Summary
Full Decision
The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Paulo Lourenço and Emanuel Vidal Lima, appointed by the Deontological Council of the Administrative Arbitration Centre to form an Arbitral Tribunal, hereby decide as follows:
ARBITRAL DECISION
I – REPORT
1. On 5 July 2018, A..., Ltd., Tax ID Number..., with registered office at ..., no.…, ...-... Sintra, filed a request for constitution of an arbitral tribunal, under the combined provisions of Articles 2 and 10 of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters, as amended by Article 228 of Law no. 66-B/2012, of 31 December (hereinafter, abbreviated as LRAT), seeking the declaration of illegality of the following tax acts:
i. assessment no. 2018..., of VAT, relating to the taxation period 2014.07M, which reversed assessment no. 2014... in the amount of € 41,245.48;
ii. assessment no. 2018..., of Compensatory Interest, relating to the taxation period 2014.07M in the amount of € 6,079.47;
iii. assessment no. 2018..., of VAT, relating to the taxation period 2014.08M, which reverses assessment no. 2014... in the amount of € 9,932.35;
iv. assessment no. 2018..., of Default Interest, relating to the taxation period 2014.08M in the amount of € 1,884.17;
in the total amount of € 59,141.47.
2. To support its request, the Claimant alleges, in summary, that it complied with all tax-related legal duties incumbent upon it and cannot be held responsible for any unpaid tax, and that consequently the assessments against which it objects should be annulled.
3. On 07-07-2018, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).
4. The Claimant proceeded to appoint an arbitrator, having appointed His Excellency Dr. Paulo Lourenço, in accordance with Article 11(2) of the LRAT. Pursuant to Article 11(3) of the same article, the Respondent appointed His Excellency Dr. Emanuel Vidal Lima as arbitrator.
5. The arbitrators appointed by the parties were appointed and accepted their respective mandates.
6. Following a request submitted by the arbitrators appointed by the parties, a presiding arbitrator was appointed, in accordance with Article 6(2)(b) of Decree-Law no. 10/2011, of 20 January, the present Rapporteur, who, within the applicable time limit, also accepted the mandate.
7. On 24-08-2018, the parties were notified of these appointments and expressed no wish to challenge any of them.
8. In conformity with the provisions of paragraph (c) of Article 11(1) of the LRAT, the collective Arbitral Tribunal was constituted on 13-09-2018.
9. On 16-10-2018, the Respondent, duly notified for this purpose, submitted its reply defending itself through challenge.
10. Under the provisions of paragraphs (c) and (e) of Article 16 and Article 29(2), both of the LRAT, the holding of the meeting referred to in Article 18 of the LRAT was dispensed with.
11. A time limit having been granted for the submission of written submissions, both parties refrained from doing so.
12. It was indicated that the final decision would be notified by the end of the time limit provided for in Article 21(1) of the LRAT, which time limit was extended in accordance with Article 21(2) of the same article.
13. The Arbitral Tribunal is materially competent and is regularly constituted in accordance with Articles 2(1)(a), 5 and 6(2)(b) of the LRAT.
The parties have legal personality and capacity, are legitimate and are legally represented, in accordance with Articles 4 and 10 of the LRAT and Article 1 of Ordinance no. 112-A/2011, of 22 March.
The proceedings are not affected by any nullities.
Accordingly, there is no obstacle to the examination of the merits of the case.
Having considered everything, we hereby render
II. DECISION
A. FACTS
A.1. Facts Established as Proven
1- The Claimant herein is a commercial company whose purpose is the "Import, wholesale and retail trade in jewellery, watchmaking and jewels" and operates in the market through two shops.
2- Among its customers are persons residing abroad who approach it in order to purchase jewellery items, jewels or watches.
3- In sales made to customers residing in third countries not belonging to the European Union, at the date of the facts under consideration, it was frequent for the Claimant to apply the VAT regime provided for in Decree-Law no. 295/87, of 31 July, amended by Decree-Law no. 202/95, of 3 August, and by Decree-Law no. 206/96, of 26 October, which regulated the application of the provisions of paragraph (b) of Article 14(1) of the VAT Code.
