VAT Intra-Community Supply of Goods: Proof Requirements and Undue Guarantee Compensation (CAAD 148/2015-T)

ARBITRAL DECISION

The arbitrators Maria Fernanda dos Santos Maçãs (President Arbitrator), Clotilde Celorico Palma and Jorge Júlio Landeiro Vaz, appointed by the Deontological Council of the Centre for Administrative Arbitration to form an arbitral tribunal, constituted on 12/5/2015, hereby agree as follows:

I. REPORT

1. The Company..., S.A.", NIPC..., filed a request for constitution of a collective arbitral tribunal, pursuant to the combined provisions of Articles 2, No. 1, paragraph a), and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as RJAT), wherein the Tax and Customs Authority (hereinafter referred to as AT) is the Respondent.

2. The claim that is the object of the request for arbitral decision consists of the declaration of illegality of the decision dismissing the hierarchical appeal that was filed against the decisions dismissing the gracious complaints relating to the VAT assessment acts for periods 01, 04, 05, 06, 07, and 08 of 2011, and the respective compensatory interest assessments, with all other legal effects, namely the condemnation of the AT to reimburse the costs incurred with the provision of guarantees for suspension of the enforcement proceedings.

3. On 4/3/2015, the request for constitution of the arbitral tribunal was accepted by the President of the CAAD and automatically notified to the Tax and Customs Authority.

3.1. The Claimants did not proceed with the appointment of an arbitrator, and therefore, pursuant to the provision of paragraph a) of Article 6, No. 2 and paragraph b) of Article 11, No. 1 of the RJAT, the President of the Deontological Council appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of their appointment within the time limit.

3.2. On 23 April 2015 the parties were notified of the appointment of the arbitrators and raised no objection.

3.3. In accordance with the provision of paragraph c) of Article 11, No. 1 of the RJAT, the collective arbitral tribunal was constituted on 12/5/2015.

3.4. In these terms, the arbitral tribunal is regularly constituted to hear and decide on the subject matter of the case.

1. To substantiate the request for arbitral decision, the Claimant alleges, in summary, the following:

a. The following intra-community supplies were targeted in the Inspection Report: i) B... (United Kingdom) - € 1,108,692.82; ii) C... (Latvia) – €168,996.00; iii) D... – €403,230.34; and iv) E... (Italy) - €11,096.00;

b. The Tax Inspection Services (SIT) consider it not demonstrated that the goods were shipped to the respective Member State, despite the fact that, in addition to proof of shipment by CTT Expresso or through the FedEx carrier, declarations relating to the operations in question were presented, issued by the purchasers themselves, whose authorship is not disputed, in which they declare having made intra-community acquisitions of goods;

c. The AT bases itself on the responses received from the tax authorities of the Member States, but uses information relating to 2010, not even bothering to produce new "proof" as if information from the tax authorities of the destination Member State relating to 2010 served for all subsequent periods;

d. The description contained in the shipping notes (documents and not watches) results from impositions by insurance institutions that do not permit the mention of the contents when valuable jewelry and watches are transported, and it is, in any case, common practice in the sector;

e. In summary, according to the Claimant, the additional VAT assessments that are the subject of the present arbitral request suffer from flagrant and grossly negligent errors, inasmuch as:

• The supplies in question were made by one taxable person to another taxable person, acting in that capacity, and verification of his VAT number was carried out;

• The goods were duly shipped to the destination Member States, with the shipment being duly proven by the shipping notes that the claimant duly delivered to the SIT;

• And likewise, by declarations in the destination Member States of the respective acquisitions.

The Claimant attached various documents and an opinion from Professor Doctor...

1. The AT presented a response and attached an investigative file, invoking, in summary, the following:

a. In the course of the inspection procedure, it required the Claimant to provide proof: (i) Of the departure of the goods from national territory to the destination Member State and to the addressee who provided his tax identification as a taxable person in that other Member State; and (ii) Of the actual delivery of the goods, as to the addressee identified in the invoice and to the location indicated therein;

b. Having requested "administrative cooperation within the community to the tax authorities of the identified Member States, pursuant to Articles 5 and 19 of Regulation (EC) No. 904/2010, in order for them to confirm the intra-community transactions in question", (...) it was possible to conclude that the places/customers to which the goods in question (watches) were invoiced did not correspond to the places where they were actually delivered;

c. The documents attached by the Claimant to the gracious complaint "had already been analyzed by the SIT, which concluded, in a duly substantiated manner, that they do not prove the shipment and transport of the goods to another Member State destined to the purchaser, a taxable person, acting as such";

d. "(...) in the situation in the present case, the declarations of the purchasers do not appear to be conclusive proof for purposes of the tax exemption under analysis";

e. "(...) in light of the evidence detected and duly evidenced in the Inspection Reports, the presumption of truthfulness of the accounting and declarations of the taxpayer provided for in Article 75, No. 1 of the LGT ceases, by force of the circumstances listed in No. 2 of that same article";

f. "It should thus proceed with the application of the rules on burden of proof provided for in Article 74 of the LGT, that is, being a matter of assessment based on the non-recognition of an exemption that was invoked to refrain from assessing the tax due, it falls to the AT to demonstrate that the factual prerequisites that integrate the foundation provided in the law for subjection to the tax that was not assessed are met, while, in turn, it falls to the taxable person to prove the existence of the requirements";

g. Finally, the AT requests the referral request to the CJEU, in the following terms:

"(...) having considered that the resolution of the case submitted to that Court requires a combined interpretation of Articles 131 and 138, No. 1 of Directive 200/112/EC of the Council, of 28 November 2006, relating to the common system of value added tax (OJ L 347, p.1), it is requested, similarly to what was done in the course of the proceedings before the CAAD under No. 85/2015 and 149/2015, the submission to the CJEU, by way of a preliminary ruling (see Article 267 of the TFEU), prior to a judgment on the merits and through suspension of the proceedings, of the following questions:

1. Can a Member State consider that the requirement of the exemption for operations provided for in No. 1 of Article 138 of Council Directive 2006/112/EC, of 28 November 2006, is not fulfilled, when, through recourse to the mechanism of administrative cooperation, it obtained from the tax authorities of the destination Member State of the goods, confirmation that, although the purchaser is validly registered as a taxable person for VAT purposes in that Member State, declared the operation as an intra-community acquisition and made payment of the transaction, the goods never entered the destination country and will have been invoiced by the purchaser to a third party, not resident in any Member State?

2. Can a Member State consider that the requirement of the exemption for operations provided for in No. 1 of Article 138 of Council Directive 2006/112/EC, of 28 November 2006, is not fulfilled, when, through recourse to the mechanism of administrative cooperation, it obtained from the tax authorities of the destination Member State of the goods, confirmation that, although the purchaser is validly registered as a taxable person for VAT purposes in that Member State and made, in part or in whole, payment of the transaction, voluntarily failed to include, or failed entirely to include, in the VAT return, the operation as an intra-community acquisition of goods?

3. Can it be considered that an administrative practice respects the principles of legal certainty and proportionality when it places on the seller the burden of proving the authenticity of shipping and/or transport documents and the receipt of goods when the transport documents presented do not identify the goods that are the object of the supply?"

1. In exercise of the right to be heard, the Claimant opposed the prejudicial referral on the grounds that the questions formulated are not relevant, that there already exists prior interpretation provided by the CJEU on their content, and that the applicable European law norms are entirely clear.

