Summary
Full Decision
ARBITRAL DECISION
I. REPORT
Object of the Petition
"A..., SA", NIPC…, with registered address at…, …-… ..., located within the jurisdiction of the Financial Services of …-…, filed, under the terms of subsection a), of Article 2, paragraph 1, and Article 10 of Decree-Law no. 10/2011, of 20 January (RJAT), a petition for constitution of an arbitral tribunal and for pronouncement on the legality of the following additional assessments for VAT and compensatory interest:
No. …, referring to period 2010-01, in the amount of €3,059.75 and assessment no. …, in the amount of €572.38, of compensatory interest;
No. …, referring to period 2010-02, in the amount of €1,400.00 and assessment no. …, in the amount of €257.14, of compensatory interest;
No. …, referring to period 2010-03, in the amount of €2,068.99 and assessment no. …, in the amount of €373.67, of compensatory interest;
No. …, referring to period 2010-04, in the amount of €1,880.00 and assessment no. …, in the amount of €332.94, of compensatory interest;
No. …, referring to period 2010-05, in the amount of €1,060.29 and assessment no. …, in the amount of €184.17, of compensatory interest;
No. …, referring to period 2010-06, in the amount of €660.00 and assessment no. …, in the amount of €112.54, of compensatory interest;
No. …, referring to period 2010-07, in the amount of €2,414.98 and assessment no. …, in the amount of €403.60, of compensatory interest;
No. …, referring to period 2010-08, in the amount of €1,050.01 and assessment no. …, in the amount of €171.91, of compensatory interest;
No. …, referring to period 2010-09, in the amount of €1,511.99 and assessment no. …, in the amount of €242.58, of compensatory interest;
No. …, referring to period 2010-10, in the amount of €1,627.50 and assessment no. …, in the amount of €255.76, of compensatory interest;
No. …, referring to period 2010-11, in the amount of €1,785.00 and assessment no. …, in the amount of €274.45, of compensatory interest;
No. …, referring to period 2010-12, in the amount of €1,050.00 and assessment no. …, in the amount of €157.87, of compensatory interest;
No. …, referring to period 2011-01, in the amount of €1,840.00 and assessment no. …, in the amount of €271.01, of compensatory interest;
No. …, referring to period 2011-02, in the amount of €1,265.00 and assessment no. …, in the amount of €181.88, of compensatory interest;
No. …, referring to period 2011-03, in the amount of €1,724.95 and assessment no. …, in the amount of €242.53, of compensatory interest;
No. …, referring to period 2011-04, in the amount of €1,380.14 and assessment no. …, in the amount of €188.91, of compensatory interest;
No. …, referring to period 2011-05, in the amount of €919.91 and assessment no. …, in the amount of €123.09, of compensatory interest;
No. …, referring to period 2011-06, in the amount of €2,069.98 and assessment no. …, in the amount of €270.17, of compensatory interest;
No. …, referring to period 2011-07, in the amount of €1,150.00 and assessment no. …, in the amount of €145.94, of compensatory interest;
No. …, referring to period 2011-08, in the amount of €2,299.96 and assessment no. …, in the amount of €284.82, of compensatory interest;
No. …, referring to period 2011-09, in the amount of €1,150.00 and assessment no. …, in the amount of €138.50, of compensatory interest;
No. …, referring to period 2011-10, in the amount of €1,725.01 and assessment no. …, in the amount of €201.71, of compensatory interest;
No. 2014…, referring to period 2011-11, in the amount of €2,254.00 and assessment no. 2014…, in the amount of €256.40, of compensatory interest;
No. 2014…, referring to period 2012-01, in the amount of €574.99;
No. 2014…, referring to period 2012-03, in the amount of €1,724.88;
No. 2014…, referring to period 2012-04, in the amount of €1,149.95;
No. 2014…, referring to period 2012-05, in the amount of €2,069.93;
No. 2014…, referring to period 2012-06, in the amount of €919.98;
Interest Assessment No. 2014…, referring to period 2012-06, in the amount of €83.17;
No. 2014…, referring to period 2012-07, in the amount of €919.98;
Interest Assessment No. 2014…, referring to period 2012-07, in the amount of €80.05;
No. 2014…, referring to period 2012-08, in the amount of €3,450.46;
No. 2014…, referring to period 2012-09, in the amount of €4,600.08;
No. 2014…, referring to period 2012-11, in the amount of €919.98;
The records show that the petitioner filed a request for administrative review against the additional assessments now challenged, which was dismissed by order of the Director of Financial Services of …, dated 20.03.2015.
2. Constitution and Functioning of the Arbitral Tribunal
In accordance with Article 6, paragraph 1 of the RJAT, the President of the Deontological Council of CAAD appointed as sole arbitrator the undersigned, Joaquim Silvério Dias Mateus, who accepted the appointment within the legally prescribed period without any of the parties having expressed objection to his designation.
The sole arbitral tribunal was constituted on 24-08-2015.
An order was issued dispensing with the holding of the meeting provided for in Article 18 of the RJAT, without any of the parties having objected, and the tribunal also determined that testimonial evidence would be dispensed with, and fixed the date of 15 April 2016, following extension of the deadline, for the pronouncement of the final arbitral decision.
