Attorney Gil Nadel, Gilad Paz
The District Court of Tel Aviv has recently deferred a tax appeal that was submitted by a tax-payer, and in effect the tax-payer was charged with paying approximately NIS 170,000 to the VAT Authority. The tax-payer claimed to have sold hormonal medications for fertility to clients in Romania and Moldova, and is therefore entitled to pay VAT at a rate of 0% on the basis of business transactions, but the court accepted the stance of the Tax Authority which stated that it was not sufficiently proven that the export had actually occurred.
The case and claims made by the parties:
The tax-payer claimed to have personally exported the medicine in a suitcase that was in his possession when he traveled abroad which is why he didn't bother to acquire documents that testify to the export, such as an export entry.
The tax-payer further claimed that he had previously been assisted in export through the services of an Israeli Customs agent who had placed the medications in refrigeration in the warehouses of the cargo terminal at Ben Gurion Airport about one day before Hochman took the goods with him on his trip abroad, but at a certain point it became clear that the medications had been in storage for too long without refrigeration, and they were useless. Therefore, he decided to take them with him in a suitcase as personal baggage and to export them himself abroad.
In the end, the Tax Authority disqualified the periodic reports submitted by Hochman. This disqualification was based on the faced that Hochman had not met the legal requirements and had not made sure to acquire an export entry as an essential document to prove the export had actually occurred. And yet the Tax Authority was willing to allow the tax-payer to attempt to sufficiently prove to them that the export had taken place in practice but this was not done.
Thus, the objection submitted by him against the Tax Authority's evaluation was deferred and the appeal found its way to court.
Court ruling:
The tax-payer presented to the court his bookkeeping files as well as those of an Israeli supplier called "Lapidot" from whom he claimed to have acquired the medications. However, due to differences between the bookkeeping of the tax-payer and those of Lapidot, the court refused to base their ruling on this evidence.
In addition, the tax-payer presented the court with consignment notes which allegedly testify that he did in fact export the medications to a clinic in Romania. However, since these consignment notes were produced by homemade means through Word and were not drawn up in accordance with legal instructions regarding bookkeeping in the VAT tax law, the court refused to accept these consignment notes as evidence.
In addition, the fact that the tax-payer chose not to issue invoices for the medication shipments was accredited to his debt. Another incongruity was discovered between the cost of the exported medications as declared by the tax-payer and the purchase cost as declared by the Romanian client.
Thus, in the end, as a result of all these incongruities that were unable to be clarified the court deferred the tax-payer's claim that he had actually exported goods, his appeal was deferred and he was charged with NIS 25,000 in legal expenses.
[Tax appeal (District Court of Tel Aviv) 11010-10-10 Hochman vs. VAT Tel Aviv, Judge Eitan Orenstein, verdict of September 23, 2012. Party representatives: on behalf of the appealer- Attorney Keti Brada. On behalf of the state- Attorney Jonathan Crowni of the Tel Aviv District Attorney's Office].
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