Process: 222/2015-T

Date: December 8, 2015

Tax Type: IVA

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 222/2015-T) addresses the VAT exemption requirements for intra-community supplies of goods under Article 14(a) of the Portuguese VAT Code (RITI). The dispute centers on an additional VAT assessment of €1,842.30 for the third quarter of 2012, relating to a sale of watches valued at €8,010.00 to a Latvian company (B…). The Portuguese Tax Authority denied the VAT exemption, arguing that the taxpayer failed to adequately prove the goods departed Portuguese territory. The main evidentiary issue involved a shipping note from the transport company (C…) that described the shipment as 'documents' rather than 'watches.' The claimant explained this discrepancy was due to insurance policy requirements that excluded coverage for shipments explicitly identifying jewelry, watches, or similar valuable items. The claimant provided supporting evidence including the shipping note, bank transfer proof of payment, and online tracking confirmation of delivery. The Tax Authority challenged this evidence, citing discrepancies between the claimant's declarations and information obtained from Latvian tax authorities regarding transactions with B… during the first half of 2012. The Authority suggested B… might be merely a documentary intermediary, questioning whether the goods actually left Portugal. The Respondent also requested suspension of proceedings to refer questions to the Court of Justice of the European Union regarding the proportionality principle and the burden of proof placed on sellers in intra-community transactions. This case illustrates the strict evidentiary standards applied to VAT exemptions for intra-community supplies and the taxpayer's burden to demonstrate compliance with all legal requirements, particularly proof of cross-border transport.

Full Decision

ARBITRAL DECISION

Claimant: A… – …, Lda.

Respondent: Tax and Customs Authority

I. REPORT

A… - …, Lda., Tax Identification Number …, with registered office at Avenida …, no. …, in Lisbon (hereinafter referred to only as the Claimant), filed, on 30-03-2015, a request for constitution of a single arbitral tribunal, under the terms of Articles 2 and 10 of Decree-Law no. 10/2011 of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as LFATM), in conjunction with Article 99(a) of the Portuguese Tax Procedure Code (PTPC), in which the Tax and Customs Authority is the Respondent (hereinafter referred to only as the Respondent).

The Claimant seeks a declaration of illegality of the dismissal order of the hierarchical appeal filed against the decision rendered on the administrative complaint submitted with reference to the additional VAT assessment for the third quarter of 2012, in the amount of €1,842.30, and the consequent annulment of the said assessment act, with refund to the Claimant of the tax improperly paid plus compensatory interest. The Claimant bases its claim on the fact that the VAT assessed relates to an intra-Community supply of goods exempt under Article 14(a) of the VAT Code (VATC) because the respective requirements are satisfied.

The request for constitution of the arbitral tribunal was accepted by the President of the CAAD on 31-03-2015 and notified to the Tax and Customs Authority on the same date.

Pursuant to Article 6(2)(a) and Article 11(1)(b) of the LFATM, the Ethics Council appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the assignment within the applicable period.

On 26-05-2015, the parties were duly notified of this appointment and did not manifest any intention to challenge the appointment of the arbitrator, in accordance with Article 11(1)(a) and (b) of the LFATM and Articles 6 and 7 of the Ethics Code.

In accordance with the provisions of Article 11(1)(c) of the LFATM, the single arbitral tribunal was constituted on 11-06-2015.

Notified to submit its response to the Claimant's claim, the Respondent filed its response on 26-06-2015, alleging that the Claimant had not properly proven compliance with the requirements for VAT exemption in intra-Community supplies of goods referred to in Article 14(a) of the VATC. Furthermore, from the investigations carried out by the Respondent itself, there were strong indications that the goods in question had not been dispatched or transported out of national territory by the seller or the purchaser. Additionally, the Respondent requested suspension of the present proceedings for referral to the Court of Justice of the European Union ("CJEU") of two specific questions relating to the interpretation and application of Articles 131 and 138 of Directive 2006/112/EC of 28 November.

Following the scheduling of the meeting under Article 18 of the LFATM for examination of witnesses listed by the Claimant, the latter amended the list of witnesses and requested, under Article 421(1) of the Code of Civil Procedure (CCP), the use of evidence produced in case no. 753/2014-T which was heard by the CAAD.

