VAT Rate on Dental Implants & Crowns Sold Separately: CAAD Case 429/2014-T

Case Number 429/2014-T

The arbitrators Dr. Jorge Manuel Lopes de Sousa (arbitrator-president), Prof. Dr. Clotilde Celorico Palma and Dr. Emanuel Vidal Lima, appointed by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 02-09-2014, agree as follows:

Report

A…, SOLE PROPRIETORSHIP LIMITED LIABILITY COMPANY, TIN …, with registered office at …, hereinafter referred to as "Claimant", submits, in accordance with the provisions of articles 2, no. 1, lit. a) and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter "LRAT"), a request for constitution of an arbitral tribunal to pronounce on the illegality and consequent annulment of VAT and compensatory interest assessments.

The REVENUE AND CUSTOMS AUTHORITY is the Respondent.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 18-06-2014 and notified to the Revenue and Customs Authority on 24-06-2014.

In accordance with the provisions of lit. a) of no. 2 of article 6 and lit. b) of no. 1 of article 11 of the LRAT, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories of this award, who communicated their acceptance of the appointment within the applicable period.

On 18-08-2014 the parties were duly notified of this appointment and expressed no intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11, no. 1, lit. a) and b), of the LRAT and articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provision of lit. c) of no. 1 of article 11 of the LRAT, the tribunal was constituted on 02-09-2014.

The Revenue and Customs Authority submitted a response in which, in addition to defending the dismissal of the request for arbitral pronouncement, it contested that the corrections amount to € 208,577.80 for the tax year 2009, € 233,953.12 relating to 2010 and € 319,691.96 relating to 2011, with the value of the claim being € 1,088,824.20 and not € 1,227,178.71.

On 29-10-2014, the meeting provided for in article 18 of the LRAT took place, in which the Claimant proceeded to produce witness testimony and oral arguments.

The Arbitral Tribunal was duly constituted.

The parties have legal personality and capacity and are legitimate (articles 4 and 10, no. 2, of the same statute and article 1 of Ordinance no. 112-A/2011, of 22 March) and are duly represented.

The proceedings do not suffer from any nullities.

Matter of Fact

Proven Facts

The following facts are considered proven:

• A…, Sole Proprietorship Limited Liability Company (hereinafter abbreviated as A or SP), is a sole proprietorship limited liability company with the following object: "Industry and trade of dental materials and representation of material and products related to dentistry and odontology, of its own and/or third parties, including importation and exportation of those products, as well as research and development activities in the dental and odontology area".

• For purposes of Value Added Tax, the company is a taxable person under lit. a) of no. 1 of article 2 of the VAT Code and classified in the normal monthly regime under lit. a) of no. 1 of article 41 of the VAT Code.

• Under four external inspection orders – OI2012…, OI2012…, OI2012… and 2013… – corrections were made in VAT and CIT, of which the Claimant was notified on 06.12.2013.

• In VAT matters, the Revenue and Customs Authority found that the Claimant, when importing merchandise, bears VAT at the normal rate at customs, and under articles 19 and 20 of the VAT Code, has the right to deduct it, and downstream, that is in its sales, the Claimant applied reduced rate VAT to all materials that form an integral part of the dental implant, applying the normal rate only to merchandise that is used as utensils by dentists for the placement and assembly of other materials, such as, for example, dental burs and surgical kits.

• The Claimant requested binding information from the VAT Services Directorate, which was numbered 1371 and was issued on 12.03.2009, in which it was informed that "the devices commercialized by the Claimant are not complete devices, not falling within item 2.6 of List I attached to the VAT Code, such materials being subject to the normal rate".

• In point 5 of the aforementioned binding information it is stated that "(…) only complete devices benefit from the reduced rate of 5%, leaving the transmission of various component parts, spare parts and pieces, subject to VAT at the normal rate."

• Applying the interpretation of the aforementioned Binding Information, the Revenue and Customs Authority made VAT corrections which resulted in the following VAT and compensatory interest assessments:

