Process: 657/2014-T

Date: October 20, 2017

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This Portuguese tax arbitration case (Process 657/2014-T) concerns the VAT treatment of marble block sales by A... SA to a Spanish company, B... SL. The taxpayer initially classified these transactions as exempt intra-Community supplies under Article 14(1)(a) of the RITI (VAT Intra-Community Transactions Regime), reporting them in field 7 of periodic VAT declarations. Following an external inspection by the Finance Department in 2009-2010, tax authorities determined these were domestic supplies subject to VAT under Article 6(1) of the VAT Code, not exempt intra-Community transactions. During the inspection, the taxpayer voluntarily regularized its position by submitting substitute periodic VAT declarations (declarações periódicas de substituição), resulting in self-assessments totaling €180,015.46 (€169,063.29 in tax plus €10,952.17 in compensatory interest). The taxpayer subsequently appealed administratively, arguing the sales qualified for VAT exemption as direct exports under Article 14(b) of the VAT Code, provided proper customs documentation existed. After administrative dismissal, the taxpayer brought arbitration proceedings before CAAD requesting declaration of illegality of the VAT assessments and interest, alleging error in legal classification. The case involved significant procedural developments including replacement of two arbitrators due to illness and resignation. The arbitral tribunal was constituted under Decree-Law 10/2011 establishing the Legal Framework for Tax Arbitration (RJAT). The central legal issue is whether marble sales to a Spanish customer constitute exempt exports or taxable domestic supplies, requiring analysis of substantive conditions for VAT exemptions and whether CAAD has jurisdiction over challenges to voluntary self-assessments made through substitute declarations.

Full Decision

ARBITRAL DECISION

The Arbitrators, Councillor Jorge Lopes de Sousa (Arbitrator President), Dr. Conceição Pinto de Sousa and Dr. Marcolino Pisão Pedreiro, appointed by the Deontological Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby agree on the following:

I. REPORT

  1. On 03.09.2014, the company A..., SA, with registered office in ..., ..., ..., Ourém, NIPC ... submitted a request for the constitution of a single arbitral tribunal, in accordance with and for the purposes of the provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter "RJAT"), with the Tax and Customs Authority (AT) being summoned.

  2. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD on 03.09.2014 and automatically notified to the AT on 04.09.2014.

  3. In accordance with the provisions of article 6, paragraph 1 and article 11, paragraph 1, letter b) of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal Councillor Jorge Lino Alves de Sousa, Dr. Conceição Pinto de Sousa and Professor Guilherme W. d'Oliveira Martins, who communicated acceptance of the corresponding office within the applicable deadline.

  4. On 03.11.2014 the parties were duly notified of this appointment, and expressed no wish to refuse the appointment of the arbitrators in accordance with the joint provisions of article 11, paragraph 1, letters a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  5. By order of 12.12.2014, the following was decided: "As the parties raised no objection, the tribunal invites the Claimant to pronounce itself, within a period of 10 days, on the exceptional matter alleged up to article 15 of the AT's response, the tribunal dispensing itself from holding the meeting referred to in article 18 of the RJAT. And, in the same vein, as the parties likewise raised no objection, the tribunal dispenses itself from the examination of the witnesses listed in the initial petition, as it appears that the case already contains the necessary elements to decide on the law."

  6. On 04.02.2015 the following was decided: "The Deontological Council of CAAD became aware that His Excellency Councillor Jorge Lino Alves de Sousa, arbitrator-president of the collective tribunal functioning in the case in question, is incapacitated, due to illness, from performing these functions. Consequently, in accordance with and under article 8, paragraph 1 of the Deontological Code of CAAD, we are obliged to terminate his mandate and appoint, as his replacement, in the capacity of arbitrator-president, His Excellency Councillor Jorge Manuel Lopes de Sousa, in observance of the provisions of article 9 of the same code. Notify all parties involved in the present case."

  7. On 05.02.2015 the following was decided: "Since the parties made no request regarding the order of 12-12-2014 in which it was stated that 'the case already contains the necessary elements to decide on the law', the case shall proceed immediately to decision. The date of 16-03-2015 is set for the decision, and by that date the Claimant must pay the subsequent court fee."

  8. As it was not possible to deliver the decision by the announced date, the initial deadline was successively extended until the final date of 02.07.2015, by orders of 11.03.2015, 14.04.2015, 29.04.2015, 22.05.2015 and 22.06-2015.

  9. In the present arbitral case, the Claimant requests that the illegality of the acts assessing Value Added Tax (VAT) and compensatory interest resulting from the self-assessments of tax resulting from the periodic VAT declarations of model C substitution submitted by the Claimant for voluntary regularization of its tax-legal situation in the course of the inspection action carried out by the Finance Department of ... in the years 2009 and 2010 be declared, which gave rise to the corresponding VAT and compensatory interest collection documents, all in a total of €180,015.46, being €169,063.29 of tax and €10,952.17 of compensatory interest.

  10. By petition of 12-03-2015, the Claimant stated that it withdrew the request in relation to invoices Nos. 15/2010, 17/2010 and 46/2010.

  11. On 21-09-2017, the President of the Deontological Council of CAAD issued an order in these terms:

"In case No. 657/2014-T, His Excellency Professor Guilherme de Oliveira Martins, adjunct arbitrator of the collective tribunal constituted in this case, has resigned from the functions of arbitrator, invoking reasons which are to be considered as justifiable. Accordingly, it is determined to replace, as adjunct arbitrator in the present case, His Excellency Professor Guilherme d'Oliveira Martins with His Excellency Dr. Marcolino Pisão Pedreiro."

  1. Dr. Marcolino Pisão Pedreiro accepted the appointment which was communicated to the parties who raised no opposition.

I.1. The Claimant sustains its request, in summary, in the following terms:

  1. The Claimant requests that the illegality of the acts assessing Value Added Tax (VAT) and compensatory interest resulting from the self-assessments of tax resulting from the periodic VAT declarations of model C substitution submitted by the Claimant for voluntary regularization of its tax-legal situation in the course of the inspection action carried out by the Finance Department of ... in the years 2009 and 2010 be declared, which gave rise to the corresponding VAT and compensatory interest collection documents, all in a total of €180,015.46, being €169,063.29 of tax and €10,952.17 of compensatory interest.

  2. For this purpose, it invokes the defect of violation of law due to error by the AT as to the tax-legal classification of the operations in question, which it understands to be subject to VAT but exempt under letter b) of article 14 of the VAT Code as the conditions for direct export are met.

  3. The Claimant proceeded to sell various blocks of marble to B... SL, taxpayer B..., with registered office in Spain, considering the operations exempt from VAT under letter a) of paragraph 1 of article 14 of the RITI, by marking the respective periodic tax declarations in field 7, intended for intra-Community supplies of goods.

  4. In the context of the external inspection action carried out by the Finance Department of ..., pursuant to Service Order No. OI2011..., it was concluded that the operations in question constitute supplies of goods subject to VAT and not exempt, located in national territory, in accordance with paragraph 1 of article 6 of the VAT Code, combined with letter a) of paragraph 1 of article 1 and paragraph 1 of article 3 of the same legal instrument.

  5. In the course of the inspection action the Claimant regularized its tax-legal situation, by submitting periodic substitution declarations and consequent self-assessments of tax, increased by compensatory interest, reflected in the collection documents identified in the case file.

  6. By petition of 28.09.2012, the Claimant submitted an appeal of the self-assessments referred to, filed in the Finance Service of ... with No. ...2012..., invoking generically that the sale of the blocks of marble in question had as "destination export", without invoking for that purpose in the 20 articles of the text any legal reference other than the RITI. This appeal was dismissed by order of the Head of Division of Tax Justice of the Finance Department of ..., of 05.02.2013.

