VAT Export Exemption Dispute: CAAD Arbitration Case 17/2015-T on Additional VAT Assessments

ARBITRATION DECISION

I – REPORT

On 8 January 2015, A…. , S.A., NIPC …, with head office at …– Km …,… …, …-… …, filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, as amended by article 228 of Law No. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), seeking the declaration of illegality of the acts of additional VAT assessments, relating to the years 2010 and 2011, resulting from the inspection action carried out by the Tax Inspection Services of the Finance Directorate of Santarém, pursuant to Service Orders No. OI2012 … and OI2013 …, specifically, with exclusion of others, the following acts:

To support its request, the Claimant alleges, in summary, that the assessment acts in question are affected by illegality, due to errors in the factual and legal assumptions.

On 9 January 2015, the request for constitution of the arbitral tribunal was accepted and automatically notified to AT (Tax Authority).

The Claimant did not proceed with the appointment of an arbitrator, and therefore, pursuant to the provisions of article 6(2)(a) and article 11(1)(a) of the RJAT, the President of the Deontological Council of CAAD designated the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the assignment within the applicable period.

On 6 March 2015, the parties were notified of these designations, and neither expressed any intention to refuse any of them.

In accordance with the provisions of article 11(1)(c) of the RJAT, the collective Arbitral Tribunal was constituted on 24 March 2015.

On 30 April 2015, the Respondent, duly notified for this purpose, presented its reply, defending itself solely by way of impugning.

Given that, in this case, none of the purposes legally entrusted to it were fulfilled, and taking into account the position taken by the parties, pursuant to the provisions of articles 16(c) and 19 of the RJAT, as well as the principles of procedural economy and prohibition of useless acts, the holding of the meeting referred to in article 18 of the RJAT was waived, as was the presentation of submissions by the parties.

The Arbitral Tribunal is materially competent and is regularly constituted, pursuant to articles 2(1)(a), 5 and 6(1) of the RJAT.

The parties have legal personality and capacity, are legitimate, and are legally represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Order No. 112-A/2011, of 22 March.

The proceedings are not affected by any nullities.

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

Having considered everything, it falls to pronounce

II. DECISION

A. MATTER OF FACT

A.1. Facts Established as Proved

1. The AT assessed VAT and compensatory interest on the Claimant A… in the amounts of 117,091.12€ and 4,347.00€, on the grounds that this tax was missing from the sale of 2 tower cranes which it carried out, under the Equipment Purchase and Sale Contract with Repurchase Option concluded with B… – Engineering and Construction, S.A., NIPC …, on 1 June 2010, with an amendment of 25 April 2013.

2. The said contract contains, among other things, the following clauses:

"Clause 1

OBJECT OF THE CONTRACT

This contract has as its object the purchase, by B… from A…, of two Tower Cranes (…" and "…"), whose detailed description is contained in the Annex, hereinafter referred to as "equipment" and the possible repurchase ("buy-back") of that same equipment by A… from B…, should the latter wish to exercise that right.

Clause 2

PLACE AND DATES OF DELIVERY

The equipment will be delivered at the premises of A… located at …. The delivery of the equipment will take place, at the latest, by 25/06/2010.

Clause 3

PLACE OF USE

As owner, B… may use the equipment in the works it carries out in Portugal or in other countries, namely, in Algeria.(...)

Clause 8

EXPORT WITH RESERVATION OF RETURN

Considering that the purchase of the equipment by B… from A… consists of an intra-Community transaction and that B… intends to carry out an export with reservation of return in order to possibly exercise the repurchase option of the equipment in accordance with clause 9, B… will hire a Customs Agent at the port of the European Community where it will embark the equipment bound for ALGIERS, who will execute the customs procedures on the basis of a Proforma Invoice to be provided by B…, with a view to the said export with reservation of return and the obtaining of the Community document "INF 3" in accordance with article 847 of Regulation (EEC) No. 2454/93 on the Implementation Provisions of the Community Customs Code. This document will certify, in a possible situation of return of the equipment and entry at any port of the European Community, that the same have already been previously subject to Introduction into Free Practice and Consumption in the European Community."

