CAAD 709/2016-T: VAT VIES System – Annulment of Additional VAT Assessments and Compensatory Interest

ARBITRAL DECISION

The arbitrators Cons. Jorge Manuel Lopes de Sousa (arbitrator-president), Dr. António Alberto Franco and Dr. Emanuel Augusto Vidal Lima (arbitrator-members), appointed by the Deontological Council of the Administrative Arbitration Centre to form the Arbitral Tribunal, constituted on 14-02-2017, agree as follows:

1. Report

A…, S.A., taxpayer no.…, with registered office at …, no. …, …, Lisbon (hereinafter referred to as "Applicant"), came, pursuant to article 10 of Decree-Law no. 10/2011, of 20 January (hereinafter "RJAT" - Legal Framework for Tax Arbitration), to request the constitution of a collective arbitral tribunal, with a view to:

(i) the declaration of illegality, and consequent annulment of the additional assessments of Value Added Tax ("VAT") and compensatory interest nos.…, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, 2015…, …, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015…, with a value totalling € 175.244,48 (€ 171.537,84 of tax and € 3.706,64 of compensatory interest) (document no. 1 attached to the request for arbitral decision, the content of which is deemed reproduced);

(ii) the declaration of illegality, and consequent annulment, of the decision partially rejecting the administrative appeal whereby the Applicant contested the legality of those assessments ("Contested Decision") (document no. 2 attached to the request for arbitral decision, the content of which is deemed reproduced) and

(iii) the condemnation of the Tax and Customs Authority ("AT") to reimburse the amounts unduly paid with respect to such assessments - in the total amount of € 175.244,48 (document no. 3 attached to the request for arbitral decision, the content of which is deemed reproduced), plus the corresponding indemnification interest, pursuant to the provisions of article 43 of the General Tax Law ("LGT") and default interest, if applicable.

The respondent is the TAX AND CUSTOMS AUTHORITY.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 13-12-2016.

Pursuant to the provisions of subparagraph a) of paragraph 2 of article 6 and subparagraph b) of paragraph 1 of article 11 of RJAT, 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 signatories, who communicated acceptance of the appointment within the applicable time frame.

On 25-01-2017 the parties were duly notified of this appointment, and did not express their wish to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11, paragraph 1, subparagraphs a) and b) of RJAT and articles 6 and 7 of the Deontological Code.

Thus, in accordance with the provisions of subparagraph c) of paragraph 1 of article 11 of RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the collective arbitral tribunal was constituted on 14-02-2017.

The Tax and Customs Authority submitted a reply in which it argued that the request should be judged without merit.

The Tax and Customs Authority did not submit administrative process.

By order of 02-05-2017 a hearing was dispensed with and it was decided that the process would proceed with written submissions.

The parties submitted submissions.

The arbitral tribunal was duly constituted, in accordance with the provisions of articles 2, paragraph 1, subparagraph a), and 10, paragraph 1, of Decree-Law no. 10/2011, of 20 January, and is competent.

The parties are duly represented, possess legal personality and capacity, are legitimate and are represented (articles 4 and 10, paragraph 2, of the same decree-law and article 1 of Order no. 112-A/2011, of 22 March).

The process is not affected by nullities.

2. Statement of Facts

2.1. Proven Facts

Based on the evidence contained in the process and the administrative file attached to the records, the following facts are considered proven:

a) The Applicant is a commercial company that is essentially engaged in the provision of services within the following activities: i) shipping agent, ii) freight forwarder, and iii) intermediary in maritime freight contracts (permanent certificate of commercial registration, attached to the request for arbitral decision, as document no. 4, the content of which is deemed reproduced);

b) The Applicant, as a shipping agent, provides services related to the needs of ships calling at national ports and additionally provides, equally, maritime freight services for goods, carried out by shipowners it represents, in intra-Community and extra-Community transport;

c) As a freight forwarder, the company provides services related to the coordination and organization of all transport operations, namely national and international transport;

d) The Applicant is a VAT subject and is classified under the normal monthly periodicity regime;

e) The Applicant is responsible for coordinating the logistics associated with the entry and stay of a ship in a national port, and one of the functions assumed by the Applicant with its clients is to ensure that the crew of these ships has economic resources to meet the expenses they may need to incur in national territory during the period of the ship's stay in national territory, which it achieves through "advance to captain", whereby the amounts delivered to captains are previously transferred by the shipowner (owner of the ship) to the Applicant and the Applicant issues a credit note at the moment it receives the bank transfer from the shipowner, so the Applicant merely limits itself to delivering to the captain (on behalf and for the account of the shipowner its client) the amount previously transferred to it for that purpose (documents nos. 5 to 11 attached to the request for arbitral decision, the contents of which are deemed reproduced);

f) The amounts of "advance to captain" delivered by the Applicant, in the total value of € 250.339,96, were recorded by the Applicant in third-party accounts, not being considered its expenses (document no. 8 attached to the request for arbitral decision, the content of which is deemed reproduced);

g) The Applicant did not calculate VAT with respect to such amounts of "advance to captain", and the Tax and Customs Authority assessed an additional amount of € 57.578,19;

h) In addition to the amounts of "advance to captain" the Applicant bore small costs on behalf and for the account of the clients, indicated in document no. 11 attached to the request for arbitral decision, the content of which is deemed reproduced, in the total amount of € 3.416,68 to which it gave identical treatment, and the Tax and Customs Authority assessed an additional amount of € 785,82;

i) The Applicant provides services to shipowners of ships relating to the preservation of transported goods, by making energy available to them;

j) The services referred to in the preceding subparagraph are indicated in the invoices issued as "Energy" and for that purpose the Applicant subsequently issues an invoice to the owner of the vessel for the same provision of energy, without calculating VAT;

k) The amounts relating to the provision of energy to ships are indicated in document no. 17 attached to the request for arbitral decision, the content of which is deemed reproduced, and amount to a total of € 1.037,27, so the VAT additionally assessed by AT with respect to such values, paid on behalf and for the account of third parties, amounts to € 238,57;

l) The Applicant, as a shipping agent, represents the shipowner (owner of a ship engaged in deep-sea navigation) before the local authorities and fulfils the obligations incumbent upon the shipowner before those authorities;

m) For this purpose, the Applicant makes an estimate of the total amount in question based on rules of experience, and requests from the shipowner an advance/provision for account of such services – the "scale account advance" – and, after the provision of the services, the respective invoice is issued for the services provided as a shipping agent, deducting from the amount to be paid the amount already paid as an advance (documents nos. 13, 14 and 35 attached to the request for arbitral decision, the contents of which are deemed reproduced);

n) The amounts relating to "scale account" are identified in the attached document no. 14 to the request for arbitral decision, amounting to € 305.347,89, and the Tax and Customs Authority assessed an additional VAT in the amount of € 70.230,01;

o) The Applicant intermediates the contracting of transport services between owners of goods and shipowners of ships through the maritime freight activity, being contracted by companies that wish to transport certain goods by sea and, not having their own ships for that purpose, subcontracts the necessary transport to shipowners;

p) The amounts relating to the freight services appear in document no. 19 attached to the request for arbitral decision, the content of which is deemed reproduced, amounting to € 63.935,39, amount in respect of which the Tax and Customs Authority assessed VAT in the amount of € 14.075,14;

q) The Tax and Customs Authority conducted an inspection of the Applicant, following the submission of a VAT refund request, which led to the issuance of Service Order OI2015… and, subsequently, OI2015…, OI2015… and OI2015…, relating to the periods 2011 to 2014;

r) In the inspection action, the Tax Inspection Report was prepared, a copy of which appears in document no. 12 attached to the request for arbitral decision, the content of which is deemed reproduced, in which, among other things, the following conclusions are formulated:

III - Conclusions

From the analysis carried out on the documents sent by the taxpayer, as well as the summary declarations submitted and contained in the AT information system, we verified that:

III.4.1 - The taxpayer provided services to clients domiciled in various Community countries, which it considered not located in Portugal, by application of subparagraph a) of paragraph 6 of article 6 of CIVA by implication, evidenced in the respective periodic declarations (field 7), which are found to have the following irregularities: clients ceased activity on a date prior to the services provided; clients with commencement of activity after the services provided and clients not registered for VAT purposes in the VIES system.