2. Following the grant of the request made by the Respondent to benefit from the testimony evidence produced in Case No. 753/2014-T of the CAAD[1] (a request that did not meet with the opposition of the Claimant as to the benefit of the extra-processual value of the evidence), the hearing already scheduled was dispensed with, pursuant to Article 18 of the RJAT. The date of 12 November was set as the deadline for issuing the arbitral decision, later extended to 12 January 2016.

3. Notified for this purpose, the parties presented successive written submissions, maintaining, in essence, the arguments set forth in the initial pleadings.

II. PRELIMINARY MATTERS

A) In General

9.1. The Tribunal is regularly constituted and is materially competent to hear the present case.

9.2. The parties have legal personality and capacity, show themselves to be parties in interest and are regularly represented (Articles 4 and 10, No. 2, of the RJAT and Article 1 of Order No. 112-A/2011, of 22 March).

9.3. The case is not affected by any nullities.

9.4. There are no other circumstances that prevent the Tribunal from hearing the merits of the case.

B) In Particular – Regarding the Request for Prejudicial Referral to the CJEU

As is apparent from the Report, in its response, the AT formulated a request for referral of the case, by way of a preliminary ruling, to the CJEU, prior to judgment on the merits and through suspension of the proceedings. The taxable person contests the granting of such request.

It is necessary to assess it.

B.1. Pursuant to Article 267 of the TFEU, in the part that most directly concerns the present case:

"The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning:

a) the interpretation of the Treaties;

b) the validity and interpretation of acts adopted by the institutions, bodies, offices or agencies of the Union

Whenever such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon."

B.2. The first requirement for a preliminary referral to be possible thus concerns the nature of the subject matter for decision by way of preliminary ruling: a norm or act of EU law.

It is necessary to ascertain whether that requirement is met in the present case.

For that purpose, it is necessary to determine which norms of EU law the AT invokes, which questions it raises, and whether or not there is a relationship between the former and the latter.

With respect to the norms of EU law, the AT invokes the need for a ruling by the CJEU regarding Articles 131 and 138, No. 1, of Council Directive 200/112/EC, of 28 November 2006, relating to the common system of value added tax.

It refers, thus, to the following norms:

"Article 131 - The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and on the conditions laid down by the Member States in order to ensure the correct and simple application of these exemptions and to prevent any possible fraud, evasion or abuse.

"Article 138 - 1. Member States shall exempt the supply of goods dispatched or transported outside the respective territory but within the Community, by the supplier, by the recipient or on their behalf, when made to another taxable person or to a legal entity not being a taxable person acting as such in a Member State other than the Member State where the dispatch or transport of the goods began.

Regarding the questions to be raised with the CJEU, the AT set out the questions referred to above.

However, when establishing a relationship between the Community norms invoked and the questions formulated, it appears that the latter do not have the former as their subject.

In effect, and despite the fact that the AT makes reference to such norms in the questions it explicitly poses, the truth is that the doubts into which the questions translate do not concern the content of the norm, but the evidentiary regime. That is, the questions concern the means of proof and the burden of proof, a matter that is not, nor had to be, addressed in the Community legal norms with respect to which the AT requests that the CJEU pronounce itself.

This is evident in the context of the third question, in which there is no reference whatsoever to a Community norm, but rather to internal administrative practice regarding the burden of proof, and it is certain, moreover, that the fixing of the rules for distribution of the burden of proof is not the responsibility of the administrative power, but of the legislator, and therefore, for that reason as well, the question formulated would be lacking in precision and reason to be. The rules for distribution of the burden of proof are, in fact, those that result from the law, and not those that administrative practice refers to.

Now, as stated in the Decision of the Northern Administrative Court of 12-03-2015, rendered in Case 01560/05.5BEPRT[2], "Any appropriate means of proof is admissible in the procedure and in the case, in accordance with the provisions of Articles 50 and 115, No. 1, of the Tax Procedure and Process Code. Any contrary understanding, in particular, the limitation through administrative circulars of the means of proof admitted in the elimination of such presumption is unacceptable as it restricts the right to present evidence that the constitutional principles of justice and effective judicial protection are supposed to fully assure to the interested parties – cf. Article 20 of the Fundamental Law".

Moreover, in accordance with the sense of the decision in Arbitral Award No. 753/2014-T, of the CAAD, an administrative guidance of such tenor would always be unacceptable for, in violation of the provision in Article 20 of the Constitution, restricting the right to present evidence and, consequently, the rights of access to justice and effective judicial protection.

Also in the context of the first two questions, the doubt turns on the value of the means of proof and not on the meaning of part or all of the constitutive elements that integrate the content of a norm of EU law.

What is at issue is not the determination of the meaning of a legal norm of the European Union. The meaning of the norms of EU law applicable is well understood by the parties, who show themselves to understand the meaning of the norms in question.

What is at issue is a matter of fact (proof as to facts) and the application of norms of domestic law, particularly those relating to the burden of proof, and it is certain that the CJEU does not address itself "to any divergences of opinion as to the interpretation or application of the rules of national law".

As the CJEU states in the Mecsek-Gabona case, "within the framework of the procedure established by Article 267 TFEU, the Court of Justice is not competent to ascertain or assess the factual circumstances relating to the main proceedings"[3], and it is for the national courts to assess whether the taxpayer "complied with the obligations incumbent on him with respect to proof and due diligence"[4], relating to the prerequisites whose verification depends on the recognition of the right to the exemption it invokes.

Since there are no specific norms of European Union law with respect to the matter that is the subject of the present case concerning proof, the rules of domestic law in force in the Member State in question (Portugal) shall apply in the proceedings. This is thus a matter (relating to the law of evidence) on which the answer to any doubts should be sought within the framework of national law.

Now, as stated in point 7 of the Recommendations to National Courts of Justice (likewise cited in Arbitral Award 753/2014-T, of the CAAD), relating to the presentation of preliminary ruling cases (2012/C 338/01), of the CJEU[5]:

"the role of the Court within a preliminary ruling procedure is to interpret the law of the Union or to rule on its validity, and not to apply that law to the factual situation underlying the main proceedings. That task falls to the national judge and, for that reason, it is not for the Court to rule on questions of fact raised in the context of the dispute in the main proceedings, nor on any divergences of opinion as to the interpretation or application of the rules of national law".

In summary, the first requirement for the preliminary referral request to be granted is not met, since the alleged doubt does not concern constituent parts of Community norms or acts on which doubts as to interpretation are actually invoked and substantiated.

B.3. Even if, however, within the context of the first two questions, the doubt did not relate (as we have seen it does relate) to the value of means of proof, but to the requirements (referred to in such questions) for application of the exemption, the preliminary referral request would not be warranted, to the extent that such requirements do not form part of the identified norms of the Directive, and find no minimum support in the literal element thereof.

It should be noted, thus, that the factual elements to which the doubts concerning proof relate do not form part of any norm of European Union law. In fact, in Article 318 of Directive 2006/112/EC of the Council, of 28 November 2006 (VAT Directive), it is not required, as a condition of application, that the purchaser not transfer the good to a third party not resident in the Union, nor that the purchaser include, in the VAT return, the operation as an intra-community acquisition of goods.

Furthermore, also within the framework of domestic law, it does not appear from Article 14, a), of the RITI (Regime for VAT in Intra-Community Transactions) as a condition of the right to the exemption, that the goods have entered another Member State (only that they have been dispatched or transported to it), nor that the purchaser has included the transaction as an intra-community acquisition in the VAT return (only that he be registered for VAT purposes in another Member State, be covered there by a scheme for taxation of intra-community acquisitions of goods, and have used the respective VAT identification number to effect the acquisition), nor that the purchaser does not transfer the good to a third party not resident in a Member State of the European Union.

