Process: 36/2015-T

Date: November 25, 2015

Tax Type: IVA

Source: Original CAAD Decision

Summary

This VAT arbitration case (Process 36/2015-T) concerns the exemption status of psychology services under Article 9(1) of the Portuguese VAT Code (CIVA). The claimant, a registered psychologist with the Ordem dos Psicólogos Portugueses, challenged three VAT assessments totaling approximately €8,000 issued by the Tax Authority for services provided in 2011-2012. The psychologist had provided clinical consultation services to an institute participating in a European Commission-funded project aimed at reducing alcohol consumption among at-risk youth. The core dispute centered on whether the services constituted exempt clinical psychology services or non-exempt research activities. The claimant argued that she performed psychological evaluation and intervention using established clinical methodologies (motivational interviewing and self-reflection techniques) on approximately 40 young people aged 12-21 at various healthcare and educational facilities. The Tax Authority contended that the services involved 'case studies' for manual preparation, exceeding the scope of Article 9(1) exemption. The claimant emphasized that no manual was prepared and that the activity consisted solely of clinical practice aimed at mitigating alcohol dependence. A procedural issue was raised regarding one assessment (€41.40) having different grounds, potentially falling outside the tribunal's jurisdiction. The case involved interpretation of Portuguese VAT exemptions in light of EU VAT Directive requirements, with the claimant citing CJEU jurisprudence and requesting, subsidiarily, a preliminary reference to the CJEU if necessary. The arbitral tribunal, constituted under the RJAT (Legal Regime for Tax Arbitration), heard witness testimony and party statements before the parties submitted written arguments defending their respective positions on whether clinical psychology services provided within a research project framework qualify for VAT exemption.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A…, (hereinafter referred to as the Claimant) taxpayer no. …, resident at …, presented on 21-01-2015, pursuant to the provisions of paragraph a) of no. 1 of Article 2 and Article 10, no. 1, paragraph a) of Decree-Law no. 10/2011, of 20 January, hereinafter referred to as RJAT (Legal Regime for Tax Arbitration), a petition for constitution of an Arbitral Tribunal, in which the Tax and Customs Authority (hereinafter designated as AT or Respondent) is named, with a view to pronouncing on the illegality of the acts of assessment of value added tax (VAT) nos. 2014 …, relating to period 201112T, in the amount of €4,780.86, no. 2014 …, concerning period 201203T, in the amount of €41.40, and no. 2014 …, relating to period 201206T, in the amount of €3,135.50.

  2. The petition for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 23-01-2015 and was immediately notified to the Respondent in accordance with legal provisions.

  3. Pursuant to the provisions of paragraph a) of no. 2 of Article 6 of the RJAT, by decision of His Excellency the President of the Deontological Council, duly communicated to the parties within the prescribed periods, José Coutinho Pires was appointed as arbitrator, who communicated to the Deontological Council and to the Administrative Arbitration Centre his acceptance of the engagement within the period stipulated in Article 4 of the Deontological Code of the Administrative Arbitration Centre.

  4. The Sole Arbitral Tribunal was constituted on 31-03-2015, in accordance with the prescription of paragraph c) of no. 1 of Article 11 of the RJAT.

  5. On 01-09-2015, the hearing referred to in Article 18 of the RJAT was held, at which witnesses B… and C…, called by the Claimant, were heard and party statements were also made, the Claimant having waived the hearing of witnesses D… and E…,

  6. By petition of 2015-09-07 the Claimant waived the hearing of witness F…

  7. By order of 2015-09-08 the parties were invited to submit written arguments,

  8. These being filed by the Claimant and Respondent, respectively on 2015-09-18 and 2015-10-01, where they fundamentally reiterate and defend the positions they had already evident in their pleadings, with the Respondent further emphasizing that the assessment of assessment no. 2014 … is beyond the jurisdiction of this tribunal.

