CAAD Rules on VAT Export Exemption: Proof of Export Under Article 14(1)(a)(b) CIVA – Process 621/2018-T

ARBITRAL DECISION

Arbitration Case No. 621/2018-T

Decision Date: 26 September 2019

Subject: VAT – Articles 14(1) subparagraphs a) and b) of the VAT Code – export substantiation documents

Claim Value: € 39,124.13

ARBITRAL DECISION (see full version in PDF)

The sole arbitrator of the Singular Court, Dr. Catarina Belim, appointed by the Ethics Council of the Centre for Administrative Arbitration ("CAAD") to form the present Arbitral Court, constituted on 25.02.2019, decides as follows:

I. REPORT

1. A... (PORTUGAL) S.A., hereinafter referred to as the "Claimant", collective person and tax identification number ..., with registered office at Rua ..., ..., Industrial Zone ..., ...-... ..., Portugal, having been notified of the express dismissal of the Administrative Review filed against the tax acts imposing additional Value Added Tax ("VAT") assessments, with numbers ... (taxation period 06.13), ... (taxation period 08.13), ... (taxation period 09.13), ... (taxation period 11.13), ... (taxation period 12.13), and ... (taxation period 03.14), issued following a partial external tax inspection regarding VAT for the years 2013, 2014 and 2015, filed on 10.12.2018 a request for constitution of a Collective Arbitral Court, pursuant to the provisions of Articles 5(2), subparagraph b) and 10 of the Legal Regime of Tax Arbitration ("LRTA"), approved by Decree-Law No. 10/2011 of 20 January, in conjunction with Article 102(1), subparagraph b) of the Code of Tax Procedure and Process ("CTPP"), with the Tax and Customs Authority ("TCA") as the Respondent.

2. The Claimant seeks the annulment of the aforementioned additional assessments and consequent restitution of amounts paid, plus corresponding compensatory interest in accordance with Article 43 of the General Tax Law.

3. It argues on the merits that there is no legally valid basis sustaining the assessments, as the exports of goods are proven, in compliance with Article 14(1), subparagraphs a) and b) of the VAT Code ("VATC").

4. It argues on formal grounds the lack of substantiation of the act dismissing the Administrative Review.

5. In accordance with Articles 5(2), subparagraphs a) and b) and 6(1) of the LRTA, the Ethics Council of the Arbitration Centre appointed the undersigned as sole arbitrator of the Arbitral Court, who communicated acceptance of the appointment within the applicable period.

6. The Arbitral Court was constituted at CAAD on 25.02.2019, as communicated by the President of the Ethics Council of CAAD.

7. Notified for that purpose on 29.03.2019, the Respondent filed its response and attached the respective administrative file, defending itself by way of challenge.

8. On 02.04.2019, the Respondent attached to the case file an Order No. ... of 29.03.2019 issued by the Sub-Director of the tax management area – VAT (by delegation), which was also notified to the Claimant's representative by means of Official Letter No. ... of 01.04.2019.

9. This Order was intended to annul the following contested tax acts:
   (i) Annulment of additional assessment No. ..., of June 2013, in the amount of the correction of € 11,956.21;
   (ii) Annulment of additional assessment No. ..., of November 2013, in the amount of € 10,651.35.

10. On 22.04.2019, the Claimant, after being notified to attach to the case file the documents protested for attachment in the request for arbitral pronouncement (hereinafter "RAP"), which substantiate revised SAD documents, submitted a request regarding documents 7 and 8, clarifying that, according to information from the respective customs agent, there is no legal possibility of issuing revised SAD documents in the cases in question.

11. The Claimant was again notified on 30.04.2019 to attach to the case file the revised SAD documents protested for attachment in the RAP with document 4 and document 11 (which had not been mentioned in the request of 22.04.2019), as well as new copies of documents attached to the RAP that were not, in part, legible.

12. The Claimant responded to this notification on 13.05.2019, with the revised SAD documents protested for attachment in the RAP with document 4 and document 11 not being included.

13. Notified for that purpose, the Respondent exercised, on 31.05.2019, the right to be heard regarding the elements presented by the Claimant concerning documents 7 and 8, defending itself by way of challenge.

14. Pursuant to subparagraphs c) and e) of Article 16 and Article 29(2), both of the LRTA, the holding of the meeting referred to in Article 18 of the LRTA was dispensed with, without opposition from the Parties.

15. Having been granted time for successive submissions, these were presented by the parties, pronouncing on the evidence produced and developing their respective legal positions.

16. By order of 31.07.2019 the period for rendering the decision was extended, pursuant to Article 21(2) of the LRTA, considering the necessity of translation of documents attached to the RAP in Serbian language into Portuguese language (document 5 of the RAP), documents which were attached to the case on 11.09.2019.

1. Given the foregoing, it is important to delimit the main issues to be decided.

2. First, it should be noted that the following additional assessments resulting from corrections to VAT exemptions mentioned in the following invoices were contested in the RAP:

Corrections contested in the RAP

Values in €

1. Having been annulled by the aforementioned Order of 29.03.2019, the additional assessments concerning the following corrections:

Corrections annulled by the Tax Authority on 29.03.2019

Values in €

1. The case thus proceeds for consideration of the claim made regarding the remaining additional assessments not yet annulled, concerning the following corrections (as indicated by the Claimant, Article 4 of its Submissions: "in these conditions, the claim remains regarding the assessments not yet annulled"):

Corrections underlying the additional assessments not annulled by the TA

Values in €

1. Regarding these corrections, it is necessary to examine and decide the substantive issue, which focuses on proving the exports of goods referred to in the respective invoices.

2. Should the substantive defects underlying the challenge not be upheld, it will then be necessary to analyse the formal defect invoked by the Claimant of lack of substantiation of the act dismissing the Administrative Review.

