There Is an Operation Even If the Supplier Is APOC

On September 2, 2024, in the case “Petro Gar Combustibles SRL,” Chamber B of the Argentine Tax Court overturned the debt determinations that challenged transactions carried out with a supplier included in the E-Apoc database, since the Argentine Tax Authority (ARCA) was unable to prove the transactions did not exist.

The company filed an appeal before the Tax Court against the debt determinations of Income Tax, VAT, and “Salidas No Documentadas” (tax liability arising from expenses that do not have proper documentation), as well as the resolutions imposing a fine for tax fraud. The resolutions challenged:
 

1. the deduction of certain expenses in income tax,
2. in VAT, the inclusion of tax credits of the questioned transactions with the supplier,
3. regarding “Salidas No Documentadas,” the disbursement of funds attributed to the expense transactions which, according to ARCA, had not been proven to be substantial and had been made using non-valid documentation. ARCA's claim was based on the invoices issued by a supplier for commissions on fuel sales.

In the appeal, the company argued:
 

1. The supplier had the operational capacity to carry out its operations and was not in the E- Apoc database at the time the transactions were carried out, nor did it have criminal cases pending, and the invoicing formalities and CAI (printing authorization code) verification were fulfilled.
2. The supplier’s quality of service for “sales on behalf of and under the order of fuel” does not require a special operational capacity, since it is a personal activity consisting of visiting customers or taking orders by telephone or e-mail.
3. Of the circularizations to the supplier's customers, six responded that it acted as an authorized commercial agent.
4. Regarding the payment circuit, the invoices correspond to the commissions detailed in the notes about the liquid product; each invoice corresponds to a check number that pays its amount, and in this way the payment circuit was demonstrated.
5. At the time of the transactions, the supplier provided the necessary documentation/information to prepare the internal record (bylaws, registration before the Public Registry of Commerce of the Province of Buenos Aires, corporate purpose, Minutes of the Shareholders and Board of Directors' meetings, and Financial Statements), which prove the existence of the supplier. In addition, their invoices were verified, withholdings were made, and they were paid by check.
6. The company’s lack of personnel or domicile are irrelevant, since the sales activity is a service and does not require a large deployment of space or staff.

The Tax Court highlighted that ARCA took as sole and exclusive support to the debt determination the fact that the supplier was included in the E-Apoc database. Therefore, it considered that the challenge to the transactions with the supplier was not adequately considered, since ARCA did not demonstrate the existence of a series of proven, serious, and accurate signs that would lead to question the validity of the invoice and the effective realization of the transactions.

The Tax Court also emphasized that the administrative load in the E-Apoc database is not a decisive and sufficient element for ARCA to challenge transactions and make debt determinations regarding the suppliers in that database.

This ruling held that, although the supplier did not have registrable assets, and even though the supplier's domicile was the president's home, the president of the supplier explained that, due to the activity, it was not necessary to have registrable assets (e.g. trucks, warehouses).  The Court also noted that in several responses to the circularizations made to the customers of the supplier company, the supplier, or the supplier’s president was recognized as the agent or contact person.

The Court highlighted that the supplier was registered before ARCA, with a declared economic activity, with filed balance sheets, and the tax returns and payments made, regardless of non-compliances (such as the exhibition of the VAT books or answering requirements of ARCA). However, these were not enough to disregard the existence of the supplier and the services provided. It also pointed out that, from the circuit of payments, there is no evidence of inconsistencies that could support that the operations did not exist and/or that they were not paid to the company as the real beneficiary.

The ruling quotes case law that establishes that the tax domicile and compliance with the tax obligations of suppliers are not attributable to the taxpayer that carried out commercial transactions with them. It also highlighted that the burden of proof is correlative to the burden of the proposal of facts and, since the tax determination was based on the supplier's record in the E-Apoc database, the Tax Court decided to revoke the debt determinations and the fine resolutions.

ARCA filed an appeal before the Court of Appeals in Federal Administrative Matters in the City of Buenos Aires, which has not been resolved. Accordingly, this decision is not final.