Summary
Full Decision
ARBITRAL TAX DECISION
Case No. 626/2018-T
Decision Date: 2019-08-26
VAT
Value of the Claim: €25,092.12
Subject Matter: VAT – Statute of Limitations for the Right to Make an Assessment
ARBITRAL DECISION
1. REPORT
1.1
A... Lda., a legal entity no. ..., with registered office at ..., ...-... – ..., (hereinafter referred to as the "Claimant") submitted on 11-12-2018 a request for arbitral pronouncement, pursuant to Article 2, paragraph 1, subparagraph a) and Article 10, paragraphs 1 and 2 of the Legal Framework for Tax Arbitration, provided for in Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter abbreviated as "RJAT") and Articles 1 and 2 of Order No. 112-A/2011, of 22 March.
1.2
The Claimant seeks the pronouncement of the Arbitral Tribunal in order to declare the illegality and annulment of the additional VAT assessment of 08/09/2018, as well as the respective compensatory and default interest thereon.
1.3
The respondent is the Tax and Customs Authority (hereinafter referred to as the "Respondent").
1.4
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 11-12-2018.
1.5
Pursuant to subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of the RJAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council of CAAD appointed as arbitrator of the single arbitral tribunal His Excellency Mr. Dr. Olívio Mota Amador, who, within the applicable deadline, communicated his acceptance of the assignment.
1.6
The parties were notified on 04-02-2019 of the appointment of the arbitrator and did not express any intention to refuse the appointment, pursuant to the combined provisions of Article 11, paragraph 1, subparagraphs a) and b), of the RJAT and Articles 6 and 7 of the CAAD Deontological Code.
1.7
In accordance with Article 11, paragraph 1, subparagraph c), of the RJAT, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 25-02-2019.
1.8
The Respondent, duly notified through the arbitral order of 25-02-2019, submitted on 01-04-2019 its Reply and on the same date attached the Administrative File.
1.9
The Arbitral Tribunal, by order of 09-04-2019, notified the Claimant to indicate the facts on which it requested examination of the witness indicated in the request for arbitral pronouncement.
1.10
On 17-04-2019, the Claimant indicated the facts on which it intended to examine the witness.
1.11
By order of 02-05-2019, the Arbitral Tribunal scheduled 17 May, at 11h, for examination of the witness indicated by the Claimant.
1.12
The Arbitral Tribunal, on 17-05-2019, proceeded to examine the witness C... in accordance with the minutes that are in the present arbitral proceedings and which are deemed, for all legal purposes, to be fully reproduced. In that session the Tribunal: (i) notified the Claimant and the Respondent to, in that order and successively, submit written pleadings within 15 days; (ii) set 01-07-2019 as the date for issuing the arbitral decision, a date that was subsequently postponed through orders of the Arbitral Tribunal dated 01-07-2019, 15-07-2019, and 22-08-2019.
1.13
The Claimant submitted on 31-05-2019 its pleadings. On 14-06-2019, the Respondent submitted its pleadings, attaching a document.
1.14
The Claimant, on 18-06-2019, commented on the document attached by the Respondent with the pleadings.
1.15
On 25-06-2019, the Respondent exercised its right of contradiction regarding the request submitted by the Claimant identified in the previous paragraph.
1.16
The position of the Claimant, in accordance with the request for constitution of the Arbitral Tribunal and the pleadings, is in summary as follows:
1.16.1
The issues raised by the Claimant are: (i) The failure to notify the assessment within the statute of limitations period because the additional assessment based on the correction effected by the AT Services has long since exceeded the statute of limitations period that ended on 01/01/2016; (ii) The omission of notification for prior hearing in violation of the provisions of Article 60, paragraph 1, subparagraphs a) and e) of the LGT and Article 60 of the RCPIT.
1.16.2
There is no challenge to an act that rejected the request for VAT refund, nor were any wrongful deductions invoked on the basis of the transaction in question, which was clearly identified by an invoice that was subject to the corrections made.
1.16.3
Since there was no VAT assessment, there is nothing to deduct or credit with respect to the concrete export transaction for the horse documented by the invoice in question, which did not result in any carry-forward to subsequent periods.
1.16.4
It is absurd and unlawful to seek to apply Article 22 of the VAT Code in matters of "wrongful deductions" that were not invoked and have nothing to do with the transaction in question here, in an attempt to circumvent the effect of the statute of limitations provided for in its own rule, based on elementary reasons of legal certainty, as is proper in a State governed by the rule of law.
