VAT Self-Assessment Review Rejected - CAAD Ruling 468/2014-T

Process: 468/2014-T

Date: February 24, 2015

Tax Type: IVA

Summary

This arbitral decision addresses fundamental questions regarding the jurisdiction of CAAD arbitral tribunals in VAT self-assessment disputes. The case involved a commercial company challenging the dismissal of an ex officio review request for VAT self-assessments from 2009, seeking reimbursement of €95,189.74. The Tax Authority raised preliminary exceptions arguing the arbitral tribunal's material incompetence on two grounds: first, that requests for tax reimbursement fall outside the tribunal's statutory competence under Article 2(1) of RJAT and Ordinance 112-A/2011; second, that the tribunal lacks jurisdiction to review decisions dismissing ex officio review requests. The AT emphasized that while arbitral tribunals may declare the illegality of assessment acts, self-assessments, withholdings, and determinations of taxable matter under RJAT Article 2, the appreciation of reimbursement requests constitutes a distinct matter beyond this scope. The Authority cited precedent decisions 126/2013-T and 244/2013-T supporting this interpretation. Furthermore, the AT argued that even when illegality of assessments is declared, enforcement measures including reimbursements are determined by the Tax Authority under Article 24 RJAT, with possible recourse to tax courts for coercive enforcement under CPPT Article 146. The case illustrates critical limitations on arbitral jurisdiction, particularly regarding procedural acts like dismissals of ex officio reviews versus substantive assessment acts. The competence issue is essential because RJAT establishes that arbitral tribunals must operate within strictly defined parameters, requiring prior administrative procedures per CPPT Articles 131-133 for self-assessment disputes, and cannot extend jurisdiction to enforcement or reimbursement determinations that belong to administrative or judicial enforcement proceedings.

Full Decision

ARBITRAL DECISION

The arbitrators Judge José Poças Falcão (arbitrator-president), Dr. José Manuel Pedroso de Melo and Professor Doctor João Ricardo Catarino (arbitrators-rapporteurs), appointed by the Deontological Council of the Centre for Administrative Arbitration ("CAAD") to form the Collective Arbitral Tribunal, constituted on 8 September 2014, agree as follows:

I. REPORT

The commercial company A, S.A., hereinafter referred to as "Claimant", with the collective identification number and Tax Number … and registered office in …, Porto, "(...) following the dismissal of the Hierarchical Appeal that it filed against the dismissal of the request for ex officio review of the VAT self-assessment relating to the year 2009 (...)", "(...) under the provisions of articles 2, no. 1, paragraph a), and 10, nos 1 and 2, both of Decree-Law no. 10/2011, of 20 January ("RJAT") and of articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March (...) came to present a request for arbitral ruling "(...) for the declaration of illegality and annulment of the aforementioned acts dismissing the Hierarchical Appeal and the Request for Ex Officio Review and, consequently, of the VAT self-assessment relating to the periods from January to December 2009, for the delivery of excess tax in the amount of € 95,189.74, the reimbursement of which it requests (...)".

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and immediately notified to the Respondent in accordance with legal terms.

In accordance with and for the purposes of the provisions in paragraph a), of no. 2 of article 6 of the RJAT, by decision of the Honourable President of the Deontological Council, duly communicated to the parties, within the legally foreseen periods, the undersigned were appointed arbitrators, having communicated to the Deontological Council and to the Centre for Administrative Arbitration the acceptance of the assignment within the period stipulated in article 4 of the Deontological Code of the Centre for Administrative Arbitration.

The Tribunal was constituted on 8 September 2014, in accordance with the requirement of paragraph c), of no. 1 of article 11 of the RJAT.

A meeting of the arbitrators and the representatives of the parties took place at the seat of CAAD, in accordance with and for the purposes of the provisions in article 18 of the RJAT.

At the said meeting, the claimant presented a written response to the exceptions plea and a document which the Tribunal ordered to be joined to the case file after hearing the AT.

Having the claimant insisted on the production of witness evidence, a date was set for the examination of witnesses and the respective evidence was produced, as appears from the case file.

The AT presented an exceptions plea and a merits plea.

In the context of the exceptions plea, the incompetence of the Arbitral Tribunal to appreciate and decide the request for ruling is raised, with the AT arguing, in summary, the following:

a) The arbitral tribunal is materially incompetent to appreciate the claimant's request for reimbursement of the VAT assessed in the amount of € 95,189.74

b) Such competence derives, in this case, from the provisions of no. 1 of article 2 of the RJAT as well as from Ordinance no. 112-A/2011, of 22 March, pursuant to article 4 of the RJAT, and comprises "the appreciation of claims relating to the declaration of illegality:

(a) Of acts of assessment of taxes whose administration is entrusted to the Tax and Customs Authority (AT) [...];

(b) Of acts of self-assessment, withholding at source and payment on account of taxes whose administration is entrusted to the AT, provided they have been preceded by recourse to the prior administrative procedure necessary, as provided in articles 131 to 133 of the Code of Tax Procedure and Process (CPPT) [...];

(c) Of acts of determination of taxable matter without resort to indirect methods, when it does not give rise to the assessment of any tax [...];

(d) Of acts of determination of taxable matter without resort to indirect methods [...];

(e) Of acts of determination of asset values, for tax purposes, whose administration is entrusted to the AT [...];

(f) Of acts of assessment of customs duties and charges of equivalent effect on the export of goods [...];

(g) Claims relating to levies on exports instituted under the Common Agricultural Policy (CAP) or under specific schemes applicable to certain goods resulting from the processing of agricultural products [...];

(h) Of acts of assessment of value added tax (VAT), special taxes on consumption (SECs) and other indirect taxes on goods not subject to import duties [...]" – cf. JORGE LOPES DE SOUSA, Commentary on the Legal Regime of Tax Arbitration, Guide to Tax Arbitration, Almedina, 2013, pp. 105-108).

c) Beyond the competence for the direct appreciation of the legality of requests of this type, the arbitral tribunals functioning at CAAD may appreciate second or third-tier acts which have as their object the appreciation of the legality of acts of those types;

d) But it is manifest that the appreciation of requests for reimbursement or refund of assessed tax does not fall within the scope of these competences;

e) Such requests as the Claimant deduced in the application presented to the Respondent on 2011-12-27, as well as in the hierarchical appeal subsequently filed and which it now reiterates in the present request for arbitral ruling [see request III) of part F of the petition presented, as well as articles 9 and 52];

f) In this sense, the Arbitral Tribunal already ruled in decision no. 126/2013-T, in which it was concluded that, as the Claimant had not requested in the subsidiary request deduced any appreciation of the legality of acts of assessment of taxes, self-assessment, withholding at source, payment on account or determination of taxable matter, the Tribunal considers itself incompetent to know of the same.

g) Additionally, although it has come to be understood that, following the declaration of illegality of assessment acts, handed down in judicial impugnation proceedings, decisions condemning the payment of indemnatory interest may be handed down, as well as, pursuant to no. 1 of article 171 of the CPPT, condemnation to payment of compensation for improper guarantee;

h) The truth is that there is no legal support that permits decisions of a different nature to be handed down, even if they constituted a consequence, at the level of enforcement, of the declaration of illegality of assessment acts.

i) As follows from the provisions of article 24 of the RJAT, the definition of the acts in which the enforcement of arbitral judgments must be concretized is the competence, in the first instance, of the AT, with the possibility of recourse to tax courts to request coercive enforcement, within the framework of the process of enforcement of judgments, provided for in article 146 of the CPPT and articles 173 et seq. of the Code of Procedure in the Administrative Courts (Cf., in line with the arguments now presented, the arbitral decision handed down in Process no. 244/2013-TCAAD);

j) There still subsists, in addition to the invoked ground, the material incompetence of the Arbitral Tribunal to appreciate decisions dismissing requests for ex officio review (point 3.2.1 of decision 244/2013-T);

k) In truth, pursuant to paragraph a) of no. 1 of article 2 of the RJAT it is determined that the competence of the arbitral tribunals comprises the appreciation of the declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account.

l) And, by virtue of the referral of no. 1 of article 4 of the RJAT, the binding of the AT to the jurisdiction of the arbitral tribunals constituted under the terms of that diploma is dependent on the provisions of Ordinance no. 112-A/2011, namely as to the type and maximum value of disputes covered.

m) The article 2, paragraph a) of that Ordinance 112-A/2011 provides that the binding of the AT to the jurisdiction referred to has as its object the appreciation of claims relating to taxes whose administration is entrusted to it, referred to in no. 1 of article 2 of the RJAT, "with the exception of claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process" (emphasis ours).