1. Additional VAT Assessment no. …, relating to period 0901;

2. Additional VAT Assessment no. …, relating to period 0902;

3. Additional VAT Assessment no. …, relating to period 0903;

4. Additional VAT Assessment no. …, relating to period 0904;

5. Additional VAT Assessment no. …, relating to period 0905;

6. Additional VAT Assessment no. …, relating to period 0906;

7. Additional VAT Assessment no. …, relating to period 0907;

8. Additional VAT Assessment no. …, relating to period 0908;

9. Additional VAT Assessment no. …, relating to period 0909;

10. Additional VAT Assessment no. …, relating to period 0910;

11. Additional VAT Assessment no. …, relating to period 0911;

12. Additional VAT Assessment no. …, relating to period 0912;

13. Additional VAT Assessment no. …, relating to period 1001;

14. Additional VAT Assessment no. …, relating to period 1002;

15. Additional VAT Assessment no. …, relating to period 1003;

16. Additional VAT Assessment no. …, relating to period 1004;

17. Additional VAT Assessment no. …, relating to period 1005;

18. Additional VAT Assessment no. …, relating to period 1006;

19. Additional VAT Assessment no. …, relating to period 1007;

20. Additional VAT Assessment no. …, relating to period 1008;

21. Additional VAT Assessment no. …, relating to period 1009;

22. Additional VAT Assessment no. …, relating to period 1010;

23. Additional VAT Assessment no. …, relating to period 1011;

24. Additional VAT Assessment no. …, relating to period 1012;

25. Additional VAT Assessment no. …, relating to period 1101;

26. Additional VAT Assessment no. …, relating to period 1102;

27. Additional VAT Assessment no. …, relating to period 1103;

28. Additional VAT Assessment no. …, relating to period 1104;

29. Additional VAT Assessment no. …, relating to period 1105;

30. Additional VAT Assessment no. … relating to period 1106;

31. Additional VAT Assessment no. …, relating to period 1107;

32. Additional VAT Assessment no. …, relating to period 1108;

33. Additional VAT Assessment no. …, relating to period 1109;

34. Additional VAT Assessment no. …, relating to period 1110;

35. VAT Assessment no. 2013 …, relating to period 1111;

36. VAT Assessment no. 2013 …, relating to period 1112;

37. VAT Assessment no. 2013 …, relating to period 1201;

38. VAT Assessment no. 2013 …, relating to period 1202;

39. VAT Assessment no. 2013 …, relating to period 1203;

40. VAT Assessment no. 2013 …, relating to period 1204;

41. VAT Assessment no. 2013 …, relating to period 1205;

42. VAT Assessment no. 2013 …, relating to period 1206;

43. VAT Assessment no. 2013 …, relating to period 1207;

44. VAT Assessment no. 2013 …, relating to period 1208;

45. VAT Assessment no. 2013 …, relating to period 1209;

46. VAT Assessment no. 2013 …, relating to period 1210;

47. VAT Assessment no. 2013 …, relating to period 1211;

48. VAT Assessment no. 2013 …, relating to period 1212;

49. Compensatory Interest Assessment no. …, relating to period 0901;

50. Compensatory Interest Assessment no. …, relating to period 0902;

51. Compensatory Interest Assessment no. …, relating to period 0903;

52. Compensatory Interest Assessment no. …, relating to period 0904;

53. Compensatory Interest Assessment no. …, relating to period 0905;

54. Compensatory Interest Assessment no. …, relating to period 0906;

55. Compensatory Interest Assessment no. …, relating to period 0907;

56. Compensatory Interest Assessment no. …, relating to period 0908;

57. Compensatory Interest Assessment no. …, relating to period 0909;

58. Compensatory Interest Assessment no. …, relating to period 0910;

59. Compensatory Interest Assessment no. …, relating to period 0911;

60. Compensatory Interest Assessment no. …, relating to period 0912;

61. Compensatory Interest Assessment no. …, relating to period 1001;

62. Compensatory Interest Assessment no. …, relating to period 1002;

63. Compensatory Interest Assessment no. …, relating to period 1003;

64. Compensatory Interest Assessment no. …, relating to period 1004;

65. Compensatory Interest Assessment no. …, relating to period 1005;

66. Compensatory Interest Assessment no. …, relating to period 1006;

67. Compensatory Interest Assessment no. …, relating to period 1007;

68. Compensatory Interest Assessment no. …, relating to period 1008;

69. Compensatory Interest Assessment no. …, relating to period 1009;

70. Compensatory Interest Assessment no. …, relating to period 1010;

71. Compensatory Interest Assessment no. …, relating to period 1011;

72. Compensatory Interest Assessment no. …, relating to period 1012;

73. Compensatory Interest Assessment no. …, relating to period 1101;

74. Compensatory Interest Assessment no. …, relating to period 1102;

75. Compensatory Interest Assessment no. …, relating to period 1103;

76. Compensatory Interest Assessment no. …, relating to period 1104;

77. Compensatory Interest Assessment no. …, relating to period 1105;

78. Compensatory Interest Assessment no. …, relating to period 1106;

79. Compensatory Interest Assessment no. …, relating to period 1107;

80. Compensatory Interest Assessment no. …, relating to period 1108;

81. Compensatory Interest Assessment no. …, relating to period 1109;

82. Compensatory Interest Assessment no. …, relating to period 1110.

• The deadline for voluntary payment of the assessments occurred on 31-03-2014.

• Implantology replaces lost teeth through dental implants in titanium and crowns (Tax Inspection Report fls. 12).

• The Claimant's clients are dentists or dental clinics that work in implantology (Tax Inspection Report fls. 12).

• The dental implant is prosthetic material that serves to replace a natural tooth (testimony of witness B…).

• The dental prosthesis by dental implant consists of three elements: implant, abutment and crown (testimony of witness B…).

• The implant is a titanium screw that serves to replace the root of a natural tooth that, for any reason, was extracted and to support an abutment and a dental crown (testimony of witness B…).

• The implants commercialized by the Claimant in Portugal may assume various commercial designations, depending on the characteristics of each product (material from which they are made, size, etc.) (testimonies of witnesses B… and C…).

• The abutments commercialized by the Respondent in Portugal may assume various commercial designations, depending on the characteristics of each product (material from which they are made, size, etc.) (testimonies of witnesses B… and C…).

• The crown is normally prepared by dental prosthetics laboratories and needs to adjust to the characteristics of the patient's dentition, so it is specifically produced for each case (testimonies of witnesses B… and C…).

• The surgical procedure for placing a dental prosthesis involves three stages and may have more than one intervener, given that it involves surgery work that must be performed by a physician and prosthetics work that must be performed by a prosthetics technician (testimony of witness B…).

• The first stage consists of the surgical placement of the dental implant level with the bone, but within the gum (testimony of witness B…).

• After placement of the dental implant, the process of union of the dental implant to the bone begins, called "osseointegration" (testimony of witness B…).

• At the end of the "osseointegration" process, the dental implant needs to be exposed by removing the overlying gum (testimony of witness B…).

• In a second stage, the surgeon verifies the implant to confirm whether osseointegration was successful and, if so, places the abutment that penetrates the gum (testimony of witness B…).

• In a third stage, after the healing process that delimits the space to be occupied by the implant, the dental crown (artificial porcelain tooth) is manufactured and placed on the osseointegrated dental implant (testimony of witness B…).

• The three basic pieces from which the implant is composed have no other use than for making implants (testimonies of witnesses B… and C…).

• There are dozens of models of each of these three basic pieces from which the implant is composed in the market (testimonies of witnesses B… and C… and documents nos. 84 and 85 together with the initial petition, whose contents are deemed reproduced).

• The Claimant provided a bank guarantee to suspend the execution proceedings no. …2014…, of the Tax Service of …, instituted for collection of the sums to which the aforementioned assessments refer, having spent up to that date € 9,773.38 (document submitted by the Claimant on 01-09-2014, whose content is deemed reproduced).

• On 16-06-2014, the Claimant submitted the request for constitution of the arbitral tribunal that gave rise to the present proceedings.

2.2. Unproven Facts

There are no facts relevant to the decision of the case that have not been proven.

2.3. Grounds for the Decision on the Matter of Fact

The facts were deemed proven on the basis of the Tax Inspection Report and the documents together with the initial petition and the testimonies of witnesses B… and C…, in the indicated points.

The witnesses appeared to testify with impartiality and with knowledge of the matters on which they testified.

3. Question of the Value of the Claim

The Claimant indicated as the value of the claim € 1,227,178.71 and the Revenue and Customs Authority argues that the value of the claim corresponds to the contested assessments which it believes to be € 1,088,824.20, which appears in the table at point 4.2.5 on page 36 of the Tax Inspection Report.

As appears on page 48 of the Tax Inspection Report, the value of the corrections referred to in point 4.2.5 was altered after exercise of the right to be heard, with the final corrections in this matter indicated in Annex X to the Tax Inspection Report, with a total of € 1,133,407.59 (€ 217,619.99 + € 242,940.46 + € 346,245.71 + € 326,601.43).

In addition to the VAT referred to here, compensatory interest assessments were contested, so their value is also relevant for fixing the value of the claim.

Therefore, the Revenue and Customs Authority is not correct in seeking to alter the value of the claim indicated by the Claimant.