4- With regard to verification of the non-residence of customers in national territory, the employees of the Claimant herein or its legal representatives required the purchaser of the goods to present a valid and official identification document, and, in fact, sometimes retained a photocopy thereof, which they filed for purposes of the internal process relating to proof of the legality of the application of the aforementioned exemption.
5- On 10/07/2014, the Claimant made a sale, entering on the invoice-receipt no. FT01G/2764, the Tax ID Number... and the name of the customer and citizen of the United Arab Emirates, B....
6- On 24/07/2014, the Claimant issued to the same customer invoice 01G/67, in the amount of € 222,512.00.
7- On that invoice, it did not enter the Portuguese Tax ID Number of the purchaser, having recorded that sale in account 71.1.3, sales to third countries.
8- Upon the purchase evidenced by this invoice, the said B..., presented an identity card of a citizen of the United Arab Emirates and Passport no.... and the Claimant created a new customer file for that purchaser, as a non-resident customer in Portugal.
9- On 25/07/2014, the said B... presented invoice 01G/67 issued by the Claimant to the Customs Services of Lisbon Airport which affixed the stamp proving the exit of the goods to a third country.
10. The Claimant was inspected on the basis of Service Order no. 0I2018..., of partial scope covering the fiscal year 2014, and the Tax Inspection Services (SIT) concluded, through the invoice referred to in the preceding points which the Claimant had issued to the said B..., that the latter had a Portuguese Tax ID Number and that the Claimant knew this at the time of issuance of the said invoice, and that despite this it did not enter the Portuguese Tax ID Number of the purchaser on that invoice.
11. The SIT further concluded, through consultation of the integrated taxpayer view, that the said B... was resident in national territory since 28-10-2011, a verification carried out through the Tax ID Number.
12. The SIT concluded, as a result, that since the said B... was resident in national territory for purposes of the exemption, the conditions for the same were not met, for which reason there was unpaid tax, to which they proceeded with assessment, in the tax acts that are the subject of the present arbitral action.
13. On 02-07-2018, the Claimant proceeded to payment of the additional VAT assessments and interest, which are the subject of the present arbitral action.
A.2. Facts Established as Not Proven
1- That at the time of the purchase referred to in points 6 and following of the proven facts, B... presented himself as resident.
2- That the conclusion referred to in point 11 of the facts established as proven was not obtained by the Customs Services only because the Tax ID Number did not appear on the invoice.
A.3. Reasoning for the Proven and Not Proven Facts
Regarding the factual matters, the Tribunal is not required to rule on everything alleged by the parties, but rather has the duty to select the facts that matter for the decision and distinguish between proven and unproven facts (see Article 123(2) of the Tax Code of Procedure and Process and Article 607(3) of the Code of Civil Procedure, applicable by virtue of Article 29(1), paragraphs (a) and (e), of the LRAT).
In this manner, the relevant facts for the judgment of the case are chosen and defined according to their legal relevance, which is established in view of the various plausible solutions to the question(s) of law (see former Article 511(1) of the Code of Civil Procedure, corresponding to current Article 596, applicable by virtue of Article 29(1), paragraph (e), of the LRAT).
Accordingly, taking into account the positions assumed by the parties, in light of Article 110(7) of the Tax Code of Procedure and Process, the documentary evidence and the case file joined to the record, the facts listed above were considered proven as being relevant to the decision.
Allegations made by the parties, presented as facts consisting of strictly conclusive assertions, insusceptible of proof and whose truth must be assessed in relation to the concrete factual matter consolidated above, were not given as proven or unproven.
B. LAW
The issue that arises in the present tax arbitration proceedings relates to the legality of the assessment to the Claimant of VAT and accessory items relating to a sale to a national citizen of the United Arab Emirates, for a transfer of goods that left the territory of the European Union.
At issue is the application – or non-application – of the provisions of Decree-Law no. 295/87, of 31 July (subsequently repealed by Decree-Law no. 19/2017, of 14 February, which established new rules for the application of the exemption referred to in paragraph (b) of Article 14(1) of the VAT Code) which regulated the application of a VAT exemption for acquisitions of goods of a non-commercial nature, of value equal to or greater than € 49.88, made by residents outside the European Community who, within 90 days, transport them in their personal baggage, with destination to a country not belonging to the European Community.