n) In this circumstance, it follows that in the situation sub judice, the mandatory precedence of a request for administrative redress was always required, as provided in no. 1 of article 131 of the CPPT.

o) Without prejudice to, as was concluded in the decision dismissing the request for ex officio review sub judice, it being still, abstractly, possible to raise the illegality of the self-assessment acts in accordance with nos 1 and 2 of article 78 of the General Tax Code (LGT).

p) Indeed, the case law has supported the understanding, which is not questioned, that, given the administrative nature of the ex officio review procedure, it is capable of being equated with the provisions of article 131, no. 1 of the CPPT for the purpose of subsequent impugnation of the decision dismissing it.

q) However, such equivalence is legally barred in the arbitral forum, being excluded from the material competence of the arbitral tribunals the appreciation of claims relating to the declaration of illegality of self-assessment acts that have not been preceded by recourse to the administrative procedure in accordance with articles 131 of the CPPT, but only by ex officio review as provided in article 78 of the LGT.

r) Indeed, article 2 paragraph a) of Ordinance no. 112-A/2011 literally excludes from the scope of the binding of the AT to arbitral jurisdiction, "(…) claims relating to the declaration of illegality of self-assessment acts (…) that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the CPPT", not referring therein to the ex officio review provided for in article 78 of the LGT.

s) That is, from the wording given to the cited legal provision it is apparent that the legislator chose to restrict the knowledge in arbitral jurisdiction to claims which, being relating to the declaration of illegality of self-assessment acts, have been necessarily preceded by the request for administrative redress provided for in article 131 of the CPPT.

t) Indeed, if this were not so, it would be sufficient for the legislator to have limited the exclusion provided for in article 2 paragraph a) of Ordinance no. 112-A/2011 to the expression "that have not been preceded by recourse to the administrative procedure", distinguishing nothing else;

u) But if, hypothetically, without justification, it were intended to include in the authorization granted the administrative procedure of ex officio review, such formulation appears manifestly illegal because such interpretation derives from the literal element inherent in the legal norm in question, as aforesaid, and, as far as interpretation is concerned, it is established in article 11, no. 1 of the LGT that in determining the meaning of tax norms and in qualifying the facts to which they apply the general rules and principles of interpretation and application of laws are observed and, consequently, the provisions of article 9 of the Civil Code;

v) In light of the interpretation elements referred to, no other interpretive solution is reached for the situation sub judice than that the AT only bound itself, under the terms of Ordinance no. 112-A/2011 (approved and published already after extensive and profuse case law which reaffirmed, given the administrative nature of the ex officio review procedure, its capability of being equated with the provisions of article 131, no. 1 of the CPPT, for the purpose of subsequent impugnation of the decision dismissing it), if the request for declaration of illegality of self-assessment act had been preceded by recourse to the administrative procedure of request for administrative redress (In this sense, see what was decided in the recent Arbitral Decision handed down in process no. 51/2012-T, where the dismissal of an ex officio review request was also questioned:

"The request for review may be alternative to the request for administrative redress, it may be complementary, it may even be that in the review procedure the taxpayer's claim was appreciated, but considering the voluntary nature of arbitration, the interpretation adopted cannot, in any case, result in a restriction of the sphere of freedom of the AT, as a party, to establish the limits of its binding. This would only not be the case if its position implied the total frustration of the objective intended with the institution of tax arbitration, which is not the case.

It should be noted, from this angle, that the Tribunal does not rule on the doctrinal construction on which is based the equivalence of the ex officio review procedure, at the initiative of the taxpayer, with the request for administrative redress procedure, for purposes of judicial impugnation. Simply, it understands that from the principle of the consecration of the arbitral procedure as a means of resolution of tax disputes alternative to the judicial impugnation process, there does not automatically follow the extension of the binding of the AT to all situations in which, doctrinally and/or jurisprudentially, is considered admissible such impugnation.")

x) There will be, parallel and equally, material incompetence of the Arbitral Tribunal because in the ex officio review request and subsequent hierarchical appeal the legality of assessment acts was not appreciated, the act subject to arbitral ruling being embodied in the decision dismissing the hierarchical appeal subsequent to the ex officio review request, in which the Claimant requested only the reimbursement/recovery of the VAT assessed in excess, without having requested the annulment of any self-assessment act, coming only to request that the "reimbursement of the VAT delivered in excess, in the total amount of € 95,189.86" be "confirmed" (cf. conclusion of the ex officio review request);

z) Whereas in the hierarchical appeal subsequently filed it sought "...recovery of the total VAT in the amount of € 95,189.86", and the dismissal decisions now being impugned were motivated by the subsumption of the case in concreto to the discipline of no. 6 of article 78 of the VAT Code, having consequently concluded that the Claimant did not comply with the two-year period for effectuation of the corrections provided for;

aa) In the case at hand, the ground for dismissal was, therefore, the expiry of the right to make the optional corrections provided for in that provision, without the legality of any tax assessment act having been appreciated.

bb) Only in the arbitral forum does the Claimant conclude that "partial illegality of the VAT self-assessment relating to the year 2009", requesting, consequently, the annulment of the administrative decisions and the reimbursement of the assessed VAT;

cc) The request for arbitral ruling has thus as its immediate object the decision dismissing both the ex officio review and the hierarchical appeal, not having as its mediate object any tax assessment act[1];

dd) "(...) so we are faced with an administrative act in tax matters which, by not appreciating or discussing the legality of the assessment act, cannot be challenged through judicial impugnation, as provided for in paragraph a) of no. 1 of article 97 of the CPPT (...)";

ee) Both the dismissal of the hierarchical appeal and the dismissal of the ex officio review request constitute administrative acts, in light of the definition given by article 120 of the Code of Administrative Procedure (CPA) [subsidiarily applicable in tax matters by virtue of the provisions of article 2, paragraph c) of the LGT, article 2, paragraph d) of the CPPT, and article 29, no. 1, paragraph d) of the RJAT], because they constitute a decision of an Administration body which, under public law norms, intended to produce legal effects in an individual and concrete situation.

ff) "(...) As such, we are faced with administrative acts in tax matters which, by not appreciating or discussing the legality of the assessment act, cannot be challenged through judicial impugnation, as provided for in paragraph a) of no. 1 of article 97 of the CPPT and article 2 of the RJAT (cf. in this sense the decision of the STA of 2009-06-25, handed down in process no. 0194/09)(...)".

gg) "(...) That is, it is considered, following and with the grounds of previous decisions handed down by the Arbitral Tribunal[2], that it does not fall within the scope of arbitral competences to appreciate the legality or illegality of decisions dismissing requests for regularization of VAT presented under article 78°, of the LGT nor, as the Claimant requests, to hand down decisions partially annulling VAT self-assessment without prior appreciation of the legality of these acts by the Tax Administration in accordance with articles 131° to 133°, of the CPPT (cf. arbitral decision handed down in process no. 148/2014-T) (...)".

hh) As mentioned, with the presentation of the request for arbitral ruling the Claimant intends the "declaration of illegality and annulment of the aforementioned acts dismissing the Hierarchical Appeal and the Request for Ex Officio Review and, consequently, of the VAT self-assessment relating to the periods from January to December 2009" (cfr. preamble of the request for arbitral ruling);

ii) Further specifying thereafter that "it comes to request the declaration of illegality of the acts of VAT self-assessment relating to the periodic declarations of the periods from January to December 2009" (article 3 of the request for arbitral ruling), petitioning, in consonance, in request II) "to annul the excess VAT self-assessment in the amount of € 95,189.74".

jj) Admitting that the mediate object of the case is unquestionably constituted by the self-assessment acts thus identified and joined to the request as Documents nos 1 to 12, "(...) it must then be concluded that the direct knowledge of the legality of such matters by this Tribunal is barred by the provisions of article 2 of the RJAT and of article 2°, of the cited Ordinance n° 112-A/2011, that is, the possibility of appreciating such self-assessment acts without there having been prior "(...) recourse to the administrative procedure in accordance with articles 131° to 133°, of the Code of Tax Procedure and Process (...)";

kk) Moreover, also such request, by only now being formulated would be untimely in light of the provisions of articles 10°, of the RJAT, 102°-1 and 2, of the CPPT and 27° and 41° of the VAT Code);

ll) Considering the Claimant's framework in the monthly periodicity regime, the deadline for payment would coincide, at most, with 10 February of the year 2010, and the request tending to the constitution of the arbitral tribunal was presented on 2014-07-07;

mm) "(...) In sum, resulting, clear and unequivocally, from the initial application the direct impugnation of acts of self-assessment of tax (VAT), the request formulated (leading to its declaration of illegality) must be declared without merit, for being untimely and, consequently, the Respondent absolved of the instance – cf. paragraph e), of no. 1, of article 278° of the applicable Code of Civil Procedure, applicable pursuant to article 29°, no. 1, paragraph e) of Decree-Law no. 10/2011, of 20 January – which is hereby requested.

