrative and Tax Court of .... of 31-10-2013, a judgment of the Tax Court of Lisbon of 05-02-2016, and the arbitral decisions of 11-07-2014, 17-11-2014 and 07-12-2016, which reached the same understanding.

The Claimant argues that given the identity of the accommodation services it provides with those provided by competing enterprises which have succeeded in obtaining favourable judgments in the proceedings referred to above, it also began to charge VAT at the reduced rate on the annual payment invoiced as consideration for accommodation provided to Club members, from 1 January 2015.

Furthermore, the Claimant also chose to file an administrative complaint regarding the self-assessment of VAT at the normal rate, for the months of November and December 2014. This complaint was dismissed and the Claimant filed a subsequent arbitration request, which resulted in case no. 612/2015-T.

The Claimant states that the decision in this arbitration case was issued on 24-06-2016, having decided that taking into account the case sub judice, it will be undisputed to assert — in view of the facts established as proven in the present proceedings, the jurisprudence, doctrine and binding information existing on this matter - that the services provided by the Claimant, to customers who are Club members, in the said hotel establishment which it manages and operates, to which it applied a normal rate of VAT (23%), are subject, in reality, to the reduced rate of (6%)".

Finally, the Claimant states that the price set and agreed with its customer for the hotel accommodation service which it provides to Club members is a final price, with VAT included, so the tax charged is incorporated in the price, at the risk and account of the Claimant.

The Claimant notes that if it charged higher tax than due it would reduce its margin, and if it charged lower tax than due it would have to bear the additional amount (which would result from correction) without being able to demand it from H... .

Indeed, the Claimant states that the final price charged to H... from January 2015 remained the same as charged previously for the same service, although it now included VAT at 6% instead of 23%.

As for the VAT charged at the normal rate of 23%, the Claimant asserts that the VAT charged to H..., a company under English law, is not deductible or reimbursable in any Member State, in accordance with article 310 of Directive no. 2006/112/EC, of 28-11.

The Claimant was subject to a tax inspection action carried out by the Finance Directorate of ..., which, according to it, did not accept the VAT regularisations in favour of the company in the amount of 803,770.42 €, and accepted the VAT charged in favour of the State in the new invoices at the rate of 6%, in the amount of 243,307.02 €, which is not in accordance with the position assumed by the Director General of the Tax Authority in case no. 612/2015-T.

For the Claimant, the subordination of the Finance Directorate of ... to the understanding of the Director General of the Tax Authority, and observed by the Claimant, constitutes a necessary consequence of the principles of trust and good faith, which govern the exercise of administrative activity, in accordance with article 266, no. 2 of the Constitution of the Portuguese Republic (CRP). And it further refers to the conclusions reached by the Tax Authority revealing a flagrant violation of the trust which the Claimant placed in its Director General, clearly deserving of protection, thereby constituting an abuse of right, in its dimension of venire contra factum proprium.

The Claimant also alleges that the inspection report concluded that there were inaccurate invoices, without justifying the reason for considering them as such, whose correction should always have been made within the time limit of two years, in accordance with no. 3 of article 78 of the VAT Code.

For the Claimant, the error as to the application of a given legal regime, which includes the VAT rate to be applied, does not constitute either a material error or a calculation error. So the regime or time limit of said no. 3 of article 78 cannot be applied, in the Claimant's understanding. To support this claim, the Claimant alludes to some doctrine and to the arbitral rulings from cases no. 245/2013-T, 348/2014-T, 524/2014-T and 608/2014-T, 170/2016-T.

Thus, in the Claimant's understanding, the general regime on this matter set out in article 98, no. 2 of the VAT Code applies, which stipulates a time limit of four years, relying on the CAAD decision from case no. 251/2014-T.

As for the allegation, made in the inspection report, that there would be a situation of unjust enrichment on the part of the Claimant, the Claimant states that the invoices with VAT of 23% were corrected and H... declared knowing and accepting this correction, without alteration of the final price paid, which remained the same. Thus, for the Claimant, what is required by article 78, no. 5 of the VAT Code for the correct regularisation of VAT in favour of the taxable person was fulfilled.

For the Claimant, the grounds of the inspection report are manifestly insufficient to achieve the proposed objective of correcting the VAT regularisations made and violates in all respects the main conclusions and determinations of the jurisprudence of the CJEU on this matter.

According to the Claimant, the inspection report violates the guarantee given by the CJEU that, to ensure VAT neutrality, it falls to the Member States to provide for the possibility of correcting any tax improperly invoiced, provided that whoever issues the invoice demonstrates its good faith (all, cf. Genius judgment, case CB342/87, 8 18). It further violates the guarantee given by the CJEU that such correction cannot depend on a discretionary power of appreciation of the administration (cf. case C-454/98, 8 68), such as that which the Tax Authority manifests exercising in its report, in particular when it says that, to maintain the final price charged to the customer, the company decided to reduce its margin, that is a purely commercial decision.

The Claimant alleges that the inspection report goes against the doctrine emanating from the Stadeco judgment (C-566/07), where the CJEU concludes that a correction made by means of credit notes and new invoices which clearly indicate to the acquirer of the services the reason and content of the correction, should be considered sufficient.