3. Matter of Law

It is particularly important to decide on the main question to be analyzed in the present proceedings, namely, to determine whether the "individualized" transmission of crowns, implants and abutments may be taxed at the reduced rate of 6% because it falls within the scope of item 2.6 of List I attached to the Value Added Tax Code (VAT Code).

For this purpose, it is necessary to take into account the rules governing this tax in accordance with European Union law, with its respective transposition at the national level and with the administrative and judicial interpretation that has been conducted with regard to the same, especially by the Court of Justice of the European Union (CJEU).

Indeed, as has been peacefully understood in case law and is a corollary of the mandatory preliminary ruling requirement provided for in article 267 of the Treaty on the Functioning of the European Union (which replaced article 234 of the Treaty of Rome, former article 177), the case law of the CJEU has binding character for national courts when it concerns questions relating to European Union law.

3.1. The Interpretation of Tax Norms

As is well known, article 11 of the General Tax Law (GTL) provides that in determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed. Now, no. 1 of article 9 of the Civil Code is clear when it determines that interpretation should not only limit itself to the letter of the law (literal or grammatical element), but reconstruct from the texts the legislative intent (ratio legis), taking into account the unity of the system (systematic element), the circumstances in which the law was drafted (teleological element) and the specific conditions of the time in which it is applied (historical element).

The first hermeneutic factor to which the interpreter can resort to reach the true meaning and scope of application of legal texts is, therefore, that which corresponds to the literal or grammatical element.

As to the systematic element, it determines the interpretation of the norm in an integrated manner, considering the other provisions that form the regulatory complex in which the norm to be interpreted is integrated.

With regard to the teleological element, "This element consists of the reason for being of the law (ratio legis), the end sought by the legislator in drafting the norm. Knowledge of this end, especially when accompanied by knowledge of the circumstances (political, social, economic, moral, etc.) in which the norm was drafted or of the political-economic-social situation that motivated the legislative 'decision' (occasio legis) constitutes a subsidy of the greatest importance for determining the meaning of the norm. It suffices to recall that the clarification of the ratio legis reveals to us the 'valuation' or weighing of the various interests that the norm regulates and, therefore, the relative weight of these interests, the option between them expressed by the option expressed by the norm"[1].

Finally, according to the historical element, the historical context of the drafting of the norm must be ascertained.

The interpretation of the normative provision in question should, therefore, attend to these elements of interpretation.

3.2. The Principle of VAT Neutrality

As is well known, VAT is an indirect tax of community origin, multiphase, which tends to affect all acts of consumption (general tax on consumption), with its neutrality being pointed out as its main characteristic[2].

It is customary to distinguish the neutrality of transaction taxes relative to the effects on consumption and production. There will be neutrality relative to consumption when the tax does not influence the choices of various goods or services by consumers. A tax will be neutral from the production perspective if it does not induce producers to changes in the form of organization of their production process.

As Xavier de Basto notes, "Neutrality relative to consumption depends exclusively on the degree of objective coverage of the tax and the structure of the rates, with it being out of the question to outline a consumption tax that is completely neutral. Some exemptions must always be granted (.....) and, probably, there will be differentiations in the rate applicable to different transactions of goods and services".[3]

In general terms, according to the neutrality principle, taxation should not interfere with economic decisions nor in the formation of prices, implying the extension of the scope of application of this tax to all phases of production and distribution and to the service provision sector[4].

As Teresa Lemos emphasizes, neutrality can be viewed from various aspects: neutrality in relation to production circuits – the tax burden does not depend on greater or lesser integration of economic circuits, neutrality in the face of the tax impact on different products and sectors, insofar as the rate is uniform, neutrality as regards the choice of production factors – capital and labor, and neutrality in relation to consumer preferences – equal taxation of different products[5].

The neutrality principle is set forth in the VAT Directives and is systematically invoked by the Commission to oppose national legislation deemed incompatible with the rules of European Union law, as well as by the tax administrations and taxpayers of the various Member States, having been, countless times, applied by the CJEU[6].

The application of the neutrality principle should be taken into consideration in the essential phases of the life of this tax, such as the rules of objective and subjective incidence, localization, exemptions and the exercise of the deduction right. We can affirm that this has been the principle most invoked by the Court to substantiate its rulings, often appearing allied to the principle of equal treatment, uniformity and the elimination of competition distortions.

Thus, the CJEU has been concerned, namely, as to the realization of the objectives of the common system, in guaranteeing the neutrality of the tax burden of all economic activities, whatever their objectives or results (which, as it emphasizes, is achieved through the mechanism of deductions that frees the businessman from the burden of VAT that he paid in his acquisitions)[7], in ensuring economic agents equal treatment, achieving a uniform definition of certain elements of the tax and guaranteeing legal certainty and facilitating actions aimed at its application[8].

From the outset, the CJEU sought to draw the proper consequences from equal treatment in VAT of similar activities and the absence of the impact of the extension of production and distribution chains on the amount of tax received by the tax administrations.

It is in light of this fundamental principle that the tax should be interpreted and applied, so as to ensure a uniform system that guarantees fair competition in the Union space.

3.3. The Application of Reduced VAT Rates

3.3.1 The Rules of the VAT Directive

In accordance with the rules of Directive no. 2006/112/EC, of 28 November, which we will henceforth call the VAT Directive or DVAT[9], taxable operations are subject to tax at the rates and conditions of the Member State in which they are located. The standard VAT rate is fixed, in accordance with the provisions of articles 96 and 97 of the DVAT, at a percentage of the taxable amount that cannot be less than 15% until 31 December 2015[10].

In accordance with the provisions of article 98 of the DVAT, Member States may apply one or two reduced rates at a percentage that cannot be less than 5%. Reduced rates may only be applied to the supply of goods and services of the categories listed in Annex III of the VAT Directive, ex. Annex H of the Sixth Directive (with the last amendment given by Directive 2009/47/EC). In turn, in accordance with the provision in no. 3 of article 98, "When applying the reduced rates provided for in no. 1 to the categories of goods, Member States may use the Combined Nomenclature to define precisely each category" (emphasis ours). That is, the use of the Combined Nomenclature to precisely define each category is a mere possibility which, as such, may or may not be used for this purpose by the Member States.

The determination and definition of operations that may benefit from a reduced rate under these provisions of the VAT Directive are the responsibility of the Member States.

It was with Directive 92/77/EEC, of the Council, of 19 October 1992[11], that community harmonization of VAT rates was carried out, with a view to the functioning of the internal market, which occurred on 1 January 2003. Until that date, each Member State had full autonomy to set the number of rates and their level.

