CAAD 753/2014-T: VAT Intra-Community Supply of Goods

Process: 753/2014-T

Date: September 14, 2015

Tax Type: IVA

Summary

CAAD Case 753/2014-T addresses procedural issues regarding document submission in Portuguese tax arbitration concerning VAT on intra-community supply of goods. The Claimant, A... - IMOBILIÁRIA, LDA, challenged a VAT assessment for period 06/2012, alleging formal defects including lack of substantiation and failure to observe prior hearing rights. In this procedural order, the arbitral tribunal ruled on two key motions: (1) the Claimant's request to remove documents submitted by the Tax Authority on 13-04-2015, and (2) the Tax Authority's request to file an insurance policy. The tribunal rejected both requests. Regarding document submission timing, the Court applied Article 423 of the Code of Civil Procedure by analogy, determining that documents may be submitted up to 20 days before the final hearing or equivalent procedural moment in arbitration. The tribunal found that since RJAT lacks a mandatory final hearing, the relevant deadline should be equated with the last procedural meeting or the moment before notification for written submissions. Critically, the Court held that the Tax Authority's document was not 'untimely' and noted the Claimant itself had submitted documents after its initial request. The tribunal also addressed whether procedural fines could be imposed for late submissions, concluding that RJAT contains no provisions for procedural fines or incidental costs, representing an intentional legislative omission rather than a gap to be filled. The Court emphasized that CAAD Cost Regulations only address arbitration fees, not other penalties. This decision establishes important precedent for document submission flexibility in Portuguese tax arbitration while clarifying that parties cannot be sanctioned with fines for timing issues.

Full Decision

ENGLISH TRANSLATION

The Arbitrators José Pedro Carvalho (President Arbitrator), Clotilde Celorico Palma and Américo Brás Carlos, designated as arbitrators at the Administrative Arbitration Center, to constitute an Arbitral Tribunal:

in the following:

ORDER

Preliminarily to its written submissions, the Claimant requests the removal from the file of the document submitted by the Tax Authority with its request of 13-04-2015, admitted on 17-04-2015, by order issued in the minutes of the Meeting provided for in Article 18 of the RJAT.

It being noted from the outset that, notified in the very act of the filing in question, the Claimant raised no objection to the filing, it will always be said that it is understood that it has no reason when it states that it is an "untimely document" and "a posteriori reasoning".

As for this latter matter, it appears, from the outset, that the Claimant confuses evidence and reasoning, it being certain that both are evidently distinct, and that in the present context we are in the first of the aforementioned levels, and that any "a posteriori reasoning" does not constitute grounds for removal of documents, as is evident, moreover, from the lack of invocation of any legal rule supporting such claim.

Furthermore, Article 423 of the Code of Civil Procedure provides that:

"2 - If the documents are not filed with the respective claim, they may be presented up to 20 days before the date on which the final hearing takes place, but the party is condemned in a fine, unless it proves that it could not present them with the claim.

3 - After the time limit provided for in the preceding number, only documents whose presentation was not possible until that moment are admitted, as well as those whose presentation has become necessary by virtue of a subsequent occurrence."

Since the tax arbitration process does not contain the imperative holding of a final hearing, to this must naturally be equated the holding of the last meeting of the process, if it exists, or the moment immediately prior to notification for the presentation of written submissions, or of setting a deadline for final decision, without holding thereof.

In this context, the filing of the document in question could never be considered "untimely", while noting, however, that the Claimant itself proceeded to file documents after the submission of its initial Request.

Thus, and at best, one could consider the possibility of condemning the Tax Authority in a fine, based on the aforementioned rule of Article 423(2) of the Code of Civil Procedure.

However, the tax arbitration process - summarized in the RJAT - contains no provision for either the application of procedural fines or the application of incidental costs.

Such omission may be regarded as a lacuna, to be filled by recourse to civil and tax procedural rules, or as an intentional omission aimed at the non-applicability of such rules.

In this case, it is understood that the latter will be the legislative option.

Indeed, the RJAT only assigns to the CAAD Cost Regulations the setting of the arbitration fee, and not of any other amount.

And, even if it is admitted that in the arbitration fee the CAAD could integrate procedural fines and/or incidental costs arbitrated by the Courts constituted within it, the fact is that it did not.

Thus, it is understood that it is not legally permissible in the seat of a tax arbitration process as this one is currently configured, the condemnation of the parties in procedural fines and/or incidental costs, which if occurring, in the current context, would, moreover, raise significant operational difficulties, related, among other things, to the entity beneficiary of the corresponding amount (the State? the CAAD? the Court?), as well as to the corresponding form of payment and possible coercive collection.

Thus, and by all the foregoing, it would not be possible to condemn the Tax Authority in a fine, just as the Claimant is not condemned in costs for the present procedural incident, of rejection of its claim for removal of the document.

In its submissions, the Respondent begins "by stating that, although the Tax Authority requested the Court to file the insurance policy no. HD2012... (...), when the Claimant exercised the right to contradict by submitting the Minutes, the Court, incomprehensibly, still has not issued a ruling on the request", whereby "the respondent reiterates the request (...) hoping for its grant given its importance for ascertaining the material truth".

First of all, it is necessary to make clear that it is not correct what is stated by the Tax Authority, regarding the lack of a ruling by this Court.

Indeed, the Tax Authority reports, on the matter in question, to its Request submitted on April 13, 2015, which was the subject of an order at the meeting referred to in Article 18 RJAT, contained in the respective minutes, and from whose operative part it expressly states that "the arbitrators constituting this Arbitral Court agree to wholly reject the Request of 13/4 submitted by the Tax Authority."

Now, having been wholly rejected the request by the Tax Authority in the aforementioned document, it will be unquestionable that, rightly or wrongly, the request in question was entirely decided, and it is certain that, not having been, in time, raised any nullity with respect to said order (see Articles 195(1) and 199 of the Code of Civil Procedure), any deficiency or insufficiency thereof will, in the meantime, have been cured, and formal res judicata has been formed on the matter (see Article 620 of the Code of Civil Procedure).

What has just been stated would not prejudice the fact that the Court, ex officio or upon request, in light of the subsequent developments of the case, under the principles inherent in the tax arbitration process, particularly those contained in Articles 16(c) and (d), 19 and 29(2) of the RJAT, might order the filing of any document indispensable "for ascertaining the material truth".

However, this is not the case of the document to which the Tax Authority refers.

Indeed, taking into account the facts relevant to the decision of the case, properly and timely alleged by the parties, as appears from the arbitral decision that follows, it does not appear that the document in question is of any relevance to the assessment of proof or non-proof of any of them.

Thus, and for all the foregoing, the request by the Tax Authority in its submissions is rejected.

For the purposes deemed appropriate, let the certificate requested in Article 48 of the written submissions of the Tax Authority be extracted.

Having thus decided, the arbitrators further agree on the following:

ARBITRAL DECISION

I – REPORT

On October 30, 2014, A... - IMOBILIÁRIA, LDA (Claimant), with registered office at Avenida …, Lisbon, registered at the Commercial Registry Office of Porto under the single number of Legal Entity No. …, filed a request for constitution of an arbitral tribunal, under the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of January 20, which approved the Legal Regime for Arbitration in Tax Matters, with the wording introduced by Article 228 of Law No. 66-B/2012, of December 31 (hereinafter, briefly designated RJAT), seeking the declaration of illegality of the acts:

of VAT assessment 2013... relating to VAT for period 06 of year 2012, dated 18-10-2013;

of dismissal of the gracious appeal presented with respect thereto; and

of tacit dismissal of the hierarchical appeal presented with respect to the decision of that appeal.

To support its request, the Claimant alleges, in summary, that the aforementioned assessment suffers from formal defects, particularly with respect to the lack of substantiation of the tax act and the failure to observe the exercise of the right to prior hearing, as well as errors in the respective legal and factual grounds.

On November 3, 2014, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority.

The Claimant proceeded to appoint an arbitrator, having designated Her Excellency Professor Doctor Clotilde Celorico Palma, in accordance with Article 11(2) of the RJAT. Pursuant to No. 3 of the same article, the Respondent appointed as arbitrator His Excellency Professor Doctor Américo Brás Carlos. By mutual agreement, the arbitrators appointed by the parties appointed to preside over this Arbitral Tribunal the present Reporter, who, within the applicable period, accepted the assignment.

On January 16, 2015, the parties were notified of these appointments, and neither expressed a desire to refuse any of them.

In conformity with the provision of paragraph (c) of No. 1 of Article 11 of the RJAT, the collective Arbitral Tribunal was constituted on February 4, 2015.

