CAAD 545/2017-T: VAT Exemption for Intra-Community Transactions of Goods Under Article 14(a) RITI

Arbitral Decision

I. REPORT

1. A..., S.A., legal person no. ..., with registered office at Av. ..., ... of ..., ...-... ... (hereinafter referred to as Claimant or Taxpayer), submitted on 2017-10-10 a request for the constitution of a singular arbitral tribunal, pursuant to the provisions of paragraph (a) of article 2, no. 1, and article 10, nos. 1 and 2, both of Decree-Law no. 10/2011, of 20 January (hereinafter referred to as RJAT), in which the Tax and Customs Authority is requested (hereinafter referred to as Respondent or TA), with a view to the declaration of nullity of the acts of VAT assessment, relating to the years 2012, 2013, 2014 and 2015, as well as the declaration of illegality and consequent annulment of the decision of partial dismissal of the administrative claim to which the number ...2017... was assigned.

2. The request for the constitution of the Singular Arbitral Tribunal was accepted by the Honourable President of CAAD and notified to the Respondent on 2017-10-10.

3. Pursuant to the provisions of paragraph (a) of article 6, no. 2 of the RJAT, by decision of the Honourable President of the Ethics Committee of CAAD, duly notified to the parties within the prescribed time limits, the undersigned was appointed as arbitrator, who communicated to that Committee the acceptance of the assignment within the time limit provided in article 4 of the Code of Ethics of the Centre for Administrative Arbitration.

4. On 2017-11-28 the parties were notified of this appointment, and did not manifest their will to refuse it, in accordance with the combined provisions of article 11, no. 1, paragraphs (a) and (b) of Law no. 66-B/2012, of 31 December.

5. The Singular Arbitral Tribunal was constituted on 2017-12-20, in accordance with the provision of paragraph (c) of article 11, no. 1 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December.

6. Duly notified to do so, on 2018-02-05 the Respondent presented its response and attached the administrative file.

7. By an arbitral order issued on 2018-02-05, and for the reasons contained therein, it was, moreover: (i) considered unnecessary the preliminary reference, (ii) dispensed with the holding of the meeting referred to in article 18 of the RJAT, (iii) dispensed with the presentation of arguments, and (iv) indicated as the deadline for the pronouncement of the decision and its notification to the parties the day of 15 April 2018.

8. To substantiate its request, the Claimant invokes, in summary, and with relevance for what matters here the following (which is mentioned largely by transcription);

8.1. (...) that it was notified of the partial dismissal of the administrative claim no. ...2017..., which did not proceed to the annulment of VAT assessments in the total amount of 24,955.95 €,

8.2. "(...) The Claimant has been making sales directly to its customers located in Spain, (see article 7 of the request for arbitral pronouncement),

8.3. During these sales to Spain (...) it has exempted the intra-community transfers of goods to this market from VAT, under article 14 of the Regime of VAT in Intra-Community Transactions ("RITI"), [see article 8 of the request for arbitral pronouncement],

8.4. (...) The Claimant was the subject of "a tax inspection procedure in the course of which the intra-community transfers of goods, relating to the years 2012, 2013, 2014 and 2015, were analysed, through which anomalous situations of identical nature were detected for all these years" (see article 10 of the request for arbitral pronouncement),

8.5. "(...) the DIT II identified some Spanish customers whose tax identification numbers were not registered, were ceased before the date of their respective transfers or whose date of registration in VIES only occurred after the transfer was completed" (see article 13 of the request for arbitral pronouncement),

8.6. "(...) DIT II concluded that, given the Spanish purchasers who were not properly registered for VIES purposes, and consequently were not covered by a taxation regime for intra-community acquisitions of goods in Spain, the [Claimant] had the obligation to assess tax in the intra-community transfers of goods made to them (see article 16 of the request for arbitral pronouncement),

8.7. "(...) not having [effected] any correction regarding the anomalies related to its Spanish customers, it was, after the issuance of the final inspection report, notified to proceed with the payment of additional VAT assessments as well as the respective compensatory interest" in the amount of 56,946.83 € (see article 17 of the request for pronouncement and table contained therein),

8.8. (...) The Claimant submitted an administrative claim against the additional VAT assessments to the Financial Services Department of ..., to which was assigned the no. ...2017...,

8.9. This claim was partially dismissed (see articles 19 and 20 of the request for arbitral pronouncement),

8.10. The Claimant further proceeds throughout its pleadings to various legal considerations regarding the regime of VAT exemption in intra-community transactions, based on the VAT Directive, expressly invoking articles 131 and 138 thereof and article 14 of RITI, concluding (article 50 of the request for arbitral pronouncement) that "the registration of the purchaser for VIES purposes is merely an instrumental and accessory measure to VAT (...)"

