Summary
Full Decision
The arbitrators Counsellor José Baeta de Queiroz (arbitrator-president), Dr. Rita Guerra Alves and Dr. Emanuel Augusto Vidal Lima, appointed by the Deontological Council of the Center for Administrative Arbitration to form the Arbitral Tribunal, constituted on 19-12-2016, decide as follows:
1. REPORT
A…, Lda., with registered office at Rua do …, …, …-… LISBOA, holder of TIN … (hereinafter simply referred to as "Applicant" or "A…"), following the dispatch of 10-05-2016 issued by delegation of the Director of Finance of Lisbon which dismissed the administrative appeal that it submitted pursuant to article 68 of the Code of Procedure and Tax Process (CPPT) of the tax act embodied in the statement of assessment of Value Added Tax (VAT) no. 2015…, of 02-06-2015, relating to the 4th quarter of 2014, as well as the statement of account reconciliation no. 2015…, of 24-06-2015, in the total amount of € 142,181.48, and the corresponding statement of assessment of compensatory interest no. 2015…, of 24-06-2015, in the amount of € 1,589.31, came, in accordance with and for the purposes of articles 2, no. 1, paragraph a), 5, no. 3, paragraph a), 6, no. 2, paragraph a) and 10, no. 1, paragraph a), all of the Legal Framework of Tax Arbitration (RJAT) and article 102, no. 1, paragraph d), of the CPPT, to lodge a request for annulment of the said act of additional VAT assessment, as well as the restitution of the tax improperly paid, increased by compensatory interest.
The Applicant opted for non-appointment of an arbitrator.
The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 04-10-2016.
Pursuant to article 6, no. 2, paragraph a), and article 11, no. 1, paragraph b), both of the RJAT, the Deontological Council appointed as arbitrators of the collective arbitral tribunal those identified above, who communicated their acceptance of the appointment within the applicable period.
The parties were notified of this appointment and did not manifest an intention to refuse it, in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b), of the RJAT and articles 6 and 7 of the Deontological Code.
Accordingly, in compliance with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the collective arbitral tribunal was duly constituted on 19-12-2016.
The Tax and Customs Authority submitted a response in which it raised the plea of expiration of the right of action, wherefore the request formulated by the Applicant, aimed at the declaration of illegality of the act and, consequently, its annulment, should be declared unsuccessful, as untimely, and, therefore, the Respondent should be absolved from the proceedings - cf. paragraph e) of no. 1 of article 278 of the Code of Civil Procedure (CPC), applicable ex vi article 29, no. 1, paragraph e), of Decree-Law no. 10/2011, of 20 January.
By dispatch of 03-02-2017, taking into account that the right of reply had already been exercised regarding the exceptions raised by the parties, that the production of evidence had not been requested and the possibility of the parties requesting the production of oral arguments was safeguarded (which did not occur), the tribunal decided to dispense with the meeting provided for in article 18 of the RJAT, in accordance with the principles of autonomy in the conduct of proceedings and in order to promote procedural speed, simplification and informality, in accordance with the provisions of articles 19, no. 2, and 29, no. 2, of the RJAT, and invited the parties to make written submissions, which they did, maintaining, in essence, the arguments set forth in the initial pleadings.
By dispatch of 27-03-2017 the date of 19 May 2017 was established as the deadline for issuing the award.
2. PRELIMINARY MATTERS
The tribunal is competent and was duly constituted.
The parties enjoy legal personality and capacity, are legitimate and are duly represented (articles 4 and 10, no. 2, of the RJAT and article 1 of Order no. 112-A/2011, of 22 March).
The exception regarding the expiration of the right of action must be considered as a matter of priority.
2.a. The issue of the exception regarding expiration of the right of action
The Tax Authority raises the issue of expiration of the right of action.
It argues that the period for direct challenge, that is, of the primary assessment act, of 90 days counted from the deadline for voluntary payment – 21 August 2015 – had long since expired on 3 October 2016, when the request for constitution of the arbitral tribunal was filed.
It is true, the TA concedes, that the Applicant "… administratively challenged the additional tax assessment act, by means of administrative appeal", and was not granted relief. But, "…notwithstanding having made reference to and identified these circumstances, the Applicant did not formulate/concretize to the Tribunal any request aimed at annulment of what was decided in that regard", identifying as the object of the request the additional assessment, the statement of account reconciliation and the statement of assessment of compensatory interest, requesting, finally, "… the annulment of the additional VAT assessment act, the restitution of the tax improperly paid and the payment of the corresponding compensatory interest".
Thus, "… having not expressly requested the annulment of the dispatch that dismissed the administrative appeal presented by it, there is no foundation that could establish the timeliness of the request and, consequently, the possibility of the Tribunal to appreciate the request formulated regarding the assessment act". This is because the tribunal's powers of cognition are limited by the request and cannot exceed it, leaving it, consequently, to absolve the Respondent from the proceedings.
