Municipal School Transport VAT: Reduced Rate and Input Tax Deduction – CAAD 827/2014-T

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), José Coutinho Pires and Ana Maria Rodrigues, appointed by the Deontological Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal hereby decide as follows:

I – REPORT

On 19 December 2014, the Municipality of …, a local public law entity, tax identification number …, filed a request for the constitution of an arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters, as amended by Article 228 of Law No. 66-B/2012, of 31 December (hereinafter briefly referred to as RJAT), seeking the declaration of illegality of the following acts:

i. Rejection of the refund request – No. …;

ii. Assessment No. 2014 … and compensation No. 2014 …;

iii. Assessment No. 2014 … and compensation No. 2014 …;

iv. Assessment No. 2014 … and compensation No. 2014 …;

v. Assessment No. 2014 … and compensation No. 2014 …;

vi. Assessment No. 2014 … and compensation No. 2014 …;

vii. Assessment No. 2014 … and compensation No. 2014 …;

viii. Assessment No. 2014 … and compensation No. 2014 …;

ix. Assessment No. 2014 … and compensation No. 2014 …;

x. Assessment No. 2014 … and compensation No. 2014 ….

To substantiate its request, the Petitioner alleges, in summary, that the corrections relate to the collective public transport service provided by the Municipality, which is subject to VAT and not exempt therefrom, being applicable to the service in question the reduced VAT rate, such that the tax borne in the acquisition of resources directly associated therewith shall be fully deductible, and that the tax authorities are in error in not recognizing this, such errors relating to the assumptions underlying the tax acts against which the Petitioner opposes.

On 22 December, the request for the constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority.

The Petitioner did not appoint an arbitrator, such that, pursuant to the provisions of subparagraph (a) of Article 6(2) and subparagraph (b) of Article 11(1) of the RJAT, the President of the Deontological Council of the CAAD appointed the undersigned signatories as arbitrators of the collective arbitral tribunal, who communicated their acceptance of the charge within the applicable period.

On 10 February 2015, the parties were notified of these appointments and neither manifested any intention to refuse any of them.

In accordance with the provisions of subparagraph (c) of Article 11(1) of the RJAT, the collective Arbitral Tribunal was constituted on 26 February 2015.

On 13 April 2015, the Respondent, duly notified for that purpose, filed its reply defending itself by way of objection.

Subsequently, considering that there was no need for the production of additional evidence beyond the documentary evidence already incorporated into the case file, that no matter of exception was in issue, and that the general procedural principles of procedural economy and prohibition of useless acts apply in arbitral proceedings, pursuant to the provisions of subparagraphs (c) and (e) of Article 16 of the RJAT, the holding of the meeting referred to in Article 18 of the RJAT was dispensed with and the parties were granted the possibility to submit written submissions if they so wished.

The parties did not exercise the possibility granted to them, the period referred to in Article 21(1) of the RJAT was extended and a period of 30 days was fixed, calculated from 29-06-2014, for delivery of the final decision in the case.

The Arbitral Tribunal is materially competent and is regularly constituted, in accordance with Articles 2(1)(a), 5 and 6(1) of the RJAT.

The parties have legal capacity and standing; they are properly represented in accordance with Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011 of 22 March.

The case is free from any defects of form.

Thus, there is no obstacle to the consideration of the merits of the case.

All things considered, it is necessary to pronounce:

II. DECISION

A. FINDINGS OF FACT

A.1. Facts Found to be Proven

1. The Petitioner is a local public law entity whose activity consists in the pursuit of its municipal functions in the most diverse areas of activity, being classified, for purposes of Value Added Tax ("VAT"), under the normal quarterly regime.

2. In the pursuit of its functions, the Petitioner carries out a vast set of operations within the scope of its powers of authority, which are excluded from VAT subjection pursuant to Article 2(2) of the VAT Code.

