Summary
Full Decision
ARBITRAL DECISION
The arbitrators Dr. Alexandra Coelho Martins (arbitrator president), Dr. Cristiana Leitão Campos and Dr. Ricardo Rodrigues Pereira (arbitrator rapporteurs), designated by the Ethics Council of the Administrative Arbitration Center ("CAAD") to form the present Arbitral Court, constituted on 7 November 2018, agree as follows:
I. REPORT
A..., S.A., legal entity number ..., with registered office in ..., ...-... ..., hereinafter referred to as "Applicant", represented by the Insolvency Administrator B..., taxpayer no. ..., with professional domicile in Rua ..., ..., ..., office ..., ...-... Porto, hereby requests the constitution of a Collective Arbitral Court, pursuant to the combined provisions of articles 2, no. 1, paragraph a) and 10, no. 1, paragraph a) and no. 2 of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters ("RJAT"), and of articles 96 and following of the Tax Procedure and Process Code ("CPPT").
The respondent is the Tax and Customs Authority ("AT").
The arbitral claim has as its mediate object the assessment of Value Added Tax ("VAT") for 2016, in the total amount of €908,400.14, and related compensatory interest of €10,601.47, carried out through two distinct acts identified as follows:
(a) Additional VAT Assessment no. 2017..., in the amount of €249,970.29, for the period 201609T, plus the assessment of compensatory interest in the amount of €10,601.47, sent by the AT's Collection Area, the corresponding amounts being paid on 29 January 2018;
(b) Cancellation of the VAT credit of €658,429.87, relating to the same period (201609T), which was mentioned in fields 61, 94 and 95 of the Periodic VAT Declaration no. ..., such cancellation being notified through official letter no. ..., dated 20 December 2017, from the Refunds Services Division, on the grounds of "insufficient credit in current account".
As the immediate object of the arbitral claim, the Applicant identifies the decision dismissing the Gracious Complaint, dated 30 May 2018 and notified on 5 June 2018, which considered the entirety of the assessment.
The Applicant seeks:
– A declaration of illegality and consequent annulment of the VAT Assessment no. 2017... in the amount of €249,970.29 and the inherent compensatory interest in the sum of €10,601.47;
– The restoration to its sphere of the VAT credit in the amount of €658,429.87; and
– The payment of indemnificatory interest in accordance with the law.
As the basis of its claim the Applicant alleges the following substantive illegalities which, in its understanding, are present in the corrections contained in the additional tax assessment and in the "denial of the right to deduction":
(i) The erroneous interpretation of the legal provisions supporting the corrections, given that the cessation of activity provided for in article 65, no. 3 of the Code of Insolvency and Recovery of Companies ("CIRE") does not imply the regularization of VAT incurred (and deducted) in the acquisition of real property assets, given that the regularization period of 20 years has not elapsed, since:
– The AT bases the obligation to regularize VAT on the cessation of activity of the Applicant, with support in articles 26, no. 3 and 24, no. 5, both of the VAT Code, and only the transfers of assets of the fixed assets are generators of this regularization obligation, and there should not be different rules in this matter for insolvent taxpayers;
– The closure of the establishments covered by the declaration of insolvency gives rise to their disposal, so it should be awaited that moment to proceed with the regularization, pursuant to article 24, no. 5 of the VAT Code;
– The obligation to regularize, if it exists, could only cover the year 2017, pursuant to article 26, no. 1 of the VAT Code, which provides for an annual regularization of 1/20 of the VAT deducted, as a solution for the period prior to the transfer which, in this case, occurred by deed of 27 June 2018;
– Article 4, no. 3 of the VAT Code provides that the disposal of commercial or industrial establishments is not subject to VAT;
– The regularization sought by the AT introduces a negative discrimination between the situation of disposal of an establishment without use during the regularization period in an insolvency process and outside such process (in the latter case, it is only subject, at most, to the annual regularization of 1/20 provided for in article 26, no. 1 of the VAT Code), such that this solution violates the principle of VAT neutrality and the constitutional principles of legality, equality and tax capacity;
(ii) The erroneous qualification as "real property" of the works and equipment incorporated in the installation of the mill and in the connection of its components, because:
– Erroneous interpretation of the concept of "real property" for VAT purposes and insufficiency of proof regarding the value and nature of the expenses incurred by the Applicant capable of justifying such qualification. In the Applicant's view, the Tax Inspection Report ("RIT") proceeded to mix equipment (movable property) and civil construction works, qualifying all as immovable and does not present sufficient elements to distinguish what were civil construction works, equipment forming part of the building and equipment that despite being materially connected to the building retain their autonomy and value, in this or any other building, referring to invoice numbers and attached schedules, without attaching any invoice, document or contract;
– The works have the nature of ancillary expenses for the installation of equipment which, in itself, can never be qualified as immovable;
– Civil construction works necessary to install the mill and connect its equipment to each other do not confer on said equipment the nature of urban properties, with such consequence not deriving, contrary to what the AT advocates, from article 204, no. 3 of the Civil Code;
– Article 13-B, paragraph d) of Implementing Regulation no. 1042/2013, of 7 October 2013, invoked by the AT, being inapplicable to the situation at hand, as this rule only entered into force as from 1 January 2017 and has no (nor could have) retroactive effects;
– Furthermore, the said European rule aims at the place of supply of services and not the determination of the taxation and exemption regime of domestic transactions on real property, regarding which European law leaves a broad margin to the Member States, including as to the delimitation of the concept of real property or property;
– The concept of immovable property not being provided by the VAT Code, and should be, according to the Applicant, the concept of property provided for in the Municipal Real Estate Tax Code ("IMI"). In this context, the AT has never qualified the equipment as constituting an autonomous type of urban property that would have to be assessed and registered in the property registries, nor did the AT have them entered in the matricial record of the urban property where the industrial unit is located;
– It being manifest that the law did not intend to qualify equipment as properties (without prejudice to the broad concept of tax property), which is deduced, firstly, from the connection of the meaning of the expressions "Building" and "Construction" to urban planning legislation;
– The equipment in question (which constitutes the mill) are not integral parts of a construction or building, maintaining their individuality in the whole that is the industrial unit, without prejudice to the fact that there was a need for some civil construction works to connect such equipment to each other and to the building where they were located, having been subsequently disposed of autonomously from the building that housed them;
– Similar to what the Supreme Administrative Court ("STA") decided regarding the equipment that make up a wind farm, in the Judgment of 11 April 2018, case no. 1328/17, the equipment cannot be classified as property, "because their normal purpose is not different from the entire property, as, also, because it is not possible to evaluate them separately, insofar as they are not economically independent parts".
On 29 August 2018, the request for constitution of the Arbitral Court was accepted by the President of CAAD and followed its normal procedure, namely with notification to the AT on 3 September 2018.
