VAT Regularization Under Article 78 of the IVA Code: CAAD Arbitration on Taxpayer Adjustments and Refund Rights

ARBITRAL DECISION [1]

The Arbitrator, Dr. Sílvia Oliveira, designated by the Ethics Council of the Administrative Arbitration Centre (CAAD) to constitute the Arbitral Tribunal, constituted on 28 September 2017, with respect to the process identified above, decided as follows:

1. STATEMENT OF FACTS

A…, S.A., registered in the Commercial Registry Conservatorship of Lisbon under the single registration number, of legal person and tax identification…, with registered office at Av. …, nº…, in Lisbon (hereinafter designated as "Claimant"), submitted a request for arbitral pronouncement and constitution of a Single Arbitral Tribunal on 27 July 2017, pursuant to the provisions of article 4 and no. 2 of article 10 of Decree-Law no. 10/2011, of 20 January [Legal Regime for Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority is the Respondent (hereinafter designated as "Respondent").

The Claimant intends for the Arbitral Tribunal to "(…) deem it appropriate to grant the present request for arbitral pronouncement, on grounds of violation of law, and consequently, to annul the decisions of partial dismissal of the voluntary claims herein challenged, in the part in which they dismiss the claims of the present Claimant, relating to the VAT taxation periods 201508, 201509, 201510, 201601, 201603, 201604 and 201605, as well as the corresponding VAT assessments and default interest, which shall result in the recognition of the Claimant's right to reimbursement of the amounts of VAT and undue default interest paid".

The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD, and automatically notified to the Respondent on 28 July 2017.

The Claimant, on 21 August 2017, submitted a request to attach to the case copies of invoices, credit notes and delivery receipts, which were missing from documents no. 14, 21, 27, 33 and 45, attached to the arbitral request.

The Claimant did not proceed with the appointment of an arbitrator, therefore, pursuant to the provisions of article 6, no. 2, subsection a) of RJAT, the undersigned was designated, on 13 September 2017, as arbitrator by the President of the Ethics Council of CAAD, and the appointment was accepted within the legally prescribed period and terms.

1.6. On the same date, the Parties were duly notified of this designation and did not express any wish to refuse the designation of the arbitrator, pursuant to the provisions of article 11, no. 1, subsections a) and b) of RJAT, in conjunction with articles 6 and 7 of the Code of Ethics.

1.7. In accordance with the provisions of subsection c), no. 1, of article 11 of RJAT, the Arbitral Tribunal was constituted on 28 September 2017, with an arbitral order being issued on the same date, to notify the Respondent to, pursuant to the provisions of article 17, no. 1 of RJAT, submit a Response, within a maximum period of 30 days and, should it wish, request additional evidence.

1.8. Additionally, it was further stated in that arbitral order that the Respondent should send to the Arbitral Tribunal, within the period for the Response, a copy of the administrative file.

1.9. On 27 October 2017, the Respondent submitted its Response, having defended itself by objection to the effect that "(…) to conclude by the total unfoundedness of the arguments advanced by the Claimant, concluding that the disputed assessments are perfectly lawful and should, as such, be maintained in the legal order", therefore "(…) the present request for arbitral pronouncement should be judged unfounded as not proven, and consequently, the Respondent absolved of all claims, all with the due legal consequences".

1.10. Additionally, with the Response submitted, the Respondent attached to the case a copy of the Administrative File.

1.11. In these terms, it was decided, by order of this Arbitral Tribunal, dated 30 October 2017, in accordance with the procedural principles set forth in article 16 of RJAT, of the autonomy of the Arbitral Tribunal in the conduct of the proceedings and in the determination of the rules to be observed [subsection c)], of cooperation and procedural good faith [subsection f)] and of free conduct of the proceedings set forth in articles 19 and 29, no. 2 of RJAT, as well as taking into account the principle of limitation of useless acts, provided for in article 130 of the Code of Civil Procedure (CPC), applicable by virtue of the provisions of article 29, no. 1, subsection e) of RJAT:

• To dispense with the holding of the meeting referred to in article 18 of RJAT;
• To proceed with the submission of written arguments (optional), with a period of 10 days (successive), with the period for arguments of the Claimant beginning with the notification of the present order and the period for arguments of the Respondent beginning with the notification of the submission of the Claimant's arguments;
• To designate 15 December 2017 as the date for the rendering of the arbitral decision.

By arbitral order of 2 November 2017 (in addition to the arbitral order referred to in the previous point), the Arbitral Tribunal further warned the Claimant that until the date of the rendering of the arbitral decision it should proceed with the payment of the subsequent arbitration fee, pursuant to the provisions of no. 3 of article 4 of the Regulation of Costs in Procedures of Tax Arbitration and communicate such payment to CAAD (which it came to effect on 23 November 2017).

On 10 November 2017, the Claimant submitted its written arguments, reiterating the allegations in the arbitral request and concluding in the same terms.

Additionally, with the arguments, it came to request the attachment to the case of five new documents.

By arbitral order, dated 14 November 2017, the Respondent was notified, in accordance with the principle of due process, to pronounce itself, if it wished, within a period of 5 days, on the content of the five documents whose attachment was requested by the Claimant, pursuant to the previous point.

On 21 November 2017, the Respondent submitted its written arguments, to the effect of reiterating the arguments already presented in its Response, concluding in the same terms, and not pronouncing itself on the documents presented by the Claimant in its arguments.

By arbitral order, dated 14 December 2017, the Arbitral Tribunal came to postpone to 27 December 2017 the rendering of the arbitral decision scheduled for 15 December 2017, alleging supervening reasons preventing the Tribunal itself.

The Claimant, by request dated 20 December 2017, came to request the Arbitral Tribunal "(…) the attachment of the notification of final decision of the hierarchical appeal within the scope of the proceeding no. …2016… rendered by the Tax and Customs Authority on 15-12-2017 and received by A… on 18-12-2017, within the scope of another additional VAT assessment (…), in which the Tax and Customs Authority pronounces itself, regarding the regularization of VAT, in cases in which both the invoice and the credit note were issued after the cessation of activity of the client (…)" to the effect of "(…) to uphold the position of A…, particularly in relation to the arguments listed (…) in articles 120.º to 144.º of its request for arbitral constitution".

By arbitral order, dated 21 December 2017, the Respondent was notified, within the scope of the principle of due process, to pronounce itself within a period of 5 days, if it wished, on the content of the aforementioned request submitted by the Claimant, and consequently, the date of 27 December 2017 for the rendering of the arbitral decision was set aside, with this being rescheduled for 18 January 2018.

The Respondent said nothing regarding the content of the request submitted by the Claimant on 20 December 2017.

In this context, this Arbitral Tribunal is of the view that, having regard to the provisions of article 423 of the CPC, applicable to Tax Proceedings by virtue of the provisions of article 29, no. 1, subsection e) of RJAT, and given the fact that the Claimant was notified of the documents now attached on 18 December 2017, the same could only be presented on the date in which they were, thus admitting their attachment to the case, given their relevance regarding the disclosure of the position assumed by the Respondent on a matter identical to that dealt with in this proceeding.[2]

2. CAUSE OF ACTION

2.1. The Claimant begins by clarifying that "(…) it is a joint-stock company with registered office in national territory, whose corporate purpose consists of the establishment, conception, construction, management and exploitation of networks and infrastructures of electronic communications, as well as in the provision of electronic communications services and services of transport and broadcasting of telecommunications signals", further noting that "(…) it is a VAT taxable person (…), being classified under the normal monthly regime, being obligated (…) to submit monthly periodic declarations (…)".

