CAAD 43/2015-T: VAT Exemption on Intra-Community Transactions Under Article 14(a) RITI

Arbitral Decision

REPORT

1. On 27 January 2015, A…, Lda, Tax Number n.º…, hereinafter referred to as the Claimant, with registered office in Portugal, requested the establishment of an arbitral tribunal and filed a request for arbitral relief, pursuant to subsection a) of article 2, section 1 and subsection a) of article 10, section 1 of Decree-Law n.º 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter referred to as TA) is the Respondent.

2. The Claimant is represented in the present proceedings by its agent, Dr…, and the Respondent is represented by the legal advisors, Dr.ª … and Dr… .

3. The petition for establishment of the arbitral tribunal was accepted by the Esteemed President of the CAAD and was notified to the Respondent on 28 January 2015.

4. By means of the petition for establishment of the arbitral tribunal and for arbitral relief, the Claimant seeks the annulment of the additional Value Added Tax (VAT) assessment n.º 2014…, of 03.09.2014, relating to the month of November 2014, in the amount of € 6,492.20 (six thousand, four hundred and ninety-two euros and twenty cents).

5. Having verified the formal regularity of the petition presented, pursuant to subsection a) of article 6, section 2 of the RJAT and the Claimant having not proceeded to appoint an arbitrator, the undersigned was appointed by the President of the Ethics Committee of the CAAD.

6. The Arbitrator accepted the appointment made, and the arbitral tribunal was constituted on 16 March 2015, at the headquarters of the CAAD, located at Avenida Duque de Loulé, n.º 72-A, in Lisbon, in accordance with the minutes of constitution of the arbitral tribunal, which was drawn up and is attached to the present file.

7. The Respondent, on 11 May 2015, presented its reply to the initial petition, having listed a witness.

8. The Tribunal scheduled 11 September 2015 for the holding of the meeting provided for in article 18 of the RJAT, and having, for procedural efficiency, and given the witness testimony indicated by the parties, decided to proceed, on that same day, with the examination of witnesses.

9. However, due to unavailability of the Claimant's agent's schedule, the meeting was rescheduled to 6 October 2015, thereby extending, in consequence, the six-month period provided for in article 21 of the RJAT, by a period of 2 months, by order of 9 September 2015.

10. Within the scope of the meeting of article 18 of the RJAT, after witness testimony was produced, the parties were notified by the Tribunal, on one hand, to submit to the file various missing documents duly identified in the respective minutes, which, some being in a foreign language, by agreement of the parties, the requirement for their translation into Portuguese was waived, and on the other, to submit written arguments successively, within the period of 10 days, with the period for the Claimant commencing with the submission to the file by the Respondent of the enclosed documents.

11. The Claimant submitted its arguments on 23 October 2015, and the Respondent on 2 November 2015.

12. In compliance with the provisions of article 18, section 2 of the RJAT, the Tribunal scheduled 16 November 2015 for the purpose of pronouncing the arbitral decision, having warned the Claimant that it should proceed with payment of the subsequent arbitration fee, pursuant to article 4, section 3 of the Regulation on Fees in Tax Arbitration Proceedings, and communicate such payment to the CAAD.

II. The Claimant sustains its petition, in summary, as follows:

The Claimant sustains the petition for annulment of the additional Value Added Tax (VAT) assessment n.º 2014…, of 03.09.2014, relating to the month of November 2013, in the amount of € 6,492.20 (six thousand, four hundred and ninety-two euros and twenty cents), on the grounds that it is unlawful, in the following manner:

a) In July 2014, the Services of the Tax and Customs Authority (Respondent), following an external inspection procedure of the Claimant's accounting records, proceeded to make corrections in respect of VAT, relating to the year 2013, in the total amount of € 6,395.49 (six thousand, three hundred and ninety-five euros and forty-nine cents), "because the transport of goods related to intra-Community transactions with the Spanish customer "B…, SL" …was not carried out outside Portuguese territory…" according to the facts contained in the Tax Inspection Report;

b) Contrary to the thesis sustained by the Respondent in the aforementioned Report, regarding the matter of cheques issued by the company C…, Lda to B…, SL, endorsed to the Claimant, for payment of invoices issued by B… to the latter, it alleges that "one can legitimately understand that, among many possible hypotheses, these are loans from "C…, Lda" to "B…" intended for payment of invoices issued by the Claimant", seeing no illegality in this procedure, inasmuch as, "the payment for supplies of goods by means of cheque endorsement is current practice in business."

