CAAD 509/2018-T: VAT Deduction Right Deadline, Invoice Requirements & Neutrality Principle

ARBITRAL DECISION (consult full version in PDF)

The arbitrators Dr. Jorge Lopes de Sousa (arbitrator-president, appointed by the other Arbitrators), Dr. Isaque Marcos Lameiras Ramos and Dr. Emanuel Augusto Vidal Lima, appointed by the Claimant and the Respondent, respectively, to form the Arbitral Tribunal, constituted on 26-12-2018, agree as follows:

1. REPORT

A... S.A., a company with the sole registration number and collective person number ..., with registered office in ..., ..., ... no. ..., ...-..., ... (hereinafter referred to as "Claimant"), filed an application for the constitution of a collective arbitral tribunal, pursuant to the combined provisions of articles 2, no. 1, point a), 5, no. 3, point a), 6, no. 2, point b), of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), with a view to an arbitral ruling on the final decision refusing the administrative appeal presented against Value Added Tax (VAT) assessments relating to the periods of January, April and May 2013, totaling an amount of € 308.108.71, which are identified in the tables below:

The Claimant also requests compensation for undue withholding.

The application for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to the TAX AUTHORITY AND CUSTOMS SERVICE on 12-10-2018.

The undersigned communicated acceptance of the exercise of their functions within the applicable deadline.

On 05-12-2018, the Parties were notified of the appointment of the arbitrators, having not manifested any will to refuse, in accordance with the combined provisions of article 11, no. 1, points a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics.

Thus, in accordance with the provision in point c) of no. 1 of article 11 of the RJAT, the collective arbitral tribunal was constituted on 26-12-2018.

The Tax Authority and Customs Service responded, contesting the admissibility of the application for arbitral ruling.

By dispatch of 05-02-2019 it was decided to waive the holding of the meeting provided for in article 18 of the RJAT and arguments.

The arbitral tribunal was regularly constituted and is competent.

The parties enjoy judicial personality and capacity, are entitled (articles 4 and 10, no. 2, of the same instrument and article 1 of Ordinance no. 112-A/2011, of 22 March) and are duly represented.

The proceedings are not affected by nullities.

A decision must be rendered.

2. STATEMENT OF FACTS

2.1. Established Facts

The following facts are considered established:

• The Claimant is a subsidiary of the company "B..., S.A." (NIF ES...), with registered office in Madrid, parent company of Group C... and which holds all of its share capital;

• The Claimant's object is the provision of services in the areas of information systems and engineering projects and development, maintenance and support of computer applications, business management solutions and their corresponding implementation, and pursues economic activities ("CAE") of computer consultancy as the main activity (62020), and computer programming as a secondary activity (062010);

• The Claimant initiated its activity in Portugal on 04-10-2002, being subject to the normal VAT scheme, with monthly periodicity;

• The Tax Authority and Customs Service conducted an inspection of the Claimant under Service Order no. Ol2015...;

• In that inspection a Tax Inspection Report was drawn up contained in document no. 4 attached by the Claimant, the content of which is reproduced herein, in which it is stated, among other things, the following:

III.2.1. Revocation Agreement E...

Within the scope of the revocation agreement of the contract for the provision of goods and services between A... and E..., analyzed previously (item III.1.2.) and as a result of cross-referencing the periodic VAT declarations submitted by the taxpayer, for the tax periods comprised within the scope of the present inspection procedure, with the respective accounting records (accounts 243 - VAT) of the period, it was found that the taxpayer proceeded to deduct the VAT contained in the invoices issued by E... relating to the sale of licenses and equipment within the scope of the "CAH" project.

As we have seen, the goods were not reflected in the taxpayer's accounting. The destination of the goods is unknown.

The discipline underlying the exercise of the VAT deduction right for VAT taxpayers is provided for in articles 19 and 20 of the CIVA, from which it follows that, in order for the tax paid on acquisitions of goods and services to be deductible, these must have a direct and immediate relationship with the downstream operations that confer such right.

As a general rule, all tax paid on goods and services acquired for the exercise of an economic activity referred to in point a) of no. 1 of article 2 of the CIVA is deductible, with the exception of the situations set out in article 21 of the CIVA, provided that it relates to transfers of goods and provision of services that confer the right to deduction under article 20 of the CIVA, including those which, although falling within the scope of economic activities referred to in article 2 of the CIVA, are not located in national territory, by virtue of the location rules contained in article 6, being, however, qualified as operations conferring the right to deduction by point b) of no. 1 of the same instrument.

Thus, in order for the deduction of tax to be possible, acquisitions of goods or services must be made with a view to carrying out taxable operations, as provided in point a) of no. 1 of article 20 of the CIVA, or operations that enjoy full exemption, such as exports, operations assimilated to exports, operations carried out abroad that would be taxable if carried out in national territory, some operations linked to imports and to suspensive customs arrangements (in accordance with point b) of the same legal provision) and also intra-community transfers of goods to other Member States of the European Union, provided for in no. 2 of article 19 of the VAT Scheme for Intra-Community Transactions (RITI).

Therefore, acquisitions made within the scope of activities outside the scope of the tax, or outside the concept of economic activity (non-subject activities), do not give rise to deduction, nor do those intended for example for exempt operations under article 9 (simple or incomplete exemptions), or when carried out within the scope of the Special Exemption Scheme provided for in article 53 and following.

In this matter, it is recalled that the CIVA results from the transposition, into the internal legal order, of several Community Directives relating to the harmonization of the legislation of the Member States with respect to value added taxes, and the interpretation of internal law must, in this domain, be convergent with the principles and rules postulated in the respective community rules.

Thus, with respect to the right of deduction, the case law of the Court of Justice of the European Communities (CJEC) has been affirming that "in order for VAT to be deductible, upstream operations must have a direct and immediate relationship with downstream operations with the right to deduction. Thus, the right to deduction of VAT which has been levied on the acquisition of goods or services upstream presupposes that the expenses incurred with their acquisition have formed part of the constituent elements of the price of downstream taxable operations with the right to deduction." (Judgment of the CJEC, of 29 October 2009, case no. C-29/08).

In the case under examination and given that the goods are not reflected in the taxpayer's accounting, their destination is unknown, and it has not been proved that they were intended for the carrying out of taxable operations.

In light of the foregoing, a correction is made to the VAT deducted in field 24 of the periodic declaration for the month of April 2013, in the amount of € 183.930.62, as detailed below:

III.2.2. Invoices issued by supplier D...