  9. To support its petition, the Claimant alleged, in summary and with relevance:

i. the claimant exercises the professional activity of psychologist, being registered with the Order of Portuguese Psychologists (cf. article 2 of the petition for arbitral pronouncement);

ii. (…) in the years 2011 and 2012 she provided clinical consultation to G… (Institute …) (cf. article 3 of the petition for arbitral pronouncement);

iii. between 2010 and 2013 G… developed in Portugal a project designated …, co-financed by the European Commission, coordinated by … (LWL) and monitored by the University of ... (cf. article 8 of the petition for arbitral pronouncement);

iv. the project … aimed at the creation and development of coordinated strategies among the various European countries participating in order to obtain an effective reduction in alcohol consumption in at-risk youth populations (cf. article 9 of the petition for arbitral pronouncement);

v. G… hired the claimant's services so that she would collaborate in some activities of the project … (cf. article 12 of the petition for arbitral pronouncement);

vi. some phases of the project aimed at exclusive acts of Psychology, such as evaluation and psychological intervention (cf. article 13 of the petition for arbitral pronouncement):

vii. the claimant's activity focused precisely on the professional provision of psychological evaluation and intervention and occupational therapy of the at-risk population identified by G… (cf. article 14 of the petition for arbitral pronouncement);

viii. the evaluation and psychological intervention took place at the Health Centre of …, at the Higher School of Nursing of … and at the …Estate, falling upon a population of approximately 40 young people, between the ages of 12 and 21 (cf. article 15 of the petition for arbitral pronouncement);

ix. the claimant used clinical methodologies widely used in Psychology for the reduction of addictive behaviours, such as motivational interviewing techniques and self-reflection (group dynamics) (cf. article 16 of the petition for arbitral pronouncement);

x. the tax administration understood (….) that the services provided by the claimant to G… constitute "case studies… with a view to the preparation of a manual" which would therefore exceed the scope of the exemption of no. 1 of Article 9 (cf. article 20 of the petition for arbitral pronouncement);

xi. (…) the claimant did not prepare any manual nor conducted any "case studies" with a view to producing a manual (cf. article 21 of the petition for arbitral pronouncement);

xii. the claimant's activity consisted in mitigating or reducing alcohol dependence in a group of young people, through a process of evaluation and intervention associated with a scientifically informed, rigorous and responsible exercise of Psychology (cf. article 23 of the petition for arbitral pronouncement);

xiii. the claimant's contribution was exhausted in the exercise of clinical activity as a Psychologist, an activity whose importance the LWL manual, like the Report of ... recognized (cf. article 32 of the petition for arbitral pronouncement);

xiv. the Claimant, in defence of its position, cites various rulings of the Court of Justice of the European Union (CJEU), also invoking domestic legislation, related to the central subject matter of the present case;

xv. concluding as extracted from its petition that "the acts of additional VAT assessment and the corresponding compensatory interest shall be declared illegal and annulled, with all legal consequences – namely the condemnation of the Public Treasury to restitute to the claimant the amount of tax paid plus interest, at the legal rate, accrued since the date of payment of the undue amount, to which shall be added any accruing until full restitution",

xvi. on a subsidiary basis, it considers the possibility, if that be the case, that the Arbitral Tribunal make a preliminary reference to the Court of Justice of the European Union regarding the question it raises within the framework of VAT exemptions provided in no. 1 of Article 9 of the VAT Code and its compatibility with the VAT Directive.

  1. The AT, duly notified for this purpose, presented its response in a timely manner, sustaining, in brief summary, a position contrary to that presented by the Claimant, in line with the position it had already assumed in the Tax Inspection Report, raising a preliminary issue (which it elaborates in its written arguments) which can be reduced to the following:

i. that the assessments to which the Claimant refers have different grounds, namely assessment no. 2014 …, concerning period 201203T, in the amount of €41.40, and which does not share the ground that was at the origin of the other two assessments,

ii. for which reason the arbitral tribunal cannot have jurisdiction over it;

The Respondent submits, summarily and with relevance for the central question of the present case, the following:

iii. that the Claimant is registered in the AT registry for the exercise of the main activity of "Psychologists" and the secondary activity of "Trainers", falling within IRS, under the simplified tax regime (cf. tax inspection report (TIR) and article 9 of the response);

iii. in the course of 2011, the Claimant issued only one receipt dated 30-12-2011, in the amount of €20,786.34, exempt from VAT under Article 9 of the VAT Code, for the provision of services to G…, the description of which consists of "Work of Research in Clinical Psychology" (cf. Administrative File attached, TIR and article 16 of the response);

