Summary
Full Decision
ARBITRAL AWARD
The arbitrators Cons. Jorge Manuel Lopes de Sousa (arbitrator-president), Prof. Dr. Eva Dias Costa and Dr. António Nunes dos Reis (co-arbitrators), appointed by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 14-02-2017, agree as follows:
1. REPORT
A…, holder of the collective person identification number…, with registered office at …, n.º…, Porto, (hereinafter referred to as the "Claimant"), filed, under the provisions of articles 2.º, n.º 1, letter a) and 10.º of Decree-Law n.º 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters - RJAT), a request for arbitral decision, aimed at the annulment of the dispatch issued by the Sub-Director General of Taxes, in the exercise of subdelegated competences, which dismissed the hierarchical appeal n.º…2015…, and part of the additional VAT assessment n.º…, relating to the period 2010/03T, and of the compensatory interest assessment n.º…, also relating to the period 2010/03T.
The Claimant further requests payment of compensation for unduly provided guarantee in accordance with the provisions of article 53.º of the LGT and article 171.º of the CPPT.
The Claimant further argues that, in case of doubt, a preliminary ruling referral should be made.
The Respondent is the TAX AND CUSTOMS AUTHORITY.
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 16-12-2016.
Pursuant to the provisions of letter a) of n.º 2 of article 6.º and letter b) of n.º 1 of article 11.º of the RJAT, as amended by article 228.º of Law n.º 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the signatories, who communicated acceptance of the office within the applicable period.
On 13-01-2017 the parties were duly notified of this appointment, and did not manifest the intention to refuse the appointment of the arbitrators, in accordance with the combined provisions of article 11.º n.º 1 letters a) and b) of the RJAT and articles 6.º and 7.º of the Deontological Code.
Thus, in accordance with the provisions of letter c) of n.º 1 of article 11.º of the RJAT, as amended by article 228.º of Law n.º 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 14-02-2017.
The Tax and Customs Authority responded arguing that the claim should be dismissed as ungrounded.
By dispatch of 16-01-2017 a hearing was dispensed and it was decided that the proceedings continue with written submissions.
The Parties submitted their submissions.
The arbitral tribunal was regularly constituted, in accordance with the provisions of articles 2.º, n.º 1, letter a), and 10.º, n.º 1, of Decree-Law n.º 10/2011, of 20 January, and is competent.
The parties are duly represented, have standing and capacity, are legitimated and are represented (articles 4.º and 10.º, n.º 2, of the same legislation and article 1.º of Order n.º 112-A/2011, of 22 March).
The proceedings do not suffer from nullities and there are no exceptions or any obstacle to the consideration of the merits of the case.
2. FACTS
2.1. Proven Facts
Based on the elements contained in the proceedings and documents submitted with the request for arbitral decision, the following facts are deemed proven:
A. The Claimant is a Private Institution of Social Solidarity and Education, recognized as an Institution of Public Utility by dispatch of the Minister of Finance and Public Instruction, on 22-07-1926;
B. The Claimant is a private law association, with principal activity classified under CAE 817901 - Social support activity for children and youth, with accommodation, and with secondary activity classified under CAE 88910 - Child care activity, without accommodation;
C. For VAT purposes, in the year 2010, the Claimant was exempt, under article 9º of the VAT Code;
D. The Claimant was subject to an inspection procedure carried out by the Finance Directorate of Porto, authorized by inspection order n.º Service Order n.º OI2013… of 07-11-2013, relating to the year 2010;
E. In the course of the inspection procedure, arithmetic corrections were made in the VAT assessment for the year 2010 in the total amount of € 120.000,00, because the Claimant did not assess VAT relating to operations of concession of exploitation of a parking facility, of which it is concessionaire company B…, S A, with the NIPC…, which at the date had the designation C… S A;
F. In the Tax Inspection Report prepared in the said inspection procedure, which is contained in the administrative file and is reproduced in full, the following is mentioned, among other things:
G. III - DESCRIPTION OF FACTS AND GROUNDS FOR PURELY ARITHMETIC CORRECTIONS TO TAXABLE MATTER
First, we will describe, based on the two contracts entered into, the facts that we consider relevant so that, subsequently, we identify the moment when the concession of exploitation occurs and its classification under VAT, ending with the quantification of the tax due.
1. Facts
1.1. First contract entered into (2006/11/24)
On 2006/11/24, a contract is entered into between A…- NIPC-…, with registered office at…, nº…, Porto, as first party and the company C… SA, NIPC -…, with registered office at…, Lot…, Parish of…, Municipality of Viana do Castelo, as second party, denominated "Commercial Concession Promise Contract" in which the following facts are established that we consider important:
In clause two of the aforesaid contract, it establishes that "The representative of the second parties promises, except in the event provided for in clause ten, to proceed with the construction, by itself or by adjudication to another contractor, in the part to be set aside of the property identified in the preceding clause, of the following:
"A parking facility for vehicles, underground, of two levels, with the area to be determined after completion of the architectural design, composed of the maximum number of parking spaces that can be achieved in the design and that are approved by the City Council of Porto, and other access areas".
In clause four of the same contract, it provides that: "All and any works, buildings, constructions and improvements that the representative of the second parties carries out on the aforesaid property shall immediately become, for all purposes, the exclusive property of the represented of the first parties.
In clause thirteen of the aforesaid contract, it states that "The commercial concession contract shall have a duration of 50 (fifty) years, counted from the date of its commencement, and may be renewed or not for equal or different periods, as the parties wish manifested in writing".
In clause fourteen of the same contract, it establishes that:
1. As consideration for the commercial concession, the representative of the second parties promises to pay to the represented of the first parties, the greater of the following amounts:
a) The result of multiplying the number of parking spaces permitted to be constructed, by the difference between the price of each space, which is set at 14.000.00 (fourteen thousand) euros, VAT included, and the actual cost of each space, depending on the construction cost, in principle less than that:
b) Or, the sum of €600.000,00 (six hundred thousand) euros;
c) The number of spaces to be taken into account, referred to in the previous clause a), are those with commercial aptitude, excluding those intended for disabled persons and the represented of the first parties.
