Process: 432/2018-T

Date: April 3, 2019

Tax Type: IVA

Source: Original CAAD Decision

Summary

CAAD arbitration decision 432/2018-T addresses the critical distinction between material/calculation errors and errors of law in VAT self-assessment, examining whether Article 78(6) or Article 97(2) of the Portuguese VAT Code applies to corrections. The taxpayer A... S.A. sought annulment of VAT self-assessment acts for periods 2015/11 to 2016/12, arguing it erroneously included taxable base amounts (not just VAT) in field 4 of periodic declarations due to bookkeeping errors, effectively overpaying amounts to the State that lack the legal nature of tax. The claimant contended this constituted a factual error correctable through general mechanisms under Article 97(2), not a tax regularization subject to Article 78(6)'s specific procedure. The Tax Authority raised jurisdictional objections, arguing the arbitral tribunal lacked material competence since the administrative appeal decision didn't assess the self-assessments' legality but merely refused to address the claim on grounds it fell within Article 78(6)'s optional regularization framework. This case highlights fundamental interpretative questions regarding correction mechanisms in Portuguese VAT law: when taxpayers can invoke general correction procedures versus specific regularization regimes, the legal nature of overpaid amounts, and whether restricting correction pathways violates EU effectiveness principles. The distinction between discrepancies in represented reality (factual/legal errors) versus supervening facts requiring regularization proves central to determining applicable procedures and arbitral jurisdiction under RJAT.

Full Decision

ARBITRAL DECISION

The arbitrators Dr. José Poças Falcão (arbitrator-president), Dr. Filipa Barros and Prof. Doctor Luís Menezes Leitão, appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 14 November 2018, hereby agree as follows:

I – REPORT

A..., S.A. (hereinafter referred to as the Claimant), with unique registration and corporate person number..., with registered office at Av. ..., n.º..., in Lisbon (...-...), did, pursuant to articles 2 no. 1, paragraph a) and 10 et seq. of the Legal Framework for Tax Arbitration, provided for in Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter abbreviated as "RJAT") and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, submit a request for arbitral pronouncement seeking a declaration of illegality of the tax acts of self-assessment of Value Added Tax (VAT) relating to the periods 2015/11 to 2016/12 and of the decision dismissing the administrative appeal no. ...2017....

The respondent is the TAX AUTHORITY AND CUSTOMS AUTHORITY (hereinafter referred to as AT).

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to AT on 04-09-2018.

The Claimant did not proceed to appoint an arbitrator, whereby, pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable timeframe.

On 24-10-2018, the parties were duly notified of such appointment and did not express any desire to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provisions of paragraph c) of no. 1 of article 11 of the RJAT, the Arbitral Tribunal was constituted on 14-11-2018.

Duly notified, AT submitted a response in which it defended the inadmissibility of the request, pleading by exception and by objection on the merits.

As it was considered that the facts relevant to the decision have sufficient documentary support, the meeting referred to in article 18 of the RJAT was dispensed with.

18 March 2019 was set as the date for the pronouncement of the final decision.

To substantiate its request, the Claimant alleges, in summary, that the decision dismissing the administrative appeal relating to the annulment of the VAT self-assessment acts relating to the periods 2015/11 to 2016/12 is unlawful, invoking for this purpose the applicability of the general means of correction provided for in article 97 no. 2 of the VAT Code, whilst ruling out, on the other hand, the application of the mechanism established in Article 78 no. 6 of said Code, since there are no tax regularisations at issue in the proceedings.

Indeed, the Claimant contends that, as a result of a bookkeeping error and a subsequent error in completing the periodic declarations, amounts corresponding to the taxable base of VAT were included in field 4 of the periodic declarations, and such amounts were delivered to the State coffers. Thus, the Claimant delivered to the State not only the amount corresponding to the VAT levied but also the value of the consideration received from the respective clients on which VAT was levied. Therefore, even if it corrected the invoices in question, in the terms proposed by AT in the context of the draft decision dismissing the administrative appeal, the situation under analysis would continue not to be subsumable under the regime established in article 78 no. 6 of the VAT Code, as the sums it seeks to have refunded do not have the legal nature of VAT.

Applying the rule of interpretation provided for in article 9 of the Civil Code (ex vi article 11 no. 1 of the LGT), it follows from the wording of the cited legal provision that it concerns the correction of material errors or calculation errors in the records or in the periodic declarations in which the taxable person proceeded incorrectly to the payment or deduction of VAT, which means that the mechanism is intended only for the regularisation of sums that have the legal nature of tax.

Since there are no tax regularisations at issue, nor indeed material or calculation errors, the taxable person should avail itself of the remaining general means of reaction, as provided for in article 97 no. 2 of the VAT Code, the Claimant considering that this is the internal guidance of AT, conveyed in Circular Letter no. 30.082/2005 of 17 November.

Therefore, the Claimant contends that the decision dismissing the administrative appeal is flawed by a breach of law due to a misinterpretation of the provisions of article 78 no. 6 of the VAT Code.

Being this the context, the Claimant qualifies the error incurred in the VAT self-assessment as a factual error, having erred in the determination of legally relevant facts and, consequently, the rules to be applied in the calculation of the taxable matter to be stated in the declaration. For this purpose, the Claimant relies on prior jurisprudence delivered by CAAD, according to which a distinction should be made between the discrepancy between the reality represented in the periodic declaration and the reality – factual or legal error – and the supervening occurrence of a fact (change in reality) which entails a change in the tax to be borne or deducted, the latter situations being those to which the aforementioned provision of article 78 no. 6 of the VAT Code refers.

Thus, the situation in question should be qualifiable as a factual error whose legal solution is set out in article 16 of the VAT Code.

Furthermore, it states that the alleged error in the issuance of invoices invoked by AT in the decision dismissing the administrative appeal does not alter its conclusion, insofar as non-compliance with the legal formalities in the issuance of invoices does not imply the need for VAT regularisation under article 78 of the Code of that tax and even less legitimises AT in not immediately reimbursing the sums unduly paid.

It concludes by stating that, in light of the factual and legal framework described, the AT's decision constitutes an unjust enrichment of the State, as if it is forbidden to correct the VAT self-assessment acts, on the grounds that the administrative appeal procedure is not considered the appropriate means, such understanding is likely to violate the principle of effectiveness enshrined in the European legal order.

In turn, the respondent submitted a response in which it defended itself by exception and by objection on the merits.

In the context of the defence by exception, the respondent alleges, in summary, the following:

In the first place, AT raises the exception of material incompetence of the arbitral tribunal to hear the request submitted for its consideration, which concerns an administrative tax act that did not assess the legality of the self-assessments in question, refusing to pronounce itself on the merits of the claim put forward by the then appellant, on the grounds that the petitioned matter is framed within the optional regularisation provided for in no. 6 of article 78 of the VAT Code. Indeed, it contends that the binding of the tax administration to arbitral jurisdiction is provided for in Ordinance no. 112-A/2011, of 22/03, which excludes from the scope of such binding, pursuant to paragraph a) of its article 2, claims relating to the declaration of illegality of self-assessment acts that have not been preceded by recourse to the administrative remedy in accordance with articles 131 to 133 of the CPPT.

In light of the said normative framework, it emphasises that article 97 no. 2 of the VAT Code prescribes the inadmissibility of appeals when the regularisation provided for in article 78 of the same Code would be admissible, as is the case in the proceedings.

