Summary
Full Decision
ARBITRAL DECISION
The Arbitrator Alexandre Andrade, appointed by the Ethics Council of the Administrative Arbitration Centre (hereinafter referred to simply as CAAD) to form the Singular Arbitral Tribunal, constituted on 18 March 2019, decides as follows:
1. Report
A... (hereinafter referred to simply as Claimant), with registered office at Street ..., no. ..., ...-... ..., Tax ID ..., submitted a request for constitution of an Arbitral Tribunal, pursuant to Decree-Law no. 10/2011 of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to simply as RJAT), in which the TAX AND CUSTOMS AUTHORITY (hereinafter referred to simply as Respondent) is the respondent party.
In the Request for Arbitral Pronouncement, the Claimant ultimately requests the following: a) The act of rejection of the Administrative Appeal above identified should be annulled, and consequently the above-enumerated assessments should be annulled, in the terms challenged, on the grounds of their illegality due to violation of law and b) The reimbursement to the Claimant of the amount of € 20,025.86, unduly paid tax by her, should be ordered, with the payment of compensation interest in favor of the Claimant from 6/12/2018 until the date of effective restitution by the TA.
That is, with the Request for Arbitral Pronouncement the Claimant intends, on the one hand, the declaration of illegality of the decision of the TA (here Respondent) in the administrative appeal no. ...2018... and the consequent annulment of the additional VAT assessments, relating to the years 2013 and 2014, with the following numbers: (i) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. 2017..., in the amount of € 642.66; (ii) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. 2017..., in the amount of € 10,585.24; (iii) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. 2017..., in the amount of € 1,448.61; (iv) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. 2017..., in the amount of € 2,306.53; (v) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. ..., in the amount of € 4,638.55; (vi) Assessment no. 2017.../statement of accounts reconciliation no. 2017..., in the amount of € 85.00 and (vii) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. ..., in the amount of € 319.20, in the global amount of € 20,025.86, and, on the other hand, the reimbursement of the amount of the tax paid - € 20,025.86 - plus compensation interest at the legal rate, pursuant to article 43 of the General Tax Law (LGT).
The Claimant states in the Request for Arbitral Pronouncement that the assessments are based on a correction made by the Tax Inspection Services (hereinafter SIT), within the scope of Service Orders 2015... and 2017... . The correction made was based on the non-classification under VAT of invoicing relating to service provision rendered by the claimant in the year 2013 and part of 2014, specifically its non-classification under the provision in subparagraph f) of item 4.2 of List I attached to the VAT Code.
In the words of the Respondent, in its Response, the present request for arbitral pronouncement concerns the additional VAT assessments issued following the inspection procedures carried out for the years 2013 and 2014, covered by service orders nos. OI2015... and OI2017..., whose report (RIT), being an integral part of the administrative file, is hereby fully reproduced for the proper legal purposes. In the said inspection action, the inspection services (SIT) concluded that the Claimant issued numerous invoices charging VAT at the reduced rate (6%) because, erroneously, it considered that those services fell within subparagraph f) of item 4.2 of List I attached to the VAT Code. For its part, the Claimant understands that the assessments in question are illegal, insofar as the TA made an incorrect interpretation of that same item. However, the argumentation, of fact and law, invoked by the Claimant is, with all due respect, far from substantiating and supporting the claim formulated, which should be dismissed, as will be demonstrated below.
The Respondent further states in its Response: That is, it seems clear that the Claimant provided technical services and not technical assistance, since those services, in accordance with the description contained in the invoices, consist in the mere preparation of applications and the preparation and/or monitoring of projects, without any assistance in the acquisition of technological information of which the Claimant disposes. Consequently, the Claimant is not right when it seeks to include the services it provides in the concept of technical assistance and, thereby, subject them to the reduced VAT rate, and the assessments challenged, because legal, should be maintained in the legal order.
The Respondent finally requests the following: In these terms, and in all matters of law, [...], the present request for arbitral pronouncement should be judged unfounded for lack of proof, and, consequently, the Respondent should be absolved of all claims, all with the due and legal consequences.
The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD on 7 January 2019 and subsequently notified to the Respondent.
Pursuant to article 6(1) and article 11(1)(b) of the RJAT, the Ethics Council of CAAD appointed the undersigned as Arbitrator of the Singular Arbitral Tribunal, who communicated acceptance of the assignment within the applicable time period.
On 26 February 2019, both parties were duly notified of such appointment, and neither manifested the will to refuse the appointment of the arbitrator, pursuant to article 11(1)(a) and (b) of the RJAT and articles 6 and 7 of the CAAD Code of Ethics.
In accordance with article 11(1)(c) of the RJAT, the Singular Arbitral Tribunal was constituted on 18 March 2019.
On 19 March 2019, the Singular Arbitral Tribunal issued the following Arbitral Order: The Arbitral Tribunal having been constituted, the highest official of the Tax Administration Service shall be notified, pursuant to article 17 of Decree-Law no. 10/2011 of 20 January (RJAT), to present a response within 30 (thirty) days and, if it wishes, to request the production of additional evidence, adding that a copy of the administrative file shall be sent to the Arbitral Tribunal within the period for presenting the response, with article 110(5) of the Tax Procedure and Process Code applying in the event of failure to send it.
