Process: 78/2014-T

Date: July 11, 2014

Tax Type: IVA

Source: Original CAAD Decision

Summary

CAAD arbitration case 78/2014-T addressed a fundamental jurisdictional question regarding Portuguese tax arbitration tribunals' competence to rule on VAT (IVA) rate disputes. The claimant, a tourist accommodation operator, challenged VAT self-assessment acts from September 2011 to April 2013 totaling €853,351.89, arguing that transactions were incorrectly taxed at 23% instead of the reduced 6% rate applicable to tourist accommodation services. The taxpayer operated a tourist village with fully equipped dwellings, hotel-like services including daily housekeeping, restaurants, bars, swimming pools, and recreational facilities, offering services both to the general public and club members with preferential annual payment arrangements. Following rejection of a gracious claim under Article 131 of the Code of Tax Procedure (CPPT) by the Director of Finance of Faro, the taxpayer sought arbitration requesting declaration of illegality and partial annulment of the self-assessment acts. The Portuguese Tax and Customs Authority raised a preliminary exception arguing lack of jurisdiction ratione materiae, contending that Article 2 of the RJAT (Administrative Arbitration Legal Regime) only permits arbitral tribunals to declare illegality of assessment acts, not to recognize rights to tax refunds. The arbitral tribunal, composed of three arbitrators designated by CAAD's Deontological Council, dismissed the jurisdictional exception with comprehensive reasoning. The tribunal held that since the claimant primarily sought declaration of illegality of VAT self-assessment acts—expressly covered by Article 2, no. 1, paragraph a) of RJAT—the tribunal possessed jurisdiction. Furthermore, the tribunal clarified that refund claims constitute a legal consequence of illegality declarations under Article 24, paragraph b) of RJAT, which mandates restoration of the situation that would exist absent the illegal tax act. This CAAD arbitration decision establishes important precedent regarding the scope of Portuguese tax arbitration jurisdiction in IVA disputes, confirming that arbitral tribunals can adjudicate VAT rate classification controversies when framed as challenges to assessment act legality following administrative claim rejection.

Full Decision

ARBITRAL DECISION

The arbitrators Dr. Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. Francisco Carvalho Furtado and Dr. Emanuel Augusto Vidal Lima, designated by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 04-04-2014, hereby agree as follows:

1. Report

"A..." Sole Proprietorship Limited Company, VAT No. ..., with registered office at Avenue ..., ..., in ... (hereinafter "A" or "Claimant"), following the dispatch of 01-11-2013 issued by delegation of the Director of Finance of Faro which rejected the claim submitted pursuant to article 131 of the Code of Tax Procedure (CPPT) against the self-assessment acts of Value Added Tax (VAT) from September 2011 to April 2013 in the cumulative amount of € 853,351.89, has, under the terms and for the purposes set out in articles 2, no. 1, paragraph a), 3, no. 1, and 15 et seq., Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT"), filed applications for a declaration of illegality and partial annulment of the said self-assessment acts and of the act rejecting the necessary claim that confirmed them.

The Claimant opted for non-designation of an arbitrator.

The application for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority.

Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, the Deontological Council designated as arbitrators of the collective arbitral tribunal Counsellor Jorge Lopes de Sousa, Dr. Francisco Carvalho Furtado and Dr. Emanuel Augusto Vidal, who communicated acceptance of the appointment within the applicable deadline.

The parties were notified of this designation and did not manifest an intention to challenge the appointment of the arbitrators, pursuant to the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, in compliance with the provision of paragraph c) of no. 1 of article 11 of the RJAT, the collective arbitral tribunal was constituted on 04-04-2014.

The Tax and Customs Authority filed a response in which it raised the exception of lack of jurisdiction of the Arbitral Tribunal ratione materiae and argued that, if this were not accepted, the claim should be dismissed as unfounded.

At the meeting provided for in article 18 of the RJAT, as the Tax and Customs Authority declared acceptance of the facts alleged by the Claimant, witness testimony production was waived and the Parties presented oral submissions.

The Arbitral Tribunal was duly constituted.

The parties have legal personality and capacity and are legitimate (articles 4 and 10, no. 2, of the same statute and article 1 of Ordinance no. 112-A/2011, of 22 March).

No other invalidity is apparent.

