Reduced VAT Rate on Dental Implants and Prosthetic Abutments – CAAD Arbitration 330/2015-T

ARBITRAL DECISION

The arbitral tribunal functioning with a single arbitrator constituted in the CAAD – Administrative Arbitration Centre pursuant to the legal regime established by Decree-Law No. 10/2011 of 20 January[1], to which was appointed by its respective Deontological Council, the arbitrator from the Centre's list Nuno Maldonado Sousa, hereinafter renders its arbitral decision.

1. Report

1.1. Constitution of the Arbitral Tribunal

A..., Lda., legal entity No. ..., with registered office at Avenue..., No. ..., Block..., room..., ...-... Porto, filed a petition for constitution of the arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of the RJAT and Articles 1 and 2 of Ordinance No. 112-A/2011, of 22 March, in which the Tax and Customs Authority[2] is the respondent.

The petition for constitution of the arbitral tribunal was accepted by the President of CAAD on 29-05-2015 and was notified to the AT on the same date.

Pursuant to the provisions of Article 6, No. 1 and Article 11, No. 1, paragraph b) of the RJAT, the Deontological Council appointed as arbitrator of the single arbitral tribunal the undersigned, who communicated acceptance of the assignment within the applicable period, and notified the parties of such appointment on 23-07-2015. In accordance with the rule contained in Article 11, No. 1, paragraph c) of the RJAT, the arbitral tribunal was constituted on 07-08-2015.

1.2. The Petitioner's Request

In its Initial Petition the Petitioner requested:

(i) The declaration of illegality of acts of additional VAT[3] assessment for the monthly periods from January 2010 to December 2010 and of assessments of compensatory interest calculated on the outstanding tax, totalling €43,853.19, in accordance with the following breakdown:

(ii) Compensation for provision of guarantee intended to suspend execution of the disputed assessments, which it claims to have furnished.

The Petitioner bases its main request on the understanding that the transfer of articles designated as crowns, implants and abutments for application in implantology (surgical area of dental medicine) should be taxed at the reduced VAT rate, as it falls within the scope of item 2.6[4] of "List I – Goods and services at reduced rate" attached to the CIVA[5] and not at the normal rate as the AT understood in the grounds of the additional assessment acts disputed.

The compensation request is supported by the Petitioner in the discipline provided for in the applicable provisions of the LGT[6] (Article 53) and the CPPT[7] (Article 171).

1.3. The Position of the AT

The Tax and Customs Authority presented its Reply[8] sustaining the legality of the assessments and defended the lack of merit of the request and its grounds by understanding that the said item 2.6 only covers the sale of prostheses, including dental prostheses, but does not include the parts, components and accessories or linking or fastening materials of such prostheses, which were traded by the Petitioner, with this operation to be taxed at the normal rate of the tax.

The AT bases its position on the interpretation it makes of the provisions of the CIVA which is conveyed by the dispatch of the Deputy Director-General of Value Added Tax, dated 1987-08-04 and in case law it invokes from the CJEU[9].

1.4. Proceedings and Arguments

In its IP the Petitioner requested the use of the expert evidence produced in the arbitral proceedings conducted in the CAAD, in which the AT was also requested. It promptly attached the expert's replies to the questions put to him. In its Reply the AT stated it does not object to the use of this evidence. As the requirements set out in Article 421-1 of the CPC[10], applicable pursuant to Article 29-1-e) of the RJAT, have been met, the use of the expert evidence already produced in the aforesaid proceedings is hereby granted in the present case.

The Petitioner also attached to its IP opinions relevant to establishing the factual matter, one subscribed by Dr. B..., distinguished dental surgeon, with the title "Implant-supported prosthesis and its components as a substitute for the dental organ," another by the Scientific Commission of the Order of Dental Surgeons, with the title "Dental implants and the information Medical Devices – Regulation" issued by the Order of Dental Surgeons on 20-02-2013.

The Petitioner also attached the opinion on the legal aspects of the case by the distinguished legal counsel Dr. C....

