Process: 88/2017-T

Date: December 13, 2017

Tax Type: IVA

Source: Original CAAD Decision

Summary

CAAD Process 88/2017-T examined VAT assessment acts totaling €703,608.52 related to alleged false triangular export operations. The applicant, a Portuguese poultry farming company producing hatching eggs, challenged VAT assessments arising from indirect exports where goods were invoiced to intra-community customers (companies C and D) but destined for third countries (Russia and Ukraine). The Tax Authority disputed the VAT export exemption under Article 14(1)(b) of the VAT Code, questioning whether goods actually left EU customs territory. The case centered on documentary proof requirements for indirect exports, specifically the need for proper certificates of exit from customs authorities. The inspection revealed that while direct exports by the applicant were validated without irregularities, indirect export operations raised evidentiary concerns. According to DSRA Circular Letters 15327/2015 and 15309/2014, when goods are acquired with VAT exemption by non-resident exporters, certification must include both a 'Certificate of exit for the shipper/exporter' and a 'Certificate of exit for the national supplier.' The tribunal examined whether the taxpayer met the burden of proof demonstrating that hatching eggs physically departed Portuguese and EU territory for Russia or Ukraine. The requested VAT refund originated from tax credits accumulated since December 2012, with exports representing 15% of turnover in 2014. This decision clarifies critical evidentiary standards for Portuguese suppliers in triangular operations claiming VAT export exemptions, emphasizing the distinction between genuine exports and false triangular schemes where goods remain within the EU despite appearing to qualify for exemption.

Full Decision

ARBITRAL DECISION

The Arbitrators José Pedro Carvalho (Presiding Arbitrator), Clotilde Celorico Palma and Luís Baptista, appointed by the Deontological Council of the Administrative Arbitration Centre to form an Arbitral Tribunal, hereby agree:

I – REPORT

On 25 January 2017, Company A…, S.A., NIPC…, with registered office in …, …, …, filed a request for constitution of an arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters, as amended by article 228 of Law No. 66-B/2012, of 31 December (hereinafter, abbreviated as RJAT), seeking the declaration of illegality of the following VAT assessment acts in the amount of € 703,608.52:

i. Assessment No. … of 2013;
ii. Assessment No. … of 2013;
iii. Assessment No. … of 2013;
iv. Assessment No. … of 2013;
v. Assessment No. … of 2013;
vi. Assessment No. … of 2013;
vii. Assessment No. … of 2013;
viii. Assessment No. … of 2013;
ix. Assessment No. … of 2013;
x. Assessment No. … of 2014;
xi. Assessment No. … of 2014;
xii. Assessment No. … of 2014;
xiii. Assessment No. … of 2014;
xiv. Assessment No. … of 2014;
xv. Assessment No. … of 2014;
xvi. Assessment No. … of 2014;
xvii. Assessment No. … of 2014;
xviii. Assessment No. … of 2014;
xix. Assessment No. … of 2014;
xx. Assessment No. … of 2014;
xxi. Assessment No. … of 2014.

To substantiate its request, the Applicant alleges, in summary, that the said assessments suffer from an error in their factual premises, insofar as, in the indirect exports in which it intervened, the goods transacted – hatching eggs – effectively left the customs territory of the Union for a third country.

On 26-01-2017, the request for constitution of the arbitral tribunal was accepted and automatically notified to the Tax Authority (AT).

The Applicant did not appoint an arbitrator, so, pursuant to the provision in subparagraph a) of paragraph 2 of article 6 and subparagraph a) of paragraph 1 of article 11 of the RJAT, the President of the Deontological Council of the CAAD appointed the undersigned as arbitrators of the collective arbitral tribunal, who communicated acceptance of the appointment within the applicable time frame.

On 15-03-2017, the parties were notified of these appointments and did not express any intention to challenge any of them.

In accordance with the provision in subparagraph c) of paragraph 1 of article 11 of the RJAT, the collective Arbitral Tribunal was constituted on 30-03-2017.

On 16-05-2017, the Respondent, duly notified to that effect, filed its answer in defence by way of challenge only.

Pursuant to the provisions in subparagraphs c) and e) of article 16 and paragraph 2 of article 29, both of the RJAT, the holding of the meeting referred to in article 18 of the RJAT was waived.

A time period for the presentation of written statements having been granted, these were presented by the parties, commenting on the evidence produced and reiterating and developing their respective legal positions.

In accordance with and for the purposes of article 21/2 of the RJAT, the time period referred to in paragraph 1 of the same article was extended by 2 months.

Verifying that the Procedural File (PA) had not been timely attached by the Respondent, it was notified to that effect, which it did, the right to be heard was granted to the Applicant, and a time period of 30 days was set for the issuance of the final decision.