2. Question of Lack of Jurisdiction of the Arbitral Tribunal

The Tax and Customs Authority raises the question of lack of jurisdiction of the Arbitral Tribunal on the basis that, in summary, the Claimant seeks recognition of the right to refund the amount of tax that it believes was levied illegally to its clients and, in light of article 2 of the RJAT, the jurisdiction of arbitral tribunals comprises, among others, consideration of claims relating to "declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account".

The Tax and Customs Authority contends that it follows unequivocally therefrom that the legislator chose not to provide for (in the RJAT) the possibility of considering claims aimed at recognition of rights in tax matters.

The Claimant argues that the VAT assessment acts to its clients at the rate of 23% were illegal because the rate of 6% should have been applied, and filed a gracious claim in which it presented its claim and which was rejected.

The claim formulated by the Claimant is as follows:

"In these terms and in the remaining matters of Law that will be properly supplied by Your Honours, the present arbitral action should be adjudged entirely proven and well-founded, and accordingly, with the inherent consequences in law, declared illegal and partially annulled the VAT self-assessment acts from September 2011 to April 2013 for the total amount of € 853,351.89 and likewise the act rejecting the necessary claim presented in time in relation to them which confirmed them".

It is clear, therefore, that the Claimant seeks, primarily, to have declared the illegality of VAT self-assessment acts, directly and through the declaration of illegality of the act that rejected the gracious claim.

Therefore, the claim formulated is covered by the jurisdiction of the arbitral tribunals operating at CAAD, which includes jurisdiction to consider claims for "declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account" [article 2, no. 1, paragraph a), of the RJAT].

Furthermore, from the reference made in article 10, no. 1, paragraph a), of the RJAT to article 102, no. 2, of the CPPT, which refers to challenges to decisions on gracious claims, it follows that the request for consideration of the legality of assessment acts may be presented following decisions of this type.

The claim to receive amounts that have been levied illegally is a consequence of the eventual declaration of illegality, within the scope of the duty to "restore the situation that would have existed if the tax act which is the subject of the arbitral decision had not been practised", referred to in paragraph b) of no. 1 of article 24 of the RJAT, so that the existence of this claim does not exclude the jurisdiction of the arbitral tribunals operating at CAAD, but rather presupposes the prior declaration of illegality of the assessment acts.

Therefore, the exception of lack of jurisdiction raised by the Tax and Customs Authority is dismissed.

3. Facts of the Case

3.1. Proven Facts

The following facts are considered proven:

a) The Claimant "A", Sole Proprietorship Limited Company, is a taxpayer subject to Corporate Income Tax, resident in national territory and classified under the normal VAT regime with monthly periodicity;

b) The Claimant's principal activity is the operation of tourist villages with catering services;

c) The Claimant is the owner of a tourist accommodation establishment;

d) The Claimant's establishment comprises all the typical elements that characterize the generality of establishments intended for tourist accommodation, providing therein the services that are provided in hotels;

e) The Claimant's establishment has bedrooms, 96 fully equipped dwellings ready for occupation and use which enjoy a daily cleaning and housekeeping service, replacement of towels, bedding and personal hygiene consumables;

f) The said establishment comprises tennis courts and gymnasium, games room, reception, restaurant, bars, football field, outdoor and indoor swimming pools, sauna and jacuzzi, children's play area, common rest areas and a hairdressing salon, among other facilities;

g) The Claimant's establishment provides ancillary services to customers accommodated therein, namely personalized customer service, meals or other specific complementary services such as supervised classes in various sports and other recreational activities;

h) The Defendant provides all its services to the general public, but offers more advantageous conditions to the so-called members of "A" (Club);

i) The status of Club member confers on customers the right to use a given dwelling for temporary accommodation during a determined week of each year, at preferential prices;

j) The status of Club member is subject to an annual payment that exempts payment of any other consideration for accommodation, but which is typically lower than the price of equivalent accommodation charged to other clients;

k) If any annual payment is missed, the client will permanently lose his status as a member and will be treated as any other client, being able to occupy a dwelling only if available upon payment of the price due by any non-member client of the Club;

l) The service that the Claimant provides to all its customers, members and non-members of the Club, is identical;

m) The service that the Claimant provides to all its customers – members and non-members of the Club – consists of accommodation in a hotel-type establishment;

n) On the amount of the annual payment invoiced to Club member customers, the Claimant was levying VAT at the normal rate, whereas on the amount invoiced to other customers for accommodation in the same dwellings it was levying VAT at the reduced rate;