1. The equipment sold consisted of two Tower cranes "…" and "…".

2. These goods were sold for the global price of 606,155.57€ (including spare parts for both cranes), and the following invoices were issued:

i. Invoice 986 of 23/06/2014 for the amount of 257,736.00€ excluding VAT;

ii. Invoice 987 of 23/06/2010 for the amount of 327,719.58€ excluding VAT;

iii. Invoice 1151 of 15/07/2010 for the amount of 20,700.00€ excluding VAT.

1. A…. stated in these invoices "VAT exempt (Article 14, No. 1-A)".

2. A… has in its possession the following customs declarations for export to Algeria, namely:

i. Invoices No. 986 and 987 – Export customs declaration No. …

ii. Invoice No. 1151 – Export customs declaration No. …

1. These documents present in box 37 the Code …, and in box 44 the mention "temporary export", and the mention PS2, appearing identified, as documents supporting the proforma invoice declaration (identified by alphanumeric Code N325): the proforma invoices 13 and 14, of 26/06/2010, in the case of the DAU No. 2010 … and the proforma invoice No. 15, of 15/07/2010, in the case of the DAU 2010 ….

2. Invoices No. 986 and No. 987 both have the issue date of 23.06.2010, while invoice No. 1151 has the issue date of 15.07.2010.

3. The proforma invoices, Nos. 13 and 14, have the issue date of 13.07.2010, while the proforma invoice No. 15, has the issue date of 15.07.2010.

4. With respect to the transmission of goods to Angola, contracted between the Claimant A… and C…, S.A., to which invoices No. 1401 of 07/11/2011 for the amount of 11,000.00€, and No. 1488 of 14/12/2011 for the amount of 20,700.00€ refer - VAT was equally not assessed, and the invoices mention "VAT exempt for export in accordance with Article 14 section a) of CIVA".

5. A… presented to the IT transport guides No. … and ….

6. A…. has in its possession the following Customs Declarations of the clearance of goods in Luanda, namely:

i. Customs Declaration for import No. … of 16-11-2011;

ii. Customs Declaration for import No. … of 22-12-2011

1. A… also possesses:

i. Copy 3 of the Export Declaration (DAU) No. 2011 …, presented to the Customs Authority of Lisbon Airport, on 09/11/2011, with identified in box 44 the commercial invoice (identified by alphanumeric code …) No. 1401, of 07/11/2011, and presenting a total invoiced value of € 11,000.00 (box 22);

ii. Copy 3 of the Export Declaration (DAU) No. 2011 …, presented to the Customs Authority of Lisbon Airport, on 16/12/2011, with identified in box 44 the commercial invoice (identified by alphanumeric code …) No. 1488, of 14/12/2011, and presenting a total invoiced value of € 20,700.00 (box 22).

1. These export declarations were made for the regime of definitive export (identified by numeric code 10.00 in the respective boxes 37), with the certification of exit noted on 11/11/2011 and 17/12/2011, respectively.

2. The AT also considered there to be missing VAT in the operation of transmission of goods titled by Invoice of the Claimant A… No. 1308 of 04/10/2011 for the amount of 50,000.00€, relating to the sale of salvage materials, in favour of the company D…, SL, with head office in …, Spain, in which it states: "VAT exempt – art. 14, section a) RITI", on the grounds that proof of the exit of the goods (salvage materials) from the national territory was not provided.

3. On this matter, it appears from the IT Report, among other things, that:

"We requested from the taxpayer a copy of the transport document that accompanied the goods in question, to which we were informed of the non-existence of that document because those goods never left the Ibergru shipyard, having been in its custody since the date of the invoice.".