As a result of the sampling carried out on VAT accounts, a deduction of tax was detected relating to invoices issued by supplier "D...", NIF..., issued in 2010 and 2011, in the periodic declaration for the month of January 2013.

The amount of VAT deducted is € 83.297.50, as shown in the following table:

Upon inquiry, the certified accountant of the taxpayer informed that the respective expense is not recognized accounting-wise in the period under analysis (fact which was confirmed), but in earlier periods, the company having in 2013 proceeded to pay the invoices and, consequently, to the deduction of the VAT contained therein in the periodic declaration corresponding to the month in which payment occurred - January 2013.

In accordance with the rule established in article 22, no. 1, of the CIVA, the deduction of tax must be made in the declaration of the period in which receipt of the invoices or receipt of VAT payment forming part of the import declarations occurred, it being, however, admitted the possibility of corrections provided for in article 78 of the same instrument, in the situations described therein.

In the same article are provided situations in which the possibility of tax deduction being made in different periods is admitted, namely when the receipt of documents supporting deduction occurs in a declaration period different from the one in which issuance occurred (in accordance with no. 3), or when the tax to be deducted exceeds the amount due by taxable operations in the same period (in accordance with no. 4 of the same provision).

Thus, from the reading of that normative provision, it is inferred that the deduction of tax cannot be made at any time, at the taxpayer's choice, and the useful scope of the referred norms indicating the appropriate moments for deduction precisely serves to exclude that it may be done at different moments, when such is not specially provided for.

Community law provides the same, which takes precedence over internal law, provided that the fundamental principles of the democratic rule of law are not violated (as established in article 8 of the Constitution of the Portuguese Republic - CRP), namely the Sixth Directive of the Council on VAT - Directive no. 2006/112/CE, of 2006/11/28, which in its articles 179 and 180 establishes that:

"The taxable person shall effect the deduction by subtracting from the total amount of VAT due for a given tax period the amount of VAT in respect of which, during the same period, the right of deduction has arisen and is being exercised, as provided for in article 178", and that "Member States may authorize the taxable person to effect deductions that have not been made in accordance with articles 178 and 179."

From this it is concluded that the deduction of tax can only be made outside the moments considered appropriate under conditions which shall be fixed, which rules out the viability of the attribution to the taxpayer of the right to make the deduction when it chooses, within the maximum legally admissible period.

In the same sense, the Judgment of the Supreme Administrative Court, case no. 0966/10, of 2011/05/18 points, when it states that "no. 2 of article 92 of the CIVA, in establishing that the right to deduction can only be exercised up to the limit of four years after the birth of the right to deduction, does not have the scope of attributing to the taxpayer the freedom to choose any moment within that period to effect the deduction, but rather to set a maximum limit that cannot be exceeded, even in cases where deduction can be made at moments different from those indicated in article 22. It further adds that "apart from article 71, no. 6, of the CIVA, there is no legal provision that can be interpreted as permitting the taxpayer to exercise the right of deduction at a moment later than those resulting from this article 22, in cases where, as a result of an oversight in their accounting, they only detected that they had the right to deduction at a moment later than the one in which it should have been exercised."

Now, in the case under examination, there was no oversight in the accounting, since the invoices are recorded in customer accounts, having the respective expense been recognized earlier (as reported by the taxpayer). Indeed, as a result of the circulation carried out to supplier "D...", motivated by the divergences detected in the cross-referencing of the recapitulative schedules of customers and suppliers (annexes O/P), the same informed that "(...) the only movement that occurred in that period (2013) was a receipt of two invoices dated 2010 and 2011."

In light of the foregoing, the deduction of VAT in the periodic declaration for the month of January 2013 in the amount of € 83.297.50 should not be accepted.

(...)

IX.2. – Prior Hearing

(...)

- Corrections in the field of VAT relating to the E... Revocation Agreement

In its explanation, the taxpayer expresses its disagreement with the correction made, stating, as it had done previously, that "as a consequence of the agreement and in light of the return of goods, the Claimant promoted the carrying out of taxable operations, namely, a re-billing operation which constitutes, under the terms of the VAT Code, a taxable operation subject to VAT."

Such re-billing operation was substantiated in invoice no. 13120042 issued to B..., SA, with registered office in Spain, in the amount of €4.688.981.00 and, according to the taxpayer, "(...) aimed at charging back to the re-billing of expenses and losses incurred by the now Claimant with the execution and subsequent revocation of the CAH Project for B..., SA (the entity that managed the overall relationship with G...)."

However, and as we have seen, the invoice issued by the taxpayer has the following generic description: "service in the overall management of the G... partnership within the scope of the E... project", that is, it constitutes a provision of services that is not detailed and which is unclear as to the type of service that was performed.

Furthermore, being a re-billing, as the taxpayer would like to make believe, it should mention this fact, as in several invoices detected in the accounting in the course of the inspection acts.

By not mentioning nor identifying the re-billing of expenses, it leads us to believe that this is the invoicing of a normal intra-group service provision and within the scope of the taxpayer's activity, as is the practice in the company and is verified in several documents issued.

Indeed, it is incumbent upon the taxpayer to prove, under article 74 of the LGT, that the invoiced amount relates to the re-billing of expenses incurred within the scope of the CAH-E... project and which include "all costs incurred with the CAH project, including all costs arising from the revocation agreement", which did not occur.

The taxpayer argues that the Spanish company "B..., SA" managed the overall relationship with the G... partnership. However, from both the elements consulted in the course of the inspection acts and the documents now presented and which form an integral part of the right to prior hearing (included in annexes 15, 16, 17, 18, 19 and 20 of the petition), it was verified that the contacts, agreements, contracts, orders in the scope of the CAH-E... project were celebrated between the taxpayer (A...) and G... Portugal, with no apparent intervention of the Spanish company throughout the process.

It is reinforced what was already referred to above, that as is clear from the transfer pricing file, A... acts as a full risk service provider, assuming full responsibility and the risks associated with the projects in progress.

In light of the foregoing and having the taxpayer not presented elements that contradict the corrections proposed in item III.2.1 of this report, we consider that they should be maintained.

- Corrections in the field of VAT relating to supplier D...

In this respect, the taxpayer argues that, although it initially bore the VAT, it proceeded to deduct the same only in 2013, that is, "within the limitation period for VAT purposes."

In accordance with the Judgment delivered by the Central Administrative Court of the South (case no. 05273/12, of 22 January 2015, mentioned by A...), the taxpayer acquires the right to deduction of VAT paid on the acquisition of goods and/or services "(...) from the moment when the suppliers invoice it the price of the goods or services."