1.16.5
Article 22 of the VAT Code does not derogate from or introduce any restriction to the legal rules applicable regarding statute of limitations, which are expressly provided for in Article 45 of the LGT, by virtue of Article 94, paragraph 1 of the VAT Code, without any exception.
1.16.6
The statute of limitations period commences, if the law does not fix another date, at the moment when the right may be legally exercised (Article 329 of the Civil Code).
1.16.7
Since an additional VAT assessment is at issue regarding a certain and determined tax fact evidenced by an invoice issued on 06/10/2010, indicated in the periodic IVA declaration for the 4th quarter 2010, which was submitted within the legal deadline on 14/02/2011, and this being a tax of single obligation (and not a periodic tax), the beginning of the statute of limitations period is counted from the start of the civil year following that in which the exigibility of the tax occurred, pursuant to Article 45, paragraphs 1 and 4 of the LGT, by virtue of Article 94, paragraph 1 of the VAT Code, that is, in this case from 01/01/2012.
1.16.8
Counted from 01/01/2012, the four-year legal period of the statute of limitations for the right to make a VAT assessment was completed on 01/01/2016, pursuant to Article 45, paragraphs 1 and 4 of the LGT, by virtue of Article 94, paragraph 1 of the VAT Code.
1.16.9
The VAT assessment and compensatory and default interest in question were only notified to the Claimant via CTT on 12/09/2018, that is, well after the statute of limitations period for the right to make an assessment had expired on 01/01/2016, which requires the annulment of the challenged act, with the legal consequences thereof.
1.16.10
The alleged omission of prior hearing can only be considered a non-essential formality if it were demonstrated that, even without such prior hearing having been provided, the final decision of the procedure could not be different, which is not the case.
1.16.11
Since it is lawful for the Claimant to produce evidence of the prerequisites of Article 14, paragraph 1, subparagraph b) of the VAT Code through any means of proof, under the principles of the inquisitorial system and the free admissibility of evidence that apply in tax law, it appears to us that the omission of prior hearing cannot be downgraded to non-essential, which also requires the annulment of the challenged act, with the legal consequences thereof.
1.17
The position of the Respondent, expressed in the reply and the pleadings, can be summarized as follows:
1.17.1
According to the Respondent, the Claimant does not challenge the contested assessment on the basis of a defect of violation of law due to error regarding facts or law, and it is not a matter in dispute in the proceedings that the absence of the customs documentation proving the exemption noted on invoice no. 0045 of 06/10/2010 determines, by virtue of the provisions of paragraph 8 and paragraph 9 of Article 29 of the VAT Code, the obligation for the supplier of the goods to make the corresponding VAT assessment. The Claimant also does not challenge the reasons of fact and law that served as the basis for the decision that refused the tax refund request in the amount of €35,000.00.
1.17.2
Although it appears from the content of the request for arbitral pronouncement that the Claimant does not challenge the contested assessment on the basis of a defect of violation of law due to error regarding facts or law, it was found that in the examination of the witness, in accordance with the Claimant's representative, it concerned the commercial transaction underlying the invoice that gave rise to the additional VAT assessment now contested. In this manner, as a precaution, and although it is considered that the illegality of an assessment due to defect of violation of law is a matter which, not being raised by the Claimant in its request for arbitral pronouncement nor being subject to ex officio knowledge, does not fall within the purview of the Arbitral Tribunal to decide, under penalty of exceeding its jurisdiction, the Respondent challenges all matters of fact that the Claimant sought to prove through the examination of its witness, both regarding the transaction underlying the invoice and other matters of fact.
1.17.3
For this type of situations, triggered by the exercise of the right to deduct tax and consequent refund of the accumulated carry-forward in successive periods, paragraph 3 of Article 45 of the LGT expressly provides that "the statute of limitations period is that of the exercise of such right."