III.4.2 - Below is a list of clients who had ceased activity on a date prior to services provided. In Appendix no. 1 are the respective certificates of the cessation dates.

III.4.3 - NIF… commenced activity on 11-01-2013 and the taxpayer provided services to it on prior dates. In Appendix no. 2 is the certificate of the commencement date of activity.

III.4.4 - The NIFs not registered for VAT purposes in the VIES system are, as shown in Appendix no. 3, the following: …, …, …, … and ….

III.4.5 - The irregular situations reflected in point III.4.1 lead to the purchasers of the services provided being, in general, considered non-taxable persons, so the operations carried out for them cannot be considered located in the respective Member States, by application of subparagraph a) to paragraph 6 of article 6 of CIVA by implication. Thus, it is considered that all operations carried out to the clients referred to in points III.4.2, III.4.3 and III.4.4 are considered located in Portugal by application of subparagraph b) of paragraph 6 of article 6 of CIVA. Having analysed the content of the services provided to all these clients, the exemption provided for in subparagraph j) of paragraph 1 of article 14 of CIVA could be applicable, which relates to the direct needs of vessels engaged in deep-sea maritime navigation that carry on a commercial, industrial or fishing activity, by application of subparagraphs d) and f) of paragraph 1 of said article 14, as well as their cargo. However, and as provided in the said subparagraphs of article 14, this exemption would only be applicable if we were in the presence of operations connected with the pursuit of a commercial, industrial or fishing activity, now such could not be applicable to the services under analysis, because the pursuit of those activities cannot be by non-taxable persons who are ceased, non-existent or not registered for VAT purposes.

III.4.6 - Thus it is concluded that all services provided to clients evidenced in points III.4.2, III.4.3 and III.4.4 are located in Portugal, by application of subparagraph b) of paragraph 6 of article 6 of CIVA, with no exemption being applicable, so they are subject to tax at the standard rate in accordance with subparagraph c) of paragraph 1 of article 18 of CIVA.

s) Following the inspection actions, the following VAT assessments and compensatory interest were issued:

[Table references]

t) The Applicant filed an administrative appeal of the assessments which had the no. …2016…;

u) The administrative appeal was partially granted by order of 24-08-2016, which manifests agreement with an information, a copy of which appears in document no. 2 attached to the request for arbitral decision, the content of which is deemed reproduced, in which, among other things, the following is stated:

For this purpose, the appellant alleges the following:

A. Lack of proof of the constitutive facts supporting the assessments:

1. To set the context, it should first be said that, following a procedure of tax inspection, it was concluded that there were some irregularities in the scope of the appellant's activity (point III.4.1 of the final report, at p. 171), namely:

a. Clients with date of cessation of activity prior to the date of provision of services;

b. Clients with date of commencement of activity after the date of provision of services;

c. Clients not registered for VAT purposes in the VIES system.

1. It was thus considered that the acquirers of the services provided by the appellant are not taxable persons.

2. Thus, these services which the appellant considered not located in Portugal, by application of subparagraph a) of paragraph 6 of article 6 of the VAT Code by implication, should be considered as located in Portugal and subject to VAT, pursuant to subparagraph b) of paragraph 6 of article 6 of the VAT Code, at the standard rate (subparagraph c) of paragraph 1 of article 18 of the VAT Code).

3. In its initial petition, the appellant begins by challenging the factual premises of the final report, described in point 1.

4. First, because this proof is made through printouts of queries made to the VIES system by the inspection services only on 2015-03-31 and 2016-05-13 (at p. 178 to 204).

5. And, on the other hand, due to the lack of reliability and updating of the VIES system itself. First, it is pointed out, in this regard, the fact that the European Commission rejects any responsibility for the accuracy of the information provided there (articles 62 to 64 of the petition, at p. 18 to 17); secondly, also the judicial and arbitral courts have already corroborated this idea, questioning the coercive nature of the elements contained in the system (articles 65 to 67 of the petition, at p. 17 to 18).

6. In summary: "What is questioned, however, is whether the information collected from VIES in 2015 would be true in 2011, 2012, 2013 and 2014 on the date of issuance of the future invoices and whether the information available in the VIES system is sufficient in itself and is reliable enough to dispense with or not be able to be supplemented by other means of proof" (article 42 of the appellant's submissions, at p. 13).

7. Now, being in question the alleged right of the Tax and Customs Authority (AT) to assess VAT additionally, the burden of proof of the constitutive facts respectively rests exclusively principally with the AT (paragraph 1 of article 74 of the General Tax Law [LGT]), facts about which no margin of doubt can rest, recalling that the principle "in dubio pro fisco" does not apply here.

8. In this sense, paragraph 1 of article 75 of the LGT is equally violated insofar as it is incumbent upon the AT to rebut the presumption of veracity and good faith which the periodic declarations submitted by the appellant benefit from.

9. "In these terms, there can be no doubt that, pursuant to article 100 of CPPT, the Additional Assessments should never have taken place, being illegal, since the AT did not prove the constitutive elements of its tax claim and, if it is admitted that some proof was made, this should always be considered insufficient due to the doubts that remain about its reliability" (article 76 of the appellant's petition, at p. 20).

B. Acquisition of services by VAT taxable persons with valid tax identification numbers:

1. By contacting its clients, the appellant managed to gather some additional elements that allow it to conclude as to the validity of their respective tax identification numbers, on the date of issuance of the invoices and, consequently, as to their status as VAT taxable persons.

a. Entities with allegedly ceased activity:

1. As for client B…, with identification number in VIES …, it was found that the same is valid (at p. 228) although with its tax identification number changed to ….

2. The appellant, which was unaware at the time of this change, can no longer use the expedient of annulment and replacement of each invoice (ratification of inaccurate invoices of paragraph 3 of article 78 of the VAT Code) as the two-year period for that purpose has expired.

3. What is important to note (...) is that the services were effectively provided and by an entity in full activity and with a valid tax identification number" (article 85 of the petition, at p. 22).

4. The same reasoning is to be applied to client C…, with tax identification number …, which was changed to … (at p. 230).

5. As well as to client D…, with tax identification number … changed to … (at p. 232).

6. The same applies to client E…, …, whose tax identification number was changed to …. In this case, it was only not possible to obtain the VIES system certificate due to an error in the system itself, beyond the appellant's control (p. 234).

7. Still with client F…, …, with its tax identification number changed to … (at p. 236).

8. Identical situation we find for client G… SA, ES …, with change to the tax identification number … (at p. 242).

9. Equally, as for client H…, St, with tax identification number…, there was a change in the name to H… S.A., corresponding to the change in legal form from limited company to joint-stock company, with the consequent change of number to … (at p. 248).