The Respondent did not object to this use, so the request to use the evidence was granted and the production of witness evidence in these proceedings was dispensed with.

The parties submitted their respective summary statements, reproducing the arguments in their pleadings.

By request of 19-11-2015, the Respondent submitted to the proceedings a copy of the decision rendered in the arbitral case no. 164/2015-T in which the Claimant was a party.

The Arbitral Tribunal was properly constituted and is competent.

The parties have legal personality and capacity and are legitimate (Articles 4 and 10(2) of the same instrument and Article 1 of Regulatory Decree no. 112-A/2011 of 22 March).

The proceedings do not suffer from nullities.

II. CLAIMANT'S CLAIM

The Claimant contests the decisions dismissing the hierarchical appeal and the administrative complaint rendered regarding the additional VAT assessment for the period 2012-09, in the amount of €1,842.30 on the grounds that they are based on an incorrect interpretation of the law and analysis of the evidence produced.

In effect, following an inspection carried out by the Tax Authority, it concluded that the exemption under Article 14(a) of the VATC should not be applied to the sale that the Claimant made to B…, on 18-07-2012, formalized by invoice no. 2012…, in the amount of €8,010.00, because the Claimant had not properly proven the departure of the goods from national territory.

The Claimant contests this position, submitting the shipping note no. …, from C…, dated 18-07-2012, and proof of the bank transfer made by the purchasing entity for payment of the price. By consulting the transporter's website, it was possible to confirm receipt of the shipment in question.

The fact that the shipping note contains in its description the reference to "documents" rather than watches is justified by an insurer's requirement that excludes from coverage under the policy any losses occurring in shipment of articles if the shipping note contains any reference to jewelry, silverware, watches, etc.

In the Claimant's view, sufficient and adequate evidence was produced for purposes of applying the exemption under Article 14(a) of the VATC, and therefore the dismissal decisions rendered by the Respondent are unfounded. Consequently, the additional VAT assessment contested should be annulled, with the Claimant entitled to refund of the tax improperly paid, plus compensatory interest, under the legal terms.

III. RESPONDENT'S RESPONSE

The Respondent contests the Claimant's claim on the grounds that adequate and sufficient evidence was not provided of compliance with the legal requirements for the exemption provided for in Article 14(a) of the VATC, since the shipping note provided contains the reference to "documents" rather than watches. This fact prevents the Tax Authority from concluding on the veracity of the declaration made by the Claimant.

To this fact, is added the fact that, from information obtained from the tax authorities of Latvia regarding operations carried out in the first half of 2012 between the Claimant and B…, the Respondent found there to be discrepancies between the operations declared by the Claimant and the operations declared by the purchaser, with no identical data provided. These discrepancies suggest that B… was nothing more than a documentary intermediary, with it remaining to be demonstrated that the goods indicated in the invoice in question actually left national territory. In the Respondent's view, the burden of proving the departure of goods from national territory rests with the Claimant, and since it has not fulfilled this, it must be concluded that the requirements necessary for applying the said exemption have not been satisfied. In this regard, the Claimant's claim will not be upheld, and the dismissal orders and the additional VAT assessment contested should be maintained.

Without prejudice to the challenge, and considering that the decision to be rendered in these proceedings involves the application of Community law (Articles 131 and 138 of Directive no. 2006/112/EC of 28 November), the Respondent further considers that these proceedings should be suspended so that a request for preliminary ruling to the CJEU may be made regarding the following questions:

"1) Can it be considered that an administrative practice respects the principle of proportionality when it places on the seller the burden of proving the authenticity of transport documents and the receipt of goods when the transport documents for the goods do not identify the goods that are the subject of the supply?

  1. Can it be considered that an administrative practice respects the principle of proportionality when it places on the seller the burden of proving the effectiveness of intra-Community supplies when there is contradiction between the documentation presented by the different operators (seller and purchaser)?"

IV. FACTUAL MATTERS

A. Proven Facts

The following facts are considered proven:

  1. The Claimant is a commercial company that engages, among other activities, in the import, export, and trade of jewelry and watchmaking articles.

