Process: 661/2016-T

Date: May 31, 2017

Tax Type: IVA

Source: Original CAAD Decision

Summary

In CAAD Process 661/2016-T, an agricultural company challenged additional VAT assessments totaling €5,140.23 relating to the qualification of schist wall repair and recovery services on agricultural terraces in the Douro region. The Tax Authority (TA) classified these services as construction works subject to the reverse charge mechanism under Article 2(1)(j) of the Portuguese VAT Code, requiring the claimant to self-assess VAT rather than accept the 6% reduced rate applied by suppliers. The claimant argued that schist walls integrated into agricultural terraces are inseparable from the agricultural land itself, serving as essential retaining structures for embankments that enable vine and olive cultivation in the region's distinctive terraced morphology. Without these walls, the agricultural land could not exist. The company distinguished these agricultural support services from traditional construction works on buildings or boundary walls, emphasizing that the primary objective is maintenance of productive agricultural land, not construction activity. The claimant referenced TA's own Binding Information 5964/2013, which classified similar 'land preparation for vine planting' services under Item 4.1 of List I, confirming their agricultural nature and eligibility for reduced VAT rates. The core legal issue centered on whether tax qualification should follow the substance of operations—agricultural land maintenance—or their formal characteristics as wall reconstruction. The claimant contended that uniform and systematic VAT treatment requires recognizing these services as agricultural cultural interventions rather than civil construction works, thereby excluding them from reverse charge obligations applicable to construction services under Portaria 19/2004.

Full Decision

Arbitral Decision

I – Report

1.1. A…, S.A., a commercial company with registered office in …, …, registered in the Commercial Registry Office of … under the unique registration number and collective person number … (hereinafter designated as "Claimant"), having been notified of the additional VAT assessments identified with number …, number…, number …, number…, number …, number…, number…, number …, number …, number … and number…, relating to the periods 1402M to 1412M, which gave rise to account settlement statements relating to compensations with numbers 2016 …, 2016 …, 2016 … and 2016…, in the total amount of €5140,23, presented, on 31/10/2016, a request for the establishment of an Arbitral Tribunal, pursuant to the provisions of articles 2nd, no. 1, subparagraph a), 5th, no. 3, subparagraph a), 6th, no. 2, subparagraph a), and 10th and following of Decree-Law no. 10/2011, of 20/1 (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as "LRAT"), in which the Tax and Customs Authority (TA) is the Respondent, with a view to "obtaining an arbitral decision regarding the declaration of illegality, and consequent annulment, of the additional VAT assessments and respective compensations of the account settlement statements above identified and, in addition, the reimbursement of the amount of tax wrongly paid by the Claimant and the respective compensatory interest, pursuant to article 43rd of the General Tax Law".

1.2. On 19/1/2017, this Single Arbitral Tribunal was established.

1.3. Pursuant to article 17th, no. 1, of the LRAT, the TA was cited, as the Respondent party, to submit its answer, pursuant to the said article. The TA submitted its answer on 1/3/2017, having argued, in summary, to the effect of the total lack of merit of the Claimant's request.

1.4. By order of 22/5/2017, the Tribunal considered, pursuant to article 16th, subparagraphs c) and e), of the LRAT, and 19th of the LRAT, that the production of testimonial evidence and the meeting of article 18th of the LRAT were dispensable, and that the case was ready for decision. The date of 31/5/2017 was further fixed for the delivery of the arbitral decision.

1.5. The Arbitral Tribunal was regularly constituted, is materially competent, the case does not suffer from defects that would invalidate it, and the Parties have legal personality and capacity, being legitimate.