8.11. The Claimant further invokes the case law of the CJEU regarding VAT exemption applicable to ICT's, and more specifically the Judgment of 9/2/2017, Case C-21/16, Euro Tyre BV - Branch in Portugal and the Judgment of 20/10/2016, Case C-24/15, Plöckl.

The Claimant petitions, as extracted from its request, that the decision of partial dismissal of the administrative claim no. ...2017... be annulled, as well as the VAT assessments for the years 2012, 2013, 2014 and 2015 be annulled, in the total amount of 24,955.96 €, and furthermore that the TA be condemned to the restitution of such tax, increased by compensatory interest, as well as condemned to pay compensatory interest calculated on the amount of 31,990.88 € corresponding to the assessments annulled as a consequence of the administrative claim procedure.

1. The TA, duly notified to do so, timely presented its response, referring to the conclusions of the Final Inspection Report and response to the Administrative Claim no. ...2017..., seeking the dismissal of the request.

2. The parties have legal personality and capacity, are legitimate and are legally represented (article 3, 6 and 15 of the Code of Tax Procedure and Process, pursuant to article 29, no. 1 of the RJAT).

3. The proceeding does not suffer from any nullities, no exceptions have been raised, and there is no obstacle to the examination of the case.

II - GROUNDS

A. MATTER OF FACT

A.1. Facts established as proven

a. The Claimant is a commercial company operating under the name "A..., S.A.".

b. For tax purposes it is covered under Corporate Income Tax adopting a taxation period different from the calendar year, pursuant to no. 2 of article 8 of the CIRC, and for VAT purposes it is classified under the normal monthly periodicity regime.

c. In compliance with Service Orders nos. OI2016.../.../.../... of the Financial Services Department of ... it was subject to a partial inspection procedure relating to the years 2012, 2013, 2014 and 2015.

d. The inspective action arose as a result of an official communication from the Department of Services for Fraud Investigation and Special Actions (DSIFAE) reporting the existence of anomalies in intra-community transfers.

e. As a result of the inspection procedure, additional corrections were made in respect of VAT and compensatory interest,

f. Having, as a consequence, been issued the respective VAT assessment notes and compensatory interest in the total amount of 56,946.83 €.

g. Through official communication no. ... of 15/09/2016, the Claimant was notified, pursuant to article 62 of the RCPIT of the Tax Inspection Report emanating from the Division of Tax Inspection II of the Financial Services Department of ... .

h. From the tax inspection report, whose content is hereby reproduced, the following is contained, for what is relevant here:

"(...) not having been provided by the purchaser with a valid tax identification number for purposes of intra-community acquisitions in his Member State, it is concluded that the supplier, in this case A..., is obliged to assess tax".

(...)

"Thus, a summary table was prepared for each year, which identifies the intra-community transfers of goods that do not benefit from VAT exemption because they do not comply with the provisions of article 14, (a) of the Regime of VAT in Intra-Community Transactions, using extracts from the current accounts of these customers provided by A... (for the designation of unregistered taxpayers we use that which appears in these current account extracts)".

i. The Claimant was notified of the corrections resulting from the inspection action through Official Communication no. ... emanated from the Division of Tax Inspection II (DIT II) of the Financial Services Department of ..., dated 15 September 2016.

j. On 22/03/2017 the Claimant submitted an administrative claim with the Financial Services Department of ... .

k. The administrative claim was partially upheld by a decision issued by the Head of Division of the Financial Services Department, under delegation of powers, dated 12/07/2017, where the TA proceeded to annul VAT assessments in the amount of 31,990.88 €.

l. In the draft decision of the administrative claim, subsequently made final, the following is contained, among other things:

"VAT not assessed – Intra-community transfers of goods that do not benefit from exemption for the years 2012 to 2015, in the amount of € 56,946.83

In compliance with the order of the Sub-Director-General of ITA, dated 05-10-2015, a copy of Report no. ..., dated 10-09-2015 of the DSIFAE (Department of Services for Fraud Investigation and Special Actions), was sent to the Financial Services Department of ... under Official Communication No. DSIFAE/.../2015, dated 08-10-2015, relating to the analysis of intra-community transfers of goods (ICT's) for the years 2012 to 2015, and anomalies of identical nature were detected in all these years.