  2. For purposes of corporate income tax, the Claimant is subject to the general taxation regime with organized accounting.

  3. For purposes of VAT, the Claimant is registered in the normal monthly periodicity regime as of 2012-01-01.

  4. In 2012, the Claimant carried out various intra-Community supplies of goods without levying VAT, under Article 14(a) of the VATC.

  5. The Claimant had, for all exports declared by it, shipping notes from carriers C… and "boarding passes".

  6. On 18-07-2012, the Claimant issued invoice no. 2012…, in the amount of €8,010.00, in the name of B…, with address at …, …/… – …, Riga, in Latvia, without levying VAT.

  7. B… was, at that date, a VAT taxable person registered as such in Latvia.

  8. For purposes of invoice issuance, B… indicated the VAT tax identification number from Latvia (LV…).

  9. For purposes of proving the requirements for the exemption under Article 14 of the VATC, the Claimant presented the shipping note no. …, from C…, of 18-07-2015.

  10. In the description of shipping note no. …, from C…, there is reference to "Documents".

  11. By consulting the website page of C…, it is confirmed that the shipment sent with the identified shipping note was delivered.

  12. The billing address corresponds to the address indicated in the C… shipping note presented by the Claimant.

  13. B… made payment on 13-07-2012 by bank transfer from its account in ... Bank, in Riga, Latvia.

  14. Following a VAT refund request with reference to period 2012-09, a partial external inspection was carried out on the Claimant, under service order no. OI2012….

  15. For control of the exemptions practiced by the Claimant in intra-Community supplies of goods, the cooperation of the tax authorities of the Member States where the purchasers reside was requested.

  16. Following information gathered, the Tax Authority concluded that:

"With regard to supplies to customers D… (France), E… (Italy) and F… (United Kingdom), no facts were reported that could call into question the exemption applied by A… in the respective intra-Community supplies of goods;

Regarding supplies to customer G… (Spain), we are not at this date in possession of elements that could call into question the exemption invoked in the operations, although the operations raise founded doubts as to the actual circuit of the goods;

With regard to supplies to customer B… (Latvia), facts were reported that may be summarized as follows:

· There is no evidence that the watches entered the Member State that appears in the transport document presented;

· The client company is nothing more than a documentary intermediary."

  1. The information gathered from the tax authorities of Latvia regarding operations between the Claimant and B… concern the first half of 2012.

  2. During the first half of 2012, the Claimant sold to B… a total of 35 watches for the total value of €246,405.00.

  3. B… declared to the tax authorities of Latvia the acquisition of only 3 watches for the total value of €80,257.00.

  4. Following the inspection procedure, the Tax Authority made the additional VAT assessment no. 2013 … for period 2012-09.

  5. From the account reconciliation statement no. 2013 … made following the identified additional assessment, tax payable in the amount of €1,842.30 was determined.

  6. The tax was paid on 04-09-2013.

  7. The Claimant filed an administrative complaint of the additional VAT assessment on 21-11-2013.

  8. The administrative complaint was dismissed by order of 31-12-2013.

  9. The Claimant filed a hierarchical appeal of the decision dismissing the administrative complaint.

  10. The hierarchical appeal was dismissed by decision notified to the Claimant on 29-12-2014.

B. Unproven Facts

It was not proven that the description "Documents" inserted in the shipping note no. …, from C…, was made because mention of "watches" was prohibited under the insurance contract entered into by the Claimant.

It was also not proven that the inspection services requested the cooperation of the tax authorities of Latvia for purposes of validating the intra-Community supply of goods identified in the proceedings, contrary to what had been done for operations carried out in the first half of 2012.

C. Grounds for the Factual Matters

The factual matters given as proven are based on the documentary evidence presented in these proceedings and on the testimony of witness H…, by reproduction of the testimony given in arbitral case no. 753/2014-T.

