Process: 392/2015-T

Date: January 17, 2016

Tax Type: IVA

Source: Original CAAD Decision

Summary

CAAD arbitration case 392/2015-T examined whether dental implants, abutments, and connector pieces sold separately qualify for Portugal's reduced 6% VAT rate under Item 2.6 of List I annexed to the IVA Code. The claimant, a dental implantology products distributor, challenged tax assessments totaling €102,946.23 covering periods 201112T to 201312T. The company argued that implant components individually constitute prostheses that substitute human organs and should benefit from the reduced rate, asserting that restrictive interpretation violates constitutional equality principles and renders Item 2.6 meaningless since clinics purchase components separately during phased medical procedures. The Tax Authority maintained its 1987 doctrine that only complete prosthetic sets (implant, connectors, and crown together) qualify for reduced VAT, while separately invoiced components face the normal rate. The AT emphasized that EU jurisprudence requires strict interpretation of reduced rate provisions, noting the actual prosthesis is the crown (which the claimant doesn't sell), and that the implant merely fixes the prosthesis. The Authority further argued that since healthcare professionals benefit from VAT exemption on their services, the tax burden rarely reaches final consumers. This excerpt presents only the initial report section with party arguments under Article 18 of the IVA Code; the tribunal's reasoning and final decision are not included in the provided text.

Full Decision

ARBITRAL DECISION

The arbitrators José Pedro Carvalho (arbitrator president), Francisco de Carvalho Furtado and Pedro Galego (arbitrator members), appointed by the Deontological Council of CAAD to form the Arbitral Tribunal, constituted on 23 September 2015, agree as follows:

I. REPORT

  1. The Claimant A... S.A. Sucursal em Portugal, legal entity no. …, with registered office at Rua…, …, …, …-… Porto, having been notified of acts of assessment of Value Added Tax and Compensatory Interest practiced by reference to the taxation periods 201112T to 201312T, in the total amount of € 102,946.23, hereby submits, pursuant to paragraph a), of no. 1 of article 2 and of paragraph a) of no. 1 of article 10 of Decree-Law no. 10/2011, of 20 January ("Legal Regime of Tax Arbitration", hereinafter "LRTA") a request for arbitral determination aimed at the annulment of such acts.

  2. The Respondent is the Tax and Customs Authority (AT).

  3. The claim that is the object of the request for arbitral determination consists of the annulment of such acts.

  4. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to the AT.

  5. The Claimant did not proceed with the appointment of an arbitrator, whereby, pursuant to the provision in paragraph a) of no. 2 of article 6 and of paragraph b) of no. 1 of article 11 of the LRTA, the President of the Deontological Council appointed the undersigned as arbitrators of the collective Arbitral Tribunal, who communicated acceptance of their appointment within the prescribed period.

  6. On 26 August 2015, the parties were notified of the appointment of the arbitrators and raised no objection.

  7. In accordance with the provision in paragraph c) of no. 1 of article 11 of the LRTA, the collective Arbitral Tribunal was constituted on 23 September 2015.

  8. In these circumstances, the Arbitral Tribunal is regularly constituted to appreciate and decide the subject matter of the proceedings.

  9. To substantiate the request for arbitral determination, the Claimant alleges, in summary, the following:

a) The Claimant is engaged in the commercialisation, in Portuguese territory, of articles for dental implantology, of which it highlights dental implants, abutments and connector pieces;

b) Its customers are dental clinics and dentists;

c) The sales of the goods it commercialises are fully encompassed within Item 2.6 of List I attached to the VAT Code;

d) The doctrine resulting from the ruling of 11 May 2007 in the Binding Information Process no. … cannot override the Law;

e) These are alienations of goods that substitute, wholly or in part, a human organ, and Item 2.6 of List I attached to the VAT Code cannot be interpreted restrictively as the Respondent does;

f) The restrictive interpretation of the Respondent places in question the principle of equality, of constitutional dignity, inasmuch as we would be dealing with equal situations with different taxation rates;

g) The letter of the Law does not restrict its application to the situation of alienation of complete prostheses;

