By: David Erales
As a general premise, exports of merchandise are exempt from Value Added Tax, which means that the tax generated by such sales abroad does not trigger the tax obligation to pay the tax. Article 2 of the Value Added Tax Law (VAT), paragraph 4, defines exports of goods as: “4) Export of goods: The sale, once all legal procedures have been complied with, of national or nationalized personal property for use or consumption abroad”. Article 7 of the Value Added Tax Law considers exports as part of the general exemptions, stating that: “The following are exempt from the tax established in this law: (…) 2. Exports of goods and exports of services, as defined in Article 2 numeral 4 of this law”.
From the above it is inferred that for a sale of goods abroad to be considered as an export and to enjoy the exemption contained in the law, it must comply with the sale of goods for use or consumption abroad, therefore, the sale will be considered local if it does not comply with such conditions. In addition to the above, the Value Added Tax Law indicates that the “legal formalities” must be complied with, however, the law is not clear in determining which are the formalities that must be complied with.
From a strictly legalistic point of view, legal formalities should be understood as all those formalities that are regulated by LAW. Article 239 of the Political Constitution of the Republic, when regulating the principle of legality in tax matters, is clear when establishing that any LAW that affects the collection bases must be issued by the Congress of the Republic of Guatemala, therefore, the exportation, being a legal exemption, should be understood that it complies with this when it complies with what is established in its definition. When analyzing the Value Added Tax Law, it is concluded that it does not regulate any procedure to perfect exports, therefore, it could be presumed that by complying with the sale abroad for its exclusive use and consumption abroad, the definition given in article 2, paragraph 4, would be understood to be complied with and, therefore, that such export should be recognized as such. The above is usually documented through the corresponding commercial invoice, transportation documents, such as: bill of lading, waybill, air waybill or other equivalent document; declaration of the customs value of the goods, if applicable; certificate or certification of origin of the goods, when applicable; licenses, permits, certificates or other documents referring to compliance with the non-tariff restrictions and regulations to which the goods are subject, and other authorizations; among others.
In spite of the above, in practice the Tax Administration has made a large number of adjustments to the Value Added Tax, due to the fact that, in its opinion, in spite of having provided evidence of the export, it considers that the export has not been perfected because all the “legal formalities” have not been complied with, since, the Central American Uniform Customs Code (CAUCA) and its Regulations (RECAUCA), regulate the customs obligation to issue a declaration at the time of export[1], but above all, to issue a complementary declaration once said export has been made from the different posts, indicating in Article 372 of the RECAUCA: “Article 372. Minimum export requirements. Registered exporters shall submit or transmit electronically, prior to export, the declaration of goods with the minimum necessary information established by the Customs Service by means of administrative provisions, which shall be submitted to the risk analysis system.
The export shall be perfected by filing the goods declaration and complementary information, within three days following the shipment of the goods, confirming the payment of the difference in taxes, if any.”
The failure to file such goods declaration in the customs system, as well as the complementary declaration have caused the aforementioned adjustments, since it is considered that, without complying with such formalities, the export, even if it has been exported, the same was not perfected and, therefore, is not valid in accordance with article 2 clause 4 of the Value Added Tax Law.
In this regard, the Constitutional Court has recently established the legal doctrine that it is mandatory to comply with the presentation of the complementary declaration regulated in Article 372 of the RECAUCA for the export to be considered as completed, indicating that: “Based on the aforementioned and upon analyzing the grievances denounced by the plaintiff and confronting them with the arguments presented by the challenged authority, this Court notices that the Supreme Court of Justice, Civil Chamber, -in issuing the challenged decision- carried out the logical-legal analysis of the facts submitted to its knowledge, because it took into account the circumstances that were presented in the controversy, and made the analysis regarding the meaning and scope of article 372 of the Regulations of the Central American Uniform Customs Code, concluding that such norm contains three assumptions: (i) the first, that the declaration of goods must be filed or transmitted electronically, prior to export; (ii) the second, that the declaration filed shall be submitted to the risk analysis system; and (iii) the third, that the export must be completed by filing the declaration of goods and complementary information within three days after the goods have been shipped; and that according to such assumptions, it determined that, although the documents that corroborate that the sale was made abroad were in sight, this does not replace the obligation to file the declarations and complementary information within three days, in order to consider the sale made outside the national territory as perfected, aspects that this Court shares, since the presentation of the declaration within the established term, is a formal requirement that is attributable to the taxpayer and constitutes a legal requirement to conclude the export process, being this necessary to demand the refund of the tax credit. Criterion sustained by this Court in judgment of October thirteenth, two thousand twenty-one, dictated within the file 1651-2021.” Exp. No. 5857-2021
It has also indicated: “…the presentation of the declaration of goods and complementary information is a regulatory requirement that has the purpose of complying with a customs administrative process, therefore, although by means of other documents it can be accredited that an export was correctly carried out, this formality must be carried out for the export to be considered perfected”. Exp. No. 3835-2021
From the related rulings it is concluded that it is not enough to prove the export as such (sale of the goods for the exclusive use abroad) but that, in addition, great attention must be paid to the customs clearance, regarding the presentation of the goods declarations, above all, to always be careful to present the complementary declaration within three days after the export has been made, otherwise there is a risk that adjustments will be made to the tax debit for having declared the sales as export without having perfected the same, Otherwise, there is a risk that adjustments will be made to the tax debit for having declared the sales as exports without having perfected the same, as well as the risk that if a refund of the tax credit is requested, the same will be denied due to such situation.
Knowing the jurisprudence and legal doctrines issued by the courts of justice serves to have foreseeability of an outcome in a possible tax dispute, but also serves to prevent it, so, taking into account the recent rulings on the complementary declaration it is advisable that those who are engaged in exporting take into account this situation, and above all, ask their customs agents (who represent them in the respective customs offices) to take due care in always filing such complementary declarations and thus properly document the perfection of such export, thus allowing them to avoid adjustments and improve their chances of obtaining the tax credit refund.
[1] Articles 77 to 88 of the CAUCA.