II – Parties' Arguments

2.1. The Claimant alleges in its initial petition that: a) "the correction proposed by the TA is essentially based on its understanding regarding the qualification of repair and/or recovery services of slate walls integrated in agricultural land, for the support of embankments, as common construction services, subject to the application of the reverse charge regime, pursuant to subparagraph j), of no. 1, of article 2nd of the VAT Code"; b) "by virtue of the fact that the services in question are of an agricultural nature, as will be demonstrated, the invoices supporting them were issued by the Claimant's suppliers with VAT at the rate of 6%, without applying the reverse charge regime applicable to construction services, provided for in subparagraph j), of no. 1, of article 2nd of the VAT Code"; c) "nevertheless, in the TA's understanding, which considers that the repair services of slate walls integrated in agricultural crops are mere construction services and not services of an agricultural nature, the reverse charge regime should have been applied, by issuing the corresponding invoices with the mention 'VAT self-assessment' - pursuant to no. 13 of article 36th of the VAT Code, with the VAT assessment being the responsibility of the Claimant (purchaser of the services)"; d) "the Claimant cannot agree with the TA's understanding, which, as will be demonstrated, causes a distortion in the application of tax rules, disregarding the substance of the operations that are at the origin of the corrections it has made"; e) "in the context of its agricultural activity, the Claimant cultivates a set of crops/agricultural operations, through which it produces, in particular, wine and olive oil, and which are specifically located in the Douro region. In this sense, the Claimant is frequently faced with the need to resort to recovery and/or reconstruction services of slate walls, which are an integral part of the agricultural land on which the vineyards and agricultural operations are located"; f) "in fact, as a result of the morphological characteristics peculiar to the land located in the Douro region – marked by terraces – in order for it to be possible to create, maintain or develop any crop/agricultural operation, slate walls are invariably necessary, which are installed and merged with the land itself, and which are determinant in the support of the embankments"; g) "[thus,] these walls cannot be framed in the more traditional concept of a wall [...] [since] we are dealing here with walls that integrate the very terraces where the vines and olive trees are planted. That is, slate walls are absolutely inseparable from the agricultural land itself, in that, without them, the land and the crop/agricultural operation would not exist"; h) "the lands in the Douro region could not even exist without the retaining walls, which, for this reason, are inseparable from them. [...] what is not in question is the repair and/or reconstruction of any wall on agricultural land, which is intended to divide a piece of land or to separate one piece of land from another"; i) "whenever the Claimant proceeds, for example, to contract repair or construction services of the walls of its facilities (and not of the crops) – those, indeed, construction services – it applies the reverse charge, settling the respective VAT. It being important to distinguish these services, those of construction proper, carried out on real property, or on walls surrounding farms, in which the sole objective of the service consists of an intervention related to a specific construction, from services of an agricultural nature, whose primary objective consists of the maintenance of the agricultural land itself, and not in carrying out any construction, in order to qualify it as part of the concept of construction"; j) "by considering the applicability of the reduced rate to these services [of 'preparation of land for vine planting', according to the Binding Information regarding Process no. 5964, of 18/11/2013], by their inclusion in Item 4.1 of List I [attached to the VAT Code], the TA confirms that, in substance, we are faced with land preparation services for agricultural purposes, and not with construction services [...]. That is, the TA, by framing the operations at issue in Item 4.1 of the table attached to the VAT Code, demonstrates unequivocally that it is inseparable from the concept of 'cultural intervention' provided for there, and should be covered by the set of services/operations that benefit from the reduced VAT rate, as a result of their close connection with agriculture"; l) "here, as in any other operation, Tax Law should pay attention to its substance, as well as to the integrated and systematic application of the provisions instituted by the legislator"; m) "[it is necessary] to frame it uniformly and systematically in VAT, with consideration of the substance of the operations, avoiding the qualification of the operation as an agricultural service for the purposes of determining the applicable VAT rate and as a construction service for the purposes of applicability of the reverse charge regime"; n) "the TA considers that, 'being construction or reconstruction of walls supporting terraces or boundary walls, even if they relate to agricultural properties, there is the existence of construction services, provided for in Portaria no. 19/2004, of 10 January. However, it should be noted, once again, it is the substance of the operation that should be relevant for the application or non-application of the reverse charge regime, and in this case, we are not faced with construction services, but rather with cultural interventions. [...] we are not faced with a construction service because the repair/reconstruction is carried out specifically on walls that are an integral part of the agricultural land itself, that is, we are faced with an intervention in the crop itself, and not in common walls, intended to divide land into distinct parts or to separate one piece of land from another"; o) "[if for the services of surriba] the TA, mindful of the substance of the work and, even considering that the services in question are, in the abstract, construction services, understands, and rightly so, that, as a result of their eminently agricultural nature, they should not be considered as construction services, for the purposes of applying the reverse charge regime [then,] consequently, it is necessary that the TA maintain a coherent position and that, in all cases, pay attention to the substance of the operations actually carried out"; p) "for agricultural purposes, the preparation and maintenance of the walls is as relevant as the maintenance of the land itself, in that one does not exist without the other"; q) "regardless of whether or not the reverse charge is applied, it is important to note that the VAT at issue here was actually paid. Having been assessed by the Claimant's suppliers on all invoices at issue here, with their respective inclusion in its periodic VAT declarations, as confirmed by the suppliers themselves in the Declarations attached here and given as fully reproduced (See Doc. 18 and 19). In this way, it is found that, in the situation in question, there was no damage whatsoever to the State, in that the tax was actually assessed. That is, the TA cannot require the Claimant to settle €5230,14 of VAT that, in reality, was already paid, under penalty of duplicating the tax collection"; r) "the additional VAT assessments relating to the year 2014 should be annulled, as well as all subsequent acts, in particular the account settlement statements, and the TA should be sentenced to reimburse the tax paid by the Claimant, in the amount of €5140,23, as well as in the payment of the compensatory interest that may be due under the terms and for the purposes of the provisions of articles 30th, no. 1, subparagraph e), and article 43rd, both of the GTL, and article 61st of the TCPC."