1.17.4
Precisely, in the case of VAT, the determination of the tax owed implies the exercise by the taxpayer of the right to deduct the tax borne upstream in the taxable transactions it carries out (Article 19 VAT Code), and when a tax credit is determined, it may be carried forward in the following periodic declarations, maintaining a situation of tax credit, or, when it so chooses, provided the respective prerequisites are met, it may request the refund of the tax. In the case at hand, with an accumulated tax credit situation that the Claimant sought to recover, having for this purpose submitted a refund request in its DP1712T, and with the refund sought relating to a credit that has been carried forward by the Claimant successively since the tax period of 2007, it was necessary that the inspection activity carry out an analysis of the Claimant's VAT account for the period from 2007 to 2017.
1.17.5
It is evident that the exercise of the right to deduct the tax borne upstream, which is part of the mechanism for determining the tax owed, is not separable, in its analysis, from the assessed tax. Therefore, the conclusion regarding the Claimant's entitlement to the requested refund involves analysis of the taxable transactions carried out and the tax borne to verify the balance payable or to be refunded to the taxpayer. It would be manifestly contrary to the principle of justice to have a legal solution that allowed taxpayers to request the refund of tax collected more than 4 years ago and, simultaneously, prevented the AT, in the course of its analysis of the taxpayer's account, from the possibility of correcting the tax in the State's favor.
1.17.6
The verification of the prerequisites of the refund, in order to ascertain whether it is due, must be performed at the moment when the refund is requested, and the reasons of legal certainty underlying the statute of limitations regime for the right to make an assessment are not applicable in that case. As appears from the case law delivered on this question of law, it would be contrary to the principle of legality and the material truth to apply the preclusory effect of the statute of limitations for the right to make an assessment in situations where the taxpayer requests the refund of tax. This position is supported by case law (see, judgment of the TCA Sul of 12/05/2016, in case no. 08095/14).
1.17.7
With regard to the exercise of the right to prior hearing, the Respondent challenges what was stated by the Claimant since it is proven in the proceedings that the Claimant was notified of the draft inspection report through an official letter sent by registered mail to its tax address.
1.17.8
Even if this were not the case, a hypothesis that is raised by a legal duty of representation, it must be noted that case law is unanimous in considering that the omission of the formality intended to ensure the exercise of the right to prior hearing is not essential when it is demonstrated that, even without it having been complied with, the final decision of the procedure could not be different.
1.17.9
In fact, and in the situation of the present proceedings, considering the legal framework involved in the proceedings, more specifically subparagraph b) of paragraph 1 of Article 14 of the VAT Code and paragraphs 8 and 9 of Article 29 of the VAT Code, the requirement for a customs document proving the exemption noted on the invoice in question is unequivocal, the lack of which determines the obligation for the supplier of the goods to make the corresponding VAT assessment.
1.17.10
Despite the Tax Authority's requests, the Claimant does not possess the customs document in question, nor has it invoked in these proceedings any other document or justification capable of demonstrating the right to that exemption.
1.17.11
Thus, it is necessary to conclude that in the situation of the present proceedings the exercise of the right to prior hearing did not appear capable of altering the draft corrections that would come to be made final (in the same sense see, judgment of the STA of 16/11/2011, in case no. 0539/11).
1.18
The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to Articles 2, paragraphs 1, subparagraph a), 5 and 6, paragraph 1, of the RJAT.
The parties have legal personality and capacity, are properly interested and are regularly represented, in accordance with the provisions of Articles 4 and 10, paragraph 2, of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March.
1.19
When the Respondent submitted its pleadings, it attached a document entitled "Collection of news items about the Olympic horse ..., on the internet sites indicated" in which three news items are transcribed, inserted on websites, relating to the said horse (see, 1.13 supra).
The Claimant commented on the document identified above (see, 1.14 supra), having requested its removal from the proceedings and the consideration as not written of points nos. 9 and 10.3 of the Respondent's pleadings, on account of the invocation of secondary nullities, pursuant to Articles 195, paragraph 1, and 199, paragraph 1, of the Code of Civil Procedure (CPC).
The Respondent exercised its right of contradiction, considering the nullities invoked by the Claimant to be unfounded and, consequently, the request for removal of the document attached with the pleadings should be denied and also the request to consider points nos. 9 to 10.3 of the pleadings as not written (see, 1.15 supra).
It is necessary to rule on this matter.
Pursuant to Article 10, paragraph 2, subparagraphs c) and d) of the RJAT, documents must be attached to the pleadings containing the factual circumstances that are to be proven.