3. The Petitioner also carries out a set of operations, whether transfers of goods or provisions of services, which are not within the scope of its powers of authority and are therefore subject to VAT under the general terms of the Code of this tax.

4. In the deduction of VAT borne, and with respect to the periods from 2011 to 2013, with respect to all goods and services, including those related to activities not subject or subject but exempt which do not confer the right to deduction of VAT borne and not only those of mixed use, the Petitioner deducted a percentage of the tax (pro rata) of 2% in 2011 and 2012 and of 1% in 2013, which was calculated by including in the denominator all operations carried out, including those outside the scope of the tax, that is, those not resulting from the exercise of an economic activity for VAT purposes, and excluded therefrom only those operations referred to in Article 23(5) of the VAT Code, whose wording was not altered by the State Budget for 2008.

5. During the course of 2013, the Petitioner reviewed the deduction method it had been applying and began to deduct the tax, with effect to the fiscal years 2011 and onwards, in accordance with the following criteria:

i. With respect to acquisitions of goods or services used exclusively for operations which it considered subject to tax and not exempt therefrom (e.g.: rebillings to A… of …, concession of operation of B…, operation of the municipal library bar, collective transport), the Petitioner began to fully deduct the VAT borne;

ii. With respect to acquisitions of goods and services used exclusively for operations which it considered not subject to tax or subject but exempt (e.g.: public lighting, expenses related to schools and sanitation) the VAT borne was not deducted;

iii. With respect to goods or services of mixed use, used simultaneously in operations which it considered as conferring the right to deduction of the tax and operations which it considered as not conferring that right, the Petitioner considered that all operations to which these goods are assigned are resulting from the exercise of an economic activity and applied the deduction percentage calculated in accordance with Article 23(4) of the VAT Code.

1. As a result of the described revision of the method, there were adjustments in favour of the State and in favour of the taxpayer, with respect to the years 2011, 2012 and 2013, which were reflected in the amended declarations for December of each of the years, in the amounts shown below:

1. In the periodic VAT return for the 1st Quarter of 2014, the Petitioner requested a VAT refund in the amount of €79,727.28.

2. Following this refund request, the Petitioner was subject to an external tax inspection procedure covering the years 2011 to 2014 (1st Quarter).

3. On 19 September 2014, the Petitioner was notified, through Official Letter No. …, of 18 September 2014, of the tax inspection report, where arithmetic corrections were made in the context of VAT, in the amount of €201,082.90, resulting from the following situations:

i. VAT borne in the periods 2011, 2012 and 2013 and unduly deducted relating to School Transports - €198,489.81;

ii. VAT unduly deducted relating to Inputs of goods and services assigned to activities exempt or not subject to tax - €1,756.89;

iii. Failure to assess VAT on the operation of the bar - €836.20.

1. On 24 September 2014, the Petitioner was notified, through document No. …, of the rejection of the refund request, stating that, as a result of the corrections, compensations and assessments carried out, VAT credit of €695.70 is available for the Petitioner, for compensation in future payments.

2. From the corrections referred to in point 9(i) above, there resulted the tax acts that are the subject of the present arbitral action.

3. On 17 October 2014, the Petitioner received the "Statements of Adjustment of Accounts", from which results a VAT amount payable of €37,572.66, compensatory interest of €3,291.39 and default interest in the amount of €212.12.

4. On 5 December 2014, the Petitioner proceeded to pay the additional VAT assessments and interest mentioned in the preceding points.

5. The Petitioner, in observance of its powers resulting, in particular, from Decree-Law No. 299/84, of 5 September (which regulates the transfer to municipalities of powers regarding organization, financing and control of the operation of school transport) and Law No. 159/99, of 14 September (which was in force until the entry into force of Law No. 75/2013, of 12 September, and which established the framework for transfer of functions and powers to local authorities) provides, under the legal terms, a transport service for compulsory education students (1st, 2nd and 3rd cycles), as well as secondary education.