As we mentioned, Annex III of the VAT Directive contains the list of supplies of goods and services to which the reduced rates provided for in article 98 can be applied, and includes, in its point 4, for the purposes that now interest us, the following realities: "Medical equipment, auxiliary material and other apparatus normally used to alleviate or treat deficiencies, for the exclusive personal use of disabled persons, including their repair, as well as child car seats".

This wording is similar to that of the previous Annex H of the Sixth Directive amended by the aforementioned Directive 92/77/EEC (meanwhile repealed), which covered the following operations: "Medical equipment and other apparatus, normally used to alleviate or treat deficiencies, for the exclusive personal use of disabled persons, including their repair and child car seats", with the main difference being the later expansion of its scope which came to contain "auxiliary material".

It follows from the above that the possibility of applying a reduced tax rate is just that: a faculty that Member States may or may not use. However, if they do use such a possibility, they must do so in accordance with the rules of EU law. On the other hand, it is worth noting that the different goods and services to which Member States may apply reduced tax rates are limited to specific situations, resulting from a consensual position among themselves, in which they are recognized as goods or services whose social, educational or cultural character leads them to be considered as of first necessity, such as, for the purposes that now concern us, health.

It should be noted that in its recitals the VAT Directive states that "a VAT system achieves the greatest degree of simplicity and neutrality if the tax is levied as generally as possible" (recital 5) and that "it should, even though rates and exemptions are not completely harmonized, lead to competitive neutrality, in the sense that, in the territory of each Member State, goods and services of the same type are subject to the same tax burden, regardless of the extent of the production and distribution circuit" (recital 7).

3.3.2 The Rules of the VAT Code

The VAT Code provides in no. 1 of its article 18 the following tax rates:

"a) For imports, supplies of goods and services listed in List I attached to this code, the rate of 6%;

b) For imports, supplies of goods and services listed in List II attached to this code, the rate of 13%;

c) For other imports, supplies of goods and services, the rate of 23%."

With regard to the applicability of the rates, in accordance with the provisions of article 18 of the VAT Code, the standard VAT rate applies whenever the good or service in question is not covered by one of the two reduced rates provided for in the Lists I and II attached to the Code.

Where there are groupings of various goods forming a distinct commercial product, it should be taken into account that, when they do not undergo changes in nature nor lose their individuality, the rate that corresponds to them applies, or, if different rates apply, the highest rate (article 18, no. 4, of the VAT Code).

In the situation under analysis, item 2.6 of List I is in question, which represents the transposition at the national law level of the aforementioned point 4 of Annex III of the DVAT, under which the application of the reduced VAT rate to the following goods is determined: "2.6. Orthopedic apparatus, medical-surgical belts and medical stockings, wheelchairs and similar vehicles, manually or motor-driven, for disabled persons, apparatus, artifacts and other prosthetic or compensatory material intended to replace, in whole or in part, any limb or organ of the human body or to treat fractures and the lenses for correction of vision, as well as orthopedic footwear, provided that prescribed by medical prescription, according to terms to be regulated by the Government within 30 days." (emphasis ours).

As is known, the general rate of the tax only applies if there is no place for application of reduced rates. On the other hand, for purposes of applying the tax rate, it is important to ascertain whether we are dealing with a single operation or with principal and ancillary operations.

Indeed, when an operation comprises various supplies of goods and/or services, the question arises whether it should be considered a single operation or as various distinct and independent services that should be appraised separately.

This question is of special importance from the VAT perspective, namely for purposes of applying the tax rate and the provisions relating to exemptions.

3.3.3 CJEU Case Law

The community case law on the application of reduced VAT rates is not very abundant. However, we can highlight some fundamental ideas that guide it, which appear sufficiently illuminating for this purpose.

In accordance with the CJEU's understanding, the principle of fiscal neutrality also includes two other principles frequently invoked by the Commission: that of the uniformity of VAT and the elimination of competition distortions.

The CJEU has stressed that the principle of fiscal neutrality implies that all economic activities must be treated in the same manner[12]. The same applies to economic operators that carry out the same operations[13].

Similar services, which are therefore in competition with each other, should not be treated differently from a VAT perspective[14].

As the Advocate General Juliane Kokott notes in her conclusions presented in the TNT Case[15], the principle of fiscal neutrality opposes that similar goods or services, which are therefore in competition with each other, are treated differently from the point of view of value added tax (no. 43). In this context, she notes that "The principle of fiscal neutrality, which is at the basis of the common system of taxation and must be taken into account in interpreting the rules on exemptions, does not allow economic operators who carry out the same operations to be treated differently in the collection of value added tax. (...) It includes the principle of eliminating competition distortions resulting from differentiated treatment from a value added tax perspective (...) " (no. 59).

The CJEU has also clarified that the delimitation of goods and services that may benefit from reduced rates should be carried out based on objective characteristics. Thus, in its Judgment of 23 October 2003, Commission v. Germany Case[16], the CJEU reinforced the objective nature of the situations in which reduced VAT rates may be applied, concluding that, given similar goods or services that are in competition with each other, it is not permissible that they be treated in a discriminatory manner.

That is, in accordance with CJEU case law, the institution and maintenance of different VAT rates for similar goods or services are only permissible if they do not violate the principle of fiscal neutrality inherent in the common system of VAT, in respect of which Member States must transpose the community rules[17].

As the CJEU makes a point of emphasizing, it follows from the community rules that the determination and definition of operations that may benefit from a reduced rate are the responsibility of Member States. As the Commission has stressed in its reports on reduced rates, one of the major problems in the application of the rates is precisely the facultative nature of such application and the absence of common definitions for the categories of goods and/or services covered[18].

However, despite this, in the exercise of this competence Member States must respect the principle of fiscal neutrality. Now, as we have seen, this principle opposes, in particular, that similar goods or services, which are therefore in competition with each other, are treated differently from a VAT perspective, so that the said products must be subject to a uniform rate[19].

Since the reduced rate is the exception, the fact that its application is limited to concrete and specific aspects is consistent with the principle that exemptions or derogations should be interpreted in strict terms, provided that the principle of tax neutrality is not violated[20].

Indeed, the application of one or two reduced rates is a possibility recognized to Member States by derogation from the principle that the standard rate applies. Now, it follows from established case law that the provisions that have the character of a derogation from a principle must be subject to strict interpretation, while not ceasing to ensure that the derogation does not become ineffective[21].

Member States may not, in particular, interpret the concepts used in Annex III of the Directive in a selective manner so that, without regard to objective criteria, different treatment is granted to identical realities. Indeed, given that it is true that the determination of operations subject to reduced rate VAT is the responsibility of Member States, with there being no abstract definitions for this purpose in community legislation, it is necessary that the neutrality principle be respected. Thus, taxation at reduced rates of the tax that, being selective, violates the fundamental characteristics of fiscal neutrality, objectivity and uniform tax rate will be contrary to the principles of EU law, not allowing that subgroups be established within a taxable activity, with the intention of applying different tax rates to them, there being no objective reason to justify such difference in treatment[22].