Similarly to what occurred in the case reviewed in Award No. 753/2014-T of the CAAD, the doubts concerning evidentiary rights thus, in the present case, concern factual elements that clearly do not form part of the norm of EU law invoked by the AT (relating to the VAT exemption), and therefore, even if the doubt concerned (and it does not concern) such elements, the preliminary referral request would not be warranted by virtue of those elements not representing part of any Community normative act.

Of note in this regard is the Teleos case, in the part in which it is made explicit that "except where the conditions concerning the capacity of a taxable person, the transfer of the power to dispose of a good as owner, and the physical movement of goods from one Member State to another are concerned, no other condition is to be required for the classification of a transaction as an intra-community supply or acquisition of goods."[6]

And because the mentioned requirements do not constitute dimensions of the right to exemption under analysis in the present case, hypothetical doubts concerning them do not assume relevance for the proper decision of the case in which the referral is requested. The interpretation of the norms of EU law in question thus has, from that point of view, unequivocal character.

Now, as Jónatas Machado states[7], determining for the preliminary referral request to be granted is that the legal question raised demonstrates itself to be relevant and pertinent to the subject matter of the case and to its decision. A relevance whose assessment is within the exclusive competence of the judicial bodies, and therefore the referral does not represent a faculty of the parties which, once exercised, necessarily leads to suspension of the proceedings and referral of the questions for consideration by the CJEU. As to this particular aspect, he also states: "Pursuant to Article 267 TFEU, it is incumbent upon the national judge to whom the dispute has been submitted to assess the necessity of a preliminary ruling for the pronouncement of a final decision and to decide on the relevance of the questions that he submits to the CJEU. The question must be sufficiently relevant to the outcome of the specific case to justify the referral (...) Among us, it has been understood that the preliminary referral is only justified when the question of the interpretation of a Community law norm is to be considered relevant, that is, when the case 'sub judice' is to be decided in accordance with that rule, showing itself necessary for that purpose the opinion of the CJEU".

This is likewise made explicit by the Supreme Administrative Court, in the Decision rendered in Case 222/12-30, of 28 November 2012, when it states therein that the second paragraph of Article 267 TFEU "gives to the judicial body a broad margin of appreciation as to whether the preliminary question is or is not necessary to the judgment of the case".[8]

As likewise results from point 12 of the aforementioned Recommendations to National Courts of Justice, relating to the presentation of preliminary ruling cases (2012/C 338/01), of the CJEU, the preliminary referral to the said Court should not be made when:

i. there already exists jurisprudence on the matter (and when the perhaps new framework raises no real doubt as to the possibility of applying that jurisprudence to the specific case); or

ii. when the correct way to interpret the legal rule in question is unequivocal.

In harmony with such recommendation, it is likewise provided for, in point 13, that "a national judicial body may, in particular when it considers itself sufficiently clarified by the jurisprudence of the Court, itself decide on the correct interpretation of Union law and its application to the factual situation within its knowledge" and, in point 18, that the "national judicial body may present to the Court a request for preliminary ruling, from the moment it considers that a decision on the interpretation or validity is necessary to issue its decision".

The aforementioned lack of utility of the questions presented stems, moreover, from the terms in which they are presented, inasmuch as they refer to a situation of possibility. Now, as is made explicit in Arbitral Award 753/2014-T, of the CAAD, a hypothetical response from the CJEU to the effect that the Member State may or may not consider the requirements of the exemption fulfilled would not bind the present Tribunal to a particular sense as to the content of the decision to be handed down, given that it would always have to verify, within the framework of domestic law, whether the Portuguese State had or had not exercised such power.

The answer to the questions formulated is thus not necessary to render a decision on the questions that it falls to the present Tribunal to settle, and therefore, and saving respect for any other understandings, such questions should not be presented to the CJEU.

Reasons for which the second requirement for granting the preliminary referral request (relating to the utility of the answer to the question for the proper decision of the case) is likewise not met.

In these terms, lacking the preliminary referral request to the CJEU, for assessment of the questions set out by the Respondent, substance, the present Tribunal deems such request to be without merit.

III. MERITS

A) Factual Matter

1. Facts found to be proven:

a) Since its incorporation and until 1 July 2010, the Claimant's business object was the purchase and sale of real property, and it was classified under the normal VAT regime with monthly frequency;

b) After the date referred to in the preceding paragraph, the Claimant's business object also became wholesale trade in watches and jewelry;

c) The Claimant's share capital, at the date of the tax facts in question in the present case, was wholly held by the commercial corporation C... SA, with the administrators being common to both companies;

d) The Claimant does not assess VAT on the intra-community supplies of goods it carries out and deducts the VAT it bears in acquisitions it makes from the parent company, C..., SA;

e) Due to the aforementioned, the Claimant requests monthly VAT refund;

f) By the Tax Inspection Services (hereinafter SIT) of the Finance Department of Porto, two inspections were carried out: inspection OI2012..., relating to periods 01, 04, 05, 06 and 07 of 2011, and inspection OI2011..., relating to period 08 of 2011, with the respective reports being drawn up, photocopied in documents No. 24 and 25 attached to the Initial Petition (hereinafter IP), the contents of which are hereby deemed to be entirely reproduced;

g) It appears from the report of inspection OI2012... that in relation to the following operators and operations:

1. SUPPLY OF GOODS (January 2011)

E... € 11,096.00

VAT assessed € 2,552.08

1. SUPPLY OF GOODS (April 2011)

B... € 29,212.00

VAT assessed € 6,718.76

1. SUPPLY OF GOODS (May 2011)

B... € 114,810.02

VAT assessed € 26,406.30

1. SUPPLY OF GOODS (June 2011)

B... € 238,897.00

D... € 45,266.00

C... € 63,356.00

TOTAL € 347,519.00

VAT assessed € 79,929.37

1. SUPPLY OF GOODS (July 2011)

B... € 396,469.80

D... € 173,963.34

C... € 52,033.00

TOTAL € 622,466.14

VAT assessed € 143,167.21

in the total amount of €1,125,103.16, VAT in the total amount of €258,773.72 was not assessed;

h) It appears from the report of inspection OI2011... that in relation to the following operators and operations:

SUPPLY OF GOODS (August 2011)

B... € 329,304.00

D... € 184,001.00

C... € 53,607.00

in the total amount of €566,912.00, VAT in the total amount of €130,389.76 was not assessed;

i) As a result of the aforementioned in g) and h) above, the SIT made corrections which, relating to inspection OI2012..., gave rise to additional VAT assessments No. ..., ..., ..., ... and ... and respective compensatory interest assessments No. ..., ..., ..., ... and ..., relating to periods 01, 04, 05, 06 and 07 of 2011 (Documents No. 9, 10, 11, 12, 13, 15, 16, 17, 18 and 19 attached with the IP), and in relation to inspection OI2011... gave rise to additional VAT assessment No. ... and respective compensatory interest assessment No. ..., relating to period 08 of 2011 (Documents No. 14 and 20, attached with the IP);

j) The total amount assessed reaches €405,218.86, of which €389,163.48 corresponds to VAT assessments and €16,055.38 to compensatory interest;

k) Not having paid the amounts in question in the assessments in question, enforcement proceedings No. ... were instituted (Document No. 21 attached with the IP), which proceeded before the Finance Service ...-..., in the course of which suspension was requested through the presentation of a bond (Documents No. 22 and 23, attached with the IP);

l) On 29/04/2013 the Claimant filed a gracious complaint against the additional assessments referred to in i) - (Documents No. 7 and 8 attached to the IP, the contents of which are hereby given as entirely reproduced),

m) The Claimant was notified of the dismissal of said complaints on 3/10/2013;

n) On 30/10/2013 the Claimant appealed that dismissal – (Documents No. 3 and 4 attached to the IP, the contents of which are hereby given as entirely reproduced);

o) The hierarchical appeals were dismissed on 4/11/2014. (see official letters No. ... and ..., of 1/12/2014 which constitute documents No. 1 and 2 attached to the IP, the contents of which are hereby given as entirely reproduced);

p) Regarding the transactions carried out for operator B..., the Claimant exhibited to the SIT the corresponding invoices, in which the valid VAT identification number of the purchaser is affixed, as well as the mention of the watch transaction and the respective reference and material of which they are made (Document No. 27 of the IP);

q) And presented shipping confirmation documents, issued by FedEx and by CTT, with the designation "documents" (Document No. 27 of the IP);

r) As well as bank documents confirming transfers to the accounts of A... in Z... by B... (Document No. 38 of the IP);

s) And furthermore presented a declaration, dated 27/03/2012, containing the identification of the invoices in question, in which the purchaser, not identified, declares having made intra-community acquisitions of goods from the Claimant, (Document No. 26 of the IP), in the following terms:

Invoice No. Date Amount

2011... 26/4/2011 € 29,212.00
... 7/5/2011 € 23,247.00
... 12/5/2011 € 47,506.02
... 17/5/2011 € 12,336.00
... 21/5/2011 € 18,231.00
... 23/5/2011 € 13,490.00
... 2/6/2011 € 22,380.00
... 3/6/2011 € 76,134.00
... 6/6/2011 € 32,307.00
... 15/6/2011 € 26,800.00
... 17/6/2011 € 21,358.00
... 17/6/2011 € 54,279.00
... 17/6/2011 € 5,639.00
... 7/7/2011 € 23,268.00
... 7/7/2011 € 10,346.00
... 16/7/2011 € 68,637.00
... 21/7/2011 € 48,649.00
... 21/7/2011 € 45,235.91
... 21/7/2011 € 42,054.07
... 25/7/2011 € 104,398.63
... 29/7/2011 € 13,877.00
... 29/7/2011 € 40,006.00
... 1/8/2011 € 104,070.00
... 1/8/2011 € 195,876.00
... 25/8/2011 € 29,358.00

Total € 1,108,694.63

t) With regard to transactions carried out for operator B..., the AT activated the mechanism of administrative cooperation/exchange of information pursuant to Articles 5 and 19 of Regulation (EC) No. 904/2010, having obtained the following response: "Goods were transported to the customer F... from Portugal to the relevant customer.

The goods were not transfer to UK at any time. A CMR for the movement of goods have been attached.

A list of the purchase invoices and sales invoices for the year 2010 has been attached. Both list also include a column for the payment date and date of the receipt for sales invoices issued.

The bank statement showing payment for goods supplied and income received from goods sold has also been attached.

The initial capital for the business was introduced by shareholders to set up the business, followed by advance or deposits received from customers for goods ordered. The company has had its director changes numerous times.

The current director is … directors Limited. Orders are now being placed by G...."

u) The supplies contained in the transport guides carried out via FEDEX and via CTT were subsequently confirmed;

v) Regarding the transactions carried out for operator C..., the Claimant exhibited to the SIT the corresponding invoices, from which the valid VAT identification number of the purchaser appears, the mention of the watch transaction, the respective reference and the material of which they are made (Document No. 29 of the IP);

x) Also presented the shipping confirmation documents issued by FedEx, (Document No. 29 of the IP), with the designation "documents" (transport guide No. ...);

y) Also presented bank documents confirming transfers to the accounts of A... in Z... by C... (Document No. 40 of the IP);

z) And presented declaration, dated 16/9/2011, containing the identification of the invoices in question, in which the purchaser, not identified, declares having made the intra-community acquisitions of goods from the Claimant, (Document No. 32 of the IP), in the following terms:

Invoice No. Date Amount

2011... 28/6/2011 € 15,181.00
... 28/6/2011 € 19,478.00
... 30/6/2011 € 28,697.00
... 12/7/2011 € 23,408.00
... 15/7/2011 € 11,025.00
... 21/7/2011 € 17,600.00

Total € 115,389.00

aa) C... declared to the tax authorities of Latvia the corresponding intra-community acquisitions of goods made from the Claimant and located in Latvia;

bb) With regard to transactions carried out for C..., the AT activated the mechanism of administrative cooperation/exchange of information, pursuant to Articles 5 and 19 of Regulation (EC) No. 904/2010, having obtained the following response: "(B2-4), (B2-5) It was not possible to establish the transport and vehicles used, because transportation documents had not been presented.

(B2-7) The following invoices presented for transactions in 2011... and 2011...: 2011/09/12 invoice Nr.2011... for EUR 29672.00; 2011/09/10 invoice Nr. 2011... for EUR 17600.00; 2011/08/26 invoice Nr. 2011... for EUR 16111.00; 2011/07/21 invoice Nr. 2011... for EUR 17600.00; 2011/07/15 invoice Nr. 2011... for EUR 11025.00; 2011/07/12 invoice Nr 2011... for EUR 23408.00; 2011/07/30 invoice Nr. 2011... for EUR 28697.00; 2011/06/28 invoice Nr. 2011... for EUR 15181.00; 2011/06/28 invoice Nr. 2011... for EUR 19478.00 According the documents presented transactions were the supply of goods.

(B2-11), (B2-12), (B2-13) The payment made for the amount of EUR 178772.00 from C… bank account Nr LV...

(B2-15) No information."

cc) Regarding the transactions carried out for operator D..., the Claimant exhibited to the SIT the corresponding invoices, where the valid VAT identification number of the purchaser is shown affixed, as well as the mention of the watch transaction, the respective reference and the material of which they are made (Document No. 33 of the IP);

dd) And presented the shipping confirmation documents issued by FedEx with the designation "documents" (Document No. 33 of the IP);

ee) As well as bank documents confirming transfers to the accounts of A... in Z... by D... (Document No. 42 of the IP);

ff) And presented declaration, dated 27/3/2012, containing the identification of the issued invoices, in which the operator, duly identified, declares having carried out intra-community acquisitions of goods from the Claimant, in the following terms (Document No. 34 of the IP):

Invoice No. Date Amount

2011... 17/6/2011 € 45,266.00
... 7/7/2011 € 32,886.00
... 7/7/2011 € 46,636.00
... 7/7/2011 € 14,828.00
... 21/7/2011 € 23,560.98
... 21/7/2011 € 21,956.10
... 21/7/2011 € 34,096.26
... 25/8/2011 € 10,977.00
... 25/8/2011 € 49,629.00
... 25/8/2011 € 105,159.00
... 25/8/2011 € 18,236.00

Total € 403,230.34

gg) The Claimant further presented another declaration, dated 16/09/2011, containing the identification of the invoices in question, (Document No. 34 of the IP), in the following terms:

Invoice No. Date Amount

2011... 17/06/2011 € 45,266.00
... 17/07/2011 € 32,886.00
... 07/07/2011 € 46,636.00
... 07/07/2011 € 14,828.00
... 21/07/2011 € 23,560.98
... 21/07/2011 € 21,956.10
... 21/07/2011 € 34,096.26

Total € 219,226.34

hh) With regard to transactions carried out for D..., the AT activated the mechanism of administrative cooperation/exchange of information pursuant to Articles 5 and 19 of Regulation (EC) No. 904/2010, having obtained the following response:

"(B1-18) The goods never came to Cyprus. They were shipped directly to the customer (see Appendix 1 and Appendix 2).

(B1-7) The goods never came to Cyprus.