6. This service is provided by the Municipality itself, through company C…, but also by various other public transport companies, such as D…, Lda., E…, Lda. and F…, Lda.

7. In accordance with the School Transport Plans published by the Petitioner, the students covered by the school transport service were as shown in the following table:

1. Recorded by the Petitioner as expenses in account 62101 (Supply of Services/School Transport) in accordance with the analytical balance sheets as of 31 December, and which correspond to the amounts invoiced by the transport companies to the Petitioner, relating to the aforementioned transport services, are the amounts shown in the following table:

1. The amounts recorded by the Petitioner as received in return for the provision of the aforementioned transport services, in the fiscal years 2011, 2012 and 2013, totalled the following amounts:

1. To meet the costs of school transport, the Municipalities receive an amount that is annually incorporated into the Financial Equalization Fund (Article 22 of Decree-Law No. 299/84), and the amount of the transfer recorded by the Petitioner in account 7421118 (Transfers Received/School Transport), in each of the years 2011, 2012 and 2013, was €337,083.00.

2. In the fiscal years 2011, 2012 and 2013, the Petitioner assessed VAT at the reduced rate of 6% on the amounts referred to in the table above, contained in point 18 above, but only with respect to secondary school students (from the 10th to 12th years).

3. When accounting for the school transport services invoiced by the aforementioned transport companies relating to 2011 and 2012, the Petitioner initially applied the deduction percentage of 2% to the VAT borne.

4. With respect to 2013, the Petitioner initially applied the deduction percentage of 1% to most of the school transport invoices when accounting for them, but in relation to some invoices, deducted the VAT borne in full and, with respect to others, deducted no tax whatsoever.

5. Subsequently, upon reviewing the deduction method, described above in points 4 and 5, and with respect to the aforementioned services, the Petitioner deducted the full amount of the VAT borne in the invoices in which no tax had been deducted and deducted the remaining portion of the VAT borne in the invoices in which the pro rata had been applied, and the amount thus determined was entered in field 40 (adjustments in favour of the taxpayer) of the amended periodic declaration for December of each of the years.

6. The VAT deducted by the Petitioner with respect to the transport in question, in the year 2011 and 2012 totalled the following amounts:

1. In the year 2013, the VAT relating to the same activity totalled the following amounts:

1. The transport services provided by the Petitioner to students are, by legal requirement, free for students in the 1st, 2nd and 3rd cycles and subsidized by 50% with respect to their use by secondary school students.

2. Requests for school passes are made by educational establishments to public passenger transport companies, with the proper authorization of the Petitioner.

A.2. Facts Found not to be Proven

1. The school pass is only issued for days on which there are classes and for the sections of the route that connect the location of the educational establishment to the student's residence.

2. Students may use this collective public transport service, regardless of whether they are going to school or not, since the so-called school pass used by students has no limits on the number of trips and or days of use.

3. The vehicles providing the aforementioned transport service do not operate any special circuits intended exclusively for students, but rather circuits intended for the general public.

4. Students may use these transport services either to travel to school or to any other location.

A.3. Justification of the Findings of Fact Proven and Not Proven

With respect to the findings of fact, the Tribunal is not required to pronounce on everything alleged by the parties; rather, it is its duty to select the facts that matter for the decision and to distinguish proven from unproven facts (cf. Article 123(2) of the Tax Procedure Code and Article 607(3) of the Civil Procedure Code, applicable by virtue of Article 29(1), subparagraphs (a) and (e), of the RJAT).

Thus, the facts relevant to the determination of the case are chosen and delineated in function of their legal relevance, which is established in view of the various plausible solutions of the legal issue(s) in question (cf. former Article 511(1) of the Civil Procedure Code, corresponding to current Article 596, applicable by virtue of Article 29(1), subparagraph (e), of the RJAT).

Accordingly, taking into account the positions assumed by the parties, the documentary evidence and the case file, the facts listed above were deemed proven as relevant to the decision.