c) With regard to the matter of B…'s business activity in 2013, the Claimant states that "in 2013, an employee of the Claimant, named …, on several occasions traveled to B…'s warehouse in Porriño and verified its operation. He verified that there was working there as an employee of B…, at least one employee named … (…) whose tenure as an employee of B… began on 4 March 2013(…); he further verified that the warehouse was equipped with electrical power(…) furthermore, the Claimant became aware that B… paid rent for the use of the warehouse in Porriño (…); in addition, B… used Spanish telecommunications services (…)." It adds that "when it began supplies to the company "B…, SL" it verified that it was legally constituted and fiscally registered. With commencement of activity on 24.9.1997, updated on 18.10.2012 with respect to management(…) And, in the economic year 2013, B… normally conducted its activity during the year, as is demonstrated by the "Declaración recapitulativa de operaciones intracomunitarias" of the Spanish Tax Agency, relating to the fourth quarter of that year 2013.".

d) The Claimant continues, alleging that "By that recapitulative declaration it can be seen that, in this fourth quarter of 2013, B… made purchases from the Claimant in the amount of 68,380.70 euros, as demonstrated by the form "Modelo 349 Resumen operaciones con la Unión Europea –Relación de Operaciones Intracomunitarias"", that is, "this company purchased goods from the Claimant in the amount of 68,380.70€ an amount which matches (…) the values that the Claimant declared as intra-Community supplies to B…during the months of October, November and December of that same year 2013."

e) It further states, with regard to the transport company, that the latter "is in possession of a copy of the shipping declarations by the Claimant and of the transport by Transport Company D… to the recipient B…, in Spain, and its receipt by that recipient, of the goods contained in the invoices which gave rise to this additional assessment".

f) It further emphasizes that the Claimant "before effecting sales to B…, took care to gather the necessary information in order to confirm that the registration for VAT purposes was in effect, requesting its identification number, and also information to the effect that it was a taxable person covered by a regime of taxation of intra-Community acquisitions of goods, for which it used its VAT identification number to effect the acquisitions. The Claimant also ensured that at the date of the supplies the registrations for VAT purposes in Spain were valid."

g) Concluding, in the sense that "the goods were shipped from the Claimant's registered office in Portugal and received by the recipient in Spain, the respective transactions benefit from the VAT exemption provided for in subsection a) of article 14 of the regime for VAT in intra-Community transactions–RITI".

III. In its Reply the Respondent, invoked, in summary, the following:

The Respondent, in the reply it presented, contests and opposes the arguments put forward by the Claimant, in the following manner:

a) With regard to the question of the issuance of cheques by the company C…, Lda to B…, SL, endorsed to the Claimant, for payment of invoices issued by B… to the latter, which could constitute loans, the Respondent states that: "the cheques issued by C…, Lda served to pay A…, Lda for goods invoiced to B…, SL and that among the many possible hypotheses it can legitimately be a case of loans from C…, Lda to B…intended for payment of invoices issued by it, (…) but to that end and as results from articles 74 of the LGT and 342 of the CC, it would have to present proof of their existence. Moreover, during the inspection no evidence whatsoever was found that the companies had any relationship, commercial or otherwise. In fact, if the claimant (…) had made the loan it would be recorded in the accounting and there would eventually be a written loan contract. This not being the case, we must conclude to the non-existence of any loan and, given the available elements, without other evidence provided by the Author, one can only conclude that the goods were ultimately intended for the company C…, Lda, since it is the one bearing the acquisition.". Continuing to the effect that "we are led to believe that the goods were intended for C…, Lda and not for B…, with the latter having been used only as a documentary vehicle for a commercial operation located in national territory."

b) With regard to the question of B…'s business activity in 2013, it puts forward that "in purely formal terms the existence of company B…, SL was never questioned," however, the Respondent considers that "the Author cannot base such conclusion [existence of B…, SL's activity] solely on the fact that it issued several invoices to that company, since, as we have continued to state, there were no indications of activity.", because, on one hand, "as regards the displacement of worker … to B…'s warehouse and that he found there a worker named …, we cannot fail to state that such is divorced from reality is that the Spanish TA found a declarative gap in its database, concerning workers associated with the company". In fact, "in the year 2013, that worker declared income of category A paid by the transport company D…, Lda." "It is also not unusual that an employee earns only the amounts described (…), note that in document 3 attached to the claim the worker earned only 702.53 Euros and in document 4 the same worker earned only 330.84 Euros. It also follows from those documents that Ms. …'s address was (…) Rua…, n.º … -… Left, in Porto (…) ".