h) The medical act in question involves various phases, spread over time, whereby it would not make economic sense for the customers to acquire all components of the prosthesis simultaneously;

i) These component elements of the prosthesis are acquired during the course of the medical procedure;

j) The concept of prosthesis does not encompass only the set of pieces, with each of these pieces being, in itself, a prosthesis, and should, in its commercialisation, have applied the reduced rate of taxation;

k) The interpretation of the Law must be made in accordance with the provision of no. 3 of article 9 of the Civil Code, it being presumed that the legislator knew how to express his thinking in adequate terms;

l) Since no clinic or dentist acquires complete prostheses, the restrictive interpretation, which is not in accordance with article 9, no. 3, of the Civil Code, of the Respondent, transforms Item 2.6 of List I attached to the VAT Code empty of content and impossible to apply;

m) The interpretation of the legal norms in question must take into account that VAT is a tax that tends to reach all acts of consumption and which has neutrality as its main characteristic;

n) The interpretation that the Respondent seeks to enforce creates unjust and discriminatory situations among different dental prostheses, given that operations of alienation of single-piece prostheses would be taxed at the reduced rate and operations of alienation of composite prostheses would be taxed at the normal rate;

o) The interpretation and application that the Respondent makes of the Law violates the provision of articles 5, no. 2 and 7, no. 3, of the General Tax Law, as it places in question the aims of taxation, of generality, equality, legality and substantive justice;

p) The acts of assessment of compensatory interest are affected by the same defects attributed to the acts of assessment of tax and should, also, be annulled.

  1. The Respondent submitted a reply, defending itself by opposition, alleging, in summary, the following:

a) In the course of the tax inspection procedure it was ascertained that the claimant carried out its activity of commercialisation of medical devices for orthodontia – dental implants and other connector pieces;

b) In the operations of alienation of such goods, the Claimant applied the reduced rate of VAT of 6% by understanding that the sale of such goods falls within item 2.6 of List I attached to the VAT Code;

c) The understanding of the Tax and Customs Authority on this matter has been, since 1987, that if the taxable person invoices the customer a set of goods consisting of prosthesis, implant and connector pieces, such operation will be subject to the reduced VAT rate, but if the taxable person invoices the customer only implants and connector pieces or both, as separate components, the normal VAT rate should be applied;

d) Item 2.6 of List I attached to the VAT Code only encompasses the transmission of the article in itself, which configures an artificial piece that substitutes the organ of the human body or part thereof autonomously and unitarily;

e) Situations of application of the reduced rate represent a deviation from the application of the general VAT regime, whereby the Court of Justice of the European Union has ruled in the sense of strict interpretation of norms that provide for the application of these rates;

f) The objective of the reduced rate is to diminish the burden borne by the final consumer;

g) As these goods are used by professionals and entities in the health sector, which benefit from exemption of the tax on the services they provide, the burden of these expenses hardly falls on the final consumer;

h) Article 11, no. 4, of the General Tax Law prohibits the analogical integration of gaps resulting from tax norms covered by the reservation of Law of the Assembly of the Republic – cf. articles 103, no. 2 and 165, no. 1, paragraph i), of the Constitution of the Portuguese Republic;

i) The norms that provide for the reduced VAT rate are included in the lot covered by the reservation of Law of the Assembly of the Republic, whereby in their interpretation analogy cannot be resorted to;

j) Article 11 of the General Tax Law obliges that in the interpretation of tax norms the rules and general principles of interpretation of Laws, provided for in article 9, of the Civil Code are observed;

k) Having regard to the referred rules of legal hermeneutics, the concept of prosthetic material encompasses that which is intended or apt for the substitution of a limb or organ of the human body, wholly or partially;

l) In the case at hand, the prosthesis consists of the piece designated as crown (artificial tooth in porcelain), which is not commercialised by the Claimant;

m) The implant (form of fixation of the prosthesis) does not benefit from the same fiscal treatment as the prosthesis;

n) These elements constitute material for prosthesis, and not prosthetic material, as results from the letter of Item 2.6, of List I attached to the VAT Code;