  7. On 13.03.2013 the Claimant lodged a Hierarchical Appeal, filed with No. ...2013..., against that dismissal, with the ground that "the exports in question benefit from the VAT exemption, under the terms provided in letter a) of paragraph 1 of article 14 of the VAT Code, provided that duly proved by means of the appropriate customs documents", and that therefore "VAT and compensatory interest are not due in the periods indicated in the disputed assessments". The appeal was dismissed, on the grounds of non-application of the concept of export (even if indirect), nor in any special regime.

  8. It demonstrates in the initial petition that supplies of goods are at issue with the following method:

a. Dispatch from the customs posts of Portugal in the name of B..., SL;

b. Embarked at Port ... with destination to China;

c. Delivered at ports in China shown in the BLs.

  1. Classifying the respective operations as supplies of goods exempt from VAT under the terms of letter b) of paragraph 1 of article 14 of the VAT Code, maintaining that the VAT exemption is not ruled out by the fact that the claimant declared in the periodic VAT declarations that these were intra-Community supplies and invoking in the invoices the exemption under letter a) of paragraph 1 of article 14 of the VAT Code.

  2. Thus it disputes 11 assessments referring to the periods 0906, 0909, 0912, 1003, 1005, 1006, 1007, 1008, 1009, 1010, 1011, all in a total of €180,015.46, being €169,063.29 of tax and €10,952.17 of compensatory interest.

I.B. In its Response, the AT invoked, briefly, the following:

a) By Way of Objection

  1. In fact, the collection documents identified by the Claimant in its request for arbitral decision correspond to the difference in tax between the periodic declaration initially submitted and the subsequent substitution declaration submitted by the Claimant for regularization of its tax-legal situation in the course of the aforesaid inspection action.

  2. For its part, the substantive contestability of the self-assessment of tax depends on the prior appeal, in accordance with paragraph 1 and 2 of article 131 of the Code of Tax Procedure and Process, which was lodged by the Claimant and was the subject of a decision of dismissal, subsequently upheld in hierarchical appeal.

  3. In this context, the illegality of the self-assessments is a corollary of the act of dismissal of the hierarchical appeal which upheld the dismissal of the appeal, administrative acts which confirm those self-assessments, incorporating their alleged illegality.

  4. It follows from this that the Claimant should formulate its request expressly aimed at declaring the illegality of the act of dismissal issued in administrative litigation in question, namely the dismissal of the hierarchical appeal which upheld the dismissal of the appeal, without which the Arbitral Tribunal is prevented from pronouncing itself on the illegality of those appeals and hierarchical appeal decisions, since the tribunal's powers of cognition are limited by the request formulated.

  5. In addition to not requesting an arbitral decision on those decisions issued in administrative litigation, the Claimant also invokes no illegality regarding those decisions, as results from the content of its pleading and the respective request formulated at the end.

  6. In such terms, the Arbitral Tribunal cannot consider the request, as the respective procedural prerequisites are not met.

  7. Without conceding, it further invokes that by reason of the fact that the Claimant in the course of the inspection procedure, as well as in the appeal and hierarchical appeal, did not invoke the provision of letter b) of paragraph 1 of article 14 of the VAT Code, it is understood that the decision of dismissal of the hierarchical appeal is not contestable with the grounds and means of proof now presented.

b) By Way of Substantive Response

  1. The respondent disputes all articles 4 to 115 of the imputation and refers to the decision issued in hierarchical appeal, invoking summarily that "in no case was the goods sold or dispatched/transported from Portugal to Spain or any other Community country", for which reason such supplies of goods do not constitute intra-Community supplies, under letter a) of paragraph 1 of article 14 of the RITI, constituting operations carried out in national territory subject to VAT, under letter a) of paragraph 1 of article 1 and paragraph 1 of article 3 of the VAT Code.

  2. As can be seen from the inspection report, although the goods were intended for export, they were supplied to the company B..., SL, established in Spain and dispatched to a third country, from national territory, by this company, thus constituting an "indirect export" covered by letter a) of paragraph 1 of article 14 of the VAT Code.

  3. This indirect export must however be proved by means of the appropriate customs documents, as provided in paragraph 8 of article 28 of the VAT Code, the Claimant not having proved what is alleged, as it did not present to the case documents proving the departure of the goods in question from national territory, with destination to a third country, in accordance with that provision, so as to attest that, within its legal sphere, such transactions were susceptible of application of the exemption provided under letters a) or b) of paragraph 1 of article 14 of the VAT Code.

  4. It should consequently be judged that the Claimant's request is without merit.

I.3. The Claimant presented its response to the objection, in the following terms:

  1. It invokes the content of letter a) of paragraph 1 of article 2 of the RJAT.

  2. It states that the notification sent to the claimant by the AT communicated that the latter, not agreeing with the dismissal of the hierarchical appeal, has the right to lodge judicial impugnation, in accordance with letter a) of article 101 of the LGT.

  3. Now, it concludes, the object of judicial impugnation consists in the illegality of tax acts, including the self-assessment.

  4. From which it follows that the present action constitutes the proper means for the defence of the claimant's rights.

II. PRELIMINARY EXAMINATION

  1. The Tribunal is competent and is regularly constituted, in accordance with articles 2, paragraph 1, letter a), 5 and 6, all of the RJAT.

  2. The parties have legal standing and capacity, are legitimate parties and are legally represented, in accordance with articles 4 and 10 of the RJAT and article 1 of Order No. 112-A/2011, of 22 March.

  3. The case does not suffer from any nullities.

  4. The Tax and Customs Authority further raises, as an objection, the question of whether the decision of the hierarchical appeal is contestable with the grounds and means of proof presented and whether any defect is imputable to it. However, in arbitral cases, assessments are always the object of the case (direct or indirect), as results from article 2 letter a) of the RJAT, for which reason the declaration of their illegality may be requested directly, even when an appeal and hierarchical appeal are submitted which uphold them, for which reason defects do not have to be imputable to the decisions of that appeal or hierarchical appeal.

Indeed, this follows already from the decision of the Central Administrative Court South, for, despite the difficulty in identifying the ground for nullity, it follows clearly from the judgment that the understanding is adopted that the defects imputable to the assessments disputed in arbitral proceedings may be different from those invoked in the preceding necessary appeal or hierarchical appeal, which implies that only defects have to be imputable to the assessments, even new ones, as is the case.

For this reason, this objection fails.

III.1. FACTS

The following facts are considered proved:

a) An inspection action was carried out on the Claimant in which the Tax Inspection Report was prepared, which forms part of document No. 96 attached with the request for arbitral decision, the content of which is reproduced herein, in which the following is stated, among other things:

VI - REGULARIZATIONS EFFECTED BY THE TAXPAYER IN THE COURSE OF THE INSPECTION ACTION.

VI -1 Supplies of goods subject to VAT in accordance with letter a) of paragraph 1 of article 1, paragraph 1 of article 3 and paragraph 1 of article 6, all of the VAT Code, from which tax shortfall resulted.