In accordance with articles 5, no. 3, paragraph a), 6, no. 2, paragraph a) and 11, no. 1, all of the RJAT, the Ethics Council of CAAD designated the arbitrators of the Collective Arbitral Court, who communicated acceptance of the appointment within the applicable deadline. The parties, notified of this designation on 17 October 2018, did not object.
The Collective Arbitral Court was constituted on 7 November 2018.
On 13 December 2018, the Respondent filed a Reply, in which it defends itself by exception and by objection.
Regarding the exception, it raises the material (partial) incompetence of the Arbitral Court in the part of the claim, in the amount of €658,429.85, which it considers to concern the dismissal of the VAT refund request. In this context, it cites various arbitral case law affirming, with support in article 2, no. 1, paragraph a) of the RJAT and in Ordinance no. 112-A/2011, of 22 March 2011, that the competence of Arbitral Courts is limited to the assessment of the (il)legality of acts of assessment, with the dismissal of a refund request not constituting a tax act of assessment, such that its assessment falls outside the material scope of arbitral jurisdiction (Judgments no. 137/2017-T, of 29 January 2018, and 48/2015-T, of 3 October 2015). The Respondent further contends that a different interpretation is unconstitutional by violation of article 212, no. 3 of the Constitution and also by violation of the principle of free access to courts, in the aspect of the right to double degree of jurisdiction, in accordance with articles 20 and 268 of the Constitution. Thus, according to the Respondent, the knowledge of the matter by this Court is restricted to the act of VAT assessment in the amount of €249,970.29, and the exception of dilatory material incompetence should be judged well-founded as regards the amount of the refund request, of €658,429.87.
In the defense by objection, the Respondent alleges that the obligation to regularize VAT arises from article 26 of the VAT Code and from the figure of self-consumption of goods provided for in article 16 of the VAT Directive and in article 3 of the VAT Code, with appropriate adjustments.
What is at issue is the closure of the Applicant's establishment, which it considers should be equated to a true onerous transfer of goods, a solution that aims to prevent evasion and prevent VAT-exempt goods from being used for purposes alien to the Applicant's social purpose, for which it invokes various case law of the Court of Justice (Case C-20/91, De Jong, and case 50/88, Kuhne, with judgments dated 6 May 1992 and 27 June 1989, respectively).
It rejects the interpretation conveyed by the Applicant that the regularization of the amounts of VAT deducted relating to the acquisition of real property or works on real property, in the event of cessation of economic activity of companies as a result of insolvency, should only occur upon transmission of such goods, as provided for in article 24, no. 5 of the VAT Code, since article 26, no. 3 of this diploma expressly provides for regularization directly derived from "cessation of activity" only referring to the cited article 24, no. 5 as to the manner of its implementation, i.e., its technical realization, which is "once and for all, for the [regularization] period still not elapsed".
On the other hand, it understands that there is no parallelism between the cessation of activity and the transfers of establishment contemplated in article 3, no. 4 of the VAT Code, as these are distinct situations, the non-taxation regime in the latter case depending on whether it is an economic organization that continues, a circumstance that does not occur in the situation at hand.
The Respondent affirms that its understanding is in accordance with the decision in the Court of Justice case C-229/15, with judgment of 16 June 2016, according to which "in the event of cessation of taxable economic activity of a taxable person, the holding of goods by that person, when such goods have conferred the right to deduct VAT at the time of their acquisition, may be equated to a supply of goods effected for consideration and subject to VAT [under article 18 of the VAT Directive], if the regularization period provided for in article 187 of the VAT Directive has ended." This judgment alerts to the fact that the regularization of the previously deducted tax must be carried out, in accordance with article 185, no. 1 of the VAT Directive, when, following the VAT declaration, changes in the elements taken into account for determining the amount of such deduction occur, seeking to avoid granting an unjustified economic advantage to the taxable person and to ensure a correspondence between upstream tax deduction and downstream tax collection.
Article 18, paragraph c) of the VAT Directive provides that Member States may equate to supplies of goods effected for consideration the holding of goods in the event of cessation of the taxable economic activity of a taxable person, when such goods have conferred the right to total or partial VAT deduction at the time of their acquisition. According to the Respondent, this equation was made by the national legislature through its insertion into the regularization regime contained in article 26, no. 3 of the VAT Code, which applies regardless of the classification as movable or immovable goods, under the said article 18, paragraph c) of the VAT Directive and the content of the Court of Justice's judgment in case C-229/15 aforementioned.
Regarding the alleged error in qualification of works and equipment incorporated in the installation of the mill as "real property", the Respondent relies on article 204, no. 1 of the Civil Code to reach a different conclusion, with this rule providing that "[a]ny movable thing materially attached to the property with a permanent character [constitutes an integral part]". In the situation at hand, the Respondent contends that material attachment to the building is also revealed from the perspective of economic purpose, which concerns the destination of the movable thing for the service and utility of the property and that the three groups of assets listed in the RIT allow one to deduce that the equipment and works in question became coupled to the ground with a permanent character. The Respondent further notes that the AT's invocation of Implementing Regulation no. 1942/2013 did not constitute the basis for qualification of those as real property, which was based on article 204, no. 1 of the Civil Code, but merely as reinforcement thereof, in addition to the fact that the Regulation's rule merely gathered what had been understood from the case law of the Court of Justice, specifically in case C-428/02, Fonden Marselisborg, of 3 March 2005, and case C-275/01, Sinclair Collis, of 12 June 2001.
The fact that the goods can be detached does not compromise this qualification [of real property], in addition to which it does not follow from the subsequent deed of sale of the equipment that the component parts of the mill were separated from the immovable to which they were coupled.
According to the Respondent, it was incumbent upon the Applicant, in accordance with the provisions of article 74, no. 1 of the General Tax Law ("LGT") and of article 342, no. 2 of the Civil Code, to prove the facts impeding, modifying or extinguishing the right invoked, which it has not done.
Regarding the allegation that the RIT does not contain sufficient proof elements, namely failure to attach copies of invoices, the Respondent notes that the Report contains, in appendix, 22 schedules, in which are disclosed the year of invoice issuance, the accounting entry number and document number, the invoice date, the name and tax number of the supplier, a brief description, transcribed from the invoices, the account of the Chart of Accounts (POC)/Accounting Standards (SNC) in which the purchase was recorded, the value of the taxable base (acquisition), as well as the value of the VAT deducted, information that was collected and relies on the Applicant's accounts and whose probative value results from the provision of article 76, no. 1 of the LGT.
Finally, as to the alleged dissonance of the understanding adopted in the STA Judgment, case no. 1328/17, of 4 November 2018, the Respondent considers that such disagreement does not exist. In its view, this judgment embraces the idea that each wind turbine, which may be considered a movable thing by nature, ultimately becomes an integral part in the property where it is installed, and therefore, in its entirety, considered as an integral part of that immovable property.
