Summary
Full Decision
ARBITRAL DECISION
I - Report
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On 29-06-2016, the company "A..., SROC", with TIN..., filed a petition for the establishment of a single arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as RJAT), with a view to declaring the illegality of the acts of additional VAT assessments and compensatory interest Nos. ... to No. ..., relating to the periods from January to September 2011 and No. 2015..., relating to the period of December 2011.
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Pursuant to Article 6, paragraph 1 of RJAT, the Ethics Council of the Centre for Arbitration appointed the undersigned arbitrator, notifying the parties.
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The Tribunal is duly constituted to examine and decide the subject matter of the proceedings.
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The allegations supporting the Claimant's petition for arbitral pronouncement are, in summary, as follows:
4.1 The acts of assessment now contested were preceded by an external tax inspection conducted by the Tax Inspection Services of the Directorate of Finance of ..., which resulted in various corrections to the taxable base of the Appellant, for purposes of both Corporate Income Tax and VAT.
4.2 The Appellant exercised its right to a hearing, which led the Tax Authority to amend the draft inspection report, having accepted some of the arguments presented by the taxpayer, and corrected various aspects pointed out by it.
4.3 However, part of the corrections contested by the taxpayer was maintained by the Tax Authority, having led, in particular, to the assessment of VAT in the total amount of € 14,106.34, to which the Appellant reacted by submitting a gracious appeal on 28.10.2015, which was to be wholly dismissed by a ruling dated 29.03.2016, notified to the Appellant on 31.03.2016.
4.4 With regard to the deduction of tax on documents which, according to the tax inspection services (SIT), were not issued in legal form, these state that "Among the various invoices issued by B..., there are five invoices containing only the following description 'Provision of Services'."
4.5 In its right to a hearing, the Appellant presented the service provision contract concluded in 2005, which supports the aforesaid invoicing, and which included, among other things, the provision of technical labour for audit work carried out by the Appellant, accounting services of the Appellant itself, as well as the use of a training room, charging a single monthly fee.
4.6 In the year 2011 the Appellant had four employees on its staff, which is manifestly insufficient for a level of service provision of approximately 1.5 million euros, even considering service providers and the partners.
4.7 For this reason, the Appellant resorted to subcontracting services from B..., as well as from other companies, namely C... and another company called D..., as a way of having qualified human resources for the provision of its services.
4.8 This situation was to change in 2012, with the admission by A... of employees from the aforementioned companies B... and D..., thus ceasing the provision of services between the companies.
4.9 Furthermore, B..., in the year 2011, sold two vehicles to A..., having subsequently charged expenses related to those vehicles, as well as allocated part of the purchase of an antivirus system and portable computers acquired jointly in order to take advantage of quantity discounts.
4.10 These movements are not to be confused with the aforementioned ones, nor are they included in the text of the contract.
4.11 Given the above, one cannot dissociate the service provision contract from the invoices issued, since its scope and characteristics are defined therein.
4.12 Indeed, this is easily verifiable, as on 30/06/2011 invoice .../A was issued with the description "Additional costs incurred in the first half according to service provision contract".
4.13 Thus, for this reason as well, the SIT cannot claim to have been unaware of the existence or reference to the contract.
4.14 The services that B... provides, within the scope of its corporate purpose, are taxed always at the standard VAT rate, regardless of the question of what the correct rate to be applied is.
4.15 On the other hand, the Appellant also finds strange the duality of criteria that the SIT used in this matter, as in the two financial years included in the inspection procedure B... issued under the said service provision contract 13 invoices in 2011, totalling € 158,000, to which VAT was added, with 12 of them containing the same description.
4.16 D... issued two invoices in the amount of € 55,000 plus VAT, each in each one of the financial years with the description "miscellaneous fees".
4.17 C... issued 13 invoices in 2011 totalling € 7,786.34 plus VAT and 11 invoices in 2012 totalling € 5,253.31 plus VAT, 12 of them with the description "Service provision", having corrected the VAT deducted from invoices issued by B... in the period from January to May 2011 and the invoice issued by C... in the month of February 2011.
