VAT Exemption for Education Services Under Article 9(9) CIVA – CAAD Case 332/2015-T

CAAD: Tax Arbitration

Case No.: 332/2015-T

Subject matter: VAT - exemption, goods and connected services provision, education; art. 9 no. 9 of the VAT Code

ARBITRAL DECISION

I. REPORT

1. On 27 May 2015, the company A…, SA, taxpayer no.…, hereinafter identified as the Claimant, filed a request for arbitral pronouncement, pursuant to the provisions of articles 2, no. 1, subparagraph a) and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as Lfat), in conjunction with article 102 of the Code of Tax Procedure and Process (CTPP), applicable by virtue of article 10, no. 1, subparagraph a) of Decree-Law no. 10/2011, of 20 January.

2. The request for constitution of the arbitral tribunal was accepted on 9 June 2015, by His Excellency the President of CAAD and, subsequently, notification of the Tax and Customs Authority (hereinafter identified as the Respondent Entity) was effected.

3. The Claimant did not proceed to the appointment of an arbitrator, whereby, pursuant to article 6, no. 1 of the LFAT, the undersigned was designated by the President of the Deontological Council of CAAD to constitute the present singular Arbitral Tribunal, with the appointment being accepted in accordance with legal provisions.

4. In the present case, the Claimant seeks that the Arbitral Tribunal declare:

a) the illegality of the additional assessment act of Value Added Tax no.…, in the amount of € 3,518.08, relating to the period 1103T,

b) the illegality of the additional assessment act of Value Added Tax no.…, in the amount of € 4,929.28, relating to the period 1106T;

c) the illegality of the additional assessment act of Value Added Tax no.…, in the amount of € 4,056.76, relating to the period 1109T;

d) the illegality of the additional assessment act of Value Added Tax no. 2014…, in the amount of € 13,781.49, relating to the period 201112T;

e) the illegality of the additional assessment act of Value Added Tax no. 2014…, in the amount of € 4,827.61, relating to the period 201203T;

f) the illegality of the additional assessment act of Value Added Tax no. 2014…, in the amount of € 4,287.79, relating to the period 201206T;

g) the illegality of the additional assessment act of Value Added Tax no. 2014…, in the amount of € 5,786.75, relating to the period 201209T;

h) the illegality of the additional assessment act of Value Added Tax no. 2014…, in the amount of € 13,556.62, relating to the period 201212T;

i) the illegality of the compensatory interest assessment act no.…, in the amount of € 499.28, relating to the period 1103T;

j) the illegality of the compensatory interest assessment act no.…, in the amount of € 649.85, relating to the period 1106T;

k) the illegality of the compensatory interest assessment act no.…, in the amount of € 493.92, relating to the period 1109T;

l) recognition of the right to compensation for guarantee improperly provided.

1. On 3 February 2016, the first meeting of the arbitral tribunal took place.

2. The Claimant supports its request, in summary, on the understanding that all services provided by it are connected with the activity of education, whereby all of them benefit from VAT exemption under no. 9, article 9 of the VAT Code, which covers service provisions that have education as their object, as well as transfers of goods and provision of connected services effected by establishments integrated into the National Education System.

3. Moreover, it understands: with respect to the sale of school textbooks that such sales are made exclusively to students and teachers; with respect to the sale of clothing (uniforms), that such sale is connected with the education activity to the extent that the use of uniforms is integrated into the philosophy of the education system adopted by the Claimant; with respect to extended hours and surcharge, that such are necessarily connected with the education activity; and with respect to education, health and psychology services, that such services are inextricably linked to the educational practice carried out by the Claimant.

4. The Respondent Entity understands that, being a matter relating to exemptions, there is required not only a general principle of strict interpretation, in so far as exemptions constitute derogations from the general rule of subjection to tax, but also the interpretation must be made in accordance with the objectives pursued by the said exemptions and respecting the requirements of the principle of tax neutrality.