2.2. The Claimant, in summary, requests that the Arbitral Tribunal "deign to grant this request for the establishment of an arbitral tribunal and arbitral pronouncement, declaring the illegality of the additional VAT assessments identified with number…, number…, number…, number…, number…, number…, number…, number…, number…, number … and number…, relating to periods 1402M to 1412M, in the total amount of €5230,14, and which gave rise to the account settlement statements relating to compensations with numbers 2016 …, 2016 …, 2016 … and 2016 …, in the total amount of €5140,23, and sentencing the TA to reimburse the amount of tax paid by the Claimant, plus the respective compensatory interest."

2.3. For its part, the TA alleges, in its answer: a) that, "when construction services are at issue, the reverse charge rule provided for in subparagraph j) of no. 1 of article 2nd of the VAT Code should be applied, it being certain that if these services are provided within the framework of a cultural intervention carried out on an agricultural or forestry operation, the reduced tax rate is applied to it, as it falls within item 4.1 of List I attached to the VAT Code. That is, it should be the recipient of the services who self-assesses the tax, in this case, self-assessing it at the reduced rate. [...]. Therefore, and without further ado, it is easily concluded that the applicability or non-applicability of the reverse charge rule, provided for in subparagraph j) of no. 1 of article 2nd of the VAT Code, does not interfere in any way with the application of the reduced tax rate, when this is to be applied"; b) that "the Claimant believes that the purpose of the work is relevant for the application of the reverse charge rule provided for in subparagraph j) of no. 1 of article 2nd of the VAT Code. However, this is not so. Unlike item 4.1 of List I attached to the VAT Code, for the application of this reverse charge rule, the purpose or objective of it is of no importance whatsoever. Nor the need for it to consolidate/support the land in its current morphology, for if that were the case, the reverse charge rule would not apply to the construction of any retaining wall. In fact, any retaining wall of earth intends to consolidate the earth of a given piece of land, in its desired morphological configuration"; c) that "the application of the reverse charge rule provided for in subparagraph j) of no. 1 of article 2nd of the VAT Code depends only on the verification of two requirements, the first being that the services provided are construction services, and the second that the recipient of such services is a taxpayer with the right (total or partial) to deduct the tax borne. Thus, in the case at hand, given that the Claimant is a taxpayer with the right to deduct, the application of that rule will occur whenever the Claimant is the recipient of construction services (as it assumes in article 41st of the B.I.)"; d) that "the said Circular Notice [no. 30101, of 24/5/2007], in its Annex I, has some examples of services that are considered for this purpose to be construction services and, in this, in particular, in the 6th subcategory of category 5, retaining walls are provided for. Moreover, Portaria 19/2004, of 10/01, itself, which establishes the categories and subcategories relating to the construction activity, provides as construction works, in the 6th subcategory of category 5, retaining walls"; e) that, "it being certain that this mechanism [of reverse charge] constitutes a deviation from the normal mechanism of VAT settlement, it is not true that it should be subject to a restrictive interpretation, and such objective finds no support either in Law, Doctrine or Case Law. The application of item 4.1, that one should be interpreted restrictively, as should the exemptions provided for in article 9th of the VAT Code, but not this rule"; f) that "the Claimant's claims [regarding the alleged duplication of collection] entirely lack merit"; g) that, "from all of the above it is clear that the tax acts in question are valid and legal [...], therefore, no error attributable to the services occurred, in this case. Thus, the legal requirements that confer the right to compensatory interest are not met".