c) On the other hand, with regard to energy consumption, the Respondent understands that, "after careful analysis of those documents, the warehouse in question had no activity, or if it had any it would be very low since experience tells us that warehouses have very high energy consumption, that is, exactly the opposite of what is seen there." (…) "With relative ease we see that the use of electricity in that warehouse was practically nil, taking into account the amounts paid.", and further, still regarding the rental of the warehouse by B…, the Respondent refers that "no rental contract was presented." "Among the elements sent by the accounting office "…" [to the Spanish TA] there is also no rental contract evidencing the payment of rents, with only two rental invoices being sent dated 01/11/2013 and 02/02/2014. These invoices contain withholding tax (…) but in fact the payments were not made by the deadline (…)". "In the invoices delivered to the Spanish TA we cannot fail to note that one of them refers to February 2014, or possibly January 2014, a period in which the facilities were closed (verified on site by the inspection services of the Spanish TA)." Thus, the Respondent understands that "the conclusion that can be drawn, given the available elements, is that in formal terms an appearance was sought to be given of the occupation of facilities for the conduct of an activity, but in reality those facilities were empty and closed, even having a notice board indicating they were available for rent."

d) The Respondent further states that with regard to the question of transport of goods outside national territory "that in formal and documentary terms they meet all the requirements required by tax laws. Were it not for the indications found by the Spanish TA that B…, SL did not conduct any activity, coupled with the fact that the companies neighboring it did not know the name B…, S.L and stated they had never seen personnel working at the location of its registered office". Moreover, "indications were found, in prior years, that it was the practice for goods originating in national territory to be destined for a location in the industrial zone of Porto. It having been proven that the company to which the goods were destined did not conduct any activity, (…) wherefore, the Spanish TA "ceased its activity ex officio." Adding that "the existence of CMRS (International Road Freight Transport Declarations) is not sufficient to attest that the goods left national territory, since the recipient of the goods is a company whose existence is merely formal.".

e) Concluding to the effect that "the violation of the norms relating to RITI is demonstrated, wherefore the additional VAT assessment is due."

IV. Preliminary Determination

The Tribunal is competent and is regularly constituted, pursuant to subsection a) of article 2, section 1 and articles 5 and 6, all of the RJAT.

The parties have legal capacity and standing, are properly represented and the proceedings are not affected by any nullities.

V. Factual Matters

For the conviction of the Arbitral Tribunal, regarding the proven facts, the documents attached to the file were relevant, as well as the administrative process, and the witness testimony produced, with two witnesses being presented by the Claimant and one by the Respondent, all analyzed and weighed in conjunction with the pleadings.

It should be noted that the witness testimony presented by the Claimant proved to be of little credibility and contradictory.

a. Facts Established as Proven

Of relevance to the decision, the following facts are established as proven:

A. The Claimant is a sole shareholder limited company registered, for the purpose of Portuguese classification of economic activities (CAE) with code … – Wholesale trade agents of textiles, clothing, footwear and leather articles, which is engaged in customer recruitment and trading of textiles and clothing, "mainly for the intra-Community market, with the largest volume of invoicing issued to customers in Italy, France and the United Kingdom. - cfr. Doc. n.º 2 attached to the initial petition and by agreement;

B. The Claimant is a taxable person resident in Portugal, which is classified in the normal monthly regime for VAT purposes, since 2009.05.05. - cfr. Doc. n.º 2 attached to the initial petition;

C. In the fourth quarter of November 2013, the Claimant sold goods in the amount of € 68,380.70 to a Spanish company, called B…, SL, – cfr. Docs. n.º 22, 23, 24, 25 and 26 attached to the initial petition;

D. The company B…, SL was registered in the Mercantile Registry of Pontevedra, with commencement of activity on 24.09.1997, with registered office at … … …, Vigo, … Pontevedra, with the corporate object of "construction and building commerce textile trade of all kinds", with a sole shareholder and sole administrator named …. – cfr. Doc. n.º 21 attached to the initial petition;

E. The company B…, SL was registered for VIES purposes, at the date of the facts, having been de-registered for these purposes on 18.04.2014. (cfr. administrative process);

F. B… paid the consumption of electrical energy of the property located at Calle …, … …- cfr. Docs n.º 5, 6, 7, 8, 9, 10, 11 and 12 attached to the initial petition;

G. B… SL, in the months July, September and November 2013 paid rent to … a …, S.A., in the amount of € 1,500.00 (one thousand five hundred euros), for the rental of property located at … n.º … interior, …Vigo-Pontevedra – cfr. Docs. n.º 13, 14 and 15 attached to the initial petition), without, however, having proceeded to deliver the withholding tax that it made with the Spanish Authorities – cfr. administrative process;

