CAAD Case 207/2018-T: VAT False Invoices and Proof of Non-Existence of Taxable Event

ARBITRAL DECISION

[1] (see full version in PDF)

The arbitrators Cons. Jorge Lopes de Sousa (arbitrator-president), Dr. Leonardo Marques dos Santos and Dr. Sílvia Oliveira (arbitrator-members) appointed by the Deontological Council of the Centre for Administrative Arbitration to form the Arbitral Tribunal, constituted on 04-07-2018, agree as follows:

1. Report

A..., S.A., legal entity no. ..., with registered office at Rua ..., nº ... - ..., ... – ... (hereinafter referred to as "A..." or "Claimant"), pursuant to the provisions of article 10 of Decree-Law no. 10/2011 of 20 January (hereinafter "RJAT"), requested the constitution of an Arbitral Tribunal with a view to declaring the illegality of the following VAT assessments and compensatory interest:

• Additional VAT assessment no. ... in the total amount of € 20,418.45, plus compensatory interest assessment, issued by the AT with reference to the period of June 2012,

• Additional VAT assessment no. ... in the total amount of € 46,233.96, plus compensatory interest assessment, issued by the AT with reference to the period of July 2012,

• Additional VAT assessment no. ... in the total amount of € 35,742.00, plus compensatory interest assessment, issued by the AT with reference to the period of August 2012,

• Additional VAT assessment no. ... in the total amount of € 113,061.10, plus compensatory interest assessment, issued by the AT with reference to the period of September 2012,

• Additional VAT assessment no. ... in the total amount of € 61,869.08, plus compensatory interest assessment, issued by the AT with reference to the period of October 2012,

• Additional VAT assessment no. ... in the total amount of € 46,413.31, plus compensatory interest assessment, issued by the AT with reference to the period of November 2012,

• Additional VAT assessment no. ... in the total amount of € 86,999.12, plus compensatory interest assessment, issued by the AT with reference to the period of December 2012,

• Additional VAT assessment no. ... in the total amount of € 80,617.14, plus compensatory interest assessment, issued by the AT with reference to the period of January 2013,

• Additional VAT assessment no. ... in the total amount of € 142,132.54, plus compensatory interest assessment, issued by the AT with reference to the period of February 2013,

• Additional VAT assessment no. ... in the total amount of € 85,047.12, plus compensatory interest assessment, issued by the AT with reference to the period of March 2013,

• Additional VAT assessment no. ... in the total amount of € 80,731.65, plus compensatory interest assessment, issued by the AT with reference to the period of April 2013,

• Additional VAT assessment no. ... in the total amount of € 140,915.33, plus compensatory interest assessment, issued by the AT with reference to the period of May 2013,

• Additional VAT assessment no. ... in the total amount of € 101,955.26, plus compensatory interest assessment, issued by the AT with reference to the period of June 2013,

• Additional VAT assessment no. ... in the total amount of € 484,880.67, plus compensatory interest assessment, issued by the AT with reference to the period of July 2013,

• Additional VAT assessment no. ... in the total amount of € 936,704.50, plus compensatory interest assessment, issued by the AT with reference to the period of August 2013,

• Additional VAT assessment no. ... in the total amount of € 393,570.68, plus compensatory interest assessment, issued by the AT with reference to the period of September 2013,

• Additional VAT assessment no. ... in the total amount of € 235,325.95, plus compensatory interest assessment, issued by the AT with reference to the period of October 2013,

• Additional VAT assessment no. ... in the total amount of € 12,336.32, plus compensatory interest assessment, issued by the AT with reference to the period of November 2013,

• Additional VAT assessment no. ... in the total amount of € 32,097.38, plus compensatory interest assessment, issued by the AT with reference to the period of December 2013,

• Additional VAT assessment no. ... in the total amount of €37,995.48, plus compensatory interest assessment, issued by the AT with reference to the period of May 2014.

The Claimant further requests the conviction of the Tax and Customs Authority to payment of indemnity interest.

The Respondent is the TAX AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 24-04-2018.

Pursuant to the provisions of article 6, paragraph 2(a) and article 11, paragraph 1(b) of the RJAT, the Deontological Council appointed as arbitrators the undersigned, who communicated acceptance of the appointment within the applicable deadline.

On 14-06-2018, the parties were duly notified of this appointment and did not express any intention to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11, paragraph 1, items (a) and (b) of the RJAT and articles 6 and 7 of the Deontological Code.

Thus, in compliance with the provisions of article 11, paragraph 1(c) of the RJAT, as amended by article 228 of Law no. 66-B/2012 of 31 December, the collective arbitral tribunal was constituted on 04-07-2018.

The Tax and Customs Authority responded, raising the issue of the incompetence of the Arbitral Tribunal to rule on the request for conviction of the Respondent to payment of VAT refunds and defending the dismissal of the claim.

By order of 02-10-2018, the meeting provided for in article 18 of the RJAT was dispensed with and it was decided that the proceedings would proceed with written submissions.

The Parties submitted submissions, with the Claimant not having commented on the exception raised by the Tax and Customs Authority.

The arbitral tribunal was duly constituted, in accordance with the provisions of articles 2, paragraph 1(a), and 10, paragraph 1, of Decree-Law no. 10/2011 of 20 January.

The Parties are duly represented, enjoy legal personality and capacity, are legitimate and are represented (articles 4 and 10, paragraph 2, of the same instrument and article 1 of Ordinance no. 112-A/2011 of 22 March).

The proceedings do not suffer from defects.

It is important to first address the issue of incompetence raised by the Tax and Customs Authority [article 13 of the Code of Administrative Court Procedure, applicable to tax arbitral proceedings by virtue of the provisions of article 29, paragraph 1(c) of the RJAT].

2. Issue of the Incompetence of the Arbitral Tribunal to Rule on the Request for Conviction of the Respondent to Payment of VAT Refunds Requested in Separate Proceedings

The Claimant requests a declaration of illegality of acts assessing additional VAT and, moreover, "the implementation of the VAT refund as requested in a timely and valid manner by A...".

The Tax and Customs Authority raises the exception of the incompetence of this Arbitral Tribunal to rule on the request for conviction to effect payment of VAT refund requests, which were made in separate proceedings.

The determination of the issue of incompetence is prioritized by virtue of the provisions of article 13 of the Code of Administrative Court Procedure, applicable to tax arbitral proceedings by virtue of the provisions of article 29, paragraph 1(c) of the RJAT.

The Tax and Customs Authority is correct, as the competence of arbitral tribunals operating within CAAD is restricted to acts of the types indicated in article 2 of the RJAT, namely acts of assessment of taxes, self-assessment, withholding at source and payments on account and acts of determination of taxable matter, determination of collectible matter and determination of property values.