Regarding the intra-community transfers of goods, carried out to Spanish customers, the taxpayer did not provide any justification for these having occurred to customers with tax identification numbers not registered, ceased before the date of their respective transfers or whose start date for purposes of intra-community operations only occurred after the transfer was completed.

Since several purchasers of goods were identified who were not properly registered for VIES purposes, that is, were not covered by a taxation regime for intra-community acquisitions of goods in Spain, as provided in no. 2.2 of process no. T..., with Order of the Sub-Director-General of Taxes, legal substitute of the Director-General, dated 31-03-2009 and of article 14 (a) of RITI, VAT should have been assessed"

"(...) The valid VAT tax identification number for the performance of intra-community operations is a substantive obligation, thus constituting an absolutely indispensable element for the tax exemption to be effective in transfers, as required by article 14 of RITI.

Registration in the VIES system is the formalization of this substance.

"(...) Now, in the present case the additional VAT assessments had solely and exclusively as their basis the fact that some of its Spanish purchasers were not properly registered in the VIES system at the time of the intra-community transactions of goods".

m. The Claimant, under the "PERES" (Special Plan for Reduction of State Indebtedness - Decree-Law no. 67/2016, of 3 November), paid the assessed VAT amounts.

n. On 2017-10-10 the Claimant submitted a request to CAAD for the constitution of the arbitral tribunal which gave rise to the present proceeding.

A.2. Facts established as not proven

With relevance to the decision there are no facts that should be considered as not proven.

A.3. Grounds for the matter of fact established as proven and not proven

Regarding the matter of fact the Tribunal does not have to pronounce itself on everything that was alleged by the parties, rather it has the duty to select the facts that matter for the decision, to discriminate between proven and unproven matter [(see art. 123, no. 2 of the CPPT, and no. 3 of article 607 of the Code of Civil Procedure, applicable, pursuant to article 39, no. 1, paragraphs (a) and (e) of RJAT)]-

Thus, the facts relevant for the judgment of the case are chosen and selected according to their legal relevance, which is established in light of the various solutions to the question(s) of law. (see article 596 of the Civil Code of Procedure, applicable pursuant to article 29, no. 1, paragraph (e) of RJAT).

Thus, taking into account the positions assumed by the parties, in light of the provisions of article 110, no. 7 of the CPPT, the documentary evidence attached to the proceedings and the attached file, the above-listed facts are considered proven, with relevance to the decision.

B. LAW

On the preliminary reference

Pursuant to the provisions of paragraph (b) of article 267 of the Treaty on the Functioning of the European Union (ex. article 234 of the TCE), the Court of Justice of the European Union is competent to rule on a preliminary basis on the interpretation of acts adopted by the organs and institutions of the Community, and the courts of the Member States may request it to rule whenever a question of this nature is raised before them, if they consider it necessary for the judgment of the case, and are obliged to do so when their decisions do not admit judicial appeal under domestic law.

It should be borne in mind that when faced with a matter that is indissociably "linked" to the application of European Union law, and in the present case to the exemptions applicable to intra-community transfers of goods (ICT's) provided for in article 138 of the VAT Directive, account must be taken of the provision of article 8, no. 4 of the Constitution of the Portuguese Republic, in providing that "the provisions of the treaties governing the European Union and the norms emanated from its institutions, in the exercise of their respective competencies, are applicable in the domestic legal order, in accordance with the terms defined by European Union law, with respect for the fundamental principles of the democratic rule of law.".

From this follows the supremacy of European Union law over national domestic law that incorporates the case law of the CJEU.

Now:

The Claimant, in the final part of its pleadings, raised the possibility of a preliminary reference to the CJEU, since the application of Community norms is at issue, namely the norms of Directive no. 2006/112/CE, of 28 November of the Council, and put forward the formulation of the questions that could be raised before the Court of Justice of the European Union.

With all due respect, this not being the appropriate forum for the analysis of the issues that the preliminary reference raises, namely those concerning its mandatory or optional character, the subject of the question at issue, the phase of the process in which the same should be raised, admissibility or otherwise of ordinary appeal from the decision to be rendered by the national court, and others, the fact is that "preliminarily" in the order issued on 2018-02-05 it was understood as unnecessary the preliminary reference.

