VAT Exemption for Insurance Negotiation Services Under Article 9(27)(e) CIVA – CAAD Case 756/2015-T

ARBITRAL DECISION

The Arbitrator Nuno Cunha Rodrigues, designated by the Deontological Council of the Administrative Arbitration Centre (CAAD) to constitute the present Arbitral Tribunal, constituted on 16.03.2016, decides as follows:

I. REPORT

1. A..., taxpayer number ..., with tax domicile at ..., Property ..., ..., in ..., presented, on 17/12/2015, a request for constitution of a sole arbitrator tribunal, in accordance with articles 2nd and 10th of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as LRAT), in conjunction with subparagraph a) of article 99 of the Code of Administrative Court Procedure, in which the Tax and Customs Authority (hereinafter referred to only as the Respondent) is the Respondent.

2. The Claimant requests the declaration of illegality of the additional VAT assessment acts relating to the first, second, third and fourth quarters of the years 2011 to 2013 and first quarter of 2014, in a total amount of €36,702.90 and respective compensatory interest, in a total amount of €3,162.12.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 22-12-2015 and notified to the Tax and Customs Authority on that same date.

Pursuant to the provisions of subparagraph a) of article 2 of article 6 and subparagraph b) of article 1 of article 11 of the LRAT, the Deontological Council designated the undersigned as arbitrator of the sole arbitrator tribunal, who communicated acceptance of the appointment within the applicable time period.

On 01-03-2015 the Parties were duly notified of this designation and did not express their will to refuse the designation of the arbitrators, in accordance with the combined provisions of article 11, paragraph 1, subparagraphs a) and b) of the LRAT and articles 6 and 7 of the Code of Ethics.

In accordance with the provisions of subparagraph c) of article 1 of article 11 of the LRAT, the sole arbitrator tribunal was constituted on 16-03-2016.

On 27-05-2016 the meeting provided for in article 18 of the LRAT took place, during which and by agreement of the parties, statements were given by witness B... (hereinafter witness B...), called by the Claimant; by witness C... (hereinafter witness C...), also called by the Claimant, with witness D, D...'s questioning being dispensed with at the Claimant's indication.

The Parties were granted a period for successive arguments, which both proceeded to make.

The Arbitral Tribunal was regularly constituted and is competent.

The parties have legal personality and capacity and are entitled (articles 4 and 10, paragraph 2, of the same diploma and article 1 of Order No. 112-A/2011, of 22 March).

The proceedings do not suffer from nullities and no obstacle arises to the examination of the merits of the case.

II. THE CLAIMANT'S REQUEST

The Claimant requests the declaration of illegality of the VAT assessments of the years 2011 to 2013 and 1st quarter of 2014, and respective compensatory interest, on the grounds that the services provided by the Claimant to the companies (i) E..., Sole Proprietor, Ltd.; (ii) F...S.A. and (iii) G..., Sole Proprietor, Ltd. benefit from the exemption provided in subparagraph e) of paragraph 27 of article 9 of the VAT Code.

E..., Sole Proprietor, Ltd. is engaged in the sale of rights of tourist utilization but does not directly negotiate the sale of its titles, attributing these operations to its sales force composed of various sellers, including the Claimant.

For this purpose, E..., Sole Proprietor, Ltd. sets a minimum sale price, which must be mandatorily respected by the sellers, including the Claimant, being able to provide incentives in terms of commissions, which will be higher if the sale is higher than the minimum price set.

In the years 2011 to 2013 and in the 1st quarter of 2014, in the context of her activity, the Claimant limited herself to the practice of acts or operations of an administrative, material or technical nature, being assigned negotiation powers with regard to the final price of the contract, provided that it was higher than the minimum price set by E..., Sole Proprietor, Ltd.

The Claimant understands that the activity developed subsumes itself, thus, to the concept of "negotiation" to which subparagraph e) of paragraph 27 of article 9 of the VAT Code refers, as it was framed by the tax services and also in accordance with the jurisprudence of the CJEU, namely the judgment C-435/05 (Volker Ludwig), of 21-06-2007.