2.2. The Claimant further clarifies that "within the scope of its activity of provision of electronic communications services (…) it issues monthly more than two million invoices", "(…) to more than two million clients, which makes impractical, from a practical standpoint, the validation of the tax identification number of each client, prior to the issuance of the invoice".

2.3. Now, according to the Claimant, "during its monthly billing cycles, (…) it often finds itself in the need to issue rectifying documents of invoices in which it proceeds to the reduction of the taxable values of the operations", being that it notes that "this necessity (…) arises from the fact that the Claimant has to settle client accounts, by virtue of the application of discounts or adjustments after several invoices issued by reference to base values", issuing "(…) a credit note in which it corrects the invoiced values downward, thus reducing the taxable basis of the operation".

2.4. Thus, "once these credit notes are issued, the Claimant has the possibility (…) of regularizing the tax paid to the State in excess, provided that it can prove (…) that the purchaser of the services became aware of the rectification or that it was reimbursed of the tax charged in excess in the invoice".

2.5. According to the Claimant, "in the case under analysis, what is being challenged by the Tax and Customs Authority is precisely the regularization of VAT which the Claimant proceeded to upon the submission of the periodic VAT declarations relating to the periods of August to October 2015 and January and March to May 2016".

2.6. "In effect, with respect to the taxation periods of 201508, 201509, 201510, 201601, 201603, 201604 and 201605, the Claimant was notified of 7 additional VAT assessments, which it presented (…) the respective voluntary claims, and regarding which a decision of partial approval (…)" was rendered", "(…) this being the object of the present request for arbitral pronouncement".

2.7. Thus, throughout the request, the Claimant describes and details the procedures adopted with respect to the submission of Periodic VAT Declarations, relating to each of the taxation periods referred to in the previous point, as well as regarding the regularizations of VAT in its favor, included in those declarations.

2.8. However, according to the Claimant, the Respondent identified alleged inaccuracies verified in Annex 40 of each of the Periodic Declarations submitted, having issued the following VAT Assessment Statements (amounts in Euros):

2.9. In this context, the Claimant notes that, "without prejudice to not agreeing (…) with the said assessments, (…) it paid the amounts in full (…)", having submitted the following voluntary claims, on the grounds of "defect of lack of grounds and, subsidiarily (…), on the basis of defect of violation of law" (amounts in Euros):

2.10. The Claimant further states that the voluntary claims submitted were subject to an order of partial approval, notified on 28/04/2017 (Order of August/2015), 12/05/2017 (Order of September/2015), 08/06/2017 (Order of October/2015 and Order of January/2016), 19/05/2017 (Order of March/2015, Order of April/2016 and Order of May/2016), respectively, on the grounds which follow:

Voluntary Claim relating to the Order of August/2015

2.10.1. "(…) the partial dismissal of the voluntary claim (…) is justified by the non-verification of the requirements of the VAT regularization mechanism (…)", in that "[i]n the case at issue there are situations in which the activity, in terms of VAT, of some taxable persons acquiring goods or services found itself ceased as of the date of issuance of the invoices or the credit notes, with these not having proceeded to the submission of periodic VAT declarations for the period, or periods following the one in which the Claimant effected the VAT regularization in its favor (…)" (emphasis by Claimant);

2.10.2. "(…) the regularization of tax in the case of individual taxpayers and taxable persons who undertake exclusively exempt operations that do not confer the right to deduction shall be done pursuant to no. 8 of article 78.º of CIVA, with such diligences being must be documented and certified by an official auditor, pursuant to no. 9 of article 78.º of CIVA, which is not the case in our specific case (…)";

2.10.3. "[i]n this way, the requirements provided for by the VAT regularization mechanism are not met (…)";[5]

2.10.4. "the deduction of tax must be effected in the period or in the period following receipt of the invoices, provided that the 4-year period has not expired (…), which does not occur in the specific case, as there is the issuance of several credit notes in the months of April and June, the regularization of which was effected in the month of August (…)".

Voluntary Claim relating to the Order of September/2015

2.10.5. "(…) when tax regularization is at issue in the case of individual taxpayers and taxable persons who undertake exclusively exempt operations that do not confer the right to deduction, such diligences must be documented and certified by an official auditor (…)";

2.10.6. "(…) the requirements of nos. 2, and 5 of article 78.º of the VAT Code are not met, which is why the VAT regularization in favor of the Claimant is not accepted (…)".

Voluntary Claim relating to the Order of October/2015

2.10.7. "(…) non-verification of the presuppositions upon which VAT regularization by the taxable person depends (…), namely those provided for in article 78.º, nos. 2, 5 and 8 of the VAT Code" (underline by Claimant).

Voluntary Claim relating to the Order of January/2016

2.10.8. "(…) the requirements (…) of the VAT regularization mechanism are not met (in particular, those provided for in nos. 2, 5 and 8 of article 78.º of the VAT Code), which is why it was decided upon the [dismissal] of the claim formulated by the Claimant, regarding the additional VAT assessment (…), in the part corresponding to the (…) inaccuracies verified (…) duly notified (…)" (underline by Claimant).

Voluntary Claim relating to the Order of March/2016

2.10.9. "(…) the requirements provided for by the VAT regularization mechanism are not met, as the regularization is not documented and certified by an official auditor (…)"(underline by Claimant).

2.10.10. And because "[the] presuppositions provided for in nos. 2 and 5 of article 78.º of the VAT Code are not met";

2.10.11. The Respondent decided "(…) upon the [dismissal] of the claim formulated by the Claimant, regarding the additional VAT assessment, in the part corresponding to the (…) inaccuracies verified (…) duly notified (…)".

Voluntary Claim relating to the Order of April/2016

2.10.12. "(…) the TA detected incoherencies (…) at the level of the cadastral situation, in the scope of VAT, with respect to various economic operators of the aforesaid Regularizations Annex of Field 40 of the Periodic Declaration, resulting from errors L01 – Invalid or Non-Existent NIF in Registry and L04 – Taxable Person ceased or without valid classification (…)";

2.10.13. "(…) non-verification of the presuppositions upon which VAT regularization depends, provided for in nos. 2, 5 and 9 of article 78.º of the VAT Code (…)"

Voluntary Claim relating to the Order of May/2016

2.10.14. It was decided "(…) upon the [dismissal] of the claim formulated by the Claimant, regarding the additional VAT assessment, in the part corresponding to the (…) inaccuracies verified (…)";

2.10.15. "(…) the requirements upon which VAT regularization in favor of the taxable person depends are not met (…)".

2.11. However, for the Claimant, "once the factuality (…) is analyzed, it results (…) that, notwithstanding having been amply demonstrated (…) that the client became aware of the rectification of each of the invoices annulled (…) the TA decided only upon the partial approval of the claims formulated by the Claimant", therefore "for not being able to accept these decisions rendered upon the voluntary claims submitted, by virtue of the same being based on erroneous factual and legal presuppositions, the (…) Claimant comes to submit the (…) request for arbitral pronouncement (…)".

2.12. In this context, the Claimant begins by noting that "(…) given the factuality (…) exposed, there are no doubts that all the presuppositions upon which the possibility of cumulating claims depends are met".