3. Grounds for the Petition
The petitioner based its petition on the following argumentation, which is summarized below:
In the initial petition, it begins by informing that the assessments challenged were based on the disqualification, as intra-Community transactions of goods, of sales it made to three companies in Spain, a disqualification carried out in the context of a tax inspection procedure conducted by the tax inspection of the Financial Services Offices of … and …, in collaboration, according to which, in summary, the Spanish companies receiving the goods had no physical structure nor personnel at their service that would allow them to carry out commercial, industrial or other activity, that these companies were not known at the address of the head office common to all of them, given that they had common partners, and even that it was doubtful whether the goods had left the national territory since it was common practice for orders between companies that declared intra-Community transfers of goods and the Spanish companies to be made by telephone, fax from national numbers, by the same persons, with employment relationships with national companies that paid them dependent employment income.
On the other hand, the petitioner continues, the tax administration also invoked omissions in the transport documents that matched what was found by the Spanish tax administration, that the addresses of the companies identified in the invoices it issued did not exist nor were known, further adding that the tax inspection noted that the petitioner only received requests/orders from a single person of Portuguese nationality, who earned dependent employment income from national companies, and was never contacted by other persons who had connections to those Spanish companies.
Thus, the petitioner continues, the respondent concluded that the goods did not leave Portugal and that they were imported into consumption here, and therefore should be considered internal transfers of goods subject to tax under Article 1 of the CIVA.
The petitioner further adds and contends that, contrary to what was stated by the tax inspection, all the operations in question were effectively carried out with the Spanish companies B…, SL, C…, SL and D…, SL, with the goods leaving Portugal and delivered in Spain.
To support its position, in terms of the doctrine of the AT, the petitioner begins by invoking the circulated memorandum no. 30009, of 10/12/1999, from the VAT Services Directorate, available on the AT website, which indicates that proof of the departure of goods from the national territory, in the context of intra-Community transactions, can be made using general means of proof, namely, transport documents (CMR declaration), transport contracts, invoices from transport companies, or declaration, in the member state of destination of the goods, by the respective purchaser, that it has carried out the corresponding intra-Community acquisition there.
The petitioner also invokes legal provisions and doctrine in order to demonstrate that said instructions bind the AT, stressing that the inspection report itself notes that the Spanish tax administration informed that the three Spanish companies fulfilled the formality of declaring to the VIES system the operations carried out and that before proceeding with the sales the petitioner confirmed, with the AT, that the three companies had valid TIN in VIES, with B…, SL having TIN ES-…, C…, SL having TIN ES-… and D…, SL, having TIN ES-….
On the other hand, the petitioner continues, with the request for preliminary hearing, the documents of transport of the goods to Spain were attached, namely, the CMR expedition declarations, with the Spanish companies having contracted the transport of the goods.
On the other hand, regarding the arguments presented by the AT about who negotiated the purchase of the goods, the petitioner contends that it is frequent for intermediaries to intervene for this purpose.
The petitioner notes that its goods were transported to Spain by the transport company "E…, Lda" and that, as the report itself recognizes by stating that "when the transport of these goods is not carried out in vehicles of the transport company E…, Lda, but rather by other transport companies, the goods are not delivered in Spain but rather in Porto", its goods are not delivered in Porto but rather in Spain.
Regarding the income paid to persons from the Spanish acquiring companies, the petitioner notes that, according to information communicated by the Spanish tax administration, these companies paid income to employees and administrators in the period of 2010, 2011 and 2012 in the amount exceeding €122,236.28 and that, contrary to what was stated by the AT, the object of said companies being wholesale trade, it is not necessary to have a very large structure for its operation.
Next, the petitioner contests the consistency of the information provided by the Spanish tax administration at the request of its Portuguese counterpart, drawing attention to the fact that the technical staff visited the place where the companies were located about two years after their closure, and that in this way, it would be difficult to find them.
The petitioner also alleges that the AT did not comply with the administrative instructions that it itself had issued, through the circulated memorandum no. 30009, of 10/12/1999, by disregarding the transport documents and the proof that, in Spain, the acquiring companies declared to VIES the goods transferred.
The petitioner concludes its petition by invoking the violation of the principles of trust and neutrality of VAT, reinforcing the reasons which, in its view, make the assessments challenged illegal, thus requesting their annulment and the assessment of compensatory interest from the date of effective payment of the tax until its reimbursement.
Notified to submit arguments, the petitioner reiterated what it had explained in the initial petition.
4. Position of the Respondent
For its part, the respondent authority, in its response, begins by referring to the activity carried out by the petitioner, in the textile area, and confirms that it is a VAT taxable person since 01.01.1986, going on to account for the reasons that led the AT to launch the inspection that gave rise to the assessments now challenged and to describe the measures taken with the Spanish tax administration in order to obtain confirmation of the actual realization of the sales declared by the petitioner to the Spanish companies B…, C… and D….
Thus, according to the respondent's response, the determining facts for issuing the assessments now challenged were, in essence, extracted from information obtained from the Spanish tax administration and which, in summary, are the following:
First, the Spanish tax administration informed that the companies B… and C… ceased their activities in September and November 2011, and that D… still continued in operation at the time of the inspection procedure.
The Spanish administration also informed, the respondent continues, that the three Spanish companies were "unknown to their neighbors and did not possess any physical structure inherent to the exercise of economic activity".
Next, the response reports that the notifications made by the Spanish tax authority were returned, clarifying that the notification made by mail to the company C… was returned and the notifications made by electronic mail to the companies B… and D… were not considered effective since the email boxes were not opened.
On the other hand, although the respondent authority acknowledges that the tax obligations inherent in the tax were complied with by the companies in question, it notes that "the declared values present negative or balanced values, in order to give rise to payments of tax in reduced amounts or not give rise to any payment of tax".