The AT attached the administrative file. The tribunal promoted the holding of a meeting with the Parties, the examination of a witness summoned by the Petitioner and the production of arguments. The Petitioner and the AT chose not to attend the convened meeting, with the right to perform these acts being foreclosed, as was recorded in the respective minutes, which were duly notified to them.

1.5. Joinder/Consolidation

The AT raised the exception of lack of material jurisdiction of this tribunal to consider the compensation for provision of guarantee within the scope of execution. The Petitioner responded sustaining jurisdiction. The consideration of this matter is deferred to a later moment, as there will only be need to assess this question if the main request is granted.

The arbitral tribunal was regularly constituted and has jurisdiction ratione materiae pursuant to the rules of Article 2, No. 1, paragraph a) of the RJAT (without prejudice to what was noted in the preceding paragraph).

The Parties possess legal personality and capacity (the AT's being pursuant to the discipline contained in Article 4, No. 1 of the RJAT and Article 10, No. 2, of the same enactment and Article 1, paragraph a) of Ordinance No. 112-A/2011, of 22 March), are legitimate and are regularly represented.

There are no procedural defects that would invalidate the proceedings.

Thus, there is no obstacle to the tribunal's consideration of the merits of the case, and it is necessary to decide.

2. Decision

2.1. Factual Matters

2.1.1. Facts Deemed Proven

The following facts were established in these proceedings:

A. The Petitioner is a limited liability company dedicated to the commercialization, importation and exportation of products, materials, instruments, machines and dental equipment. [AP, p. 84]

B. The Petitioner is classified under the general regime of taxation for corporate income tax purposes and under the normal regime of monthly periodicity for VAT, by election. [AP, p. 84]

C. The Petitioner commercializes medical devices for implantology, dental implants and other prosthetic devices. [AP, pp. 83-107]

D. Between 15-09-2014 and 18-11-2014 the AT conducted an external tax inspection procedure on the Petitioner under the authority (service order) No. 2014..., covering the operations included in the periodic VAT returns for periods 201001 to 201012. [AP, p. 83]

E. In the tax inspection report on the Petitioner, inter alia, the following can be read: [AP, pp. 84-85]

Following the analysis of the elements provided during the action, namely the detailed accounting extracts relating to VAT (in particular, the account...), with a view to monitoring tax in favour of the State mentioned in the returns referred to in Article 29, No. 1, paragraph c) and Article 41, No. 1, paragraph a) of the VAT Code (CIVA), with reference to the determination periods covered in the year falling within the scope (temporal scope) of the external tax inspection procedure in question, as well as the documents supporting the accounting entries or records evidenced in such extracts (notably, the invoices issued by the taxpayer), we verified that the taxpayer carried out, in the year 2010, domestic transfers of dental implants and related material, having applied, in the assessment of the tax with reference to such outgoing operations, the reduced rate referred to in Article 18, No. 1, paragraph a) of the CIVA.

F. In the tax inspection report on the Petitioner, inter alia, the following can also be read: [AP, p. 85]

Now, pursuant to the provisions of item 2.6 of List I attached to the CIVA (corresponding to item 2.5 in the version prior to Decree-Law No. 102/2008, of 20 June), the reduced VAT rate, referred to in Article 18, No. 1, paragraph a) of the respective Code, only covers "appliances, implements and other prosthetic or compensatory materials intended to replace, wholly or in part, any member or organ of the human body."

Note that, with regard to implants applied in dental medicine, these are nothing more than mere metal roots (generally in commercially pure titanium) osseointegrable in the maxilla (upper part of the mouth) or in the mandible (lower and mobile part of the mouth) intended exclusively to serve as support or anchorage to a structure of one or more artificial teeth (crown, bridge, etc.).

Suffice it to point to the very definition of "dental prosthesis" as "a fixed or mobile structure consisting of one or a set of artificial teeth, which replaces missing teeth" (see Portuguese Language Dictionary with Orthographic Agreement, Porto Editora, available for consultation at: http://www infopedia.pt/lingua-portuguesa/prótese) to understand how dental implants, when traded in isolation or autonomously, can be considered as prostheses.