o) Not being the goods alienated by the Claimant included in List I attached to the VAT Code, and it not being possible to resort to analogy or promote the extensive interpretation of such norm, it should be considered that the same goods are not encompassed by the possibility of application of the reduced VAT rate, in their commercialisation;

p) The Tax and Customs Authority does not avail itself, in its interpretation, of the concepts of "complete apparatus" or "unique implant unit", considering instead that the application of the reduced rate applies to all goods that, by themselves, may substitute an organ or limb of the human body, and not any elements that are used individually in the process of substitution;

q) All goods listed in Item 2.6 of List I attached to the VAT Code are goods that already are at a stage where they can be used, when acquired, for the purposes of overcoming human ailment or deficiency;

r) The rationale of this norm is, thus, to reduce the taxation of products specifically designed for the correction or compensation of deficiencies or for the substitution, wholly or partially, of organs or limbs of the human body;

s) The goods commercialised by the claimant are not included in such category as they only serve as support for the dental prosthesis, and the reduced rate of tax is not applicable to them as these are goods not expressly provided for in Item 2.6 of List I, attached to the VAT Code;

t) The principle of fiscal neutrality postulates that the tax should not influence the choice of the consumer;

u) Tax norms should be interpreted having regard to the principle of neutrality;

v) The principle of neutrality is placed in crisis if different rates fall on the materials necessary for the elaboration of each of the different types of prostheses;

w) Only the application of the normal rate of tax to the pieces, parts and accessories guarantees the neutrality of the tax;

x) The proceedings deal only with matters of law whereby the production of witness testimony should be dispensed with, as it is a useless act;

y) Concludes requesting the dismissal of the claim filed by the Claimant and the maintenance of the acts of assessment of VAT and Compensatory Interest.

  1. On 26 October 2015 a ruling was issued to the effect that the Claimant should inform the Tribunal if it maintains interest in the examination of the witnesses listed and, if so, to indicate which concrete facts the examination would concern.

  2. Through a procedural document presented on 6 November 2015, the Claimant waived the examination of the witnesses listed.

  3. By ruling of 11 November 2015 it was decided to dispense with the meeting referred to in article 18 of the LRTA, granting a period of ten days for the parties to submit their (successive) arguments.

  4. Neither the Claimant nor the Respondent submitted arguments.

II. DETERMINATION OF ISSUES

  1. The parties have standing and capacity, show themselves to be legitimate and are regularly represented (articles 4 and no. 2 of article 10, of the LRTA and article 1 of Regulation no. 112-A/2011, of 22 March).

  2. The Tribunal is competent and is regularly constituted.

  3. The proceedings do not suffer from nullities.

  4. There are no other circumstances that obstruct the knowledge of the merits of the case.

III. ISSUES TO BE DECIDED

  1. In the present proceedings, the issue to be decided is to determine whether the goods commercialised by the Claimant (medical devices for orthodontia - titanium implants and abutments) are encompassed within the provision of item 2.6 of List I attached to the VAT Code, with their alienation being taxed, in VAT, with application of the reduced rate of 6% provided for in article 18, no. 1, paragraph a), of the VAT Code.

IV. MERITS

IV.1. Matters of Fact

  1. Proven Facts

  2. With relevance for the appreciation and decision of the issues raised, the following facts are taken as established and proven:

a) The Claimant is a commercial company whose object is the purchase and sale, operation, training, manufacture, distribution, storage, maintenance, importation and exportation, on own or third-party account, of medical and hospital material and machinery, dental, implantology, x-ray, dental laboratory, laboratory and dental clinic in Portugal – Doc. 19, attached to the Initial Request;

b) In compliance with Service Order no. OI 2014…, the Claimant was the subject of an external tax inspection procedure, of partial scope, for the years 2011, 2012 and 2013 – Doc. 20, attached to the Initial Request;

c) In the course of the said inspection procedure, arithmetic corrections were made, ascertaining tax (VAT) owing in each of the taxation periods by considering that the procedure adopted by the taxable person, consisting of the application of the reduced VAT rate for purposes of assessment of the tax due in transmissions of implants, dental abutments and other accessories effected in the national market, lacks any legal basis, due to lack of classification of such goods in any of the items of the lists attached to the VAT Code – Doc. 20, attached to the Initial Request;

d) The claimant carries out, in Portuguese territory, the activity of commercialisation of medical devices for orthodontia – dental implants and other connector or fixation pieces of dental prosthesis.

