Summary
Full Decision
ARBITRATION DECISION
The Arbitrators Carlos Alberto Cadilha (Arbitrator President), Filipa Barros and Jorge Carita, designated by the Deontological Council of the Administrative Arbitration Centre to form an Arbitration Tribunal, hereby agree on the following:
I – REPORT
1. On 24 October 2018, A..., Lda., NIPC..., with registered office at Rua ..., ..., ..., in ..., hereinafter referred to as "Claimant", requested the constitution of an arbitration tribunal and filed a request for arbitration award, in accordance with paragraphs a) of Article 2(1) and paragraph a) of Article 10(1) of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as LRAT), with a view to declaring unlawful the acts of assessment of Value Added Tax (VAT) relating to the periods 2014, 2015, 2016 and 2017, and respective default interest, in the total amount of €212,810.83 (two hundred and twelve thousand, eight hundred and ten euros and eighty-three cents).
2. The Claimant is represented, in the present proceedings, by its mandatories, Dr. B... and Dr. C..., and the Respondent, the Tax and Customs Authority (hereinafter referred to as TCA), is represented by legal advisors, Dr. D... and Dr. E....
3. Having verified the formal regularity of the request presented, in accordance with the provisions of paragraph a) of Article 6(2) of the LRAT and given that the Claimant did not proceed with the appointment of an arbitrator, the signatories were designated by the President of the Deontological Council of the CAAD, who accepted the office within the legally stipulated period.
4. The present Tribunal was constituted on 7 January 2019, at the headquarters of the CAAD, located at Av. Duque de Loulé, No. 72 A, in Lisbon, as confirmed by the communication of the collective arbitration tribunal which is attached to the present proceedings.
5. The Respondent, after being duly notified, presented its response on 7 February 2019.
6. On 12 February 2019, by order, the Tribunal notified the Claimant to make submissions on the TCA's proposal regarding the waiver of witness testimony indicated by the Claimant, and in case of disagreement therewith, to indicate to the record the facts on which the witnesses would be examined.
7. On 25 February 2019, the Claimant presented a response to the order indicated in 6 above, expressing its disagreement and opposition to the waiver of witness testimony suggested by the Respondent and indicating the matters on which the witnesses would be examined.
8. By order of 27 February 2019, the Tribunal, on the one hand, scheduled 3 April 2019 for the holding of the meeting provided for in Article 18 of the LRAT and for the production of witness testimony listed and supplemented by the Claimant, and on the other hand, notified the Respondent to make submissions, if it wished, on the supplementation of the witness list.
9. The holding of the meeting provided for in Article 18 of the LRAT and the examination of witnesses took place only on 2 May 2019, due to a request presented by the Claimant dated 8 March 2019, in which it expressed its unavailability for the first date.
10. On 2 May 2019, the meeting provided for in Article 18 of the LRAT took place, during which the witnesses listed by the Claimant were examined. In the said meeting, the Tribunal notified the Claimant and Respondent to, in that order and successively, present written submissions within 20 days, scheduled 7 July 2019 for the purpose of issuing the arbitration award, in accordance with Article 18(2) of the LRAT, and finally warned the Claimant that it should proceed with payment of the subsequent arbitration fee, in accordance with Article 4(3) of the Regulation of Costs in Tax Arbitration Proceedings, and communicate such payment to the CAAD.
11. Following this, on 22 May 2019, the Claimant presented written submissions.
II. The Claimant supports its request, in summary, on the following:
1. The Claimant supports the request for declaration of unlawfulness of the acts of additional assessment of Value Added Tax (VAT), relating to the years 2014, 2015, 2016 and 2017, in the amount of €212,810.83 (two hundred and twelve thousand, eight hundred and ten euros and eighty-three cents) and respective default interest, on the following grounds:
a) The Claimant invokes, as a preliminary matter, the ILLEGALITY OF THE INSPECTION, on the grounds that: "(…) the TCA, in the course of the inspection procedures identified above [OI2017..., OI2018..., OI2018..., OI2018...], exceeded the scope of the external inspection for which it is accredited, with the inspection acts also including the analysis of operations carried out between 2009 and 2013, an analysis that resulted in corrections to VAT allegedly not charged and improperly deducted by the Claimant in the tax periods 2014 to 2017." In fact, "(…) the TCA could not [conduct] any inspection acts that encompassed the period from 2009 to 2013, since the scope of the inspection procedure was limited to the years 2014, 2015, 2016 and 2017)".
b) The Claimant continues, arguing that in acting this way, the TCA "tainted the present inspection procedure (…) with a defect of breach of law, embodied in the violation of the provisions of Article 15 of the RCPITA". The Claimant also imputes to the Respondent's conduct "(…) a defect of breach of the procedural duties of cooperation and of acting in accordance with the rules of good faith."
c) Concluding, on this matter, that: "[t]he non-observance of the cited Article 15 of the RCPITA constitutes a procedural defect of the inspection carried out, a defect that, relating to the competence to conduct the inspection action outside the scope established in the Service Order, results in the illegality of the said inspection, whereby any additional assessments arising therefrom will inevitably also be affected by illegality, leaving no alternative but their annulment."
d) The Claimant argues a DEFECT OF BREACH OF LAW, namely, of the provisions of Article 9(29) of the VAT Code, on the grounds that, contrary to what the Respondent maintains, the exploitation it makes of the real properties of which it is the owner, through the conclusion of rental agreements, should be included within the exemption provided for in that provision.
e) In fact, the Claimant argues that such exploitation fulfils the prerequisites of the exemption referred to above, since it only constitutes a "passive availability of [the] immovable[s]"".
f) Indeed, the Claimant clarifies that, as owner and landlord of a leased property, in certain circumstances, it may provide other services formally distinct from those, capable of being performed separately, provided that such provisions are not independent, in accordance with the understanding it derives from Community case law.
g) According to the Claimant's understanding "(…) the inclusion of such type of provisions in the context of a rental agreement that is in fact characterized by the predominant element of passive availability of the property, does not constitute an independent provision of services and does not preclude the application of the exemption to the single service provision of letting. It is precisely on the basis of the standards, administrative doctrine and case law (…) that the Claimant does not charge VAT on the rents it receives through the concluded rental agreements, because the same constitute exempt service provisions, in accordance with Article 9(29) of the VAT Code".