The respondent adds that the Spanish client companies of the present petitioner declared paying income to personnel of diminutive value, in the three years covered by the information request procedure, "if we take into account that the amounts reported also included payments to members of corporate bodies".
The response then goes on to report that in "records of statements collected from other suppliers of said Spanish companies it was possible to prove" the facts described below:
That "the orders for merchandise were made by only two persons, either by telephone, by fax or by email, through national numbers".
That "during the years 2010 and 2011 the income earned by these two persons was paid by entities with registered offices in Portugal".
That "one of these paying entities was identified, in the transport documents, as the company transporting the goods to Spain".
That "in certain situations it was found that the very same orders (both in terms of type of products and quantities) were made by said persons, on an earlier date, with the invoice being issued in the name of other Portuguese companies".
That "representatives of other supplier companies reported that there was no prior order from customers, with the driver himself making the order and identifying himself as an employee of the transport company, paying in cash and choosing the product and quantity based on the monetary availability he had with him".
That "one of the supplier companies also reported that even though the invoices were issued in the name of C… and D…, the goods it sold were delivered by its vehicles to an address in Porto".
After the factual matter transcribed, the response continues to present the grounds for the assessments challenged, adding that "from the data collected it was possible to verify with other transport companies that the goods of other national companies that also declared sales with the same Spanish purchasers, were not delivered in Spain, despite the invoices being issued in the name of the Spanish companies identified above" and that it was also proved "in those cases that the goods were delivered to a specific address in Porto and not in Spain".
To conclude the presentation of the factual grounds on which the assessments challenged are based, the respondent's response states that having "weighed all the evidence gathered by the tax inspection services, as well as the information provided by the Spanish tax administration, and after the exercise of the right to hearing by the petitioner, it was concluded that there were no elements that would allow proving, in an unequivocal manner, that the goods in question left the national territory with destination to Spain, and therefore the inspection procedure resulted in assessments of additional VAT, referring to the years 2010, 2011 and 2012.
The respondent's response then goes on to present the legal grounds beginning by contesting the petitioner's assertion that it complied with the requirements of the circulated memorandum 30009, of 10/12/1999, from the VAT Services, since, the respondent argues, "through various external auditing procedures to various entities that declared, alongside the petitioner, having carried out intra-Community transfers of goods with the same Spanish companies, it was possible to find sure indications that call into question the actual departure of goods from the national territory", further adding that not only is the formal evidence presented by the petitioner insufficient to prove the requirements provided for in Article 14 of the RITI, but once again appeals to the probative measures related to other suppliers of the Spanish companies and to the information collected from the Spanish tax administration.
Resuming the facts in essence already transcribed, the respondent insists that it is not possible to establish that the departure of goods from the national territory was proven, which is a sine qua non condition for the verification of the exemption provided for in Article 14 of the RITI, and that it was the petitioner who, in accordance with Article 74 of the LGT, was responsible for providing said proof.
In concluding, the respondent cites in support of the thesis, that it was the petitioner's responsibility to prove the departure of the goods, the judgment of the TCAN of 28 June 2007, proc. 00130/02, concluding that the challenge should be judged unfounded.
In counter-arguments, the respondent deems the response presented to be entirely reproduced, adding some remarks to the documents subsequently submitted by the petitioner, particularly the CMRs.
The respondent observes, regarding these documents, that they remain mostly illegible, that some are crossed out and others incomplete with absence of dates or reference to invoices, further adding that some of them reveal incongruities at the level of quantities indicated, for example, by referring to the same volume and type of products with completely different weights, as is the case, for example, the "CMR … in which it is stated that 102 boxes of towels total 1,352 kg, the CMR … in which it is mentioned that 102 boxes of towels already amount to 2,362 kg, the CMR no. … in which 90 boxes of towels total 1,542 kg, or still the CMR no. … in which 65 boxes of towels make up 1,516 kg", incongruities which, according to the respondent, do not allow establishing a correspondence between the same (CMRs) and the goods billed in the years in question (2010, 2011 and 2012).
Still in this regard, the respondent invokes the arbitral proceedings no. 228/2015-T and 43/2015-T, as well as the judgment of the TCAS of 07.06.2011, proc. 04434/10, in which faced with circumstances identical to those of the present case, regarding incongruities of CMRs, it was decided that these documents do not provide proof of the departure of goods from the national territory, concluding by arguing that the petition should be judged unfounded.
5. Clarification
The arbitral tribunal is substantively competent and was regularly constituted, the parties enjoy legal capacity and standing, have legitimate interest and were legally represented.
Since the case is free of defects and no issues have been raised that prevent the appraisal of the merits of the case, it is considered that the conditions for pronouncing the arbitral decision are met.
II. DECISION
II.A. STATEMENT OF FACTS
II.A.1. Presentation of Relevant Facts for the Arbitral Decision
- According to what is recorded in the inspection report, dated 13 November 2014, which served as the basis for the assessments challenged, the tax inspection services of the Financial Services Office of …, through consultation of the VIES system, verified that "A…, SA", TIN…, with registered office in Place of …, ..., declared having carried out intra-Community transfers of goods, in the years 2010, 2011 and 2012, to the following companies based in Spain:
B… SL, TIN ES …
C… TEXTIL SL, TIN ES …
D… SL, TIN ES …
Having raised doubts about the truthfulness of said transfers and since the transferor had its registered office in the area of the financial services office of the district of …, the tax services of … requested authorization from that financial services office to conduct the inspection, which was granted.