Since, therefore, the claim of the claimant is not to be framed within the appeal of self-assessments provided for in article 131 of the CPPT, given that such framing is expressly rejected by no. 2 of article 97 of the VAT Code, in conjunction with article 78 of the same statute.

Furthermore, pursuant to article 2 paragraph a) of Ordinance no. 112-A/2011, the appeal lodged by the claimant is not comparable to the appeal provided for in article 131 of the CPPT, and it is certain that it results from the wording of the law that the claims submitted to arbitral jurisdiction have been preceded by recourse to the administrative remedy in accordance with article 131 of the CPPT, the legislator intending to refer to the submission of an administrative appeal necessary in relation to the request for a declaration of illegality of the self-assessment act.

Indeed, if the legislator did not provide for, in article 2 of the said Ordinance of binding, the procedure of official revision as comparable to recourse to the administrative remedy, and especially to the administrative appeal, for the purposes of accessing the request for arbitral pronouncement, it was certainly because it did not intend to do so. Now, such considerations apply to any other recourse to the administrative remedy that does not constitute, for what concerns the proceedings, a recourse to the administrative remedy in accordance with article 131 of the CPPT.

It concludes by stating that the understanding advocated, that disputes which concern the declaration of illegality of self-assessment acts, as is the case in the situation sub judice, are excluded from the material competence of arbitral tribunals, if they are not preceded by an administrative appeal in accordance with article 131 of the CPPT, is required by the constitutional principles of the Rule of Law and separation of powers (cf. articles 2 and 111, both of the CRP), as well as by the right of access to justice (article 20 of the CRP) and legality (cf. articles 3 no. 2, 202 and 203 of the CRP and also article 266 no. 2 of the CRP), in its corollary of the principle of indisponibility of tax credits inherent in article 30 no. 2 of the LGT, which bind the legislator and all AT's activity.

However, should this view not be accepted, AT contends that the material incompetence of the Arbitral Tribunal will nevertheless result from the fact that the impugned decision did not assess the legality of the self-assessment tax acts.

Effectively, the act object of arbitral pronouncement is embodied in the decision of refusal to assess the merits of the claim put forward by the then appellant on the grounds that the administrative appeal is not the legally admissible means for this purpose. Thus, it is necessary to conclude that the legality of any tax self-assessment act was not assessed, with no pronouncement on the merits of the issue.

Now, pursuant to paragraph a) of no. 1 of article 97 of the CPPT, administrative acts in tax matters that do not assess or discuss the legality of the assessment act are not subject to judicial review.

AT stresses that this understanding is supported both by doctrine and by the jurisprudence of the STA and of CAAD itself, according to which it does not fall within the scope of arbitral competence to assess the legality or illegality of decisions dismissing requests for VAT regularisation submitted under article 78 of the LGT, nor, as the claimant requests, to pronounce decisions partially annulling VAT self-assessments without prior assessment of the legality of such acts by the Tax Authority in accordance with articles 131 to 133 of the CPPT.

It concludes that the arbitral request cannot be heard by the present Tribunal, in view of the verification of a dilatory exception which amounts to the incompetence of the tribunal, which prejudices the assessment of the merits of the case, and should determine the absolution of the respondent entity from the action, having regard to the provisions of articles 576 no. 1 and 577 paragraph a) of the CPC, applicable ex vi article 29 no. 1 paragraph e) of the RJAT.

In the context of the defence on the merits, the respondent alleges, in summary, the following:

The claimant seeks to assert its right to refund of amounts allegedly delivered in excess, in error, based on invoices that do not fully comply with the legal formality of containing explicitly the elements referred to in paragraphs c) and d) of no. 5 of article 36 of the VAT Code, namely:

  • the taxable value of the operation which serves as the basis for the assessment of the tax and,

  • the amount of tax due for the taxable operation.

In this regard, AT recalls that only retailers are given, pursuant to articles 39 and 40 of the VAT Code, the possibility of issuing documents mentioning the value of the operation with VAT included, in lieu of the elements provided for in paragraphs c) and d) of no. 5 of article 36 of the VAT Code, and it is generally mandatory to apportion the tax, pursuant to no. 1 of article 37 of the VAT Code, with a breakdown of the tax relating to the service provided.

In any case, since the claimant's error results from the fact that the elements which served as the basis for completing the periodic declarations are incorrectly recorded in the accounts, it should be understood that the error in question constitutes a material or calculation error in the accounting records made, capable of being framed under no. 6 of article 78 of the VAT Code.

Accordingly, the regularisation of said errors is merely optional, as it results in tax in favour of the taxable person, and could only be effected within the period of two years, counted from the birth of the right to deduction, pursuant to no. 1 of article 22 and no. 6 of article 78, both of the VAT Code.

Therefore, it would be incumbent upon the claimant to correct the error in the issuance of the invoices from which the declarative error resulting in the alleged underpayment of VAT derives, by annulling the respective supporting documents – invoices/receipts, followed by the issuance of credit notes to customers, and, finally, the issuance of new invoices that contain all the legal requirements provided for in the cited no. 5 of article 36 of the VAT Code, as results from no. 1 of article 78 of the VAT Code.

Furthermore, in AT's view, the documents presented by the claimant, attached to the proceedings, besides not being certified, are insufficient to achieve the intended proof, as to the alleged error committed and as to its quantification.

In light of the foregoing, AT pleads for the inadmissibility of the request for arbitral pronouncement, given that the alleged error committed by the claimant constitutes a material or calculation error, of optional regularisation within 2 years, and the possibility of applying the general period of 4 years for exercising the right to deduction, provided for in no. 2 of article 98 of the VAT Code, should be ruled out.

Given that, in this case, none of the purposes legally entrusted to it were verified, and there being no objection from the parties, under the provisions of articles 16 paragraph c), 19 and 29 no. 2 of the RJAT, as well as the principles of procedural economy and prohibition of useless acts, on 3 January 2019, the realisation of the meeting referred to in article 18 of the RJAT was dispensed with, and the parties were notified to submit written submissions of fact and law, within a simultaneous period of 20 days.

It was further decided that within the same period for submission of submissions the claimant may exercise the right to reply to the exceptions invoked by the respondent.

On 04 February 2019, the claimant submitted its written submissions, maintaining, essentially, the arguments contained in the request for arbitral pronouncement, and responding to the exceptions invoked by the respondent, as follows:

With regard to the first exception, it notes that the means used by the claimant to review the error in the acts of self-assessment of tax is the correct one, with no other means of reaction capable of being used.

Indeed, having regard to the facts put forward in the request for arbitral pronouncement, it follows that the claimant inserted, in error, in field 4 of the VAT periodic declarations not only the amount corresponding to VAT, but also the amount corresponding to the taxable base and which served to assess the tax. As a result of this error, the claimant delivered to the State coffers, as VAT, amounts that do not have the legal nature of tax.

Thus, contrary to the thesis defended by the respondent, the situation in question does not fall within the scope of the VAT regularisation regime established in article 78 no. 6 of the VAT Code, since the self-assessment acts constitute factual errors that run counter to the basic rules of the VAT Code, in particular article 16 no. 1 of that statute.