On March 4, 2015, the Respondent, duly notified for this purpose, presented its defense by exception and by challenge, and the Claimant, after being notified for such purpose, presented a written ruling on the said matter of exception.

On April 17, 2015, the meeting referred to in Article 18 of the RJAT took place, where a request submitted on April 13, 2015 by the Respondent was decided, and where the witness presented in the act by the Claimant was heard.

Having been granted a period for the presentation of written submissions, the same were presented by the parties, pronouncing themselves on the evidence produced and reiterating and developing their respective legal positions.

A period of 30 days was set for the pronouncement of final decision, after the presentation of submissions by the Tax Authority, which period was extended by an additional 30 days, and the period referred to in Article 21(1) of the RJAT was also extended by two months.

The Arbitral Tribunal is materially competent and regularly constituted, in accordance with Articles 2, No. 1, paragraph (a), 5 and 6, No. 1, of the RJAT.

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

The case is not affected by nullities.

All being considered, it is necessary to pronounce

II. DECISION

A. MATTERS OF FACT

A.1. Facts Found to be Proven

The Claimant is a limited partnership company that began its activity in 1998 and whose capital was, as of the date of the tax fact in question in the present case, entirely held by the joint-stock commercial company B… - Real Estate and Holdings, SA
The Claimant was initially registered for the exercise of the activities of "management of real estate investments, purchase of real estate for resale, preparation of projects, construction and commercialization of properties, provision of consulting services within the scope of the aforementioned activities", CAE 068100, with classification for VAT purposes under the normal regime with monthly periodicity, and expanded its business purpose, from July 2010 onwards, to "import, export and trade in jewelry and watch articles".
From January 14, 2012, the Claimant began to effectively carry out the activity of wholesale trading of watches.
In period 6-2012, the Claimant purchased watches on the domestic market in the amount of €114,805.69, plus VAT at the rate of 23% in the amount of €26,405.31, for a total of €141,211.00.
From the accounting elements of the Claimant, relating to the period in question, the following watch sales billed for the intra-community market are recorded:
On the invoices referred to in the preceding point, the Claimant did not bill VAT, considering them to be intra-community transfers of goods.
With a view to validating the operations recorded and declared by the Claimant as Intra-Community Transfers of Goods, attached to the issued invoices were:

documents validating the tax number of the respective purchasers for intra-community goods operations, documents extracted from the VIES system (VAT Information Exchange System); and
documents relating to the transport of goods (described as "documents") with destination to the operators registered in the Member States contained in the invoices, issued by the contracted carrier, FedEx Express, having as intermediary in this operation the operator C... Expresso, SA, with registered office in Maia.

The Claimant had recorded as means of receipt the following documents:

With respect to operators D... (Italy) and E... (France), the records were documented by originals of the payment notices from BANK ... communicating the payment orders from the same received;
With respect to operator F... (Netherlands), the same were supported by documents extracted by the Claimant from the home banking service of BANK ....

In the VAT declaration for the respective period, the Claimant proceeded to deduct the VAT incurred on the purchase of the watches referred to above, calculating a tax credit in the amount of €26,405.31, and requested the corresponding refund.
The Claimant was subject to an inspection procedure, determined by 0I2012 …, covering the aforementioned period 6-2012.
In the analysis of the accounting elements and periodic VAT declaration, carried out in the aforementioned inspection procedure, no discrepancies were identified.
The Tax Inspection Report contains, among other things, the following:

"From the analysis of the respective documents to justify the transport of goods, which the Tax Authority designated as 'bill of lading', inconsistencies and well-founded doubts resulted regarding the shipment of the billed goods, as well as regarding the proof of delivery of the goods to the clients.

In the expectation that the Tax Authority would present additional proof elements that would lead to a judgment of validation of the operations, this was compromised by the response to the questionnaire already identified, by informing that: 'Normally all deliveries are dispatched to customers in accordance with the precise instructions given by them. In the case of postal shipment, normally through the FEDEX company, it is possible through its internet site to have proof of delivery of the shipment.' Now, consulting the FedEx website (www.fedex.com), to track the transport of goods destined to the alleged customers of the Member States and obtain receipt and identification of the person delivering the goods, no positive response was achieved, but rather the message: 'No signature is available'.

It also appears from the information collected on the FedEx site an indication to 'check later if the signature is already available', which we attempted to obtain, without success.

Given the foregoing, it was not possible to conclude through the information elements displayed and available on the FedEx site, by the validation of the operations declared as intra-community transfers of goods."

In the course of the inspection procedure, and in light of the doubts raised, on September 4, 2012, the Dutch tax authorities were contacted, under the scope of administrative cooperation between Member States, provided for in Articles 5 and 19 of Regulation (EC) No. 904/2010, which informed, on 10/04/2012, that: "Our taxpayer F..., VAT NL..., has declared that they did not have done business with your taxpayer, A... Imobilaria, (VAT PT.... There is only one fixed supplier from portugal, G…, Rua …, Portugal".
The aforementioned information was translated by the Portuguese Tax Authority, in a document attached to the Tax Inspection Report, as follows: "Our taxpayer, F..., VAT No. NL..., declared that they had not had any business with your taxpayer A... Imobiliária Lda, VAT No. PT.... There is only one fixed supplier in Portugal, ... Rua ... Portugal.".
As for the other two entities (E... International and D...), no information was requested regarding the operations of the 6-12 period, as they had occurred with respect to immediately preceding periods and for those entities, requests for confirmation of the declaration of the corresponding acquisitions, having the French tax authorities communicated the declaration of acquisition, in the period, by the French operator in question, and the Italian tax authorities informed the registration of acquisitions by the Italian operator also in question.
From the inspection action carried out by the Tax Inspection Services (SIT) on the accounting elements of the Claimant, for the year 2012, within the scope of the analysis of the aforementioned refund request, resulted technical corrections in VAT in the amount of €16,033.30, relating to the period 2012/06.
The corrections refer to sales billed by the Claimant to company F..., resident in the Netherlands, which the Tax Authority understood did not meet all the requirements established in paragraph (a) of Article 14 of the VAT Regime on Intra-Community Transfers, to be exempt from tax, having concluded "for the simulation of intra-community transfers of goods declared for the taxpayer F..., VAT No. NL....".
In the course of the inspection procedure, the Claimant was notified to exercise the right of prior hearing, through official letter No. …/…, of 17/05/2013, by registered mail on the same date, having not reacted within the period granted for this purpose, the proposed corrections being maintained for that reason, communicated to the Claimant through official letter No. …/…, of 26/05/2013, from which resulted the assessment subject to the present case, which determined the refund of the amount of €10,372.01, instead of the amount of €26,405.31, calculated by the Claimant.
On February 17, 2014, the Claimant filed, via postal service, a gracious appeal, in which it requested the annulment of the assessment in question, as well as the corresponding compensatory interest.
With this appeal, the Claimant presented a statement, on letterhead paper of "F...", written in English language, dated October 10, 2013, with a signature affixed in the name of the legal representative and with the stamp of that company, as well as a Dutch law firm (H…, Advocaten, of Utrecht), with the following content:

"Paper from F...

Amsterdam. 10.10.2013

Declaration

F..., … AMSTERDAM, VAT number NL ..., states that it has made the following intra-community purchases to A..., Imobiliaria, Lda, VAT number PT ...:

Your Invoice n. Date Amount€ number of watches

20120022 02.05.2012 74.224,00€ 7

20120029 20.06.2012 69.710,00€ 6

We also state that the total merchandise (7 watches of the Invoice 2012022 and 6 watches of the invoice 20120029), referring to the above invoices was received in our address in Amsterdam and delivered by the fedex shipping company with the following tracking numbers:

Your Invoice n. Date Amount€ number of watches Fed ex tracking number received on

20120022 02.05.2012 €74.224,00 7 … 03.05.2012

20120029 20.06.2012 €69.710,00 6 … 21.06.2012

Signed by the legal representant of the company"

The final decision of the order dismissing the gracious appeal, after the period granted for the right of prior hearing, which was not exercised by the Claimant, was issued on May 27, 2014 and notified through official letter No. … and official letter No. … (counsel), both dated May 27, 2014, whose proof of receipt was signed on May 29, 2014.
The Claimant filed a hierarchical appeal of the aforementioned dismissal of the gracious appeal, which was tacitly dismissed on August 1, 2014.
The Tax Authority formulated a supplementary request for the purpose of, by the Dutch tax authorities, next to F..., clarifying the inconsistency of the response given in 2012 with the statement issued in 2013, and confirming or not, the intra-community acquisition in question in the records.
The Dutch tax authorities communicated, in response to the additional information request, the following:

"further investigation has shown that after all the following invoices were present in the administration of our taxpayer F..., VAT NL...