Thus, without prejudice to the competence to render convictions to payment of sums that may result from the allowance of a request for annulment of acts of those types (inherent in the competence to render convictions to payment of indemnity interest, which are calculated based on an amount to be refunded), it must be concluded that this Arbitral Tribunal lacks competence to rule on or render convictions to payment of VAT refunds relating to requests that were presented to the Tax and Customs Authority in separate proceedings for that purpose (without prejudice to the competence to rule on the legality of assessments connected with refund requests, should these be issued).

It is therefore declared that this Arbitral Tribunal is materially incompetent to rule on the request for conviction of the Tax and Customs Authority to effect refunds that were requested of it in separate proceedings.

3. Factual Matters

3.1. Proven Facts

• The Claimant has been engaged since October 2009 in the activity of "Precious metals recycling, precious metals trade, precious stones trade and second-hand goods trade" (document no. 2 attached with the request for arbitral ruling, the content of which is hereby reproduced);

• The Claimant maintains organized accounts in accordance with commercial and tax law, adopting the SNC standard;

• The Claimant submitted the periodic VAT declarations relating to the fiscal years 2012 and 2013 (document no. 3 attached with the request for arbitral ruling, the content of which is hereby reproduced);

• The Claimant submitted the periodic income declarations (form 22), with reference to the fiscal years 2012 and 2013 (document no. 5 attached with the request for arbitral ruling, the content of which is hereby reproduced);

• The Claimant submitted the annual simplified business information declarations (IES) for the fiscal years 2012 and 2013 (document no. 5 attached with the request for arbitral ruling, the content of which is hereby reproduced);

• The Claimant submitted on 30-12-2017 a request for special revitalization proceedings, which was admitted and subject to publication on 05-02-2018 (document no. 6, relating to case no. .../17...T8VNG, attached with the request for arbitral ruling, the content of which is hereby reproduced);

• In that case no. .../17...T8VNG, the Tax Administration claimed credits in the amount of € 9,134,943.44, which includes the amounts of the assessment acts that are the subject of this arbitral proceeding, with the exception of that relating to May 2014 (document no. 7 attached with the request for arbitral ruling, the content of which is hereby reproduced);

• Inspection actions were carried out on the Claimant, pursuant to external service orders no. OI2012..., no. OI2013..., no. OI2013..., no. OI2013..., no. OI2017..., no. OI2017... and OI2017... (page 10 of the Tax Inspection Report, hereinafter "RIT", which is part of the administrative proceedings, the content of which is hereby reproduced);

• In the RIT, the following is stated, among other things:

B. REASON, SCOPE AND TEMPORAL SCOPE

B.1 - Reason

The taxable person under analysis was investigated under the inquiry process no. .../12...TELSB which took place in the Central Department of Investigation and Criminal Action - Lisbon, for which an indictment was issued, where it was proven that in the years 2010, 2011, 2012 and 2013 obtained undue patrimonial advantage through the reduction of the collectible matter of CIT and the undue deduction of VAT, by reason of having, among other expenditures, recorded and considered as tax expenditure, purchase invoices that do not correspond to any transactions.

In addition to the reason described, the inspection for the fiscal years 2011 and 2012 is also based on communication from DSIFAE, after they detected that A... had a sharp increase in intra-community transmissions and exports in 2011 and 2012. They also verified incongruence between the values recorded in the annual declaration and those in the attachments O and P of third parties, with divergence from various suppliers who did not declare the sales they made to A...

Also included in A...'s case was an event created by the Finance Department of ..., after they found, pursuant to order DI2013... of 2013-06-14, that B..., Sole Proprietorship Ltd., issued gold sales invoices to A... in May and June 2013, transmissions where the obligation to assess VAT is the responsibility of the purchaser, but which are not shown in the supplier schedules presented by A...

For the reasons described, service orders were issued for the years in which irregularities were detected, in order to effect the necessary corrections. Service orders nos. OI2013..., OI2013... and OI2013... are also based on analysis of the VAT refund requests for periods 2013 04, 2013 05, 2013 06, 2013 07, 2013 08 and 2013 09.

(...)

CHAPTER III - DESCRIPTION OF FACTS AND GROUNDS FOR PURELY ARITHMETIC CORRECTIONS TO TAXABLE MATTER

A - ANALYSIS OF A..., SA'S ACCOUNTING

A.1 - ACTIVITY UNDERTAKEN

The taxable person operates in the market for buying and selling precious metals, with acquisitions made essentially in the domestic market from companies and/or self-employed individuals.

Among its suppliers are: C..., D..., E..., Ltd., F..., G..., H..., I..., J..., K... Ltd., L... Ltd., M... Ltd., N..., O... Ltd., P... Ltd., Q... Ltd., R... Ltd., W... and T..., which, as mentioned in point D.5 2, were investigated in the Inquiry processes .../12...TELSB, or ...12... TELSB.

Sales are made to the domestic market and intra-community market.

The main customer in the domestic market is the company U..., NIPC:..., which acquired from it essentially fine gold.

Intra-community transmissions, non-existent in 2010, assume significant weight in the following years, representing 26%, 73% and 82% of the total declared sales in the years 2011, 2012 and 2013, respectively.

A.2 - PURCHASES SUPPORTED BY FALSE INVOICES

A... declared that it had made purchases from the companies V... Sole Proprietorship, Ltd., K... Sole Proprietorship, Ltd., L..., Ltd., M..., Ltd., J..., W..., Ltd., R..., Ltd., and D..., all of these entities heavily suspected of issuing false invoicing, as stated in the indictment of the inquiry process no. .../12...TELS8, whose characterization we shall now present.

A.2.1 - V..., Ltd.

V... Ltd. is a sole proprietorship limited company, which began operations on 1960-12-28 and ceased operations for VAT purposes on 2009-10-15. It was registered for the activity of "other wholesale trade in consumer goods, not specified", CAE 46494. For VAT purposes, it was classified under the normal quarterly regime and for CIT purposes under the simplified taxation regime until 2009-12-31, being thereafter under the general taxation regime.

It has a tax address at ... street, no. ..., ... in Lisbon, from its beginning until the cessation of operations, the tax address corresponded to the registered office at ..., no. ..., ... in Lisbon.

It submitted all the tax declarations to which it was legally obliged. However, it only declared in the year 2008 a turnover of €5,829.15, and in the years 2009 and 2010, a turnover of €0.00.

Nevertheless, in the years 2008 to 2010, there are entities that declared having made significant amounts of acquisitions from the company V... Ltd., among which A... which in 2010 declared having made acquisitions from it in the amount of €21,372.00, despite V... Ltd. no longer effectively exercising any activity since the year 2008.