In response to the exceptions the claimant argued:

A. Exception set out in point A) - "Of the material incompetence of the Arbitral Tribunal to appreciate the claimant's request for reimbursement of VAT assessed in the amount of € 95,189.74": excess VAT assessed and not deductible VAT

The Claimant assessed excess tax (as referred to 9 times in its Request for Ex Officio Review – cf. preamble and articles 7, 8, 9, 17, 18, 19 and 27 – and 10 times in the Hierarchical Appeal relating to the dismissal of the first – cf. articles 5, 6, 11, 12, 13, 14, 24, 43 and 44) and requested the annulment of the self-assessment act and the corresponding reimbursement or "refund" of the assessed tax via Request for Ex Officio Review. The Claimant attaches the Request for Ex Officio Review as Doc. 1 of the present ruling. [3]
The Claimant proceeded to the inclusion of the said amount of VAT in its periodic VAT declaration, as a title of regularization of tax in favour of the taxpayer, having requested confirmation from the Tax and Customs Authority ("AT") via Request for Ex Officio Review;
The Request for Ex Officio Review refers in its preamble that the now Claimant, A, comes to "request the EX OFFICIO REVIEW of the VAT assessment";
The AT acknowledges in the response to the Request for Ex Officio Review that "The ex officio review request was presented on 27 December 2011, relating to the VAT assessed by A from January to December 2009, so the ex officio review request is timely" (cf. page 5/8 of the decision) being such fact reiterated by the dismissal of the Hierarchical Appeal filed by the Claimant (cf. page 5/12 of the decision);
What is the reason for the AT now to assert that the Claimant was not attacking an assessment act?! What is the reason for the AT now to deceptively deny that the Claimant did not request the appreciation of the legality of an assessment act having only requested the "appreciation of requests for reimbursement or refund of assessed tax" (cf. article 31 and 85 of the response of the AT)?!
It is obvious that the expression refund was employed in its general sense. That is, having initially been assessed excess VAT, the rectification of this tax (VAT assessed, it is reiterated) implies the refund, return or restitution (all synonyms!) of what was overpaid. It is only this that the word refund refers to and not to any situation of VAT deduction/deductible VAT;
The decision of the STA of 18 May 2011 cited by the AT does not apply to the case insofar as it concerns the matter of the exercise of the right to deduction (article 22 of the CIVA) and not reimbursement of excess assessed tax;
The reimbursement of excess assessed tax (repeat: not to be confused with VAT deduction) is regulated by rules of the VAT Directive distinct from those relating to deduction, so the overlapping of these concepts will necessarily motivate the referral of this question for appreciation by the Court of Justice of the European Union.

B. Exception set out in point "B" of the Response - "Of the material incompetence of the Arbitral Tribunal to appreciate decisions dismissing requests for ex officio review (point 3.2.1 of decision 244/2013-T)"): Arbitral request following the dismissal of Hierarchical Appeal and not of Ex Officio Review Request:

The AT does wrong when it refers that the present request for arbitral ruling was presented following the decision dismissing the ex officio review request and not, as effectively occurred, following the decision dismissing a Hierarchical Appeal;
The considerations made by the AT at this point must be disregarded because they are based on a wrong premise: that the Claimant, A, presented the request for arbitral ruling following the decision dismissing the ex officio review request;
What the claimant did was to present the arbitral request following the dismissal of a Hierarchical Appeal submitted by it, in line with paragraph a) of no. 1 of article 10 of the RJAT "The request for constitution of an arbitral tribunal is presented: a) Within the period of 90 days, counted from the facts provided for in nos 1 and 2 of article 102 of the Code of Tax Procedure and Process, as to acts susceptible to autonomous impugnation and, as well, of the notification of the decision or the end of the legal period for decision of the hierarchical appeal";
On the other hand, the competence of the arbitral tribunals is perfectly defined in no. 1 of article 2 of the RJAT. Paragraph a) of this provision states that the competence of the arbitral tribunals comprises the appreciation of the "declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account".
As mentioned, the Hierarchical Appeal filed by the Claimant sought the "declaration of illegality of acts of (…) self-assessment";
The question of the material competence of the arbitral tribunals is provided for in article 2 of the RJAT, not containing article 2 of Ordinance no. 112-A/2011, of 22 March, any rule of competence of these tribunals. Indeed, if such were the case, the said Ordinance would be struck by organic and formal unconstitutionality, because such an act ("Ordinance") does not constitute a legislative act, as provided for in article 112 of the CRP, and insofar as the definition of the "Organization and competence of the courts and the Public Prosecutor and status of the respective magistrates, as well as non-jurisdictional entities for composition of conflicts" constitutes a relative reservation of law in accordance with paragraph p) of no. 1 of article 165 of the CRP;
Moreover, the binding of the AT to the jurisdiction of the arbitral tribunals is defined in the first place by the preamble of article 2 of Ordinance no. 112-A/2011, of 22 March, i.e., matters relating to the declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account and also declaration of illegality of acts of determination of taxable matter when it does not give rise to the assessment of any tax, of acts of determination of taxable income and of acts of determination of asset values;
Only in a second place is the binding of the AT to the jurisdiction of the arbitral tribunals excluded in cases of claims relating to the declaration of illegality of self-assessment acts that have not been preceded by recourse to the administrative procedure in accordance with article 131 of the CPPT, being, in this context, to exclude a literal interpretation of paragraph a) of article 2 of Ordinance no. 112-A/2011, of 22 March. As noted in article 9 of the Civil Code (applicable pursuant to article 11, no. 1 of the LGT) "interpretation must not be confined to the letter of the law, but reconstruct from legal texts, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied";
In this way, the scope of the requirement of prior request for administrative redress in the said legal provision has as its sole and reasonable justification the need for a position-taking by the AT on the legality of tax quantification acts (i.e., self-assessment acts, which, by their nature, are not the object of such scrutiny), prior to its contestation by contentious means;
In the situation at hand, the possibility was guaranteed, twice, for the AT to rule on the legality of the self-assessment relating to 2009, so it is incumbent to interpret paragraph a) of article 2 of Ordinance no. 112-A/2011, of 22 March, to the effect of including in its scope cases in which the legality of self-assessment is preceded by an Ex Officio Review Request and Hierarchical Appeal instead of Request for Administrative Redress (in line with the case law adopted in the Decisions of Counselor Jorge Lopes de Sousa at CAAD);
In summary: the second-tier act from which the arbitral request was deduced was not the dismissal of an ex officio review request, but rather the dismissal of a hierarchical appeal, with express applicability under article 10 of the RJAT; there is no doubt that the mediate object of the case is constituted by a VAT assessment act (in excess), or rather, a self-assessment act and its illegality and consequent invalidity; the requirement of article 2, a) of the Binding Ordinance must be interpreted to the effect that there occurs precedence of recourse to the administrative procedure and not strictly to the effect that it must be by means of a request for administrative redress.

C. Exception set out in point "C) Of the material incompetence of the Arbitral Tribunal because, in the ex officio review request and subsequent hierarchical appeal, the legality of assessment acts was not appreciated": The proper means of reaction in tax courts would be Judicial Impugnation

The AT cannot invoke that in the Ex Officio Review Request and subsequent Hierarchical Appeal "the legality of any tax assessment act was not appreciated" (cf. article 90 of the response of the AT) for all that has been referred to previously;
Moreover, in making such assertion the AT, referring that the question raised by the Claimant could not be challenged judicially through Judicial Impugnation (cf. article 102 of the response of the AT), contradicts its own conduct;
In fact, both in the notification of the decision dismissing the ex officio review request and in the notification of the decision dismissing the hierarchical appeal (twice!!), the AT states that the Claimant, A, could "file judicial impugnation", in the first notification, or "deduce judicial impugnation", in the second notification (cf. second paragraph of the cover page of the notifications), which demonstrates that in both moments it reached the correct conclusion of what was being discussed in the present case: the legality of the VAT self-assessment relating to 2009;

D. Exception set out in point "D) Of the material incompetence and untimeliness for direct impugnation of VAT assessment acts": the request for constitution of an arbitral tribunal must be presented within 90 days of notification of the Hierarchical Appeal decision

The request for constitution of an arbitral tribunal is timely because the Claimant was notified of the decision of the Hierarchical Appeal on 11 April 2014, having submitted the present request on 7 July 2014, and the deadline for submission of the same would be 10 July 2014;
In accordance with paragraph a) of no. 1 of article 10 of the RJAT "The request for constitution of an arbitral tribunal is presented: a) Within the period of 90 days, counted from the facts provided for in nos 1 and 2 of article 102 of the Code of Tax Procedure and Process, as to acts susceptible to autonomous impugnation and, as well, of the notification of the decision or the end of the legal period for decision of the hierarchical appeal".