02-05-2012 20120022 € 74 224

20-06-2012 20120029 € 69.710

The invoices were paid by bank. We did not find any transport documenten

Our taxpayer did not declared these purchases as intra community acquisitions in his turnover tax return.

We did not found the document d.d 10-10-2013 you send us in the administration of our taxpayer but the invoices and bank statements proves that the transactions have been occurred.

We have enclosed relevant documents."

A.2. Facts Found Not to be Proven

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

A.3. Substantiation of the Proven and Unproven Matters of Fact

Regarding the matters of fact, the Tribunal does not have to pronounce itself on everything that was alleged by the parties, its duty being, rather, to select the facts that matter for the decision and discriminate the proven from the unproven matters (see Article 123, No. 2, of the Code of Tax Procedure and Article 607, No. 3 of the Code of Civil Procedure, applicable ex vi Article 29, No. 1, paragraphs (a) and (e), of the RJAT).

Thus, the facts pertinent to the judgment of the case are chosen and delineated according to their legal relevance, which is established in light of the various plausible solutions of the legal question(s) in question (see former Article 511, No. 1, of the Code of Civil Procedure, corresponding to the current Article 596, applicable ex vi Article 29, No. 1, paragraph (e), of the RJAT).

Thus, taking into account the positions assumed by the parties, in light of Article 110(7) of the Code of Tax Procedure, the documentary evidence and the proceedings attached to the file, the facts listed above were considered proven, with relevance to the decision.

Not included therein are the facts enumerated in the written submissions of the Claimant, but not contained in its initial request, including the facts relating to the possible motivation of the description of goods contained in the documents referred to in point 7 of the facts found as proven, since they were not the subject of evidence produced in contradiction, which was delimited by the matters of fact contained in the initial request and indicated in point (v) of the Claimant's Request submitted on March 18, 2015.

B. LAW

i. of the preliminary question

As an obstacle to the appreciation of the merits of the case, the Tax Authority raises the question of the incompetence of the Arbitral Jurisdiction on the grounds of subject-matter.

The Respondent understands that "what is at issue is a VAT refund" and that "Because of this, this arbitral jurisdiction cannot know of the present request, by absolute incompetence on the grounds of subject-matter".

It is thus necessary, first of all, to determine whether the matter in question has a place, or not, within the scope of competence of the tax arbitration jurisdiction[1].

Article 124 of Law No. 3-B/2010, of April 28, authorized the Government to legislate "in order to institute arbitration as an alternative form of jurisdictional resolution of disputes in tax matters", so that the tax arbitration process would constitute an alternative procedural means to the process of judicial challenge and the action for recognition of a right or legitimate interest in tax matters.

Decree-Law No. 10/2011, of January 20 (RJAT), implemented the aforementioned legislative authorization with a more restricted scope than initially provided, not contemplating, namely, an alternative competence to that of the action for recognition of a right or legitimate interest in tax matters, and "instituted tax arbitration limited to certain matters, listed in its Article 2" making the binding of the tax administration dependent on "a regulation of the members of the Government responsible for the areas of finance and justice, which establishes, in particular, the type and maximum value of disputes covered"[2].

The scope of tax arbitration jurisdiction is thus delimited, in the first place, by the provisions of Article 2 of the RJAT, which sets forth, in No. 1, the criteria for material distribution of competence, covering the appreciation of claims aimed at the declaration of illegality of tax assessment acts[3].

Given the voluntary character of submission to arbitration jurisdiction, in a second line "the competence of arbitral courts operating in the CAAD is also limited by the terms in which the Tax Administration was bound to that jurisdiction, concretized in Order No. 112-A/2011, of March 22, since Article 4, No. 1 of the RJAT establishes that 'the binding of the tax administration to the jurisdiction of courts constituted under the terms of this law depends on a regulation of the members of the Government responsible for the areas of finance and justice'" [4].

The cited Order provides, in its Article 2, that "The services and bodies referred to in the preceding article bind themselves to the jurisdiction of arbitral courts operating in the CAAD that have as their purpose the appreciation of claims relating to taxes whose administration is entrusted to them referred to in No. 1 of Article 2 of Decree-Law No. 10/2011, of January 20, with the exception of the following:...", indicated in the subsequent paragraphs of the same article.

As already seen, the Tax and Customs Authority alleges that the acts of partial dismissal of VAT refund are not covered by the competence of arbitral courts in tax matters, operating in the CAAD.

However, in the case at hand, it was the Tax and Customs Authority itself that carried out a VAT refund accounting operation which it called a "VAT ASSESSMENT DEMONSTRATION", to which it assigned an "ASSESSMENT NUMBER" and an "ASSESSMENT DATE", and indicated, at the end, that the Claimant "is hereby (...) notified of the VAT assessment relating to the period to which the operations relate, as a result of which there is ground for refund in the amount calculated, as per the above demonstrative note" and "From the assessment made, Your Excellency may present, to the competent Tax Office, gracious appeal or judicial challenge in accordance with the terms of Articles 70 and 102 of the Code of Tax Procedure" (emphasis ours).

That is: in view of the available documentary elements, one should conclude that, concretely, rightly or wrongly, an assessment act was performed. Such act, embodied in the document notified to the Claimant comprising the VAT assessment demonstration 2013... relating to VAT for period 06 of year 2012, dated 18-10-2013, shall be the subject of these proceedings, reducible to the provision of paragraph (a) of Article 2 of the RJAT.

Moreover, the Tax Authority itself ends up acknowledging this, referring, several times, throughout the Response presented in the case (see Articles 18, 19, 51 and 52), to the VAT assessment sub judice, an act which is fully identified by the Claimant in its initial request (see the preamble combined with Article 1), and is perfectly apprehensible to a normal recipient that the request formulated in the end derives from the alleged illegality of such an assessment act (and the second-degree acts – decisions of the gracious appeal and subsequent hierarchical appeal – performed on it), being a legally necessary consequence of the declaration thereof, as appears, moreover, from paragraphs (a) and (b) of No. 1 of Article 24 of the RJAT.

The legality of the identified assessment act – rightly or wrongly performed – is unquestionably susceptible of being appreciated and falls directly within the scope of the competencies of arbitral courts operating in the CAAD, whereby the invoked exception of absolute incompetence must fail.

Even if this were not understood, for a long time the understanding has been adopted that administrated parties should not be prejudiced in the exercise of procedural rights when they are induced into error by acts of competent public entities, a rule that has explicit aspects, for the courts, in Article 157, No. 6, and Article 191, No. 3, of the Code of Civil Procedure of 2013 (previous Articles 161, No. 1, 198, No. 3)[5] and for administrative acts, in Article 7 of the Code of Administrative Procedure and Article 60, No. 4, of the Code of Administrative Procedure and Tax Process[6],[7].

That is, in summary, it has been understood that when an administrated party is induced to use a certain procedural means by a certain conduct of the Administration, the latter cannot claim to oppose knowledge of the merits of the request, sheltering itself in the inadequacy of the procedural means whose use it itself, objectively, induced.

In the case, it is also found that there is doctrine, (JOSÉ XAVIER DE BASTO and GONÇALO AVELÃS NUNES), defending that, «a contested refund by the tax administration is entirely equivalent to a tax assessment and the means of reacting against that act of the administration, which denies or revokes a refund, are identical to those that the law puts at the disposal of taxpayers to annul, in whole or in part, the tax assessment»[8], a thesis which is in line with the application, determined by Article 22, Nos. 11 and 13 of the VAT Code, to acts of dismissal of refund requests of the administrative and contentious challenges of VAT assessment acts, provided for in Article 93 of the same Code.[9]

In this context, being the Tax Administration itself that in the notification identified the notified act as being a VAT assessment, inducing the Claimant to the use of a procedural means appropriate to its challenge, and it not being certain that such qualification is wrong (as cannot be otherwise understood when it is found that the adequacy of such qualification is affirmed by two reputed professors of tax law) always, also by this route, the exception raised by the Tax and Customs Authority should be judged to be without merit.

ii. of the preliminary ruling request

In its Response, the Tax Authority requests "submission to the CJEU, as a preliminary ruling (see Article 267 of the TFEU), prior to the pronouncement on the merits and by means of suspension of the instance, of the following questions:

Can a Member State consider that the requirement for exemption of operations provided for in No. 1 of Article 138 of Council Directive 2006/112/EC of November 28, 2006, is not met, when, through recourse to the mechanism of administrative cooperation obtained from the tax authorities of the Member State of destination of the goods, the confirmation that the purchaser, although validly registered as a taxable person for VAT purposes in that Member State and has made the payment of the transaction, did not include the operation in the VAT declaration as an intra-community acquisition of goods?
Can it be considered that an administrative practice respects the principle of proportionality when it places on the seller the burden of proving the authenticity of transport documents and the receipt of goods when the transport documents presented do not identify the goods subject to the transfer, nor the recipient?"