h) The Claimant clarifies with regard to the rental agreement it has with company F... relating to the property located at ..., No..., in ..., that there are no other services or movable property associated therewith. In fact, it states that "[i]n the present case, despite the invoices for the supply of water and electricity being in the name of the Claimant (as landlord) and not of F... (as tenant), it is very clearly evident from the related invoices (…) that despite the account holder being the Claimant, the invoice is directed to F..., with F... being the one paying for such supply[ies]", Moreover, "[t]he fact that the Claimant appears as account holder in this type of contract only has justification for practical reasons, of not having changed the account holder status [at the time of conclusion of the lease agreement, but only in May 2010, as regards the electricity supply agreement] and cannot be seen as a provision of services by the landlord to the tenant.
i) The Claimant further notes, on this matter, that "[w]ell then, if the supply of electricity and water are essential and basic conditions for the habitability of any property and therefore essential for the enjoyment thereof by the tenant, we can say that this supply is integrated in the very operation and concept of leasing, not constituting any independent provision of services. Whereby such supply by a landlord could never place the latter in an active position regarding the leasing of a property."
j) With regard to the question of pest control that the Respondent attributes as an independent provision of services carried out by the Claimant, thus changing its passive position in the lease, the Claimant clarifies that: "[t]he invoices issued by G...– provider of such services – relating to pest control services, refer to properties owned by the Claimant not leased to F... (…)." This company "(…) hires in its own name the same services, also from G..., with respect to the properties it leased to the Claimant herein"
k) The Claimant clarifies, contradicting the TCA's allegation that it adapted the leased property, identified in h) above, specifically to the needs and purposes pursued by company F..., as tenant, that such fact, on the one hand, was not proven by the TCA, and on the other hand, is not actually the case, given that it merely carried out a general rehabilitation of the property without the necessary and specific characteristics for the implementation of a Radiology Medical Centre that F... operates, which requires a very high investment in adapting the property to the specific conditions for containment of the radiation inherent to the activity that would be conducted therein.
l) The municipal licensing for the use of the property for the activity that would be pursued there was indeed requested by the Claimant, since it is normal for such a request to be made by the owner; however, it was F..., its tenant, that: "a) assumed all the costs with a view to adapting the property to the pursuit of its Radiology Centre activity; b) obtained the necessary license to pursue this activity from the General Health Directorate; c) conducted all negotiations for the licensing of radiodiagnostic equipment, as well as agreements for the provision of complementary diagnostic means with the state through a convention concluded with the National Health Service; d) acquired the furniture and consumables necessary to equip the property with the characteristics necessary to pursue the Radiology Centre activity."
m) "Consequently, based on the above, it is indubitable that the exploitation of the property by the Claimant is done solely and exclusively through the conclusion of an agreement under which the Claimant grants F... the temporary enjoyment of the property (…)"
n) With reference to the leasing of the property located at ..., No..., in ..., the Claimant mentions that it is a property composed of ground floor, first and second floor, which it acquired in 1998 and which it leased to company F... the 2nd floor of the said property, for the purpose of "warehouse". And the other floors were made available to company H..., Lda for it to develop its activity of providing art gallery and bar services, which did not last long, given the fire that broke out on 06.01.2012
o) Indeed, the Claimant understands that the rental agreement, whose object is the property identified in n) above, concluded with company F... is exempt from VAT, under the provisions of Article 9(29) of the VAT Code, since such property is made available without any services or movable property associated therewith, here applying the clarifications provided by the Claimant above set out regarding the supply of water and electricity, pest control and adaptation of the property to its purpose (which had no adaptation as it served as a warehouse).
p) Regarding the making available of the G/F and 1st floor of the property identified in n) above, the Claimant states that the fact that it proceeded with the adaptation of the property for the development of the activity related to the art gallery and supporting bar, "(…) cannot[…] prevent the classification of the lease agreement with F... as exempt from VAT in accordance with Article 9, No. 29, of the VAT Code, as these are two distinct service provisions (one by the Claimant to F... and another by the Claimant to company H...)."
q) The property located at ..., ..., ... was the subject of a financial lease in which the initial lessee was company F..., transferring such position in 2004 to the Claimant herein, which immediately exercised the option to purchase the property at its residual value. Subsequently, the Claimant concluded a rental agreement with the transferor, which was considered by the TCA as having been "(…) incorrectly classified by the Claimant as a provision of exempt VAT services, on the grounds that it is not a lease of "bare walls", since, together with the making available of the property to the tenant, the Claimant allegedly: (i) provides services, namely, supply of electricity, water, pest control and (ii) equipped and "furnished" the property for the purposes to be pursued by the tenant".
r) According to the Claimant's view, "(…) the supply of water, electricity and pest control do not constitute an end in itself for F..., but only services intimately linked and inseparable from the habitability and enjoyment of the property leased by the Claimant, whereby this argument of the TCA is also not valid, in so far as it does not change the characterization of the present rental agreement as "bare walls".
s) The Claimant further adds, with regard to this property, that "(…) it did not carry out any adaptation of the property in favor of the tenant F..., since this was already duly adapted for the pursuit of the Ultrasound Centre activity, with F... itself proceeding with its adaptation". As well as "(…) never equipped or "furnished" the property for the purposes to be pursued by the tenant F... ."
t) The property located at Rua ..., ..., in ..., according to the Claimant, was demolished in 2015, after municipal inspection, "as it was in conditions that endangered the safety of pedestrians on that street, since it could collapse at any moment." It happens that in that year, the Claimant concluded a rental agreement of the property with company F... for it to continue with its activity, which was terminated in the same year, "which is why no rental payment was registered since then".(…) "Whereby it is evident that the invoice [No. FR 2/98, of 2017.04.12, whose description is "Correction to rental values" of €18,500 attributed by the TCA to this property cannot concern it", "taking into account that already in 2016 the said rental agreement had terminated."
u) In fact, the Claimant argues that such invoice "(…) amounts only to a settlement of the remaining rents, issued with a view to rectify invoices previously incorrectly debited", so much so that "(…) it was not recorded as income in the Claimant's accounts in January and February 2017, but as an increase in revenues in account 27219 which, with the January rents and part of a February rent, settled the respective account."
v) The last property, located at Rua ..., ..., ..., composed of 3 floors allocated to different purposes, owned by the Claimant, was the subject of a rental agreement that it has with company F..., initiated in 2012 and terminated in 2016, which is, according to the same, exempt from VAT under Article 9(29) of the VAT Code, by virtue of having been made available "(…) without any services or movable property associated."