In accordance with Article 29, paragraph 1, subparagraph e), of the RJAT, the civil procedural regime is subsidiarily applicable to the tax proceedings, and, as follows from paragraph 2 of such provision, such application must be made in terms properly adapted to the reality of tax proceedings and to the specificities of each action.
Pursuant to Article 423, paragraph 1, of the CPC, documents must be attached to the pleadings in which the factual information to which such documents relate is invoked. Under paragraphs 2 and 3 of this rule, the late filing of documents is permissible under the following terms:
"2 - If not attached to the respective pleading, documents may be presented up to 20 days before the date on which the final hearing is held, but the party is ordered to pay a fine, unless it proves that it was unable to file them with the pleading.
3 - After the time limit provided for in the previous paragraph, only documents whose presentation was not possible up to that moment are admitted, as well as those whose presentation became necessary as a result of a subsequent occurrence."
The application of this rule properly adapted to arbitral proceedings leads to the conclusion that in cases where there has been no trial hearing, the procedural reference to be taken into account is the moment of the pleadings and not that of the hearing.
It is verified, however, that the Respondent did not attach the document to the proceedings until the twentieth day prior to the beginning of the deadline for filing pleadings.
The document whose filing was requested by the Tax Authority concerns facts connected with matters contained in the request for arbitral pronouncement (see, nos. 5, 6 of the request for arbitral pronouncement) and which could have been attached to the Reply, furthermore, none of the hypotheses in which, exceptionally, the filing of documents subsequent to the deadline is considered permissible is verified.
In these terms, the said filing is not admitted and the document improperly presented by the Respondent with the pleadings shall be removed from the proceedings.
The Claimant's request to consider points nos. 9 and 10.3 of the Respondent's pleadings as not written is denied, because the said points of the Respondent's pleadings consist of considerations about the production of witness evidence that the Respondent legitimately makes in the exercise of its powers within the arbitral proceedings, and it falls to this Tribunal to assess their relevance taking into account the issues raised in the proceedings.
1.20
The proceedings are not affected by any nullities.
There are no other circumstances that prevent the Tribunal from deciding the merits of the case.
In these terms, the Arbitral Tribunal is regularly constituted to consider and decide the subject matter of the proceedings.
2. MATTERS OF FACT
2.1 Facts Established as Proven
With relevance for the consideration and decision of the issues raised, the following facts are established and proven:
A) The Claimant is a limited liability company whose corporate purpose is "Construction, promotion and commercialization of real estate developments, operation of tourist, hotel and similar complexes, purchase and sale of real estate, purchase of real estate for resale and management of real estate investments owned or by third parties" (see, Document no. 4 attached to the request for arbitral pronouncement);
B) The Claimant develops, in the framework of its activity, an equestrian project with the objective of promoting and developing "..." and other equestrian modalities (see, Final Inspection Report contained in the Administrative File, Part I);
C) The Claimant, since 01-10-2005, is registered under the normal VAT regime, with quarterly periodicity and with the right to full deduction of VAT borne (see, Final Inspection Report contained in the Administrative File, Part I);
D) The Claimant issued on 06-10-2010 invoice no. 0045 addressed to ..., resident in ..., ..., ..., concerning the sale of the horse "...", for the price of €450,000.00 (four hundred and fifty thousand euros), by contract executed on 11-08-2010 and containing the following reference: "Export – goods transported outside the Community by purchaser without residence or establishment in national territory – Exempt from VAT pursuant to Article 14, paragraph 1-b)" (see, Document no. 5 attached to the request for arbitral pronouncement);
E) The sale identified in the preceding subparagraph was declared in field no. 8 of Table 06 of the Periodic VAT Declaration for the 4th Quarter/2010, identified under no. ..., filed on 14-02-2011 (see, Document no. 6 attached to the request for arbitral pronouncement);
F) The Claimant submitted a request for VAT refund on 12-02-2018, relating to the 4th quarter/2017, under no. ..., in the amount of €35,000.00 (see, Administrative File, Part I);
G) In compliance with Service Order no. OI2018..., of 16-02-2018, Team 55 of Division V of Department C of the Tax Inspection of the Financial Authority of Lisbon carried out an internal inspection procedure to analyze the VAT refund request identified in the preceding subparagraph; (see, Administrative File, Part I);
H) The Claimant was notified of the Draft Corrections to the Inspection Report for the purpose of exercising the right to prior hearing, in accordance with the provisions of Article 60 of the LGT and Article 60 of the RCPITA, through official letter no. ..., of 27-07-2018, from the Tax Inspection Services, Division V, of the Financial Authority of Lisbon, sent to its tax address by registered mail from CTT, postal registration RH...PT, (see, Administrative File, Part II);
I) The Claimant did not exercise its right to prior hearing with respect to the draft Inspection Report identified in the preceding subparagraph;
J) The Claimant was notified, pursuant to Article 62 of the RCIPTA, of the Final Report, through official letter no. ..., of 21-08-2018, from the Tax Inspection Services of the Financial Authority of Lisbon, sent by registered mail from CTT, postal registration RH...PT, (see, Administrative File, Part I);
K) The Final Report of the inspection procedure, identified in the preceding subparagraph, contains the following:
"The company has been in a position of tax credit since the beginning of activity, 4th quarter of 2005, having reached in the period under review the amount of €70,555.74, despite the refund request being only €35,000.00.