2.4. The TA concludes that this request should be "judged to lack merit, with the tax act of assessment in question remaining in the legal order and the respondent entity being absolved of the claim, in accordance with the due and legal consequences."

III – Proven and Unproven Facts and their Grounds

3.1. The following facts are considered proven:

i) The Claimant is a commercial company that has the main activity code "11021 – production of common and liqueur wines", and secondary codes "01261 – olive growing", "55202 – tourism in rural areas" and "01210 – wine growing".

ii) The Claimant now dedicates itself to agricultural exploitation, namely: to the production and commercialization of table wines and Port wines; to agricultural and livestock operations; to tourism, recreational and leisure activities; and to the leasing of spaces for events. In the context of its agricultural activity, it cultivates a set of agricultural operations, through which it produces, in particular, wine and olive oil, and which are located in the Douro region.

iii) The Claimant – given the morphological characteristics of the land located in the Douro region, a region marked by terraces – resorted to recovery and/or reconstruction services of slate walls, necessary for the support of the embankments.

iv) The Claimant is a VAT taxpayer, pursuant to and for the purposes of subparagraph a) of no. 1 of article 2nd of the VAT Code, being framed in the normal monthly periodicity regime of VAT and in the general regime for Corporate Income Tax purposes.

v) The assessments now at issue were notified to the Claimant on 2/8/2016. They are, specifically, the following: additional VAT assessment relating to period 1402M, with number…; additional VAT assessment relating to period 1403M, with number…; additional VAT assessment relating to period 1404M, with number…; additional VAT assessment relating to period 1405M, with number…; additional VAT assessment relating to period 1406M, with number…; additional VAT assessment relating to period 1407M, with number …; additional VAT assessment relating to period 1408M, with number…; additional VAT assessment relating to period 1409M, with number…; additional VAT assessment relating to period 1410M, with number…; additional VAT assessment relating to period 1411M, with number…; and additional VAT assessment relating to period 1412M, with number … (see Docs. 1 to 11). Following the above-mentioned assessments, the Claimant was further notified of: compensations with number 2016 … (in the amount of €2956,32), number 2016 … (€1901,40), number 2016 … (€115,64), and number 2016 … (€166,87). All the tax acts in question were issued following a partial scope tax audit to which the Claimant was subject through Service Order no. OI2015…, which had as its object the VAT for the year 2014.

vi) The correction proposed by the TA in the VAT context, following the said inspection action, was based, as set out in the Audit Report (which was attached as Doc. 17 to the present proceedings), on the understanding that, regarding the qualification of repair and/or recovery services of slate walls integrated in agricultural land, for the support of embankments, these should be considered as common construction services – subject, accordingly, to the application of the reverse charge regime, pursuant to subparagraph j), of no. 1, of article 2nd of the VAT Code.

vii) The Claimant paid all amounts required by the TA (and now disputed), as evidenced by Doc. 16 attached to the proceedings.

viii) The Claimant filed, on 31/10/2016, this request for arbitral pronouncement.

3.2. There are no relevant unproven facts for the decision of the case.

3.3. The facts considered pertinent and proven (see 3.1) are based on the analysis of the positions set out by the parties and the documentary evidence attached to the present proceedings.