w) The Claimant further argues, in the request for constitution of the arbitration tribunal, under the heading "ON THE RIGHT TO DEDUCTION" that "in so far as the rental agreements above analyzed, concluded by the Claimant, should be qualified as "bare walls" leases, exempt in accordance with Article 9(29) of the VAT Code, the Claimant understood, in the course of the inspection procedure, that it would not have had the right to deduct certain amounts of VAT it bore in its input operations, contrary to what it did."
x) Now, "(…) the Claimant now understands that it would not have had the right to deduct the VAT it bore in the construction and rehabilitation of the property [located at ..., No. ... and ...],]" which was "(…) improperly deducted (…) amounts to €103,979.99", and "(…) deducted in the tax periods 2000, 2001 and 2012"
y) Consequently, the Claimant notes, in view of the provisions of Article 24 of the VAT Code, that "[t]he VAT must be regularized, in the case of immovable property in respect of which full or partial deduction of VAT that burdened the construction, acquisition or other investment expenses related thereto took place, in one lump sum, when these are allocated to a non-taxable activity, namely when the property becomes the subject of exempt lease", whereby, and in the case in question, "[g]iven that the Claimant concluded the "bare walls" lease agreement with F... on 01.10.202 – the moment at which it allocated the property [identified in h) above] to a non-taxable activity for VAT purposes – the first should have proceeded with the regularization of the deducted tax in 2000 and 2001, in one lump sum, in the proportion of the years remaining for the expiration of the 20-year regularization period for immovable property, in the periodic statement of the last quarter of 2002. Which, through lack of knowledge, the Claimant did not do."
z) It continues stating that "[o]n the other hand, with regard to the tax deducted in 2012, since at that date the property had already been allocated to a non-taxable activity, the Claimant should not have deducted this tax. However, once again through lack of knowledge, the Claimant improperly deducted this tax in 2012."
aa) With regard to the regularization of the tax with reference to the invoices relating to the property identified in n) above, the Claimant states that it does not result from the same that any service was provided to F... within the scope of the rental agreement concluded with respect to this property, only: (…) they indicate is that the delivery location is Largo ..., No...",", and "(…) they relate to the rehabilitation of the garden located in the inner courtyard in the ground floor of this property, having strictly nothing to do with the space leased to F..., whereby the VAT in these invoices is deductible, since it was borne for the actual conduct of a taxable activity, i.e., the activity of art gallery and supporting bar."
bb) The Claimant recalls that "[t]he time of exploitation of this building within the art and bar activity was very short, as a result of a fire that damaged, very considerably, these two first floors of the building", whereby "[…] it is indubitable that the Claimant only did not continue the pursuit of a taxable activity in this property due to circumstances beyond its control, namely due to a fire that damaged the property, making its use impossible.", and should, with regard to this situation, maintain the right to regularization, as results from the case law of the CJEU, and in this case, according to the Claimant, "[…] can only accept the correction of VAT deducted with respect to the construction and rehabilitation of the second floor of the property with respect to which it concluded a rental agreement for non-residential purposes with F..., exempt from VAT in accordance with Article 9(29) of the VAT Code."
cc) The Claimant admits that "[the] VAT improperly deducted by it as far as the construction and rehabilitation of the second floor of the property should be corrected", being that, for such purpose, "[it] will, first and foremost, have to proceed with the calculation of the percentage of VAT that was deducted for the construction and rehabilitation of this second floor. Considering that the global value of VAT deducted with regard to the present property corresponds to €68,469.58, and taking into account that it was rehabilitated, in an equal and integrated manner, with respect to its 3 floors, the proportion of VAT deducted in the construction and rehabilitation of the second floor should correspond to 33.33% of the VAT wholly deducted (…)"
dd) With regard to the regularization of VAT relating to the lease of the property indicated in t) above, "[a]s this is an exempt lease, the Claimant now understands that it does not have the right to deduction [in the period of 2014] of the VAT it bore in the construction and rehabilitation of the property", whereby, "[…] given that the Claimant concluded the "bare walls" lease agreement with F... in 2015, it should proceed with the regularization of the deducted tax, in one lump sum, in the proportion of the years remaining for the expiration of the 20-year regularization period for immovable property."
ee) With regard to VAT deduction relating to the situation of the property identified in v) above, the Claimant further clarifies that "[f]rom the plan attached (…), it results in an approximate manner that: (i) the part of the property allocated to the Claimant corresponds to 16.65% of the gross area of the property; (ii) the part of the property allocated to F... also corresponds to 16.65% of the gross area of the property; (iii) the part of the property allocated to the partners corresponds to 66.67% of the gross area of the property. However, since 18.07.20148 part of the property has also been allocated to the activity of local accommodation, being duly legalized and registered for such purpose. In this way, 16.67% of the gross area of the property was leased to F... for the development of its activity; and 66.67% of the gross area of the property are leased to the Claimant's partners, as their usual place of residence."
ff) Accordingly, and contrary to what the Respondent understands, the Claimant maintains that with respect to these leases, "[the] Claimant (…) should have proceeded with the regularization of the same proportion of deducted tax, in one lump sum."
gg) It is also to be noted that in 2018, the Claimant allocated 75% of this property to the activity of local accommodation, an activity that is subject to VAT in accordance with Article 9(29)(a) of the VAT Code. Accordingly, and following on from this, the Claimant argues that "when a taxable person who practices operations that do not confer the right to deduction bears VAT relating to the construction of a property and subsequently allocates that property to the pursuit of a taxable activity, may deduct the proportion of VAT relating to the remaining period until the 20-year regularization period for immovable property expires.", In the case in question, "[t]he Claimant, upon completion of the works on the property, deducted the VAT it bore", (…) "there having been no subsequent regularization (…) only could now have such regularization in the proportion relating to the 7 years in which the property was not associated with the pursuit of taxable operations."
hh) The Claimant further invokes the EXPIRY OF THE RIGHT TO ASSESS, referring for such purpose that, "[n]otwithstanding all the above, and given that the Claimant recognizes that it improperly deducted certain amounts of VAT borne in input operations related to exempt output operations, in some cases, the right to assess these VAT regularizations has already expired," by virtue of the provisions of Article 45 of the General Tax Law applicable ex vi Article 94(1) of the VAT Code, with the exception of two that it identifies as follows:
1. The Claimant accepts "[the] corrections relating to the improperly made deduction in 2015 [of the tax concerning the operations inherent to the property identified in n) above], in the proportion of 33.33% of the VAT wholly deducted for the rehabilitation of the property, by reference only to the second floor thereof, in the amount of €806.95."