The facts found not to be proven are due to the absence of sufficient evidence to support them.

Specifically, there is no evidence available in the case regarding the terms and conditions of the school passes of the Municipality of …, including routes, schedules, and terms of use.

The Petitioner sought to prove point 2 of the facts found not to be proven by referring to consultation of the "Internet website of the Municipality." Beyond understanding that the mere mention of a fact on an electronic page, in itself, proves nothing more than that whoever administers it placed such mention there, it appears that the Petitioner does not mention any specific URL.

Nevertheless, it was found that at the address …, it states that, with respect to the service "C…", "The school pass has no limits on the number of trips and days of use".

It was also found that, for example, on the electronic page of E… (http://...), it states that the school pass is a "Monthly pass, valid for a limited number of trips, for the requested month", which is in conformity with the provisions of Article 11 of Decree-Law No. 299/84, of 5 September, which provides that "Subscription tickets shall be valid for one month, to be used only in two trips on school days and for the sections of the routes that connect the location of the educational establishment to the location of the student's residence."

B. ON THE LAW

Given the delimitation made by the Petitioner in its initial petition, the issue that arises in the present case is whether the services recorded by the Petitioner in account 712132, as provision of school transport services, in the fiscal years 2011, 2012 and 2013, constitute, or do not constitute, services subject to VAT and not exempt therefrom, and, as such, confer the right to deduction of the tax borne upstream, in the acquisitions recorded by the Petitioner as expenses in account 62101.

To this end, and with relevance to the issue at hand, Article 1(a) of the VAT Code, in the wording in force as of the date of the tax facts, provides:

"1 - The following are subject to value added tax:

a) The transfer of goods and the provision of services carried out in the national territory, in return for payment, by a taxable person acting as such;"

Furthermore, Articles 2(2) and (3) of the same Code provide:

"2 - The State and other public law entities are not, however, taxable persons for the tax when they carry out operations in the exercise of their powers of authority, even if they receive fees or other consideration therefor, provided that their non-subjection does not give rise to distortions of competition.

3 - The State and other public law entities referred to in the preceding paragraph are, in any case, taxable persons for the tax when they exercise any of the following activities and for the taxable operations resulting therefrom, unless it is found that they exercise them in a non-significant manner: (...)

e) Transport of persons;"

Finally, Article 9(9) of the VAT Code provides:

"The provision of services which consist of education, as well as transfers of goods and provision of related services, such as the provision of accommodation and meals, carried out by establishments integrated into the National Education System or recognized as having analogous purposes by the competent ministries;"

The Petitioner initially bases its claim on the understanding that "we are not faced with the provision of school transport services, as the Tax Authority assumed", but that "The service of collective transport (and not school transport) is provided by the Municipality to users (including students) on terms analogous to the service provided by any private entity."

However, this understanding cannot be accepted.

First and foremost, the Respondent's own accounting records, which enjoy a presumption of truthfulness (cf. Article 75(1) of the General Tax Code), distinguish the revenues and expenses in question as school transport.

Moreover, if, as the Petitioner argues, with regard to the accounting records it made in accounts 712132 and 62101, "we are not faced with the provision of school transport services", it would have to be concluded that the Petitioner was not fulfilling the legal duty that results for it, inter alia, from Decree-Law No. 299/84, of 5 September, and Law 159/99 of 14 September, since it would not be making available to its students, its constituents, entitled to such service, that service.

It appears therefore evident that the revenues and expenses that the Petitioner recorded in accounts 712132 and 62101 do not refer to the operation of a collective transport company, in whatever terms, competing with the other operators of that market. Indeed, and contrary to what the Petitioner claims, it is a matter of common knowledge that there is no private operator whose purpose is to offer free transport to a considerable portion of its users.[1]

On the contrary, the situation that emerges is that the revenues and expenses that the Petitioner recorded in accounts 712132 and 62101 correspond to the contracting of external services intended to fulfill the legal obligation incumbent upon it to provide school transport services, arising from Decree-Law No. 299/84, of 5 September and Law 159/99 of 14 September (free for students in compulsory education, and with a 50% discount for secondary school students).