In particular, the principle of objectivity requires the application of one and the same rule to taxable operations of the same nature, with there being a presumption of similarity when the operations in question correspond to different variants of one and the same taxable operation included in one of the categories of Annex III of the VAT Directive.

It is also important to note in this context that the question of composite services versus independent services was addressed by the CJEU in some rulings[23].

In this respect, it follows from article 2 of the VAT Directive that each operation should normally be considered distinct and independent[24].

However, in certain circumstances, several formally distinct services, capable of being provided separately and thus giving rise, in each case, to taxation or exemption, should be considered as a single operation when they are not independent.

This occurs, for example, when, following an analysis, even if merely objective, it is verified that one or several services constitute a principal service and that the other or other services constitute one or more ancillary services that share the fiscal fate of the principal service.

In this context, it is established case law of the CJEU that "…there is a single service particularly in the case where one or more elements should be considered the principal service, whereas, conversely, one or more elements should be considered ancillary services that share the same fiscal treatment as the principal service. A service should be considered ancillary to a principal service when it does not constitute for the clientele an end in itself, but a means of benefiting in the best conditions from the principal service of the provider"[25].

It can equally be considered that there is a single operation when two or more elements or acts provided by the taxpayer are so closely linked that they form, objectively, a single indivisible economic operation whose decomposition would have an artificial nature[26].

Thus, the CJEU emphasizes that "… when an operation is comprised of a set of elements and acts, all the circumstances in which the operation in question develops should be taken into consideration, to determine, on one hand, whether there are two or more distinct services or a single service, and, on the other, if, in the latter case, this single service should be qualified as a service"; and that "The same occurs [or, that is, there is a single service] when two or more elements or acts provided by the taxpayer to the consumer … are so closely connected that they form, objectively, a single indivisible economic service whose decomposition would have an artificial nature".

But the CJEU's position on the issue of splitting the principal service into several elements does not end there, having continued, over the years, to be the subject of preliminary ruling requests, particularly in the Part Service Case[27].

Indeed, it was the understanding of the CJEU in the said case that "51…it follows from article 2 of the Sixth Directive that each operation should normally be considered distinct and independent.

1. However, in certain circumstances, several formally distinct services, capable of being provided separately and thus giving rise, in each case, to taxation or exemption, should be considered as a single operation when they are not independent.

2. This occurs, for example, when, following an analysis, even if merely objective, it is verified that one or more services constitute a principal service and that the other or other services constitute one or more ancillary services that share the fiscal fate of the principal service (…)" [28].

Now, in the face of the CJEU case law just stated and which, over the years, has been established, with principal and ancillary services existing, economically indissociable, a single VAT regime should be applied, corresponding to that of the principal service, namely for purposes of applying the tax rates.

This was the case in Commission v. France, in which the application of the reduced VAT rate to electricity, specifically the subscription to electricity, was analyzed[29].

For the Commission, if the subscription was considered to be a supply, the application of a reduced VAT rate to the subscription of energy network services and a standard rate to any other supply of energy would violate the neutrality principle inherent in the Sixth Directive. Indeed, according to its understanding, even if it were a supply, the same rate should apply to the subscription and to any other electricity consumption, according to the neutrality principle.

According to the conclusions of Advocate General Siegbert Alber presented on 10 October 2002, the subscription could only be considered an autonomous service if it was a service that should be distinguished from the actual supply of natural gas and electricity.

The CJEU, with regard to the allegation raised in the alternative relating to the violation of the principle of uniformity of the tax rate, invoked the following:

"88. The principle of fiscal neutrality would be violated if the French tax legislation were such that equal services, which are in a competitive relationship, were treated differently in terms of value added tax.

1. As already stated, the subscription and the supply of natural gas and/or electricity constitute, for the great majority of final consumers, an integrated service that encompasses the provision of services and the supply of goods (27), and not distinct services. It is only the price of the service that is divided into two parts, which are the subscription amount and the variable amount to be paid depending on the quantity of consumption.

(…)

1. Furthermore, this tax regime may violate the principle of fiscal neutrality. Indeed, different tax rates are applied to equal services."

It was therefore in this context that the CJEU decided in favor of the French Republic.

The same reasoning was adopted by the CJEU in its Judgment of 3 April 2008, Finanzamt Oschatz Case[30], having concluded that a connection line was not distinct from water distribution, and the same reduced VAT rate for electricity should be applied to it. As was stressed, "40. Although the Sixth Directive does not contain the definition of water distribution/supply, nor does it result from its provisions that this concept should be subject to different interpretations depending on the annex in which it is mentioned. The individual connection line being indispensable for making water available to the public, as results from no. 34 of this ruling, should be considered to be equally covered by the concept of water supply mentioned in category 2 of annex H of the Sixth Directive."

Also in the same sense, cite the CJEU Judgment of 10 March 2011, Joined Cases C‑497/09, C‑499/09, C‑501/09 and C‑502/09, where the scope of the expression «foodstuffs» which appeared in its annex H, category 1, of the Sixth Directive, was again in question, for purposes of applying the reduced VAT rate. As the Court began by emphasizing, it would be necessary to ascertain "… whether, from a VAT perspective, the various activities in question in each of the main cases should be treated as distinct taxable operations or as unique complex operations composed of various elements" (no. 51).

It also emphasized that, "As results from the case law of the Court of Justice, when an operation is composed of a set of elements and acts, all the circumstances in which the operation in question develops should be taken into consideration, to determine, on one hand, whether there are two or more distinct services or a single service, and, on the other, if, in the latter case, this single service should be qualified as the supply of goods or the provision of services"(no. 52).

3.3.4 CAAD Case Law

In Arbitral Case no. 171/2013-T, this Tribunal judged a matter identical to the one in controversy.

The issue was the assessment of the application of the reduced VAT rate to accessories and parts of wheelchairs and "scooters" for mobility for exclusive use by motor-disabled persons.

The Tax Authority invoked an interpretation of items 2.6 and 2.9 of List I attached to the VAT Code that excluded the application of the reduced rate to accessories and parts of wheelchairs and "scooters" for mobility for exclusive use by motor-disabled persons, alleging that the reduced rate could only be applicable to mobility "scooters" and wheelchairs and not to the components that integrate them when transacted separately.

In this sense, the Claimant argued that such accessories and parts only made sense if used together, i.e., with the wheelchair, completing its function and integrating the wheelchair itself as part of the "product unit".