With regard to the invoice found in A...'s accounting, listed in point A.2.11 of this chapter, it was issued when V... Ltd. had already ceased its operations and from observation thereof it is concluded that it belongs to a block of invoices requisitioned from the Printing House "X... Ltd.", ordered by Y... and delivered at his jewelry store located at ... street in Lisbon. It is also apparent that, like other invoices issued in the name of V... Ltd., it was filled in with handwriting similar to that of Z..., ex-wife of Y...

The payment of this invoice was recorded accounting by A... as "Cash", with a receipt as supporting document. From the investigation carried out under the inquiry process, no proof of payment of this invoice was found, neither in the accounting nor in the bank accounts held by A..., nor in the bank accounts held or co-held by V... Ltd. or by its managing partner AA... This invoice was allegedly paid in cash.

The managing partner of V... Ltd., AA..., clarified in an interrogation record, a photocopy of which is attached as annex 2, not knowing D... nor the company A..., and never having carried out any business with these.

The person in charge of the printing house, BB..., clarified in turn, in an interrogation record of which a photocopy is attached as annex 3, that these were ordered by Y... and delivered at his jewelry store located at ... street in Lisbon.

It was thus proven that the invoice issued in the name of V... Ltd. to A... does not constitute a real and effective transaction between those two entities, and is therefore false invoicing.

A.2.2 - K... Sole Proprietorship, Ltd.

K... Ltd., with tax address at ... avenue, no. ..., ... in Lisbon, began operations on 2009-09-24, with main CAE - 46480 "wholesale trade in watches and jewelry and jewelry articles" and secondary CAE - 47770 "retail trade in watches and jewelry and jewelry articles in specialized establishments".

It was classified for VAT purposes under the normal quarterly regime and for CIT purposes under the general taxation regime.

From 2011-01-01 onwards, it was classified for VAT purposes under the normal monthly regime.

Its sole partner is J..., to whom management functions were assigned.

K... Ltd. only submitted the CIT income declaration for the year 2009. From that year onwards it submitted no CIT income declaration.

For VAT purposes, it only submitted two declarations relating to the year 2009 and three relating to the year 2010. From the 3rd quarter of 2010 (1009T) onwards, it submitted no periodic VAT declaration.

Nevertheless, between 2009 and 2012, there are several entities that declare significant amounts of acquisitions from K... Ltd., amounts which are entirely inconsistent with K...'s declared situation. Among the entities that declared having made acquisitions from K... Ltd., A... is found, which in the years 2010 and 2011 recorded in its accounting invoices issued in the name of K... Ltd.: the list of which is presented in point A.2.11 of this chapter, in the amounts of €22,608.60 and €2,186,080.00, respectively.

With regard to employees, K... Ltd. does not appear as a payer of income.

K...'s invoicing documents are pre-printed; they were requisitioned from the printing house "X... Ltd., and all were filled in with handwriting similar to that of Y...

In the receipts supporting the accounting records of payments for these invoices is indicated that payment was in cash. However, in relation to the two invoices issued in 2010, both of relatively small value when compared with those issued in 2011, two checks from an account held by A..., in the amounts of €9,232.00 and €13,375.00, were associated, which were drawn at the counter by Y... The photocopy of the second check in A...'s accounting indicates it is payable to M... Ltd., an indication which was crossed out and K... was inserted.

Also from analysis of bank accounts held or co-held by K... Ltd. or by its managing partner J..., no entry with origin in A... was detected in the period when this invoicing was issued.

It results from the above that the invoicing issued in the name of K... Ltd. to A... does not constitute real and effective transactions between those two entities, and is therefore false invoicing.

A.2.3 - L..., Ltd.

L... Ltd. with tax address at ... Street, no. ..., ... in Lisbon, began operations in "retail trade in watches and jewelry articles in specialized establishments", CAE 47770, on 2011-11-15.

It is classified for VAT purposes under the normal quarterly regime, and for CIT purposes under the general taxation regime.

It was constituted with a share capital of €5,000.00 divided into two shares, one of €50.00 belonging to K... Ltd.: and another of €4,950.00 belonging to J..., being the latter designated as manager.

In the years 2011 and 2012, L... Ltd. complied with its disclosure obligations, having submitted the respective CIT income declarations and periodic VAT declarations.

From the reading of those declarations the following items are drawn:

[Tables shown in original]

It indicated in the 2012 IES declaration having as suppliers and customers the following:

[Tables shown in original]

Nevertheless, these declared values, in the years 2011 and 2012, there are entities that declared having made acquisitions from L... Ltd., of values much higher than those declared by L... Ltd.. Among the entities that declared having made acquisitions from L... Ltd., A... is found, which in the years 2011 and 2012 recorded in its accounting invoices issued in the name of L... Ltd., the list of which is presented in point A.2.11 of this chapter, in the amounts of €662,480.00 and €469,700.00, respectively. None of the invoices accounted for by A... was declared by L... Ltd. to the Tax Administration. L...'s invoicing documents are pre-printed and were also requisitioned from the printing house "X... Ltd. and all were filled in with handwriting similar to that of Y...

Payments were made in cash or by check from an account held by A... The two invoices with the lowest total value (no. 57 and no. 58) were paid by two checks in the amounts of €9,884.00 and €24,910.00, one drawn at the "counter" by Y... and the other deposited in an account held by the same Y... These checks were endorsed to him by CC...

Invoice no. 61 has an indication that it was paid by checks no. ..., no. ... and no. ..., in the value of €30,000.00 each. However, in that period, no check with these references and amounts was deducted from any of A...'s bank accounts.

From the above, it is concluded that the invoicing issued in the name of L... Ltd. to A... does not constitute real and effective transactions between those two entities, and is therefore false invoicing.

A.2.4 - M... Jewelry Sole Proprietorship, Ltd.

This is a limited partnership company, which has as its sole partner and manager, Y..., NIF...

In the taxpayer's records, the company's tax address at the date of beginning of operations appears to be ... street, no. ..., ..., ..., having been changed on 2014-01-22 to ... street, nº ..., Lisbon.

According to the AT's information system, it began on 1997-11-03 the activity of Retail Trade in watches and jewelry and jewelry articles in specialized establishments, CAE 47770.

For VAT purposes, it was classified under the normal quarterly regime and for CIT purposes under the general regime.

It proceeded to submit periodic VAT and CIT declarations, presenting no disclosure omissions.

In the year 2011, A... recorded in its purchases two invoices, listed in point A.2.11 of this chapter, issued by the company M... Ltd., concerning fine gold, in the total amount of €332,542.50.

None of these invoices was recognized accounting by M... Ltd.

In A...'s accounting, the payments for these purchases were recorded as "cash", with no proof of such payment being attached. Neither in the accounts of these, nor in M...'s bank accounts, nor in accounts held by Y..., was any financial transaction associated with this invoicing detected.

In M...'s accounting for this fiscal year, no accounting record was detected of purchases of fine gold, nor of gold scrap, nor any purchases of used gold from individuals.