2.13. On the other hand, the Claimant understands that "(…) considering that the partial approval decision that occurred longest ago was notified to the Claimant on 28.04.2017, the present request appears unequivocally timely (…), with the 90-day period, counting from the aforesaid date, ending on 27.07.2017, the date on which (…) the present request for constitution of an arbitral tribunal is submitted".

2.14. As to the claim, the Claimant understands that "as results from the factuality (…) set forth and the documents brought into the present case, the thema decidendum is summarized in ascertaining whether the VAT assessments herein challenged, in the total amount of € 3,633.77, are or are not affected by illegality, on the ground of violation of law, as well as the subsequent decisions rendered by the TA in the respective voluntary claim procedures".

2.15. In particular, "(…) the Claimant understands that the TA will have erred in the factual presuppositions upon which the Claimant's right to VAT regularization in its favor is based and (…) will have erred in interpreting and applying the rules relating to the VAT regularization procedure and its respective formalities".

On the Lack of Grounds of the Assessment Statements Herein Challenged

2.16. In this context, the Claimant understands that "(…) from the analysis of the Assessment Statements that are the object of the present case (…) there does not appear the necessary grounding, neither of fact nor of law, which is incumbent upon the TA", concluding that given that the "(...)TA has the legal duty to make express reference to the applicable legal provisions (…)", "(…) grounding that does not contain this reference is always insufficient and has as its consequence the voidability of the act".[6]

2.17. Thus, the Claimant reiterates that "given the foregoing, and given the proven lack of grounding of the Assessment Statements identified above, the same should be declared illegal, with all legal consequences, particularly the right to reimbursement of the amounts unduly paid by the Claimant", but "should it not be so understood (…) the said assessments should always be considered partially illegal, on the ground of violation of law (…)".

Illegality – Defect of Violation of Law on Account of Error in the Legal Presuppositions Upon Which the Assessments Herein Challenged are Based

2.18. In this matter, the Claimant understands that "as a general tax on consumption, VAT generally burdens all operations undertaken by VAT taxable persons with economic content that can be embodied in the transfer of goods or the provision of services (…)", being that "(…) VAT taxable persons, in order to ascertain the tax owed to the State, deduct from the tax borne on the taxable operations they undertook the tax due or paid for the acquisition of goods and services from other taxable persons".

2.19. The Claimant notes that "this deduction mechanism (…) makes VAT a neutral tax, which solely aims to burden VAT taxable persons to the extent of the value they add to the goods or services along the distribution chain", being that "(…) only the tax mentioned in invoices issued in legal form, in the name and possession of the tax taxable person (…)" confers the right to deduction, "or that is, (…), a taxable person may only deduct the VAT borne on the acquisition of goods and services from other VAT taxable persons, to the extent that they possess invoices proving such acquisitions, issued in accordance with law".

2.20. However, according to the Claimant, "(…) it is expressly provided for in the VAT Code the possibility for taxable persons (i) to alter the taxable value or the tax of an operation or (ii) to correct an invoice for any reason, including inaccuracy through the issuance of a rectifying document of an invoice (…)", listing the rectifying documents of invoices.

2.21. Thus, according to the Claimant, "when there is occasion for the issuance of these rectifying documents of invoices (…), the taxable person has the obligation – in the case of having charged tax in insufficient amount –, or the faculty – in the case of having charged tax in excess – to proceed to the regularization of the tax paid to the State in insufficient or excess amount (…)" because "articles 78.º and following of the VAT Code provide a regime in which taxable persons can proceed to regularizations of the tax charged and deducted in favor of the State and of taxable persons".

2.22. In the case, "(…) the Claimant proceeded (…) to regularize tax in its favor, by virtue of the reduction/annulment of the taxable basis of already invoiced and accounting recorded taxable operations", being that "(…), the Claimant included the VAT charged to its clients in the periodic declarations of the periods following the issuance of the invoices and paid the corresponding VAT to the State".

2.23. Now, according to the Claimant, "its clients, by virtue of finding themselves in one of the three situations described below, did not deduct the VAT from the invoices issued by the Claimant" and, despite there persisting "(…) many doubts as to the VAT regularization contained in the invoices (…)", the Claimant understands that "(…) the rectification of an invoice must be effected through compliance (…)" with certain procedures, which it lists in the request.[7]

2.24. In this context, the Claimant reiterates that "as results from the evidence brought into the present case, and the administrative file (….), all the procedures (…) identified were complied with".

2.25. Thus, the Claimant clarifies that "with a view to simplifying the exposition of the arguments (…) the Claimant grouped the situations identified in the situations at issue in three categories (…)", namely:

2.25.1. "Tax of credit notes that regularize invoices, in which both documents were issued after the cessation of activity of the client, for VAT purposes";

2.25.2. "Tax of credit notes that regularize invoices, in which both documents were issued prior to the cessation of activity of the client, for VAT purposes, but in which the client ceased activity on a date prior to the regularization of VAT by the Claimant" and,

2.25.3. "Tax of credit notes issued on a date after the cessation of activity of the client for VAT purposes, being that it currently appears in the Finance Portal that the client has valid classification".

Tax of Credit Notes That Regularize Invoices, In Which Both Documents Were Issued After the Cessation of Activity of the Client

2.26. In this context, the Claimant understands that "(...) it is (...) unfeasible to validate, in all monthly billing cycles, the tax classification of its clients, a circumstance which results directly from the lack of reliability (...) and the slowness of the tool made available by the TA for the validation of the tax identification numbers of clients and suppliers and their respective tax classification", being that "(…) it is further compounded by the fact that the vast majority of invoices issued relate to the provision of continued services, therefore the Claimant acts naturally on the presumption that its clients maintain their classification for VAT purposes".

2.27. The Claimant states that "(…) for these specific situations, (…) it only proceeded to regularize the tax in its favor after having received the duplicate of the credit note, or the notice of receipt from CTT, duly signed, inclusive sometimes with the application of the stamp, being business clients, thus complying with the requirement provided for in no. 5 of article 78.º (…)".

2.28. Additionally, "(…) it must be noted that, at the moment of the entry of these tax identification numbers in Annex 40 of its Periodic Declaration, the Claimant was unaware of the fact that the same had ceased their activity for VAT purposes, altering their status of VAT taxable person to non-taxable person for VAT purposes", therefore the Claimant understands that it is "(...) flagrant the disproportionality of the formal requirement imposed on the Claimant of completing an annex to its monthly periodic declaration (…) without even establishing a minimum threshold for this requirement of discrimination, and from which results the aberrant situation of the monthly completion of an Annex to the periodic declaration with hundreds of pages and with thousands of lines, discriminating tax to be regularized in favor of the taxable person which not rarely amounts to a few cents and few times exceeds ten euros (…)".

2.29. And, the Claimant understands that, "it is equally shocking the disproportionality of the formal requirement of validation of the tax identification number and the tax classification of its clients, one by one, in the Finance Portal (…), therefore it was not even required that the Claimant know the fact that its clients had ceased their activity for VAT purposes".

2.30. Thus, the Claimant understands that "once the need to annul or rectify the value of the taxable operations at issue is verified, it is of the most elementary justice that the TA permits the Claimant to regularize the tax in its favor".

2.31. According to the Claimant, being "indubitable that the right to deduction is an exclusive right of VAT taxable persons", "it becomes manifestly clear that a taxpayer who is ceased loses, after the date of cessation, the nature of a VAT taxable person, which is why it will not be able to exercise the right to deduction of the VAT borne upstream for the pursuit of its activity".