On 29 April 2019 the Respondent presented a Response and attached the Administrative File.
On 9 May 2019, the Singular Arbitral Tribunal issued the following Arbitral Order: The Claimant presented its Request for Arbitral Pronouncement. The Respondent presented its Response. In accordance with the Principle of Contradiction, ensured, in particular, through the power conferred on the parties to pronounce on any matters of fact or law raised in the proceedings, and the Principle of Autonomy of the Arbitral Tribunal in the conduct of the proceedings, first and foremost, the Claimant shall be notified to inform, within a period of 10 (ten) days, whether, in view of the positions of the parties assumed in the Pleadings, it maintains interest in the examination of the witness it has called, or whether it waives it. Should the Claimant maintain interest in such examination, it must, in the same period, indicate which specific points of the Initial Request will be the subject of such evidence. Both parties shall be notified of this Arbitral Order. The Claimant did not respond.
On 28 May 2019, the Singular Arbitral Tribunal issued the following Arbitral Order: The Claimant presented its Request for Arbitral Pronouncement. The Respondent presented its Response. On 9 May 2019, the Claimant was notified of the following Order from this Arbitral Tribunal: In accordance with the Principle of Contradiction, ensured, in particular, through the power conferred on the parties to pronounce on any matters of fact or law raised in the proceedings, and the Principle of Autonomy of the Arbitral Tribunal in the conduct of the proceedings, first and foremost, the Claimant shall be notified to inform, within a period of 10 (ten) days, whether, in view of the positions of the parties assumed in the Pleadings, it maintains interest in the examination of the witness it has called, or whether it waives it. Should the Claimant maintain interest in such examination, it must, in the same period, indicate which specific points of the Initial Request will be the subject of such evidence. To this Order of the Arbitral Tribunal, the Claimant said nothing. There is no exception matter on which the parties need to pronounce. No utility is seen in holding the meeting provided for in article 18 of the Legal Framework for Tax Arbitration (RJAT), whereby, in accordance with the Principles of Autonomy of the Arbitral Tribunal in the conduct of the proceedings, Celerity, Simplification and Procedural Informality (article 16(2)(c), article 19(2) and article 29(2), all of the RJAT), the meeting provided for in article 18 of the RJAT is dispensed with and it is determined that the proceedings shall continue with optional written submissions, for a period of 10 (ten) days, beginning with notification of this Arbitral Order the period for submissions by the Claimant and with notification of the presentation of the submissions by the Claimant, or with the end of such period, in the absence of such presentation, the period for submissions by the Respondent. 26 July 2019 is set as the deadline for issuance of the Arbitral Decision. Pursuant to article 4(4) of the Costs Regulation in Tax Arbitration Proceedings, the Claimant shall make payment of the subsequent arbitration fee, communicating such payment to CAAD. In the name of the Principle of Cooperation of the Parties, this Arbitral Tribunal requests the sending of procedural documents in Word format. Both parties shall be notified of this Arbitral Order.
The parties did not submit any submissions.
On 15 July 2019, the Singular Arbitral Tribunal issued the following Arbitral Order: The Claimant, in the Request for Arbitral Pronouncement, protested to attach the Power of Attorney. It has not done so to date. The Claimant shall be notified to attach the Power of Attorney before the date set by this Singular Arbitral Tribunal for issuance of the Arbitral Decision, i.e., before 26 July 2019.
On 24 July 2019, the Claimant presented a request requesting the attachment to the file of a legal power of attorney, with ratification of the proceedings, in favor of the undersigned.
The Singular Arbitral Tribunal is competent and was regularly constituted.
The parties enjoy legal personality and capacity, are legitimate and are duly represented (article 4 and article 10(2), both of the RJAT and article 1 of Ordinance no. 112-A/2011 of 22 March).
The proceedings do not suffer from nullities and the request was filed in a timely manner. There are no other circumstances that prevent the tribunal from deciding the merits of the case.
2. Factual Matter
2.1 Proven Facts
Having analyzed the evidence produced in the course of these proceedings, the Singular Arbitral Tribunal considers the following facts proven, with relevance to this Arbitral Decision:
A. The Claimant has the legal nature of an Association.
B. The Claimant is registered as a VAT taxable person, having commenced activity on 1 January 1989, being classified in the normal quarterly periodicity regime. The Claimant is, for VAT purposes, a non-exempt taxable person.
C. The Claimant carries out the main activity of "Activities of economic and employers' organizations", with economic activity code 94110.
D. The Claimant also carries out secondary activities of "Professional training", with secondary economic activity code 85591 and "Other consulting, scientific, technical and similar activities, not elsewhere classified", with secondary economic activity code 74900.
E. In the course of its activities, the Claimant provides services to its members/associates.
F. The Claimant provided services related to projects/applications for support programs for its members, more specifically, relating to the preparation of projects/applications, monitoring of projects/applications, preparation of payment requests for projects/applications.