2. The amount determined in accordance with letter a) and b) of the preceding number, shall be paid by the representative of the second parties as follows:
a) The corresponding to 25% (Twenty-five per cent), on the date of signing of this contract-promise;
b) The corresponding to 25% (twenty-five per cent), on the date of issuance, by the City Council of Porto, of the construction permit;
c) The corresponding to 50% (Fifty per cent), on the date of issuance, by the City Council of Porto, of the occupancy permit.
3. In addition to the stipulated in the preceding numbers, nothing further shall be paid by the representative of the second parties, as long as the concession lasts.
1.2. Second contract (2008/10/24)
On 2008/10/24, another contract is entered into between the same entities that entered into the previously mentioned contract, denominated "Contract for concession of construction and operation of the parking facility at …, Porto, which A…, enters into with C…, SA", from which we extract the following facts:
In clause four of that contract, it provides that: "1. All the development constructed by the concessionaire, by itself or by adjudication to a contractor, becomes, automatically, property of the concedent, while clause four maintains "the concession period at 50 (fifty) years, counted from the date of signature, and may be renewed or not for equal or different periods, as the parties wish manifested in writing".
Clause six of the same contract, relating to the consideration, refers to the following:
1. As consideration for the commercial concession, the concessionaire still pays to the concedent, in cash, the sum of €600.000.00 (six hundred thousand euros), as follows:
a) The sum of 150.00,00 (one hundred and fifty thousand euros), has already been paid, upon signing of the promise contract, on 24.11.2006.
b) The sum of 150.00,00 (one hundred and fifty thousand euros), on this date (2008/10/24 - date of the second contract), the concedent granting the respective discharge.
c) The sum of 300.000,00 € (Three hundred thousand euros), on the date of issuance, by the City Council of Porto, of the occupancy permit of the parking facility.
2. The concessionaire undertakes to provide, free of charge, 3 (three) free parking spaces for vehicles of the concedent, for the duration of the concession and its renewals."
1.3. Moment of realization of the concession
It should be noted that on 2010/01/26, the denomination of the second party that entered into the two contracts was changed, from C…, SA, to B…, SA.
Given that operations subject to VAT and not exempt from it are at issue, in chronological terms, the following facts occurred:
a) In accordance with what is stated in letter a) and b) of n.º 1 of clause six of the second contract, part of the consideration for the concession was received, namely, the amount of 150.000,00 €, on 2006/11/24, and 150.000,00 €, on 2008/10/24, thus the concedent still has to receive the amount of 300.000,00 €, which, according to the same contract, should be paid at the moment the occupancy permit is issued.
b) With respect to those receipts, no invoice or equivalent document was issued nor was the applicable VAT assessed, being obliged to do so under the terms of letter b) of article 29, n.º 1 of the VAT Code, since that legal provision determines that in addition to the obligation of payment of the tax, taxpayers are obliged to "...b)-Issue an invoice or equivalent document for each supply of goods or provision of services, as defined in articles 3.º and 4.º of this legislation, as well as for payments made to them before the date of supply of goods or provision of services", and the tax is due under the terms of letter c) of n.º 1 of article 8.º of the same legal provision, which determines that "If the supply of goods or provision of services gives rise to payment, even if partial, prior to the issuance of the invoice or equivalent document, at the moment of receipt of that payment, for the amount received, without prejudice to the provisions of the preceding letter".
c) According to the data collected, namely the photocopy of the cash sale n.º 2010…, of 2010/03/31, issued by the concessionaire company, B…, SA, relating to the first revenues obtained by the concessionaire from the parking facility in question, verified in the period between 2010/03/08 to 2010/03/31.
d) Thus, we conclude that the operation of the parking facility began on 2010/03/08, which corresponds to the date on which the first benefit related to the parking of vehicles in the parking facility was generated.
e) On 2012/05/24, a dispatch authorizing the use of the building where the parking facility is located was issued by the City Council of Porto.
f) On 2012/06/06, the A… delivered a statement of changes in order to alter the classification under VAT, that is, from that day onwards it became a mixed taxable person with actual allocation of all assets.
g) On 2012/06/25, in order to comply with clause four of both contracts, or by transfer of property by the concessionaire company (B…), it issues invoice n.º …, for the amount of 2.815.034,75 €, plus VAT in the amount of 647.457,99 €, to the concedent (A…), having as description the following "Construction of a building in the turnkey mode, with supply of materials, labor, machinery, and equipment, intended for the parking facility located at Rua …, consisting of basement and sub-basement, with total construction area of 6.882 m2, with entrance at …, delivered to A… by exchange of the concession of exploitation for 50 years, in accordance with the respective contract";
h) In turn, A… issues invoice nº … of 2012/06/26, to the concessionaire company (B…), in the amount of 2.815.034,75 €, plus VAT in the amount of 647.457,99 €, having as description the following "Concession of exploitation of the Vehicle Parking Facility at Rua …, n.º…, Porto, for a period of 50 years, in accordance with concession contract.".
i) In the periodic VAT statement, submitted on 2012/08/13, by A…, relating to the second quarter of 2012: no tax is determined to be paid to the State treasury, due to the value of VAT assessed in the issued invoice being equal to the value of VAT deducted.
j) On 2013/01/16, it filed a statement of changes in order to be classified under the exemption regime under the terms of n.º 7 of article 9º of the VAT Code, effective 2012/12/31.
k) We were verbally informed by the Administrator, Mr. Eng D… that the company B…, SA, has not paid to date the amount of 300.000,00 €, to which it had committed to do so from the moment the occupancy permit issued by the City Council of Porto was issued, which occurred on 2012/05/24, as well as the fact that a judicial action was still filed by that company against A…, in which it is claimed, among other situations, that the amount of 300.000,00 €, is not owed due to the fact that revenues obtained were lower than those that would have been obtained if the pavilion that A… had, according to them, undertaken to build had been constructed.
l) We were informed by the Administrator, Mr. Eng.D…, by electronic mail, on 2014/03/25, the following:
"By this email we hereby report that A… never formally authorized the operation of the parking facility, always invoking the non-issuance of the permit by Porto City Council. Nor did it accept the delivery of the work in advance, even when, taking advantage of the inspection by one of the entities that pronounced on it, B… intended to consider that delivery as consummated, in the absence of the owner and in the presence of the employee of A… Mr. E… and the trainee Eng. F…
With best regards.