10. The change of tax identification number applies, also, to client I…, from … to … (at p. 260).

11. And also to client J…, with tax identification number…, changed to … (at p. 232).

12. The same reasoning applies to client K…, with tax identification number …, changed to…, valid in the VIES system (at p. 266).

13. The change of corporate name also occurred with client L… KG, tax identification number … to M…, with number … - the latter valid in the VIES system (at p. 270).

14. With regard to client N…, the tax identification number was changed from … to …, with the appellant acknowledging that neither of the numbers is valid in VIES.

15. This entity was extinguished following an insolvency procedure; however, the services were provided before that date.

16. With regard to client O… S.A., with tax identification number…, the appellant submits a certificate issued by the Spanish tax authorities dated 2009, assuring the validity of its NIF (at p. 238).

17. This client also claims that its tax identification number does not appear in the VIES system in that the ship flying the flag of Madeira Island, of which it is the owner, is engaged in deep-sea navigation, and the operations carried out are not considered intra-Community operations (at p. 240).

18. Consequently, there is no cessation of activity of the client; simply it does not carry out intra-Community operations and, as such, does not appear in the VIES system.

19. Notwithstanding the absence of client P…, … from the VIES system, it can be assured that the same is in full activity, with a valid identification number, as confirmed by a declaration from the Spanish tax authorities (at p. 244).

20. Client Q…, … is in the process of liquidation and dissolution, as a result of an insolvency proceeding (at p. 246).

21. Now, in our legal system, the insolvency proceeding does not automatically imply the cessation of activity of the company. In fact, in the case of this client, on the contrary, net sales of € 318.287,00 were recorded in 2013 - a moment after the date of the alleged cessation of activity which appears in the VIES system as 2009-01-27.

22. The appellant claims that it contacted R…, … with registered office in Finland, taken as its client. However, in reality, all services were provided to S…, with tax identification number …, with registered office in Norway (at p. 250).

23. Given that Norway is not a Member State of the European Union, the VAT Directive does not apply to this territory and, naturally, there is no registration in the VIES system as no intra-Community operations were carried out.

24. The appellant recently learned that client T… (UK), …, acts on behalf and for the account of the company holding its share capital - U…, ..., with registered office in Cyprus - to whom the services were actually provided and whose tax identification number is valid in the VIES system (at p. 252 to 254 and 266).

25. Client V…, S.A., with tax identification number…, was incorporated into company W… S.A., with tax identification number…, with registered office in Luxembourg - whose number is valid in the VIES system (at p. 258).

26. As for client X…, with tax identification number…, the appellant claims that invoice no. … should have been issued to entity … and invoice no. FT12… issued to entity … - both with tax identification numbers valid in the VIES system (at p. 264 and 266).

b. Entity with activity not yet commenced:

1. The client company Y…, with tax identification number…, indicates having commenced activity on 2012-10-11 (at p. 272), rather than that shown in the VIES computer system whose commencement date of activity appears as only 2013-01-11.

c. Entities not registered in VIES:

1. The client Distribuidora Z…, with tax identification number …, is tax resident in the Canary Islands (at p. 274) and, as such, not covered by the terms of the VAT Directive (subparagraph b) of paragraph 1 of article 5 of the VAT Directive) nor the VIES system registration. Now, the fact of not carrying out intra-Community operations does not automatically imply that it is not a taxable person for VAT purposes.

2. This is exactly the same situation that occurs with client AA…, with tax identification number … (at p. 280).

3. According to information obtained from the Spanish tax authorities (at p. 276), client entity BB…, with tax identification number…, is in full activity and its number is valid.

4. Client CC…, with tax identification number…, states that it has already ceased its activity in November 2014 (at p. 278). However, before that date it maintained its activity regularly, and there is no reason why the VIES system should not have registered this entity, presumably it is another error in the system itself.

5. DD… S.A. is registered in Panama and the tax identification number … associated belongs to a branch in Spain. Now, the services were provided to the company registered in Panama and not to its branch. As such and since Panama is not a Member State of the European Union, it does not carry out intra-Community operations, and the VAT Directive does not apply to it.

C. On the exemption or absence of VAT incidence:

1. The appellant begins by explaining that, in the scope of its activity, even if the operations were considered located in Portugal, they would be exempt from VAT.

2. As shown in the table at p. 283 and 284, the appellant summarizes for us the basis of incidence taken into account in the additional assessments here in dispute:

[Table reference]

1. One of the tasks incumbent upon the appellant is to deliver a certain sum of money to the captain so that he and his crew, when arriving in Portugal, can cover any needs they have in national territory - designated "advance to captain".

2. The operation of this transaction begins, however, with the prior transfer of this amount by the shipowner (owner of the ship) to the appellant who then issues a credit note.

3. This operation, better described by the appellant in articles 228 to 241 of its petition (at p. 48 to 61 and with attached documents 286 to 296), should be considered outside the scope of the tax, by subparagraph c) of paragraph 6 of article 16 of the VAT Code, so the additional assessments in the amount of € 253.756,64 are illegal.

4. The scale account services and the shipping agent activity in general, whose legal framework is contained in Decree-Law no. 264/2012, of 20 December, correspond to the organization and coordination of the stay of vessels in ports, notably before the port and maritime authority, regarding responsibility for tariffs and other charges related (by way of example, fee with the Immigration and Border Service, ship parking expenses, pilotage and trimming fees).

5. In these cases, "(…) the Appellant made an estimate of the total amount in question based on rules of experience, and requests from the shipowner an advance/provision for account of such services (…)" (article 258 of the petition, at p. 55). Subsequently, the respective invoice is issued, in which the advance is deducted (as shown at p. 298 to 322).

6. Now, these transfers of goods and provision of services are exempt, pursuant to subparagraphs d), f) and j) of paragraph 1 of article 14 of the VAT Code. In summary, these are "(...) services provided 'with a view to the direct needs of vessels' whose owners are clients of the Appellant and who provide their services as a shipping agent" (article 265 of the petition, at p. 56).

7. Through maritime freight. "(…) the Appellant intermediates the contracting of transport services between owners of goods and shipowners of ships" (article 274 of the petition, at p. 58), whose legal treatment is provided for in Decree-Law no. 181/87, of 29 April.

8. The client is charged the value that the appellant incurred in contracting the shipowner who carried out the transport, with the possible addition of a margin and/or other expenses incurred, as exemplified in the case at p. 327 to 330.

9. In the example presented by the appellant in which the acquirer is a taxable person without seat or stable establishment in Portugal, the operation would not be located in national territory, by force of the application of subparagraph a) of paragraph 6 of article 6 by implication of the VAT Code.

10. However, even if this were not understood, the operation is covered by the exemption of the combination of subparagraphs d) and f) of paragraph 1 of article 14 of the VAT Code.

11. The same applies to the provision of energy to ships, which refers to the preservation of goods of vessels that are in containers transported by them.

12. In these cases, '(…) the entities responsible for the management of the port issue an invoice to the Appellant for the provision of energy, and the Appellant subsequently issues an invoice to the owner of the vessel for the same provision of energy" (article 269 of the petition, at p. 57), as exemplified at p. 324 and 325.