The Respondent concludes that the claim should be dismissed and consequently the claim should be rejected in the part not covered by the exception of material incompetence raised by it.
By order of 28 January 2019, the Applicant was notified to exercise the right to reply on the exception matter and the parties were given the opportunity to pronounce themselves on the waiver of the hearing provided for in article 18 of the RJAT, requesting the joinder of the administrative file ("PA"), which was satisfied on 5 February 2019. On the same date, the President of the Ethics Council of CAAD determined the replacement of the assistant arbitrator Dr. José Ramos Alexandre, due to justified resignation, by Dr. Ricardo Rodrigues Pereira, which was notified to the procedural participants.
On 6 February 2019, the Applicant pronounced on the exception of material incompetence raised by the opposing party, and contends that the Arbitral Court is competent to know the entirety of the claim relating to VAT assessment in the amount of €908,400.14.
Both parties, notified for optional submissions, maintained the positions assumed.
By orders of 2 May and 14 June 2019, the deadline for rendering the decision was extended, pursuant to article 21, no. 2 of the RJAT, given the complexity of the matter.
II. SANEAMIENTO (PRELIMINARY HEARING)
- PRELIMINARY ISSUE OF MATERIAL INCOMPETENCE OF THE ARBITRAL COURT
The Respondent raises the exception of partial material incompetence, on the grounds that Arbitral Courts are not competent to hear claims relating to acts of dismissal of VAT refund requests, as the analysis and decision of refund requests do not involve the assessment of the legality of an act of assessment.
Thus, with the assessment of a VAT refund not coming within the assessment of the legality of an act of assessment, the Respondent concludes that the issue brought to the proceedings relating to the cancellation of the VAT credit in the amount of €658,429.85 does not fall within the competence of arbitral jurisdiction, in accordance with and for the purposes of article 2, no. 1 of the RJAT and article 2 of Ordinance no. 112-A/2011, of 22 March (Binding Ordinance).
Indeed, national case law, namely the STA Judgment of 11 June 2008, rendered in case no. 115/08, and the Judgment of the Full Section of the Tax Dispute Section, in case no. 239/16, of 21 February 2018, reaches consensus regarding the conclusion that (administrative) decisions on refund requests are not of the nature of acts of assessment, being unrelated to the latter.
Equally, there is no doubt that article 2, no. 1 of the RJAT, in its current wording, only allows the hearing of claims for "declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account" and "declaration of illegality of acts of determination of taxable matter when it does not give rise to assessment of any tax, acts of determination of taxable income and acts of determination of property values".
It appears, however, that notwithstanding anything being objectionable in the abstract to the Respondent's thesis, according to which Arbitral Courts cannot hear an act of dismissal of a VAT refund request, a thesis with which we agree and which is generally recognized in various arbitral judgments (e.g., case no. 137/2017-T, of 29 January 2018; case no. 48/2015-T, of 3 October 2015; and case no. 238/2013-T, of 4 April 2014), the claim filed by the Applicant and the matter submitted to the assessment of this Court do not concern the assessment of an act of dismissal of a VAT refund.
First, the formulation of the arbitral claim does not have as its (partial) object the dismissal of the VAT refund request, but, expressly, the VAT assessment carried out by the AT relating to regularizations in the total amount of €908,400.14, resulting from the corrections made in the tax inspection procedure. The Applicant clarifies in this regard that the VAT assessment was carried out in two ways: (i) by issuance of an autonomous act of VAT assessment, in the amount of €249,970.29, accompanied by the assessment of related compensatory interest; and (ii) by cancellation of the VAT credit, of €658,429.85 that had been reported in the Applicant's Periodic VAT Declaration for the period under analysis.
In this context, this Court finds that reason is with the Applicant. In truth, without prejudice to the effect that a favorable decision may have on the VAT refund, what is at issue in the present proceedings is the discussion of the legality of an act of assessment of this tax in the total amount of €908,400.14.
Note that there is a prior legal issue which, notwithstanding naturally having effects on the VAT refund, assumes itself as logically prior and which concerns the need, or otherwise, to assess VAT for regularizations owed in favor of the State under article 26, no. 3 of the Code of this tax.
In effect, following the inspection action carried out by the AT, to assess the grounds for the VAT refund requested by the Applicant, the latter identified tax in arrears which, in its view, should have been assessed and was not, relating to VAT regularizations associated with cessation of activity. This allegedly outstanding tax that should have been assessed by the Applicant, and was not, amounts to €908,400.14, as results from the RIT.
The assessment of the amount in question should have given rise to a formal act of assessment notified to the Applicant in relation to which it could exercise its rights of defense. However, it received such notification only regarding part of that amount (€249,970.29). As for the remaining amount (€658,429.85), the AT proceeded to compensate it with the amount of the VAT credit for which the Applicant had requested refund, extinguishing it, with only the notification of the dismissal of the refund for "insufficient credit in current account" appearing in the record.
However, it is not against that dismissal that the Applicant comes to react, but against the prior assessment of the tax that "consumed" the Applicant's VAT credit.
Thus, the Applicant is right in stating that following the Inspection Report an assessment operation took place that covers all the tax that the AT proposed to correct. An assessment act which, by producing a modification in the Applicant's legal-tax and patrimonial situation (as it altered the value of the VAT assessed and due which, according to the AT, it should have declared), should have been notified to it and not merely, as acquired in the record, notified its consequence, i.e., the cancellation of the VAT credit that the Applicant had in its sphere.
It should be noted that if not for this additional VAT assessment owed for regularizations, there would have been no obstacle to granting the refund request, as the material validity of the exercise of the right to VAT deduction that generated the tax credit was not questioned in the inspection action that specifically analyzed its grounds and validated them.
The corrections made relate to a different reason, concerning the mechanism of regularizations in favor of the State.
Now, the lack or omission of unregularized VAT by the Applicant in its periodic declarations can only be corrected by an act of substitutive assessment, the existence of which is necessary to produce legal effects in the Applicant's sphere, as in the absence of such a tax act [of assessment] there would be no valid legal title capable of producing such effects capable of founding the subsequent cancellation of the VAT credit of €658,429.87 of which the Applicant was entitled and the consequent dismissal of the refund request. It is that additional assessment act underlying the cancellation of the VAT credit that the Applicant comes to challenge.
Thus, the position of the Respondent in the Reply cannot be accepted. First, because according to the claim and cause of action formulated by the Applicant, what is under discussion is the legality of VAT assessment relating to regularizations of tax deducted (in earlier years) relating to real property, whose grounds and proposed correction are contained in the Report drawn up following the inspection action, and not the consequent act of dismissal of the VAT refund due to "insufficiency of VAT credit in current account".