The Applicant admits that it did not expressly formulate any request relating to the dispatches that decided the administrative appeals it submitted.
But it understands that, notwithstanding, they "… unequivocally form part of the object of the present proceedings…", because it referred to them, stating its disagreement and disputing the arguments produced therein, pointing out the defects they suffer from and arguing for their illegality.
Furthermore, it asserts that the interpretation of paragraph a) of no. 1 of article 10 of the Legal Framework of Tax Arbitration made by the TA would put the norm in conflict with articles 20 and 268, nos 4 and 5 of the Constitution of the Portuguese Republic, "… by violation of the principle of access to justice and effective judicial protection…".
For the Applicant, it is "… evident that the express decision of dismissal that fell upon the administrative appeal forms part of, contrary to what is invoked, the object of the request for arbitral ruling".
By way of conclusion, the Applicant states that "… there is no doubt that both the law and the case law are satisfied with the request for annulment of the tax acts, and therefore one should conclude that the exception raised is unsuccessful".
This issue must be decided.
Taxpayers who wish to legally challenge a tax assessment act have a period of 90 days counted from the following facts:
‒ the expiry of the period for voluntary payment, unless it is a self-assessment act – articles 102, no. 1, paragraph a), and 131 of the Code of Procedure and Tax Process (CPPT);
‒ the tacit dismissal of the same administrative appeal – article 102, no. 1, paragraph d), of the CPPT;
‒ the dismissal of the administrative review appeal lodged against the decision of said administrative appeal – articles 76, no. 2, and 102, no. 1, paragraphs d) and e), of the CPPT;
‒ the dismissal of the request for official review of the assessment act – articles 78 of the General Tax Law (LGT) and 102, no. 1, paragraph e), of the CPPT.
In any case, the immediate object of legal challenge is the tax assessment act.
Although article 62, no. 1, paragraph d), of the Statute of Administrative and Tax Courts (ETAF) confers on tax courts competence to know "of appeals of acts that may be contended in administrative proceedings of total or partial dismissal of administrative challenges...", it must always be understood that such knowledge implies and requires knowledge of the assessment act itself.
Let us consider an unlikely hypothetical scenario:
A taxpayer, having appealed administratively the assessment, goes to court to challenge – and challenge only – the act that dismissed the appeal.
The court rules in its favor and annuls – and annuls only – the act dismissing the administrative appeal.
The Administration continues to have an intact enforceable title and nothing prevents its enforcement.
In vain would the taxpayer have resorted to court and the judge decided the case. We would be faced with a useless process, which is moreover prohibited by article 130 of the Code of Civil Procedure (CPC) – the process is a sequence of acts and, in this case, all of them would be useless.
And the reason is that the administrative decision which, in the context of an administrative appeal, administrative review or official review, dismisses the taxpayer's request for annulment of the assessment act does not alter the legal situation of the taxpayer, but rather maintains it, nor does it constitute a harmful act – the harm, if it exists, resulted from the assessment.
Therefore, by making the administrative decision unfavorable to the taxpayer disappear from the legal order, everything remains the same – the assessment survives and the Tax Authority can demand payment of the assessed tax.
It is inconceivable, from the foregoing, a legal challenge against such administrative decision if the object of the proceedings does not include – indirectly – the appreciation of the legality of the assessment itself.
But what happens if the taxpayer, having administratively appealed the assessment act, and having that appeal dismissed, comes, availing itself of the period counted from that dismissal, to challenge the assessment, without simultaneously requesting annulment of the dismissal act?
This is the present case.
For the TA, as we have seen, the result is expiration of the right of action.
Not of the right of action against the decision dismissing the administrative appeal – this would be timely – but of the right of action against the assessment act.
The TA's sound argument is alluring, but we do not believe it leads to the appropriate solution.
As we have seen, mere challenge of the act dismissing the administrative appeal would be entirely inconsequential, as it would not result in the disappearance of the assessment act.
Therefore, both acts should, strictly speaking, be challenged – immediately, that of dismissal of the appeal; indirectly, that of assessment.
But what the tribunal would appreciate would be, above all, the grounds opposed to the assessment, because without this, for the reasons set out, no effective judicial protection would be given to the rights of the challenger.
The act dismissing the appeal, having done no more than maintain, administratively, that of assessment, would fall by itself, as the defects of the assessment are transmitted to it – as a secondary act, it will be illegal for not having recognized, as it should have, the illegality of the assessment.
From all this it follows that the relevance of the act dismissing the administrative appeal has to do, more than with its (il)legality, with the fixing of the period for challenging the assessment.
Consequently, the petition in which only the declaration of illegality of the assessment is requested, without formulating an identical request regarding the dismissal of the appeal (despite, in this case, having made extensive reference to it and set forth the grounds of its illegality), suffers only from an imperfection which, moreover, the tribunal could have invited to correct, in accordance with article 18, paragraph c), of the RJAT.