H. In the months of June, August, September and October 2013, charges for Spanish telecommunications services were made to the company B… S.L – cfr. Doc. n.º 16, 17, 18, 19 and 20 attached to the initial petition ;

I. The goods shipped by the Claimant destined for Spain, to the company B…, SL, were transported by transport company D…, Lda, with registered office at Rua… , …/…, …-… …, Portugal. – cfr. Doc. n.º 26 and 27 attached to the initial petition;

J. The Claimant's accounting records were the subject of an external inspection procedure, initiated on 23.07.2014 and concluded on 29.07.2014, carried out by the Tax Inspection of the Finance Directorate of Porto (cfr. Doc. n.º 2 attached to the initial petition);

K. On 18.09.2014, as a result of that inspection procedure, the Claimant was notified to proceed with payment of the sum of € 6,395.49 of VAT, corresponding to the reversal of the VAT assessment for the period of November 2013. (cfr. Doc. n.º 1 attached to the initial petition);

L. The Claimant proceeded to payment of the amount of € 6,395.49 by offsetting against the VAT refund relating to the month of July 2014. (cfr. Doc. n.º 1 and 1 A attached to the initial petition);

b. Facts Established as Not Proven

However, the following facts, with relevance to the case at hand, are established as not proven:

A. It was not proven that the company B…, S.L conducted commercial activity in Spain.

B. It was not proven that the company B…, S.L had commercial relations with the company C.., Lda headquartered in Porto;

C. It was not proven that the goods shipped by the Claimant physically left national territory.

VI. Legal Grounds

1. In the present case, there is only one disputed legal question and it relates to the fact of determining whether the sales made by the Claimant to the company "B…, SL", a taxable person registered for VAT purposes in Spain, in the fourth quarter of the year 2013, meet the requirements provided for in subsection a) of article 14 of the Regime for VAT in Intra-Community Transactions, being able the same to be classified as Intra-Community Transactions of Goods and, therefore, exempt from VAT in Portugal?

Let us see,

1. Firstly, and with relevance to the determination of the concept of Intra-Community Transactions of Goods, which is not defined in the Regime for VAT in Intra-Community Transactions (RITI), it is important, from the outset, to determine what is meant by supply of goods for VAT purposes, given that both concepts are interlinked, the latter being able to serve as the basis for the former.

2. Now, pursuant to the provisions of article 3, section 1 of the Value Added Tax Code (CIVA), "supply of goods is understood as the onerous transfer of tangible goods as to correspond to the exercise of the right of ownership."

3. It results, thus, from this legal rule that only transactions that meet the following requirements are considered supply of goods for VAT purposes:

a) That they be onerous, since, in principle, supplies made on a gratuitous basis are excluded from the scope of VAT;

b) That they have as their object tangible goods, movable or immovable, with transfers of intangible goods being excluded from this concept, since these are taxed as supplies of services;

c) That they be effected in a manner corresponding to the exercise of the right of ownership. "It is not necessary that the supplier be the owner of the goods supplied. Thus, we have as taxable transactions supplies of goods made by possessors or mere holders of the goods, who have economic disposal of the goods".[1]

1. Having established this, and as we wish to reach the concept of Intra-Community Transaction of Goods, it becomes useful to consult the RITI as to the concept of "intra-Community acquisition of goods", as this is a corollary thereof and the closest we find in this statute, notwithstanding that we must make an interpretation a contrario thereof.

2. In fact, the notion of "intra-Community acquisition of goods" finds its provision in article 3 RITI providing that: "an intra-Community acquisition is in general understood as the acquisition of power to dispose, in a manner corresponding to the exercise of the right of ownership, of a movable tangible good whose shipment or transport to national territory, by the seller, by the acquirer or on their account, with destination to the acquirer, has commenced in another member state."

3. Thus, it will be safe to consider, as was done in the Judgment of the CAAD rendered in process n.º 323/2014-T, that an intra-Community transaction in goods (ITG) corresponds to "the transfer of power to dispose, in a manner corresponding to the right of ownership, of a movable tangible good whose shipment or transport to the territory of another Member State, by the seller, by the acquirer or on their account, with destination to the acquirer, had commenced in national territory."

4. Complementarily, consulting the RITI, we note that article 7, under the heading "operations assimilated to supply of goods for consideration" assumes special importance in the delimitation of operations that can be classified as ITG, in that, on one hand, it assimilates to the concept of intra-Community supply of goods, other operations and, on the other hand, proceeds to a negative delimitation of some operations not classifiable as ITG.