5. For the Respondent Entity, the sale of school textbooks cannot be considered as connected with the provision of education services, as it is not inherent to the performance of such operations but merely auxiliary, also considering that including the sale of school textbooks within the scope of exemption would create serious breaches and distortions of competition against other economic operators that effect these same transfers of goods. The same applying with respect to the sale of clothing, which it further states cannot be considered connected with the activity provided for in no. 9, article 9 of the VAT Code.

6. With respect to the education, health and psychology services, the Respondent Entity understands that services that refer to the monitoring effected to students for difficulties at the level, namely, of learning, are operations subject to VAT and not exempt therefrom.

7. Finally, for the Respondent Entity the services related to extended hours and surcharge after 7 p.m. cannot be considered connected with the education activity, whereby they cannot benefit from the framework of the exemption provided for in no. 9, article 9 of the VAT Code, especially since in the understanding of the Respondent Entity to assess the framework within the exemption whenever an assessment would have to be made regarding the indispensability of the transfers of goods and provision of services for the realisation of exempt operations and regarding the fact that such activities provide the organisation with the realisation of operations effected in direct competition with commercial enterprises subject to VAT, scrutiny which the operations do not withstand.

II. PRELIMINARY RULING

The Tribunal is materially competent and is regularly constituted, pursuant to articles 2, no. 1, subparagraph a), 5 and 6, all of the LFAT.

The parties have legal personality and capacity, are legitimate and are represented, pursuant to articles 4 and 10 of the LFAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

No nullities are verified, whereby it is necessary to rule on the merits of the request.

III. OBJECT OF THE ARBITRAL PRONOUNCEMENT

The following questions are presented to the Tribunal, pursuant to the description above:

i. the classification of a set of services provided and transfers of goods effected by the Claimant within the exemption provided for in no. 9, article 9 of the VAT Code, namely, the sale of school textbooks, the sales of clothing (uniforms); the extension of hours, the surcharge after 7 p.m. and the Education, Health and Psychology Service;

ii. the right to compensation for guarantee improperly provided.

IV. FACTUAL MATTERS

Proven Facts

a) The Claimant has been taxed for the principal exercise of the activity "Pre-school Education", CAE…, since 11 January 1999 and provides services within the scope of pre-school education and primary and secondary education in its own facilities (cf. pages 5 and 6/21 of the Inspection Report attached to the administrative file);

b) The Claimant was subject to an external inspection procedure, of general scope, pursuant to Service Order no. OI2014…, extending to the years/periods of 2011 and 2012 (cf. page 4/21 of the Inspection Report attached to the administrative file).

c) According to the Inspection Report, the sale of school textbooks "is an operation subject to VAT and not exempt therefrom, implying the respective assessment of tax. Such transfers, given the nature of the goods, are taxed at the reduced rate provided for in subparagraph a) of no. 1 of article 18 of the VAT Code, by classification under item 2.1 of list I, annexed to the VAT Code (cf. page 11/21 of the Inspection Report attached to the administrative file).

d) According to the Inspection Report, the sale of clothing (uniforms) carried out by the Claimant translates into "operations of sales of goods, specifically uniforms/individual clothing items, bearing the logo adopted by the educational institution", the use of which is mandatory and whose sale is made at the College itself (cf. page 11/21 of the Inspection Report attached to the administrative file).

e) According to, further, the Inspection Report, the Extension of Hours "aims to accommodate students, one or two hours beyond school hours, thus allowing parents management of the time of the student's stay in the College facilities according to their needs" (cf. page 11/21 of the Inspection Report attached to the administrative file).

f) From the same Inspection Report it results that the Surcharge after 7 p.m. corresponds to a "penalty for the stay of students in the College facilities beyond 7 p.m." (cf. page 12/21 of the Inspection Report attached to the administrative file).

g) According to, further, the Inspection Report, the Education, Health and Psychology Service provided by the Claimant "corresponds to personalised monitoring of deficiencies detected either at the level of learning, health and behaviour" (cf. page 12/21 of the Inspection Report attached to the administrative file).