o) Given the identity of the services it provides to all its customers, the Claimant understood that it should treat them uniformly for purposes of VAT liability;

p) For this purpose, it began to levy VAT at the reduced rate also on the annual payment invoiced to Club members, as accommodation, in the months of February to August 2011;

q) In order to dispel any doubt about this understanding, the Claimant filed, on 28-03-2011, a request for binding information;

r) The binding information from the VAT Services Department issued in process no. ..., sanctioned by the Director-General, and notified to the Claimant on 3-10-2011, established the understanding that the services provided to Club members are subject to VAT at the normal rate and not at the reduced rate that the Claimant had applied in its invoicing;

s) The said binding information was based on the fact that the annual payment relates to a set of rights and not merely to the right of occupation of a week in a given dwelling and as such constitutes an operation subject to tax, taxed at the normal VAT rate, which does not fall within a hotel-type accommodation service;

t) In light of the information obtained, the Claimant additionally self-assessed, on 31-10-2011, tax at the normal rate on the value of the same service through replacement declarations relating to February, March, April, May, June, July and August 2011;

u) In complying with the binding information, the Claimant understood that it was giving rise to an error in each of the said acts of additional VAT self-assessment;

v) For that reason, it filed gracious claims against all acts of additional VAT self-assessment from February to August 2011, all dated 31 October 2011;

w) The claims filed against the VAT self-assessment acts of February and March 2011 that applied the normal rate were rejected by decision of the Deputy Director of the Finance Department of Faro, recorded in processes no. ... and ... of that Finance Department;

x) From that rejection the Claimant filed an arbitral challenge that was processed at CAAD with no. 117/2012-T;

y) On 21-05-2013, the award of the Arbitral Tribunal was issued, which adjudged the claim entirely well-founded and annulled the VAT self-assessment acts of February and March 2011 that applied the normal rate (document no. 4 attached to the request for arbitral decision, the content of which is reproduced as herein);

z) The claim filed against the VAT self-assessment act of April 2011 that applied the normal rate was likewise rejected by decision of the Deputy Director of the Finance Department of Faro, recorded in process no. ... of that Finance Department;

aa) From that rejection the Claimant filed a judicial challenge that was processed in the Administrative and Tax Court of Loulé with no. .../13.0BELLE;

bb) On 31-10-2013, the judgment of the Administrative and Tax Court of Loulé was delivered, which adjudged the claim entirely well-founded and annulled the VAT self-assessment act of April 2011 that also applied the normal rate (document no. 5 attached to the request for arbitral decision, the content of which is reproduced as herein);

cc) The claim filed against the VAT self-assessment acts of May to August 2011 that applied the normal rate was entirely granted by decision of the Deputy Director of the Finance Department of Faro, issued in process no. ... of that Finance Department which forthwith annulled them (document no. 6 attached to the request for arbitral decision, the content of which is reproduced as herein);

dd) The price established by the Claimant with its Club member customers for the hotel accommodation service it provides to them has always been a final price with VAT included;

ee) The tax assessed, whether or not legally due, is incorporated in this price and is borne by and at the risk of the Claimant;

ff) If it levies tax in excess of that due, the Claimant will see its margin reduced and if it levies tax less than that due, the Claimant will have to bear the additional portion without being able to demand it from its customer;

gg) Between February and August 2011, the Claimant invoiced the hotel accommodation service at the reduced VAT rate;

hh) Confronted with the binding information referred to, the Claimant self-assessed in the said replacement declarations the additional portion of VAT that it remitted to the State without being able to demand it from its customers;

ii) Between September 2011 and April 2013, the Claimant charged for the same hotel accommodation service an identical price to what it had charged to its Club member customers between February and August 2011, but included therein VAT at the normal rate of 23% which it self-assessed in the respective periodic declarations and remitted to the State;

jj) Without being able to charge its customers any amount additional to the value of the fixed annual fee that it had contracted with them, the Claimant reduced its margin, so that in the same price it could include 23% VAT;

kk) Between February and August 2011, as between September 2011 and April 2013, the Claimant did not charge its customers any amount additional to the value of the fixed annual fee that was established as the consideration for the hotel accommodation service it provided to them;

ll) In the months of September 2011 to April 2013, the Claimant wholly accepted the said Binding Information and paid the additional value resulting therefrom, relating to the difference between VAT at the normal rate and at the reduced rate, with respect to Club members, in accordance with the table that follows:

[TABLE WITH VAT VALUES FOR SEPTEMBER 2011 - APRIL 2013]

mm) From September 2011 onwards, the Claimant began to levy tax to its customers at the rate of 23%;

nn) With respect to the periods of September 2001 to April 2013, a gracious claim was filed by the Claimant, regarding all monthly VAT assessments, which had no. ...;

oo) The gracious claim referred to in the preceding paragraph was not granted, as the Tax and Customs Authority understood that it was not the Claimant that bore the difference between VAT at the normal rate and at the reduced rate;

pp) The decision rejecting the said gracious claim, issued on 01-11-2013 by the Director of Finance of Faro in a substitute capacity, manifests agreement with information from the respective services, which appears in document no. 1 FSCC RG 02 attached to the request for arbitral decision, the content of which is reproduced as herein, in which the following is stated, among other matters:

"With respect to the VAT periods claimed in the various processes presented, we must consider two distinct periods, the first being with respect to the months of February 2011 to August of the same year, a period in which the claimant, having charged Club Members VAT at the reduced rate, bore, after becoming aware of the Binding Information issued by the Tax Authority, the difference of VAT to the Normal rate, this difference having been remitted together with the replacement declarations for each of those months and subsequently reimbursed by virtue of the award of the Arbitral Tribunal, and the second, which corresponds to the months of September 2011 to April 2013, a period in which the taxpayer remitted to the State the VAT charged at the Normal rate to its club members, reason for which, having not borne any additional VAT, nor will it have the right to reimbursement or deduction of any amount, since it merely remitted the tax charged to its customers, and there are no known, in accordance with information from the Inspection Services, already previously referred to, accounting entries regarding adjustments in favor of the taxpayer (by rectification of the tax for less), nor were the requirements set out in article 78, namely in its no. 5, of the VAT Code complied with".

qq) The Claimant charged an annual fixed price, with VAT included, to its customers who were club members, assuming itself, through the reduction of its income, the burden of bearing the difference between VAT at the normal rate and at the reduced rate;

rr) On 31-01-2014, the Claimant filed the application for constitution of the arbitral tribunal that gave rise to the present proceedings.

3.2. Unproven Facts

There are no facts relevant to the decision of the case that have not been proven.

3.3. Reasoning for the Decision on the Facts

The facts were given as proven on the basis of the documents attached to the request for arbitral decision and which form part of the administrative file and on the basis of agreement of the Parties, as the Tax and Customs Authority, at the meeting referred to in article 18 of the RJAT, accepted all the facts alleged by the Claimant.

4. Legal Issues

4.1. Question at Issue in the Proceedings

It is contended by the Claimant and accepted by the Tax and Customs Authority that, in the months of September 2011 to April 2013, VAT was levied by the Claimant on Club members at the normal rate when VAT at the reduced rate was due.

The controversy rests solely on the understanding of the Tax and Customs Authority, referred to in the opinion on which the decision on the gracious claim was based, that the Claimant "having not borne any additional VAT, nor will it have the right to reimbursement or deduction of any amount, since it merely remitted the tax charged to its customers, and there are no known accounting entries regarding adjustments in favor of the taxpayer (by rectification of the tax for less), nor were the requirements set out in article 78, namely in its no. 5, of the VAT Code complied with".

Thus, the question to be decided is whether, notwithstanding the fact that the Claimant has illegally levied VAT at the normal rate on its Club member customers and there has been no rectification, it has the right to challenge the self-assessment acts on the grounds of illegality of such levy and, in consequence, to recover the VAT levied in excess.

As we are dealing with a tax of European origin and subject to regulation by the European Union, the jurisprudence of the CJEU on this matter must be respected, which is a corollary of the obligation of preliminary ruling provided for in § 3 of article 267 of the Treaty on the Functioning of the European Union.

4.2. Consideration of the Question

As results from the position taken by the Tax and Customs Authority regarding the applicability of the reduced VAT rate to the operations to which the Claimant applied the normal rate, it is an established fact that the assessments whose declaration of illegality the Claimant seeks are indeed affected by illegality, which is not even a matter of controversy.

Therefore, the true reason for the position of the Tax and Customs Authority in rejecting the gracious claim in which the Claimant sought to have such illegality declared is the lack of legal standing of the Claimant to request such declaration and to receive the amount illegally levied, derived from the fact that, in the understanding of the Tax and Customs Authority, the Claimant is not harmed by the illegal VAT levy, which was entirely passed on to its Club member customers. In a situation of this type one can see, from another perspective, the creation of a situation of unjust enrichment of the Claimant by permitting it to obtain amounts of VAT that it charged to its customers.