Accordingly, the self-assessment acts of the tax being unlawful, as contrary to the basic rules of incidence and assessment of VAT, as well as the whole concept of VAT, the claimant made use of the administrative appeal, in the terms and for the purposes of article 131 of the CPPT, as that is the means which procedural law provides for petitioning the AT to correct errors of this nature. Being the situation subsumable within the concept of factual error, and not of "material or calculation errors", the possibilities of applying the mechanism provided for in article 78 no. 6 are ruled out, requiring the error to be corrected by AT through the revision of the tax acts triggered by the procedural mechanism imposed by article 131 of the CPPT.

Based on doctrine and on prior decisions delivered by the Arbitral Tribunal, the claimant reiterates that the means used is the proper one, with no remaining doubts as to the material competence of the Arbitral Tribunal to assess and declare the illegality of the self-assessment acts sub judice.

Indeed, according to arbitral jurisprudence, the express reference to article 131 of the CPPT made in article 2 no. 1 paragraph a) of the said Ordinance no. 112-A/2011 cannot have the decisive scope of ruling out the possibility of assessing requests for illegality of decisions dismissing requests for correction and revision of self-assessment acts. An interpretation based exclusively on the literal wording cannot be accepted, having regard to general principles of interpretation. Thus, the obligation to resort to the administrative appeal prior to this being necessary to open the contentious avenue of challenge to self-assessment acts, provided for in no. 1 of article 131 of the CPPT, is intended to allow AT to know and pronounce on the legality of the legal and factual situation created by the act. Similarly, in cases where a request for correction or official revision of the assessment act is formulated, the AT is provided with an opportunity to pronounce itself on the merits of the taxable person's claim before the latter has recourse to the judicial avenue.

Now, there is no doubt that, in the case in question, the claimant submitted an administrative appeal against the VAT self-assessment acts, providing AT with the opportunity to pronounce itself on the merits of its claim, whereby it cannot be accepted that access to the arbitral route is prevented on pain of violation of the right of access to justice and effective judicial protection enshrined in article 20 of the CRP.

In the second place, the respondent argued that the Arbitral Tribunal lacked material competence since the AT's decision which concerned the administrative appeal did not assess the legality of the self-assessment acts, and recourse to the arbitral route is barred when the administrative tax act does not assess the merits of the issue.

Now, as to this issue, the claimant is of the opinion that AT is not correct.

Indeed, what is at issue in the present proceedings is the fact that AT considers that the situation sub judice is subsumable to "material or calculation error", established in article 78 no. 6 of the VAT Code and, for this reason, the means appropriate to the claimant's claim is the tax regularisation mechanism established in that legal provision, and not the administrative appeal.

The AT bases the qualification of the error and, consequently, the subsumption of the situation in question to the provision of that legal provision, on the circumstance that the claimant did not comply with the legal formalities provided for in article 36 no. 5 of the VAT Code for the issuance of invoices.

In light of such considerations, the claimant submitted the present request for arbitral pronouncement on the grounds that AT's judgment suffers from a misqualification of the legal-tax situation and, on the other hand, from a misinterpretation of the regularisation mechanism established in article 78 no. 6 of the VAT Code.

Therefore, the discussion of the legality of the self-assessment acts centres on the fact that AT considers that these are corrections of material or calculation errors in the accounting records, applying the legal regime provided for for VAT regularisation, whereas the claimant considers that there is a factual and legal error, whose legal solution is set out in article 16 of the VAT Code.

In this sense, the decision dismissing the administrative appeal evaluates the nature of the error shown by the claimant, having made considerations in the decision dismissing the administrative appeal, in which it identifies the practical situation, analyses the facts presented and assigns a factual and legal solution different from the solution found by the claimant (cf. points 61 to 78 of the decision dismissing the appeal).

Thus, the reasoning based on the decision dismissing the administrative appeal is not based solely and solely on the adequacy of the procedural means used, but rather concerns the qualification of the situation from the factual and legal point of view.

Furthermore, in the decision dismissing the administrative appeal, AT ends up admitting that the claimant's claim could have been accepted if it had followed the mechanism provided for in article 78 of the VAT Code, thereby indicating that the self-assessment acts are unlawful.

In support of its thesis, the claimant invokes prior decisions of the Arbitral Tribunal, according to which, having regard to the criterion for the division of fields of judicial review and administrative action, outlined by paragraphs d) and p) of no. 1 of article 97 of the CPPT, it is not necessary that the assessment of the legality of an assessment act be the basis of the administrative decision or that the claim formulated be a request for the assessment of the legality of an assessment act, it being sufficient that such act involves it, which, in this context, means that in the impugned act is included a judgment on the legality of an assessment act, even if its legality or illegality is not the basis of the decision.

Without prejudice to the foregoing, and even if the Arbitral Tribunal were to understand that the decision dismissing the administrative appeal does not involve the assessment of the legality of the self-assessment acts – which is only conceivable as a mere matter of form, without conceding – in the claimant's opinion this would not be sufficient to find itself incompetent to assess the request for arbitral pronouncement in question. Indeed, and contrary to what the respondent argues, even if the administrative acts in tax matters do not assess the legality of the self-assessment act, they may be subject to review through arbitration, and what is at issue is not, in the arbitral process, the concrete application of the criterion for the division of fields of judicial review and administrative action (as would happen in obedience to the rules of article 97 nos. 1, paragraphs d) and p) and 2 of the CPPT), having regard to the conceptual structure of article 2 no. 1 of the RJAT, and the provision of article 97 nos. 1, paragraphs d) and p) and 2 of the CPPT is not extensible to the procedural rules provided for in the RJAT.

Finally, the claimant reminds that the means of reaction used was the one expressly indicated by AT in the decision dismissing the administrative appeal, given that the admissibility of this procedural means to react against the decision dismissing the administrative appeal is recognised by AT in its own decision.

The claimant concludes that AT cannot seek to prevent the assessment of the merits of the request, shielding itself behind the inadequacy of a procedural means whose use it itself, objectively, induced, on pain of violation of the principle of cooperation and good faith enshrined in article 59 of the LGT.

With regard to the facts subject to challenge, the claimant considers its arguments reinforced through the evidence produced in the proceedings, supported by suitable accounting documents and properly explaining the error sought to be demonstrated.

Finally, contrary to the alleged insufficiency of invoices attached to the proceedings, the claimant emphasises the necessity and adequacy of conducting proof by sampling in situations where the amounts of commissions and VAT levied appear in a large number of invoices that make the production of physical proof almost impractical.

On 15-02-2019 the respondent submitted its submissions reiterating all the arguments presented in the response.

II. CASE MANAGEMENT

The Arbitral Tribunal is materially competent and was regularly constituted.

The parties enjoy legal personality and capacity, have legal standing and are duly represented (articles 4 and 10 no. 2 of the same statute and article 1 of Ordinance no. 112-A/2011, of 22 March). The proceedings are not affected by any nullities.

There are no other circumstances that prevent the assessment of the merits of the case.