V. MATTERS TO BE DECIDED

From all the above, it falls to this tribunal to decide the following matters:

a) Preliminary ruling to the CJEU;

b) Illegality of the VAT assessment act for period 2012-09.

a) Preliminary Ruling to the CJEU

In its response, the Respondent concludes that the decision to be rendered in these proceedings requires a combined interpretation of Articles 131 and 138(1) of Directive no. 2006/112/EC of 28 November, and therefore proposes submission to the CJEU, by way of preliminary ruling, of the following questions:

"1) Can it be considered that an administrative practice respects the principle of proportionality when it places on the seller the burden of proving the authenticity of transport documents and the receipt of goods when the transport documents for the goods do not identify the goods that are the subject of the supply?

  1. Can it be considered that an administrative practice respects the principle of proportionality when it places on the seller the burden of proving the effectiveness of intra-Community supplies when there is contradiction between the documentation presented by the different operators (seller and purchaser)?"

On these requests for preliminary ruling, this tribunal subscribes to the dismissal decision rendered in arbitral case no. 164/2015-T, in which the Respondent had made an equal claim.

In effect, as stated in point 7 of the recommendations to national courts concerning the presentation of cases for preliminary ruling (2012/C 338/01) of the CJEU[1], "the role of the Court in the context of a preliminary ruling proceeding is to interpret Union law or to rule on its validity, and not to apply that law to the factual situation underlying the main proceedings. That role falls to the national judge and, therefore, it is not for the Court to rule on questions of fact raised in the context of the dispute in the main proceedings or on any disagreements as to the interpretation or application of the rules of national law."

In this regard, a request for preliminary ruling is necessary whenever, the decision to be rendered not being subject to judicial appeal under internal law, there are interpretative doubts concerning Union law, except when jurisprudence on the matter already exists and the correct way to interpret the legal rule in question is unequivocal (see point 12 of the recommendation).

Consequently, "a national court may, in particular when it considers itself sufficiently informed by the case-law of the Court, decide itself on the correct interpretation of Union law and its application to the factual situation of which it is aware" (see point 13 of the recommendation).

This is precisely the present case, insofar as this tribunal considers that regarding Community legislation and internal legislation on the matter, there are no interpretative doubts that have not been clarified by jurisprudence of the CJEU. As stated in the arbitral decision rendered in case no. 164/2015-T: "In effect, having weighed the facts and the exact sense, tenor and scope of the Community provisions and of the jurisprudence already emanated by the CJEU, it appears clear that they are sufficiently clear to resolve with reasonable clarity the questions at issue. In effect, such jurisprudence is so clear that it enabled the TA to issue equally clear Administrative Doctrine – Circular Notice 30009 of 10.12.2009 – in which appears an understanding that appropriately reflects the established jurisprudence, which is, furthermore, confirmed in the attached Opinion."

Moreover, in this tribunal's view, even if the preliminary ruling request were granted, the answers that would be given by the CJEU to the questions raised by the Respondent would not have an impact on the final decision to be rendered in these proceedings.

In effect, even if the CJEU were to consider that the administrative practices described by the Respondent in the questions raised respect the principles of legal certainty and proportionality, the truth is that such a conclusion would not have direct relevance in the present case, since the decision to be taken by this tribunal will always have to be based on national law and the internal rules regarding the allocation of the burden of proof. And it is in light of national law that one must ascertain whether such an administrative practice – even if in conformity with Community law – is binding on the deciding judicial body and whether or not it is legal under national law.

Hence, being the rules for allocation of the burden of proof those that derive from the law and not those that administrative practice determines, it is irrelevant to ascertain whether such administrative practice is or is not in conformity with Community law. Even if one were to conclude that such administrative practice would be in conformity with Community law, it would not, by itself, be binding on this tribunal, which will always have to decide in accordance with the law as constituted and not according to administrative practices.

In light of all the above, it is understood that the requested preliminary ruling to the CJEU is not justified, and this tribunal is in full position to rule on the subject matter of the dispute, and therefore the request presented by the Respondent is dismissed.

b) Illegality of the VAT Assessment Act for Period 2012-09

The matter to be decided in these proceedings concerns the application of the exemption provided for in Article 14(a) of the VATC to the sale made by the Claimant to B…, on 18-07-2012, and formalized in invoice no. 2012…, in the amount of €8,010.00.