2. With regard to the property identified in t) above, the Claimant argues that "[t]he VAT borne in the construction and rehabilitation services" thereof "and improperly deducted by the Claimant amounts to €572.70", which "was deducted in the tax period 2014.", whereby the period for expiry of the right to assess with respect to this has not ended, according to the Claimant, with regularization being due.
ii) Finally, it requests payment of compensation arising from the provision of undue guarantee, in accordance with Article 53 of the General Tax Law.
III. In its Response, the Respondent invoked, in summary, the following:
a) The Respondent rebuts the Claimant's arguments, starting by pronouncing on the alleged expiry of the right to assess invoked by the Claimant that "(…) the Claimant expressly confesses, in various articles of its petition (…) to have improperly deducted tax, in a global amount of €437,144.30 (…), [h]owever, despite confessing such facts, the Claimant now alleges that there is a case of expiry of the right to assess and in such circumstance no correction could have been made (…)" doing, according to the Respondent, "a truncated reading of the legal norms in this matter, when it invokes Article 45(4) of the General Tax Law, turning a blind eye to what is provided in its Article 45(3).", bearing in mind that "the regularizations of deductions relating to immovable property are effected in a period of twenty years in accordance with Articles 24 to 26 of the VAT Code. As such, the Claimant's argument regarding the verification of expiry does not hold."
b) As far as the substantive issue is concerned, the Respondent argues that "(…) the Claimant ignored the right to the tax credit which is the method by which the tax operates and the main pillar thereof, set out in the norms relating to the right to deduction (of which it enjoyed at its pleasure). If it were not so, it would be clear that when one is covered by any exemption not provided for in Article 14 of the VAT Code, the right to deduction is restricted. But no. The Claimant allowed itself not to charge tax on the operations it conducted, but to deduct the tax it bore in the inputs associated therewith".
c) The Respondent clarifies that "[w]ith the exception of a single building, what was found is that all the others were rehabilitated and specifically adapted to the pursuit of a particular type of activity. Indeed, one of the properties was duly adapted and licensed to function as a radiological center and the Claimant, before the transfer, installed therein, among others, a magnetic resonance equipment, which for obvious safety reasons required specific adaptation and licensing of the facilities, in particular with respect to shielding and protection of the examination room, from radiation and magnetic interference."
d) The Respondent continues by referring that "[t]here were, moreover, properties which, in addition to being specifically adapted, were previously and duly equipped, having then been transferred for the purpose of pursuing a specific activity."
e) Concluding to the effect that "[…] the situations previously described place these lease operations outside the scope of application of the exemption." For, "[i]n fact, we are dealing with unnamed service provisions subject to tax in accordance with the provisions of Article 1(1)(a) and Article 4 of the VAT Code, which have no framework in the exemption provided for in No. 29 of Article 9, whereby such operations, contrary to what the Claimant seeks to assert, are subject to VAT and are not exempt therefrom."
f) Indeed, the Respondent further argues that "(…) in the receipts issued by the Claimant herein to the purchasers of the referred services what is stated is: "Assignment of Exploitation". Now, as is well known, assignment of exploitation is expressly excluded from the exemption by paragraph c) of No. 29 of Article 9 of the VAT Code, relating to the lease of immovable property."
g) The Respondent understands that "(…) in light of the said Community case law, the exemption provided for the lease of immovable property must be subject by Member States to a strict interpretation, where there is no room for the Claimant's allegation, which seeks in the case for us to be dealing with a lease agreement, when in fact what is at issue is a provision of unnamed services."
h) According to the Respondent's understanding, "[…] in the case of the present proceedings, we are not dealing with service provisions that translate into typical lease contracts – and only those benefit from the exemption in No. 29 of Article 9 of the VAT Code."
i) In fact, "[…] the lease of immovable property capable of benefiting from the exemption has a well-defined and precise scope in accordance with the criteria established by the Case Law of the CJEU that are based on the reasons that gave rise to the said exemption. Indeed, it was the fact that the majority of rental agreements were concluded by individuals, without the absence of an adequate organizational structure for the operation of the tax, together with other reasons namely linked to the principle of non-discrimination that led to the establishment of the said exemption. (…) the scope of the exemption typified in No. 29 of Article 9 of the VAT Code is very limited and is not capable of extending to situations such as those occurring in the present proceedings."
j) Concluding to the effect that "[…] [f]or such reason, the VAT assessments now contested do not suffer from any illegality, as they were effected in accordance with the norms of the VAT Code and the applicable Community legislation in this matter, and should be maintained for all legal effects."
k) As far as the alleged illegality of the Tax Inspection is concerned, the Respondent argues that "in order to assess whether all the prerequisites of the right to deduction are met, the Tax Administration is not limited by the period of expiry of the right to assess, and may make corrections to the taxpayer's declarations relating to the period in which the right to deduction was exercised, even if prior to that period of expiry."
l) The Respondent further adds that "[…] in accordance with the provisions of Article 45(3) of the General Tax Law, in case any deduction or tax credit has been made, the period of expiry is that of the exercise of that right. Which means that in proper terms the period for issuing assessments relating to regularizations unduly omitted is that of, in the case in question, 20 years. This because the right to deduction is indivisible, with no formal or value distinctions between initial deductions and regularizations of deductions, and the latter cannot be treated differently."
m) The Respondent continues by referring that: "[i]ndeed, on the matter of periods for exercise of the right to deduction or correction of taxes, the CJEU has understood that EU Law is not violated if prescription periods or expiry periods more favorable to the Tax Administrations than to individuals are established. What in the situation in question is materialized in the fact that, at the limit, in accordance with Article 98(2) of the VAT Code, taxpayers have 4 years to effect regularizations as to tax rendered in excess, whereas the TCA, in accordance with Article 45(3) of the General Tax Law, may issue assessments faced with the omission of regularizations for improper deductions, within the period of the respective tax year, which in the case in question amounts to 19 years after the first calendar year in which VAT deduction occurred."
n) In addition, the Respondent finally states that "[i]n accordance with Article 45(3) of the General Tax Law, despite having analyzed the years 2014 to 2017, the TCA was not conditioned to the said years for issuing assessments of VAT regularizations, which had been improperly deducted in past periods."
o) Concluding, finally, the Respondent, to the effect of the inadmissibility of the request for arbitration award.