The Claimant further refers to the CJEU judgments no. C-147/01 and C-441/98, C-398/09, CH309/06, €192/95, C566/07 and CH191/12) and the CAAD judgments from cases no. 78/2014, 348/2014 and 170/2016.

The Claimant concludes by asserting that the acts now challenged are illegal, because:

a) they proceed from a flagrant violation of the trust which the Claimant placed in the Director General of the Tax Authority, thereby constituting the Tax Authority in an abuse of right, in its dimension of venire contra factum proprium;

b) they proceed from the qualification of invoices issued pursuant to the administration's doctrine as merely inaccurate, in order thus to subsume their correction to the two-year time limit of article 78.2, no. 3, of the VAT Code, when these resulted from an error of classification or of law already judicially recognised, such that the present Claimant may promote the respective regularisation in its favour, in accordance with article 98 of the VAT Code, that is, within the general and supplementary time limit of four years provided therein;

c) they violate the provision in article 78, no. 5 of the VAT Code, whose disjunctive conjunction "or" naturally leads the interpreter to conclude that the regularisation is not improper, where there is proof that the acquirer became aware of the rectification, even if they are not reimbursed the excess tax;

d) they violate the Community principles of fiscal neutrality, objectivity and uniform VAT taxation rate, on the one hand, and of effectiveness or efficacy, on the other, which oppose a national law or domestic administrative practice that presumes unjust enrichment based on the mere legal or jurisprudential repercussion of tax on third parties and thereby prevents the correction of improperly invoiced tax;

e) they are affected by violation of law and double collection, since the Tax Authority corrected the VAT regularisation, excluding from field 40 of its periodic declarations the tax charged in excess in the invoices issued to H..., but kept in field 2 of the same periodic declarations the tax charged at 6% in the new invoices issued to H..., relating to the same accommodation services previously taxed at 23%, resulting in the VAT of 23% charged and remitted to the State with the old invoices, totalling 803,770.42 €, now having added to it the VAT of 6% charged and remitted to the State with the new invoices, totalling 243,307.02 €.

The Claimant thus requests the annulment of the VAT assessments and the respective interest assessments.

Finally, the Claimant requests the condemnation of the Tax Authority to the payment of compensation for costs incurred with the guarantee provided in the tax enforcement proceedings, in accordance with articles 53 of LGT and 171 of CPPT.

The Claimant indicates three witnesses and requests their examination.

3. Response of the Respondent

The Respondent, in its response, begins by making reference to a preliminary issue which we shall explain below.

The Respondent states that on 21-04-2017, it was cited to contest the administrative action no. .../17......., which was processed in the Administrative and Tax Court of ...., in which the Claimant challenged the ruling of 23-01-2017 of the VAT Refunds Directorate General, which dismissed its request for VAT refund which it requested in the periodic declaration for the month of August 2016.

In said challenge, the Respondent states that the Claimant alleged that the challenged ruling is based on the provision of the tax inspection report of 02-01-2017, issued under service order no. ... .

According to the Respondent, the Claimant also bases the present arbitration request on the same tax inspection report.

For the Respondent, both cases are rooted in the conclusions of the same inspection procedure and in the non-acceptance of the tax regularisation which it promoted in its favour in the periodic declaration of August 2016, relating to the years 2012, 2013 and 2014.

The Respondent also states that the Claimant seeks the same relief since in both proceedings it intends that the same tax regularisation in its favour be accepted due to the fact that it issued in 2016, credit notes to cancel the invoices, considering that it should have charged VAT at the rate of 6%. In that sequence, the Claimant regularised VAT in its favour, which is why it obtained a tax credit in the periodic declaration for the month of August 2016.

The Respondent concluded by stating that what the Claimant intends to obtain in the present case is the same as what it formulated in case no. .../17... ...., and that this case constitutes a prejudicial issue in relation to the present proceedings, in accordance with article 272 of the Civil Procedure Code.

On the other hand, the Claimant presents a defence by way of denial, defending the lack of merit of the relief, on the grounds that the total annulment of the invoices issued and recorded is not the correct means of making any corrections to the said invoices, and on the grounds that the regularisation cannot be accepted since it was not made within the two-year time limit, in accordance with the provision in no. 5 of article 78 of the VAT Code.

The Respondent begins by stating that, although the total value of the new invoices issued coincides with the total value of the credit notes, there is no direct correspondence, either in terms of value or in terms of dates, between the invoices that were intended to be cancelled and the new invoices issued. Moreover, the new invoices issued to H... in 2016 do not mention that they are intended to replace other invoices issued in previous years.

Thus, for the Respondent it is not possible to ascertain with precision that the services included in the new invoices are exactly the same as those which were invoiced during the years 2012, 2013 and 2014.

The Respondent alludes to no. 3 of article 78 of the VAT Code which provides that in the case of inaccurate invoices which have already given rise to the registration referred to in article 45 of the VAT Code, as is the case of the invoices issued by the Claimant to H... in 2012, 2013 and 2014, rectification is optional when there is excess tax charged, but may only be made within the time limit of two years.