The reasons that presided over this understanding, which are naturally reiterated and clarified here, relate fundamentally to the fact that there is already a pronouncement in European case law on the question at issue.

By invoking on this specific question the Cilfit Judgment of 06-10-182 (Case 283/81): "the obligation to raise the preliminary question of interpretation may be dispensed with when: i) the question is not necessary, nor relevant to the judgment of the main dispute; ii) the Court of Justice has already ruled firmly on the question to be referred, or when there is already established case law thereof on the same; iii) the National Court has no reasonable doubts as to the solution to be given to the question of Union Law, because the meaning of the norm in question is clear and evident ("theory of the clear act", whose demanding and cumulative verification criteria were likewise defined in the same judgment".

As was written in arbitral process no. 364/2015- T of 16/02/2017 which, we anticipate, we will follow closely, "(...) national courts may decide the question without referring to the CJEU when previous decisions of this Court have already dealt with the legal aspect in question, regardless of the procedures that led to such decisions".

Now,

In the arbitral process noted, having decided to submit to the pronouncement of the CJEU questions of undeniable similarity with those underlying in the present proceedings, these were already decided within the scope of the Judgment of 09/02/2017, rendered in case no. C-21/16 (Euro Tyre BV- Branch in Portugal) to whose partial transcription we shall proceed below, clarifying in this forum, better the reason for this tribunal's understanding, regarding the unnecessary preliminary reference to the CJEU of which was reported in the order of 2018-02-05, as mentioned above.

On the merits

The question that arises in the present proceedings is fundamentally to determine whether, given the matter of fact established as proven, the requirements of article 14, paragraph (a) of the Regime of VAT in Intra-Community Transactions (RITI) are or are not met, which provides as follows:

Article 14

Exemptions in transfers

The following are exempt from tax:

a). The transfers of goods, made by a taxable person referred to in paragraph (a) of article 2, no. 1, shipped or transported by the seller, by the purchaser 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 purposes of value added tax in another Member State, who has used the respective identification number to effect the acquisition and is there covered by a taxation regime for intra-community acquisitions of goods".

It is consensually established that the normative in question encloses for the verification of the tax exemption, as requirements that;

(i) the transferor be a VAT taxable person in its state of residence,

(ii) that the same be true with respect to the purchaser, that is, that the latter be resident in another Member State, and that it use the respective identification number to effect the acquisition,

(iii) that the goods are actually shipped or transported to the Member State of the purchaser's residence, with destination to it.

In the case before us what is at issue, evident from the outset in the Tax Inspection Report and in the decision that fell upon the administrative claim is the disregard of the purchaser(s): "having identified several purchasers who are not properly registered for VIES purposes" (...) "one of the requirements of VAT exemption is not met, as provided in paragraph (a) of article 14 of RITI".

It is thus clear, unequivocal and uncontroversial the reason why the TA disregarded as intra-community transfers of goods, those that are at the origin of the assessments challenged – lack of VIES registration of the purchasers.

Regarding VIES (VAT Information Exchange System) it cannot fail to be noted from the outset, what emerges from the Judgment of the Central Administrative Court South, of 30/04/2014 (case no. 07020/13) in this respect:

"(...) ix. VIES suffers from fragilities associated with the lack of harmonization of national rules for the registration of non-residents and the delay with which VAT forms are filled, in combination with the VAT exemption in intra-EU transfers, which allow the carousel fraud system to be completed before the missing trader disappears.

x. The reliability of the data transmitted by VIES is not total, as these depend on declarations submitted by taxable persons.

xi. VIES information should, as a rule, be supported by complementary elements obtained in national territory that demonstrate the existence of the operations or, at least, their plausibility and that allow to support, in particular, an additional assessment resulting from an inspection action."

It should therefore be analyzed whether the lack of such a requirement "(...) are not properly registered for VIES purposes (...)" in the words of the TA, is sufficient reason to discard the VAT exemption provided for in paragraph (a) of article 14 of RITI, this time in light of the case law of the CJEU.