Let us examine this.

As stated in point 7 of the recommendations to national judicial bodies regarding the submission of preliminary proceedings (2012/C 338/01), of the CJEU[10]:

"the role of the Court in the context of a preliminary proceeding consists in interpreting the law of the Union or pronouncing itself on its validity, and not in applying this law to the factual situation underlying the main proceedings. This role is incumbent on the national judge and, therefore, it is not incumbent on the Court to pronounce itself on questions of fact raised within the scope of the dispute in the main proceedings or on eventual divergences of opinion regarding the interpretation or application of national law rules".

Moreover, it is recalled, in point 12 of those same recommendations, that the preliminary ruling to the aforementioned Court should not be given when:

i. there is already case law on the matter (and when the possibly new framework does not raise any real doubt as to the possibility of applying that case law to the concrete case); or

ii. when the correct way to interpret the legal rule in question is unequivocal.

Consequently, it continues in point 13, "a national judicial body can, particularly when it considers itself sufficiently clarified by the case law of the Court, decide itself the correct interpretation of the law of the Union and its application to the factual situation of which it has knowledge".

Finally, it should be taken into account that, as stated in point 18 of the same recommendations, "The national judicial body may submit to the Court a request for preliminary ruling from the moment it considers that a decision on the interpretation or validity is necessary to pronounce its decision.".

The first question formulated by the Tax Authority is thus concerned with knowing whether "Can a Member State consider that the requirement for exemption of operations provided for in No. 1 of Article 138 of Council Directive 2006/112/EC of November 28, 2006, is not met, when, through recourse to the mechanism of administrative cooperation obtained from the tax authorities of the Member State of destination of the goods, the confirmation that the purchaser, although validly registered as a taxable person for VAT purposes in that Member State and has made the payment of the transaction, did not include the operation in the VAT declaration as an intra-community acquisition of goods".

The first filtering criterion of the merit of the question formulated, from the perspective of its submission, as a preliminary ruling to the CJEU, is connected with its usefulness for the decision of the case. That is, only if the answer to the question formulated is necessary to pronounce a decision on the questions that present themselves to the Court to settle, should that question be submitted to the CJEU.

Now, with respect to other opinions, it is understood that this is not the case of the question at issue.

Indeed, whether the answer to the question formulated is affirmative or negative, it will not be susceptible of conditioning the direction of the decision to be pronounced.

Thus, if the answer were in the affirmative direction, recognizing that a Member State may consider that the requirement for exemption is not met, when it has the confirmation that the purchaser, although validly registered as a taxable person for VAT purposes in its Member State and has made the payment of the transaction, did not include the operation in the VAT declaration as an intra-community acquisition of goods, from this would not result, by the very semantics of the question, a conditioning of the answer, that it would be forbidden, in those cases, and in the present case specifically, to consider that the requirement for exemption is met.

On the other hand, and symmetrically, also in the case of a response in the opposite direction, recognizing to Member States the possibility of considering that the requirement for exemption is met, in cases in which they have the confirmation that the purchaser, although validly registered as a taxable person for VAT purposes in its Member State and has made the payment of the transaction, did not include the operation in the VAT declaration as an intra-community acquisition of goods, it would not result, in the same terms, that it would be forbidden, in those cases, and in the present case specifically, to consider that the requirement for exemption is not met.

That is, in summary: an answer saying that the Member State may or may not consider the exemption requirements to be met would not impose a particular direction on the decision to be pronounced in the present case, since it would always be necessary to ascertain under national law whether the Portuguese State used the power that would be recognized to it in the answer to the question posed.

For a question of scope analogous to that formulated by the Tax Authority, and which now occurs to us, to be useful, the same should, from the outset, be of an imperative content, whose answer would translate an imposition, and not a mere possibility.

Not being the Court bound, on this matter, by the request by the party, and having the duty to, ex officio, submit for resolution to the CJEU the questions that prove necessary for the decision of the case, and that are within the competence of those, in such a framework, two questions could be formulated, to wit:

Is a Member State obliged to consider that the requirement for exemption of operations provided for in No. 1 of Article 138 of Council Directive 2006/112/EC of November 28, 2006, is not met, when, through recourse to the mechanism of administrative cooperation obtained from the tax authorities of the Member State of destination of the goods, the confirmation that the purchaser, although validly registered as a taxable person for VAT purposes in that Member State, and has made the payment of the transaction, did not include the operation in the VAT declaration as an intra-community acquisition of goods?
Is a Member State forbidden to consider that the requirement for exemption of operations provided for in No. 1 of Article 138 of Council Directive 2006/112/EC of November 28, 2006, is not met, when, through recourse to the mechanism of administrative cooperation obtained from the tax authorities of the Member State of destination of the goods, the confirmation that the purchaser, although validly registered as a taxable person for VAT purposes in that Member State, and has made the payment of the transaction, did not include the operation in the VAT declaration as an intra-community acquisition of goods?

However, and from the outset, even the answer to these questions would not be of a decisive character with respect to the case sub judice.

Indeed, in the present case, there are factors both in favor and against the consideration of the verification of the assumptions of the exemption in question a series of additional circumstances, whose assessment would always go beyond the scope of the suggested questions, and their possible answers, by which it could always be considered that the assumptions of the exemption were met, taking into account other elements than the character of taxable person of the purchaser and the occurrence of payment, or that they were not met, taking into account other elements than the mere circumstance of non-inclusion in the VAT declaration of the operation as an intra-community acquisition of goods.

On the other hand, and here we come to the crux of the question that is truly under discussion in the present case, what is at issue is, essentially, a judgment of fact – which translates into knowing whether or not there was a shipment of goods to the recipient of the intra-community operation – and the application of rules of domestic law, particularly those relating to the burden of proof.

That is, we are, it is believed, in that domain to which the CJEU refers as "applying (...) law to the factual situation underlying the main proceedings". What is being discussed in the proceedings is not to ascertain the meaning of a rule of European law, that meaning being clear and assumed by the parties, who understand the meaning of the rule and exteriorize that understanding, but to verify whether that rule is or is not applicable "to the factual situation underlying the main proceedings", and it is certain that in that judgment national law rules relating to the burden of proof intervene, and that the CJEU does not "deal with any divergences of opinion regarding the interpretation or application of national law rules".

As the CJEU itself stated in the Mecsek-Gabona Judgment, "in the context of the proceedings instituted by Article 267 TFEU, the Court of Justice is not competent to verify or assess the factual circumstances relating to the main proceedings"[11], and it is for the national courts that it falls to assess whether the taxpayer of its State "complied with the obligations incumbent upon it in matters of proof and due diligence"[12], with respect to the assumptions of the exemption that it claims.

Finally, and in any case, it is always understood that the correct way to interpret the community legal rule in question, from the perspective of the potential questions formulated, should be held as unequivocal, in the sense that the answer should be negative, to both. That is, a Member State will be neither obliged to nor forbidden from considering that the requirement for exemption is not met, when, through recourse to the mechanism of administrative cooperation obtained from the tax authorities of the Member State of destination of the goods, the confirmation that the purchaser, although validly registered as a taxable person for VAT purposes in that Member State and has made the payment of the transaction, did not include the operation in the VAT declaration as an intra-community acquisition of goods. Rather, in light of what has been the case law of the CJEU, essentially oriented towards the correct and simple application of exemptions, independently of those factors (non-declaration of the intra-community acquisition by the purchaser, registration of the latter for VAT purposes in its State, and actual payment of the operation), the Member State may – without doubts – consider met, or not met, the assumptions of the exemption, as the remaining factual elements collected point in one or the other direction.

Moreover, in the Teleos Judgment, cited by the Tax Authority itself, it was expressly recorded that "it should be considered that, with the exception of the conditions relating to the status of taxable person, the transfer of the power to dispose of goods as an owner and the physical movement of goods from one Member State to another, no other condition can be required for the purpose of qualifying an operation as an intra-community delivery or acquisition of goods"[13], and that "even though the presentation by the purchaser of a tax statement relating to the intra-community acquisition may constitute evidence of the actual transfer of goods out of the Member State of supply, such statement does not, however, assume a determining significance for the purposes of proof of an intra-community delivery exempt from VAT"[14].