Pursuant to the said rule, intra-Community supplies of goods made by a taxable person resident in Portugal shall be exempt from VAT provided that:

  • the purchaser is also a taxable person for VAT purposes resident in another Member State;

  • the purchaser, as a taxable person in another Member State, uses its respective identification number to carry out the acquisition; and

  • the goods are actually dispatched or transported to another Member State for delivery to the purchaser.

In dispute in these proceedings is, precisely, the verification of this last requirement. In the Respondent's view, the Claimant failed to demonstrate the actual departure of the goods invoiced from national territory given that the shipping note presented does not refer to "watches" but rather "documents". Since it is incumbent upon the Claimant to prove, specifically, the verification of the requirements of Article 14(a) of the VATC, the insufficiency of the evidence presented will imply the non-application of such exemption, and there will be legal grounds for the assessment made by the Respondent.

Let us then examine:

Given that the issue concerns the taxpayer's right to a tax exemption, it is settled that, under Article 74 of the General Tax Law (GTL), the burden of proving the requirements of the right it seeks to exercise rests with it.

This rule must, however, be combined with the provision of Article 350(1) of the Civil Code, applicable by cross-reference from Article 2 of the GTL, which provides that "Whoever has a legal presumption in their favor is excused from proving the fact to which it leads"; and with what is provided in Article 344(1) of the Civil Code, which establishes the reversal of the burden of proof whenever there is a legal presumption.

This is subscribed to by Diogo Leite de Campos, Benjamin Silva Rodrigues and Jorge Lopes de Sousa[2], in arguing that the rule of Article 74(1) of the GTL "(…) should be set aside in situations in which the reversal of the burden of proof indicated in Article 344 operates, that is, 'when there is a legal presumption, exemption or release from proof'".

In the tax field, Article 75(1) of the GTL provides that "The statements of taxpayers presented in accordance with the terms provided by law, as well as the data and determinations entered in their accounting or records are presumed to be true and made in good faith, when such accounting or records are organized in accordance with commercial and tax legislation, without prejudice to the other requirements on which the deductibility of expenses depends."

As the aforementioned authors state[3], this is a legal presumption that it will be incumbent upon the Tax Authority to rebut, so that "(…) if the tax administration does not demonstrate the lack of correspondence between the content of such statements, accounting or records and reality, their content will have to be considered as true," dispensing the taxpayer from its proof, under the said Article 350 of the Civil Code.

The setting aside of this legal presumption will operate in two ways:

(i) by demonstration of any of the circumstances listed in Article 75(2) of the GTL; or

(ii) by its rebuttal, through evidence to the contrary of what is presumed, under Article 350(2) of the Civil Code.

Applying these rules to the concrete case, we must presume as true and made in good faith both the periodic VAT statements presented, in accordance with the law, by the Claimant, in which it determined the refund initially requested, and the data entered in its accounting, including invoicing, in which no divergences were identified by the Respondent.

Having reached this point, it is now necessary to analyze whether the inspection services and the Respondent managed to set aside such legal presumption of veracity, either through Article 75(2) of the GTL or through evidence to the contrary, under Article 350(2) of the Civil Code.

Analyzing Article 75(2) of the GTL, we conclude that there would be grounds for setting aside the legal presumption of veracity of the Claimant's statements (i) the existence of omissions, errors, inaccuracies, or founded indications that the Claimant's accounting and statements do not reflect the actual situation, or (ii) the lack of cooperation on the part of the Claimant in clarifying its tax situation.

Regarding the possible lack of cooperation by the Claimant, it is considered that the Claimant responded, to the extent possible, to the cooperation requests made by the Tax Authority, making available the documentation in its possession regarding the operation in question. It should also be noted that, at no time, the Respondent invoked or alleged the lack of cooperation on the part of the Claimant. Therefore, it cannot be concluded that the presumption of Article 75(1) of the GTL should be set aside on this ground.

It remains, then, to analyze the matter in light of Article 75(2)(a) of the GTL and Article 350(2) of the Civil Code.

