Information;Order — ECLI:EU:C:2022:979
Date: 2022-12-09
Language of the case: Portuguese
Court formation: Sixth Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Portugal

Summary C-459/21 – 1 
Case C-459/21 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged:  
26 July 2021 
Referring court:  
Tribunal Arbitral Tributário (Centro de Arbitragem 
Administrativa – CAAD) [Tax Arbitration Court (Administrative 
Arbitration Centre – CAAD), Portugal] 
Date of the decision to refer:  
8 July 2021 
Claimants:  
The Navigator Company, S.A., having its registered office in 
Setúbal 
Navigator Pulp Figueira, S.A., having its registered office in 
Figueira da Foz 
Respondent:  
Autoridade Tributária e Aduaneira (Tax and Customs 
Administration) 
Subject matter of the main proceedings 
The dispute in the main proceedings concerns a request for a declaration as to the 
unlawfulness of the decisions dismissing the applications for reconsideration by 
which the claimants seek a declaration as to the unlawfulness, in part, of the two 
claimants’ self-assessments for value added tax (‘VAT’) for the monthly periods 
from January to December 2018, and an order for the reimbursement to them of 
the amount which they consider they have overpaid, rising to EUR 225 881.99, 
plus such default interest at the statutory rate as may have accrued from the date 
of each monthly VAT period until full reimbursement. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-459/21 
 
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Subject matter and legal basis of the request for a preliminary ruling 
This request for a preliminary ruling, made under Article 19(3)(b) TEU and 
Article 267 TFEU, concerns an assessment of the lawfulness, in the light of the 
principle of equivalence in European Union law, of certain restrictions and 
exclusions of the right to deduct VAT which are laid down in Article 21 of the 
Código do Imposto sobre o Valor Acrescentado (Value Added Tax Code) 
(‘CIVA’), in particular those relating to motor vehicle expenses, diesel fuel 
expenses, entertainment expenses and travel and accommodation expenses. 
Question referred for a preliminary ruling 
Does the principle of equivalence preclude national VAT legislation, such as that 
laid down in Article 21(1) of the Código do Imposto sobre o Valor Acrescentado 
(Value Added Tax Code) (‘CIVA’), maintained under the standstill clause, which 
excludes entirely or in the proportion of 50% the right to deduct VAT on motor 
vehicle expenses, travel and accommodation expenses and entertainment 
expenses, these being, in the context of corporation tax, fully deductible as 
expenses (without prejudice to ex post verification and subject to certain 
conditions), or, in the context of autonomous taxation, effectively deductible in a 
proportion greater than 50%? 
Provisions of European Union law relied on 
Principle of equivalence under European Union law, Articles 167 to 192 of 
Directive 2006/112/EC. 
Provisions of national law relied on 
Article 8(4) of the Constituição da República Portuguesa (Constitution of the 
Portuguese Republic); Article 21 of the CIVA; Articles 23, 23 A, 87, 87 A and 88 
of the Código do Imposto sobre o Rendimento das Pessoas Coletivas (Corporation 
Tax Code); [‘the CIRC’]); Article 124(1) of del Código de Procedimento e de 
Processo Tributário (Tax Procedure Code) (‘the CPPT’); Article 22(1) of Decreto-
Lei n.º 10/2011, de 20 de janeiro, que regula o regime jurídico da arbitragem em 
matéria tributária (Decree-Law No 10/2011 of 20 January 2011 approving the law 
governing arbitration in tax matters) (‘the RJAT’); Lei Geral Tributária (LGT) – 
Decreto-Lei n.º 398/98, de 17 de dezembro [General Tax Law (LGT) – Decree-
Law No 398/98 of 17 December 1998]. 
Brief presentation of the facts and the main proceedings 
1 The company THE NAVIGATOR COMPANY, S. A. (‘Navigator’) and the 
company NAVIGATOR PULP FIGUEIRA, S. A. (‘Pulp Figueira’) ― the latter 
having succeeded to all the rights and obligations of NAVIGATOR ADDED 
THE NAVIGATOR COMPANY AND NAVIGATOR PULP FIGUEIRA 
 