In the years 2009 and 2010, the taxpayer A..., SA carried out supplies of goods to the company B..., SL, established in Spain. The goods which were invoiced to the latter company were dispatched from national territory to a third country – China – and the export was carried out by the Spanish company B... SL. In no case was the goods sold dispatched/transported from Portugal to Spain or any other Community country, for which reason these operations are not considered intra-Community supplies, contrary to what the taxpayer did, exempting them under letter a) paragraph 1 of article 14 of the RITI. The supplies of goods in question, made by A..., SA to B..., SL, were supplies of goods which were in national territory, made to a customer established in another Member State - Spain, where the goods were delivered to the purchaser in national territory and by the latter dispatched/exported from a Portuguese port (Lisbon or Sines), to a Third Country - China. Thus, these supplies of goods, made by A..., SA to B..., SL, on a paid basis, are considered effected in national territory, in accordance with paragraph 1 of article 6 of the VAT Code, which provides that "Taxable supplies are supplies of goods which are located in national territory at the moment when transport or dispatch to the purchaser begins or, in the case of no dispatch or transport, at the moment when they are placed at the disposal of the purchaser", and are subject to VAT in accordance with the provisions of letter a) of paragraph 1 of article 1 and paragraph 1 of article 3 of the VAT Code, which respectively define that - "The following are subject to value added tax: a) Supplies of goods and provision of services effected in national territory, on a paid basis, by a taxable person acting as such;" "A supply of goods is generally understood to be the paid transfer of tangible goods in a way corresponding to the exercise of the right of ownership."

The taxpayer considered these supplies exempt in accordance with letter a) of paragraph 1 of article 14 of the RITTI, using field 7 of the Periodic VAT Declarations intended for Intra-Community Supplies of Goods (ISG). We conclude that the goods were not dispatched/transported from Portugal to Spain, or any other Community country, for which reason the operations are not considered intra-Community supplies. It should also be noted that in some invoices issued to B..., SL the reason justifying the non-application of the tax is not indicated, as required by letter e) of paragraph 5 of article 36 of the VAT Code, however the operations carried out have characteristics identical to those already referred to, and therefore are also subject to VAT.

VI -1.1 VAT Shortfall/Year 2009 - € 33,755.23

In the following table, relating to the year 2009, are identified the invoices which evidence supplies of goods which the taxpayer exempted in accordance with letter a) of paragraph 1 of article 14 of the VAT Code, but which relate to supplies of goods subject to VAT in accordance with the provisions of letter a) of paragraph 1 of article 1 and paragraph 1 of article 3 of the VAT Code and which are considered located in Portugal, in accordance with the provisions of paragraph 1 of article 6 of the same Code (Table 1):

The taxpayer made the delivery of the following Model C VAT substitution declarations, relating to the following periods, correcting the shortfall situations:

09/06 Declaration No. ... (regularized VAT in the amount of € 8,536.14) 09/07 Declaration No. ... (replaced only for declarative error values initially declared in field 7 which were corrected to field 8, as these were exports) 09/09 Declaration No. ... (regularized VAT in the amount of € 9,407.32) 09/12 Declaration No. ... (regularized VAT in the amount of € 15,811.77)

VI -1.2 VAT Shortfall/Year 2010 - € 135,308.06

In the following table, relating to the year 2010, are identified the invoices which evidence supplies which the taxpayer exempted in accordance with letter a) of paragraph 1 of article 14 of the VAT Code and letter a) of paragraph 1 of article 14 of the RITTI, but which relate to supplies of goods subject to VAT in accordance with the provisions of letter a) of paragraph 1 of article 1 and paragraph 1 of article 3, both of the VAT Code and which are considered located in Portugal, in accordance with the provisions of paragraph 1 of article 6 of the same code (Table 2):

The taxpayer made the delivery of the following Model C VAT substitution declarations, relating to the following periods, correcting the shortfall situations:

10/03 Declaration No. ... (regularized VAT in the amount of €11,685.76) 10/05 Declaration No. ... (regularized VAT in the amount of €23,032.77) 10/06 Declaration No. ... (regularized VAT in the amount of € 24,864.69) 10/07 Declaration No. ... (regularized VAT in the amount of € 18,857.74) 10/08 Declaration No. ... (regularized VAT in the amount of € 15,189.02) 10/09 Declaration No. ... (regularized VAT in the amount of € 9,201.13) 10/10 Declaration No. ... (regularized VAT in the amount of € 19,747.22) 10/11 Declaration No. ... (regularized VAT in the amount of € 12,729.83)

Total Regularizations: € 135,308.06

b) Following the inspection action, VAT and compensatory interest assessments were issued together with the request for arbitral decision, the contents of which are reproduced herein, relating to the following periods and amounts:

  • VAT for period 0906, assessment No. ..., in the amount of € 8,536.14;

  • Compensatory interest for period 0906, assessment No. ..., in the amount of € 873.73;

  • VAT for period 0909, assessment No. ..., in the amount of € 9,407.32;

  • Compensatory interest for period 0909, assessment No. ..., in the amount of € 868.05;

  • VAT for period 0912, assessment No. ..., in the amount of € 15,811.77;

  • Compensatory interest for period 0912, assessment No. ..., in the amount of € 1,299.60;

  • VAT for period 1003, assessment No. ..., in the amount of € 11,685.76;

  • Compensatory interest for period 1003, assessment No. ..., in the amount of € 846.50;

  • VAT for period 1005, assessment No. ..., in the amount of € 23,032.77;

  • Compensatory interest for period 1005, assessment No. ..., in the amount of € 1,509.44;

  • VAT for period 1006, assessment No. ..., in the amount of € 24,864.59;

  • Compensatory interest for period 1006, assessment No. ..., in the amount of € 1,550.46;

  • VAT for period 1007, assessment No. ..., in the amount of € 18,857.74;

  • Compensatory interest for period 1007, assessment No. ..., in the amount of € 1,111.83;

  • VAT for period 1008, assessment No. ..., in the amount of € 15,189.02;

  • Compensatory interest for period 1008, assessment No. ..., in the amount of € 863.90;

  • VAT for period 1009, assessment No. ..., in the amount of € 9,201.13;

  • Compensatory interest for period 1009, assessment No. ..., in the amount of € 480.98;

  • VAT for period 1010, assessment No. ..., in the amount of € 19,747.22;

  • Compensatory interest for period 1010, assessment No. ..., in the amount of € 967.34;

  • VAT for period 1011, assessment No. ..., in the amount of € 12,729.83;

  • Compensatory interest for period 1011, assessment No. ..., in the amount of € 580.34;

c) The Claimant submitted an appeal which forms part of the administrative case file, the content of which is reproduced herein, invoking, in summary, that the sales of blocks of marble were ordered by customers of B... SL and had destination China, being dispatched by that company, for which reason, attending to the principle of substance over form and article 11, paragraph 3, of the LGT, the supplies of goods in question should be considered for tax purposes as exports and not as operations subject to VAT, as the Claimant possessed the customs documents;

d) The appeal was dismissed by order and it states agreement with an opinion the content of which is reproduced herein, in which the following is stated, among other things:

With regard to the conclusion formulated by the appellant in which the recognition of the exemption should focus on economic reality and not on the fact or legal transaction "strictu sensus" and as such be considered for tax purposes as exports and not as operations subject to VAT, basing its position on paragraph 3 of article 11 of the LGT, and which refers to the interpretation of tax rules, from our point of view we cannot share the same interpretation given by the appellant.

Paragraph 3 of article 11 of the LGT provides that "If doubt persists on the meaning of the rules of incidence to be applied, account should be taken of the economic substance of the tax facts."

Now, as to the interpretation which can be drawn from the rule in question, the application of the said provision is residual, indeed the interpretation rules contained in paragraphs 2 and 3 of this article are of successive application. Thus, it is only in the event of impossibility of application of paragraph 2, which provides that "Whenever tax rules use terms proper to other branches of law, these should be interpreted in the same sense as they have there, unless it follows otherwise directly from the law", that paragraph 3 applies.