h) Following the said inspection action, corrections were determined in respect of VAT with reference to the following operations (cf. page 10/21 of the Inspection Report attached to the administrative file):

i. Sale of textbooks;

ii. Sales of clothing (uniforms);

iii. Extension of hours;

iv. Surcharge after 7 p.m.;

v. Education, Health and Psychology Service (EHPS).

i) The following amounts of tax in arrears were determined, detailed by tax period (cf. pages 13 to 15/21 of the Inspection Report attached to the administrative file):

Year 2011

Year 2012

j) In fulfilment of the corrections determined in the course of the inspection action, the following acts were issued, whose legality is contested:

i. additional assessment act of Value Added Tax no.…, in the amount of € 3,518.08, relating to the period 1103T,

ii. additional assessment act of Value Added Tax no.…, in the amount of € 4,929.28, relating to the period 1106T;

iii. additional assessment act of Value Added Tax no.…, in the amount of € 4,056.76, relating to the period 1109T;

iv. additional assessment act of Value Added Tax no. 2014…, in the amount of € 13,781.49, relating to the period 201112T;

v. additional assessment act of Value Added Tax no. 2014…, in the amount of € 4,827.61, relating to the period 201203T;

vi. additional assessment act of Value Added Tax no. 2014…, in the amount of € 4,287.79, relating to the period 201206T;

vii. additional assessment act of Value Added Tax no. 2014…, in the amount of € 5,786.75, relating to the period 201209T;

viii. additional assessment act of Value Added Tax no. 2014…, in the amount of € 13,556.62, relating to the period 201212T;

ix. compensatory interest assessment act no.…, in the amount of € 499.28, relating to the period 1103T;

x. compensatory interest assessment act no.…, in the amount of € 649.85, relating to the period 1106T;

xi. compensatory interest assessment act no.…, in the amount of € 493.92, relating to the period 1109T.

k) For compulsory collection of the assessment acts contested and better identified in subparagraphs i) to iii) and ix) to xi) of the point above, the tax enforcement proceeding no. …2015…, was instituted by the Tax Service of …-… (cf. Docs. 3 to 8, attached with the request for arbitral pronouncement).

l) To suspend the tax enforcement proceeding, a bank guarantee no.…, issued by B… (cf. Doc. 9, attached with the arbitral request) was provided.

The factual matters given as proven, which are peacefully recognized and accepted by the parties, are based on documentary evidence produced, attached with the request for arbitral pronouncement and with the administrative file.

Unproven Facts

Of the facts of interest for the decision of the case, set out in the request for arbitral pronouncement and the response, all objects of concrete analysis, those not set out in the factuality described above were not proven.

V. LAW

1. The first question under consideration in the present proceedings concerns the classification of a set of services provided and transfers effected by the Claimant within the exemption provided for in no. 9, article 9 of the VAT Code, namely, the sales of school textbooks, the sales of clothing (uniforms), the extension of hours, the surcharge after 7 p.m. and the Education, Health and Psychology Service.

2. Exempt from Value Added Tax, in accordance with the provision of no. 9, article 9 of the VAT Code, are service provisions that have education as their object, effected by establishments integrated into the National Education System.

3. This exemption further covers transfers of goods and provision of services connected with education, such as the provision of accommodation and meals.

4. The said legal provision stipulates that exempt are "service provisions that have education as their object, as well as transfers of goods and provision of connected services, such as the provision of accommodation and meals, effected by establishments integrated into the National Education System or recognised as having analogous purposes by the competent ministries".

5. This exemption is based on subparagraph i), no. 1, article 132 of the VAT Directive, according to which Member States exempt operations related to "the education of children and youth, school or university education, vocational training or retraining, and likewise service provisions and transfers of goods closely related thereto, effected by public law bodies pursuing the same aim and by other bodies which the Member State concerned considers to pursue analogous aims" (cf. further subparagraph i), article 13-A of the Sixth Directive).