G. Following the provision of services referred to in F of section 2.1 of the Proven Facts, the Claimant issued (among others), between 2013-02-22 and 2014-03-06, invoices with the following descriptions: "Preparation of PU-AAR application", "Preparation of Project Payment Request", "Preparation of PRODER action 111 project", "Preparation of IE", "Preparation of PU-Pernes application", "Preparation of PU-VFX application", "Preparation of Vitis application", "Preparation of Inclement Weather Project Measure 152", "Preparation/Monitoring of PRODER Project", "Preparation of Interim Payment Request – Action 112" and "First payment request – action 112".
H. The invoices referred to in G of section 2.1 of the Proven Facts were issued with VAT at the reduced rate of 6%.
I. The Claimant, at times before and also at times after the period between 2013-02-22 and 2014-03-06, issued, with descriptions identical to those indicated in G of section 2.1 of the Proven Facts, invoices with VAT at the normal rate, i.e., at the rate of 23%.
J. Under Service Order no. OI2015... and Service Order no. OI2017..., external inspection procedures were developed for the periods 2013 and 2014.
K. The procedures were motivated by the fact that the competent authorities had detected indications of irregularities committed by the Claimant in VAT matters.
L. Following the inspection procedures, the following additional assessments were issued: (i) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. 2017..., in the amount of € 642.66, relating to period 201303T; (ii) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. 2017..., in the amount of € 10,585.24, relating to period 201306T; (iii) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. 2017..., in the amount of € 1,448.61, relating to period 201309T; (iv) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. 2017..., in the amount of € 2,306.53, relating to period 201312T; (v) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. ..., in the amount of € 4,638.55, relating to period 210403T; (vi) Assessment no. 2017.../statement of accounts reconciliation no. 2017..., in the amount of € 85.00, relating to period 201406T and (vii) Assessment no. 2017.../statement of accounts reconciliation no. 2017... and no. ..., in the amount of € 319.20, relating to period 201412T.
M. The additional assessments referred to in L of section 2.1 of the Proven Facts total, overall, the amount of € 20,025.86.
N. The Claimant did not accept the conclusions of the inspection procedures and presented the proper Administrative Appeal.
O. The Administrative Appeal presented by the Claimant was assigned number ...2018... .
P. By Letter dated 30 August 2018, the Claimant was notified of the draft decision on the Administrative Appeal, which stated: Given the applicable legislation, the content of the information below is corroborated, which, pursuant to article 77 of the General Tax Law, becomes an integral part of this draft order as substantiation, whereby the request will be rejected in the terms proposed. In accordance with article 60(1)(b) of the General Tax Law, notification is given for exercise of the right to be heard.
Q. Having been notified, the Claimant exercised the right to be heard.
R. By Letter dated 27 September 2018, the Claimant was notified of the decision on the Administrative Appeal, which decided: In view of the foregoing, it seems to us that the rejection of the request should be maintained, in the terms proposed in the information that supports the draft order notified.
S. The Claimant did not accept it and filed a Request for Arbitral Pronouncement.
T. In Point III – Description of Facts and Grounds of Merely Arithmetic Corrections to the Taxable Matter of the Tax Inspection Report it is stated: In the course of the inspection action on the taxable person, in VAT matters and in the year 2013, it was found that the same issued invoices, dated 2013-01-01 and 2013-03-22, with the descriptions, among others, "Preparation of PRODER Action 111 Project – project completion", "Preparation of PRODER project 111" and "Preparation of PU-AAR application", in which it correctly charged VAT at the rate of 23% [...]. As of invoice no. 157/20134, also dated 2013-03-22, the Association began to issue invoices with the descriptions, among others, "Preparation of PU-AAR application", "Preparation of Project Payment Request", "Preparation of PRODER action 111 project", "Preparation of IE", "Preparation of PU-Pernes application", "Preparation of PU-VFX application", "Preparation of Vitis application", "Preparation of Inclement Weather Project Measure 152", "Preparation/Monitoring of PRODER Project", "Preparation of Interim Payment Request – Action 112" and "First payment request – action 112", in which it incorrectly charged VAT at the rate of 6% [...]. The Association maintained this practice of issuing invoices, with the above-mentioned descriptions, in which it incorrectly charged VAT until the issuance of invoice 110/20144, dated 2014-03-06, with the description "Preparation of PU-AAR application" [...], with invoice no. 111/20144, of 2014-03-07, also with the description "Preparation of PU-AAR application", having been issued with VAT correctly charged at the rate of 23%. [...]. The Association thus issued, between 2013-03-22 and 2014-03-06, hundreds of invoices relating to service provision related to projects/applications for support programs for its members, more specifically relating to the preparation of projects/applications, monitoring of projects/applications, preparation of payment requests for projects/applications, incorrectly charging VAT at the reduced rate (6%), because it erroneously considered that those services concerned technical assistance and fell within subparagraph f) of item 4.2 of List I attached to the VAT Code. [...].