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VALUE, S.A. (‘Added Value’) ― (together, ‘the claimants’) filed with the Tax 
and Customs Administration their respective monthly value added tax (‘VAT’) 
returns for the tax periods from January 2018 to December 2018 and their 
individual corporation tax (‘IRC’) returns for the 2018 financial year. 
2 The claimants submitted individual summary statements itemising, along with the 
relevant rates of autonomous taxation applied in the context of IRC during the 
2018 financial year, the entertainment expenses, motor vehicle expenses, per 
diems and allowance-related expenses and charges they had incurred, and the 
amounts relating to autonomous taxation, amounting to EUR 578 235.72 in the 
case of Navigator and EUR 142 465.28 in the case of Added Value. 
3 Navigator also submitted a summary statement itemising expenses, charges and 
rates of autonomous taxation applied in the context of IRC during the 2018 
financial year under the regime especial de tributação dos grupos de sociedades 
(special scheme applicable to the taxation of groups of companies; ‘RETGS’), the 
amount of tax due being EUR 984 490.26. 
4 Both Navigator and Added Value filed applications for reconsideration of the self-
assessments for VAT for the monthly periods from January to December 2018 
with the Tax and Customs Administration. These were dismissed. 
5 On October 2020, the claimants submitted to the referring court under Decree-
Law No 10/2011 of 20 January 2011 the application for arbitration which gave 
rise to the main proceedings. 
6 The claimants in the main proceedings seek a declaration as to the unlawfulness of 
the decisions dismissing their applications for reconsideration and a declaration as 
to unlawfulness, in part, of the two companies’ self-assessments for VAT for the 
monthly periods from January to December 2018. 
7 They also seek reimbursement of the sum which they consider they have overpaid, 
amounting to EUR 225 881.99, plus such default interest at the statutory rate as 
may have accrued from the date of each monthly VAT period until full 
reimbursement.  
Main arguments of the parties in the main proceedings 
8 The claimants submit that the contested self-assessments are vitiated by a defect 
arising from Article 21 of the CIVA, which provides for the ‘exclusion of the right 
to deduct’ VAT in certain cases.  
9 Navigator and Added Value argue, in essence, as follows. 
10 The right to deduct is the fundamental principle of VAT. That principle is 
applicable to all expenditure: the key is to determine how it is to be applied in 
individual cases. Although the standstill clause allows automatically applicable 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-459/21 
 
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abstract exclusions from the right to deduct to be maintained, it is the Member 
States that impose those exclusions. National laws must observe the Community 
principle of equivalence, from which the standstill clause does not derogate. 
Community VAT is discriminated against by comparison with the national IRC in 
a manner which is not consistent with the principle of equivalence. The 
autonomous taxation levied in the context of the IRC on the expenses and charges 
at issue is intended to replace the automatic exclusions of those expenses and 
charges from deduction in the context of the IRC and, if it is not viewed as such, 
the discriminatory treatment, which is contrary to the principle of equivalence, 
will be even greater. In connection with those expenses, and with a view to 
tackling the same issue of the possibility of their being used for non-business 
activities, the national legislature provided for and maintained less favourable 
treatment for the right to deduct in the context of VAT (scheme under EU law) 
than for the same right in the context of the IRC (national scheme), inasmuch as 
the CIVA, generally speaking, automatically excludes a priori all deductions of 
VAT on the aforementioned inputs, whereas the CIRC excludes such deductions 
to a lesser extent and in a lesser proportion. 
11 The claimants note the following differences between the deductibility of tax on 
expenses in the context of the IRC and the autonomous taxation thereof, if 
applicable, and the deductibility of VAT, in the case of motor vehicle expenses, 
diesel fuel expenses, entertainment expenses and travel and accommodation 
expenses: 
a) tax on expenses connected with motor vehicles which have an acquisition 
cost of less than EUR 25 000 and are subject to autonomous taxation at a 
rate of 10%: 
i) deductible for the purposes of the IRC but subject to autonomous 
taxation at a rate of 10%, meaning that 47.62% is non-deductible on 
the IRC return (10% rate / 21% rate) [(this does not take into account 
any State tax applicable)]; 
ii) non-deductible on the VAT return. 
b) tax on expenses connected with motor vehicles which carry a purchase cost 
of less than EUR 25 000 and are not subject to autonomous taxation: 
i) deductible for the purposes of the IRC and not subject to autonomous 
taxation, meaning that they are effectively fully deductible on the IRC 
return; 
ii) non-deductible on the VAT return. 
c) tax on diesel fuel expenses connected with motor vehicles which carry a 
purchase cost of less than EUR 25 000 and are subject to autonomous 
taxation at a rate of 10%: 
THE NAVIGATOR COMPANY AND NAVIGATOR PULP FIGUEIRA 
 
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i) deductible on the IRC but subject to autonomous taxation at the rate of 
10%, meaning that 47.62% is non-deductible on the IRC return (10% 
rate / 21% rate) [(this does not take into account any State tax 
applicable)]; 
 ii) non-deductible in the proportion of 50% on the VAT return. 
d) tax on diesel fuel expenses connected with motor vehicles which carry a 
purchase cost of less than EUR 25 000 and are not subject to autonomous 
taxation: 
i) deductible for the purposes of the IRC and not subject to autonomous 
taxation, meaning that they are effectively fully deductible on the IRC 
return (fully deductible for the purposes of the IRC); 
ii) non-deductible in the proportion of 50% on the VAT return. 
e) tax on entertainment expenses: 
i) deductible for the purposes of the IRC but subject to autonomous 
taxation at the rate of 10%, meaning that 47.62% is non-deductible on 
the IRC return (10% rate / 21% rate) [(this does not take into account 
any State tax applicable)]; 
 ii) non-deductible on the VAT return. 
f) tax on travel and accommodation expenses not subject to autonomous 
taxation: 
i) deductible for the purposes of the IRC and not subject to autonomous 
taxation, meaning that they are effectively fully deductible on the IRC 
return (fully deductible for the purposes of the IRC); 
ii) non-deductible on the VAT return. 
12 The autonomous taxation of these categories of expense within the context of the 
IRC and the possibility of deducting tax on them with a view to determining 
taxable profits presuppose that tax on such expenses is only partially deductible, 
inasmuch as the deductibility of tax on those expenses does not entirely rule out 
the possibility that they will be subject, within the context of the CIRC, to a levy 
in the form of autonomous taxation. 
13 The claimants maintain that, in national law, both the impossibility of exercising 
the right to deduct VAT, in full or in part, on motor vehicle, entertainment and 
travel and accommodation expenses, and the autonomous taxation, where 
applicable, of such expenses in the context of the CIRC are founded on the same 
basic justification, that is to say the possibility that those categories of expense are 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-459/21 
 