6. In accordance with article 134 of the VAT Directive "Service provisions and transfers of goods are excluded from the benefit of the exemption provided for in subparagraphs b), g), h), i), 1), m) and n) of no. 1, in the following cases:

a) When they are not indispensable to the realisation of exempt operations;

b) When they are intended, essentially, to obtain supplementary income for the body through the realisation of operations effected in direct competition with commercial enterprises subject to value added tax.

1. It is important to note that the terms used to designate the exemptions laid down in article 9 of the VAT Code are in principle subject to strict interpretation, given that they constitute derogations from the general principle, according to which VAT is charged on any service provision effected for remuneration by a taxable person (cf. Judgment of 11 January 2001, Commission/France, C-76/99 and Judgment of 20 June 2002 Commission/Germany, C-287/00, in http://curia.europa.eu).

2. However, contrary to "what normally occurs in the matter of interpretation of provisions containing exemptions of VAT in internal operations, in the judgment of 20 June 2002 (C-287/00, Commission/Germany, Reports p. I -5811) the CJEU affirmed the unnecessary application of strict interpretation of the exemption currently provided for in subparagraph i) of no. 1 of article 132 of the VAT Directive, by considering that this exemption aims to ensure more economical access to services linked to education" (cf. LAIRES, Rui – Exemptions from VAT in Cultural, Educational, Recreational, Sports and Medical or Social Assistance Activities, IDEFF, no. 14, p. 176).

3. In the said judgment of 20 June 2002 (Commission/Germany, C-287/00), when assessing the subjection to VAT of research activities of public institutions of higher education carried out for remuneration, it is stated that the definition of the concept of service provision "closely connected" with university education "does not, however, require a particularly strict interpretation, in so far as the exemption of service provisions closely connected with university education is intended to ensure that the benefit thereof does not become inaccessible by reason of the increase in costs of such education if it itself, or the service provisions and transfers of goods closely connected thereto, were subject to VAT (cf. as regards article 13-A, no. 1, subparagraph b) of the Sixth Directive, judgment of 11 January 2001, Commission/France, C-76/99, Reports, p. I-249, no. 23).

4. The "purposive element has therefore served to enable the CJEU to establish the meaning of VAT exemption provisions, always respecting the limits imposed by their literal element" (VASQUES, Sérgio – Value Added Tax, Lisbon, 2015, p. 330).

5. And, for the CJEU, the provision under examination aims to ensure that the benefits of education do not become inaccessible by reason of the increases in costs of education itself or of service provisions closely connected thereto.

6. This position is recognised by the Supreme Administrative Court according to which "It being certain that European case law has established, in the matter of VAT exemptions, a general principle of strict interpretation, since exemptions constitute derogations from the general rule of subjection to tax, in the specific domains of education, as in health, European case law has equally established that such interpretation must be made in accordance with the objectives pursued by the said exemptions and respecting the requirements of the principle of tax neutrality." (cf. Judgment of the Supreme Administrative Court, handed down in Case no. 01209/14, on 25-03-2015, in www.dgsi.pt).

7. Clarifying that it is not reasonable to apply a restrictive interpretation of this exemption "since education, if intended for students, presupposes a set of human and material means devoted to its pursuit and which, to that extent, appear indispensable to the adequate pursuit of that activity, taken by Europe as being of general interest" (cf. Judgment of the Supreme Administrative Court, handed down in Case no. 01209/14, on 25-03-2015, in www.dgsi.pt).

8. It should thus be understood that the concept of "transfers of goods and provision of services connected with education" underlying no. 9, article 9 of the VAT Code does not require a particularly restrictive interpretation in so far as the exemption of education and operations closely connected with education is intended to ensure that the benefit thereof does not become inaccessible by reason of the increase in costs that would result if it itself, or operations closely connected thereto, were subject to VAT.