AA..., a collaborator of Y..., said in interrogation, a photocopy of which is attached as annex 2, that he does not remember Y... ever having sold fine gold or having melted gold, with Y...'s monthly sales being about 1 kg of gold artifacts.

From the above, it is concluded that the fine gold invoicing issued in the name of M... Ltd. to A... in the year 2011 does not constitute real and effective transactions between those entities, and is therefore false invoicing.

A.2.5 - J...

J... has tax residence at ... street, no. ..., ...-... in Lisbon. From 2011-07-07 until 2013-09-24, he was registered for the exercise, in self-employed capacity, of the activity of "retail trade in watches and jewelry articles in specialized establishments", CAE 47770, presenting as secondary activity that of "consultants", CSRS 1320. He was also registered for the exercise of activity in self-employed capacity in the periods from 2007-10-12 to 2009-01-28 and 2009-12-15 to 2009-12-31. In these periods he was classified under the normal quarterly regime for VAT purposes and the simplified regime for IRS purposes.

In terms of relationships with tax relevance, J... presents the following:

[Tables shown in original]

In the period between 2008 and 2013, J... did not submit any periodic VAT declaration or IRS income declaration to which he was legally obliged.

Nevertheless, there are entities that declared having made significant amounts of acquisitions from J... in the years 2010 to 2012. Among the entities that declared having made acquisitions from J..., A... is found, which in the years 2010, 2011 and 2012 recorded in its accounting invoices issued in the name of J..., in the amounts of €66,290.00, €1,387,397.15, and €4,101.16, respectively. This invoicing concerns gold scrap and silver scrap, it being verified that in 2011 two invoices indicate it is fine gold.

There is no entity declaring having made any sales to J...

J...'s invoicing documents are pre-printed and these were also requisitioned from the printing house "X... Ltd."

However, the "Cash Sales" referring to the years 2012 are distinguished from the rest by having been requisitioned only in September 2012, and by having a very different layout from the earlier ones.

From viewing these "Cash Sales", the following conclusion is drawn:

Those relating to the years 2010 and 2011 were filled in with handwriting similar to that of Y...;

Whereas those relating to the year 2012 were filled in by J...

Another difference is also verified: the invoiced values in 2012 are much more modest than those invoiced in previous years.

In interrogation, a photocopy of which is attached as annex 4, J... stated that "the only invoices he issued to A..., in the name of J..., in self-employed capacity, total about €15,000.00 in artifacts/silver scrap, made at the end of 2012, delivered at the store of .... ... in Lisbon."

With regard to payments, we verified that those relating to 2010 and 2011 are made in cash or by checks from a bank account held by A..., while payments concerning the invoicing issued in 2012 are made through bank transfer ordered by A... to an account held by J..., at banking institution DD...

With the exception of three, the beneficiary of the said checks was Y..., in the total amount of €468,660.00. Some of these checks were endorsed to him by J... The remaining three checks, dated September 2011, with a total value of €119,979.00, were drawn at the "counter" by J...

It is noted that in the case of J..., the amounts of the means of payment are materially relevant relative to the total invoiced, which suggests that Y..., with the connivance of J..., also used this entity to conceal transactions of gold scrap that would effectively have been his own.

It should be noted that some of those checks, which A... recorded accounting as payment for purchases it made from J..., were filled in payable to M... Ltd...

From the above it is concluded that:

The invoicing of gold scrap and silver scrap, issued in the name of J... to A..., was actually controlled by Y... in the years 2010 and 2011.

The two invoices purporting to document acquisitions of fine gold and which are listed in point A.2.11 of this chapter do not constitute real and effective transactions, and are therefore false invoicing.

A.2.6 - W..., Ltd., (W...)

The company W..., Ltd. has tax address at ... Street, ..., ... and began operations on 2000-10-27. It is registered for the activity of "wholesale trade in watches and jewelry articles" - CAE 46480.

According to the AT's databases, it has as managing partner EE..., NIF..., and as partner FF..., NIF...

In the years 2012 and 2013, it proceeded to submit the periodic VAT declarations to which it was legally obliged, being in a position of tax liability in 2012, but of reduced value, and in a tax credit position in 2013 of considerably higher value.

With respect to CIT, it submitted declaration form 22 and the annual accounting and tax information declaration for the year 2012, with the 2013 declarations being missing.

In the 2012 annual declaration, the company indicated customers and suppliers, with the annual amount of internal operations effected exceeding €25,000.00 (amount including VAT). From the supplier listing, A..., SA and GG... - Sole Proprietorship, Ltd., NIPC..., appear, with the latter appearing as the main supplier.

With regard to 2013, although neither W... nor GG... submitted the annual declaration, it was verified in W...'s accounting that GG... continues to appear in 2013 as its main supplier and A... as its main customer.

After analyzing W...'s purchase and sales invoices, it was concluded that, except for fine gold in 2012, all of the remaining W...'s invoicing to A... is supported by invoicing from the company GG...

The invoicing issued by W... to A... in the years 2012 and 2013 is presented in the following tables.

Supplies from W... to A..., contained in the latter's accounting:

[Tables shown in original]

Since the invoicing issued to A... is supported by invoicing from GG..., it is important to verify the tax situation of the latter: and the following was verified;

This is a company constituted on 2012-03-12, and has as sole partner and manager HH..., NIF..., of Brazilian nationality;

It indicated as registered office .... no. ..., ...;

On the same day of constitution of the company and in the same registry office, HH... constituted as attorney of the company, II..., to whom powers were conferred to "... open accounts in any bank or close the same, move to debit or credit any bank accounts with any Banks or Banking Houses (...), requisition and sign checks, request account balances, being able for that purpose to move any accounts that the principal may have in the said Banks and in general practice and sign everything that is necessary for the proper execution of the mandate", i.e., a power of attorney that grants powers to act on behalf of the company, pursuant to power of attorney of which a photocopy is attached as annex 5.

It is a non-reporting company for tax purposes, so the amounts of purchases and deductible VAT mentioned by W... were not declared by GG...

GG...'s activity was officially ceased by the AT on 2013-12-20, on the grounds that it never exercised any activity, with the registered office being officially changed to the tax address of the managing partner HH...

There is no company or other entity declaring having made any sale/provision of services to GG...

From analysis of the invoices issued by GG... to W..., several irregularities were detected which demonstrate invoicing manipulation, namely:

• At least five types of handwriting are identified;

• Invoices issued on a date prior to the date of requisition at the printing house. Note that in the requisition the date of 2012-08-02 appears, pursuant to photocopy attached as annex 6, in the invoices the date of 08/2012 appears, pursuant to photocopies of two invoices attached as annex 7 as an example, and in the printing house invoice the date of 17/09/2012 appears, pursuant to photocopy attached as annex 8, with invoices being issued with the date of July 2012, pursuant to photocopy of invoices no. 009-A, 0013-A, 0016-A and 0018-A, of which a photocopy is attached as an example in annex 9;

• Several invoices were identified with no correspondence with the sequential numbering criterion and respective chronology. Examples are given: invoice no. 9-A with date of 12/07/2012 and invoice no. 8-A with date of 09/11/2012.