It happens, furthermore, that, in the present case, it results from the petition that the Applicant did not ignore the administrative appeal, which it not only referred to but criticized, attributing to it the defects it ascribes to the assessment act. From this an implicit request can be extracted, which, not having been reduced to writing, is revealed from the terms of the pleading.
The decision that fell upon the administrative appeal does not, given all that has been said, fail to form part of the object of the proceedings.
Only this understanding ensures the effective judicial protection constitutionally guaranteed by article 20 of the Constitution of the Portuguese Republic.
Without thereby resulting in any violation of any other principle, substantive or procedural, nor any violation of any right or legitimate interest of the Tax Authority which, by the way it responded, clearly showed that it understood the party's contention and its grounds.
Reasons for which the exception regarding the expiration of the right of action raised by the Respondent is held to be unsuccessful.
There are no other exceptions, nullities or preliminary issues that prevent the appreciation of the merits of the case.
3. ARGUMENTS OF THE PARTIES
3.a. To substantiate its claims, the Applicant alleges, in summary, that:
a) The tax referred to in the additional assessment subject to challenge does not correspond to services provided in the 4th quarter of 2014, but rather to services provided during the following periods: 2012/09T, 2012/12T, 2013/03T, 2013/06T, 2013/09T and 2013/12T;
b) From 2009 onwards, the business activity consisted solely of the management of the commercial center B… . During the years 2009 to 2013, A… went through a turbulent period [economically and financially, as well as regarding the company's management acts] which culminated in the non-compliance with various tax and contractual obligations to the tenants of B…;
c) This non-compliance meant that the tenants of B… ceased to pay the agreed rents and also terminated their respective Shop Use Contracts (CUL). At the end of 2013, the current management, faced with A…'s business situation and its potential, undertook a series of actions aimed at recovering the business and regularizing the company's debts. These actions enabled the maintenance of A…'s activity, with new CULs being concluded with the granting of a series of discounts on the rent amounts for the periods identified above, payment of which was pending by the tenants;
d) Once the negotiation process was completed, A… proceeded to issue invoices for the amounts contained in the CULs initially concluded with the tenants, as well as to issue credit notes (discounts) that resulted from the conclusion of the new CULs;
e) Based on articles 7 and 8 of the VAT Code (CIVA), according to which tax is due and becomes payable at the moment when the goods transferred are made available to the purchaser and services are rendered and, in cases where invoice issuance is mandatory, at the moment of its issuance, without exceeding the period for that issuance;
f) It did not issue the invoices on the dates of the service provisions indicated in the invoices, but only subsequently at the end of December 2014;
g) In Documents nos 2 and 3 attached to the Request (corresponding to pages 52 to 86 of the Administrative Proceedings (PA)), it attaches copies of invoices relating to service provisions, invoices relating to common expenses and credit notes, issued to companies C…, SA ("C…"), D…, SA ("D…") and E…, SA ("E…"), and relating to the entire period between July 2012 and December 2014, and also those relating to January 2015 issued to companies C… and D… . All such invoices and credit notes are dated December 2014 (24-12-2014 and 30-12-2014);
h) Thus, in December 2014, the following invoices relating to tax periods prior to 01-01-2014 were issued:
i) Also in December 2014, the following invoices were issued with reference to the tax period 2014/12T:
j) On the other hand, in December 2014 the following credit notes with reference to tax periods prior to 01-01-2014 were issued:
k) And, likewise, still in December 2014, the following credit notes were issued with reference to the tax period 2014/12T:
l) In relation to the first three quarters of the year 2014, it filed the VAT returns on 10-08-2015 and attaches copies of payment receipts and bank payment documents, with processing date of 11-08-2015, relating to those periods: 2014/03T, 2014/06T and 2014/09T (cf. pages 87 to 92 of PA);
m) With respect to the periods 2012/09T, 2012/12T, 2013/03T, 2013/06T, 2013/09T and 2013/12T, whose periodic VAT returns were missing, it proceeded to file them on 18-12-2015 and made payment, on the same date, of the assessed VAT amounts. It attaches copies of the periodic returns submitted relating to those quarterly periods and of the bank documents relating to payment (cf. pages 93 to 116 of PA);
n) Likewise, with respect to the period 2014/12T;
o) It was notified on 10-03-2015 to exercise the right of prior hearing regarding the draft additional VAT assessment for the period 2014/12T (there is no evidence of this fact in the proceedings);