For the Respondent, the existence of proof that the acquirer became aware of the rectification or that it was reimbursed the excess tax charged is also essential, in order for the regularisation of VAT to be possible, in accordance with article 78, no. 5 of the VAT Code.

In the Tax Authority's view, since there was a provision of services by the Claimant to H... which gave rise to the invoices issued in 2012, 2013 and 2014, the invoices cannot simply be cancelled, when they should have been rectified.

The Tax Authority further alleges that a reduction in the VAT rate would have to be reflected in the final price borne by the customer and, in the present proceedings, there is no proof that the said reduction in rate benefited those customers.

In the Respondent's view, the Claimant intending to claim restitution of VAT charged in excess and which it received from H... without producing adequate proof that such VAT was returned to the customer or actually borne, this is a situation of unjust enrichment for the Claimant.

Finally, the Tax Authority alleges that the examination of the witnesses called appears to be a useless and unnecessary act.

4. Dismissal of Preliminary Issues

The present request for arbitral pronouncement was filed in a timely manner, in accordance with article 10, no. 1, paragraph a) of Decree-Law no. 10/2011 of 20 January.

The tribunal is competent as to the assessment of the request for arbitral pronouncement formulated by the Claimant.

The parties have judicial personality and capacity and are parties (articles 42 and 10, no.2º1 and 2 of RJAT and article 1 of Ordinance no. 112-A/2011 of 22 March).

The case has no procedural defects.

As to preliminary issues, the Respondent raises a prejudicial issue, in accordance with article 272 of the Civil Procedure Code, saying that the Claimant intends to obtain in the present case the same as is sought in case no. .../17......., being processed in the Administrative and Tax Court of ...., and in which it challenges the ruling of 23-01-2017 of the VAT Refunds Directorate General, which dismissed the request for VAT refund which it requested in the periodic declaration for the month of August 2016.

It is necessary to decide this preliminary issue.

It is known that there are cases, such as lis pendens, in which there is a legal obstacle to both cases proceeding, and others in which the proceedings may be suspended in one of the cases, without this being a legal requirement.

It is not justified to examine the case at hand to conclude that it is not one of lis pendens, since the Respondent, which raises the issue, does not base it on this ground. And neither are we faced with a case in which suspension is imposed by a legal requirement in accordance with article 269, no. 1, paragraph d) of the Civil Procedure Code, since no such requirement is found in the law.

Thus, our case is one of those in which the tribunal may suspend the proceedings, according to its prudent discretion, but in which the suspension is not imposed by legal requirement.

Now, between the two cases in question there is, clearly, a relationship, in that each of them concerns the same parties, the same tax, and, one may venture, the same fundamental issue. But not necessarily a relationship of dependence, since the decision to be made in one of the cases - namely, in this one - does not depend on any issue that must first be determined in the other case. Here, the legality of assessment acts is discussed, there, in the TAC of ...., the right to VAT refund is debated. And, even if the respondent affirms that the objective pursued by the Claimant is equivalent, the issue need not be resolved by the suspension of one of the cases, but rather will be settled by the decision which first becomes final and binding.

It should be noted, lastly, that the suspension of proceedings in tax arbitration cases is a measure to be taken with great parsimony, since - always reserving the cases where it cannot be avoided -, it is equivalent to making the timing of decisions in arbitral proceedings, which are desired to be faster than those which proceed in state courts, depend on the timing of the latter courts, which would undermine one of the strongest reasons for which tax arbitration was established and leads taxpayers to resort to it.

In summary, and given the provisions of articles 269, no. 1, paragraph c) and 272, no. 2 of the Civil Procedure Code, applicable ex vi article 29, no. 1, paragraph e) of RJAT, the suspension of proceedings requested by the Respondent is not determined.

5. Matters of Fact

5.1. Facts Established:

Having analysed the documentary and witness evidence produced, the following facts are considered established and of interest for the decision of the case:

  1. The Claimant is a taxable person for corporate income tax purposes resident in national territory and covered by the normal VAT regime with monthly periodicity;

  2. The Claimant operates a tourist accommodation establishment located in ..., ..., in the ..., called F...;

  3. The establishment comprises all the typical elements that characterise any establishment intended for tourist accommodation and the services provided therein are not distinguished, as to their nature, from the services provided in an ordinary hotel;

  4. The establishment operated by the Claimant is exclusively sought for non-residential purposes and use by all its customers is limited to short periods of time intended for rest and leisure;

  5. In the nineteen-eighties, the G... (Club) was created by the promoters of the establishment, with the objective of aggregating and retaining customers and promoting a high and constant occupancy rate, independent of tourism seasonality and economic cycles;

  6. From the services available both Club members and any user in general, may benefit, under different conditions, more advantageous for members;

  7. Club membership confers the right to use for temporary accommodation of a given accommodation unit during a given week of each year, at preferential prices;

  8. Membership depends on an annual payment that dispenses payment of any other consideration for accommodation, but which is typically lower than the price of identical accommodation charged to other customers;

  9. Should the annual payment be missed, the customer loses his membership status and is treated as any other, being able to occupy an accommodation unit only available by paying the price due by any non-Club member customer;

  10. The Claimant periodically invoices H..., a company under English law, for the weeks reserved for Club members;

  11. The service which the Claimant provides to all its customers, members and non-members of the Club, is identical;

  12. The service which the Claimant provides to all its customers, members and non-members of the Club, consists of hotel-type accommodation;

  13. The Claimant charged VAT at the reduced rate on the hotel accommodation services provided to customers who are not Club members, while on the amount of payment invoiced to Club member customers for accommodation in the same units, the Claimant had been charging VAT at the normal rate;

  14. The price set by the Claimant with its Club member customers for the hotel accommodation service it provides to them is, always, a final price, with VAT included;

  15. Without being able to charge its customers any amount in addition to the fixed charge it contracted with H..., the Claimant reduced its margin, so that in the same price it could include VAT at the normal rate.