4.18 For these reasons, it is important to conclude that the Tax Authority had no right to refuse the deduction of the VAT in question, having proceeded incorrectly in denying this right and in additionally assessing the corresponding tax.
4.19 Whereby the Tax Authority, in making these corrections and, subsequently, drawing up the assessments contested, violated the provisions of Articles 36 and 19/2/a) of the VAT Code — which constitutes grounds for judicial challenge of the assessment acts identified above, for incorrect qualification and quantification of tax facts [Article 99/a) of the Code of Tax Procedure].
4.21 In order to suspend the execution of the tax debt, the Appellant provided a bank guarantee on 19.10.2015 in the amount of € 17,567.95.
4.22 Furthermore, the assessment relating to the period 2011.12 was paid on 2015.08.27, within the voluntary payment period.
4.23 Being so, if this petition for declaration of illegality is upheld, the Appellant will have the right to the refund of the amount unduly paid, plus compensatory interest at the legal rate (Articles 43/4 and 35/10 of the General Tax Law), calculated from the date of payment of said amount by the Appellant to the date of issuance of the respective credit note (Article 61/5 of the Code of Tax Procedure).
- In turn, the Respondent Tax Authority and Customs presented its defence, in which it defended itself in the following terms:
5.1 The Claimant has its registered office at Street ..., No. ..., ..., ... and has as its corporate purpose the practice of Accounting Activities and Audit, Tax Consultancy, which began on 07.01.1991, being classified, as a professional society and in light of Article 6 of the Corporate Income Tax Code, under the Transparent Tax Regime, and, regarding VAT, under the Normal Monthly Periodicity Regime.
5.2 Pursuant to Service Order OI2014... and taking into account the inspection actions already carried out against the respective managing partners, the Claimant underwent, on 10.11.2014, an external inspection action aimed at assessing compliance with its tax obligations.
5.3 With Dr. E... being responsible for accounting, it was found that it was divided into four cost centres, associated with each one of the partners – Dr. F... Cost Centre, Dr. G... Cost Centre, Dr. E... Cost Centre and Head Office Dr. H... Cost Centre.
5.4 In accordance with what was observed by the SIT, the Claimant recorded in its accounting VAT unduly deducted on partner expenses, on other office supplies expenses, on goods and services not related to the taxpayer's activity and deducted on documents not issued in legal form.
5.5 The Claimant exercised its right to a hearing and the SIT acknowledged some of the justifications presented by it.
5.6 However, with respect to VAT unduly deducted on documents not issued in legal form, no amendment was made, therefore the correction in the amount of € 11,638.00 was maintained.
5.7 Against the assessments in dispute, arising from the corrections identified in the preceding paragraph, the Claimant filed the gracious appeal procedure, whose decision of express dismissal sanctioned by a ruling of 29.03.2016, of which it was notified on 31.03.2016, is at the origin of the challenge formulated in these proceedings.
5.8 The non-acceptance of said invoices is based on the fact that they do not comply with all the requirements mentioned in current Article 36, No. 5, paragraphs a) and b) of the VAT Code, in that they do not specify or quantify the services provided to it.
5.9 Effectively, Article 19, No. 2, a) and No. 6, of the VAT Code only permits the deduction of tax on invoices issued in legal form, that is, with the requirements of Articles 36 to 40 of the same Code, wherefore, under Article 20, No. 1, a) of the VAT Code, the tax could not have been deducted.
5.10 In truth, for the right to VAT deduction contained in the value of upstream operations to be realized, it must be verified whether the requirements of the documents evidencing those same operations are valid and sufficient.
5.11 In the case under examination we have a set of invoices issued by companies B..., Lda., and by C..., Lda.
5.12 Thus, if we take into account that all the invoices mentioned issued by those companies, it is found that they do not contain the express description of the services actually provided.