U. In Point III – Description of Facts and Grounds of Merely Arithmetic Corrections to the Taxable Matter of the Tax Inspection Report it is stated: With regard to services relating to the preparation of applications/projects related to investment, subsidies or agricultural projects, it has been the understanding of the TA services [...] that the same do not fall within the said subparagraph f) of item 4.2 of List I, or in any of the different items of the lists attached to the VAT Code, being consequently taxed at the normal rate of 23% in accordance with article 18(1)(c) of the VAT Code, a conclusion which the Association also reached, because, after having incorrectly applied the reduced rate of 6% to the said service provision between 2013-03-22 and 2014-03-06, it began as of 2014-03-07 to correctly apply the rate of 23% to the service provision relating to the preparation of projects/applications, monitoring of projects/applications, preparation of payment requests/applications.
V. In the section on Right to be Heard – Point IX – Right to be Heard – Substantiation of the Tax Inspection Report, the Claimant here stated: It is important to note that in 2014 the AAR became aware of diverse understandings regarding the VAT classification of various operations, and, out of caution, decided to begin applying normal rate VAT to the services contained in the invoices. This does not mean that it accepted the understanding expressed in the Binding Opinion contained in annex IX, particularly because this only binds the Tax Administration.
2.2 Unproven Facts
There are no facts material to this Arbitral Decision that have not been proven.
2.3 Justification for the Determination of Factual Matter
The factual matter was determined by this Singular Arbitral Tribunal and its conviction was formed on the basis of the procedural documents and requests presented by the parties and the documents attached by the parties to these proceedings.
With regard to the factual matter, the tribunal does not have the duty to rule on all the matters alleged, but rather has the duty to select those that are relevant to the decision, taking into account the cause (or causes) of action that substantiates the claim filed by the plaintiff, as per article 596(1) and article 607(2)-(4), both of the Civil Procedure Code (CPC), applicable by virtue of articles 29(a) and (e) of the RJAT and to record whether it considers it proven or not proven, as per article 123(2) of the Tax Procedure and Process Code (CPPT).
According to the principle of free evaluation of evidence, the tribunal bases its decision, with respect to the evidence produced, on its intimate conviction, formed from the examination and evaluation it makes of the means of proof brought to the proceedings and in accordance with its life experience and knowledge of persons, as per article 607(5) of the CPC. Only when the probative force of certain means is pre-established in law (e.g., full probative force of authentic documents, as per article 371 of the Civil Code) does the principle of free evaluation of evidence not apply in the appreciation of the evidence produced.
Thus, taking into account the positions assumed by the parties and the documentary evidence attached to the file, the facts listed above were considered proven, with relevance to the decision.
3. Legal Matter (Substantiation)
In the Request for Arbitral Pronouncement, the Claimant seeks [...] that the illegality of the act of rejection of the Administrative Appeal be declared and, consequently, of the VAT assessment acts above identified, and that they be annulled, [...], for suffering from the defect of violation of law, [...].
The Claimant argues in the Request for Arbitral Pronouncement that the correction made was based on the non-classification under VAT of invoicing relating to service provision rendered by the claimant in the year 2013 and part of 2014, specifically its non-classification under the provision in subparagraph f) of item 4.2 of List I attached to the VAT Code.
For the Claimant, the service provision rendered [...] and expressed in the invoices attached to the inspection file, express technical assistance that aims to improve agricultural production. Moreover, [...] the services rendered [...] are included in the criterion of normal use in agricultural production [...]. The technical assistance provided [...] thus presents itself as decisive for the realization of agricultural production by the farmers to whom it provides services.
For the Claimant, this understanding is justified, as it states in the Request for Arbitral Pronouncement, because: Within the framework of the Common Agricultural Policy of the European Union, agricultural and livestock activity develops almost entirely in compliance with commitments undertaken by agricultural producers with national authorities, and the improvement of agricultural, forestry, livestock and environmental performance of the countries of the Union is among the objectives of the Common Agricultural Policy of the European Union, [...]. In this framework, there are applications for the Basic Payment Scheme and other commitments undertaken by agricultural producers. The legal provisions of the European Union provide, in particular, rules that ensure compliance with the obligations established by the provisions relating to direct payments (including controls and the application of administrative measures and administrative sanctions in case of non-compliance), rules relating to conditionality, such as statutory management requirements, good agricultural and environmental conditions, monitoring and evaluation of the relevant measures and rules relating to the payment of advances and recovery of undue payments. When an agricultural producer applies for aid under the CAP or PRODER, he undertakes to comply with all legal provisions of the Union and national authorities, and shall, in particular, implement agricultural and environmental practices that comply with that legislation. By making applications, the claimant undertakes not only to present the documentation necessary for direct payment or for the commitment to which the agricultural producer applies but also to provide all the technical assistance necessary to the agricultural producer, so that he can, on the one hand, comply with his obligations and, on the other hand, have better agricultural production. The technical assistance provided by the claimant to agricultural producers is also realized in support and advice in the field of good practices within the scope of integrated production, organic agriculture, efficient water use, livestock activity (...). All of the claimant's technical assistance is provided by its technicians, with literary, technical and professional qualifications to carry it out, in particular agricultural engineers and agronomists. These technicians develop their activity both at the claimant's office and on the farms of the farmers. In the course of its activity, the claimant's technicians develop the technical assistance services referred to above, advising and verifying, in particular, the compliance with the obligations undertaken with applications to the various projects to which agricultural producers apply, the conditions in which their farms develop, advising on the best methods of production. Ensuring agricultural producers productive practices that take into account conditionality related to agriculture, such as crop diversification, maintenance of permanent grasslands, including traditional orchards where fruit trees are cultivated at low density in grasslands, and the creation of areas of ecological interest. Enabling significant improvements in agricultural production, also ensuring that consumers have a stable supply of food at affordable prices.
