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Article in the EU VAT Directive
Facts
The companies Navigator and Added Value have submitted their monthly VAT returns and their individual corporate tax returns to the Portuguese tax and customs authorities. Both companies subsequently requested the tax authorities to annul their VAT returns. It argued that the VAT returns contain a defect related to Article 21 of the Portuguese VAT Code, which provides for the ‘exclusion from the right to deduct’ of VAT in certain cases. According to the companies, that article is contrary to the EU law principle of equivalence. Indeed, the companies argue that there are differences between the possibility of deducting expenses under corporate income tax (and autonomous taxation) and the possibility of deducting VAT, as regards expenditure on vehicles, expenses for representation and travel and subsistence expenses. . The tax authorities rejected the companies’ objection to the VAT returns. The companies have submitted an application for arbitration to the referring court. as regards expenditure on vehicles, expenditure on representation and travel and subsistence costs. The tax authorities rejected the companies’ objection to the VAT returns. The companies have submitted an application for arbitration to the referring court. as regards expenditure on vehicles, expenditure on representation and travel and subsistence costs. The tax authorities rejected the companies’ objection against the VAT returns. The companies have submitted an application for arbitration to the referring court.
Consideration:
The referring court asks the EU Court for further clarification on the EU law principle of equivalence. The court wants to know whether that principle precludes a national VAT scheme (such as Article 21 of the Portuguese VAT Code) which excludes completely or 50 percent the right to deduct expenses for vehicles, travel and accommodation expenses and representation expenses. , whereas such amounts are fully deductible as expenses under corporate tax or can actually be deducted for more than 50 percent as expenses under autonomous tax.
Preliminary questions:
Does the principle of equivalence preclude a national VAT regime such as that laid down in Article 21(1) of the Código do Imposto sobre o Valor Acrescentado (VAT Code; ‘the CIVA’), which is subject to the standstill provision and excludes wholly or 50 % of the right to deduct vehicle expenses, travel, subsistence and representation expenses, while such amounts are fully deductible for corporate tax purposes (subject to ex post verification and subject to certain conditions) as costs,whether more than 50 % can actually be deducted as costs under the autonomous tax?
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