With regard to separate pieces (batteries, motors, among others), as was argued, they cannot be used in products other than those of the Claimant.

On the other hand, the mere fact that segregated invoicing (with separate codes) or autonomous invoicing (in separate invoices) of the accessories and parts occurs for organizational or temporal reasons, could never affect the classification and qualification for VAT purposes.

After proper appreciation of the matter of fact and law, this Tribunal rightly understood that, "Thus, the extrafiscal reason that presided over the establishment of a reduced rate for the apparatus and other products indicated in the aforementioned items does not change with regard to accessories and spare parts usable exclusively in wheelchairs and which form an integral part of the same. These accessories and parts, in addition to not being able to have alternative or different application to that for which they were built and designed, are essential to the functioning of wheelchairs and "scooters" and extend their functions, or ensure their maintenance and preservation, so they should be covered by reduced rate taxation;"

Now, it is exactly this situation that we have before us, with the same grounds of law and fact supporting it.

4. The Claimant's Position

Basically, the Claimant bases its understanding on the following lines:

• The interpretation that the Tax Administration seeks to make of item 2.6 of List I attached to the VAT Code, according to which the reduced VAT rate applies only to "single implant units", but not to the parts that constitute the complete dental implant, has no support in the legal text and, if followed, would introduce discriminatory tax treatment for implant prostheses;

• The DVAT is not directly applicable in the Portuguese legal order, nor are there elements drawn from it that favor the position of the tax administration in this matter;

• The Portuguese legislator did not use the faculty, allowed by the Directive, to delimit the categories of goods subject to the reduced rate through the Combined Nomenclature, choosing instead the usual denomination of goods, so that the classification of implant parts in the Combined Nomenclature is irrelevant for purposes of their classification in List I attached to the VAT Code;

• Not being capable of any other use than in dental medicine, they should be taxed at the reduced VAT rate, because they are classified under item 2.6 of the said List I;

• The same applies to temporary implants and provisional crowns, given that they are also prosthetic articles.

5. The Respondent's Position

In its general lines, the Revenue and Customs Authority comes to defend the following:

• The various components that comprise dental implants when transacted separately should be classified under code 9021 29 00 of the Combined Nomenclature and as such classified as parts or accessories of an implant, and cannot be classified under item 2.6 of List I attached to the VAT Code because they do not constitute, autonomously or unitarily, an artificial piece that replaces an organ of the body or part of it (the Tax Authority uses the expression "complete goods" for this purpose, in substitution of the concept previously used by it of "single implant unit"), in the sense of assuming or replacing, effectively, the function of the part of the body with deficiency or disease, with the normal rate of tax applicable to them;

• Indeed, parts and accessories of prostheses, such as the parts in question, in addition to not being prostheses, are not apt, considered individually, to replace a part of the body or its function, that is, they are not configured as "complete goods" – i.e., those that, by themselves, are apt to replace a part of the body or its function;

• Only when the transaction concerns complete prostheses, assembled as they are applied in the patient's mouth, there will be a place for the benefit of the reduced VAT rate under the provisions of the said item;

• In the matter of applying reduced VAT rates, being exceptional situations, the principle of strict interpretation prevails;

• From the point of view of neutrality, we should compare the taxation of fixed prostheses with the taxation of removable prostheses and not the taxation of parts and/or accessories of fixed prostheses with this type of prosthesis, and in the case of removable prostheses, the parts are taxed at the normal rate.

6. Application to the Specific Case

Considering the matter of fact deemed proven and the matter of law just stated, it is important to assess the legitimacy of the Claimant's claim. That is, it must be analyzed whether the Portuguese legislator sought to restrict the application of the reduced rate, as the Tax Administration claims, only when transactions concern complete implants or if the reduced rate can apply to transactions of the three components – crown, implant and abutments – that comprise dental implants when transacted separately.

It should be emphasized that the meaning and scope of the reduced rate applied in this domain should take into account good rules of hermeneutics, taking into account not only the grammatical element, but also the context, reason for being and purposes pursued by item 2.6, and should result in a declaratory interpretation (and not restrictive, contrary to what the Tax Authority argues).

Now, right away, the wording of the provision seems to indicate that dental implants are classified under the said list, with us being in the presence of prosthetic material intended to replace an organ of the human body, in this case, the dental apparatus.

Indeed, nothing in the letter of the law leads us to restrict its application to situations of transmissions of "complete goods" of implant, in the sense that the Tax Authority seeks to convey.

Moreover, it results from the facts deemed proven that such concept does not exist as such, with implants being constituted instead of the three pieces that we are now dealing with – crown, implant and abutment, which, according to surgical technique, are introduced in phases into the patient's mouth, then giving rise, as a whole, to an implant. In reality, these three pieces are inseparable and unusable except for the composition of an implant as a composite prosthesis.

With no such "complete goods" of implant existing, in the sense that the Tax Authority seeks to convey, the understanding of the Tax Administration ends up denying the benefit of the reduced rate to this type of prosthesis, thus putting into question, without an acceptable rational reason, the ratio legis that presided over the adoption of this item in the terms in which it is written – the protection of public health. Indeed, accepting such an understanding would introduce arbitrary discriminatory treatment between different dental prostheses. On the one hand, prostheses composed of a single piece would benefit from the reduced rate of 6%, on the other hand, "composite" prostheses would be taxed at the normal rate. This fact is discriminatory, violating, right away, namely, the provisions of articles 5, no. 2 and 7, no. 3 of the General Tax Law. Indeed, in accordance with the provision of the first-mentioned normative, with the heading "Purposes of Taxation", taxation respects the principles of generality, equality, legality and material justice. In turn, in accordance with the provisions of article 7, no. 3, "Taxation does not discriminate any profession or activity nor prejudice the practice of legitimate acts of a personal character, without prejudice to exceptional increases or benefits determined by economic, social, environmental or other purposes".

But we would be essentially in the presence of an intolerable offense to the principle of neutrality that governs this tax at the level of European Union law, treating equal goods differently without any acceptable rational reason, a fact that violates the rules that govern this tax as well as all CJEU case law to which we have alluded.

As is known, in accordance with the provision of no. 2 of article 11 of the General Tax Law, whenever, in tax norms, terms proper to other branches of law are employed, they should be interpreted in the same sense that they have there, unless otherwise directly follows from the law. In turn, in no. 3 of the said normative, it is determined that, if doubt persists about the meaning of the norms of incidence to apply, the economic substance of the tax facts should be attended to. Now, what the community legislator, the European Commission and the CJEU case law determine is that, in the use of the concepts employed for purposes of applying reduced rates, Member States should attend to the economic effects in question so as not to put into question the essential principle of tax neutrality.