  16. Given the identity of the services it provides to all its customers, the Claimant understood that it should treat them uniformly for VAT purposes;

  17. The Claimant issued, between January and October 2016, credit notes for the invoices issued to H..., and the corresponding new invoices with VAT at the reduced rate, with a view to regularising the excess tax included in the invoices issued between January 2012 and October 2014;

  18. The VAT at the normal rate contained in the credit notes issued, in the amount of 803,770.42 €, was recorded in the account regularisations in favour of the company and entered in field 40 of the VAT periodic declarations;

  19. And the VAT at the reduced rate in the amount of 243,307.02 € contained in the new invoices issued was recorded in the VAT account charged at the reduced rate and entered in field 2 of the VAT periodic declarations;

  20. The Claimant was subject to a tax inspection action by the Finance Directorate of ..., following a request for VAT refund requested in the VAT periodic declaration for the month of August 2016.

  21. The Claimant was notified of the following assessments, attached to the arbitration request:

a) Additional VAT assessment no. ... from period 1601M;

b) Additional VAT assessment no. ... from period 1603M;

c) Additional VAT assessment no. ... from period 1607M;

d) VAT assessment statement no. 2017 ... from period 1602M;

e) VAT assessment statement no. 2017 ... from period 16031;

f) VAT assessment statement no. 2017 ... from period 1604M;

g) VAT assessment statement no. 2017 ... from period 1605M;

h) VAT assessment statement no. 2017 ... from period 1606M;

i) VAT assessment statement no. 2017 ... from period 1607M

j) VAT assessment statement no. 2017 ... from period 1608M;

k) VAT assessment statement no. 2017 ... from period 1609M;

l) VAT assessment statement no. 2017 ... from period 1610M;

m) VAT assessment statement no. 2017 ... from period 1610M;

n) VAT interest statement no. 2017 ... from period 1602M;

o) VAT interest statement no. 2017 ... from period 1603M;

p) VAT interest statement no. 2017... from period 1604M;

q) VAT interest statement no. 2017... from period 1605M;

r) VAT interest statement no. 2017 ... from period 1606M;

s) VAT interest statement no. 2017 ... from period 1607M;

t) VAT interest statement no. 2017... from period 1609M;

u) VAT interest statement no. 2017... from period 1610M;

v) VAT interest statement no. 2017... from period 1610M;

w) VAT interest statement no. 2017... from period 1608M;

x) Settlement statement no. 2017... from period 1602M;

y) Settlement statement no. 2017... from period 1602M;

z) Settlement statement no. 2017 ... from period 1603M;

aa) Settlement statement no. 2017 ... from period 1603M;

bb) Settlement statement no. 2017 ... from period 1604M;

cc) Settlement statement no. 2017 ... from period 1604M;

dd) Settlement statement no. 2017 ... from period 1605M;

ee) Settlement statement no. 2017 ... from period 1605M;

ff) Settlement statement no. 2017 ... from period 1606M;

gg) Settlement statement no. 2017 ... from period 1606M;

hh) Settlement statement no. 2017 ... from period 1607M;

ii) Settlement statement no. 2017 ... from period 1607;

jj) Settlement statement no. 2017 ... from period 1609M;

kk) Settlement statement no. 2017 ... from period 1609M;

ll) Settlement statement no. 2017 ... from period 1610M;

mm) Settlement statement no. 2017 ... from period 1610M;

nn) Settlement statement no. 2017 ... from period 1610M;

oo) Settlement statement no. 2017 ... from period 1610M;

No other facts with relevance to the decision of the case were established.

5.2. Grounds for the Facts Established:

The facts established were based on the documents attached to the case file, the administrative file, the examination of the witnesses called by the Claimant, and facts admitted by agreement of the parties.

5.3. Facts Not Established

There are no other facts of relevance to the assessment of the merits of the case that have not been established.

6. Matters of Law:

6.1. Object and Scope of the Present Case

It is acknowledged by the Claimant and accepted by the Respondent that, between January 2012 and October 2014, VAT was charged by the Claimant to H... for the services provided to Club members, at the normal rate.

However, as these are accommodation services in an establishment of hotel type, the reduced rate was applicable, in accordance with the provision in item 2.17 of List I annexed to the VAT Code, which is supported in point 12 of Annex III of Directive no. 2006/12/EC of the Council, of 28-11-2006, which recognises to the Member States of the European Union the power to apply a reduced rate to "accommodation in hotels and establishments of the same type, including holiday accommodation and use of camping and caravan sites".