5. Thus, the positive delimitation of the concept finds its provision in section 1 of that rule, which is a general assimilation rule, according to which: "is considered supply of goods effected for consideration, in addition to those provided for in article 3 of the VAT Code, the transfer of movable tangible goods shipped or transported by the taxable person or on their account, with destination to another member state, for the needs of their business."

6. However, and considering the excessively broad scope of this rule as to the assimilations it encompasses, the legislator understood that it should limit (negatively) the type of operations comprised by the concept of ITG, which it did, in section 2 of article 7 of the RITI, which provides that:

"The following operations are not, however, considered supplies of goods, in accordance with the above section:

a) Transfer of goods to be subject to installation or assembly in another member state in accordance with section 1 of article 9 or of goods whose supply is not taxable in national territory in accordance with sections 1 to 3 of article 10;

b) Transfer of goods to be subject to supply on board a ship, aircraft or train, during transport in which the places of departure and arrival are situated within the Community;

c) Transfer of goods which consists of export operations and assimilated operations provided for in article 14 of the VAT Code or in supplies exempt under article 14;

d) Transfer of gas, through a natural gas network or any network connected to it, and transfer of electricity, heat or cold through heating or cooling networks;

e) Transfer of goods to be subject to expert appraisal or any work consisting of supplies of services to be carried out to the taxable person, materially executed in the member state of arrival of the shipment or transport of the goods, provided that, after execution of said work, the goods are re-shipped to national territory with destination to the taxable person;

f) Transfer of goods to be temporarily used in supplies of services to be carried out by the taxable person in the member state of arrival of the shipment or transport of the goods;

g) Transfer of goods to be temporarily used by the taxable person, for a period not exceeding 24 months, in the territory of another member state within which the importation of the same good from a third country, for the purpose of temporary use, would benefit from the temporary import regime with full exemption from duties."

1. "In these situations we have simple movements of goods that do not give rise to intra-EU transactions in goods, being able, at most, in some cases, to give rise to taxation as supplies of internal goods or supplies of services."[2]

2. In fact, and as is stated in the aforementioned CAAD Judgment, "the principal consequence of qualifying an operation as ITG is that this, in a similar manner to export operations, shall, in principle, be exempt from VAT in the Member State of origin (i.e., in the Member State where the shipment or transport of the good commenced with destination to another Member State), conferring on the supplier the right to deduction of VAT borne upstream for its performance, thus avoiding double taxation of an operation which from an economic standpoint constitutes a whole and ensuring the neutrality of the tax",

3. However, it must be taken into account that, for an operation to be qualified as ITG, and to be able to benefit from VAT exemption, it is necessary that it cumulatively[3] meets the requirements provided for in subsection a) of section 1 of article 14 of the RITI.

Thus,

1. Article 14, section 1, subsection a), of the RITI, provides that the following are exempt from VAT: "supplies of goods, effected by a taxable person, shipped or transported by the seller, by the acquirer or on their account, from national territory to another member state with destination to the acquirer, when the latter is a natural or legal person registered for VAT purposes in another member state, who has used the respective identification number to effect the acquisition and is there covered by a regime of taxation of intra-Community acquisitions of goods."

2. This means that, for the exemption provided for in subsection a) of section 1 of article 14 of the RITI to take effect, it is necessary that the following requirements be met:

a) That the supply in question has as its object movable or immovable goods, in a manner corresponding to the exercise of the right of ownership, and that it be made for consideration;

b) That this supply be effected by a natural or legal person who effects operations that give, in whole or in part, the right to deduction of VAT, i.e., that it be effected by a VAT taxable person as referred to in subsection a) of section 1 of article 2 of the CIVA;

c) That the goods which are the subject of the supply be shipped by the seller/supplier, by the acquirer or on the latter's account, from national territory to another member state with destination to the acquirer, and

d) That the acquirer/purchaser be a taxable person registered for VAT purposes in the member state of destination of the goods; who has used the respective identification number for VAT purposes in making the acquisition and is covered in the state of destination by a regime of taxation of intra-Community acquisitions of goods.