In the present case, it seems evident that it will not even be permissible to frame the interpretation of the VAT rules now in dispute within paragraph 2 of article 11 of the LGT, and all the more so, in no way could the application of paragraph 3 of this provision be made, as desired by the appellant, because we are undoubtedly in the presence of an interpretation and application of proper rules, (VAT Code) specific to tax law without parallel in any other legislation which makes up our national legal order.

It is settled according to doctrine that the point of view enshrined in paragraph 3 fits within a general idea, not present, it should be emphasized, in the general tax law, that Tax Law aims at economic realities and not legal facts. Consequently, deliberately forgetting the "instrument" through which the economic fact becomes an element of the tax legal type. And leading to the "contamination" economic of the search and, thus, of the interpretation of the rule, and thus of the interpretation of the rule. This path easily leads to the derogation of legal rules by the interpreter of the rule, on the pretext, more or less stated, of its inadequacy to the economic results which are erected, with broad subjectivism, into its purpose.

A position which is understood in its fullness, considering that the various legal systems, and the tax one in particular, must contain in its rules and transmit to taxpayers a certainty, fundamental legal security for the tax relationship which is established between the state and its citizens.

e) The Claimant lodged a Hierarchical Appeal of the decision dismissing the appeal;

f) The Hierarchical Appeal was dismissed by a decision which refers to the grounds of an opinion, the content of which is reproduced herein, in which the following is stated, among other things:

4.2. Opinion

4.2.1. The appellant, having recognized that the supplies of goods had, erroneously, been accounted for and declared as exempt, under the terms of the provision of letter a) of paragraph 1 of article 14 of the RITI, proceeded to deliver substitution declarations for the periods under analysis, where it entered the values of the tax shortfall calculated in the inspection report, thus filling in the shortfalls detected by the SIT.

4.2.2. However, it now alleges that there is no legal basis for the additional assessments now in question, on the ground that the goods were intended for a third country (China), being true exports, classifiable under the exemption provided in letter a) of paragraph 1 of article 14 of the VAT Code, provided they are duly proved by means of the customs documents provided for in paragraph 8 of article 29 of the VAT Code.

4.2.3. However, it is added at the outset, that following analysis of the elements available in the case, there appear to be no reasons to revoke the contested act, in that those elements do not prove, in a concrete and unequivocal way, that the operations in question observed the legally imposed framework, to benefit from the exemption under article 14 of the VAT Code.

4.2.4. Paragraph 8 of article 29 of the VAT Code provides that the operations exempt under letter a) of paragraph 1 of article 14 (among other referred to there) must be proved by means of appropriate customs documents or, if there is no legal obligation of intervention of the customs services, by declaration issued by the purchaser of the goods, indicating the destination to be given to them. Being certain that the lack of such documents of proof implies, for the supplier of the goods, the obligation to assess the corresponding tax, in accordance with the provisions of paragraph 9 of the same article.

4.2.5. On the other hand, even if the operations under analysis constituted situations susceptible of classification under article 6 of Decree-Law No. 198/90, of 19/06, legislation which regulates the VAT exemption regime in sales to national exporters, presupposing this exemption regime the occurrence of two subsequent operations of the same goods, the following framework would have had to be observed (which was not the case in the matter in hand).

• Existence of a sale in national territory, by a supplier also national, where the purchaser is a Portuguese exporter, followed by a sale by that same exporter to a purchaser located in a third country/territory (export);

• The second operation (export) would be exempt from VAT, under letter a) of paragraph 1 of article 14 of the VAT Code;

• The first operation could only be an exempt operation, if the conditions set by the special regime regulated by the said legislation were met and with the express option of those involved.

4.2.6. However, the application of the exemption regime to the supplier of the exporter is based on the use of procedures and obligations in issuing, namely, attestation by customs and delivery to the supplier, of certificates which prove the effective departure of the goods from the customs territory (export) - the Export Proof Certificates (EPC). This certificate constitutes the document used in the scope of the special exemption regime in sales by suppliers to national exporters, provided for in Decree-Law No. 198/90 of 19/06, which after being visaed by customs, attests to the VAT exemption in the sale of the supplier to the exporter.

4.2.7. In summary, being clearly expressed in letter a) of paragraph 1 of article 14 of the VAT Code that the dispatch or transport of the goods outside the Community has to be ensured by the supplier of the goods itself or by a third party on behalf of the seller, in addition to the prerequisites previously referred to, to benefit from the VAT exemption on export it is still necessary to prove that the goods were effectively transported and dispatched from national territory, with destination to a third country. Such proof must be effected by means of appropriate customs documents, in accordance with the provisions of paragraph 8 of article 29 of the VAT Code, namely, the third copy of the Single Customs Document (DAU) duly certified by the customs authority at the exit of the territory of the Community.

4.2.8. Being thus, in the case of the dispatch or transport of the goods outside national territory with destination to a third country is not carried out by the seller or by a third party on its behalf, but rather by a customer of theirs who acquired them in national territory to then proceed to their export, only this latter operation can benefit from the VAT exemption provided in letter a) of paragraph 1 of article 14 of the VAT Code, the seller remaining under obligation to assess the VAT in the supply of goods effected in national territory, even though the subsequent export operation of the same goods can be proved by means of appropriate customs documents, which obviously are not in its name, but in that of its customer (the exporter).

4.2.9. Now, as the SIT referred "...the goods which were invoiced to this latter company, were dispatched from national territory to a third country - China, and the export was carried out by the Spanish company B... SL. In no case was the goods sold dispatched/transported from Portugal to Spain or any other Community country ..." for which reason, such supplies of goods did not constitute intra-Community supplies, under letter a) of paragraph 1 of article 14 of the RITI. And, they added that, being the goods located in national territory at the moment when transport or dispatch began, as provided in paragraph 1 of article 6 of the VAT Code, constituted operations effected in national territory, subject to VAT, under letter a) of paragraph 1 of article 1 and paragraph 1 of article 3 of the VAT Code.

4.2.10. This classification would be correct if the purchaser of the goods were a taxable person with registered office or permanent establishment in Portugal, even if the goods were intended for export, and the provisions of article 6 of Decree-Law No. 198/90, of 19/06 were not applicable to them. However, as can be seen from the inspection report and the description of the transaction made by the appellant itself, although the goods were intended for export, they were supplied to the company B..., SL, established in Spain and dispatched to a third country, from national territory, by this company, thus constituting an "indirect export" covered by letter b) of paragraph 1 of article 14 of the VAT Code. It is emphasized that to this effect goes the content of Opinion No. 54/2012, of 28 November 2012, of the Centre for Tax Studies, issued following analysis of a similar situation, where the same exporting company was also B..., SL.

4.2.11. It should be noted however that the situation of indirect export provided in letter b) of paragraph 1 of article 14 of the VAT Code should be proved by means of appropriate customs documents, as provided in paragraph 8 of article 28 of the VAT Code. For this purpose, the scheme of proof defined in Information No. 198, of 1985/06/26, Proc. EN1270/85, of this Service Department, which received favorable order of 1985/07/22, relating to a similar case, may be observed, namely, the taxable person not established in Portugal (exporter – B... S.L.) should have indicated the name and address of the supplier of the goods and annexed to the dispatch voucher a copy of the invoice of the sale of the goods and after effecting the export should have sent to the appellant (supplier of the goods) a copy of the DAU (Single Customs Document) presented to the Customs Services to constitute, within the sphere of this, a document proving the "indirect export".