1. With respect to this transaction, the Claimant has the following documentation:

i. Invoice No. 1308 dated 04-10-2011;

ii. Transport documents (CMR) No. 73483 of 09/03/2012;

iii. Transport document (CMR) No. 0000053 of 08/11/2012.

1. These transport documents (CMR) have no mention of the said invoice No. 1308, but only two transport guides: the CMR No. 73483 to guide No. 14976, and the CMR No. 0000053 to guide No. 14651.

A.2. Facts Established as Not Proved

With relevance to the decision, there are no facts that should be considered as not proved.

A.3. Reasoning on the Proved and Not Proved Matters of Fact

With respect to the matters of fact, the Tribunal does not need to pronounce itself on everything alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to distinguish the proved facts from those not proved (see article 123(2) of the CPPT and article 607(3) of the CPC, applicable ex vi article 29(1), sections a) and e), of the RJAT).

In this manner, the facts relevant to the judgment of the case are chosen and determined according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) (see previous article 511(1) of the CPC, corresponding to current article 596, applicable ex vi article 29(1), section e), of the RJAT).

Thus, taking into account the positions assumed by the parties, in light of article 110/7 of the CPPT, the documentary evidence and the proceedings file attached to the record, the facts listed above were considered proved, with relevance to the decision.

B. ON THE LAW

In the present proceedings, there are three groups of situations, duly distinguished by the Claimant and the Respondent in the exposition of their respective positions on the matter sub judice.

Let us examine each of them.

a) B… – Engineering and Construction, S.A.

As appears from the facts established as proved, the AT assessed VAT and compensatory interest on the Claimant, in the amounts of 117,091.12€ and 4,347.00€, on the grounds that this tax was missing from the sale of 2 tower cranes which it carried out, under the Equipment Purchase and Sale Contract with Repurchase Option concluded with B… – Engineering and Construction, S.A., NIPC …, on 1 July 2010, with an amendment of 25 April 2013.

The Claimant submits that the operation in question constitutes an export and that, as such, will be exempt from VAT.

In this regard, article 14(1) of CIVA provides:

"The following are exempt from tax:

a) transmissions of goods dispatched or transported outside the Community by the seller or by a third party on his account;»"

Relevantly, article 29 of the same CIVA provides:

"8. The transmissions of goods and the provision of services exempt under sections a) to j), p) and q) of no. 1 of article 14 and under sections b), c), d) and e) of no. 1 of article 15 must be proved through the appropriate customs documents or, if there is no legal obligation for intervention by customs services, declarations issued by the purchaser of the goods or user of the services, indicating the destination to which they will be given.

1. The lack of the supporting documents referred to in the preceding number determines the obligation for the transmitter of the goods or provider of the services to assess the corresponding tax.".

The Claimant contends that, having the "appropriate customs documents", proving the dispatch or transport outside the Community, the transaction in which it was involved should be regarded as exempt.

It is therefore necessary to see, in the first place, whether the customs documents should, or should not, be regarded as "appropriate" for the purpose in question.

By way of preliminary observation, it is considered that the judgment of appropriateness in question should be made in the context of the tax in question (VAT), and not in the customs context. That is, it is not a matter of verifying the regularity of the document to permit the transport of the good in question to an extra-Community territory, but the suitability (the appropriateness) of the same to evidence that the goods object of a particular transaction were "dispatched or transported outside the Community by the seller or by a third party on his account".

It thus becomes vital to verify whether the customs documents presented, in the context of the overall factual frame ascertained, corroborate, beyond any reasonable doubt, the extra-Community destination of the transmitted goods.

Now, in this case, it is considered that this does not occur.

Indeed, and as the AT points out in its reply, the DAUs submitted by the claimant as documents 13 and 14, present in box 37 the Code 2300, which, in accordance with the instructions for completing customs export declarations, corresponds to "temporary export", being used when goods temporarily leave the Customs territory of the Community with a view to their return in their unchanged state, and may thus, upon re-importation, benefit from the regime of "returned goods" provided for in articles 185 to 187 of the CAC.