But the Judgment itself further emphasizes that "Hence, in accordance with and for the purposes of the provision in no. 2 of the same article 22, and in obedience to a principle of immediate deduction, in each tax period (monthly or quarterly), the deduction of tax paid must be made in the declaration of the acquiring taxpayer, of the period itself or of the immediately following tax period to the one in which receipt of the documents conferring it was verified, namely invoices, equivalent documents or receipt of VAT payment forming part of the import declarations."

Case law further adds, as has been seen, that the norms contained in the CIVA, namely the provision in article 98 of the CIVA, are intended to delimit the moment at which the deduction of tax can be made by the taxpayer and to prevent that it can be made at moments different from those legally provided for, leaving the moment not to the taxpayer's choice.

In its explanation, the taxpayer adduces the arguments contained in paragraph 319, which we now transcribe:

In this regard, and with particular relevance to the case at hand, it should be noted that the recent decision of the Tax Authority, by the Secretary of the VAT Management Directorate in delegation of the General Director, of 4 March 2016, relating to Process 9860 on the non-recording of 2012 invoices by a particular taxpayer which wished to include them in the periodic VAT declarations of 2013 and 2014, decided that:

• 10. Thus, if the tax has been levied on goods or services acquired for the carrying out of taxable operations, in accordance with article 20 of the CIVA, and the tax is not related to expenses mentioned in no. 1 of article 21 of the CIVA, the purchaser may exercise the right to deduction (...) being able to exercise such right up to the expiry of the period referred to in no. 2 of article 98 of the CIVA;

• 11. Thus, if in fact the Claimant, in the year 2012, did not exercise the right to deduction of the tax (...) nothing prevents it from being able to exercise such right taking into account the conditions established in articles 19 to 21 of the CIVA and the period provided for in no. 2 of article 98 of the same instrument."

The decision to which the taxpayer makes reference is the Binding Information issued in the scope of Process no. 9860, issued by dispatch of the Deputy General Director of VAT of 2016/03/04, under the heading: "Right to deduction - moment at which the right arises". The same only comes to confirm what is already founded in the present inspection report, as follows.

It therein provides that the deduction of VAT mentioned in invoices not yet recorded must be made in accordance with article 22 of the CIVA, provided that within the period provided in no. 2 of article 98 of the same instrument (4 years), as clarified by no. 8 of Circulated Office no. 30082, of 2005/11/17, of the DSIVA.

And further, in points 10 and 11 of the referred Binding Information, indeed transcribed by the taxpayer in its petition, although in incomplete form, one can read (the underlined portion corresponding to the part omitted by the taxpayer):

• "• 10. Thus, if the tax has been levied on goods or services acquired for the carrying out of taxable operations, in accordance with article 20 of the CIVA, and the tax is not related to expenses mentioned in no. 1 of article 21 of the CIVA, the purchaser may exercise the right to deduction of the tax mentioned in invoices not yet recorded/registered, being able to exercise such right up to the expiry of the period referred to in no. 2 of article 98 of the CIVA;

• 11. Thus, if in fact the Claimant, in the year 2012, did not exercise the right to deduction of the tax, given that the invoices were not recorded, nothing prevents it from being able to exercise such right taking into account the conditions established in articles 19 to 21 of the CIVA and the period provided for in no. 2 of article 98 of the same instrument."

That is, there is a primordial fact which consists in knowing whether the invoices are or are not recorded/registered. And, as has already been clearly demonstrated above, it is clear that the invoices issued by supplier D... were recorded by the taxpayer in periods prior to 2013.

In light of the foregoing and in view of the factual elements and grounds presented here, we consider that the corrections proposed in point III.2.2 should be maintained.

• Following the inspection the Tax Authority and Customs Service issued the following VAT assessments and compensatory interest:

• The Claimant filed an administrative appeal of the mentioned assessments;

• The administrative appeal was processed under no. ...2017... and was dismissed by dispatch of 28-06-2018, issued by the Deputy Director of Finance of the Administrative Justice Division of the Finance Directorate of Lisbon, which manifests agreement with information contained in document no. 1 attached with the application for arbitral ruling, the content of which is reproduced herein, in which it is stated, among other things, the following:

II - DESCRIPTION OF THE FACTS

1 - As in the report on pages 189 to 211 of the file, the VAT corrections that are the subject of the appeal resulted from an inspection action to the appellant company, relating to the exercise of 2013 (Service Order no. OI2015...) and consisted of the following, which is summarized below (points 2 and 3 - the amounts of the corrections are indicated):

2 - E... Revocation Agreement (€ 183.930.62):

Value of VAT contained in the two invoices below identified, issued by the Public Treasury Management and Debt Agency – E..., whose deduction by the now appellant in the periodic declaration of April/2013 was considered improper because the goods were not reflected in its accounting and the destination of the same is unknown, and it has not been proved that they were intended for the carrying out of taxable operations.

In point III.2.1 of the report it is stated that the discipline underlying the exercise of the VAT deduction right for VAT taxpayers is provided for in articles 19 and 20 of the CIVA, from which it follows that, in order for the tax paid on acquisitions of goods and services to be deductible, these must have a direct and immediate relationship with the downstream operations that confer such right.

Reference is also made to point III.1.2-"E... Revocation Agreement" of the report, which deals with a correction in the field of Corporation Income Tax which is based, among others, on the value of the same invoices and where it states that, following the revocation of the contract concluded between the now appellant and E... for the carrying out of the CAH project (Customers System, Accounts, AforroNet and Homebanking of E...) and as provided for in the Revocation Agreement and Release Declaration, in particular its clause 4 (cf. p. 144), E... issued the two invoices to the appellant (copies of the invoices on pages 221 and 222).

The amount of those invoices was included by the now appellant in the value of € 1.617.237.00 entered in field 704-"Negative equity variations not reflected in net income" of its income declaration mod. 22 relating to the period of 2013, by reason of the accounting in account 561-"Results of previous years" (summary table on page 21 of the report - p. cf. 198) and was not considered as deductible in the calculation of taxable profit, above all, also, because the destination attributed to the goods in question was not proved, and it was not possible to determine whether the same were intended for sale, allocation to company use or purposes alien to the same.