Accounting, all payments related to GG...'s supplies are recorded as cash, that is, allegedly paid in cash, the usual procedure when we are dealing with non-existent operations.

It should be noted that we are talking about a company that invoiced over 30 million euros solely in favor of W... However, from the numerous banking documentation analyzed under the inquiry process .../12... TELSB, no means of payment associated with these transactions were detected.

In an interrogation record, a photocopy of which is attached as annex 10, JJ... confirms that he intervened in the deed of incorporation of GG..., HH... receiving financial consideration, while JJ... paid the costs of that same deed. He added further that he is unaware of any invoicing from GG..., as he sold all invoices to W... and KK... (nephew of W...), invoices which had previously been handed to him by LL... loose, without any sequential order and from several series, with the objective of the defendant creating capital.

The day immediately following the incorporation of the company, HH... returned to Brazil.

The invoices from GG... to W... allowed the latter to deduct VAT in substantial amounts, thereby making W... constantly a VAT creditor, despite GG... not delivering that same VAT to the State's coffers and companies situated downstream deducting the VAT contained in invoices issued by W..., including A..., which requested VAT refunds.

From the above, it is concluded that GG... is a non-existent company, constituting merely an invoice sales transaction, an expedient created so that downstream operators can conceal various fraud schemes and even request substantial VAT amounts from the State.

It was thus demonstrated that W...'s invoicing to A... could never be supported by invoicing from GG..., being clearly false invoicing, so the amounts invoiced by W... in the year 2012 in the total amount of €1,785,812.24 to which VAT in the total amount of €410,736.82 is added and in the year 2013 in the total amount of €15,773,061.72 to which VAT in the total amount of €1,625,780.81 is added cannot be accepted for tax purposes.

A.2.7 - R... Sole Proprietorship, Ltd.

The company R..., Ltd., has registered office at ... Street, no. ..., ... in ... and is registered for the exercise of the activity of "manufacture of jewelry and other jewelry articles" - CAE: 32122.

From the beginning of its activity on 2001-05-16 until the present date, it has been classified for VAT purposes under the normal quarterly regime and for CIT purposes under the general taxation regime.

It has as sole partner and manager R..., NIF...

Since the year 2007 it has submitted no declaration relating to VAT or CIT, the same applying to the annual accounting and tax information declaration. However, from consultation with the AT's database, it was found that there are companies that declared being customers of the company R..., Ltd., among which A..., which in 2013 declared having made acquisitions from it in the amount of €4,475,117.00. Analyzed invoicing that supports this value, it appears to relate to gold scrap 800 for recycling, in which VAT was assessed in the amount of €836,810.28 which R... did not pay and which A... deducted and requested refunds for.

There are no companies mentioning having made sales to R..., Ltd. In social security, there is no worker registered in the company's service, nor did the company submit any payroll declarations.

Additionally, in this invoicing, unit prices were manipulated, so that the invoices would contain VAT, allowing A... to deduct it, i.e., the unit price without VAT is considerably lower than the international market gold quotation, being only superior to the market value if we add VAT to the unit price without VAT. In this way, the invoice issuer receives a higher amount, appropriating the respective VAT that is not delivered to the State's coffers. In turn, A..., in addition to gaining market share by attracting more suppliers, also requests refunds from the State.

It happens that in gold scrap, the assessment of VAT is the responsibility of the purchaser, and the reverse charge rule must be applied. In the inquiry process where the data were collected, it was demonstrated that both A... and R..., Ltd. were aware that this practice was illegal, but despite this, they used this expedient from which both benefited to the detriment of the State.

Apart from the behavior described showing that the invoicing from R..., Ltd. to A... does not correspond to genuine transactions, the managing partner himself recognized in an interrogation record, a photocopy of which is attached as annex 11, that all invoices from R..., Ltd. are false because the company sold nothing.

It was thus demonstrated that all invoicing from R..., Ltd. to A... is entirely false, so the amounts of €3,638,306.93 and €836,810.28, for CIT and VAT purposes, respectively, cannot be accepted for tax purposes.

A.2.8 - Sales by D... as a Private Individual

The following are recorded in A...'s accounting, sales made by D..., in the capacity of a private individual, in the following quantities and amounts:

[Tables shown in original]

Attached as annex 12 is a photocopy of the documents listed above.

In addition to sales to A..., sales also appear in the accounting of C... NIF ... (mother-in-law of D... and whose business he also managed) purchases from D... Considering the sales to these two entities, D... allegedly sold 385,200.83 grs of precious metals and 383.51 carats of diamonds and gems, in the amount of €966,688.73, in the capacity of a private individual, which is completely implausible. It is not credible that D... holds in his personal assets such a high quantity of precious stones and metals reaching a value close to €1,000,000.00.

Furthermore, as is better shown in the following section, two declarations were recorded in A...'s accounting which purport to prove that D... made a loan to A... through contributions in kind, in this case 20,000 grs of fine gold, which only reinforces the conclusion that the sales declared by him could not have occurred.

With respect to payment, the supposed sales were paid by check or bank transfer, as shown in the following table:

[Tables shown in original]

However, of the €166,155.20 paid by A..., it was verified that €133,000.00 had MM... as final beneficiary, either through endorsement of checks (in the case of the €86,000.00 check) or through the issuance of checks from D...'s accounts immediately after the bank transfers made by A...

As for the €15,950.00 check issued by A... payable to D..., it was endorsed by the latter to NN..., an employee of OO... Sole Proprietorship Ltd., one of A...'s suppliers. Thus, D... was not the beneficiary of this check, but rather a third party with no direct relationship to him, so we can only conclude the falsity of the transaction.

The combination of all the facts gathered demonstrates that the purchase invoices issued in the name of D... are fictitious documents and served to document simulated transactions that generated a fictional cost in A...'s accounts.

These acquisitions from D... were accounted for as tax expenses, having thereby been deducted for CIT purposes and influenced the determination of taxable profit in the amounts discriminated in the following table:

[Tables shown in original]

A.2.9 - Loans from D..., PP... and QQ...

It was also found that A... accounted for four documents, a photocopy of which is attached as annex 13, where the company declares having received loans in fine gold from managing partners D..., PP... and QQ..., in the following quantities and amounts:

[Tables shown in original]

These declarations are signed by the parties and supposedly attest that the three shareholders made loans to A... through contributions in kind, in this case a loan made in fine gold. This transaction was accounted for as a purchase and consequently represents a cost borne by the company in the year 2013.

It also means that A... assumed a debt to its shareholders in the amount of €997,000.00.

