Tax Irregularity Database: Limits of Taxpayer Responsibility

In the case “La Cachuera SA (TF 39867900-I) c/Dirección General Impositiva s/recurso directo de organismo externo,” Chamber II of the National Court of Appeals in Federal Administrative Matters overturned the ruling of the Tax Court, which had upheld the debt determination. The Chamber held that responsibility for suppliers’ irregularities should not be automatically transferred to the taxpayer acquiring the services, when at the time of the transaction the suppliers were not included in the E-APOC database, a database in which the Tax Authority includes taxpayers who, due to different circumstances, are considered non-compliant.

The Tax Authority issued a debt determination regarding Value Added Tax (fiscal periods February 2017 to July 2021), challenging input VAT credits related to services rendered by seven suppliers, and imposed a fine for alleged tax fraud.
 

The taxpayer appealed the debt determination before the National Tax Court. Chamber D upheld the administrative act, reasoning that:
 

1. invoices issued by certain taxpayers reflected transactions not actually carried out by the issuers,
2. The company’s invoices, payment vouchers, and accounting records were insufficient to evidence the materiality of the transactions.

The taxpayer filed an appeal before the Court of Appeals, arguing that the Tax Court’s decision was arbitrary and stating, among other arguments, that:
 

1. The VAT taxable event had been duly perfected and statutory withholding obligations had been fulfilled.
2. The accounting expert report confirmed that payments were effectively collected by the challenged suppliers and were made through checks and bank transfers.
3. The questioned suppliers were incorporated into the E-APOC database later on: they were not listed in it at the time of contracting.
4. The taxpayer had no relation to any alleged schemes carried out by its suppliers and was not responsible for tax obligations they may have failed to meet.
5. The Tax Authority did not challenge the transactions when declared as deductible expenses for Corporate Income Tax purposes.
6. The expert report, documentary evidence, and bank statements demonstrated the actual existence, operational and economic capacity of the services rendered, and their settlement through the banking system, evidencing the payment circuit.
7. The taxpayer verified the suppliers’ active Tax ID (CUIT), confirmed that invoices bore valid CAI and CAE authorizations issued by the Tax Authority, and consulted the former Tax Authority database regarding the suppliers’ tax compliance status and any classification as apocryphal. At the time of the transactions, each supplier’s tax status was in good standing, and their inclusion in the E-APOC database occurred long after the transactions had taken place.

The Court emphasized that “the obligation of the audited taxpayer with respect to suppliers of goods and services must, as a general principle, be limited to verifying that the selected suppliers hold active CUIT numbers, that invoices bear a valid CAI, and that the suppliers are not included in the E-APOC database at the time the transactions are executed.”[1]

Since the Company complied with these requirements, its conduct was not reproachable, as the irregularities or inconsistencies were attributable to the suppliers and beyond its control. This doctrine stems from “Bildown SA c/Fisco Nacional (AFIP - DGI),” rule don December 27, 2011 (Fallos, 334:1854), quoted by Chamber II in other cases.[2]  

The Court addressed the scope of the due diligence obligation required from taxpayers with respect to their suppliers, concluding that any deficiencies or breaches attributable to the latter cannot be automatically imputed to the former.

Chamber II placed particular emphasis on the dates on which the suppliers were incorporated into the E-APOC database. The Tax Authority acknowledged that the suppliers issuing the challenged invoices held valid CAE/CAI authorizations, and that their classification as apocryphal occurred later on. Significant weight was also given to the expert report, which included detailed information regarding invoice settlement and identification of payment recipients, based on cross-checking bank debits, payment orders, and suppliers’ current account statements, among other accounting records analyzed.

Accordingly, the Court admitted the appeal and revoked the debt determination, with costs.