Correspondingly, in box 44 of the same export declarations, the mention "temporary export" was entered, and the mention PS2 (relating to acceptance of the conditions of identification for possible return of the goods), appearing identified, as documents supporting the declaration, not the commercial invoices, but rather the proforma invoices (identified by alphanumeric Code N325): the proforma invoices 13 and 14, of 26/06/2010, in the case of the DAU No. 2010 … and the proforma invoice No. 15, of 15/07/2010, in the case of the DAU 2010 ….

On the other hand, the contract which, admittedly, frames the operation in question, concluded on 1-6-2010, is conclusive regarding the following aspects:

• The place of delivery of the equipment would be the premises of A… located in Porto Alto;

• The delivery of the equipment would be, at the latest, 25/06/2010;

• As owner, B… could use the equipment in the works it carries out in Portugal or in other countries, namely, in Algeria;

• The purchase of the equipment by B… from A… consists of an intra-Community transaction;

• It was incumbent upon B… to carry out the export.

In this context, the customs documentation presented by the Claimant cannot be regarded as appropriate to demonstrate the occurrence of an export, exempt from VAT.

Indeed, article 74(1) of the LGT provides that "The burden of proof of the facts that are constitutive of the rights of the tax administration or of the taxpayers rests upon whoever invokes them.".

Wishing the Claimant to benefit from an exemption in the context of VAT, it would have to demonstrate, beyond any reasonable doubt, that the goods were dispatched or transported outside the Community by it or by a third party on its account.

In this case, and for what has been said, it is understood that this did not occur.

Thus, the arbitral request must be dismissed in this part.

b) C…, S.A.

Regarding the transmission of goods to Angola, contracted between the Claimant A… and C…, S.A., to which invoices No. 1401 of 07/11/2011 for the amount of 11,000.00€, and No. 1488 of 14/12/2011 for the amount of 20,700.00€ refer, VAT was equally not assessed by the Claimant, in accordance with article 14(a) of CIVA.

On this matter, it was found that the Claimant:

• presented to the IT transport guides No. 15353 and 15389;

• has in its possession the Customs Declarations of the clearance of goods in Luanda;

• possesses Copy 3 of the Export Declaration (DAU) No. 2011 …, presented to the Customs Authority of Lisbon Airport, on 09/11/2011, with identified in box 44 the commercial invoice (identified by alphanumeric code N380) No. 1401, of 07/11/2011, and presenting a total invoiced value of € 11,000.00 (box 22) and Copy 3 of the Export Declaration (DAU) No. 2011 …, presented to the Customs Authority of Lisbon Airport, on 16/12/2011, with identified in box 44 the commercial invoice (identified by alphanumeric code N380) No. 1488, of 14/12/2011, and presenting a total invoiced value of € 20,700.00 (box 22), with such export declarations having been made for the regime of definitive export (identified by numeric code 10.00 in the respective boxes 37), with the certification of exit noted on 11/11/2011 and 17/12/2011, respectively.

Given that the legal framework of this situation is the same as the preceding one, the decisive criterion should also be the same, and therefore it must be verified whether the customs documents presented, in the context of the overall factual frame ascertained, corroborate, beyond any reasonable doubt, the extra-Community destination of the transmitted goods.

In this case, in light of the matters of fact gathered, there should be no doubt that the customs documentation presented by the Claimant should be regarded as appropriate to demonstrate the occurrence of an export, exempt from VAT.

The AT argues in this matter that, when carrying out the inspection procedure that gave rise to the assessments now being impugned, those documents were in the possession of the taxpayer, or were presented by it in the course of that procedure, and therefore the Claimant cannot, in this proceeding, present documents that it should have presented in the inspection procedure, since they are dated 2011, and the Claimant had the opportunity to present them in due time, as it was under the obligation to have those documents in its possession and to present them.