For the Administrative Board of A…,
Eng. D…, Administrator."
2. Classification under VAT
In light of the foregoing, the classification under the VAT Code of those operations is as follows:
a) Under the terms of letter a) of n.º 1 of article 1º of the VAT Code, supplies of goods and provisions of services carried out within the national territory, for consideration, by a taxable person acting as such, are subject to VAT.
b) In turn, n.º 1 of article 4º of the same code determines that "Operations carried out for consideration which do not constitute supplies of goods, intra-community acquisitions or imports of goods are considered as provisions of services".
c) For VAT purposes, the concept of "provision of services" has a residual character, covering all operations resulting from economic activity that are not defined as supply of goods, intra-community acquisition or import of goods.
d) Letter b) of n.º 1 article 7º of the VAT Code refers to the tax being due and becoming due at the moment of the provision of services, without prejudice to the provisions in the remaining numbers.
e) N.º 1 of article 36 of the VAT Code determines that "The invoice or equivalent document referred to in article 29º must be issued at the latest on the 5th business day following the day on which the tax is due under article 7º."
f) In accordance with letter b) of n.º 1 article 29º of the VAT Code, taxpayers are obliged to issue an invoice or equivalent document for each supply of goods or provision of services, as well as for payments made before the realization of the same, namely payments made as deposit, advance or provision.
g) On the other hand, article 8º of the VAT Code determines in its n.º 1 that "Notwithstanding the provisions of the preceding article, whenever the supply of goods or provision of services gives rise to the obligation to issue a future invoice or equivalent document, under the terms of article 29º, the tax becomes due:
a) If the deadline provided for the issuance of invoice or equivalent document is complied with, at the moment of its issuance.
b) If the deadline provided for the issuance is not complied with, at the moment when it ends;
c) If the supply of goods or provision of services gives rise to payment, even if partial, prior to the issuance of the invoice or equivalent document, at the moment of receipt of that payment, for the amount received, without prejudice to the provisions of the preceding letter.
h) Thus, at the moment of the provision of services, an invoice or equivalent document must be issued, for the amount of the difference between the value of the final invoice, which corresponds to the total value of the services provided, and the value of the advances, in case VAT has been assessed on the same, or, alternatively, the issuance of an invoice or equivalent document for the total value of the services provided, in which case the supplier may regularize VAT assessed on the advances received in his favor, for which purpose he must comply with the provisions of article 78º of the VAT Code, namely in its n.º 5.
3. Conclusion / Quantification of the tax due
Having regard to what has been stated, it is concluded that there is VAT taxation of the consideration for the concession of exploitation of the parking facility, in the amount of 600.000,00€.
The concession of exploitation of the parking facility constitutes a provision of services, subject to tax under the terms of article 4º of the VAT Code, due and payable at the moment of its realization, that is, on 2010/03/08, by virtue of the determination in letter b) of n.º 1 of article 7º of the VAT Code, as that is the moment of its realization, given that it is the moment in which, on the part of the concessionaire, the beginning of operation of the aforesaid parking facility occurs.
As to the due date of the tax, article 8º of the VAT Code determines, notwithstanding the provisions of article 7º of the VAT Code, that whenever the supply of goods or provisions of services gives rise to the obligation to issue an invoice under the terms of article 29º of the same legislation, the tax is due at the moment of its issuance, if the deadline for its issuance is complied with, or if the deadline for its issuance is not complied with, at the moment when it ends.
Article 36º n.º 1 letter a) of the VAT Code establishes that the invoice must be issued at the latest on the 5th business day following the day on which the tax is due under article 7º of the VAT Code, that is, on 2010/03/15.
As regards the amount subject to VAT, it shall be the total value of the consideration because exploitation of the parking was ceded, that is, in the amount of 600.000,00 €, which means that in the concrete case, the invoice should have been issued on 2010/03/15 (5 business days after the tax is due and payable, which occurred on 2010/03/08, the date on which operation of the parking facility began), for the amount of 600.000,00 €, with the exclusion of the advances received or the regularization provided for in n.º 5 of article 78º of the VAT Code, had VAT been duly assessed on the advances received, as demonstrated in the following table:
Thus, and taking into account the classification under VAT referred to above, it is found that in the two first moments relevant for purposes of tax assessment, VAT was not assessed on the two anticipated advances received, nor, in the third moment in which the tax-generating event occurs, which corresponds to the commencement of use of the parking facility by the concessionaire company, that is, on 2010/03/08, for which reason an invoice should have been issued, at the latest, on the 5th business day following the moment the provision of services was made, that is, on 2010/03/15, having as basis of the tax the amount of the consideration for the concession, which amounts to 600.000,00 €, deducting from any amounts of VAT that would have been assessed on the anticipated advances received, which manifestly did not happen. In this way, the fact remains that the invoice should have been issued for the amount of 600.000,00 €, and VAT assessed in the amount of 120.000,00 €, which is outstanding from 2010/03/15, the deadline date for issuing the invoice.