We resume and draw upon for this purpose the judgment rendered on 16/02/2017 within the scope of case no. 364/2015-T of CAAD, with particular emphasis on the questions that were raised in the preliminary reference, which were as follows:

"i- Articles 131 and 138, no. 1 of Directive no. 2006/112 must be interpreted in the sense that they oppose the Tax Administration of a Member State refusing to grant a VAT exemption in an intra-community delivery to a seller seated in that Member State, because the purchaser, seated in another Member State, is not registered in VIES nor is there covered by a taxation regime for intra-community acquisitions of goods, although it has, at the time of the transaction, a valid identification number for purposes of VAT in that other Member State, a number that was used in the invoices of the transactions, when the material requirements of an intra-community delivery are cumulatively met, that is, when the right of disposal of the good as owner has been transferred to the purchaser and the supplier proves that such good was shipped or transported to another Member State and that, following that shipment or that transport, the same left physically the territory of the Member State of delivery to a taxable person or legal entity acting as such in a Member State other than the point of departure of the goods ?"

"i- The principle of proportionality opposes an interpretation of article 138, no. 1 of Directive no. 2006/112/CE in the sense that the exemption be refused in a situation where a seller seated in a Member State knew that the purchaser, seated in another Member State, despite being the holder of a valid identification number for VAT purposes in that other Member State, was not registered in VIES nor was there covered by a taxation regime for intra-community acquisitions of goods, but had the expectation that registration as an intra-community operator would be granted to it retroactively?

The CJEU clarified on these questions in the Judgment C-21/16 of 09/02/2017 as follows:

(...)

"23. First and foremost, it must be recalled that article 138, no. 1, of the VAT Directive provides for the obligation of the Member States to exempt deliveries of goods that satisfy the conditions listed there (judgment of 9 October 2014, Traum, C-492/13, EU:C:2014:2267, no. 46).

1. Under this provision, Member States exempt deliveries of goods shipped or transported, outside their territory but within the European Union, by the seller, by the purchaser or on behalf of these, made to another taxable person or to a legal entity not being a taxable person acting as such in a Member State different from the Member State of departure of the shipment or transport of the goods.

2. According to consistent case law of the Court of Justice, the exemption of the intra-community delivery of a good is applicable only when the right of disposal of the good as owner has been transferred to the purchaser and the seller proves that such good was shipped or transported to another Member State and that, following that shipment, or that transport, the same good left physically the territory of the Member State of delivery (judgment of 6 September 2012, Mecsek-Gabona, C-273/11, EU:C:2012:547, no. 31 and case law cited).

3. In the case in question, it follows from the elements in the referral decision that the questions submitted are based on the premise that the material requirements of an intra-community delivery within the meaning of article 138, no. 1, of the VAT Directive, as recalled in nos. 24 and 25 of this judgment, were met. The VAT exemption was refused solely because, at the time of the sales in question in the main proceedings, the purchaser was not registered for the purpose of carrying out intra-community operations in Spain nor enrolled in the VIES system. In that Member State, the purchaser had only a VAT identification number valid for carrying out operations in that State and not for carrying out intra-community operations.

4. In this regard, it should be noted that, in fact, within the scope of the transitional system for the taxation of trade in the Union, the identification of VAT taxable persons through individual numbers aims to facilitate the determination of the Member State where the final consumption of the goods delivered occurs (judgments of 6 September 2012, Mecsek-Gabona, C-273/11, no. 57, and of 14 March 2012, Ablessio, C-527/11, EU:C:2013:169, no. 19). Indeed, article 214, no. 1, paragraph (b) of the VAT Directive requires Member States to take all necessary measures so that they are identified through an individual number, in particular, all taxable persons or legal entities not being taxable persons who make intra-community acquisitions.

5. The registration of taxable persons who carry out intra-community operations in the VIES system also presents an undeniable importance in this context. This system aims to enable operators to obtain confirmation of the VAT identification number of their business partners and national Tax Administrations to monitor intra-community operations and detect any irregularities. The said system thus responds to the requirement, provided for in article 27 of Regulation no. 1798/2003 and, from 1 January 2012, in article 17 of Regulation no. 904/2010, that Member States have an electronic database containing a register of persons to whom they have assigned a VAT identification number.

6. However, neither article 138, no. 1, of the VAT Directive nor the case law of the Court of Justice mention, among the material requirements of an intra-community delivery exhaustively enumerated, the obligation for the purchaser to have a VAT identification number (see, in this sense, judgment of 6 September 2012, Mecsek-Gabona, C-273/11, EU;C:2012:547, no. 59) or a fortiori, the obligation for this to be registered for the purpose of carrying out intra-community operations and to be enrolled in the VIES system.