According to this judgment, the activity of "negotiation" is nothing more than "an intermediary activity that may consist, among other things, in indicating to a party to the contract the occasions for entering into a particular contract" whereby it is not obligatory that the Respondent to the Assessment acted in representation of the said companies for whom services were provided, by virtue of the law not requiring a mandate with representation for this purpose.

It is not relevant whether the clauses concerning the purchase and sale contract are previously fixed by the companies, given the concept of negotiation outlined in the cited judgment.

In light of the above, the Claimant concludes as to the illegality of the contested assessments for violation of subparagraph e) of paragraph 27 of article 9 of the VAT Code, whereby they request their annulment and that of the compensatory interest assessed.

III. THE PUBLIC TREASURY'S RESPONSE

In response, the Respondent considers the Claimant's request entirely unfounded, on the grounds that the activity developed by the Claimant is not subsumed to the concept of "negotiation" to which subparagraph e) of paragraph 27 of article 9 of the VAT Code refers.

The Respondent considers that the Claimant's activity consists only in the identification of potential customers of company E..., Ltd. and that the Claimant has its own interest in that the value of her commission depends on the value of the sale that will be carried out.

The Respondent adds that the Claimant's activity consists of mere prospecting and solicitation of future and potential customers of the product negotiated and marketed by the company to whom it provides its services.

The difference in the Claimant's actions is manifest compared to that which is the subject of analysis in the CJEU judgment of 21-11-2007, handed down in case C-453/05, Volker Ludwig case, also cited by the Claimant, in which it is established fact for the Court that the wealth advisor, with an agency contract with the entity granting the credit, even drafts binding contract proposals that he then transmits, after signature by the customer, to the referred entity, whereby the circumstances underlying this case cannot be regarded as similar, with his provision being considered as ancillary and sharing in the tax treatment of the principal.

The Respondent also considers that the argument to the effect that the Tax Service official had no doubts about the framing of the activity under the exemption regime does not hold, since such framing resulted from the information provided by the Claimant at the time of filing the return.

In accordance with the concept of "negotiation" defined in the CSC Financial Services judgment[1], "the expression negotiation concerning securities does not refer to services that merely consist of providing information concerning a financial product and, possibly, receiving and processing requests for subscription of the corresponding securities, without proceeding with their issuance".

Furthermore, in light of this ruling, "the activity of negotiation is a service provided to a contracting party and remunerated by this party as an activity distinct from intermediation. Among other things, it may consist of indicating to it the occasions for entering into a particular contract, contacting the other party and negotiating on behalf and for the account of the customer the details of the mutual performances. The purpose of this activity is, thus, to proceed with what is necessary for both parties to enter into a contract, without the negotiator having its own interest as to the content of the contract."

The Respondent understands that the Claimant's activity consists only in the identification of potential customers of E..., Sole Proprietor, Ltd. and that the Claimant has its own interest in that the value of her commission depends on the value of the sale that will be carried out.

The possible exemption applicable to the case may or may not benefit E..., Sole Proprietor, Ltd. and never the Claimant, since it is the former who markets the securities.

The Respondent also considers that, if the Claimant's interpretation is adopted, the numerous real estate intermediation companies that provide services in the area of customer prospecting and intermediation in the sale and leasing of real estate would also benefit from the exemptions that benefit the principal business, which is not the case. Therefore, if in the solicitation of customers for real estate sales or lease contracts no exemption from article 9 is applicable, neither can the mere solicitor of potential customers in the acquisition of a security relating to a minor real right or a merely binding security benefit from the exemption typified in article 9 of the VAT Code.

In that measure, the Respondent considers not to have been duly demonstrated that the activity developed by the Claimant in favor of E..., Sole Proprietor, Ltd. may benefit from the exemption provided in subparagraph e) of paragraph 27 of article 9 of the VAT Code inasmuch as, so far as established by the Respondent, such activity does not integrate the concept of "negotiation".