In that point III.1.2 of the report it is further stated the following:

a. From the analysis of the taxpayer's accounting, it was found that the entry of the goods is not reflected accounting-wise. In the course of the inspection, the certified accountant of the taxpayer informed that the goods were not recognized accounting-wise, for reasons of obsolescence of the same, being too specific for future reuse, not having been subject to write-off.

b. For his part, the taxpayer's representative declared that "The licenses are not tradeable, are not sold and have no utility whatsoever. As regards the equipment or machines, they are stored because they are goods parametrized for the solution of the project. The company understands that, because they are non-tradeable goods and of no utility to the company (...) they were not reflected accounting-wise".

c. As for the allegation of the taxpayer (now appellant), in prior hearing of the conclusions of the report, that an invoice was issued to B..., SA (Spanish law company) in the value of € 4.688.981.00 (p. 223-verso), corresponding to the value of all costs incurred by the E... project, including those derived from the conclusion of the revocation agreement, value recorded in account 711 and subject to taxation in the field of Corporation Income Tax, it is stated in the report that such invoice has the descriptor "Service in the overall management of the G... partnership within the scope of the E... project", concluding that this is not a re-billing of expenses incurred under the E... Revocation Agreement.

d. As for the allegation, also in prior hearing of the conclusions of the report, that the software licensing transferred was not recognized accounting-wise, as it had no utility or commercial value, because, although valid, it was licensed specifically to end user E..., reference is made in the report to the declaration of E... which forms part of the Revocation Agreement and Release Declaration (pages 142 to 145), according to which all transferable licenses are assigned to the appellant.

3 - Invoices issued by supplier D... (€ 83.297.50):

Value of VAT contained in the two invoices below identified, issued by supplier D..., with NIF ..., whose deduction by the now appellant in the periodic declaration of January/2013 was considered improper for having been made in the period of payment of the invoices and not in the period in which receipt of the invoices was verified, as provided for in article 22 of the CIVA, nor were the situations met in which the possibility of the deduction of tax being made in different periods is admitted (nos 3 and 4 of article 22 or corrections provided for in article 78 of the CIVA).

(cf. annexes 18 and 19 to the report, pages 242 to 246, and annexes 25 to 30 to the prior hearing of the conclusions of the report, pages 266 to 277)

It is also stated in the report the following:

a. The expense documented by the invoices is not recognized in the period of 2013, but, according to information from the certified accountant, it was in an earlier exercise.

b. The deduction of tax can only be made outside the moments considered appropriate under conditions which shall be fixed, which rules out the viability of the attribution to the taxpayer of the right to make the deduction when it chooses, within the maximum legally admissible period, which is supported by case law (mentioned in the report).

c. The provision in no. 6 of article 78 of the CIVA is not applicable in the case under examination, since there was no oversight in the accounting. The invoices are recorded in customer accounts, having the respective expense been recognized earlier (as reported by the taxpayer).

d. The Judgment delivered by the Central Administrative Court of the South (case no. 05273/12, of 22-01-2015) emphasizes that "Hence, in accordance with and for the purposes of the provision in no. 2 of the same article 22, and in obedience to a principle of immediate deduction, in each tax period (monthly or quarterly), the deduction of tax paid must be made in the declaration of the acquiring taxpayer, of the period itself or of the immediately following tax period to the one in which receipt of the documents conferring it was verified, namely invoices, equivalent documents or receipt of VAT payment forming part of the import declarations."

e. Given that the invoices issued by supplier D... were recorded by the taxpayer in periods prior to 2013, the understanding expressed in the Binding Information, invoked by the taxpayer, "Right to deduction - moment at which the right arises", Process no. 9860, with dispatch of the Deputy General Director of VAT of 04-03-2016, does not apply, that the deduction of VAT mentioned in invoices not yet recorded must be made in accordance with article 22 of the CIVA, provided that within the period provided in no. 2 of article 98 of the same instrument (4 years), as clarified by no. 8 of Circulated Office no. 30082, of 17-11-2005 of the DSIVA.

4 - With the appeal the documents nos 1 to 12 are presented (cf. pages 19 to 161 and point I-2 above).

III - ANALYSIS OF THE CLAIM

1 - The appellant has standing (article 9 of the Tax Procedure and Process Code) and the claim is legal (article 68 of the CPPT) and was filed in time, within the 120-day period referred to in no. 1 of article 70 of the CPPT (payment deadline for the amount assessed, 08-09-2016, pages 179 to 187; appeal filed on 06-01-2017).

For the purposes of articles 68, no. 2 and 111, no. 3, both of the CPPT, it was verified, by consultation of the Computer System, that up to the present date no judicial action with the object of the appeal under analysis has been filed.

2 - E... Revocation Agreement:

As referred to above in point II-2, the deduction of VAT contained in the two invoices identified there was considered improper because the goods were not reflected in the accounting of the taxpayer, now appellant, and for having failed to prove that they were intended for the carrying out of taxable operations.

Furthermore, having the taxpayer alleged, in the phase of prior hearing of the conclusions of the report that an invoice was issued for B..., SA (Spain), by the value of € 4.688.981.00 (p. 223-verso), corresponding to the value of all costs incurred by the E... project, it is stated in the report that the same has the descriptor "Service in the overall management of the G... partnership within the scope of the E... project", concluding that this is not a re-billing of expenses incurred under the E... Revocation Agreement.

As for the fact that the goods were not recorded in the accounting, the appellant argues that the goods had no value whatsoever, because they are non-transferable from a contractual point of view.

Analyzing the content of the agreements concluded between G... and the now appellant, it is found that they provide for the possibility of the distribution of G... products to the appellant's customers, as end users (as they were, in fact, to E...), and that only to these is the possibility of making redistribution to third parties forbidden (cf. annex 26 of the prior hearing in the inspection action "Software Distribution Agreement "Full Use" - pages 256 to 261 of the present file).

On the other hand, as for the allegation that the costs incurred with the E... Revocation Agreement, including the amount debited by E... in the two invoices at issue, were, in turn, debited to B..., SA by the value of € 4.688.981.00, two e-mails and tables designated "Project Management - Economic Summary Sheet" are attached (annexes to the appeal nos 8 and 9 - pages 137 to 145) intended to demonstrate that such value corresponded to the sum of the monthly values considered by the company in the referred tables.

Regardless of the question of what is the origin of these tables or whether they include real, budget or both values, it should be stated that the same make no mention of the value of the Revocation Agreement (€ 3.000.000.00 - cf. clauses 2 and 3 of the agreement - pages 143 and 144), a value which includes that of the above-identified invoices (cf. no. 2 of clause 3).

The appellant does not allege that the goods and rights mentioned in the invoices at issue were transmitted to B... (Spain) or any other entity. It alleges that no value was attributed to such goods and rights and that the same were not recognized in accounting for that reason.

