IUC Vehicle Tax Liquidation Annulment – CAAD Arbitration Decision 108/2014-T

ARBITRAL DECISION

I - REPORT

A - PARTIES

A…, SA, designated as "Claimant", with registered office at Rua …, …, in Lisbon, with the collective entity number …, challenging party in the tax procedure above and marginally referenced, came, invoking the provisions of articles 2.º, no. 1, paragraph a) of the Legal Framework for Tax Arbitration, approved by Decree-Law no. 10/2011, of 20 January (hereinafter RJAT), and of articles 1.º and 2.º of Ordinance no. 112-A/2011, of 22 March, to request the establishment of a sole arbitral tribunal, with a view to examining the following claim opposing it to the Tax and Customs Authority, hereinafter designated as "Respondent" or "TA".

B - CLAIM

1 - The request for establishment of the Arbitral Tribunal was accepted by the esteemed President of CAAD on 12/02/2014 and notified to the Tax and Customs Authority (TA) on the same date.

2 - Pursuant to the provisions of no. 1 of art. 6.º and paragraph a) of no. 1 of art. 11.º of Decree-Law no. 10/2011, of 20 January, the Deontological Council appointed, on 28/03/2014, as sole arbitrator António Correia Valente, who communicated acceptance of the appointment.

3 - On 28-03-2014 the Parties were notified of this appointment, in accordance with the combined provisions of art. 11.º, no. 1, paragraph b) of the RJAT, in the wording introduced by art. 228.º of Law no. 66-B/2012, of 31 December, and in articles 6.º and 7.º of the Deontological Code, neither having expressed any desire to refuse the appointment of the arbitrator.

4 - In these circumstances, in accordance with the provisions of paragraph c) of no. 1 of art. 11.º of Decree-Law no. 10/2011, of 20 January, in the wording introduced by art. 228.º of Law no. 66-B/2012, of 31 December, the arbitral tribunal was duly established on 15/04/2014.

5 - On 15 July 2014, a meeting was held with the Parties, referred to in article 18.º of the RJAT, of which minutes were drawn up and are attached to the file, and a period of 15 days was established for the Respondent and the Claimant to respectively provide, attached to the file, the administrative process and the summary table relating to the vehicle registrations, related to the tax assessments and to the corresponding sales invoices, which were referred to in the request for arbitral pronouncement.

6 - The present Claimant requests that this Arbitral Tribunal:

a) - Declare the illegality and consequent annulment of the tax assessment acts relating to the Single Vehicle Circulation Tax (hereinafter designated as IUC), for the years 2009, 2010, 2011 and 2012, concerning the vehicles, in the number of twenty-one, identified in the file and which are hereby considered to be fully reproduced;

b) - Condemn the TA to restitution of the sum of € 1,611.64, corresponding to the total amount paid as IUC, for the years and vehicles mentioned above;

c) - Condemn the Tax and Customs Authority to payment of compensatory interest for the IUC improperly assessed and paid.

C - CAUSE OF ACTION

7 - The Claimant, in supporting its request for arbitral pronouncement, states, in summary, the following:

8 - That it is a Financial Institution, whose corporate purpose consists of the practice of operations permitted to banks, with the exception of the receipt of deposits, entering into with its clients, in these circumstances and in the context of its activity, contracts of Long-Term Rental and Financial Leasing Contracts.

9 - That, between 14 November 2013 and 20 December, it was notified of official IUC assessments, concerning the vehicles identified in the request for arbitral pronouncement by their respective registration number, having proceeded to voluntary payment of the amounts relating to such assessments.

10 - That the vehicles identified in the request for arbitral pronouncement were, all of them, sold on a date prior to that to which the tax relates, not being, therefore, the owner of such vehicles on the date identified by the Respondent, as being that on which the tax event occurred.

11 - That the rule of subjective tax base, contained in art. 3.º, no. 1 of the CIUC, in the part in which it considers as owner the person in whose name the vehicle is registered, constitutes a mere legal presumption of tax base;

12 - That the principle of equivalence established in art. 1.º of the CIUC is a structuring principle of the IUC, which is clearly evident in Annex II to Bill no. 118/X, which gave rise to Law no. 22-A/2007, of 29 June, which approved the CISV and the CIUC.

13 - That, specifically regarding the CIUC, it states there, in fact, that "[…] as a structuring and unifying element […] the principle of equivalence is established, thus making clear that the tax, as a whole, is subordinate to the idea that taxpayers should be burdened to the extent of the cost they cause to the environment and the road network, this being the reason for this tax figure".

14 - That the transfer of motor vehicle ownership may be effected by mere effect of the contract, not depending on any subsequent act, such as delivery of the thing or registration, the said sales contract not being subject to any specific formality.

15 - That registration does not have constitutive value, but only declarative value, and the absence of registration cannot affect the quality of owner, nor the full effectiveness of motor vehicle sales contracts.

16 - That although facts subject to registration only produce effects against third parties after the date of their respective registration, as provided in art. 5.º, no. 1 of the Property Registration Code, it is certain that, pursuant to no. 4 of art. 5.º of the said Code, third parties for purposes of registration are those who have acquired from a common author incompatible rights.

17 - That, given the legal notion of third party, the Respondent does not meet the legal requirements inscribed in this notion, and therefore cannot invoke the absence of registration to justify the ineffectiveness of the sales contracts for the vehicles in question.

18 - That one cannot but conclude that no. 1 of art. 3.º of the CIUC establishes a presumption, this being the interpretation that best safeguards the unity of the legal system.

19 - That, thus, if the buyer - new owner of the vehicle - does not effect the registration of their property right, it is presumed that that right continues to belong to the seller, and this presumption may be rebutted by proof to the contrary.

20 - That the TA cannot, by alleging the absence of updating of the registration of the property right, demand payment of the tax from the former owner in whose name the vehicle is registered, whenever, by any means, sufficient proof of the respective sale is presented to it.

21 - That the sales of the vehicles in question are supported by invoices/receipts, of whose copies attached to the file, it results that, on the date the tax became due, the Claimant was not the owner of the vehicles identified in the corresponding assessments, due to the respective transfers of ownership having previously occurred, in accordance with civil law.