5.13 In truth, the designation of the invoices "Provision of Services" reflects a generic description that does not enable the identification of what type of service is being provided therein.
5.14 For this reason, the description of said invoice does not allow determination of the type of service being provided, due to the broad scope of this concept.
5.15 As such, they do not permit the precise individualization that would enable correct deduction of the tax associated therewith.
5.16 In its right to a hearing, the Claimant comes to challenge the correction made to invoices issued by company B..., Lda., stating that the inspection services did not seek to know whether there was any contract supporting the service provisions to which said invoices refer.
5.17 This, however, was rebutted by the Inspection Services, which when they confronted the Claimant, through its representative in the inspection action (the partner – Dr. I...) on the question of the invoices issued by that company only referring to "Provision of Services", not specifying the services provided, and therefore contrary to Article 19/2 and 36/5 of the VAT Code, were not informed of the existence of any Service Provision Contract with that company.
5.18 As the Inspection Services state, if that contract existed, it should have been mentioned, so that the doubts raised about the invoices in question would be clarified if, after analysis, it were proved that the connection between invoices and the corresponding contract was demonstrated.
5.19 However, such connection must be unequivocal and translate, without doubt, that those invoices are covered by that specific contract, as a company may enter into several contracts, with identical and/or similar purposes, and from this generate some (legitimate) doubt about the services invoiced and the contracts on which they are based.
5.20 And, having the Claimant attached this contract in its right to a hearing, it was analyzed according to Article 60 of the Code of Tax Inspection Procedure.
5.21 However, some doubts remained: which service provisions are bound by the contract, for what reason do some invoices contain as an annex sheets with the breakdown of the services charged (for example: mobile communications with respective dates, staff allocation, ...), while others only designate provision of services. What is the reason that only one invoice mentions a service provision contract?
5.22 Now, as can be seen, the invoices are not drafted in legal form and the document to which they refer, in addition to not representing a document equivalent to the invoice as required by Article 36 of the VAT Code, when presented within the scope of the inspection procedure, raised doubts about whether they were covered by that contract.
5.23 Furthermore, such contract should have been included in the company's records, all the more so if that were the case, as accounting in fact requires, the Inspection would have known of its existence and would have requested it from the Claimant.
5.24 Thus, taking into account that the Claimant made the deduction of VAT associated with said invoices, for the exercise of this right to be legitimate and legal, all of them must be issued fulfilling all requirements set out in No. 5 of Article 36 of the VAT Code, which did not happen.
5.25 The requirement for such documents and formalities has the purpose of enabling the administration to control the tax situation and not merely to obtain secure proof of the facts to be controlled, hence those formalities being substantial.
5.26 They do not therefore meet the legal requirements for them to be considered invoices or equivalent documents when the requirements of quantification and specification of services provided are not met.
5.27 It is not the fact that the Claimant subsequently, in exercising its right to a hearing in the course of the inspection procedure, came to present documents with the intention of supplementing the contents of those invoices, that allows the missing requirements to be considered as met.
5.28 In truth, as was highlighted in the Final Inspection Report, and in the decision of the gracious appeal, the essential requirements for deduction of the tax supported must be inherent in the invoices themselves, since these are the legal documents that evidence the tax credit materialized in the right to deduction and not in any appendices.
5.29 The Claimant states in paragraphs 23 to 25 of the petition that the inspection services had knowledge of the contract, through invoice No. .../A issued on 30/06/2011.
5.30 The inspection services allude to this invoice (which was not subject to correction), in the sense that those invoices which did not contain generic descriptions – such as the case of invoice No. .../A – and made reference to a contract, were not subject to corrections. However, the Inspection Services did not know that it was that specific contract.
5.31 The fact that formalities are ad substantiam and not merely ad probationem, does not permit them to be replaced by any other means of proof, as follows from Article 364 of the Civil Code.
5.32 Vague and generic references, such as "work performed" or "services provided", are insufficient in that there is no specification of which work or services were actually provided.