Not indicating the AT – because it does not exist – any legal ground for the intended preclusive effect of the tax inspection procedure, or for the putative obligation, under penalty of that same preclusive effect, of presenting the documentation at that stage (and it does not follow, in any way, either from article 31(2) or article 59, both of the LGT, any preclusive effect), the AT cannot, evidently, be recognized as correct in this part.

The AT further asserts that "the exercise of the right to exemption and deduction of VAT that these operations could confer was dependent on the taxpayer having these documents at the moment when it exercised those rights, which did not occur in the present case."

The position sustained by the AT, moreover, directly violates settled Community case law on the matter.

In this regard, it was written in the Judgment of the CJEU (Third Chamber) of 27 September 2007, handed down in Case C-146/05 (Albert Collée vs Germany):

"Article 28.°C, A, section a), first paragraph, of the Sixth Directive 77/388, relating to the harmonization of the laws of the Member States with respect to taxes on turnover, as amended by Directive 91/680, must be interpreted as meaning that it precludes the tax administration of a Member State from refusing to exempt a value added tax intra-Community supply, which actually took place, solely on the ground that proof of that supply was not provided on time. A national measure making the right to exemption of an intra-Community supply dependent, in essence, on the fulfilment of formal obligations, without taking into account substantive requirements and, in particular, without questioning whether those requirements were satisfied, goes beyond what is necessary to ensure the correct collection of tax. Indeed, transactions must be taxed taking into account their objective characteristics. Now, in determining the intra-Community character of a supply, it follows from the case law of the Court of Justice that if a supply meets the conditions laid down in Article 28.°C, A, section a), first paragraph, of the Sixth Directive, no value added tax is due on that supply. Consequently, given that it is uncertain whether an intra-Community supply was carried out, the principle of fiscal neutrality requires that the exemption from tax be granted if the substantive requirements were satisfied, even if the taxpayers neglected certain formal requirements. This would not be the case only if the breach of these formal requirements had the effect of preventing the proof of the satisfaction of the substantive requirements.

On the other hand, a requirement that the necessary accounting entries must be made immediately after the execution of the transaction, without, however, a specific period being laid down for this effect, may put the principle of legal certainty at risk. Indeed, it is important to allow that, in the accounts of the taxpayers, account can be taken of changes in the classification of an intra-Community supply, subsequent to the execution of that transaction. Such adjustments may, in the concrete case, become necessary due to circumstances beyond the control of those parties. The intra-Community character of a supply should therefore be recognized in the case of a later adjustment of the accounts, provided that the objective criteria on which the concepts that define that operation are based are met."

Thus, and the assumptions of section a) of no. 1 of article 14 of CIVA being demonstrated, the arbitral request must proceed in this part.

c) D… , SL

In this part, the VAT exemption sought by the Claimant is based on article 14(a) of RITI.

This rule provides:

"The following are exempt from tax:

a) Transmissions of goods, effected by a taxable person referred to in section a) of no. 1 of article 2, dispatched or transported by the seller, the purchaser or on their account, from the national territory to another Member State with destination to the purchaser, when the latter is a natural or legal person registered for value added tax purposes in another Member State, who has used the respective identification number to effect the acquisition and is covered thereby by a taxation regime for intra-Community acquisitions of goods;"

With respect to this matter, it was found that the Claimant has Invoice No. 1308 dated 04-10-2011, and transport documents (CMR) No. 73483 of 09/03/2012 and transport document (CMR) No. 0000053 of 08/11/2012.

It was further found that the transport documents (CMR) have no mention of the said invoice No. 1308, but only two transport guides: the CMR No. 73483 to guide No. 14976, and the CMR No. 0000053 to guide No. 14651.

The documentation presented, without grounds appearing to question it – as is not questioned – is regarded as suitable to prove the requirements of the said article 14(a) of RITI.

The AT objects, noting the discrepancy between the dates of the invoice and the transport documents, that "on the date of issue of the invoice, the goods were in national territory and, consequently, subject to the rules of the tax as being an internal operation.".