It is established as fact that the inspection in question was launched due to irregularities – In no. III.2, subsection 6, it is noted that some goods from other companies did not go to Spain but were instead delivered in Porto – collected from other companies; that the inspection was merely internal with no record in the inspection report that it involved any external inquiry with the petitioner or any other company involved in the intra-Community transfers carried out by the same petitioner, namely the transport company or any other Portuguese company that supposedly could have acquired the goods that should have gone to Spain and that, according to the same report, were imported into consumption in Portugal.
The company A…, SA, is classified, for VAT purposes, in the normal regime of monthly periodicity, by choice, since 01.01.1986, and for CIT purposes since 01-01-1989, in the general taxation regime, for the exercise of the activity of weaving of cotton-type thread, with CAE…, as the main activity, and manufacture of made-up textile articles, except clothing, CAE…, as a secondary activity.
- The inspection report goes on to report (see point III.1) that in order to ascertain the capacity of the companies based in Spain to acquire the intra-Community sales declared to VIES in Portugal, and under the frontier cooperation agreement for direct exchange of tax information concluded on 24/10/2006 between the authorities of the Portuguese Republic and the Kingdom of Spain, the following information was requested by the Portuguese AT from its Spanish counterpart, about said companies and in the following terms:
a. Since all Portuguese and Spanish companies have textile goods trading as their activity (fabrics and clothing);
b. Please inform who are the holders of capital of said companies and their respective corporate bodies;
c. Ascertain whether in the financial years 2009 to 2011 the companies complied with their tax declaration and payment obligations and what the volume of business declared by each;
d. Being within our knowledge and confirmed by consultation in VIES that the companies in question carried out transactions between themselves reaching very significant values, reaching millions of euros per year, please inform whether the companies have the structure, logistical capacity and human resources to carry out the operations declared;
e. Collect the invoices supporting the intra-Community transactions carried out and respective transport documents, as well as evidence of the receipts and payments of these transactions.
- The Spanish authorities, in response to the information requested, informed the following (see scheme/summary contained in the inspection report):
| B… SL | D… SL | C… SL | |
|---|---|---|---|
| Address | … Pontevedra | … Pontevedra | … Pontevedra |
| Notifications (1) | Yes | Yes | Yes |
| Response | No | No | Returned |
| Tax Declarations | Without tax declarations and with debts | 2011-filed declarations. Has debts €1,734 / 2012-without declarations. VAT debt €2,098 | Filed declarations with amounts to pay. |
| Facilities | Unknown at address | Unknown at address | Unknown at address |
| VIES | Yes | Yes | Yes |
| Personnel | Never had | Never had | Never had |
| Cessation | 30.09.2011 | 30.11.2011 |
(1) Notifications made by the Spanish tax administration
- The inspection report notes that from the table above and from other information provided by the Spanish tax administration it results that the companies in question, in the years 2009 to 2011, have several common points, namely:
a. The address is the same;
b. They did not respond to the notifications and only the notification addressed to C… was returned;
c. The companies were not known by their neighbors;
d. That said companies, despite being unknown at the address of the registered office and the indications of inactivity, two of the companies complied with their tax obligations, although they presented negative or balanced values in order to pay tax in reduced amount or even not pay tax;
e. They complied with the formality of declaring to the VIES system the operations carried out;
f. The responsible persons (partner/representative) are common among them;
g. There is no information in that administration's database that the companies had employees to whom they paid income.
- Indications Found in Other National Companies that Declare Sales to the Same Spanish Companies.
The inspection report then goes on to report (no. III.2) that other inspection procedures were carried out on other companies that also declared sales to the Spanish companies in question, as a result of which the following "relevant facts" were found, reported in the terms that follow in full:
a. "In relation to the contact person and means of ordering, it was found that almost all of them were made to the same 2 persons. Orders were made either by telephone, by fax (national numbers) or even by email;
b. These 2 persons, in the financial years 2010 and 2011 earned income paid by entities based in national territory and one of these entities was identified, in the transport documents and in a statement record, as the transporter of goods to Spain;
c. In certain situations it was stated that the same persons, on an earlier date made the same orders of the same products but the invoice was issued in the name of other Portuguese companies, and when these same orders were visited they were again billed in the name of these companies;
d. Legal representatives of other companies reported that prior orders were not made, but that the driver himself, who identified himself as an employee of the transport company, would go to their premises, choose the product, taking the quantity based on the money he had with him and that this situation of payment made in cash by the driver was recurrent with some suppliers;
e. One of the circularized suppliers stated that even though the invoices were issued in favor of the Spanish companies C… SL and D…, Lda, the goods were delivered by its vehicles to an address in Porto;
f. From the analysis carried out it was found that when the transport of these goods was not carried out in vehicles of the transport company, E…, Lda, but rather by other transport companies, the goods were not delivered in Spain but rather in Porto".
- The inspection report also reports (see III.3) that it was requested from the present petitioner that it present the "statement of current account referring to your client indicated below, in the period between 01-01-2010 until 31-12-2012, as well as copy of the respective invoices, transport documents with confirmation of receipt of goods at destination and copy of the means of receipt".
From the subsequent text it results that A…, the present petitioner, replied to what was requested, having sent the requested documents, with the inspection report giving no account of having proceeded with their analysis, what information it extracted, what irregularities it detected in these documents, having only made reference to the transport documents for the Spanish companies reporting that some omissions were found, namely the identification of the vehicle registration that carried out the transport and the proof of receipt of the goods.
The report also adds that it was found that there was a high number of companies that carried out sales to the companies based in Spain.