It should be noted that in 2006 and 2007 there were 2 VAT refund requests, in the amounts of €35,636.92 + €53,809.34, which were fully refunded.
The periods of 2007 and 2008 corresponded to a period of investment by A... in its tourist-sports complex. During this period the construction invoices were issued with reverse charge mechanism, and the taxable person made the corresponding VAT assessment and deduction. Commercial operation, with invoices to customers, began in January 2009.
The tax credit originated from VAT borne and deducted with the initial investment made in the construction of the equestrian complex, B..., and later with the difference between VAT assessed and VAT deducted which in recent years has been negative as the revenue recorded by the company does not cover the costs borne. The revenue recorded comes from the leasing of spaces and facilities for services related to various stables, in varying numbers (35, 33, 23), according to monthly invoices, with B..., Lda, NIF ... and others as clients.
Documentation was requested, VAT account statements and documents recorded in the periods from 2007 to 2017, excluding the 2014 period as it was the subject of an external inspection action carried out on the basis of Service Order no. OI2017... of 2017/03/07.
- Transfer of a horse to a client based in Brazil
From the analysis of said documentation, it was verified that the taxable person recorded an export transaction relating to the transfer of a horse "..."(…). For the amount of €450,000.00, without VAT assessment, stating in the invoice that this is an operation exempt pursuant to Article 14, paragraph 1 b) of the VAT Code.
However, pursuant to paragraph 8 of Article 29 of the VAT Code, the said exemption must be proven through the appropriate customs document, in this case the "Certificate of export for the shipper/exporter".
Pursuant to paragraph 9 of Article 29 of the VAT Code, the absence of said evidential document determines the obligation for the supplier of the goods or service provider to make the corresponding VAT assessment (…)
The fact that the transport of the goods shipped was the responsibility of the purchaser is not relevant for this purpose, as paragraph 9 of Article 29 of the VAT Code expressly states that the absence of the evidential document (appropriate customs document) determines the obligation for the supplier of the goods to make the corresponding VAT assessment.
Accordingly, there is a failure to assess VAT in the amount of €94,500.00, calculated by applying the normal VAT rate at the time of the transaction, October 2010 (21%) to the value of the transfer of the goods, €450,000.00. (…)
Conclusion
In accordance with the infractions described in points 1 and 2, VAT was found to be outstanding in this inspection action in the total amount of €95,075.00 (€94,500.00 + €575.00). As the value of the accumulated credit at the end of the tax period 2017/12T is €70,555.74, resulting consequently in the rejection of the refund request in the amount of €35,000.00, the cancellation of the remaining credit value and also the making of an additional assessment in the amount of €24,519.26.
The said infractions are penalized through Article 114 of the RGIT."
(see, Final Inspection Report, contained in the Administrative File, Part I, and which is deemed to be fully reproduced for all legal purposes).
L) The Claimant was notified of the correction made to the value of the excess to be carried forward existing in the VAT account, with the grounds contained in the inspection report through the Correction Document under no. ... (see, Document no. 8 attached to the request for arbitral pronouncement);
M) The Claimant was notified of the additional VAT assessment no. 2018..., of 08-09-2018, in the amount of €24,519.26, (see, Document no. 2 attached to the request for arbitral pronouncement);
N) The Claimant was notified of the assessment of compensatory and default interest in the amount of €572.86 (see, Documents no. 3 attached to the request for arbitral pronouncement).