4.2.12. That is, for the supplies in question to be able to benefit from the exemption provided in letter b) of paragraph 1 of the VAT Code it was necessary, on one hand, that the supplying company (the appellant) indicated in the invoices issued that this was an exempt operation by way of the provision of this rule and, on the other hand, that the exporter (B... SL) indicated the name and address of the supplier of the goods and annexed to the export dispatch voucher a copy of the invoice issued by the appellant. And, after effecting the export the exporter should have sent it a copy of the DAU presented at the Customs Services to constitute, within the sphere of the appellant, a document proving the "indirect export".

4.2.13. However, this was not the case, as, in the matter in hand, in addition to the appellant asserting that the operations constituted effective exports, it did not prove what was alleged, as it did not present to the case documents proving the departure of the goods in question from national territory, with destination to third country, in accordance with the provision of paragraph 8 of article 29 of the VAT Code, so as to attest that, within its legal sphere, such transactions were susceptible of application of the exemption provided under letters a) or b) of paragraph 1 of article 14 of the VAT Code.

4.2.14. In this regard, it is verified that the operations in question, did not meet the requirements to benefit from the exemption provided in letter a) of paragraph 1 of article 14 of the RITI (as they had been accounted for), nor, on the other hand, although constituting supplies of goods classifiable under the exemption provided in letter b) of paragraph 1 of article 14 of the VAT Code (indirect export), were the elements of proof legally required presented.

4.2.15. It is also noted that, in the hierarchical appeal, no new elements were added likely to alter the meaning of the dismissal decision of the appeal, the appellant merely asserting that "The dispatch and sending of the goods was done by the appellant directly to customs / port and dispatched by B..., SL, with destination to China" and that it had in its possession the appropriate customs documents required by paragraph 8 of article 29 of the VAT Code, which it had already exhibited to the SIT in the course of the inspection action.

4.2.16. Faced with the above, in that from the analysis of the elements contained in the case, does not result the proof, in a clear and unequivocal way that, within the legal sphere of the appellant, the operations in question constituted exports (even if indirect), in the generic concept provided in letters a) or b) of paragraph 1 of article 14 of the VAT Code, nor in any special regime, namely that stipulated in article 6 of Decree-Law No. 198/90, of 19/06, it is concluded that the operations under analysis do not meet the prerequisites for application of the exemption provided in the cited rules, for which reason the dismissal of the request is proposed.

4.2.17. It remains to be stated that, having in view the instructions on the right of hearing conveyed through paragraph 3 of article 60 of the LGT and paragraph 3 of Circular No. 13, of 1999/07/08, of the Tax Justice Department and considering that the appellant has already been notified to exercise the right of hearing, regarding the matter in question, we are of the opinion that it is appropriate to dispense with a new hearing regarding the same facts.

  1. CONCLUSION

Faced with the above and noting that the grounds of the present Hierarchical Appeal in no way alter the meaning of the decision issued, no new elements having been added likely to prove that, on one hand, the operations in question subsumed to effective exports under letter a) of paragraph 1 of article 14 of the VAT Code and, on the other hand, that they were susceptible of application of the exemption provided in letter b) of paragraph 1 of article 14 of the VAT Code, we are of the opinion that there are no reasons to revoke the contested act, thus proposing the dismissal of the request.

g) In the present case the Claimant presented customs documents proving the export to China of the goods referred to in the following invoices:

– 319/2009, relating to period 0906 (documents Nos. 1 to 5 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 356/2009, relating to period 0909 (documents Nos. 6 to 10 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 379/2009, relating to period 0912 (documents Nos. 11 to 15 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 26/2010, relating to period 1005 (documents Nos. 18 to 22 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 27/2010, relating to period 1005 (documents Nos. 23 to 27 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 28/2010, relating to period 1005 (documents Nos. 28 to 32 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 31/2010, relating to period 1006 (documents Nos. 33 to 37 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 32/2010, relating to period 1006 (documents Nos. 38 to 42 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 33/2010, relating to period 1006 (documents Nos. 43 to 47 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 34/2010, relating to period 1006 (documents Nos. 48 to 52 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 35/2010, relating to period 1007 (documents Nos. 53 to 57 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 38/2010, relating to period 1007 (documents Nos. 58 to 62 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 40/2010, relating to period 1008 (documents Nos. 63 to 67 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 41/2010, relating to period 1008 (documents Nos. 68 to 72 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 43/2010, relating to period 1009 (documents Nos. 73 to 77 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 44/2010, relating to period 1009 (documents Nos. 78 attached with the request for arbitral decision and documents attached by the Claimant on 16-02-2015, the contents of which are reproduced herein);

– 49/2010, relating to period 1011 (documents Nos. 81 to 85 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 52/2010, relating to period 1011 (documents Nos. 86 to 90 attached with the request for arbitral decision, the contents of which are reproduced herein);

– 53/2010, relating to period 1011 (documents Nos. 91 to 95 attached with the request for arbitral decision, the contents of which are reproduced herein);

III.2. GROUNDS FOR THE FACTUAL FINDINGS

The facts were considered proved based on the documents referred to.

Documents proving the export were not attached in relation to the remaining invoices.

IV. LEGAL GROUNDS

The goods in question were sold by the Claimant to the company B... SL, established in Spain, which exported to China, from Portugal, those which relate to the invoices in relation to which the export was proved.

The Claimant referred in the invoices the VAT exemption on the basis of article 14, paragraph 1, letter a), of the VAT Code, which relates to "supplies of goods dispatched or transported outside the Community by the seller or by a third party on behalf of the latter".

This exemption is not applicable, as it was not the Claimant who exported the goods nor did B... SL act on behalf of the Claimant.

However, in view of the documentation presented solely in the present arbitral case it is possible to conclude that, in relation to the invoices referred to in the facts proved, there is a possibility of classification under the exemption provided in letter b) of the same paragraph 1 of article 14 of the VAT Code, which establishes, insofar as is relevant here, that the following are exempt from tax "supplies of goods dispatched or transported outside the Community by a purchaser without residence or establishment in national territory".

In this type of situations where a national taxable person makes a supply of goods to a purchaser with registered office in a Member State of the European Union which transports them outside the customs territory, one is substantively before an indirect export, in which the exemption of letter b) of paragraph 1 of article 14 of the VAT Code should be applied, as the Tax and Customs Authority itself recognizes in the hierarchical appeal decision by stating:

"However, as can be seen from the inspection report and the description of the transaction made by the appellant itself, although the goods were intended for export, they were supplied to the company B..., SL, established in Spain and dispatched to a third country, from national territory, by this company, thus constituting an 'indirect export' covered by letter b) of paragraph 1 of article 14 of the VAT Code. It is emphasized that to this effect goes the content of Opinion No. 54/2012, of 28 November 2012, of the Centre for Tax Studies, issued following analysis of a similar situation, where the same exporting company was also B..., SL."

The Tax and Customs Authority itself has been broadly applying this understanding, as can be inferred from point 3.2 letter b) of Circular No. 8/2015.

This is an understanding which finds support in letter b) of paragraph 1 of article 14 of the VAT Code, through extensive interpretation, permitted by article 10 of the Status of Tax Benefits.