iv. in 2012 (15-4-2012) she issued in favour of G… receipt of €13,632.63, with the description "Work in Clinical Psychology", equally exempt from VAT, under Article 9 of the VAT Code (cf. TIR and article 17 of the opposition);

v. with respect to the activity as a Psychologist, namely the services provided to G…, the TIR states on page 6, that it was a research project, aimed at the preparation of a manual on a methodology for alternative treatment for young people with abusive alcohol consumption, this activity not consisting of the practice of clinical acts (cf. TIR and article 21 of the opposition);

vi. it reaffirms in line with the conclusions of the inspection report that the services provided by the Claimant (to G…) "exceed the objective scope of the application of the exemption provided in no. 1 of Article 9 of the VAT Code, which must be subject to strict interpretation, in so far as those did not consist of any activity of diagnosis, treatment of diseases or any anomaly of health" (cf. article 49 of the response);

vii. concluding by AT for the dismissal of the petition for arbitral pronouncement with the due and legal consequences.

  1. In the arguments presented, the parties fundamentally reiterate and defend the positions they had already evident in their pleadings.

  2. The Arbitral Tribunal is materially competent and is regularly constituted, in accordance with Articles 2 no. 1, paragraph a), 5 and 6 no. 1 of the RJAT.

  3. The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with Articles 4 and 10 of the RJAT and Article 1 of Order no. 112-A/2011, of 22 March.

  4. The case does not suffer from nullities, the Respondent having, in its pleading of response, invoked an exception, which it elaborates in its written arguments, regarding assessment no. 2014 …, which shall be the subject of examination below.

II. GROUNDS

A. MATTERS OF FACT

A.1. Facts found to be proven

  1. The Claimant is taxed by the main activity of "psychologists" NACE 1010 and secondary activity of "trainers" NACE 8011, classified under IRS in the simplified taxation regime of Article 31 of the VAT Code and, under VAT, classified in the mixed allocation system (exemptions of Article 9 and Article 53 of the VAT Code – given the typicality of the services provided or the turnover volume) from the beginning of activity on 15-01-2009 to 01-02-2011, excused from filing periodic VAT declarations given the classification under Article 53 of the VAT Code and subsequently after this date and until 01-01-2013, classified in the normal regime of quarterly periodicity.

  2. The now Claimant was subject to an inspection procedure conducted under Service Orders OI 2013…/…, as a result of which VAT assessments were made in the amounts of €4,780.86, €3,176.90 and €41.40 relating to the financial years 2011 and 2012.

  3. Between 2010 and 2013 G… (Institute …) developed a project designated "…",

  4. For which it hired the services of the Claimant at least in the years 2011 and 2012,

  5. In the context of services provided by her, she issued in favour of G… two receipts, one on 30-12-2011, in the amount of €20,780.34, with the following description "work in research of clinical psychology" and another on 15-04-2012, in the amount of €13,632.63 with the description of "work in clinical psychology" (cf. administrative file attached).

  6. In both receipts no VAT was charged.

  7. On 21 January 2015, the Claimant filed her petition for arbitral pronouncement with CAAD, which gave rise to the present case.

From the tax inspection report it appears, among other things, and with relevance that:

"In 2011: [the Claimant] issued only one receipt (electronic green receipt no. 1) to G…, dated 30-12-2011, for the activity of "psychologists", having described it as "Work of Research in Clinical Psychology", in the amount of €20,786.34, exempt from VAT under Article 9 of the VAT Code";

"In 2012: she issued […] electronic receipt no. 4, to "G…" dated 15-04-2012 in the amount of €13,632.63, having described the activity as "Work in Clinical Psychology", exempt from VAT under Article 9 of the VAT Code";

"The psychology services performed for G…, have underlying the application of a European project, which provides for the application of techniques previously studied/selected ("The Project commenced and developed in its entirety in 2010 (project design, planning of activities and selection of the community). Psychological intervention was carried out at both individual and group level, as well as accompaniment was provided to some family members, and other key persons related to these young people in order to reduce their risk behaviours and associated consequences" – as mentioned by the taxpayer), aimed at reducing alcohol consumption in young people of a given community, and with a view to "… evaluation and preparation of a manual for multilevel intervention for young people with abusive alcohol consumption";

"In accordance with the understanding endorsed by the IVA Services Management the activity of psychologist, when oriented towards provision of services consisting of the preparation of diagnoses (at medical request) or the application of treatments, is exempt from VAT, in accordance with the normative previously mentioned.