The tax arbitration case, being an alternative means to the judicial challenge process (no. 2 of article 124 of Law no. 3-B/2010, of 28 April), is, like the latter, a procedural means of mere legality, in which the aim is to eliminate the effects produced by illegal acts, by annulling them or declaring their nullity or non-existence, in accordance with articles 2 of RJAT and 99 and 124 of CPPT, applicable by virtue of the provision in article 29, no. 1, paragraph a) of RJAT.

For this reason, the legality of the acts must be assessed in light of their grounds, and the tribunal cannot, upon finding that an illegal ground has been invoked as support for the administrative decision, assess whether its action could be based on other grounds.

Thus, the fact that arbitral decisions have been issued on the same substantive legal situation, for a given period of time, does not imply that the Tax Authority has the obligation to accept the understanding adopted in those arbitral decisions for other periods of time, since the binding force of those decisions is limited to the acts which were their subject, in the terms and with the grounds with which they were taken.

Thus, it is important to assess all the grounds invoked in the present proceedings.

As this is a tax of European origin and subject to regulation by the European Union, the jurisprudence of the CJEU on this matter must be observed, which is a corollary of the obligation of preliminary reference, provided for in § 3 of article 267 of the Treaty on the Functioning of the European Union.

6.2. Assessment of the Issue

6.2.1. On the Rate Applicable to the Payment Made by H...

The determination of the fiscal regime applicable to this payment will depend on the classification of the services underlying that same payment.

It is established in the matter of fact that the service which the Claimant provides to all its customers consists of hotel-type accommodation, and that it is identical whether provided to Club members or to non-member customers.

The difference lies in the amount paid for use by Club members in relation to non-member customers.

In accordance with item 2.17 of the list I annexed to the VAT Code, "Accommodation in hotel-type establishments" benefits from the reduced VAT rate.

In accordance with article 18 of the VAT Code, "the reduced rate applies exclusively to the price of accommodation, including breakfast, if not separately invoiced, being equivalent to half the price of full board and three quarters the price of half board".

In binding information issued on 20-10-2011 it is argued that "The expression 'hotel-type establishment' used in the wording of item 2.17 of List I annexed to the VAT Code, is broader than the expression 'hotel establishments', since the concept of 'hotel-type establishment' encompasses the hotel establishments referred to in art. 11 of the aforesaid Decree-Law no. 39/2008, of 7 March, as well as other establishments with functions analogous to hotel establishments, that is, it also encompasses establishments which, regardless of their classification, provide accommodation services (accommodation services are understood as accommodation proper, as well as ancillary service provisions related to those accommodations, namely cleaning and support service provisions)."

The legislator in resorting to this expression would have sought to encompass both hotel establishments and establishments of the same type, such as this also appears to have been the intention of the Community legislator in resorting to the expression "Accommodation in hotels and establishments of the same type", in the aforementioned Annex III of Directive 2006/112/EC.

Let us see whether the accommodation units made available to Club members can be integrated into the concept of hotel-type establishment for this purpose.

By hotel establishment is understood "tourism enterprises intended to provide temporary accommodation and other ancillary or support services, with or without the provision of meals, and aimed at daily rental" (cf. art. 11 of the Regulatory Framework for the installation, operation and functioning of tourism enterprises), as is the case with hotels, hotel-apartments and inns.

As seen, for the Tax Authority, hotel-type establishments are all other establishments with functions analogous to hotel establishments, that is, all establishments that provide accommodation services, understood as accommodation proper, as well as ancillary service provisions to those accommodations, namely cleaning and support service provisions.

Indeed, in accordance with no. 2, of art. 43 of the aforesaid Regulatory Framework for the installation, operation and functioning of tourism enterprises "It is presumed that there is provision of tourism accommodation services when a property or fraction thereof is furnished and equipped and offered to the general public, in addition to sleeping facilities, cleaning and reception services, for periods of less than 30 days".

Now, if on the one hand hotel establishments, as tourism enterprises, by nature provide a provision of tourism accommodation services, which allows us to resort to an element of this concept, on the other hand it does not appear to be able to be qualified as a hotel-type establishment, an establishment in which the provision of accommodation services is not carried out with a short duration character.

In the present case, the accommodation units in question are integrated into a tourist accommodation establishment.

As seen, the provision of accommodation service which is provided to Club members in the exercise of their usage rights is, in all respects identical to that of other customers to whom, in accordance with the law, a provision of tourism accommodation services is provided, taxed at the reduced rate under VAT.

In light of this conclusion, we understand that the present case concerns "Accommodation in hotel-type establishments", within the meaning and for the purposes of item 2.17 of the list I annexed to the VAT Code, as concluded by the arbitral decision of case no. 117/2012-T.

6.2.2. The Obstacle to Acceptance of Invoice Rectification Due to Non-Compliance with the Two-Year Period
6.2.2.1. Situation of Inaccurate Invoices versus Error of Classification or Error of Law

No. 7 of article 29 of the VAT Code provides that "where the taxable amount of an operation or the corresponding tax are altered for any reason, including inaccuracy, a corrective invoice document must be issued".