9. The exemption under analysis is composed of an element of an objective nature and another of a subjective nature.

10. Encompassed within this exemption are service provisions of education and transfers of goods and provision of services connected with education, effected by establishments integrated into the National Education System or recognised as having analogous purposes, with the integration of the Claimant into the National Education System not being called into question in the present case by either party.

11. It is therefore important to analyse whether the transfers and services provided by the Claimant and not recognised as exempt by the Tax Administration – sale of school textbooks, sales of clothing (uniforms), the extension of hours, the surcharge after 7 p.m., and the Education, Health and Psychology Service can be considered service provisions of education or transfers of goods and provision of services connected with education for the purposes of no. 9, article 9 of the VAT Code.

12. Neither no. 9, article 9 of the VAT Code, nor subparagraph i), no. 1, article 132 of the VAT Directive provides the definition of the concept of service provisions "closely connected" with education.

13. Service provisions and transfers of goods can only be considered "closely connected" with education when they are related to education and are effectively provided as ancillary provisions of education, which constitutes the main provision (Judgment of the Court of Justice, of 14 June 2007, case 0434/05).

14. It follows, further, from the case law of the Court of Justice that a provision should be considered ancillary in relation to a main provision when it does not constitute for the clientele an end in itself, but a means to benefit, in the best conditions, from the main service of the provider.

15. On the other hand, it has been affirmed that operations connected with the main activity can only benefit from the exemption if they are indispensable to the realisation of those exempt operations.

16. To be "qualified as indispensable, the ancillary operations must be of such a nature and characteristics that, without resorting to those operations, it would not be possible to ensure that the main service from which the client benefits had an equivalent value, that is to say, for example, that it offered the same quality". (cf. LAIRES, Rui - The Notion of "Closely Connected Operations" – Journal of the Order of Accountants, no. 132, MAR. 2011, p. 56 and 57).

17. Finally, service provisions and transfers of goods do not benefit from the exemption if they are intended, essentially, to obtain supplementary income for the body through the realisation of operations effected in direct competition with commercial enterprises subject to VAT.

18. This exclusion is understood as a specific expression of the principle of tax neutrality, which prevents, namely, that similar service provisions, which are therefore in competition with each other, be treated differently from the VAT perspective.

19. Having established the framework of the exemption under analysis, it is important to verify whether the operations underlying the corrections promoted by the tax administration are encompassed within the provision of no. 9, article 9 of the VAT Code.

20. The sale of school textbooks, according to the Inspection Report "is an operation subject to VAT and not exempt therefrom, implying the respective assessment of tax. Such transfers, given the nature of the goods, are taxed at the reduced rate provided for in subparagraph a) of no. 1 of article 18 of the VAT Code, by classification under item 2.1 of list I, annexed to the VAT Code (cf. page 11/21 of the Inspection Report attached to the administrative file).

21. As stated, operations connected with the main activity benefit from the exemption when they do not constitute for the clientele an end in itself, but a means to benefit, in the best conditions, from the main service of the provider, and in the case at hand, considered as operations connected with education are operations related to this that are effectively provided as ancillary provisions of education, which constitutes the main provision.

22. Not only is the use of textbooks typical of education, but school textbooks, as manuals specifically developed in accordance with the programmes or curricular guidelines and with the curricular goals in force, are true pedagogical instruments.

23. Moreover, the relevant specific legislation qualifies the school manual as a "relevant didactic-pedagogical resource", of the teaching and learning process, supporting the student's autonomous work which aims to contribute to the development of competencies and learning defined in the national curriculum (cf. subparagraph b) of article 3 of Law no. 47/2006, of 28 August).

24. It being further established that school textbooks include information corresponding to the core contents of the programmes in force, proposals for didactic activities and assessment of learning, and may also include guidance for the teacher's work (cf. subparagraph b) of article 3 of Law no. 47/2006, of 28 August).

25. School textbooks thus form part of the set of materials devoted to the adequate pursuit of the main activity – education – whereby it is concluded that they are encompassed within the concept of "transfers of goods and provision of services" connected with education, for the purposes and effects of no. 9, article 9 of the VAT Code.