D - RESPONSE OF THE RESPONDENT

22 - The Respondent, Tax and Customs Authority, (hereinafter designated as TA), submitted, on 22/05/2014, a Response and, under the conditions mentioned in the minutes relating to the meeting referred to in article 18.º of the RJAT, proceeded to attach a copy of the Tax Administrative Process, for the purposes of what is provided, respectively, in nos. 1 and 2 of article 17.º of the Legal Framework for Tax Arbitration (RJAT).

23 - In the said Response, the TA understands that the tax acts in question are in evident conformity with the law, pronouncing itself for the non-acceptance of the claim and for the maintenance in the legal order of the tax assessment acts challenged, defending, in summary, the following:

24 - The interpretation that the Claimant makes of the provisions of art. 3.º of the CIUC arises, not only from a biased reading of the law, but also from an interpretation that does not attend to the systematic element, violating the unity of the regime established in the entire IUC and, more broadly in the entire legal-tax system, and further arises from an interpretation that ignores the ratio of the regime established in the said article.

25 - It emphasizes that the legislator did not use the expression "is presumed" as it could have done, for example, in the following terms: "the passive subjects of the tax are the owners of the vehicles, and it is presumed that such are the natural or legal persons, of public or private law, in whose names the same are registered". (See no. 23 of the Response)

26 - On the systematic element of interpretation, it considers that the solution advocated by the Claimant is intolerable, finding no legal support for the understanding put forward by it. (See no. 34 of the Response)

27 - On the disregard of the "ratio" of the regime, the TA considers that, in light of a teleological interpretation of the regime established throughout the IUC Code, the interpretation advocated by the Claimant, to the effect that the passive subject of the IUC is the owner or the financial lessee (even if this quality is not shown in the vehicle registration) is manifestly erroneous, in that it is the very ratio of the regime established in the CIUC that constitutes clear evidence that what was intended by the tax legislator was the creation of an IUC based on the taxation of the owner of the vehicle, as shown in the vehicle registration. (See no. 49 of the Response)

28 - It adds that the new IUC taxation regime substantially altered the motor vehicle taxation regime, the passive subjects of the tax becoming the owners appearing in the property registration, regardless of the circulation of vehicles on the public road, thus, the Single Vehicle Circulation Tax coming to be owed by the persons who appear in the registration as owners of the vehicles (See no. 50 of the Response)

29 - In this sense, it states that this is the understanding inscribed, namely, in recommendation no. 6-B/2012. File no. R3478/10, of 22/06/2012, from the Ombudsman addressed to the Secretary of State for Public Works, Transport and Communications.

30 - The interpretation conveyed by the Claimant is, also, beyond what has already been mentioned, non-conforming with the Constitution, specifically because, among others, it violates the principle of efficiency of the tax system, which has constitutional dignity.

31 - It further adds that the Claimant failed to produce documentary evidence capable of substantiating the alleged transfer of ownership of the vehicles in question, given that invoices are not suitable documents for this purpose, and such proof did not occur in the previous administrative procedure. (See nos. 73 and 102 of the Response)

32 - It also states that, if one were to follow the thesis defended by the Claimant as to the establishment of a rebuttable presumption in art. 3.º of the CIUC, it would then be necessary to conclude that the rebuttal of such presumption depended on compliance with what is provided in art. 19.º of the CIUC, given that, in the matter of financial leasing, the Claimant could only be exonerated from the said tax if it had complied with the specific obligation provided in the said article, which did not occur.

33 - Finally, in light of all the arguments it has put forward, it considers that the request for arbitral pronouncement underlying this process should be judged as non-substantiated, maintaining in the legal order the tax assessment acts challenged, thus absolving the Respondent entity.

E - QUESTIONS TO BE DECIDED

34 - It is therefore necessary to examine and decide.

35 - In light of what has been set out, regarding the positions of the Parties and the arguments presented, the main questions to be decided are whether:

a) The rule of subjective tax base contained in article 3.º no. 1 of the CIUC establishes or does not establish a presumption.

b) What is the legal value of vehicle registration in the economy of the CIUC, particularly for purposes of the subjective tax base of this tax.

c) If, on the date the tax event occurred, the vehicle had already been previously transferred, although the property right therein continues to be registered in the name of its former owner, for purposes of the provisions of article 3.º, no. 1, of the CIUC, the passive subject of the IUC is the former owner or the new owner.

F - PROCEDURAL REQUIREMENTS

36 - The Arbitral Tribunal is duly established and is materially competent, in accordance with paragraph a) of no. 1 of article 2.º of Decree-Law no. 10/2011, of 20 January.

37 - The Parties have legal personality and capacity, are legitimated and are legally represented (cfr. art. 4.º and no. 2 of art. 10.º of Decree-Law no. 10/2011 and art. 1.º of Ordinance no. 112/2011, of 22 March).

38 - The process does not suffer from defects that would invalidate it.

39 - Taking into account the tax administrative process, a copy of which was sent by the TA, and the documentary evidence attached to the file, it is now necessary to present the factual matter relevant to understanding the decision, which is set out as follows.

II - GROUNDS

G - FACTUAL GROUNDS

40 - In terms of relevant factual matter, this tribunal establishes as proven the following facts:

41 - The Claimant is a Financial Institution, whose activity is engaged in the conclusion, with its clients, of long-term rental and financial leasing contracts for motor vehicles, proceeding, upon completion of such contracts, to transfer ownership of the vehicles to the corresponding lessees or to third parties.

42 - The Claimant proceeded to sell the twenty-one vehicles identified in the process, as results from the corresponding invoices, where the date of placing at the disposal of each vehicle to the respective purchasers is referenced.

43 - As proof of the mentioned sales, the Claimant attached copies of the sales invoices for the twenty-one vehicles, in which the amount of VAT charged appears.

44 - The sale of the said vehicles, in light of the mentioned invoices and the date of placing at the disposal of each vehicle to the respective purchasers, occurred on a date prior to the tax event and to the moment of its exigibility.