The AT submits that "Although the law does not establish a period within which the transport of the good to the purchaser should begin or be concluded, for an operation to be qualified as intra-Community, it must be demonstrated that there exists a temporal and material nexus between the delivery of the good in question and the transport thereof, as well as continuity in the unfolding of the operation.", and that "in the case in question, there is no temporal nexus between the issue of the invoice, in October 2011, and the supposed transport of the goods, staged, six and thirteen months later."

As the AT correctly states, "the intra-Community transmission of a good only takes place – and the exemption is only applicable – when the right to dispose of the good, as owner, is transferred to the purchaser, when the supplier demonstrates that that good was transported to another Member State and when, as a result of that transport, the said good has physically left the territory of the Member State of supply."

The AT will not be correct, however, in its judgment that there will not exist "a temporal and material nexus between the delivery of the good in question and the transport thereof, as well as continuity in the unfolding of the operation.". Indeed, it cannot be accepted that the mere passage of a period, per se, is just cause for the exclusion of the right to exemption.

As was stated in the Judgment of the CJEU (Fifth Chamber), of 19 December 2013, handed down in Case C‑563/12 (Bdv Hungary Trading Kft., In Liquidation vs. Hungary):

"Articles 146°, no.°1, and 131° of Directive 2006/112/EC of the Council, of 28 November 2006, relating to the common system of value added tax, must be interpreted as meaning that they preclude a national law according to which, in the context of a delivery for export, goods intended for export outside the European Union must leave the territory of the European Union within a fixed period of three months or 90 days after the date of delivery, if the mere expiry of that period has the consequence of permanently depriving the taxpayer of the exemption of that delivery."

Hence, if the AT intended to challenge the existence of the invoked nexus and continuity, it should have demonstrated more than the mere passage of a time period (even if, in this case, of 6 and 13 months), between the invoicing and the delivery of the goods.

Having stopped at that point, and bearing in mind the Community case law cited, it is understood, also in this part, that the AT is not correct.

C. DECISION

In these terms, this Arbitral Tribunal decides to rule partially in favour of the arbitral request submitted and, in consequence,

a) Annul the VAT and compensatory interest assessments No. 2014 …, 2014 …, 2014 …, 2014 …, in the amounts of, respectively, 2,530.00€, 243.15€, 5,106.00€ and 473.38€;

b) Annul the VAT and compensatory interest assessments No. … and …, in the amounts of 11,500.00€ and 1,141.81€;

c) Maintain the remaining tax acts subject to the present arbitral action;

d) Condemn the parties in the costs of the proceedings, in the amount of €3,672.00, in the proportion of their respective failure, fixing at €480.00 the part charged to the AT and at €3,192.00 the part charged to the Claimant.

D. Value of the Proceedings

The value of the proceedings is fixed at €160,982.76, pursuant to article 97-A(1)(a) of the Code of Tax Procedure and Process, applicable by virtue of sections a) and b) of no. 1 of article 29 of the RJAT and no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The amount of the arbitration fee is fixed at €3,672.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the parties in the proportion of their respective failure, in the terms stated above, pursuant to articles 12(2) and 22(4), both of the RJAT, and article 4(4) of the said Regulation.

Notify.

Lisbon

11 June 2015

The Arbitrator President

(José Pedro Carvalho - Relator)

The Arbitrator Member

(José Luís Ferreira – with dissenting opinion)

The Arbitrator Member

(António Nunes dos Reis)

Dissenting Opinion

I concur with the arbitration decision, although with complementary reasoning with respect to the export operation to Algeria.

I agree with the starting point of the decision: the proof of exit of goods from national territory. It is certain that this requirement is common to the application of the export regime, both for VAT purposes and for purposes of Community Customs Law.

Thus, section a) of no. 1 of article 14 of the VAT Code extends the regime of complete exemption to "transmissions of goods dispatched or transported outside the Community by the seller or by a third party on his account". And no. 1 article 161 of the Community Customs Code (CAC) stipulates that "the export regime permits the exit of Community goods from the customs territory of the Community".