III. DECISION

1. Factual Findings

1.1. Facts found to be proved

The following facts are found to be proved:

a) The claimant is a financial institution that carries on normally and habitually the activity described in no. 1 of article 4 of the General Framework for Credit Institutions and Financial Companies (RGICSF), approved by Decree-Law no. 298/92, of 31 December;

b) The claimant is a VAT taxable person, coming within the standard regime, with monthly periodicity, carrying out operations subject to VAT;

c) As a result of an internal review of procedures, the claimant found that, in the periods 2015/11 to 2015/12 and 2016/01 to 2016/12, it delivered to the State coffers the amounts of €10,029.25 and €59,374.24, respectively, as VAT, when in fact such amounts correspond to the value of commissions paid by customers;

d) In the course of its activity, the claimant provides services related to payment of services and purchases through the multibanco network, managed by SIBS B..., S.A. ("SIBS");

e) This service allows merchants registered with it to make available to their customers, via the multibanco network, the payment of invoices arising from the provision of services and sale of goods, such as those from the so-called "utilities" (e.g., water, electricity and gas), among others;

f) The invoice that the merchant provides to its customers contains the following indications: entity number, multibanco reference number and amount payable;

g) When a merchant registers for this service, the claimant requests SIBS to open a reference, designated as "Entity";

h) For each purchase or service payment, SIBS provides a "Multibanco Reference" which the merchant will include in the invoice to be issued which, in turn, will allow the customer, together with the indication of the "Entity" number and the amount payable, to make payment in the multibanco network;

i) Once payment is made by the customer via the multibanco network, the "Support Bank" delivers to the merchant the price of the purchase of the good or service;

j) As consideration for the services provided in the context of payments by multibanco references, merchants pay the claimant a commission;

k) This commission can be deducted from the price of the good or service to be delivered by the claimant to the merchant, or can also be paid later by the merchant, until the 7th day of the following month;

l) The commission charged by the claimant was subject to VAT, at the legal rate of 23%;

m) In the course of a review of procedures carried out, the claimant found that, in error, in recent years, it recorded in the accounting line #58823 – VAT Levied – the value corresponding to the commission charged to the merchant;

n) Thus, in the accounting line #58823 the claimant recorded the VAT levied on the commission, as well as the value corresponding to the commission itself;

o) In the invoices issued to its customers the claimant did not properly segregate the value corresponding to the aforementioned commissions paid by merchants from the VAT levied on those same commissions (cf. sample copy of invoices attached to the PAR as doc. no. 6).

p) Thus, from the invoices relating to commissions charged to customers, issued by the claimant, the following elements appear:

  • Invoice/receipt number;
  • Reference month;
  • Customer code;
  • Multibanco entity code;
  • Tax identification number;
  • Customer's business name and address;
  • Date, description, quantity and total amount of the operation;
  • Mention of VAT included at the legal rate of 23%;
  • Date of issue of the document.

(cf. doc. no. 6 attached with the PAR).

q) The error in issuing invoices, of not segregating the VAT levied in relation to the value of the commission, led to an error in completing the VAT periodic declarations (cf. doc. no. 1 attached with the Request for Arbitral Pronouncement (hereinafter PAR).

r) In completing field 4 (Tax Due to the State) of the VAT periodic declarations for the periods 2015/11 to 2016/12, the claimant showed, among others, the balance of the accounting line #58823 (cf. table attached with the PAR as document no. 2, containing the breakdown of accounting lines and respective balances, as well as the corresponding ledgers and account extract, attached as docs. no. 3 and no. 4, respectively);

s) The balance of accounting line #58823 included not only the amount corresponding to the VAT levied, but also the amount corresponding to the commission charged to the merchant (cf. ledger entries and account extract attached with the PAR as docs. no. 3 and no. 4, as well as information contained in the table with the payment methods, attached to the PAR as doc. no. 5);

t) The invoices issued to customers by the claimant, duly marked in the table of payment methods, show that the value of the commission charged, increased by the VAT levied at the rate of 23%, was recorded in accounting line #58823 (cf. table of payment methods attached to the PAR as doc. no. 5 and sample copy of invoices attached to the PAR as doc. no. 6).

u) The amount identified in the invoices as "Amount" due, i.e., as commission, was fully recorded in the accounting line of VAT levied which, in turn, was entered in field 4 of the periodic declaration as VAT due to the State and delivered to the State coffers (cf. documents attached with the PAR nos. 2, 3, 4, 5 and 6);

v) The error in the accounting records and subsequent error in completing the VAT periodic declarations led the claimant to deliver as tax due to the State the amount of the consideration received by it, in the total amount of €69,403.49 (cf. doc. no. 1 attached with the PAR);

w) In order to react against the error in completing the VAT periodic declarations and convinced of the illegalities of the self-assessment acts, the claimant submitted an administrative appeal against such self-assessment acts (cf. doc. no. 7 attached with the PAR);

x) On 12-04-2018, through letter no. ... from the Division of Tax Management and Assistance of the Large Taxpayers Unit, the claimant was notified of the draft decision dismissing the administrative appeal submitted (cf. doc. no. 8 attached with the PAR);

y) In the draft decision, AT proposes the dismissal of the administrative appeal on the grounds that, in summary, the following applies:

"39. Therefore, to correct the error in issuing the invoice from which the declarative error resulting in the alleged underpayment of VAT derives, the appellant must proceed (in cases where the period for doing so is still running) to annul the respective supporting documents – "invoices/receipt" through the issuance of credit notes to the respective customers,

  1. proceeding thereafter to the issuance of new invoices that contain all the legal requirements provided for in the aforementioned no. 5 of article 36 of the VAT Code, as results from the provision of no. 1 of article 78 of the VAT Code (...)

  2. It should be noted that such regularisations do not constitute an obligation but rather a mere option granted to taxable persons. However, the full exercise of this option is conditioned by the verification of the option imposed by no. 5 of the same article (...)

  3. Consequently, alongside the regularisation of VAT made in favour of the taxable person (transferor or provider), in cases where the purchaser has already proceeded to the accounting record, the latter, in turn, is obliged to correct the VAT deduction initially made, proceeding to regularise in favour of the State the corresponding amount of tax, until the end of the period following receipt of the corrective document. (...)

  4. On the other hand, since we are facing a situation susceptible to the application of the VAT regularisation mechanism within the normative framework provided for in article 78, in light of which it is necessary to evaluate how to effect the VAT regularisations that the appellant seeks to achieve, it is important here to note that the material or calculation error referred to above, completely rules out the possibility of applying the general period of four years for exercising the right to deduction provided for in no. 2 of article 98 of the VAT Code.

  5. Insofar as – as we shall see – on the one hand, we are not facing the absence of legal rules especially applicable to VAT regularisations arising from material or calculation errors that would justify the application of the general period of four years. (...)

  6. In accordance with the understanding established, such time limit applies only, given its general character, when there is no rule of special character that sets a lower or higher time limit, on pain of these rules being deprived of practical content, as if this were not the case the period of four years provided for in article 98 of the VAT Code would always apply. Which, as results from the foregoing, is not the case. (...)

  7. In this sense, having regard to that on the date on which it submitted the petition, the tax acts of self-assessment now in question and which constitute its object were still susceptible of correction in accordance with article 78 of the VAT Code, whereby this administrative procedure of appeal cannot be admitted, by virtue of the provision in the first part of no. 2 of article 97 of the VAT Code.

  8. Similarly, also in relation to some of the 2016 periods contested, at the date of drafting of this information, the period of 2 years for regularisation of the operation is still running, which is why it is reiterated that, as results from the first part of no. 2 of article 97, in order to proceed to the desired correction, the appellant must resort to the regularisation mechanism provided for in no. 6 of article 78 of the VAT Code, and for this reason it is manifestly impossible to admit its claim in this regard.