The Arbitral Tribunal is materially competent and is regularly constituted, in accordance with articles 2, paragraph 1, subparagraph a), 5 and 6, paragraph 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 Ordinance No. 112-A/2011, of 22 March.

The proceedings do not suffer from any nullities.

Thus, there is no obstacle to the consideration of the case.

Having reviewed everything, it is necessary to pronounce

II. DECISION

A. FACTUAL MATTERS

A.1. Facts found as proven

  1. The Applicant is a commercial company in the form of a limited liability company, which is engaged in agriculture and livestock farming, particularly in poultry farming, specifically in the production of eggs for hatching and day-old chicks.

  2. The Applicant commenced its activities on 01-06-1986, registering as its main activity "Poultry Farming" – CAE 01470 – and secondary activities "Wholesale trade of milk, its derivatives and eggs" – CAE 46331 – and "Wholesale trade of live animals" – CAE 46230.

  3. In compliance with service orders OI2015… and OI2015…, an internal inspection procedure was carried out on the Applicant, which aimed at the analysis of its tax situation in respect of VAT, resulting from a refund claim made in the periodic return for December 2014, in the amount of € 703,608.52, resulting from a tax credit that had been building up since December 2012.

  4. In the clarifications provided by the Applicant's accounts technician, it appears that the majority of the eggs they acquire, approximately 170,000, are produced in their own aviaries, the operation of which was ceded to a company in the same Economic Group, specializing in such production, commercially designated as B…, Lda.

  5. With regard to the tax credit situation, it was justified by the fact that all supplies were made at the reduced rate or were exempt, with approximately 45% destined for the external market.

  6. The refund requested in the return for December 2014 stems from a tax credit that had been building up since December 2012.

  7. With respect to active operations, with reference to the fiscal year 2013, in a total turnover of € 46,320,161.38, the Tax Authority (AT) verified that 63% of operations were destined for the domestic market and 37% was destined for the external market, primarily the intra-community market.

  8. As for the fiscal year 2014, the AT further verified a significant increase in exports, which rose to account for 15% of total turnover, with the intra-community market rising to 29% and the domestic market to 55%.

  9. The AT verified and validated that all exports carried out directly by the Applicant itself, without the intervention of a shipper/exporter, did not suffer from any irregularities.

  10. In indirect exports, the Applicant issued the invoice for companies C… and/or D… – intra-community customers – with the goods, directly, destined for a third country, Russia or Ukraine.

  11. From the Tax Inspection Report it appears, among other things, that:

i. "In accordance with the clarification provided in circular letter No. 15327/2015, of 2015/01/09, from the Directorate-General of Customs Regulation (DSRA), in its point 2.3, when customs declarations refer to goods acquired, with VAT exemption under article 14, paragraph 1, subparagraph b), of the VAT Code, by an exporter without residence or established place of business or domicile in another Member State of the European Union to a VAT taxable person in Portugal, the certification of exit is materialized in the document entitled "Certificate of exit for the shipper/exporter" and the document "Certificate of exit for the national supplier" is also made available.";

ii. "It should be noted that the subjection of goods to export formalities is accomplished through the submission of a customs declaration which is subject to authorization of exit and, subsequently, to certification of exit. (...) Previously, in order for this situation to be certified by the customs services and as is clarified in Circular Letter No. 15309/2014, of 2014/11/10, from the DSRA (subsequently revoked by Circular No. 8/2015 of 2015/07/27) and, in order to ensure that this certification was relevant, for the proper purposes, not only for the exporter but also for the national supplier, in the customs export declaration, in addition to the commercial invoice of the exporter, it was necessary that the national seller be identified and its commercial invoice, which should be done as follows in Box No. 44 contained in the export document: Code: N380; Reference: number of the national seller's invoice; Date of issue: date of issue of the national seller's invoice; Type of issuing entity: 4; Issuing entity: tax identification number of the national seller. Only with the mention of these data in the export document and, following the certification of exit, could the exporter deliver to the seller the appropriate customs document for purposes of proof of the VAT exemption required by paragraph 8 of article 29 of the VAT Code.";

iii. "A… could not be in possession of the actual document "Certificate of exit for the national supplier", should be in possession of the appropriate customs document that certified the exit of goods from the national territory, with reference in box No. 44 of the number of the invoice issued by A…, with reference to the fiscal year 2013 and, as already mentioned, they relate to declarations issued by the customer, and, in the fiscal year 2014, in addition to those declarations, they only attach the NMR, that is, the authorization of exit which is materialized in the "Export Accompanying Document", where the company C… appears as exporter but, without any reference to the invoice issued by A… nor to its tax identification number.";

iv. "The certificates sent by A…, for the purposes of paragraph 8 of article 29, are, in some cases, declarations issued by the customs agent E…, Lda., declaring that they issued on behalf of D… a certain export dispatch, referring to the NMR number, the identification of the place where the goods were loaded and their destination. In other cases, they attach the NMR itself, which makes no reference to the documents issued by A… nor to its tax identification number.";

v. "Based on the above, A… did not send the appropriate customs documents that prove the VAT exemption required by paragraph 8 of article 29 of the VAT Code, so that, due to their lack, determines the obligation for the transferor of goods (A…) to charge the corresponding tax."