26. It should be noted in this respect that, in the same Report in which the Tax Inspection Services conclude that the sale of school textbooks carried out by the Claimant is an operation subject to VAT and not exempt therefrom, it is stated that the provision of teaching material effected by educational establishments to their students is a transfer of goods or provision of services connected with education, by virtue of its character of complementarity in relation to the education activity.

27. Indeed, in the Inspection Report it is clarified that the following is covered by the exemption provided for in no. 9, article 9 of the VAT Code the "operations that, in common terms, have a character of complementarity in relation to the education activity proper, such as, the provision of accommodation, meals and teaching material, effected by those establishments, to their students". (cf. page 10/21 of the Inspection Report attached to the administrative file).

28. The position of the Inspection Services transcribed above reflects the understanding already disclosed by the Tax Administration in Information no.…, of 2013-09-16, in case no. 2013…, VAT Service Directorate, referred to in the Report itself, and, subsequently in the Ruling handed down on 19 October 2015, of the VAT Service Directorate, in Case … (both in Inforfisco).

29. However, no justification is advanced in the Inspection Report for the conclusion that the provision of school textbooks by the Claimant to its students is an operation subject to VAT and not exempt therefrom and, for the understanding implicit in that conclusion, that books and school manuals are not considered teaching materials.

30. In its response, the Respondent Entity contends that the transfer of school textbooks cannot be considered connected with the provision of education services, as it is not inherent to the performance of those operations but merely auxiliary, also considering that including the sale of school textbooks within the scope of exemption would create serious breaches and distortions of competition against other economic operators that effect these same transfers of goods.

31. By what has been expounded as regards the nature of school manuals and their use, it is demonstrated that these form part of the set of materials devoted to education, it not being possible without them to ensure an equivalent value, whereby they are encompassed within the concept of "transfers of goods and provision of services" connected with education, for the purposes and effects of no. 9, article 9 of the VAT Code, a conclusion which is not refuted by the allegation of the Respondent Entity that books are merely auxiliary, as they remain resources used in the main provision, without which the same would not be provided with the same quality.

32. The Respondent Entity further contends, however, and as already stated, that including the sale of school textbooks within the scope of exemption would create serious breaches and distortions of competition against other economic operators that effect these same transfers of goods.

33. Note that, the non-recognition of the exemption by virtue of the alleged creation of serious breaches and distortions of competition against other economic operators that effect these same transfers of goods is not advanced in the Inspection Report, which underlies the corrections.

34. Notwithstanding, having concluded that operations connected with education are in question, for the operations under examination to be excluded from the benefit of the exemption, it was necessary that the concrete reasons were identified as to why it is understood that "serious breaches and distortions of competition" are created, in the words of the Respondent Entity, namely through the demonstration that they "were intended essentially, to provide the Claimant supplementary income through the realisation of operations effected in direct competition with commercial enterprises subject to VAT", which did not occur.

35. In light of the foregoing, the request for annulment of the contested acts is judged well-founded with respect to the corrections which have as their basis operations of sale of textbooks.

36. The sale of clothing (uniforms) translates into "operations of sales of goods, specifically uniforms/individual clothing items, bearing the logo adopted by the educational institution", the use of which is mandatory and whose sale is made at the College itself (cf. page 11/21 of the Inspection Report attached to the administrative file).

37. For the Claimant, the sale of uniforms should benefit from VAT exemption as it is an operation connected in that the use of uniforms is integrated into the philosophy of the education system adopted by it.

38. The Claimant does not, however, clarify in what manner the use of uniforms is integrated into its education philosophy.

39. As already stated, an operation connected with the main activity can only benefit from the exemption if it does not constitute for the clientele an end in itself, but a means to benefit in better conditions from the main service and is indispensable to the realisation of the exempt operation, in such a way that without resorting to that operation it would not be possible to derive identical benefit from the main provision.