13. These services fall under the norm of subparagraph j) of paragraph 1 of article 14 of the VAT Code.

14. To corroborate the application of these exemptions provided for in article 14 of the VAT Code, in the terms set out above, the appellant brings to attention information no. 1560 of 16 July 1998 as well as information no. 1303 2004051 of 12 September 2015, from the AT, whose decisions point in the same direction (articles 292 and 294 of the petition, at p. 61 and 62).

15. Now, the AT understands, in the inspection report of the case at hand, that the exemption of article 14 of the VAT Code as referred to above does not have applicability in that the development of activities required by the article itself - commercial, industrial or fishing activity - could not be carried out by non-taxable persons (acquirers with ceased activity, not yet in existence, or not registered for VAT purposes).

16. Reasoning with which the appellant cannot agree since the exemption in question does not depend on the status of the taxable person but only on the development of an activity of a commercial, industrial or fishing nature. It would, moreover, be contradictory to tax services on these activities if it were not admitted that they were carried out by non-taxable persons. More specifically: if the vessels on which the services fall are not engaged in a commercial, industrial or fishing activity, what exactly are they engaged in?

17. It is certain that all purchasers of the appellant are or were VAT taxable persons on the date of issuance of the respective invoices and, more importantly, with vessels engaged in deep-sea maritime navigation - vessels which are related to the services provided by the appellant and engaged in a commercial activity, as a rule the transport of goods.

18. In summary, we can only conclude that the AT is confusing the concept of VAT taxable person for the purposes of the VAT Directive with the concept of pursuit of a commercial, industrial or fishing activity. One and the other are not necessarily coincident.

19. "In these terms, and even though the Additional Assessments were not already illegal by the grounds previously invoked, - which is only pondered out of professional duty, without conceding - and even concluding that we were in the presence of non-taxable purchasers (in which case the operations would be located in Portugal pursuant to article 6, paragraph 6 b) of the VAT code), such operations would always be, pursuant to subparagraph j) of paragraph 1 of article 14 of the same code, exempt from VAT, and therefore illegal and unable to maintain the assessment acts here claimed" (article 331 of the petition, at p. 68),

D. On manifest errors:

1. Assessment no. 2015... contains a glaring error with respect to its taxable base.

2. The assessment concerns, among others, invoice no. …, dated 2013-10-04, issued to client Distribuidora Z…, a Spanish company with tax identification number…, in the total amount of € 513,41 (at p. 332) and not by the amount of € 61.341,00 that AT considered for the purposes of VAT assessment (at p. 333).

3. As such, if there were an assessment it would be for € 118,08 (€ 513,41*23%) and not the € 11.808,43 recorded.

4. Consequently, the additional assessment could never exceed the amount of € 144.493,06, to the detriment of the € 166.183,41 assessed.

5. Equally, assessments nos. 2015…, 2015…, 2015…, 2015…, 2015… and 2015… have their value inflated.

6. What the appellant has to oppose regarding these assessments in particular is related to the date of the alleged cessation of activity of client K…, a Swedish company with tax identification number …, which AT says occurred on 2014-02-26.

7. However, many of the invoices taken into account for the additional assessments mentioned date from a moment prior to the cessation of activity of this entity, and know:

[Invoice dates reference]

1. As such, invoices prior to 2014-02-28 can and should be removed from the basis of the additional assessments because they relate to a taxable person with activity underway, that is, prior to cessation of its activity.

2. The amount to be additionally assessed in VAT - if the issuance of additional assessments were agreed with - will have to be altered, removing € 5.092,65 unduly charged.

3. In these terms, the AT should correct these two unequivocal errors, in the spirit of the provisions of paragraphs 2 and 3 of article 95-A of CPPT, immediately annulling the amount of € 16.763,00 (€ 11.690,35 + € 5.092,69) of the claimed assessments and proceeding with its reimbursement.

(...)

IV - ANALYSIS OF THE REQUEST

After the exposition of the arguments brought in the administrative appeal petition, at point I, the following should be said:

1. As to Point I, A., we can say that the proof made in the inspection procedure is valid, sufficient and assures the conclusions drawn from it.

2. The date of the inspection and the printouts of information contained in the computer system (at p. 179 to 204) do not interfere with its content. In other words, whether a search was carried out in 2015 or in 2011, 2012, 2013 or 2014 (dates of the provision of services in question and, consequently, of the VAT periods assessed), the information obtained is the same.

3. The results of the searches carried out always relate to dates prior to 2016, naturally; results which, on the date of provision of services, if the sources were consulted, would appear equally in the system.

4. In fact, this is the premise and the basis of operation of the VIES system itself. Putting this premise in question is putting the entire system in question.

5. To verify the dates of commencement and cessation of activity, the best means of proof that any entity, specifically the tax administration, has is indeed the VIES system.

6. If this system is irrefutable or 100% reliable is a discussion that is not appropriate here to address. In any case, it should be said that if it is concluded that it is not, then ask what computer system we might have that is. It will certainly be a question without an answer.

7. The VIES system is, without doubt, the most practical, swift and secure way to know the information provided in it.

8. And nothing in this reasoning is contradicted by the disclaimer presented in the VIES system by the European Commission nor by judicial and arbitral decisions, which attest to the exception (the non-exact coincidence of VIES information with the factual situation, on a given date) and not the rule.

9. As for Point I, B., we can group the situations mentioned for each client purchaser of the appellant's services into three categories:

a. Change of tax identification number.

b. Issuance of invoice to entity different from the one that actually acquired the services.

c. And, finally, tax residence outside the European Union. These are, therefore, entities that do not carry out intra-Community operations, so the VAT Directive does not apply.

1. In this dispute - as the appellant correctly points out, saying that the most correct method to overcome it would be to correct inaccuracies in invoices, if within deadline - the three situations pointed out are entirely unrelated to the AT.

2. That is to say, the invoices were issued to certain tax identification numbers. These numbers do not appear in the VIES system. So if the client, purchaser of the appellant's service, had, on that date, (i) changed its number, (ii) if the entity actually acquiring was another or, still, (iii) if they were entities outside the European Union space, these are all matters which the appellant should have ensured before issuing the invoices.

3. The AT cannot be responsible for inaccuracies in the issuance of invoices by its taxpayers.

4. Nothing assures us that, given the non-correspondence or validity of the tax identification numbers stated in the invoices, the acquirer of the service is the one the appellant claims to be (for example, a client with a different tax identification number or corporate name) and not another.

5. In this sequence and finding that taxable persons for VAT purposes, for the purposes of the VAT Directive, do not exist with the tax identification numbers indicated, the subsequent reasoning can only be to consider these acquirers as individuals, as non-taxable persons for VAT, as the tax inspection rightly did.

6. As such, the operations will be considered located in national territory, pursuant to subparagraph b) of paragraph 6 of article 6 of the VAT Code, and taxed at the standard rate, as per subparagraph c) of paragraph 1 of article 18 of the VAT Code.

7. The third point alleged by the appellant, described in Point I, C. above, cannot proceed.

8. The AT is not confusing the concept of a VAT taxable person with the concept of pursuit of a commercial, industrial or fishing activity.

9. Contrary to what the appellant wishes to suggest, the inspection does not address which entities can pursue those activities or which subjects can.

10. Let us transcribe: "However, and as provided in the said subparagraphs of article 14, this exemption would only be applicable if we were in the presence of vessels connected with the pursuit of a commercial, industrial or fishing activity, but this cannot be applicable to the services under analysis, because the pursuit of those activities cannot be carried out by non-taxable persons who are ceased, non-existent or not registered for VAT purposes" (page 14 of the final inspection report, at p. 172).