II. CASE MANAGEMENT

1. The Court has jurisdiction.

2. The request for arbitral pronouncement is timely, as it was filed within the period provided for in Article 10(1), subparagraph a) of the LRTA, counted from the facts provided for in Article 102(1), subparagraph b) of the CTPP.

3. The case does not suffer from defects that would wholly invalidate it.

4. The parties have legal capacity and personality and demonstrate themselves to be legitimate.

1. As mentioned above, the Respondent, already during arbitral proceedings, annulled the additional assessments No. ... (taxation period 06.13), in the amount of € 11,956.21 and No. ... (taxation period 11.03) in the amount of € 10,651.35 (cfr. Article 13 of the LRTA and Article 168(3) of the Administrative Procedure Code, applicable ex vis Article 29 of the LRTA).

2. This annulment was based on conclusive proof of the export of goods by the Claimant already in the request for arbitral pronouncement, following the granting of requests for revision of customs documents that had been requested by the Claimant from the competent Customs Authorities (documents Nos. 6, 6-A, 9 and 10 of the RAP).

3. There is thus, following the annulment of the aforementioned acts, a supervening impossibility of the dispute regarding the same, imposing, in this part, the extinction of the instance in accordance with Article 277, subparagraph e) of the Code of Civil Procedure.

4. The case thus proceeds for consideration of the claim made regarding the remaining additional assessments not yet annulled.

III. FACTS

A. Proven Facts

1. With relevance to the decision, the following facts which the Court deems proven should be considered:

a. The Claimant is a Portuguese commercial company that pursues the main activity of "manufacture of computers and peripheral equipment" corresponding to CAE 26200 (cfr. page 10, section II.3.1 of the Final Inspection Report).

b. The Claimant is registered for VAT under the normal monthly regime (cfr. Article 2 of the RAP confirmed by the Final Inspection Report attached to the administrative file, page 10, section II.3.I).

c. The Claimant is integrated in F..., with registered office in the United Kingdom, formed in 2013, built on the basis of Group G... and H..., with combined experience of more than 280 years (cfr. page 12 of the Final Inspection Report, section II.3.4 and section 16 of the RAP).

d. The Claimant issued, in the years 2013, 2014, the invoices indicated in section 19 of this decision, mentioning sales of goods to third countries in which it applied VAT exemption for export operations, in accordance with subparagraphs a) or b) of Article 14(1) of the VATC (cfr. annexes 2 to 20 of the Right to be Heard of the Claimant attached to the administrative file, part VI of the administrative file and invoices enumerated on pages 15 to 19 of the Final Inspection Report, sections III.2.2.1.1., III.2.2.1.2., III.2.2.2.1. and III.2.2.3.1.).

e. The Claimant was subject to an external tax inspection of partial scope regarding VAT, exercises 2013, 2014 and 2015, carried out by the Tax Inspection Services under Service Orders No. OI2016..., OI2016... and OI2016... (cfr. page 10 of the Inspection Report section II.1. and service orders contained in document 18 of the administrative file).

f. The Claimant was notified of the Draft Inspection Report containing corrections regarding VAT, and filed a Right to be Heard on 6.03.2017 (cfr. document 10 of the administrative file).

g. The Claimant was notified of the Final Inspection Report of 21.03.17.

h. In this Report: (i) part of the arguments invoked by the Claimant in the Right to be Heard were accepted and (ii) VAT corrections were maintained regarding, in the part relevant to the present case, the year 2013 and 2014.

i. The corrections in question were made on the basis of the following grounds transcribed from the Final Inspection Report:

j. Additional VAT assessments with numbers ... (taxation period 06.13), ... (taxation period 08.13), ... (taxation period 09.13), ... (taxation period 11.13), ... (taxation period 12.13), and ... (taxation period 03.14) were issued by the Tax and Customs Authority on 28.03.2017 (cfr. document 1 attached with the RAP).

k. The Claimant voluntarily paid the additional tax assessments (cfr. Article 12 of the RAP, admitted by the Respondent).

l. The Claimant filed, on 18.09.2017, an Administrative Review against the VAT assessment acts (cfr. Document 2 attached with the RAP).

m. The Claimant was notified on 12.09.2018, via CTT, by means of official letter of 06.09.2018, of the express dismissal of the Administrative Review (cfr. Article 4 of the RAP and Document 2 attached with the RAP).

n. The Claimant filed at CAAD on 10.12.2019 the request for constitution of the Arbitral Court that gave rise to the present case.

Regarding the corrections and corresponding additional assessments mentioned in section 20 of this decision, the following facts are deemed proven:

Invoice ... 300357

o. The contested correction of period 08.13, in the amount of € 5,136.10, concerns the mention of VAT exemption applied in invoice ... 300357 of 01.08.2013, relating to a transfer of goods between the Claimant and B... (cfr. Annex 15.1 of the Right to be Heard attached to the administrative file).

p. As regards this invoice ... 300357:

• it contains in the lower left corner of the 1st page the indication:
  "J…
  …
  … INC (WATERFRONT)
  ... WATERTOWN
  WI...";

• it contains on the 2nd page the indication: "Lin Code / Serial Number 1... – VERTERA 6G ALARM KI" and that 143 units are involved;

• it is related to the document "Packing List" ..., of 05.08.2013 issued by B... (cfr. Annex 15.2 of the Right to be Heard attached to the administrative file), whose main body refers to the same serial number of the equipment mentioned in invoice ...300357, i.e. ..., the same type of goods 6G ALARM and the same number of units 143;

• it is associated with the export declaration document for the exporter/shipper of SAD No. 2013..., version 1, of 07.08.2013 (cfr. Annex 15.2 of the Right to be Heard attached to the administrative file) in which:
  (i) is identified as Exporter/Shipper, in box 2, B..., i.e. the same purchaser of invoice ...300357;
  (ii) is identified in box 8 as the place of destination the same as indicated in invoice ...300357 issued by the Claimant to J...:
  "...
  ... ...
  US – UNITED STATES OF AMERICA;
  (iii) is referred to in box 44, concerning Special References/Documents Presented/Certificates and Authorizations the same Packing List number ... issued by B... and related to invoice ...300357;
  (iv) the field D "Control by the Customs Authority of Departure" is filled with the following content: Result: Considered Compliant AUT: Date 2013-08-07 C. DEPARTURE: Date: 2013-08-08.