G. In the tax inspection report on the Petitioner, inter alia, the following can also be read: [AP, p. 86]

Consequently, it is manifest that the goods in question traded by the inspected entity (dental implants and other pieces of linking or fastening of the dental prosthesis) cannot be subsumed under the normative provision of item 2.6 of List I attached to the CIVA (and do not meet the conditions necessary for the corresponding classification under the said item), because, in addition to not being prostheses, they are not capable of fulfilling, performing or ensuring, individually considered (i.e. by themselves) and at the moment of occurrence of the taxable event (i.e. at the moment of the corresponding domestic transfer), the functions of the dental organ.

H. In the tax inspection report on the Petitioner, inter alia, the following can also be read: [AP, p. 85]

In Annex 1 is evidenced, with regard to the items in question, a detailed list of the supporting documents (invoices) of the corresponding domestic transfers (number and date), the references, the quantities, the descriptions, the taxable values (unit and total, with reference to each item), the VAT assessed by the taxpayer (at the reduced rate).

I. In Annex 1 of the tax inspection report on the Petitioner, inter alia, it can also be read that the sales on which the VAT incurred was corrected had as their subject-matter the following goods: [AP, pp. 91-107]

a. Abutments;

b. Implants;

c. Colosso fixation screws;

d. Colosso transmucous fixation screws;

e. Mini O'ring ring;

f. Mini O'ring female.

J. In the external tax inspection procedure on the Petitioner the AT found that domestic transfers of goods with VAT assessed at the reduced rate had been made and concluded that they were liable to VAT assessment at the normal rate, in accordance with the following table: [AP, p. 87]

K. By official letter of 29-12-2014 the Petitioner was notified of the tax inspection report and of the dispatch approving the proposal for "corrections of a purely arithmetical nature in VAT in the amount of €37,091.02 [doc. 5, pp. 1 and 3]

L. The AT directed to the Petitioner the following VAT assessments and compensatory interest, all with the deadline for voluntary payment on 31 March 2015 and which total €43,853.19: [doc. 1]

M. On 21-04-2015 an enforcement procedure was commenced against the Petitioner for collection of VAT in the amount of €43,853.19 and on 07-05-2015 it offered as guarantee for seizure its inventory of goods which it valued at the approximate amount of €75,000.00. [docs. 2 and 3]

N. On 13-05-2015 the document denominated "seizure record" was completed, of the Petitioner's goods identified therein, to which was assigned the value of €75,605.85, a document that was executed by the official serving in the Financial Services office of Porto... and which does not contain the signature of the court-appointed custodian [doc. 4]

O. Each tooth is an individual entity, commonly being anatomically constituted by crown, root or roots and periodontium.

P. All constituent parts of the tooth are inseparable, that is, one part cannot exist without the other.

Q. Implantology is a surgical area of Dental Medicine dedicated to the placement of dental implants intended to replace lost teeth through dental implants in titanium and crowns.

R. The dental prosthesis by dental implant consists of three elements: implant, abutment and crown.

S. Dental implants are a safe and permanent solution for the replacement of one or more teeth.

T. Dental implants are structures in pure titanium, placed in the maxilla or mandible, which replace the root of a natural tooth that was extracted.

U. Dental implants function as support pillars for unitary crowns and fixed or removable bridges, partial or total.

V. The dental implant is a titanium screw intended to replace the root of a natural tooth that was extracted.

W. The implant is the structure surgically positioned in the maxillary bone below the gingiva, with a view to fulfilling the function of the tooth root.

X. The abutment is a cylindrical structure inserted into the implant.

Y. On the abutment is placed the crown which is an implement that allows the replacement of the visible part of the tooth.

Z. The crown is prepared by dental prosthetics laboratories and needs to be adjusted to the characteristics of the patient's dentition and is specifically produced for each case by dental prosthetics technicians.

AA. Implants and abutments are produced in series.

BB. Implants and abutments traded by the Petitioner can only be utilized within implantology and are only used in the creation of an artificial piece that replaces a tooth wholly or in part.

CC. The nature and quality of implants and abutments are not altered by their placement.

DD. The surgical procedure for placing a dental prosthesis encompasses surgical work done by a physician and prosthetic design work done by a prosthodontist.