2.32. Now, according to the Claimant, "being unquestionable that we are faced with regularizations classified under article 78.º, no. 2 of the VAT Code (…) and there being a (single) requirement for the supplier of goods or the provider of services to proceed to the regularization of tax when the taxable value of an operation or its respective tax undergoes rectification downward (…)"[8], "the Respondent cannot impose additional requirements (…), or the requirement of validation of the tax identification number and the tax classification of its clients (…) in the Finance Portal –, to thereby, in unequivocal violation of the structuring principles of the common VAT system, make it impracticable for the Claimant to exercise the right to deduction".

2.33. And, the Claimant reiterates, "(…) even the formal requirement enshrined in article 78.º, no. 5 of the VAT Code violates frontally the principle of proportionality, in circumstances, such as those of the case at issue, in which the purchaser did not deduct the VAT from the rectified original invoice because this one too was issued after the cessation of its activity for VAT purposes", being "therefore irrefutable that ceased companies which, in such circumstances, received invoices did not deduct the corresponding VAT as the right to deduction thereof was denied to them for not qualifying as VAT taxable persons on the date of issuance of the invoices".

2.34. In these terms, the Claimant concludes that "this situation does not cause harm to the State's coffers, which (…) requires that the TA not obstruct the correction of the tax improperly charged, for the benefit of the principle of tax neutrality".

Tax of Credit Notes That Regularize Invoices, In Which Both Documents Were Issued Prior to the Cessation of Activity of the Client, for VAT Purposes, But in Which the Client Ceased Activity on a Date Prior to the Regularization of VAT by the Claimant

2.35. In this context, according to the Claimant, "similarly to the situations that are subsumed in the previous case, also here the regularization of tax in favor of the Claimant was preceded by the receipt of the credit note, or the notice of receipt from CTT, duly signed by the client in question (…)".

2.36. Thus, having regard to "(…) the reasons already advanced (…), the Claimant does not conform with the non-acceptance of the VAT regularization in its favor (…) without even seeking to prove the non-regularization of tax in favor of the State by the respective client (…)".

Tax of Credit Notes Issued on a Date After the Cessation of Activity of the Client for VAT Purposes, Being That It Currently Appears in the Finance Portal That the Client Has Valid Classification

2.37. According to the Claimant, "(…) in these situations, despite the fact that the client has already ceased its activity, for VAT purposes, on the date of the regularization of tax in favor of the Claimant, the truth is that, according to the Respondent, currently the client presents, in the Finance Portal, information that its VAT classification is valid, not being therefore, in a situation of cessation of activity for VAT purposes".

2.38. "Thus, the Claimant understands that, also in these situations, the regularization of tax in its favor should not be prevented", "especially because (…) they are nonexistent or residual, in the universe of corrections impugned in the present request for arbitral pronouncement, the situations in which the invoice was issued prior to the date of cessation of activity of the purchaser and the credit note was issued after cessation with the purchaser currently appearing in the Finance Portal as having its VAT classification in effect".

2.39. In this context, the Claimant clarifies, "in many of the situations in which invoices and credit notes are issued with very few days of difference, it is possible to anticipate that (…) when the invoices themselves were issued, the purchaser appeared in the Finance Portal as having ceased its activity for VAT purposes", therefore "in this manner, the Claimant understands that, also in this case, the additional assessment of tax should not be accepted".[9]

2.40. In these terms, the Claimant understands that "(…) the TA is precisely acting against the provisions of the VAT Directive and advocated by the CJEU, by rejecting the regularization effected by the Claimant".

2.41. Indeed, the Claimant understands that "the VAT Code provides for a formality which, in general, should be complied with when the taxable person intends to rectify the VAT of an operation and regularize in its favor the VAT paid to the State", because, "pursuant to the provisions of article 78.º, no. 5 of the VAT Code, when the taxable value of an operation or its respective tax undergoes rectification downward, the regularization in favor of the taxable person can only be effected when this has in its possession proof that the purchaser became aware of the rectification or that it was reimbursed of the tax, without which the respective deduction is considered undue" (emphasis by Claimant).

2.42. "Now, the TA bases, from the outset, its decision to dismiss the voluntary claims that are the object of the present case and, consequently, of the corresponding additional VAT assessments, on the fact that the Claimant has – allegedly – breached the obligation provided for in article 78.º, no. 5 of the VAT Code", which the Claimant refutes because "as results from the foregoing and contrary to what the TA sustains, the Claimant attached to the voluntary claim procedures sufficient proof that the purchaser (…) became aware of the rectifications effected to the invoices at issue (…)".[10]

2.43. Consequently, the Claimant understands that "the TA is denying the Claimant the right to regularize the VAT of invoices issued by it and subsequently corrected, on the basis of the alleged breach of a legal formality which it complied with entirely (…)".

2.44. The Claimant alleges that "VAT (…) burdens only the final consumer, allowing economic agents the deduction of VAT borne in the various phases of the chain", therefore the Claimant understands that "it is (…) the principle of neutrality that justifies the mechanism of VAT deduction by taxable persons along the production chain", being that "(…) the right to deduction is a fundamental principle of VAT functioning, which ensures the neutrality of the tax".[11]

2.45. In these terms, the Claimant concludes that "the principle of neutrality imposes (…) that taxable persons be granted the possibility of regularizing the VAT that was paid to the State", constituting "(…) a serious distortion of the basic principles of this tax the dual burdening of the taxable person with respect to the same operation".

2.46. Now, the Claimant understands that "(…) the position adopted by the TA in the decisions to dismiss the voluntary claims, by rejecting the regularization in favor of the Claimant of the VAT paid in excess to the State, is contrary to the principle of neutrality".[12]

2.47. On the other hand, the Claimant notes that "(…) the CJEU has already clarified that it is contrary to the principle of neutrality any limitation of the right to deduction that is not justified by the risk of loss of tax revenue", citing for this purpose part of the content of Arbitral Decision no. 698/2014-T, of 03.08.2015.

2.48. For the Claimant, "it is therefore evident that the acts of dismissal of the voluntary claims of the additional VAT assessments and of the interest assessments are afflicted by the defect of violation of law, in particular of the provisions of article 78.º of the VAT Code, on account of error in the legal presuppositions, being afflicted by this same defect the assessments herein challenged".

Illegality – Non-Application of Article 78.º, No. 9 of the VAT Code

2.49. In this matter, the Claimant notes that "in all the decisions to dismiss the voluntary claims rendered and herein impugned, the TA comes to assert that, having not occurred the certification by OA that is required pursuant to article 78.º, no. 9 of the VAT Code, the presuppositions upon which VAT regularization in favor of the taxable person depends are not met".

2.50. In the case, the Claimant understands that "(…) the TA, beyond not making a correct interpretation of the norms of law that should be applicable to the situations under analysis, resorts to the application of a legal provision that has no application to the cases (…), in particular, article 78.º, no. 9 of the VAT Code", because "as results from the letter of the provision itself, this is only applicable to the situations provided for in its no. 8, that is, to credits in arrears, of doubtful collection, or in phase of litigation, and that is not, as is evident, the case of the situations under analysis (…)".

2.51. Thus, the Claimant understands that "given the foregoing, only by oversight could the TA have intended to apply the aforesaid provision to the situation of the Claimant, which is why that argument should be disregarded, for being devoid of any legal foundation (…)".