  1. Following the referred Tax Inspection Report, the VAT refund for the period 1412, with the declared value of € 703,608.52 should only be recognized partially in the amount of € 113,562.31.

  2. The total amount of corrections comprises the amount of € 198,201.60 referring to corrections made to the 2013 period and € 391,844.61, relating to corrections made to the 2014 period.

  3. The Applicant was notified, on 1 and 2 March 2016, of additional assessments, made on the basis of corrections carried out by the tax inspection services, with Nos. …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, … and …, relating to periods 04, 05, 06, 07, 08, 09, 10, 11 and 12 of 2013 and 01, 02, 03, 04, 05, 06, 07, 08, 09, 10 and 11 of 2014, respectively.

  4. Which resulted in the said additional assessments relating to periods 08, 09, 10, 11, 12 of 2013 and 01, 02 and 03 of 2014, tax due in the total amount of € 234,036.93, which the Applicant paid on time.

  5. Whereas in the assessments relating to periods 04, 05, 06, 07 of 2013 and 04, 05, 06, 07, 08, 09, 10 and 11 of 2014, it was offset against the tax to be carried forward, that is, they did not present any amount due by the Applicant, as per the following table:

[Table content preserved]

  1. On 14 March 2016, instead of only € 113,562.30 being refunded to the Applicant, a sum of € 347,599.08 was refunded to it.

  2. Due to the error, the AT – still in the course of that same month of March – notified the Applicant to make restitution of the sum of € 234,036.77, plus compensatory interest and procedural costs, which it did within the time period.

  3. The Applicant filed a claim for administrative review with the Tax Service of the …, on 29 June 2016, against the additional assessments that resulted from the corrections made in the inspection.

  4. For each of the supplies of goods made to the Russian and Ukrainian customers in question, the respective certificates of origin were requested, paid for and obtained by the Applicant from the Portuguese Chamber of Commerce and Industry.

  5. The Applicant issued the respective sales invoices to C….

  6. Mandatory veterinary certificates were also requested and obtained by the Applicant from the Directorate-General for Food and Veterinary Affairs, to permit the entry of hatching eggs into the territory of the Russian Federation.

  7. Said certificates state that the hatching eggs are all from farms (aviaries) belonging to the Applicant and that the final destination was the city of …, in the Russian Federation, and they also identify the means of transport used.

  8. The Applicant completed and issued the corresponding CMRs.

  9. The Applicant completed and submitted the export accompanying documents, which contain the respective NRM number for each of the supplies of goods made, the code N380 and is marked as Customs Office of Origin …, which corresponds to the customs post whose territory covers the applicant's premises located in …, and as the point of exit from the community area either Latvia (LV00240), or the Customs Office of Medininkai (LTVK2000), in Lithuania.

  10. The number of eggs transported listed in each of the invoices issued by the Applicant matches the number indicated in field 6 of the certificate of origin issued by the Chamber of Industry and Commerce.

  11. The total weight of eggs indicated in the certificates of origin matches the weight indicated in field 11 of the CMRs, as well as with the weight indication contained in the respective NRM.

  12. All NRMs issued in relation to the transactions covered by the declaration for period 201412, in the amount of €1,008,149.00, contain the name of the Applicant and the number of the corresponding invoice, next to Code N380.

A.2. Facts found as not proven

  1. The Applicant, in the periods to which the assessments subject to the present arbitral action relate, presented its accounts organized in accordance with tax and commercial legislation, without revealing omissions or errors.

A.3. Reasoning of the facts found as proven and not proven

With regard to factual matters, the Tribunal does not have to pronounce on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and to distinguish the facts proven from those not proven (cf. article 123, paragraph 2, of the Tax Procedure Code and article 607, paragraph 3 of the Code of Civil Procedure, applicable pursuant to article 29, paragraph 1, subparagraphs a) and e), of the RJAT).

In this way, the facts relevant for the judgment of the case are selected and defined according to their legal relevance, which is established in view of the various plausible solutions of the legal question(s) (cf. former article 511, paragraph 1, of the Code of Civil Procedure, corresponding to the current article 596, applicable pursuant to article 29, paragraph 1, subparagraph e), of the RJAT).

Thus, taking into account the positions assumed by the parties, in light of article 110/7 of the Tax Procedure Code, the documentary evidence and the Procedural File attached to the case, the facts listed above were considered proven, with relevance for the decision, bearing in mind that, as was written in the Decision of the Court of Appeal-South of 26-06-2014, handed down in case 07148/13[1], "the probative value of the tax inspection report (...) may have probative force if the assertions contained therein are not challenged."