There is, therefore, no reason to conclude that the tax subject to appeal was levied on goods or services acquired for the carrying out of taxable operations (or operations carried out abroad that would be taxable if carried out in national territory), so the correction subject to appeal should be maintained.

3 - Invoices issued by supplier D...:

As referred to above in point II-3, the correction was based on the fact that the deduction of VAT of the invoices was made in the periodic declaration of the month in which payment occurred, January/2013, when the invoices had already been received by the company and recorded in periods prior to 2013, as reported by the certified accountant.

The appellant argues that the invoices, although issued in 2010 and 2011, were only received in January 2013 due to a dispute with the supplier regarding delivery, with the purchase order only being issued on 08-01-2013. It attaches documents nos 11 and 12 (pages 157 to 161) and also makes reference to documents previously presented (documents nos 25 to 30 annexed to the prior hearing - pages 266 to 277).

Indeed, in those documents the recording of both invoices on 14-01-2013 appears.

As for the information of the certified accountant, mentioned in the report, that the expense relating to the amount of the invoices was recorded in periods prior to 2013, it is reported in point 27 of the appeal that in periods prior to that recording the recording of the respective expense was made as an increase in costs or provision, without, however, any documents of such recording occurring in earlier periods being attached.

Consulting the accounting documents presented (pages 160 and 161), the recording appears there as a provision. Paragraph 8 of Accounting Standard and Financial Reporting 21 defines a provision as a liability of uncertain timing or amount.

Such accounting appears to be justified by the dispute with the supplier.

However, this does not mean that the company had not already received the invoices prior to 2013, having then recorded them as a provision.

Although article 7 of the CIVA determines that the liability of the tax takes place when goods are placed at the disposal of the purchaser, in cases where an invoice is issued, article 8 of the same code fixes the moment of such liability at the end of the period for issuing the invoice or, if it occurs earlier, at the moment of issuance.

In accordance with that norm, the tax invoiced is deductible by the purchaser in the period in which the receipt of the invoice takes place or in the following one (without prejudice to later rectification - article 22 of the CIVA).

There does not, therefore, appear to be reason to change the correction subject to appeal.

4 - Given that, as stated above in points 2 and 3, the appellant has no reason, the dismissal of the claim is proposed, maintaining the assessments subject to appeal.

It is further added that, as the prerequisites of no. 1 of article 43 of the LGT are not met in this case, the appellant has no right to indemnity interest.

• The Claimant concluded with E... (NIF...), on 14-09-2010, a contract for the provision of services relating to an application solution and the goods and services necessary for the parameterization, additional application development, data migration and respective implementation of the E... Customers, Accounts, AforroNet and Homebanking System (hereinafter "CAH Project"), and on 22.08.2011, within the scope of the first, a new contract for the provision of services;

• The CAH Project had specific characteristics geared towards the needs of an entity like E..., which justified the acquisition of specific hardware, customized computer programs and respective licenses from entity G...;

• During the course of contract execution, E... incurred various costs relating to the implementation of the referred solutions, namely in the acquisition of various computer goods, as well as various software use licenses, post-sale assistance services and maintenance and technical support expenses;

• Due to technical impossibilities and delays in the execution of the CAH Project, not attributable to the Claimant, it was not possible for it to deliver the application solution requested by E..., within the contractually provided period;

• As a consequence, an agreement was concluded on 12-04-2013 between the Claimant and E..., a revocation agreement and release declaration (amicable), which is contained in document no. 8 attached by the Claimant, the content of which is reproduced herein and in which it is stated, among other things, the following:

CLAUSE 2

(Contractual Penalty)

A... shall pay to E..., by way of the penalty provided for in article 4, no. 2 of the Contract, the sum of EUR 623.681.40 (six hundred twenty-three thousand, six hundred eighty-one euros and forty cents).

CLAUSE 3

(Return and Pecuniary Compensation)

1. A... shall return to E... the amount of the Contract price that had been paid to it, in a total of EUR 1.154.243.41 (one million, one hundred fifty-four thousand, two hundred forty-three euros and forty-one cents; amount with VAT included), issuing a credit note for that purpose.

2. A... shall further reimburse E... for the expenses that it had in the performance of the Contract in the acquisition of hardware, software and services in the amount of EUR 1.222.075.19 (one million, two hundred twenty-two thousand, seventy-five euros and nineteen cents; amount with VAT included).

3. The payments to be made by A... under the terms of the preceding number are made against presentation of an invoice by E... subject to VAT.

CLAUSE 4

(Delivery of equipment and transfer of licenses)

1. For the purposes of the preceding paragraph's second and third numbers, E... shall deliver to A... the equipment, software licenses, invoices and corresponding warranties.

2. E... undertakes to transfer to A... all transferable licenses identified in the attached Declaration, undertaking not to use the remaining licenses that are non-transferable.

• Following the agreement, the Claimant issued the invoice/receipt a copy of which is contained in document no. 9, the content of which is reproduced herein;

• Following the agreement, E... issued the invoices copies of which are contained in document no. 10 attached with the application for arbitral ruling, the contents of which are reproduced herein:

• no. S1130000536, in the value of € 559.864.64 (including VAT of € 104.690.14), with the description "G... Software Licensing acquired within the scope of the CAH project";

• no. S1130000537, in the value of € 238.446.20 (including VAT of € 44.587.50), with the description "Services provided by E... during the execution of the CAH project";

• no. S1130000538, in the value of € 423.764.35 (including VAT of € 79.240.49) with the description "HP Equipment Acquired within the scope of the CAH project, according to equipment schedule in annex";

• The equipment/hardware (i.e., for the Flexcube integrated and application solution) were parametrized for an entity with the specific characteristics of E... (financial and insurance);

• The CAH Project (with public entity) was a specific project;

• The software use licenses used in the scope of this project were personal and non-transferable (in addition to customized for the purposes of the activity developed by E... and in relation to the equipment acquired for the purposes of the same);

• The Claimant did not reflect accounting-wise the equipment received from E..., due to obsolescence of the same and understanding it to be illegal to use unlicensed hardware;

• The Claimant issued an invoice to B..., SA (NIF ES...), for the value of € 4.688.891, which is contained in document no. 12 attached with the application for arbitral ruling, the content of which is reproduced herein, with the description "Service in the Overall Management of the G... partnership within the scope of the E... project";