IV – On the Law

In the present case, the essential questions that arise are whether: 1) as the TA alleges, regarding the qualification of repair and/or recovery services of slate walls integrated in agricultural land, for the support of embankments, these should be considered as common construction services – subject, accordingly, to the application of the reverse charge regime, pursuant to subparagraph j), of no. 1, of article 2nd of the VAT Code; 2) as the Claimant alleges, the assessments at issue are illegal "due to duplication of collection (article 205th of the TCPC)"; 3) whether the requested compensatory interest is due.

Let us see, then.

  1. The Claimant alleges that "the correction proposed by the TA is essentially based on its understanding regarding the qualification of repair and/or recovery services of slate walls integrated in agricultural land, for the support of embankments, as common construction services, subject to the application of the reverse charge regime, pursuant to subparagraph j), of no. 1, of article 2nd of the VAT Code".

It adds that, "in the context of its agricultural activity, [...] it cultivates a set of crops/agricultural operations, through which it produces, in particular, wine and olive oil, and which are specifically located in the Douro region. In this sense, the Claimant is frequently faced with the need to resort to recovery and/or reconstruction services of slate walls, which are an integral part of the agricultural land on which the vineyards and agricultural operations are located". "[...] in fact, as a result of the morphological characteristics peculiar to the land located in the Douro region – marked by terraces – in order for it to be possible to create, maintain or develop any crop/agricultural operation, slate walls are invariably necessary, which are installed and merged with the land itself, and which are determinant in the support of the embankments". Thus "these walls cannot be framed in the more traditional concept of a wall [...] [since] we are dealing here with walls that integrate the very terraces where the vines and olive trees are planted. That is, slate walls are absolutely inseparable from the agricultural land itself, in that, without them, the land and the crop/agricultural operation would not exist".

For its part, the TA understands that, regarding the qualification of repair and/or recovery services of slate walls integrated in agricultural land, for the support of embankments, these should be considered as common construction services – subject, accordingly, to the application of the reverse charge regime, pursuant to subparagraph j), of no. 1, of article 2nd of the VAT Code.

It considers, therefore, that, for the application of the said reverse charge rule, "the purpose or objective of it is of no importance whatsoever. Nor the need for it to consolidate/support the land in its current morphology, for if that were the case, the reverse charge rule would not apply to the construction of any retaining wall. In fact, any retaining wall of earth intends to consolidate the earth of a given piece of land, in its desired morphological configuration".

On the other hand, it notes that the "Circular Notice [no. 30101, of 24/5/2007], in its Annex I, has some examples of services that are considered for this purpose to be construction services and, in this, in particular in the 6th subcategory of category 5, retaining walls are provided for [by referral from Annex I to 'other services provided for in Portaria no. 19/2004, of 10 January, and not expressly mentioned in Annex II']. Moreover, Portaria 19/2004, of 10/01, itself, which establishes the categories and subcategories relating to the construction activity, provides as construction works, in the [aforementioned] 6th subcategory of category 5, retaining walls".

The question that arises is, therefore, whether the walls at issue here can be considered not to be "retaining walls". And, making an interpretation adjusted to the circumstances of the present case, it is not apparent how the above-mentioned slate walls, even though integrated in agricultural land and for the support of embankments, can not be considered, in light of what the said Circular Notice and Portaria provide, as "retaining walls".

Indeed, a retaining wall or a wall of retention (whatever type it may be) cannot avoid being an integral part of the (agricultural) land it aims to support. Such walls (or structures) are, inevitably, "an integral part of the agricultural land itself" (to use the expressions of the Claimant). However, if this circumstance were to serve to conclude – as the Claimant alleges – that "we are not faced with construction services, but rather with cultural interventions" (or "with an intervention in the crop itself"), then the application of the reverse charge regime would be hindered for all works or tasks that, being unquestionably construction, would consist – as occurs in this case – in the construction or rehabilitation of walls aimed at the retention of agricultural land (note, moreover, that the specificities referred to and invoked with respect to the Douro Valley do not permit, nonetheless, that a different treatment be applied to it than that which is applied to other geographical and geomorphological contexts that also require the construction or rehabilitation of "retaining walls").