e) Such articles are intended for dental clinics and dentists who perform dental implantology.

f) On such articles, in the periods covered by the assessments in question, the Claimant proceeded with the assessment of VAT at the reduced rate.

g) The Claimant was notified of the act of assessment of VAT no. 2015 …, practiced by reference to the period 201203T, in the amount of € 6,347.74, which was paid on 13 April 2015 – Doc. 2, attached to the Initial Request;

h) The Claimant was notified of the act of assessment of VAT no. 2015 …, practiced by reference to the period 201206T, in the amount of € 18,846.11, which was paid on 13 April 2015 – Doc. 3, attached to the Initial Request;

i) The Claimant was notified of the act of assessment of VAT no. 2015 …, practiced by reference to the period 201209T, in the amount of € 8,616.71, which was paid on 13 April 2015 – Doc. 4, attached to the Initial Request;

j) The Claimant was notified of the act of assessment of VAT no. 2015 …, practiced by reference to the period 201212T, in the amount of € 13,486.90, which was paid on 13 April 2015 – Doc. 5, attached to the Initial Request;

k) The Claimant was notified of the act of assessment of VAT no. 2015 …, practiced by reference to the period 201303T, in the amount of € 8,488.44, which was paid on 13 April 2015 – Doc. 6, attached to the Initial Request;

l) The Claimant was notified of the act of assessment of VAT no. 2015 …, practiced by reference to the period 201306T, in the amount of € 14,240.79, which was paid on 13 April 2015 – Doc. 7, attached to the Initial Request;

m) The Claimant was notified of the act of assessment of VAT no. 2015 …, practiced by reference to the period 201309T, in the amount of € 10,377.40, which was paid on 13 April 2015 – Doc. 8, attached to the Initial Request;

n) The Claimant was notified of the act of assessment of VAT no. 2015 …, practiced by reference to the period 201312T, in the amount of € 14,171.25, which was paid on 13 April 2015 – Doc. 9, attached to the Initial Request;

o) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201112T, in the amount of € 195.00, which was paid on 13 April 2015 – Doc. 10, attached to the Initial Request;

p) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201203T, in the amount of € 666.33, which was paid on 13 April 2015 – Doc. 11, attached to the Initial Request;

q) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201206T, in the amount of € 1,786.50, which was paid on 13 April 2015 – Doc. 12, attached to the Initial Request;

r) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201209T, in the amount of € 730.88, which was paid on 13 April 2015 – Doc. 13, attached to the Initial Request;

s) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201212T, in the amount of € 1,008.00, which was paid on 13 April 2015 – Doc. 14, attached to the Initial Request;

t) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201303T, in the amount of € 551.63, which was paid on 13 April 2015 – Doc. 15, attached to the Initial Request;

u) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201306T, in the amount of € 780.31, which was paid on 13 April 2015 – Doc. 16, attached to the Initial Request;

v) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201309T, in the amount of € 465.13, which was paid on 13 April 2015 – Doc. 17, attached to the Initial Request;

w) The Claimant was notified of the act of assessment of Compensatory Interest no. 2015…, practiced by reference to the period 201312T, in the amount of € 489.19, which was paid on 13 April 2015 – Doc. 18, attached to the Initial Request;

x) On 23 June 2015, the Claimant submitted the request for arbitral determination that gave rise to the present proceedings.

  1. Basis of the Matters of Fact

a) The proven factuality was based on the documents attached with the request for arbitral determination and in the administrative proceedings, with no controversy regarding them.

b) There are no other facts with relevance for appreciation of the merits of the case that were not proven.