40. Although it is admitted that the use of uniforms does not constitute an end in itself, it is not evident that the use of uniforms is indispensable to education, or that it ensures that the same is provided with greater quality.

41. The reasons that led the Claimant to require the use of uniform are not known. It is admitted that the use of uniform by students may contribute to a greater sense of belonging to a specific school community but it is not evident that it is not possible to ensure education of equivalent value, without resorting to the use of uniforms. Indeed, many establishments offer excellent quality education without requiring the use of uniform, which appears to us revealing of the non-indispensability.

42. The use of uniforms does not thus appear essential to the realisation of the main provision. In this way, the non-recognition of the exemption does not call into question the purpose of the provision to ensure that the benefits of education do not become inaccessible by reason of the increases in costs of education itself or of service provisions closely connected thereto.

43. For which reason it is concluded that the sale of school uniforms is an operation which does not fall within the exemption provided for in no. 9, article 9 of the VAT Code.

44. In light of the foregoing, the request for annulment of the contested acts is judged unfounded with respect to the corrections which have as their basis operations of sale of uniforms.

45. The assessment acts whose legality is contested further have as their basis two other service provisions, namely, the extension of hours and the penalty for the possibility of staying after 7 p.m.

46. The Extension of Hours "aims to accommodate students, one or two hours beyond school hours, thus allowing parents management of the time of the student's stay in the College facilities according to their needs" and the Surcharge after 7 p.m. corresponds to a "penalty for the stay of students in the College facilities beyond 7 p.m." (cf. pages 11 and 12/21 of the Inspection Report attached to the administrative file).

47. The extension of hours facilitates access to education in that for professional and family organisation reasons the extended school hours is today a determining factor in the choice of educational establishment, and broadens the range of establishments to which those with responsibility for education can resort.

48. If the provision of accommodation by educational establishments is considered by the provision itself as an activity connected with education, with greater reason the possibility of stay at school of students for the period necessary so that those responsible for education can combine the school hours with the management of family life, generally determined by the professional obligations of the latter, should also be considered as falling within the provision of the provision.

49. Accordingly, it is concluded that this activity facilitates access to the main provision and allows its realisation with greater quality.

50. The argument of the Respondent Entity does not, for its part, hold that this activity, to benefit from VAT exemption, there is a violation of the principle of tax neutrality, as it is not demonstrated that it is intended, essentially, to obtain supplementary income for the body through the realisation of operations effected in direct competition with commercial enterprises subject to VAT.

51. For the reasons expounded it is concluded that the extension of hours is an operation which falls within the exemption provided for in no. 9, article 9 of the VAT Code.

52. It is accordingly judged that the request for arbitral pronouncement is well-founded with respect to the corrections related to the Extension of Hours.

53. The penalty for staying after 7 p.m., in so far as it is configured by the Claimant itself as a penalty, and as such, as a mere mechanism to discourage students from staying at school beyond a certain hour, does not aim to ensure extended hours but merely to discourage the use of the establishment at a certain time, an objective which is in no way related to the realisation of the main activity of education with better quality or which would allow benefit from that provision in better conditions.

54. Accordingly, the penalty under analysis is not an operation which falls within the exemption provided for in no. 9, article 9 of the VAT Code, the request for arbitral pronouncement being accordingly judged unfounded with respect to the corrections related to the Penalty for Staying after 7 p.m.

55. Underlying the assessment acts whose legality is contested is, further, the Education, Health and Psychology Service.

56. It is therefore important to assess whether the Education, Health and Psychology Service can be considered a service provision "closely connected" with education, for the purposes and effects of no. 9, article 9 of the VAT Code.

57. As already stated, for a provision to be considered ancillary in relation to a main provision, it should not constitute for the clientele an end in itself, but a means to benefit, in better conditions, from the main service of the provider.

58. To make this assessment it is important to know the concrete characteristics of the service provision in question.

59. As for the concrete characteristics of the Education, Health and Psychology Service, only the information results from the file that "it corresponds to personalised monitoring of deficiencies detected either at the level of learning, health and behaviour" (cf. page 12/21 of the Inspection Report attached to the administrative file).