Regarding the formalities of invoices, subparagraph b) of article 36(5) of the VAT Code (CIVA) stipulates the following: invoices [...] must contain the following elements: [...] b) the quantity and usual denomination [...] of the services rendered, with specification of the elements necessary to determine the applicable rate. Article 226(6) of Directive 2006/112/EC of the Council of 28 November 2006, relating to the common system of value added tax, stipulates, [...] the only particulars that must mandatorily appear, for VAT purposes, on invoices issued [...] are [...] the extent and nature of the services rendered.
As Emanuel Vidal Lima teaches in VAT – Value Added Tax, Commented and Annotated, 9th Edition, 2003, Porto Editora, In article 35(5) of the VAT Code are described which elements must mandatorily appear in invoices, being left to the discretion of the taxpayer the form and presentation of these elements. The same Author further teaches, in the same book, the invoicing of service provision must always quantify and specify the operations, not being able to accept, for example, the mere indication of "services rendered".
Following the services rendered, the Claimant issued, between 22 March 2013 and 6 March 2014, various invoices, with the following descriptions: "Preparation of PU-AAR application", "Preparation of Project Payment Request", "Preparation of PRODER action 111 project", "Preparation of IE", "Preparation of PU-Pernes application", "Preparation of PU-VFX application", "Preparation of Vitis application", "Preparation of Inclement Weather Project Measure 152", "Preparation/Monitoring of PRODER Project", "Preparation of Interim Payment Request – Action 112" and "First payment request – action 112".
Of the invoices attached to the file, nothing more appears in the "description".
As is stated in the Tax Inspection Report (point T of section 2.1 of the Proven Facts), As of invoice no. 157/20134, also dated 2013-03-22, the Association began to issue invoices with the descriptions, among others, "Preparation of PU-AAR application", "Preparation of Project Payment Request", "Preparation of PRODER action 111 project", "Preparation of IE", "Preparation of PU-Pernes application", "Preparation of PU-VFX application", "Preparation of Vitis application", "Preparation of Inclement Weather Project Measure 152", "Preparation/Monitoring of PRODER Project", "Preparation of Interim Payment Request – Action 112" and "First payment request – action 112". Such services, provided by the Claimant to its members/associates, are characterized, as stated in the Tax Inspection Report (point T of section 2.1 of the Proven Facts), as service provision related to projects/applications for support programs for its members, more specifically relating to the preparation of projects/applications, monitoring of projects/applications, preparation of payment requests for projects/applications.
It is further to be noted that, as is stated in the Tax Inspection Report, [...] although at earlier times and also subsequently, the Claimant issued invoices, with similar service descriptions, in which the VAT rate charged was 23%, i.e., the correct rate.
On the one hand, the Claimant argues that the service provision rendered [...] and expressed in the invoices attached to the inspection file, express technical assistance that aims to improve agricultural production, and on the other hand, the Respondent argues that [...] the Association issued, between 2013-03-22 and 2014-03-06, hundreds of invoices relating to service provision related to projects/applications for support programs for its members, more specifically relating to the preparation of projects/applications, monitoring of projects/applications, preparation of payment requests for projects/applications, incorrectly charging VAT at the reduced rate (6%), because it erroneously considered that those services concerned technical assistance and fell within subparagraph f) of item 4.2 of List I attached to the VAT Code. [...].
That is, for the Respondent, in the Response, it seems clear that the Claimant provided technical services and not technical assistance, since those services, in accordance with the description contained in the invoices, consist in the mere preparation of applications and the preparation and/or monitoring of projects, without any assistance in the acquisition of technological information of which the Claimant disposes. Consequently, the Claimant is not right when it seeks to include the services it provides in the concept of technical assistance and, thereby, subject them to the reduced VAT rate, [...].
It has been the understanding of the Tax Authority, here Respondent, not to classify under subparagraph f) of item 4.2 of List I (or under any of the different items of the lists attached to the said diploma) services relating to the preparation of applications for projects related, in particular, to investment, subsidies, or agricultural projects. See the argument made by the Respondent in the Response, [...] service provision that consist in the preparation of applications for investment projects, subsidies or agricultural projects are excluded from item 4.2 because they are not services directly related to agricultural production, understood in the literal sense. And this is all the more relevant because we cannot forget that the rule in question provides for the application of the reduced rate to operations falling within it, and, as appears from the case law of the Court of Justice of the European Union (CJEU), the provisions that permit the application of a reduced VAT rate, as they constitute derogations from the principle that the normal rate applies, must be subject to strict interpretation.