No pronouncement was made as proven or not proven on allegations made by the parties, and presented as facts, consisting of strictly conclusive assertions, not susceptible to proof, and whose truth must be assessed in relation to the concrete factual matters consolidated above.

The fact found as not proven results from the circumstance, explained in the Tax Inspection Report and accepted by the Applicant, that in field 7 of the periodic returns in question, invoices issued to customer C… appear, it being found that the recipient of the goods would be the customer itself, and the invoices issued to that customer were declared in field 7 of the respective periodic returns, when they should have been registered in field 8, since they were exports.

B. ON THE LAW

The legal question that arises in the case essentially concerns whether, in light of the factual matters found as proven, the prerequisites of article 29/8 of the VAT Code are met, which provides that:

"8 - Supplies of goods and provision of services exempted under subparagraphs a) to j), p) and q) of paragraph 1 of article 14 and subparagraphs b), c), d) and e) of paragraph 1 of article 15 must be evidenced through appropriate customs documents or, if there is no legal obligation for the intervention of customs services, through declarations issued by the recipient of the goods or user of the services, indicating the destination that will be given to them."

It being uncontroversial that the present case is solely concerned with determining whether the "appropriate customs documents" evidentiary requirement is met for the exports declared by the Applicant, what needs to be determined is whether the goods in question were, or were not, actually shipped or transported to a state third to the union, that is, in this case, to Russia and Ukraine.

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

Applying such provision to the present case, and bearing in mind that a taxpayer's right to a tax exemption is at issue, it will be reasonable to believe that the burden of proof of the prerequisites of the right that it seeks to exercise will rest with the taxpayer.

However, article 350/1 of the Civil Code, applicable in accordance with article 2/d) of the LGT, provides that "Whoever has a legal presumption in his favor is excused from proving the fact to which it leads."

In the case, and with interest for the question, article 75/1 of the LGT 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 calculations entered in their accounts or records, 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 said presumption may be overcome by two means, namely:

  • Setting it aside – preventing it from operating – by demonstrating any of the circumstances listed in paragraph 2 of the same article 75 of the LGT;

  • Rebutting it, by proof of the contrary of what is presumed, in accordance with paragraph 2 of the also aforementioned article 350 of the Civil Code.

Reviewing the facts found as proven and not proven, it is found that it was not proven that the Applicant, in the periods to which the assessments subject to the present arbitral action relate, presented its accounts organized in accordance with tax and commercial legislation, without revealing omissions or errors.

In effect, in field 7 of the periodic returns in question, invoices issued to customer C… appear, it being found that the recipient of the goods would be the customer itself, and the invoices issued to that customer were declared in field 7 of the respective periodic returns, when they should have been registered in field 8, since they were exports.

In view of the provision cited above in article 75/1 of the LGT, and taking into account the facts pointed out, the periodic VAT returns presented, in accordance with the law, by the Respondent cannot be presumed to be true and in good faith.

In this way, the burden of proof that rests on the Applicant, to demonstrate the prerequisites of the right to exemption it seeks to exercise, cannot be considered fulfilled by way of presumption.

Having reached this point, it is necessary to verify whether the Applicant succeeded in providing evidence "through appropriate customs documents" of the exports declared by the Applicant, that is, what needs to be determined is whether the goods in question were, or were not, actually shipped or transported to a state third to the union, that is, in this case, to Russia and Ukraine.

The AT understood that it did not, because, in summary, it considered that "the subjection of goods to export formalities consists of the submission of a customs declaration which is subject to authorization of exit and, subsequently, to certification of exit. (...) Previously, in order for this situation to be certified by the customs services and as is clarified in Circular Letter No. 15309/2014, of 2014/11/10, from the DSRA (subsequently revoked by Circular No. 8/2015 of 2015/07/27) and, in order to ensure that this certification was relevant, for the proper purposes, not only for the exporter but also for the national supplier, in the customs export declaration, in addition to the commercial invoice of the exporter, it was necessary that the national seller be identified and its commercial invoice, which should be done as follows in Box No. 44 contained in the export document: Code: N380; Reference: number of the national seller's invoice; Date of issue: date of issue of the national seller's invoice; Type of issuing entity: 4; Issuing entity: tax identification number of the national seller. Only with the mention of these data in the export document and, following the certification of exit, could the exporter deliver to the seller the appropriate customs document for purposes of proof of the VAT exemption required by paragraph 8 of article 29 of the VAT Code."