On the Preliminary Reference to the CJEU

2.52. In this context, the Claimant understands that "(…) the legislative, historical, systemic and jurisprudential elements above presented make perfectly clear the interpretation of the EU law norms at issue here and indubitable that the act of tax assessment is afflicted by illegality (…)", "therefore the Arbitral Tribunal will be capable of deciding in accordance with the applicable law, national and EU, as well as the principles of the VAT system, and a preliminary reference to the CJEU of any question is not necessary".

2.53. "Notwithstanding, should this Tribunal understand that doubts subsist as to the interpretation of the rules above mentioned in light of EU Law, this Tribunal has the legal duty to submit the appropriate questions to the CJEU", which are indicated by the Claimant in the arbitral request:

2.53.1. "Do the provisions of the VAT Directive and the principles governing the VAT system preclude a national practice whereby the tax authority refuses a taxable person the right to regularize in its favor the VAT contained in a rectifying document that reduces in whole or in part the taxable value by virtue of the annulment or reduction of the taxable operation, in circumstances in which the VAT of the rectified original invoice was not deducted by the purchaser and, additionally, the taxable person certified itself that the purchaser became aware of the rectifying document and of the reduction of the taxable value?";

2.53.2. "Do the provisions of the VAT Directive and the principles governing the VAT system preclude a national practice whereby the tax authority conditions the regularization in favor of the taxable person of the VAT contained in a rectifying document that reduces in whole or in part the taxable value by virtue of the annulment or reduction of the taxable operation, to the possession by the taxable person of proof that the purchaser became aware of this regularization, when this purchaser is not a VAT taxable person as it is an entity whose activity for VAT purposes is ceased and which, additionally, did not deduct the VAT of the rectified original invoice to the extent that it too was issued after the cessation of the activity of the purchaser for VAT purposes?";

2.53.3. "Do the provisions of the VAT Directive and the principles governing the VAT system preclude a national practice whereby the tax authority conditions the regularization, in favor of a taxable person (which, in each monthly billing cycle, issues invoices to more than two million purchasers and issues thousands of rectifying documents), of the VAT contained in rectifying documents that reduce in whole or in part the taxable value by virtue of the annulment or reduction of taxable operations, the formal requirement of the validation, prior to the issuance of invoices and prior to the issuance of rectifying documents, of the tax identification number of the purchasers and their tax classification for VAT purposes?";

2.53.4. "Do the provisions of the VAT Directive and the principles governing the VAT system preclude a national practice whereby the tax authority conditions the regularization, in favor of a taxable person (which, in each monthly billing cycle, issues more than two million invoices), of the VAT contained in rectifying documents that reduce in whole or in part the taxable value by virtue of the annulment or reduction of taxable operations, to the completion of an annex to its monthly periodic declaration in which it must be discriminated the VAT number of each of the thousands of purchasers to whom rectifying documents were issued, the year and month of the thousands of documents rectified, the taxable basis and the tax regularized through the thousands of rectifying documents?";

2.53.5. "Do the provisions of the VAT Directive and the principles governing the VAT system preclude a national rule that excludes the possibility of regularization, in favor of a taxable person, of the VAT contained in rectifying documents that reduce in whole or in part the taxable value by virtue of the annulment or reduction of taxable operations, when this regularization is not effected in the periodic declaration for the month relating to the period in which the circumstances occurred that determined the annulment of the assessment or the reduction of its taxable value or in the periodic declaration for the following month?".

On the Right to Compensatory Interest

2.54. In this matter, the Claimant understands that "concluding that the Claimant is right and that the VAT assessments correspond to unlawful acts, the TA should be condemned to the payment of compensatory interest, at the rate of 4% per annum, on the amount of the tax herein contested and unduly (…) paid (…)", being that "such interest should be counted from the date in which the amounts were unduly paid until the date of processing of the respective credit note by the TA".

3. RESPONSE OF THE RESPONDENT

3.1. The Respondent, in the Response submitted, defended itself by objection by understanding that the Claimant is not correct, in that "the arguments invoked, of fact and of law, are (…) far from substantiating and supporting any of the claims formulated, which should be rejected (…)".

3.2. The Respondent begins by noting that "the inaccuracies detected refer to tax regularizations in favor of the Claimant (…) relating to operations undertaken between the Claimant and various taxable persons whose activity, for VAT purposes, is ceased or without valid classification on the date of the regularization of tax".

3.3. On the other hand, the Respondent further notes that "the notifications issued by the TA mention (…) that (…) it should proceed to the submission of the periodic declaration and annexes that prove necessary, for the period in reference (…)" but "once no substitution declaration was submitted, for any of the periods in reference, as a result of the automatic corrections thereof (…) the corresponding VAT assessments were issued, which determined the payment to the State of VAT of the amounts corresponding to the regularization considered undue" whose "values resulting from the assessments were paid in full by the Claimant which (…) not agreeing partially with the assessments effected submitted the corresponding voluntary claims, accepting, in some cases, the remaining amount".

3.4. The Respondent notes that "in the seven claims at issue, we are faced with one (or several) of the following situations: a) Tax of credit notes that regularize invoices, in which both documents were issued after the cessation of activity of the client, for VAT purposes; b) Tax of credit notes that regularize invoices, in which both documents were issued prior to the cessation of activity of the client, for VAT purposes, but in which the client ceased its activity, for the purposes of the aforesaid tax, on a date prior to the regularization of VAT; c) Tax of credit notes issued on a date after the cessation of activity of the client for VAT purposes, being that the client currently has valid classification in the Finance portal".

3.5. Additionally, the Respondent notes that "in each of the voluntary claims at issue, the TA services prepared an Annex (…) where each of the invoices and corresponding credit notes issued by the Claimant were in detail identified and assessed, having concluded by the existence of various irregularities that obstruct the regularization of tax pursuant to article 78.º of CIVA" and, "in that sense partial dismissal orders of the claim formulated by the Claimant were rendered (…)".

3.6. The Respondent reiterates that "(…) the arguments now brought before the arbitral tribunal were all already submitted, and analyzed, within the scope of the respective voluntary claims, which is why reference is made to the same, giving, here, the grounds that led to the dismissal as fully reproduced, to which it adheres (…)".

On the Alleged Lack of Grounding

3.7. In this context, according to the Respondent, "it is obvious the conclusion that the requirements of grounding of tax acts (…) were fully complied with by the TA", being "uncontroversial (…) that grounding is sufficient when it allows a normal recipient to understand the cognitive and evaluative itinerary followed by the author of the act, that is, when the recipient can know the reasons that led the author of the act to decide in that manner and not otherwise".

3.8. Thus, the Respondent understands that "in the case at issue, the Claimant had perfect knowledge of the content of the various assessment acts and pronounced itself, by filing the corresponding voluntary claims, on the proposed corrections", concluding the Respondent that "(…) the grounding contained in the different assessment acts was clear, congruent and sufficient to allow the Claimant to submit the request for arbitral pronouncement regarding the proposed corrections, reiterating (…) the reasons already advanced during the voluntary claim procedures".