But moreover,
The Respondent makes clear, in the arguments presented in the Administrative Appeal the following: the appellant provides services for the preparation of applications and monitoring of projects related to investment, undertaken within the scope of PRODER. Having regard to all the foregoing, in order for the services provided by the appellant to be considered technical assistance, for purposes of applying the reduced rate provided in subparagraph f) of item 4.2 of List I of the VAT Code, it is not enough that the recipients are agricultural producers, or that the services consist in the preparation of applications and monitoring of investment projects related to agricultural production. It is necessary that they contribute directly and unequivocally to "agricultural production".
Making clear also that, for the Respondent, this is not the case here.
Thus, this Singular Arbitral Tribunal understands that the thema decidendum amounts to determining whether the service provision rendered by the Claimant, indicated and described in the invoices attached to this file, express technical assistance (in the form of service provision) that contributed to the realization of agricultural production, classifiable, for purposes of applying the reduced VAT rate, under subparagraph f) of item 4.2 of item 4 of List I attached to the VAT Code.
Let us see, first and foremost, what the Law says.
Pursuant to article 18(1)(a) of the VAT Code (CIVA), The rates of the tax are as follows: a) For imports, transmissions of goods and service provision contained in List I attached to this diploma, the rate of 6%.
Pursuant to subparagraph f) of item 4.2 of item 4 of List I attached to the VAT Code, service provision that contribute to the realization of agricultural production are subject to the reduced tax rate, 4.2 - Service provision that contribute to the realization of agricultural production, in particular the following [...]: f) Technical assistance.
This Singular Arbitral Tribunal calls to the substantiation of this Arbitral Decision the Decision of the Supreme Administrative Court (STA), dated 30 April 2002, in the context of proceedings no. 026797, cited by the Respondent in the Response, where it states: Indeed, upon closer inspection, these rules must be interpreted literally, as the courts did, because otherwise the interpreter was granting a tax benefit where the law did not grant it. Here, interpretation has limits. This STA Decision further states, in the case, in its summary: I - Rules that confer tax benefits are exceptional rules, whereby they can be interpreted extensively, but do not allow for analogical integration; II - Although exceptional rules can be interpreted extensively, as a rule they are subject to a strict or minimal interpretation, which need not be restrictive.
Following this, this Singular Arbitral Tribunal calls to the substantiation of this Arbitral Decision Arbitral Decision no. 171/2013-T, dated 6 December 2014, where this decision states the following: Moreover, by constituting an exception to the general principle (which is the application of a normal rate), the application of reduced rates must be, in accordance with Community case law, interpreted strictly, as emphasized in the Decisions handed down in cases nos. C-83/99 [...] and C-384/01 [...]. However, Decision no. 171/2013-T continues, in this regard, it should be clarified that strict interpretation is not equivalent to restrictive or restrictive interpretation. The case law of the CJEU uses the word "strict" (in English, "strictly", in French "de manière stricte" and in Spanish "estrictamente"), whose meaning is "precise", "rigorous" (Dictionary of Contemporary Portuguese Language, Academy of Sciences of Lisbon, Verbo, Volume I, 2001). Thus, what this European Court advocates is a literal interpretation, also called declarative interpretation, [...]. In fact, literal or rigorous correspondence with the text of the rule does not imply a restriction of its meaning, typical of restrictive interpretation based on the presumption that the text said more than what was intended to be said, but rather the election of a meaning that the text directly and clearly contains, because it is that [meaning] which corresponds to the legislative intent (cf. João Baptista Machado, "Introduction to Law and the Discourse of Legitimation", Almedina, 2010, 18th reprint, pp. 185 and 186). In strict or declarative interpretation, "the literal meaning, or one of the literal meanings, covers what, definitively, proves to be what it intends to express" (cf. Oliveira Ascensão, The Law. Introduction and General Theory, Almedina, 10th ed., 1999, p. 418). [...] Now, if there is any special principle of interpretation in the field of the application of reduced VAT rates, such principle can only be one of full and rigorous respect for the verbal meaning (or meanings) possible of the expressions contained in the law (principle of strict or declarative interpretation).
As Dr. Manuela Rosário emphasized, Consultant of the Order of Official Accountants, in Vida Económica, 10 April 2015, on the subject "Technical Assistance – Reduced VAT Rate", In summary, only service provision that contribute to the realization of the agricultural production of the acquirer of the services fall within item 4.2. And agricultural production activities are those that are connected with the exploitation of land or in which it has an essential (not accessory) character.
It is reiterated what the Law stipulates, pursuant to subparagraph f) of item 4.2 of item 4 of List I attached to the VAT Code, service provision that contribute to the realization of agricultural production are subject to the reduced tax rate, 4.2 - Service provision that contribute to the realization of agricultural production, in particular the following [...]: f) Technical assistance. That is, technical assistance (the service provided) must contribute to the realization of agricultural production.