The exemption thus covers (and only) the acts performed by psychologists within clinical psychology. However, whenever the activity of psychology is connected to acts related to teaching, school and vocational guidance, case studies with a view to the preparation of manuals (even if performed by clinical psychologists), because they exceed the objective scope of application of no. 1 of Article 9 of the VAT Code, are considered taxable operations and not exempt".

A.2. Facts found not to be proven

With relevance for the decision of the case, there are no facts that should be considered as not proven.

A.3. Grounds for the matters of fact found to be proven and not proven

With respect to the matters of fact, the Tribunal does not need to pronounce on everything that was alleged by the parties; rather, it has a duty to select the facts relevant to the decision and to distinguish proven from unproven matters [(cf. Article 123 no. 2 of the Code of Tax Procedure and Process and Articles 607 of the Code of Civil Procedure, applicable ex vi of Article 29 no. 1, paragraphs a) and e) of the RJAT)].

Thus the facts relevant to the judgment of the case are selected and defined according to their legal relevance, which is established in light of the various plausible solutions to the question(s) of law. (cf. Article 596 of the Code of Civil Procedure, applicable ex vi of Article 29, no. 1, paragraph a) of the RJAT).

Thus, taking into account the positions assumed by the parties, the documentary evidence attached to the case file, the administrative file attached, the testimonial evidence and party statements produced, the above-listed facts are considered proven, with relevance for the decision, recognized and accepted by the parties.

The witnesses appeared to testify with impartiality and with knowledge of the facts on which they testified, and the party statements made by the Claimant were also taken into account.

B. ON THE LAW

  • Preliminary Issue

It will be necessary, before addressing the matter to be decided, and taking into account the exception raised by the AT, to rule on it from the outset, in consequence of the provisions of Articles 124 of the Code of Tax Procedure and Process and Article 608 of the Code of Civil Procedure.

In its response to the petition for arbitral pronouncement, reiterated and elaborated in the written arguments it produced, the Tax and Customs Authority invokes, in summary, the following:

(i) assessment no. 2014 …, concerning period 201203T in the amount of €41.40, does not share the ground that was at the origin of the other two assessments,

(ii) this assessment originated from a receipt issued by the Claimant on 01 March 2012 to "H…" in the amount of €180.00,

(iii) with respect to this assessment the Claimant presented "any argument tending to assert any defect in it", culminating in the sense that it was not complied with by the Claimant with the provision in paragraph d) of no. 1 of Article 552 of the Code of Civil Procedure, being faced with an insurmountable dilatory exception, with consequent dismissal as aforesaid.

The Claimant did not comment on the exception raised by the Respondent.

Without need for other considerations, it must be said from the outset that the Respondent is correct, in that, with respect to the VAT assessment indicated, which originated from the issuance of a receipt in the amount of €180.00, there exists on the part of the Claimant no exposition of any facts related to the petition or cause of action, (except for the consideration of its amount for the purpose of indicating the value of the petition), which determines in this segment the insufficiency of its petition, dictating as a consequence the dismissal, in light of the provisions of Articles 186, no. 2 paragraph a), 576 no. 2 and paragraph b) of Article 577, ex vi of Article 29, no. 1 paragraph e).

Wherefore, in light of what has been stated, the Respondent is absolved of the action with respect to VAT assessment no. 2014 …, concerning period 201203T in the amount of €41.40.

  • Exemptions under VAT

It is relevant to underline that the concept of exemption, not being foreign to interpretative difficulties of various and complex order, is distinct from the concept of non-applicability of tax, adopting the conceptualization proposed by Alberto Xavier in the sense that non-applicability "arises from the non-verification of a positive element of the legal type of the taxable fact or the verification of its negative element", while in exemption "notwithstanding the taxable fact has been verified in all its elements, the constitutive efficacy thereof is originally paralyzed by the occurrence of another fact to which the law attributes such imperative efficacy".