On the Alleged Defect of Violation of Law

3.9. In this context, enumerating the provisions of article 78º of the VAT Code (in the wording applicable on the date of the facts), the Respondent notes that "once (…) the Claimant did not proceed with the rectification of the periodic declaration and its respective Annex, the TA effected the automatic correction of the periodic declarations at issue" being that "therefrom resulted the issuance of additional VAT assessment (…), whose amounts correspond to the VAT that is considered unduly regularized in favor of the Claimant, as, being at issue operations between this and operators ceased for VAT, with impact at the level of VAT regularizations in favor of the taxable person, the presuppositions of functioning of the mechanism provided for in article 78.º of CIVA were not assured".

3.10. In effect, the Respondent understands that "the norm provided for in no. 5 of article 78.º of CIVA is aimed at preventing the supplier taxable person from regularizing in its favor tax initially deducted by its client, without this proceeding to the correction of the corresponding amount in favor of the State", therefore "if the supplier opts to effect the rectification, this must be operated by both intervening parties (supplier and purchaser) within the periods established in the respective norms (…), under penalty of not being able to be effected".

3.11. In the case, the Respondent notes that "(…) there are situations in which the activity, in terms of VAT, of some of the taxable persons acquiring goods or services found itself ceased on the date of issuance of the invoices or credit notes, with these not having proceeded to the submission of periodic VAT declarations for the period, or periods following, the one in which the Claimant effected the VAT regularization in its favor" being that, according to the Respondent, "the Claimant considers that once these clients had already ceased their activity they lost the quality of taxable person, and should be treated as if they were personal clients", a position with which the Respondent does not agree as "(…) even if it is considered that we are not faced with a taxable person, it is important to recall that the regularization of tax, in the case of individual taxpayers and taxable persons who undertake exclusively exempt operations that do not confer the right to deduction is done pursuant to no. 8 of article 78.º of CIVA, with such diligences being must be documented and certified by an official auditor (…)", "which is not the case at issue".

3.12. The Respondent proceeds by noting that "on the other hand, the final consumer, to the extent that it does not integrate the notion of taxable person (…) cannot exercise (…) the right to deduction regulated in article 19º of the same Code", "being all too evident that, in the situations here at issue, the regularization of tax in favor of the Claimant occurred at a moment after the date of cessation of activity of its clients, that is, these, at that moment did not have the nature of taxable person".[13]

3.13. The Respondent further notes that "in the same way, in some of the situations under analysis, the delivery receipts which the Claimant attached to the voluntary claim procedures do not identify, in unequivocal manner, the credit note that was sent through it, which is why, beyond those already invoked previously, the request for regularization of tax contained in those credit notes was dismissed, as it cannot be considered suitable for the effect".

3.14. That is, the Respondent understands that "(…) in the cases in which the taxable person does not have in its possession written confirmation effected by its clients that they received communication evidencing the amount of the corrected VAT, or that they were reimbursed of the respective tax, it is considered that the provisions established in no. 5 of art. 71º of CIVA are not complied with, rendering the respective regularization of tax undue".

3.15. In effect, the Respondent alleges that "(…) in accordance with the First Directive, the essential principle of the common VAT system is that of neutrality, which implies that VAT should bear in the same manner on all operations, regardless of the extent of the chains of production and distribution", being that "the principle of neutrality has been the object of numerous CJEU decisions which have allowed densifying its concept (…)".[14]

3.16. However, according to the Respondent, "(…) what is at issue in the present arbitral action (…) is not the possibility of effectuating the exercise of the right to deduction (…) but rather the (non-)compliance with the requirements regarding regularizations of tax previously charged".

3.17. In effect, the Respondent reiterates that "the EU legislator provided (…) that in case of annulment, rescission, resolution, non-payment in whole or in part of the price after the operation is effected the Member States establish conditions that permitted the regularization of the VAT initially charged, in obedience to the principle of neutrality" being that, for the Respondent, "article 78º of CIVA and the formal requirements therein provided aim (…), in accordance with the principle of neutrality, to project the effects of the annulment of credits/debts in the sphere of the creditor and debtor, allowing (…) the purchaser of the good the annulment in whole or in part of the tax, for purposes of rectification of the deduction initially effected".

3.18. Now, according to the Respondent, it was these "requirements that the Claimant did not comply with (…), proving to be devoid of legal foundation the argument that the impossibility of compliance is unfeasible and impossible", concluding "that no illegality can be charged to the assessments herein challenged".

On Compensatory Interest

3.19. In this context, the Respondent understands that "the corrections effected by the TA are in absolute conformity with law, no defect occurring that should dictate the annulment of the assessments, therefore there is no place for the payment of compensatory interest".

3.20. In these terms, the Respondent reiterates that "(…) it remains to conclude by the total unfoundedness of the arguments advanced by the Claimant, concluding that the assessments herein disputed are perfectly lawful, and should (…) be maintained in the legal order".

4. PRELIMINARY DETERMINATION

4.1. The request for arbitral pronouncement is timely as it was submitted within the period provided for in subsection a) of no. 1 of article 10 of RJAT.

4.2. The Parties enjoy legal standing and capacity, are entitled with respect to the request for arbitral pronouncement and are duly represented, pursuant to the provisions of articles 4 and 10 of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

4.3. The Tribunal is competent to hear the request for arbitral pronouncement formulated by the Claimant.

4.4. The joinder of claims here effected by the Claimant, is legal and valid, pursuant to the provisions of article 3, no. 1 of RJAT, given that the merits of the claims depend, essentially, on the assessment of the same factual circumstances and the interpretation and application of the same principles or rules of law.

4.5. No exceptions were raised that warrant dismissal.

4.6. There are no nullities, therefore, it is now incumbent to rule on the merits of the claim.

5. MATTER OF FACT

Facts Proven

5.1. The following facts are considered proven:

5.1.1. The Claimant is a joint-stock company with registered office in national territory, whose corporate purpose consists of the establishment, conception, construction, management and exploitation of networks and infrastructures of electronic communications, as well as in the provision of electronic communications services and services of transport and broadcasting of telecommunications signals.

5.1.2. The Claimant is a VAT taxable person, pursuant to the provisions of subsection a) of no. 1 of article 2 of the VAT Code, being classified under the normal monthly regime, submitting its periodic declarations monthly.

5.1.3. The Claimant is considered a Taxpayer of High Economic and Tax Relevance (or Large Taxpayer), being listed on the Special Registry of Taxpayers, in conformity with the Order of the Director General of the Respondent (no. 6999/2013, of 30 May).

5.1.4. Within the scope of its activity, the Claimant proceeded to submit the following Periodic VAT Declarations, with the indication of the following amounts (totals) as "Regularizations in Favor of the Taxable Person" (amounts in Euros):

5.1.5. In the aforesaid Periodic Declarations, the Claimant proceeded to regularize, in its favor, the VAT paid to the State, having completed all necessary fields of the respective Annex 40 to the declaration.

Regularizations in Favor of the Claimant Effected in the Periodic Declaration Relating to August 2015

5.1.6. The Claimant was notified, of the order of 6 October 2015, relating to the inaccuracies verified in some of the tax identification numbers indicated in the Annex "Regularizations of Field 40" of the Periodic VAT Declaration relating to period 201508, therein noting that "the amount of tax regularized in favor of the taxable person, corresponding to invalid, non-existent or ceased NIFs, may result in the correction of the tax computed for the period" therefore, once the correction period expired, the Respondent "(…) will proceed to the rectification of the periodic declaration and its respective Annex "Regularizations of Field 40" and, if appropriate, to the issuance of additional assessment (…)".