5.33 In this context, jurisprudence has been consistent in concluding that there cannot be VAT deduction if all requirements of Article 36, No. 5, of the VAT Code are not met, that is, if invoices are not issued according to "legal form", as required by Article 19, No. 2, of the VAT Code.
5.34 It should be said that even in situations of exemption, the specification of services is essential to compliance with the formalism required by current Article 36 of the VAT Code.
5.35 In the case under examination, the situation that the law configures as "error attributable to the services" is not verified, wherefore the prerequisites for application of Article 43 of the General Tax Law are not met.
5.36 Indeed, the law did not provide for objective liability, but rather liability linked to the fault of the services.
5.37 This fault (the "attributability to the services") – whether by intent or negligence – must be alleged and proved, and does not result automatically from any illegality.
5.38 That is, the duty to indemnify does not result immediately and automatically from the annulment of the act, being only due when it is determined that there was error attributable to the services.
5.39 In the case at hand, there is no existence of any error attributable to the services in the issuance of the assessment contested, wherefore the request for payment of compensatory interest is not warranted, being unfounded.
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On 16/10/2016, an arbitral ruling was issued, pursuant to Article 16, paragraph c) of RJAT, dispensing with the meeting provided for in Article 18 of the same statute, taking into account that the subject matter of the dispute is essentially a matter of law, no exceptions were raised, and the relevant documents are on file, nor was it considered necessary to present legal arguments, though it was admitted that the parties could request the holding of said meeting.
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The parties did not request that the meeting provided for in Article 18 of RJAT be held.
II - Established Facts
- With relevance to the decision of the case, the following facts are considered established:
8.1. The acts of assessment now contested were preceded by an external tax inspection conducted by the Tax Inspection Services of the Directorate of Finance of ..., which resulted in various corrections to the taxable base of the Appellant, for purposes of both Corporate Income Tax and VAT.
8.2. The Appellant exercised its right to a hearing, which led the Tax Authority to amend the draft inspection report, having accepted some of the arguments presented by the Claimant, and corrected various aspects pointed out by it.
8.3. Part of the corrections contested by the Claimant was maintained by the Tax Authority, having led, in particular, to the assessment of VAT in the total amount of € 14,106.34.
8.4. The Appellant reacted by submitting a gracious appeal on 28.10.2015, which was wholly dismissed by a ruling dated 29.03.2016, notified to the Appellant on 31.03.2016.
8.5. The corrections to the taxable base, set out in page 4 of the Inspection Action Report are as follows:
| Summary of Infraction | Periods | Amount |
|---|---|---|
| VAT unduly deducted on partner expenses | 2011.01 to 2011.12 | € 116.75 |
| VAT unduly deducted on other office supplies expenses | 2011.04 to 2011.07 | € 169.24 |
| VAT unduly deducted on goods and services not related to the taxpayer's activity | 2011.09 | € 74.75 |
| VAT unduly deducted on documents not issued in legal form | 2011.01 to 2011.12 | € 11,638.00 |
Financial Year 2012
| Summary of Infraction | Periods | Amount |
|---|---|---|
| VAT unduly deducted on partner expenses | 2012.01 to 2012.12 | € 63.53 |
8.6. In exercising its right to a hearing, the Appellant presented the service provision contract concluded in 2005, which was attached to the gracious appeal as Annex 1, which supports the aforesaid invoicing, and which included, among other things, the provision of technical labour for audit work carried out by the Appellant, accounting services of the Appellant itself, as well as the use of a training room, charging a single monthly fee.
8.7. B... ensured a significant part of the human resources used by the Appellant in the services provided to its clients.
8.8. In the year 2011, the Appellant had four employees on its staff, which did not allow it to ensure on its own a level of service provision of approximately 1.5 million euros.
8.9. For this reason, the Appellant resorted to subcontracting services from B..., as well as from other companies, namely C... and another company called D..., as a way of having qualified human resources for the provision of its services.