45 - Regarding, however, two of them, namely, vehicles with registration numbers … and …, this did not happen. In fact,

46 - As for the vehicle with registration number …, in light of invoice no. …, it was sold on 16-02-2011 and placed, on that same date, at the disposal of the purchaser, that is, after the date the tax became due, which refers to 17-03-2009 and 17-03-2010.

47 - As for the vehicle with registration number …, in light of invoice no. …, it was sold on 02-12-2011 and placed, on that same date, at the disposal of the purchaser, that is, after the date the tax became due, which refers to 21-06-2010.

48 - The Claimant, as expressly stated in the minutes relating to the meeting provided in art. 18.º of the RJAT, proceeded to payment of the IUC, concerning all the vehicles in question, "as soon as they appeared for collection on the Finance platform on its website, there being consequently no place for prior hearing, to avoid additional costs in fines and interest", a payment that was effected on 14-11-2013.

GROUNDS FOR PROVEN FACTS

49 - The facts established as proven are based on the documents mentioned, in respect of each of them, insofar as their correspondence to reality was not questioned.

UNPROVEN FACTS

50 - There are no facts established as unproven, given that all facts considered relevant to the assessment of the claim were proven.

H - LEGAL GROUNDS

51 - The factual matter is established, and it is now necessary to proceed with its legal subsumption and to determine the law applicable to the facts at issue, in accordance with the questions to be decided set out in no. 35.

52 - The essential question in the present proceedings, regarding which there are absolutely opposed understandings between the Claimant and the TA, is to know whether the rule of subjective tax base contained in no. 1 of art. 3.º of the CIUC establishes or does not establish a rebuttable presumption.

53 - The positions of the parties are known. In fact, for the Claimant, that rule, "in the part in which it considers as owner the person in whose name the vehicle is registered", establishes a rebuttable legal presumption, whereas for the Respondent the interpretation that the Claimant makes of the provisions of no. 1 of art. 3.º of the CIUC is notoriously erroneous, in that it results from a "biased reading of the letter of the law", does not attend to the "systematic element" of interpretation, violating the "unity of the regime established throughout the CIUC" and "ignores the ratio of the regime" established in the said article, also translating a non-conformity with the Constitution, specifically because, among others, it violates the principle of efficiency of the tax system. (See nos. 19 and 61 of the Response).

I - INTERPRETATION OF THE RULE OF SUBJECTIVE TAX BASE CONTAINED IN NO. 1 OF ARTICLE 3.º OF THE CIUC

54 - It should first be noted that it is well-established in doctrine that the general principles of interpretation fully apply to the interpretation of tax laws. This is an understanding that has, moreover, been recognized in article 11.º of the General Tax Law.

55 - It is commonly accepted that, with a view to grasping the meaning of the law, interpretation uses various means, and it is important, first of all, to reconstruct the legislative thought through the words of the law, which means seeking, from the outset, its literal meaning. The said meaning, as is also well-established, corresponds to the lowest degree of interpretive activity, and it is important to evaluate and assess it in light of other criteria, with the so-called elements of a logical nature intervening for that purpose, whether of rational (or teleological) sense, of a systematic character or of a historical order.

56 - With respect to the interpretation of tax law, it is worth recalling, as indeed the jurisprudence has been noting, namely in the Supreme Administrative Court Rulings of 05/09/2012 and 06/02/2013, files nos. 0314/12 and 01000/12, respectively, available at: www.dgsi.pt, the importance of the provisions of article 9.º of the Civil Code (CC), as a fundamental precept of legal hermeneutics, which, in this context, cannot fail to be considered.

57 - Interpretive activity is therefore unavoidable in resolving the doubts raised by the application of the legal norms in question.

58 - In the view of FRANCESCO FERRARA, in Interpretation and Application of Laws, translation by MANUEL DE ANDRADE, (2nd ed.), Arménio Amado, Editor, Successor - Coimbra, 1963, p. 131, the said interpretive activity "[…] is unique [and] complex, of a logical and practical nature, as it consists in inducing from certain circumstances the legislative will", adding, ibidem, p.130, that "Regarding the practical application of law, legal interpretation is by its nature essentially teleological".

59 - The purpose of interpretation, the said author also tells us, ibidem, pp. 134/135, is "[…] to determine the objective meaning of the law […]". The law, being the expression of the will of the State, is a "[…] will that persists autonomously, detached from the complex of thoughts and tendencies that animated the persons who contributed to its emanation". Hence, the activity of the interpreter should be to "[…] seek not what the legislator wanted, but what appears objectively sought in the law: the mens legis and not the mens legislatoris".

60 - For MANUEL DE ANDRADE, citing FERRARA, in Essay on the Theory of Interpretation of Laws, p. 16 (2nd ed.), Arménio Amado, Editor, Successor - Coimbra, 1963, "Interpretation seeks the voluntas legis, not the voluntas legislatoris […], and seeks the actual will of the law, not its will at the moment of application: it is not, therefore, a will of the past, but a will always present as long as the law remains in force. That is to say that the law, once formed, stands apart from the legislator, gaining autonomous consistency; and, more than that, becomes a living entity, which is not just an inanimate body […]".

OF THE LITERAL ELEMENT

61 - It is in this framework that it will be important to find an answer to the questions to be decided, particularly to the one that aims to know whether article 3.º, no. 1 of the CIUC establishes or does not establish a presumption, beginning, from the outset, with the literal element.

62 - Being the literal element the first one that is important to use, in seeking the legislative thought, it is necessarily with this that one must begin, seeking to reach the meaning of the expression considered as such to the persons inscribed in the said article 3.º, no. 1 of the CIUC.

63 - Article 3.º, no. 1 of the said CIUC provides that "The passive subjects of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered." (our underlining)

64 - The formulation used in the said article, it should first be noted, makes use of the expression "being considered", which raises the question of whether such expression can be attributed a presumptive meaning, thus equating it with the expression "being presumed". These are expressions frequently used with equivalent meanings, as is clear in various situations in the Portuguese legal system.