Thus, the request for arbitral decision is well-founded as to the assessments based on the invoices indicated in the factual findings established, in these terms:

  • as to VAT for period 0906, assessment No. ..., in the amount of € 8,536.14;

  • as to compensatory interest for period 0906, assessment No. ..., in the amount of € 873.73;

  • as to VAT for period 0909, assessment No. ..., in the amount of € 9,407.32;

  • as to compensatory interest for period 0909, assessment No. ..., in the amount of € 868.05;

  • as to VAT for period 0912, assessment No. ..., in the amount of € 15,811.77;

  • as to compensatory interest for period 0912, assessment No. ..., in the amount of € 1,299.60;

  • as to VAT for period 1005, assessment No. ..., in the amount of € 23,032.77;

  • as to compensatory interest for period 1005, assessment No. ..., in the amount of € 1,509.44;

  • as to VAT for period 1006, assessment No. ..., in the amount of € 24,864.59;

  • as to compensatory interest for period 1006, assessment No. ..., in the amount of € 1,550.46;

  • as to VAT for period 1007, assessment No. ..., in the amount of € 18,857.74;

  • as to compensatory interest for period 1007, assessment No. ..., in the amount of € 1,111.83;

  • as to VAT for period 1008, assessment No. ..., in the amount of € 15,189.02;

  • as to compensatory interest for period 1008, assessment No. ..., in the amount of € 863.90;

  • as to VAT for period 1009, assessment No. ..., in the amount of € 9,201.13;

  • as to compensatory interest for period 1009, assessment No. ..., in the amount of € 480.98;

  • as to VAT for period 1011, assessment No. ..., in the amount of € 12,729.83;

  • as to compensatory interest for period 1011, assessment No. ..., in the amount of € 580.34.

In view of the factual findings established, the request for arbitral decision is unfounded as to the assessments:

  • of VAT for period 1003, assessment No. ..., in the amount of € 11,685.76;

  • of compensatory interest for period 1003, assessment No. ..., in the amount of € 846.50;

  • of VAT for period 1010, assessment No. ..., in the amount of € 19,747.22;

  • of compensatory interest for period 1010, assessment No. ..., in the amount of € 967.34.

V. DECISION

In these terms, this Arbitral Tribunal agrees on the following:

a) To judge the request for arbitral decision partially well-founded and to declare the illegality of the following assessments:

  • of VAT for period 0906, assessment No. ..., in the amount of € 8,536.14;

  • of compensatory interest for period 0906, assessment No. ..., in the amount of € 873.73;

  • of VAT for period 0909, assessment No. ..., in the amount of € 9,407.32;

  • of compensatory interest for period 0909, assessment No. ..., in the amount of € 868.05;

  • of VAT for period 0912, assessment No. ..., in the amount of € 15,811.77;

  • of compensatory interest for period 0912, assessment No. ..., in the amount of € 1,299.60;

  • of VAT for period 1005, assessment No. ..., in the amount of € 23,032.77;

  • of compensatory interest for period 1005, assessment No. ..., in the amount of € 1,509.44;

  • of VAT for period 1006, assessment No. ..., in the amount of € 24,864.59;

  • of compensatory interest for period 1006, assessment No. ..., in the amount of € 1,550.46;

  • of VAT for period 1007, assessment No. ..., in the amount of € 18,857.74;

  • of compensatory interest for period 1007, assessment No. ..., in the amount of € 1,111.83;

  • of VAT for period 1008, assessment No. ..., in the amount of € 15,189.02;

  • of compensatory interest for period 1008, assessment No. ..., in the amount of € 863.90;

  • of VAT for period 1009, assessment No. ..., in the amount of € 9,201.13;

  • of compensatory interest for period 1009, assessment No. ..., in the amount of € 480.98;

  • of VAT for period 1011, assessment No. ..., in the amount of € 12,729.83;

  • of compensatory interest for period 1011, assessment No. ..., in the amount of € 580.34.

b) To judge the request for arbitral decision partially unfounded as to the request for declaration of illegality of the assessments:

  • of VAT for period 1003, assessment No. ..., in the amount of € 11,685.76;

  • of compensatory interest for period 1003, assessment No. ..., in the amount of € 846.50;

  • of VAT for period 1010, assessment No. ..., in the amount of € 19,747.22;

  • of compensatory interest for period 1010, assessment No. ..., in the amount of € 967.34.

VI. VALUE OF THE CASE

The value of the case is set at € 180,015.46, corresponding to the sum of the values of the disputed assessments.

VII. COSTS

In accordance with article 22, paragraph 4, of the RJAT, the amount of costs is set at € 3,672.00, in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Cases.

Responsibility for costs falls entirely on the Claimant, which gave rise to the case, as it did not present documents proving the exports during the tax inspection, nor in the appeal, nor in the hierarchical appeal, presenting them only in the request for arbitral decision.

Lisbon, 20 October 2017

The Arbitrators

Jorge Lopes de Sousa

Conceição Pinto Rosa

Marcolino Pisão Pedreiro

ARBITRAL DECISION

The Arbitrators Jorge Lopes de Sousa (Arbitrator President), Conceição Pinto de Sousa and Guilherme Waldemar d'Oliveira Martins, appointed by the Deontological Council of the Centre for Administrative Arbitration to form an Arbitral Tribunal, hereby agree on the following:

I. Report

  1. On 03.09.2014, the company A… – …, SA, with registered office in Road …, ..., …, Ourém, NIPC … submitted a request for the constitution of a single arbitral tribunal, in accordance with and for the purposes of the provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter, "RJAT"), with the Tax and Customs Authority (AT) being summoned.

  2. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD on 03.09.2014 and automatically notified to the AT on 04.09.2014.

  3. In accordance with the provisions of article 6, paragraph 1 and article 11, paragraph 1, letter b) of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrators of the collective arbitral tribunal the undersigned, who communicated acceptance of the corresponding office within the applicable deadline.

  4. On 03.11.2014 the parties were duly notified of this appointment, and expressed no wish to refuse the appointment of the arbitrators in accordance with the joint provisions of article 11, paragraph 1, letters a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  5. By order of 12.12.2014, the following was decided: "As the parties raised no objection, the tribunal invites the Claimant to pronounce itself, within a period of 10 days, on the exceptional matter alleged up to article 15 of the AT's response, the tribunal dispensing itself from holding the meeting referred to in article 18 of the RJAT.

And, in the same vein, as the parties likewise raised no objection, the tribunal dispenses itself from the examination of the witnesses listed in the initial petition, as it appears that the case already contains the necessary elements to decide on the law."

  1. On 04.02.2015 the following was decided: "The Deontological Council of CAAD became aware that His Excellency Councillor Jorge Lino Alves de Sousa, arbitrator-president of the collective tribunal functioning in the case in question, is incapacitated, due to illness, from performing these functions. Consequently, in accordance with and under article 8, paragraph 1 of the Deontological Code of CAAD, we are obliged to terminate his mandate and appoint, as his replacement, in the capacity of arbitrator-president, His Excellency Councillor Jorge Manuel Lopes de Sousa, in observance of the provisions of article 9 of the same code.

Notify all parties involved in the present case."

  1. On 05.02.2015 the following was decided: "Since the parties made no request regarding the order of 12-12-2014 in which it was stated that 'the case already contains the necessary elements to decide on the law', the case shall proceed immediately to decision.

The date of 16-03-2015 is set for the decision, and by that date the Claimant must pay the subsequent court fee."

  1. As it was not possible to deliver the decision by the announced date, the initial deadline was successively extended until the final date of 02.07.2015, by orders of 11.03.2015, 14.04.2015, 29.04.2015, 22.05.2015 and 22.06-2015.

  2. In the present arbitral case, the Claimant requests that the illegality of the acts assessing Value Added Tax (VAT) and compensatory interest resulting from the self-assessments of tax resulting from the periodic VAT declarations of model C substitution submitted by the Claimant for voluntary regularization of its tax-legal situation in the course of the inspection action carried out by the Finance Department of ... in the years 2009 and 2010 be declared, which gave rise to the corresponding VAT and compensatory interest collection documents, all in a total of €180,015.46, being €169,063.29 of tax and €10,952.17 of compensatory interest.