11. The argument of the inspection report is clear and tells us only and simply that, with the tax identification numbers in question having ceased, non-existent or not registered in the VIES system, any activity pursuit cannot be associated with them. No further considerations are made.

12. And these suffice to conclude as to the non-applicability of the exemption enshrined in subparagraph j) of paragraph 1 of article 14 of the VAT Code since not all its legal requirements are met.

13. Finally, regarding Point I, D., it should be noted that the appellant's request is to be considered partially meritorious.

14. As for assessment no. 2015…, comparing the table presented by the tax inspection (at p. 216) and the invoice brought to the records by the appellant (at p. 332), namely, invoice number, date, acquirer and amount, we find that there occurred a lapse in the accounting of the total invoice value (€ 61.341,00 instead of the invoiced € 513,41) and consequently the VAT amount to be assessed.

15. In fact, there is an excess in VAT to be assessed in the amount of € 11.690,35, as demonstrated above.

16. Finally, some of the invoices issued to aforementioned K…, a Swedish company with tax identification number…, considered for the purposes of additional VAT assessments (with nos. 2015…, 2015…, 2015…, 2015…, 2015… and 2015…) are prior to 2014-02-28, that is, the date of cessation of activity (date appearing in the final Inspection report, at p. 172 and 197).

17. As such, the amount of € 6.092,65 relating to the excess VAT assessment with respect to the invoices mentioned should be annulled and consequently refunded to the appellant (at p. 212, 213 and 219).

(...)

VI - CONCLUSION

In these terms, faced with the evidence existing in the records which support the request, I propose the partial grant of it:

• Annulment of the amount of € 11.690,35 of the additional VAT assessment with no. 2015…, of the period of October 2013.

• Annulment of a total of € 5.082,65 in additional assessments nos. 2015…, 2015…, 2015…, 2015…, 2015… 2015….

v) The Applicant's client R…, is registered in Norway (document no. 46 attached to the request for arbitral decision, the content of which is deemed reproduced);

w) The Applicant's client Distribuidora Z…, is tax resident in the Canary Islands (document no. 54 attached to the request for arbitral decision, the content of which is deemed reproduced), having been provided by the Applicant the services indicated in document no. 55 attached to the request for arbitral decision, the content of which is deemed reproduced, being that (i) € 49.120,00 correspond to advance to captain; (ii) € 92.393,35 correspond to scale account and (iii) € 893,75 correspond to third-party costs;

x) The Applicant's client DD… SA, is registered in Panama and were provided to it the services referred to with indication of the NIF…, of a Spanish branch thereof;

y) The Applicant's client AA… is tax resident in the Canary Islands (document no. 59 attached to the request for arbitral decision, the content of which is deemed reproduced);

z) The Applicant paid the amounts assessed for VAT and compensatory interest (documents attached as no. 3 to the request for arbitral decision, the contents of which are deemed reproduced);

aa) On 29-11-2016, the Applicant filed the request for arbitral decision that gave rise to the present process.

2.2. Unproven Facts

It was not proven that the services provided by the Applicant were not related to the pursuit of a commercial, industrial or fishing activity.

2.3. Justification for the Determination of the Statement of Facts

The proven facts are based, in general, on the documents attached by the Applicant to the request for arbitral decision and on statements of the Applicant that were not questioned by the Tax and Customs Authority.

Regarding the provision of services to R…, document no. 46 states that the provision of services was carried out to the Norwegian company with the same designation and there are no reasons to doubt the statement made in it.

With regard to the companies resident for tax purposes in the Canary Islands, these are facts certified by the Spanish tax authorities. Not appearing in the records nor being any reason to believe that these companies have changed their tax residences, it is considered proven what occurred on the date when the operations referred to in the records took place.

With respect to the company resident in Panama, the Applicant's statement that the services were provided to it and not to the Spanish branch is accepted. The Tax and Customs Authority states that the Applicant did not submit any proof, but the fact is that no proof was also submitted that the services were provided to the Spanish branch. The doubt about this fact must be procedurally valued in favor of the Applicant, by force of the provisions of article 100, paragraph 1, of CPPT. In any case, whether the services were provided to the Panamanian company or to its branch, we are faced with services not taxed in Portugal, either because they are covered by an exemption or by force of the location rules, as better explained in the assessment of law.

The Tax and Customs Authority did not submit administrative process.

3. Legal Matters

The Tax and Customs Authority assessed VAT additionally invoking the following grounds, in summary:

– the Applicant provided services to clients domiciled in various Community countries, which it considered not located in Portugal, by application of subparagraph a) of paragraph 6 of article 6 of CIVA by implication, but among them included clients with activity ceased on a date prior to the services provided, clients with commencement of activity after the services provided and clients not registered for VAT purposes in the VIES system;

– these clients are considered non-taxable persons, so the operations carried out for them cannot be considered located in the respective Member States, by application of subparagraph a) to paragraph 6 of article 6 of CIVA by implication, and consequently, are considered located in Portugal, by application of subparagraph b) of paragraph 6 of article 6 of CIVA;

– in view of the services provided, the exemption provided for in subparagraph j) of paragraph 1 of article 14 of CIVA could be applicable, which relates to the direct needs of vessels engaged in deep-sea maritime navigation that carry on a commercial, industrial or fishing activity, by application of subparagraphs d) and f) of paragraph 1 of said article 14, but this exemption would only be applicable if we were in the presence of operations connected with the pursuit of a commercial, industrial or fishing activity and cannot be applicable to the services under analysis, because the pursuit of those activities cannot be by non-taxable persons who are ceased, non-existent or not registered for VAT purposes.

The Applicant argues, in summary, the lack of reliability of VIES for verification of the existence of VAT taxable persons and that the requirements of the exemption provided for in subparagraph j) of paragraph 1 of article 14 of CIVA are met, with reference to subparagraphs d) and f) of the same paragraph.

Besides this the Applicant presents complementary evidence regarding the taxable persons and operations carried out.

Although the Tax and Customs Authority has assessed the matter, prioritarily, from the perspective of the location of operations, the problem that must be resolved prioritarily is whether the exemption provided for in article 14, paragraph 1, subparagraph j) of CIVA, with reference to subparagraphs d) and f), of the same paragraph, is applicable, because, if it is concluded that we are faced with exempt operations, it will be irrelevant to know if, in the case of them being taxable, they should be so in Portugal or in another Member State by force of the rules on the location of operations contained in article 6 of CIVA.

On the other hand, being a matter that concerns the application of European Union law, namely the exemptions applicable to international transport, whether relating to the delivery of goods or provision of services, provided for in article 148 of Council Directive no. 2006/112/EC, of 28-11-2006, which underlies the exemptions provided for in article 14 of CIVA.

Being the application of European Union law at issue, account must be taken of the fact that article 8, paragraph 4, of the CRP establishes that "the provisions of the treaties governing the European Union and the rules emanating from its institutions, in the exercise of their respective competencies, are applicable in the internal order, on the terms defined by European Union law, with respect for the fundamental principles of the democratic rule of law state".

From this rule flows the supremacy of European Union law over national internal law, so domestic legal rules must take account of the case-law of the CJEU.

Thus, in assessing the subject matter of the records, account must be taken of the case-law of the CJEU on the consequences of non-registration in VIES and its effects on the refusal of VAT exemptions in intra-Community transactions, a matter addressed by the Applicant in its submissions.