  9. In that measure, contrary to what is sought by the appellant here, to have recognised the right to regularise, in its favour, the VAT allegedly levied in excess, following the error in issuing invoices, as well as in the material or calculation error detected in the accounting records corresponding from which it proceeded to complete the periodic declarations in question, it is imposed as the only applicable regularisation mechanism, that specially provided for in the final part of no. 6 of article 78 of the VAT Code, in accordance with which, the regularisation in question would have to be effected within the period of two years counted "(...) from the birth of the respective right in accordance with no. 1 of article 22 of the VAT Code (...)".

z) On 02-05-2018, the claimant exercised its right to a hearing, once more expressing its disagreement with the framing proposed in the draft decision of AT, explained above (cf. doc. no. 9 attached with the PAR);

aa) On 09-05-2018, through letter no. ... from the Division of Tax Justice of the Large Taxpayers Unit, the claimant was notified of the decision dismissing the Administrative Appeal, in which AT maintained the position set out in the Draft Decision (cf. decision dismissing the Administrative Appeal attached with the PAR as doc. no. 10);

bb) On 03-09-2018 the request for constitution of an Arbitral Tribunal was received (cf. electronic request submitted to CAAD).

1.2. Facts found not to be proved

Of those alleged, relevant to the decision, none remained unproved.

1.3. Reasoning on the Factual Findings

With regard to the facts, the Tribunal does not have to pronounce on everything that was alleged by the parties, but rather has the duty to select the facts that matter for the decision and discriminate the proved matter from the unproved matter (articles 123 no. 2 of the Code of Procedure and Tax Process – CPPT – and 607 no. 3 of the Code of Civil Procedure – CPC –, applicable ex vi article 29 no. 1, paragraphs a) and e) of the RJAT).

Thus, the facts pertinent to the judgment of the case are chosen and selected according to their legal relevance, which is established in view of the various plausible solutions of the legal question(s) (cf. former article 511 no. 1 of the CPC, corresponding to the current article 596, applicable ex vi article 29 no. 1 paragraph e) of the RJAT).

Thus, having regard to the positions assumed by the parties, in light of article 10 no. 7 of the CPPT, the documentary evidence and the administrative file attached to the proceedings, the facts above listed are found to be proved, having regard to that, as was written in the judgment of the TCA-South of 26-06-2014, delivered in case 07148/131, "the probative value of the tax inspection report (...) may have probative force if the assertions contained therein are not challenged".

In particular, the facts found to be proved above identified in paragraphs c) to bb) took into account the provisions in the parties' pleadings as well as in the documents submitted by the claimant, the Tax Inspection Report and the documentation contained in the PA.

Thus, considering the facts above listed, and without prejudice to the prior analysis of the exceptions of material incompetence invoked by AT, it is understood that the main matter in dispute is limited to an essential question of law: to assess the legality of AT's decision when considering that the error invoked by the claimant, consisting in the delivery of excess values as tax, values that constitute payment of consideration, constitutes a "material or calculation error", only correctable within the 2-year period, in accordance with the mechanism provided for in article 78 no. 6 of the VAT Code, or, if instead, such error should be framed as a factual or legal error, under the terms provided for in article 98 no. 2 of the VAT Code, capable of correction within the 4-year period, as the claimant argues.

2. Law

2.1. Preliminary Issues

As a preliminary matter, it is necessary to begin by analysing the exceptions of material incompetence of the Arbitral Tribunal raised by AT.

2.2. Material Incompetence

The respondent raises the material incompetence of this tribunal, to the extent that in its understanding, paragraph a) of article 2 of Ordinance no. 112-A/2011, of 22 March, excludes from the scope of such binding claims relating to the declaration of illegality of self-assessment acts that have not been preceded by recourse to the administrative remedy in accordance with articles 131 to 133 of the CPPT, "It not being (...) the case to frame the claim of the respondent within the appeal of self-assessments provided for in art. 131 of the CPPT given that such framing is expressly rejected by no. 2 of art. 97 of the VAT Code, in conjunction with art. 78 of the same statute." (see point 19 of the Response). In this light, it considers that, even equating the "appeal lodged by the respondent to the appeal provided for in art. 131 of the CPPT, such equation is legally barred in arbitration", as article 2 paragraph a) of the said Ordinance only expressly contemplates the means established in article 131 of the CPPT, in view of the literal element and therefore inevitable element of article 2 paragraph a) of Ordinance no. 112-A/2011.

Thus, AT understands, in light of this normative provision, that the same should be understood literally, precluding from the scope of tax arbitral jurisdiction claims relating to the declaration of illegality of self-assessment acts that have not been preceded by appeals in accordance with the said CPPT provisions.

All of AT's argumentation on the matter, however, ends up amounting to sustaining that it was the legislator's intention to restrict the competence of tax arbitral jurisdiction, as regards the assessment of illegalities of self-assessment acts, solely to situations in which there is an appeal submitted in accordance with articles 131 to 133 of the CPPT, as that is what is expressly established by the text of the provision being interpreted.

With all due respect, no substantial reason is discernible from among those offered by AT that explains the rationale for the understanding it sustains. Indeed, no substantial reason is discernible – and AT presents nothing in that regard – for why, having regard to the conditions and specificities peculiar to each of the administrative remedies in question, in the same terms that tax tribunals are bound, should the legality of self-assessment acts not be cognoscible in arbitration.

Furthermore, even a literalist reading of the provision in question, provided it is properly contextualised, does not inexorably lead to the result defended by AT in the proceedings.

Indeed, the expression employed by such provision parallels the provision of article 131 no. 1 of the CPPT itself, which should be understood as a concretisation of the assumed, and peacefully recognised, legislative intention that the tax arbitral process constitutes an alternative procedural means to the judicial review process.

The provision of paragraph a) of article 2 of Ordinance 112-A/2011, of 22 March, should also be understood as being explained by the circumstance that, in its absence – and given the wording of article 2 of the RJAT – it would be possible to envisage the direct challenge of self-assessment acts, without precedence of administrative pronouncement. That is: bearing in mind that given the RJAT no intervention by the administration prior to arbitral challenge of a self-assessment was necessary to be configured, the tenor of the Ordinance should be interpreted as equating – in this matter – the tax arbitral process to the judicial review process and not, as would follow from the position sustained by AT, turning from 80 to 8, taking a broader impugnability than possible in the scope of Tax Tribunals, and transmuting it into a more restricted one.

Thus, no reason is seen – and, once more, AT gives no contribution in that regard – for why one and the other provision should be interpreted differently, all the more so as the letter of the provision of Ordinance 112-A/2011, of 22 March, ends up being less restrictive than that of the CPPT, in that it does not integrate the expression "mandatory", nor does it refer to "administrative appeal" but rather to "administrative remedy". Hence it is possible to read the provision itself in the letter of the law in the sense that only excluded from the scope of tax arbitral jurisdiction is the assessment of claims relating to the declaration of illegality of self-assessment, withholding, and payment on account acts, that have not been preceded by recourse to the administrative remedy in terms compatible with articles 131 to 133 of the CPPT.

This is, therefore, the reading that is subscribed to, following the judgment delivered in case no. 48/2012T of CAAD, and subsequent arbitral jurisprudence, an understanding also followed by doctrine, and no violation of any constitutional provision is discerned, given that the interpretation effected is contained in the letter of the law, in particular articles 2, 3 no. 2, 20, 111, 202, 203 and 266 no. 2, all of the CRP.