It can further be read, in the same judgment, that "the fact that the purchaser has submitted a statement to the tax authorities of the Member State of destination relating to the intra-community acquisition, such as the one at issue in the main proceedings, may constitute additional proof to demonstrate that the goods actually left the territory of the Member State of supply, but does not constitute determining proof for the purposes of VAT exemption of an intra-community delivery."

From which no doubts are offered that, both in light of the community normative statement in question and the reading made of it by the case law of the CJEU, that the declaration of intra-community acquisition, or lack thereof, by the purchaser, in an intra-community transfer of goods, may constitute additional proof to demonstrate that the goods left, or did not, actually leave the territory of the Member State of supply, but does not constitute determining proof for the purposes of VAT exemption of an intra-community delivery.

Thus, and for all the foregoing, it is understood that the requested preliminary ruling to the CJEU is not justified, as to the first of the questions formulated by the Tax Authority in its response, or any other related to it.

The Tax Authority also formulates the question of whether "Can it be considered that an administrative practice respects the principle of proportionality when it places on the seller the burden of proving the authenticity of transport documents and the receipt of goods when the transport documents presented do not identify the goods subject to the transfer, nor the recipient?", intending its appreciation, also within the framework of a preliminary ruling, by the CJEU.

Also this question, however, will stumble on the test of the necessity of the answer for the decision to be pronounced, whose passage is indispensable to the viability of the option for preliminary ruling.

Indeed, even if the CJEU might consider "that an administrative practice respects the principle of proportionality when it places on the seller the burden of proving the authenticity of transport documents and the receipt of goods when the transport documents presented do not identify the goods subject to the transfer, nor the recipient", this would contribute nothing to the decision of the case, notably because it would be under national law, whose application is forbidden to the CJEU, that it would be necessary to ascertain whether:

the presumed administrative practice proportionate in light of community law imposes itself, or not, on the judicial body charged with deciding the case; and
the same administrative practice is, or is not, legal, in light of national law.

Now, as stated in the Judgment of the Administrative Court of the Superior Court of Justice of March 12, 2015, pronounced in case 01560/05.5BEPRT[15], "Any appropriate means of proof is admissible, in the procedure and in the process, in accordance with the provisions of Articles 50 and 115, No. 1, of the Code of Tax Procedure and Process. A contrary understanding, in particular, the limitation through administrative circulars of the means of proof admitted in the elimination of that presumption is unacceptable as it restricts the right to proof that the constitutional principles of justice and effective judicial protection fully assume to be assured to the interested parties – see Article 20 of the Fundamental Law.".

From which, being the rules of distribution of the burden of proof those that flow from the law, and not those which administrative practice determines, the answer to the second question formulated would not be of usefulness for the decision to be pronounced, insofar as, on the one hand, the administrative practice to which it reports, even if judged, in light of community law, proportionate, would not impose itself on this Court, which is obliged to judge according to Portuguese law constituted, and, on the other, in light of this, the limitation through administrative circulars of the means of proof admitted for the demonstration of the fulfillment of the assumptions of the right to the exemption now discussed will be unacceptable as it restricts the right to proof that the constitutional principles of justice and effective judicial protection fully assume to be assured to the interested parties, in accordance with, moreover, Article 20 of the Constitution.

Thus, and for all the foregoing, it is understood that the requested preliminary ruling to the CJEU is not justified, also as to the second of the questions formulated by the Tax Authority in its response.

iii. of the merits of the case

The legal question that arises in the proceedings is essentially concerned with knowing whether, in light of the matters of fact found as proven, the assumptions of Article 14(a) of the VAT Regime on Intra-Community Transactions (RITI) are or are not met, which provides that:

"Are exempt from tax:

a) The supplies of goods, carried out by a taxable person referred to in paragraph (a) of No. 1 of Article 2, dispatched or transported by the seller, by the purchaser or on account of either, from the national territory to another Member State with destination to the purchaser, when the latter is a natural or legal person registered for value added tax purposes in another Member State, who has used the respective identification number to make the acquisition and is covered there by a system of taxation of intra-community acquisitions of goods;"

It being not controversial that the requirements for the application of the exemption in question are:

that the supplier is a taxable person for VAT in its Member State of residence;
that the purchaser is also a taxable person for VAT, resident in another Member State, and uses the respective identification number to make the acquisition;
that the goods are actually dispatched or transported to the Member State of residence of the purchaser, with destination to the latter;

is solely in question in the present case to ascertain the verification of the last of those enumerated requirements, by which what is to be ascertained is whether the goods in question were or were not actually dispatched or transported to another Member State, with destination to the purchaser, or, in the case, to the Netherlands, with destination to company F....

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

Applying such provision to the present case, and bearing in mind that what is in question is a right of the taxpayer to a tax exemption, it will be agreed, it is believed, that the burden of proof of the assumptions of the right it seeks to exercise will rest on the latter.

However, Article 350(1) of the Civil Code, applicable in accordance with Article 2(d) of the General Tax Law, provides that "Whoever has a legal presumption in their favor is spared from proving the fact to which it leads."

In the case, and with interest to the question, Article 75(1) of the General Tax Law provides that "The declarations of taxpayers presented in accordance with the terms provided by law are presumed to be true and in good faith, as well as the data and determinations recorded in their accounting or bookkeeping, when these are organized in accordance with commercial and tax legislation, without prejudice to the other requirements on which the deductibility of expenses depends."

The aforementioned presumption may be overcome in two ways, to wit:

by removing it – preventing it from operating – by the demonstration of any of the circumstances listed in No. 2 of the same Article 75 of the General Tax Law;
by rebutting it, by the proof to the contrary of what is presumed, in accordance with No. 2 of the likewise referred to Article 350 of the Civil Code.

Examining the facts found as proven, it is verified that:

From the accounting elements of the Claimant, relating to the period in question, the following watch sales billed for the intra-community market are recorded:
On the invoices referred to in the preceding point, the Claimant did not bill VAT, considering them to be intra-community transfers of goods.
With a view to validating the operations recorded and declared by the Claimant as Intra-Community Transfers of Goods, attached to the issued invoices were:

o documents validating the tax number of the respective purchasers for intra-community goods operations, documents extracted from the VIES system (VAT Information Exchange System); and

o documents relating to the transport of goods (described as "documents") with destination to the operators registered in the Member States contained in the invoices, issued by the contracted carrier, FedEx Express, having as intermediary in this operation the operator C... Expresso, SA, with registered office in Maia.

The Claimant had recorded as means of receipt the following documents:

o With respect to operators D... (Italy) and E... (France), the records were documented by originals of the payment notices from BANK ... communicating the payment orders from the same received;

o With respect to operator F... (Netherlands), the same were supported by documents extracted by the Claimant from the home banking service of BANK ....

In the VAT declaration for the respective period, the Claimant proceeded to deduct the VAT incurred on the purchase of the watches referred to above, calculating a tax credit in the amount of €26,405.31, and requested the corresponding refund;
In the analysis of the accounting elements and periodic VAT declaration, carried out in the aforementioned inspection procedure, no discrepancies were identified.

In light of the aforementioned Article 75(1) of the General Tax Law, the declarations presented in the periodic VAT declaration by the Respondent, where it calculated the indicated refund, must be presumed to be true and in good faith, as well as the data described in its accounting, in which no discrepancies were identified by the Tax Authority.

The aforementioned presumption, moreover, was expressly invoked by the Claimant (see Article 69 of the initial request), and recognized by the Tax Authority itself (see page 8 of the decision of the gracious appeal) – as could not be otherwise, since if the Claimant had submitted its periodic declaration in accordance with the law, and had regularly organized accounting, it would be placed on the same footing as a negligent taxpayer[16] – as has already been seen, may be overcome in two ways, pointed out, respectively, by Article 75(2) of the General Tax Law and Article 350(2) of the Civil Code.

Let us see if this occurs.