E. There is no mere decision of untimeliness - Articles 8, 11 and 19 of the response of the AT

The AT acknowledges that the decision dismissing the Hierarchical Appeal was based on the fact that the Claimant's rectification was qualified as a material error or calculation error;
It is never too much to recall that this question is one of merit and implies the appreciation of the legality of the self-assessment act and of the error underlying it: whether material or calculation error or error of law;
It is true that in the present situation the error was that of the Claimant, as could not fail to be in the cases of self-assessment. But the error in self-assessment is for these purposes fictionally attributed as error imputable to the services, so as to permit the taxpayer to rectify its errors. If it were not so (apart from the lack of legal support) the taxpayer would suffer a double penalty, because:

a) In addition to being performing functions that belong to the State without being remunerated (the assessment of taxes);

b) The taxpayer who self-assesses the tax would be placed in a more disadvantageous position than that in which it would be if the State were to assume its functions.

CONCLUDING:

Considering the above and in the other terms of law that may be applicable, always with the learned supplementation of Your Excellencies, Distinguished Arbitrators, it is concluded that none of the exceptions invoked by the Tax Authority in its response proceeds.

Procedural clarification

Exception or preliminary matter: the material incompetence of the Arbitral Tribunal.

The AT raises, among other matters, that of the material incompetence of the Arbitral Tribunal to appreciate the request.

And it bases its position on the fact that, on one hand, the object of the case is a request for arbitral ruling which has as its object a self-assessment act - to which the claimant attributes the defect of illegality - without there having been prior recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process, such recourse being required by the terms of the binding of the AT to arbitral jurisdiction by the Ordinance; on the other hand, in the circumstance that the request formulated – reimbursement or refund of assessed and paid VAT -, is withdrawn from the scope of competences of tax arbitral jurisdiction insofar as the appreciation of the legality of acts of assessment of taxes, self-assessment, withholding at source, payment on account or determination of taxable matter is not raised (articles 2-1, of the RJAT; Ordinance n° 112-A/2011 pursuant to article 4, of the RJAT) and, moreover, such material incompetence would equally result from the non-fulfillment of the presupposition of necessary prior appreciation, in the context of a request for administrative redress, of the act of withholding at source, it not being admissible in arbitral jurisdiction the equivalence with request for administrative redress of the regime of review of tax acts provided for in article 78-1 and 2, of the LGT (articles 4-1, of the RJAT, Ordinance n° 112-A/2011 and articles 131 to 133, of the CPPT).

Now, having in account that the scope of material competence of the tribunal is of public order and its knowledge precedes that of any other matter (art. 13 of the Code of Procedure of the Administrative Courts applicable pursuant to art. 29, no. 1, al. c) of the RJAT), and that the infraction of the rules of competence ratione materiae determines the absolute incompetence of the tribunal, which is subject to ex officio knowledge [art. 16, nos 1 and 2 of the Code of Tax Procedure and Process applicable pursuant to art. 29, no. 1, als. a) and c) of the RJAT], it is important to begin by appreciating the preliminary exception raised by the Respondent on the incompetence of the arbitral tribunal.

Let us see, first and foremost, the facts and, namely, those especially relevant for the pronouncement of the decision as to the material competence of the Arbitral Tribunal.

II GROUNDS

Proven facts

The following facts are documentarily proven and/or accepted by the parties in their respective pleadings:

1 - The claimant is a legal entity whose commercial object consists of the activity of a travel agency and organizer of tourist circuits, providing travel and tourism services;

2 - It is subject, in terms of VAT, to the special regime for travel agencies – Dec. Law no. 221/85 – and as well to the general rules of VAT in everything not regulated by that special regime;

3 - Such activity comprises operations in which it acts in its own name before the client and operations in which it is a mere intermediary resorting to goods or services provided by third parties within or outside the European Union;

4 - The claimant assessed VAT on the totality of the so-called tourist packages sold and operations of sale of transport tickets;

5 - And delivered, thus, (improperly) VAT to the State in the amount of 93,776.16 euros, delivered in monthly periodic VAT declarations;

6 - By application of 2011-12-27 the Claimant requested "...pursuant to article 78 of the General Tax Code ("LGT")" the ex officio review "of the VAT assessment effected in excess in the periodic declarations of this tax, relating to the periods from January to December 2009, and consequent payment of excess tax liability, in the value of € 95,189.86..." clarifying in that application that "... the Claimant now comes to exercise the right to deduction/reimbursement of the amount of VAT assessed in excess, in the periodic declarations from January to December 2009, in the amount of € 93,776.16, for the provision of 'tourist packages' whose operations were carried out outside the EU, which are exempt from VAT, in accordance with paragraph s) of no. 1 of article 14 of the Code of this tax and no. 3 of article 1 of Decree-Law no. 221/85, of 3 July." (cfr. article 9 of the application) and that "...now comes to exercise the right to reimbursement of the amount of excess assessed tax, in the provision of air transport services for passengers, in the periodic declarations from January to December 2009, in the amount of € 1,413.70." (cfr. article 19 of the application) (cfr. pages 2 to 23 of PA);

7 - By order of 2012-10-12, of the Deputy Director of Finance of Porto (with subdelegation of competencies) issued in Information no. …, of the same date, the request was partially granted, having been determined the acceptance of the regularization of the values of VAT improperly assessed, for the months of November and December 2009, however subject to confirmation of the verification of the necessary requirements by the Tax Inspection Services, in the terms and with the grounds contained in the said Information and whose tenor is given as fully reproduced for all legal purposes [(«Article 78, no. 6, of the CIVA is applicable if material errors or calculation errors are verified in the records to which articles 44 to 51 and 65 of the VAT Code refer. The error in self-assessment, is an error of the taxpayer, by negligence of its services, situation falling within article 78 no. 6 and in its conditionalities. The situation under analysis constitutes a calculation error, since it is a situation in which the operations that underlay its determination were incorrect, so the correction would have to be effected in a VAT declaration mentioned in article 41 of the CIVA, and subject to the discipline contained in no. 6 of article 78 of the CIVA, so in accordance with the said provision, "The correction of material errors or calculation errors in the records to which articles 44 to 51 and 65 refer, in the declarations mentioned in article 41 and in the forms 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 taxpayer, but can only be effected within the period of two years, which, in the case of exercise of the right to deduction, is counted from the birth of the respective right in accordance with no. 1 of article 22, being mandatory when it results in tax in favour of the State." That is the regularization is optional when it results in tax in favour of the taxpayer and can only be effected within the period of two years.

(...) In light of the above and to the legal provisions cited, the situation in question being the result of internal errors and without any interference in the sphere of third parties, constitutes the practice of material or calculation errors, subject to the discipline of no. 6 of article 78 of the CIVA.» (cfr. pages 50 to 60 of PA)].

8 – By application of 2012-11-16 the Claimant came to file a hierarchical appeal of that decision, where it sought, finally, the "...right to recovery of the total VAT in the amount of € 95,189.86 and not only the tax relating to November and December 2009.", requesting "... the full granting of the ex officio review request..." (cfr. article 44 of the application, pages 61 to 97 of PA).

9 - By order of 2014-03-31 of the Sub-Director-General for the Tax Management Area – VAT (with subdelegation of competencies), issued in Information no. …, of 2014-03-03, the dismissal of the hierarchical appeal filed was determined, with the grounds there expressed and whose tenor is given as fully reproduced for all legal purposes, considering namely, quoting: «(...) The appellant came to allege that there did not occur a material or calculation error, but an error of classification, given that, as regards the operations effected outside the European Union (EU) (tourist packages), according to its allegation, it did not apply the VAT exemption in the totality of the operations, having assessed tax at the normal rate, from which resulted the improper delivery of tax to the State.

As regards other operations (isolated sale of passenger transport services), it applied the margin regime, without attending to the place where the operations were carried out, which, equally, also resulted in the improper delivery of tax to the State.

However, this is not so, because what is verified is that A effected the calculations incorrectly for the determination of the tax, as regards the operations effected of sales of 'tourist packages and 'isolated sales of passenger transports', alleging that it determined excess tax.

Even if there was an error in the determination of the tax, that error did not occur due to responsibility of the AT, but was due to calculations effected by the appellant, because in truth, it was mistaken, which it only verified when it proceeded to an internal revision of procedures.