Returning to the VAT regime - the tax contested in the case in question - no. 8 of article 29 of the respective Code determines that the export must be proved "through appropriate customs documents".

And no. 4 of article 161 of the CAC stipulates the principal regime, in accordance with which goods intended for export are the subject of an export declaration at the customs office of exit.

In sum, we verify the complete identity between the VAT Code and the CAC, with respect to both the definition of export as an operation of exit of goods from Community territory and the identification of the documentary means capable of proving that exit.

The appropriate customs document is, par excellence, the Single Administrative Document (DAU).

As the Respondent AT correctly pointed out in its Reply, "provided that the export of the goods has actually taken place and the exporter possesses the mentioned copy of the Single Administrative Document (…) the proof of the exemption provided for in section a) of no. 1 of art. 14 of CIVA is completed".

Copies 3 of two DAUs were presented.

Both documents were validated by the Alverca Customs Authority. Which, for this purpose, returned the copies to the shipper (the Claimant).

From these copies 3, the exit of goods is stated on 26 July 2010.

The Respondent AT alleged that the proforma invoices appear in the DAUs. That the definitive invoices do not identify the proforma invoices, two of them having been issued prior to the proforma invoices.

None of these grounds are valid. The definitive invoices exist, identify the operation and contain the elements required in tax legislation (VAT). It being irrelevant that they mention or do not mention proforma invoices, given that these have no tax validity and do not dispense with the issue of the definitive invoice.

The Respondent AT also alleges that the DAU indicates the regime of temporary export and consequently the return of goods.

This fact is, however, irrelevant to the question under consideration: whether or not the goods were dispatched to Algeria.

Moreover, when the arbitration decision - correctly - focuses the basis of the decision on proof of actual exit of goods. Without considerations regarding the customs regime applied or applicable.

Having arrived here, it remains to know why copies 3 of the DAU - as the principal document for VAT and Community Customs Law purposes - are not suitable to prove the actual exit of goods.

Giving precedence to substance (material truth) over form, I understand that confirmation of receipt of goods in Algeria was lacking. This could be proved by any documentary means capable of demonstrating receipt and customs clearance in the country of destination.

The Claimant did this in the export operations to Angola. The same did not occur with respect to the export to Algeria.

It is not a matter of the issue of proforma invoices. Nor the reference to the temporary export regime. And not even the suitability of copies 3 of the DAU, validated by the Alverca Customs Authority.

But, rather, the degree of certainty regarding the actual exit of goods. On this point, the judgment of the TCAN (case No. 01560/05).

This doubt regarding the actual exit of goods was enlarged by the Claimant itself.

Which presented a purchase and sale contract with a company resident in national territory. However, it issued definitive invoices to an Algerian subsidiary of that company.

The contract mentions an "intra-Community transaction" between the Claimant and the Portuguese customer. Without it being possible to understand the corresponding ground.

It is stated that it will be the customer who will carry out the export to Algeria. That the return of goods to Community territory, by means of the customer's repurchase option with the Claimant, would benefit from the previous introduction into free practice in Community territory.

This would only be comprehensible if there had been a prior taxable transaction between the Claimant and its customer. Which would not occur in the case of direct export by the Claimant to the Algerian subsidiary of its customer.

In sum, there is a manifest divergence between the contract that the Claimant attached to the proceedings and the entire subsequent commercial and documentary circuit.

With doubt remaining regarding the commercial operations actually practiced, the economic agents intervening in the commercial chain and the physical movement of goods.

Strangely, the Claimant clarified nothing. Having even foregone the arbitration hearing and final submissions. When a rigorous additional evidential effort was required of it.

And with doubt remaining regarding the exit of goods from Portugal and arrival of the same in Algeria, the regime of VAT exclusion is not applicable.

(José Luís Ferreira)