From this it follows that the fine gold transferred by D... and PP... would be part of their personal assets, and thus should be added to the quantities and values of precious metals that were mentioned in the previous sections. Let us see:

"In the capacity of a private individual, D... sold 385,200.83 grs of precious metals and 383.51 carats of diamonds and gems for the total value of €966,688.73. Taking into account the quantities of fine gold allegedly transferred to A..., D... had in his possession 405,120.83 grs of precious metals and 383.51 carats of diamonds and gems, in a total value of €1,676,688.73;

In the capacity of a private individual, PP... sold at least 31,914.50 grs of precious metals for a total value of €82,681.35. Adding the quantities of fine gold allegedly transferred to A..., PP... held at least 36,914.50 grs of precious metals, in a total value of €247,681.35;

With respect to QQ..., he transferred 4 kgs of fine gold to A... for the value of €122,000.00, quantities and values quite significant to be held by a private individual.

If we observe the values declared between 1996 and 2013 for IRS purposes, we verify that QQ..., D... and PP... did not earn sufficient income to allow them to have in their personal assets the quantities of fine gold allegedly loaned to A...:

[Tables shown in original]

Thus, it is implausible that D..., PP... and QQ... possess in their personal assets such a high quantity of precious stones and metals reaching a total global value exceeding €2,000,000.00.

Note the declarations issued by A..., finding that three of them are dated 2013-10-08 and relate to the transfer of fine gold by each of the three shareholders, but at completely different unit prices. Now, having the transaction been carried out on the same day and being the same good in question, one cannot understand the existence of such significant divergences in unit prices ranging from €30.50/gr to €33.00/gr.

Observe the fine gold quotation in the international market on the same day:

[Tables shown in original]

Taking into account the commercial margins that A... must guarantee to obtain profit, only the alleged transfer by QQ... at a unit price of €30.50/gr provides obtaining some profit margin to A... The transfer by PP..., if real, would clearly result in a loss for the company.

Note that on that same day A... is making valuations with its customer RR..., at unit prices of €31.17, €31.18 and €31.13.

Now, the existence of notable divergences in unit prices practiced in the alleged loans, operations that occur on the same day, combined with the fact that A... obtains losses with these transactions leads us to conclude that this transaction has no economic rationality whatsoever.

It should be noted that similar declarations are filed in the accounting folders that were never accounted for. These declarations are dated 08/07/2013 and therein PP... and QQ... transfer 2,000.00 grs and 1,300.00 grs of fine gold for the values of €62,000.00 and €40,300.00, respectively, being duly signed by the parties.

This situation clearly demonstrates the ease of elaborating declarations which in this case were not accounted for because the reason for their conception ceased to exist.

All the facts previously described only corroborate the conclusions drawn in this report regarding the sales by D... as a private individual, i.e., these declarations were also forged with the purpose of generating a fictional cost accounted for by the company with the purpose of inflating costs and thus obtaining patrimonial advantage.

Although in this case there is no immediate financial consideration, the company assumed a debt to the shareholders from which they will have to be reimbursed.

Thus, we are dealing with fictional costs that were accounted for as tax expenses, having thereby been deducted for CIT purposes and influenced the determination of taxable profit in the amount of €997,000.00.

A.2.10 - Conclusion

In summary, strong evidence was gathered pointing to the fact that A..., in the years 2010 to 2012, used invoicing issued in the name of V... Ltd., K... Ltd., J..., L... Ltd. and M... Ltd., which does not constitute real and effective transactions between these entities, with Y... being responsible for the issuance of this "false paper".

Furthermore, the facts previously described also demonstrate that J... is controlled by Y..., serving as a "shell company" for issuing invoices regarding transactions actually carried out by Y... with A...

The facts exposed also demonstrate that the sales carried out by D... in the capacity of a private individual to A..., as well as the loans made by the latter, by PP... and QQ..., are in fact simulated operations which had the intent to generate a fictional cost in the company and thereby inflate the declared costs and reduce the declared fiscal result.

It was also demonstrated that W... is a "pass-through company" and simultaneously issuer of "false paper", which together with the entities R..., Ltd. and T... (to which we will refer in point A.3 of this chapter) allowed A... to request high amounts of VAT from the State, without that same VAT being handed over by the issuers to the State's coffers.

Such fraudulent conducts seriously harmed the State's coffers, as will now be demonstrated.

A.2.11 - Calculation of False Invoicing Amount

The following tables present the breakdown of invoices that have been proven to be false.

Year 2010

(...)

Year 2011

(...)

Year 2012

(...)

Year 2013

(...)

A.3 - UNDUE DEDUCTION OF VAT

A.3.1. THE SPECIFICITY OF THE TAX CLASSIFICATION OF INVESTMENT GOLD

With the publication of Decree-Law 362 of 16 September, the legislature transposed into the national legal order Directive no. 98/80/CE of the Council of 12 October 1998, which supplements the common VAT system and establishes a special scheme applicable to investment gold.

The preamble of the said directive states that "Whereas experience demonstrates that, with respect to most deliveries of gold with a fineness above a certain value, the application of tax payment by the customer can help prevent tax fraud and, at the same time, reduce the financial burdens of operations; justifying that Member States be authorized to use this mechanism".

In other words, the aforementioned reference corresponds to saying that "In order to prevent tax fraud and, at the same time, reduce the financial burdens associated with deliveries of gold with a fineness above a certain value, it is justified to authorize Member States to designate the purchaser as the tax debtor".

As results from the preamble of the said decree-law, it was created with the objective of preventing fraud and tax evasion and avoiding pre-financing of the tax, having established that for deliveries of investment gold when there has been an option for taxation, and for deliveries of gold in the form of raw material or semi-processed products, the debtor is the purchaser of the goods, provided that he has the right to full or partial deduction of the tax.

In this way, gold that complies with the characteristics provided for in article 2 of the said decree, which is classified as investment gold, is exempt from VAT, whatever the destination given to the gold or the nature of the purchaser (taxable person or private individual), as provided in article 3 of the same instrument.

Still according to article 10, in transactions of gold in the form of raw material or semi-processed products with fineness equal to or above 325 thousandths, VAT is due by the purchaser, the latter being responsible for its assessment while simultaneously having the right to deduction.

That is, the application of the instrument is not restricted solely to the concept of fine gold or raw gold, as it also encompasses gold in the form of raw material.

In order to understand such a definition of gold in the form of raw material, we must interpret the letter of the law, its context and the purpose of that same provision.

Thus, with respect to the letter of the Law, the concept of gold in the form of raw material should be interpreted as encompassing any material that is composed in part by gold.

In its broad concept, any material is considered which is intended for later transformation, or, in other words, is capable of encompassing raw gold, gold as a pure metal or any material partially composed of gold.