IV. PRELIMINARY MATTERS
The Tribunal is competent and regularly constituted, in accordance with paragraph a) of Article 2(1) and Articles 5 and 6, all of the LRAT.
The parties have legal personality and capacity, are shown to be legitimate, are regularly represented and the proceedings do not suffer from any nullities.
V. FACTUAL MATTERS
Regarding the factual matters, it is important, first and foremost, to emphasize that the Tribunal does not have to pronounce on all that was alleged by the parties; rather, it is its duty to select the facts that are relevant to the decision and to distinguish established facts from unestablished facts, all in accordance with Article 123(2) of the Code of Tax Procedure and Process (CTPP) and Articles 607(3) and (4) of the Code of Civil Procedure (CCP), applicable ex vi Article 29(1), paragraphs a) and e), of the LRAT.
In this way, the facts relevant to the judgment of the case are chosen and delimited in accordance with their legal relevance, which is established in consideration of the various plausible solutions to the question(s) of Law (see Article 511(1) of the former CCP, corresponding to Article 596 of the current CCP).
Thus, taking into account the positions assumed by the parties in their respective pleadings (request for constitution of arbitration tribunal and submissions of the Claimant and Response of the Respondent), the documentary evidence attached to the proceedings and the witness testimony produced at the meeting held, the following facts with relevance to the decision are considered proven:
a. Facts Established as Proven
With interest for the decision, the following facts are considered proven:
A. The Claimant is a limited liability company of a family nature, constituted in 1998, having located its registered office at ..., No..., in ..., changing its registered office in 2015 to Rua ..., No. ... in ..., which it maintains to the present date.
B. For VAT purposes, the Claimant has been classified, since the beginning of its activity, under the normal regime with quarterly periodicity, with a view to carrying out operations that confer the right to full VAT deduction, through the pursuit of the main activity with CAE 46900 – non-specialized wholesale trade, and from 24.02.24, through the pursuit of secondary activities with CAE 55119 – other hotel establishments with restaurant and CAE 68311 – real estate mediation activity. – cf. agreement of parties and administrative file -;
C. For corporate income tax (CIT) purposes, the Claimant is covered by the normal regime for determining taxable profit – cf. administrative file -;
D. The Claimant is owner of various properties, which it exploits through the conclusion of rental agreements for non-residential purposes and for residential purposes, among which:
a) Urban property located at ..., ..., in ...;
b) Urban property located at ..., ..., in ...;
c) Urban property located at ..., ..., in ...;
d) Urban property located at Rua ... ..., in ...;
e) urban property located at ..., ..., in Lisbon;
f) urban property located at Rua ..., ..., in Lisbon;
g) urban property located at Rua ..., ..., in ...;
E. The Claimant was subject to an inspection action, initiated on 2017.11.30, pursuant to service orders OI2017..., of 2017.11.29, OI2018..., of 2018.01.10, initiated on 2018.01.12, and OI2018... and OI2018..., both of 2018.04.04, initiated on 2018.04.09, with reference to the tax periods 2014, 2015, 2016 and 2017 – cf. administrative file -;
F. The period for conclusion of the procedure accredited by OI2017... was extended by a further 3 months, in accordance with Article 36(3) of the Complementary Regime of Tax and Customs Inspection Procedure (RCPITA), with notice to the taxpayer by letter ..., registered on 2018.04.09 – cf. administrative file - ;
G. The external inspection procedure – OI2017... – was initially framed under activity code 1222120603, having as objective the control of the values declared for VAT, in particular the tax deducted by the Claimant relating to fixed assets, with a VAT service order thus being opened for the tax period 16.12T, subsequently widening its scope to become multi-purpose for the year 2016, with notice to the taxpayer on 2018.01.12, due to the fact that in the course of the procedure situations had been detected that required a more comprehensive analysis. – cf. administrative file - ;
H. Subsequently, a multi-purpose external procedure for the year 2015 was opened – OI 2018...– in which irregularities were detected, leading to the opening of two other partial procedures in VAT and CIT for the year 2014 and, in VAT for the year 2017 – cf. administrative file - ;
I. In the course of the inspection action identified in E above, on 2019.05.09, the Claimant was, on the one hand, notified of the draft tax inspection report, from which results the proposed correction of VAT calculated by the Claimant in the periods inspected, relating to failure to charge, improper deductions and failure to regularize, as follows:
Years Not Charged Improper Deduction Regularization Outstanding Total VAT Outstanding
2014 30,498.00 1,604.11 14,004.87 46,106.98
2015 40,296.00 2,548.40 14,095.66 56,940.06
2016 39,031.00 1,992.61 14,095.66 55,119.27
2017 34,776.00 5,772.86 14,095.66 54,644.52
Total 144,601.00 11,917.98 56,291.85 212,810.83
J. And, on the other hand, to exercise, if it so wished, the right of prior hearing that it held under the provisions of Article 60 of the General Tax Law (GTL) – cf. document No. 1 attached with the request for constitution of the arbitration tribunal - ;
K. On 05.06.2018, the Claimant exercised, through a request, the right of prior hearing that it held – cf. document No. 2 attached with the request for constitution of the arbitration tribunal;
L. On 29.06.2018, the Claimant was notified of the Inspection Report – cf. document No. 3 attached with the request for constitution of the arbitration tribunal – from which the following may be derived:
"III. Description of the facts and grounds for quantitative corrections to the taxable matter
1. Value Added Tax – VAT
From the situations described below result corrections to VAT, considered to be outstanding in the various periods of 2014, 2015, 2016 and 2017, the following map of which is intended to summarize:
VAT Section III.1 Total
Periods Section A.1. Section A.2 Section B.1 Section B.2 Section C Periods
14.03T 7,521.00 244.64 7,765.64
14.06T 7,659.00 507.48 8,166.48
14.09T 7,659.00 168.81 7,827.81
14.12T 7,659.00 683.18 14,004.87 22,347.05
Total 2014 30,498.00 1,604.11 14,004.87 46,106.98
15.03T 345.00 861.32 1,206.32
15.06T 345.00 637.79 982.79
15.09T 345.00 404.97 749.97
15.12T 38,916.00 345.00 644.32 14,095.66 54,000.98
Total 2015 38,916.00 1,380.00 2,584.40 14,095.66 56,940.06
16.03T 8,694.00 438.02 9,132.02
16.06T 8,694.00 473.08 9,167.08
16.09T 8,694.00 439.18 9,133.18
16.12T 12,949.00 642.33 14,095.66 27,686.90
Total 2016 39,031.00 1,992.61 14,095.66 55,119.27
17.03T 8,694.00 660.73 2,170.28 11,525.01
17.06T 8,694.00 648.52 1,800.73 11,143.25
17.09T 8,694.00 274.22 218.38 9,186.60
17.12T 8,694.00 14,095.66 22,789.66
Total 2017 34,776.00 1,583.47 4,189.39 14,095.66 54,644.52
Grand Total 143,221.00 1,380.00 7,728.59 4,189.39 56,991.85 212,810.83
A. VAT Not Charged
A.1 In the leases declared
It was verified that the taxpayer, with respect to all leased properties, considered that they were exempt service provisions from VAT, under No. 29 of Article 9 of the VAT Code (see Annexes 3, 5 and 6).