Regularizations in Favor of the Claimant Effected in the Periodic Declaration Relating to September 2015

5.1.7. The Claimant was notified, of the order of 10 November 2015, relating to the inaccuracies verified in some of the tax identification numbers indicated in the Annex "Regularizations of Field 40" of the Periodic VAT Declaration relating to period 201509, therein noting that "the amount of tax regularized in favor of the taxable person, corresponding to invalid, non-existent or ceased NIFs, may result in the correction of the tax computed for the period" therefore, once the correction period expired, the Respondent "(…) will proceed to the rectification of the periodic declaration and its respective Annex "Regularizations of Field 40" and, if appropriate, to the issuance of additional assessment (…)".

Regularizations in Favor of the Claimant Effected in the Periodic Declaration Relating to October 2015

5.1.8. The Claimant was notified, of the order of 4 December 2015, relating to the inaccuracies verified in the tax identification numbers indicated in the Annex "Regularizations of Field 40" of the Periodic VAT Declaration relating to period 201510, therein noting that "the amount of tax regularized in favor of the taxable person, corresponding to invalid, non-existent or ceased NIFs, may result in the correction of the tax computed for the period" therefore, once the correction period expired, the Respondent "(…) will proceed to the rectification of the periodic declaration and its respective Annex "Regularizations of Field 40" and, if appropriate, to the issuance of additional assessment (…)".

Regularizations in Favor of the Claimant Effected in the Periodic Declaration Relating to January 2016

5.1.9. The Claimant was notified, of the order of 8 March 2016, relating to the inaccuracies verified in the tax identification numbers indicated in the Annex "Regularizations of Field 40" of the Periodic VAT Declaration relating to period 201601, therein noting that "the amount of tax regularized in favor of the taxable person, corresponding to invalid, non-existent or ceased NIFs, may result in the correction of the tax computed for the period" therefore, once the correction period expired, the Respondent "(…) will proceed to the rectification of the periodic declaration and its respective Annex "Regularizations of Field 40" and, if appropriate, to the issuance of additional assessment (…)".

Regularizations in Favor of the Claimant Effected in the Periodic Declaration Relating to March 2016

5.1.10. The Claimant was notified, of the order of 9 May 2016, relating to the inaccuracies verified in the tax identification numbers indicated in the Annex "Regularizations of Field 40" of the Periodic VAT Declaration relating to period 201603, therein noting that "the amount of tax regularized in favor of the taxable person, corresponding to invalid, non-existent or ceased NIFs, may result in the correction of the tax computed for the period" therefore, once the correction period expired, the Respondent "(…) will proceed to the rectification of the periodic declaration and its respective Annex "Regularizations of Field 40" and, if appropriate, to the issuance of additional assessment (…)".

Regularizations in Favor of the Claimant Effected in the Periodic Declaration Relating to April 2016

5.1.11. The Claimant was notified, of the order of 7 June 2016, relating to the inaccuracies verified in the tax identification numbers indicated in the Annex "Regularizations of Field 40" of the Periodic VAT Declaration relating to period 201604, therein noting that "the amount of tax regularized in favor of the taxable person, corresponding to invalid, non-existent or ceased NIFs, may result in the correction of the tax computed for the period", therefore once the correction period expired, the Respondent "(…) will proceed to the rectification of the periodic declaration and its respective Annex Regularizations of Field 40 and, if appropriate, to the issuance of additional assessment (…)".

Regularizations in Favor of the Claimant Effected in the Periodic Declaration Relating to May 2016

5.1.12. The Claimant was notified, of the order of 8 July 2016, relating to the inaccuracies verified in the tax identification numbers indicated in the Annex "Regularizations of Field 40" of the Periodic VAT Declaration relating to period 201605, therein noting that "the amount of tax regularized in favor of the taxable person, corresponding to invalid, non-existent or ceased NIFs, may result in the correction of the tax computed for the period" therefore, once the correction period expired, the Respondent "(…) will proceed to the rectification of the periodic declaration and its respective Annex "Regularizations of Field 40" and, if appropriate, to the issuance of additional assessment (…)".

5.1.13. Following the notifications effected by the Respondent to the Claimant, (identified above in points 5.1.6. to 5.1.12.), and given that the Claimant did not proceed with the submission of any substitution periodic declarations for the periods in reference, the Respondent issued the following VAT Assessment Statements:

5.1.14. The Claimant paid the amounts referred to in the previous point on the following dates:

5.1.15. The Claimant submitted the following voluntary claims regarding the additional VAT assessments identified in the previous point:

Voluntary Claim no. …2016… (Periodic VAT Declaration Relating to August 2015)

5.1.16. In the voluntary claim submitted regarding the VAT assessment relating to the DP of August/2015, the Claimant does not agree partially with the respective assessment (of EUR 5,197.76), claiming EUR 1,107.45 and accepting the remainder.

5.1.17. Within the scope of this voluntary claim, the Claimant distinguishes two types of situations, (i) that relating to "tax of credit notes that regularize invoices, in which both documents were issued after the cessation of activity of the client, for VAT purposes – in which the regularized tax amounts to € 1,028.66" and (ii) that relating to "tax of credit notes that regularize invoices, in which both documents were issued to clients with invalid or non-existent tax identification numbers – in which the amount of regularized tax amounts to € 78.79".

5.1.18. The Claimant was notified, within the scope of the voluntary claim identified, of Official Letter no.…, of 18 July 2016, to submit, within the period of 15 days, documentary support relating to the errors detected by the Respondent, referring to VAT regularizations inserted in field 40 of the VAT periodic declaration of period 201508 (errors that were at the origin of the additional VAT assessment that is the object of the voluntary claim referred to above), namely, copies of the invoices and credit notes to which points 13 and 23 of the voluntary claim submitted refer, as well as the respective accounting records effected, designation of the justifying reasons for the issuance of the credit notes and copy of the documents proving that the client became aware of the rectification of each of the invoices annulled.

5.1.19. The Claimant submitted, on 3 August 2016, CD with the elements requested by the Official Letter identified in the previous point.

5.1.20. The Claimant was notified of Official Letter dated 16 March 2017 relating to the draft decision of partial approval of the voluntary claim under analysis (of dismissal of the claim formulated corresponding to the 20 inaccuracies verified in Annex 40 of the DP of VAT, duly notified, from which resulted tax to be paid in the amount of EUR 173.31 and approval of the claim corresponding to the 104 inaccuracies in the aforesaid Annex, not duly notified to the taxable person, in the amount of EUR 5,024.45) and to, within the period of 15 days, exercise, if it wished, the right of participation in the decision in the modality of prior hearing.

5.1.21. In this context, according to the content of Report no. …-ADP/2016, the Respondent understood, in the draft decision of the voluntary claim identified, that "the invoices and credit notes under analysis are embodied in the VAT regularizations effected in favor of A…, in field 40 of the Periodic Declaration relating to August 2015, of clients ceased as of the date of issuance thereof, not being met the requirements provided for by the VAT regularization mechanism, whose regulatory framework is classified and is regulated pursuant to the provisions of article 78º of CIVA" (emphasis ours).

5.1.22. In these terms, the Respondent notes in the aforesaid Report that "the full exercise of that prerogative is conditioned by the verification of the presupposition contained in no. 5 of the same article (…)", that is, it understands that "at the moment in which the supplier of goods or provider of services exercises the option to regularize it in its favor the tax, it has, necessarily, to have in its possession proof that the purchaser became aware of the reduction downward or that it was reimbursed of the tax, under penalty of the respective deduction not being admitted" (emphasis ours).