1. Now, considering that there are concepts used which reveal some complexity, in particular in subsections c) and d) above, we propose to clarify them, which we do in the following manner:

2. With regard to subsection c) above, the concept of shipment is mentioned. In fact, this is a concept that is not legally defined, but which the CJEU has been interpreting by assigning to it the following contours: "an intra-Community acquisition of goods only occurs and the exemption of the intra-Community supply only applies when the right to dispose of the goods as owner has been transferred to the acquirer and the supplier proves that those goods were shipped or transported to another Member State and that, as a result of that shipment or transport, the same left physically from the territory of the Member State of supply."[4]

3. Thus, and consequently, for "the intra-Community acquisition of goods and the exemption of the intra-Community supply" to be verified, it is necessary:

a) on one hand, that the right to dispose of the goods as owner has been transferred to the acquirer and,

b) on the other, that the supplier proves that those goods were shipped or transported to another member state, and

c) on the other, that, as a result of that shipment or transport, the goods physically and effectively leave the territory of the Member State of supply, that is, in the case at hand, from national territory to Spain.

1. Complementarily, consulting the CIVA, we note that subsection e) of section 2 of article 1 defines the concept of "intra-Community transport of goods", within the scope of VAT, revealing it as "the transport of goods whose places of departure and arrival are situated in the territory of different Member States." Moreover, and of interest, the CIVA defines "place of departure" and "place of arrival" in its subsections f) and g) of the same section 2 of article 1, as "the place where transport actually commences, not taking into account journeys made to reach the place where the goods are located" and "the place where transport of the goods actually terminates.", respectively.

2. Thus, it can be considered that the concept of shipment presupposes the physical movement of a good from one member state to another. Indeed, this condition establishes the difference between an intra-Community operation and a national/internal operation, "for, only in this way is it possible to apply the principle of attribution of tax revenue to the member state where final consumption occurs, that is, the principle of taxation at the destination, applicable to intra-Community trade. Hence the relevance given to the expression "from national territory to another member state".[5]

3. Indeed, the transport of goods should have, according to article 14 of the RITI, as "destination its acquirer", with relevance here to the importance of the concept of "place of arrival", that is, the place where transport of the goods actually terminates. Which must coincide with the location of the acquirer, mentioned in the invoice, pursuant to article 27, section 5, of the RITI.

4. This means that, in addition to the elements provided for in article 36 of the CIVA, namely: "a) The names, firms or company names and the registered office or domicile of the supplier of goods or provider of services and the recipient or acquirer, as well as the corresponding tax identification numbers of the taxable persons; b) The quantity and usual denomination of the goods supplied or services provided, with specification of the elements necessary for the determination of the applicable rate; packaging not actually traded must be the subject of separate indication and with express mention that its return was agreed; c) The price, net of tax, and other elements included in the taxable value; d) The applicable rates and the amount of tax due; e) The reason justifying the non-application of tax, if applicable; f) The date on which the goods were placed at the disposal of the acquirer, on which services were rendered or on which payments were made prior to performance of the operations, if that date does not coincide with the date of issue of the invoice", invoices relating to intra-Community supplies of goods must also contain "the tax identification number of the taxable person preceded by the prefix PT, the identification number for VAT purposes of the recipient or acquirer with the prefix of the member state that assigned it and the place of destination of the goods."[6]

5. Furthermore, and with regard to subsection d), as to the clarification of the concepts used there, for a transaction to be qualified as an intra-Community transaction in goods as such, it is necessary, and essential, that the acquirer be an entity registered for VAT purposes in the member state of destination, wherefore, and to that extent, the supplier should gather, prior to the consummation of the sale of the goods, the necessary information that allows it to confirm that the registration for VAT purposes is in effect, by requesting its VAT identification number. Should the acquirer not provide said number and the supplier be unable to obtain it by other means, the latter should presume that the entity is not registered, charging the tax due, since the intra-Community transaction in goods in question does not meet the conditions required for it to be considered exempt.

6. Now, as stated, the indication of the tax identification number / VAT number is a fundamental element in transactions effected between taxable persons of different Member States, allowing, within the scope of the VIES system, to make known to the tax administration of the country of destination of the goods the value of intra-Community acquisitions subject to taxation and the identification of the acquirers registered therein for VAT purposes.

7. Thus, obtaining confirmation of the validity of a taxable person's VAT number from another Member State can be done through the VIES system (System of exchange of information on VAT). As a matter of security, filing of proof of consultation of the validity of the number should be kept. The VIES consists of an electronic means of transmission of information relating to VAT registration of companies registered in the EU, that is, it is a system updated by the tax administrations of each Member State, which sometimes records errors and omissions that may cause some valid operators to appear invalid in the system and vice versa. Moreover, information relating to ITGs is likewise transmitted, through the VIES system, between the administrations of the Member States.