It should also be emphasized that A… should have filed, within 15 days from the date of the change, a statement of changes, as referred to in article 32º of the VAT Code, in order to alter its classification under VAT.
(...)
VIII. OTHER RELEVANT ELEMENTS
Given that the taxpayer did not file the statement of changes, within 15 days from the date of the change, being obliged to do so under the terms of article 32º of the VAT Code, we will issue the Official Change Report, in order to classify it, from 2010/03/08, under the mixed regime, which corresponds to the date on which it carried out operations subject to VAT, under the terms of letter b) of n.º 1 of article 7º of the VAT Code, relating to the concession of the parking facility.
IX. PRIOR HEARING
In order for the taxpayer to exercise the right of hearing, under the terms of article 60º of the RCPIT and 60º of the LGT, it was sent on 2014/04/10 (date of the receipt stamp) to the registered office, the Draft Report through Office n.º …/… of 2014/04/03, and the same was exercised on 2014/04/24 (date of entry in this chapter of the Directorate).
1. Prior hearing
As for the prior hearing, it was submitted within the granted period, having been divided into two chapters, in chapter I are the introductory considerations and in chapter II which is subdivided into three groups (A, B, C), are explained the reasons why the taxpayer does not agree with the corrections we made, which we give here as reproduced.
In point A - Previous point, it contains a brief history of the Institution and the various steps taken for the concession of the parking facility;
In point B - Justification of the correction proposed by the TIS - indicates the justification for the corrections contained in the Draft Tax Inspection Report.
In point C - Position and justification of the Petitioner, there are the reasons why the taxpayer does not agree with the correction indicated in the Draft Report of Tax Inspection, relating to the right to assess VAT on the advances received on 2006/11/24 and 2008…, in the amount of 150.000,00 €, each, due to the right to assess having lapsed under the terms of article 45.º of the LGT, for the following reasons:
"37º. According to article 45º, n.º 1, of the LGT, the "right to assess taxes lapses if the assessment is not validly notified to the taxpayer within four years, when the law does not provide otherwise."
"38º - Article n.º 4 of this legal rule adds that the "limitation period is counted, in periodic taxes, from the end of the year in which the tax-generating event occurs and, in taxes of single obligation, from the date on which the tax-generating event occurred, except in the value added tax and in income taxes when taxation is carried out by withholding on a definitive basis, in which case that period is counted from the beginning of the civil year following that in which, respectively, the due date of the tax or the tax-generating event occurred.
....
"40º- In these terms, having the Petitioner received, on 24.11.2006 and 24.10.2008, two payments in the amount of € 150.000,00 each and the rule of the VAT Code telling us that this tax became due on those dates, it is equally clear that the limitation period for the Tax Administration to assess the outstanding tax began, in relation to each of those advances, on 01.01.2007 and 01.01.2009, respectively.
"41º - The limitation period being fixed at 4 years, the right for the Tax Administration to assess the outstanding tax in relation to such advances ended, respectively, on 31.12.2010 and 31.12.2012.
2. Appraisal of the prior hearing
Indeed, the taxpayer did not assess, under the terms of letter c) of n.º 1 of article 8.º of the VAT Code, the VAT relating to the two advances received on 2006/11/24 and on 2008/10/24, in the amount of 150.000,00 €, each.
The corrections we made, in the VAT assessment, were not based on the two anticipated receipts in the amount of 150.000,00 €, verified on 24.11.2006 and 24.10.2008, but rather on the value of the concession of exploitation of the parking facility, in the amount of 600.000,00 €, because the tax-generating event of this operation occurred on 2010/03/08, which corresponds to the date on which the concessionaire began its use.
In these terms, given the fact that the parking facility entered into activity on 2010/03/08, on that date the tax-generating event occurred, under the terms of letter b) of n.º 1 of article 7º of the VAT Code.
Thus, under the terms of n.º 1 of article 36º of the VAT Code, A…, should have issued an invoice within the five business days following the tax-generating event, and the tax to be paid to the State treasury should be calculated as follows:
3. Conclusion
As the taxpayer did not assess VAT, either on the anticipated payments or on the value of the concession of the parking facility, the correction we made is to be maintained, because VAT is due on the entire concession of the parking facility, in the amount of 600.000,00 €, and because the four-year period provided for in article 45º of the LGT, counted from the beginning of the civil year following that in which the relevant moment for purposes of tax due date occurred (2010/03/08), under the terms of letter b) of n.º 1 of article 7º of the VAT Code, has not been exceeded.
H. As a result of the arithmetic corrections made, an additional VAT assessment n.º … was issued for the period 1003T, in the amount of € 120.000,00, and a compensatory interest assessment n.º…, in the amount of € 19.160,55;
I. On 21-10-2014, the Claimant filed an administrative appeal of the assessments, which was opened under n.º …2014…, which was dismissed;
J. The dispatch dismissing the administrative appeal refers to the grounds of an opinion the contents of which are reproduced, in which the following is mentioned, among other things:
On the consideration of the request
On 24/11/2006 a Commercial Concession Promise Contract is entered into between the Appellant in the capacity of first party and the company "C…, S.A.", with NIPC…, in the capacity of second party. Through the said contract, the second party promised to proceed with the construction, by itself or through adjudication to another contractor, of an underground vehicle parking facility, the ownership of which would immediately pass to the patrimonial sphere of the first party. In turn, the latter promised to grant the commercial operation of the aforesaid parking facility to the company "C…, SA", for a duration period of 50 years, counted from the date of its commencement, which may or may not be renewed for equal or different periods, as the parties wish manifested in writing. To the aforesaid contract was assigned the amount of € 600 000.00 as consideration for the commercial concession, to be paid by the second party as follows:
- The corresponding to 25% (€150 000,00) on the date of signature of the aforesaid Promise Contract;
- The corresponding to 25% (€ 150 000,00) on the date of issuance of the construction permit by the City Council of Porto;
- The corresponding to 50% (€ 300 000,00) on the date of issuance of the occupancy permit by the City Council of Porto.