Moreover, it appears that the understanding adopted by the Respondent in the Reply is contradictory with the conclusion stated in the RIT in the following segment of the reasoning:
"In conclusion, the assessment of the legitimacy of any VAT refund request sequences the assessment of the legitimacy of the declared values that originated the credits that enabled it, and the subsequent assessment of the legitimacy of the values that were declared under VAT, even when in the context of the assessment of any refund request, does not preclude those values from being, possibly, subject to correction, and such possibility, it is reiterated, will result, either from the carrying out of acts of assessment, that is, from the promotion of corrections to the values that were declared by any taxable person in tax periods in relation to which no period of limitation has yet occurred, or, failing that, in the disregard, total or partial, of the amount of the credits generated in periods in which that period of limitation has already occurred. (emphasis ours)
Not being the second hypothesis, of period of limitation of the assessment of VAT regularizations, and as the AT itself affirms in the segment transcribed, the correction cannot but result "from the carrying out of acts of assessment", as a form of "promotion of corrections to the declared values".
Additionally, in this case, the deficient identification and the failure to notify autonomously of the act of VAT assessment supporting the cancellation of the credit of this tax are imputable to the Respondent, which illegally omitted them, and cannot prevail itself of such circumstance to, in a formalist interpretation and contra factum proprium, restrict and limit the Applicant's rights of defense based on the equivocal allegation that this aims to attack the dismissal of the VAT refund (claim which, it is reiterated, is not formulated in the present proceedings) and not the act of assessment of VAT regularizations, reviewable (as it is an act of assessment, and we have no doubts about this) in arbitral jurisdiction, in accordance with the provision of article 2, no. 1 of the RJAT.
The decision dismissing the Applicant's refund request is the consequence of an additional assessment act of VAT relating to regularizations. It is that assessment and not the decision of dismissal that is discussed in the present proceedings.
That is, in light of the available elements, VAT relating to regularizations was indeed assessed, pursuant to article 26, no. 3 of the VAT Code, assessment referable to the provision of article 2, no. 1, paragraph a) of the RJAT, capable of being assessed by this Court insofar as it falls directly within the scope of its jurisdiction, such that the invoked exception of incompetence must be considered unfounded.
In similar sense, the arbitral judgment no. 660/2017-T, of 12 March 2019, also pronounces, which states that in "the context of VAT, assessment is based on the declarative system (self-assessment), being a complex act only fully understandable if considered in a broad sense" that is, "only understandable taking into account the «credit mechanism and the chaining of assessment-deduction» which, as Sérgio Vasques refers, serves to «ensure the typical neutrality of VAT, preventing cumulative effect and ensuring that tax is ultimately borne by the final consumer»".
The said Judgment further adds, with relevance for the present proceedings, that it follows, "from the structure of the VAT Code itself, that we are faced with a broad notion of assessment, which encompasses deductions and tax regularizations (articles 19 to 26 of the VAT Code), as well as administrative assessments arising from inspection acts and official determination of tax (Chapter VI of the VAT Code).
This is the case of additional assessments regulated by article 87 of the VAT Code, relating to the "timing and manner of exercising the right to deduction". In no. 1 of this article, it is provided that, without prejudice to the case of assessments based on presumptions and indirect methods, to be carried out in accordance with the LGT, the AT "corrects the declarations of taxable persons, when it duly considers that these contain lower tax or higher deduction than due, additionally assessing the difference".
And in no. 5 of this same article, it says that if "after 12 months relating to the period in which the excess began, there persists a credit in favor of the taxable person exceeding €250, the latter may request its refund". This thus arises, alongside deduction by subtraction and carryforward, as a mode of exercise of the right to deduction and, consequently, may be seen as an element forming part of the tax assessment itself, clearly distinguishing itself from forms of tax refund, such as, e.g., the restitution of VAT already paid to political parties or to the Church.
It is in this sense that the position of José Xavier de Basto and Gonçalo Avelãs Nunes should be understood, when they affirm that "a refund contested by the tax authority is in all respects equivalent to an assessment of tax and the means of reacting against such an act of the administration, which denies or revokes a refund, are identical to those that the law places at the disposal of taxpayers to annul, in whole or in part, the assessment of tax."
In fact we are, in these cases, faced with a mere change in the form of assessment: a self-assessment becomes an additional administrative assessment. The fact that, at the accounting level, such fact presupposes a settlement of accounts does not alter the legal nature of the act."
Thus, also by virtue of the breadth that presides over the understanding of what is assumed as an assessment for VAT purposes, it should be considered that recourse, in the present proceedings, to arbitral jurisdiction, does not merit censure, and the exception of material incompetence invoked by the Respondent should be judged unfounded.
Regarding the Respondent's position that different interpretation is unconstitutional by violation of article 212, no. 3 of the Constitution and also by violation of the principle of free access to courts, in the aspect of the right to double degree of jurisdiction, in accordance with articles 20 and 268 of the Constitution, it should be noted that, given that acts of VAT assessment relating to regularizations in favor of the State are at issue, the faculty of submitting them to arbitral jurisdiction was expressly determined by the ordinary legislature (article 2, no. 1 of the RJAT). In this context, the grounds for the alleged violation of the Constitution are not discerned, particularly of the principles of free access to courts, since arbitral courts are one of the categories of courts provided for in the Constitution (article 209, no. 2) and the configuration of the system of appeals (double degree of decision) falls within the scope of legislative configuration, provided that the fundamental principles of jurisdiction are safeguarded, as appears to be the case, first and foremost in view of the provisions of articles 25 to 28 of the RJAT.
- OTHER PROCEDURAL PREREQUISITES
The Court was regularly constituted and is competent ratione materiae, given the configuration of the object of the proceedings (cf. articles 2, no. 1, paragraph a) and 5 of the RJAT).
The request for arbitral pronouncement is timely, as it was presented within the deadline provided for in article 10, no. 1, paragraph a) of the RJAT.
The parties have legal personality and capacity, have standing and are regularly represented (cf. articles 4 and 10, no. 2 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).
III. REASONING
- FINDINGS OF FACT
With relevance for the decision, it is important to note the following facts which are judged proven:
A. A..., S.A., here the Applicant, is a company under Portuguese law, whose corporate purpose consists of the exercise of activities of "Culture, production, sowing, transformation and marketing of oleaginous plants in general. Production, culture and transformation of olive, olive oil and derivatives and edible oils. Olive mill and associated services. Bio-energy and biomass production. Provision of associated services." – cf. Tax Inspection Report ("RIT") attached with the request for arbitral pronouncement ("ppa") and with the PA.
B. Since 2011 the main activity declared by the Applicant is olive oil production, to which corresponds the CAE 10412, and secondarily the activity of wholesale trade in cereals, seeds, legumes and other raw materials for agriculture, to which corresponds CAE 46214 – cf. RIT.