I.1. The Claimant sustains its request, in summary, in the following terms:

  1. The Claimant requests that the illegality of the acts assessing Value Added Tax (VAT) and compensatory interest resulting from the self-assessments of tax resulting from the periodic VAT declarations of model C substitution submitted by the Claimant for voluntary regularization of its tax-legal situation in the course of the inspection action carried out by the Finance Department of ... in the years 2009 and 2010 be declared, which gave rise to the corresponding VAT and compensatory interest collection documents, all in a total of €180,015.46, being €169,063.29 of tax and €10,952.17 of compensatory interest.

  2. For this purpose, it invokes the defect of violation of law due to error by the AT as to the tax-legal classification of the operations in question, which it understands to be subject to VAT but exempt under letter b) of article 14 of the VAT Code as the conditions for direct export are met.

  3. The Claimant proceeded to sell various blocks of marble to B… SL, taxpayer …, with registered office in Spain, considering the operations exempt from VAT under letter a) of paragraph 1 of article 14 of the RITI, by marking the respective periodic tax declarations in field 7, intended for intra-Community supplies of goods.

  4. In the context of the external inspection action carried out by the Finance Department of ..., pursuant to Service Order No. OI2011…, it was concluded that the operations in question constitute supplies of goods subject to VAT and not exempt, located in national territory, in accordance with paragraph 1 of article 6 of the VAT Code, combined with letter a) of paragraph 1 of article 1 and paragraph 1 of article 3 of the same legal instrument.

  5. In the course of the inspection action the Claimant regularized its tax-legal situation, by submitting periodic substitution declarations and consequent self-assessments of tax, increased by compensatory interest, reflected in the collection documents identified in the case file.

  6. By petition of 28.09.2012, the Claimant submitted an appeal of the self-assessments referred to, filed in the Finance Service of ... with No. …2012…, invoking generically that the sale of the blocks of marble in question had as "destination export", without invoking for that purpose in the 20 articles of the text any legal reference other than the RITI. This appeal was dismissed by order of the Head of Division of Tax Justice of the Finance Department of ..., of 05.02.2013.

  7. On 13.03.2013 the Claimant lodged a Hierarchical Appeal, filed with No. …2013…, against that dismissal, with the ground that "the exports in question benefit from the VAT exemption, under the terms provided in letter a) of paragraph 1 of article 14 of the VAT Code, provided they are duly proved by means of the appropriate customs documents", and that therefore "VAT and compensatory interest are not due in the periods indicated in the disputed assessments". The appeal was dismissed, on the grounds of non-application of the concept of export (even if indirect), nor in any special regime.

  8. It demonstrates in the initial petition that supplies of goods are at issue with the following method:

a. Dispatch from the customs posts of Portugal in the name of B…, SL;

b. Embarked at the port of Sines with destination to China;

c. Delivered at ports in China shown in the BLs.

  1. Classifying the respective operations as supplies of goods exempt from VAT under the terms of letter a) of paragraph 1 of article 14 of the VAT Code, maintaining that the VAT exemption is not ruled out by the fact that the claimant declared in the periodic VAT declarations that these were intra-Community supplies and invoking in the invoices the exemption under letter a) of paragraph 1 of article 14 of the VAT Code.

  2. Thus it disputes 11 assessments referring to the periods 0906, 0909, 0912, 1003, 1005, 1006, 1007, 1008, 1009, 1010, 1011, all in a total of €180,015.46, being €169,063.29 of tax and €10,952.17 of compensatory interest.

I.B. In its Response, the AT invoked, briefly, the following:

a) By Way of Objection

  1. In fact, the collection documents identified by the Claimant in its request for arbitral decision correspond to the difference in tax between the periodic declaration initially submitted and the subsequent substitution declaration submitted by the Claimant for regularization of its tax-legal situation in the course of the aforesaid inspection action.

  2. For its part, the substantive contestability of the self-assessment of tax depends on the prior appeal, in accordance with paragraph 1 and 2 of article 131 of the Code of Tax Procedure and Process, which was lodged by the Claimant and was the subject of a decision of dismissal, subsequently upheld in hierarchical appeal.

  3. In this context, the illegality of the self-assessments is a corollary of the act of dismissal of the hierarchical appeal which upheld the dismissal of the appeal, administrative acts which confirm those self-assessments, incorporating their alleged illegality.

  4. It follows from this that the Claimant should formulate its request expressly aimed at declaring the illegality of the act of dismissal issued in administrative litigation in question, namely the dismissal of the hierarchical appeal which upheld the dismissal of the appeal, without which the Arbitral Tribunal is prevented from pronouncing itself on the illegality of those appeals and hierarchical appeal decisions, since the tribunal's powers of cognition are limited by the request formulated.

  5. In addition to not requesting an arbitral decision on those decisions issued in administrative litigation, the Claimant also invokes no illegality regarding those decisions, as results from the content of its pleading and the respective request formulated at the end.

  6. In such terms, the Arbitral Tribunal cannot consider the request, as the respective procedural prerequisites are not met.

  7. Without conceding, it further invokes that by reason of the fact that the Claimant in the course of the inspection procedure, as well as in the appeal and hierarchical appeal, did not invoke the provision of letter b) of paragraph 1 of article 14 of the VAT Code, it is understood that the decision of dismissal of the hierarchical appeal is not contestable with the grounds and means of proof now presented.

b) By Way of Substantive Response

  1. The respondent disputes all articles 4 to 115 of the imputation and refers to the decision issued in hierarchical appeal, invoking summarily that "in no case was the goods sold or dispatched/transported from Portugal to Spain or any other Community country", for which reason such supplies of goods do not constitute intra-Community supplies, under letter a) of paragraph 1 of article 14 of the RITI, constituting operations carried out in national territory subject to VAT, under letter a) of paragraph 1 of article 1 and paragraph 1 of article 3 of the VAT Code.

  2. As can be seen from the inspection report, although the goods were intended for export, they were supplied to the company B…, SL, established in Spain and dispatched to a third country, from national territory, by this company, thus constituting an "indirect export" covered by letter a) of paragraph 1 of article 14 of the VAT Code.

  3. This indirect export must however be proved by means of the appropriate customs documents, as provided in paragraph 8 of article 28 of the VAT Code, the Claimant not having proved what is alleged, as it did not present to the case documents proving the departure of the goods in question from national territory, with destination to a third country, in accordance with that provision, so as to attest that, within its legal sphere, such transactions were susceptible of application of the exemption provided under letters a) or b) of paragraph 1 of article 14 of the VAT Code.

  4. It should consequently be judged that the Claimant's request is without merit.

I.3. The Claimant presented its response to the objection, in the following terms:

  1. It invokes the content of letter a) of paragraph 1 of article 2 of the RJAT.

  2. It states that the notification sent to the claimant by the AT communicated that the latter, not agreeing with the dismissal of the hierarchical appeal, has the right to lodge judicial impugnation, in accordance with letter a) of article 101 of the LGT.

  3. Now, it concludes, the object of judicial impugnation consists in the illegality of tax acts, including the self-assessment.

  4. From which it follows that the present action constitutes the proper means for the defence of the claimant's rights.

II. PRELIMINARY EXAMINATION

  1. The Tribunal is competent and is regularly constituted, in accordance with articles 2, paragraph 1, letter a), 5 and 6, all of the RJAT.

  2. The parties have legal standing and capacity, are legitimate parties and are legally represented, in accordance with articles 4 and 10 of the RJAT and article 1 of Order No. 112-A/2011, of 22 March.