• it is included in the request for revision of SAD No. 2013... (document 7 attached to the RAP) presented by B... to the Director of the Customs Authority of Lisbon Airport on 4.08.2017 with the following content:

q. The response to this request, of August 2017, as per document 7 of the RAP, has the following content: "Being this SAD from the year 2013, and the regulation referred to in the request was only transposed in Circular Letter dated 10/11/2014 (15309/2014) and its framework in STADA-EXPORT in Circular Letter 15327/2015, of 9 January 2015. I consider the request to be irrelevant, as the situation in question has its own proper framework, in force at the date of the Dispatch. On 19/08/2017".

Invoice ...300358

r. The contested correction of period 08.13, in the amount of € 8,655.95, concerns the mention of VAT exemption applied in invoice ...1300358, of 01.08.2013, relating to a transfer of goods between the Claimant and B... (cfr. Annex 3 of the Right to be Heard attached to the administrative file).

s. As regards this invoice ... 300358:

• it contains in the lower left corner of the 1st page the indication:
  "J… …
  …– E…
  LTD
  … SHANGAI …
  201203
  CHINA"

• it contains on the 2nd page the indication of the following goods transferred: "Lin Code / Serial Number 1 ... VERTERA 6G Alarm KI";

• it is related to the document denominated "SHIPPING INVOICE" ... issued by B... (cfr. Annex 3 of the Right to be Heard attached to the administrative file), which refers in its main body to the same serial number of the equipment mentioned in invoice ...300358, i.e. 1..., the same type of goods 6G ALARM and the same number of units 241;

• it is related to the Export Accompanying Document ("EAD"), NRM..., of 2013.08.08 – (cfr. Annex 3 of the Right to be Heard attached to the administrative file), which:
  (i) identifies as Exporter/Shipper, in box 2, B..., i.e. the same purchaser of invoice ...300358;
  (ii) identifies, in box 8 the same Recipient and place of destination indicated in invoice ...300358 issued by the Claimant to J...:
  E… LTD
  … ... SHANGAI
  (iii) identifies as dispatching country PT, Portugal, and as destination country CN, China, the same places indicated in invoice ...1300358;
  (iv) identifies in box 1 the code N380 and the mention of "8002491", same number as the "SHIPPING INVOICE" ... related to invoice ...1300358;
  (v) identifies in box E "Control by the Customs Authority of Dispatch/Export" Result: A2, Deadline (time limit): 2015-08-26;
  (vi) is blank in box (K) concerning "Control by the Departure Customs Authority";

• it is related to the document titled Air ... LIS... (attached by the Claimant in the Submissions) which identifies:
  (i) as shipper, A...;
  (ii) as recipient E..., LTD., same recipient indicated in invoice ...1300358 issued by the Claimant, part relating to J...:
  (iii) as transport company K... S.A.;
  (iv) the code of authorized agent ... :...;
  (v) Invoice 8002491, same number as the Shipping Invoice 8002491 issued by B... and related to invoice ...1300358;
  (vi) as airport of departure Lisbon airport to LHR (Heathrow), flight BA503/08, as first transport, with destination airport Pudong/Shanghai, flight ... /09;
  (vii) that 3 pieces are being transported, with a weight of 999 Kg, with the nomenclature "6G Silent Alarm" corresponding to the same nomenclature 6G ALARM and the same weight indicated in the Shipping Invoice ... issued by B... and related to invoice ...1300358;
  (viii) as date of execution 07.08.2013, with invoice ...1300358 having the date of 01.08.2013;

• it was included in the request for revision of SAD No. 2013... presented on 2.08.2017 (document 8 attached to the RAP) by B... to the Director of the Customs Authority of Lisbon Airport with the following content:

t. The Customs Authority responded to this request as follows: "Being this SAD from the year 2013, and the regulation referred to in the request was only transposed in Circular Letter dated 10/11/2014 (15309/2014) and its framework in STADA-EXPORT in Circular Letter 15327/2015, of 9 January 2015. I consider the request to be irrelevant, as the situation in question has its own proper framework, in force at the date of the Dispatch. On 19/09/2017".

Invoices ...1300369, ...1300371 and ...1300374

u. The contested corrections of period 08.13, in the amount of € 412.27, € 16.62, and € 12.82, concern the mention of VAT exemption applied in invoices ...1300369, ...1300371 and ...1300374, relating to transfers of goods between the Claimant and B... (cfr. Article 31 of the RAP, Inspection Report section IX.31.1 and copies of invoices contained in annex VI of the administrative file).

v. As regards these invoices ...1300369, ...1300371 and ...1300374, the Claimant presented a request for revision regarding SAD 2013..., received on 01.03.2017 by the Customs Authority of ... and without response in the case file, to the effect that this document would mention invoices ...1300369, ...1300371 and ...1300374 in the respective box 44 (cfr. annex 21 of the Right to be Heard and document 4 of the RAP which contains the body of the revision request but not the SAD).