8.10. This situation was to change in 2012, with the admission by A... of employees from the aforementioned companies B... and D..., thus ceasing the provision of services between the companies, with the number of employees thus increasing from 4 in 2011 to 19 in the 2012 financial year, while B... reduced its staff from 16 to 7 and D... from 8 to 5.
8.11. B..., in the year 2011, sold two vehicles to A..., having subsequently charged expenses related to those vehicles, as well as allocated part of the purchase of an antivirus system and portable computers acquired jointly in order to take advantage of quantity discounts.
8.12. On 30/06/2011, invoice .../A was issued with the description "Additional costs incurred in the first half according to service provision contract".
8.13. In the two financial years included in the inspection procedure, B... issued under the said service provision contract 13 invoices in 2011, totalling € 158,000, to which VAT was added, with 12 of them containing the same description.
8.14. D... issued two invoices in the amount of € 55,000 plus VAT, each in each one of the financial years with the description "miscellaneous fees".
8.15. C... issued 13 invoices in 2011 totalling € 7,786.34 plus VAT and 11 invoices in 2012 totalling € 5,253.31 plus VAT, 12 of them with the description "Service provision".
8.16. The VAT deducted from invoices issued by B... in the period from January to May 2011 and the invoice issued by C... in the month of February 2011 was corrected.
8.17. The Appellant has its registered office at Street ..., No. ..., ..., ... and has as its corporate purpose the practice of Accounting Activities and Audit, Tax Consultancy, which began on 07.01.1991, being classified, as a professional society and in light of Article 6 of the Corporate Income Tax Code, under the Transparent Tax Regime, and, regarding VAT, under the Normal Monthly Periodicity Regime.
8.18. Pursuant to Service Order OI2014... and taking into account the inspection actions already carried out against the respective managing partners, the Appellant underwent on 10.11.2014 an external inspection action aimed at assessing compliance with its tax obligations.
8.19. On the basis of the Certificate of the Commercial Registry and other elements obtained in the course of the inspection procedure, it was concluded that those responsible, in fact, for the company, in the financial years under analysis, were Mr. Dr. H... TIN ...; Mr. Dr. F... TIN ...; Mr. Dr. G... TIN ... and Mr. Dr. I... TIN....
8.20. With Dr. E... being responsible for accounting, it was found that it was divided into four cost centres, associated with each one of the partners – Dr. F... Cost Centre, Dr. G... Cost Centre, Dr. E... Cost Centre and Head Office Dr. H... Cost Centre.
8.21. The Tax Authority was not informed of the service provision contract, during the inspection action, when it confronted the Appellant through its representative (the partner – Dr. I...) on the question of invoices issued by that company only referring to "Provision of Services", without specifying the services provided.
III - Facts Not Established
- There are no facts not established with relevance to the decision of the case.
IV - Law
- The following matters are to be examined:
— Illegality of the acts of VAT assessment and compensatory interest
— Compensatory interest
We shall thus examine these two matters.
ILLEGALITY OF THE ACTS OF VAT ASSESSMENT AND COMPENSATORY INTEREST
- Article 36, No. 5 of the VAT Code states:
"5. Invoices must be dated, numbered sequentially and contain the following elements:
a) The names, business names or corporate designations and the address or domicile of the supplier of goods or service provider and the recipient or purchaser, as well as the corresponding tax identification numbers of the taxable persons;
b) The quantity and ordinary denomination of goods supplied or services provided, with specification of the elements necessary for determining the applicable rate; packaging not actually traded must be the subject of separate indication with express mention that its return was agreed;
c) The price, net of tax, and other elements included in the taxable amount;
d) The applicable rates and the amount of tax due;
e) The reason justifying the non-application of tax, if applicable;
f) The date on which the goods were placed at the disposal of the purchaser, on which the services were performed or on which payments prior to the performance of operations were made, if that date does not coincide with the date of issuance of the invoice.