Now, there being no error imputable to the services, its claim could never be accepted on the basis of the revision of the tax, embodied in no. 1 of art. 98 of the CIVA and art. and no. 1 of art. 78 of the LGT.

The errors, in the case at hand, constitute material or calculation errors, covered; that is, by the provision established in no. 6 of art. 78 of the CIVA.

(...)

However, when the ex officio review request was presented, on 2011/12/27, relating to all the tax periods of 2009, the deadline for exercising the right to regularization of the tax, was already exceeded, except, relating to November and December, in which case the request was accepted at that seat. Being, this, a peremptory and termination deadline, if not observed, results in the extinction of the right it intended to protect, leading, in this case, to the impossibility of the appellant coming to obtain the regularization sought.» (cfr. pages 171 to 185 of PA).

Unproven facts

There are no other facts that are essential for the appreciation of the aforesaid question.

Grounds

The Tribunal's conviction, in establishing the above factual framework, was based on the documentation joined to the case, in the administrative instructional process and on the acceptance or non-impugnation by the AT of the factual framework drawn by the claimant in its request for arbitral ruling.

The Law

At issue, for appreciation of the competence of this Arbitral Tribunal, is only and simply knowing whether, in the factual framework described, one can or cannot conclude that the AT is bound by arbitral jurisdiction.

In defence of the exception, the AT argues, in summary, that in light of the provisions of articles 2, no. 1, paragraph a) and 4, no. 1, both of the RJAT, and in articles 1 and 2, paragraph a), both of Ordinance no. 112-A/2011, of 22.03, the exception of material incompetence of the Arbitral Tribunal to appreciate and decide the Claimant's request is verified (cf. articles 493, nos 1 and 2 and 494, paragraph a) of the CPC, pursuant to article 29, no. 1, paragraphs a) and e) of the RJAT), an understanding which, moreover, is corroborated by the recent case law of the Arbitral Tribunal in excluding from the scope of its competences the appreciation of legality or illegality of decisions dismissing requests for regularization of VAT, as well as pronouncing authorizations for taxpayers to regularize VAT in their favour.

It is also defended that the material incompetence of the Arbitral Tribunal results from the cause underlying the dismissal of the ex officio review request. Indeed, the administrative act leading to the dismissal of the ex officio review request was based on the invocation of the untimeliness of the intended VAT regularization, not being, for that reason, appreciated the legality of any self-assessment acts, which would result in the unsusceptibility of the act being impugned through judicial impugnation (and also, obviously, through the arbitral route).

In this sense, the AT considers that, even if by mere hypothesis it were considered that the legality impugned results from a second-tier act ["(...) and will cover cases in which the second-tier act is that of dismissal of a request for ex officio review of the tax assessment act, in the case of the present case this does not happen since the ground for dismissal was that of the untimeliness of the VAT regularization requested by the Claimant(...)"], the material incompetence of arbitral jurisdiction would always occur, in accordance with paragraph a) of no. 1 of article 2 of the RJAT, by absence of appreciation of the legality of the self-assessment act within the framework of the ex officio review procedure.

Beyond the grounds referred to, the AT also invokes the incompetence of the Arbitral Tribunals functioning at CAAD to appreciate decisions dismissing requests for ex officio review.

Such impediment would result from the referral of no. 1 of article 4 of the RJAT, to Ordinance no. 112-A/2011, which establishes the binding of the AT to the jurisdiction of the Arbitral Tribunals constituted under the terms of that diploma, namely, as to the type and maximum value of disputes covered.

Now, in accordance with article 2 paragraph a) of Ordinance 112-A/2011, the binding of the AT to the jurisdiction of the Arbitral Tribunals has as its object the appreciation of claims relating to taxes whose administration is entrusted to it, referred to in no. 1 of article 2 of the RJAT, "with the exception of claims relating to the declaration of illegality of self-assessment acts, withholding at source and payment on account that have not been preceded by recourse to the administrative procedure in accordance with articles 131 to 133 of the Code of Tax Procedure and Process".

Consequently, and considering the terms of binding of the AT, in the situation at hand the mandatory precedence of a request for administrative redress (emphasis ours) was always required, as provided in no. 1 of article 131 of the CPPT, being argued that the expression "recourse to the administrative procedure" does not also reference the ex officio review of the tax act, literally excluded from the material competence of the Arbitral Tribunals and legally barred in the arbitral forum.

Let us then examine the question more closely.

The scope of tax arbitral jurisdiction results, in the first place, from the provisions of art. 2, no. 1 of the RJAT, which sets out the criteria for determining the material competence of the arbitral tribunals in the following terms:

"The competence of the arbitral tribunals comprises the appreciation of the following claims:

a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account;

b) The declaration of illegality of acts of determination of taxable matter when it does not give rise to the assessment of any tax, of acts of determination of taxable income and of acts of determination of asset values".

In light of this provision, it should be understood that the competence of the arbitral tribunals "is restricted to activity connected with acts of assessment of taxes, falling outside its competence the appreciation of the legality of administrative acts of total or partial dismissal or of revocation of exemptions or other tax benefits, when dependent on recognition by the Tax Administration, as well as other administrative acts relating to tax matters which do not involve appreciation of the assessment act, to which paragraph p) of no. 1 of art. 97 of the CPPT refers" (Jorge Lopes de Sousa, Commentary on the Legal Regime of Tax Arbitration in Guide to Tax Arbitration, Almedina, 2013, p. 105).

The appreciation of the competence of the arbitral tribunal involves a judgment on the adequacy to the case sub judice of the means of the special administrative action or of the judicial impugnation process, in view of the provisions of art. 97 of the CPPT, which proceeds to the definition of the respective fields of application distinguishing the "impugnation of administrative acts in tax matters that involve the appreciation of the legality of the assessment act" (al. d) of no. 1) and the "contentious recourse of total or partial dismissal or revocation of exemptions or other tax benefits, when dependent on recognition by the tax administration, as well as other administrative acts relating to tax matters that do not involve appreciation of the legality of the assessment act" (al. p) of no. 1), and that, in accordance with no. 2 of art. 97, the "contentious recourse of administrative acts in tax matters, which do not involve the appreciation of the legality of the assessment act, authored by the tax administration, comprising the central government, regional governments and their members, even when practiced by delegation, is regulated by the norms on process in the administrative courts".

To concretize such distinction between the scope of application of these procedural means, which, by virtue of al. a) of no. 1 of art. 2 of the RJAT, has relevance in the definition of the competence of tax arbitral tribunals, it constitutes established jurisprudential orientation that "the use of the judicial impugnation process or contentious recourse (currently special administrative action, by virtue of the provisions of art. 191 of the CPTA) depends on the content of the impugned act: if this involves the appreciation of the legality of an assessment act the judicial impugnation process will be applicable and if it does not involve an appreciation of that type the contentious recourse/special administrative action is applicable" (cfr. the decision of the STA of 25.6.2009, proc. no. 0194/09).

In this way, having present these basic principles, to determine the competence of the arbitral tribunal it is necessary to ascertain the content of the impugned act, so as to verify whether it involved the appreciation of an assessment act.

For this purpose, as results from the expression "appreciation" used in paragraph d) of no. 1 of art. 97 of the CPPT, it is sufficient that, in the act in question, the "legality of the assessment act" has been evaluated or examined, even if that appreciation is not the ground of the administrative decision (Cf., in this sense, the arbitral decision of 06/12/2013, handed down in process no. 117/2013-T).

Subsumption

Now as clearly results from the case and from the list of proven facts here is in issue the dismissal of the request for ex officio review of VAT self-assessment, presented by the claimant, under the provisions of article 78, of the LGT, relating to a purported correction of VAT allegedly assessed in excess.

This request was dismissed on the ground that, quoting the order, «(...)The appellant came to allege that there did not occur a material or calculation error, but an error of classification, given that, as regards the operations effected outside the European Union (EU) (tourist packages), according to its allegation, it did not apply the VAT exemption in the totality of the operations, having assessed tax at the normal rate, from which resulted the improper delivery of tax to the State.

However, this is not so, because what is verified is that A effected the calculations incorrectly for the determination of the tax, as regards the operations of sales of 'tourist packages and 'isolated sales of passenger transports', alleging that it determined excess tax.

The errors, in the case at hand, constitute material or calculation errors, covered; that is, by the provision established in no. 6 of art. 78 of the CIVA.

(...)

From the above it follows the obvious conclusion that the Tax Administration did not appreciate the legality of the assessment.

The act that is at issue, which constitutes the immediate object of the present process, is, consequent and unquestionably, the decision dismissing the request for review, said ex officio, presented.

