IUC Tax Liability for Leasing Companies: Registered Owner vs Actual Owner in Arbitration

ARBITRATION DECISION

CAAD: Tax Arbitration

Case No. 114/2014 – T

Subject Matter: IUC – taxpayer; jurisdiction of arbitration tribunal

I - REPORT

A., S.A. (hereinafter referred to as the Claimant), legal entity no. …, with registered office …, filed, on 12-02-2014, pursuant to paragraph a) of article 2(1) and articles 10 et seq. of Decree-Law No. 10/2011, of 20 January, which approves the Legal Framework for Arbitration in Tax Matters (RJAT), in conjunction with paragraph a) of article 99 and paragraph d) of article 102(1) of the Tax Code of Procedure and Process (CPPT), a request for arbitration award, in which the Respondent is the AT - TAX AND CUSTOMS AUTHORITY, seeking to:

• Declaration of the illegality of the Unique Circulation Tax assessments challenged (identified in documents nos. 2 to 25 attached to the initial petition) relating to the tax periods 2009 to 2012, in the amount of € 1,719.19, with their consequent annulment;

• The condemnation of the AT – Tax and Customs Authority to reimburse the Claimant the amount of tax unduly paid and the corresponding compensatory interest.

The Claimant alleges, in substance, the following:

• The Claimant is a financial institution whose corporate purpose includes the practice of operations permitted to banks, with the exception of the receipt of deposits, having, for this purpose, all legally required authorizations;

• In the course of its activity, the Claimant enters into contracts with its clients for Long-Term Rental and Financial Lease Contracts of motor vehicles, upon the conclusion of which it transfers the ownership thereof to the respective lessees or to third parties;

• Between 14 November 2013 and 20 December 2013, the Claimant was notified of Official Assessments of IUC relating to the vehicles identified in the present request for arbitration award (document 1 attached to the initial petition) and to the tax periods 2009, 2010, 2011 and 2012;

• As previously mentioned, the Claimant proceeded to voluntarily pay the IUC assessed (Documents nos. 2 to no. 44);

• The Claimant considers the assessment acts to be illegal, insofar as the vehicles in respect of which the payment of IUC was due were not its property on the date identified by the AT – Tax and Customs Authority as the date of the occurrence of the taxable event;

• In accordance with article 3(1) of the IUC Code, "the taxpayers 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 name the same are registered;"

• Although the current text has not used the term "are presumed," contrary to what was contained in the now-defunct Motor Vehicle Tax Regulation (article 3(1) of the Motor Vehicle Tax Regulation, approved by Decree-Law No. 143/78, of 12 June and repealed by Law No. 22-A/2007, of 29 June provided: "the tax is due by the owners of the vehicles, being presumed as such, unless the contrary is proved, the persons in whose name the same are registered or matriculated," article 3(1) of the CIUC continues to contain a legal presumption regarding taxable base;

• In the Portuguese legal system there are various examples of norms that establish presumptions using the verb "consider," examples of which, in the Civil Code, among others, are articles 314, 369(2), 374(1), 376(2) and 1629; In the Industrial Property Code, article 98; In the tax legal system, examples are article 21(2) of the Code for the Tax on Income of Legal Persons or article 89-A(4) of the General Tax Law;

• On the other hand, article 3 of the CIUC should also be interpreted in light of the principle of equivalence, established in article 1 of the same Code. From the outset it should be concluded that the tax aims to tax the actual users of the vehicles;

• If it is understood that article 3 of the CIUC establishes a presumption, this is necessarily rebuttable, by virtue of article 73 of the General Tax Law (LGT);

• From the documents presented by the Claimant, it is extracted that all the vehicles on which the assessments now challenged fall were sold on a date prior to that to which the tax relates;

• The vehicle registration does not have constitutive value but only declarative value, therefore the absence of registration cannot affect the quality of owner;

• The absence of registration also does not prevent the full efficacy of vehicle purchase and sale contracts, in accordance with the combined provisions of article 5(1) and (4) of the Land Registry Code (CRPred.);

In its response to the request for arbitration presented by the Claimant, the Respondent AT - Tax and Customs Authority raises a defense by exception and by impugnation, alleging, in summary, the following:

A - By Exception

• With the exception of Document no. …, all other documents submitted by the Claimant do not constitute official assessments, but rather mere collection notes, generated by the Claimant itself through the Internet on the Tax Portal;

• The Respondent did not send to the Claimant any other official assessments other than the one already referred to with no. …;