65 - In fact, there are countless rules that establish presumptions, using for this purpose, moreover, the verb "to consider" in various ways. It is therefore not difficult to identify situations, in various areas of law, in which the expression "being considered" or "is considered" is used with a meaning equivalent to the expression "being presumed" or "is presumed", expressions to which, whether at the level of irrebuttable presumptions, or in the context of rebuttable presumptions, an equivalent meaning is conferred, countless times.

66 - It not appearing relevant to again reference examples revealing such situations, given that such examples are abundantly stated in some of the decisions of the tax arbitral tribunals, of which example are those handed down in the context of Files nos. 14/2013 - T, 27/2013 - T and 73/2013 - T, we consider them here as entirely reproduced.

67 - In these circumstances, the mentioned expressions being recurrently used with an equivalent purpose and meaning, it can be concluded that it is not only the use of the verb "to presume" that places us before a presumption, but also the use of other terms can serve as a basis for presumptions, such as, in particular, occurs with the expression "being considered", which, in our view, is precisely what occurs in no. 1 of art. 3.º of the CIUC.

This is, therefore, an understanding that, not appearing to correspond to a biased reading of the letter of the law, as the TA considers, is in harmony with the provisions of no. 2 of art. 9.º of the CC, in that it ensures, to the legislative thought, the minimum verbal correspondence required therein.

68 - In the literal perspective, in light of what has been set out, there is no doubt that the interpretation that considers a rebuttable presumption established in no. 1 of art. 3.º has full backing in the formulation established therein, in light of the mentioned equivalence between the expression "being considered as such" and the expression "being presumed as such".

The linguistic element, as mentioned above, being the first to be used in seeking the legislative thought, must, however, in order to find the true meaning of the rule, be submitted to the control of the other elements of interpretation of a logical nature (whether such elements are of rational (or teleological) sense, of a systematic character or of a historical order).

69 - Indeed, as is drawn from the work of MANUEL DE ANDRADE, mentioned above, p. 28, "[…] purely linguistic analysis of a legal text is only the beginning […], the first degree […] or the first act of interpretation. In other words, it only provides us with the probable legislative thought and will […] or, better, the grammatical delimitation of the possible consistency of the law […], the framework within which its true content resides".

70 - Thus, let us then examine the rational (or teleological) element.

OF THE HISTORICAL AND RATIONAL (OR TELEOLOGICAL) ELEMENT

71 - Taking into account the elements of interpretation of a historical bent, it is worth first recalling what is expressly stated in the explanatory statement of Bill no. 118/X of 07/03/2007, underlying Law no. 22-A/2007 of 29/06, when it states that the reform of motor vehicle taxation is implemented through the shift of part of the tax burden from the moment of acquisition of vehicles to the circulation phase and aims to "form a coherent whole" which, although intended for the collection of public revenue, intends that the same be collected "in the measure of the environmental costs that each individual causes to the community", adding, regarding the tax in question and the different types and categories of vehicles, that "as a structuring and unifying element […] the principle of equivalence is established, thus making clear that the tax, as a whole, is subordinate to the idea that taxpayers should be burdened to the extent of the cost they cause to the environment and the road network, this being the reason for this tax figure".

72 - In this framework, it seems clear that the logic and rationality of the new motor vehicle taxation system can only coexist with a passive subject of the tax, on the assumption that this, and no other, is the real and effective subject causing road and environmental damage, as follows from the principle of equivalence, inscribed in art. 1.º of the CIUC.

73 - The said principle of equivalence, which informs the current Single Vehicle Circulation Tax, has, at least in the part in which it specifically relates to the environment, underlying it the polluter-pays principle, and embodies the idea, inscribed in it, that whoever pollutes must, for that reason, pay. The said principle, which, in some way, has constitutional basis, in that it represents a corollary of the provisions of paragraph h) of no. 2 of art. 66.º of our Constitution, also has recognition at the level of community law, whether at the level of primary law, which has occurred since 7 February 1992, when the Treaty on European Union was signed in Maastricht, in whose art. 130.º-R, no. 2, the said principle came to be part of the support of Community policy in the environmental field, whether at the level of secondary law.

74 - What is aimed to be achieved through the said principle is to internalize negative environmental externalities, which, after all, in the case of the present proceedings, amounts to nothing more than ensuring that the harm that comes to the community, resulting from the use of motor vehicles, is assumed by their "owners - economic - users", as costs that only they should bear.

75 - Returning to the mentioned principle of equivalence, it may be said that the same has, in the economy of the CIUC, an absolutely structuring role, with the normative building of the Code in question being based on it. The said principle cannot therefore fail to constitute an end that is intended to be legally pursued, embodying, to that extent, a light of remarkable brilliance that, constantly and continuously, cannot fail to illuminate the path of the interpreter.

76 - Regarding the said principle, it is worth noting what Sérgio Vasques tells us, when, in Special Consumption Taxes, Almedina, Coimbra, 2001, p. 122, regarding the technical implementation of that principle considers that "In obedience to the principle of equivalence, the tax should correspond to the benefit that the taxpayer derives from public activity; or to the cost that the taxpayer imputes to the collective through its own activity".

77 - Addressing specifically the IUC, the mentioned author adds, op. cit., that "Thus, a tax on automobiles based on a rule of equivalence will be equal only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause different wear and environmental cost, pay different tax also", adding that the implementation of the said principle "[…] dictates other requirements still regarding the subjective tax base of the tax […]".

78 - In light of what has just been mentioned, it is clear that the taxation of the real and effective polluters corresponds to an important end sought by the law, in this case by the CIUC, an end that, in the words of Francesco Ferrara, in Interpretation and Application of Laws, 2nd Edition, Arménio Amado, Editor, Successor, Coimbra, 1963, p. 130, should always be before the eyes of the jurist, given that, as the mentioned author states therein, "[…] legal interpretation is by its nature essentially teleological".

79 - Thus, it should be noted that, both in light of the said historical elements, and in light of the elements of a rational or teleological character of interpretation that are left referenced, it is equally necessary to conclude that no. 1 of art. 3.º of the CIUC can only establish a rebuttable presumption.