IV.2. On the Law

The central issue to be decided relates to the interpretation of item 2.6 of List I, attached to the VAT Code in order to ascertain whether the same incorporates in its provision the goods sold by the Claimant and better identified in the administrative proceedings – as the Claimant understands - or whether these same sales should be taxed at the normal rate of 23% - as the Respondent advocates.

Indeed, both in the conclusions of the Tax Inspection Report and in the procedural documents presented in the present proceedings, the Respondent defends the understanding according to which "(…) item 2.6 is restricted to "complete goods" as being those which, by themselves, may substitute an organ or limb of the human body and not any elements that are used individually in the process of substitution ". In this manner, since the Claimant promotes the sale of goods (titanium implant and abutment) necessary for fixation and support of the prosthesis, but which are not prosthesis, should, in the understanding of the Respondent, apply in these operations article 18, no. 1, paragraph c) of the VAT Code, that is the rate of 23%.

The Claimant does not accept the aforementioned understanding since it considers that the prosthesis is a whole, including the material of fixation and support, and that the rate of tax, in this case the Value Added Tax, cannot be different depending on whether the prosthesis is sold in separate pieces or as a whole, whereby it sustains that in these operations the provision of article 18, no. 1, paragraph a) of the VAT Code should apply.

It is, then, upon the confrontation of these theses that the Tribunal should pronounce itself.

Pursuant to the provision of article 18 of the VAT Code, the operations provided for in the norms of objective scope shall be taxed as follows:

a) importations, transmissions of goods and provision of services contained in list I (attached to the VAT Code), at the rate of 6%";

b) importations, transmissions of goods and provision of services contained in list II (attached to the VAT Code), at the rate of 13%"; and,

c) remaining importations, transmissions of goods and provision of services, at the rate of 23%.

From the letter of article 18 of the VAT Code it results, thus, that the normal rate is of subsidiary application.

Having regard to the contours of the case at hand, it is important, as has been already mentioned, to analyse item 2.6 of list I attached to the VAT Code, which lists some of the goods subject to the reduced rate, in order to verify whether the goods alienated by the claimant – titanium implants and abutments - are included, or not, in those listed.

In item 2.6 of List I attached to the VAT Code the following goods are listed:

"Orthopaedic apparatus, medical and surgical supports and medical stockings, wheelchairs and similar vehicles, manually or motor-operated, for disabled persons, apparatus, appliances and other prosthetic or compensatory material intended to substitute, wholly or in part, any limb or organ of the human body or for treatment of fractures, and lenses for correction of sight, as well as orthopaedic footwear, provided that prescribed by medical prescription, under the terms regulated by the Government".

In these circumstances, it is relevant to ascertain and elaborate the concepts, both of prosthetic material, and of organ of the human body, and, likewise, to verify whether the goods transacted are included in prosthetic material and whether they are intended to substitute, wholly or partially, an organ of the human body.

Prosthesis can be defined as the substitution of an organ of the body or part thereof, by an artificial piece (Dicionário do Estudante, Portuguese, Porto Editora, page 795).

On the other hand, human organ can be defined as part of an organized body with a particular function (Dicionário do Estudante, Portuguese, Porto Editora, page 719).

As is of general knowledge, a tooth is a hard, prominent and whitish structure composed of pulp, dentine and enamel that is implanted in the dental arch. In terms of function, it is evident that this organ is used to cut, grasp and grind food, preparing it to be swallowed. Now, there is no doubt that the tooth is an organ of the human body, and the same is constituted by: root, cervix and crown. The root ensures the junction of the tooth to the dental arch, the cervix ensures the connection between the root and the crown, and the crown defines the function of the tooth (e.g., cut, grasp, grind) and protects the vascular and nervous structure of the tooth.

The goods alienated by the Claimant – titanium implant and abutment - aim to substitute the "original" root and cervix of the tooth, with the first ensuring the connection to the dental arch and the second ensuring the connection between the implant and the crown. That is, each of these parts is indispensable to the functional substitution of the organ (the tooth), consisting in the substitution of part of an organ of the human body.