• Thus, since a collection note does not constitute a tax act, in the present case there is a situation of lack of subject matter of the arbitration proceedings, which constitutes a peremptory exception that should lead to the dismissal of the Respondent from the instance, in accordance with article 576(3) of the Code of Civil Procedure;

• Furthermore, given the non-existence of assessment acts (with the exception of the already mentioned assessment act documented through collection note no. …), the Arbitration Tribunal is also incompetent ratione materiae to examine the request, which constitutes a procedural exception that precludes examination of the merits of the case;

• If it is to be understood that we are dealing with self-assessments generated by the Claimant on the Tax Portal through the Internet, in order for such self-assessments to be subject to judicial challenge it was necessary for the challenge to be preceded by administrative recourse against such self-assessments, which does not occur, the consequence of this being the non-challengeability of such acts.

B - By Impugnation

• The tax legislator, in establishing in article 3(1) who are the taxpayers of the IUC, established expressly and intentionally that these are the owners (or, in the situations provided for in paragraph 2, the persons listed there), being considered as such the persons in whose name the same [vehicles] are registered;

• The tax norm is replete with provisions analogous to that enshrined in the final part of article 3(1), in which the tax legislator, within its freedom of legislative shaping, expressly and intentionally, establishes what should be considered legally, for purposes of taxable base, income, exemption, determination and periodization of taxable profit, residence, location, among many others;

• As an example, the Respondent points to articles 2 of the Code for the Municipal Tax on Onerous Transmission of Real Estate (CIMT), 2, 3 and 4 of the Code for the Tax on Income of Natural Persons (CIRS) and 4, 17, 18 and 20 of the Code for the Tax on Income of Legal Persons (CIRC), in which the expression "is considered" is used to qualify a situation for tax purposes, without such expression being able to be viewed as a presumption;

• In these terms, it is imperative to conclude that, in the case of the present arbitration award proceedings, the legislator established expressly and intentionally that [as proprietors or, in the situations provided for in paragraph 2, the holders listed there] are considered as such the persons in whose name the vehicles are registered, since this is the interpretation that preserves the unity of the tax legal system;

• Said understanding corresponds to that adopted in the jurisprudence of our courts, having been supported by the Administrative and Tax Court of Penafiel, in Case No. ….0BEPNF;

• Said understanding is the only one that, given the systematic element of interpretation, is compatible with the unity of the IUC regime;

• The interpretation that the Claimant makes of article 3 violates the principle of confidence and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

• The Claimant cannot prove that the facts resulting from the registration presumption are not true, because the documents presented as evidence do not have sufficient probative force to rebut the registration presumption.

On 9 June 2014, the meeting provided for in article 18 of the RJAT was held at the premises of the Administrative Arbitration Centre.

At this meeting, the parties waived the production of oral or written submissions.

This singular Arbitration Tribunal was constituted on 15-04-2014, with the arbitrator designated by the Ethics Council of CAAD, having complied with the respective legal and regulatory formalities (articles 11(1), paragraphs a) and b) of the RJAT and articles 6 and 7 of the CAAD Ethics Code).

The parties have legal standing and capacity, are legitimate and are regularly represented.

The joinder of claims is legal, as the requirements of article 3(1) of the RJAT are met.

No procedural nullities were identified.

II – ISSUES FOR DECISION

The following are the issues to be decided by the Tribunal:

• The existence of assessment or self-assessment acts whose challenge is the subject of the request;

• The jurisdiction of the Arbitration Tribunal to hear the request;

• The interpretation of article 3(1) of the Unique Circulation Tax Code of Motor Vehicles (CIUC) as establishing or not a presumption regarding the qualification, as owner of a vehicle, of the entity in whose name the property of the same is registered;

• If it is concluded that this norm constitutes a presumption, its effective rebuttal in the case of the present proceedings;

III – REASONING

A. FACTS FOUND TO BE RELEVANT

Based on the documents submitted by the Claimant and which form part of the administrative proceedings, the following facts are found to be proven:

1st: The Claimant was notified to pay 42 IUC assessments relating to the years 2009, 2010, 2011 and 2012, and relating to 29 vehicles, whose registration of property was recorded in its name;

2nd: The Claimant issued invoices relating to the sale of the 29 vehicles to which the IUC assessments challenged relate on a date prior to the date of the taxable events;

3rd: The Claimant proceeded to pay the tax contained in all the assessments challenged.