C. The Applicant is under the normal VAT regime and has complied with the obligation to submit periodic VAT declarations – cf. RIT.
D. In the exercise of its activity the Applicant acquired civil construction services and various equipment and machinery for the olive mill, among which the following stand out, with relevance for the situation at hand, 3 groups consisting in total of 22 assets which are listed below, for which it deducted the VAT incurred upon their acquisition:
GROUP 1 – FIXED ASSETS – RESULTING FROM ACTS OF CIVIL CONSTRUCTION
ITEM 1 – WORK ...
Description: Acts/services of civil construction consisting in the physical execution of the work of "Reconstruction and adaptation of mill and its surroundings in ...-...", described in the invoices as "Mill construction work order", involving both constructive and reconstructive acts
Total cost excluding VAT: €470,000.00; VAT incurred/deducted: €94,000.00
Supplier: C..., Lda., Tax ID ...
Invoice dates: 2009
Recording: Fixed asset coded with number ... – Group 2 – Installations – Mills and presses, with depreciation beginning at an annual rate of 3.57%, from the 2010 financial year
ITEM 2 – PRODER 2nd PHASE (€287,414.66 + €11,885.21)
Description: Acts/services of civil construction consisting in the physical execution of the "Mill construction work order" and acquisition of two scales, one of 35 and another of 60 tonnes
Total cost excluding VAT: €299,299.87; VAT incurred/deducted: €62,331.17
Supplier: C..., Lda., Tax ID...; D..., Lda., Tax ID...; and E..., S.A., Tax ID ...
Invoice dates: 2010
Recording: Fixed asset coded with number ... – Group 2 – Installations – Mills and presses, with depreciation beginning at an annual rate of 3.57%, from the 2010 financial year (at the value of €287,414.68) and from the 2011 financial year (at the value of €11,885.21)
ITEM 3 – ELECTRICAL INSTALLATION / YARD CLEANING
Description: Acquisitions of connection automation to the mill's electrical installation, to control passage at storage bins to the grinders, supply of electrical panels and their installation
Total cost excluding VAT: €62,865.66; VAT incurred/deducted: €12,573.13
Supplier: F..., Lda., Tax ID ...
Invoice dates: 2009 and 2010
Recording: Fixed asset coded with number ... – Group 2 – Installations – Of water, electricity, compressed air, refrigeration, and telephone (interior installations), with depreciation beginning at an annual rate of 10%, from the 2010 financial year
ITEM 4 – PRODER 2nd PHASE (WORK ...)
Description: Acquisitions of civil construction materials including pipes, inert materials and other materials; acquisitions of civil construction services, namely services for opening ditches for mill piping, services for construction of gatehouse and canteen, services for construction of pool, water treatment system, laboratory, treatment plant, masonry, and assembly services; and acquisitions of all material
Total cost excluding VAT: €274,736.51; VAT incurred/deducted: €61,727.61
Supplier: G..., S.A. (...), Tax ID...; H..., S.A., Tax ID...; I..., Lda., Tax ID...; C..., Lda., Tax ID...; J..., Tax ID...; K..., S.A., Tax ID ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 2 – Installations – Mills and presses, with depreciation beginning at an annual rate of 3.57%, from the 2011 financial year
ITEM 5 – BUILDINGS COVERING L...
Description: Supply of roofing for existing buildings at the mill
Total cost excluding VAT: €62,760.00; VAT incurred/deducted: €14,434.80
Supplier: L..., S.A., Tax ID ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 2 – Installations – Mills and presses, with depreciation beginning at an annual rate of 3.57%, from the 2011 financial year
ITEM 6 – EXCAVATION OF PIT / WELLS
Description: Services of excavation of pit and wells and services of compaction and drainage of pit
Total cost excluding VAT: €425,282.25; VAT incurred/deducted: €97,814.62
Supplier: C..., S.A., Tax ID ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 2 – Installations – Mills and presses, with depreciation beginning at an annual rate of 3.57%, from the 2011 financial year
ITEM 7 – ELECTRICAL INSTALLATION / YARD CLEANING
Description: Services for repair of damage to the electrical installation caused by the fall of bands; services for electrical connections of mill line panels and their maintenance and cleaning; services for installation of network for control of line panels; services for installation and mechanization of mobile lines at bins; and services for installation of detectors and limit switches on rotaries
Total cost excluding VAT: €30,809.39; VAT incurred/deducted: €4,556.16
Supplier: F..., Lda., Tax ID ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 2 – Installations – Of water, electricity, compressed air, refrigeration, and telephone (interior installations), with depreciation beginning at an annual rate of 10%, from the 2011 financial year
ITEM 8 – POOL LINING FOR OLIVE MILL
Description: Acquisitions of pool lining services, with supply of material, mounting of pump and sealing of pool
Total cost excluding VAT: €25,571.50; VAT incurred/deducted: €5,881.45
Supplier: M..., Lda., Tax ID...; J..., Tax ID ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 2 – Installations – Mills and presses, with depreciation beginning at an annual rate of 3.57%, from the 2011 financial year
ITEM 9 – PRODER 2nd PHASE
Description: Services for protection of transformation station and acquisition of related materials, including grounding, console placement and electrical cabling
Total cost excluding VAT: €46,284.07; VAT incurred/deducted: €10,645.34
Supplier: N... , Tax ID ...
Invoice dates: 2012
Recording: Fixed asset not identified in the depreciation schedule
ITEM 10 – PRODER 3rd PHASE
Description: Intra-community acquisition of warehouse construction services; civil construction services relating to sewers and masonry, walls around masonry, installation of grill in masonry and mill, installation of piping for water at olive discharge location, floor laying in masonry and plastering of its walls, construction of sewer boxes, preparation of fixtures for storage units, kennel construction, pit construction and deposit mounting; acquisition of civil construction materials such as cement, angles, bars, rebar, sand and all material
Total cost excluding VAT: €80,181.54; VAT incurred/deducted: €18,441.75
Supplier: O..., SL, Tax ID ES-...; J..., Tax ID...; I..., Lda., Tax ID...; K..., S.A., Tax ID ...
Invoice dates: 2012 (acquisition date)
Recording: Fixed asset not identified in the depreciation schedule
ITEM 11 – 15/30 KV OIL TRANSFORMER
Description: Intra-community acquisition of an electrical transformer
Total cost excluding VAT: €165,279.00; VAT incurred/deducted: €38,014.17
Supplier: P..., Tax ID ES – ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 1 – Food, beverages and tobacco – B – Other food industries – Rice milling, hulling and polishing and vegetable oil refining, with depreciation beginning at an annual rate of 5%, from the 2011 financial year
ITEM 12 – MILL ELECTRICAL PANEL
Description: Acquisition of an electrical command and protection panel for the mill
Total cost excluding VAT: €13,450.00; VAT incurred/deducted: €3,083.50
Supplier: N..., Tax ID ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 2 – Installations – Of water, electricity, compressed air, refrigeration, and telephone (interior installations), with depreciation beginning at an annual rate of 10%, from the 2011 financial year
ITEM 13 – METAL STRUCTURES / ...