This regime derives from the provisions of Articles 146(1)(b) and 147 of Council Directive 112/2006/EC of 28 November, which respectively provide that:
- "1. Member States shall exempt the following transactions:
(...)
b) Supplies of goods dispatched or transported by the person acquiring them, not established in the territory of that Member State, or on their behalf, outside the Community, with the exception of goods transported by the person acquiring them and intended for the equipment or supply of pleasure boats, private aircraft or any other means of transport for private use;";
- "1. Where the supply referred to in Article 146(1)(b) concerns goods transported in the personal baggage of travellers, the exemption shall apply only if the following conditions are met:
a) The traveller is not established in the Community;
b) The goods are transported outside the Community before the end of the third month following that in which the supply takes place;
c) The total value of the supply, VAT included, exceeds EUR 175 or the equivalent in national currency, fixed once a year, using the exchange rate of the first working day of October, with effect from 1 January of the following year.
However, Member States may exempt from tax supplies of goods whose total value is lower than the amount laid down in the first subparagraph, point (c).
2. For the purposes of paragraph 1, "traveller not established in the Community" means any traveller whose habitual place of residence is not situated in the territory of the Community. In this case, "habitual place of residence" means the place mentioned in the passport, identity card or any other document recognized as a valid identification document by the Member State in the territory of which the supply is made.
The proof of export is provided by presenting the invoice, or a supporting document substituting for it, stamped by the customs office of exit from the Community.
Each Member State shall send to the Commission a specimen of the stamps used in issuing the stamp referred to in the second subparagraph. The Commission shall communicate this information to the tax authorities of the other Member States."
As the Tax Authority itself explains, in its Doctrine Sheet emanating from Case no. 2972, and the subject of a decision of the SDG of Taxes, legal substitute of the Director-General, on 2012-02-29, concerning the said regime:
"3. Article 1, paragraph 4 requires that: 'The proof of residence, which must be required by the seller and the customs services, shall be provided by presenting the passport or other identification document officially recognized as valid'.
4. Under Article 3(1) 'The supplies of goods covered by this decree-law shall be documented by invoices issued in legal form, which must contain the annotation of documentary proof of the identity and residence of the purchaser'.
5. For its part, Article 3(2) provides that 'The invoices shall be issued in three copies, with the triplicate intended for the seller and the remaining copies for the purchaser, which shall present them to the customs office of exit from the customs territory of the European Community for confirmation of the export and shall send the original to the seller'.
6. The said exemption operates through two methods, to be used at the option of the person transferring goods to travellers:
6.1 The VAT taxable person seller carries out the transfer exempt from VAT, awaiting subsequent receipt from the purchaser of the original invoice, duly confirmed in accordance with the terms referred to in Article 3(2). However, and as stated in Article 4, if the seller, after 150 days from the transfer, does not have in his possession the original invoice duly confirmed by the customs services, he must proceed to assess the tax by the end of the period following that in which the said 150-day period ended.
6.2 Alternatively, the seller may require the buyer to pay the amount of the tax, committing himself, however, to refund such amount. In this case, the reimbursement of VAT paid by non-residents who benefit from this exemption is the responsibility of the seller, who, after having in his possession the original invoice, duly confirmed by the customs services, must proceed to refund the amount of tax paid, within fifteen days of its receipt.
7. In this way, in order to be able to benefit from the said exemption, it becomes necessary for the purchaser to present, at the time of purchase, his passport to the seller, so that the latter may annotate the number thereof on the invoice, drawn up in triplicate, with two copies intended for the purchaser, as well as to annotate the address of the purchaser abroad.
8. It is appropriate to point out that it is the responsibility of the purchaser of the goods to request from the seller the issuance of the respective invoice informing the purpose for which it is intended."
Also in the "VAT Manual – Customs Aspect", the Tax Authority explained its understanding of the functions of the various parties involved in the procedure for applying the exemption in question, stating, with regard to customs authorities, among other things, that:
"For confirmation of the export of goods transported by travellers, the national customs services shall proceed as follows: (...)
b. To verify that the requirements provided for in Decree-Law no. 295/87 are met, relating to the goods, the travellers and the invoices."