Invoice ...1300408

w. The contested correction of period 09.13, in the amount of € 846.62, concerns the mention of VAT exemption applied in invoice ...1300408, of 23.09.2013, relating to a transfer of goods between the Claimant and D... with address in Belgrade, Republic of Serbia (cfr. Article 34 of the RAP, Inspection Report section IX.31.1 and copy of invoice contained in document 5 of the RAP and annex VI of the administrative file).

x. As regards this invoice ...1300408:

• it concerns the transfer of the following goods:
  "Lin Code / Serial Number Qty Un Price Item Amount w/o Tax
  (…)
  …
  GAS SPRING 082503 20 UN 7.01 140.20
  …
  TCHSCR UPGRD 15" + 5 UN 564.39 2,821.95
  CNTRL BRD
  ** Cont **
  ...
  LCD 15" B… BA150XD 2 UN 359.40 718.80
  DVI + VGA W/O PSU&VGA"

• it was complemented by the document issued by the Claimant titled Shipping Note No. ..., of 18.09.2013, which specifies that the goods are subject to Incoterms: EX-WORKS |..., that it concerns 21 KGS and that the goods are destined for Belgrade;

• it was proven that the respective goods left the territory of the European Union and entered Serbian territory, as evidenced by the Unique Customs Document, copy 8 intended for Importer/Recipient, issued on 21.10.2013, attached with document 5 of the RAP, subject to certified translation (Serbian language to Portuguese language) attached to the case on 11.09.2019, document 5 of the RAP this which was not contested by the Respondent, which even admits that this document concerns an import declaration in section 92, page 15 of Order No. 1275 of 29.03.2019 issued by the Sub-Director of the tax management area – VAT: "However, the document in question is not an export declaration, but an import declaration, an inappropriate document to prove the occurrence of the export". Supporting the entry of goods into Serbian territory are in particular the following mentions of this declaration:

  (i) Unique Customs Document, 8, Copy for Importer/Recipient
  (ii) Destination Customs Authority: Belgrade Railway Station 11118/ 10.21.2013;
  (iii) Box 2: Shipper A.../PT;
  (iv) Box 8: Recipient D...;
  (v) Box 15: Dispatching Country Portugal;
  (vi) Box 20: Delivery Terms ... |...;
  (vii) Box 29: Entry Customs Authority 25011;
  (viii) Box 31 (3 entries): Shock Absorber for ATM Cover, Touch Screen Panel with Panel Control, 15 LCD Monitor ... (respectively), which coincide with the references of goods contained in invoice ...1300408;
  (ix) Box 35: Gross Weight kg 21;
  (x) Box 44 – attached documents: ...1300408/2013 (same number as the invoice in question);
  (xi) Boxes 41 and 42 (3 entries): Number of units 20, 5 and 2 (respectively) and Price 140.20, 2,821.95 and 718.80 (respectively), which coincide with the references of units and goods contained in the invoice...;
  (xii) Place and date: Belgrade 10/21/2013. Stamp of the competent authorities, not contested or contradicted by the Respondent.

Invoices ...1400110, ...1400111 and ...1400128

y. The contested corrections of period 03.14, in the amount of € 124.48, € 7.31, and € 280.27 concern the mention of VAT exemption on export applied in invoices ...1400110, ...1400111 and ...1400128, relating to transfers of goods between the Claimant and C... (cfr. Article 31 of the RAP, Inspection Report section IX.31.1 and copies of invoices contained in annex VI of the administrative file).

z. As regards these invoices, the Claimant presented a request for revision regarding SAD 2014..., presented on 03.03.2017 to the Customs Authority of ..., without response attached to the present case, to the effect that this document would mention invoices ...1400110, ...1400111 and ...1400128 in the respective field 44 (cfr. document 11 of the RAP and Annex 22 of the right to be heard attached to the administrative file, which contains the body of the revision request but not the SAD).

Invoices ...1300555, ...1300556, ...1300557, ...1300558, ...1300559

aa. As regards invoices ...1300555, ...1300556, ...1300557, ...1300558, ...1300559 of period 11.13, it was proven that the same were subject to a request for revision of customs dispatch SAD No. 2013..., made to the Customs Authority of Lisbon Airport on 03.03.2017, which was granted on 08.04.2017 by officials of that same Customs Authority (documents 6 and 6-A attached to the RAP).

B. Unproven Facts

1. No other customs documents or international goods shipping support documents with relevance to the case were proven, namely with regard to invoices ...1300370, ...1300372, ...1300373, ...1300546, ...1300572, ...1300573.

C. Substantiation of the Decision on Facts

1. Regarding facts, the Court does not have to pronounce on everything that was alleged by the parties, but rather has the duty to select the facts that matter for the decision and discriminate between proven and unproven matters (cfr. Article 123(2) of the CTPP and Article 607(3) of the Code of Civil Procedure, applicable ex vis Article 29 of the LRTA).

2. In this way, the facts pertinent to judgment of the case are chosen and selected according to their legal relevance, which is established in light of the various plausible solutions of the legal issues (cfr. former Article 511(1) of the Code of Civil Procedure, corresponding to current Article 596, applicable ex vis Article 29(1), subparagraph e) of the LRTA).

3. Taking into account the positions assumed by the parties, in light of Article 110/7 of the CTPP, the documentary evidence and the administrative file attached to the case, the aforementioned facts were deemed proven, with relevance to the decision, based on the documentary elements indicated therein.

4. Regarding the facts deemed unproven, the same are based on the non-existence of sufficient documentary evidence to extract the verification of the same.

5. No pronouncements were made, either as proven or unproven, regarding allegations made by the parties and presented as facts, consisting of strictly conclusive statements or legal arguments, which cannot be subject to proof and whose truthfulness must be assessed in relation to the concrete facts set forth above.

D. Burden of Proof

1. Article 74 of the General Tax Law provides that "The burden of proof of facts constituting the rights of the tax administration or of taxpayers falls on whoever invokes them."