Additionally, as an exception, the respondent invokes the material incompetence of this Arbitral Tribunal on the grounds that the decision of the tax administration which concerned the administrative appeal did not assess the legality of the self-assessment acts in question, considering that "(...) the act object of arbitral pronouncement is embodied in the decision of refusal to assess the merits of the claim put forward by the then appellant on the grounds that the administrative appeal is not the legally admissible means for this purpose." (see point 47 of the Response). In this way, the respondent understands that the decision dismissing the administrative appeal cannot be reviewed through judicial challenge, in accordance with the provisions of paragraph a) of no. 1 of article 97 of the CPPT and article 2 of the RJAT, as it does not concern the legality of the self-assessment acts here in question.

With all due respect, it is understood that the respondent is not correct.

Thus, still on the respondent's thesis, we would be "before an administrative act in tax matters which, by not assessing or discussing the legality of the assessment act, cannot be reviewed through judicial challenge, in accordance with the provisions of paragraph a) of no. 1 of article 97 of the CPPT and article 2 of the RJAT", whereby considering "that it does not fall within the scope of arbitral competence to assess the legality or illegality of decisions dismissing requests for VAT regularisation submitted under article 78 of the LGT, nor, as the respondent requests, to pronounce decisions partially annulling VAT self-assessments without prior assessment of the legality of such acts by the Tax Authority in accordance with articles 131 to 133 of the CPPT", the alleged exception would be verified.

Now, on the one hand it is clear already from the administrative appeal, for the Tribunal and for any reasonable recipient, that the claimant seeks the partial annulment of its VAT self-assessment acts relating to the periods between November 2015 and December 2016, acts which are, moreover, within the knowledge and possession of the respondent, and that such claim is founded on the erroneous delivery in excess of tax due to the erroneous accounting record of the value of the operation with VAT included, and is furthermore founded, in the present arbitral action, on the alleged illegality of the act dismissing the administrative appeal submitted relating to the self-assessment acts, due to erroneous application of the period referred to in no. 6 of article 78 of the VAT Code.

On the one hand, it is evident to this Tribunal that the discussion of the legality of the self-assessment acts centres on the fact that AT considers that these are corrections of material or calculation errors in the accounting records of the claimant, applying the legal regime provided for for VAT regularisation, whereas the claimant considers that there is a factual and legal error, whose legal solution is set out in article 16 of the VAT Code.

On the other hand, and contrary to what the respondent alleges, the decision dismissing the administrative appeal proceeds to qualify the error shown by the claimant, and has moreover been given a factual and legal solution different from the solution offered by the claimant.

Indeed, AT considers that "Contrary to what is alleged by the appellant in the hearing on rights, the analysis effected, as provided for in point V of this information, shows, unequivocally, that the alleged delivery of tax in excess results from a material or calculation error in the assessment of the tax levied in each of the periods (...) That is, in the case in question, there are indeed material or calculation errors committed by the taxable person in the delivery of the tax assessed in favour of the State, whose amounts of VAT were recorded by the taxable person in the respective periodic declarations, and the correction of such can only be effected in obedience to the regularisation mechanism provided for, specifically in no. 6 of article 78 of the VAT Code (...)"

It is thus evident that in the decision dismissing the administrative appeal, AT considers the self-assessment acts in question unlawful, and consequently inadmissible the refund of the amounts of tax delivered in excess by the claimant, by subsuming the error of the self-assessment acts to a "material or calculation error in the assessment of the tax", and, in this context, to consider the period provided for in article 78 no. 6 of the VAT Code exceeded.

As written in the judgment of CAAD delivered in case no. 117/2013-T, "although the dispositive part of the act dismissing the request for revision of the self-assessment act does not pronounce on the legality of the latter, it ends up admitting, in its reasoning, that the claim of the herein respondent could have been accepted if it had been formulated within the period provided for in article 78 no. 6 of the VAT Code, which entails that the self-assessment act is unlawful."

Hence, no doubts persist that in the decision dismissing the administrative appeal the legality of the claimant's VAT self-assessment acts, in question in the present proceedings, was indeed assessed.

In summary, the vice of material incompetence imputed by the respondent does not occur in any of its aspects invoked, which is declared, judging the alleged exception inadmissible.

2.3. Merits of the Case

a) Question to be decided

The situation in the present proceedings, which the decision addresses, is in its essential contours of simple definition.

The claimant, in the periods between 2015/11 to 2016/12, delivered by error to the State coffers amounts that do not have the legal nature of tax, by entering in field 4 of the VAT periodic declarations (Tax Due to the State), not only the amount corresponding to the VAT levied on the commissions charged to its customers, but also the value of the commission itself.

In this regard, the claimant delivered to the State the sum of the amount corresponding to VAT and the amount corresponding to the taxable base that served to assess the said tax.

It is important to note that claimant and respondent are in agreement in attributing the aforementioned error in completing the VAT periodic declarations to the fact that the invoices issued by the claimant did not fully comply with the legal formality of explicitly and independently showing the elements referred to in paragraphs c) and d) of article 36 no. 5 of the VAT Code, namely, the taxable value of the operation which serves as the basis for the assessment of tax, as well as the amount of tax due for the taxable operation.

Accordingly, the disagreement between the parties lies in the qualification of the type of error and in the procedure for the refund of the amounts unduly delivered to the State.

In relation to the nature of the error, AT qualifies it as a material or calculation error, capable of being framed under no. 6 of article 78 of the VAT Code. As for the refund procedure, AT understands that the situation amounts to a tax regularisation and that to correct the error in issuing the invoice, from which the declarative error resulting in the underpayment of VAT derives, the claimant must proceed to annul the respective supporting documents – invoices/receipt – through the issuance of credit notes to the respective customers, and then proceed to the issuance of new invoices that contain all the legal requirements provided for in no. 5 of article 36 of the VAT Code, therefore, following the procedure provided for in no. 1 of article 78 of the said Code.

Now, according to the claimant's thesis, amounts were delivered to the State coffers that do not have the legal nature of tax, and such error in completing the periodic declarations and the consequent delivery of the value of the consideration for services provided, in addition to the tax itself, constitutes rather a factual or legal error to which the mechanism established in article 78 no. 6 of the VAT Code cannot be applied, since what is at issue is not the regularisation of any tax.

The claimant thus considers that the error committed in the present proceedings constitutes an error in the self-assessment of tax, and that the general means of reaction provided for in article 97 no. 2 of the VAT Code apply, and the general period of 4 years resulting from no. 2 of article 98 of the VAT Code.

In these terms, the question to be assessed consists in knowing whether the claimant's position is correct when it sustains the possibility of being able to obtain, over a period of 4 years, the refund of sums unduly computed and delivered to the State as tax, through a combined reading of the provisions of articles 16 no. 1, 97 no. 2 and 98 no. 2, all of the VAT Code.

Let us see, then.

b) Legal and Jurisprudential Framework

Article 98 of the VAT Code provides as follows:

"1 - When, for reasons attributable to the services, tax has been levied in excess of the amount due, official revision shall be effected in accordance with article 78 of the general tax law.

2 - Without prejudice to special provisions, the right to deduction or refund of tax delivered in excess can only be exercised up to the lapse of four years after the birth of the right to deduction or overpayment of tax, respectively.

3 - No assessment shall be annulled when its amount is less than the limit provided for in no. 4 of article 94."

In turn, article 97 no. 2 of the VAT Code provides as follows:

"(...)