2.2 Facts Established as Not Proven
There are no other facts with relevance for consideration of the merits of the case that have not been proven.
2.3 Reasoning for the Proven and Not Proven Matters of Fact
With respect to the matters of fact, taking into account the provisions of Article 123, paragraph 2, of the CPPT and Article 607, paragraph 3, of the Code of Civil Procedure (CPC), applicable by virtue of Article 29, paragraph 1, subparagraphs a) and e), of the RJAT, the Tribunal does not have to rule on everything that was alleged by the parties; rather, it is its duty to select the facts that matter for the decision and to distinguish the proven matters from the not proven matters.
Thus, in accordance with Article 596 of the Code of Civil Procedure (CPC), applicable by virtue of Article 29, paragraph 1, subparagraph e), of the RJAT, the facts relevant to the judgment of the case were selected and defined in function of their legal relevance, which was established taking into account the questions of law raised.
As for the matters of fact established as proven, the Arbitral Tribunal's conviction was based on the free assessment of the documentary evidence attached to the proceedings, whose authenticity was not challenged, and on the testimony of witness C..., who appeared to be impartial in his testimony and to have knowledge of the facts he reported.
Having regard to the positions assumed by the parties, in light of Article 110, paragraph 7, of the CPPT, the documentary evidence attached to the proceedings, and the witness evidence identified above, the facts listed above were considered proven, with relevance for the decision.
3. MATTERS OF LAW
3.1 Issues to Be Decided
The two issues to be decided raised in the present proceedings by the Claimant concern:
(i) the alleged failure to notify the VAT assessment and the compensatory and default interest within the statute of limitations period for the right to make an assessment, in accordance with the provisions of Article 45 of the LGT (see, nos. 23 to 33 of the request for arbitral pronouncement);
(ii) the alleged omission of an essential formality, pursuant to the provisions of Article 60, paragraphs 1, subparagraphs a) and e), of the LGT and Article 60 of the RCPIT, of notification for prior hearing of the draft inspection report (see, nos. 34 to 38 of the request for arbitral pronouncement).
It is necessary to rule on this matter.
3.2 Application of Law to the Case Sub Judice
3.2.1
With respect to the first issue to be decided, this Arbitral Tribunal subscribes to the position expressed in Arbitral Decision No. 48/2015-T, of 3 October 2015, when it states:
"VAT, as a consumption tax, is characterized essentially as a typical indirect tax, which affects each one of the transactions or service provisions and allows 'taxable persons to relieve themselves of the burden of tax borne upstream, ensuring that taxation affects, at each stage of the economic circuit, the value added, being borne mainly by the final consumer'. Each taxable person assesses tax, at the applicable legal rate, on his sales or service provisions, increasing it in the value of invoices or equivalent documents that it passes to its customers. At the end of each period (the month or quarter) the taxable person pays to the public coffers only the difference between the tax so passed on in its active operations and the tax borne in its acquisitions and contained in the invoices of which it was the recipient. The determination of VAT payable or VAT to be recovered constitutes the result of the tax assessment operation, which is normally carried out by the taxable persons themselves (self-assessment). (…) resulting from the concept of assessment, as the determination of VAT relating to each tax period effected by the taxable person, whether a positive value – VAT owed to the public coffers – or a negative value – tax credit against the public coffers, then it should be concluded that both situations should be seen, purely and simply, as values of the periodic VAT determination integrating thus, in both cases, the concept of assessment." From another perspective, a distinction tends to be made between VAT assessed by the taxable person in the active operations that it carries out and VAT deducted by virtue of passive operations associated with its activity, considering that 'only as to tax assessed by the taxable person in its outputs are the notions of taxable event and exigibility applicable', in particular for the purposes of applying the statute of limitations rules (Article 45 of the LGT).
A concept that appears to be endorsed in Article 22, paragraph 1, of the VAT Code when it refers to the right to deduction arising at the moment when the deductible tax becomes exigible, 'being effected by subtraction from the total amount of tax owed for taxable operations by the taxable person during a declaration period, the amount of deductible tax, exigible during the same period.'