- In light of the elements collected, the inspection report extracted the following conclusions:
a. The companies receiving the goods did not have physical structure nor personnel at their service that would allow them to carry out commercial, industrial or other activity;
b. They were not known at the address of the registered office (common to all);
c. They had a common partner/representative among them;
d. It was common practice for orders, between companies that declared Intra-Community Transfers of Goods (TIB) and the Spanish companies, to be made by telephone, fax from national numbers, by the same persons, with employment relationships with national companies that paid them dependent employment income, which in itself calls into question the departure of goods from the national territory;
e. Omissions were found in the transport documents that matched what was found by the Spanish tax administration, that at the addresses indicated there did not exist, nor were known, the companies identified in the invoices issued by A… SA;
f. The A… only received requests/orders from a single person of Portuguese nationality, who earned dependent employment income from national companies and was never contacted by other persons with connections to those Spanish companies;
g. Given the above and the absence of other elements/facts that prove in an unequivocal manner that the goods in question left Portugal, the inspection report concluded that they were imported into consumption in national territory, and therefore should be considered internal transfers of goods, subject to tax under Article 1 of the CIVA.
- According to the inspection report, the total sales of A… to the three Spanish companies amounted to the following values:
To the company B… SL: €36,643.70 in the months of January to April 2010
To the company C… SL: €141,451.14 in the months of April to December 2010 and January to November 2011;
To the company D… SL: €78,500.82 in the months of December 2011 and January to October 2012.
-
Following an arbitral order determining the improvement of documentary proof filed with the initial petition, the petitioner submitted to the case, through registered mail received at CAAD on 19 January 2016, certified photocopies of 63 CMRs, that is, "international expedition declarations" provided for in the "Convention on the Contract for the International Carriage of Goods by Road (CMR)"
-
The structure of the CMRs is composed of the following numbered fields from 1 to 24:
In the upper right corner is the identification of the CMR and its number;
In field 1, space for identifying the expeditor of goods;
In fields 2 and 3, space for identifying the recipient of merchandise and the place of delivery;
In field 4, space for indicating the place and date of loading of merchandise;
In field 5, space for indicating attached documents (invoice);
In fields 6 to 12, space for identifying the goods subject to transport, namely, the mark and numbers, number of items, mode of packaging, nature of goods, statistical number, gross weight in kg, and volume in m3;
In fields 13, 14, 15, 19 and 20, space for including instructions from the expeditor, price of transport, forms of payment and reimbursement;
In fields 16, 17 and 18, space for identifying the transporter of goods and other information relating to the transport;
In field 21, space for indicating the date of completion of the CMR;
In field 22, space for the signature and stamp of the expeditor;
In field 23, space for the signature and stamp of the transporter; and
In field 24, space for the data relating to receipt of goods.
- From the visual analysis of the 63 CMRs attached to the file, the following main information results:
a. Field 1 of the 63 CMRs is filled with the stamp or with descriptive reference to the expeditor "A…, SA, ...", often with indication of TIN…, sometimes without that number being visible.
b. In fields 2 and 3, regarding the recipient of merchandise and place of delivery, there are 8 CMRs that indicate "B…, SL", …, … Km…, Pontevedra, Spain; There are 27 CMRs that indicate "C…, SL", …, … Km…, …, Pontevedra, Spain; There are 20 CMRs that indicate "D…, SL", …, … Km…, …, Pontevedra, Spain.
It is noted that some of these CMRs do not present good legibility and there are 8 of them in which the data in fields 2 and 3 are not totally or partially visible.
c. Field 4, regarding the place and date of loading of merchandise, indicates "…/…/Portugal", with the loading date also indicated. These indications are visible in 52 of the 63 CMRs presented.
d. Field 5 is generally filled with indication of a number, referenced as invoice number, with also some of the CMRs where this indication is not visible.
e. Fields 6 to 12 contain information about the goods transported, namely, the number of items indicating various numbers; the mode of packaging indicating boxes, bundles or cartons; the nature of the material indicating Towels, Textiles or Fleece; The weight in kg indicating various weights.
It is noted that in 16 CMRs this data is not totally or partially visible.
f. Fields 13, 14, 15, 19 and 20 relating to instructions from the expeditor, price of transport, forms of payment and reimbursement are not filled in any CMR;
g. Fields 16, 17 and 18 indicate, through the affixing of stamps, the transporter as being "E…Lda". The domicile of this transporter is indicated in most of the CMRs at Rua…, in Porto; in others at Rua…, Aveiro; and in still others at Praceta…, in Barcelos. In most CMRs, no. … is indicated as the TIN of the transporter.
h. Field 21 has the date of completion of the CMR affixed, which is visible in most of them.
i. Field 22 contains the stamp of the expeditor "A…, SA" and an initial, elements that are visible in all CMRs.
j. Field 23 contains the stamp of the transporter "E…, Lda" and an initial, also visible in all CMRs;
k. Field 24 has the stamp of the company that received the goods – one of the Spanish companies indicated in fields 2 and 3 (see above 5.2) – as well as an initial, data that are also visible in all CMRs presented.
- On 10 December, the petitioner submitted to the file 30 documents (documents 62 to 92) with validation in the VIES system (system for exchange of information on VAT) of VAT numbers of Spanish taxable persons, namely, ES…, ES … and ES…
The said validations have the dates on which they were carried out affixed, noting that they are dates from the first four months of 2010 with respect to the taxable person "B… SL" ES…, from the months of May to December 2010 and from January to November 2011 in relation to the taxable person "C… Textil SL" ES … and from the months of January to October 2012 in relation to the taxable person "D… SL" ES….