80 - Consideration should also be given to the systematic element of interpretation.

OF THE SYSTEMATIC ELEMENT

81 - On the systematic element, BAPTISTA MACHADO tells us, in Introduction to Law and the Legitimizing Discourse, p. 183, that "this element comprises the consideration of the other provisions that form the normative complex of the institute in which the rule to be interpreted is integrated, that is, which regulate the same matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or related institutes (parallel places). It also comprises the systematic place that corresponds to the rule to be interpreted in the overall legal system, as well as its consonance with the spirit or intrinsic unity of the entire legal system".

82 - It is known that a legal principle, in this case the principle of equivalence, does not exist in isolation, but is linked by an intimate nexus with other principles that integrate, at a more global level, the respective legal system, in this case, with the other principles embodied in the IUC system. In that sense, each article of a given legal instrument, in the case of the CIUC, will only be comprehensible if we place it before the other articles that follow or precede it.

83 - With respect to the systematization of the CIUC, environmental concerns were decisive in ensuring that the mentioned principle of equivalence was, from the outset, inscribed in the 1st article of the Code, which necessarily leads to the fact that the subsequent articles, insofar as they are based on such principle, are influenced by it. This occurred, in particular, with the tax base, which came to be constituted by various elements, particularly those relating to pollution levels, and with the rates of the tax, established in articles 9.º to 15.º, which were influenced by the environmental component, and, naturally, also with the subjective tax base itself, provided in article 3.º of the CIUC, which cannot escape the mentioned influence.

84 - The systematic element of interpretation and the interaction between the various articles and principles that integrate the system inscribed in the CIUC also call for the understanding that what is established in no. 1 of art. 3.º of the CIUC cannot fail to constitute a presumption.

85 - Article 9.º, no. 1 of the CC provides that the search for legislative thought should take "[…] especially into account […] the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied", circumstances and conditions that, today more than ever, are of sensitivity to the environment and respect for issues related to it.

In this context, the considerations made on the mentioned elements of interpretation, whether of a literal character or historical bent, whether of a rational or systematic nature, point to the understanding that article 3.º of the CIUC establishes a presumption, that is, the ratio legis of that rule, while the reason or end that reasonably should be attributed to it, cannot fail to view the expression "being considered as such", used in the said article, as revealing the establishment of a presumption, which means that the passive subjects of the IUC being, in principle, the owners of the vehicles, being considered as such the persons in whose names the same are registered, may, in the end, be others.

It may be said, moreover, that the establishment of a presumption in the mentioned rule will correspond to the interpretation most compatible, particularly, with the principle of equivalence, mentioned above, being the one that best ensures the coherence and harmony of the various elements that integrate the legal system inscribed in the CIUC.

86 - Here arrived, it is worth recalling the provisions of art. 73.º of the LGT, when it establishes that "Presumptions established in tax base rules always admit proof to the contrary", (our underlining), which means that the legal presumption, which appears to be established in no. 1 of art. 3.º of the CIUC, will necessarily be rebuttable.

87 - In this framework, the passive subjects of the tax are, presumptively, the persons in whose names the vehicles are registered, that is, the said passive subjects are, in principle, and only in principle, the persons in whose names such vehicles are registered.

88 - In fact, if the owner in whose name the vehicle is registered comes, as occurs in the present proceedings, to indicate and prove who was the owner or lessee of the vehicles in question, nothing justifies, in our understanding, that either the former owner or the lessor be held responsible for the payment of the IUC that may be due.

89 - Moreover, this interpretation of no. 1 of article 3.º of the CIUC is the one that, in our opinion, best fits the principles to which the TA should subordinate its activity, namely the principle of inquisitorial procedure, in order to discover the material truth.

90 - With regard to the said principle of inquisitorial procedure, it is worth alluding to the teachings of Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in General Tax Law, Annotated and Commented, 4th Edition 2012, Encontro de Escrita, Lda, Lisbon, p. 488/489, when, in annotations to the cited art. 58.º, they state that it falls to the administration a dynamic role in gathering the elements with relevance for the decision, adding that the "[…] lack of diligences deemed necessary for the construction of the factual basis of the decision will affect it not only in the case where they are mandatory (violation of the principle of equality), but also if the materiality of the facts considered is not proven or if relevant facts, alleged by the interested party, are lacking in that basis, due to insufficient proof that the Administration should have collected […]".

The principle of inquisitorial procedure, add the said authors, op. cit, "[…] has to do with the powers (-duties) of the Administration to carry out the investigations necessary to the knowledge of essential or determining facts for the decision […]".

91 - The material truth, embodied, in the present case, in the circumstance that the vehicles identified in the request for arbitral pronouncement have, in their vast majority, been sold by the Claimant at a moment prior to that of the exigibility of the tax, that is, as of the date from which the tax creditor could assert, before the tax debtor, its right to payment of the tax, was, in light of the administrative process, within the knowledge of the TA.

92 - Let it not be said, as the TA does, that the establishment of a presumption in art. 3.º of the CIUC and the consequences resulting therefrom would offend the principle of efficiency of the tax system, in that they would lead, namely, to the "obstruction and increased cost of the competencies assigned to the Respondent". (See nos. 61 and 65 of the Response)

The efficiency of the Administration in general, or of the TA in particular, in the current sense, will correspond to the capacity/work methodology oriented towards optimizing the work executed or the services provided, which will mean producing the maximum, in quantity and quality, with the minimum of costs, having nothing to do with compliance with legally established principles and respect for the rights of citizens, whether in the capacity of taxpayers or not.

93 - In a technical sense, it would be said that the principle of efficiency of the tax system is commonly held, in the field of tax procedure, as a corollary of the principle of proportionality, which, as is known, imposes an adequate proportion between the legal ends and the means chosen to achieve those ends, or, as Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa state, in General Tax Law, Annotated and Commented, 4th Edition 2012, Encontro de Escrita, Lda, Lisbon, p. 488, in annotations to article 55.º of the LGT, this is a principle that obliges "[…] the tax administration to refrain from imposing on taxpayers obligations that are unnecessary to the satisfaction of the ends that it pursues".