Description: Intra-community acquisition of the structure (warehouse) in which storage tanks for olive oil are installed and which were fixed to the cement base built, as well as the other connection elements such as electrical panels, cabling and piping
Total cost excluding VAT: €245,794.50; VAT incurred/deducted: €51,616.85
Supplier: Q..., SL, Tax ID ES – ...
Invoice dates: 2010
Recording: Fixed asset coded with number ... – Group 1 – Food, beverages and tobacco – B – Other food industries – Rice milling, hulling and polishing and vegetable oil refining, with depreciation beginning at an annual rate of 5%, from the 2010 financial year
GROUP 2 – FIXED ASSETS – OLIVE RECEPTION AND EXTRACTION LINE EQUIPMENT
ITEM 14 – CLEANING, WEIGHING LINE AND ELECTRICAL PANEL
Description: Acquisition of an olive cleaning line, consisting of a washer-weigher and electrical panel for the hoods, having been physically attached to the building
Total cost excluding VAT: €40,000.00; VAT incurred/deducted: €8,000.00
Supplier: R..., S.A., Tax ID ...
Invoice dates: 2008
Recording: Fixed asset coded with number ... – Group 2 – Installations – Mills and presses, with depreciation beginning at an annual rate of 5%, from the 2010 financial year
ITEM 15 – OLIVE TREATMENT LINE
Description: Intra-community acquisition of machinery existing in the olive reception area, consisting of various lines, consisting of pulp separators, olive reception boxes, conveyor belts and their supports, bins, washers and weighers, equipment of large dimensions and installed on the built infrastructure, with an extensive paved floor area, having been fixed to the concrete slab, with the main support points embedded, to allow the structural safety of all equipment
Total cost excluding VAT: €687,470.00; VAT incurred/deducted: €144,368.70
Supplier: S..., S.A., Tax ID ES – ...
Invoice dates: 2010
Recording: Fixed asset coded with number ... – Group 1 – Food, beverages and tobacco – B – Other food industries – Rice milling, hulling and polishing and vegetable oil refining, with depreciation beginning at an annual rate of 5%, from the 2010 financial year
ITEM 16 – OLIVE EXTRACTION LINE
Description: Intra-community acquisition of three olive extraction lines, consisting of machinery that works in an integrated manner in the successive phases of transformation of olive into olive oil and which is connected to all the built infrastructure, either by its installation/fixation to the ground, or by all the coupled connections, namely electrical cabling, ducts and piping
Total cost excluding VAT: €950,000.00; VAT incurred/deducted: €218,500.00
Supplier: T..., Tax ID ES – ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 1 – Food, beverages and tobacco – B – Other food industries – Rice milling, hulling and polishing and vegetable oil refining, with depreciation beginning at an annual rate of 5%, from the 2011 financial year
ITEM 17 – OLIVE EXTRACTION LINE
Description: Intra-community acquisition of services relating to installation of piping connections to pits, including supply of valves and piston pumps
Total cost excluding VAT: €50,000.00; VAT incurred/deducted: €11,500.00
Supplier: T..., Tax ID ES – ...
Invoice dates: 2013
Recording: Fixed asset that despite appearing in the depreciation schedule for the 2013 financial year, was not subject to depreciation in that or subsequent financial years
ITEM 18 – OLIVE EXTRACTION LINE
Description: Intra-community acquisition of services relating to the assembly work of the above-described olive extraction lines
Total cost excluding VAT: €913,711.85; VAT incurred/deducted: €182,742.37
Supplier: T..., Tax ID ES – ...
Invoice dates: 2009, 2010
Recording: Fixed asset coded with number ... – Group 1 – Food, beverages and tobacco – B – Other food industries – Rice milling, hulling and polishing and vegetable oil refining, with depreciation beginning at an annual rate of 5%, from the 2010 financial year
GROUP 3 – FIXED ASSETS – CONSISTING OF STORAGE TANKS
ITEM 19 – OLIVE OIL TANKS
Description: Intra-community acquisition of 73 tanks, with five different capacities (between 5,000 liters and 87,300 liters), which are connected to the ground via piping and installation and connection between each of the tanks. The tanks are installed in a building to which corresponds the fixed asset "Metal Structures /..." and through which pass, and are installed, electrical panels, piping and cabling
Total cost excluding VAT: €627,300.00; VAT incurred/deducted: €126,668.00
Supplier: U..., Tax ID ES – ...
Invoice dates: 2009, 2010 (acquisition in 2010)
Recording: Fixed asset coded with number ... – Group 1 – Food, beverages and tobacco – B) Other food industries – Tanks – Of metal, with depreciation beginning at an annual rate of 3.57%, from the 2010 financial year
ITEM 20 – WATER TANK
Description: Acquisition of a set intended for water treatment to be used in the mill. It consists of two circular tanks, installed on a cement floor, and next to these is a covering in the area where the monitoring and control equipment are and where the respective piping and cabling are, with the fixation to the contiguous floor of such piping and equipment
Total cost excluding VAT: €12,000.00; VAT incurred/deducted: €2,760.00
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 1 – Food, beverages and tobacco – B) Other food industries – Tanks – Of metal, with depreciation beginning at an annual rate of 3.57%, from the 2011 financial year
ITEM 21 – STEEL TANKS V... / STAINLESS
Description: Acquisition of tanks and supply and assembly of components associated with the installation of olive oil tanks, such as tubes and accessories, pumps to enable the circulation of olive oil and drainage piping of waste water, as well as services for connection of centrifuges to the piping
Total cost excluding VAT: €161,277.81; VAT incurred/deducted: €37,093.90
Supplier: V..., S.A., Tax ID ...
Invoice dates: 2011
Recording: Fixed asset coded with number ... – Group 1 – Food, beverages and tobacco – B) Other food industries – Tanks – Of metal, with depreciation beginning at an annual rate of 3.57%, from the 2011 financial year
ITEM 22 – STEEL TANKS / STAINLESS – V...
Description: Acquisition of olive oil tanks
Total cost excluding VAT: €188,699.19; VAT incurred/deducted: €43,400.81
Supplier: V..., S.A., Tax ID ...
Invoice dates: 2012
Recording: Fixed asset that despite appearing in the depreciation schedule for the 2012 financial year, was not subject to depreciation in that or subsequent financial years
– cf. RIT.
E. The Applicant, in the context of the insolvency proceedings to which it was subject closed its establishment, pursuant to article 65, no. 3 of the CIRE, and declared cessation of activity on 17 August 2016, that is, in the quarterly period [3rd quarter] ending on 30 September of that year [2016] – cf. RIT.