EE. The surgical procedure for placing a dental prosthesis is performed in three stages:

FF. The first stage consists of the surgical placement of the dental implant leveled with the bone, but within the gingiva, in the subsequent process of osseointegration which consists in the union of the dental implant to the bone, followed by exposure of the implant through removal of the overlying gingiva.

GG. In the second stage the surgeon places the fixing abutment which penetrates the gingiva.

HH. In the third stage the dental crown is fabricated and placed, which constitutes the artificial tooth in porcelain or other material on the osseointegrated dental implant.

II. The technique proper to implantology advises the segmentation of the process in two phases, the first corresponding to the placement of the dental implant and the second to the placement of the abutment and the crown.

JJ. Oral rehabilitation with resort to implantology makes it possible to confer or optimize the mastication function of a patient who is partially or totally edentulous.

KK. Oral rehabilitation can alternatively be done by the rehabilitation of the edentulous spaces in a fixed manner by performing bridges over teeth, which implies the invasive procedure of at least two teeth, or else through removable prostheses supported only by the mucosa.

LL. Dental implants maintain the bone and facial aesthetic structure that is lost with the absence of teeth and maintain the integrity of the neighboring teeth.

2.1.2. Facts Deemed Not Proven

No other facts with interest for the decision of the case were alleged.

2.1.3. Grounds for the Factual Matters Deemed Proven

The tribunal's conviction was based on the documentary evidence in the record and on the position taken with respect to each fact by the Parties in their pleadings.

For the tribunal's conviction the following special contributions are noted:

(i) For the facts identified from A. to L.: From the documents or items of the administrative file referenced in square brackets in 2.1.1;

(ii) For the remaining facts identified from M. to GG: The expert evidence and technical documents relating to implantology attached by the Petitioner.

(iii) For the fact identified in Z, in the part in which it affirms the exclusivity of use in implantology of implants and abutments, the assertion of the Petitioner in paragraph 36 and the position manifested by the AT in the same sense, in paragraph 98 of its Reply, contributed in particular.

2.2. Legal Matters

2.2.1. Substantive Issue: the VAT Rate Applicable to Transactions in Dental Implants

The fundamental issue consists in determining which VAT rate is applicable to the transactions in abutments and implants made by the Petitioner.

There are two conflicting theses present in the record. On the one hand, the interpretation that the AT makes of the provisions of Article 18, No. 1, paragraphs a) and c) of the CIVA, in connection with item 2.6 of the list I attached to that code and which is in the direction of applying the normal rate (Article 18, No. 1, paragraph c) CIVA) to the transactions of the articles in question. In turn, the Petitioner argues that the transactions in question should be classified under the provision of Article 18, No. 1, paragraph a) of the CIVA, in connection with item 2.6 of list I, with the application of the reduced rate. It is thus necessary to determine whether the articles traded are included in the aforementioned item 2.6.

The wording of the provisions that most directly regulate the dispute is as follows:

CIVA

Article 18. Rates of the Tax

1 - The rates of the tax are as follows:

a) For imports, transfers of goods and provision of services listed in list I attached to this enactment, the rate of 6%;

b) For imports, transfers of goods and provision of services listed in list II attached to this enactment, the rate of 13%;

c) For the remaining imports, transfers of goods and provision of services, the rate of 23%.

CIVA

List I - Goods and services subject to reduced rate

2.6 - Orthopedic appliances, medical-surgical bandages and medical hosiery, wheelchairs and similar vehicles, operated manually or by motor, for disabled persons, appliances, implements and other prosthetic or compensatory materials intended to replace, wholly or in part, any member or organ of the human body, or for the treatment of fractures, and lenses for vision correction, as well as orthopedic footwear, provided prescribed by medical prescription, in accordance with terms to be regulated by the Government within 30 days.[11]