There is no concept of "technical assistance" in the Law.
However, there is a clear position of the TA, expressed and substantiated in Binding Opinions, as referred to, not to classify under subparagraph f) of item 4.2 of List I the services relating to the preparation of applications for projects related, in particular, to investment, subsidies, or agricultural projects.
This Singular Arbitral Tribunal understands that what is important for purposes of this Arbitral Decision is, taking into account all the interpretation to be made, to know whether the service provision realized by the Claimant, expressed in the invoices attached to the file, in addition to being considered as "of technical assistance", "contributed to the realization of agricultural production". This Singular Arbitral Tribunal adds, "contributed, directly and unequivocally to the realization of agricultural production".
The Claimant argues in the Request for Arbitral Pronouncement that: By making applications, the claimant undertakes not only to present the documentation necessary for direct payment or for the commitment to which the agricultural producer applies but also to provide all the technical assistance necessary to the agricultural producer, so that he can, on the one hand, comply with his obligations and, on the other hand, have better agricultural production. The technical assistance provided by the claimant to agricultural producers is also realized in support and advice in the field of good practices within the scope of integrated production, organic agriculture, efficient water use, livestock activity.
However, from the description of the invoices attached to the file, see, "Preparation of PU-AAR application", "Preparation of Project Payment Request", "Preparation of PRODER action 111 project", "Preparation of IE", "Preparation of PU-Pernes application", "Preparation of PU-VFX application", "Preparation of Vitis application", "Preparation of Inclement Weather Project Measure 152", "Preparation/Monitoring of PRODER Project", "Preparation of Interim Payment Request – Action 112" and "First payment request – action 112", it appears only that the services provided by the Claimant were carried out in the specific scope of "preparation of applications", "preparation of project payment requests", "preparation of projects", "preparation/monitoring", i.e., without further references, specifically without any reference to technical assistance services, advice services, support services, agricultural production or others. That is, without further specification, extent or nature of the services.
The invoices attached to the file are limited to "preparation of applications", "preparation of project payment requests", "preparation of projects", "preparation/monitoring", without further "descriptions".
It is repeated, as Emanuel Vidal Lima teaches, In article 35(5) of the VAT Code are described which elements must mandatorily appear in invoices, being left to the discretion of the taxpayer the form and presentation of these elements. The same Author further teaches, in the same book, the invoicing of service provision must always quantify and specify the operations [...].
The Claimant states in the Request for Arbitral Pronouncement that the claimant undertakes not only to present the documentation necessary for direct payment or for the commitment to which the agricultural producer applies but also to provide all the technical assistance necessary to the agricultural producer, however, from the invoices, only appears, as already stated, "preparation of applications", "preparation of project payment requests", "preparation of projects", "preparation/monitoring", without further "descriptions".
In the Administrative Appeal, it is summarized by the Respondent that the applicability of the reduced rate does not encompass all and any services that may contribute in some way to the overall "agricultural activity" of the taxpayer, even if possibly considered by the latter as technical assistance. In fact, the Respondent individualizes, in the Administrative Appeal, its applicability is limited to technical assistance services that contribute to "agricultural production", not encompassing, for example, a whole series of financial and agricultural management services, such as services relating to the preparation of applications for projects related, in particular, to investment, subsidies or agricultural projects [...]. In summary, the Respondent individualizes, in the Administrative Appeal, the appellant provides services for the preparation of applications and monitoring of projects related to investment, undertaken within the scope of PRODER. Having regard to all the foregoing, in order for the services provided by the appellant to be considered technical assistance, for purposes of applying the reduced rate provided in subparagraph f) of item 4.2 of List I of the VAT Code, it is not enough that the recipients are agricultural producers, or that the services consist in the preparation of applications and monitoring of investment projects related to agricultural production. It is necessary that they contribute directly and unequivocally to "agricultural production", which is not the case here. For the Respondent: In fact, the services provided by the appellant, while they may contribute in some way to the overall activity of their clients, only indirectly contribute to agricultural production itself.
That is, this Singular Arbitral Tribunal highlights, from the position of the Respondent, the following: in order for the services provided, in this case, by the Claimant, to be considered technical assistance - for purposes of applying the reduced rate provided in subparagraph f) of item 4.2 of List I of the VAT Code - it was not enough that the recipients be agricultural producers or that the services consist in the preparation of applications and monitoring of investment projects related to agricultural production. It was necessary that such services contribute directly and unequivocally to "agricultural production".
For the Respondent, the services provided by the Claimant, although they may contribute in some way to the overall agricultural activity of its clients, only indirectly contribute to agricultural production itself.
Taking into account the legal rule - Service provision that contribute to the realization of agricultural production – this Singular Arbitral Tribunal is aligned with the understanding of "the necessity of services contributing, in an unequivocal way to agricultural production".