60. However, from the elements attached to the file it is not possible to perceive which professionals participate in this service, the concrete situations in which the service is provided are not identified, nor in what concrete acts the same is implemented.

61. Article 74 of the General Tax Law provides that "The burden of proof of the facts that constitute the rights of the tax administration or taxpayers falls on whoever invokes them."

62. The rule of no. 1, article 342 of the Civil Code is transposed into the tax process, according to which "It is incumbent on him who invokes a right to prove the facts that constitute the right claimed."

63. Being in question in the case at hand a right of the taxpayer to a tax exemption, the burden of proof of the requirements of the right which it seeks to exercise shall rest with it.

64. It falls to he who seeks and has grounds to exercise his right to non-taxation, to the avoidance of the normal incidence of VAT, the burden of proving, validly and relevantly, that the activity which he pursues falls within the requirements of the exemption.

65. Thus, the burden of proof of the fulfilment of those requirements fell on the Claimant which in the case at hand entailed, at a minimum, a clarification as to the concrete nature of the activity, by whom it was carried out and in what situations it was carried out, a burden which cannot be considered to be met with a mere description of the activity with vague and generic terms.

66. Since elements which allow identification of the nature/characteristics of the operation and, consequently, which allow the conclusion that one is before a service provision connected with education do not result from the file, it is important to conclude by the maintenance of the corrections determined by the Tax Administration, the Claimant's request being unfounded as to this matter.

67. The second question which it is necessary to consider concerns the assessment of the request for compensation for guarantee improperly provided.

68. Having been proven in the file that the Claimant provided the bank guarantee no.…, to suspend the tax enforcement proceeding no. …2015…, instituted for compulsory collection - of the additional assessment acts of Value Added Tax nos.…, … and…, and of the compensatory interest assessment acts nos.…, …, and … - the right to compensation for guarantee improperly provided is recognised, in the proportion of the amount annulled, to be determined as a function of the costs effectively borne with its provision until the date of its release, in accordance with the provisions of article 53 of the General Tax Law and 171 of the Code of Tax Procedure and Process, by virtue of the annulled corrections being due to error attributable to the Services.

VI. DECISION

In light of the foregoing, it is determined:

i) The dismissal of the Claimant's request with respect to the corrections related to the Sale of Uniforms, with the Penalty for Staying after 7 p.m. and with the Education, Health and Psychology Service, the contested acts being maintained with respect to these corrections;

ii) The allowance of the Claimant's request with respect to the corrections related to School Textbooks and with the Extension of Hours, with the consequent annulment of the contested acts with respect to these corrections;

iii) The recognition of the right to compensation for guarantee improperly provided in the proportion of the amounts annulled, with respect to the acts, in relation to which the tax enforcement proceeding no. …2015… was instituted.

The value of the case is set at € 56,387.43 (fifty-six thousand three hundred and eighty-seven euros and forty-three cents), pursuant to article 97-A of the Code of Tax Procedure and Process, applicable by virtue of the provisions of subparagraphs a) and b), no. 1, article 29 of the LFAT, and no. 2, article 3, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs, in the amount of € 2,142.00 (two thousand one hundred and forty-two euros), pursuant to Table I of the RCPAT, 70% charged to the Claimant and 30% charged to the Respondent Entity, given that the present request was judged partially well-founded, and in fulfilment of the provisions of no. 2, article 12, and no. 4, article 22, both of the LFAT, and of the provision of no. 4, article 4, of the cited Regulation.

Notify.

Lisbon, 30 March 2016

[Text prepared by computer, pursuant to article 131, no. 5 of the Code of Civil Procedure (CCP), applicable by reference from article 29, no. 1, subparagraph e) of the LFAT, with blank lines and revised by the undersigned].

The Arbitrator

(Ana Moutinho Nascimento)