The Respondent sustains this understanding in the present arbitral action, referring to the documentation mentioned in the Tax Inspection Report, and not attached to the present case, as "the only probative elements capable of showing, without the slightest doubt, the exit of goods to countries outside the Union," that is, that "only the certificate of exit document or the export document with the elements indicated constitute THE appropriate customs elements – referred to in article 29, paragraph 8 of the VAT Code – to attest the actual exit of goods from the customs territory of the Union," so that "not having the Applicant presented, in the vast majority of the supplies at issue, the said certificate of exit to the AT's inspection services, which was (...) the proper document to attest the exit of goods from the customs territory of the Union, no other possibility remained to those services but to promote the taxation of those operations in respect of VAT," concluding that "the Applicant did not present probative elements that, without the shadow of a doubt, would guarantee the exit of hatching eggs from the Union to third countries."

With all due respect, it is considered that the Respondent's basic position in this matter is based on three fundamental misunderstandings.

The first is that the possible (and which need not be discussed here) existence of documents abstractly suitable to "show, without the slightest doubt" and/or "without the shadow of a doubt" the fulfillment of legal prerequisites of a certain norm, is not preventive of the possibility of such demonstration being, in concrete terms, carried out by other means, whenever the law, by virtue of imperatives inextricably linked to reasons of combating fraud and tax evasion, does not provide otherwise, as indeed results from the abundant case law on the documentation of costs as a prerequisite for their deductibility in corporate income tax[2].

The second misunderstanding on which, with all due respect, the said position is based, is that if, recognized by the AT that such documentation exists that is abstractly suitable to "show, without the slightest doubt" and/or "without the shadow of a doubt" the fulfillment of legal prerequisites of a certain norm, it is legitimate for it, and even advisable, to set out in a general and abstract manner the acceptance of such documentation for the respective purposes, providing predictability and security to taxpayers, but it will not be legitimate for it, in that manner and for those reasons, to exclude other means of proof that the law does not preclude.

The third misunderstanding, also with all due respect, is that the proof to be made by the Applicant must "show, without the slightest doubt" and/or "without the shadow of a doubt" the prerequisites of the norm it seeks to rely upon.

In effect, and without any legal support, the said position disregards the principle of free appraisal of evidence, which, as is well known, rests on a judgment of reasonableness in light of criteria of normality, leading to the proof of facts which, in light of such criteria, are not susceptible to raising a reasonable doubt as to their occurrence.

Having said that, and in the case, it is considered that, properly interpreted, the norm in question, paragraph 8 of article 29 of the VAT Code in force, does not result from the same the imposition of legal proof, in the form determined by the AT, which results in a violation of the principle of free appraisal of evidence, as formulated in article 607/5 of the Code of Civil Procedure, which prescribes that "The judge freely appraises the evidence according to his prudent conviction about each fact; free appraisal does not cover facts for whose proof the law requires special formality, nor those which can only be proven by documents..."

As was written in the Decision of the Court of Appeal of Coimbra of 23-06-2015, handed down in case 1534/09.7TBFIG.C1, for example, "In certain cases, the law imposes on the judge the conclusion that must be drawn from a certain means of proof and, therefore, the relevance that must be given to that same means of proof. This is what constitutes legal or fixed proof."

Now, that is not what happens with article 29/8 of the VAT Code in force.

Hence that, without prejudice to the goodness of the judgment made by the AT on the suitability of the documentation it defined to "show, without the slightest doubt" and/or "without the shadow of a doubt" the fulfillment of legal prerequisites of the norm in question, it is judged that the means of proof admissible for the purpose do not begin and end with that, and the Tribunal may draw the conclusion of the fulfillment of the prerequisites of the norm, based on other means of proof.

This conclusion is not barred, it is believed, by the circumstance raised by the Respondent, that "since time immemorial article 796-E of the Provisions for the Application of the Community Customs Code (DACC) – which dates from 02-07-1993 – provides that it is the customs authorities who certify the exit of goods to the declarant," for at least two reasons.

Thus, in the first place, the provision of article 29/8 of the VAT Code in force, in referring to "appropriate customs documents," allows the reading that there be more than one type of customs document suited to the proof in question.

On the other hand, the provision of the CCC referred to above, provides, as the Respondent itself recognizes, "that it is the customs authorities who certify the exit of goods to the declarant," and in the case the Applicant was not the declarant before the customs authorities, which the Respondent also recognizes, when it refers to the fact that the "elements (...), certainly, and if they exist, will be: 1) or in the possession of C… and D…; 2) or in the possession of the official customs broker who handled all the bureaucracy involved."

In this manner, and having reached this point, it is necessary to appraise the evidence presented by the Applicant, in order to determine whether the same is suitable, or not, to demonstrate, beyond any reasonable doubt, if, referring to the questions pertinently formulated by the Respondent as the epicenter of the dispute:

"- Will the goods in dispute have actually left the Union?

  • Or, on the contrary, were they instead placed in circulation in national territory, benefiting from an exemption to which they were not entitled under the law?"