II.A.2. Facts Deemed Proven and Not Proven
There are, with relevance to the decision in light of the various perspectives of analysis of the legal issues, no other facts proven and/or not proven.
The Tribunal's conviction in fixing the aforesaid factual framework was based on the documentary elements integrated in the file and not challenged, in conjunction with the position of the parties reflected in their respective pleadings, which is considered to reveal the absence of real controversy as to the materiality of the facts but only as to the way of interpreting and framing them.
Nevertheless, it is borne in mind that the tribunal does not have to pronounce on everything that was alleged by the parties, with it being incumbent upon it the duty to select the facts relevant to the decision and to discriminate between proven and not proven matter (see Article 123, paragraph 2, of the CPPT and Article 607, paragraph 3 of the CPC, applicable by force of Article 29, paragraph 1, subsections a) and e), of the RJAT).
II.B. ON THE LAW
The additional VAT assessments challenged were issued based on the corrections proposed in the inspection report attached to the file (see page 11 of the report), referring to tax periods from January to December 2010, in the amount of €19,568.51, from January to December 2011, in the amount of €18,399.95, and referring to the months of January, March, April, May, June, July, August, September and October 2012, in the amount of €16,330.24, in the total of €54,298.70, which, after adding the respective compensatory interest, amounts to €59,484.88.
At issue in the present arbitral proceeding is the determination of the legality of said additional assessments issued based on indications, collected through internal inspection and information requested from the Spanish tax administration, which, according to the AT, demonstrate that the present petitioner introduced into the national market a set of goods without assessment of tax, having declared that the same were subject to intra-Community transfers to three taxable persons based in Spain.
Let us see:
At the level of Community law, Article 138, paragraph 1 of Directive 2006/112, which replaced the 6th Directive, determines that:
"Member States shall exempt supplies of goods dispatched or transported outside their territory but within the Community by the supplier, the customer or on behalf of these, effected to another taxable person or to a legal entity that is not a taxable person acting as such in a Member State different from the Member State where the dispatch or transport of the goods begins."
For its part, Article 14, subsection a) of the VAT Regime in Intra-Community Transactions (RITI) provides that:
"The following are exempt from tax:
a) Supplies of goods, made by a taxable person referred to in subsection a) of Article 2, paragraph 1, dispatched or transported by the supplier, the customer or on behalf of these, from national territory to another Member State with destination to the purchaser, when the latter is a natural or legal person registered for value added tax purposes in another Member State, who has used the respective identification number to carry out the acquisition and is covered there by a taxation regime for intra-Community acquisitions of goods;".
Looking at the circulated memorandum no. 30009, of 10/12/1999, from the VAT Services Directorate, instructing the services of the then DGCI on how intra-Community transfers of goods should be proved (still in force at the time of the occurrence of the facts relevant to the present arbitral decision), it is stated therein that the requirements for the exemption provided for in Article 14, subsection a) of the RITI to occur are as follows:
"That the goods are dispatched or transported by the supplier, the customer or on behalf of these, from national territory to another Member State of the European Union and;
the purchaser is registered for value added tax purposes in another Member State, has indicated the respective tax identification number and is covered there by a taxation regime for intra-Community acquisitions of goods".
There is varied case law addressing this topic.
For example, it was established in the judgment of the STA of 09-09-2009, proc. 0491/09 that "in accordance with the provisions of Article 14 of the RITI - DL no. 290/92, of 28.12 -, only supplies of goods made by a taxable person that is covered, in the country of origin, by a taxation regime for intra-Community acquisitions of goods, in which the purchaser is a natural or legal person registered for VAT purposes in another Member State, that uses the respective identification number to carry out the acquisition and is covered by a taxation regime for intra-Community acquisitions of goods in that other Member State are exempt from taxation under VAT".
In summary, the VAT exemption in intra-Community transfers, meaning that there is no place for assessment of tax and that the transferor taxable person has the right to deduct the tax supported upstream to acquire or produce these goods, requires that the transferor be a VAT taxable person in the Member State of origin and the purchaser be also a VAT taxable person in the Member State of destination that uses the respective tax identification number in that acquisition.
Beyond these requirements of a subjective nature, the goods must be effectively dispatched or transported to another Member State, by the transferor, the purchaser or a third party on behalf of either of them.
It is demonstrated in the proceeding that the petitioner was a VAT taxable person in Portugal and that the purchasers, B…, C… and D…, were VAT taxable persons in Spain, who used the respective identification number to carry out the acquisitions.
And as for the other requirement connected with the dispatch or transport of goods from Portugal, Member State of origin, to Spain, Member State of destination?
The AT states that it collected strong indications that the goods were imported into consumption in Portugal and that they were not effectively dispatched or transported to another Member State, with destination to the purchasers.
The question that arises here is to determine which are the indications collected by the AT that are susceptible of grounding the revocation of the exemption provided for in Article 14, subsection a) of the RITI and which are the proofs that the petitioner could present to demonstrate that the goods left Portugal and that its declarations to VIES were true.