However, from the analysis that was possible to carry out, with the exception of the property at ... (which according to the information given to the inspection had not yet received an operating license from the respective Municipal Council), it is verified that in the remaining cases, the leases are not merely of "bare walls", but rather have underlying them other aspects that provide the tenant with additional value, as follows described.
a) - service provisions
With the exception of the property at ..., with respect to all the others, along with the collected rents are also supplied generally to the tenant electricity and/or water and/or other services – namely pest control in the properties at..., package "...", in the Lisbon apartment, replacement of bulbs in the building at ... (...) – see Annexes 7 and 13.
b) - specifically adapted properties
Although the consultation of the accounts was limited, as previously stated in II.C.5.1, it was possible, through the documents attached to the property register, in the case of the 2 first properties (from the property map in Annex 1 – Largo ... and Largo ...) and in the case of the 5th property (from that map – ...) of the specific circumstances in which they were acquired, as well as the information provided to the inspection, to establish that both the building located at Largo ..., ..., in ..., and the contiguous building, located at No. ... of that Largo ..., were both rehabilitated and altered (the 1st in 2001 and the 2nd in 2009) with a view to the specific pursuit of certain activities - the 1st for "..." and the 2nd for "Beverage Establishment and Art Gallery", having obtained from the Municipal Council ... the Licenses to Use Nos. .../2001 and .../2009, respectively (in Annex 9 to p. 3 and Annex 8 to p. 7); as well as it was further verified that the property located also in ..., on the ... of No. ... of ..., which was acquired from F... (whose position in real estate financial lease agreement it transferred in Feb, 2004 to the taxpayer, allowing the latter simultaneously to acquire it from the lessor at its residual value, through the exercise of purchase option) in 2004, was duly adapted and licensed for operation as a radiological center, as this is where F... started its radiology activity, and installed therein among others a magnetic resonance equipment (see table of rents between 2013 and 2017 presented to the inspection in Annex 6 to p. 2 and photos in Annex 9 to pp. 4 and 5), which for obvious safety reasons required specific adaptation and licensing of the facilities, in particular with respect to shielding and protection of the examination room, from radiation and magnetic interference.
c) Properties duly equipped
It was further verified that some of these properties, in addition to being specifically adapted, were also equipped/fitted by the taxpayer for such purpose: in the case of the Radiology center – see investment asset records Nos. 19 to 27 and 29 to 31 (…); and in the building at ..., see records Nos. 44 and 45 (…), records 46 and 47, record 56 (…) and record 57 (…) in Annex 2, to pp. 8 to 11 and 39 to 40 and also p. 6 of Annex 19.
c.1) It should also be noted that some of the other properties may also be duly equipped/fitted for their use. In this sense, although the consultation of the accounts is limited (…) and despite the little information on the investment asset records, see the purchase of the LCD in 12-2005 (record 32), at the time of work on the apartment at ... in Lisbon, on Rua ... (record 33), and the purchase of the... in 2.2006 (record 37), at the time of work on the apartment in ... in Lisbon, in ... (record 39) – see Annex 2. Other situations that may possibly exist are however difficult to identify, if the respective investment assets have not been recognized as such, but taken directly to expenses of the fiscal year (thus losing their identity/autonomy on the balance sheet of the company), a practice that was identified in the years under review, as described below in section III.2.C.
Thus the situations previously described place these lease operations outside the scope of application of the exemption. We are therefore dealing with service provisions in accordance with Article 4 of the VAT Code, which have no framework in the exemption provided for in No. 29 of Article 9 of the VAT Code, whereby they are subject to VAT and are not exempt therefrom.
(…)
1.4 Thus the amounts in question of VAT not charged and outstanding, by properties and periods, are contained in the table that follows, which totals in the years 2014, 2015, 2016 and 2017, a grand total of 143,221.00€.
(…)
B. VAT Improperly Deducted
B.1. Expenses with immovable property without business use
As described in section III.1.C below, it is verified that the taxpayer has 3 properties or parts thereof, which are not being used for its business purposes, whereby in accordance with the provisions of Article 19(7) of the VAT Code "The tax relating to immovable property allocated to the business cannot be deducted insofar as such property is intended for the personal use of the owner of the business, its personnel, or in general, for purposes unrelated to the business."
Thus the VAT borne in the percentages corresponding to the areas not used and equally referred to in section III.1.C below, relating to all expenses incurred with these properties, namely consumption, repairs, materials, utensils, and other expenses, cannot be deducted.
In this way, it is verified that the taxpayer improperly deducted VAT in the various periods of the years 2014, 2015, 2016 and 2017, amounts that total a grand total of 7,728.59€, being discriminated in map Annex 10 to p. 1 – see also extracts of VAT accounts in Annex 10, some water and electricity invoices in Annex 13 and also documents relating to other expenses in Annex 14.
B.2. Other expenses unrelated to the business
It was found that in the year 2017, the deduction of VAT in the total annual amount of 4,189.39€ borne with expenses relating to materials and services, which, in light of the elements and notations contained in the invoices themselves of acquisition (local) that point to use foreign to the operations of the company, is not thus fiscally capable of deduction in favor of the taxpayer., in accordance with the provisions of Article 20(1) of the VAT Code -see Annex 10 to pp. 22 and 23 and Annex 11.