It thus concludes to the unfoundedness of the request of the Respondents, considering that illegality cannot be attributed to the contested assessment acts as invoked by the Respondents, that is, the violation of subparagraph e) of paragraph 27 of article 9 of the VAT Code.

IV. FACTUAL MATTERS

A. Facts Proven

The following facts are considered proven:

1. E..., Ltd. is engaged in the sale of securities of rights of tourist utilization on real property, by weekly fractions.

2. Upon acquiring the security, its holder has the right to enjoy holidays for the period, under the conditions and with the services fixed contractually.

3. Tourist utilization rights may have different characteristics.

4. Tourist utilization rights have a duration of more than 20 years.

5. To sell tourist utilization rights, E... Sole Proprietor, Ltd. resorts to independent service providers with no employment relationship.

6. These service providers are remunerated on the basis of commissions corresponding to sales made, so they only receive payment if they sell tourist utilization rights.

7. For each commission received, the service provider issues the relevant self-employment receipt in the name of E..., Ltd.

8. The company has a minimum price table, which must be mandatorily respected by service providers, the final price value depending on the negotiation made by the sellers.

9. As long as the minimum sale value is respected, the seller is free to negotiate the price they see fit.

10. Sellers receive a higher commission if, proportionally, sales are made above the minimum price set by E..., Sole Proprietor, Ltd.

11. In addition to the commission due for sales, service providers are entitled to commissions for contractual changes negotiated with customers that entail a modification of the tourist utilization right initially acquired, with additional payment at the customer's charge.

12. Sellers do not have representation powers of E... Sole Proprietor, Ltd.

13. Purchase and sale contracts are signed by the legal representatives of E... Sole Proprietor, Ltd. and not by the service providers who negotiate the sale.

14. The Claimant has been registered, from 01.01.2005, for the activity of "other business support service activities, [classification]..." with the framing to which article 9 of the VAT Code alludes.

15. During the years 2011, 2012, 2013 and first quarter of 2014, the Claimant provided services to E... Sole Proprietor, Ltd.

16. In the development of her activity, it was the responsibility of the Claimant to contact potential customers to whom she disclosed and promoted the tourist utilization rights of E... Sole Proprietor, Ltd.

17. The Claimant negotiated with customers the purchase price of the rights in question or the modification of the utilization title already held by the customer.

18. The Claimant set the final sale or modification price of title and agreed with the customer the conditions of acquisition, in terms of period for holiday enjoyment, type of tourist unit, associated services, etc., that best suited the customer's profile, without prejudice to subsequent validation by E... Sole Proprietor, Ltd.

19. The final price set could never be lower than the price previously determined by E..., Sole Proprietor, Ltd.

20. The Claimant did not have representation powers of E... Sole Proprietor, Ltd.

21. Sale contracts for securities were not formalized or signed by the Claimant.

22. The Claimant earned a commission for each transaction carried out, issuing the relevant self-employment receipt.

23. For services provided in 2011, the Claimant earned commissions in a total of Euro 56,203.91.

24. For services provided in 2012, the Claimant earned commissions in a total of Euro 40,037.79.

25. For services provided in 2013, the Claimant earned commissions in a total of Euro 61,327.47.

26. For services provided in the first quarter of 2014, the Claimant earned commissions in a total of Euro 2,008.61.

27. All receipts issued by the Claimant to (i) E..., Sole Proprietor, Ltd.; (ii) F...S.A. and (iii) G..., Sole Proprietor, Ltd. were issued without VAT assessment as this considered there to be an exemption provided in subparagraph e) of paragraph 27 of article 9 of the VAT Code.

28. The Claimant was subject to an internal tax inspection, of partial scope in VAT matters, relating to the tax years 2011 to 2013, as well as to the first quarter of 2014, which had its origin in Service Orders Nos. O12014..., O12014..., O12014... and O12014... all dated 19/09/2014 and issued by the Finance Office of....