This decision of dismissal, in turn, relates to the "ex officio review of the VAT self-assessment" so it has an impact on the self-assessment acts of the tax relating to 2009, on whose illegality the Claimant intended to base its right to regularization of the VAT assessed in excess.

Consequently, and considering the terms of binding of the AT, in the situation at hand the mandatory precedence of a request for administrative redress was always required, with the consequent ruling on the merits of the claim presented, in light of the provisions of no. 1 of article 131 of the CPPT, because and furthermore, the expression "recourse to the administrative procedure" does not also reference the ex officio review of the tax act[4], literally excluded from the material competence of the Arbitral Tribunals and legally barred in the arbitral forum.[5]

That is and stated differently: we are faced with an administrative act in tax matters which, by not appreciating or discussing the legality of the assessment act, cannot be challenged through judicial impugnation, as provided for in paragraph a) of no. 1 of article 97 of the CPPT and article 2 of the RJAT.[6]

This supports the AT's understanding as to the question of the material incompetence of the Arbitral Tribunals for appreciation of the object of this dispute, considering, following and with the grounds of previous decisions handed down by the Arbitral Tribunal[7], that it does not fall within the scope of arbitral competences to appreciate the legality or illegality of decisions dismissing requests for VAT regularization presented under article 78, of the LGT nor, as the Claimant requests, to hand down decisions annulling VAT self-assessment without prior appreciation of the legality of these acts by the Tax Administration in accordance with articles 131 to 133, of the CPPT.

Naturally the grounds of the AT's decision when it concludes and decides on the dismissal of the ex officio review request for untimeliness may be open to debate.

The truth, however, is that, even if the grounds of that order were to suggest that the fate of the request could be granting if untimeliness did not occur, this did not remove from the order its nature of non-pronouncement on the merits and, consequently, the non-fulfillment of the necessary presupposition for the material competence of the Tax Arbitral Tribunals constituted within the scope of CAAD.

The formula "declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account", used in paragraph a) of no. 1 of art. 2 of the RJAT does not restrict, in a mere declarative interpretation and as was seen, the scope of arbitral jurisdiction to cases in which a act of one of those types is directly impugned. Indeed, the illegality of assessment acts may be declared jurisdictionally as a corollary of the illegality of a second-tier act (request for administrative redress) or third-tier act (hierarchical appeal), which confirms an assessment act, incorporating its illegality.

Therefore, the inclusion in the competences of the arbitral tribunals functioning at CAAD is admitted in cases in which the declaration of illegality of the acts there indicated is effected through the declaration of illegality of second-tier or third-tier acts, which are the immediate object of the impugnatory claim, by virtue of the reference made in that provision to self-assessment acts, withholding at source and payment on account, which are expressly referred to as included among the competences of the arbitral tribunals.

On the other hand, the prior pronouncement of the Tax Authority in other procedures provided for in Law, namely in the process of review of tax acts provided for in article 78, of the LGT[8], would only possibly be considered [and there are, at least, strong doubts that it could be] as equivalent to the requirement provided for in article 2, of the said Ordinance n° 112-A/2011, of prior "(...) recourse to the administrative procedure in accordance with articles 131 to 133, of the Code of Tax Procedure and Process (…)", in the case of effective and real pronouncement as to the merits and/or illegality of the self-assessment act[9].

If the fulfillment of that presupposition could be considered independently of a merits appreciation and, namely, when it was rejected or dismissed summarily for untimeliness, in that way would have been found the way to open the arbitral route: it would be sufficient to present a request for administrative redress or ex officio review manifestly untimely and, the request denied, present the request for arbitral ruling without risk of inadmissibility for material incompetence of the Arbitral Tribunal.

This was not, naturally, the legislator's objective of the said ordinance when drafting the provision in question, but rather, and manifestly, intended to exclude from arbitral jurisdiction the appreciation and decision on, in particular, self-assessment of taxes without there having been first an appreciation by the Tax Administration of the merits of that claim through the appeal mechanisms in accordance with articles 131 to 133, of the CPPT.

Accordingly and in conclusion: this Arbitral Tribunal is materially incompetent to appreciate and decide the request which is the object of the dispute sub judice, in accordance with articles 2, no. 1, paragraph a) and 4, no. 1, both of the RJAT and articles 1 and 2, paragraph a), of Ordinance no. 112-A/2011, which constitutes a preliminary exception imperative of knowledge of the merits of the cause, in accordance with the provisions of article 576, nos 1 and 2 of the CPC pursuant to article 2, paragraph e) of the CPPT and article 29, no. 1, paragraphs a) and e) of the RJAT, which prevents the knowledge of the request and the absolution of the instance of the AT, in accordance with articles 576, no. 2 and 577, paragraph a) of the CPC, pursuant to article 29, no. 1, paragraphs a) and e) of the RJAT.

Final notes

Despite the aforesaid exception of material incompetence of this Tribunal preventing the appreciation of the merits of the request, it is nonetheless considered not useless certain observations relating to the underlying question to conclude that, even if the aforesaid material competence were conferred on the Tribunal, the request would fail.

Let us then examine this.

The claimant argues that the error that it invokes to justify the request is not a material or calculation error, to the contrary of what the AT defends, case in which it would fall within no. 6 of art. 78 of the CIVA, but an error resulting from lack of clarity of the VAT regimes for travel agencies "which motivated an incorrect interpretation of the legal framework by the Claimant, configuring such conduct a clear error in the assumptions as to the applicable regime (i.e. an error of law)" (article 82 of the pi.).

And it also argues that, in the case at hand, the errors that it committed were not material or calculation errors, but rather errors of law as to the application of the VAT regime for travel agencies for "revealing special complexity" and "lack of clarity of the VAT regimes for travel agencies and organizers of tourist circuits" as it refers in articles 59 and 82 of the pi without however identifying in which point or what aspect of the regimes it had difficulty in understanding or applying.

Now, it appears that the claimant incurs in both errors: in error of law by applying badly the norms of the special regime and the general norms of VAT equally applicable to its activity; and in successive and reiterated material errors by successively misidentifying the facts and the economic operations practiced.

However there exists or subsists, a difference between these two errors. As to the first – error of law – its invocation proves unacceptable when it is, as is the case, a taxpayer that has by obligation to apply, as a matter of priority, in its commercial activity, the special regime for travel agencies and which, 20 years after having initiated such activity, and almost 30 years after this special regime was created, now invokes, for its benefit, difficulties in the understanding and application and "lack of clarity" (pi, article 66) of the regime.

Such culpability is aggravated by the fact that, in the case, the specifically applicable regimes to the economic operations in question do not reveal special complexity. Indeed, there is no controversy on the fact that the claimant applied incorrectly the DL 225/85 to the "totality of its sales/provision of travel services, including tourist packages for which the agency resorts to third parties for acquisition of services which were effected by these in third countries, as well as in isolated sales of passenger transports originating from and destined to abroad, to the autonomous regions and/or between islands of those regions" (articles 36 to 38 of the pi) and point II. 4, p. 5 of the Examination Report).

Indeed, neither the special regime for travel agencies nor the general VAT regime reveal special complexity in what concerns tourist packages in which the agency acts as a mere intermediary, nor in isolated sales of exempt passenger transport tickets. In fact, it is not only the special regime for travel agencies that is at issue here, but also the general VAT regime, applicable to the operations here specifically in question. It is even of meridian clarity the express reference to paragraph s) of no. 1 and no. 4 of article 14 of the CIVA, whose exemption regime does not reveal special complexity, nor does it reveal article 8 of the special VAT regime for travel agencies, cited, where it is read that: "The provisions of this decree-law do not apply to the provision of services effected by travel agencies and organizers of tourist circuits in the name and on behalf of the client, which will be subject to the discipline of general VAT."

Therefore, this does not concern the application of some more complex aspect of the travel agencies regime, since, in the case, as proven in the Examination Report (point II.4, fls.4) it would always prove of easy comprehension the fact that in operations in which the travel agency resorts to third parties, as regards services outside the Community, the provision of services is assimilated to an intermediary activity, to which the general VAT regime is applied, exempt by virtue of paragraph s) of no. 1 of article 14 of the CIVA. And in relation to which the claimant would not have had to effect (nor deliver to the State) the VAT self-assessment that it did.