7. Contrary to what the Governments of Portugal and Poland argued, in substance, before the Court of Justice, these obligations cannot be deduced from the requirement that the purchaser must be a taxable person acting as such in a Member State different from the Member State of departure of the shipment or transport of the goods (see, by analogy, judgment of 27 September 2012, VSTR, C-587/19, EU:C:2012;592, no. 40),

8. Indeed, the definition of a taxable person, set forth in article 9, no. 1, of the VAT Directive, aims only at a person who carries out, in an independent manner and in any place, an economic activity, whatever be the purpose or result of that activity, without making this quality dependent on the fact that that person has a VAT identification number (see, in this sense, judgment of 27 September 2012, VSTR, C-587/10, EU:C:2012:592, no. 49 and case law cited), specific, if applicable, for the purpose of carrying out intra-community operations, or that said person is registered in the VIES system. Furthermore, it follows from the case law of the Court of Justice that a taxable person acts in that capacity when it carries out operations within the scope of its taxable activity (see, in this sense, judgment of 27 September 2012, VSTR, C-587/10, EU:C:2012:592, no. 49 and case law cited).

9. Consequently, neither the acquisition by the purchaser of a VAT identification number valid for the purpose of carrying out intra-community operations nor its registration in the VIES system constitute material requirements of the VAT exemption of an intra-community delivery. They are merely formal requirements that cannot call into question the right of the seller to VAT exemption, insofar as the material requirements of an intra-community delivery are met (see, by analogy, judgments of 6 September 2012, Mecsek-Gabona, C-273/11, EU:C:2012:547, no. 60; of 27 September 2012, VSTR, C-587/10, EU:C:2012:592, no. 51; and of 20 October 2016, Plockl, C-24/15, EU:C:2016:791, no. 40).

10. In this regard, it must be recalled that, in the absence of a specific provision in the VAT Directive regarding the evidence that the parties must provide in order to benefit from the VAT exemption, it is for the Member States to establish, in accordance with article 131 of this directive, the requirements for exemption of intra-community deliveries to ensure the correct and simple application of said exemptions and prevent any fraud, evasion and abuse. However, in the exercise of its powers, the Member States must respect the general principles of law that form part of the legal order of the Union (see, judgments of 6 September 2012, Mecsek-Gabona, C-273/11, EU:C:2012:547, no. 36 and case law cited, and of 9 October 2014, Traum, C-492/13, EU: C: 2014:2267, no. 27).

11. According to the case law of the Court of Justice, a national measure goes beyond what is necessary to ensure the correct collection of tax if it makes the right to VAT exemption dependent, in essence, on the fulfilment of formal obligations, without taking account of the substantive requirements and, in particular, without questioning whether these were respected. Indeed, operations must be taxed taking into account their objective characteristics (judgment of 20 October 2016, Plöckl, C-24/15, EU:C: 2016:791, No. 37 and case law cited).

12. Now, as regards the objective characteristics of an intra-community delivery, it follows from nos. 23 to 25 of this judgment that if a delivery of goods meets the requirements provided for in article 138, no. 1, of the VAT Directive, such delivery is exempt from VAT (see, in this sense, judgment of 20 October 2016, Plöckl, C-24/15, EU:C:2016:791, no. 38 and case law cited).

13. From this it follows that the principle of fiscal neutrality requires that the exemption be granted if the substantive requirements were met, even if the taxable persons have neglected certain formal requirements (judgment of 20 October 2016, Plöckl, C-24/15, EU:C:2016:791, no. 39).

14. Consequently, the Administration of a Member State cannot, in principle, refuse the VAT exemption of an intra-community delivery for the sole reason that the purchaser is not enrolled in the VIES system nor covered by a taxation regime for intra-community acquisitions.

15. Thus, it must be noted that, according to the case law of the Court of Justice, there are only two cases in which non-compliance with a formal requirement may imply the loss of the right to VAT exemption (see, in this sense, judgment of 20 October 2016, Plockl C-24/15, EU:C:2016:791, no. 43).

16. On the other hand, the principle of fiscal neutrality cannot be invoked for purposes of VAT exemption by a taxable person who has intentionally participated in tax fraud that endangered the functioning of the common VAT system (see judgment of 20 October 2016, Plöckl, C-24/15, EU:C:2016:791, no. 44 and case law cited).