p) According to that notification the TA calculated VAT assessed on invoices reported for the period under analysis in the amount of € 204,211.53[1], considering, however, that the Applicant had only recorded in its periodic return the amount of € 59,368.32, in accordance with the formula contained in the model notification set out below and which, in summary, considers only the VAT assessed by the taxpayer excluding self-assessed VAT:
q) With date of 02-06-2015, the TA issued the additional tax assessment here at issue in which it considers a regularization of tax in favor of the State (field 41) in the amount of € 146,973.37 and an amount to be paid of € 142,181.48 (cf. pages 41 to 43 and 51 of PA);
r) The amount officially regularized in favor of the State represents the difference, after account reconciliation, between the amount of € 206,211.53, considered by the TA as VAT assessed on reported invoices and the amount of € 59,368.32, recorded by the Applicant in field 4 of the periodic return filed;
s) It made payment of the amount resulting from the tax act challenged, calculated in the official return relating to 2014/12T (cf. pages 117, 118 and 136 to 139 of PA);
t) Because it did not agree with the tax assessment subject to the request for arbitral ruling, alleging duplication of VAT payment, it presented, on 21.12.2015, the competent administrative appeal (cf. pages 2 to 17 and 23 to 37 of PA);
u) It justifies the duplication of collection by referring that with respect to the periods of the years 2012 and 2013, as well as with respect to the last period of 2014, it proceeded to submit the periodic VAT returns that were missing and, consequently, to pay the amounts of tax due;
v) By Official Notice dated 18.05.2016, it was notified of the draft decision dismissing the administrative appeal presented (cf. page 146 of PA);
w) It exercised in writing its right of prior hearing, in accordance with and for the purposes of article 60 of the General Tax Law, in which it sustains that the VAT assessed by the TA relating to the month of December 2014 concerns service provisions made in VAT periods of previous years/fiscal years and that the tax act appealed duplicates the amount of VAT actually due by the Applicant, in that the tax assessed in December 2014 with reference to the last period of 2014 and as well the tax assessed with reference to the periods 2012 09T, 2012 12T, 2013 03T, 2013 06T, 2013 09T and 2013 12T had already been paid into the State coffers through the filing of the periodic VAT returns relating to those periods that were missing (cf. pages 154 to 160 of PA).
x) By Official Notice dated 30.06.2016, it was notified of the maintenance of the decision dismissing the administrative appeal (cf. page 194 of PA).
y) Now, being unable to agree with the TA's decision, it filed the request for arbitral ruling.
3.b. The Tax and Customs Authority (TA) submitted a response and attached the administrative file, invoking, in summary, and in addition to the exception already considered, the following:
a) The tax act does not suffer from any illegality, so the Applicant is not correct;
b) The Applicant did not issue the invoices on the dates of service provisions but only subsequently, at the end of 2014, thus not complying with the rules contained in articles 7 and 8 of the CIVA in relation to the VAT relating to service provisions prior to December 2014;
c) The filing of substitute periodic returns regarding the periods in which, in accordance with articles 7 and 8 of the CIVA, the tax should have been assessed, does not remedy the non-compliance referred to in the preceding paragraph;
d) In summary, according to article 37, no. 1, of the CIVA, the assessment of tax on taxable operations is carried out in the invoice for the purposes of its demand from the purchasers of goods and services. It is not carried out in the periodic return. The latter is intended to declare the VAT already assessed in the documents (cf. page 193 of PA);
e) That it does not see how, prior to the issuance of invoices, compliance with the obligation to record operations could be achieved, as articles 44 and 45 of the CIVA provide that the record of transfers of goods/service provisions made by the taxpayer must be made after invoice issuance, until presentation of the periodic return and must contain all the data necessary to complete the periodic return;
f) That it does not appear, therefore, that there is any illegality of the additional assessment relating to the 4th quarter of 2014 due to the fact that it takes as its basis the VAT assessed in invoices of service provision relating to prior periods, but issued only at the end of December/2014;
g) That the Applicant neither through the administrative appeal nor through the prior hearing demonstrates (namely with accounting records) the origin of the amounts declared in those substitute returns, or, as appears to result from the fact that only in December 2014 did it issue invoices and credit notes referring to those service provisions not yet invoiced, that the amounts declared in those substitute PR, or part thereof, did not correspond to documents issued and recorded in those periods (cf. page 194 of PA).