On 24/10/2008 a Contract for Concession of Construction and Operation of the parking facility is entered into between the same parties, whereby and in accordance with its clause 6, the following was established:
- The amount of € 150 000,00 had already been paid upon signing of the Promise Contract entered into on 26/11/2006;
- The amount of € 150 000,00 paid on this date (24/10/2008), the concedent granting the respective discharge;
- The amount of € 300 000,00 to be paid on the date of issuance of the occupancy permit of the parking facility by the City Council of Porto.
Attention should be drawn first to the fact that, notwithstanding the taxpayer Appellant being classified under the VAT exemption regime under the terms of article 9º n.º 7 of the respective code (VAT Code), given that it is a Private Institution of Social Solidarity and Education, recognized as such by dispatch of 22/07/1926 of the Minister of Finance and Public Instruction, in the concrete case under analysis, we are dealing with operations subject and not exempt, under the terms of the provisions of article 1º n.º 1 letter a) of the VAT Code.
In fact, the subject matter of the contract translates into the realization of a provision of services (concession of commercial operation), for consideration (in the amount of € 600 000,00), as defined by article 4º n.º 1 of the VAT Code, according to which: "Operations carried out for consideration which do not constitute supplies of goods, intra-community acquisitions or imports of goods are considered as provisions of services", (residual notion). That in accordance with article 29º n.º 1 letter b) of the same legal provision, in the version in force at the date of the facts, oblige the respective provider of the service to issue an invoice or equivalent document for each provision of services, as defined in article 4º of this provision, as well as for payments made to it before the date of the provision of services. That is, by virtue of the last legal rule referred to above, when the Appellant received the first amounts for purposes of consideration as a deposit, on 26/11/2006 and on 24/10/2008 respectively, in the amount of € 150 000,00 each, it was obliged to issue an invoice or equivalent document and assess the corresponding VAT, which it did not. In fact, under the terms of article 7º n.º 1 letter b) of the VAT Code: "Without prejudice to the provisions of the following numbers, the tax is due and becomes due... In provisions of services, at the moment of its provision;".
In turn, in accordance with article 8º n.º 1 letter c) of the said provision, in the version in force at the date of the facts: "Notwithstanding the provisions of the preceding article, whenever the supply of goods or provision of services gives rise to the obligation to issue an invoice or equivalent document, under the terms of article 29º, the tax becomes due... If the supply of goods or provision of services gives rise to payment, even if partial, prior to the issuance of the invoice or equivalent document, at the moment of receipt of that payment, for the amount received, without prejudice to the provisions of the preceding letter." (our emphasis).
Thus, if the Appellant when receiving the advances in the total amount of € 300 000,00, had issued an invoice and assessed the corresponding VAT, it could finally, at the moment of the provision of services, have issued an invoice or equivalent document for the amount of the difference between the value of the final invoice corresponding to the total value of the services provided (€ 600 000,00) and the value of the advances (€ 300 000,00), or, alternatively, could have issued an invoice or equivalent document for the total value of the services provided (€ 600 000,00), being able, in this case, to regularize VAT already assessed on the advances received in its favor, following the procedures ordered by article 78º of the VAT Code, namely its n.º 5. (see Dispatch of 30/08/93 of the VAT Services - VAT Code - VAT Regularizations - Customer Advances).
However, not having the taxpayer Appellant made use of any of these procedures available to it by law, and being certain that no amount whatsoever was assessed and paid by the same as VAT, the Tax Inspection Services considered that the invoice should have been issued for the amount of the total consideration for the commercial operation (€ 600 000,00), at the moment from which the tax became due which, as we have seen, in accordance with the provisions of article 7º n.º 1 letter b) of the VAT Code, would be at the moment of the provision of services, or until the 5th business day following the day on which the tax became due, in accordance with article 36º n.º 1 letter a) of the said provision.
Having the same Services detected that the operation of the parking facility by the concessionaire began on 08/03/2010, this being the date to be considered as the date of the provision of services, the aforesaid invoice would have had to be issued at the latest by 15/03/2010, for the amount of € 600 000,00 + VAT, that is, € 600 000,00 x 20% (VAT rate in force in 2010), as shown in the demonstrative table in the inspection action report at pp. 57.
The Appellant argues that the period for assessing the VAT corresponding to the advances received on 26/11/2006 and on 24/10/2008, respectively, in the total amount of € 300 00,00, has lapsed by virtue of the provisions of article 45º n.º 1 and n.º 4 of the LGT. Under the terms of article 45º n.º 1 of the General Tax Law (LGT), in the version in force at the date of the facts: "The right to assess taxes lapses if the assessment is not validly notified to the taxpayer within four years,...", (our emphasis).
In turn, under the terms of n.º 4 of the same provision: "The limitation period is counted,... in the value added tax..., from the beginning of the civil year following that in which, respectively, the tax due date or the tax-generating event occurred." (our emphasis).
Now, it is true that in the case of advances received before the provision of services, it makes the tax due, by virtue of the provisions of article 8º n.º 1 letter c) of the VAT Code, at the moment of receipt of those advances. However, not having the taxpayer proceeded to any tax assessment at the time of those receipts, the VAT in question in the present case, in the amount of € 120 000,00 (€ 600 000,00 x 20%), would then have to be assessed on the date on which the invoice should have been issued in this case: at the moment of the provision of services for the total value of the services provided (€ 600 000,00). And that moment can only be situated, as is argued in the tax inspection report, at the moment when the provision of services itself is realized: on 08/03/2010, the date on which operation of the parking facility begins. Therefore, the four-year period provided for in article 45º of the LGT for assessing taxes, in this case VAT, can only be counted from the civil year following that in which the tax-generating event occurred (commercial operation of the parking facility). Thus, having the operation of the parking facility begun on 08/03/2010, the counting of the four-year limitation period would begin on 01/01/2011 and would lapse on 01/01/2015.