17. It must be noted that, according to the case law of the Court of Justice, it is not contrary to Union law to require that an operator act in good faith and take all measures that can be reasonably required of him to ensure that the operation he carries out does not involve his participation in tax fraud (judgment of 6 September 2012, Mecsek-Gabona, C-273/11, EU:C:2012:547, no. 48 and case law cited). In the event that the taxable person in question knew or should have known that the operation he carried out was implicated in fraud committed by the purchaser and did not take reasonable measures at his disposal to avoid such fraud, he should be refused the right to VAT exemption (judgment of 6 September 2012. Mecsek-Gabona, C-273/11, EU:C:2012:547, no. 54).

18. In the present case, the mere circumstance, invoked by the referring court, that the seller, on the one hand, knew that, at the time of the operations, the purchaser was not registered in the VIES system nor covered by a taxation regime for intra-community acquisitions of goods and, on the other, had the expectation that, subsequently, the purchaser would be registered retroactively as an intra-community operator, cannot allow the national tax authority to refuse the VAT exemption. Indeed, it follows from the elements on the file transmitted by the referring court and emphasized in no. 20 of this judgment that, in the case in question, there was no fraud nor tax evasion on the part of Euro Tyre.

19. On the other hand, the violation of a formal requirement may lead to a refusal of VAT exemption if that violation has the effect of preventing the production of incontestable proof of compliance with substantive requirements (see, judgment of 20 October 2016, Plöckl, C-24/15, EU:C:2016;791, no. 46 and case law cited).

20. In this case, as results, in substance, from no. 26 of this judgment, the questions submitted are based on the premise that the material requirements of an intra-community delivery within the meaning of article 138, no. 1, of the VAT Directive were met. Furthermore, no element of the file transmitted to the Court of Justice indicates that the violation of the formal requirement at issue in the main proceedings prevented the conclusion that this was the case. However, it is for the referring court to carry out the necessary verifications in this regard.

21. In light of the foregoing considerations, it must be answered to the questions submitted that article 131 and article 138, no. 1, of the VAT Directive must be interpreted in the sense that they oppose the Tax Administration of a Member State refusing to exempt from VAT an intra-community delivery for the sole reason that, at the time of that delivery, the purchaser, seated in the territory of the Member State of destination and holder of a valid VAT identification number for operations in that State, is not enrolled in the VIES system nor covered by a taxation regime for intra-community acquisitions, even if there is no serious evidence suggesting the existence of fraud and it is demonstrated that the material requirements of the exemption are met. In this case, article 138, no. 1, of the VAT Directive, interpreted in light of the principle of proportionality, equally opposes such refusal when the seller had knowledge of the circumstances that characterized the situation of the purchaser taking into account the application of VAT and had the expectation that, subsequently, the purchaser would be registered retroactively as an intra-community operator."

"For the foregoing reasons, the Court of Justice (Ninth Chamber) declares:

Article 131 and article 138, no. 1 of Directive 2006/112/CE of the Council, of 28 November 2006, on the common system of value added tax, must be interpreted in the sense that they oppose the Tax Administration of a Member State refusing to exempt from value added tax an intra-community delivery for the sole reason that, at the time of that delivery, the purchaser, seated in the territory of the Member State of destination and holder of a valid value added tax identification number for operations of that State, is not enrolled in the System for Exchange of Information on Value Added Tax, nor covered by a taxation system for intra-community acquisitions of goods, even if there is no serious evidence suggesting the existence of fraud and it is demonstrated that the material requirements of the exemption are met. In this case, article 138, no. 1, of this directive, interpreted in light of the principle of proportionality, equally opposes such refusal when the seller had knowledge of the circumstances that characterized the situation of the purchaser taking into account the application of value added tax and had expectation that, subsequently, the purchaser would be registered retroactively as an intra-community operator"

It is clear, without need for any other considerations as unnecessary, that the circumstance that the purchaser(s) is/are not enrolled in VIES nor covered by a taxation regime for intra-community acquisitions of goods does not prevent the (complete) VAT exemption provided for in paragraph (a) of article 14 of RITI, recalling by way of conclusion and once again, that in the case in question the TA disregarded the exemptions in question, with the only argument evidenced, that is, disqualification of some Spanish customers of the Claimant, by virtue of the fact that they were not properly registered for VIES purposes.

Given that enrollment in VIES is a formal requirement within the scope of the VAT exemption that we have just analyzed, we cannot fail to agree with the Claimant, in stating, taking as reference the Judgment of 09/02/2017- Case C-21/16, Euro Tyre BV- Branch in Portugal, that "the Tax and Customs Authority cannot make the right to VAT exemption in intra-community transfers of goods depend on the fulfilment of mere formal requirements, namely the registration of purchasers in the VIES system or their registration for purposes of carrying out intra-community operations of goods in the destination country thereof."