2. Bearing in mind that it is a question of a right of the Claimant to VAT exemption, the burden of proof of the legal presuppositions it seeks to exercise shall rest on it (all the more so because, as demonstrated in the Final Inspection Report and admitted by the Claimant, there being extra-Community sales registered in VAT declarations and accounting for which there was no supporting documentation of any customs or international shipment documents, the presumption established in Article 75(1) of the General Tax Law does not operate in its favor).

IV. ON LAW AND MERITS

A. Delimitation of the Substantive Issue to Be Decided

1. In the present arbitral action, the Claimant essentially contests two types of corrections:
   (i) corrections made in the application of the exemption to so-called indirect exports, where the Claimant's customer acts as exporter; the corrections made to invoices ...1300357 and ...1300358 are in this situation where the goods were exported from Portugal not by the Claimant but by the company B..., established in the United Kingdom;
   (ii) corrections made in the application of the exemption to so-called direct exports, where the Claimant acts as exporter; the remaining corrections made and here subject to challenge are in this situation.

2. Notwithstanding the existence of two types of corrections, the substantive issue to be decided is a single and transversal one: given the facts deemed proven, are the presuppositions of Article 29(8) of the VATC fulfilled or not, which provides (as worded by Decree-Law 102/2008 of 20 June) that:

"8 - Transfers of goods and supplies of services exempt under subparagraphs a) to j), p) and q) of Article 14(1) and subparagraphs b), c), d) and e) of Article 15(1) must be substantiated through appropriate customs documents or, where there is no legal obligation for customs intervention, through declarations issued by the purchaser of goods or user of services, indicating the destination which will be given to them."

1. In the absence of substantiation, additional tax must be assessed in accordance with Article 28(9) of the VATC.

Let us see.

B. National Regulatory Framework

1. The substantive issue to be decided has its central legal framework in Articles 14 and 29 of the VATC which provide as follows at the time of the facts:

"Article 14 of the VAT Code (Decree-Law 394-B/84, of 26 December)

Exemptions in exports, operations assimilated to exports and international transport

1 - The following are exempt from the tax:

a) Transfers of goods dispatched or transported outside the Community by the seller or by a third party on his account;

(Amended by Decree-Law 290/92 of 28 December)

b) Transfers of goods dispatched or transported outside the Community by a purchaser not resident or established in national territory or by a third party on his account, even though, before their dispatch or transport, they undergo repair, transformation, adaptation or any other work in the interior of the country, carried out by third parties acting on behalf of the purchaser, with the exception of goods intended for the equipment or supply of recreational and pleasure boats, tourism aircraft or any other means of transport for private use and goods transported in the personal luggage of travelers with domicile or usual residence in another Member State;

(Amended by Decree-Law 82/94, of 14 March)

"Article 29 of the VAT Code (Decree-Law 394-B/84, of 26 December)

General Obligations

...

8 - Transfers of goods and supplies of services exempt under subparagraphs a) to j), p) and q) of Article 14(1) and subparagraphs b), c), d) and e) of Article 15(1) must be substantiated through appropriate customs documents or, where there is no legal obligation for customs intervention, through declarations issued by the purchaser of goods or user of services, indicating the destination which will be given to them.

(Amended by Decree-Law 102/2008, of 20 June)

9 - The lack of substantiating documents referred to in the previous number determines the obligation for the transferor of goods or supplier of services to assess the corresponding tax.

(Amended by Decree-Law 323/98, of 30 October)"

C. European Regulatory Framework

1. The national regime, in particular Article 14(1) subparagraphs a) and b) of the VATC, is framed by Article 146(1) of the VAT Directive, included in Chapter 6 of this Directive under the heading "Exemptions on Export". This article provides that:

"Article 146

Exemptions on Export

1. Member States shall exempt the following transactions:

a) Supplies of goods dispatched or transported, by the seller or his account, outside the Community;

b) Supplies of goods dispatched or transported by the purchaser not established in their territory, or his account, outside the Community, with the exception of goods transported by the purchaser himself and intended for the equipment or supply of pleasure boats, tourism aircraft or any other means of transport for private use;"

1. In turn, Article 29(8) of the VATC is framed by Articles 131 and 273 of the VAT Directive which establish:

Article 131

"The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and under the conditions laid down by the Member States in order to ensure the correct and simple application of those exemptions and to prevent any possible fraud, evasion or abuse"

Article 273

"Member States may provide for such other obligations as they consider necessary in order to ensure the correct collection of VAT and to prevent fraud, provided that those obligations do not give rise, in trade between Member States, to formalities related to the crossing of a frontier and that equal treatment is granted to intra-Community transactions and transactions carried out between Member States by taxable persons."

D. Rationale of VAT Exemptions on Export and Its Delimitation

1. In this regard, it is clear from case law of the Court of Justice – which has ruled several times in recent years on the rationale of VAT exemptions on export – that the VAT exemption provided for in Article 146(1), subparagraphs a) and b) of the VAT Directive:

i. Aims to ensure taxation of supplies at the place of destination, that is, where the exported products will be consumed;

ii. Aims at the exemption of deliveries of goods when the supplier demonstrates that the goods were dispatched or transported outside the Union and when, following such dispatch or transport, the goods physically left the territory of the Union;

iii. Can only be limited by Member States, within the scope of the powers conferred on them by Article 131 of the VAT Directive, in strict compliance with the principle of proportionality, with measures not being admitted that would make the right to deduction of VAT depend, in essence, on the fulfillment of formal obligations, without taking account of their substantive requirements or the substance of the operations carried out;

iv. Can only be limited by Member States, within the scope of the powers conferred on them by Article 273 of the VAT Directive, on the basis of non-compliance with formal requirements, when situations of tax fraud that has endangered the functioning of the common VAT system are involved.