The AT defends its thesis by arguing that the description of item 2.6 only "covers the sale of prostheses, including dental prostheses" but does not include "parts or materials for linking or fastening of such prostheses." This understanding is based on the idea that only complete prostheses are provided for in item 2.6, considered in their complexity, as a means of replacing a member or organ of the human body. As a result, it concludes that parts, components and accessories of prostheses are not included in the provision of item 2.6 because these constituent elements, "in addition to not being prostheses, are not capable of fulfilling, individually considered, the function of replacing a part of the body or its function"[12]. The AT distinguishes and treats differently (i) the parts it considers components of the prosthesis, namely the "implant proper, the connecting pieces and the tooth crown," which are not included in item 2.6 with the normal VAT rate being applicable to transactions in these components; (ii) the prosthesis as a complex unit which it calls a unique implant unit, which is an artificial piece that replaces a certain organ of the human body, which is covered by the item in question and to the transactions of which the reduced rate applies. The reason that leads to the exclusion of these individual component elements from the scope of application of the list is based on the lack of capacity of these to themselves fulfill the function of replacing, wholly or in part, any member or organ of the human body[13].

Using other terminology the AT emphasizes the distinction between the concept of implant which constitutes "the mode of fastening of the prosthesis" and the concept of prosthetic material which is the device that "is intended for or is capable of replacing a member or organ of the human body"[14]. To put it another way, in the AT's thesis, "prosthetic material" and "material for prosthesis," are not the same thing and item 2.6 only provides for the latter meaning.

Note that the AT does not recognize any function to titanium implants and abutments other than that of mere components, with the function of supporting and fastening the prosthesis but which by themselves do not perform or replace any organ, namely the dental organ, although it considers the crown, or artificial tooth in porcelain, a prosthesis, "since it is this that replaces the tooth, in its masticatory, verbalization and aesthetic function"[15].

From the legal point of view – item 2.6 is ultimately a provision subject to interpretation – the AT invokes the exceptional character that the application of the reduced rate should have in light of European Union law, there being need to make a strict interpretation when determining the transactions that are not taxed at the normal rate. It points in the same direction at certain case law from the Supreme Court of Justice[16], which affirms that list I of the CIVA has the nature of being "exhaustive and not exemplary." It further states that the provision is ultimately intended to tax at the reduced rate "products specifically designed for the correction or compensation of deficiencies or for the replacement, wholly or in part, of organs or members of the human body" and that consequently it only includes appliances and prostheses in themselves, considered as a final product which in the present case corresponds to the "artificial tooth (prosthesis)."

The Petitioner bases its thesis on concepts from medical science, namely the concept of a tooth, which is anatomically constituted by crown, root and periodontium, that titanium dental implants are placed in the maxilla or mandible and replace the roots of lost teeth and serve as support for unitary crowns and fixed or removable bridges. In these terms the implant is intended to replace the root of a natural tooth and therefore is in itself a device[17]. In turn the abutment is a cylindrical structure that is inserted into the implant and it is on it that the crown is placed which is "the visible part of the artificial tooth"[18].

As to the interpretation of what constitutes prosthetic material, the Petitioner attributes to it a different meaning from that which the AT considered; for the Petitioner under this heading are grouped the materials used "in the creation of an artificial piece that replaces a part of the human body," namely materials that cannot have any other purpose or use. For the Petitioner implants, abutments and crowns are ultimately prosthetic materials[19].

At the level of normative interpretation the Petitioner considers that implants and abutments are in themselves implements, as are they prosthetic material and that therefore they fulfill the normative provision of item 2.6.

It is now necessary to take a position.

It does not appear that the interpretation made by the AT is sustainable in light of the elements in the record, of a factual and legal nature; let us examine which goods situated in the universe under discussion in these proceedings are ultimately included in item 2.6 of list I attached to the CIVA. The provision considers included in the group of goods subject to the reduced rate "appliances, implements and other prosthetic or compensatory materials intended to replace, wholly or in part, any member or organ of the human body."

In a first approach it should be noted that it appears indisputable that the dental implant is in itself an implement intended to functionally replace the root of the tooth[20]. It appears undisputed that, given that the root of the tooth is in itself a constituent element of the human body, with the proper function of supporting the crown, the transactions in such implants should be taxed at the reduced rate.

Crowns are also implements intended to replace the visible part of the artificial tooth and its masticatory function and for the reasons indicated regarding implants they should be considered covered by item 2.6, if the question arose in this proceeding.