Although specifically on the application of exemptions in the context of intra-Community transactions the CJEU clarified in the recent judgment of 09-02-2017, delivered in case no. C-21/16, that failure to register in VIES does not justify the refusal of VAT exemptions on intra-Community operations, if there is no serious evidence suggesting the existence of fraud and it is proven that the material requirements of the exemption are met:

Articles 131 and 138, paragraph 1, of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding the tax authorities of a Member State from refusing to exempt from value added tax an intra-Community supply of goods solely on the ground that, at the time of that supply, the acquirer, established in the territory of the Member State of destination and holding a valid value added tax identification number for transactions in that State, is not registered in the VAT Information Exchange System, nor covered by a system of taxation of intra-Community acquisitions, provided that there is no serious evidence suggesting the existence of fraud and provided that it is established that the material conditions for exemption are met.

In this judgment reference is made, among other things, to the following:

1. Consequently, neither the obtaining, by the acquirer, of a valid VAT identification number for carrying out intra-Community operations nor its registration in the VIES system constitute material requirements of the VAT exemption of an intra-Community supply. They are only formal requirements which cannot call into question the right of the supplier to VAT exemption, provided that the material requirements of an intra-Community supply are met (see, by analogy, judgments of 6 September 2012, Mecsek-Gabona, C-273/11, EU:C:2012:547, paragraph 60; 27 September 2012, VSTR, C-587/10, EU:C:2012:592, paragraph 51; and 20 October 2016, Plöckl, C-24/15, EU:C:2016:791, paragraph 40).

2. In this regard, it must be recalled that, in the absence of a specific provision in the VAT Directive as to the evidence which taxable persons must provide in order to benefit from the VAT exemption, it is for the Member States to set, in accordance with article 131 of that directive, the conditions for the exemption of intra-Community supplies to ensure the correct and simple application of those exemptions and to prevent possible fraud, evasion and abuse. However, in the exercise of their powers, Member States must respect the general principles of law which are part of the legal order of the Union (see judgments of 6 September 2012, Mecsek-Gabona, C-273/11, EU:C:2012:547, paragraphs 36 and case-law cited, and 9 October 2014, Traum, C-492/13, EU:C:2014:2267, paragraph 27).

3. According to the case-law of the Court of Justice, a national measure goes beyond what is necessary to ensure the correct collection of the tax if it makes the right to VAT exemption depend, in substance, on the fulfilment of formal obligations, without taking account of the material requirements and, in particular, without inquiring whether these have been observed. In fact, transactions must be taxed taking into account their objective characteristics (judgment of 20 October 2016, Plöckl, C-24/15, EU:C:2016:791, paragraph 37 and case-law cited).

Neither the obtaining, by the acquirer, of a valid VAT identification number for carrying out intra-Community operations nor its registration in the VIES system constitute material requirements of the VAT exemption of an intra-Community supply. They are only formal requirements which cannot call into question the right of the supplier to VAT exemption, provided that the material requirements of an intra-Community supply are met.

In the same vein, the CJEU decided in the judgment of 06-09-2012, delivered in case no. C-273/11, invoked by the Applicant:

1. However, neither the wording of article 138, paragraph 1, of Directive 2006/112 nor the case-law referred to in paragraph 31 of this judgment mention, among the material requirements of an intra-Community supply, exhaustively enumerated, the obligation to possess a VAT identification number.

2. In fact, the assignment of that number provides proof of the tax status of the taxable person for the purposes of applying VAT and facilitates the tax control of intra-Community operations. However, this is a formal requirement, which cannot call into question the right to VAT exemption provided that the material requirements of an intra-Community supply are met (see, by analogy, with regard to the right to deduction, judgments of 21 October 2010, Nidera Handelscompagnie, C-385/09, 2010 ECR I-10385, paragraph 50, and 22 December 2010, Dankowski, C-438/09, 2010 ECR I-14009, paragraphs 33 and 47).

Although this case-law has been adopted as to the application of exemptions relating to the supply of goods, it is clear that it will apply to the other exemptions provided for in Council Directive no. 2006/112/EC of 28-11-2006, since there is no specific feature of goods supply operations that would justify different treatment for supplies of services.

Being so, the interpretation adopted by the CJEU is to be applied, and a preliminary reference being unnecessary, in view of what was decided in the judgment of 6 October 1982, Case Cilfit, Case 283/81, paragraph 14.

Thus, in line with the aforementioned more recent case-law of the CJEU, namely that adopted in the judgment delivered in case no. C-21/16, it should be understood that failure to register in VIES is not sufficient to refuse the exemption of operations, provided that it is proven that the acquirer has a valid VAT number, there is no serious evidence suggesting fraud and the material requirements of the exemption are demonstrated.

It is in this light that the situations that are the object of controversy in the records regarding the application of exemptions will be assessed.

In the case at hand, the Tax and Customs Authority did not question that the services were provided in the terms that appear in the invoices, being, indeed, the fact that they were provided the assumption of the additional VAT taxation.

The Tax and Customs Authority also did not claim that the material requirements of the exemption were not met, namely that the provision of services and delivery of goods were intended to and carried out to meet the direct needs of vessels, considering as an obstacle to the application of the exemption provided for in subparagraph j) of paragraph 1 of article 14 of CIVA only that we were not faced with "operations connected with the pursuit of a commercial, industrial or fishing activity".

But the Tax and Customs Authority made no investigation into the activity developed by the vessels in question, nor does it indicate or even suggest any activity other than "commercial, industrial or fishing" in which the vessels in question were used, concluding the lack of this requirement based on a legal ground which it understands to be that "the pursuit of those activities cannot be by non-taxable persons who are ceased, non-existent or not registered for VAT purposes", which it concluded from the fact that the companies indicated in the invoices were not registered in VIES on the dates of provision of services.

Thus, interpreting the grounds contained in the Tax Inspection Report, which underlies the contested assessments, it is concluded that the refusal of the exemption provided for in subparagraphs d), f) and j) of paragraph 1 of article 14 of CIVA is based on this legal understanding that it cannot be applied when the supplies of goods or provision of services are intended for "non-taxable persons who are ceased, non-existent or not registered for VAT purposes".

It is manifest that this understanding of the Tax and Customs Authority is incompatible with the aforementioned case-law of the CJEU, according to which the application of the exemption does not depend on the "obligation to possess a VAT identification number", the assignment of which is a means to prove the tax status of the taxable person for the purposes of applying VAT which facilitates the tax control of intra-Community operations, but "this is a formal requirement, which cannot call into question the right to VAT exemption provided that the material requirements of an intra-Community supply are met".

Also according to that case-law, "a national measure goes beyond what is necessary to ensure the correct collection of the tax if it makes the right to VAT exemption depend, in substance, on the fulfilment of formal obligations, without taking account of the material requirements and, in particular, without inquiring whether these have been observed. In fact, transactions must be taxed taking into account their objective characteristics". "Neither the obtaining, by the acquirer, of a valid VAT identification number for carrying out intra-Community operations nor its registration in the VIES system constitute material requirements of the VAT exemption of an intra-Community supply. They are only formal requirements which cannot call into question the right of the supplier to VAT exemption, provided that the material requirements of an intra-Community supply are met".

Furthermore, in the case at hand, no fact was found that constitutes serious evidence suggesting the existence of fraud, nor does the Tax and Customs Authority make reference in the Tax Inspection Report to any fraud or evidence of fraud as the ground for the additional assessment, so the justification for refusal of the exemption which is reserved at the end of the operative part of the judgment delivered in case no. C-21/16 is not met.