Consultation of the information system of the Tax and Customs Authority showed that the aforesaid additional assessments were notified to the taxpayer on 26/07/2014, as shown at pp. 66 and 66A), the right to assessment therefore not having lapsed.
In light of the foregoing and for the reasons set out above, the request is to be dismissed.
K. On 27-04-2015, the Claimant filed a hierarchical appeal of the dismissal of the administrative appeal, which was opened under n.º …2015…;
L. The hierarchical appeal was dismissed by dispatch of the Sub-Director General of the Tax and Customs Authority, issued on 01-09-2016 and notified on 14-09-2016, the contents of which are reproduced, in which the following is mentioned, among other things:
The taxpayer filed a hierarchical appeal of the decision dismissing the administrative appeal, under the terms of n.º 2 of article 66.º of the Tax Procedure and Process Code (CPPT).
Timeliness
The final dispatch dismissing the administrative appeal was notified to the appellant through registered mail with confirmation of receipt (RM …PT), on 31/03/2015, under the terms of article 39.º n.º 3 of the CPPT.
In the tax procedure, the deadlines are continuous, being counted in accordance with what is provided for in article 279.º of the Civil Code, by virtue of n.º 1 of article 20.º of the CPPT.
The hierarchical appeal meets the requirements provided for in articles 66.º and 76.º of the CPPT, having been received in these Services on 27 April 2015, being the same timely, as prescribed by n.º 2 of article 66.º of the CPPT.
The administrative appeal was dismissed maintaining the decision contained in the content of the draft dispatch, since the taxpayer did not exercise the right of prior hearing.
Having analyzed the hierarchical appeal presented, it is found that it did not bring new elements to those already invoked in the respective administrative appeal procedure, that is, the claim made in the administrative appeal is the same as that formulated in the hierarchical appeal.
Thus, and for the reasons stated, the dispatch issued in the Administrative Appeal aforesaid is maintained, on 25 March 2015.
The proceedings shall be remitted to the VAT Services Directorate (DSIVA), for purposes of n.º 3 of article 66.º of the CPPT.
M. The Claimant did not make payment of the amounts assessed within the voluntary payment period, following which the enforcement proceeding n.º …2014... was opened, against which the Respondent was served on 06-10-2014 (document n.º 28 attached to the request for arbitral decision, the contents of which are reproduced);
N. On 01-12-2014, the Respondent provided a guarantee in the amount of € 89.000,00 to suspend the enforcement proceeding referred to (document n.º 29 attached to the request for arbitral decision, the contents of which are reproduced);
O. The Respondent provided a guarantee to suspend the enforcement proceeding;
P. On 30-11-2016, the Respondent filed the request for constitution of the arbitral tribunal which gave rise to the present proceeding.
2.2. Unproven Facts
There are no facts relevant to the decision of the case that have not been proven.
2.3. Rationale for the determination of the facts
The proven facts are based on the documents submitted by the Claimant with the request for arbitral decision and on the administrative file, there being no controversy about the facts.
3. LEGAL MATTERS
The Claimant entered into a contract for the concession of exploitation of a parking facility, which began to be exploited in 2010, but received two partial advance payments, one in the amount of 150.00,00 assessed upon the signing of the promise contract, on 24-11-2006, and another also of 150.00,00, on 24-10-2008, the date of the second contract.
The Claimant did not assess VAT in relation to any of the payments.
The Claimant argues that, being the VAT relating to the aforesaid payments due on the respective dates, the right of assessment would have had to be exercised, in relation to each payment, within a period of 4 years from the beginning of the civil year subsequent to the respective payment and, therefore, the assessment made in 2014, was issued after the limitation periods had expired.
The Tax and Customs Authority understood that "at the moment of the provision of services, an invoice or equivalent document must be issued, for the amount of the difference between the value of the final invoice, which corresponds to the total value of the services provided, and the value of the advances, in case VAT has been assessed on the same, or, alternatively, the issuance of an invoice or equivalent document for the total value of the services provided".
The principal question which is the subject of the proceedings is, thus, whether the limitation of the right to assessment as regards the amounts paid in advance in 2006 and 2008 has occurred.
Additionally, the Claimant imputes a defect of lack of reasoning to the assessment of compensatory interest.
3.1. The Question of Limitation of the Right to Assessment
Article 45.º of the General Tax Law (LGT) regulates the limitation of the right to assessment, establishing the following, insofar as relevant here:
Article 45.º
Limitation of the right to assess
1. The right to assess taxes lapses if the assessment is not validly notified to the taxpayer within four years, when the law does not provide otherwise.
(...)
4. The limitation period is counted, in periodic taxes, from the end of the year in which the tax-generating event occurs and, in taxes of single obligation, from the date on which the tax-generating event occurred, except in the value added tax and in income taxes when taxation is carried out by withholding on a definitive basis, in which case that period is counted from the beginning of the civil year following that in which, respectively, the tax due date or the tax-generating event occurred.
From these rules it follows that
– the limitation period of the right to assessment is four years (n.º 1);
– the limitation period is counted, in relation to VAT, "from the beginning of the civil year following that in which... the tax due date occurred" (n.º 4).
Thus, to apply this regime one must determine when the VAT relating to advance payments became due, the moment of the tax-generating event being irrelevant.