Within the domestic legal framework, Article 9 of the VAT Code establishes the list of "exemptions in internal operations" and before the usual systematic and normative proposal, exemptions in the modality of incomplete, simple or partial, (in contrast with complete or total exemptions), under which the right to deduct VAT borne is not granted, meaning that in these exemptions the exempt taxable person does not charge tax on its active operations, but does not have the right to deduct VAT borne for its realization.

In this type of exemption it can be said that the chain of deductions is broken, since the exempt operator cannot deduct the tax borne upstream, and one can speak of "hidden tax" meaning thereby that the tax borne by the operator for the realization of its activity (inputs), not being able to be deducted, will tend to be incorporated, tendentially into the value of the goods or services, thus placing in crisis the neutrality of value added tax, as one of its fundamental and distinctive characteristics compared to other taxes.

The exemptions in internal operations provided in Article 9 of the VAT Code, and as relevant here, transpose Article 132 of Directive 2006/112/EC of the Council of 28 November 2006, in so far as "The Member States exempt the following operations";

"b) hospitalization and medical assistance, and also operations closely connected therewith, provided by public law bodies or, under conditions similar to those applying to the latter, by hospital establishments, medical care and diagnostic centres and other establishments of the same nature duly recognized";

"c) The provision of medical and paramedical care services within the scope of the exercise of medical and paramedical professions, as defined by the Member State in question".

The grounds for exemptions, which some of those provided in Article 9 of the VAT Code embrace, have to do with "certain activities of general interest", having underlying "a set of internal exemptions which are motivated by reasons of economic and social order, aimed at promoting the access and consumption of what is usually called merit goods"[1], with particular relevance, and as relevant here, of significant social relevance, the exemptions relating to the exercise of functions of "doctor, dentist, midwife, nurse and other paramedical professions", whether they are practiced by "hospital establishments, clinics, dispensaries and similar" (no. 2 of Article 9), or outside them.

Such exemptions relate to "activities which aim to diagnose, treat and if possible cure diseases or anomalies of health".[2].

It is also important to note in the synopsis of the normative framework that the Value Added Tax Code (VAT Code) which came into force on 01 January 1986 corresponds in its rules to the transposition of the commonly designated Sixth VAT Directive (Directive 77/388/EEC) of the Council, of 17 May 1977, a directive that was subsequently repealed by Directive 2006/112/EC, usually called the VAT Directive (VAT Dir.), of 28/11/2006, relating to the common system of value added tax, which reformulated the text of the Sixth Directive in essentially formal terms.

Thus it will be revealed, of central relevance, to invoke in light of the VAT Directive, and even if summarily, some aspects related to exemptions, their objective character and their interpretation which have been carried out in the jurisprudence of the Court of Justice of the European Union (CJEU).

For this purpose, we follow, following closely the laborious and exhaustive analysis carried out by Sérgio Vasques, (in his recent work already cited), starting, from the outset, from the principle "that the rules of exemption have an exceptional character in the context of VAT, and should therefore be interpreted strictly, i.e., literally, with extensive interpretation or by analogy being prohibited."

Such interpretation of exemption rules, reiterated several times in CJEU jurisprudence, takes into account the circumstance that, as VAT is a general tax on consumption "it is subject to a principle of generality, tending to apply to all goods and services, which is why exemption rules, as they are deviations from the generality of the tax, must be "expressed and precise"[3].

Notwithstanding the reiterated reaffirmation of the CJEU as to the qualification of exemption rules as having an exceptional character, excluding their extensive interpretation or analogy,[4] the fact is that the CJEU has "moderated" such interpretation in the sense that "this strict interpretation is not to be confused with a restrictive interpretation and that the exemption rules of the VAT Directive should not be interpreted in a manner that would "deprive them of their effects"[5], meaning that the purposive element has served for the CJEU to establish the meaning of VAT exemption rules, observed that such are the limits determined by their literal element.

Beyond the literal and purposive elements and as Sérgio Vasques tells us (work and location cited) "the [CJEU] has also taken into account, to a greater or lesser degree, the historical element, seeking in many cases to look at the origin and evolution of exemption rules to establish their meaning", further concluding the author that "the systematic element has also served in many cases for the CJEU to establish the meaning of the exemption rules provided in the VAT Directive".