However, whilst it is true that there are situations of this type in which a situation of unjust enrichment can be configured that justifies the denial of legal standing to challenge assessments of taxes passed on to third parties, there are also situations in which this does not occur, as the CJEU has already recognized in the judgment of 06-09-2011, delivered in case no. C-398/09 (cited by the Claimant), in which it was held as follows:

"The rules of Union law relating to the recovery of unduly paid amounts must be interpreted to the effect that the recovery of unduly paid amounts can only give rise to unjust enrichment in the hypothesis that the amounts unduly paid by a taxpayer, by virtue of a tax collected in a Member State in violation of Union law, have been directly passed on to the buyer".

On the other hand, as was held in the CJEU judgment of 21-02-2000, delivered in case no. C-441/98, "although Union law does not preclude a Member State from refusing reimbursement of taxes levied in violation of its provisions provided that it is proven that such reimbursement will result in unjust enrichment, it precludes the application of any presumption or rule of proof intended to place on the operator in question the burden of proving that the amounts unduly paid were not passed on to other persons and intended to prevent the presentation of evidence to dispute an alleged pass-on".

Thus, in harmony with this jurisprudence of the CJEU, the answer to the question of the legal standing of the Claimant to seek the declaration of illegality of the VAT self-assessment acts depends on establishing, in light of the concrete factual circumstances, whether the reimbursement to the Claimant of the illegally levied VAT does or does not create a situation of unjust enrichment. Or, from another perspective, the solution to the question depends on knowing whether or not the Claimant was harmed by the illegal levy.

Now, in the factual context that results from the evidence produced, it was the Claimant that ultimately bore the difference between VAT at the normal rate and VAT at the reduced rate, in the period from September 2011 to April 2013.

In fact, it was proven that the Claimant charged all its customers an identical price, with VAT included, which meant that, when it illegally levied VAT at the normal rate, the Claimant obtained for the services provided an income lower than what it earned when it applied the reduced rate.

Indeed, the practice of the Claimant is perfectly understandable, for, given that the normal rate was applied to customers who were club members and not to the general public, the maintenance of a fixed income for the services to which VAT would be added would have the consequence that club members would receive less favorable treatment than the general public as to the price they would pay for the same services, which would not be reasonable, for it is obvious that if the status of club member can justify some discrimination in relation to the general public, the discrimination will be positive, translated into a more favorable price, and not negative.

In these circumstances, it must be concluded that the consequences of the illegality of the VAT levy fell on the Claimant and not on the club members to whom it charged VAT at the normal rate, as these members benefited from a reduction of the Claimant's income, in an amount equal to the difference between the normal rate and the reduced rate of VAT, so that the price they paid for the services did not exceed what was paid by the general public, for the same services.

Being so, the refund to the Claimant, as a consequence of the illegality of the levy, of the amount of VAT borne in excess will not entail a situation of unjust enrichment, for, despite the apparent pass-on of this excess to the club member customers, the reality is that it was the Claimant that bore it, which becomes clear when one observes that the price paid by club members was annual and fixed, having not been altered in the months in which the Claimant began to levy VAT at the reduced rate to all customers.

On the other hand, in the situation at hand, in which it is considered proven that it was the Claimant that bore the illegally levied VAT, there is no place for the requirement made in article 78, no. 5, of the VAT Code, which provides that, when "tax undergoes rectification for less, the adjustment in favor of the taxpayer can only be made when the latter has in its possession proof that the acquirer became aware of the rectification or that he was reimbursed for the tax, without which the respective deduction is considered improper".

In fact, this rule is applicable to cases of rectification carried out by the taxpayer itself and not to those in which there is a jurisdictional declaration of illegality, which as a corollary has the duty of the Tax and Customs Authority to restore the situation that would have existed if the illegal act had not been practised [articles 100 of the LGT and 24, no. 1, paragraph b), of the RJAT], regardless of whether the acquirer of the services became aware of the illegality or not.

By the foregoing, it is concluded that the Claimant is correct and that the illegality of the VAT self-assessments referred to should be declared.