Regarding the question of proof documents, one can read in paragraph 4 of the circulated memorandum no. 30009 cited above that "in the absence of a norm that, in the VAT legislation, expressly indicates the means considered suitable for proving the verification of the requirements of the exemption provided for in Article 14, subsection a) of the RITI, it should be admitted that proof of the departure of goods from national territory can be made using general means of proof, namely through the following alternative possibilities:
The documents proving the transport, which, depending on whether it is by road, air or sea, may respectively be, the expedition declaration (CMR), the air waybill (AirwaybilI-AWB) or the bill of lading (Bill of landing-B//L);
Transport contracts entered into;
Invoices from transport companies;
Dispatch notes; or
The declaration, in the Member State of destination of the goods, by the respective purchaser, of having carried out the corresponding intra-Community acquisition there"
Now, as appears from the evidence submitted to the file, the petitioner proceeded to submit 63 CMRs, analyzed above in II.A.1.8 and following, which, notwithstanding some omissions and doubts also noted to some of said documents, does not fail to constitute conclusive evidence in the sense of considering it demonstrated that the VAT taxable person "A…, SA", as expeditor, proceeded, in the years marked by the tax inspection as being those in which the intra-Community transfers were declared to VIES, to a large set of sales of goods, packaged in boxes, bundles or cartons, containing towels, textiles and fleece, which were transported to a locality situated in Spain by the transport company "E…, Lda", and received by the 3 Spanish companies, with receipts signed in the appropriate field of the CMRs, which were declared in VIES by the national operator as being the purchasers of these same goods.
Would these documents be true or false? The AT suggests that it collected indications that called into question the transfers and the transport operations evidenced in said CMRs.
However, except for some doubts and objections raised by the AT's representatives in the present case about the visibility and completion of some CMRs and about the goods and weights mentioned in them, as noted above, it is observed that the doubts and objections did not focus on the majority of the CMRs and that the same did not require the submission of any document or raise any supplementary inquiry to clarify its doubts.
For its part, the inspection report not only provides no support that would now allow the AT to call into question said documents with solid arguments, but does not describe any inquiry it carried out on the truth or falsity of the data contained in the transport declarations, whether as to the completion of the documents themselves, or as to the transport operations and their participants underlying the same.
It is also noted that it was demonstrated in the file (see II.A.1.12) that the petitioner, in the periods in which the transactions to Spain were located, used the VIES system to validate the tax numbers of the three Spanish companies its customers.
As established in the inspection report (see no. 3 above), the Financial Services Office of … requested a set of information from the Spanish tax authority which, through the "Special Agency of Galicia" of the Tax Agency, informed briefly what appears above in II.A.1. 4 and 5.
Having been determined by arbitral order the submission to the file of a copy of the information request and the responses provided by the Spanish AT, it is noted, in summary, the following:
Through information dated 10 October 2013 (regarding company B…) and 11 October 2013 (regarding companies C… and D…), the responses provided by the "tecnico de hacienda" F… confirm the legal and tax existence of the Spanish companies, give account of the compliance with some tax obligations in that country, intra-Community operations declared to VIES, the scarce human means of the companies in question and provide other general information to which the report of the tax inspection refers.
It is found, on the other hand, that said information did not respond to several questions posed by the Portuguese AT, particularly regarding volumes of business declared, regarding invoices supporting the intra-Community transactions between the Portuguese and Spanish companies, regarding transport documents, regarding payments and receipts, having responded to other questions with little or no relevance to confirm or refute whether the intra-Community transfers declared by the petitioner existed, namely information regarding partners and administrators, regarding debts to the Spanish tax administration, among others.
It is not overlooked that the documents received from the Spanish AT which, as noted above, were submitted to the file, proved to be of no use for comparing whether the intra-Community transfers declared by the present petitioner have any relationship with the intra-Community acquisitions declared by the Spanish companies, neither in a positive nor in a negative sense, given that the names and TINs of the companies contained in said information were hidden before their submission to the present case, with the invocation that it was a matter covered by the secrecy referred to in Article 64, paragraph 1 of the LGT.
It should also be noted that the information in the inspection report that the "responsible persons" are common among the three companies (see above no. 5/f) is not entirely accurate.
In fact, although there are some names linked to more than one of the three companies, as is the case of the "representative" of D…, G…, who was also an administrator of B… and received remuneration from C…, the information coming from Spain say that in the case of D… the administrator and sole partner between 25/03/2010 and 01/06/2012 was H…, NIE Y…, then becoming I… NIE Y…; that in the case of C… the administrator and sole partner was J… with TIN…; and that in the case of B… the administrator and sole partner was G…, NIE X….
Also not entirely accurate is the assertion recorded in the inspection report, which moreover had some corrections in the course of the prior hearing, that the Spanish companies did not have employees to whom they paid income (see above 5/g) given that, in relation to the company D… the information from the Spanish AT says that, besides the administrator and the "representative", in the financial years 2010 and 2011, the company paid remuneration to two employees; in the case of C… that the company paid remuneration in 2011 to the "representative" and to an employee named K…; and in the case of B… that in 2010 it paid remuneration to the sole administrator and to an employee L….
It is also noted that several pieces of information gathered by the Spanish tax administration are not accurate and much less exhaustive in relation to the questions posed by the Portuguese tax administration, a fact to which is not unrelated the circumstance that they were provided in October 2013, with the company B… having closed its activities in September 2011 and the company C… having closed in November 2011.
In other cases, the information coming from the Spanish tax administration, particularly in relation to the indication of the unfamiliarity with the location of the companies at the address indicated in the information request made by its Portuguese counterpart, are not sufficiently consistent to be accepted as procedural evidence, given that they do not inform about the location contained in its own records, do not describe which method was used, which and how the neighbors who declared their unfamiliarity were questioned, what the degree of credibility of the information collected was, among other omissions.
It also cannot be overlooked that the internal inspection report drawn up by the Financial Services Office of … regarding the intra-Community transfers carried out by the present petitioner was based, according to itself, on information gathered from other companies, in other inspections, without any specific inquiry about, for example, financial flows between the Spanish companies and the transferor "A…", about the accounting of this company, about the transport company that appears in all CMRs and which certainly would have much information about the transport in question, about the genuineness of the completion of the CMRs themselves, among other inspection omissions.