In the event that the operation or operations to which the invoice relates comprise goods or services subject to different rates of tax, the elements mentioned in paragraphs b), c) and d) must be indicated separately, according to the applicable rate."
In turn, Article 19, No. 2, paragraph a) of the VAT Code prescribes the following:
"Only tax mentioned in the following documents confers the right to deduction, in the name and possession of the taxable person:
a) On invoices issued in legal form"
Finally, No. 6 of the same Article 19 of the VAT Code provides that:
"For purposes of exercising the right to deduction, invoices are considered issued in legal form those containing the elements provided for in Articles 36 or 40, as the case may be".
What occurs here is that, due to the existence of a service provision contract, in certain invoices the type of service actually provided is not mentioned.
Now, in addition to the Appellant providing varied types of services, in some of the invoices that it issued (and which are not at issue in these proceedings), the service is expressly mentioned or reference is made to the existence of the contract, as is the case of invoice .../A, with the description "Additional costs incurred in the first half according to service provision contract", with respect to which no correction was made.
However, various invoices were issued containing only the reference "provision of services", it being impossible to determine, without access to other documentation, which services are concerned.
As José Guilherme Xavier de Basto states: "In the VAT regime, as is known, each invoice mentioning tax constitutes a cheque on the Treasury, as it confers on the recipient who is a taxable person the right to deduct the VAT contained therein" (in Taxation of Consumption and its International Coordination, Cadernos de Ciência e Técnica Fiscal, No. 164, p. 140).
In this regard, the Judgment of the Central Administrative Court South of 28 May 2013 (Pedro Marchão Marques), Case No. 5786/12 states: "In view of the specific mechanism for assessing tax by the taxable person, set out in Articles 19 et seq. of the VAT Code, by express provision of its No. 2, only tax mentioned in invoices and equivalent documents issued in legal form confers the right to deduction..., which constitutes, for that taxable person, a genuine substantial requirement in order to be able to exercise the right to deduction on its productive inputs, as is established jurisprudence. Among those legal requirements for invoices are those contained in No. 5 of Article 35 of the same VAT Code, among which stands out the quantity and ordinary denomination of goods supplied or services provided – its paragraph b) -, what the matter contained in points 3 and 8 of the proven facts of the appealed sentence, manifestly shows, that such invoices do not contain, as can be gathered from pages 123 to 125 of the appendix, generically alluding to work performed hand labour, which would not permit, minimally, control of its performance and in this way prevent fraud and tax evasion".
The Judgment of the Supreme Administrative Court of 15 April 2009 (Pimenta do Vale), Case No. 0951/08 also states: "what the legislator intended was to prevent tax evasion and fraud, requiring various formalities for documents that attest the existence of tax facts: in transmissions of goods and provision of services, invoices must comply with all requirements of said Article 35. In the case at hand, the tax fact is the provision of services, wherefore the documents relevant for purposes of VAT assessment are said invoices. However, these documents, which allowed establishing a relationship with the acquiring company, do not possess the essential legal elements provided for that would permit preventing VAT assessment. In truth, and repeating what we stated above, the formalistic character of VAT is recognized, in order, namely, to prevent, as much as possible, tax evasion, wherefore the respective formalities are «ad substantiam», not merely «ad probationem»."
Objectively, it will not be possible to determine the type of services provided if there is only a generic reference to "provision of services", and if we are dealing with services arising from a contract, there is no reason why there should not be an express reference to the contract in question, as is the case with invoice .../A mentioned by the parties.
On the other hand, the existence of various services mentioned in the same contract leads to it being impossible for the Tax Authority, even knowing of the existence of a contract, to determine the type of service actually provided.
The ratio of the rule, as has been stated, is to prevent tax evasion, and accepting generic reference to "provision of services", if documents were presented subsequently to specify what the service in question is, would require a multiplication of inspection actions and possible paralysis of services, permitting tax evasion.