Having summarily defined the interpretative methodology that should be taken into account in the interpretation of exemption rules which nevertheless constitute, for CJEU jurisprudence "autonomous concepts of European law" and having gleaned some of the reasons underlying them, we are now in a position to address the concrete case.

The Matter to be Decided

Within the framework of the so-called incomplete exemptions, of a mandatory character and without need for any recognition by the tax administration, and as relevant here, we have from the outset those related to activities and areas of health, with emphasis on no. 1 of Article 9 of the VAT Code;

Article 9 - Exemptions in internal operations

The following are exempt from tax:

1). The provision of services in the exercise of the professions of doctor, dentist, midwife, nurse and other paramedical professions".

The parties do not appear to question that the exemption operates regardless of the legal nature of the service provider, namely the fact that it is an individual or legal person, a position moreover set out in the Judgment of 10 September 2002, of the then Court of Justice of the European Communities[6], nor do they appear to dissent as to the objective character of the exemption in question, and the necessity that the practice of the services underlying no. 1 of Article 9 of the VAT Code be exercised by professionals qualified and accredited for that purpose.

The central question to be decided thus reduces itself to knowing whether the activity provided by the Claimant to the Institute … (G…) in the period between 2011 and 2012 is or is not exempt from value added tax.

Let us see then;

The Claimant's position, as already stated above, is based, very summarily, on the following facts;

  • that the Claimant in the years 2011 and 2012 provided services to G…, within the framework of a project designated by …, co-financed by the European Commission, coordinated by .. (LWL) and monitored by the University of ..., the objective of which was the "creation and development of coordinated strategies […] in order to obtain an effective reduction in alcohol consumption in at-risk youth populations".

The services provided by the Claimant, in her capacity as a clinical psychologist, would have, according to her, [focused] "on the professional provision of psychological evaluation and intervention and occupational therapy of the young population with Eiras identified with pathological problems related to excessive alcohol consumption, which included, in particular, methodologies widely used in clinical psychology for the reduction of risk behaviour, such as motivational interviewing techniques and individual or group self-reflection".

That is,

The Claimant, in summary, maintains that the services she provided within the framework of the project "…", consisted of diagnoses and therapies within clinical psychology, and, as such, exempt from VAT.

The position and understanding of the AT are opposed to those presented by the Claimant, arguing essentially that the professional performance of the latter within the scope of her engagement by G… had as its object the study of cases and as ultimate ground the preparation of a manual.

Well then,

It is the conviction of this tribunal, based on the assessment of the evidence, that the professional activities carried out by the Claimant within the framework already referred to are delineated in the performance of activities typical of occupational therapy, aimed, in the concrete case, at directing young people in order to contribute to improving their quality of life, or put another way "to treat and if possible cure diseases or anomalies of health", recognizing, as could not be otherwise, that the abusive use of alcohol by young people is a matter of public health.

We do not share the AT's perspective as to the disqualification of the Claimant's activities as a clinical psychologist while providing professional services to G…, within the framework of the aforementioned project and its purpose, and as to her exclusion from the exemptions provided in no. 1 of Article 9 of the VAT Code.

Invoking here the concept of provision of medical (or paramedical, we would add) services which the binding information issued in case no. …, by order of the Tax Services Management on 2012-01-02 brings to bear by invoking the ruling of the then Court of Justice of the European Community of 14 September 2000 (Case 384/98), in the following sense: "As to the concept of provision of medical services, provided in no. 1 of Article 9 of the VAT Code, it is important to refer to the Ruling of the then Court of Justice of the European Community (now CJEU), of 14 September 2000, Case 384/98, which considers as such, those which consist of providing assistance to persons, diagnosing and treating disease or any anomaly of health". (emphasis and underlining ours)

The acts performed with the selected community with the objectives already referred to, which took the form of diagnoses, processes of evaluation and intervention, will be integrated, in our view, within the perspective of clinical acts of clinical psychology, with the objective (among others) of promoting the improvement of the health and wellbeing of the community targeted by such intervention.

This conviction is not shaken by the references (apparently contradictory) as to the activities listed in the receipts in question "work in research of clinical psychology" and "work in clinical psychology", nor by the fact that incidentally the Claimant's professional activities were integrated into a broader framework, which may have contributed to the preparation of a "manual for multilevel intervention with young people with abusive alcohol consumption".