As to its context, the provision applies only to gold in the form of raw material with a fineness equal to or above 325 thousandths.

Regarding the objectives of the regulation, no others are envisioned other than to prevent fraud and reduce financial burdens. In fact, the text of the directive itself states that "...experience demonstrates that, with respect to most deliveries of gold with a fineness above a certain value, the application of tax payment by the customer can help prevent tax fraud and, at the same time, reduce the financial burdens of operations...".

And, in fact, if the purchaser of the object is defined as the VAT debtor, the tax debt and the right to deduction coincide in the same person, so the tax administration is not obliged to return any amount or consider credits for the purchaser.

All the more so, the risk of VAT fraud is tendentially higher the more valuable and the easier to transport the goods commercialized are.

Thus, if we look at the wording of article 10 of decree-law 362/99 of 16.09, we conclude that there are no reasons to include in the concept of gold in the form of raw material only fine gold when the provision simultaneously encompasses semi-processed products with fineness equal to or above 325 thousandths. On the other hand, the requirement with respect to minimum fineness should not only cover semi-processed products, but also gold in the form of raw material as provided by the instrument itself. And lastly, it is not compatible with the function of this provision to differentiate, in the case of gold in the form of raw material, for example between alloys and gold scrap, insofar as by virtue of the decisive fineness for the value, the vulnerability to fraud in transactions with objects containing gold will not depend on this fact.

Therefore, taking into account the aforementioned objectives of the regulation, "gold in the form of raw material" should not encompass any material presenting a gold fineness of equal to or above 325 thousandths, but only the material which does not constitute a final product and which, therefore, is not suitable for delivery to final consumers who are not taxable persons.

In this sense, the concept of "gold in the form of raw material" encompasses any material which is intended for later transformation, and not for final consumption, but which, however, does not constitute any "transformed product", provided it presents a gold fineness equal to or above 325 thousandths.

Similarly, in accordance with the common sense inherent in the concepts of "gold in the form of raw material" and "semi-processed products", these should be distinguished according to the degree of processing to obtain the final product, being that in this sense "gold in the form of raw material" designates objects in which only the gold contained - regardless of the form it presents in each case - is relevant for the following production process, whereas "semi-processed products" encompasses objects that have already undergone a transformation with a view to the final product.

Circular order 30014 of 13.01.2000 from the VAT Services Directorate also clarified the classification of gold that is not investment gold stating that "Transmissions, intra-community acquisitions and imports of gold that is not investment gold are subject to taxation according to the rules of the VAT Code and the VAT Implementation Rules. However, in transmissions of gold in the form of raw material (bar, plate, granules, solder, etc.) or semi-processed products (for example wire, tape, tube that are not gold artifacts) with fineness equal to or above 325 thousandths, the payment of the tax and other obligations arising from these operations (except those provided for in article 12) must be fulfilled by the purchaser when this is a taxable person referred to in paragraph 1(a) of article 2 of the VAT Code, who has the right to full or partial deduction of the tax".

That is, if any doubts existed as to the wording of article 10 of Decree-Law 362/99 of 16 September, this circular order clarified such situation regarding the minimum fineness requirement of gold equal to or above 325 thousandths, enumerating for purposes of illustration types of materials that fall within the concepts of "gold in the form of raw material" and "semi-processed products", in the sense of a broad interpretation, that is, capable of encompassing any material partially composed of gold, including gold intended for melting and subsequent transformation into fine gold, commonly called "gold scrap" or "gold scrap",

This is, therefore, a special law (lex specialis) relating to the specific products mentioned therein.

It should also be noted that the former Assay Office Regulations provided in paragraph 2 of article 30 that "...'scrap' shall mean the totality of articles destroyed irreparably...", that is gold scrap are gold objects that have lost their identity by having been destroyed irreparably, with no possibility of recovery as artifacts.

Also noteworthy is what is mentioned in the Legal Regime of Jewelry and Assay Offices, hereinafter RJOC, which in article 3(m) defines "New by-product resulting from used precious metal articles" as the precious metal article not transformed, in the form of a bar, sheet or other precious metal article resulting from the melting of used precious metal articles acquired from a private individual. That is, this definition also aligns with the broad interpretation previously referred to regarding "gold in the form of raw material", namely being capable of encompassing any material partially composed of gold, regardless of whether it is acquired from a private individual or a tax subject, in the sense of being defined as a by-product.

Commonly, according to the real market concepts in this sector, it is in this situation that gold scrap fits, which is intended for melting and to be reused in manufacture or to be sold in the state of assayed bar or as fine gold, with the RJOC also accepting this concept, the sense of raw material.

Thus, in summary, if it is gold in the form of bar or plate, with weights accepted by the gold markets with a fineness equal to or above 995 thousandths, such an operation will be exempt from VAT. However, the seller may exercise the renunciation provided that the purchaser is a taxable person, the latter being responsible for the assessment while simultaneously having the right to deduction.

If it is gold in the form of raw material or semi-processed products, with fineness equal to or above 325 thousandths, the person responsible for assessment is always the purchaser, provided he is a taxable person.

A.3.2 - UNDUE DEDUCTION OF VAT ASSESSED BY T...

In the year 2013, A... accounted for purchases supported by invoices from T... in the value of €3,420,091.00. This amount includes VAT in the value of €352,557.42 which A... deducted, with €88,633.97 relating to acquisitions of fine silver and €263,923.45 to acquisitions of gold scrap, merchandise in which the assessment of VAT is the responsibility of the purchaser, and the reverse charge rule must be applied.

It was demonstrated in the inquiry process where the data were collected that both A... and T... were aware that VAT assessment on scrap was contrary to law, as evidenced by the documents, a photocopy of which is attached as annex 14, where VAT is considered as part of profit, but despite this they used this expedient from which both benefited to the detriment of the State. T... by invoicing with the intention of not delivering VAT to the State considered that VAT was included in the price which allowed it to sell at a price above the market, although the unit price without VAT is below the international market quotation. A... deducted VAT and requested refunds and by buying at a price below the official quotation allowed it to increase its market share.

T... proceeded to submit the periodic VAT declarations for the 3rd and 4th quarters of 2013 on 2014-04-28, that is outside the periods stipulated by the VAT Code, where it determined VAT to pay to the State, but the tax assessed in the VAT declarations submitted by T... was not paid.

The VAT assessed by T... for A... in the amount of €263,923.45, concerning sales of gold scrap does not therefore confer the right to deduction as it concerns a fraud practiced by the managers of T... and A...

B - OMISSION OF PURCHASES

B.1 - P..., Ltd., NIPC...

In the analysis carried out of A...'s accounting, specifically concerning its current account with supplier W..., Ltd., hereinafter referred to as W..., NIPC..., it was found that payments of purchases made by A... from the company W... are made essentially by checks from bank account no. ..., held by A..., based at SS..., with payments also being made by checks from account no. ..., held by A..., based at TT...