As for VAT in which the taxable person incurs in its inputs, it is not generated in its legal sphere nor is it exigible to it, constituting (…) a credit which it may or may not exercise against the State, exercising the right to deduction. The doctrine converges, however, that it is through the right to deduction that a structural principle of the tax is guaranteed (that of neutrality), because through the exercise of this right 'the taxable person is assured of the relief from the tax paid in the acquisition of the essential and necessary inputs for the pursuit of an economic activity (…)'. However, the legislator, in deference to other essential principles of the legal order, such as those of certainty and legal security, and on the basis of the principle of proportionality, establishes in Article 98, paragraph 2, of the VAT Code that the 'right to deduct tax', or 'refund of tax paid in excess', may only be exercised by the taxable person up to 4 years after the birth of the right to deduction or overpayment of tax. In any event, it is verified that the Portuguese legislator, although with different rules for the exercise of the respective right, opted to fix an equal period, both for the statute of limitations for the right to deduct, and for the right to make an assessment, which, as we will see, is also four years. These concepts should be distinguished from the situation of VAT refund, to which paragraphs 4 and following of Article 22 of the VAT Code refer, where it is established that 'whenever the deduction of tax to which there is entitlement exceeds the amount owed for taxable operations in the corresponding period, the excess is deducted in the following tax periods', clarifying the conditions necessary for the taxable person to be able to request the refund of that credit.
To the concept of refund here used, the statute of limitations period of Article 98 of the VAT Code is not applicable, because the scope of application of Article 22 of the VAT Code covers only situations in which the assessment and deduction of tax were effected correctly resulting from its balance a VAT credit in the taxable person's favor, which will be used in subsequent periods (in a running account logic) giving the taxable person the faculty to request the refund of the same and thus avoid its carry-forward and application in subsequent periods. Thus it is understood that to this refund no statute of limitations period applies, indeed, the taxable person having the right to obtain the refund of a VAT credit generated without temporal limitation, that is, originated by the deduction of tax in periods that are beyond the general statute of limitations period (of 4 years).
Similarly, also on the part of the Tax Administration, it is not limited here by the statute of limitations period for the right to make an assessment, because in assessing the existence of the prerequisites of a refund request, it merely carries out corrections to the VAT credit, rejecting the refund in whole or in part and correcting in this manner the taxable person's account. This means that from the rejection in whole or in part (expressed or silent) of a refund request no obligations result for taxable persons that did not previously exist. As was stated in the Judgment of the STA of 12/7/2007, case no. 303/07, "with the refund request concerning the totality of the tax relationships relating to a determined period, its definitive content is necessarily to be defined, whereby it cannot be justified, by the reasons of legal certainty underlying the statute of limitations regime for the right to make an assessment, that there be restrictions to the determination and relevance of the facts that matter for their definition".
Taking into account the above, this Tribunal considers that the verification of the prerequisites of VAT refund must be made at the moment when the refund is requested, not being applicable, in that case, by the reasons previously stated, the reasons of legal certainty that underlie the statute of limitations regime for the right to make an assessment.
In these terms, the claim made by the Claimant with respect to the first issue to be decided is not well founded.
3.2.2
As to the second issue to be decided, taking into account the facts established as proven and contained in paragraph 2.1, subparagraph H), above, it is verified that the Respondent notified the Claimant for the purpose of prior hearing of the draft inspection report, whereby, in this regard, the claim made by the Claimant is not well founded.
4. DECISION
The Arbitral Tribunal hereby decides:
a) Remove from the proceedings the document attached by the Respondent in the Pleadings, in accordance with paragraph 1.19 above;
b) Judge the request for arbitral pronouncement to be entirely without merit;
c) Condemn the Claimant to pay the costs in the present proceedings.
5. VALUE OF THE PROCEEDINGS
The value of the proceedings is hereby fixed at €25,092.12 (twenty-five thousand and ninety-two euros and twelve cents), in accordance with Article 97-A, paragraph 1, subparagraph a), of the Code of Tax Procedure and Proceedings, applicable by virtue of subparagraphs a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulation on Costs in Tax Arbitration Proceedings.
6. COSTS
The arbitration fee is hereby fixed at €1,530.00 (one thousand five hundred and thirty euros), in accordance with Table I of the Regulation on Costs in Tax Arbitration Proceedings, to be paid by the Claimant, since the request was entirely without merit, in accordance with the provisions of Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4, of the said Regulation.
Let notice be given.
Lisbon, Center for Administrative Arbitration, 26 August 2019.
The Arbitrator
Olívio Mota Amador
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