• The Claimant sent emails copies of which are contained in document no. 11 attached with the application for arbitral ruling, the content of which is reproduced herein, addressed to B..., SA, referring to the invoicing of the value of € 4.688.891 relating to losses incurred by the Claimant with the revocation of the contract with E... ("As a result of the agreement signed for the revocation of the contract with E..., the final result of the operation and closure of the projects will represent a loss for A... of 4.688.981 €. In this sense and in the context of global negotiations with supplier G… A…, SA will proceed to invoice within 2013 the value previously mentioned of 4.688.981 € to B…, SA");

• The said invoice issued to B..., SA was recorded in account 711 and was relevant for taxation of the Claimant in Corporation Income Tax;

• The value of the invoice issued to B..., SA was included in the recapitulative declaration relating to the period 2013/12 (NIF ES...) (document no. 12 attached with the application for arbitral ruling, the content of which is reproduced herein);

• The goods acquired by the Claimant within the scope of the agreement with F... were stored at the location of the Claimant's activity (article 61 of the application for arbitral ruling and document no. 17);

• Within the scope of the SIGAP Project, concluded between the now Claimant and F... (hereinafter "F..."), the Claimant came to conclude a contract with D... (NIF...) in order to acquire 50 biometric data collection modules, which would be directly delivered by D... to F...;

• Within the scope of that contract, D... issued invoices nos 1000091 and 1100085, dated 15-12-2010 and 14-12-2011, in the values of € 229.068.13 and € 232.854.38 (VAT included), respectively (document no. 13 attached with the application for arbitral ruling, the content of which is reproduced herein):

• After the delivery of the first 25 modules, a dispute occurred between the now Claimant and D... regarding the fact that the remaining 25 modules should remain in the latter's facilities, for an indefinite period until there was agreement with the final customer (F...) for the same 25 modules to be delivered;

• The purchase and receipt order for the 50 biometric data collection modules was only authorized by the Director of the Purchasing Functional Area of the now Claimant on 08-01-2013 (Document no. 14 attached with the application for arbitral ruling and electronic signature date);

• The VAT indicated in the invoices issued by D..., in the total value of € 83.297.51 was deducted by the Claimant in the period of January 2013;

• The Claimant provisioned, in accounting terms (as increases in costs with suppliers), the cost of the invoices issued by D... in accounts of deductible VAT (243200008, 2432000022, 2432000037 and 2432000044) (document no. 15 attached with the application for arbitral ruling, the content of which is reproduced herein);

• In a statement issued by D... on 02-03-2016 it is stated that the invoices issued by D... nos 1000091 and 1100085 (in a total of 461.922.51€) were paid on 14-01-2013 (document no. 16 attached with the application for arbitral ruling, the content of which is reproduced herein);

• The Claimant provided a bank guarantee to suspend the enforcement proceedings no. ...2016... instituted for coercive collection of the amounts assessed (article 130 of the application for arbitral ruling, not contested);

• On 11-10-2018, the Claimant filed the application for arbitral ruling that gave rise to the present proceedings.

2.2. Facts Not Proven and Reasoning of the Fact-Finding Decision

The facts were established based on unchallenged statements by the Claimant and on documents attached by the Claimant.

The Tax Authority and Customs Service did not present an administrative file.

In the examination of law, the reasons are indicated for why the Claimant's statements merit credibility regarding the facts that were established.

3. MATTER OF LAW

The Tax Authority and Customs Service conducted an inspection of the Claimant in which, among other things, it considered improper the deduction of VAT included in two invoices issued by E... and in two invoices issued by D....

The Claimant filed an administrative appeal of the assessment which was made following the inspection, but it was dismissed.

The decision on the administrative appeal contains the reasoning for the final position of the Tax Authority and Customs Service that sustains the assessment, which is therefore what should be taken into account in examining the legality of the assessment.

3.1. Invoices issued by E...

The Tax Authority and Customs Service considered improper the deduction of VAT contained in the invoices issued by E... "because the goods are not reflected in its accounting and the destination of the same is unknown, having not been proved that they were intended for the carrying out of taxable operations".

In exercising the right of prior hearing on the draft Tax Inspection Report, the Claimant invoked, in summary:

– that the entry of goods was not reflected accounting-wise "for reasons of obsolescence of the same, being too specific for future reuse";

– that the software licensing transferred was not recognized accounting-wise as it had no utility or commercial value, because, although valid, it was licensed specifically to end user E...;

– that it issued an invoice to B..., SA, in the value of € 4.688.981.00, corresponding to the value of all costs incurred by the E... project, including those derived from the conclusion of the revocation agreement, such invoice having the descriptor "Service in the overall management of the G... partnership within the scope of the E... project".

3.1.1. Failure to Record

With regard to the non-recording of goods in the Claimant's accounting, its certified accountant explained that it was motivated by the obsolescence and specificity of goods parametrized for the said E... project, which made them unsuitable for future reuse.

There is no reason to doubt these statements, particularly because it is credible that software and computer equipment become obsolete rapidly, as is usual, and it was not disputed that it is software and equipment specific for use by E.... [1]

The fact that the agreements concluded between G... and the Claimant provide for the possibility of distribution of products to the Claimant's customers, as end users (as they were, in fact, to E...), and only to these is the possibility of making redistribution to third parties forbidden does not imply that it would have been possible to find interested parties in the acquisition of computer hardware and software that E... itself was no longer interested in using, as can be inferred from the revocation agreement, despite being material and software specifically prepared for its needs.

Moreover, the fact that the equipment was "stored" in the Claimant's facilities, without use, which was reported to the inspection and which the Tax Authority and Customs Service had the opportunity to confirm, points to the truth of the information provided by the certified accountant, particularly because it is not normal for a company aimed at obtaining profits to keep in its possession, without use, computer equipment if it could obtain income from them. The photograph attached by the Claimant as document no. 17, the falsity of which is not invoked, allows confirmation of the certified accountant's statements.

For its part, with regard to software, the Claimant expresses the understanding that it was non-transferable to other possible customers and bases its position on articles 70 to 72 of the application for arbitral ruling, with no elements in the proceedings allowing its understanding to be contradicted.

In any case, having the Tax Authority and Customs Service, in the course of the inspection procedure, had knowledge that the equipment was in the Claimant's facilities, if it had doubts regarding the possibility of use and that such was relevant for taxation purposes, it should have proceeded to its examination, in compliance with the legal requirement to "carry out all necessary procedures for the satisfaction of the public interest and discovery of material truth" (article 58 of the LGT).

There is, therefore, no basis for doubting that the goods acquired remained in the ownership of the Claimant and were not recorded accounting-wise and used for the reasons invoked by the Claimant.