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not incurred, either in whole or in part, for business purposes but in order to meet 
the personal needs of the company’s employees. 
14 The claimants claim that the principle of equivalence is applicable. That principle, 
which has been applied by the Court of Justice of the European Union in its case-
law, requires that both states of affairs be governed by the same measure, 
inasmuch as the national legislature must impose ‘an equivalent limitation on the 
principle of the right to deduct in the context of both taxes, that is to say VAT (the 
state of affairs under Community law) and the IRC (the national state of affairs)’. 
15 The Tax and Customs Administration, as respondent, makes, in essence, the 
following claims with respect to the matter of infringement of the principle of 
equivalence. 
16 The possibility of deducting tax on expenses and losses is subject to requirements 
and conditions, laid down by the legislature in the CIRC, which are informed 
principally by basic economic and accounting-related criteria ― consumption of 
goods and use of services ― associated with the attainment of business-oriented 
objectives. The operational rationale of VAT rests on the subtractive method (tax 
credit), consisting in the application of the tax rate to the value of transactions 
carried out by the taxable person during a given period and the deduction from the 
amount thereby arrived at of the tax paid by that taxable person on the purchases 
made by him during that same period. The deduction scheme is linked to the 
purchase of goods and services rather than to consumption and, since it impacts on 
the amount actually owed to the State in each period, that scheme has been 
harmonised to such an extent that there are no significant differences between the 
Member States of the European Union (Articles 167 to 192 of Directive 
2006/112/EC). Given those differences as between the IRC and VAT, there do not 
appear to be any grounds for aligning the rules on the deduction of tax on 
expenses or losses with a view to determining taxable profits with the rules on the 
deduction of input VAT with a view to determining the VAT owed in each period, 
or for taking the view that that differentiation is such as to constitute an 
infringement of the Community principle of equivalence. The main objective of 
autonomous taxation in the context of the IRC is to combat fraud and tax evasion 
by preventing certain behaviours that encourage aggressive tax planning. 
Underlying Article 21 of the CIVA is the issue that, in most cases, it is difficult to 
determine to exactly what extent the items which it lists are related to business 
activity or personal consumption. Since these are different taxes, the interpretation 
of the VAT rules will necessarily be different from the interpretation of other 
taxes such as the IRC at issue in this case. Even if the purposes of the two taxes 
are connected, the fact remains that their modus operandi, when it comes to 
examining matters such as this, is necessarily different, inasmuch as the IRC, in 
particular autonomous taxation, falls within the scope of the Constitution of the 
Portuguese Republic or the General Law on Tax, and VAT falls within the scope 
of Community law. In the context of the IRC, the deduction of tax on the expenses 
at issue in this case, including non-deductible VAT, is authorised.  
THE NAVIGATOR COMPANY AND NAVIGATOR PULP FIGUEIRA 
 
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17 The Tax Administration submits with respect to Article 21 of the CIVA that the 
autonomous taxation laid down in the CIRC as being applicable to the 
aforementioned expenses also has its basis in the difficulty of determining to 
exactly what extent the items which that provision lists are related to business 
activity or private consumption. 
Brief presentation of the grounds of the request for a preliminary ruling 
18 All parties have stated that they consider it appropriate for a reference for a 
preliminary ruling to be made to the Court of Justice of the European Union. 
19 The claimants submit that, bearing in mind the absence of any specific case-law of 
the Court of Justice of the European Union, , in so far as the Arbitration Tribunal 
has doubts about the requirements which, in the circumstances of this case, flow 
from the Community principle of equivalence, the Tribunal must submit to the 
Court of Justice of the European Union such questions as it considers appropriate 
in the light of the specific doubt raised, as provided for in Article 267 of the 
Treaty on the Functioning of the European Union. 
20 As all parties recognise, the fact that the Court of Justice of the European Union 
has established no relevant case-law calls for an assessment as to whether it is 
necessary to submit a request for a preliminary ruling, a course of action which is 
supported by all parties. 
21 The Court of Justice of the European Union has consistently held  that its case-law 
is binding on national courts where it relates to matters relating to European 
Union law, as a corollary of the mandatory nature of the reference for a 
preliminary ruling provided for in Articles 19(3)(b) TEU and 267 TFEU (which 
replaced Article 234 of the Treaty of Rome, formerly Article 177).. 
22 The Arbitration Tribunal considers that, since the answer to the question raised is 
not obvious, with the result that, in the absence of relevant case-law of the Court 
of Justice of the European Union, a reference for a preliminary ruling is justified.