Concluding, consequently, that the VAT assessments challenged are illegal due to defect of law, justifying their annulment.

III - COMPENSATORY INTEREST

In accordance with the provision of paragraph (b) of article 24 of the RJAT, the arbitral decision on the merits of the claim for which no appeal or challenge is available, binds the tax administration from the end of the period for appeal or challenge, and the administration must, in the precise terms of the favorable arbitral decision for the taxpayer until the end of the period for the voluntary execution of the sentences of the tax judicial courts, "restore the situation that would exist if the tax act subject of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose", which is in line with what is provided for in article 100 of the LGT, applicable pursuant to paragraph (a) of no. 1 of article 29 of the RJAT, which provides:

Article 100

Effects of decision favorable to the taxpayer

"The tax administration is obliged, in case of total or partial substantiation of the claim, judicial challenge or appeal in favor of the taxpayer, to immediately and fully restore the legality of the act or situation that is the subject of the dispute, including the payment of compensatory interest, if applicable, from the end of the period for execution of the decision",

Although article 2, no. 1, paragraphs (a) and (b) of the RJAT uses the expression "declaration of illegality" to define the jurisdiction of the arbitral tribunals operating under the aegis of CAAD, making no mention of condemnatory decisions, it should be understood that the powers that are attributed to courts in judicial challenge proceedings are included in their jurisdiction, and this is the interpretation that harmonizes and is consistent with the meaning of the legislative authorization on which the Government based itself in approving the RJAT, in which it is proclaimed, as the first guideline, that "the tax arbitration process must constitute an alternative procedural means to judicial challenge proceedings and to the action for recognition of a right or legitimate interest in tax matters".

Given what has been said, no. 5 of article 24 of the RJAT, in affirming that "payment of interest is due, regardless of its nature, in accordance with the terms provided for in the general tax law and in the Code of Tax Procedure and Process", should be interpreted in the sense of allowing the recognition of the right to compensatory interest in the tax arbitration process.

Compensatory interest has a reparatory function of the damage, damage that results from the fact that the taxpayer was unlawfully deprived of a certain amount, during a determined period of time, aiming to place him in the situation in which he would have been had he not made the payment that was wrongfully required of him.

Given what has been set forth above, and in light of the decision on the merits of the case already indicated, this singular arbitral tribunal decides to condemn the Respondent to the payment of compensatory interest calculated on 24,955.96 € as well as to the payment of compensatory interest calculated on the amount of 31,990.88 € corresponding to the assessments annulled as a consequence of the administrative claim procedure.

IV - DECISION

In accordance with what has been stated, this Singular Arbitral Tribunal decides:

i – to judge the request for arbitral pronouncement to be substantially founded;

ii – to annul the VAT assessments challenged for the years 2012, 2013, 2014 and 2015, in the amount of 24,955.96 €,

iii – to declare the illegality and consequent annulment of the decision of partial dismissal of the administrative claim to which was assigned the number ...2017...;

iv – to judge the request for reimbursement of the amounts wrongfully paid as substantially founded, as well as

v- to judge the request for payment of compensatory interest calculated on the amount of 31,990.88 € corresponding to the assessments annulled as a consequence of the administrative claim procedure as substantially founded:

vi- to condemn the Tax and Customs Authority to the payment of the costs of the proceeding.

V - VALUE OF THE PROCEEDING

In accordance with what is provided for in articles 296, nos. 1 and 2 of the Code of Civil Procedure, approved by Law no. 47/2013, of 26 June, 97-A, no. 1, paragraph (a) of the Code of Tax Procedure and Process, and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at 24,955.96 €.

VI - COSTS

Pursuant to the provision in articles 12, no. 2, 22, no. 4 of the RJAT, and article 2 and 4 of the Regulation of Costs in Arbitration Proceedings, and Schedule I attached hereto, the amount of costs is fixed at 1,530.00 €.

NOTIFY

Text prepared on computer, pursuant to the provision in article 131 of the Code of Civil Procedure, applicable by reference from article 29, no. 1, paragraph (e) of the Legal Regime for Tax Arbitration, with blank lines, and reviewed by the arbitrator.

The wording of this decision is governed by the orthography prior to the 1990 Orthographic Agreement, except with respect to transcriptions made.

Twelfth of April of two thousand and eighteen.

The arbitrator

(José Coutinho Pires)