Now, such general regime offers today, about 29 years after the entry into force of the CIVA, not the slightest doubt as to the regime of location of taxable operations provided for in article 6 of the CIVA nor as to the general regime of assessment and exemption imposed (in certain operations). Indeed, it constitutes a basic rule in VAT that exports and assimilated operations are exempt, as provided for in article 14 of the CIVA, in particular those realized by the claimant, when relating to services provided outside the Community, as provided for in its paragraphs r) and s) of its number 1. Because it is perfectly clear that goods and services provided in the national territory but used and exploited in third countries are exempt from VAT. (Clotilde Celorico Palma, Introduction to VAT, IDEEF notebooks, no. 1, p. 263).

At issue in the case is the error of determination of excess VAT, relating to operations exempt from VAT under article 14 of the CIVA, motivated by manifest error of the Claimant, as was proven in the factual matter fixed. And it is also proven that the claimant applied (badly) the special regime for travel agencies (margin regime) to economic operations to which it should have applied the general VAT regime, in light of the provisions of articles 1, no. 3 and 8 of DL 221/85, as results proven at fls. 4 and 5 of the Report, which does not contest it.

Nor is there any doubt that, in the case, such exemption constitutes a complete exemption from tax, that is, it not only permits the removal of VAT supported upstream but also does not require the assessment forward of the tax that would normally be owed, that is, in the active operations realized by the TP.

There is still a second set of reasons for which the invocation of the special complexity of the VAT regime for travel agencies, as well as all the case law of the CJEU to support it, should not proceed. It is that this is nothing more than a diffuse invocation, which at no time the claimant concretizes in its pi. Indeed, it does not invoke nor does it prove what specifically the difficulty in understanding the special regime in question has been. Indeed, only in article 65 of its pi does it refer to the fact that "constitutes equally a non-negligible factor the use of computer systems originating from the United States.." but not even there does it inform what concretely is the factor of such complexity or incomprehensibility. Because although it may be condescended that this special regime has complex aspects, this specific complexity not only does not verify in relation to the operations at hand – quite the contrary - but is not concretely identified by the Claimant. So we are left without knowing what exactly was the factor that prevented it from correctly applying the special and general regimes of VAT to the operations in question.

And this leads us to the third reason for which it appears that such complexity (and the consequent invocation of error of law) should not proceed: it is that, as is invoked in the Examination Report and was not contested by the claimant, what is at issue is the application of the general VAT regime to the intermediation operations realized by the claimant relating to services provided outside the territory of the Community and to the sale of exempt tickets, not the special regime for travel agencies (articles 36, 37).

Now, in accordance with the provisions of article 14 of the CIVA are thereof (VAT) exempt (complete exemption) the operations of export of goods and services and as well as assimilated operations. Thus, the sale of tourist packages with destination abroad and of exempt transport tickets, configure precisely assimilated operations because the service provided will be consumed outside the territory of the EU and, therefore, is exempt from VAT under a basic regime (al. r) and s) of no. 1 and no. 4), which presents no complexity.

Moreover, the claimant reveals to know well the principle of the neutrality of VAT, which permits it to understand how this neutrality works in operations assimilated to exports. Indeed, it invokes it abundantly to support, and rightly, the thesis that the MS must provide the possibility of correction of tax improperly assessed, so it makes no sense to attribute to the error in self-assessment the nature of error in the assumptions of application of the legal framework, which it invokes in article 83 of its pi.

Thus, it does not seem appropriate to accept that this concerns an error in the assumptions of application or of classification of the legal framework relating to the operations in question, which is clear, as is seen. If it is not to be believed that the claimant is unaware of the figure of the exemption (and its effects in VAT) of which operations taxable and equated to exports are the beneficiaries, it seems to me to be clear that it is not to accept that this concerns an error of law, an error as to the understanding of the content of the applicable law, an error as to the functioning of a general mechanism of VAT, but a material error of identification of those operations.

Indeed, it is not appropriate that a VAT taxpayer, obliged to the application of a special regime for its activity sector, which works with it every day along its many years of activity, as results proven from the examination report, now invokes in a general and abstract form, not concretized in the petition, the complexity of the regime to ground the lack of knowledge of basic operations of classification, of application of that general regime and of application of the basic rules and mechanisms of VAT to operations that it practices every day or, at least, frequently.

If it had, then, difficulties in the application of the special regime for travel agencies, the truth is that it not only does not invoke in what this specific difficulty consisted and the way it concretely made difficult the classification of the operations of sale of tourist packages and exempt tickets, but also does not prove that it ever requested clarifications, v. g. through written information requests (directed to the AT or to the association of the sector (APAVT), nor demonstrates having sought to understand the administrative doctrine on this matter, as is the case of Circular Dispatch no. …, of 1991 of DSIVA.

Thus, the abstract invocation of general difficulties, not concretely identified, of classification of some of those operations, which, moreover, are not excusable for an operator in the sector, appears to be inappropriate.

Rather, it appears undeniable that its modus operandi corresponds to a generic posture as to the duty of compliance, a deficient general operating mode, which the Examination Report confirms, at fls. 18 when it states that the taxpayer, despite these difficulties, which, according to it, have dragged on since ever, did not seek to clarify itself, did not update itself, did not modify its procedures, maintaining its erroneous routines of bookkeeping registration and VAT determination, continuing not to isolate the provision of services not integrated in the tourist packages and, consequently, not to give them the VAT treatment that they require, fact which also did not contest.

All the more so as in the Examination Report itself there is an alert to the fact that, faced with this non-compliant attitude with the VAT rules that are applicable to it, "at the limit, the AT may, in the future, come to be called upon to rule on errors in VAT self-assessment in 2012…".

Consequently, the invocation of these alleged general diffuse difficulties of understanding of the special (and general VAT) regimes appears inappropriate because not grounded, when the Claimant does not identify which it is, not enabling us with concrete data that permit us to judge their actual verification.

Thus, the generic and abstract invocation of error of law should not be accepted, but it should be taken as proven that what is at issue are material errors of bookkeeping registration, of inscription or of writing, of the facts in its bookkeeping and in the VAT declarations, as well as of calculation errors in the determination of the taxable base subject to the margin regime and of the base subject to the general VAT regime.

What was proven was that the claimant registered the operations incorrectly, in terms of its bookkeeping not "permitting the clear and unequivocal knowledge of the elements necessary to the calculation of the tax, as well as permitting its control, comprising all the data necessary to the completion of the periodic declaration of the tax" and to "evidence: a) The value of non-exempt operations, net of tax, according to the applicable rate; b) The value of exempt operations without the right to deduction; c) The value of exempt operations with the right to deduction; d) The value of assessed tax, according to the applicable rate, with distinct relevance of that relating to the operations referred to in paragraphs f) and g) of no. 3 of article 3 and in paragraphs a) and b) of no. 2 of article 4, as well as in cases where the respective assessment is the responsibility of … the purchaser" (or in accordance with what is required by the margin regime), as is required by article 44 of the CIVA and as well the registers, in accordance with the provisions of articles 45 to 51 and 65, all of the CIVA.

Now, constitute VAT corrections provided for in art. 71, among others, the corrections of material errors committed in the registers and in the declarations — cfr. Clotilde Celorico de Palma, Introduction to VAT, p. 186. Since it is precisely art. 44 of the CIVA that, in the context of bookkeeping obligations, determines that bookkeeping must be organized so as to permit the clear and unequivocal knowledge of the elements necessary to the calculation of the tax, as well as to permit its control, comprising all the data necessary to the completion of the periodic declaration of the tax – Clotilde Celorico de Palma, ob. cit., p. 184.

Thus, it clearly stands out that these are material errors of determination of the taxable base and of the operations carried out and or of calculation in the assessment of the VAT to be delivered to the State (articles 47 and seq. of the pi). And, therefore, the invocation made by the AT proves appropriate that the applicable regime should be that of article 78 of the CIVA, in particular its number 6, which establishes the period of two years to effect the correction. A period that has been exceeded.

On the other hand, article 98 of the CIVA provides the standard regime of ex officio review and exercise of the right to VAT deduction, establishing that "without prejudice to special provisions, the right to deduction or to reimbursement of tax delivered in excess can only be exercised until the lapse after the birth of the right to deduction or excess payment of tax, respectively".

However, the said article 78, no. 6 of the CIVA establishes that "the correction of material or calculation errors in the records to which articles 44 to 51 refer in the declarations mentioned in article 41 and in the forms 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 taxpayer, but can only be effected within the period of two years, which, in the case of exercise of the right to deduction, is counted from the birth of the respective right in accordance with no. 1 of article 22, being mandatory when it results in tax in favour of the State."

Thus, this article 78, no. 6, by providing for a period of two years counted from the birth of the right to deduction, to exercise the respective right, in the situations there provided for, will be one of the "special provisions" to which alludes the initial part of article 98, no. 2, of the CIVA, in which the maximum period of four years after the birth of the right to deduction is not applicable, but rather two years.