3.1.2. Re-billing to B..., S.A.

The Claimant issued an invoice to B..., SA (Spanish law company) in the value of € 4.688.981.00 (document no. 12), being invoked in the inspection that "this value corresponding to the value of all costs incurred by the E... project, including those derived from the conclusion of the revocation agreement, value recorded in account 711 and subject to taxation in the field of Corporation Income Tax".

The Tax Authority and Customs Service invoked, in the Tax Inspection Report, that "such invoice has the descriptor "Service in the overall management of the G... partnership within the scope of the E... project", a generic description, which does not allow the conclusion that this was a re-billing of expenses incurred under the E... Revocation Agreement".

Point b) of no. 5 of article 36 of the CIVA requires the indication of "quantity and usual denomination of goods transferred or services provided" and the formula used is generic, as the Tax Authority and Customs Service states, not allowing determination of which services are referred to, including the said re-billings of expenses.

However, the mere finding of the insufficiency of the description to identify all invoiced services does not imply that the right to deduction can be refused.

In fact, it is now settled that the CJEU has been flexibilizing and relativizing the formal requirements for the exercise of the right to deduction and the function assumed by invoices in this context, emphasizing instead the need to make substance of the operations prevail over any invoice defects, provided that such does not entail a risk of fraud. As the Advocate General states in the Conclusions presented in case C-280/10 (§68), with abundant case law references: "the objective of this approach is to ensure the right to deduction for any taxable person who has borne the payment of the tax. By adding excessive difficulties at the time of issuing and presenting an invoice, a Member State risks obstructing, or even making impossible, the exercise of deduction, a consequence that is directly opposed to the objectives pursued by Directive 2006/112. Thus, the case law of the Court of Justice has developed a variant of the principle of proportionality for this type of case, and has repeatedly stated that 'the formalities thus established by the Member State in question and which must be respected by the taxable person in order to be able to exercise the right to deduct VAT cannot exceed what is strictly necessary to control the correct application of the self-assessment procedure'."

In this vein, and as understood by the CJEU, in the judgment of 15-09-2016, delivered in case no. C-516/14, "article 178, point a), of Directive 2006/112 must be interpreted as precluding national tax authorities from refusing the right to deduct value added tax merely by the fact that the taxable person possesses an invoice that does not comply with the requirements laid down in article 226, nos 6 and 7, of that directive, when those authorities have at their disposal all the information necessary to check whether the substantive requirements concerning the exercise of that right are satisfied".

In the case at hand, the description of the invoice makes reference to the partnership with G... and the E... project, and it is not submitted that the Claimant in the year 2013 (the invoice is dated 12-12-2013) had another partnership with G... related to another project with E..., there are strong reasons to believe that the invoice refers to the project in question and encompasses the expenses with this incurred by the Claimant, including those derived from the revocation agreement.

On the other hand, the Claimant's thesis that the amount that was paid to E... following the revocation agreement was re-billed to B..., SA (NIF ES...) is corroborated by the emails contained in document no. 11 (the falsity of which is neither invoked nor demonstrated), in which it is stated that losses resulting from the revocation agreement are invoiced: "As a result of the agreement signed for the revocation of the contract with E..., the final result of the operation and closure of the projects will represent a loss for A... of 4.688.981 €. In this sense and in the context of global negotiations with supplier G… A…, SA will proceed to invoice within 2013 the value previously mentioned of 4.688.981 € to B…, SA". The fact that the revocation contract is annexed to that email leaves no reasonable doubt that the amount invoiced includes the charges resulting from it.

Thus, it is to be concluded that there are sufficient elements to conclude that re-billing by the Claimant occurred of what was paid to E... and that what it spent was included in the value invoiced to B..., SA.

In this context, in light of the said CJEU case law, the insufficiency of the invoice descriptor does not justify the refusal of the right to deduction with respect to expenses that are concluded to have been re-billed.

The re-billing of the expense with the acquisition of goods is to be considered a provision of services subject to VAT, when the re-billed expense falls within the scope of VAT incidence and is not exempt [2], in light of the residual concept of provision of services contained in article 4, no. 1, of the CIVA, in which all one-off operations that are not "transfers, intra-community acquisitions or imports of goods" are considered as "provisions of services".

This, moreover, is the understanding that the Tax Authority and Customs Service has been applying, as seen from the administrative decisions referred to by the Claimant.[3]

In the specific case, the value was re-billed to B..., SA, which is a Spanish taxable person. Now, this operation, as it is a provision of services (B2B), is located in the territory where the acquiring taxable person has its registered office. As the acquirer has its registered office in Spain, the operation is not considered to be located in Portugal [cf. CIVA: article 6, no. 6, a)] but rather in Spain, so A... invoiced the said value without VAT. But this regime in no way alters the company's right to deduction, since, in accordance with the provision in article 20, no. 1, b), II), of the CIVA, the referred operation, although not subject, does not prejudice the right to deduction of VAT paid upstream by the Portuguese company.

Thus, although the acquired goods were not re-transferred to B..., SA, the mere re-billing of the expense with their acquisition by the Claimant in the context of the revocation of the contract with E... constitutes a provision of services not subject to VAT, in accordance with the provision in article 6, no. 6, point a), a contrario, of the CIVA (acquiring taxable person not established in Portugal), so the right to deduction of the tax levied on the acquired goods is assured by articles 19, no. 1, point a), and 20, no. 1, point b) , II), of the CIVA.[4]

Based on the foregoing, the correction made on this matter is defective in violation of law, which, under article 163, no. 1, of the Code of Administrative Procedure, subsidiarily applicable under article 2, point c), of the LGT, justifies the annulment of the VAT assessments and compensatory interest relating to the periods 2013/04 and 2013/05, which were based on that correction.

3.2. Invoices issued by supplier D...

3.2.1. Positions of the Parties

Supplier D... issued on 15-12-2010 and 14-12-2011 two invoices, with nos 1000091 and 1100085, respectively, in which VAT was assessed in the amounts of € 39.755.63 and € 43.541.88, which the Claimant paid.

The expense to which the invoices refer was recorded prior to the year 2013, as a provision, due to a dispute with the supplier, but both invoices were only recorded on 14-01-2014, and, in the understanding of the Tax Authority and Customs Service, "such recording appears to be justified by the dispute with the supplier" (as stated in the decision on the administrative appeal).