5. Decision

In these terms, this Arbitral Tribunal hereby agrees:

a) To dismiss as unfounded the exception of lack of jurisdiction of the Arbitral Tribunal;

b) To adjudge the request for arbitral decision as well-founded;

c) To declare the partial illegality of the VAT self-assessment acts practised by the Claimant in the period of September 2001 to April 2013, in the part in which VAT was levied at the normal rate instead of VAT at the reduced rate, in the total amount of € 853,351.89;

d) To declare the illegality of the decision of the dispatch of 01-11-2013, which rejected the gracious claim no. ... .

6. Case Value

In accordance with the provisions of article 315, no. 2, of the CPC and 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation on Costs in Tax Arbitration Proceedings, the case value is fixed at € 853,351.89.

7. Costs

Pursuant to article 22, no. 4, of the RJAT, the amount of costs is fixed at € 12,240.00, in accordance with Table I annexed to the Regulation on Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Lisbon, 11 July 2014

The Arbitrators

(Jorge Manuel Lopes de Sousa)

(Francisco Carvalho Furtado)

(Emanuel Augusto Vidal Lima)

Frequently Asked Questions

Automatically Created

What was the outcome of CAAD arbitration case 78/2014-T on VAT self-assessment?
In CAAD case 78/2014-T, the arbitral tribunal ruled on a preliminary jurisdictional issue, dismissing the Tax Authority's exception of lack of jurisdiction. The tribunal held that it possessed competence to consider the taxpayer's challenge to VAT self-assessment acts totaling €853,351.89 involving disputed application of 23% versus 6% tax rates for tourist accommodation services. The decision established that arbitral tribunals can hear VAT rate disputes when formulated as requests for declaration of illegality of self-assessment acts under Article 2, no. 1, paragraph a) of RJAT.
Can the Portuguese Tax Arbitration Tribunal rule on VAT rate classification disputes?
Yes, Portuguese tax arbitration tribunals operating under CAAD have jurisdiction to rule on VAT rate classification disputes when properly framed as challenges to the legality of assessment or self-assessment acts. In case 78/2014-T, the tribunal confirmed that Article 2, no. 1, paragraph a) of RJAT grants arbitral tribunals competence to consider claims for declaration of illegality of self-assessment acts, which encompasses disputes over whether the correct VAT rate was applied. The tribunal clarified that subsequent refund claims arising from illegality declarations fall within the tribunal's remedial powers under Article 24 RJAT, not outside its jurisdiction.
How to challenge VAT self-assessment decisions through CAAD arbitration in Portugal?
To challenge VAT self-assessment decisions through CAAD arbitration in Portugal, taxpayers must first file a gracious claim under Article 131 of the Code of Tax Procedure (CPPT) with the relevant Tax Authority. Following rejection of the administrative claim, taxpayers can submit an arbitration request under Articles 2, 3, and 10 of Decree-Law 10/2011 (RJAT), seeking declaration of illegality and annulment of both the self-assessment acts and the decision rejecting the gracious claim. As demonstrated in case 78/2014-T, the claim must be formulated primarily as a request for declaration of illegality of the assessment acts to fall within the arbitral tribunal's statutory jurisdiction.
What is the jurisdiction of Portuguese arbitral tribunals in VAT rate disputes under RJAT?
Under the RJAT (Administrative Arbitration Legal Regime), Portuguese arbitral tribunals have jurisdiction over VAT rate disputes when structured as challenges to assessment act legality pursuant to Article 2, no. 1, paragraph a), which covers declaration of illegality of self-assessment acts. Case 78/2014-T clarified that this jurisdiction extends to disputes over correct VAT rate application, rejecting the Tax Authority's narrow interpretation that would exclude such matters. The tribunal emphasized that Article 10, no. 1, paragraph a) of RJAT, referencing Article 102, no. 2 of CPPT, confirms arbitral jurisdiction over challenges to decisions on gracious claims concerning assessment acts.
How does Article 131 CPPT apply to VAT self-assessment claims before tax arbitration?
Article 131 CPPT establishes the mandatory administrative pre-arbitration procedure requiring taxpayers to file gracious claims with the Tax Authority before pursuing arbitration. In case 78/2014-T, the claimant filed an Article 131 claim challenging VAT self-assessment acts, which was rejected by the Director of Finance of Faro on 01-11-2013. This rejection decision became a challengeable administrative act that, together with the underlying self-assessment acts, could be contested through CAAD arbitration under Article 10, no. 1, paragraph a) of RJAT, which expressly references challenges to gracious claim decisions per Article 102, no. 2 CPPT.