Now, on the basis of the documentation provided, it is concluded that, regarding the operation at issue in the present proceedings, the Tax Authority did not determine anything concrete that contradicts the Claimant's version, or indicates the lack of veracity of the Claimant's accounting and the VAT statements submitted on the basis of that same accounting.

In effect, the information obtained from the tax authorities of Latvia regarding the operations carried out between the Claimant and B… concerns the first half of 2012, and therefore the discrepancies detected between the information provided by the Claimant and the tax authorities of Latvia are limited to that same period. And even regarding these discrepancies, it was left undemonstrated – not resulting from either the inspection report or any of the information supporting the dismissal of the administrative complaint and the hierarchical appeal – who had the correct and complete information: whether the Claimant or the Latvian authorities.

Moreover, in this tribunal's view, this invoked discrepancy between the data collected from the Claimant's accounting – and entirely reported to the Tax Authority – and the information provided by the Latvian tax authorities, according to which the purchaser did not declare the entirety of the operations declared by the Claimant, cannot, by itself, constitute a founded indication that the Claimant's accounting does not reflect the actual situation.

And it cannot, first of all, because the decision to declare or not declare an intra-Community acquisition is determined exclusively by the purchaser, with the Claimant being completely unrelated thereto, in terms of not being able to determine or control it. On the other hand, even if this were not the case, it would still have to be concluded that, at most, such a circumstance would be only capable of generating a situation of doubt which, in order to have tax-legal relevance, would have to be combined with other factual elements.

In fact, and applying the reasoning of the Teleos judgment (case C-409/04), it should be understood that the fact that the purchaser did not submit a declaration to the tax authorities of the Member State of destination regarding the intra-Community acquisition may constitute supplementary evidence to demonstrate that the goods did not actually leave the territory of the Member State of dispatch, but does not constitute decisive evidence for purposes of refusing to apply the VAT exemption in intra-Community supplies of goods.

Also, in the CJEU judgment rendered in case C-587/10, it was stated that "with the exception of the conditions relating to the status of taxable persons, the transfer of the right to dispose of a good as an owner and the physical movement of goods from one Member State to another, no other condition can be imposed to qualify an operation as intra-Community supply or acquisition of goods."

In this regard, and contrary to what the Respondent contended, the fact that, in the first half of 2012, the purchasing entity of the watches sold by the Claimant did not declare such intra-Community acquisitions of goods in Latvia is not sufficiently relevant evidence that the Claimant's accounting deserves credibility.

And it will not be sufficient evidence because, as the Respondent itself determined, the Claimant complied with all its accounting and tax obligations, having demonstrated that (i) all sales made were properly declared, (ii) documents evidencing the departure of the merchandise from national territory were collected, (iii) the price was actually paid by the purchaser by bank transfer from an account held by it. The entire financial and formal circuit and all the records made by the Claimant allow one to conclude, precisely, the veracity of what was declared by the Claimant.

Moreover, the intra-Community supply of goods questioned by the Tax Authority occurred in July 2012, that is, in the second half of 2012. And regarding this period, the Tax Authority did not collect any information from the tax authorities of Latvia that would confirm or deny the Claimant's declaration.

Regarding the operation that is the subject matter of these proceedings, the only ground invoked by the Respondent for refusing to apply the exemption of Article 14(a) of the VATC results solely and only from the fact that the shipping note contains the description "documents" and not "watches".

Now, for purposes of applying the VAT exemption peculiar to intra-Community supplies of goods, it was incumbent upon the Claimant to demonstrate that:

  • the purchaser was a taxable person for VAT purposes resident in another Member State;

  • the purchaser used its respective identification number to carry out the acquisition; and

  • the goods were actually dispatched or transported to another Member State for delivery to the purchaser.

As we have seen, in the case at hand, there being no doubts whatsoever regarding the first two requirements, and the third being, in the first instance, presumptively proven (by application of Article 75(1) of the GTL), it would then have been incumbent upon the Respondent to demonstrate some fact preventing that presumption or simply to rebut it.

Having analyzed the matter, it is the understanding of this tribunal that, in the concrete case, the answer to both questions should be negative.