Also in this regard, the Judgment of the Central Administrative Court South of 15 October 2002 (José Gomes Correia), Case No. 06153/01 states: "The statute tells us, further, in the various paragraphs of No. 5 of Article 35, that invoices or equivalent documents must be dated, numbered sequentially and contain the names, business names or corporate designations and the address or domicile of the supplier of goods or service provider and the recipient or purchaser, as well as the corresponding tax identification numbers of the taxable persons; contain the quantity and ordinary denomination of goods supplied or services provided, with specification of the elements necessary for determining the applicable rate; contain the price, net of tax, and other elements included in the taxable amount; and contain the applicable rates and the amount of tax due. From this it results, therefore, that, for the VAT Code, an invoice issued in legal form is one that complies with what is provided for in Article 35 thereof, that is, for this purpose, an invoice that does not comply with all these requirements is not an invoice issued in legal form. In this context, nor can it be said that Article 35 permits distinguishing between lack of legal form and lack of merely accessory, non-essential elements, which could only lead to supplementation of the lack. For legal form, as has been seen, is that of Article 35 No. 5 of the VAT Code(…). Thus, an invoice or equivalent document that does not fully comply with Article 35 No. 5 of the VAT Code is not issued "in legal form" and, consequently, does not permit deduction of the respective tax. In the case at hand, in the invoices in question the formal requirements contained in paragraphs b) and c) of the cited No. 5 of Article 35 of the VAT Code are not shown to be met, for there are not discriminated either the services (nor their nature) that in fact were provided and to which those invoices refer, nor the unit or total quantities thereof. It should be noted further that we are not even dealing with a case to which the regime of Article 38 of the VAT Code applies, nor with a case in which the taxpayer could process global invoices, having previously informed the DGCI of the fact. It adds to this that, notwithstanding the appellant might wish to produce testimonial evidence about the discriminated work, such evidence would not be suitable and nor would evidence by documents internal that cannot replace the indications that the law imposes be discriminated in the invoice itself: for purposes of VAT only tax mentioned in invoices and equivalent documents issued in legal form confers the right to deduction and, as thus, by more appropriate that other methods might be, given that the legislator only conferred the right to deduction of tax mentioned in invoices and equivalent documents, these must necessarily be those processed by the sellers".
As is well stated by the Respondent, jurisprudence is consistent in the understanding that invoices must necessarily comply with the requirements provided for in Article 35 of the VAT Code, being a formality ad substantiam and not a formality ad probationem. In this sense see further more recently the Judgments of the Central Administrative Court South of 10 July 2014 (Pedro Marchão Marques) Case 07282/14 and 16 December 2015 (Catarina Almeida e Sousa), Case 07027/13.
Wherefore the VAT assessments and compensatory interest, carried out by the Tax Authority, in not accepting the VAT deduction made on invoices that do not comply with legal requirements are lawful, the request for declaration of illegality thereof being not warranted.
RIGHT TO COMPENSATORY INTEREST
- Article 43/1 of the General Tax Law provides that "compensatory interest is due when it is determined, in gracious appeal or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount superior to that legally due."
However, in the case at hand, there is no error on the part of the services, attributable or otherwise.
For the Tribunal considers that the position of the Tax Authority is correct and does not suffer from any defect or illegality.
Wherefore there is no right to compensatory interest.
V – Decision
On the basis of the grounds stated, the Tribunal decides to dismiss the Claimant's petition for declaration of illegality of the acts of additional VAT assessment and compensatory interest Nos. ... to No. ..., relating to the periods from January to September 2011 and No. 2015..., relating to the period of December 2011.
The request for condemnation to compensatory interest is likewise dismissed.
The following amount is fixed for the proceedings: € 13,907.87 (amount indicated and not contested), and the corresponding arbitration fee amount of € 918.00 according to Table I of the Regulation of Costs of Tax Arbitration Proceedings.
The costs are borne by the requesting entity.
Lisbon, 23 December 2016
The Arbitrator
(Luís Menezes Leitão)
Frequently Asked Questions
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