29. The said inspective actions began on 29 September 2014 and were concluded on 23 December 2014.

30. In the inspection report prepared by the Tax and Customs Authority the following is mentioned:

[Section 30 appears to contain inspection report details that are not fully included in the provided text]

1. As a consequence, the Tax Authority proceeded with the following assessment acts:

[Section 35 appears to list assessment acts that are not fully included in the provided text]

B. Facts Not Proven

Other facts with relevance to the arbitral decision were not proven.

C. Grounds for the Factual Matters

The factual matters given as proven are based on documentary evidence presented and not contested, as well as on the testimony of witnesses B... and C....

The aforementioned testimonies proved to be serious and impartial in the eyes of the Court, in that, alongside the spontaneity characteristics thereof, they proved to be logically structured and coherent.

V. ISSUES TO BE DECIDED

A. On the Illegality of VAT Assessments

Tax litigation – through judicial challenge and the request for arbitral pronouncement – is reduced to litigation for annulment or declaration of nullity of tax acts, whereby the subject matter thereof is delimited by the tax act put into question and its respective grounds.

Thus, as far as the present case is concerned, it is necessary to decide whether the VAT assessment acts contested by the Claimant should or should not be annulled, as illegal.

It follows from the conclusions of the inspection report attached to the case and its respective grounds that, in the view of the Respondent, the activity developed by the Claimant will not be subsumed to the concept of "negotiation" to which subparagraph e) of paragraph 27 of article 9 of the VAT Code refers, whereby the VAT exemption provided therein will not be applicable to the services provided, in the years 2011 to 2013 and in the first quarter of 2014 to the companies (i) E..., Sole Proprietor, Ltd.; (ii) F... S.A. and (iii) G..., Sole Proprietor, Ltd.

It is thus necessary to decide.

Let us proceed.

Value Added Tax (VAT) is a general tax on consumption, in which the transfer of goods, the provision of services, imports and the intra-community acquisition of goods are taxed.

It is a tax that comprises a general regime and various special regimes, each of them the subject of a high degree of community harmonization.

The rules of VAT incidence may be of personal incidence – see article 2 of the VAT Code – and of real incidence – see article 1 of the VAT Code.

When a given situation falls within both categories – of personal and real incidence – we find a taxable event subject to VAT.

In the event that any of the incidence rules is not fulfilled, the event is not covered by the VAT Code and is, therefore, a situation not subject to VAT. In this way, the principle of legal certainty and the principle of tax legality are implemented: only facts expressly provided for in law are subject to tax.

On the other hand, it may happen that a given taxable event, fulfilling the rules of personal and real incidence, is, by express legal provision, exempt from taxation for VAT purposes.

In this light, we must distinguish non-subjection to a tax (in which the event does not fulfill the incidence rules whereby it is not covered by that tax), from exemption from a tax (in which, with the incidence rules being fulfilled, the law determines the exemption of that event in the context of a particular tax).[2]

In the case at hand, the question is whether a given taxable event is exempt from VAT, according to article 9, paragraph 27, subparagraph e) of the VAT Code[3], knowing that paragraph 27 of article 9 provides, precisely, that the set of operations listed therein (in subparagraphs a) through h)) is exempt from tax.

What is at issue is therefore whether this exemption rule – the provision of subparagraph e) of paragraph 27 of article 9 – can be invoked by the Claimant, in the context of the services that it provided to the companies (i) E..., Sole Proprietor, Ltd.; (ii) F...S.A. and (iii) G..., Sole Proprietor, Ltd.

It should be noted that, in accordance with the extensive jurisprudence of the Court of Justice of the European Union (CJEU), the exemptions provided in Directive 2006/112/EC of the Council - and, consequently, in paragraph 27 of article 9 - constitute autonomous concepts of European Union law that must be interpreted strictly as they constitute exceptions to the common VAT system.

However, this requirement of strict interpretation must be in conformity with the objectives of the exemptions provided and respect the principle of fiscal neutrality under penalty of, by emptying them of content, putting in question the legal and economic effects intended.