It is further to be noted the following: in its Response, the Respondent indicates that the TA has pronounced itself numerous times on this matter, issuing Binding Opinions – by way of example, see Opinions nos. 5228, with order of 29.07.2013 [...]. Because important for the substantiation of this Arbitral Decision, the following is highlighted from Binding Opinion no. 5228, dated 29 July 2013: i) The company has two main areas of activity, the production of olives and respective sale of olives or olive oil and the technical assistance provided by its sole managing partner, an agricultural engineer with specialty in olive cultivation; ii) The said managing partner provides technical assistance services to various olive-growing clients, through a monthly or bi-monthly arrangement, by means of the preparation of technical opinions on their farms and management maps supporting the farm with respect to annual treatments and work to be performed on the land; iii) The invoices relating to the said service provision have been issued with VAT at the normal rate of 23%; iv) Whereby the applicant wishes to know whether the service provision in question, since it contributes to the realization of agricultural production by olive growers, can be taxed at the reduced rate. [...] 6. List I attached to the VAT Code contemplates goods and services to which the reduced rate provided in article 18(1)(a) of the same diploma can be applied. 8. Among the service provision mentioned in item 4.2 which has raised the most doubts regarding classification under the said item, item 4.2 deserves to be highlighted, which contemplates, service provision of technical assistance which, as item 4.2 states, contribute to the realization of agricultural production. 9. Thus, service provision carried out by agricultural engineers in the scope of agricultural productions are covered by the assumptions of subparagraph f) of item 4.2 of List I attached to the VAT Code and are, consequently, taxed at the reduced rate provided in article 18(1)(a) of the VAT Code. 10. However, with regard to services relating to the preparation of applications for projects related, in particular, to investment, subsidies, or agricultural projects (afforestation, deforestation, etc.) it has been the understanding of these services that the same do not fall within the said subparagraph f) of item 4.2 of List I (or under any of the different items of the lists attached to the said diploma), being, consequently, taxed at the normal rate in force (23%) in accordance with article 18(1)(c) of the VAT Code. 11. Thus, in virtue of the foregoing, service provision carried out by an agricultural engineer and referred to in point 1(ii) of this opinion, assuming the nature of technical assistance service provision, pursuant to subparagraph f) of item 4.2 of List I attached to the Code, are consequently taxed at the reduced rate provided in article 18(1) [item no. 5228] of the VAT Code.
For all of the foregoing, on the basis of the procedural documents and the documents attached to the file by the parties, particularly the invoices and their description, this Singular Arbitral Tribunal understands that, although service provision by the Claimant existed, expressed in the invoices attached to the file, it has not been demonstrated that such service provision contributed to agricultural production itself. It has not been demonstrated that the service provision realized by the Claimant contributed directly and unequivocally to agricultural production. It has not been demonstrated that the service provision realized by the Claimant was decisive for the realization of agricultural production by the farmers to whom the Claimant provided services.
Whereby, as the Law stipulates that service provision must contribute to the realization of agricultural production, and such contribution has not been demonstrated in this case, this Singular Arbitral Tribunal understands that there is no illegality in the taxation as carried out in the additional VAT assessments challenged, whereby their annulment is not justified.
Pursuant to article 608(2) of the Civil Procedure Code, applicable by virtue of article 29 of the RJAT, this Singular Arbitral Tribunal is not obliged to consider all the arguments of the parties, when the decision is prejudiced by the solution given, which in these proceedings is reflected in the decision handed down on the illegality of the assessment, whereby the determination of the remaining questions brought to the file is prejudiced.
4. Request for Reimbursement of Amount Paid and Compensation Interest
The Claimant formulates a request for reimbursement of the amounts collected by the Tax and Customs Authority, here Respondent, as well as the payment of compensation interest.
As the Request for Arbitral Pronouncement is to be judged unfounded, it cannot be concluded that there are unduly paid amounts and, consequently, neither the annulment of the VAT assessments, nor the reimbursement of amounts paid by the Claimant, nor the payment of compensation interest is justified, pursuant to article 43(1) of the LGT.
5. Arbitral Decision
In these terms, this Singular Arbitral Tribunal decides:
a) To judge the Request for Arbitral Pronouncement unfounded.
b) To absolve the Respondent of all claims.
c) To condemn the Claimant in the costs of these proceedings.
6. Value of the Proceedings
Pursuant to article 306(2) of the CPC, article 97-A(1)(a) of the CPPT and article 3(2) of the Costs Regulation in Tax Arbitration Proceedings, the value of the proceedings is set at € 20,025.86.
7. Costs
This Singular Arbitral Tribunal understands that the value to be considered for purposes of determining costs in the present Request for Arbitral Pronouncement is the value that motivated the constitution of this Singular Arbitral Tribunal, i.e., the value of € 20,025.86, corresponding to the value of the challenged assessments and initially indicated by the Claimant in the Request for Arbitral Pronouncement.
Pursuant to article 12(2) and article 22(4), both of the RJAT, the amount of costs is set at € 1,224.00, pursuant to Table I attached to the Costs Regulation in Tax Arbitration Proceedings, at the charge of the Claimant.
Let notice be given.
Lisbon, 26 July 2019
Singular Arbitral Tribunal
The Arbitrator,
(Alexandre Andrade)
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