In this sequence, and with regard to travellers, the Tax Authority states in that Manual that:
"The traveller who wishes to claim the tax exemption under this regime must cumulatively meet the following conditions:
• Be resident in a third country.
Confirmation of the condition stated shall occur through the presentation of an official identification document, which must state the place of residence, also identifying the respective country, so as to prove that it is, in fact, a third country.
• Have no residence in national territory.
Confirmation of the condition stated shall occur through consultation of the database 'Taxpayer View', of the Tax and Customs Authority (DGCI), accessible at customs offices.
• Possess travel documents for a third country."
And, with regard to invoices, it is stated in the same Manual:
"The invoices supporting the sales of goods for which the exemption from tax under this regime is claimed must:
• Be issued in legal form.
Confirmation of the condition stated shall occur on-site, through presentation of an invoice containing the elements provided for in Article 36 of the VAT Code, namely:
Date
Number
Name and Tax ID Number of the seller
Name and residence of the purchaser as the bearer of the goods, as a private individual
Quantity and identification by the usual name of the goods
Net price of tax
Applicable tax rate
• Be issued in triplicate."
It is concluded in that document that:
"If the conditions necessary for the application of the VAT exemption under this regime, stated above, are met, with regard to the goods, the subjects and the invoices:
The customs services shall confirm the export of goods transported in the baggage of travellers, by affixing an approved stamp for that purpose, on the invoices (or on the forms issued by companies known as 'Tax-free', filled out completely and legibly)."
*
Moving to the concrete case, it is verified, in summary, that:
- The Claimant sold certain goods to a citizen of the United Arab Emirates, who requested the invoicing of the same in accordance with the terms applicable to sales to travellers;
- The Claimant proceeded to invoice in accordance with the requested terms, demanding and ensuring that the legally and administratively required elements were included therein, with the exception of the annotation of the passport or other official document indicating the identity and residence of the purchaser;
- The said foreign citizen validated, with the proper customs authorities, the exit of the goods in question from the community territory;
- The Claimant had, two weeks before the sale referred to above, made another sale to the same foreign citizen, with that sale having been invoiced as an intra-community acquisition, and the said foreign citizen having indicated, and being entered on the corresponding invoice, a Portuguese Tax ID Number.
Taking into account the aforementioned circumstances, it is not possible to conclude otherwise than that the tax assessments now at issue will be illegal.
Let us see why.
*
First and foremost, it must be borne in mind that the exemption in question is not an exemption that is objectively or subjectively conditioned on circumstances peculiar to the person transferring goods to travellers, but rather on circumstances peculiar to the latter.
In other words, the said exemption should not be characterized as an exemption granted to the person transferring the goods, but rather as an exemption granted to travellers.
In this sense, the CJEU has already stated that "the conditions laid down in Article 147 of the VAT Directive concern only the persons acquiring the goods in question and do not refer to the sellers of those goods."
The Tax Authority, too, as seen previously, emphasizes that "it is the responsibility of the purchaser of the goods to request from the seller the issuance of the respective invoice informing the purpose for which it is intended".
It follows from this, therefore, that the person transferring the goods participates in the operation within the framework of the ancillary duties of cooperation with the Tax Authority that are incumbent upon him, as imposed by the Law (community and national) and by the Tax Authority itself, within the limits thereof.
These duties, as the Tax Authority itself clarifies in various contexts, consist, first of all, in the issuance of the invoice in legal form and in triplicate, containing the annotation of documentary proof of the identity and residence of the purchaser, as well as containing the elements provided for in Article 36 of the VAT Code, namely date, number, name and Tax ID Number of the seller, name and residence of the purchaser as the bearer of the goods, as a private individual, quantity and identification by the usual name of the goods, net price of tax, applicable tax rate.
Furthermore, if the person transferring the goods did not receive, within 150 days, the original invoice duly confirmed by the customs services at the exit from the customs territory of the European Community, confirming the export, he should proceed to assess the tax by the end of the period following that in which the said 150-day period ended.
In the case at hand, the Tax Authority based the assessments imposed on the Claimant, and now at issue, on the circumstances that:
- the purchaser was not resident in a third country;
- the invoice issued did not contain the annotation of the passport or other official document indicating the identity and residence of the purchaser.