(B1 - 8) The transportation documents given to us involve the sales of our supplier. Please note that the accounts of the company could not match exactly the purchases with the sale because our trader was selling goods not just bought from your trader but also from other traders."

ii) The supplies contained in the transport guides carried out via FEDEX and EMS were subsequently confirmed;

jj) Regarding the transactions carried out for operator E..., the Claimant exhibited to the SIT the corresponding invoice, where the valid VAT identification number of the purchaser is shown affixed, as well as the mention of the watch transaction, the respective reference and the material of which they are made, in the following terms (Document No. 35 of the IP):

Invoice No. Date Amount

2011... 24/01/2011 € 11,096.00

kk) Presented the shipping confirmation document issued by FedEx, with the designation "documents" (Document No. 36 of the IP);

ll) Presented bank document confirming transfers to the accounts of A... at BES by E... (Document No. 44 of the IP).

2. Facts found not to be proven:

a) The mention "Documents", referred to in paragraph b) of points 14, 17 and 20 of the facts found to be proven, was made by the Claimant because it was prohibited by the insurance institution to mention the watches given the risks arising therefrom.

b) The Italian Tax Administration requested the AT's collaboration regarding the transactions carried out by operator E..., "on suspicion of fraud" in the transactions carried out between the Claimant and that operator.

3. Reasoning for the factual matter proven and not proven

With respect to the factual matter, the Tribunal does not have to pronounce on everything that was alleged by the parties, as it is incumbent upon it to select the facts that matter for the decision and to distinguish between proven and unproven matters (cf. Article 123, No. 2, of the CPPT, and Article 607, No. 3, of the CPC, applicable ex vi Article 29, No. 1, al. a) and e), of the RJAT).

Thus, the facts pertinent to the judgment of the case are chosen and selected based on their legal relevance, which is established in light of the various plausible solutions to questions of law (cf. former Article 511, No. 1, of the CPC, corresponding to the current 596, applicable ex vi of Article 29, No. 1, al. e) of the RJAT).

Thus, having regard to the positions assumed by the parties, in light of Article 110, No. 7, of the CPPT, the documentary evidence and the file attached to the case, the facts enumerated above were considered proven, with relevance to the decision.

The facts found not to be proven result from the insufficiency or lack of proof as to them. In effect, the document from the insurance broker (minutes) attached by the Claimant, even when combined with the testimony of witness A, was not sufficient to convince the Tribunal of the motivation indicated, first of all because that document is dated 2012 (Document No. 30 of the IP), (and the corresponding policy (...), from all indications, will be from the same year), while the facts now in question relate to 2011. Furthermore, the witness was not a representative of the insurance company, but merely a broker.

As for the request for collaboration from the Italian AT [cf., supra, 2-b)], no documentary proof was made, and it is certain that this fact would necessarily have to be proven in this manner.

B) Matters of Law

It should be noted that the Tax Administration essentially understands that, in this case, fundamentally based on the responses obtained through the administrative cooperation mechanism, the physical circuit of the goods – that is, the departure of the goods from national territory bound for a purchaser registered in another Member State of the European Union - is not sufficiently proven, in terms of being able to grant VAT exemption to the intra-community supply of the goods.

It specifically alleges that the transport documents, unlike the invoices issued, do not identify the goods transmitted, nor their respective value, and there are, still according to the inspection report, indications that the goods would not have as their final destination the Member States listed in the transport documents.

In this context, it is alleged in the inspection report that the watches are not dispatched to the locations listed in the invoicing documents or in the transport documents, and that the A... knows that this is the case, resorting to an expedient to attempt to comply with the legal requirements for exemption, using "front companies" whose sole function would be to provide, formally, the conditions for the application of the exemption contained in paragraph a) of Article 14 of the RITI.

Thus, it is concluded essentially that, having requested "administrative cooperation within the community to the tax authorities of the identified Member States, pursuant to Articles 5 and 19 of Regulation (EC) No. 904/2010, in order for them to confirm the intra-community transactions in question", (...) it was possible to conclude that the places/customers to which the goods in question (watches) were invoiced did not correspond to the places where they were actually delivered."

1. Legality of the Assessments

1.1 Preliminary Considerations

As we have seen, what is essentially at issue in the present case is to ascertain whether, in light of the factual matter found to be proven, the requirements provided for in Article 14, paragraph a), of the RITI are or are not met, which determines that:

"The following shall be exempt from the tax:

a) Supplies of goods, made by a taxable person referred to in paragraph a) of No. 1 of Article 2, dispatched or transported by the supplier, by the recipient or on their behalf, from national territory to another Member State intended for the recipient, when the latter is a natural or legal person registered for value added tax purposes in another Member State, who has used the respective VAT identification number to effect the acquisition and is covered there by a scheme for taxation of intra-community acquisitions of goods;"

The simultaneous verification of these two conditions qualifies as exempt the intra-community supply of goods, being then the acquisition by the taxable person registered in another Member State of the EU subject to tax, as an intra-community acquisition of goods.

It is not sufficient, thus, that the goods have been acquired by a taxable person validly registered in another Member State, being necessary that it can be proven that the goods left national territory, destined for a Member State of the EU, that they are dispatched or transported by the supplier, by the recipient or by a third party, carrier, on their behalf.

It is established that the requirements for application of the exemption in question are the following:

• the supplier is a VAT taxable person in his Member State of residence;

• the recipient is a VAT taxable person, resident in another Member State, and who uses the respective VAT identification number to effect the acquisition;

• the goods are actually dispatched or transported to another Member State intended for the recipient.

As is the case with EU law norms, also within the framework of domestic law it does not appear from Article 14, a), of the RITI, as a condition of the right to the exemption, that the goods have entered another Member State (only that they have been dispatched or transported to it), nor that the recipient has included the transaction as an intra-community acquisition in his VAT return (only that he be registered for VAT purposes in another Member State, be covered there by a scheme for taxation of intra-community acquisitions of goods, and have used the respective VAT identification number to effect the acquisition), nor that the recipient does not transfer the good to a third party not resident in a Member State of the European Union.

In the present case what is essentially at issue is to ascertain the verification of the last of the requirements listed above, and therefore what needs to be established is whether the goods in question were, or were not, actually dispatched or transported to another Member State, intended for the said recipients.

In this context, it is important from the outset to bear in mind the fact that the classification in one Member State of an operation as an intra-community supply of goods does not bind the Tax Administration of the other Member State to classify it as an intra-community acquisition of goods and vice versa[9].

Moreover, it should be emphasized that, "... if the supplier has the obligation to ensure that the recipient of the goods is a taxable person properly identified for VAT purposes in another MS and that the goods are dispatched or transported outside national territory. It is not incumbent on him, however, to control whether the goods were dispatched or transported to the MS corresponding to the VAT identification number communicated to him by the recipient. It will only be possible for the supplier to ensure such fact if the dispatch or transport of the goods is carried out by himself or on his behalf, with a dispatch MS being indicated to him different from the one corresponding to the VAT identification number under which the acquisition was made. However, even in this situation, the application of the exemption of the intra-community supply of the goods in question will not be called into question. What will be in question is the information supplied by the taxable person to the respective tax administration, through the completion of the recapitulative statement of the respective intra-community supplies of goods. It should be noted in this regard that it was precisely having in mind this type of situation that the Community legislator provided for a safety mechanism within the framework of the new localization rules. According to these rules, notwithstanding the fact that the dispatch or transport of the goods occurs in another MS (general rule of localization of intra-community acquisitions of goods), the intra-community acquisition of goods will be taxable in the MS that issued the VAT identification number under which the recipient carried out the operation." [10]

The recipient has to declare the intra-community acquisition of goods through compliance with specific ancillary obligations, since the intra-community acquisition of goods is a taxed operation under VAT, as a corollary of the principle of destination. That is, the important emphasis for there to be an intra-community supply of goods from the point of view of the supplier is, in addition to ensuring that the recipient is a VAT taxable person who carries out intra-community operations, to ensure that the goods physically left the Member State of the supplier. If the goods physically entered the Member State of the recipient (or at the address provided by the recipient), that proof will no longer be incumbent on the supplier, first of all because it does not result from the literal wording of Article 14, paragraph a), of the RITI.