There are no unproven facts with relevance to the decision of the case.

B. LEGAL REASONING

1. Issue of the existence of assessment or self-assessment acts whose challenge is the subject of the request

In its defense by exception, the Respondent raises the following issues:

• With the exception of Document no. …, the documents submitted by the Claimant as proof of IUC assessments constitute collection notes and not assessments. Being collection notes, they are not tax acts, and as such cannot be the subject of challenge, therefore there is no subject matter to the present arbitration proceedings.

• There are no assessment acts in this case, therefore the Arbitration Tribunal is incompetent ratione materiae to examine the request;

• If it is to be understood that we are dealing with self-assessments generated by the Claimant on the Tax Portal through the Internet, in order for such self-assessments to be subject to judicial challenge it was necessary for the challenge to be preceded by administrative recourse against such self-assessments, which does not occur, the consequence being the non-challengeability of such acts.

The Respondent alleges that the documents submitted by the Respondent (with the exception of document no. …) are mere collection notes, which do not constitute tax acts.

We do not believe the Respondent is correct on this point.

The collection notes submitted by the Claimant do not embody assessment acts, but prove that assessment acts of the tax existed, or those collection notes could not have been issued (in the same sense, the arbitration award rendered in case No. 183/2014-T, not yet published and submitted by the Respondent to the proceedings).

What the Claimant challenges are the assessment acts that were at the origin of the collection documents submitted to the proceedings as a means of proving the assessments.

Therefore, the exception of lack of subject matter of the proceedings does not occur.

2. The jurisdiction of the Arbitration Tribunal to examine the request

The Respondent further alleges that, being faced, in all cases except that of assessment no. …, with self-assessments, their challenge is dependent on prior administrative recourse, which, in the cases in question, did not occur.

It is a fact, recognized by the Claimant, that no administrative recourse were filed against the assessments challenged.

And contrary to what the Claimant affirms, it in fact did carry out a self-assessment, by electronic means, through the electronic communication platform of the AT – Tax and Customs Authority.

Now, pursuant to article 2, paragraph a) of the "Binding Order,"[1] excluded from the scope of binding of the AT – Tax and Customs Authority to tax arbitration are self-assessments that have not been preceded by recourse to the administrative route, in accordance with article 31 of the CPPT.

In turn, article 131 of the CPPT provides that "in case of error in self-assessment, challenge shall necessarily be preceded by administrative recourse directed to the head of the regional peripheral body of the tax administration".

And thus, it must be concluded that the self-assessments referred to are not challengeable before arbitration tribunals, therefore this tribunal is incompetent to examine the legality of such assessments.

The tribunal is, however, competent, pursuant to the same article 2, paragraph a) of the "Binding Order" and article 2(1), paragraph a) of the RJAT, to examine the legality of the official assessment with no. … .

3. As to the interpretation of article 3(1) of the CIUC, in order to determine whether or not the same establishes a presumption of ownership of the vehicle

On this issue and in the exact terms in which it is raised here, the arbitration tribunal, which we joined as member, constituted in case No. 63/2014-T[2], pronounced itself. As we consider applicable in the present case everything that is said in said award with respect to this issue, we reproduce here its content, adhering to the doctrine expounded there:

"Article 3 of the CIUC provides:

Article 3

Subjective Scope of Taxation

1 - The taxpayers 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 name the same are registered.

2 - Financial lessees, acquirers with reservation of title, as well as other holders of purchase option rights by virtue of lease contract are assimilated to proprietors.

The taxpayers of the IUC are, in the first place, the owners of the vehicles, and may also be assimilated to proprietors the "financial lessees, acquirers with reservation of title, as well as other holders of purchase option rights by virtue of lease contract."

The ownership of motor vehicles is subject to mandatory registration (article 5(1) and (2) of D.L. No. 54/75, of 12 February).

The obligation to register falls on the buyer – the active subject of the fact subject to registration, which is, in this case, the ownership of the vehicle (article 8-B(1) of the Land Registry Code, applicable to Vehicle Registration by virtue of article 29 of D.L. No. 54/75, of 12 February and combined with paragraph a) of article 5(1) of D.L. No. 54/75)

But the Vehicle Registration Regulation[3] contains a special regime for entities engaged in the commercial activity of sale of motor vehicles, in force since 2008. According to this regime, which is established in article 25(1), paragraphs c) and d), registration may be promoted by the seller, by means of a request signed only by itself.