  3. The case does not suffer from any nullities.

III. DECISION

The Claimant requests that the illegality of the acts assessing Value Added Tax (VAT) and compensatory interest resulting from the self-assessments of tax resulting from the periodic VAT declarations of model C substitution submitted by the Claimant for voluntary regularization of its tax-legal situation in the course of the inspection action carried out by the Finance Department of ... in the years 2009 and 2010 be declared, which gave rise to the corresponding VAT and compensatory interest collection documents, all in a total of €180,015.46, being €169,063.29 of tax and €10,952.17 of compensatory interest.

For this purpose, it invokes the defect of violation of law due to error by the AT as to the tax-legal classification of the operations in question, which it understands to be subject to VAT but exempt under letter b) of article 14 of the VAT Code as the conditions for direct export are met, presenting documents proving the export.

And for that, the Claimant:

  1. Presents impugnation of the collection documents that correspond to the difference in tax between the periodic declaration initially submitted and the subsequent substitution declaration submitted by the Claimant for regularization of its tax-legal situation in the course of the aforesaid inspection action;

  2. Invokes a legal basis (letter b) of article 14 of the VAT Code) which it did not invoke either in the appeal or in the hierarchical appeal.

As regards both the first question and the second we have a unified understanding.

Indeed, in cases of necessary appeal (namely those provided in articles 131, 132, 133 and 133-A of the Code of Tax Procedure and Process), the situation of delimitation of the scope of judicial impugnation by the scope of administrative impugnation arises in different terms.

Indeed, the legislative intent which seeks to satisfy the requirement of appeal is to allow the Tax Authority to consider the questions of legality raised by the taxpayer before there is judicial impugnation and, for this reason, it is inherent in such requirement that only the defects which are imputable by the taxpayer in the necessary appeal may be grounds for judicial impugnation.

In fact, if it were possible for the taxpayer to invoke any defects in the appeal and completely different ones in judicial impugnation it would frustrate the objective of allowing the Tax Authority to previously consider the questions of legality which will be raised judicially.

This limitation of the scope of judicial impugnation by the scope of administrative impugnation is also the regime which derives linearly from the text of article 2 letter a) of the RJAT by establishing, for the purpose of the competence of the arbitral tribunals which are excepted from its scope "claims relating to the declaration of illegality of self-assessment, withholding at source and payment on account acts which have not been preceded by recourse to the administrative route in accordance with articles 131 to 133 of the Code of Tax Procedure and Process". Although there is here an unfortunate agreement error, by saying "preceded" instead of "preceded", it is manifest that this precedence refers to the claims and not to the acts, as the latter can never be preceded by a claim about them... And, thus, the "claims relating to the declaration of illegality", all of them, must be included in the appeal before being submitted to the consideration of the arbitral tribunals functioning at CAAD, which closes the door to other claims being presented before these. On the other hand, flowing naturally from the regime of necessary administrative impugnation the need for submission of claims to the Tax Authority before the use of the judicial route, the concerns of compatibility with the constitutionally recognized right to judicial impugnation of injurious acts in adequate and clear terms do not arise in these cases.

The conditions are not therefore met to consider the merits of the request.

In view of all that which is set forth above, it is decided to judge the objection for absolute incompetence of this arbitral tribunal invoked by the Tax and Customs Authority totally well-founded and to absolve the respondent from the instance.

The value of the case is set at €180,015.46 in accordance with article 97-A, paragraph 1, a), of the Code of Tax Procedure and Process, applicable by virtue of letters a) and b) of paragraph 1 of article 29 of the RJAT and paragraph 2 of article 3 of the Regulations on Costs in Tax Arbitration Cases.

The amount of the arbitration fee is set at € 3,672.00 in accordance with Table I of the Regulations on Costs in Tax Arbitration Cases, to be borne entirely by the Claimant, in accordance with articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and article 4, paragraph 4, of the cited Regulations.

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Lisbon, 2 July 2015

The Arbitrators

Jorge Lopes de Sousa

Conceição Pinto Rosa

Guilherme W. d'Oliveira Martins

Frequently Asked Questions

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What is a VAT substitute periodic declaration (declaração periódica de substituição) under Portuguese tax law?
A VAT substitute periodic declaration (declaração periódica de substituição) is a corrective tax filing submitted under Portuguese VAT law to replace a previously filed periodic VAT declaration. Taxpayers use substitute declarations to voluntarily regularize their tax situation when they discover errors, omissions, or incorrect VAT treatment in original declarations. These declarations result in self-assessment of additional tax due plus compensatory interest. In this case, the taxpayer submitted substitute declarations during a tax inspection to reclassify sales originally reported as exempt intra-Community supplies to taxable domestic supplies, generating assessments of €169,063.29 in VAT and €10,952.17 in interest.
Does the Portuguese tax arbitration tribunal (CAAD) have competence to rule on VAT substitute periodic declarations?
Yes, the Portuguese tax arbitration tribunal (CAAD) has competence to rule on disputes arising from VAT substitute periodic declarations. Under Article 2 of Decree-Law 10/2011 (RJAT), CAAD has jurisdiction over challenges to tax assessments, including self-assessments resulting from substitute declarations. In this case, CAAD accepted jurisdiction over the taxpayer's challenge to VAT and compensatory interest arising from substitute declarations filed during an inspection. However, the specific issue of whether CAAD can review voluntary self-assessments made during inspection proceedings may raise preliminary jurisdictional questions that the tribunal must address before deciding on the merits.
What legal framework governs the formation and replacement of arbitrators in CAAD proceedings under Decree-Law 10/2011?
Under Decree-Law 10/2011 (Legal Framework for Tax Arbitration - RJAT), arbitrators are appointed by CAAD's Deontological Council pursuant to Article 6(1) and Article 11(1)(b). For collective tribunals, three arbitrators are appointed, with parties having the right to refuse appointments under Articles 6-7 of the Deontological Code. When an arbitrator becomes incapacitated or resigns, Article 8(1) of the Deontological Code mandates termination of the mandate and replacement under Article 9. In this case, the arbitrator-president was replaced due to illness, and an adjunct arbitrator was replaced following resignation for justifiable reasons. Parties are notified of replacements and may object. The replacement arbitrators accept their appointments within applicable deadlines.
How does the reform of an arbitral decision (reforma da decisão arbitral) apply in Portuguese tax arbitration cases?
Reform of an arbitral decision (reforma da decisão arbitral) in Portuguese tax arbitration refers to the correction or clarification of errors in the decision by the same tribunal that issued it. This procedural mechanism allows the arbitral tribunal to rectify material errors, calculation mistakes, or clarify ambiguities without requiring appeal to courts. The reform is indicated in the case title as annexed to the main decision, suggesting this case involved either a request for correction or clarification of an initial arbitral ruling. Reform is distinguished from appeal and represents a more limited review focused on technical corrections rather than substantive re-evaluation of legal conclusions.
What procedural steps must a taxpayer follow to challenge a VAT assessment before the CAAD arbitral tribunal?
To challenge a VAT assessment before CAAD, a taxpayer must: (1) Submit a request for constitution of an arbitral tribunal under Articles 2 and 10 of Decree-Law 10/2011, identifying the contested tax acts; (2) The request is accepted by CAAD's President and automatically notified to the Tax Authority (AT); (3) The Deontological Council appoints arbitrators (typically within time limits specified in RJAT); (4) Parties are notified and may refuse arbitrator appointments; (5) The taxpayer files an initial petition presenting legal grounds and evidence; (6) AT submits a response; (7) The tribunal may order procedural steps including preliminary matters, evidence hearings, or waive formalities if sufficient elements exist; (8) The taxpayer must pay subsequent court fees by the decision deadline; (9) The tribunal issues a decision within statutory timeframes (extendable for justifiable reasons).