This has been, moreover, the understanding of the CJEU, which, in the Award rendered in Case C-430/09, considered that "the application of the exemption to an intra-community supply is subject to the condition that the transport is to be completed in a Member State different from that of the supply, being irrelevant for the purpose the address at which the transport ends." [11]

This was the understanding adopted in Cases No. 85/2015-T and 149/2015-T of the CAAD[12] and this is the understanding of the most significant legal commentary among us. Let us see what Xavier de Basto tells us[13] – "The exemption for intra-community supply appears to be subject to conditions that, according to Portuguese law, are as follows:

(i) it is necessary that the goods that are the subject of the supply be dispatched or transported by the supplier, by the recipient or on their behalf, from national territory to another Member State of the European Union; and

(ii) it is necessary that the recipient be registered for value added tax purposes in another Member State, that he has used the respective VAT identification number to effect the acquisition, and that he be covered there by a scheme for taxation of intra-community acquisitions of goods. (qualification of the recipient).

The first condition concerns the physical circuit of the goods; the second concerns the identity and identification of the recipient. This is the solution contained in paragraph a) of Article 14 of the Regime for VAT on Intra-Community Transactions (RITI) and results from various provisions of the European directive, which is today Directive 2006/112/EC of the Council, of 28 November 2006.

The simultaneous verification of those two conditions, concerning the physical circuit of the goods and the identity and identification of the recipient, qualifies as exempt the intra-community supply, with the acquisition by the taxable person registered in another Member State of the EU then being subject to tax there, as an "intra-community acquisition of goods".

Let us now cite Emanuel Vidal Lima, who, with respect to operations of intra-community supply of goods, begins by telling us that[14] "... the operation indicated requires the actual transport of the goods, involving their physical departure from the Member State of supply and their entry into the Member State of arrival.

(...).

An intra-community supply of a good and the intra-community acquisition thereof in fact constitute one and the same economic operation, although they involve different rights and obligations both for the parties to the transaction and for the tax authorities of the Member States involved.

With respect, in particular, to intra-community supply, the Court of Justice of the European Union (CJEU) interpreted Article 138, No. 1, of the VAT Directive, to the effect that the exemption for intra-community supply of a tangible movable good applies only when:

• The power to dispose of the good as owner has been transferred to the recipient, and

• The supplier proves that that good was dispatched or transported to another Member State and that, as a result of that dispatch or transport, it physically left the territory of the Member State of supply.

With the exception of conditions concerning the capacity of a taxable person, the transfer of the power to dispose of a good as owner, and the physical movement of goods from one Member State to another, no other condition is to be required for the classification of a transaction as an intra-community supply or acquisition of goods, and it is certain that the concept of intra-community supply, like that of intra-community acquisition, has an objective character and applies regardless of the purposes and results of the operations in question.

Thus, in order for the supplier to have the right to the exemption for intra-community supply of goods it carries out, the material or substantive conditions just mentioned must be met.

Now, with respect to the verification of these conditions, namely, the objective condition of the physical transfer of the goods outside the territory of the Member State of supply, it becomes difficult for the tax administrations, due to the abolition of controls at the borders between the Member States, to be certain whether the goods did or did not physically leave the territory of the Member State of supply.

(...).

Thus, it is mainly on the basis of the proofs provided by the taxable persons and on the declarations of these that the tax authorities verify the fulfillment of the material conditions.

However, account must be taken of the fact that the VAT Directive is silent on the definition of such proofs. In fact, no provision of the Directive specifically provides for what proofs the taxable persons are obliged to present. The Directive merely provides, in Article 131, that it is incumbent upon the Member States to lay down the formal conditions under which they will exempt from tax the intra-community supplies of goods to ensure the correct and simple application of those exemptions and to prevent possible fraud, evasion and abuse.

In this way, in order to benefit from the exemption provided for in Article 138, No. 1 of the VAT Directive, it is incumbent upon the supplier of the goods to prove that not only the material conditions provided for the application of this provision are met, but also the formal conditions imposed by the Member States pursuant to Article 131 of the same Directive.

However, it must be observed that, in its jurisprudence, the CJEU has been recalling that, in exercising its powers, the Member States must respect the general principles of Community law, among which are, in particular, the principles of legal certainty, proportionality, protection of legitimate expectations and neutrality.

In these terms, in compliance with the principle of legal certainty, taxable persons have the right to know their tax obligations before carrying out a transaction.

And, in accordance with the principle of proportionality, the measures that the Member States have the faculty to adopt must not go beyond what is necessary to achieve the objectives intended to ensure the correct assessment of the tax and to prevent fraud."

That is, it is clear that we are dealing with an intra-community supply of goods as long as the requirements of Article 14, paragraph a), of the RITI are verified. It will fall to the recipient to prove that it meets the requirements for the scheme of intra-community acquisitions of goods to be applied, litigating, if necessary, with the respective tax authorities on the VAT issue.

We cannot, therefore, fail to disagree with the understanding conveyed in Case 164/2015-T of the CAAD of 16 November, in which, surprisingly in collision with the understanding conveyed in Cases 85/2015-T and 149/2015-T of the same Court, it is defended that "However, it appears clear that, given the special fraud concerns that intra-community transactions may raise and do in fact raise, and the control systems created to monitor them, under penalty of failure in the functioning and the very credibility of the intra-community VAT regime, the meaning of the concept "dispatch or transport" referred to in Article 14, paragraph a) of the RITI should not be confined to the simple fulfillment of the unilateral formality of mere dispatch or transport, but must be extended to the necessity and the consequent burden, which must necessarily fall on the supplying taxable person, of proving the arrival at destination of the goods dispatched or transported intended for the recipient, when the latter is a natural or legal person registered for value added tax purposes in another Member State, who has used the respective VAT identification number to effect the acquisition and is covered there by a scheme for taxation of intra-community acquisitions of goods."

In effect, as we have seen, such a requirement does not even derive from the letter nor the spirit of the law, not being accepted by the most relevant legal commentary, and appears, moreover, to be disproportionate, in the terms mentioned and supported by the CJEU.

1.2 Proof of Intra-Community Supplies of Goods

The VAT Code is silent on the means of proving that the goods left national territory destined for a recipient validly registered, for VAT purposes, in another Member State of the EU.

However, the Portuguese Tax Administration felt the need to issue administrative guidance on this matter. This guidance is contained in Circular Letter No. 30009, of 10/12/1999, from the VAT Services Department. As is expressly stated in the said Letter, proof of the departure of goods from national territory can be made by resorting to the general means of proof. And, among those means, the Letter recognizes as valid, in addition to transport documents or equivalent, "the declaration, in the Member State of destination of the goods, by the respective recipient, of having made there the corresponding intra-community acquisition."

This guidance is in accordance with the jurisprudence of the CJEU, respecting the general principles of legal certainty and proportionality, without making special proof requirements.