2 - Hierarchical remedies, appeals and challenges are not admitted if the assessments are still susceptible of correction under article 78 or if the periodic declaration whose omission gave rise to the assessment provided for in article 88 has not been filed"

Furthermore, article 16 no. 1 of the VAT Code provides as follows:

"Taxable value in domestic operations

1 - Without prejudice to the provisions of nos. 2 and 10, the taxable value of transfers of goods and supplies of services subject to tax is the value of the consideration obtained or to be obtained from the purchaser, recipient or a third party. (Amended by article 119 of Law no. 64-B/2011, of 30 December)".

Finally, article 78 no. 1 and 6 of the same Code states, among other things, the following:

"Regularisations

1 - The provisions of articles 36 and following must be observed whenever, once an invoice is issued, the taxable value of an operation or the respective tax is to be rectified for any reason. (As amended by D.L. no. 197/2012, of 24 August, effective 1 January 2013).

(...)

6 - The correction of material or calculation errors in the record referred to in articles 44 to 51 and 65, in the declarations mentioned in article 41 and in the guides or declarations mentioned in paragraphs b) and c) of no. 1 of article 67 is optional when it results in tax in favour of the taxable person, but can only be effected within a period of two years, which, in the case of exercising the right to deduction, is counted from the birth of the respective right under no. 1 of article 22, being mandatory when it results in tax in favour of the State."

Now, as results from the provisions transcribed, where there is a need to rectify the assessment of tax incorrectly made as a result of an assessment higher than that due, the law allows, depending on the qualification of the error that motivated the assessment (or lower deduction), that such situation may be corrected in the following terms:

a) Where it is a material error or calculation, the VAT self-assessment incorrectly carried out can be the object of correction within the period of 2 years counted from the date of overpayment of the tax, in accordance with article 78 no. 6 of the VAT Code;

b) Where it is a legal or classification error, the VAT self-assessment incorrectly carried out can be the object of correction within the period of 4 years counted from the date of overpayment of the tax, in accordance with article 98 no. 2 of the VAT Code;

In the context of delimiting the fields of action of material error or calculation and classification or legal error, doctrine and jurisprudence have been pronouncing themselves widely in the case-by-case concretisation of the situations that may be reduced to each of the aforementioned errors.

In the words of Alexandra Martins and Pedro Moreira, article 78 no. 6 of the VAT Code is intended to target "solely and exclusively, the lapses calami in the transposition of elements from invoices to accounts and from these to VAT periodic declarations". In turn, Afonso Arnaldo and Tiago Albuquerque Dias associate material or calculation errors with those provided for in article 95-A of the CPPT, 249 of the Civil Code and 614 no. 1 of the Code of Civil Procedure, reducing them "to situations in which the taxable person is mistaken in the materialisation of deduction or assessment acts, namely, by mistake, in the transcription of values or for arithmetic reasons, i.e., in both situations minor and evident errors."

Furthermore, in accordance with administrative doctrine, material or calculation errors are considered "those that result from internal errors of the company that have no interference in the sphere of third parties. They typically consist of errors in transcribing invoices to the records or from the records to the periodic declaration, not including those marked in point 8" of the same administrative instruction which identifies situations to which the mechanisms of article 78 of the VAT Code are not applicable, clarifying that such errors should be regularised "under articles 23, 24, 24-A, and 25 of the VAT Code".

As regards this matter there are numerous arbitral decisions from CAAD, and there is also some jurisprudence from superior administrative and tax courts. It was considered in a judgment of the Central Administrative Court South that the material error provided for in no. 6 of article 78 of the VAT Code is an error in completing the fields of the periodic declaration.

In turn, with relevance to the disputed case, the Supreme Administrative Court (STA) states, in the context of a case in which the question of the period applicable for claiming VAT delivered in excess by the taxpayer was analysed, that everything comes down to knowing whether, in the concrete case at issue, the disputed question concerns mere material or calculation errors provided for in article 78 no. 6 of the VAT Code or legal errors, provided for in article 98 no. 2 of the VAT Code. In this regard, the STA reduced the characterisation of material or calculation errors to the situations provided for in article 95-A no. 2 of the CPPT, that is, "material or manifest errors resulting from the anomalous functioning of the tax administration's information systems, as well as the unequivocal situations of calculation error, writing error, inaccuracy or lapse."

Thus, according to the said jurisprudence, it is important to question, in view of the concrete case, whether the error resulted from a mere mechanical operation (errors of transcription or recording in the periodic declaration) or whether the error derives from a non-mechanical operation, of those implying the interpretation of the law to determine the VAT due. In case of legal error in the periodic declaration, not subsumable therefore under the special regime provided for in no. 6 of article 78, the STA understands that the taxable person has a general period of 4 years to claim the amount of tax delivered in excess, as results from no. 2 of article 98 of the VAT Code.

Still on the scope to be conferred on the rule provided for in no. 2 of article 98 of the VAT Code, jurisprudence has held that such provision "does not have the scope of assigning to the taxable person the freedom to choose any moment within that period to effect the deduction, but rather to set a maximum limit that cannot be exceeded", understanding that it should be articulated with the remaining provisions for tax regularisation, to the extent that such provisions constitute special provisions that supersede the temporal limitation maximum.

Therefore, whenever the VAT Code determines a special period for tax regularisation, and the concrete situation is subsumable under such special period – for example, to material or calculation errors – the general period of 4 years would not apply.

c) Application to the Concrete Case

As mentioned, the reason for the dissent between the parties lies in the fact that AT understands that the error incurred by the claimant constitutes a material or calculation error, subject to the regularisation procedure provided for in article 78 no. 6 of the VAT Code and conditioned to the temporal limit of two years, not accepting, in the case in question, the appeal of the self-assessment submitted by the taxpayer, in accordance with article 97 no. 2 of the said Code nor the use of the mechanism contained in article 98 no. 2 of the same Code.

Now, with all due respect, the AT's thesis is not subscribed to.

A more detailed analysis of the circumstances of the case, as they result from the evidence, allows for verification that the taxable person, by having incorrectly framed its active operations from the accounting point of view, proceeded to levy as tax due the very value of the consideration.

It further results from the evidence that if it is true that the taxable person delivered the State overpaid tax, the truth is that it did not levy it in excess to its customers, and therefore there is no place for the refund of tax to whoever bore it.

Note that in the case at hand the correction of the accounting records can be made internally and without interference in the sphere of third parties, because even though the invoices were issued without explicitly containing the elements referred to in paragraphs c) and d) of article 36 of the VAT Code, the claimant's customers were apportioned the exact amount of VAT that fell to them to bear, levied at the general applicable rate of 23%.

In this way, it cannot be imputed to the claimant a material or calculation error since it did not make an accounting error, did not commit any error of sympathy or material lapse, nor adopted untimely, fraudulent, or, for any reason, blameworthy behaviour at that level.

There was not even a risk of loss of tax revenue given the levy of the corresponding tax at the maximum applicable rate. What occurred was that the claimant, through an internal analysis of its procedures, became aware that it had erred on facts determining with respect to the premises of the taxation of its active operations, in particular, for the purposes of the application of the provisions of article 16 of the VAT Code.

Indeed, the error-vice referred to by the claimant resulted from the inclusion in the balance of accounting line #58823, not only of the amount corresponding to the VAT levied, but also of the amount corresponding to the commission charged to its customers. Thus, it is understood that the error in question directly results from the accounting framing level reflected on the legal framing level of the operation, in particular the qualification of certain amounts – as to the taxable value of the operations – and consequently, the values that should be reported by taxable persons as service provisions and those that should be reported as tax to be delivered to the State.