All operations listed in paragraph 27 of article 9 of the VAT Code are defined according to the nature of the service provisions that are furnished and not according to the person or quality of the service provider, the recipient of the service or the manner in which the service is provided, as is demonstrated in the exhaustive list of subparagraphs provided therein.

In the situation at hand, doubt arises as to the activity provided by the Claimant to the companies (i) E..., Sole Proprietor, Ltd.; (ii) F... S.A. and (iii) G..., Sole Proprietor, Ltd.

Strictly speaking, the difficulty revolves around the qualification of the services provided by the Claimant: it is sought to know whether this is equivalent to negotiation for purposes of the provision of article 9, paragraph 27, subparagraph e) of the VAT Code, which covers "operations and services, including negotiation, but excluding mere custody and administration or management, relating to (...) securities representing operations on real property when carried out for a period of less than 20 years" and which resulted from the transposition, into Portuguese law, of the provision in article 135, paragraph 1, subparagraph f) of Council Directive No. 2006/112/EC, of 28 November 2006, on the common system of value added tax.

i) On the Concept of Negotiation in Light of Article 9, Paragraph 27, Subparagraph e) of the VAT Code:

In the CSC Financial Services judgment[4], the CJEU sought to clarify the concept of "negotiation" for purposes of the provision of article 13, B, subparagraph d), paragraph 5 of the sixth VAT directive (prior to Directive No. 2006/112/EC) – a provision that was transposed into Portuguese law by the current subparagraph e) of paragraph 27 of article 9 of the VAT Code.

The CJEU concluded that the term "negotiation" "refers to an activity carried out by an intermediary who does not take the place of a party to a contract concerning a financial product and whose activity is different from the typical contractual performances made by the parties in contracts of that type."

The same judgment adds, in paragraph 39, that "indeed, the activity of negotiation is a service provided to a contracting party and remunerated by this party as an activity distinct from intermediation. Among other things, it may consist of indicating to it the occasions for entering into a particular contract, contacting the other party and negotiating on behalf and for the account of the customer the details of the mutual performances. The purpose of this activity is, thus, to proceed with what is necessary for both parties to enter into a contract, without the negotiator having its own interest as to the content of the contract." (emphasis in original)

The CJEU went further, considering that one is not faced with a negotiation activity "when one of the parties to the contract entrusts to a subcontractor part of the material operations connected to the contract, such as informing the other party, receiving and processing requests for subscription of the securities that are the subject matter of the contract. In this case, the subcontractor occupies the same position as the product seller and is not, thus, an intermediary who does not take the place of one of the parties to the contract within the meaning of the provision in question." (see paragraph 40) (emphasis in original)

In other words, the CJEU considered, in the CSC judgment, that in cases where the service provider acts on behalf of the entity to which it provides services, not having its own interest in the contract, we are not faced with a financial intermediation activity, the financial operations carried out in this context being exempt from VAT.

The Portuguese tax administration came to the same conclusion as the CJEU.

With a view to delimiting the concepts of negotiation and intermediation, note the binding information issued on 6 July 2007, regarding article 9, paragraph 28 (current 27), subparagraph b)), in which the tax administration considered that "if the contract entered into between the mediators and credit institutions is a mediation contract for the realization of credit or consumer financing contracts, it will have underlying operations exempt from VAT, with the respective commission not being subject to taxation, since the exemption provided in subparagraphs a) and b) of paragraph 28 of article 9 of the VAT Code contemplates operations of a banking and financial nature, including intermediation, applying the respective provision regardless of the quality of the entity that carries out such operations".

The same information considered, in point 6, that if the company "is not a party intervening in the contracts, representing the intervention nothing more than a mere provision of services (solicits customers, but does not represent a party to the contract, limiting itself to an action of clarification and help in filling in the necessary elements with a view to its appraisal by the financing entity), the operation is subject to tax and is not exempt therefrom".

Having reached this point, some uncertainty may be generated in the use of the concepts of negotiation and intermediation.