The Tax and Customs Authority in the Tax Inspection Report accepts that the due date of the VAT relating to the advance payments referred to occurred at the moments of the payments, by application of articles 7.º, n.º 1, letter b), 8.º, n.º 1, letter c), and 29.º, n.º 1, of the VAT Code, saying the following:
With respect to those receipts, no invoice or equivalent document was issued nor was the applicable VAT assessed, being obliged to do so under the terms of letter b) of article 29 n.º 1 of the VAT Code, since that legal provision determines that in addition to the obligation of payment of the tax, taxpayers are obliged to "...b)-Issue an invoice or equivalent document for each supply of goods or provision of services, as defined in articles 3.º and 4.º of this provision, as well as for payments made to it before the date of supply of goods or provision of services", and the tax is due under the terms of letter c) of n.º 1 of article 8.º of the same legal provision, which determines that "If the supply of goods or provision of services gives rise to payment, even if partial, prior to the issuance of the invoice or equivalent document, at the moment of receipt of that payment, for the amount received, without prejudice to the provisions of the preceding letter".
But the Tax and Customs Authority also understood the following:
h) Thus, at the moment of the provision of services, an invoice or equivalent document must be issued, for the amount of the difference between the value of the final invoice, which corresponds to the total value of the services provided, and the value of the advances, in case VAT has been assessed on the same, or, alternatively, the issuance of an invoice or equivalent document for the total value of the services provided, in which case the provider may regularize VAT assessed on the advances received in its favor, for which purpose it must comply with the provisions of article 78º of the VAT Code, namely its n.º 5.
(...)
As regards the amount subject to VAT, it shall be the total value of the consideration for the ceding of the exploitation of the parking, that is, in the amount of 600.000,00 €, which means that in the concrete case, the invoice should have been issued on 2010/03/15 (5 business days after the tax became due and payable, which occurred on 2010/03/08, the date on which operation of the parking facility began)
(...)
As the taxpayer did not assess VAT, either on the advance payments or on the value of the concession of the parking facility, the correction we made is to be maintained, because VAT is due on the entire concession of the parking facility, in the amount of 600.000,00 €, and because the four-year period provided for in article 45º of the LGT, counted from the beginning of the civil year following that in which the moment relevant for purposes of the tax due date occurred (2010/03/08), under the terms of letter b) of n.º 1 of article 7º of the VAT Code, has not been exceeded.
Articles 7.º, 8.º and 29.º of the VAT Code, as amended during the period when the advance payments were made, establish the following, insofar as relevant here:
Article 7.º
Tax-generating event and due date of tax
1. Without prejudice to the provisions of the following numbers, the tax is due and becomes due:
(...)
b) In provisions of services, at the moment of its provision;
(...)
Article 8.º
Due date of tax in case of obligation to issue invoice
1. Notwithstanding the provisions of the preceding article, whenever the supply of goods or provision of services gives rise to the obligation to issue an invoice or equivalent document, under the terms of article 29.º, the tax becomes due:
a) If the deadline provided for the issuance of invoice or equivalent document is complied with, at the moment of its issuance;
b) If the deadline provided for the issuance is not complied with, at the moment when it ends;
c) If the supply of goods or provision of services gives rise to payment, even if partial, prior to the issuance of the invoice or equivalent document, at the moment of receipt of that payment, for the amount received, without prejudice to the provisions of the preceding letter.
2. The provisions of the preceding number shall still apply to cases in which there is issuance of an invoice or equivalent document, or payment, preceding the moment of realization of the taxable operations, such as this is defined in the preceding article.
(...)
Article 29.º
General obligations
1. In addition to the obligation of payment of the tax, the taxable persons referred to in letter a) of n.º 1 of article 2.º are obliged, without prejudice to the provisions of special provisions, to:
(...)
b) Issue an invoice or equivalent document for each supply of goods or provision of services, as defined in articles 3.º and 4.º of this provision, as well as for payments made to it before the date of supply of goods or provision of services;
(...)
Article 7.º, n.º 1, letter b), of the VAT Code establishes the rule that "the tax is due and becomes due" "in provisions of services, at the moment of its provision".
However, article 8.º, n.º 1, of the VAT Code, in saying that "notwithstanding the provisions of the preceding article, whenever the supply of goods or provision of services gives rise to the obligation to issue an invoice or equivalent document, under the terms of article 29.º, the tax becomes due", departs from the application of the rule, in all cases ("whenever") in which the provision of services gives rise to the obligation to issue an invoice, under the terms of article 29.º.
This article 8.º, as results from its heading, contains special rules regarding the due date of the tax in cases in which there is an obligation to issue an invoice and that obligation exists as to "payments made to it before the date of supply of goods or provision of services", as provided for in article 29.º, n.º 1, letter b), second part.
Therefore, independently of the moment of the occurrence of the tax-generating event, it results from these articles 8.º and 29.º that, when there are payments made before the provision of services, the tax relating to the payments "becomes due" in advance, on the dates of the payments.
Being thus, resulting unquestionably from article 45.º, n.º 4, of the LGT that, in relation to VAT, the four-year limitation period is counted from the beginning of the civil year following that in which the tax due date occurred, one must conclude that the limitation period of the right to assessment is counted from the beginning of the civil years subsequent to those in which the payments occurred and not from the date of the provision of services.
Thus, being the VAT relating to advance payments made in 2006 and 2008 due from the dates on which they were made, the limitation periods of the right to assessment began on 01-01-2007, as to the payment made in 2006, and on 01-01-2009, as to the payment of 2008.
And if the VAT was due already before 2010 and could and should have already been assessed, it cannot be understood that it was only due as of 08-03-2010, the date that the Tax and Customs Authority considered to be that of the provision of services.
In truth, as results from article 45.º, n.º 4, of the LGT, in relation to VAT it is not the date of the provision of services, but rather the date of the due date of the tax that is relevant for purposes of determining the civil year in which the limitation period of the right to assessment begins, therefore, being the tax due in the dates of the years 2006 and 2008 in which the advance payments were made, it is from the beginning of the years 2007 and 2009, respectively, that the limitation periods of the right to assessment are counted in relation to those payments.
On the other hand, the regime of limitation of the right to assessment being intended to realize legal certainty, it cannot be understood that, after the period in which the right can be exercised has expired, it is reborn.