No. 3 of article 78 of the VAT Code provides that, "in cases of inaccurate invoices which have already given rise to the registration referred to in article 45, rectification is mandatory when there is tax charged short, and may be made without any penalty until the end of the period following the one to which the invoice to be rectified relates, and is optional, when there is tax charged over, but may only be made within a time limit of two years".

No. 5 of the same article 78 provides that, "when the taxable amount of an operation or the respective tax undergoes rectification for less, the regularisation in favour of the taxable person may only be effected when the latter has in his possession proof that the acquirer became aware of the rectification or was reimbursed the tax, without which the respective deduction is considered improper".

In the case at hand, the Claimant proceeded with the regularisation of invoices issued with VAT at the normal rate to H... between January 2012 and October 2014.

The Respondent alludes to article 78, no. 3 of the VAT Code which provides that in the case of inaccurate invoices which have already given rise to the registration referred to in article 45 of the VAT Code, rectification is optional when there is excess tax charged, but may only be made within the two-year time limit.

The Claimant argues that this is not a situation of inaccurate invoices capable of being classified under article 78, no. 3 of the VAT Code, arguing that the Tax Authority did not justify the reason for considering them as such. For the Claimant, the error as to the application of a given legal regime, which includes the VAT rate to be applied, does not constitute either a material error or a calculation error. So the regime or time limit of said no. 3 of article 78 of the VAT Code cannot be applied.

There is no legal definition of the concept of inaccurate invoices, used in no. 3 of article 78 of the VAT Code, but the terminology used manifestly points to the "truthfulness" of the elements that must appear on invoices, in accordance with article 36, and not to questions of legal classification, normally of complex solution dependent on the application of deep legal knowledge, which does not accord with the requirement for appropriate resolution by the generality of VAT taxable persons.

Furthermore, in the case at hand, it was the Tax Authority itself which indicated in administrative decisions the legal understanding to adopt on the rate to be applied, which it confirmed in binding information, so it is not conceivable, in light of a perspective that bears in mind the unity of the legal system and the constitutionally recognised right to contentious challenge of all injurious acts, inherent to the fundamental right to effective judicial protection (articles 20, no. 1, and 268, no. 4, of the CRP) that the law provides for the duty of the Tax Authority to inform taxable persons of their obligations [article 59, no. 1, paragraph m), of LGT] and, as a condition for challenge, require it to act in dissonance with what is informed, practising what, from the Tax Authority's perspective, is an illegality, as argued by the CAAD decision from case no. 170/2016-T.

If the law provides for the obligation of the Tax Authority to inform taxable persons of their tax duties, it cannot penalise compliant citizens with the loss of a constitutionally recognised right due to the fact that they act in accord with what is informed, nor is it conceivable in light of the principle of the Rule of Law (article 2 of the CRP) that citizens should have to practise acts which the Administration deems illegal, subjecting themselves to the negative consequences that flow therefrom, in order to ensure constitutionally recognised rights.

We conclude that the error committed by the Claimant regarding the VAT rate applicable to the services provided to its Club member customers, which was reflected in the invoices issued between January 2012 and October 2014 and, consequently in the VAT self-assessment for that period, manifestly constitutes a situation of error of classification or error of law. By virtue of an incorrect interpretation of the law, the Claimant applied to those services a VAT rate of 23%, higher than the legally applicable rate of 6%.

The Claimant complied with the rules on correction of invoice inaccuracy, which are "the issuance of credit notes and new invoices (with the fields of taxable amount and tax due correct in light of the new applicable rate), in accordance with articles 29, no. 1 and 7, 36, 44, 45 and 78 of the VAT Code".

Indeed, the procedure used by the Tax Authority for rectification of invoices, through the issuance of credit notes and new invoices, as prescribed by the VAT Code, should be accepted by the Tax Authority.

6.2.2.2. The Fundamental Principle of Neutrality and the Repercussion of Tax in CJEU Jurisprudence

In its petition the Claimant invokes some CJEU judgments which do not specifically concern VAT situations (namely the judgments Weber's Wine World Handels- Gmbh (of 02.10.2003, case C-147/01) and Michailidis (of 21.09.2000, case C-441/98)).

The Stadeco judgment (of 18.06.2009, case C-566/07), although it refers to VAT, does not have direct application to the situation analysed in the present proceedings (in that sense see analysis of the decision in the dissenting statement contained in the CAAD decision 170/2016-T, subscribed by António Carlos dos Santos. The same applies to the CJEU judgment Alakor Ganonatermelo és Forgalmazó of 18.05.2013 (case no. C-191/12).

Already the CJEU judgment of 21/03/2018 (Case C-533/16, Volkswagen AG) refers in its nos. 38, 40 and 41 that "The system of deductions and therefore of refunds is designed to relieve the taxable person entirely of the burden of the VAT due or paid in the course of all his economic activities. The common VAT system therefore ensures neutrality [principle of neutrality] as to the tax burden of all economic activities ... provided that they themselves are ... subject to VAT". According to the same judgment "The right to deduct VAT is, however, subject to compliance with requirements or conditions, both substantive and formal", and "As to substantive requirements or conditions ..., to benefit from that right, it is necessary, on the one hand, that the person in question be a 'taxable person' ... and, on the other, ... and that, upstream, those goods are supplied or those services are provided by another taxable person". For its part, Directive 206/112/EC, relating to the common system of value added tax, provides in no. 2 of article 1 that "The principle of the common VAT system is to apply to goods and services a general tax on consumption strictly proportional to the price of the goods and services, whatever the number of transactions occurring in the process of production and distribution preceding the stage of taxation.