For their part, abutments are not presented in the record as an element that replaces any constituent part of the human body. The matters ascertained permit the statement that abutments are the connection piece between the implant and the crown. The elements gathered do not clarify whether they are an implement aimed at replacing a part of the human body[21] or whether they are merely elements intended to fulfill a function of a technical nature, which is the connection between the implant and the crown. It appears to the tribunal that it will be necessary to investigate by another avenue the regime applicable to abutments.

The provision that has been analyzed also provides for another group of situations to which the reduced rate should be applied, which are the operations in which prosthetic material is traded. It is believed that the meaning of the provision in this regard is what the Petitioner indicates, i.e., prosthetic material consists of all components used in the creation of a prosthesis, including materials that cannot have any other purpose or use. This is the situation of abutments[22] and consequently by this avenue, abutments are also included in the set of goods that item 2.6 covers.

Besides, implants also constitute prosthetic material and also by this avenue are situated within the scope of item 2.6.

In any event, and as was already emphasized by the arbitral award rendered by the Arbitral Tribunal in the context of the CAAD, of 17-11-2015, in proceedings 296/2015-T, the AT's thesis is in this particular contradictory, as in qualifying implants and abutments as mere elements "of support and fastening of the prosthesis" it denies the very existence of fixed dental prostheses, as these are precisely characterized by being supported by implants and abutments, which are ultimately their integral parts, or more properly, they are prosthetic material. The integral parts of the prosthesis are ultimately, each of them, one of the parts of the organ or member that the whole is intended to replace, provided they have the characteristic of not being used for any purpose other than their incorporation in the prosthesis.

The grounds presented by the AT for making the assessments disputed by the Petitioner are not in conformity with the law, such that the Petitioner's request should succeed.

There is still a clarification that should be made. The Petitioner complains of the treatment given by the AT to the VAT on sales of "components of dental prostheses"[23], although in the action all arguments are directed exclusively to the situation of implants and abutments. Neither the Petitioner nor the AT transpose to their petitions the specific facts underlying the assessments, which are ultimately the various sales of equipment made by the Petitioner.

The analysis of the TIR[24] reveals that in addition to implants and abutments the VAT on other sales was also corrected that the Petitioner did not claim, namely "Colosso fixation screws," "Colosso transmucous fixation screws," "Mini O'ring ring" and "Mini O'ring female" and it will not be their lesser economic significance that will lead to the ignoring of these corrections in the decision. In fact, there is no allegation in the IP that these goods are prosthetic material, with the meaning that has been fixed, as it is entirely unknown what pieces they are, what they are for and whether their purpose is exclusively incorporation in dental prostheses. This aspect will not fail to be noted in the condemnation.

2.2.2. Question of Credit Notes Allegedly Disregarded

In its IP the Petitioner also states that sometimes its customers return products that they purchased from it and that it then issues credit notes, with a view to canceling the corresponding invoices. It states that with the corrections made by the AT it also "disregarded the said credit notes, presenting no valid justification for doing so"[25]. The Petitioner does not identify these situations, limiting itself to a referral to the identification that it claims is contained in its document No. 10. The document in question is a statement of accounting reconciliation that does not contain factual elements.

First, it should be noted that facts are not documents, these being merely means of proof. If the Petitioner intended to have a certain reality considered it was its burden to allege the corresponding facts and it did not do so. Second, even attempting to make up for the lack of elements, the tribunal cannot grasp the meaning of the Petitioner's assertions because it does not know the invoices that the credit notes were intended to cancel nor any other circumstance relating to these transactions.

For the reasons set out the tribunal cannot examine this argument of the Petitioner.

2.2.3. Compensation

The Petitioner also petitions that it be "recognized the right of the Petitioner to compensation provided for in Article 171 of the CPPT and Article 53 of the LGT." The provisions cited regulate compensation to the person against whom execution is brought and an impugner who provides a bank guarantee or equivalent, to suspend execution.