As stated above, no concrete information was received from the tax authorities of Latvia regarding this operation, and therefore there is no official information here – even though foreign and subject to evidence to the contrary, under Article 76(4) of the GTL – that would deny or confirm the Claimant's data.

Moreover, the important emphasis for being faced with an intra-Community supply (ICS) from the perspective of the supplier is, in addition to ensuring that the purchaser is a taxable person for VAT engaged in intra-Community operations, to ensure that the goods physically left the Member State of the taxable person who is the supplier.

Thus, in order to rebut the presumption of veracity of the intra-Community supply regularly declared, it would be necessary to demonstrate that the goods did not leave national territory, which the Respondent failed to do – which would have been incumbent upon it, under Article 344 of the Civil Code. In compliance with the rules for allocation of the burden of proof, the Respondent cannot be satisfied with an alleged absence of proof of the departure of the goods from national territory by the Claimant resulting from the fact that the transport document presented by the Claimant contains the description "Documents" and not watches.

In this respect, note that the Claimant had, for all exports declared by it, shipping notes from carriers C… or "boarding passes", and it has not been demonstrated that among the situations that were accepted by the Tax Authority (transactions with D…, E… and F...), there do not exist others in which the description contained in those documents was precisely the same ("Documents").

Furthermore, demonstrative of the non-decisiveness of this circumstance is the fact that, resulting as it does from the documentation presented by the Claimant, the Tax Authority concluded that such was not sufficient to, from the outset, proceed with the additional tax assessment.

On the other hand, and no concrete cause having been proven for the insertion of the reference in question, such fact, unaccompanied by any other circumstances indicating that the shipment in question did not actually occur, is not accorded decisive relevance in this regard, all the more so that, as the Claimant suggests, if the sense of its actions had been to create a façade of shipment, it would certainly have ensured that the documentation in question contained the reference "watches" and not "documents".

Now, insofar as, following the foregoing grounds, it was the Respondent who, in order to prevent the triggering of the presumption enshrined in Article 75(1) of the GTL, was burdened with the task of gathering "founded indications" that the accounting and statement presented by the Claimant, at issue in the present proceedings, did not reflect its real taxable matter, the doubt in question would necessarily have to be resolved against the position of that authority.

In this manner, and for all the above reasons, it is concluded that the presumption enshrined in Article 75(1) of the GTL applies in the case, relating to the periodic statement and accounting entries presented by the Claimant regarding the intra-Community supply of goods at issue, and therefore, under Article 350(1) of the Civil Code, it is dispensed from proving the factual requirements thereof, which are presumed.

It is thus not possible, in summary, to validate the judgment that we are dealing with concrete objective facts, based on concrete evidence, which according to the rules of common experience are strongly indicative of the existence of the tax fact. Hence, for all the above reasons, it must be considered that the Respondent did not fulfill the burden of demonstrating facts preventing the presumption of veracity of the Claimant's statement, enshrined in Article 75(1) of the GTL.

In the same manner, it must be concluded that the elements contributed by the Tax Authority are insufficient to rebut the presumption of veracity formed in accordance with the said rule, and therefore, in this part, the arbitral claim must be judged upheld.

VI. DECISION

In accordance with the above, this Arbitral Tribunal decides to uphold entirely the Claimant's claim and, consequently, to annul the orders dismissing the hierarchical appeal and the administrative complaint regarding the additional VAT assessment for period 2012-09, as well as the additional assessment no. 2013 …, which gave rise to the tax debt in the amount of €1,842.30, condemning the Respondent to refund the tax improperly paid, plus compensatory interest, counted from the date of payment until the date of its effectuation.

Value of the case: In accordance with Article 306(2) of the CCP and Article 97-A(1)(a) of the PTPC and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €1,842.30.

Costs: Under Article 22(4) of the LFATM, the amount of costs is fixed at €306.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Let this arbitral decision be registered and notified to the parties.

Lisbon, 08-12-2015

The Single Arbitrator

(Maria Forte Vaz)

[1] Published in the Official Journal of the European Union, C 338/1, of 06-11-2012.

[2] See General Tax Law Annotated and Commented, 4th Edition, 2012, Encontro da Escrita Publisher, p. 656.