Since 2001, the obligation to declare the sale by the seller to the "authority responsible for registration" is also expressly established in the Road Code (now in its article 118(4)).

The registration must be effected within 30 days from the date of acquisition of the vehicle (article 42 of the Vehicle Registration Regulation (Decree-Law No. 55/75, of 12 February).

The current IUC is designed to operate in integration with vehicle registration, which is inferred from article 3 of the CIUC itself. The alternative to this articulation would be the obligation to communicate to the AT – Tax and Customs Authority all vehicle transfers, similar to what happens with the IMT Code, a highly bureaucratic solution which the legislator rejected.

In a situation of full compliance with the law, upon the alienation of the ownership of the motor vehicle, this change of ownership will be registered in due time.

The AT - Tax and Customs Authority may, thus, at any moment, know which vehicles are registered in Portuguese territory and who their respective owners are for purposes of tax assessment.

There is, therefore, a close articulation between Vehicle Registration and the Unique Circulation Tax, so that, if the Tax Administration cannot avail itself of the data contained in Vehicle Registration, this will result in an inevitable loss of efficiency, not to say paralysis, in the administration of the tax.

For that reason, article 3(1) of the CIUC, after establishing that "the taxpayers of the tax are the owners of the vehicles," adds that [as such] are considered "the natural or legal persons, of public or private law, in whose name the same are registered."

In the case of the present proceedings, in which the Claimant alleges to have transferred the ownership of all vehicles to which the assessments challenged relate, prior to the dates to which the assessments relate, the same Claimant remained, on the date of the assessments, as the holder of the registration of ownership of the allegedly sold vehicles.

But since such transfers were not communicated to Vehicle Registration, the Tax Administration adopted the only procedure it could adopt: it applied article 3(1) of the CIUC, considering the Claimant as owner of the vehicles, by being the entity in whose name the vehicles were registered. Note that, even if article 3 of the CIUC did not contain the expression "being considered as such the natural or legal persons, of public or private law, in whose name the same are registered," the Tax Administration would always benefit from this presumption of ownership since it results from Vehicle Registration itself.

Indeed, article 7 of the Land Registry Code (CRPred), applicable to vehicle registration, by virtue of article 29 of the Vehicle Registration Code, stipulates that "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."

The Claimant recognizes that, during the period to which the assessments relate, it was the holder of the vehicle registration of ownership, but alleges that it was no longer the actual owner thereof because it had in the meantime alienated them.

The issue that arises in this situation is that of the value of the second part of the provision, in determining that "the taxpayers 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 name the same are registered."

In saying that "the persons in whose name the same are registered are considered as owners of the vehicles," is the law establishing a legal presumption?

Or, on the contrary, is the law saying that the persons in whose name the vehicles are registered are 'proprietors' for tax purposes, i.e., are taxpayers?

The Claimant argues that the law contains a legal presumption, basing itself on the example of several legal provisions in force in the legal system that, employing the verb 'consider,' undoubtedly contain presumptions.

The Claimant's thesis also draws support from the merely declarative value of vehicle registration.

If the Claimant's thesis is correct, then, in accordance with article 73 of the General Tax Law, and because this is a norm of taxable base, the presumption is necessarily rebuttable, which means it admits proof to the contrary. Which in this case means that the Challenger may prove that it was not the owner of the vehicles in the period to which the assessments relate and, therefore, was not the taxpayer of the assessed tax.

To the contrary, the Respondent argues that the norm in question does not establish any presumption, and that the legislator established expressly and intentionally that [as such] ("as proprietors or, in the situations provided for in paragraph 2, the persons listed there") are considered the persons in whose name the vehicles are registered, since this is the interpretation that preserves the unity of the tax legal system.

The Respondent relies, just as the Claimant does, on the example of several legal tax provisions that, using the verb "consider," do not contain presumptions, but non-presumptive qualifications. Examples would be articles 2 of the Code for the Municipal Tax on Onerous Transmission of Real Estate (CIMT), 2, 3 and 4 of the Code for the Tax on Income of Natural Persons, and 4, 17, 18 and 20 of the Code for the Tax on Income of Legal Persons (CIRC).

From the examples provided by both parties, it is clear from the outset that it is possible to find in the legal system as many examples of provisions that use the verb "consider" in the sense of "presume" as examples of legal provisions that use the verb "consider" to establish non-presumptive legal qualifications, therefore these arguments are not conclusive.