E. Application of the Rationale of VAT Exemptions in Question to the National Export Rules and Its Delimitation

1. Applying the foregoing to our specific case – and remembering that Portuguese VAT is always framed by the harmonized Community VAT system – it follows that the validation of the VAT exemption applied to a given operation as an export, in situations where no suspicions of tax fraud or evasion arise, depends on proof of the actual exit of the goods in question from the territory of the Union.

2. It also follows that the requirement for compliance with formal requirements at customs authority level cannot be imposed to deny VAT exemption on export when other elements, which arise from the customs documents themselves or from documents supporting international shipment of goods, demonstrate the substantive requirements of the exemption on export and the actual (non-fraudulent) exit of goods from the territory of the Union.

3. Which is to say that the denial of VAT exemption by the Tax Authority cannot be admitted merely: (i) on the basis of non-compliance with the customs formalities of inclusion in box 44 of Code N380, number of the invoice of the Portuguese economic operator, date of issue of the invoice, indication of entity issuing type 4 and VAT number of the Portuguese economic operator and merely (ii) on the basis of the absence of presentation of the document of certification of departure for the national supplier.

4. The conclusion reached in the point above is all the more true given that the formalities required by the Tax Authority appear to be required on the basis of Circular Letter No. 15309/2014, of 10.11.2014, Circular Letter No. 15327/2015 of 09.01.2015 and Circular No. 8/2005 of 27.07.2015 (which repeals Circular Letter No. 15309/2014) (cfr. paragraph 4 of page 17 of the Final Inspection Report and page 9 of the Respondent's Response).

5. Now the requirement of these formalities based on the aforementioned circulars could never be admitted in the specific case: (i) first, because the customs formalities in question consist of generic guidelines that bind only the Tax Authority and not the taxpayers (ii) secondly because the corrections in question relate to periods prior (periods between 06.13 to 03.14) to the publication (and entry into force) of these guidelines (10.11.14, 09.01.2015 and 27.07.2015), (iii) more importantly, as we have already seen, because it follows from the rationale of the VAT exemptions in question that compliance with such formal requirements at the customs authority level cannot be imposed by a public administration to deny a VAT exemption on export, when other elements, in the customs documents themselves or in documents supporting international shipment of goods, demonstrate the substantive requirements of the exemption on export and the actual (non-fraudulent) exit of goods from the territory of the Union.

6. This court thus adheres to the Arbitral case law in case No. 88/2017-T of 13.12.2017, in which the Collective Arbitral Court decided:

"Given this, and in the case, it is considered that, properly interpreted the norm in question, of Article 29(8) of the applicable VATC, there does not result therefrom the imposition of a legal proof, in the form determined by the TA, which results in a violation of the principle of free assessment of evidence, as formulated in Article 607/5 of the Code of Civil Procedure, which prescribes that 'The judge freely assesses the evidence according to his prudent conviction about each fact; free assessment does not cover facts for whose proof the law requires special formality, nor those which can only be proven by documents...'.

As was written in the Decision of the Court of Appeal of Coimbra of 23-06-2015, issued in case 1534/09.7TBFIG.C1, for example, 'In certain cases, the law imposes on the judge the conclusion he must draw from a certain means of proof and therefore the relevance he must give to that same means of proof. This is what legal or tariff evidence consists of.'

But that is not what happens with Article 29/8 of the applicable VATC.

(…)

Thus, first, the norm of Article 29/8 of the applicable VATC, when speaking of 'appropriate customs documents', allows the reading that there be more than one type of customs document suitable for the proof in question."

1. Let us then see whether, in the specific case, it has been demonstrated that the goods actually left the Community territory following the respective transfers of goods.

Invoice ...1300357

1. Given the facts deemed proven regarding this invoice (subparagraphs o) to q) of the Proven Facts of the Facts section of this decision), in particular the correlation between invoice ...1300357 and the supporting document ... referred to in box 44 of the document of export declaration for the exporter of SAD No. 2013..., which is duly certified by the customs authorities attesting the exit of goods from Community territory, there is no doubt in this Court that the merchandise left Community territory destined for the United States of America and nothing indicates that the merchandise had been placed in circulation or consumed in national territory, thus forging the spirit of VAT exemption on export.

2. In this regard, the Respondent invokes that the response of the Customs Authority to the request for revision of the SAD – to the effect that it is not necessary to revise the SAD in question insofar as Circular Letter No. 15309/2014, of 10.11.2014 and Circular Letter No. 15327/2015 of 09.01.2015 are not applicable to the specific case – does not attest to the substantive nature of the operations, limiting itself to considering that, from the formal point of view, it was not necessary to mention the invoice in the aforementioned documents of export declaration for the exporter/shipper.

3. With due respect, recognizing that the Tax Authority that compliance with the customs formalities invoked by it was not required at the date of the facts, in view of the other elements that prove the actual dispatch of goods from Community territory, the recognition of the exemption is due, on penalty of being required from the taxpayer formal conditions for the application of an exemption impossible to fulfill.

4. And it should be said that the dichotomy of treatment with the operations titled by invoices ...1300555, ...1300556, ...1300557, ...1300558, ...1300559 is not understood, which, also concerning 2013 – and to which the same formal rationale would be applicable by which the revision of the SAD regarding invoice ...1300357 was denied – saw granted the request for revision of the respective SAD by the same Customs Authority of Lisbon Airport (with the consequent revocation of the additional VAT assessments).

5. Thus in this part the request for annulment of the respective assessment is well-founded.

Invoice ...1300358

1. The facts deemed proven regarding this invoice (subparagraphs r) to t) of the Proven Facts of the Facts section of this decision) demonstrate the correlation between invoice ...1300358, the EAD NRM... and the Air ... LIS...