h) That it also proceeded to analyze another administrative appeal proceeding, with number …2015…, relating to corporate income tax for fiscal year 2013, also presented by the Applicant, to which the claimant attached the accounting elements of the fiscal year (accounting records and copies of supporting documents);
i) That by comparison between these elements and the said substitute returns filed on 18-12-2015 (not assessed), it was not possible to find any correspondence between the amounts declared and those recorded in the accounts;
j) That from the accounting elements provided by the Applicant to support the administrative appeal presented regarding corporate income tax for 2013, there is a single invoice for service provisions (rents), addressed to F.., Lda., in the amount of € 150,217.74, to which was added VAT in the amount of € 34,550.80. However, from the VAT return relating to the period 2013/12T was declared the amount of the tax base of € 97,413.42 and VAT of € 22,405.09, whereas in the other three periodic returns relating to 2013 were recorded amounts of tax base and assessed VAT not recorded in that fiscal year;
k) That no supporting evidence was presented of the duplication that the Applicant appears to allege between the value of the additional assessment subject to appeal and the amounts paid with the substitute returns;
l) That in fiscal year 2013 the Applicant issued only one invoice (to client F…, in the amount of € 150,217.74, before VAT). The remaining amounts entered in the accounts 7- Income relate to rent increases. Thus, in addition to those from 2014, invoices were issued at the end of 2014 relating to rents from the 2nd half of 2012 and all of 2013, as well as credit notes relating to discounts and invoices relating to common expenses, all relating to the same period of 2012 and 2013. These documents (invoices and credit notes) served as the basis for the increase in income relating to 2013 (economic accrual). Thus, the amount of income recorded in fiscal year 2013 includes the invoice issued in 2013 and the increase in income for that period which were only debited to clients in 2014 (cf. page 6 of Doc. no. 14 attached to the Request).
4. FACTUAL MATTERS
On relevant factual matters, and based on the critical examination of the documents attached, which are hereby considered reproduced, the tribunal finds the following to be established:
4.1. ESTABLISHED FACTS
A) The TA proceeded to issue an official VAT assessment statement, following a discrepancy detected between the communication of invoices reported via the E-Invoice program and the amounts in the context of VAT declared by the Applicant, in the periodic return of goods and service provisions, based on invoices reported to the TA valued at 206,211.53€ and the value of VAT declared in the periodic return of 59,368.32€, with a difference of 146,973.37€.
B) The Applicant was notified of the VAT assessment statement, numbered 2015…, with the VAT correction relating to the period 2014 12T in the amount of 146,973.37 € in column 41, with the following grounds: "Additional Assessment issued pursuant to article 87 of the VAT Code, because it was found that the value of VAT assessed in invoices is greater than the value of VAT presented in the periodic return for the indicated period. The assessment was made based on the calculation indicators contained in the notification for Prior Hearing, and was possibly modified based on subsequent corrections. Interest at the statutory rate shall be due on the amounts of tax in default, in accordance with articles 96 of the CIVA and 35 of the General Tax Law".
C) The Applicant made payment of the tax from the VAT assessment statement, in the amount of 142,181.48 €.
D) The Applicant exercised its right of prior hearing provided for in article 60 of the General Tax Law.
E) The Applicant filed the administrative appeal numbered …2015…, regarding the VAT assessment statement no. 2015… .
F) The administrative appeal was dismissed by the Deputy Director of Finance, on 29 June 2016, and the Applicant was notified.
4.2. UNESTABLISHED FACTS
Of the facts of interest for the decision of the case, contained in the challenge, all of them subject to concrete analysis, the following were not established: those not contained in the factuality described above, namely, that the VAT in invoices issued in December 2014 refers to services rendered in 2012 and 2013, and that it was then paid into the State coffers.
5. LEGAL MATTERS
1. Given the positions of the parties assumed in the pleadings filed, the central issue to be resolved by the present Arbitral Tribunal is to appreciate the legality of the VAT assessment, as regards the correction made by the TA, in the issuance of the official VAT assessment statement no. 2015…, relating to the period 2014 12T, in the amount of 146,973.37 € described in column 41, this being the indirect object of the request for arbitral ruling.
2. The Applicant, in summary, sustains that the additional assessment in question constitutes a duplication of collection. Sustaining that the invoices in question, on which the additional assessment resulted, issued in the 4th quarter of 2014, do not refer to services rendered in that period, but rather to services rendered in the periods 2012 09T, 2012 12T, 2013 03T, 2013 06T, 2013 09T and 2013 12T, and that regarding those it proceeded to correct and pay the VAT relating to those invoices in the respective periods, by filing substitute returns.
3. The TA proceeded to issue the VAT assessment statement no. 2015 … (official periodic return) following a detected discrepancy of 146,973.37 €, between the communication of invoices reported via the E-Invoice program and the amounts in the context of VAT declared by the Applicant, in the periodic return of goods and service provisions based on invoices reported to the TA valued at 206,211.53€ and the value of VAT declared of 59,368.32€.
4. The disputed issue in the present Arbitral Proceeding concerns whether there is duplication of collection in the official periodic return issued by the TA, since the applicant alleges that the VAT of the VAT assessment statement no. 2015 … has already been duly assessed.
5. Now, in its returns, the Applicant reported that in the 4th quarter of 2014 (2014 12T) it issued invoices that resulted in the value of VAT of 206,211.53 €, and that by submitting the periodic VAT return for that period the Applicant declared the value of VAT of 59,368.32 €.
6. Indeed, the TA, pursuant to article 87 of the CIVA, proceeded to issue an official periodic return, based on the information at its disposal, which it did by means of communications and returns filed by the Applicant.