The aforementioned presumption shall not operate, if any of the circumstances (preventive) listed in No. 2 of Article 75 of the General Tax Law are verified, namely, and for what matters now:

The declarations, accounting or bookkeeping reveal omissions, errors, inaccuracies or well-founded indications that they do not reflect or prevent knowledge of the actual taxable matter of the taxable person;
The taxpayer did not comply with the duties incumbent on the taxpayer to clarify its tax situation;

As Elisabete Louro Martins explains[17]:

"The degree of proof required of the Tax Administration to set aside the presumption of truth provided for in the General Tax Law in favor of the taxpayer will, in our opinion, depend on the nature of the defects found. Formal defects (...) should be the subject of effective proof based on the documents themselves presented by the Taxable Person (...). In fact, either the documents are formally correct or they are formally incorrect, and it is inadmissible that a decision be issued on the basis of mere indications of facts that can be grasped on the basis of available documents.

On the other hand, the same rule cannot be applied to material defects, since they are often based on elements external to the accounting, such as the fact that they do not record real operations that may confer on the taxable person the right to deduction, which do not allow obtaining a degree of reasonable certainty regarding the existence of the tax fact. As results from the second part of paragraph (a) of No. 2 of Article 75 of the General Tax Law, in the case of material defects, it will be sufficient for the Tax Administration to present objective concrete facts, based on concrete proofs, which according to common experience rules are strongly indicative of the existence of the tax fact".

Examining, once again, the list of facts ascertained in the present case, it is verified that there is no evidence of any circumstance relating to the second of the preventive circumstances of the operability of the presumption in question, which has just been listed. On the contrary, and as emerges from the fact found as proven in point 12 of the matters of fact, the Respondent corresponded, to the extent that was possible for it, to the requests for cooperation formulated by the Tax Authority, in order to clarify its tax situation. Thus, citing Jorge Manuel Santos Lopes de Sousa[18], "once the duty to clarify has been fulfilled, the presumption of veracity and good faith of the declarations of taxpayers provided for in No. 1 of Article 75 of the General Tax Law is maintained, with it being incumbent on the Tax Administration to challenge the veracity, through the demonstration of 'serious indications' of non-correspondence with the truth, thus 'imposing on [it] the burden of proof of the facts preventing the presumed truth that results from the declaration of taxpayers'".

With respect to the first of those same circumstances, mentioned above, since no omissions, errors, inaccuracies of the declarations or accounting were notoriously detected, it shall remain to ascertain whether well-founded indications were gathered that those do not reflect the actual taxable matter of the taxable person.

At this level, what the Tax Authority ascertained was that its Dutch counterpart informed, in a first instance, that the taxable person, F..., would have declared that it had not had any business with the Claimant.

This was – unquestionably – the determining element of the assessment against which the Claimant rebels, as results, meridianly clear, from the circumstance that, with the same type of documentary support, the Tax Authority accepted what was declared by the Claimant with respect to the intra-community transfers of goods with Italy and France, whose respective authorities confirmed, as stated in point 15 of the matters of fact above established, the occurrence of the transactions.

That is, it was not the content of the documentation presented by the Claimant[19], analogous to that of other transfers that ended up being accepted by the Tax Authority, that determined the assessment in crisis in the present case, but the information provided to the Tax Authority by its Dutch counterpart. Indeed, the documentation in question, as the Tax Authority recognizes, both in its Response (see Article 54) and in its submissions (see Article 44), raised doubts, insufficient, however, to determine the non-existence of the shipment of goods, and the consequent additional assessment, by which reason, in the transaction in question in the present case, as in two others (to Italy and France), additional information was requested from the respective tax authorities.

It shall thus be necessary to ascertain whether the information provided by the Dutch authority, at the time, could be qualified as a "well-founded indication" that the accounting and declaration presented by the taxable person did not reflect its actual taxable matter, and, if so, whether, in the context of the factual elements meanwhile gathered, such qualification is susceptible of being maintained.

As to the first of these questions, it should be said from the outset that, with respect to this information, and contrary to what the Tax Authority argues in its submissions, it is understood that Article 76(4) of the General Tax Law does not apply, at least with the scope which the aforementioned authority postulates, that is, as making proof that F... had no transaction with the Claimant. Indeed, the information in question will only make proof that someone – not identified[20] – in the name of that Dutch taxpayer will have declared that F... had no transaction with the Claimant. It will be this, the fact attested by the document in question, which consists of a fact directly perceived by the Dutch tax authority, and the proof capable of being recognized to the information provided by it shall be restricted to the occurrence of such declaration.

Nevertheless, and with the precision just made, it is understood that the answer to the first question posed above – on whether, at the time, the first information provided by the Dutch authorities could be qualified as a "well-founded indication" that the accounting and declaration presented by the taxable person did not reflect its actual taxable matter – should be affirmative.

Effectively, in the framework delineated in the Tax Inspection Report, where there was found an impossibility of obtaining receipt and identification of the person delivering the goods, and information was gathered from a tax authority of another Member State, stating that the taxable person purchaser of a declared intra-community transfer of goods, its resident, communicated to it that it had had no business with the declaring supplier of that, in light of the silent posture of the Claimant when granted the opportunity to exercise its right to prior hearing, not constituting unequivocal proof – particularly because the production of the means of proof in question was not contradictorily challenged – it should be reputed as a well-founded indication that the declared intra-community transfer of goods, as well as the accounting entries supporting it, would not be true, in terms of preventing the operation of the presumption enshrined in No. 1 of Article 75 of the General Tax Law.

Such conclusion, however, cannot be maintained, it is judged, in the framework resulting from the subsequently gathered elements.

Indeed, on the one hand, the Respondent succeeded in presenting a document, whose genuineness was not questioned, nor does it appear questionable, integrating a declaration by the purchaser in the intra-community transfer of goods in question, confirming that quality, as well as the actual receipt of the goods.

This document, taking into account that no circumstance was ascertained that would allow to, in a well-founded manner, question its genuineness, cannot be probatively valued in a manner different from the information originally provided by the Dutch tax authority, insofar as this information does not relate to a fact of personal knowledge of the latter (the existence, or otherwise, of transactions between F... and the Claimant), nor does it identify who, in the name of F..., will have declared the non-existence of transactions with the Claimant.

On the other hand, the very subsequent information of the Dutch tax authorities came to confirm that, after all[21], the invoices issued by the Claimant were found in the accounting of F...[22], the same occurring with respect to documents relating to the payment of the transaction[23]. That is, the very second information of the Dutch authorities puts into question the evidentiary foundation of the first, noting that, having those authorities the understanding that the first information was erroneous (which is evident from the use of the expression "after all"), they did not undertake any effort to explain it, in particular by identifying the author of the first declaration and seeking, from him, an explanation for what was stated.

Thus, in the context of the judgment relating to the existence, or otherwise, of "well-founded indications" that the accounting and declaration presented by the Claimant, in question in the present case, do not reflect its actual taxable matter, taking into account that the only circumstance ascertained by the Tax Authority in that direction within the scope of the tax procedure that culminated in the tax acts subject to the present case – the declaration gathered by the Dutch authorities from an unidentified person, according to which there would have been no transaction between the Claimant and F... – is contradicted both by the documentation meanwhile presented by the Claimant and by the supplementary information from the same Dutch tax authorities, it shall be concluded in the negative, by which the presumption enshrined in Article 75(1) of the General Tax Law cannot fail to operate.

It is true that the aforementioned second information of the Dutch tax authorities conveys new data – which as such is not grounds for any of the challenged acts – which is the circumstance of the non-declaration by F... of the intra-community acquisition of its part.

With respect to this aspect, it should be said from the outset that the understanding of the Claimant is not accepted, according to which the document in question, and this specific data conveyed by it, integrate an a posteriori substantiation. Indeed, the same is a document whose genuineness is not, in a well-founded manner, questioned, and which attests to a fact, of personal knowledge of the respective issuing entity, a fact which has a preventive effect on a presumption, also itself a means of proof, of which the Claimant seeks to avail itself in the present case. From which, it is judged, the Tax Authority has full legitimacy to attach the document in question to the case, and to avail itself of the fact documented in its favor.

Placed thus, it is, however, considered that the circumstance in question (non-declaration of the intra-community acquisition by F...), is not equally susceptible of being qualified, for purposes of preventing the formation of the presumption enshrined in Article 75(1) of the General Tax Law, as a "well-founded indication" that the accounting and declaration presented by the Claimant, in question in the present case, do not reflect its actual taxable matter. Indeed, the decision to declare or not the intra-community acquisition is exclusively determined by the purchaser, the Claimant being entirely foreign to it, in terms of not being able to determine or control it.