In each transaction, the VAT, calculated on the price of the good or service at the rate applicable to the said good or service, is chargeable, with prior deduction of the amount of tax which has directly affected the cost of the various elements making up the price.

The common VAT system applies up to and including the retail trade stage".

It follows from the foregoing that VAT, although it is a "general consumption tax", for reasons of administration of the tax system, is generally levied on the supplier of goods or provider of services, who has the obligation to issue an invoice for those taxable operations he carries out, an invoice that must contain the VAT rate applicable and the amount of tax to be paid (nos. 9 and 10 of article 226 of Directive 206/112/EC; paragraph d) of no. 5 of article 36 of the VAT Code),

reflecting the mechanism of tax repercussion in VAT, as established in no. 1 of article 37 of the VAT Code (according to which "the amount of tax charged must be added to the invoice amount, for the purpose of its demand from the acquirers of goods or recipients of services").

The analysis of VAT situations must therefore, reflecting the coherence of the VAT system, take into account the fundamental principle of VAT neutrality.

Thus, the CJEU Judgment (Case C-533/16, Volkswagen AG) above, refers in its no. 51 that "European law should be interpreted as being opposed to the regulation of a Member State which, in circumstances such as those of the case (Case C-533/16), in which VAT was invoiced to the taxable person and paid by him several years after the delivery of the goods in question, refuses the benefit of the right to refund the VAT on the grounds that the time limit of preclusion provided for in that regulation for the exercise of that right began to run on the date of delivery and expired before the submission of the refund request", so, in coherence and as a result of the principle of neutrality, it should also be considered that it is opposed to the regulation of the Union the non-acceptance of the deduction resulting from a regularisation of tax in favour of the taxable person by virtue of the latter rectifying by the issuance of credit notes that cancel invoices in which years before an incorrect VAT rate had been applied (in this case, the normal VAT rate), at the same time that it issues new invoices relating to operations occurring years before applying the legally applicable rate to the operation (in this case, the reduced VAT rate of 6%); as well as the non-acceptance of the refund request resulting from that deduction.

The conclusions set out above are equally coherent with the CJEU Judgment of 12/04/2018 (Case C-8/17, Biosafe against Flexipiso). As is stated in its no. 26, "following an additional assessment, an increase in VAT was paid to the State and was the subject of corrective documents of the initial invoices several years after the delivery of the goods in question, the benefit of the right to deduct VAT is refused on the grounds that the time limit provided in the said legislation for the exercise of this right is counted from the date of issuance of the said invoices and has expired".

As in the CJEU judgment referred to above (Case C-533/16, Volkswagen AG), the CJEU, in light of the principle of neutrality, carries out a balancing of the principles of legal certainty, equivalence, effectiveness and proportionality (cf. nos. 36, 37 and 38 of the Judgment).

For the CJEU "the possibility of exercising the right to deduct VAT without time limit would run counter to the principle of legal certainty". On the other hand, there is an equivalence between similar rights in tax matters which are based on domestic law and those based on European law (principle of equivalence).

Moreover, Member States should not make it impossible or excessively difficult, in practice, to exercise the right to deduct VAT (principle of effectiveness).

According to the CJEU, although under article 273 of the VAT Directive, Member States may provide for other obligations to ensure the correct collection of VAT and prevent fraud, these measures "must not go beyond what is necessary to achieve these objectives" (principle of proportionality), so, "They cannot therefore be used in such a way as to call into question the right to deduct VAT, and consequently the neutrality of VAT" (CJEU Judgment of 12/04/2018 (Case C-8/17, Biosafe against Flexipiso).

Conclusion:

In light of the above grounds, and in conclusion, the VAT assessment acts in question are deemed illegal, and the additional VAT assessments which are the subject of the present case, as well as the respective interest assessments, should be annulled.

7. Relief for Compensation for Undue Guarantee Provision

The Claimant requests the condemnation of the Tax Authority to the payment of compensation for costs incurred with the guarantee provided in tax enforcement proceedings, in accordance with articles 53 of LGT and 171 of CPPT.

However, it does not appear from the established facts, nor from the documents attached to the case, that the Claimant provided a bank guarantee for a period exceeding three years, in tax enforcement proceedings instituted against it for the collection of the sums assessed here in question.

Wherefore, the relief for payment of compensation for undue bank guarantee provision must be dismissed.

8. Decision

In light of the above, the relief formulated by the Claimants in the present tax arbitration case is determined to be well-founded, as to the illegality of the VAT assessment acts, which are the subject of the present proceedings, in the total amount of 263,015.14 €.

9. Case Value

In accordance with the provisions of articles 315, no. 2, of CPC and 97-A, no. 1, paragraph a), of CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned the value of 263,015.14 €.