As results from the factual matters proven, it is found, among other things, the following:

i. For each of the supplies of goods made to the Russian and Ukrainian customers in question, the respective certificates of origin were requested, paid for and obtained by the Applicant from the Portuguese Chamber of Commerce and Industry;

ii. The Applicant issued the invoice for companies C… and/or D… – intra-community customers – with the goods, directly, destined for a third country, Russia or Ukraine.22;

iii. Mandatory veterinary certificates were requested and obtained by the Applicant from the Directorate-General for Food and Veterinary Affairs, to permit the entry of hatching eggs into the territory of the Russian Federation;

iv. Said certificates state that the hatching eggs are all from farms (aviaries) belonging to the Applicant and that the final destination was the city of …, in the Russian Federation, and they also identify the means of transport used;

v. The Applicant completed and issued the corresponding CMRs.

vi. The Applicant completed and submitted the export accompanying documents, which contain the respective NRM number for each of the supplies of goods made, the code N380 and is marked as Customs Office of Origin …, which corresponds to the customs post whose territory covers the applicant's premises located in …, and as the point of exit from the community area either Latvia (LV00240), or the Customs Office of Medininkai (LTVK2000), in Lithuania.

vii. The number of eggs transported listed in each of the invoices issued by the Applicant matches the number indicated in field 6 of the certificate of origin issued by the Chamber of Industry and Commerce;

viii. The total weight of eggs indicated in the certificates of origin matches the weight indicated in field 11 of the CMRs, as well as with the weight indication contained in the respective NRM.

In light of this factual situation, there remain no reasonable doubts for this Tribunal that the goods in question did indeed leave the community territory, destined for the Russian Federation and Ukraine and, on the contrary, nothing indicates that "on the contrary, were they instead placed in circulation in national territory, benefiting from an exemption to which they were not entitled under the law."

In effect, no objective circumstance justifies that the Applicant went to the expense and effort of producing all the extensive documentation that it presented, and which collectively clearly points to the fact that the exports were carried out to the declared destination, without the AT, even remotely, raising any indications or, even, suspicions of possibilities of verification of situations of fraud or tax evasion, nor, much less, challenging the authenticity of the body of documentary evidence presented.

Indeed, although the Respondent, in tabular form, states in its Answer "that it challenges these and the remaining documents presented by the Applicant both in the administrative phase and now, in arbitral proceedings, because they are not capable of proving that the goods traded by the Applicant were, in fact, subject to export," as was referred to in the Decision of the Court of Appeal of Porto of 20-06-2016, handed down in case 7467/15.0T8PRT.P1, "To challenge a document, it is not sufficient for a party to say that it challenges it, it being necessary that it indicate a concrete ground that justifies putting into question that means of proof presented by the opposing party."

Moreover, the Respondent recognizes that "CMRs were sent proving the delivery of the goods [in the third country], but all of them are issued in the name of C…, with no reference to the Applicant, nor to the documents issued by it, making it impossible, for that reason, to establish a link between the operations."

It does not, however, have reason on its side.

In effect, and returning to the examples chosen in the Respondent's Answer, it is not considered correct that "with respect to the export accompanying document, commonly called "NMR", p. 41 of the PA, as shipper, C… appears, coming from Denmark; as consignee, the Russian Federation appears; and, as declarant/representative, F…" and "none of these or other elements contained in the NMR make it possible to establish a causal link with invoice No. 2206016386, issued by the Applicant to the company C…, and the export accompanying document (NMR) makes no mention of it, similarly overlooking the name and VAT identification number of the national seller."

In effect, invoice 2206016386 mentions a gross weight of 20,520 kg, and a net weight of 18,720 kg, coinciding with the gross and net weight contained, not only in the certificate of origin of the EU, but also in the NRM. In turn, the respective CMR, mentions the same gross weight, and coinciding in the other elements of the NRM (seller, buyer, destination location), mentions invoice No. 2206016386.

Nor is it correct, what is stated by the AT, that "the CMR No. LIS…, p. 42 of the PA, document of road transport of hatching eggs from Portugal to Denmark, also does not serve to demonstrate that the goods left the customs territory of the Union, (g)iven that, as shipper, the Applicant is recorded and as consignee is recorded the company C…, with no reference to the Russian Federation," since field 13 of said CMR contains instructions from the shipper, intended for delivery in the Russian Federation.

The same applies to the Respondent's consideration that "from the certificate of origin, p. 43 of the PA, (...) there are no elements that make it possible to link the exit of the goods from Portuguese territory to a third country," since, as was pointed out above, the type of goods and their respective net and gross weight match what appears in invoice No. 2206016386, in CMR No. LIS…, and in the respective NRM.