However, even if this were not understood, it would always be concluded that, at the limit, such circumstance would be only susceptible of generating a situation of doubt. Effectively, and applying here the ratio of the CJEU's response to the fourth question raised in the Teleos Judgment[24], cited by both parties, it should be understood that the fact that the purchaser did not present a statement to the tax authorities of the Member State of destination relating to the intra-community acquisition, such as the one now at issue, may constitute additional proof to demonstrate that the goods did not actually leave the territory of the Member State of supply, but does not constitute determining proof for purposes of non-exemption of VAT of an intra-community delivery.

It is not, thus and in summary, possible to validate the judgment that we are faced with "objective concrete facts, based on concrete proofs, which according to common experience rules are strongly indicative of the existence of the tax fact".

Now, insofar as, in the light of the substantiation preceding, it was the Tax Authority which, in order to prevent the activation of the presumption enshrined in Article 75(1) of the General Tax Law, was burdened with the task of gathering "well-founded indications" that the accounting and declaration presented by the Claimant, in question in the present case, did not reflect its actual taxable matter, the doubt in question would imperatively have to be resolved in a direction unfavorable to the position of that authority.

Thus, and for all the foregoing, it is concluded that the presumption enshrined in Article 75(1) of the General Tax Law is operative in the case, relating to the periodic declaration and accounting entries presented by the Claimant, with respect to the intra-community transaction of goods in question in the tax acts subject to the present case, by which, in accordance with Article 350(1) of the Civil Code, the latter is spared from proving the factual assumptions thereof, which are presumed.

Having arrived here, it is necessary to verify whether the Tax Authority succeeded in proving to the contrary the facts which, in accordance with the foregoing, must be presumed, relating to the occurrence of the intra-community transfer of goods in question in the present case, in the exercise of the faculty which, in accordance with Article 350(2) of the Civil Code, was available to it. As Elisabete Louro Martins states[25], "when doubts arise regarding the facts declared by the Taxable Person in the income statement, if all the questions raised by the Tax Administration have been resolved during tax inspection or during the exercise of the duty to provide clarifications through analysis of the documents presented by it, it will not be legitimate for the Tax Administration to act through the practice of the tax act, without presenting any proof that objectively indicates the formal or material defect verified, in accordance with Article 350, No. 2, of the Civil Code, since legal presumptions are given full probative force".

Examining the facts proven, there is not discerned that this occurs. That is, there is not seen that it follows from the factual framework in question the proof, beyond any reasonable doubt, that the intra-community transfer of goods in question did not occur.

Effectively, in the direction of its verification point, in the first place, the timely tax declaration and accounting treatment presented by the Claimant, as well as the declaration referred to in point 20 of the facts found as proven, and, accessorily, the invoicing, in accordance with the law, operated by it and present in the accounting of the recipient, the actual payment of the transaction, and the existence of the respective proofs both in the accounting of the Claimant and in the accounting of the purchaser, in addition to the existence of documents – although not conclusive – relating to the dispatch[26].

In the direction of the non-occurrence of the intra-community transfer of goods in question, points, in the first place, the non-declaration, by the purchaser, of the intra-community acquisition of goods, as well as, accessorily, the deficiencies of the documentation presented regarding the dispatch, generating doubts as stated in the Tax Inspection Report and transcribed in point 12 of the facts proven, and the declaration of an unidentified person, in the name of F..., according to which it had no transaction with the Claimant.

All things being weighed, it is understood that sufficient proof has not been made of the non-occurrence of the intra-community transfer of goods duly declared, in accordance with the law, and recorded by the Claimant in its accounting, by which, in light of the non-rebuttal of the presumption enshrined in Article 75(1) of the General Tax Law[27], the arbitral request should proceed, the other questions raised by the Claimant being prejudiced (lack of substantiation and prior hearing).

The Claimant combines with the request for annulment of the tax acts subject of these proceedings, the request for condemnation of the Tax Authority in the payment of compensatory interest.

It is a prerequisite for the attribution of compensatory interest that the error in which the Tax Authority labored is imputable to it (see Article 43 of the General Tax Law).

In the case of the proceedings, it is manifest that, following the illegality of the assessment act, for the reasons pointed out above, an amount less than due was refunded to the Claimant, which should be corrected, by force of the provisions of Articles 24, No. 1, paragraph (b), of the RJAT and 100 of the General Tax Law, since this is essential to "restore the situation that would exist if the tax act subject to the arbitral decision had not been performed".

It is also clear in the proceedings that the illegality of the assessment act subject to the present case is directly imputable to the Respondent, which, on its own initiative, performed it without legal support, suffering from a wrongful assessment of the legally relevant facts and consequent application of the legal rules to the concrete case.

Thus, the Claimant is entitled to the receipt of compensatory interest, in accordance with the provisions of Articles 43, No. 1, of the General Tax Law and 61 of the Code of Tax Procedure.

Compensatory interest is due to the Claimant from the date on which it should have benefited from the refund of the tax in question, and on the respective amount, until the moment in which it is made, at the legal rate.

C. DECISION

To this effect, the arbitrators further decide in this Arbitral Tribunal to judge the arbitral request wholly substantiated and, in consequence,

a) To annul, for the reasons set out above, the following acts:

i. VAT Assessment 2013... relating to VAT for period 06 of year 2012, dated 18-10-2013;

ii. Dismissal of the gracious appeal presented with respect thereto; and

iii. Tacit dismissal of the hierarchical appeal presented with respect to the decision of that appeal.

b) To condemn the Tax Authority to repay the amount improperly not refunded to the Claimant, following the tax acts referred to, plus compensatory interest, counted from the date on which it was due until the date of its effectuation.

D. Value of the Case

The value of the case is fixed at €16,033.30, in accordance with Article 97-A, No. 1, paragraph (a), of the Code of Tax Procedure and Process, applicable by force of paragraphs (a) and (b) of No. 1 of Article 29 of the RJAT and No. 2 of Article 3 of the Rules of Costs in Tax Arbitration Proceedings.

Let notification be made.

Lisbon

September 14, 2015

The President Arbitrator

(José Pedro Carvalho - Reporter)

The Arbitrator Member

(Clotilde Celorico Palma)

The Arbitrator Member

(Américo Brás Carlos - votes against, in accordance with the attached dissenting statement)

Case No. 753/2014-T

DISSENTING OPINION

I voted against the decision and its grounds in the judgment, essentially for the reasons which I shall now enumerate:

Matters of Fact

1.1 In the list of facts found as proven, the judgment identifies in the 2nd bullet of point 7, the following fact:

"With a view to validating the operations recorded and declared by the Claimant as Intra-Community Transfers of Goods, attached to the issued invoices were:

documents relating to the transport of goods (described as 'documents') with destination to the operators registered in the Member States contained in the invoices, issued by the contracted carrier, FedEx Express, having as intermediary in this operation the operator C... Expresso, SA, with registered office in Maia".

I consider that the description thus adopted for discriminating this fact is not sufficiently clear, and I consider it, for that reason, below what is imposed by the imperative of discrimination implicit in No. 1 of Article 125 of the Code of Tax Procedure (applicable by force of paragraph (a), of No. 1, of Article 29 of the RJAT), insofar as it did not specify, above any reasonable doubt, the fact proven; which is the non-identification by the Claimant in the "documents relating to the alleged transport of the goods" (see tax inspection report and Article 35 of the initial petition) of the watches in question, having "identified them only as documents" (see Article 54 of the response).

1.2. I also do not agree with the judgment when it does not include in the facts found as proven "the facts relating to the possible motivation of the description of the goods contained in the documents referred to in point 7 of the facts found as proven, since they were not the subject of evidence produced in contradiction, which was delimited by the matters of fact contained in the initial request and indicated in point (v) of the Claimant's Request submitted on March 18, 2015".

This is because the non-description of the goods (it is indeed a non-description of the goods) in the transportation documentation, in addition to resulting from the statements of the witness (at 8 minutes), representative of the company that concluded the insurance contract in which the Claimant is insured and by it called, is also justified by the Claimant through the attachment to its request of March 18, 2015, of a copy of an amendment act to the aforementioned policy dated August 30, 2012, which provides:

"(…)

The territorial scope and contracted capitals are the same as those contained in the policy.

EXCLUSIONS:

Complaints for losses of shipments are excluded when any word related to jewelry (gold, silver, pearls, watches, etc.) appears in the transport document.

(…)

The remaining coverage remains unchanged.".

And, as is known, justification within the scope of the coverage that was contracted aims to justify, but does not extinguish the fact justified. Which is the non-identification of the dispatched goods, whose reality is thus further demonstrated (Article 341 of the Civil Code).