Although the procedure has various phases at different temporal moments (due to the need, among other things, of healing), in fact we are dealing with a single medical procedure whereby each stage, and the elements applied, are essential to the functional substitution of the organ. The crown individually considered is not a prosthesis in the sense that, without titanium implant and without abutment, it is not apt to functionally substitute the tooth – in fact it is not even possible to place (fix) it in the human body (Human Anatomy, Rouviere, Masson). In this manner, with each one of the components being essential for the functional substitution of the organ, it seems apparent that one should conclude that we are dealing with prosthetic material.

For all that has been set forth, and having regard to the most demanding criteria of legal hermeneutics, these will be the meanings to be attributed to each of the terms under analysis (crown, implant, abutment and prosthesis).

Therefore, it is verified, in the concrete case, that each one of the goods that is the object of transmission by the Claimant is prosthetic material, which is intended to substitute, wholly or in part, an organ of the human body – the tooth.

In the face of what has been set forth, the understanding of the Respondent should fail, according to which "item 2.6 applies, thus, to apparatus and prostheses in themselves, final product, in the case at hand to the artificial tooth (prosthesis)". As we have seen, the concept of prosthesis also encompasses the elements introduced for substitution of parts of the organ, in particular the titanium implant (in substitution of the root) and the abutment (in substitution of the cervix).

The goods in question thus constitute prosthetic material (not material for prosthesis), with the function of substituting part or entirety of an organ of the human body – the tooth.

In these circumstances, such transmission finds perfect and direct legal classification in the literal element of the norm contained in point 2.6 of list I attached to the VAT Code, applying, in consequence, to such transactions, the reduced rate of 6%, contemplated in art. 18, no. 1, a) of the said statute.

It is important, further, to note that the interpretation upheld by the Respondent – application of the reduced rate only to the artificial tooth, as a unit, does not find support in the letter of the Law.

Indeed, item 2.6 of List I attached to the VAT Code does not require that the prosthetic materials be transmitted in an aggregated manner – cf. Decisions 429/2014-T and 530/2014-T of CAAD. The Law only requires that these be prosthetic materials intended to substitute, wholly or in part, an organ of the human body.

In this manner, with the absence in the letter of the Law of any reference to the form of alienation of the goods (in aggregate by contrast to fragmented)[1], and the interpreter being required to presume that the legislator knew how to express his thinking in adequate terms (cf. article 9, no. 3, of the Civil Code), the conclusion is imposed that such circumstantiality is irrelevant for the determination of the rate of tax to be applied, and the Respondent's argument fails.

In the face of everything that has been set forth, it is concluded that the Tax and Customs Authority erred on the assumptions, violating the provision of article 18 of the VAT Code and, likewise, item 2.6 of List I attached to that Code, whereby the acts of assessment in question should be declared illegal and annulled accordingly.

Being illegal the acts of assessment of tax, so too shall be the acts of assessment of compensatory interest which also constitute the object of the present request for arbitral determination. Pursuant to the provision of article 35 of the General Tax Law, the right of the State to assess compensatory interest depends on the existence of a situation of delay in the assessment of tax, for which there is fault attributable to the taxable person.

Now, in the face of the conclusion reached with respect to the legality of the acts of assessment of tax, it is necessarily concluded that, with the absence of any delay in the assessment of tax, the assumptions for the execution of the acts of assessment of compensatory interest do not exist.

It is concluded, thus, that the acts of assessment of compensatory interest are illegal by violation of the provision of article 35 of the General Tax Law, being annulled accordingly.

V. DECISION

In view of which the present Arbitral Tribunal agrees in judging the claim filed by the Claimant totally well-founded, declaring illegal and annulling the acts of assessment of Value Added Tax and of Compensatory Interest in question.

VI. VALUE OF THE PROCEEDINGS

In accordance with the provision of no. 2 of article 306 and no. 2 of article 297, both of the Civil Procedure Code, of paragraph a) of no. 1 of article 97-A of the Tax Procedure and Process Code and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the proceedings are assigned a value of € 102,946.23 (one hundred two thousand, nine hundred forty-six euros and twenty-three cents).