In this framework, the said principle of efficiency of the tax system will mean the capacity to achieve legally fixed objectives in reason of the available means, or better, with the minimum of means, which will have nothing to do with respect for the rights of citizens, nor with the need to comply with the principles to which the tax administration should subordinate its activity, namely that of inquisitorial procedure and the discovery of material truth, and obviously the application of the mentioned principle of efficiency cannot be made to the detriment of citizens' rights.

J - ON THE ACQUISITION OF VEHICLE OWNERSHIP AND THE VALUE OF REGISTRATION

94 - First of all, it should be added, in light of what will be explicitly stated below on the value of registration, that the purchasers of the vehicles become owners of these same vehicles through the conclusion of the corresponding sales contracts, with or without registration.

95 - There are three articles of the Civil Code that are important to take into account, regarding the acquisition of ownership of a motor vehicle. They are, first of all, art. 874.º, which establishes the notion of a sales contract as being "[…] the contract by which ownership of a thing, or another right, is transferred, by means of a price"; art. 879.º, in whose paragraph a) it is established, as essential effects of the sales contract, "the transfer of ownership of the thing or the holding of the right" and art. 408.º, which has as its heading contracts with real effectiveness, and establishes in its no. 1, that "the constitution or transfer of real rights over a determined thing is given by mere effect of the contract, except for the exceptions provided for by law". (our underlining)

We are, in fact, in the field of contracts with real effectiveness, which means that their conclusion brings about the transfer of real rights, in this case, motor vehicles, determined by the mere effect of the contract, as is expressly derived from the rule previously mentioned.

96 - Regarding the said contracts with real effectiveness, it is worth noting the teachings of Pires de Lima and Antunes Varela, when, in annotations to art. 408.º of the CC, they tell us that "From these so-called real contracts (quoad effectum), for having as immediate effect the constitution, modification or extinction of a real right (and not just the obligations tending towards that result) the so-called real contracts (quoad constitutionem) are distinguished, which require the delivery of the thing as an element of their formation (cfr. arts. 1129.º, 1142.º and 1185.º) ".

We are thus faced with contracts in which the ownership of the thing sold is transferred, without more, from the seller to the buyer, having, as cause, the contract itself.

97 - Also from the jurisprudence, specifically from the Ruling of the Supreme Court of Justice no. 03B4369 of 19/02/2004, available at: www.dgsi.pt, it is drawn that, in light of the provisions of art. 408.º, no. 1, of the C. Civil, "the constitution or transfer of real rights over a determined thing is given by mere effect of the contract, except for the exceptions provided for by law". This is the case of the sales contract for a motor vehicle (arts. 874.° and 879.º al. a) of the C. Civil), which does not depend on any special formality, being valid even when concluded in verbal form - conf. Ruling of the Supreme Court of Justice of 3-3-98, in CJSTJ, 1998, year VI, Volume I, p. 117". (our underlining)

98 - Having the sales contract, in light of what has been mentioned, a real nature, with the mentioned consequences, one must also consider the legal value of vehicle registration resulting from that contract, in that the transaction of the said good is subject to public registration.

99 - It establishes, in fact, no. 1 of art. 1.º of DL no. 54/75, of 12 February, relating to the registration of motor vehicles, (amended several times, the last of which through Law no. 39/2008, of 11/08), that "The registration of vehicles has essentially as its purpose to give publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce". (our underlining)

100 - It being clear, in light of the said rule, what the purpose of registration is, there is, however, no clarity, within the scope of the said Decree-law, about the legal value of that registration, and it is important to consider article 29.º of the mentioned legal instrument, relating to the registration of motor vehicle ownership, when it provides that "The provisions relating to property registration are applicable, with the necessary adaptations, to the registration of motor vehicles, […]". (our underlining)

101 - In this framework, so that we can reach the sought knowledge about the legal value of motor vehicle ownership registration, it is important to take into account what is established in the Property Registration Code, which, approved by Decree-Law no. 224/84, of 6 July, and amended for the last time, through Decree-Law no. 125/2013, of 30 August, provides in its article 7.º that "the definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it". (our underlining)

102 - The combination of the provisions in the retromentioned articles, particularly what is established in no. 1 of art. 1.º of DL no. 54/75, of 12 February and in art. 7.º of the Property Registration Code, allows us to consider, on the one hand, that the fundamental function of registration is to give publicity to the legal situation of vehicles, allowing, on the other hand, to presume that the right exists and that such right belongs to the holder, in whose favor the same is registered, in the precise terms in which it is defined in the registration.

103 - Thus, the definitive registration constitutes nothing more than the presumption that the right exists and belongs to the registered holder, in the exact terms of the registration, but a rebuttable presumption, admitting, therefore, contrary evidence, as follows from the law and jurisprudence has been noting, and to this regard may be seen, among others, the Rulings of the Supreme Court of Justice nos. 03B4369 and 07B4528, respectively, of 19/02/2004 and 29/01/2008, available at: www.dgsi.pt.

104 - The function legally reserved to registration is, thus, on the one hand, to give publicity to the legal situation of goods, in this case, vehicles and, on the other hand, to allow us to presume that the right over those vehicles exists and that it belongs to the holder, as such inscribed in the registration, which means that registration does not have a constitutive nature of the property right, but only declarative, hence registration does not constitute a condition of validity of the transfer of the vehicle from seller to buyer.

105 - It should be noted, however, that while it is true that the non-existence of registration has the relevance mentioned above, it is equally true that its non-existence prevents the full effectiveness of the sales contract. To this regard, it is worth noting the provisions of nos. 1 and 4 of art. 5.º of the Property Registration Code, applicable to motor vehicle ownership registration by virtue of what is established in art. 29.º of DL no. 54/75, of 12 February.

106 - Article 5.º, no. 1 of the said Property Registration Code provides that "Facts subject to registration produce effects against third parties only after the date of their respective registration", while no. 4 of the same article establishes that "Third parties, for purposes of registration, are those who have acquired from a common author incompatible rights".