Equally it appears to us to be completely irrelevant the circumstance that the Claimant in administrative proceedings, namely when notified to exercise the right of hearing, did not, as the AT refers, "even bring evidence to the inspection procedure that would allow a different conclusion", and subsequently came to challenge the VAT assessments in the petition for arbitral pronouncement, reminding us in this segment that the objection procedure is a process of assessment of the legality of acts performed by the tax administration, with production of condemning or constitutive effects.

Taking into account the interpretative rules governing VAT, which above have been briefly explained, as a result of the evidence, and the assessment made on the documentary evidence, testimony and party statements produced, not overlooking the strict interpretation to which we should proceed with respect to paragraph c) of Article 132 of the VAT Dir., in the sense that the Member States exempt from VAT "the provision of medical and paramedical care services within the scope of the exercise of medical and paramedical professions, as defined by the Member State in question", it is the conviction of this Tribunal that the exemption provided in no. 1 of Article 9 of the VAT Code should be applied, the Claimant being correct in the petition it formulates.

C. QUESTION OF PRELIMINARY REFERENCE

The Claimant formulates, on a subsidiary basis, a petition for preliminary reference to the Court of Justice of the European Union, in accordance with the provisions of Articles 19, no. 3, paragraph b) and 267 of the Treaty on the Functioning of the European Union, although it has not alleged throughout its argumentative petition for arbitral pronouncement any facts that could contribute thereto, other than in the petition itself, where it seeks to have "declared illegal and annulled the acts of additional VAT assessment and the corresponding compensatory interest, with all legal consequences – namely the condemnation of the Public Treasury to restitute to the claimant the amount of tax paid plus interest, at the legal rate accrued since the date of payment of the undue amount, to which shall be added any accruing until full payment – if necessary after petition to the Court of Justice of the European Union to rule as a preliminary matter on the compatibility with Directive 2006/112/EC, of 28 November, under Article 267 of the TFEU".

With respect to this segment, and without need for any other considerations, it must be said, summarily, that (i) arbitral tribunals form part of the set of national courts as follows from Article 209 of the Constitution of the Portuguese Republic (CRP), (ii) the preamble of Decree Law no. 10/2011, of 20 January, made it clear that "(…) in cases where the arbitral tribunal is the final instance for decision of tax disputes, the decision is susceptible to preliminary reference in compliance with § 3 of Article 267 of the Treaty on the Functioning of the European Union", (iii) in case of doubt as to the interpretation of European law norms, the arbitral tribunal may have recourse to preliminary reference, (iv) the Claimant did not indicate the specific questions it might eventually wish to raise with the CJEU, (iv) in the case at hand there are no doubts for the arbitral tribunal as to the interpretation of the norm(s) in question, wherefore, and consequently, this tribunal decides to reject the petition for preliminary reference to the CJEU.

D. DECISION

For all these reasons, this Arbitral Tribunal decides:

a. to judge the present petition for arbitral pronouncement partially admissible and, in consequence, to annul the tax assessment acts nos. 2014 …, in the amount of €4,780.86, and assessment no. 2014 … in the amount of €3,135.50, with the exception of assessment no. 2014 …, in the amount of €41.40, and,

b. in consequence, to condemn the Tax and Customs Authority to restitute the tax and compensatory interest corresponding to the VAT assessments declared illegal in the same proportion.

E. VALUE OF THE CASE

In accordance with the provisions of Articles 306 nos. 1 and 2 of the Code of Civil Procedure, approved by Law no. 47/2013, of 26 June, 97-A) no. 1, paragraph a) of the Code of Tax Procedure and Process and Article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €7,957.76.

F. COSTS

Under Articles 12, no. 2, 22 no. 4 of the RJAT, and Articles 2 and 4 of the Regulation of Costs in Tax Arbitration Proceedings, and Table I hereto attached, the amount of costs is fixed at €612.00, to be borne by both parties, in proportion to their failure in the action, with €3.18 being borne by the Claimant and €608.82 by the Respondent.

BE NOTIFIED

Text prepared by computer, in accordance with the provision of Article 131 of the Code of Civil Procedure, applicable by referral from Article 29 no. 1 of the Legal Regime for Tax Arbitration, with blank verses and reviewed by the arbitrator.

