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Flashback on ECJ Cases – C-662/13 (Surgicare) – Mandatory prior application of a national administrative procedure if the tax authorities suspect that an abuse has been committed

On February 12, 2015, the ECJ issued its decision in the case C-662/13 (Surgicare).

Context: Reference for a preliminary ruling — VAT — Directive 2006/112/EC — Deduction of input tax — Transactions constituting an abusive practice — National tax law — Special national procedure where the existence of abusive practices is suspected in the field of taxation — Principles of effectiveness and equivalence

Article in the EU VAT Directive

Article 273 and 342 of the EU VAT Directive 2006/112/EC.

Article 273

Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.

Article 342

Member States may take measures concerning the right of deduction in order to ensure that the taxable dealers covered by special arrangements as provided for in Section 2 do not enjoy unjustified advantage or sustain unjustified harm.


  • Surgicare is a company established under Portuguese law the activities of which consist of, on the one hand, the construction, operation and management of healthcare establishments that belong either to it or to third party entities, public or private; and, on the other hand, the supply of medical and surgical services in general, domiciliary and outpatient care, diagnostic and therapeutic activities and other related or additional activities.
  • In the period from 2003 to 2007, Surgicare constructed, on land belonging to it, a hospital and fitted it with medical equipment. During the period of construction and fitting out of the hospital, Surgicare did not carry out taxable transactions, with the result that Surgicare accumulated VAT credit.
  • After the construction of the hospital, Surgicare transferred the operation thereof, with effect from 1 July 2007, to Clínica Parque dos Poetas SA, a company which had the same shareholders and belonged to the same group of companies as Surgicare, namely the Espírito Santo Saúde group.
  • Following that transfer, which Surgicare considered to be a transaction subject to VAT, Surgicare deducted from the tax due to the Treasury in respect of the rent paid by the transferee the VAT paid on the acquisition of goods and services for the construction and fitting out of the hospital. Surgicare applied, as a mixed taxable person, the method of actual application of the goods and services acquired.
  • The Fazenda Pública carried out a tax review of Surgicare’s activities for the years 2005 to 2007 and concluded that the company had abused the right to a VAT refund. According to the revenue authority, the transfer of the operation of the hospital to a company created for that purpose by the same group of companies was concluded with the sole aim of subsequently enabling Surgicare to establish the existence of a right to deduct the input VAT paid during the period when the building was constructed and fitted, even though Surgicare would not have been able to benefit from that right if it had operated the hospital itself, since that activity is exempt from VAT. Consequently, the Fazenda Pública served on Surgicare, in 2010, a notice of assessment in respect of VAT wrongly deducted by Surgicare during the financial years 2005 to 2007, together with interest for late payment, amounting in total to EUR 1 762 111.04.
  • Surgicare challenged the notice of assessment before the tribunal tributário de Lisboa (Tax Court, Lisbon), on the basis that the assessment was tainted with illegality on the grounds that, first, the Fazenda Pública had not used the mandatory special procedure laid down in Article 63 of the CPPT and, second, that the practices in question were not abusive.
  • By judgment of 25 October 2012, that court dismissed the action as unfounded. Surgicare appealed to the referring court against that judgment.
  • The referring court takes the view that the Fazenda Pública, when it suspects the existence of an abusive practice, must use the procedure laid down by Article 63 of the CPPT. That court is uncertain, however, whether that procedure must be followed given that the system of VAT has its origins in EU law.


When the tax authorities suspect the existence of an abusive practice designed to obtain a VAT refund and Portuguese law provides for a mandatory preliminary procedure applicable to abusive practices in taxation matters, is that procedure to be regarded as inapplicable to VAT, given the Community origin of that tax?

AG Opinion



Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it does not preclude the mandatory preliminary application of a national administrative procedure, such as that laid down by Article 63 of the Code of Taxation Procedure and Proceedings (Código de Procedimento e de Processo Tributário), in the event that the revenue authorities suspect the existence of an abusive practice.


The VAT Directive must be interpreted in such a way that it does not preclude the mandatory prior application of a national administrative procedure if the tax authorities suspect that an abuse has been committed.


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