[3] Cited work, p. 664.

Frequently Asked Questions

Automatically Created

What are the conditions for VAT exemption on intra-community supplies of goods under Article 14(a) of the RITI?
Under Article 14(a) of the RITI (Portuguese VAT Code), intra-community supplies of goods are exempt from VAT when specific conditions are met: (1) the goods must be dispatched or transported from Portuguese territory to another EU Member State; (2) the transport must be carried out by or on behalf of the seller or the purchaser; (3) the purchaser must be a taxable person or non-taxable legal entity registered for VAT purposes in another Member State; and (4) the seller must obtain and maintain adequate documentary evidence proving the goods physically left Portuguese territory and arrived in the destination Member State. The burden of proof rests entirely on the seller to demonstrate all these requirements are satisfied.
Can the Portuguese Tax Authority deny a VAT exemption for intra-community transactions based on transport evidence?
Yes, the Portuguese Tax Authority can deny a VAT exemption for intra-community transactions based on insufficient or questionable transport evidence. In this case, the Authority rejected the exemption because the shipping note described the cargo as 'documents' rather than 'watches,' creating doubt about what was actually transported. Additionally, discrepancies between the seller's declarations and information from foreign tax authorities can justify denial. The Tax Authority requires clear, consistent, and verifiable documentation proving the specific goods invoiced actually departed Portugal. Taxpayers bear the burden of providing documentary evidence that withstands administrative scrutiny, including transport documents accurately describing the goods, proof of delivery, and consistency with the purchaser's declarations in the destination country.
How does CAAD arbitration handle disputes over additional VAT assessments on intra-community supplies?
CAAD (Administrative Arbitration Centre) handles disputes over additional VAT assessments on intra-community supplies through a structured arbitration process. The taxpayer files a request for constitution of an arbitral tribunal challenging the assessment and any dismissed administrative appeals. A single arbitrator or panel is appointed to hear the case. Both parties submit pleadings—the claimant presenting evidence of compliance with VAT exemption requirements, and the Tax Authority explaining why the exemption was denied. The tribunal may hear witness testimony, review documentary evidence, and consider legal arguments regarding interpretation of EU and Portuguese VAT law. In complex cases involving EU law interpretation, the proceedings may be suspended for preliminary rulings from the Court of Justice of the European Union. The arbitral tribunal issues a binding decision that can annul the assessment if the taxpayer proves entitlement to the exemption.
What evidence is required to prove that goods were transported outside Portugal for intra-community VAT exemption purposes?
To prove goods were transported outside Portugal for intra-community VAT exemption purposes, taxpayers must provide comprehensive documentary evidence including: (1) commercial transport documents (CMR notes, bills of lading, or courier shipping receipts) clearly identifying the goods, sender, recipient, origin, and destination; (2) proof of delivery or receipt acknowledgment in the destination Member State; (3) correspondence or contracts with the purchaser confirming the cross-border transaction; (4) evidence of payment from the foreign purchaser; and (5) consistency with the purchaser's intra-community acquisition declarations in their Member State. The transport documents must accurately describe the actual goods being shipped—generic descriptions like 'documents' are problematic. The evidence package must create a coherent, verifiable audit trail demonstrating the specific goods invoiced physically left Portugal and arrived at the stated EU destination. Additional corroborating evidence such as online tracking records strengthens the proof.
Is a taxpayer entitled to compensatory interest after annulment of an unlawful additional VAT assessment?
Yes, a taxpayer is entitled to compensatory interest after annulment of an unlawful additional VAT assessment under Portuguese tax law. When an arbitral tribunal or court annuls a tax assessment as illegal, the Tax Authority must refund the improperly collected tax amount. Portuguese tax procedure law (CPPT) provides that compensatory interest accrues on tax amounts paid in excess or unduly collected from the date of payment until the date of refund. The interest compensates the taxpayer for the State's use of funds to which it was not entitled. The rate and calculation method are established by law. In this case, the claimant specifically requested refund of the €1,842.30 tax amount plus compensatory interest as part of the relief sought, which is standard practice in successful challenges to VAT assessments before CAAD.