F. In the periodic VAT declaration for that quarter – 2016/09T – the Applicant calculated a VAT credit in its favor in the amount of €658,429.87, having requested the refund of this tax – cf. copy of declaration attached with the ppa and RIT.
G. The Applicant did not report in that periodic VAT declaration for the last period of activity – 2016/09T – regularizations of VAT in favor of the State – cf. RIT.
H. On 14 September 2017, an external inspection action commenced against the Applicant, by the Tax Inspection Division of the Finance Office of ..., under Service Order no. OI2017..., with the purpose of assessing the legitimacy of the VAT refund request, filed by the Applicant, referring to the period of 201609T, in the amount of €658,429.85 – cf. RIT.
I. Following this inspection action, the Applicant was notified of the Draft Inspection Report, in which the AT concluded that regularizations of VAT deducted in the acquisition (in earlier years) of goods and services relating to real property were owed in favor of the State, in the total amount of €908,400.14, as a result of cessation of activity, under the combined application of articles 26, no. 3 and 24, no. 5 of the VAT Code – cf. RIT.
J. The Applicant exercised the right of hearing, in which it expressed its disagreement with the AT's position, which subsequently issued the Final Report, of 7 December 2017, notified by official letter no. ..., dated 12 December 2017, maintaining the VAT corrections advocated in the Draft, in the amount of €908,400.14 – cf. RIT.
K. The following reasoning is contained in the RIT:
"[…] CHAPTER III – OF THE FACTS AND GROUNDS OF PURELY ARITHMETIC CORRECTIONS TO TAXABLE MATTER
For the successive VAT credits, which resulted from the values declared by the taxable person in the periodic VAT declarations submitted by it, summarized in appendix, occurred, among others, deductions relating to tax supported in acquisitions of tangible fixed assets (tangible fixed assets), which comprised acquisitions of realities typified as movable goods and immovable property, and, in the latter case, occurred, either acquisitions of actual immovable property, or acquisitions of immovable property by physical and functional accession, that is, of goods that, by their durable connection to the ground and/or to the buildings that resulted from the acquired civil construction acts, or that, by their functional relevance to such buildings, being qualifiable as movable, before their acquisition/installation, acquired that nature, by physical accession, due to such durable connection, and/or by functional accession, in this case, industrial.
This distinction assumes particular relevance in the assessment of the legitimacy of the identified VAT refund request at hand, inasmuch as the taxable person declared to the AT to have ceased on 2016-08-17, in accordance with no. 3 of article 34 of the VAT Code, and in accordance with no. 3 of article 65 of the Code of Insolvency and Recovery of Companies, the activity taxed under VAT, which it had been exercising until then.
Indeed, in article 26 of the VAT Code, entitled «Regularizations of deductions relating to immovable property not used for business purposes» the following rules appear: […]
That is, it results as to all amounts of Value Added Tax, which were supported, and deducted by the taxable person, in acquisitions of immovable property, that such cessation of activity imposes the obligation, not fulfilled by the taxable person, provided for in the transcribed no. 3 of article 26 of the VAT Code, to proceed with the regularization in favor of the State, of those declared deductions, in the following terms:
– The value of the regularization will correspond, for each immovable fixed asset, the part of the arithmetic sum of all the declared deductions, connected with its acquisition/construction/production, part that will correspond to the exact proportion of the number of years that remain, for the said 20-year period to be completed, over those same 20 years, as required by the transcribed no. 5 of article 24 of the VAT Code
– The said 20-year period is counted:
– Either from the year of the start of depreciation of the acquired fixed assets, consisting of immovable property, that is, counted from their effective use in the context of taxed activity, which means, in the particular case of fixed assets under construction whose effective use has occurred, and in which the conclusion thereof has been preceded by the successive declaration of deductions, relating to the amounts of tax supported in the corresponding acquisitions that were made over a certain period of time, covering, therefore, successive tax periods, that the counting of the said regularization period is initiated, not from the year, or years, after a complete year in which those deductions occurred, but rather from, after a complete year, the year of the start of use of the fixed asset, as results from the provided in no. 4 of the said article 24, in which appears the mention of «(…) in the year of the start of its use (…)»;
– Or, in the case of fixed assets consisting of immovable property, whose use did not occur, as provided for in the transcribed no. 1 of article 26 («Non-use for business purposes of immovable property in relation to which tax deduction occurred»), from the year of acquisition of such fixed assets, as results from the transcribed no. 2 of article 24, to which the said no. 1 of article 26 refers, both of the VAT Code, in which appears the mention of «(…)determined in the year of acquisition (…)».
– The assessment of the number of years remaining for the said 20-year regularization period to be completed, is made, considering that the number of years of that regularization period that have already elapsed, corresponds to the counting of the number of complete years from the date of start of use, or the date of acquisition, until the date of cessation of activity under VAT, occurring on 2016-08-17, since the transcribed no. 3 of article 26 of the VAT Code refers to «(…)complete calendar years (…)».
– The declaration of the amount of tax to be regularized in accordance with the transcribed no. 3 of article 26, should, in this case, appear in Field 41 of the periodic declaration current for the period 201609T, as results from no. 8 of the said article 24, in which it appears that «8- The regularizations provided for in the preceding numbers must appear in the declaration of the last period of the year to which it relates.».
– No regularization is due, when the value of each of the immovable property in question, is of value less than €2,500.00, as results from the provision in no. 7 of the same article 24.
Because the transcribed legislation concerns the regularization of deductions relating to tax supported in the acquisition of fixed assets, when they are qualifiable as immovable, it is important, therefore, to specify the definition and scope of what is immovable property.
Under the provision of paragraph d) of article 2 of the General Tax Law, for assessing the contours of this qualification, it is legitimate to resort to article 204 of the Civil Code, in whose number 3 is provided, as to the definition of what is immovable property, that «An integral part is any movable thing materially attached to the property with a permanent character.».
That is, it constitutes a condition for the consideration of a movable thing as immovable property that, in addition to the noted physical connection to a property (to the ground or to a building), it is further necessary that the same be permanent, in the sense that its removal, on the one hand, be an act not expected at the moment of installation of the thing, and, on the other hand, be a future act which, without prejudice to the probability of the same occurring, such probability is so diminished, either by force of the characteristics of the thing itself, or by the manner in which the thing was installed, that its removal will imply difficulties, either of a logistic or financial nature, which will translate into an opportunity cost that is not comparable to situations of normal removal of any movable thing.
That is, only when, by its physical characteristics, and in which despite its eventual permanent connection to the ground, or to the walls of any building, the removal of any movable thing does not present unusual difficulties, in the sense that, either by force of the reduced size of the thing, or by force of the minimal damage caused by its removal, it will be legitimate to qualify that thing as movable.