By the above, it is concluded that the tax acts at issue are valid and legal, given that, having regard to what the Circular Notice no. 30101, of 24/5/2007, and Portaria 19/2004, of 10/1, provide, there is no basis for not considering the repair and/or recovery services of slate walls integrated in agricultural land, for the support of embankments, as common construction services – subject, accordingly (and also in that the purchaser is a VAT taxpayer in Portugal and here carries out operations that confer, totally or partially, the right to deduce the VAT), to the application of the reverse charge regime, pursuant to subparagraph j), of no. 1, of article 2nd of the VAT Code.

  1. As for the invocation, by the Claimant, of the alleged duplication of collection (see §100th of the i.p.), it is found that the same cannot proceed.

Indeed, and as noted, for example, in the following judgment of the Administrative Court: "I – By application of general rules, the service provider is the VAT taxpayer, but in the so-called situations of reversal of the tax debt or reversal of the subjective element or of the taxpayer (reverse charge), the purchaser of the services or goods becomes the taxpayer of the tax for the respective acquisition, and must accordingly proceed with the settlement of the tax, being assigned the right to deduct the VAT paid for the acquisition of services. II – The duplication of collection, provided for in article 205th of the TCPC, results from the application of the same legal provision more than once to the same tax fact or concrete tax situation, and the non-requirement of a second payment [to the appellant/respondent], to which the invocation of duplication of collection is reduced, can only be justified if the first [required of the service provider] was due, for, if it was not, what was paid may be subsequently reimbursed, through the appropriate means of challenge and revision of the tax act and, in such a situation, it does not justify that the second payment be dispensed with, which is effectively due." (Judgment of the Administrative Court of 27/2/2013, appeal 1079/12).

The cited judgment further states: "the requirements for duplication of collection are not verified, for, as the Public Prosecutor's Office notes, in its learned Opinion, '(...) the payment of VAT made by the construction service provider is not due, since the taxpayer is the appellant. Not being due such payment, it makes no sense whatsoever that the payment by the appellant be dispensed with, that payment being, legally, due'. Thus, the service provider will always have the possibility of being able to obtain the reimbursement of the wrongly assessed tax through the appropriate mechanisms and procedural means. As observed, in this regard, by the Public Prosecutor's Office, in its learned Opinion, 'The improper payment of VAT by the service provider could have been resolved by the return of the invoices by the appellant to be corrected or by requesting that it carry out the regularization provided for in article 78th/3 of the VAT Code, and the appellant would be reimbursed, by the service provider, of the VAT that was wrongly assessed to it. (...). The appellant cannot, however, through the action of judicial challenge, seek reimbursement of the VAT, wrongly paid, by way of annulment of the tax act under review, for, as has been seen, the assessment has legal basis, since the VAT taxpayer is itself and not the service provider, and the alleged duplication of collection does not occur'".

  1. In light of the provisions of no. 5 of article 24th of the LRAT – "payment of interest, regardless of its nature, is due, pursuant to the terms provided for in general tax law and in the Code of Procedural and Tax Procedure" –, it has been understood that this rule permits the recognition of the right to compensatory interest in arbitral proceedings. The analysis of the present request is thus justified.

Compensatory interest is due when it is determined, in gracious reclamation or judicial challenge, that there has been an error attributable to the services from which results payment of the tax debt in an amount higher than that legally due (see article 43rd, no. 1, of the GTL). It is, therefore, a necessary condition for the granting of the aforementioned interest the demonstration of the existence of an error attributable to the services: "The right to compensatory interest provided for in no. 1 of article 43rd of the GTL [...] depends on it having been demonstrated in the proceedings that this act is affected by error as to the presuppositions of fact or of law attributable to the TA." (Judgment of the Administrative Court of 30/5/2012, case 410/12).

Given that there has been, as follows from what was said in 1), no error attributable to the services, this determines the lack of merit of the request for payment of compensatory interest.

V – DECISION

In light of the above, it is decided:

  • To judge the request for arbitral pronouncement to lack merit, with the tax assessment acts now being challenged remaining fully in the legal order, and the respondent entity being absolved of the claim accordingly.