The Petitioner further states that "Subsidiarily, and without relinquishing all that has been explained, the Municipality understands that even if the transport service in question were school transport (...), it would still be subject to VAT."

According to the Petitioner, "there is no provision in the VAT Code that establishes that the service of school transport provided by Municipalities is an activity exercised within the scope of their powers of authority", and "any entity (private or public) can provide this type of transport service, and the Municipality is not, in this case, vested with a power that is its own and that cannot be exercised by private parties."

The Petitioner further notes that "the VAT Code (No. 3 of Article 2 of the VAT Code), expressly states that the activity of transport of persons, when exercised by Municipalities, is subject to tax."

Let us examine this.

The Petitioner states that the VAT Code does not establish that the service of school transport is an activity exercised within the scope of powers of authority, a consideration which, being correct, is not of particular relevance, in that the VAT Code does not establish any activity as being, by definition, exercised within the scope of powers of authority.

The determination of whether an activity is exercised within the scope of powers of authority or outside thereof should therefore be made, not by interpretation of the VAT Code, but by analyzing the specific characteristics of the activity exercised in the concrete case and the circumstances in which such exercise takes place.

Now, transposing to the present case the words of the Supreme Administrative Court, expressed in its Decision of 29-02-2012, rendered in case 01096/11[2], "it does not appear that the municipality, in the case, to ensure transport to and from school, free of charge, for compulsory education students, and at a 50% discount for secondary school students, is carrying out in an independent manner and with the character of habituality, an economic activity of production, commerce or provision of services. On the contrary, this arrangement is nothing more than a way of exercising the functions that the Law confers on it within the scope of the promotion and fostering of access to education."

As in that judgment, it is concluded in this case, from Article 19(3)(b) of Law 159/99 of 14 September, which provides:

"It is further incumbent on municipal bodies with respect to the public network:

a) To ensure school transport services;"

On the other hand, and contrary to what the Petitioner claims, the assertion of the Petitioner according to which any entity (private or public) can provide this type of transport is not accepted, at least not in the sense that the Petitioner wishes to give it.

In fact, it is true that anyone who wishes (many parents do so daily) can transport free of charge students from home to school and from school to home, and does not require any powers of authority to do so.

Just as, for example, and to restrict ourselves to expenses that the Petitioner itself considered not subject to VAT, any person can illuminate the public space (if only by walking about with a flashlight), without needing powers of authority to do so.

That is not, however, what is at issue.

What is at issue is whether we are or are not faced with the exercise of the proper functions of a public entity, in accordance with the current Administrative Procedure Code,[3] of an activity "specifically regulated by provisions of administrative law", or according to the aforementioned judgment, "subject to a substantive regime of public law".

It is, precisely, the latter that is the case, since the activity of school transport was specifically regulated by the provisions of Decree-Law No. 299/84, of 5 September and Law No. 159/99, of 14 September (until the entry into force of Law No. 75/2013, of 12 September).

Furthermore, taking into account the criteria doctrinally accepted in the matter, the contractual relationships established by the Petitioner with the users of the school transport service are of an administrative and, as such, public nature. Thus, following once more the Decision of the Supreme Administrative Court already cited, "The criteria that have been used by doctrine and jurisprudence, both Portuguese and foreign, are those that singularize Administrative Law as opposed to Private Law: the subjection of the individual, the object, the purpose and the exclusive status of the Public Administration. The recourse to such criteria, especially the statutory criterion, allows for the classification of a contract as administrative. Thus (...) if the contract is entered into for the direct and immediate satisfaction of certain collective needs, the contract is administrative (criterion of purpose); if the effects agreed upon by the parties are provided for in legal norms that are directed at the public entity as such, the contract is administrative (statutory criterion)."