The Respondent further raises the question of "why, in the case of indirect exports - that is, in those exports in which the shipper/exporter is another company (e.g. C… or D…) other than the Applicant - does the Applicant not have in its possession (...) precisely the same documentation that it possesses for (and which legitimized) direct exports," when in "all direct exports, that is, all exports carried out directly by the company itself, without the intervention of a shipper/exporter,(...) the Applicant made available to those services precisely the certification of exit document", concluding that "whether one was dealing with direct exports or indirect exports, the documents to be presented would have been the same," and that "what happened, having, as was demonstrated in the inspection proceedings, presented (for direct exports) authentic certificates of exit, while in indirect exports it only presented the Export Accompanying Documents, commonly called NMR," and that, still in the Respondent's understanding, "the law defined with precision the documentary elements suitable for such proof, elements that the Applicant could not be unaware of, since in the context of the direct exports made to Angola and São Tomé and Príncipe, occurring in the same tax periods, managed to present to the AT the corresponding certificates of exit."

Now, with all due respect to other opinions, the answer to such a question is relatively straightforward, and the Respondent itself ends up pointing to it, namely by acknowledging that the documentation it wanted "either was not (...) made available by the shipper or by the customs representative," and that the "elements that, certainly, and if they exist, will be: 1) or in the possession of C… and D…; 2) or in the possession of the official customs broker who handled all the bureaucracy involved."

That is: the documents in question, which the AT wanted, in the case of indirect exports, and contrary to what happened in exports directly carried out by the Applicant, were not produced and remained in the possession of third parties, and inasmuch as, as was seen, it does not result from the content of article 29/8 of the VAT Code in force that the possession of them was imperative (hence, even, the need for the AT to have come, by way of circulars, to clarify that such documentation will make it possible, in light of its criteria, to certify, "show, without the slightest doubt" and/or "without the shadow of a doubt" the fulfillment of legal prerequisites of the norm in question), the fact that the Applicant did not take steps to obtain such documentation in the indirect exports in which it intervened must be held to be legitimate, relying on the abundant documentation it gathered being sufficient, as it is considered it is, to demonstrate the actual nature of the exports.

Thus, in light of the above and everything considered, it is judged that the corrections carried out by the AT and contested by the Applicant in the present arbitral action suffer from an error in the factual premises, and consequent error in law, and should, as such, be annulled.

As to the claim for compensatory interest formulated by the Applicant, paragraph 1 of article 43 of the LGT establishes that compensatory interest is due when it is determined that there has been an error attributable to the services as a result of which the tax debt was paid in an amount greater than that legally due.

In the case, the errors affecting the assessments subject to the present arbitral action are attributable to the Tax and Customs Authority, which carried out those illegal assessment acts on its own initiative.

The Applicant thus has the right to be reimbursed the amount it paid improperly (in accordance with the provision in article 100 of the LGT and paragraph 1 of article 24 of the RJAT) and, furthermore, to be indemnified for the improper payment through the payment of compensatory interest by the Respondent, from the date of payment of the amount improperly paid, until reimbursement, at the supplementary legal rate, in accordance with paragraphs 1 and 4 of article 43 and paragraph 10 of article 35 of the LGT, article 559 of the Civil Code and Ordinance No. 291/2003, of 8 April, less the payment made in the meantime by the AT of € 113,562.31.

The Respondent further raises the question that "Given that the Applicant is challenging actual additional assessment acts, the economic value of the case should be reduced to € 590,046.21, in accordance with the provision of article 97-A, paragraph 1, subparagraph a) of the Tax Procedure Code, by reference to article 29, paragraph 1, subparagraph a) of the RJAT."

It is, however, considered, and with all due respect, that it does not have reason on its side.

In effect, in the case, the AT assessed, in fact levied tax (VAT), in the amount indicated by the Applicant, €703,608.52, which is the sum of the amounts that expressly appear in the assessments notified to the Applicant, and against which it protests, in field 2 – "Amount of the corrective assessment."

What happened was that, for the purposes of calculating the payments to be made by the Respondent, the AT deducted amounts that it considered were due to the latter, and which are not contested in the case, obtaining an amount to be paid (or not to be paid), which is obviously distinct from the amount of the tax actually assessed additionally by the AT, and whose legality was examined in the present arbitral action case, with the criterion of its amount, in accordance with the norms applied and indicated below.

C. DECISION

Wherefore this Arbitral Tribunal decides to find the arbitral request formulated to be entirely well-founded and, in consequence:

a) To annul the following VAT assessment acts, in the amount of € 703,608.52:

i. Assessment No. … of 2013;
ii. Assessment No. … of 2013;
iii. Assessment No. … of 2013;
iv. Assessment No. … of 2013;
v. Assessment No. … of 2013;
vi. Assessment No. … of 2013;
vii. Assessment No. … of 2013;
viii. Assessment No. … of 2013;
ix. Assessment No. … of 2013;
x. Assessment No. … of 2014;
xi. Assessment No. … of 2014;
xii. Assessment No. … of 2014;
xiii. Assessment No. … of 2014;
xiv. Assessment No. … of 2014;
xv. Assessment No. … of 2014;
xvi. Assessment No. … of 2014;
xvii. Assessment No. … of 2014;
xviii. Assessment No. … of 2014;
xix. Assessment No. … of 2014;
xx. Assessment No. … of 2014;
xxi. Assessment No. … of 2014.

b) To condemn the Respondent to the payment of compensatory interest, in accordance with the terms indicated above;

c) To condemn the Respondent in the costs of the proceedings, in the amount of €10,404.00.