In this measure, the delivery to the State of the value of the consideration does not fall within a mere writing lapse or an arithmetic error that resulted in the completion of a different tax value than intended. The error in the self-assessment committed by the claimant thus results from an error in the process of formation of will, and moreover raises a problem, of a substantial order, relating to the lack of adherence of the self-assessments submitted in relation to the taxable value of the operations actually carried out by the claimant, in breach of the provisions of article 16 no. 1 of the VAT Code.

Therefore, the argument does not hold, and the application of the special period of 2 years provided for in article 78 no. 6 of the VAT Code is not accepted, resulting from the qualification of the error in question as a material calculation error, making the refund of the sums unduly delivered to the State dependent on the issuance of credit notes to the respective customers and the issuance of new invoices, this time observing the requirements of article 36 of the VAT Code, in the case at hand, containing the segregation of the taxable value and the tax relating to the service provided.

With regard to the scope to be conferred on the compliance with the formal requirements of invoices, the Court of Justice of the European Union (CJEU) has tended to downplay the weight of such requirements in the issuance of invoices "when the authorities have all the necessary information to verify whether the substantial requirements relating to the exercise of that right are satisfied". If it is true that this jurisprudence was issued in the context of the right to deduction, a principle is herein advocated that the essentiality of compliance with certain formal requirements in the issuance of invoices imposed by tax authorities should respond to the principle of proportionality having regard to the purposes of combating tax evasion and fraud aimed at by such requirements.

Now, in the concrete case, using purely formal arguments, AT seeks to appropriate sums that have the legal nature of consideration, even though they were mentioned, in error, in the periodic declarations as having the legal nature of "tax".

In this measure, and given that AT does not question the substance of the underlying operations, nor presents alternative evidence that contradicts the computation of the amounts assessed and delivered in excess, it would obtain unjust enrichment, in the exact measure of the values self-assessed by the claimant that do not constitute VAT. Furthermore, it should be noted that the refund to the taxable person of the sums unduly delivered, and to the extent that it concerns the value of the consideration, does not imply the undoing of the assessment circuit, nor the value paid and possibly deducted by the customer suffers any alteration.

Now, if in accordance with article 16 of the VAT Code and article 73 of the VAT Directive, the taxable value is constituted by the economic consideration actually received, AT received an unduly excessive amount of tax compared to what was levied by the taxable person, and therefore the correction of the situation in question must be accepted, in the terms and period referred to in no. 2 of article 98 of the VAT Code, which is moreover in consonance with the general rules of tax prescription, contained in the LGT, which naturally reserve special provisions such as no. 6 of article 78 of the same Code, for the specific situation provided for there, which as has been referred to, is not at issue in the present proceedings.

2.4 Indemnificatory Interest

In the request for arbitral pronouncement, the claimant petitions for the refund of unduly paid tax, plus indemnificatory interest.

Pursuant to article 24 no. 1 paragraph b)

Frequently Asked Questions

Automatically Created

What is the difference between material or calculation errors and errors of law in VAT self-assessment under Portuguese tax law?
Material or calculation errors in VAT self-assessment refer to mechanical mistakes in records or periodic declarations affecting VAT payment or deduction amounts, correctable under Article 78(6) of the VAT Code through specific regularization procedures. Errors of law involve misapplication of legal provisions or mischaracterization of facts for tax purposes. The distinction is crucial because Article 78(6) applies only to corrections of amounts with the legal nature of tax, while general correction mechanisms under Article 97(2) may apply to factual errors where taxpayers incorrectly determined legally relevant facts. Portuguese case law distinguishes between discrepancies in declared reality versus supervening factual changes, with only the latter triggering Article 78(6) regularization requirements.
How does Article 78(6) of the Portuguese VAT Code apply to regularization of self-assessed IVA?
Article 78(6) of the Portuguese VAT Code establishes an optional regularization mechanism specifically for corrections involving tax amounts properly characterized as VAT. It applies when supervening facts require adjustment to tax borne or deducted, not when initial self-assessment contained factual or legal errors in determining the taxable base. The provision requires specific procedural compliance and limits correction timeframes. Tax authorities interpret Article 78(6) as the exclusive remedy for certain VAT corrections, potentially blocking alternative correction paths. However, taxpayers argue this interpretation may not apply when overpaid amounts lack the legal nature of tax, as when taxable base amounts are erroneously included in VAT payment fields due to bookkeeping errors rather than genuine tax calculation mistakes.
Can taxpayers use the general correction mechanisms under Article 97(2) of the IVA Code to rectify VAT self-assessments?
Article 97(2) of the Portuguese VAT Code provides general correction mechanisms (reclamação graciosa, recurso hierárquico, impugnação judicial) that may apply to VAT self-assessment corrections when Article 78(6)'s specific regularization regime doesn't govern the situation. Taxpayers contend these general mechanisms apply to factual errors in self-assessment where amounts paid don't constitute actual tax or where corrections fall outside Article 78(6)'s scope. Tax Authority Circular Letter 30.082/2005 allegedly supports this interpretation for certain error types. However, jurisdictional questions arise regarding arbitral tribunal competence when administrative appeals don't substantively assess self-assessment legality but instead determine applicable correction procedures. The interplay between specific VAT regularization rules and general administrative remedies remains contested, with implications for taxpayer rights and EU effectiveness principles.
What was the outcome of CAAD arbitration process 432/2018-T regarding the annulment of VAT self-assessment acts from 2015-2016?
The complete outcome of CAAD Process 432/2018-T is not provided in the excerpt, which concludes at the procedural stage after the Tax Authority's response raising jurisdictional objections. The arbitral tribunal, constituted on November 14, 2018, was examining whether it had material competence to hear the case, given AT's argument that the administrative appeal decision didn't assess self-assessment legality but merely refused to address the merits based on Article 78(6) applicability. The tribunal was also evaluating whether the taxpayer's claimed overpayments (taxable base amounts erroneously paid alongside VAT) constituted material/calculation errors correctable through general mechanisms or tax regularizations requiring Article 78(6) compliance. The decision date was set for March 18, 2019, but the substantive ruling on illegality of the 2015-2016 VAT self-assessments and dismissed administrative appeal is not included in this excerpt.
What is the proper procedure to challenge an unfavorable decision on a VAT reclamação graciosa through tax arbitration in Portugal?
To challenge an unfavorable VAT reclamação graciosa decision through tax arbitration in Portugal, taxpayers must comply with RJAT (Regime Jurídico da Arbitragem Tributária) requirements under Decree-Law 10/2011. Article 10 and following provisions establish jurisdiction, while Ordinance 112-A/2011 defines Tax Authority binding to arbitration. Critically, Article 2(a) of this Ordinance excludes claims regarding self-assessment illegality not preceded by administrative remedies per CPPT Articles 131-133. Taxpayers must first exhaust the reclamação graciosa procedure before accessing arbitration. The arbitration request must clearly identify challenged acts and legal grounds. However, jurisdictional issues arise when administrative decisions don't substantively assess self-assessment legality but instead determine procedural frameworks (e.g., whether Article 78(6) or Article 97(2) applies). Tax authorities may argue arbitral tribunals lack competence over such procedural determinations, creating potential access-to-justice concerns regarding effective remedies for taxpayers facing complex correction mechanism disputes.