If there is a presumption in article 3(1) of the CIUC, it consists of the presumption regarding the quality of owner: "the taxpayers 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 name the same are registered."

On the other hand, if one understands that the norm does not establish a legal presumption, then one must consider that the law qualifies non-presumptively as owners of the vehicles the persons in whose name the vehicles are registered.

In that case, we would have a legal fiction, disconnected from the concept of civil law, and which consists of a legal expedient that considers a situation or a fact as distinct from reality to attribute to it certain legal consequences.

Article 11(2) of the General Tax Law constitutes the starting point regarding this issue, stating that "whenever, in tax norms, terms peculiar to other branches of law are employed, the same should be interpreted in the same sense as they have there, unless otherwise directly results from the law."

It must therefore be ascertained whether it unequivocally results from article 3 of the CIUC that the legislator intended to establish there a concept of "owner of a vehicle" specific to tax law, which encompasses persons who are not holders of such a right according to the rules of civil law.

Now, can the "freedom of legislative shaping" enjoyed by the legislator, (…), go so far as to determine conclusively who is the owner of a vehicle, even if only for merely tax purposes, radically dissociating this tax qualification from the qualification of civil law?

And, in the sequel to the preceding question, another question imposes itself: why would the legislator not have simply stipulated - since it would obtain exactly the same useful effect but eliminating all and any margin of legal insecurity or uncertainty - that "the taxpayers of the tax are the persons in whose name the vehicles are registered, whether as proprietors, whether as financial lessees, as acquirers with reservation of title, or as other holders of purchase option rights by virtue of lease contract"? A question all the more pertinent, and a hypothesis all the more attractive, since the legislator was aware of the negative experience, which keeps repeating itself, of the previous Motor Vehicle Circulation Tax?

The answer seems evident: because, in this latter hypothesis, which the legislator did not follow, the subjective scope of taxation could become completely disconnected from any economic substance and would depend exclusively on a legal appearance.

Now, if the legislator had, as the Respondent claims, established in the law a non-presumptive qualification regarding who is the owner of the vehicles (a legal fiction), it would thereby be establishing, through a different formulation, a rule altogether identical to the hypothetical rule referred to. It would be basing the subjective scope of taxation on a legal fiction, in total disconnection from any economic substance as the basis of subjective taxation.

It is true that the efficiency of taxation determines the need for IUC to be based on vehicle registration and, consequently, requires that the tax administration be able to rely on such vehicle registration.

But the principle of efficiency of taxation cannot absolutely override the principle of taxpaying capacity, to the point of eliminating it as a criterion of subjective taxation scope. And it is also true that the tax legislator would have at its disposal other means of holding the seller of the vehicle accountable, who fails in its duty to communicate the sale thereof, for payment of the tax, without being as a direct contributor (by configuring, e.g., a case of tax liability for the debt of a third party).

And, if it is so, it must be forcibly concluded that article 3(1) can only establish a presumption of ownership of the vehicle, even with all the negative consequences that this conclusion will certainly bring, in terms of efficiency of administration of the tax."

The Respondent is not, therefore, correct regarding the interpretation of article 3 of the CIUC, to the effect that a presumption regarding who is the owner of the vehicle is not enshrined there.

That provision can only contain a legal presumption, by virtue of the principle of taxpaying capacity, which requires that taxes – which, pursuant to article 4 of the General Tax Law, are levied on the taxpaying capacity revealed through income, expenditure and property – fall on the persons who are effectively holders of the income or property or carry out the expenditure.

As with all presumptions in the matter of tax scope, such presumption is rebuttable, by virtue of article 73 of the General Tax Law.

4. As to the rebuttal of the presumption of ownership of the right of property that falls upon the Claimant

In order to rebut the presumption of article 3 of the IUC, the Claimant must prove "the contrary," i.e., that it was not the owner of the vehicles on the date of the tax facts.

Let us then examine:

The Claimant proposes to prove, as results from the initial petition, that it transferred the ownership of the vehicles, through purchase and sale contracts, prior to the periods to which the assessments relate.

To prove that such transfers of ownership occurred through purchase and sale contracts, the Claimant presents invoices relating to the sale of the vehicles.

Being the invoice a unilateral document, with which it is intended to deny the truthfulness of facts proven through legal evidence - the presumption resulting from registration - a question of material probative law arises here, which must be analyzed.

This issue was likewise resolved in the arbitration award cited above, whose doctrine we entirely subscribe to and which we proceed to transcribe:

"The Civil Code (CC) deals with presumptions in relation to 'evidence.' Presumptions are therefore, a means of proof.