10. Costs:

In accordance with article 22, no. 4, of RJAT, and Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 4,896.00 €, to be paid by the Tax and Customs Authority.

Let notice be given.

Lisbon, 27 April 2018.

The Arbitrators

(José Baeta de Queiroz)

(Suzana Fernandes da Costa)

(José Eduardo Mendonça da Silva Gonçalves)

Text produced by computer, in accordance with article 138, no. 5 of the Civil Procedure Code (CPC), applicable by virtue of article 29, no. 1, paragraph e) of the Tax Arbitration Regime, revised by us.

Frequently Asked Questions

Automatically Created

What is the reduced VAT rate applicable to tourist accommodation establishments under Clause 17 of List I annexed to the Portuguese VAT Code (CIVA)?
Under Verba 17 of List I annexed to the Portuguese VAT Code (CIVA), tourist accommodation establishments benefit from a reduced VAT rate. This preferential rate applies to lodging services provided in establishments classified as tourist accommodation under Portuguese tourism legislation. The reduced rate, which has varied over time (historically 6% or intermediate rates depending on the period), represents a significant tax advantage compared to the normal VAT rate of 23%. To qualify, the establishment must be properly licensed and classified as tourist accommodation by competent tourism authorities, and the services must constitute genuine lodging provision rather than other differentiated services.
Can a tourist accommodation provider apply the reduced VAT rate under Verba 17 of List I annexed to CIVA, and what conditions must be met?
A tourist accommodation provider can apply the reduced VAT rate under Verba 17 of List I annexed to CIVA when several conditions are met. First, the establishment must be officially classified and licensed as a tourist accommodation establishment (estabelecimento de alojamento turístico) under Portuguese tourism regulations. Second, the services invoiced must constitute accommodation/lodging services as the primary provision, not ancillary or differentiated services. Third, the provider must maintain proper documentation demonstrating the nature of services provided. In Process 281/2017-T, the dispute centered on whether services provided to club members constituted qualifying accommodation services. The claimant argued that services to club members were identical to regular hotel services and should qualify for the reduced rate, despite Tax Authority guidance suggesting periodic payments for accommodation rights warranted the normal rate.
How did the CAAD rule in Process 281/2017-T regarding the VAT liquidation of €263,015.14 for tourist accommodation services?
In Process 281/2017-T, the CAAD arbitral tribunal was tasked with reviewing VAT assessments totaling €263,015.14 for the period January-October 2016. The claimant challenged the Tax Authority's position requiring application of the normal VAT rate to invoices issued to H... (the UK company managing club memberships) for accommodation reserved for club members. The tribunal, constituted on 30-06-2017, conducted a hearing on 13-12-2017 where three witnesses testified (the manager C..., certified accountant D..., and witness B...). The tribunal extended deliberation periods and ultimately scheduled its decision for 30-04-2018. While the complete ruling is not provided in this excerpt, the case addressed whether the evolving judicial precedent from 2013 onwards—establishing that such services qualify for reduced rates—should prevail over earlier Tax Authority binding information that had required normal rate application.
What is the arbitral tribunal procedure at CAAD for challenging VAT assessments related to tourist accommodation in Portugal?
The CAAD arbitral tribunal procedure for challenging VAT assessments follows the Portuguese Tax Arbitration Regime (RJAT). In Process 281/2017-T, the claimant submitted the arbitration request on 20-04-2017, which was accepted on 21-04-2017. Since the claimant did not appoint an arbitrator, the CAAD Deontological Council President appointed a three-member panel on 14-06-2017 under Article 6(2)(a) RJAT. The tribunal was constituted on 30-06-2017, and the Tax Authority had 30 days to respond and submit the administrative file. The claimant identified specific factual allegations requiring witness testimony. A tribunal hearing occurred on 13-12-2017 with witness examinations and oral arguments on preliminary issues. The claimant paid the subsequent arbitration fee as required by Article 4(3) RCPAT. The tribunal extended the decision deadline under Article 21(1) RJAT to 30-04-2018. This procedure demonstrates CAAD's structured approach balancing efficiency with procedural fairness in tax disputes.
What legal criteria distinguish tourist accommodation establishments eligible for reduced VAT rates under Portuguese tax law?
Portuguese tax law establishes specific legal criteria distinguishing tourist accommodation establishments eligible for reduced VAT rates under Verba 17 of List I annexed to CIVA. The establishment must hold official classification as 'estabelecimento de alojamento turístico' under tourism legislation, ensuring compliance with quality, safety, and operational standards. The core service must be temporary lodging/accommodation provision, not merely ancillary services like catering, entertainment, or facilities access. Process 281/2017-T examined whether the nature of services determines rate eligibility: the claimant argued its F... resort provided services indistinguishable from ordinary hotels, featuring all typical tourism establishment elements. The critical distinction concerns whether periodic payments for accommodation rights constitute qualifying lodging services or differentiated service bundles. Early Tax Authority guidance (binding information from 2000 and 2011) treated club membership arrangements as differentiated services warranting normal rates. However, emerging judicial precedent from 2013 onwards suggested identical accommodation services should receive identical VAT treatment regardless of payment structure, provided the substantive service remains tourist lodging.