It is understood that these should be distinct, bearing in mind in particular the case at hand.

This difference stems from the Directive on the common system of value added tax - Directive 2006/112/EC, of 28 November, of the Council of the European Union – which in providing, in article 135, paragraph 1, on exemptions for the benefit of other activities, uses, in a differentiated manner, the term negotiation (see subparagraphs b), d), e) and f)) and intermediaries (see subparagraph a)) thus contaminating the VAT Code which uses the notion of intermediation[5] in paragraph 28 of article 9 of the VAT Code in a manner distinct from negotiation, provided in subparagraph e) of article 9, paragraph 27.

In summary, and in light of the foregoing, it can be stated that the term negotiation, provided in article 9, paragraph 27, subparagraph e) of the VAT Code, implies that the following conditions are verified, cumulatively:

a) An activity carried out by an intermediary who does not take the place of a party to a contract concerning a financial product;

b) That the activity is different from the typical contractual performances made by the parties in contracts of that type;

c) That the activity consists of proceeding with what is necessary for both parties to enter into a contract, without the negotiator having its own interest as to the content of the contract.[6] (emphasis in original)

The activity of negotiation is, consequently, a service provided to a contracting party and remunerated by this party as an activity distinct from intermediation.

Among other things, it may consist of indicating to it the occasions for entering into a particular contract, contacting the other party and negotiating on behalf and for the account of the customer the details of the mutual performances.

Hence it is considered that the mere provision of information concerning a financial product or the receipt and processing of requests for subscription of the corresponding securities, without proceeding with their issuance, do not integrate the concept of "negotiation".[7]

Purely administrative and technical services that would allow the parties to enter into a contract, without any interference as to the content of that contract, cannot, accordingly, be considered as characteristic of a negotiation process.

Now, in the present case, the central issue is whether the activity provided by the Claimant to the companies (i) E..., Sole Proprietor, Ltd.; (ii) F... S.A. and (iii) G..., Sole Proprietor, Ltd. consisted in the negotiation of contracts for operations relating to securities on real property for a period exceeding 20 years.[8]

Having framed the issue at hand, we must, consequently, subsume the theoretical elements described to the factual matters given as proven, especially since, as the CJEU considered in the CSC judgment, "the question of whether, in the main proceedings, CSC's activities can be considered as those of an intermediary is essentially a question of fact that it is for the referring court to analyze."[9]

Let us proceed.

As was stated, in the past, by Advocate General Dámaso Ruiz-Jarabo Colomer[10], the "(...) idea of 'negotiate' presupposes those of 'compromise', 'yield' and 'deal', in short, that of disposing of one's own rights and interests to reach an agreement. The capacity to make use of one's own legal patrimony is possessed only by its owner or by one who represents it, by virtue of the law (parental power, guardianship), or by contractual provision (mandate, representation)."

It is important, therefore, to inquire as to what rights and interests the Claimant could dispose of concerning the companies to which services were provided.

In light of the factual matters given as proven, the Claimant's activity included the collection of identification elements of potential customers of the companies to which services were provided, reducing to writing the identification elements of possible buyers, the description of the desired real property, the period of the year chosen and, consequently, the final purchase price.

That is, the Claimant limited herself to filling in the final price at which securities on real property for a period exceeding 20 years were alienated, based on a set of parameters indicated by the companies to which services were provided, having to respect a minimum price previously determined for this purpose.

All conditions fixed by the Claimant, after customer agreement, were reduced only to the value of the final price which reflected, in particular, the type of apartment, the number of weeks of holidays or the annual scheduling thereof.

Also in accordance with the proven facts, the Claimant could not dispose of any other condition that was not related to the final price to be fixed, having to mandatorily respect a minimum value set by the companies to which services were provided.

Bearing in mind that the Claimant was obliged to respect a minimum price, it is not apparent in what measure it could, in its activity, "compromise", "yield" and "deal" with rights and interests of the companies to which it provided services, concepts underlying the idea of negotiating, in light of CJEU jurisprudence, as we have seen previously.