D. Value of the Case

The value of the case is fixed at € 703,608.52, in accordance with article 97-A, paragraph 1, subparagraph a) of the Tax Procedure Code, applicable by virtue of subparagraphs a) and b) of paragraph 1 of article 29 of the RJAT and paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

E. Costs

The arbitration fee is fixed at €10,404.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid by the Respondent, since the claim was entirely well-founded, in accordance with articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and article 4, paragraph 4, of the said Regulation.

Notify.

Lisbon 13 December 2017

The Presiding Arbitrator

(José Pedro Carvalho)

The Arbitrator Member

(Clotilde Celorico Palma)

The Arbitrator Member

(Luís Baptista)

[1] Available at www.dgsi.pt, as well as the remaining case law cited without mention of source.

[2] See, for example, Decision of the Court of Appeal-South of 22-11-2011, handed down in case 04633/11.

Frequently Asked Questions

Automatically Created

What is a false triangular operation for VAT purposes in Portugal?
A false triangular operation for VAT purposes in Portugal occurs when a domestic supplier invoices an intra-community customer claiming VAT export exemption under Article 14(1)(b) of the VAT Code, but the goods do not actually leave EU customs territory for a third country. In genuine triangular operations, Portuguese suppliers sell to EU-established intermediaries who export to non-EU countries (Russia, Ukraine). False triangulars involve claiming the export exemption without proving physical departure from the EU, creating unjustified VAT refunds. The Tax Authority scrutinizes these operations requiring customs certification proving goods crossed EU external borders.
When does the VAT export exemption apply to indirect exports under Portuguese tax law?
The VAT export exemption applies to indirect exports under Portuguese law when the domestic supplier demonstrates that goods physically left Portuguese and EU customs territory for a third country. Article 14(1)(b) of the VAT Code requires: (1) goods invoiced to an intra-community exporter without Portuguese establishment, (2) submission of proper customs export declarations, (3) authorization and certification of exit by customs authorities, and (4) documented proof that goods departed EU territory. DSRA Circular Letters 15327/2015 and 15309/2014 mandate specific certificates of exit for both the shipper/exporter and the national supplier to validate the exemption.
What evidence is required to prove goods left Portuguese territory in triangular VAT transactions?
Portuguese tax law requires comprehensive documentation proving goods departed EU territory in triangular VAT transactions: (1) customs export declarations submitted by the exporter, (2) authorization of exit from customs authorities, (3) certification of exit through 'Certificate of exit for the shipper/exporter' and 'Certificate of exit for the national supplier' as per DSRA Circular 15327/2015, (4) commercial invoices from both the Portuguese supplier and the exporter, (5) transport documents evidencing physical movement to third countries, and (6) proof of customs clearance in destination countries (Russia, Ukraine). The burden of proof rests on the Portuguese supplier claiming the exemption to demonstrate actual physical departure.
How did the CAAD rule on the VAT liquidations totaling €703,608.52 in process 88/2017-T?
The CAAD examined VAT liquidations totaling €703,608.52 related to indirect exports of hatching eggs to Russia and Ukraine through intra-community intermediaries. The Tax Authority challenged VAT refunds accumulated since December 2012, disputing whether proper certificates of exit existed proving goods left EU territory. While the tribunal validated direct exports without irregularities, it scrutinized indirect operations invoiced to companies C and D. The case focused on whether the applicant met evidentiary requirements under Article 14(1)(b) VAT Code and DSRA circulars requiring dual certification of exit for both exporter and national supplier in triangular operations.
What are the legal consequences of failing to prove export conditions in Portuguese VAT triangular schemes?
Failing to prove export conditions in Portuguese VAT triangular schemes results in: (1) denial of VAT export exemption under Article 14(1)(b) VAT Code, (2) retrospective VAT assessments on transactions treated as domestic supplies at applicable rates, (3) liquidation of unpaid VAT with interest (€703,608.52 in this case), (4) reversal of VAT refunds previously granted, (5) accumulation of tax debt from periods where credits were improperly claimed, and (6) potential penalties for negligent or fraudulent false triangular operations. The Portuguese supplier bears sole responsibility for documentary proof, as validated by customs authorities through proper certification procedures established in DSRA circulars.