5.1.23. In Annex 1 to the draft decision of the voluntary claim identified, the Respondent presents the identification of the Claimant's clients that are the object of regularization not accepted in period 201508 (designation and NIF), identifies the credit note and the invoice, the total value, the quantification of VAT and the taxable basis, the date of the invoice, the date of the credit note, the date of cessation for VAT purposes, the summary description of the analysis effected and the amount dismissed, in a total of EUR 173.31, whose content is here given as fully reproduced.

5.1.24. In the generality of the situations described in Annex 1, the Respondent mentions that "there is proof in accordance with no. 5 of art. 78.º", being that it notes that, for the generality of the Claimant's clients identified there, "the company has been ceased since (…)" date prior to the date of issuance of the invoice and the credit note (except for the client "B…" for which it notes that it is a "taxpayer non-existent in the central database"), further noting that those Claimant's clients "(…) do not file [declarations since (…)]" the date of cessation (or of the following month), that is, since date prior to the date of issuance of the invoices and their respective credit notes.

5.1.25. In Annex 2 to the draft decision of the voluntary claim identified, the Respondent presents the identification of the Claimant's clients, that are the object of regularization not accepted in period 201508, whose correction the Claimant, in a total of EUR 221.19, whose content is here given as fully reproduced.

5.1.26. By request directed to UGC, dated 3 April 2017, the Claimant exercised its right of hearing regarding the draft approval of the voluntary claim no. …2016…, filed against the additional VAT assessment no. 2016… (relating to the DP of August/2015), reiterating the arguments presented in the voluntary claim, requesting the alteration of the sense of the decision contained in the Draft Decision and the consequent approval of the voluntary claim submitted, in the amount of EUR 173.31, corresponding to the VAT regularizations considered undue by the Respondent and further requesting the return of the amounts paid, with the due legal consequences.

Voluntary Claim no. …2016… (Periodic VAT Declaration Relating to September 2015)

5.1.27. In the voluntary claim submitted regarding the VAT assessment relating to the DP of September/2015, the Claimant does not agree partially with the respective assessment (of EUR 851.06), claiming EUR 582.42 and accepting the remainder "(…) should the arguments relating to illegality (…) for lack of grounding" of the underlying tax assessment not be upheld.

5.1.28. Within the scope of this voluntary claim, the Claimant distinguishes three types of situations, (i) that relating to "tax of credit notes that regularize invoices, in which both documents were issued after the cessation of activity of the client, for VAT purposes – in which the regularized tax amounts to € 487.82", (ii) that relating to "tax of credit notes that regularize invoices, in which both documents were issued prior to the cessation of activity of the client, on a date prior to its regularization – in which the amount of regularized tax amounts to € 55.40" and (iii) that relating to "tax of credit notes that regularize invoices in which both documents were issued to clients with invalid or non-existent tax identification numbers – in which the amount of regularized tax amounts to € 39.20".

5.1.29. The Claimant notes in the voluntary claim identified above that for the two first situations [identified in the previous point as (i) and (ii)] "(…) the regularization of tax in favor of the Claimant was preceded by the receipt of the credit note, or the notice of receipt from CTT, duly signed by the client in question, in compliance with the provided for in article 78º, no. 5 of the VAT Code" and, regarding the third situation [identified in the previous point as (iii)], as "(…) the client in question will not have (…) deducted the tax contained in the invoice", "(…) the Claimant understands that its action did not cause harm to the State's coffers, having acted in such a manner as to correct the issuance of the invoices".

5.1.30. The Claimant was notified, within the scope of the voluntary claim no. …2016…, of Official Letter no.…, of 24 February 2017, to submit, within the period of 20 days, documentary support relating to the 20 errors detected by the Respondent, referring to VAT regularizations inserted in field 40 of the VAT periodic declaration of period 201509 (errors that were at the origin of the additional VAT assessment that is the object of the aforesaid voluntary claim) namely, copies of the originals of the invoices and credit notes issued, as well as the respective accounting records effected, designation of the justifying reasons for the issuance of the credit notes and copy of the documents proving that the client became aware of the rectification of each of the invoices annulled.

5.1.31. The Claimant submitted, on 20 March 2017, CD with the elements requested by the Official Letter identified in the previous point.

5.1.32. The Claimant was notified of Official Letter dated 5 April 2017 relating to the draft decision of partial approval of the voluntary claim under analysis (of dismissal of the claim formulated corresponding to the 20 inaccuracies verified in Annex 40 of the DP of VAT, duly notified, from which resulted tax to be paid in the amount of EUR 350.39 and dismissal regarding compensatory interest petitioned on this amount, approval of the claim corresponding to the 24 inaccuracies in the aforesaid Annex 40, not duly notified to the taxable person, in the amount of EUR 351.72 and approval of the compensatory interest accruing on this amount) and to, within the period of 15 days exercise, if it wished, the right of participation in the decision in the modality of prior hearing.

5.1.33. In this context, according to the content of Report no. …-ADP/2016, the Respondent understood, in the draft decision of the voluntary claim identified, that "the invoices and credit notes under analysis are embodied in the VAT regularizations effected in favor of A…, in field 40 of the Periodic Declaration relating to September 2015, of clients ceased as of the date of issuance thereof, not being met the requirements provided for by the VAT regularization mechanism, whose regulatory framework is classified and is regulated pursuant to the provisions of article 78º of CIVA" (emphasis ours).

5.1.34. In these terms, the Respondent notes in the aforesaid Report that "the full exercise of that prerogative is conditioned by the verification of the presupposition contained in no. 5 of the same article (…)", that is, it understands that "at the moment in which the supplier of goods or provider of services exercises the option to regularize it in its favor the tax, it has, necessarily, to have in its possession proof that the purchaser became aware of the reduction downward or that it was reimbursed of the tax, under penalty of the respective deduction not being admitted" (emphasis ours).

5.1.35. In Annex 1 to the draft decision of the voluntary claim identified, the Respondent presents the identification of the Claimant's clients, that are the object of regularization not accepted in period 201509, whose correction the Claimant accepted, in a total of EUR 148.95, whose content here is given as fully reproduced.

5.1.36. In Annex 2 to the draft decision of the voluntary claim identified, the Respondent presents the identification of the Claimant's clients, that are the object of regularization not accepted in period 201509 (designation and NIF), identification of the credit note and the invoice, the Total, the quantification of VAT and the taxable basis, the date of the invoice, the date of the credit note, the date of cessation for VAT purposes (when applicable), the summary description of the analysis effected and the amount dismissed, in a total of EUR 350.39, whose content here is given as fully reproduced.

5.1.37. In the generality of the situations described in Annex 2, the Respondent mentions that "there is proof in accordance with no. 5 of art. 78.º", being that it notes that, for the generality of the Claimant's clients identified there, "the company has been ceased since (…)" date prior to the date of issuance of the invoice and the credit note (except for the client "DSP/GSS/GPSl" for which it notes that it is a "taxpayer non-existent in the central database"), further noting that those Claimant's clients "(…) do not file [declarations since (…)]" the date of cessation (or of the following month), that is, since date prior to the date of issuance of the invoices and their respective credit notes.

5.1.38. By request addressed to [continuation of text truncated in source document]