Strictly speaking, the Claimant could only increase the final price, which stemmed from the own interest it had in the overall value of the contract, considering that the commission it would earn would be proportional to that same value.

This is, moreover, the central issue in the case at hand.

It is of crystal-clear understanding that the Claimant had its own interest in the sales proposal made to each customer in that the value of the commission it would earn, reiterate, depended on and corresponded to the value of the sale carried out, i.e. the final price.

In other words, the commission earned would be so much greater the greater the value of the final price.

The Claimant did not therefore have the possibility of altering any other clauses of the contract – whether those of the promise of sale contract or the definitive contract – or even "compromising", "yielding" and "dealing" with any clauses of these contracts.

Indeed, as resulted from the testimony of the two witnesses, in no circumstance could the service providers (including the Claimant) modify the contract clauses (or the promise contract if one existed), limiting themselves to filling in the necessary data in order to, fixing the final price, calculate the value of the commission they would earn and that was related, among other elements and as mentioned previously, with the type of apartment or the number of weeks and time of year chosen by the customer.

To this regard, it is important to record that witness B – B... – stated there to be a pre-filled contract template, in which the identification elements of the buyer and the real property were included, and that witness C – C... – stated that such identification elements were placed on a blank sheet of paper and that it is therefore not to be believed, bearing in mind the two testimonies given and the rules of common experience, that any contract clauses other than those directly and only related to the identification of buyers and the final sale price, and consequently to the commission that this would earn, would be filled in – or even altered – by the Claimant, whether on a blank sheet or on a pre-filled sheet.

Notwithstanding the fact that it is known there exists CJEU jurisprudence according to which the mere fact that the clauses of the credit contract have been previously fixed by one of the parties to the contract cannot, by itself, prevent the provision of a negotiation service within the meaning of article 13, B, subparagraph d), point 1, of the Sixth Directive[11], since, as the CJEU has recognized in the past, the "activity of negotiation may limit itself to indicating to a party to the contract the occasions for entering into such contract", it is understood that this is not applicable, strictly speaking, to the case at hand.

This is because the facts underlying the case at hand are different from those that existed in the Volker Ludwig judgment, since, in the latter, the activity of a wealth advisor was at issue who solicited potential customers, on behalf of a company (DVAG) and who, after an analysis of the financial situation of the person thus contacted, carried out thanks to a computer program made available by DVAG, the advisor proposed the financial products that could suit their needs.

In the case at hand, it is true that the Claimant could alter one of the essential elements of the contract – its price.

However, the freedom granted was not absolute since a minimum value previously set had to be respected and, on the other hand, the supposed freedom of price-fixing – strictly speaking the freedom to increase the minimum price set – was related, directly, to the commission that the Claimant would earn and in which it would naturally have its own interest.

Here, it could always be affirmed that the possible price increase determined by the Claimant – beyond the minimum value set – also benefited the companies for which the Claimant provided services.

This latter reality does not allow us to deny another: the Claimant had its own interest in fixing the final price since its remuneration was based on a system of commissions that were proportional to the final price, provided that the minimum value determined by the companies to which services were provided was respected.

Facts were not proven that demonstrated that the Claimant, in addition to being able to fix the final price, subject to subsequent approval by the companies to which services were provided and provided that the pre-determined minimum limit was respected, could carry out other operations capable of creating, modifying or extinguishing rights and obligations of the parties, relating to the securities at issue.[12]

In this context, it is concluded that the activity provided by the Claimant to the companies consisted, on the one hand, in the determination of the final price to be paid by customers thereof – provided that the minimum value pre-determined by the companies for which the Claimant provided services was respected – on which the commission that they earned was based and, on the other hand, in the administrative filling in of the data of identification of the acquirer and the real property, which allowed the parties to subsequently enter into a contract, with regard to which the Claimant could not interfere.