Therefore, the four-year limitation periods of the right to assessment ended on 31-12-2010 and 31-12-2012, respectively.
Consequently, the Claimant is correct, whereby the act of assessment of VAT suffers from a defect of violation of law, in the part in which it refers to the VAT relating to the aforesaid advance payments.
The dispatch dismissing the hierarchical appeal which confirmed the aforesaid assessment is illegal for the same reason.
These defects justify the annulment of the VAT assessment, in the part relating to the two advance payments of € 150.000,00 each, as well as the dispatch dismissing the hierarchical appeal, under the terms of article 163.º, n.º 1, of the Code of Administrative Procedure subsidiarily applicable under the terms of article 2.º, letter c), of the LGT.
3.2. The Question of the Legality of the Assessment of Compensatory Interest
Being the assessment of VAT illegal in the part corresponding to the advance payments which occurred in 2006 and 2008, the assessment of compensatory interest is also illegal in the part in which it has as its basis the assessment of VAT.
In truth, "compensatory interest integrates itself in the very debt of the tax, with which it is jointly assessed" (article 35.º, n.º 8, of the LGT), whereby from the partial illegality of the assessment of VAT results the illegality of the assessment of compensatory interest, in the part in which it has as its basis that illegal assessment.
Consequently, the claim for arbitral decision proceeds as to the illegality of the partial assessment of compensatory interest, being prejudiced, as being pointless, the appraisal of the autonomous defect of lack of reasoning that the Claimant attributes to it.
Justifies itself, thus, the annulment of the assessment of compensatory interest, in the part relating to the two advance payments of € 150.000,00 each, as well as the dispatch dismissing the hierarchical appeal, under the terms of the cited article 163.º, n.º 1, of the Code of Administrative Procedure.
4. COMPENSATION FOR UNDULY PROVIDED GUARANTEE
The Claimant further formulates a request for compensation for unduly provided guarantee, having provided a bank guarantee to suspend enforcement proceeding opened for collection of the assessed amounts.
Article 171.º of the CPPT establishes that "the compensation in case of a bank guarantee or equivalent unduly provided shall be requested in the proceeding in which the legality of the exigible debt is controverted" and that "the compensation must be requested in the administrative appeal, impugning or appeal or in case its ground is subsequent within 30 days after its occurrence".
Thus, it is unequivocal that the process of judicial impugning encompasses the possibility of condemnation in the payment of unduly provided guarantee and is even, in principle, the adequate procedural means to formulate such a claim, which is justified by evident reasons of procedural efficiency, since the right to compensation for unduly provided guarantee depends on what is decided as to the legality or illegality of the act of assessment.
The request for constitution of the arbitral tribunal and for arbitral decision has as its corollary that it is now in the arbitral proceeding that the "legality of the exigible debt" will be discussed, therefore, as results from the express content of that n.º 1 of the cited article 171.º of the CPPT, it is also the arbitral proceeding that is adequate to appraise the request for compensation for unduly provided guarantee.
The regime of the right to compensation for unduly provided guarantee is contained in article 53.º of the LGT, which establishes the following:
Article 53.º
Guarantee in case of unduly provided guarantee
1. The debtor who, to suspend enforcement, offers a bank guarantee or equivalent shall be compensated wholly or partially for the losses resulting from its provision, if it has maintained it for a period exceeding three years in proportion of the judgment in administrative appeal, judicial impugning or opposition to enforcement which have as their object the debt guaranteed.
2. The period referred to in the preceding number does not apply when it is verified, in administrative appeal or judicial impugning, that there was error attributable to the services in the assessment of the tax.
3. The compensation referred to in number 1 has as its maximum limit the amount resulting from the application to the value guaranteed of the rate of compensatory interest provided for in the present law and can be requested in the very proceeding of administrative appeal or judicial impugning, or autonomously.
4. Compensation for provision of unduly provided guarantee shall be paid by abatement from the revenue of the tax of the year in which payment is made.
In the case at hand, the errors that affect the assessments of VAT and compensatory interest, in the parts corresponding to the advance payments are attributable to the Tax and Customs Authority, since they were of its initiative and the Claimant in no way contributed to those errors being committed.
Therefore, the Claimant has the right to compensation for the guarantee provided.
There being no elements that permit the determination of the amount of compensation, the condemnation shall have to be effected with reference to what comes to be assessed in execution of the present award [articles 609.º, n.º 2, of the Code of Civil Procedure and 565.º of the Civil Code, applicable in these senses under the terms of article 2.º, letter d) of the LGT].
5. DECISION
In these terms, this Arbitral Tribunal agrees to:
· Declare the request for arbitral decision well-founded;
· Annul the additional VAT assessment n.º…, relating to the period 2010/03T, and the assessment of compensatory interest n.º…, also relating to the period 2010/03T, in the parts corresponding to the two payments of € 150.000,00 (€ 300.000,00 in total) made on 24-11-2006 and 24-10-2008;
· Annul the decision dismissing the hierarchical appeal which confirmed the assessments of VAT and compensatory interest in the parts relating to those payments made on 24-11-2006 and 24-10-2008;
· Declare well-founded the claim for payment of compensation for unduly provided guarantee and condemn the Tax and Customs Authority to pay to the Claimant the compensation to be determined in execution of judgment by the guarantee provided to suspend the enforcement proceeding.
6. VALUE OF THE CASE
In accordance with the provisions of article 306.º, n.º 2, of the CPC and 97.º-A, n.º 1, letter a), of the CPPT and 3.º, n.º 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 79.160,55.
7. COSTS
Under the terms of article 22.º, n.º 4, of the RJAT, the amount of costs is fixed at € 2.448,00, under the terms of Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.
Lisbon, 02-05-2017
The Arbitrators
(Jorge Manuel Lopes de Sousa)
(Eva Dias Costa)
(António Nunes dos Reis)
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