107 - In these circumstances, it will be easy to conclude that the TA, given that it did not acquire, from the same seller, rights over the vehicle, incompatible with the rights of the buyer, does not meet the concept of third parties for purposes of registration, as legally defined.

108 - Thus, if the buyers of the vehicles, as the "new" owners, do not promptly promote the adequate registration of their right, it is presumed, for purposes of no. 1 of art. 3.º of the CIUC and in accordance with the provisions of art. 7.º of the Property Registration Code, that the vehicle continues to be owned by the person who sold it and who remains its owner in the registration, it being certain, however, that such presumption is rebuttable, either by virtue of what is established in no. 2 of art. 350.º of the CC, or in light of the provisions of art. 73.º of the LGT. Hence, from the moment the said presumption is set aside, by proof of the respective sale, the TA cannot persist in considering as the passive subject of the IUC the seller of the vehicle, who, in the registration, continues to be listed as its owner.

109 - With regard to the establishment of a rebuttable presumption in art. 3.º of the CIUC, the TA states that, in the defense of this understanding "[…] it must be concluded that the functioning of that article (…) depends (…) on compliance with what is provided in article 19.º of the CIUC […]", compliance that did not occur on the part of the Claimant.

110 - In the present proceedings, however, it is not the case to appreciate the subjective tax base of the tax, in the course of the financial leasing contract, and we do not intend, therefore, to know who are the passive subjects of the tax in the framework of the validity of the said contract. What is provided in the said article 19.º also allows, moreover, to consider it as yet another argument in the sense of the rebuttable presumption, that is understood to be established in the mentioned art. 3.º.

In fact,

111 - When what is established in art. 19.º of the CIUC, precisely, for purposes of what is provided in art. 3.º of the said CIUC, that is, for purposes of subjective tax base, comes to impose, namely, on entities that proceed to financial leasing, the obligation to provide to the TA the data relating to the identification for tax purposes of the users of the leased vehicles, it reveals that, for purposes of the said subjective tax base, it was intended to know who were, after all, the potential users of the vehicles subject to financial leasing and, as such, potential polluters, to that extent, being required to support the IUC, which also appears convergent with the understanding that no. 1 of art. 3.º of the CIUC aimed to establish a legal presumption.

L - ON THE MEANS OF PROOF PRESENTED

112 - Written form not being legally required for the motor vehicle sales contract, proof of the corresponding sale may be made by any means, namely by testimonial or documentary means, in the latter being included, in particular, the invoices/receipts relating to the sales of the vehicles.

113 - As a means of proof that it proceeded to the sale of the twenty-one vehicles identified in the present proceedings, prior to the date of exigibility of the tax, the Claimant attached copies of the sales invoices for the said vehicles, in which the amount of VAT charged appears, and the date of placing at the disposal of each vehicle to the respective purchasers is referenced.

114 - As for two of the mentioned vehicles, namely those bearing registration numbers … and …, the said sales occurred, however, on dates subsequent to those on which the corresponding IUC was exigible. In fact,

115 - The vehicle bearing registration number …, in light of invoice no. …, was sold on 16-02-2011 and placed, on that same date, at the disposal of the purchaser, it being that, in light of the provisions of articles 6.º, no. 3 and 4.º, no. 2 of the CIUC, the exigibility of the tax referred to 17-03-2009 and 17-03-2010, the IUC assessed and paid corresponding to the sum of € 29.00, relating to each of the taxation periods in question.

116 - As for the vehicle bearing registration number …, in light of invoice no. …, it was sold on 02-12-2011 and placed, on that same date, at the disposal of the purchaser, it being that, pursuant to the legal rules mentioned above, the exigibility of the tax refers to 21-06-2010, the IUC assessed and paid corresponding to the sum of € 16.50.

117 - On the invoices presented by the Claimant, the TA considers that the same do not constitute suitable documents to prove the sales of the vehicles in question, not being able to substitute the Motor Vehicle Registration Request, but, with due respect, it does not seem to be correct. In fact,

118 - It happens that, in the field of tax-legal relationships, in light of the presumption of truthfulness of the facts inscribed in invoices and the transfer of the vehicles to their purchasers being considered as true, it will be incumbent upon the TA to demonstrate that such sales did not occur, it not sufficing to assert that the said documents are not suitable for that purpose.

119 - On the one hand, it is important not to confuse invoices, as documentary evidence of the transfer of goods, in this case motor vehicles, with the Motor Vehicle Registration Request, as a documentary model intended for the practice of the acts of registration of those same vehicles, and on the other hand, it is important to take into account what is established in art. 75.º, no. 1 of the LGT, when it establishes that the said documents enjoy the presumption of truthfulness, which means that if it is not demonstrated, as it was not, the absence of correspondence between the content of such invoices and reality, their content should be considered true.

120 - The documents presented by the Claimant, as means intended to prove the transactions of the vehicles in question, thus enjoying the mentioned presumption of truthfulness, appear with sufficient suitability, in order to demonstrate the said transactions.

121 - In light of what has just been mentioned, and taking into account, both the presumption established in art. 3.º of the CIUC, and the transfer of ownership of the vehicles in question, by mere effect of the contract, prior to the date of exigibility of the tax, and the legal value of motor vehicle registration in the economy of the CIUC, the tax acts in question, except those relating to vehicles bearing registration numbers … and …, cannot merit our agreement, either because there was not taken into account an adequate interpretation and application of the legal rules of subjective tax base, which constitutes an error regarding the legal presuppositions, or because the said acts were based on a matter of fact, clearly divergent from the effective reality, which constitutes an error regarding the factual presuppositions.

122 - In these circumstances, taking into account, on the one hand, that the presumption established in art. 3.º of the CIUC was rebutted and that, on the other, the vehicles in question in the present proceedings (all, with the exception of those bearing registration numbers … and …), were sold on a date prior to that of the exigibility of the tax, that is, at the moment when the Administration can demand the tax payment, one cannot but consider that, at the time of exigibility of the tax, in light of the provisions of no. 3 of article 6.º, combined with no. 2 of article 4.º, both of the CIUC, the Claimant was not the passive subject of the tax in question.