Let us examine each of them.
*
With respect to the first of the reasons indicated, it is based on the circumstance that, at the time, there was a Tax ID Number in the name of the purchaser of the goods, in force, appearing in the register of the Tax Authority that the said purchaser would be resident in Portugal.
Now, with respect to other views, such a circumstance cannot, without more, justify the imposition on the Claimant of the obligation to pay assessed tax.
Thus, and first of all, contrary to what the Respondent repeats in its reply, it "is not proven and is not accepted by the parties that the purchaser of the goods was, for purposes of the exemption, resident in national territory."
In fact, the Claimant is clear in asserting, with respect to the purchaser of the goods, that it does not know "and had no way of knowing that the latter was, in 2014, resident in Portugal".
Given this, it is considered that the existence of a Tax ID Number in the name of the purchaser of the goods, in force, appearing in the register of the Tax Authority that the said purchaser would be resident in Portugal, does not follow, at least when unaccompanied by other circumstances, as is the case, and contrary to what the Tax Authority maintains, that the purchaser of the goods from the Claimant was, at the time, resident in Portugal, for purposes of the application of Decree-Law no. 295/87, of 31 July.
In fact, and as is noted in the decision handed down in the arbitral process no. 105/2012-T of the CAAD, "under Article 1(3) of Decree-Law no. 295/87, of 31 July, a person is considered resident, for purposes of application of this specific regime, if he has remained in Portugal, in a given calendar year, for more than 180 days, consecutive or non-consecutive", and "the Tax ID Number is assigned to any and every person who earns income in Portugal subject to tax, without assigning relevance to the fact of whether or not he is resident for tax purposes in Portugal. Accordingly, it does not appear to be possible that, by the mere fact that a certain natural person is the holder of a Tax ID Number, one can conclude, as the Respondent did, that that same person is resident in Portugal. Moreover, in a factual context in which the Respondent does not even allege, and even less demonstrate, that at the time of obtaining the Tax ID Number by the purchasers identified, registration was effected as resident for tax purposes in Portugal."
That is to say: under the Decree-Law in question, a person is considered resident in Portugal if he has remained in Portugal, in a given calendar year, for more than 180 days, consecutive or non-consecutive, and the circumstance that the purchaser of the goods in question in the present proceedings has an active Portuguese Tax ID Number does not follow, directly or by presumption, that such condition is met.
Note, moreover, that it was possible for the Tax Authority to gather other evidence, in order to demonstrate that, in fact, the citizen of the United Arab Emirates in question remained, in 2014, for more than 180 days, consecutive or non-consecutive, in Portugal, as it was incumbent upon it, under the rules of burden of proof, given that it was a reason for the correction it made and a matter beyond the Claimant's knowledge.
Indeed, the Tax Authority could and should have indicated a specific address or addresses where the person in question would have resided, present documentation indicating fiscal presence in national territory and, even, within the scope of the investigative powers available to it, obtain banking documentation that would indicate the person's presence in Portugal during the period in question.
Now, the fact is that nothing more was ascertained by the Tax Authority, and from the excerpts of the Tax Authority's registers joined to the record, there does not even appear a single address in national territory, corresponding to a tax domicile.
In this context, this Tribunal cannot ratify the conclusion of the Tax Authority, on which the assessments sub iudice are based, that the purchaser of goods sold by the Claimant was not, in 2014, a resident of a third country.
This conclusion is not altered by the circumstance, also ascertained, that the Claimant made, two weeks before the transfer on which the assessments now at issue are based, another sale to the same purchaser, on which it assessed VAT, and on which a Portuguese Tax ID Number was entered.
In fact, and as we have seen, the mere existence of such a number does not permit the conclusion, ipso facto, that its holder is resident in Portugal, for purposes of the application of Decree-Law no. 295/87, of 31 July, noting further that the invoices in question were issued in July, a time when there were still more than 5 months remaining for the person in question to establish residence in a third country, and to complete the time necessary to be outside community territory for more than 185 days, a situation that it was neither incumbent upon nor possible for the Claimant to monitor.