7. The legal framework for the correction made by the TA is based on the combination of article 87 of the CIVA, the regime of Decree-Law no. 198/2012, of 24 August and article 75, no. 1 of the LGT.
8. Article 87 of the CIVA provides: 1 - Without prejudice to the provisions of article 90, the Directorate-General of Taxation proceeds to rectify the returns of taxpayers when it reasonably considers that they show a tax lower or a deduction higher than due, additionally assessing the difference. 2 - The inaccuracies or omissions made in returns may result directly from their content, from comparison with substitute returns filed for the same period or relating to prior tax periods, or even with other elements available, in particular those relating to personal income tax, corporate income tax or information received under the framework of community administrative cooperation and mutual assistance."
9. A rule complemented by Decree-Law no. 198/2012, of 24 August, which implemented the system of delivery and communication of invoices, also known as E-Invoice and SAF-T, and delivery of periodic returns by the taxpayers themselves.
10. Communications and returns, sent by the taxpayer, and which, as such, are presumed to be true in accordance with the provision of article 75, no. 1 of the LGT "Returns by taxpayers presented in accordance with the terms provided by law are presumed to be true and made in good faith, as well as the data and calculations recorded in their accounting or accounts, when these are organized in accordance with commercial and tax legislation, without prejudice to other requirements on which the deductibility of expenses depends".
11. This legal framework is quite clear, in the sense that in the event of a difference for less tax due in the returns of taxpayers, the TA should proceed to rectify and assess the difference of tax due.
12. Immediately, if from invoices reported by the Applicant results a higher tax than assessed in that period, the TA can proceed to its correction so as to be in conformity with the returns filed.
13. In the present case, there is a discrepancy between the return filed by the Applicant in the 4th quarter of 2014, regarding invoices issued and the value of VAT assessed, which gave rise to the rectification, which in the present proceedings resulted in a difference in VAT to be paid of 146,973.37 €.
14. Indeed, this amount was calculated based on invoices issued in the 4th quarter of 2014 and coincides with the communication of invoices reported via the E-Invoice program and consequently confirmed in tax inspection.
15. Correction or rectification based on the premise that the returns filed by the taxpayer are true, and in the present proceedings its falsity is not invoked.
16. Further, and in accordance with the principle of free appreciation of evidence, and especially as the parties have not raised the reliability nor veracity of the returns attached, the present Tribunal accepts the returns attached as true and reliable, in accordance with article 75, no. 1 of the LGT.
17. Thus, and given the true returns filed by the taxpayer, it is presumed that from the taxpayer's returns resulted a VAT to be assessed of 206,211.53 €, however, only declared VAT of 59,368.32 €.
18. However, the Applicant alleges that this difference of 146,973.37 € has already been duly assessed, not in the period in which the invoice was issued, but in other periods by filing substitute returns.
19. Thus, and as the Applicant invokes the duplication of collection, the burden of proof of these constitutive facts falls on it.
20. If we consider otherwise:
21. With respect to the legal regime of burden of proof, articles 74, no. 1 of the LGT and 342, no. 1 of the Civil Code (CC) provide that the burden of proof falls on whoever invokes it.
22. As follows from article 74 of the LGT "1 - The burden of proof of the constitutive facts of the rights of the tax administration or of taxpayers falls on whoever invokes it.", in line with article 342, no. 1 of the CC, "He who invokes a right has the burden of proving the constitutive facts of the right alleged.".
23. Given the foregoing, it was incumbent on the Respondent to prove that regarding the services provided under the invoices issued in the 4th Period of 2014, and on which the official periodic return was based, the VAT due was duly assessed and paid.
24. Since the taxpayer only declared 59,368.32 € of the 206,211.53 € that it should have declared, it was incumbent on it to prove that the difference in the amount of 146,973.37 €, was effectively assessed, and thus establish the duplication.
25. However, the Applicant did not prove that the invoices issued in the 4th quarter of 2014, attached as documentary evidence, and although they are marked in their text as referring to services rendered in periods other than the 4th quarter of 2014, the same does not demonstrate that the VAT of such services was assessed, paid and declared in a different period, by means of a substitute return.
26. Moreover, the Applicant did not demonstrate that the substitute returns and the VAT assessed therein refer to the invoices issued in the 4th Quarter of 2014 and which gave rise to the present assessment.
27. Thus, it was not possible for the Tribunal to establish the correspondence between the amounts recorded and declared vis-à-vis the amounts assessed in VAT under the substitute returns. The documentation available to the Tribunal does not allow one to specifically subsume the invoices, the periodic returns in question.
28. The Tribunal can only conclude that the Applicant in the 4th Quarter of 2014 had a tax to be assessed of 206,211.53 € and that it only declared 59,368.32 €, being that the amount in default would have to be assessed.
29. The Tribunal cannot determine which invoices were the basis for each of the VAT periodic returns in question. It can only determine which invoices were issued in 12/2014, and it is not possible to determine whether the same were the basis of the substitute returns in question.