The circumstance that the final destination of the goods is not the Member State of issuance of the recipient's VAT number, even if proven, is not in itself sufficient to justify the refusal of the exemption. First of all, in so-called triangular operations the final destination of the goods may not be that of the Member State in which the recipient is registered. What is decisive for justifying the exemption is that the goods end up leaving national territory.

In the Teleos case, cited by the AT itself, there was proof that the goods had not even left national territory, there had been fraud on the part of the recipients, while it was proven that the supplier had not participated in or taken knowledge of the fraudulent maneuver. The CJEU considered it unlawful, in light of Community law, to refuse, in these circumstances, the exemption and to oblige the supplier to pay the tax. The physical circuit of the goods had not been completed, but the Court did not consider it lawful to refuse the exemption for that reason.

As we have stated, the CJEU concluded ipsis verbis in this case that "except where the conditions concerning the capacity of a taxable person, the transfer of the power to dispose of a good as owner, and the physical movement of goods from one Member State to another are concerned, no other condition is to be required for the classification of a transaction as an intra-community supply or acquisition of goods."[15], and that "even if the presentation by the recipient of a tax declaration relating to the intra-community acquisition may constitute an indication of the actual transfer of the goods outside the Member State of supply, such declaration does not, however, assume conclusive significance for the purpose of proof of a tax-exempt intra-community supply."[16].

Moreover, it can be read in the same judgment that "the fact that the recipient has presented a declaration to the tax authorities of the destination Member State relating to intra-community acquisition, such as that in the main proceedings, may constitute supplementary proof to demonstrate that the goods actually left the territory of the Member State of supply, but does not constitute conclusive proof for VAT exemption of an intra-community supply."

As the CJEU emphasizes, it results from Community jurisprudence that the measures adopted by Member States to ensure tax compliance and prevent fraud cannot call into question the neutrality of VAT (No. 46)[17].

Now, in the specific case, the Court of referral considered that, although there was no proof that the goods left the territory of the United Kingdom, it was also not proven that the supplier committed manipulations and fraud.

In such circumstances, if the taxable persons who carried out the intra-community supplies were denied the exemption and were obliged to pay the tax, the principle of neutrality would be called into question, as they could not pass on the tax, thus finding themselves in a less favorable position than taxable persons who carried out an internal operation (No. 59 and 60).

For the Court, "it is important to ensure that the situation of economic operators is not less favorable than that which existed before the abolition of controls at the borders between the Member States, since this result would be contrary to the objective of the internal market to facilitate exchanges among the latter."

And "since taxable persons can no longer rely on documents provided by the customs authorities, proof of the supply and of an intra-community acquisition must be produced by another means. While it is certain that the scheme of community exchanges has become more open to fraud, it is no less true that the conditions of proof established by the Member States must respect the fundamental freedoms established by the EC Treaty, such as in particular the free movement of goods." (No. 63).

Also in the Award of the CJEU rendered in Case C-587/10, it can be read that: "55 As to the fact that the supplier presented the tax declaration of the recipient relating to his intra-community acquisition, it is to be recalled that, as was decided in No. 30 of this judgment, except where the conditions concerning the capacity of taxable persons, the transfer of the power to dispose of a good as owner and the physical movement of goods from one Member State to another are concerned, no other condition is to be required for the classification of a transaction as an intra-community supply or acquisition of goods. Thus, in order to benefit from the exemption under Article 28-C, A, paragraph a), first paragraph of the Sixth Directive, it cannot be required of the supplier that he provide elements of proof concerning the taxation of the intra-community acquisition of the goods in question.

56 Furthermore, such declaration cannot be considered to constitute, in itself, conclusive proof of the capacity of taxable person of the recipient, and may only represent an indication (see, by analogy, the judgments Teleos and others, already cited, No. 71, and of 27 September 2007, Twoh International, C-184/05, Coll., p. I-7897, No. 37).

57 Consequently, the fact that the supplier presented or did not present such declaration is likewise not capable of altering the answer to the questions submitted by the court of referral."

In these terms, there is no doubt that, both in light of the normative wording in question and the reading given to it by the jurisprudence of the CJEU, the declaration of intra-community acquisition, or lack thereof, by the recipient, in an intra-community supply of goods, may constitute supplementary proof to demonstrate that the goods did, or did not, actually leave the territory of the Member State of supply, but does not constitute conclusive proof for VAT exemption of an intra-community supply.

Let us cite, once again, Xavier de Basto. And let us opt for an abundant citation, given its relevance to the case at hand. In this context, the Professor states that [18] "...Article 14, a) of the RITI merely establishes the exemption, fixing the two conditions pointed out above relating to the physical circuit of the goods and the identity and identification of the recipient. The exemption, in effect, only operates, according to this provision, as long as the goods are "dispatched or transported by the supplier, by the recipient or on their behalf, from national territory to another Member State intended for the recipient, when the latter is a natural or legal person registered for value added tax purposes in another Member State, who has used the respective VAT identification number to effect the acquisition and is covered there by a scheme for taxation of intra-community acquisitions of goods, without referring to how the dispatch or transport is to be proven.

In this regard, the Portuguese law does not differ from that of several Member States of the Union, where the law merely establishes the two principles concerning the physical circuit of the goods and the identification of the recipient as a taxable person of another Member State.

This is what occurs, for example, in Italy, France and the United Kingdom, where recourse is had to general means of proof, without even administrative guidance on the matter. The exhibition of the contract entered into by the parties or of the insurance contract, transport of goods or the invoice or receipt signed by the recipients are elements that in those States may, among others, serve as means of proof of the dispatch, whose validity ultimately comes to be decided case by case.

In Spain, the Value Added Tax Regulation, in its Article 13, No. 2, while affirming the principle of "free proof" for the dispatch of goods to the Member State of destination, does not fail, however, to distinguish according to whether the transport is carried out by the supplier or on his behalf or by the purchaser or on his behalf. In the first case, Spanish law "recommends" (because the principle of free proof is not precluded) that proof be made by the corresponding transport contract or by invoices issued by the carrier; in the second case, certainly that which may raise more doubts, the law refers as suitable documents, the receipt of receipt issued by the recipient, the duplicate of the invoice with the stamp of the recipient, copy of the transport documents, or any other justification of the operation[19].

As for German law, it is express as to the need to produce documentary proof, clear and easily verifiable ("eindeutig und leicht nachprüfbar"), that the goods were dispatched to the State. The law clarifies which documents are considered proof "clear and verifiable", providing for this a detailed list. On the other hand, it is also incumbent on the entrepreneur to prove, through accounting, the fulfillment of the prerequisites for VAT exemption: "it must result clearly and easily verifiable from the accounting" that the entrepreneur met the said requirements.

1. It should immediately be observed that it would be very contrary to the spirit that presided over the construction of the entire system for application of VAT to intra-community transactions of taxable persons that proof of dispatch or transport outside national territory would become excessively burdensome for economic operators, to the point of placing them in a less favorable position than that which resulted from the previous regime, with exemption for export and taxation for import, both controlled by the customs authorities.

The difficulty of control, by the tax authorities, of the conditions for exemption of intra-community supplies of goods and in particular of the condition concerning the physical circuit of the goods – they must be transported or dispatched outside national territory – have been recognized in various CJEU awards. Those difficulties do not mean, however, that there are no limits to the action of Member States in controlling the conditions for exemption, as will be seen below.

(...).

We can assess the position of the AT through "factual records" that contain the answers to requests for information raised by taxpayers. In these administrative decisions, the position of the administration has been in the direction of not hindering proof of dispatch, in line with its general guidance that general means of proof are acceptable.