Thus, it is to be concluded that provided the material requirements of the exemption are demonstrated, it will be applicable to the supplies of goods and provisions of services in question.

It is in this light that the various types of situations in which the Tax and Customs Authority understood it should assess VAT will be appraised.

3.1. Matter of Amounts Relating to "Advance to Captain"

As results from the statement of facts established, the Applicant, to ensure that the crew of the ships of its clients had economic resources to meet expenses in national territory during the periods of stay of the ships, delivered to the ship captains, as "advance to captain", amounts that were previously transferred to it by the respective shipowner (owner of the ship).

The Applicant issued credit notes at the moments when it received the bank transfers from the shipowners, merely limiting itself to delivering to the captains (on behalf and for the account of the shipowner its client) the amounts previously transferred to it for that purpose.

These amounts were in the total value of € 250.339,96 and the transactions were recorded in the accounting in third-party accounts.

The same occurred with small costs, in the total value of € 3.416,68, which the Applicant bore on behalf and for the account of the clients, referred to in document no. 11 attached to the request for arbitral decision.

The Tax and Customs Authority made an additional VAT assessment in the amounts of € 57.578,19 and € 785,82, respectively, with respect to such amounts.

In accordance with the provisions of subparagraph c) of paragraph 6 of article 16 of CIVA, there are excluded from the taxable value "the sums paid on behalf and for the account of the acquirer of the goods or the recipient of the services, recorded by the taxable person in appropriate third-party accounts".

In this situation, we are not even faced with a refusal of exemption, because we are faced with facts that are outside the scope of VAT.

Thus, the additional VAT assessment in the total amount of € 58.364,01 has no legal support, so the request for arbitral decision proceeds in the respective part.

3.2. Matter of Provision of Energy to Ships

The Applicant makes energy available to ships and issues the respective invoices to the owners, without calculating VAT.

The amounts relating to the provision of energy to ships are indicated in document no. 17 attached to the request for arbitral decision and amount to a total of € 1.037,27.

These concern invoices relating to companies H…, (regarding which the NIF… was indicated) and G… SA (regarding which the NIF… was indicated).

The Tax and Customs Authority assessed an additional VAT in the amount of € 238,57, but, as the Applicant argues, subparagraphs d) and j) of paragraph 1 of article 14 of CIVA exempt "the supplies of goods for supplies placed on board vessels engaged in deep-sea maritime navigation and that carry out paid transport of passengers or the pursuit of a commercial, industrial or fishing activity" and "the supplies of services not mentioned in subparagraphs f) and g) of this paragraph, carried out with a view to the direct needs of the vessels and aircraft referred to therein and their cargo".

The Tax and Customs Authority does not ground the non-application of the exemption in hypothetical verification of the pursuit of different activities, but only in the understanding that this exemption "cannot be applicable to the services under analysis, because the pursuit of those activities cannot be by non-taxable persons who are ceased, non-existent or not registered for VAT purposes".

As referred, this understanding is not compatible with the case-law of the CJEU, so this conclusion by the Tax and Customs Authority has no factual or legal support.

In fact, the Tax and Customs Authority did not determine what activity the vessels were intended for, so it could not conclude that they were not intended for any of the activities indicated in that subparagraph d) of paragraph 1 of article 14 of CIVA.

On the other hand, neither in this subparagraph d) nor in subparagraph j) of the same paragraph (nor article 148 of Council Directive no. 2006/112/EC of 28-11-2006, which provides for the exemptions applicable to international transport), is any reference made to the need for the recipient of the goods or services to hold a valid VAT number and be registered in VIES, as a requirement for the application of the exemption, and the case-law of the CJEU prevents the exemption from being refused for these reasons.

The non-holding of a valid NIF does not imply that activity of the types referred to is not pursued, so the ground for the VAT assessment in respect of these invoices cannot be considered demonstrated. It is not questioned that the activity referred to by the Applicant occurred, which is the assumption of the VAT assessment by the Tax and Customs Authority, nor is the existence of fraud or non-existence of the material requirements of the exemption suggested, namely that the companies in respect of which electricity was supplied were not "vessels engaged in deep-sea maritime navigation and that carry out paid transport of passengers or the pursuit of a commercial, industrial or fishing activity".

By the foregoing, the request for arbitral decision proceeds as to the referred amount of € 238,57.

3.3. Matter of "Scale Account"

The Applicant, as a shipping agent, represents the shipowner (owner of a ship engaged in deep-sea navigation) before the local authorities and fulfils the obligations incumbent on the shipowner before those authorities, making an estimate of the total amount in question based on rules of experience, and requests from the shipowner an advance/provision for account of such services – the "scale account advance" – and, after the provision of the services, the respective invoice is issued for the services provided as a shipping agent, deducting from the amount to be paid the amount already paid as an advance.

The documents attached to the request for arbitral decision as documents nos. 13 and 35 include some issued by national authorities, namely the Immigration and Border Services and the Port Authority of …, in addition to the Tax and Customs Authority itself (Exit Permit).

The amounts relating to scale account are identified in the attached document no. 14 to the request for arbitral decision, amounting to € 305.347,89, and the Tax and Customs Authority assessed an additional VAT in the amount of € 70.230,01.

There is no factual element that justifies putting in doubt that we are faced with provisions of services covered by the exemption provided for in subparagraph j) of paragraph 1 of article 14 of CIVA which exempts "supplies of services not mentioned in subparagraphs f) and g) of this paragraph, carried out with a view to the direct needs of vessels and aircraft referred to therein and their cargo".

In fact, in the present process, as stated, the Tax and Customs Authority does not even suggest any other purpose to which the services referred to might relate.

The material requirements of the exemption are thus met, as, as referred to in point 3.2., the application of this exemption does not depend on the "obtaining, by the acquirer, of a valid VAT identification number for carrying out intra-Community operations nor its registration in the VIES system".

Thus, it is to be concluded that we are faced with services that benefit from the referred exemption, so the VAT assessment in the amount of € 70.230,01 is not supported.

3.4. Matter of Maritime Freight Services

The Applicant intermediates the contracting of transport services between owners of goods and shipowners of ships through the maritime freight activity, being contracted by companies that wish to transport certain goods by sea and, not having their own ships for that purpose, subcontracts the necessary transport to shipowners. The amounts relating to the freight services appear in document no. 19 attached to the request for arbitral decision, amounting to € 63.935,39, amount in respect of which the Tax and Customs Authority assessed VAT in the amount of € 14.075,14.

Also in this case, we are faced with provisions of services covered by the exemption provided for in the cited subparagraph j) of paragraph 1 of article 14 of CIVA. And the considerations made in point 3.2 on the fact that it is not a requirement of the exemption that the acquirer of the services hold a valid VAT identification number for carrying out intra-Community operations nor its registration in the VIES system also apply here.

Consequently, the additional VAT assessment in the amount of € 14.075,14 has no legal support.

3.5. Matter of Services Provided to Acquirers Established Outside the Territory of the European Union

The Applicant provided services to companies not resident in the territory of the European Union, for VAT taxation purposes.

This is the case with clients R… (tax resident in Norway), Distribuidora Z… (tax resident in the Canary Islands), DD… SA, (tax resident in Panama) and AA… (tax resident in the Canary Islands).