They are defined in article 349 of the CC as the inferences which the law or the judge draws from a known fact to establish an unknown fact.

The CC distinguishes between legal presumptions, to which article 350 refers, and judicial presumptions, dealt with in turn in article 351.

The judicial presumption (common or common sense) consists of the reasoning, originating from a rule of experience, through which, based on a known fact, the judge deduces an unknown fact.

The two species of presumptions mentioned have different probative force. And because they have different probative force, their rebuttal also obeys different rules, the rebuttal of legal presumption being more demanding.

Indeed, article 342(1) of the CC provides that 'it is incumbent upon the one who invokes a right to prove the constitutive facts of the right alleged.' This is the general rule on burden of proof.

Article 346 of the CC, under the heading 'counter-evidence,' provides that 'to the evidence produced by the party bearing the burden of proof, the opposing party may oppose counter-evidence with respect to the same facts, intended to render them doubtful; if it succeeds, the issue is decided against the party burdened with the proof.'

That is, if the burden of proof falls on one of the parties, it suffices for the opposing party to oppose 'counter-evidence,' being this evidence intended to render doubtful the facts alleged by the first. And the mere formation of this doubt is sufficient for the issue to be decided against the party burdened with the proof. As stated by Anselmo de Castro, A., 'Civil Procedural Law Declaratory,' III, Almedina, Coimbra, 1982, p. 163, the consequence of the burden of proof is that the party on whom it falls must bear the disadvantages of the uncertainty that remains regarding the facts it attempts to prove.

Now, in accordance with article 350 of the CC, the party in whose favor a legal presumption exists, which constitutes full evidence, does not have to prove the fact to which it leads. It does not, therefore, have any burden of proof regarding that fact.

In this situation, the rebuttal of the presumption will no longer obey the rule of article 346, but the rule of article 347 of the CC: 'legal full evidence can only be contradicted by means of evidence that shows that the fact of which it is the object is not true.'

Which means that it is not sufficient for the opposing party to oppose 'counter-evidence' – which is intended to cast doubt on the facts – that renders the presumed facts doubtful. It must show that the presumed fact is not true, in such a way that no uncertainty remains that the facts resulting from the presumption are not true.

Returning to the contrast between judicial and legal presumption, while the former is a simple proof, not definitive, based on the data of experience and whose appreciation is left to the prudence of the judge, legal presumptions are legal or binding proofs, which do not depend on the free appreciation of the court. On the contrary, its probative force, legally tabulated, provides the judge with a formal truth (cf. Domingos de Andrade, M, 'Elementary Notions of Civil Procedure,' Coimbra, 1976, p. 280).

Thus, in the present case, what the Claimant must prove, in order to rebut the presumption which results, both from article 3(1) of the CIUC and from Vehicle Registration itself, is that it, the Claimant, was not the owner of the vehicles in question in the period to which the assessments relate.

What the challenger proposes to prove, as results from the proceedings, is that it transferred the ownership of the vehicles, through purchase and sale contracts, prior to the periods to which the assessments relate.

To prove that such transfers of ownership occurred through purchase and sale contracts, the Challenger presents:

• Invoices relating to the sale of the vehicles in question;

(…)

It becomes, thus, necessary to analyze what value should be recognized to these elements to prove the transfer of ownership of the vehicles by the Claimant, against the presumption resulting from registration.

For this, one should begin by addressing the issue of the probative force of vehicle registration.

Vehicle registration is a public register, which has the purpose of 'giving publicity to the legal situation of motor vehicles and their respective trailers, with a view to the security of legal commerce' (article 1 of the Vehicle Registration Code (CRA)). In the notion of security of legal commerce is certainly included the exercise of rights by third parties based on registered facts.

As stated in the judgment of the Lisbon Court of Appeal of 24-3-2011 (case No. 195/09.8TBPTS.L1-2), 'land registration pursues, at one time, purposes of a private nature and purposes of a characteristically public nature. It pursues purposes of a private nature, given that it guarantees security in the field of private rights, specifically in the realm of rights with real efficacy – security of legal commerce (…), considered globally – facilitates the traffic and interchange of goods, and ensures the fulfillment of the social function of real rights; it pursues purposes of public interest, as an instrument of legal certainty, the protection of third parties and the security of legal commerce, and as a guarantor of the updating of the register in light of the publicized fact.'