The Portuguese administration is thus aware that, having abolished customs controls in intra-community exchanges, it would not be acceptable to introduce requirements which, instead of facilitating such exchanges, would hinder them, thus causing economic operators to lose the advantages of streamlining commerce that the construction of the internal market aimed to achieve. It must be admitted that the scheme of intra-community transactions between taxable persons, introduced in 1993, provides less security to the States than they enjoyed before, with classical fiscal borders, without authorizing them to make disproportionate proof requirements for dispatch. This, as is known, especially when the goods are transported by the purchaser himself, can become difficult, even when the supplier has collected the valid tax number of the recipient.

In one of the binding information rulings submitted for the consideration of the tax services, subject of a decision of 4 August 2004 (case No. 876), consideration was given to whether or not the condition concerning the physical circuit of the goods was met, in a situation in which a taxable person carries out a supply of goods to a customer, a taxable person registered for VAT purposes in another Member State (in this case, Spain), with the goods being transported from the supplier's facilities, by the latter or on his behalf, to a warehouse located in Portugal that serves as a logistics platform for the Spanish taxable person. The request for information was justified given that the supplier, after the delivery, ceases to have any knowledge of the final destination of the merchandise, since the recipient, naturally interested in the operation being VAT-exempt, was willing to issue a declaration stating that the goods are intended for Spain.

In this case, the goods transported by the supplier, duly documented by transport guides and invoice, were not dispatched directly outside national territory; their first destination was a warehouse of the customer located in national territory. By itself, that physical circuit of the goods, according to the administration, would not have fulfilled the legal requirements for exemption, which depends, as we have seen, on proving the departure of goods with destination to a recipient located outside national territory. In the response to the binding information ruling, however, the VAT services admitted, and in our view very justifiably, that if the supplier "is in possession of a document (declaration by the recipient as to his responsibility for transporting the goods destined to the respective Member State) that guarantees that the intra-community supply of goods, although deferred in time, actually takes place, the operation described can still benefit from the exemption". A good application of the principle, a solution, then, that was not confused with the deferment in time of the final transport destined to another Member State of the Union. It was after all a dispatch carried out in two stages, with passage through a warehouse located in Portugal, but in which the final destination outside national territory can be proven.

A similar situation, in which good sense and the principle of not hindering proof with disproportionate requirements likewise prevailed, was that analyzed in the "Factual Record" resulting from Case No. 2475, (decision of 29 September 2011), also in response to a request for binding information.

Also in the case under examination there is a time gap between the moment in which the goods are invoiced to VAT taxable persons in other Member States – the moment at which the supply occurs – and the moment at which the goods will be dispatched to those Member States. In the specific case set out in that "factual record", the goods that are the subject of intra-community supply, invoiced to VAT taxable persons established in other Member States of the European Union, are not directly dispatched to the customer taxable persons of those other EU States, "but are instead delivered, as indicated by these, to companies resident in national territory, VAT taxable persons in Portugal, who will also sell the respective products to the said entities resident in the European Union". In the case, it concerned "cardboard packaging", which Portuguese companies subsequently used to accommodate the merchandise they dispatched to customers, VAT taxable persons in other EU States.

The tax authority, after recalling Community jurisprudence, according to which it must be required that the supplier act in good faith and take reasonable measures within his reach to ensure that the operation he carries out does not lead him to participate in tax fraud (Award Euro Tyre Holding BV, C-430/09, of 16 December 2010), concludes that the supply of the packaging can benefit from the exemption for intra-community supplies of goods, as long as the supplier can document, through declaration by the recipient of the cardboard boxes, that they are intended to be delivered to other Portuguese taxable persons, duly identified, and will be sent by these to other Member States, after packaging. The document of transport of the packaging destined to the national companies and copy of the transport document issued by the packager, when dispatching his products already packaged, to other Member States are, according to the administration, sufficient to guarantee that it is proven that the goods were dispatched outside national territory and therefore the condition for exemption relating to the physical circuit of the goods is met. The other condition of exemption, namely that of collection of the valid VAT number of the recipient, was not in question and is easy to meet, through resort to the VAT number validation system, contained in the VIES.

These two cases illustrate, on the one hand, the insecurity felt by economic operators as to proof of dispatch, especially in cases where transport outside national territory is not carried out by the supplier himself, nor by a third party on his behalf (and therefore the supplier is not in possession of a transport document), and, on the other hand, the proper guidance of the Portuguese tax administration, which, without abandoning control of exemption, requiring that taxable persons act in good faith and not participate in fraud, shows flexibility in accepting proofs of dispatch."

As the author emphasizes, it results namely from the Mecsek-Gabona case, of 6 September 2012, Case No. C-273/11, that "... the tax administration cannot, in principle, require of the supplier, for purposes of exemption, proof that the goods left national territory and entered another Member State of the Union, that is, proof that the goods arrived at their destination."

1.3 Burden of Proof

As is known, proofs serve the function of demonstrating the reality of facts. Now, as Manuel de Andrade teaches us, the onus probandi concerns the facts of the case, being distributed among the parties according to certain criteria, translating itself, for the party to whom it falls, "...in the burden of providing proof of the fact in question, incurring the disadvantageous consequences of having the contrary fact taken as proven, when he omitted or failed to produce that proof; or in the necessity of, in any case, suffering such consequence if the case file does not contain sufficient proof of that fact (brought or not by the same party)."[20]

Regarding the classification of presumptions, the one that distinguishes legal or of law presumptions (praesumptions iuris), established by the law itself binding the judge's freedom of appraisal, stands out from natural – of fact presumptions (praesumptiones facti or hominis), judicial, simple or of experience. For the purposes that now concern us, with respect to the former, a distinction is made between absolute and refutable presumptions and presumptions subject to rebuttal. The former are absolute and irrefutable; the latter admit proof to the contrary. It will, however, be necessary for this purpose to make conclusive proof that consistently and reliably dispels the facts accepted by the presumption.

In Cases No. 735/2015-T, 85/2015-T and 149/2015-T, of the CAAD, referred to by the AT, situations very similar to those in dispute were analyzed as to the framing that is relevant for this purpose. Being the situation similar – sales of intra-community watches not described as such in the transport documents, the AT likewise invoked the lack of verification of the necessary prerequisites for purposes of granting the exemption for intra-community supplies of goods provided for in paragraph a) of No. 1 of Article 14 of the RITI, invoking diverse irregularities and incongruities detected, namely, through the mechanism of administrative cooperation, mentioning there being indications of fraud. In some cases it also concluded that the goods had not been delivered and their final destination did not coincide with that declared.

However, as was concluded in the great majority of the cases analyzed, the AT did not succeed in making conclusive proof of the facts invoked, as provided for in Article 75, No. 1, of the General Tax Law, and it did not appear that the invoked irregularities and incongruities could, in accordance with the provision of No. 2 of the said norm, justify the reversal of the burden of proof that rested on it.

As is known, Article 74 of the LGT provides that "The burden of proof of the facts constituting the rights of the tax administration or of taxpayers falls upon whoever invokes them."

Applying such provision to the present case, and bearing in mind that what is at issue is a right of the taxpayer to a tax exemption, it will be established, it is thought, that the burden of proof of the prerequisites of the right that he seeks to exercise will fall upon him.

However, Article 350, No. 1, of the Civil Code, applicable pursuant to Article 2, paragraph d), of the LGT, provides that "Whoever has a presumption of law in his favor is relieved of proving the fact to which it relates.".

Now, it transpires that Article 75, No. 1, of the LGT, determines that "The declarations of taxpayers presented in accordance with the provisions...

[The document continues but has been truncated due to length. This is a complete arbitral decision with extensive legal reasoning regarding VAT treatment of intra-community supplies.]