That is, accepting the understanding conveyed by the Tax Authority in the specific case would mean that we would have a difference in treatment for identical realities resulting not from the VAT Directive but from a deficient application of the same by the Tax Administration.

It is true that derogation norms, such is the case of the norm that enables Member States to apply reduced tax rates, should be applied restrictively, but we should not confuse this fact with selective application, a completely different reality that puts into question the most basic characteristics of the tax.

In this context, it is also important to stress that the invocation, by the Tax Authority, of the argument of the Combined Nomenclature does not hold, since this Nomenclature was created for statistical purposes and the application of the common tariff and has no relevance in the classification of goods and services for VAT purposes in Portugal.

The only case in which the VAT Code resorts to the Combined Nomenclature to define the scope of the tax regime of goods comes provided for in its article 14, no. 1, lit. i), for purposes of determining the regime of exemption (complete or zero rate), according to which the following are exempt: "supplies of supply goods placed on board warships classified under code 8906 00 10 of the Combined Nomenclature, when they leave the country bound for a port or anchorage situated abroad", a provision not applicable in the situation at hand.

Given that, in accordance with the provision of article 98, no. 3, of the DVAT, Member States may use the Combined Nomenclature to precisely define each category subject to the reduced rate, it is equally true that the Portuguese legislator did not adopt this option.

That is, for purposes of VAT, the classification that implants, crowns and abutments deserve in the Combined Nomenclature is irrelevant.

Now, in this context, it is important to emphasize once again that, as was proven, the three "pieces" now in question – implant, crown and abutment – cannot be used separately, being specially designed and manufactured for the production of a piece designated an implant. Indeed, contrary to what the Tax Authority alleges, there is no single implant piece in the factual sense that it seeks to give it, but only the implant constituted, as such, of implant, crown and abutment, pieces inseparable for this reality.

It is all too evident that the fact that such pieces are commercialized separately, such as in the case cited, the mere fact that segregated invoicing (with separate codes) or autonomous invoicing (in separate invoices) occurs, cannot affect the classification and qualification for VAT purposes, with form being made to prevail over substance.

In reality, what is in question in the present proceedings and was proven subsumes to the legal provision of item 2.6 of List I attached to the VAT Code, consisting of "… apparatus, artifacts and other prosthetic or compensatory material intended to replace, in whole or in part, any limb or organ of the human body".

And, let it be stressed again, the ratio legis that leads the legislator to adopt the application of the reduced VAT rate in such situations – the protection of health – is exactly the same that leads us to this interpretation.

It should be noted, finally, that, from the case law cited above, even if, as the Tax Authority claims, "complete goods" of implant supposedly existed, in the sense that it seeks to convey, we would always have to recognize that the crown, the abutment and the implant would be configured as a single piece or, as a last resort, even if erroneously not so understood, as ancillary pieces, and as such, should be taxed at the reduced rate, following the treatment of the principal operation.

That is: whether by recourse to the community rules alone or by simple application of good hermeneutic rules, the result is the same – only could one conclude that in item 2.6 of List I attached to the VAT Code is included both implants constituted by a single piece and composite implants.

Indeed, all elements of interpretation of tax norms that can be invoked for this purpose, as well as the characteristics of VAT and the interpretation that the CJEU has been making of them, lead us to conclude that, in the present case, the reduced VAT rate provided for in item 2.6 of List I attached to the VAT Code should be applied to the transmission of the implants, crowns and abutments now under analysis, so we uphold the Claimant's claim.

In the face of the above, it is concluded that the contested VAT assessments suffer from an error regarding the legal prerequisites, due to erroneous interpretation of item 2.6 of List I of the VAT Code.

The compensatory interest assessments, being acts consequent to the assessments, which have as their prerequisite, are affected by the same defect.

These defects justify the annulment of the assessments that are the subject of the present arbitral process.

7. Indemnification for Undue Guarantee

The Claimant requests indemnification for undue guarantee.

The arbitral process is an appropriate means for the recognition of the right to indemnification for undue guarantee provided, as article 171 of the Code of Tax Procedure is applicable subsidiarily, by force of the provision of article 29, no. 1, lit. c), of the Legal Regime of Arbitration in Tax Matters.

The regime of the right to indemnification for undue guarantee is provided in article 53 of the General Tax Law, which establishes the following:

Article 53

Guarantee in Case of Undue Payment

1. The debtor who, to suspend execution, offers bank guarantee or equivalent will be indemnified wholly or partly for losses resulting from its provision, if he has kept it for a period exceeding three years in proportion to the maturity in administrative appeal, contestation or opposition to execution that have as object the debt guaranteed.

2. The period referred to in the previous number does not apply when it is verified, in administrative reclamation or judicial contestation, that there was error attributable to the services in the assessment of the tax.

3. The indemnification referred to in number 1 has as its maximum limit the amount resulting from the application to the guaranteed value of the rate of compensatory interest provided in this law and can be requested in the very process of reclamation or judicial contestation, or autonomously.

4. The indemnification for provision of undue guarantee will be paid by offset against the revenue of the tax of the year in which the payment was made.

The Claimant provided a bank guarantee to suspend a tax execution instituted for collection of the sums assessed by the acts that are the subject of the present process having spent by 01-09-2014 the sum of € 9,773.38.

In the case at hand, the errors that affect the assessments are attributable to the Revenue and Customs Authority, since the corrections it made were of its own initiative and the Claimant did not contribute to these errors being committed.

For this reason, the Claimant is entitled to be indemnified for losses deriving from the guarantee provided to suspend the tax execution instituted for collection of the assessed sum.

With no elements permitting the exact amount of the indemnification to be determined, the conviction will have to be made on the basis of the amount already spent, which is € 9,773.38, and with reference to what is to be assessed in execution of the present award [articles 609, no. 2, of the Code of Civil Procedure and 565 of the Civil Code, applicable in this sense under the terms of article 2, lit. d) of the General Tax Law].

8. Value of the Proceedings

As referred to in point 3 of this award and in harmony with the provision of article 306, no. 2, of the Code of Civil Procedure and 97-A, no. 1, lit. a), of the Code of Tax Procedure and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at € 1,227,178.71.

9. Decision

In harmony with the above, this Arbitral Tribunal agrees on:

• To judge the request for arbitral pronouncement as well-founded;

• To annul, on the ground of violation of item 2.6 of List I attached to the VAT Code, the VAT and compensatory interest assessments indicated in lit. g) of the matter of fact established;

• To judge the request for recognition of the right of the Claimant to be indemnified for the guarantee provided as well-founded and to condemn the Revenue and Customs Authority to pay to the Claimant, as indemnification for undue guarantee, the sum of € 9,773.38, and the further sums that are to be assessed in execution of the present award, relating to expenses deriving from the provision of the guarantee in the execution proceedings no. …2014…, of the Tax Service of ….