As results from the literal wording of that no. 6 of article 78 of the CIVA, it applies only to "the correction of material or calculation errors". However, article 78 of the CIVA does not tell us what it understands by material errors. But article 95-A no. 2 of the CPPT gives us a concept of "material or manifest errors" indicating that it integrates, "in particular those resulting from the anomalous functioning of the computer systems of the tax administration, as well as unequivocal situations of calculation error, writing error, inaccuracy or lapse".

Article 78, no. 6 of the CIVA equates the calculation error to the material error, so it comprises the errors of addition and or of subtraction in the operations of calculation of the amount of VAT to (self-)assess and to deliver to the state. Thus, a material error is configured as the error in the type of register, the incorrect identification or inscription of facts and values in bookkeeping, as well as the error of completion of the fields of the periodic VAT declaration. And a calculation error, the error in the application of the tax rates, in the operation of addition of the taxable base or of the assessed tax. Calculation error will be that in which are verified material or calculation errors in the registers to which articles 44 to 51 and 65 of the said CIVA refer.

It is not ignored what was already decided in the Decision of the STA of 18.5.2011, proc. 0966/2010, which argues that the aforementioned material errors refer to situations of register error, for example, when VAT is registered for an amount different from the correct value (the situations provided for in the mentioned provision refer only to situations of mere writing or transcription errors of values), reporting, on the other hand, calculation errors, as results from the very terminology, to situations in which the values of the tax or of the operations that underlay its determination were incorrectly determined. In the case, the VAT in question was wrongly assessed and recorded in bookkeeping, so it is important to conclude that this concerns a situation falling within article 71, no. 6 of the CIVA.

Thus as it is not ignored the Arbitral Decision handed down in proc. 117/2013-T. However, if anything, there, unlike the case sub judice, it was clear (and was proven) the error in the determination of a concrete complex situation of determination of the pro rata of an SGPS higher than owed, through the inclusion of dividends and capital gains derived from the sale of shareholdings, which, once removed, as should be, determined the determination of a pro rata higher, generating VAT in its favour, whose claim was manifested through a request for review of the taxable matter. Now, in this case, the arbitrators were able to know how to appreciate the error in concreto, accepting that for the calculation of the pro rata of VAT of the SGPS the Claimant assessed badly a specific provision: article 23 of the CIVA.

It is clear that the calculation error of pro rata of an SGPS by incorrect interpretation and application of a specific norm, article 23 of the CIVA, is not an error falling within article 78, no. 6 because it constitutes an error of law (on which operations or values must be in the numerator and denominator of the fraction) on the legal regime applicable and not an error of an arithmetic nature.

To the contrary of that other case in which the reason for the error is concretely identified and was accepted as being an error in the application of a specific norm of VAT-mixed taxpayers, in the case sub judice the Claimant does not identify the provision that it applied badly, invokes only in general, that is in a diffuse form, the complexity of the entire special regime for travel agencies, but does not indicate concretely where such difficulty consists – nor how it was the cause of error in the application of law -, which remains cloudy.

Thus as it does not identify the logical iter where it erred in the application of those legal regimes, the provision or provisions from which emerges this alleged difficulty of it. Thus, although the arbitral decision taken in process 117/2013-T is settled, because clear and congruent is the difficulty of the Claimant there in the understanding and application of the legal regime of pro rata in VAT, it appears that the solution there taken (to apply article 98, no. 2 of the CIVA) cannot be worth for...

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Can a taxpayer request an official review of VAT self-assessments before the CAAD Arbitral Tribunal?

Under Portuguese law, taxpayers can challenge VAT self-assessments before CAAD arbitral tribunals only under specific conditions defined in Article 2(1)(b) of RJAT and Ordinance 112-A/2011. The arbitral tribunal has jurisdiction over 'acts of self-assessment, withholding at source and payment on account' of taxes administered by the Tax Authority, but only when preceded by mandatory prior administrative procedures under CPPT Articles 131-133. However, the tribunal's competence is limited to declaring illegality of the self-assessment act itself, not to deciding reimbursement requests. The taxpayer must first exhaust administrative remedies (ex officio review under CPPT Article 78 and hierarchical appeal) before accessing arbitral jurisdiction. Importantly, if the administrative challenge concerns procedural dismissals rather than substantive assessment legality, arbitral tribunals may lack jurisdiction over such second-tier administrative acts.

What are the time limits for filing a VAT self-assessment revision request in Portugal?

Portuguese tax law establishes strict time limits for VAT self-assessment revision requests. Under CPPT Article 78, taxpayers may request ex officio review within four years from the date of self-assessment when claiming excess tax payment. This request must be filed with the Tax Authority that has administrative competence over the tax. If the ex officio review is denied or remains unanswered, the taxpayer may file a hierarchical appeal within 30 days under CPPT Article 66. Only after exhausting these mandatory prior administrative procedures can the taxpayer access arbitral jurisdiction under RJAT. Failure to observe these time limits results in dismissal of the request as untimely (intempestividade), which constitutes a procedural bar. The untimeliness ground is absolute and prevents substantive analysis of the tax claim, as administrative authorities and tribunals lack jurisdiction over time-barred requests.

Does the CAAD Arbitral Tribunal have jurisdiction to review hierarchical appeals on VAT matters?

CAAD arbitral tribunals have limited jurisdiction over hierarchical appeals in VAT matters. According to RJAT Article 2(1), arbitral competence extends to 'second or third-tier acts' that have as their object the appreciation of legality of assessment acts, self-assessments, or determinations of taxable matter. However, as argued in this case and supported by precedent (Decision 244/2013-T), the tribunal lacks competence to review decisions dismissing requests for ex officio review of self-assessments. The distinction is critical: arbitral jurisdiction covers substantive challenges to VAT assessment legality when proper administrative procedures have been followed, but does not extend to reviewing procedural dismissals of administrative requests. When a hierarchical appeal concerns dismissal of an ex officio review (rather than challenging the underlying assessment directly), the arbitral tribunal may determine it lacks material competence, as the dispute concerns a procedural administrative decision rather than an assessment act within RJAT's defined scope.

What happens when a VAT review request is rejected as untimely under Portuguese tax law?

When a VAT review request is rejected as untimely under Portuguese tax law, several consequences follow. First, the rejection constitutes a definitive procedural bar that prevents substantive examination of the taxpayer's claims regarding excess VAT payment or assessment illegality. The untimeliness (intempestividade) ground means the administrative authority or tribunal lacks jurisdiction to proceed, regardless of the potential merit of the underlying tax claim. Second, the taxpayer may challenge this dismissal through hierarchical appeal under CPPT Article 66, but must do so within 30 days. Third, if the hierarchical appeal is also dismissed, the taxpayer may seek arbitral review under RJAT, but faces the competence limitation addressed in this decision—arbitral tribunals may lack jurisdiction over decisions dismissing ex officio reviews as distinct from substantive assessment challenges. Fourth, the untimely dismissal preserves the original self-assessment, leaving the taxpayer without recourse to recover allegedly excess tax payments through administrative or arbitral proceedings.

How does the RJAT regulate arbitral tribunal competence for VAT self-assessment disputes?

The RJAT (Regime Jurídico da Arbitragem Tributária) establishes precise parameters for arbitral tribunal competence in VAT self-assessment disputes through Article 2(1)(b) and supplementary Ordinance 112-A/2011. Competence encompasses 'acts of self-assessment, withholding at source and payment on account of taxes whose administration is entrusted to the AT, provided they have been preceded by recourse to the prior administrative procedure necessary' under CPPT Articles 131-133. This mandatory prior administrative procedure requirement means taxpayers must first request ex officio review and, if dismissed, file hierarchical appeal before accessing arbitral jurisdiction. RJAT Article 4 further conditions AT's binding to arbitral jurisdiction on Ordinance 112-A/2011's provisions regarding dispute type and maximum value. Critically, arbitral competence is limited to declaring illegality of assessment acts themselves—not deciding consequential matters like reimbursements or reviewing procedural dismissals. Article 24 RJAT assigns enforcement of arbitral decisions, including any resulting reimbursements, to the Tax Authority's competence, with possible judicial enforcement under CPPT Article 146. This framework creates strict jurisdictional boundaries distinguishing substantive assessment challenges (within arbitral competence) from reimbursement determinations and procedural dismissals (outside arbitral competence).

VAT Self-Assessment Review Request Rejected for Untimeliness – CAAD Arbitral Tribunal Competence Ruling 468/2014-T

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VAT Self-Assessment Review Request Rejected for Untimeliness – CAAD Arbitral Tribunal Competence Ruling 468/2014-T

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