It should be noted further, finally, that the conformity of Article 1(3) of Decree-Law no. 295/87, of 31 July, itself with Directive 112/2006/EC of the Council of 28 November is considered questionable, bearing in mind that, under Article 147(2) thereof, it is expressly provided that "habitual place of residence" means the place mentioned in the passport, identity card or any other document recognized as a valid identification document by the Member State in the territory of which the supply is made", a solution that was subsequently adopted by Decree-Law no. 19/2017, of 14 February, which repealed Decree-Law no. 295/87, of 31 July.
*
The Tax Authority also bases the corrections made, and now being examined, on the circumstance that the invoice issued did not contain the annotation of the passport or other official document indicating the identity and residence of the purchaser, notwithstanding that it had collected a copy of the identity card and passport thereof.
Indeed, under Article 3(1) of Decree-Law no. 295/87, of 31 July, "The supplies of goods covered by this decree-law shall be documented by invoices issued in legal form, which must contain the annotation of documentary proof of the identity and residence of the purchaser", an annotation that was not made.
Nevertheless, and first of all, it cannot be overlooked that the competent customs services, which are part of the Tax Authority itself, did not refrain from validating the documentation in question, despite the omission pointed out, considering it sufficient for the purposes in hand.
Such conduct, moreover, is in conformity with what has been the relevant case-law of the CJEU on the matter.
Thus, in its Judgment of 28 February 2018, handed down in Case C-307/16, cited above, that Court stated:
"32 It is true that, as follows from Article 131 of the VAT Directive, the exemptions provided for in Chapters 2 to 9 of Title IX of that Directive, of which Articles 146 and 147 are part, apply on the conditions that Member States lay down in order to ensure correct and simple application of those exemptions and to prevent any possible fraud, evasion or abuse. On the other hand, Article 273 of the VAT Directive provides that Member States may provide for other requirements that they consider necessary to guarantee the correct collection of VAT and to prevent fraud.
33 In this regard, the Court of Justice has already stated that, in exercising the competences conferred on them by Articles 131 and 273, Member States must respect the general principles of law which form part of the legal order of the Union, among which are the principles of legal certainty, proportionality and the protection of legitimate expectations (Judgment of 19 December 2013, BDV Hungary Trading, C-563/12, EU:C:2013:854, no. 29 and case-law cited).
34 More specifically, with regard to the principle of proportionality, the Court of Justice has already decided that, in accordance with that principle, Member States must use means which, while effectively achieving the objective pursued by national law, cause the least possible prejudice to the objectives and principles deriving from the legislation of the Union in question (Judgment of 19 December 2013, BDV Hungary Trading, C-563/12, EU:C:2013:854, no. 30 and case-law cited)."
Nevertheless, it has been repeatedly stated by the CJEU that the fact that the additional formal requirements imposed by national legislation are not met cannot call into question the right to VAT exemption.
Hence, in the case at hand, and taking into account that, as stated, the customs authorities themselves did not find the formal omission in question relevant, which does not follow imperatively from Community law, as well as the circumstance that the Claimant effectively collected a copy of the identity card and passport of the purchaser, which it presented to the Tax Authority, it is considered that the exemption in question should not be disregarded.
*
In the arbitral proceedings the Respondent further contended, in light of Article 59 of the General Tax Law, that the Claimant acted in violation of good faith and in abuse of rights, by having prior knowledge of the Tax ID Number of the purchaser, and by not including it on the second invoice it issued.
Although such matter does not appear in the Inspection Order, not forming, accordingly, part of the grounds of the corrections made, it should still be noted that it follows from Directive 112/2006/EC of the Council of 28 November that the only documentary elements relevant are the passport, identity card or any other document recognized as a valid identification document by the Member State, with no relevance whatsoever being given to the Tax ID Number.
Accordingly, both national legislation and the administrative tax documents produced by the Tax Authority on the matter do not confer any relevance whatsoever to the Tax ID Number.
On the other hand, and contrary to what the Respondent alleges, nothing indicates that the customs services lack the Tax ID Number in order to use the "Taxpayer View" Database. In fact, it is the Manual of VAT itself cited above that requires those services to consult such database, while at the same time only requiring, in the documentation to be provided to those services, data relating to the passport or other official identification document.