Pursuant to subparagraph b) of paragraph 1 of article 6 of the VAT Directive, this diploma does not apply to the territory of the Canary Islands.

Regarding services provided to acquirers not resident without a stable establishment in Portugal, the Applicant invokes Circular Notice no. 30115, of 29-12-2009.

In fact, in that Circular Notice, which publicized the understanding of the Tax and Customs Authority on the application of location rules for VAT taxation purposes, the understanding was adopted that the majority of services provided are not taxed in the European Union (Community) where the provider is a national taxable person and the acquirer is a "person established outside the community", an expression which refers to a "private individual or an entity that does not prove the status of taxable person in the respective country".

This interpretation is based, according to the Tax and Customs Authority, on an interpretation by implication of subparagraph a) of paragraph 6 of article 6 of CIVA.

Independently of the correctness or otherwise of this understanding, the Tax and Customs Authority is bound by it, by force of the provisions of article 68-A, paragraph 1, of the LGT, which establishes that "the tax administration is bound by the generic guidelines contained in circulars, regulations or instruments of identical nature, independently of their form of communication, aiming at the uniformization of the interpretation and application of tax rules".

Therefore, the additional VAT assessment regarding operations in which these companies were acquirers has no legal support.

3.6. Annulment of VAT Assessments and Compensatory Interest

From the foregoing it is concluded that the contested VAT assessments are illegal, and should be annulled on the ground of a defect of violation of law, which justifies their annulment, pursuant to article 163, paragraph 1, of the Administrative Procedure Code, subsidiarily applicable, by force of the provisions of article 2, subparagraph c), of the LGT.

The compensatory interest assessments have the VAT assessment as their premise (article 35, paragraph 8, of the LGT), so the illegality of the VAT assessments implies the illegality of the compensatory interest assessment, which should also be annulled.

The administrative appeal decision is also illegal, in the part in which it confirmed the assessments.

3.7. Questions of Prejudicial Nature

Insofar as the request for arbitral decision proceeds on the ground of a defect of violation of law, the examination of the remaining questions raised becomes prejudicial, as it is unnecessary (article 130 of CPC).

4. Reimbursement of Amount Paid and Indemnification Interest

The Applicant paid the assessed amount, in the sum of € 175.244,48 (€ 171.537,84 of tax and € 3.706,64 of compensatory interest) and requests its reimbursement, with indemnification interest.

In accordance with the provisions of subparagraph b) of article 24 of RJAT, the arbitral decision on the merits of the claim insofar as no appeal or challenge lies against it binds the Tax Administration from the end of the period set for appeal or challenge, and this should, in the exact terms of the arbitral decision's merit in favor of the taxable person and until the end of the period set for the spontaneous execution of sentences of the tax courts, "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed, adopting the necessary acts and operations for that purpose", which is in line with the provisions of article 100 of the LGT [applicable by force of the provisions of subparagraph a) of paragraph 1 of article 29 of RJAT] which establishes that "the tax administration is obliged, in case of total or partial grant of an appeal, judicial challenge or resource in favor of the taxable person, to immediate and complete restoration of the legality of the act or situation that is the object of the dispute, comprising the payment of indemnification interest, if applicable, from the end of the deadline for execution of the decision".

Although article 2, paragraph 1, subparagraphs a) and b), of RJAT uses the expression "declaration of illegality" to define the competence of arbitral tribunals functioning at CAAD, making no reference to condemnatory decisions, it should be understood that the powers attributed to the tax courts in the judicial challenge procedure are included in its competencies, being this the interpretation that is in line with the sense of the legislative authorization on which the Government relied to approve RJAT, in which it is proclaimed, as a first guiding principle, that "the tax arbitral procedure must constitute an alternative procedural means to the judicial challenge procedure and to the action for recognition of a right or legitimate interest in tax matters".

The judicial challenge procedure, despite being essentially a procedure for annulment of tax acts, admits the condemnation of the Tax Administration to the payment of indemnification interest, as inferred from article 43, paragraph 1, of the LGT, which establishes that "indemnification interest is owed when it is determined, in an administrative appeal or judicial challenge, that there was an error attributable to the services from which resulted payment of the tax debt in an amount higher than legally due" and article 61, paragraph 4 of CPPT (as amended by Law no. 55-A/2010, of 31 December, to which corresponds paragraph 2 in the original wording), which "if the decision recognizing the right to indemnification interest is judicial, the deadline for payment is counted from the beginning of the deadline for its spontaneous execution".

Thus, paragraph 5 of article 24 of RJAT, when stating that "payment of interest, irrespective of its nature, is due, pursuant to the terms provided in the general tax law and the Code of Procedure and Tax Process", should be understood as allowing the recognition of the right to indemnification interest in the arbitral procedure, as well as the reimbursement of the amount paid, which is the basis for calculating interest.

It is therefore incumbent to assess the request for reimbursement of the amount unduly paid, plus indemnification interest.

In the case at hand, it is manifest that, following recognition of the illegality of the assessment acts, there is place for reimbursement of the tax paid, by force of the aforementioned articles 24, paragraph 1, subparagraph b), of RJAT and 100 of the LGT, because such is essential to "restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed".

However, the administrative appeal was partially granted and in the part in which the assessments were administratively annulled, they are not the object of the present process, the Applicant not having considered the annulled amounts in determining the value of the case.

Therefore, the amount to be reimbursed is € 158.461,48.

As for indemnification interest, it is also clear that the illegality of the assessment act is attributable to the Tax Administration, which, on its own initiative, performed it without legal support.

Consequently, the Applicant is entitled to indemnification interest, pursuant to articles 43, paragraph 1, of the LGT and 61 of CPPT.

Indemnification interest will be paid from the date on which the Applicant made the payment until the full reimbursement of the amount which should be reimbursed, as referred to above, at the legal suppletive rate, pursuant to articles 43, paragraph 4, and 35, paragraph 10, of the LGT, article 61 of CPPT, article 559 of the Civil Code and Order no. 291/2003, of 8 April.

5. Decision

In these terms, the Arbitral Tribunal agrees to:

a) Judge the request for arbitral decision well-founded;

b) Annul the additional VAT and compensatory interest assessments nos.…, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, 2015…, …, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015…, 2015… and 2015…, in the parts in which they were not annulled by the administrative appeal decision, as well as to annul this in the part in which they were not annulled;

c) Judge the request for reimbursement of amounts unduly paid following the VAT and compensatory interest assessments well-founded, and condemn the Tax and Customs Authority to pay to the Applicant the sum of € 158.461,48, corresponding to the total value of the assessments insofar as they are the object of the present process;

d) Judge the request for indemnification interest well-founded and condemn the Tax and Customs Authority to pay to the Applicant pursuant to the terms indicated in point 4 of this judgment, on the amount to be reimbursed.

5. Value of the Case

In accordance with the provisions of article 306, paragraph 2, of CPC and 97-A, paragraph 1, subparagraph a), of CPPT and 3, paragraph 2, of the Regulations for Costs in Tax Arbitration Proceedings, the value of the case is set at € 158.461,48.

6. Costs

Pursuant to article 22, paragraph 4, of RJAT, the amount of costs is set at € 3.672,00, pursuant to Table I annexed to the Regulations for Costs in Tax Arbitration Proceedings, at the charge of the Tax and Customs Authority.

Lisbon, 20-06-2017

The Arbitrators

(Jorge Manuel Lopes de Sousa)

(António Alberto Franco)

(Emanuel Augusto Vidal Lima)