The checks subsequently identified and a photocopy of which is attached as annex 15, although filled in payable to the company W..., were endorsed and subsequently drawn at the counter by the managing partner of P..., Ltd., W... or by employees/collaborators of the same, UU..., VV..., WW... and YY...

However, in the year 2013, no invoicing issued by P... Ltd. to the company W... was found which could justify the amounts received. Nevertheless, the company W... made payments through endorsement of checks issued payable to it by A... which benefited S... and its employees in the total amount of €1,082,000.00.

These facts demonstrate that the company W... appears here as merely an intermediary, that is a "pass-through company", thereby allowing A... to distance itself from its actual supplier, which in reality was P..., Ltd., and not W...

In the same sense point the declarations of KK..., which in an interrogation record, a photocopy of which is attached as annex 16, stated that during that period he collected gold in Penafiel to be delivered by EE... to A... and that P... Ltd. sold gold and silver to A... through the company W... in a total of about 8 to 10 kg per week until P... Ltd. began selling to the company ZZ...

These facts strongly suggest the existence of sales from P... Ltd. to the company A... that were not declared to the Tax Administration.

B.2 - Q... - SOLE PROPRIETORSHIP, Ltd., NIPC...

In the analysis carried out of A...'s accounting, specifically concerning its current account with supplier W..., it was found that payments of purchases made by A... from the company W... are made essentially by checks from bank account no. ..., held by A..., based at SS...

The checks subsequently identified and a photocopy of which is attached as annex 17, although filled in payable to the company W..., were endorsed and subsequently drawn at the counter by the managing partner of Q..., Ltd., AAA... or by an employee of the latter, BBB..., who frequently made check withdrawals for Q..., Ltd.:

[Tables shown in original]

Similarly to what was reported in the previous section concerning P..., Ltd., no invoicing issued by Q... Ltd. to the company W... was found in the year 2013. However, the company W... made payments through endorsement of checks issued payable to it which benefited AAA... and its employee in the total amount of € 345,000.00.

These facts demonstrate that here also the company W... appears as merely an intermediary, that is a "pass-through company", thereby allowing A... to distance itself from its actual supplier, which in reality was Q..., Ltd., and not W...

In the same sense point the declarations of KK..., which in an interrogation record, a photocopy of which is attached as annex 16, stated that during that period he collected gold in Penafiel to be delivered by EE... to A...

These facts strongly suggest the existence of sales from Q... Ltd. to the company A... that were not declared and which should have been disclosed to the Tax Administration.

(...)

C.2 - FOR VAT PURPOSES

The VAT deducted on the false invoices to which we refer in point A.2 of this report will be subject to correction as paragraph 3 of article 19 of the VAT Code provides that tax resulting from a simulated operation cannot be deducted.

Also non-deductible is the VAT mentioned in the invoices from T... for the reasons set out in point A.3 of chapter III of this report as it was demonstrated to be a fraud.

The VAT induly deducted with respect to that invoicing totaled the amounts discriminated in the following table:

[Tables shown in original]

D - ANALYSIS OF REFUNDS

As a consequence of the corrections made in the scope of the present service orders regarding deducted VAT, the refunds for periods 2013 06 and 2013 07 will be entirely denied and those for periods 2013 04 2013 05 2013 08 and 2013 09 will be partially allowed as shown in the following tables, in which it is also evidenced whether the taxpayer had or did not have the right to refunds for periods 2012 06 to 2013 03.

[Tables shown in original]

(...)

VIII - RIGHT TO BE HEARD - GROUNDS

(...)

Thus, considering the arguments invoked in the petition, we must state the following:

1. Pursuant to paragraph 7 of article 60 of the General Tax Law, only new facts raised by the taxpayer in the exercise of his right to be heard are mandatorily taken into account;

2. The taxpayer does not invoke any new facts nor attaches any elements or means of evidence capable of being subject to examination.

3. However in observance of the duty to provide grounds imposed by article 77 of the General Tax Law, it is incumbent upon us to comment on the petition presented so the following analysis of the contested factuality will be made.

• It has no basis in claiming that the report suffers from wrong premises by having disregarded purchases supported by invoices from V..., Ltd., K... Sole Proprietorship, Ltd., L..., Ltd. and M... Sole Proprietorship, Ltd., the proof produced of their falsity it says is frail, downplaying the elements of evidence gathered in the process .../12...TELSB under which the taxpayer was investigated as contrary to what is alleged it was clearly demonstrated in the report draft characterizing these entities that it is false invoicing and as such cannot be accepted as an expense under article 23 of the Corporate Income Tax Code (CIRC).

• It cannot claim that the invoice from V..., Ltd. issued on a date when it had already ceased operations is considered real, information to which A... had access in the Tax Portal.

• The statements by AA..., managing partner of V..., Ltd., also leave no doubt that this entity never conducted any business with A... nor knows D... as mentioned in point A.2.1 of the report.

• Also it cannot be said that the proof is frail when it is stated that the person responsible for issuing this false paper is Y... as this clearly results from the elements gathered in the printing house where the invoices were printed namely the statements of the managing partner of the printing house BB... who stated that they were ordered by Y... and delivered to his jewelry store at ... street in Lisbon.

• Also not to be disregarded is the handwriting in which they were printed which is similar to that of Y...'s ex-wife.

• Contrary to what is stated in the right to be heard A... cannot say that it negotiated with the entities that presented it with the invoices and that it did not know that those entities presented it with false paper as it never negotiated with any representative of V... Ltd. but rather with Y... who could easily confirm that he had no formal relationship to that company. Also no means of payment was identified having been recorded in A...'s accounting as having been made in cash.

• The same conclusion is drawn from the invoices from K..., Ltd. and L..., Ltd. not only because the invoices in question presented irregularities in their disclosure situation as the right to be heard refers but also because the invoices were ordered at the printing house by Y... filled in with handwriting similar to his and he was the beneficiary of the checks issued for payment of the same one of which was even issued payable to his order having subsequently been erased and the company name indicated as shown in the photocopy of the check in A...'s accounting.

• Also in this situation A... cannot allege that it negotiated with the entity that delivered the goods to it together with the invoice as it could easily verify that the person in charge of those entities was J... hereinafter identified as J... who stated that he had only conducted business with A... in late 2012 and while self-employed having transmitted to him at that time silver scrap of diminished value about €15,000.00.

• Although A... in the right to be heard does not directly contest the disregard of invoices from J... in the capacity of self-employed as it contests the totality of the corrections made we also maintain relative to these the conclusions contained in the report draft when we state that the invoicing of gold scrap and silver scrap in the name of J... in 2010 and 2011 was controlled by Y... who used this entity to conceal scrap transactions that were effectively his own.

• Acquisitions of fine gold documented with