  • To judge the request also to lack merit as far as concerns the recognition of the right to compensatory interest in favor of the claimant.

The amount in dispute is fixed at €5230,14 (five thousand two hundred and thirty euros and fourteen cents), pursuant to article 32nd of the Code of Administrative Procedure and article 97th-A of the Code of Procedural and Tax Procedure, applicable by virtue of the provisions of article 29th, no. 1, subparagraphs a) and b), of the LRAT, and article 3rd, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs against the Claimant, in the amount of €612,00, pursuant to Table I of the RCPAT, and in compliance with the provisions of articles 12th, no. 2, and 22nd, no. 4, both of the LRAT, and the provision in article 4th, no. 4, of the said Regulation.

Notify.

Lisbon, 31 May 2017.

The Arbitrator,

(Miguel Patrício)

Text prepared by computer, pursuant to the provisions of article 131st, no. 5, of the Code of Civil Procedure, applicable by referral of article 29th, no. 1, subparagraph e), of the LRAT.

The drafting of this decision follows the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Are schist wall repair services on agricultural land subject to VAT reverse charge under Article 2(1)(j) of the Portuguese VAT Code?
The CAAD case 661/2016-T addresses whether schist wall repair services on agricultural terraces are subject to VAT reverse charge under Article 2(1)(j) of the Portuguese VAT Code. The claimant argued these services constitute agricultural land maintenance rather than construction services, as the walls are inseparable from the terraced agricultural land in the Douro region and essential for vine and olive cultivation. The Tax Authority classified them as construction works subject to reverse charge, requiring the purchaser to self-assess VAT instead of accepting the 6% reduced rate applied by suppliers.
How does CAAD classify repair and recovery of schist walls integrated in agricultural terraces for VAT purposes?
CAAD examined the classification dispute regarding schist wall repair and recovery integrated in agricultural terraces. The claimant maintained these services should be classified as agricultural support operations under Item 4.1 of List I (cultural interventions), eligible for reduced VAT rates, not as construction services. The company emphasized that schist retaining walls are functionally inseparable from the terraced land itself, serving as structural support for embankments that enable agricultural production, distinguishing them from traditional construction walls intended to divide properties or enclose buildings.
Can agricultural support services such as schist wall maintenance be treated as construction civil works for IVA reverse charge?
The central issue in Process 661/2016-T is whether agricultural support services like schist wall maintenance on terraces can be treated as civil construction works for VAT reverse charge purposes. The claimant argued against this classification, noting that the Tax Authority's own Binding Information 5964/2013 recognized similar land preparation services as agricultural in nature, applying reduced rates under Item 4.1 of List I. The company contended that uniform VAT treatment requires focusing on the substance of operations—agricultural land maintenance—rather than formal characteristics that might suggest construction activity.
What is the VAT treatment of additional assessments related to the reclassification of agricultural services as construction services in Portugal?
Additional VAT assessments totaling €5,140.23 were issued for periods 1402M to 1412M based on reclassification of agricultural terrace wall services from agricultural operations (6% reduced rate) to construction services subject to reverse charge under Article 2(1)(j) of the VAT Code. This reclassification required the claimant to self-assess VAT as the service recipient rather than accepting tax charged by suppliers. The company challenged this treatment, arguing for consistent qualification of schist wall maintenance as agricultural cultural interventions throughout VAT application, not construction services.
How does the CAAD arbitral tribunal review disputes over IVA reverse charge obligations on rural land maintenance services?
The CAAD arbitral tribunal in Process 661/2016-T reviewed disputes over VAT reverse charge obligations on rural land maintenance services, specifically schist wall repair on agricultural terraces. The tribunal considered arguments regarding the substance versus form of operations, the functional integration of retaining walls with agricultural land in the Douro region's terraced morphology, consistency with prior Tax Authority guidance on agricultural land preparation services, and whether systematic VAT interpretation requires uniform qualification of operations as agricultural rather than bifurcated treatment as agricultural for rate purposes but construction for reverse charge obligations.