Now, what the Claimant seeks in these proceedings is not merely to rebut a tax presumption. It is to rebut the presumption of truthfulness of the facts that are publicly registered, and that are registered for purposes of public interest, a presumption of which any person should be able to avail themselves, on penalty of the uselessness of the register.

Under conditions of compliance with the law, the rebuttal of the presumption of truthfulness of the register is very simple. When the purchase and sale of a vehicle occurs, a document intended for vehicle registration is completed – completion of which does not constitute an essential formality of the transaction – and which contains a declaration by both parties to the celebration of the contract (in accordance with article 25(1), paragraphs a) and b) of D.L. No. 55/75).

This document is a bilateral private instrument, because signed by both parties to the contract. And precisely because the purchase and sale of a movable thing is a non-formal transaction, the Vehicle Registration services need only this private instrument as evidence to proceed with the modification of the register. The seller can then promote the registration in the name of the acquiree, armed with a simple copy of that declaration.

But we have already mentioned that, if the seller is an entity engaged in the commerce of motor vehicles, it can promote the registration, in the name of the acquiree, by means of a simple request, as provided in article 25(1), paragraphs c) and d) of the Vehicle Registration Regulation.

What the Claimant presents as evidence, however – invoices not signed by the purchaser[4] and copies of customer account accounting excerpts – are only private documents, of a commercial character, and unilateral, i.e., for the issuance of which there was no involvement of the purchaser. Which means that the purchaser can deny that the invoice corresponds to any transaction actually concluded, thereby invalidating any probative value of the invoice and not even being required to produce any counter-evidence to that effect (Lisbon Court of Appeal, Judgment of 4-2-2010, Case No. 224338/08.7YIPRT.L1-8).

To these private documents, being unilateral, no more than very limited probative value can be recognized.

Even within the scope of relations between merchants regarding facts of their commerce – a field which is, as it is known, that in which commercial documents and commercial records have the greatest probative value – commercial invoicing and commercial records do not constitute full evidence, and the merchant who owns the books can even produce evidence to the contrary of his own entries (Supreme Court of Justice, Judgment of 18-10-2007, Case No. 06B3818).

If a merchant A – continuing to place ourselves within the scope of commercial relations – intending to prove that he sold to B, presents invoices issued by himself, B, who claims the non-existence of the legal transaction, need only deny the materiality of the facts set forth in those invoices, for the burden of proof to revert to the seller to prove by other means the existence of the contract (Lisbon Court of Appeal, Judgment of 4-2-2010, Case No. 224338/08.7YIPRT.L1-8, in which it is stated: "The documents submitted are limited to the existence of the declarations contained therein, that is, that invoices were issued referring to goods supplied to the defendant/appellant with the corresponding delivery note (allegation of the appellant); from the documents it does not result that the appellant ordered from the appellant the goods contained in the invoices submitted (…)")

If this is so in the context of relations between merchants regarding facts of their commerce, what value can be attributed to this type of document in the context of relations with non-merchant third parties?

On this matter, the superior courts have also pronounced themselves. Thus, in a judgment of the Lisbon Court of Appeal of 26-11-2009 (Judgment of 26-11-2009, Case No. 29158/03.5YXLSB.L1-2), it is stated that 'the probative force of the private document is limited to the declarations of its respective subscriber.'

And in another judgment of the same Court, with greater acuity for the issue to be decided, since it refers exactly to the value of the commercial invoice as evidence of the existence of a contract with a certain person, it is said that 'the requirement of payment by invoice is not sufficient to prove that the contract to which the payment relates was entered into with the entity invoiced' (Lisbon Court of Appeal, Judgment of 5-6-2008, Case 1586/2008-8).

Everything that was said about the invoice applies, in turn, to accounting excerpts. An accounting excerpt is, also, a private document (not authentic) and unilateral, whose issuance does not suppose the involvement of the counterparty in the alleged contract.

In summary, the Claimant presents, only, private and unilateral documents, to which jurisprudence has recognized a very reduced value to prove the existence of a synallagmatic contract.

In light of the foregoing, it is necessary to conclude that the Claimant has failed to prove the transfer of ownership of the vehicles on which the IUC assessments challenged fall."

The cited decision further proceeds:

"But this Court understands that, in this case, as has already been stated above, what the Claimant would have to prove, in order to rebut the presumption which results, both from article 3(1) of the CIUC and from Vehicle Registration itself, is that it, the Claimant, was not the owner of the vehicles in question in the period to which the assessments relate, since this is the fact that results from the registration presumption.