I also do not subscribe to the disregard of the witness statements because they are outside what was "delimited by the matters of fact contained in the initial request and indicated in point (v) of the Claimant's Request submitted on March 18, 2015". On the one hand, I consider that the delimitation requested by the Claimant (matters of Articles 21 to 75 of the initial petition) well encompasses the matter relating to the identification of the goods transferred. On the other hand, even if this were not the case, I consider that, given the principle of ex officio action and the inquisitorial or material truth principle, in force in tax proceedings by force of Article 99 of the General Tax Law and Articles 13 and 114 of the Code of Tax Procedure (in the same sense, moreover, of Article 90 of the Code of Administrative Procedure and Tax Process and Article 411 of the Civil Procedure Code) all subsidiarily applicable to the tax arbitration process, the tribunal could not ignore those elements of proof and, also in accordance with Article 413 of the Civil Procedure Code, should take them into consideration, independently of which party produced them or should produce them.

Matters of Law

From the perspective of applicable law, the decision was based on the following premises and conclusion:

a) The judgment considered applicable the "presumption of truth", enshrined in Article 75, No. 1 of the General Tax Law, to the periodic VAT declaration of the Claimant, where sales allegedly made to a taxable person of another Member State were considered exempt from tax, as well as to the claimant's documents mentioning the same, the Tax Administration not having, in its understanding, proved the "verification of any of the preventive circumstances" of said presumption;

b) By force of said presumption, it also considered applicable to the case the provisions of Article 350, No. 1 of the Civil Code, removing, in consequence, from the taxable person "the burden of proof of the assumptions of the right" to that exemption;

c) And it concluded by the "non-rebuttal of the presumption enshrined in Article 75, No. 1 of the General Tax Law" by the Tax Authority, with the consequent annulment of the VAT assessment in question.

I distance myself from these premises and this conclusion, because:

First - In my judgment, being a tax benefit (exemption provided for in paragraph (a) of Article 14 of the VAT Regime on Intra-Community Transactions), the judgment should have weighed the provisions of Article 14, No. 2, of the General Tax Law, which provides "The holders of tax benefits of any nature are always[28] obliged to disclose or to authorize the disclosure to the tax administration of the assumptions for their grant (…) under penalty of the said benefits being without effect". And this would suffice to remove the question sub judice from the regime of Article 75 of the General Tax Law.

In fact, being tax benefits, the burden of substantiation of the verification of their respective assumptions always rests, on their holders, which, in light of the proceedings, I consider has not occurred as to the transfer of the goods contained in the Claimant's accounting to a taxable person for VAT purposes of another Member State, acting as such.

The assumption for the right to exemption is not (nor is it seen how it could be) the mere declaration of the same; rather it is the verification of the reality of its assumptions. The mere declaration of a tax benefit thus has no constitutive effect that determines for the taxpayer a protection - in the case a presumption of veracity - capable of placing on the tax administration the burden of proof relating to the verification of the assumptions of that invoked right of the private party.

Also Joaquim Freitas da Rocha gives account of the particularity of tax benefits, in matters of the principle of Article 75 and the rule of distribution of the burden of proof of Article 74 of the General Tax Law, noting that this is a case of "deviation from the burden of proof"[29].

Note, moreover, that, even outside the scope of tax benefits, the presumption of veracity resulting from No. 1 of Article 75 of the General Tax Law is not, for relevant legal reasons, of absolute application. See that with regard to the right to deduction of VAT allegedly incurred in operations which, although invoiced, the Tax Administration considered not to have actually occurred, the Judgment of the Superior Court of Justice - Plenary, of May 7, 2003, case No. 1026/02, established case law to the effect that "(…) it is incumbent on the taxpayer, in the proceeding in which it challenges the action of the Tax Administration, the proof of the assumptions on which its right to that deduction depends."

In the same sense, decided the Judgment of the Administrative Court of the Superior Court of Justice of May 9, 2007, appeal No. 1500/06: "In cases where the disregard of the right to VAT deduction is in question, on the assumption that the operations titled by the invoices have no adherence to reality, it is not the Tax Administration which has to demonstrate the non-existence of the operations titled by the invoices, but rather, and to the contrary, it is on the taxpayer, who seeks to assert that invoked right to deduction, that it is incumbent to prove the adherence to reality of such operations[30]"

If this is so for the right to VAT deduction, it should always be understood, a fortiori, that in the case of the tax benefit in analysis (and after the Tax Administration in the inspection action concluded the simulation of intra-community transfer of goods...

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Frequently Asked Questions

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What are the proof requirements for VAT-exempt intra-community supply of goods in Portugal?

Under Portuguese VAT law, intra-community supply of goods requires substantive proof to qualify for exemption under Article 14 of the VAT Code (CIVA). Taxpayers must demonstrate: (1) physical transport of goods from Portugal to another EU Member State, (2) the purchaser's valid VAT identification number in the destination state, and (3) proper documentary evidence including transport documents, invoices with the purchaser's intra-community VAT number, and proof of delivery. The burden of proof rests on the supplier claiming the exemption. While CAAD decision 753/2014-T involved disputes over such proof requirements, the procedural order excerpt does not detail the specific evidentiary standards applied to the substantive VAT issue.

How does CAAD arbitration handle late document submission in Portuguese tax disputes?

CAAD arbitration applies flexible standards for late document submission based on Article 423 of the Code of Civil Procedure. Documents may be submitted up to 20 days before the final procedural moment (equivalent to final hearing in civil proceedings). In Case 753/2014-T, the tribunal rejected the Claimant's motion to remove documents submitted by the Tax Authority after the initial response, finding them not 'untimely.' Significantly, the tribunal held that RJAT contains no provisions for imposing procedural fines on parties for late submission, representing an intentional legislative choice. The Court noted operational difficulties in implementing such fines (determining the beneficiary entity and collection mechanisms) and concluded that neither procedural fines nor incidental costs can be awarded in tax arbitration under current RJAT framework.

Can the Portuguese Tax Authority submit additional evidence after the initial response in arbitration?

Yes, the Portuguese Tax Authority can submit additional evidence after its initial response in CAAD arbitration, subject to timing limitations. In Case 753/2014-T, the arbitral tribunal explicitly permitted the Tax Authority to file documents on 13-04-2015, after the initial response phase, rejecting the Claimant's objection that such submission was 'untimely.' The tribunal applied Article 423 of the Code of Civil Procedure, allowing document submission up to 20 days before the final procedural moment. However, the tribunal retains discretion to reject documents that are not relevant to material truth or fact-finding. The Court also noted that RJAT Articles 16(c), 16(d), 19, and 29(2) empower tribunals to order document submission ex officio or upon request to ascertain material truth, demonstrating the procedural flexibility inherent in Portuguese tax arbitration.

What procedural rules apply to document deadlines in Portuguese tax arbitration under RJAT?

Portuguese tax arbitration under RJAT applies document deadline rules by analogy from the Code of Civil Procedure (CPC), specifically Article 423. Since RJAT does not mandate a final hearing, Case 753/2014-T established that the relevant deadline is the last procedural meeting, notification for written submissions, or the moment before final decision. Documents may generally be submitted up to 20 days before this procedural moment. Article 423(3) CPC allows later submission if presentation was previously impossible or became necessary due to subsequent occurrences. Importantly, RJAT contains no provisions for procedural fines or sanctions for late submission, distinguishing tax arbitration from civil proceedings. The tribunal emphasized that both parties may submit supplementary documents during proceedings, and the Claimant cannot object to the Tax Authority's submissions while having filed documents after its own initial request.

What was the outcome of CAAD decision 753/2014-T on IVA intra-community transactions?

The provided excerpt from CAAD decision 753/2014-T contains procedural orders rather than the final substantive decision on the IVA intra-community transaction dispute. The case involved A... - IMOBILIÁRIA, LDA challenging a VAT assessment for period 06/2012, alleging formal defects including lack of substantiation and failure to observe prior hearing rights. The procedural orders addressed: (1) rejection of the Claimant's motion to remove Tax Authority documents as 'untimely,' (2) rejection of the Tax Authority's request to file an insurance policy document as not relevant to material facts, and (3) clarification that RJAT prohibits procedural fines for late submissions. The tribunal's reasoning emphasized procedural flexibility, material truth principles under RJAT Articles 16, 19, and 29(2), and the intentional absence of penalty provisions in tax arbitration regulations. The substantive outcome regarding the VAT assessment's legality is not included in this excerpt.

CAAD 753/2014-T: VAT Intra-Community Supply of Goods – Proof Requirements Ruling

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CAAD 753/2014-T: VAT Intra-Community Supply of Goods – Proof Requirements Ruling

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