C. VAT Not Regularized
1. Following the analysis made to the activity developed by the taxpayer (through the expenses and revenues recorded in the years under review), in which it was concluded regarding the provision of services related to properties, it was also found that some of the taxpayer's properties, or parts thereof, are not being used for its business purposes, namely:
1.1. The apartment at ... in Lisbon (Rua ..., ...) in addition to not having been possible to discern any business use and not registering any revenue, according to the available data from the Commercial Register, was indicated in 2009 and in 2015, as the residence of the partner-son I...;
1.2. The so-called "building ..." (at Largo ..., ..., in ...) since at least 2013, its first floors, are not leased to F..., taking into account on the one hand, the value of the lease registered annually since that year (1,000.00€), and on the other hand, the amendment to the rental agreement with F..., in which it is stated that only the 2nd floor is under lease, a situation of partial lease of the building, also visible in the table of rents provided by the taxpayer – see Annex 6 to pp. 2 and 7 to 9. Thus those two first floors, in addition to not generating any income, according to the available data from the Commercial Register, have been, since 2008, the registered office of company H..., Lda with NIPC ... of which the "partner-parents" are partners and managers, and whose statutory activity consists precisely of Bar and Art Gallery:
1.3. The villa with 3 floors in ..., which in addition to a part (about 70% of the area, to believe the information provided to the inspection – see Annex 8, pp. 9 to 11) of the lower floor, being used as office and warehouse of the company (and also as a back office of F..., for the preparation of medical reports, as previously referred to in III.1.A.2), has been used, especially by the partner-parents, as their main residence.
1.3.1 In this regard, it was verified in 2017 that the taxpayer instead of invoicing the monthly lease of 500.00€ to F... as it had done in previous years, did so now to the partner - father J... (see Annex -pp. 5; 5-pp. 5, 15, 19 and 20; and 6 -pp. 1 and 2). A situation not accepted by the inspection as reflecting reality, since:
a) the explanation given, at the beginning of the action, to the inspection for invoicing to F... seems plausible to us since:
a.1) it occurs in current times of the digital era and of teleworking;
a.2) the price set seems to us appropriate for a transfer with commercial purposes of some spaces duly equipped, supplied and maintained, all the more so in a university city like ..., where the pressure in the residential market for students is felt.
b) F... in previous years recognized and reflected in its accounts those expenses, and for it, that annual charge of 6,000.00 €, seems to us quite reasonable for the operational flexibility it provides, and this is all the more so if, on the one hand, we note the fact that F... has been for many years (at least since 2013) bearing 24,000.00 € annually, with the lease to the taxpayer of a property in ..., which according to previously stated in III.1.A.1 has not yet entered into operation due to lack of municipal license;
c) - it is not credible that the 500.00 € monthly can be the counterpart for the use by the partner-parents of the residence of ... as their main residence, a detached villa (T7 type) with swimming pool, in a noble and scenically privileged residential area, inserted in a lot with 1,500 m2 and with a gross construction area of about 720 m2 , also including electricity, water and maintenance of the pool, garden and air conditioning, when, on the other hand, the taxpayer receives/charges F..., for the lease of an 8r/c) apartment in Lisbon 600.00 € per month.
Thus, under the principle of substance over form, such invoicing is disregarded, maintaining the situation verified in the previous year – lease to F... of areas for office (preparation of reports) for 500.00 € per month and maintenance of the allocation for non-residential purposes of the residential area used by the partners and family.
2. Since, as previously mentioned in III.1.A.1.3., the taxpayer proceeded with the deduction of all VAT borne in the works of construction and/or repair of these properties, in accordance with the provisions of Article 26(1) of the VAT Code, their non-use for business purposes, for one or more complete calendar years, implies an annual regularization of 1/20 of the deduction made, which should be included in the statement of the last period of the year to which it relates.
3. Given that the "building at ..." in ... and the villa in ..., are only partially not having business use, and with a view to calculating the percentage of the property not used, account was taken of the tax graduation of the various areas for purposes of tax asset valuation given by the formula of Article 40 of the IMI Code, namely the difference between the private gross area and the dependent gross area, also provided for therein. Thus:
a) For the villa at ..., from the combination of the assessment record contained in its respective property register, with the plans provided by the taxpayer, it was possible to conclude that the area allocated to business purposes located on the 1st floor, was considered fiscally as dependent gross area (thus enjoying for tax purposes -in the assessment of a reduction of 70% - only 30% of that area), thus obtaining a percentage of non-use of the property for business purposes of 89%-see calculations in Annex 8, p. 8;
b) For the "building ..." in..., account was taken of the areas of the captions for the various divisions of that floor (the 2nd floor-attic in the plan), contained in the architecture plan that is an integral part of its respective property register, thus obtaining a percentage of non-use of the property for business purposes of 75% -see calculation in Annex 8, p. 1.
4. In these terms the total values of the annual regularizations to be effected and outstanding are those of the following table – see also Annexes 1 and 2.
Properties/periods 14.12T 15.12T 16.12T 17.12T
Lrg .... .., ... (75% of 1/20 of VAT deducted)* 2,476.82 2,567.61 2,567.61 2,567.61
R....– Lisbon (100% of 1/20 of VAT deducted) 1,019.32 1,019.32 1,019.32 1,019.32
Rua ...– ... (89% of 1/20 of VAT deducted) 10,508.73 10,508.73 10,508.73 10,508.73
Total VAT outstanding 14,004.87 14,095.66 14,095.66 14,095.66
*In 2014, the work on file 62 had not yet been completed, whereby the VAT to be taken into account for the calculation of the 1/20 is 66,048.49€ ";
M. In July 2018, the Claimant was notified of the acts of VAT assessment and interest Nos. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., and No. 2018..., of the account statements Nos. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., of the interest assessments Nos. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018..., No. 2018... relating to the tax periods 2014, 2015, 2016 and 2017, all in a total of €212,810.83 – cf. document No. 4 attached with the request for constitution of the arbitration tribunal -;
N. On 24 October 2018, the Claimant presented a request for constitution of the present Arbitration Tribunal.
b. Facts Not Proven
As stated, regarding the factual matters established as fact, the tribunal does not have to pronounce on all that was alleged by the parties; rather, it is its duty to select the facts that are relevant to the decision and to distinguish established facts from unestablished facts, as required by Article 123(2) of the CTPP and Articles 607(2), (3) and (4) of the Code of Civil Procedure, applicable ex vi Article 29(1), paragraphs a) and e), of the LRAT. Thus, the facts relevant to the judgment of the case were, as stated above, chosen and delimited in accordance with their legal relevance, with no other factuality being alleged that is relevant to the proper composition of the procedural dispute.