2. However, the customs documents – EAD NRM... and supporting international transport documents... – presented do not prove the actual exit of the goods from Community territory.

3. Indeed, the EAD presented is blank in the field concerning certification of exit of goods.

4. And the Air... presented only demonstrates that the goods were delivered to the indicated air carrier in Portugal and that they were placed in its custody under the international air transport contract.

5. The actual exit of the goods from Community territory is thus not demonstrated without doubt, only that the same had authorization for exit of merchandise from Community territory for export (as indeed results from the regime of the Export Accompanying Document contained in Articles 796-A to 796-E of the Detailed Rules on VAT, applicable to the specific case, in particular Articles 796-A, 796-DA and 796-E).

6. Thus in this part the request for annulment of the respective assessment is not well-founded.

Invoices ...1300369, ...1300371 and ...1300374

1. Given the facts deemed proven regarding these invoices (subparagraphs u) to v) of the Proven Facts of the Facts section of this decision), the Court considers that the export of goods was not proven, since no customs documents or international goods shipment support documents were presented that would make it possible to prove the actual exit of the goods in question from Community territory.

2. Thus in this part the request for annulment of the respective assessment is not well-founded.

Invoice ...1300408

1. Given the facts deemed proven regarding this invoice (subparagraphs w) to x) of the Proven Facts of the Facts section of this decision), in particular the correlation between invoice ...1300408, the Incoterm EX-WORKS ... (which means that export formalities were the responsibility of the Claimant's customer) and the proof of import of the respective goods in the Republic of Serbia evidenced by the respective import document in this country, there is no doubt in this Court that the merchandise left Community territory and entered the Republic of Serbia, and nothing indicates that the merchandise had been placed in circulation or consumed in national territory, thus forging the spirit of VAT exemption on export.

2. Thus in this part the request for annulment of the respective assessment is well-founded.

Invoices ...1400110, ...1400111 and ...1400128

1. Given the facts deemed proven regarding this invoice (subparagraphs y) to z) of the Proven Facts of the Facts section of this decision), the Court considers that the export of goods was not proven, since no customs documents or international goods shipment support documents were presented that would make it possible to prove the actual exit of the goods in question from Community territory.

2. Thus in this part the request for annulment of the respective assessment is not well-founded.

Remaining Corrections

1. Regarding the remaining corrections in question, the Court considers that the export of goods was not proven, since no customs documents or international goods shipment support documents were presented that would make it possible to prove the actual exit of the goods in question from Community territory.

2. Thus in this part the request for annulment of the respective assessment is not well-founded.

F. Lack of Substantiation of the Decision to Dismiss the Administrative Review

1. The Claimant, in the RAP, imputes a defect of lack of substantiation to the act dismissing the Administrative Review.

2. It indicates for that purpose that it is all too evident that the correction is not duly substantiated in that the Tax Authority does not present a minimum substantiation for the corrections that it made, limiting itself to referring that elements are lacking "by way of example" without specifying them.

3. It argues, regarding the new elements that were attached to the review, that the Tax Authority limits itself to saying that the lack of compliance with all legally required requirements persists, but does not make express reference to any of the documents nor does it assess them.

4. The requirement for substantiation of harmful administrative acts is contained in Article 268(3) of the Constitution of the Portuguese Republic, which establishes that "administrative acts are subject to notification to those interested, in the form provided by law, and require express substantiation and accessibility when they affect rights or legally protected interests".

5. Especially for the substantiation of tax acts, Article 77(1) and (2) of the General Tax Law establish that "the decision of a procedure is always substantiated by means of a brief exposition of the reasons of fact and law that motivated it, being able the substantiation to consist in mere declaration of concordance with the grounds of earlier opinions, information or proposals, including those that make up the tax inspection report" and that "the substantiation of tax acts may be carried out in summary form, and must always contain the applicable legal provisions, the classification and quantification of the tax facts and the operations for determining the taxable matter and the tax".

6. In this regard, the Supreme Administrative Court has understood, in uniform case law, that the substantiation of an administrative or tax act is a relative concept that varies according to the type of act and the circumstances of the specific case, but that substantiation is sufficient when it allows a normal recipient to become aware of the cognitive and evaluative itinerary followed by the author of the act to make the decision, that is, when that person may know the reasons why the author of the act decided as it decided and not otherwise, in order to be able to trigger the administrative or contentious mechanisms of challenge.

7. Now in the decision that substantiates the dismissal of the Administrative Review, the Tax Authority not only identifies the reasons of fact and law that led to the corrections made, referring to the grounds explained by the Tax Inspection Services in the Final Inspection Report (paragraphs 1 to 4 of page 5 of the decision dismissing the Administrative Review), but also addresses expressly the new documents presented by the Claimant (now Petitioner) in that Review, indicating that they present incongruences such as, for example, regarding the date of the invoices and the customs documents, which do not allow correlation between the various documents due to the lack of direct correspondence between references, designations, quantities and even values of the goods invoiced by the petitioner and the remaining documents, not meeting the requirements of Article 29(8) of the VATC (paragraph 5 of page 5 and 1 of page 6 of the decision to dismiss in question).

8. The Tax Authority concludes that "(…) considering the elements brought to the case do not appear to be able to contradict the corrections of the Tax Inspection Services, which are duly substantiated in the inspection report (…). In conclusion, (…) the petitioner did not bring to the case sufficiently reliable data that would allow the proof, in a clear, concrete and unequivocal manner that the operations in question observed the legally imposed framework, to benefit from the exemption under Article 14 of the VATC" (paragraphs 2 and 3 of page 6 of the decision to dismiss in question).

9. It follows from what has been set forth here that the Tax Authority set forth the reasons of fact why it did not uphold the Petitioner's contentions, either by referring to the facts already duly explained in the Final Inspection Report, or by indicating that the new documents presented are incongruent in the crossing of various references between them, or by concluding that valid customs documents were not presented in accordance with that already indicated by the Tax Inspection Services, which were more than understood and comprehended by the now Claimant.