VII. COSTS

In accordance with the provision of no. 4 of article 22, no. 2 of article 12, both of the LRTA, in article 2, no. 1 of article 3, and in nos. 1 to 4 of article 4 of the Regulation of Costs in Tax Arbitration Proceedings, as well as in Table I attached to this statute, the total value of costs is fixed at € 3,060.00 (three thousand and sixty euros), to be paid by the Respondent.

Lisbon, 17 January 2016.

The arbitrators,

José Pedro Carvalho

(President Arbitrator)

Francisco de Carvalho Furtado (Rapporteur)

(Arbitrator Member)

Pedro Galego (Rapporteur)

(Arbitrator Member)

[1] To the contrary: by referring to "prosthetic material", and not, simply, to "prosthesis", the legislator is, precisely, giving the opposite indication to that presented by the AT, expressly wishing not to limit itself only to the prosthesis, as a singular object ("complete good", in the terminology of the AT).

Frequently Asked Questions

Automatically Created

What VAT rate applies to dental implants and prostheses under Portuguese tax law?
Under Portuguese tax law, the VAT rate for dental prostheses is disputed. The Tax Authority's position since 1987 holds that complete prosthetic sets (including implant, connectors, and crown sold together) qualify for the reduced 6% rate under Item 2.6 of List I of the IVA Code, while implants and connector pieces sold separately as components are subject to the normal VAT rate. Suppliers of implantology components argue these elements individually constitute prostheses deserving reduced-rate treatment.
How does Item 2.6 of List I of the IVA Code define goods eligible for reduced VAT?
Item 2.6 of List I annexed to the Portuguese IVA Code provides reduced VAT rates for prosthetic materials. According to the Tax Authority's interpretation, this provision encompasses only artificial pieces that autonomously and unitarily substitute a human organ or body part in its entirety. The AT interprets this strictly to require complete prostheses rather than individual components. However, taxpayers contend the legal text doesn't restrict application to complete prostheses and that each component element constitutes a prosthesis under proper legal interpretation applying Article 9 of the Civil Code.
Can the Tax Authority override the reduced VAT classification for dental implantology products through binding information rulings?
The claimant in Process 392/2015-T argued that binding information rulings, such as the Tax Authority's 2007 ruling establishing restrictive interpretation, cannot override statutory law. The company asserted that Item 2.6's legal text doesn't impose the restrictions claimed by the AT's administrative doctrine. However, the Tax Authority defended its consistent interpretation approach based on strict construction principles for reduced rates, supported by Court of Justice of the European Union jurisprudence requiring narrow interpretation of VAT rate reductions. The tribunal's determination on whether administrative guidance properly interprets the statute is not included in this excerpt.
What was the outcome of CAAD arbitration process 392/2015-T regarding VAT on dental prostheses?
The provided text of CAAD arbitration process 392/2015-T contains only the initial report section (Section I) outlining the parties' positions and procedural history. The claimant challenged €102,946.23 in VAT assessments and compensatory interest for applying reduced rates to dental implant components. The excerpt establishes the arbitral tribunal's proper constitution and summarizes arguments but does not include the tribunal's legal analysis (fundamentação) or final decision (decisão). Therefore, the actual outcome—whether the tribunal upheld the Tax Authority's assessments or ruled in favor of the claimant's position—is not determinable from this incomplete document.
How does Article 18 of the Portuguese IVA Code interact with the reduced rate list for medical devices?
Article 18 of the Portuguese IVA Code governs VAT rates and works in conjunction with the Lists annexed to the Code that specify which goods and services qualify for reduced rates versus the normal rate. Item 2.6 of List I specifically addresses prosthetic materials eligible for reduced VAT treatment. The interaction involves applying Article 18's rate structure based on whether goods fall within List I's enumerated categories. The dispute in Process 392/2015-T centered on whether dental implant components meet Item 2.6's criteria when sold separately. The case raised interpretive questions about whether strict construction principles limit List I's scope to complete prostheses or whether individual components qualify under the statutory language referencing materials that substitute human organs or body parts.