The text of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Lisbon, 25 November 2015

The Arbitrator

(José Coutinho Pires)

[1] Sérgio Vasques, "The Tax on Value Added", Almedina, 2015, pages 316 et seq.

[2] Rui Laires, AAVV, VAT Code and RITI, Notes and Comments, coordination by Clotilde Celorico Palma and António Carlos dos Santos, Almedina, 2014, page 124.

[3] Ruling CJEU, Commission v. Netherlands, C-235/85, 26.03.1987

[4] Copygene Ruling, of 13 June 2008, case C-262/08.

[5] Sérgio Vasques, work cited, page 327 et seq.

[6] Case C-141/00 (Kugler Case, Coll. P. I-6833, no. 26)

Frequently Asked Questions

Automatically Created

Are psychology services exempt from VAT under Article 9(1) of the Portuguese VAT Code (CIVA)?
Yes, psychology services are generally exempt from VAT under Article 9(1) of the Portuguese VAT Code (CIVA) when provided by qualified psychologists registered with the Ordem dos Psicólogos Portugueses. The exemption covers clinical psychology services such as psychological evaluation, intervention, and therapy. However, the exemption applies specifically to healthcare-related psychological services, not research activities or consultancy work that falls outside the therapeutic scope. The Tax Authority may challenge the exemption if it determines that services constitute research, training, or manual preparation rather than direct clinical care.
Can a psychologist registered with the Ordem dos Psicólogos challenge VAT assessments through CAAD tax arbitration?
Yes, a psychologist registered with the Ordem dos Psicólogos can challenge VAT assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration. Under the RJAT (Legal Regime for Tax Arbitration, Decree-Law 10/2011), taxpayers can request constitution of an arbitral tribunal to contest the legality of tax assessments, including VAT. The process involves submitting a petition within legal deadlines, appointment of arbitrator(s), hearing of evidence and witnesses, and submission of written arguments. CAAD arbitration provides an alternative to judicial courts for resolving tax disputes, offering a faster and specialized forum for tax matters.
What is the legal basis for VAT exemption on clinical psychology consultations in Portugal?
The legal basis for VAT exemption on clinical psychology consultations in Portugal is Article 9(1) of the VAT Code (CIVA), which implements EU VAT Directive provisions exempting healthcare services. To qualify, psychologists must: (1) be registered with the Ordem dos Psicólogos Portugueses; (2) provide services that constitute clinical or therapeutic psychology (evaluation, intervention, treatment); and (3) ensure services fall within healthcare scope rather than research, training, or consultancy. The exemption aligns with CJEU jurisprudence interpreting healthcare exemptions, requiring services to have therapeutic purposes for diagnosing, treating, or preventing diseases and health conditions.
How does CAAD arbitration work for disputing IVA (VAT) tax assessments issued by the Portuguese Tax Authority?
CAAD arbitration for disputing IVA (VAT) assessments works through a structured process under RJAT (Decree-Law 10/2011). The taxpayer files a petition requesting constitution of an arbitral tribunal, identifying the contested assessments and grounds for illegality. The CAAD President accepts the petition and notifies the Tax Authority, which submits a response. An arbitrator is appointed, and the tribunal is formally constituted. A hearing is scheduled where witnesses testify and parties present evidence. After written arguments, the tribunal issues a binding decision on the assessment's legality. If successful, the taxpayer obtains annulment of the assessment and restitution of amounts paid plus interest.
What conditions must psychology professionals meet to qualify for the VAT exemption under Article 9(1) CIVA?
Psychology professionals must meet several conditions to qualify for VAT exemption under Article 9(1) CIVA: (1) Professional registration with the Ordem dos Psicólogos Portugueses, demonstrating legal qualification to practice; (2) Services must constitute clinical psychology activities including psychological evaluation, diagnosis, intervention, or treatment; (3) Services must have therapeutic healthcare purposes aimed at preventing, diagnosing, or treating health conditions or disorders; (4) Services must not be primarily research, consultancy, training, or educational activities that fall outside direct patient care; and (5) Compliance with professional standards and ethical requirements governing psychology practice. The Tax Authority may scrutinize whether services genuinely constitute exempt healthcare or represent non-exempt ancillary activities.