It is also found that the inspection report does not make the proper presentation and analysis of the informative data provided by the petitioner "A…", through its letter dated 2014.03.10 which, following a request made to it by the tax inspection services of …, sent a "CD with files in PDF format, of clients D…, C… and B…" containing "statements comprised between 01.01.2010 and 31.12.2012, as well as copies of the invoices, of the CMRs and of the evidence of payment".
The Court of Justice of the EU has ruled on the applicability of the VAT exemption for intra-Community transfers, particularly when it is established that, either the transferor, or the intra-Community purchaser, separately or in combination, are defrauding the rules of taxation applicable to intra-Community exchanges.
For example, it was written in the Judgment of the CJEU of 6 September 2012, proc. C-273/11, that "it is well-established case law that the fight against fraud, tax evasion and possible abuse is an objective recognized and encouraged by Directive 2006/112 (citing various judgments in this sense), which sometimes justifies high requirements as to the obligations of sellers", as long as such requirements can "reasonably be demanded of them to ensure that the operation they carry out does not involve their participation in tax fraud" (citing the Teleos and others judgment).
Subsequently, the same judgment adds that "Article 138, paragraph 1, of Directive 2006/112 must be interpreted to the effect that it does not preclude (…) the right to exemption of an intra-Community supply being refused to the seller, if it is concluded, in light of objective elements, that this failed to comply with the obligations incumbent upon it in terms of proof or that it knew or should have known that the operation it carried out was implicated in fraud committed by the purchaser and that it had not taken all reasonable measures within its reach to avoid its own participation in this fraud".
Now, what is found in the case in question is that the AT, having failed to ascertain objective data that would allow accusing the transferor and present petitioner of committing fraud in the sales it declared to the Spanish companies, since it only had "indications" which it says it collected "in other inspections" and about other intra-Community exchanges, which it did not even identify, turned to Spain where it tried to obtain what was lacking.
However, the information coming from Spain, which, as already mentioned, the AT even partially concealed before submitting it to the present case, could only be relevant to support the disregard of the declarations made by the transferor to VIES and the consequent issuance of the assessments challenged, if they had exceeded the nature of mere indications and suspicions and if they had provided concrete and objective data that had demonstrated that the Spanish companies did not exist, that they did not acquire the goods or that they did not pay for them, that the transport documents (CMRs) were false, that the transport did not take place, among other possible facts.
The indications collected, which if properly tested and supplemented by facts could even legitimize some doubts and suspicions about the role of the Spanish companies, fell far short of what would be necessary to substantiate the proof of the commission of any infraction and to allow drawing the serious consequences that the AT seeks with the issuance of the additional VAT assessments or to support the application of a penalty for non-delivery of the tax.
In these terms, all things considered and weighed, one cannot therefore consider that the AT has managed to bring to the assessment procedure and now to the present case, sustained, objective, consistent indications, and much less concrete facts, that would allow supporting the alleged falsity of the intra-Community operations declared to VIES by the present petitioner, or that could call into question the principle of truthfulness in favor of the same established in Article 75 of the LGT (in this sense, see ACD TCAS of 17.03.2016, Proc. 07345/14), regarding the transport declarations (CMRs), which are the proof elements that could reasonably be demanded of it and which at that time were among those, alternatively to others, accepted by the AT (in the described circulated memorandum 30009) of taxpayers that practiced intra-Community transfers.
The additional VAT assessments are not adequately grounded and should thus be annulled.
Regarding the Claim for Condemnation of the AT in the Assessment of Compensatory Interest
The petitioner also requests the condemnation of the AT to payment of compensatory interest.
Given the success of the claim which is hereby decreed, the amounts paid by the petitioner should be reimbursed, if necessary, in execution of the judgment.
As has been decided, although Article 2, paragraph 1, subsections a) and b), of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals that function in the CAAD, making no reference to condemnatory decisions, it is understood that its competencies include the powers that in judicial review proceedings are attributed to tax courts.
Judicial review proceedings, despite being essentially a proceeding for annulment of tax acts, admits the condemnation of the tax administration to payment of compensatory interest, as can be inferred from Article 43, paragraph 1, of the LGT.
In these terms, since, in accordance with the grounds of the present arbitral decision, it is considered that the additional assessments annulled were based on error attributable to the services, the petitioner is entitled to compensatory interest, in accordance with Articles 43, paragraph 1, of the LGT and 61 of the CPPT, assessed from the date of the payments shown to be made until the processing of the credit note, which should be complied with by the respondent authority.
II.C. DECISION
In these terms, it is decided to uphold the arbitral claim and, in consequence, annul the additional VAT assessments issued based on the tax situation described, condemning the Respondent Authority to assess compensatory interest in favor of the Petitioner and in the costs of the proceeding.
II.D. Value of the Case
The value of €59,484.88 is assigned to the case, in accordance with Article 97-A, paragraph 1, a), of the Code of Procedure and Tax Procedure, applicable by force of subsections a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulations for Costs in Tax Arbitration Proceedings.
II.E. Costs
The value of the arbitration fee is set at €2,142.00, in accordance with Table I of the Regulations for Costs in Tax Arbitration Proceedings, to be borne by the Respondent, since the claim was judged entirely successful, in accordance with Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4, of the said Regulation.
Lisbon, 15 April 2016
Let it be notified.
The Arbitrator,
Joaquim Silvério Mateus
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