30. As the burden of proof falls on the Applicant, it does not demonstrate that the amounts listed in the substitute returns correspond to documents issued in the 4th quarter of 2014, and it likewise does not demonstrate that the VAT it invokes as being in duplication has already been paid at another time.
31. Consequently, not proving that the VAT had already been assessed, it is presumed that the same was not assessed and is in default.
32. The applicant invokes procedural defects in the official periodic return issued by the TA, now in question, regarding lack of grounds, violation of burden of proof and the principle of inquisitorialness.
33. The Applicant petitions that the assessment subject to the present arbitral request suffers from an absolute lack of grounds, since the recipient cannot know which facts it is based on, in manifest violation of nos 1 and 2 of article 77 of the LGT.
34. The Tax Administration has the duty to ground the assessment acts challenged in accordance with the principle embodied in article 268 of the Constitution (CRP) and embraced in articles 125 of the Code of Administrative Procedure (CPA) and 77 of the LGT.
35. Articles 1 and 2 of article 77 of the LGT provide: "1-The decision of proceedings is always grounded by means of a concise exposition of the reasons of fact and law that motivated it, the grounds being able to consist in a mere statement of agreement with the grounds of previous opinions, information or proposals, including those forming part of the tax inspection report. 2 - The grounds of tax acts may be given in summary form, and must always contain the applicable legal provisions, the qualification and quantification of the tax facts and the operations for determining the taxable matter and the tax.".
36. In accordance with the decision of the Supreme Administrative Court (STA) in case no. 01674/13, of 03-12-2014, "The grounds referred to in this legal norm must therefore be based on reasons of fact and law that formally support the administrative decision.
And, as is consensual in case law, the requirements of grounds are not rigid, varying according to the type of act and the concrete circumstances in which it was issued: the act will be sufficiently grounded when the recipient, placed in the position of normal recipient – the bonus pater familias referred to in article 487 no. 2 of the Civil Code – may come to know the factual and legal reasons that are at its genesis, so as to allow him to choose, with full knowledge, between acceptance of the act or the activation of legal means of challenge, and in such a way that, in this latter circumstance, the court can also exercise effective control of the legality of the act, assessing its correctness in law in light of its contextual grounds.
This means that the grounds, even if given by reference or in summary form, cannot fail to be clear, congruent and contain the aspects of fact and law that allow knowledge of the cognitive and evaluative itinerary pursued by the Administration in the determination of the act. And, therefore, insufficiency, obscurity and contradiction in motivation are equivalent to lack of grounds (article 125 no. 2 of the CPA), by preventing a full apprehension of the iter volitivo and cognitive that determined the Administration to practice the act with the decisive sense it conferred on it.
With regard to legal grounds, the case law of this Court has decided that for the same to be considered sufficient it is not always necessary to indicate the applicable legal provisions, a reference to the relevant principles, the legal regime or a well-determined legal framework being sufficient, and the act should be considered to be grounded in law when it falls within a legal framework. As noted in the decision of the Full Section of 25/03/93, in case no. 27387, the duty of grounds is ensured whenever, notwithstanding the absence of express reference to any legal provision or legal principle, the decision falls within a determined and unequivocal legal framework, perfectly cognizable from the viewpoint of a normal recipient, concluding that there will be legal grounds whenever, given the text of the act, the legal reasons that determined it are perfectly intelligible."
37. It emerges from the additional assessment note that the same was issued pursuant to article 87 of the CIVA, and that it results from a correction based on communications filed by the Applicant without value judgment on the same. The additional VAT assessment in question results from the subtraction of the value of VAT assessed declared in the return of the period and the VAT assessed in invoices that were reported via the E-Invoice system by the Applicant to the TA.
38. Sufficient elements to understand the aspects of fact and law that allow knowledge of the cognitive and evaluative itinerary pursued by the Administration in the determination of the act.
39. Elements that the Applicant itself provided, were in its possession and of which it had knowledge, and as such allowed it to know the cognitive and evaluative itinerary pursued by the Administration in the determination of the act.
40. On these grounds the Applicant's petition based on lack of grounds is unsuccessful.
41. The applicant further invokes procedural defects in the official periodic return issued by the TA, now in question, regarding violation of the principle of inquisitorialness and the principle of burden of proof.
42. The principle of inquisitorialness is situated upstream of the burden of proof.
43. As for the burden of proof, it has already been stated that it falls on the Applicant; with the burden of proof falling on the Applicant, as already concluded, it is incumbent on it, in defense of its interest, to provide the TA with all the evidence it considers relevant.