123 - The TA, when it understands that the passive subjects of the IUC are, in the final analysis, the persons in whose names the motor vehicles are registered, without considering the probative elements that were presented to it, intended to identify the effective and true owners of the vehicles, is proceeding to the illegal assessment of the IUC, based on the incorrect interpretation and application of the rules of subjective tax base of the Single Vehicle Circulation Tax, contained in art. 3.º of the CIUC, whether at the level of provision, or of enactment, which configures the practice of a tax act lacking in legality due to error regarding the factual and legal presuppositions, which determines the annulment of the corresponding tax acts, for violation of law.

M - RESTITUTION OF THE AMOUNT PAID AND COMPENSATORY INTEREST

124 - Pursuant to the provisions of paragraph b) of no. 1 of art. 24.º of the RJAT, and in accordance with what is established therein, the arbitral decision on the merits of the claim of which there is no appeal or challenge binds the tax administration from the end of the period provided for appeal or challenge, this administration - in the exact terms of the substantiation of the arbitral decision in favor of the passive subject and until the end of the period provided for the spontaneous execution of the decisions of tax court sentences - "Restore the situation that would exist if the tax act object of the arbitral decision had not been practiced, adopting the acts and operations necessary for that purpose." (our underlining)

125 - These are legal commands that are in total harmony with the provisions of art. 100.º of the LGT, applicable to the case by virtue of the provisions of paragraph a) of no. 1 of art. 29.º of the RJAT, in which it is established that "The tax administration is obliged, in case of total or partial substantiation of complaints or administrative appeals, or of judicial proceedings in favor of the passive subject, to the immediate and complete restoration of the situation that would exist if the illegality had not been committed, comprising the payment of compensatory interest, in the terms and conditions provided for by law." (our underlining)

126 - The case in the present proceedings raises the manifest application of the mentioned rules, given that following the illegality of the assessment acts, referenced in this process, there must, by virtue of those rules, be restitution of the amounts paid, as title of the tax paid, as a way of achieving the restoration of the situation that would exist if the illegality had not been committed.

Regarding the said amount, it should be noted that the sum of € 1,611.64, referenced in the proceedings, as corresponding to the tax paid on 14-11-2013, should be reduced by the sum of € 74.50 corresponding to the IUC assessed and paid concerning the vehicles bearing registration numbers … and …, which brings back the amount improperly paid and, as such, subject to restitution, to the sum of € 1,537.14.

127 - As for compensatory interest, it appears manifest that, in light of what is established in article 61.º of the CPPT and the requirements of the right to compensatory interest being met, that is, verified the existence of an error attributable to the services resulting in payment of the tax debt in an amount higher than legally due, as provided in no. 1 of art. 43.º of the LGT, the Claimant is entitled to compensatory interest at the legal rate, calculated on the sum of € 1,537.14, which will be counted from 14-11-2013, until the integral reimbursement of that same sum.

N - ARBITRAL COSTS

128 - To this regard, more specifically on the responsibility for payment of the arbitral costs, which the TA considers to be owed by the Claimant, "in accordance with art. 527.º/1 of the New Code of Civil Procedure ex vi art. 29.º/1-e) of the RJAT", it is only to note that, in light of what is established in no. 2 of the said art. 527.º of the CPC, the "losing party gives rise […] to the costs of the proceedings, in the proportion in which it is defeated", and that is what will be applied in the case of the proceedings.

CONCLUSION

129 - In the circumstantial framework that has been referred to, the TA, in practicing the assessment acts in question in the present proceedings, based on the idea that article 3.º, no. 1 of the CIUC does not establish a rebuttable presumption, makes an incorrect interpretation and application of this rule, committing an error regarding the legal presuppositions, which constitutes violation of law.

130 - On the other hand, because the TA, at the date of the occurrence of the tax facts, considered the Claimant the owner of the vehicles referenced in the present proceedings, considering it as such, the passive subject of the tax, when such ownership, concerning nineteen of the twenty-one vehicles in question, was no longer inscribed in its legal sphere, basing itself, thus, on a matter of fact divergent from the effective reality, commits an error regarding the factual presuppositions, and therefore of violation of law.

III - DECISION

131 - Therefore, in light of all that has been set out, this Arbitral Tribunal decides:

• To judge partially substantiated, as proven, on the basis of a defect of violation of law, the request for arbitral pronouncement regarding the annulment of the IUC assessment acts, concerning all the vehicles identified in the file, with the exception of vehicles bearing registration numbers … and …, relating to the years 2009; 2010; 2011 and 2012;

• To annul, consequently, the IUC assessment acts, concerning the years 2009, 2010; 2011 and 2012, concerning the vehicles, as mentioned above;

• To condemn the TA to restitution of the sum of € 1,537.14, relating to the IUC assessed and paid in 2013, concerning the years 2009; 2010; 2011 and 2012, and to payment of compensatory interest at the legal rate, counted from 14-11-2013, until the integral reimbursement of the said sum;

• To condemn the Claimant and the Respondent in costs, which are fixed, for each, in the proportion of their respective defeat.

CASE VALUE

In accordance with the provisions of articles 306.º, no. 2 of the CPC (ex-315.º, no. 2) and 97.º - A, no. 1 of the CPPT and article 3.º, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case value is fixed at € 1,611.64.

COSTS

In accordance with the provisions of article 12.º, no. 2, in fine, of art. 22.º, no. 4, both of the RJAT, and art. 4.º of the Regulation of Costs in Tax Arbitration Proceedings and Table I, which is attached to it, the total amount of costs is fixed at € 306.00.

Notify accordingly.

Lisbon, 18 August 2014

The Arbitrator

António Correia Valente

(The text of this decision was prepared by computer, in accordance with article 131.º, no. 5 of the Code of Civil Procedure (ex-138.º, no. 5), applicable by referral of article 29.º no. 1 paragraph e) of Decree-Law no. 10/2011, of 20 January (RJAT), and its drafting is governed by the orthography prior to the 1990 Orthographic Agreement.)