On the contrary, when the manner of connection to the ground or to the buildings resulting from the acquired civil construction acts, and especially, when the installation or assembly of that thing, was preceded by those civil construction acts, which were carried out with the express purpose of enabling the installation of the thing, and in which it is from the combination of these two elements (the civil construction acts, and the thing, or things, installed), that the reality capable of being used in the taxed activity is born, to be, as to both, in the presence of an effective immovable property, by mutual physical and functional incorporation.
Given the set out legislation, it results from the factuality verified at the taxable person's installation location, and verified along the collected accounting elements, that three large sets of fixed assets were identified, whose acquisition sequenced the declaration, by the taxable person, as deductible VAT, of the corresponding amounts of VAT supported, namely.
1- Group 1 – Fixed assets, consisting of buildings resulting from civil construction acts, which were acquired from suppliers:
[…]
2- Group 2 – Fixed assets, consisting of olive reception and extraction line equipment:
[…]
3- Group 3 – Fixed assets, consisting of tanks:
[…]
The above-stated quantifications result from the qualification of these 22 assets of fixed assets as immovable, a qualification that results from the concept existing in the transcribed rule of the Civil Code.
However, it is also defined, in Implementing Regulation (EU) 1042/2013, of 07/10, which entered into force in all EU Member States on 1 January 2015, and in which its article 13-B, relating to the application of rules connected with the location of supplies of services carried out on immovable property, having entered into force as from 1 January 2017, has the purpose of «For the application of Directive 2006/112/EC (…)», the explication of the realities capable of being considered «(…)immovable property», for VAT purposes.
[…]
It results from the qualification as immovable property, of the 22 identified fixed assets, and from the already quantified regularizations of Value Added Tax, in accordance with the transcribed no. 3 of article 26 of the Code of this tax, the determination of the total amount of tax to be regularized in favor of the State of €908,400.14, whose declaration appears due in Field 41 of the VAT periodic declaration to be reported for the period of 201609T, as shown in the summary schedule […]
Given the value of the described correction, connected with the regularizations owed in favor of the State under the terms of no. 3 of article 26 of the VAT Code with reference to the period of 201609T, and consisting in this same tax period, in the current account for VAT of the taxable person, as a title of excess to be carried forward coming from the immediately preceding period, the amount of €658,429.85, it results that it is proposed, as to the VAT refund request with the value of that excess to be carried forward, identified with the number..., processed on 2017-07-04 in Field 95 of the ex officio periodic VAT declaration, identified with the number ..., its dismissal, on the grounds of the lack of regularization of the amount of tax to be regularized in favor of the State of €908,400.14, owed in accordance with articles 24 and 26, both of the VAT Code, as a result of the cessation of activity occurring on 2016-08-17, and for having been deducted tax supported in the acquisition of the identified tangible fixed assets, consisting of immovable property.
[…]
In conclusion, the assessment of the legitimacy of any VAT refund request sequences the assessment of the legitimacy of the declared values that originated the credits that enabled it, and the subsequent assessment of the legitimacy of the values that were declared under VAT, even when in the context of the assessment of any refund request, does not preclude those values from being, possibly, subject to correction, and such possibility, it is reiterated, will result, either from the carrying out of acts of assessment, that is, from the promotion of corrections to the values that were declared by any taxable person in tax periods in relation to which no period of limitation has yet occurred, or, failing that, in the disregard, total or partial, of the amount of the credits generated in periods in which that period of limitation has already occurred. […]
1 – By virtue of their own nature, the fixed assets identified with the numbers 1 to 13, given that the common denominator to all of them, in addition to their inevitable material connection to the ground and/or to the buildings already in place, is the persistence of a durable character of that same connection, which results, both from the very nature of the acquired civil construction acts, and of the respective materials and goods applied. Here are included, in addition to the buildings that resulted, among others, from the work carried out in fulfillment of the main contract, which was concluded with the supplier C..., SA, the acquired transformation stations, the excavated pits, the acquired tiles, and, also, the so-called ... .
2 – Also by virtue of their intrinsic nature, but also resulting from their integration with the erected reality that constitutes the mill, it results, as to the goods, described as lines, identified with the numbers 14 to 18, and also, as to the goods, described as tanks, identified with the numbers 19 to 22, that, without these, the acquisition of all the fixed assets, identified with the numbers 1 to 13, would not have had reason to have occurred, and in which these, were only acquired to enable the installation and functioning of the former, that is, given the physical reality at hand, and saving better judgment, it results that, together with the nature of the existing physical connections between these assets, stands out the fact that all of them, constitute the constituent elements of a single building, that complete it, and for whose use all contribute;
3 – Finally, the correction proposed in the Draft Report stems from the very reason for being of no. 3 of article 26 of the VAT Code, a rule that corresponds to article 187 of Council Directive 2006/112/EC of 28 November 2006, a reason for being that is connected with the period of time required, as to certain goods, whose acquisition sequenced the deduction of the supported tax, whose nature imposes the regularization of part of the practiced deduction, based on the occurrence of non-use of the good in taxed activity, in the required period of time, which enabled that same deduction, and that, and saving better judgment, attentive to the adduced argumentation, the alluded article 13-B of the identified implementing regulation, does not collide with any of the prevailing senses given by existing doctrine to the concept of immovable property, existing in the Portuguese Civil Code.
[…]
For which it is proposed:
1 – The maintenance of the corrections that were proposed in the Draft Report […]" – cf. RIT.
L. The reasoning contained in the RIT and the schedules which form an integral part of the same identify the following elements, relating to the assets for which the AT understands VAT deducted should be regularized:
(i) description of the assets;
(ii) year of acquisition;
(iii) value of acquisition excluding VAT, VAT incurred and VAT deducted by the Applicant;
(iv) suppliers and supplier invoices;
(v) accounting classification (fixed asset) and asset code in the depreciation schedule (if applicable);
(vi) useful life period/depreciation rate, annual depreciation amount and year depreciation began (if applicable) – cf. RIT.
M. These characterizing elements of the assets were extracted from the accounting and supporting documentation made available by the Applicant, which the AT considered credible and in conformity with accounting and tax rules, not having altered/corrected them, having been on the basis of these elements that the AT determined and calculated the VAT regularizations at issue – cf. RIT.
N. The reasoning and conclusions of the RIT were subject to an order of agreement of the Finance Director of ..., of 12 December 2017, of the following tenor: "Considering the opinions and the information attached, as well as the grounds of the taxation proposal, arising from the application of the provision in article 87 of the VAT Code, which I endorse and hereby reproduce, and further considering that in the exercise of the right of hearing the taxable person failed to present arguments that would justify the proposed changes, rather it supported them with the IT considering them unalterable, what is subscribed to, I determine the assessment of the tax that must be regularized, as wrongly deducted, in accordance with the rules of articles 24 no. 5 and 26
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