However, the Tax Authority and Customs Service understood, in summary, that

– this recording (justified) "does not mean that the company had not already received the invoices prior to 2013, having then recorded them as a provision";

– in cases where an invoice is issued, article 8 of the CIVA fixes the moment of tax liability at the end of the period for issuing the invoice or, if it occurs earlier, at the moment of issuance;

– in accordance with that norm, the tax invoiced is deductible by the purchaser in the period in which the receipt of the invoice takes place or in the following one (without prejudice to later rectification - article 22 of the CIVA).

The Claimant argues, in summary, the following:

– the delivery of goods by D... can only be considered as completed on 12-01-2013, since it was only on that date that acceptance of the entire contract by the now Claimant occurred, with the consequent possibility of D... proceeding to place them at the disposal and transport to the end customer of the goods as agreed;

– point a) of no. 1 of article 7 of the VAT Code establishes that "the tax is due and becomes liable, on transfers of goods, at the moment the goods are placed at the disposal of the purchaser";

– the deduction of VAT was not made prior to January 2013 for the reason that the Claimant and D... had not yet finalized the terms in which the entirety of the transaction (purchase of all modules, transportation and goods properly placed at the disposal of the end customer) would be completed;

– even the tax due was not yet fully defined, so, prudently - not anticipating a deduction that might not prove to be owed - did the now Claimant not proceed to deduct the entirety of a tax, based on certain goods and respective tax base not entirely determined;

– there cannot prevail an understanding that is not contextualized based on the provision in articles 7 and 8 of the VAT Code, in that, even under point a) of no. 1 of article 36 of the VAT Code, the 5 business days for the purposes of legal invoice issuance, in time, must be counted from the "moment when the tax is due under article 7";

– if there were no certainties as to the effective date of the supply of all goods, therefore, of the date of their placement at the disposal (article 7 of the VAT Code), the liability of the tax cannot be governed by the legal period for invoice issuance (article 8 of the VAT Code), which can only lead to the conclusion that such invoices should not have been issued by the supplier at those moments;

– if the Tax Authority accepts as valid the invoices on the basis of which VAT is assessed to the State, it must also accept them as valid for the purposes of exercising the right to deduction of VAT;

– the substantive requirements for exercising the right to deduction are met, so this right cannot be refused, in light of the principles of neutrality, effectiveness and proportionality, imposed by Directive no. 2006/112/CE of the Council, of 28-11-2006, by article 266, no. 2, of the CRP and by article 55 of the LGT.

3.2.2. Examination of the Matter

It is not a matter of contention that the substantive requirements for the exercise of the right to deduction are met in relation to the Claimant, the correction being made on the basis of the understanding of the Tax Authority and Customs Service that, in cases where an invoice is issued, article 8 of the CIVA fixes the moment of tax liability at the end of the period for issuing the invoice or, if it occurs earlier, at the moment of issuance and in accordance with that norm, the tax invoiced is deductible by the purchaser in the period in which receipt of the invoice takes place or in the following one (without prejudice to later rectification, under article 22 of the CIVA).

Article 179 of Directive no. 2006/112/CE of the Council, of 28-11-2006, establishes that "the taxable person shall effect the deduction by subtracting from the total amount of VAT due for a given tax period the amount of VAT in respect of which, during the same period, the right of deduction has arisen by virtue of the provision of article 178".

However, article 180 of the same instrument establishes that "Member States may authorize the taxable person to effect deductions that have not been made in accordance with articles 178 and 179".

Thus, although the rule is that deduction must be made in the period in which it arose, Member States may authorize that deduction be made in other periods.

In light of the wording of article 22, no. 2, of the CIVA, as introduced by Decree-Law no. 166/94, of 9 June, the possibility of deduction in a period later than the one in which receipt of invoices, equivalent documents or receipt of VAT payment forming part of import declarations was verified was not provided for:

"Without prejudice to the possibility of correction provided for in article 71, the deduction must be made in the declaration of the period in which receipt of invoices, equivalent documents or receipt of VAT payment forming part of import declarations occurred" (wording of Decree-Law no. 166/94, of 9 June).

Considering this 1994 wording, there was no legal basis for asserting that, outside the cases provided for in special norms, the VAT taxpayer could exercise the right to deduction in declarations of later periods.

It was applying this wording that the Supreme Administrative Court issued, on 18-05-2011, in case 0966/10, the judgment cited by the Tax Authority and Customs Service in its response in which it was understood that "as a rule, established in article 22, no. 1, of the CIVA, the deduction of tax must be made in the declaration of the period in which receipt of invoices, equivalent documents or receipt of VAT payment forming part of import declarations was verified, it being, however, admitted the possibility of corrections provided for in article 71".

However, with the wording given to that no. 2 of article 22 by Law no. 107-B/2003, of 31 December, the following came to be established: "Without prejudice to the provision of article 71, the deduction must be made in the declaration of the period or of a later period than the one in which receipt of invoices, equivalent documents or receipt of VAT payment forming part of import declarations was verified".

Thus, from this 2003 wording onwards, the requirement that deduction be made in the declaration of the period in which the right to deduction is born ceased to apply, it being admitted that it be made in a later period, without providing for another limit than the general one contained in no. 2 of article 98 of the CIVA, in which it is established that "without prejudice to special provisions, the right to deduction or refund of tax paid in excess can only be exercised up to the expiry of four years after the birth of the right to deduction or payment in excess of tax, respectively".

This possibility of deduction of VAT in the declaration of a period later than the one in which the right to deduction is born has support in the said article 180 of Directive no. 2006/112/CE, which establishes that "Member States may authorize the taxable person to effect deductions that have not been made in accordance with articles 178 and 179".

The CJEU case law has, for a long time, been clarifying that, except in very particular situations, it is forbidden for Member States to impose time limits on the right to deduction of tax paid that make, in practice, impossible or excessively difficult the exercise of the right to deduction – cf. in this sense, for example, the Judgment of the CJEU dated 28-07-2016 issued in case C‑332/15, § 38 and the judgment of 8-5-2008, issued in cases C‑95/07 and C‑96/07, § 46. Moreover, according to the CJEU, not only is there no obstacle to deduction being made in a period later than the one in which the right to deduction is born, but this possibility is even required by the principles of neutrality, effectiveness and proportionality, without prejudice to a maximum limit, imposed by the requirements of legal certainty, identical to the limit provided for in national law for similar situations.

In fact, in the judgment of 21-03-2018, issued in case no. C-533/16, the CJEU understood the following:

42 With respect to the methods of exercising the right to deduction of VAT, comparable to requirements or conditions of a formal nature, article 178, point a), of Directive 2006