In either of the scenarios relating to the activity exercised, the concept of "negotiation", previously elaborated from CJEU jurisprudence, is not fulfilled since the Claimant had its own interest as to the content of the contract in that the value thereof determined the commission it would earn and the subsequent tasks it had to perform limited themselves to the administrative filling in of the data of identification of the acquirer and the real property.

Now should it be considered that the Claimant had its own interest in the contract, the concept of negotiation previously explained is not verified.

In other words, and bearing in mind the activity specifically developed by the Claimant, it is concluded that the same does not integrate the concept of "negotiation" of subparagraph e) of paragraph 27 of article 9 of the VAT Code, a solution which, let it be underlined, respects the principle of fiscal neutrality.

Not having this tribunal doubts as to the interpretation and application of the provision in question, it is understood that there is no ground for a preliminary reference to the CJEU.

V. DECISION

In light of the foregoing, this Arbitral Tribunal decides to judge the request for arbitral pronouncement unfounded, as to the request for annulment of the additional VAT assessments, carried out by the Tax Authority, relating to the periods of 2011 to 2013 and to the first quarter of 2014, duly identified in point 35 of the proven facts.

Value of the Proceedings:

In accordance with the provision of article 306, paragraph 2, of the Civil Procedure Code and 97-A, paragraph 1, subparagraph a), of the Code of Administrative Court Procedure and 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is set at €36,702.90

Costs:

Pursuant to paragraph 4 of article 22 of the LRAT, the amount of costs is set at €1,836.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Claimant.

Let this arbitral decision be registered and notified to the parties.

Lisbon, 15 July 2016

The Sole Arbitrator

Nuno Cunha Rodrigues

[1] See CSC Financial Services judgment, case C-235/00, of 13 December 2001, Law Reports, 2001, p. I-10237, also available at http://curia.europa.eu/jurisp/

[2] Accordingly, see Nuno Cunha Rodrigues, The Subjection to VAT of the Relationships Underlying an Internal Consortium Contract, in Studies in Tribute to Alberto Xavier, volume II, Almedina, Coimbra, 2013, pp. 451-460.

[3] This numbering results from Rectification Statement No. 44-A/2008, of 13 August.

[4] See CSC Financial Services judgment, case C-235/00, of 13 December 2001, Law Reports, 2001, p. I-10237, also available at http://curia.europa.eu/jurisp/

[5] On the notion of intermediary in light of article 9, paragraph 28 of the VAT Code, see Mariana Gouveia de Oliveira and Ana Raquel Costa, The Original Sin of VAT: the Ancillary Service Provisions Performed by Insurance Brokers or Intermediaries, in VAT Notebooks, 2015, Almedina, Coimbra.

[6] See CJEU judgment DTZ Zadelhoff vof, case C-259/11, of 5 July 2012, and CJEU judgment CSC Financial Services, case C-235/00, of 13 December 2001, both available at www.curia.europa.eu

[7] See CJEU judgment CSC Financial Services, case C-235/00, of 13 December 2001, available at www.curia.europa.eu

[8] On the subjection to VAT of these securities, see Xavier de Basto and António Lobo Xavier, VAT and Periodic Real Estate Right Titles, in Revista Fisco, July 92, year 4, No. 45, pp. 3-13 and Clotilde Palma, VAT Treatment of the Sale of Tourist Accommodation Rights, in Revista Fisco, September 2005, year XVI, No. 119/121, pp. 159-164.

[9] See CJEU judgment CSC Financial Services, case C-235/00, of 13 December 2001, paragraph 36, available at www.curia.europa.eu

[10] See conclusions presented on 12 July 2001 in case CSC FINANCIAL SERVICES, available at www.curia.europa.eu

[11] See paragraph 39 of the CJEU judgment Volker Ludwig, case C-453/05, of 21 June 2007, available at www.curia.europa.eu.

[12] See CSC Financial Services judgment, case C-235/00, of 13 December 2001, Law Reports, 2001, p. I-10237, also available at http://curia.europa.eu/jurisp/