The application of the provision has as a requirement the actual need for a bank guarantee or equivalent to be offered, constituted and maintained (Article 53 LGT). The guarantee must thus assume one of the forms provided for in the law, which are the aforementioned bank guarantee, a pledge, surety insurance, legal mortgage or security interest (Articles 169, 195 and 199 CPPT). The law also permits that the AT's credits be further secured through other means admissible under law.

The Petitioner did not allege or prove that it constituted a guarantee in any of the forms provided for. The Petitioner could assert that certain of its goods were seized but that would always be insufficient to meet the provision of the rule which expressly refers to the need for the constitution of a guarantee.

The request of the Petitioner not having the guarantee been constituted must lack merit.

3. Decision

Considering the factual and legal elements collected and set out above, this arbitral tribunal decides to uphold the request and in consequence decides to annul the additional VAT assessments and compensatory interest identified in this decision. The annulment covers only the corrections to the VAT on the Petitioner's sales of abutments and implants and corresponding compensatory interest and excludes the corrections of sales relating to other articles, namely "Colosso fixation screws," "Colosso transmucous fixation screws," "Mini O'ring ring" and "Mini O'ring female," described in the list appearing on pages 91 to 97 of the Administrative File.

The Petitioner is condemned to pay the costs, which shall be assessed in the proper manner.

4. Value of the Proceedings

In accordance with the provisions of Article 306, No. 2, of the CPC, ex vi Article 29, No. 1-e) of the RJAT and Article 97-A, No. 1-a) of the CPPT ex vi Article 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at €43,853.19.

5. Costs

The costs are charged to the party that gave rise to them, it being understood that the party against whom judgment is rendered gives rise to them (Articles 527, No. 1 and 2 CPC). In these proceedings and considering the cited rule, the responsibility for costs is that of the AT, as the party against whom judgment is rendered.

Pursuant to Article 22, No. 4 of the RJAT and Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs charged to the AT is fixed at €2,142.00.

Lisbon, 6 February 2016

The Arbitrator,

(Nuno Maldonado Sousa)

[1] In this decision designated by the abbreviated form of common use "RJAT" (Legal Regime for Arbitration in Tax Matters).

[2] In this decision designated by the abbreviated form "AT" as is of general use.

[3] In this document designated by the abbreviated form "VAT" the Tax on Value Added.

[4] In the version effective until 31-12-2014 provided for the application of the reduced rate in the following terms: "2.6 - Orthopedic appliances, medical-surgical bandages and medical hosiery, wheelchairs and similar vehicles, operated manually or by motor, for disabled persons, appliances, implements and other prosthetic or compensatory materials intended to replace, wholly or in part, any member or organ of the human body, or for the treatment of fractures, and lenses for vision correction, as well as orthopedic footwear, provided prescribed by medical prescription, in accordance with terms to be regulated by the Government within 30 days."

[5] In this document designated by the abbreviated form "CIVA" the Value Added Tax Code.

[6] In this document designated by the abbreviated form "LGT" the General Tax Law.

[7] In this document designated by the abbreviated form "CPPT" the Tax Procedure and Process Code.

[8] In this document also designated this petition of the AT as "R-AT".

[9] In this document also designated the Court of Justice of the European Union by CJEU.

[10] In this document designated by the abbreviated form "CPC" the Civil Procedure Code.

[11] The wording transcribed is that which was in effect until the end of 2014, having been amended by Article 195 of Law No. 82-B/2014, of 31 December (State Budget for 2015).

[12] Articles 41-44 R-AT.

[13] Articles 51-53 R-AT.

[14] Articles 71-72 and 76 R-AT.

[15] Articles 76, 97 and 98 R-AT.

[16] Namely the Supreme Administrative Court judgment of 18-06-2014, proceedings No. 01689/13 [Fonseca Carvalho], with summary available at www.dgsi.pt.

[17] Paragraphs 21, 24-25, 27-28 IP

[18] Paragraphs 31 and 32 IP.

[19] Paragraphs 35-37 IP.

[20] Fact established in U).

[21] Facts established in V) and W).

[22] Fact established in Z).

[23] Paragraph 8 of the IP.

[24] Tax Inspection Report which constitutes doc. 5 attached by the Petitioner and which is also incorporated in the AF.

[25] Paragraphs 87-95 IP.