In fact, in the said Manual, it expressly states that "Confirmation of the condition stated shall occur through the presentation of an official identification document, which must state the place of residence, also identifying the respective country", and that verification of non-residence in national territory will occur "through consultation of the database 'Taxpayer View', of the Tax and Customs Authority, accessible at customs offices."
Therefore, it must be presumed that the said database has the appropriate search tools to, based on the elements referred to, determine whether or not the person in question is registered as a taxpayer in Portugal, and that, in any case, one should always consider it the responsibility of the Tax Authority to structure its databases in accordance with the terms appropriate to the function for which they are intended.
Finally, it must not be overlooked that, as proven, the Claimant had two shops, with the necessary staff for their normal operation, nothing being proven or ascertained regarding the communicability of knowledge of the first transaction to those responsible for execution of the second, and it is also certain that the Claimant was not obliged to have the services and mechanisms to ensure such communicability.
Moreover, and in this regard, the situation of the Claimant does not differ substantially from that of the Tax Authority itself, in the guise of the customs services. In fact, the Claimant, like the Tax Authority, had records revealing that the purchaser of goods sold by it possessed a Portuguese Tax ID Number, but, when carrying out their respective controls, for reasons not ascertained, they did not carry out any information cross-checking, and it should be noted that the Tax Authority itself entrusts the customs services with the responsibility of controlling the requirements of the exemption relating to "goods, travellers and invoices", and determines that the customs services shall only confirm "the export of goods transported in the baggage of travellers, by affixing an approved stamp for that purpose, on the invoices", if "the conditions necessary for the application of the VAT exemption under this regime, stated above, are met".
Accordingly, without detecting, or even alleging, any situation of fraud or tax evasion, the circumstance that, on 10/07/2014, the Claimant made a sale, entering on the invoice-receipt no. FT01G/2764, the Tax ID Number... and the name of the customer and citizen of the United Arab Emirates, B..., should not assume any relevance, particularly that which is sought for it by the Respondent.
In light of all the foregoing, given the errors of fact and law noted, the acts that are the subject of the present arbitral action should be annulled, and accordingly the arbitral request should be upheld.
*
With respect to the Claimant's claim for compensatory interest, Article 43(1) of the General Tax Law provides that compensatory interest is due when it is determined that there has been an error attributable to the services that results in payment of the tax debt in an amount higher than that legally due.
In the case at hand, the error affecting the annulled assessments is attributable, in the first place, to the Tax Authority, which proceeded to assess tax without the factual and legal presuppositions legally required for such having been met.
The Claimant therefore has the right to be reimbursed for the amount it paid (in accordance with Articles 100 of the General Tax Law and 24(1) of the LRAT) by virtue of the acts now annulled and further to be indemnified for the improper payment through the payment of compensatory interest, by the Respondent, from the date of that payment, until its reimbursement, at the legal supplementary rate, in accordance with Articles 43(1) and (4), and 35(10) of the General Tax Law, Article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.
*
C. DECISION
Accordingly, we hereby decide in this Arbitral Tribunal to grant in full the arbitral request filed and, in consequence:
a) Annul the following tax acts:
i. assessment no. 2018..., of VAT, relating to the taxation period 2014.07M, which reversed assessment no. 2014... in the amount of € 41,245.48;
ii. assessment no. 2018..., of Compensatory Interest, relating to the taxation period 2014.07M in the amount of € 6,079.47;
iii. assessment no. 2018..., of VAT, relating to the taxation period 2014.08M, which reverses assessment no. 2014... in the amount of € 9,932.35;
iv. assessment no. 2018..., of Default Interest, relating to the taxation period 2014.08M in the amount of € 1,884.17;
b) Condemn the Respondent to payment of compensatory interest, in the terms fixed above.
D. Value of the Case
The value of the case is fixed at € 59,141.47, in accordance with Article 97-A(1)(a) of the Tax Code of Procedure and Process, applicable by virtue of paragraphs (a) and (b) of Article 29(1) of the LRAT and Article 3(3) of the Regulation of Costs in Tax Arbitration Proceedings.
Let notification be made.
Lisbon, 25 March 2019
The Presiding Arbitrator
(José Pedro Carvalho)
The Vogal Arbitrator
(Paulo Lourenço)
The Vogal Arbitrator
(Emanuel Vidal Lima)
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