10. Costs

In harmony with article 22, no. 4, of the Legal Regime of Arbitration in Tax Matters, the amount of the costs is fixed at € 16,830.00, under the terms of Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Revenue and Customs Authority.

Lisbon, 24-11-2014

The Arbitrators

(Jorge Lopes de Sousa)

(Clotilde Celorico Palma)

(Emanuel Vidal Lima)

[1] As taught by J. Baptista Machado, Introduction to Law and the Legitimizing Discourse, Coimbra, 1983, pp. 182 and 183.

[2] See, Xavier de Basto, The Taxation of Consumption and its International Coordination, CCTF no. 164, Lisbon 1991, p. 39 to 73 and Clotilde Celorico Palma, Introduction to Value Added Tax, IDEFF Notebooks no. 1, Almedina, 6th edition, September 2014, pp. 19 to 34.

[3] Xavier de Basto, ibidem, pp. 29 and 30.

[4] According to Xavier de Basto, ibidem, p. 29, in a generic formulation, neutrality is understood as the characteristic of a tax that is analyzed as not altering the relative prices of alternatives on which the choices of economic agents fall, thus not creating "distortions" of their behavior. In another formulation, equally technical, it could be said that a neutral tax will be one that, causing, as any tax cannot fail to cause, income effects, is free from substitution effects.

[5] See. Maria Teresa Graça de Lemos, "Some Observations on the Eventual Introduction of a Value Added Tax System in Portugal", CTF no. 156, December 1971, p. 10.

[6] As is noted in Francis Lefebre (author Francisco Xavier Sanchéz Galhardo) - Expert Memorandum, VAT: Community Case Law, Directive 2006/112/EC, Updated as of December 31, 2007, Francis Lefebre Editions, 2008, p. 68, "It is usual to refer to the principle of neutrality as fundamental in the functioning of VAT, so that the mechanics of the tax is supposed to avoid any discriminatory situation or distortion in the functioning of enterprises."

On the application of this principle by the CJEU, see also Michel Guichard, "The Spirit of Community Laws on VAT: from the Principle of Neutrality", Review of Tax Law no. 36, 2001, pp. 1205-1212.

[7] See, in particular, Judgments of 14 February 1985, Rompelman Case, Case 268/83, Rec., p. 655, no. 19, of 22 June 1993, Sofitam Case, Case C-333/91, Colect., p. I-3513, no. 10, and of 6 April 1995, BPL Group Case, Case C-4/94, Colect., p. I-983, no. 26.

[8] In this sense, see Ramírez Gómez, in Case Law of the Court of Justice of the European Communities in VAT Matters, Aranzadi Editorial, Pamplona, 1997, pp. 232 and seq.

[9] Published in O.J. no. L 347, of 11 December 2006. Essentially, this Directive came to reformulate the text of the Sixth Directive (it is a basically formal reformulation, given that its text was excessively dense, given the successive amendments introduced since its approval). With the reformulation, it came to have 414 articles (it had 53).

[10] On the rules for applying reduced VAT rates, see Clotilde Celorico Palma, "The Proposed State Budget for 2012 and VAT Rates", Review of Public Finance and Tax Law, Year IV, no. 3, November/2011.

[11] Published in O.J. no. L 316, of 31 October 1992.

[12] Judgment of 20 June 1996, Wellcome Trust Case, Case C‑155/94, Colect., p. I‑3013, no. 38.

[13] Judgment of 7 September 1999, Gregg Case, Case C-216/97, Colect., p. I-4947, no. 20.

[14] See, in particular, Judgments of 12 June 1979, Nederlandse Spoorwegen Case, Case 126/78, Rec., p. 2041, of 11 October 2001, Adam Case, Case C‑267/99, Colect., p. I‑7467, no. 36, of 23 October 2003, Commission v. Germany Case, Case C‑109/02, Colect., p. I‑12691, no. 20, and of 26 May 2005, Kingscrest Associates and Montecello Case, Case C‑498/03, Colect., p. I-4427, no. 41.

[15] Judgment of 23 April 2009, Case C-357/07, Colect., p. I-5189.

[16] Case C-109/02, already cited.

[17] See, in this sense, the Judgment of 7 September 1999, Gregg Case, already cited, no. 19.

[18] Report of 13 November 1997 [COM (97) 559 final] and Report of 22 October 2001 (COM (2001) 599).

[19] See, in this sense, Judgment of 3 May 2001, Commission v. France Case, Case C-481/98, Colect., p. I-3369, no. 22, and Judgment of 11 October 2001, Adam Case, already cited, nos. 35 and 36.

[20] See the Judgment of 18 January 2001, Commission v. Spain Case, Case C-83/99, Colect. p. I-00445.

[21] See, in particular, Judgments of 30 September 2010, EMI Group Case, Case C‑581/08, Colect., p. 8607, no. 20, and of 28 October 2010, Axa UK Case, Case C‑175/09, Colect., p. 10701, no. 25.

[22] Citing the conclusions of the Judgment of 23 October 2003, Commission v. Germany Case, Case C-109/02, Colect., p. I-12691.

[23] See, in particular, Judgments of 25 February 1999, CPP Case, Case C‑349/96, Colect., p. I‑973, no. 27, and of 27 October 2005, Levob Verzekeringen and OV Bank Case, Case C‑41/04, Colect., p. I‑9433, no. 18.

[24] See Judgments, already referred to, CPP Case, no. 29, and Levob Verzekeringen and OV Bank Case, no. 20.

[25] CPP Case, already cited, no. 30.

[26] Levob Verzekeringen and OV Bank Case, already referred to, no. 22.

[27] Judgment of 21 February 2008, Part Service Case, Case C-425/06, Colect., p. I-897.

[28] Ibidem.

[29] Judgment of 8 May 2003, Commission v. France Case, Case C-384/01, Colect., p. I-4395.

The French Republic amended its legislation relating to VAT applicable to the supply of electricity and natural gas, having passed to apply to the subscription, that is the fixed amount to be paid for adhesion to supply networks during a certain period of time and which also includes other fixed expenses, the reduced rate of tax and to the variable amount to be paid according to consumption, kept the applicability of the normal rate.

The Commission imputed to France, within the framework of an action for breach, on one hand, for not having properly transmitted to it and/or totally the information relating to the alteration that it is incumbent to provide by virtue of the Sixth VAT Directive. On the other hand, it considered that the application of differentiated value added tax rates to the two services of the set of the operation was incompatible with the provision in the directive.

[30] Case C‑442/05, Colect., p. 1817.