8. Furthermore, and in the event that the acquirer is registered for VAT purposes in more than one Member State, it is necessary that the supplier verify that the VAT number provided by the acquirer pertains to the member state of destination of the ITG, and that it is covered by a regime of taxation of intra-Community acquisitions of goods. Indeed, this condition allows the intra-Community acquisition of the good by the acquirer to be taxed in the member state of destination, save some exceptions, such as the acquirer being covered by a potential subjective exemption from the tax. In this case, the intra-Community transaction will not be exempt, wherefore the supplier must charge the corresponding VAT.

9. Notwithstanding, with regard to all the conditions described above, in particular as to the condition of the taxable person acquirer, and as to the transport of the goods, with its physical departure from national territory, the truth is that the burden of proof of these requirements falls on the supplier, as the Judgment of the Supreme Administrative Court rendered in process n.º 01680/03, of 29.04.2004, which we follow, defends, according to which:

"I - In the absence of special rules, it is the responsibility of the Administration to prove the verification of the legal requirements of its action, especially the proof of the existence of the tax facts on which it based the additional assessment disputed.

II - Thus, the Administration having verified, through examination of the accounting records, the existence of inaccuracies or omissions in the declaration of the taxpayer, the additional assessment must be considered well-founded, since it only fell to it to prove the verification of the respective indications or requirements of taxation, that is, the legal requirements of its action.

III - Having effected an intra-Community transaction that benefits from exemption, it was incumbent on the taxpayer to prove the existence of the tax facts which it alleged as the grounds for its right, that is, the existence of the alleged intra-Community supply."

1. It follows from this that the verification and demonstration that there was a supply of goods and that these were shipped or transported from national territory by the seller, by the acquirer or on its account, with destination to another member state, is crucial for the latter to be able to benefit from the VAT exemption provided for in article 14 of the RITI, with it being incumbent on the supplier, we emphasize, to make such proof.

2. But, considering that VAT legislation does not provide, nor indicates the means considered suitable for making such proof, then, how to make it?

3. The VAT Services Directorate, responded to this matter, through Circular Memorandum n.º 30009/99, of 10.12.1999, supporting the understanding that:

"(…)

1. Faced with the lack of a rule that, in VAT legislation, expressly indicates the means considered suitable to verify the requirements of the exemption provided for in subsection a) of article 14 of the RITI, it should be admitted that proof of the departure of goods from national territory may be effected by resorting to the general means of proof, namely through the following alternative possibilities:

-the documents evidencing transport, which, depending on whether it be road, air or maritime, could be, respectively, the shipping declaration (CMR), the air waybill ("Airwaybil I"-AWB) or the bill of lading ("Bill of landing"-B/L);

-the transport contracts entered into;

-the invoices of the transport companies;

-the shipping notes; or

-the declaration, in the member state of destination of the goods, by the respective acquirer, of having effected there the corresponding intra-Community acquisition."

1. With regard to ITGs, in which the transport of the goods is effected by the acquirer or on its account, some specific problems may arise regarding proof of transport or shipment, as occurs in the case at hand.

2. The Judgment of the CAAD rendered in process n.º 323/2014 T gives examples of situations in which proof of transport or shipment becomes complicated for the supplier. For example, "the acquirer effects the collection of goods directly at the seller's establishment, with its own means of transport or by contracting a third party for the purpose, the supplies of goods under the Incoterms FOB ("free on board") and FOT ("free on truck") and, among others, cases in which the goods, after having left the seller's facilities, are transported to a logistics platform located in the same territory, departing later for the member state of destination without the seller having the possibility of confirming its departure from national territory and arrival in the territory of destination. These are the so-called "takeaway" transactions.

3. Indeed, in a situation in which the transport of the goods is carried out by the acquirer, by its own means, the seller cannot be satisfied solely with the simple indication that the goods will effectively be transported with destination to another member state, since a transport note or equivalent document presented upon departure of the goods does not establish the complete reality of the transport. In these situations, suppliers end up seeing their responsibility called into question and the exemption of the supply rejected upon occasion of an audit.

4. Specifically, in the case sub judice, it is pressing to verify whether the commercial transaction effected by the Claimant with B…, subject of the additional VAT assessment of November 2013, here disputed, is capable or not of being considered as "supplies of goods, effected by a taxable person, shipped or transported by the seller, by the acquirer or on their account, from national territory to another member state with destination to the acquirer, when the latter is a natural or legal person registered for VAT purposes in another member state, who has used the respective identification number to effect the acquisition and is there covered by a regime of taxation of intra-Community acquisitions of goods." and consequently, susceptible of benefiting from the VAT exemption, provided for in subsection a) of section 1 of article 14 of the RITI.