With respect to the proven facts, the conviction of the arbitrators was based on the positions assumed by the parties combined with critical analysis of the documentary evidence attached to the proceedings and the witness testimony.
In general, the depositions of Mrs. K... (Partner of the Claimant and radiologist physician), L... (Partner of the Claimant and radiologist physician), M..., certified accountant of the Claimant and N..., employee of the Claimant, were not determinative in forming the tribunal's conviction, it being apparent, at various points in their respective depositions, of a lack of objectivity and inability to clarify the documentary inconsistencies presented in the SIT's report. Indeed, it was possible to detect that the witnesses, despite possessing direct knowledge of the facts, had their basis of knowledge affected by the influence of the family and employment bonds they maintained with the Claimant.
For the reasons stated, preferential probative weight was given to the documents attached to the proceedings, with the role of the witnesses serving to contextualize the model of family management guided by interests of a personal nature on which the decision-making relating to the form of allocation of the Claimant's real property was based, in particular in the sphere of the contractual relationships existing with company F..., in relation to which the Claimant is in a situation of special relationships and from which it obtains revenues almost exclusively.
The facts presented by the Claimant intended to characterize the lease agreements under analysis as "bare walls" leases were not considered proven.
The causes of the permanent and prolonged inactivity of Society H... Lda., tenant of the property located at Largo ... ... ..., G/F and 1st floor, a space where the Claimant made investments to put into operation an art gallery and supporting bar, were not considered proven. In this regard, neither the location of the fire nor the allegation of the total destruction of the facilities of Society H... Lda. resident in the G/F and 1st floor was considered proven, which does not result from the documents attached to the proceedings, which indicate the notification of the fire to insurance by Company F..., resident in the 2nd floor of the property, and as regards the area of impact a "fire that occurred in a division of the building" with "Destruction of the division where the fire occurred" (see fire incident report of the fire service doc. No. 37 of the APP).
VI - ON THE LAW
1. DELIMITATION OF THE ISSUES TO BE DECIDED
As grounds for the annulment request, the Claimant invokes defects of a formal nature and defects of a substantive nature.
Thus, at issue is the appreciation and decision of the alleged defect of illegality of the inspection and the substantive defects relating to the question of whether or not the rental agreements concluded by the Claimant should be considered exempt from VAT under No. 29 of Article 9 of the VAT Code, as well as the questions relating to improperly deducted VAT and non-regularized VAT that resulted in corrections to this tax, in the total amount of €212,810.83.
1.1 DEFECT OF ILLEGALITY OF THE INSPECTION
According to the Claimant, the corrections made by the TCA in the present case are affected by illegality since the service orders conferred on the TCA powers to inspect the tax years 2014, 2015, 2016, 2017, with the TCA examining the tax periods between 2009 to 2013, as to which its right to assess taxes had already expired.
Thus, the Claimant argues that the TCA, in the course of the external inspection procedures conferred on it and the subject of extension three times, exceeded its inspection powers by analyzing operations occurring or declared in the period from 2009 to 2013, when the scope of the inspection procedure was limited to the verification of compliance with tax obligations, in VAT, for the tax years between 2014 and 2017.
According to the Claimant, the alteration of the scope of the procedure requires a reasoned order, failing which there is non-compliance with the provisions of Article 15 of the RCPITA, a fact that taints the inspection carried out with a procedural defect.
It concludes that the defect in question, relating to the competence to conduct the inspection action outside the scope established in the service order, would result in the illegality of the inspection and any additional assessments arising therefrom, determining their annulment.
Additionally, it considers that in the exercise of the inspection activity, the TCA did not observe the principles of collaboration and mutual cooperation, assuming a persecutory and intolerant posture.
Let us see.
The tax and customs inspection procedure, briefly designated tax inspection procedure or inspection procedure, is regulated by the Complementary Regime of Tax and Customs Inspection Procedure, which defines, "without prejudice to special legislation, the principles and rules applicable to inspection acts" (Article 1 of the RCPITA).
According to the RCPITA, "[t]he tax inspection procedure aims at the observation of tax realities, the verification of compliance with tax obligations and the prevention of tax infractions" (Article 2(1)), for which it comprises, in particular "[t]he confirmation of elements declared by taxable persons and other tax-obligated parties" and "[t]he inquiry into tax facts not declared by taxable persons and other tax-obligated parties" (paragraphs a) and b) of Article 2(2)).
The following do not constitute a tax inspection procedure: "[t]he mere confirmation of data contained in a statement delivered: a) That merely presents formal errors, of an arithmetic nature, or requires only the clarification or justification of declared elements; b) Whose data do not coincide with those contained in other statements of the taxable person or of a third party in possession of the tax administration, not related to the exercise of an economic activity" (Article 2(6)).
The tax procedure must comply with the principles of material truth, proportionality, contradiction and cooperation (Articles 5 to 10).
The classification of the procedure varies according to its purposes, place, scope and extent (Chapter III of Title I), with the purposes, scope and extent of the inspection procedure being capable of alteration during its execution by reasoned order of the entity that ordered it, with notification to the inspected entity required (Article 15(1)).
In inspection acts, officials serving the tax inspection have the right, namely: "free access to the facilities and dependencies of the inspected entity for the period of time necessary for the exercise of their functions" and "the examination, requisition and reproduction of documents, even when in electronic support, in the possession of taxable persons or other tax-obligated parties, for consultation, support or attachment to reports, files or records"; "the exchange of correspondence, in service, with any public or private entities on matters related to the development of their activities"; "the clarification, by official accountants and official auditors, of the tax situation of entities to which they provide or have provided services" (cf. paragraphs a), c), e) and f) of Article 28 of the RCPITA).
Officials serving the inspection have various faculties, listed in Article 29, namely, "to examine any elements of the taxpayers that may be capable of revealing their tax situation, in particular those related to their activity, or of third parties with whom they maintain economic relations and to request or effect, in particular in magnetic support, the copies or extracts considered indispensable or useful" and "to take statements from taxable persons, members of corporate bodies, official accountants, official auditors or any other persons, whenever their testimony is of interest for the clarification of tax facts" (paragraphs a) and g) of Article 29(1) of the RCP
Frequently Asked Questions
Automatically Created