Now, there is no doubt that in the contractual relationships of the Petitioner with the users of school transport services, "the effects agreed upon by the parties" are, in essence, "provided for in legal norms that are directed at the public entity as such", and which require that it assume the cost of school transport for compulsory education students, and half of that cost for secondary school students, for the purpose of satisfying collective needs.

Hence, there is no doubt, it is believed, that the activity of school transport exercised by the Petitioner is carried out in the exercise of its powers of authority as a Municipality, as presumed by Article 2(2) of the VAT Code.

The provision of Article 2(3)(e) of the VAT Code does not prevent the conclusion reached.

In effect, the service of school transport, as it results from the provisions of Decree-Law No. 299/84, of 5 September and Law No. 159/99, of 14 September (until the entry into force of Law No. 75/2013, of 12 September, and from that point forward), is a type of service that is distinct from "transport of persons" to which the aforementioned subparagraph (e) of Article 2(3) of the VAT Code refers, which refers to the exercise "in an independent manner and with the character of habituality, an economic activity of" transport of persons, which is manifestly not the case, since the very nature of the service now in question, free for the vast majority of its users, and at a 50% discount for the rest, is incompatible with that type of exercise, which is perfectly evidenced by the disparity between the expenses recorded under the respective account (contained in point 17 of the facts found to be proven) in relation to the corresponding revenues (contained in point 18 of the facts found to be proven), which evidences, without any room for doubt, the non-economic character of this type of activity.

Having therefore established that the activity of school transport exercised by the Petitioner is not subject to VAT, it must be concluded that the tax borne with the upstream expenses of such activity will not be deductible, since those do not form part of the constitutive elements of the price of the taxable operations downstream with a right to deduction.

In effect, as was written in the Supreme Administrative Court's Decision of 03/07/2013, rendered in case 01148/11:

"the right to deduction of the tax constitutes one of the main characteristics of this tax, as results from the fundamental principle inherent to VAT contained in Article 2 of the First Directive (67/227/CEE), which establishes that "In each transaction, the value added tax, calculated on the price of the good or service at the rate applicable to the said good or service, shall be chargeable, with prior deduction of the amount of value added tax that has directly borne on the cost of the various elements constituting the price.

The deduction scheme is designed to relieve the entrepreneur completely of the burden of the VAT, owing or paid, within the framework of all his economic activities.

Thus the common system of value added tax ensures complete neutrality as regards the tax burden on all economic activities, whatever the purpose or results of such activities, provided that the said activities are themselves subject to VAT (see to this effect, the judgments of 26.05.2005, Kretztechnik, C 465/03, of 22.02.2001, case C-408/98, of 14 February 1985, Rompelman, 268/83, Recueil, p. 655, n. 19; of 15 January 1998, Ghent Coal Terminal, C-37/95, Collection, p. I-1, n. 15, and of 21 March 2000, Gabalfrisa and Others, C-110/98 to C-147/98, Collection, p. I-1577, n. 44, as well as of 8 June 2000, Midland Bank, C-98/98, Collection, p. I-4177, n. 19), all also available on the site http://new.eur-lex.europa.eu.

As regards the right of deduction, the case law of the Court of Justice of the European Union has been affirming that "the right to deduction provided for in Articles 17 and 20 of the Sixth Directive is an integral part of the VAT mechanism and cannot, in principle, be limited.(…) For VAT to be deductible, the upstream operations must have a direct and immediate relationship with the downstream operations with the right to deduction. Thus, the right to deduction of the VAT that borne on the acquisition of goods or services upstream presupposes that the expenses incurred in their acquisition have formed part of the constitutive elements of the price of the taxable operations downstream with the right to deduction." – cf. Judgment Kretztechnik (2005) – C.465/03 and Judgment of the Court of Justice of the European Union, 2nd Chamber of 08.06.2000, case C-98/98, in http://new.eur-lex.europa.eu.