Let us see,

I) Regarding the 1st Requirement: it is established that "the Claimant, in the fourth quarter of November 2013, sold goods in the amount of € 68,380.70 to a Spanish company, called B…, SL," (Subsection c) of the facts established as proven), wherefore we can conclude that there is a supply of goods, since it was:

a) effected for consideration, in the amount of € 68,380.70;

b) the goods supplied were movable, consisting of textiles;

c) and was performed in a manner corresponding to the exercise of the right of ownership.

II) Regarding the 2nd Requirement: it is established that "the Claimant is a commercial company, in the form of a sole shareholder limited company, which is classified in the normal monthly regime for VAT purposes, since 2009.05.05" (Subsection B of the facts established as proven), wherefore the requirement regarding the supplier, as a legal entity effecting operations that confer, in whole or in part, the right to deduction of VAT, is met;

III) With regard to the 3rd requirement: it is established that the Claimant claims to have confirmed through the VIES system that the Spanish company was registered, in November 2013, for VAT purposes in Spain, (Subsection E) of the facts established as proven), wherefore the requirement of "the acquirer being a taxable person registered for VAT purposes in the member state of destination of the goods; who has used the respective identification number for VAT purposes in making the acquisition and is there covered by a regime of taxation of intra-Community acquisitions of goods." is met.

IV) Regarding the 4th requirement: the Claimant managed to prove that the goods were shipped on the acquirer's account, from national territory, but did not, however, succeed in proving, as it fell to it, that the goods physically left national territory with destination to Spain, since it did not succeed in contradicting the information contained in the reports prepared by the Spanish TA and the evidence brought to the administrative process presented by the Respondent.

Retain the fact that the payments of the invoices issued by the Claimant were paid by endorsement of cheques issued by a Portuguese company, called C…, Lda, seated in national territory, without there having been determined any commercial relationship between this company and B…; it was not proven that the Spanish company had any commercial activity, since it is not known by neighboring companies, and these never saw personnel working at the location indicated by the Claimant as being the warehouse of the Spanish company; because the only person indicated by the Claimant as being an employee of the Spanish company, a Portuguese taxpayer who presented her income tax return for the year 2013, as an employee of the company D…, Lda, and not of B… . All this, among other facts stated above, allowed the Tribunal to form the conviction to the effect that the Claimant's position is not correct, as sufficient proof of the departure of goods from national territory was not produced.

We are not, therefore, facing an intra-Community transaction in goods, hence the operation in question cannot benefit from VAT exemption.

In these terms, and insofar as it makes a compliant application of article 14, section 1, subsection a), of the RITI, the additional VAT assessment disputed must be maintained.

DECISION

In consonance with the foregoing, it is decided:

1. To declare unfounded, as not proven, the petition presented by the Claimant.

2. To maintain the additional VAT assessment, relating to November 2013 disputed by the Claimant, as we are not facing an intra-Community transaction in goods capable of exemption from VAT, pursuant to the provisions of article 14 of the RITI.

Value of the Proceeding

The value of the proceeding is set at € 6,395.49 (six thousand, three hundred and ninety-five euros and forty-nine cents) pursuant to article 97-A, section 1, a), of the CPPT, applicable by force of subsections a) and b) of section 1 of article 29 of the RJAT and section 2 of article 3 of the Regulation on Fees in Tax Arbitration Proceedings.

Costs

Costs are charged to the Claimant in accordance with article 22, section 2 of the RJAT, article 4 of the RCPAT, and Table I attached to the latter, which are fixed in the amount of € 612.00.

Notification ordered.

Lisbon, 16 October 2015

The Arbitrator

(Jorge Carita)

[1] VAT Code and RITI, Notes and Commentary, coordinated and organized by Clotilde Celorico Palma and António Carlos dos Santos, Almedina 2014, p. 58.

[2] Work cited, p. 575

[3] See Judgment of the Southern Administrative Court of Appeal rendered in process n.º 04434/10, of 07.06.2011, according to which:

"1. The requirements provided for in article 14 of the RITI are of cumulative verification for the Portuguese taxable person to benefit from the right to exemption of the tax, within the scope of intra-Community transactions;

1. The additional VAT assessment being based on two requirements, each of them individually sufficient to ground it, once one of them is disestablished, the assessment made continues to maintain itself valid, grounded only on the other that was maintained;

2. Not proving the taxpayer, by any means of proof admitted in law, the effective shipment and delivery of the goods sold to another taxable person of VAT situated in another member state, the same cannot benefit from the regime of exemption of the tax as intra-Community transactions."

[4] Judgment of the CJEU rendered in process C-409/04, of 29.09.2007

[5] Judgment of the CAAD cited above

[6] Work cited, p. 644