44. The TA is obliged to comply with the principle of inquisitorialness, investigation or officiality, which obliges it in accordance with the provision of article 58 of the LGT that: "the tax administration must, in the proceedings, carry out all necessary actions to satisfy the public interest and the discovery of material truth, and is not subordinate to the initiative of the author of the request". It is also provided in article 6 of the Regulation for Tax Inspection Procedures (RCIPT) that "the tax inspection procedure aims at the discovery of material truth, and the tax administration must adopt officially the initiatives appropriate to that objective"- The "justification of the principle of inquisitorialness is justified by the obligation to pursue the public interest imposed on the activity of the tax administration (articles 266, no. 1, of the CRP and 55 of the LGT) and is a corollary of the duty of impartiality that should guide its activity (article 266, no. 2, of the CRP and 55 of the LGT).
45. In the procedural sphere, this obligation imposes that the tax administration does not wait for the initiative of the interested party who formulated the request that gave rise to the proceedings, and must itself take the initiative to carry out the actions that appear relevant to correct ascertainment of the factual reality on which its decision should be based.
46. On the other hand, that duty of impartiality demands that the tax administration seeks to bring to the proceedings all the evidence relating to the factual situation on which the decision will be based, even if they are intended to demonstrate facts whose proof is contrary to the patrimonial interests of the Administration." […]" However, the failure to carry out by the tax administration of actions that are within its capacity or the failure to request from the interested parties the probative elements necessary to instruct the proceedings constitutes a defect in the proceedings capable of implying the annulment of the decision taken therein".
47. Reverting to the case at hand, it is found that, in fact, and as follows from the administrative file attached and the documentary evidence provided by the Applicant with its request for constitution of the Arbitral Tribunal, the TA notified the Applicant to present the corroborating/justifying documents.
48. In this sense "The violation of the principle of material truth, in the dimension of the principle of inquisitorialness, reflected in the refusal by the tax administration to practice actions requested by the person or entity being inspected or abstention from practicing actions which it had the obligation to carry out and from which results frustration of the duty of ascertainment of material truth, constitutes a procedural defect capable of determining the annulment of the final tax act"( Complementary Regime of Tax Inspection Procedure, Annotated and Commented, Joaquim Freitas da Rocha and João Damião Caldeira, Coimbra Editora, May 2013, p.49.).
49. Given the foregoing, the TA carried out in the proceedings all necessary actions to satisfy the public interest and the discovery of material truth, and did not violate article 58 of the General Tax Law.
50. Also in accordance with the same authors, this principle imposes on the TA the duty to carry out all necessary actions to discover material truth, even those aimed at proving facts invoked by interested parties.
51. Notwithstanding this general duty of discovery of material truth, it cannot be overlooked that it is upon the taxpayers that the obligation to provide the TA, to which it is incumbent to request for this purpose, with the elements and arguments that it deems necessary to the fair resolution of the dispute, as well as to request the carrying out of the probative actions that it considers indispensable.
52. Once the elements are made available by the taxpayers, the TA is obliged to carefully analyze them, interpreting the elements in accordance with the various plausible solutions and not only in accordance with the solution that best serves its patrimonial interests.
53. Having carried out these actions by the TA, in accordance with the principle of inquisitorialness, no other actions could be required of it, particularly since it does not have to officially carry out investigatory actions not requested.
54. Therefore, without need for other considerations, the invoked violation of the principle of inquisitorialness raised by the Applicants lacks foundation and is, consequently, unsuccessful.
6. REGARDING COMPENSATORY INTEREST
As for the Applicant's request for payment of compensatory interest, the same lacks merit, given the unsuccessful nature of the main request. There being no improper tax collected, there is no basis to indemnify the Applicant for the respective disbursement.
7. DECISION
In accordance with the grounds of fact and law set out, this Arbitral Tribunal decides:
a) To hold unsuccessful the requests for declaration of illegality of the tax acts of additional assessment of Value Added Tax (VAT) no. 2015 … and compensatory interest no. 2015 … and … which fixed a tax to be paid of 146,973.37 €.
b) To fix the value of the dispute at € 146,973.37, corresponding to the value of the assessment, since the economic value of the dispute is determined by the value of the tax assessments challenged.
c) To fix the costs in the amount of € 3,060.00 (three thousand and sixty euros), to be borne by the Applicant, in accordance with articles 12, no. 2 of the Legal Framework of Tax Arbitration, 4 of the Regulation of Tax Arbitration Proceedings (RCPAT) and Table I attached to the latter. – no. 10 of article 35, and nos 1, 4 and 5 of article 43 of the LGT, articles 5, no. 1, al. a) of the Tax Arbitration Procedure Regulation (RCPT), 97-A, no. 1, al. a) of the CPPT and 559 of the CPC.
Notify.
Lisbon, 11 May 2017
The arbitrators
(José Baeta de Queiroz)
(Rita Guerra Alves)
(Emanuel Augusto Vidal Lima)
[1] As the Applicant notes, it is believed that by error, since the documentation attached to the file shows that this amount is € 206,211.53.
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