It results from this principle as well as from the rule whereby, to give the right to deduction, the goods or services acquired must have a direct and immediate relationship with the taxable operations, that the right to deduction of the VAT that has borne these goods or services presupposes that the expenses incurred in their acquisition must have formed part of the constitutive elements of the price of the taxable operations.

Therefore, the said expenses must form part of the costs of those downstream operations which use the acquired goods and services (Judgment 408/98)."

And further in the same decision:

"In sum, as stated succinctly and assertively by Mariana Gouveia de Oliveira (The deductibility of VAT and the acquisition of shareholdings by operating companies, in Fiscality, 46, p.107.), the coherence of the case law of the Court of Justice of the European Union rests on some fundamental ideas:

"The first will be that the right to deduction "is an integral part of the VAT mechanism and cannot, in principle, be limited. This right is exercised immediately with regard to the whole of the taxes that borne on the upstream operations (see, in particular, the judgments of 6 July 1995, BP Soupergaz, C-62/93, Collection, p. I-1883, n. 18, and of 20 March 2000, Gabalfrisa and Others, C-110/98 to C-147/98, Collection, p. I-1577, n. 43)."

The second idea relates to the necessary link between the VAT borne and the carrying out of taxable operations: "For VAT to be deductible, the upstream operations must have a direct and immediate relationship with the downstream operations with the right to deduction. Thus, the right to deduction of the VAT that borne on the acquisition of goods or services upstream presupposes that the expenses incurred in their acquisition must have formed part of the constitutive elements of the price of the taxable operations downstream with the right to deduction (see the judgments already mentioned Midland Bank, n. 030, and Abbey National, n. 28, as well as of 27 September 2001, Cibo Participations, C-16/00, Collection, I-6663, n. 31)."

Finally, the Court of Justice of the European Union considers that "the general expenses of the activity of taxable persons, as constitutive elements of the price of the products, are in a direct and immediate relationship with the aggregate activity of the taxable person, and therefore, the VAT borne thereon is deductible"."

It not being, therefore, and in light of all that has been stated, contrary to what the Petitioner claims, the tax borne with the activity of school transport deductible, the arbitral request must necessarily be dismissed.

C. DECISION

This Arbitral Tribunal hereby decides:

a) To declare the arbitral petition wholly unfounded and, consequently, to maintain the tax act impugned;

b) To condemn the Petitioner to pay the costs of the proceedings, in the amount of €3,672.00, taking into account what has already been paid.

D. Value of the Case

The value of the case is fixed at €198,489.81, in accordance with Article 97-A(1)(a) of the Tax Procedure and Process Code, applicable by virtue of Article 29(1), subparagraphs (a) and (b), of the RJAT and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The value of the arbitration fee is fixed at €3,672.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Petitioner, since the petition was wholly unfounded, in accordance with Articles 12(2) and 22(4), both of the RJAT, and Article 4(4) of the aforementioned Regulation.

Let notification be made.

Lisbon

28 July 2015

The Presiding Arbitrator

(José Pedro Carvalho - Reporting Arbitrator)

The Arbitrator Member

(José Coutinho Pires)

The Arbitrator Member

(Ana Maria Rodrigues)

[1] Cf., for example, that according to the School Transport Plan of the Petitioner, for the academic year 2013/2014 (available at https://www.cm-....pt/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/Thematic%2520Navigation/Educa%25C3%25A7%25C3%25A3o/Plano%2520de%2520Transportes/ficheiros/Planos%2520de%2520transportes%2520escolares/Plano%2520de%2520Transportes%2520Escolares%25202013-2014.pdf), of 4,480 students expected to be covered, only 720 would be secondary school students. The remainder would be compulsory education students, entitled to free passes.

[2] Available at www.dgsi.pt, as is the remaining case law cited hereinafter without reference to its source.

[3] Cf. Article 2(1).