10. It also substantiated on the basis of law which rules were not verified as being met.

11. Moreover, the grounds of the Tax Authority for the dismissal were well understood by the Claimant, which multiplied in additional efforts to gather the proof that was required of it to support the exit of goods from Community territory, already in the request for arbitral pronouncement.

12. For these reasons this Court understands that the decision dismissing the Administrative Review does not suffer from a defect of lack of substantiation.

G. Payment of Compensatory Interest

1. The Claimant requests that the TA be condemned to the restitution of all amounts paid, plus the payment of compensatory interest accrued on that value.

2. In accordance with Article 24(1) and its subparagraph b) of the LRTA (in line with Article 100 of the General Tax Law), the arbitral decision in favor of the claim of the taxpayer has the effect of restoring the situation that would exist if the tax act subject to the arbitral decision had not been performed.

3. Article 24(5) of the LRTA, in providing that "interest payment is due, regardless of its nature, in the terms provided in the general tax law and in the Code of Tax Procedure and Process", permits, in case of success of the claim of the taxpayer, the recognition of the right to compensatory interest in the arbitral process, in accordance with Articles 43 and 100 of the General Tax Law, applicable ex vis Article 29 of the LRTA.

4. Article 43(1) of the General Tax Law provides that: "Compensatory interest is due when it is determined, in administrative review or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due".

5. In the present case, it was proven that the payment of the tax debt in which the claim for annulment of the respective assessment act is well-founded occurred through payment (including in this expression both actual payment and compensation of VAT credit with the value of additionally assessed tax) of additional assessment No. ..., in the amount of € 5,136.1 (correction of invoice ...1300357) and additional assessment No. ..., in the amount of € 846.62 (correction of invoice ...1300408), both issued on 28.03.2017 following the conclusion of the tax inspection procedure.

6. On that date, the following results from the evidence enumerated above regarding invoices ...1300357 and ...1300408:

(i) That the Tax Authority was, as regards invoice ...1300357, in possession of the appropriate documents that allowed it to conclude that the actual exit of goods from Community territory was proven (and consequently VAT exemption on export), cfr. annex 3 of the Right to be Heard attached to the administrative file, for which reason it is considered that there was error in the factual and legal presuppositions applied by the Tax Authority from which resulted payment of VAT in a moment greater than that legally due, which determines the payment of compensatory interest regarding the corresponding additional VAT assessment, on the value of € 5,136.1;

(ii) That as regards invoice ...1300408, the appropriate documents that make it possible to prove the exit of goods from Community territory were only presented by the Claimant – to whom the burden of proof fell – in a moment subsequent to the tax assessment acts, designating in the request for arbitral pronouncement when attaching the translation to Portuguese of the Serbian import document which permits the crossing of a series of information demonstrating the exit of goods. Thus in this part this Court cannot consider verified that "there was error attributable to the services resulting in payment of the tax debt in an amount greater than that legally due".

1. It thus results from the foregoing that the request for payment of compensatory interest on the additional assessments contested is well-founded partially on the value of € 5,136.1, in accordance with Articles 43 of the General Tax Law and 61 of the CTPP.

V. DECISION

For these reasons, and with the grounds set forth, this Arbitral Court decides:

a) To declare the instance extinct due to supervening impossibility of the dispute regarding additional assessment No. ..., concerning the period of June 2013, in the amount of € 11,965.21 and additional assessment No. ... concerning the period of November 2013, in the amount of € 10,651.35.

b) To judge partially well-founded the arbitral claim and annul additional assessment No. ..., concerning the period of August 2013, in the amount of € 5,136.1, correction made regarding invoice ...1300357 and annul additional assessment No. ..., concerning the period of September 2013, in the amount of € 846.62, correction made regarding invoice ...1300408;

c) To annul, as a consequence, partially, the act dismissing the Administrative Review above identified, in the part concerning additional assessment No. ..., in the amount of € 5,136.1, and in the part concerning additional assessment No. ... in the amount of € 846.62;

d) To condemn the Respondent to the payment of compensatory interest due on the amount of € 5,136.1, counted until processing of the respective credit note, calculated in accordance with the provisions of Articles 43 of the General Tax Law and 61 of the CTPP;

e) To judge not well-founded the request for arbitral pronouncement in the remaining claims of the Claimant;

All with the respective legal consequences, namely:

f) Of restitution, by the Respondent to the Claimant, of the amount of € 5,982.72 corresponding to the value of the additional assessments here partially annulled and paid by the Claimant.

VI. VALUE OF THE CASE

The value of the case is fixed at € 39,124.13, in accordance with the provisions of Articles 3(2) of the Regulation of Costs in Tax Arbitration Proceedings ("RCPAT"), 97-A(1), subparagraph a) of the CTPP and 306(1) and (2) of the Code of Civil Procedure ("CCP"), the latter ex vis Article 29(1), subparagraph e) of the LRTA.

VII. COSTS

The amount of Costs is fixed at € 1,836.00, which, according to the general rules of proportionality in loss of the case and special rules of distribution in case of supervening impossibility of the dispute, falls to the charge of the Claimant in the amount of 84.71%, in the value of € 1,555.28 and to the charge of the Respondent in the amount of 15.29%, in the value of € 280.72, in accordance with Table I annexed to the RCPAT and the provisions of Articles 12(2) and 22(4) of the LRTA, 4(5) of the RCPAT and 527(1) and (2), 536(3) and 537 of the CCP, ex vis Article 29(1), subparagraph e) of the LRTA.

Notify.

Lisbon, 26 September 2019

The Arbitrator,

(Catarina Belim)