For that it would not be sufficient to prove that, one day, some years ago, it had entered into a purchase and sale contract for a vehicle, since even if that contract had been entered into, the ownership of any vehicle could have returned to the ownership of the Claimant. That is, proving that A, in the year 2001, alienated good X, does not imply proving that A, in the year 2011, is not the owner of good X.

Thus, the Claimant would have to prove that it was not the owner of the vehicles on the date to which the assessments relate, which would imply, in the concrete case, proving who was the current owner.

It should not be said that this is, in this case, a diabolical burden of proof. This proof would be easy to make, it sufficing for the Claimant to update the register, for which it has the legitimacy as seller – and not only the legitimacy but the obligation, since 2001, in light of the Road Code – promoting the registration of the vehicles in the name of the buyer, by means of a simple request, pursuant to article 25(1), paragraphs c) and d) of the Vehicle Registration Regulation (provisions that establish a special regime for promotion of registration for entities that commercialize motor vehicles).

Diabolical burden of proof would be, in this case, in our understanding and disagreeing on this point with earlier arbitration awards, that required of the Tax Administration, if this, in order to avail itself of the presumption that results both from article 7 of the Land Registry Code and from article 3(1) of the CIUC, would have to present counter-evidence that put in question the material truth of the invoices presented, when the administration has no means whatsoever to do so.

The thesis of the Claimant, as far as the probative part is concerned, intending to contradict legal full evidence constituted by the register by means of the presentation of unilateral private documents, which have diminished probative value within the scope of material probative law, would imply making it impossible for the tax administration to administer the Unique Circulation Tax.

And the fact is that, from the validity in tax dispute proceedings of the principles of the inquisitorial or investigative and of free appreciation of evidence, and also of the principle of procedural acquisition, it follows that, even though there is no formal burden of proof, assigned specially or exclusively, to any of the procedural participants, a substantial burden of proof, objective, or material, is of paramount importance in this field, in the sense that the decision must naturally be unfavorable to whoever cannot manage to have materially proven the facts on which his position is based (cf. in this respect Vieira de Andrade, J. C., 'Administrative and Tax Law, Lessons to the 3rd year of the Course of 1995/96,' Coimbra, 1996, p. 186; and Saldanha Sanches, J. L., 'The Burden of Proof in Tax Proceedings,' Notebooks of Technical and Tax Science no. 151, pp. 122 et seq.).

In summary, the evidence presented by the Claimant consists exclusively of private, unilateral and internal documents, with insufficient value to, in light of material probative law, deny the validity of facts – the ownership of vehicles – on which there is legal evidence – a legal presumption – which exempts the Respondent from any burden of proof, and which is not contradictable through mere counter-evidence, which casts doubt on the facts proven by the presumption."

In light of the arguments expounded, which are here fully accepted, it is necessary to conclude that the Claimant fails to rebut the presumption that falls upon it regarding the ownership of the vehicles that are the subject of the assessments, resulting from the fact that ownership is registered in its name.

The alleged illegality of the assessments challenged by error in the legal presuppositions does not, therefore, hold.

V. DECISION

For the reasons stated, this Tribunal decides:

• To dismiss the request for declaration of illegality and consequent annulment of the assessment identified with the number …, as the presumption of ownership of the respective vehicle that falls upon the Claimant has not been rebutted and, consequently, it cannot be considered that there exists error in the legal presuppositions of the assessment;

• To declare the exception of material incompetence of the Tribunal well-founded as to the remaining requests, and in consequence to dismiss the Respondent from the instance as to such requests, as these concern self-assessments whose judicial challenge depends on prior recourse to the administrative route.

Value of the economic utility of the proceedings: The value of the economic utility of the proceedings is fixed at 1,719.19 euros.

Costs: Pursuant to article 22(4) of the RJAT, the amount of costs is fixed at 306.00 euros, in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Claimant.

Let this arbitration award be registered and notified to the parties.

Lisbon, Administrative Arbitration Centre, 30 September 2014

The Arbitrator

(Nina Aguiar)

[1] Ordinance No. 112-A/2011, of 22 March.

[2] Award not yet published.

[3] Decree No. 55/75, of 12 February.

[4] The signature of the invoice is not required by Commercial Law and is not practice among merchants. But what is being discussed is not the validity of the invoice but its probative value regarding a legal transaction, within the scope of a tax legal relationship.